IntelGenx Technologies Corp.

Thanks, Chris. Good morning, everyone and thank you for joining us on today’s call.

With me on the line are Dr. Horst Zerbe, IntelGenx’s President and CEO, and Andre Godin, our Executive Vice President and CFO.

Before we begin, I would like to remind you that all amounts mentioned today are in US dollars unless otherwise mentioned and today’s call may contain forward-looking information that represents our expectations as of today and accordingly are subject to change. We do not undertake any obligation to update any forward-looking statements, except as maybe required by US and Canadian securities laws.

A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risks and results may differ materially. Details on these risk and assumptions can be found in our filings with the US and Canadian Securities Commissions.

I’d now like to turn the call over to Dr. Zerbe.

Horst?

Thank you, Steve. Good morning, everyone and thank you for joining us for the IntelGenx 2018 fourth quarter conference call.

On today's call, I will provide a corporate update and discuss the progress we have made on our pipeline projects. Following that, Andre will review our Q4 2018 and full year 2018 financial results.

Then, we will open up the line for your questions. Over the past several quarters, IntelGenx has been making the strategic transition from being a product development focused company, which, by definition, limited as to royalty and license revenues to becoming a full service global leader in oral films, growing and deriving revenues from both product development and manufacturing activities.

We believe that this strategic shift puts us in a stronger competitive position and represents a better and more sustainable growth opportunity. 2018 was a year that validated the strategy, as we welcomed two strong new partners, Tilray Incorporated and Gensco Pharma to commercialize two key products from our VersaFilm pipeline.

Our business partners have recognized IntelGenx R&D and GMP compliant manufacturing facilities and they are excited about our innovative oral film technology’s value proposition. In addition, our business development team started foster relationships with prospective new customers interested in our contract development and manufacturing organization or CDMO services.

We also strengthened the depth of both our research and manufacturing teams, particularly with the selection of Dr. Rodolphe Obeid as Vice President of Operations.

As we anticipated, our current and future product partnerships and CDMO activities would place additional demands on our commercial organization. In the fourth quarter, we continued to make significant strides in advancing the development of our various products.

I would start with RIZAPORT, a proprietary oral film formulation of rizatriptan for the treatment of acute migraines, which is the most advanced product in our pipeline. This past November, IntelGenx announced that its 505(b)(2) NDA resubmission for RIZAPORT or soluble film 10 milligram for the treatment of acute migraines has been accepted for FDA review.

FDA has signed a PDUFA goal date of April 1 2019 on the application. Soon after FDA’s acceptance of the NDA resubmission in December, IntelGenx teamed up with Gensco Pharma, a specialty pharmaceutical company focusing on research, development and marketing of prescription products, mainly for pain management.

IntelGenx granted Gensco the exclusive right to commercialize the IntelGenx RIZAPORT product in the United States, which is the world's largest migraine market. With a proven track record of launching and commercializing important therapies, using innovative drug delivery systems, Gensco will be a valuable marketing partner for RIZAPORT.

Then, in late January, as a part of the RIZAPORT NDA resubmission, the FDA performed a pre-approval inspection of our Health Canada certified GMP manufacturing facility in Montreal. At the conclusion of the inspection, the FDA issued a Form 83 with five inspectoral observations that we responded to those in due course and within the prescribed timeframe.

We continue to expect to receive the FDA’s decision on the US approval of RIZAPORT on or around the April 1 PDUFA date. While we would prefer to wait with providing details on the anticipated US commercial launch, until we have received FDA approval, I think it's fair at this point to say the path would then be clear for RIZAPORT to become the first oral thin film on the market for the treatment of migraines and it could also be the first commercialized film product developed and manufactured at IntelGenx state of the art facilities.

In the fourth quarter, the Spanish Agency of Medicines and Medical Devices, AEMPS, granted national marketing authorization for RIZAPORT 10 milligram oral film in Spain. This marketing authorization was received by our marketing partner, Grupo JUSTE, which is now part of Exeltis Healthcare.

Once the site transfer from the German contract manufacturer to IntelGenx site is approved, Exeltis Healthcare will be able to market RIZAPORT in Spain. Now, I would like to provide an update on Tadalafil, which was indicated for erectile dysfunction and pulmonary hypertension treatment.

Our application pursues the erectile dysfunction indication only. That is fully bioequivalent with the brand product, [indiscernible].

As has been previously disclosed, IntelGenx has an exclusive license from Eli Lilly for the orange book listed 166 dosing patent, which provides IntelGenx a clear path to product launch, now that the substance patent has expired. During our third quarter conference call, we discussed the fact that we had to resume negotiations with a company that had a Tadalafil 505(b)(2) NDA already pending at FDA with the intent to jointly commercialized that product under our exclusive license from Lilly.

We believed -- still believe that the potential partnership was in our best business interest. So currently with the negotiations, we also finalized our own independent standalone 505(b)(2) application with the intention of filing that before the end of 2018, in case the partnership discussions were not successful.

We have understandably so received a number of inquiries about the current status since the end of 2018, as we had announced, neither a partnership nor our own 505(b)(2) submission to the FDA. The reason for that is actually quite straightforward.

We did in fact reach verbal agreement with the potential partner before the end of the year. Before we could formalize that definitive agreement however, Lilly had to amend -- to agree to amend IntelGenx exclusive 166 patent license in order for the partnered product to also be covered to allow for commercialization, ahead of the patent’s expiration.

That process with Lilly is well advanced, while the co-commercialization deal with the partner has been fully negotiated and is ready to be executed once the requisite amendment to IntelGenx exclusive 166 license are formalized. So I believe it's fair to say that we now seem to be on the very cusp of finally being able to introduce the Tadalafil product.

Admittedly, this has been a longer process than anyone would have anticipated. But at the end of the day, we continue to believe that the US full commercialization of one Tadalafil oral film is commercially more attractive for IntelGenx and its shareholders.

Now, I would like to briefly discuss our cannabis project with our co development partner, Tilray. We are actively working together with Tilray on the development of prototypes that would comply with the Health Canada definition of edible products.

IntelGenx and Tilray plan on commercializing one or more cannabis infused versatile product as soon as practicable after the amended cannabis -- Canadian cannabis regulations come into the effect, which would allow adult use consumers to purchase edible products in Canada. Amended regulations are currently expected to come into effect no later than October 17, 2019.

The market for cannabis is expected to see significant growth under the new Canadian legal regime, both in terms of number of participants and the value. CIBC analysts forecast the EBITDA of the private sector of the cannabis industry to worth about $1 billion in 2020.

We look forward to updating investors with progress on our cannabis infused films as it comes. Let’s now move on to Montelukast.

This is our major drug repurchasing opportunity, indicated for the treatment of certain degenerative diseases of the brain, which is Alzheimer's disease. Montelukast addressable Alzheimer's disease market is roughly $5 billion and is expected to grow significantly.

In November 2018, we announced that the True North Clinical Research site in Kentville, Nova Scotia was the first of eight established research sites in Canada to enroll the patient and commence dosing. Last month, we added Douglas Mental Health University Institute as our ninth clinical trial site and welcomed world renowned neurologists, clinical research and key opinion leader in Alzheimer's disease, Dr.

Serge Gauthier , as the site’s lead investigator. We expect all nine of our clinical test sites to be actively recruiting patients in the second quarter of this year.

While we are still early in the process, we have been pleased with the progress of our pace of enrollment, since it was initiated last year and we're happy to announce that currently 14 subjects have been enrolled in our study. The first opportunity for a designated data safety monitor board or DSMB, to review the study subject data for patients who have completed 26 weeks of treatment is anticipated later this fall.

The first DSMB meeting will look at 10 subjects who have completed full 26 weeks dosing. Besides that safety evaluation, we also plan to analyze the still blinded data for any efficacy results, hoping to be able to pick up some early trends.

While we have been pleased with the pace set in Montelukast trial’s initial stage, we are looking to expedite enrollment and are working with the contract research organizations to increase recruitment at all our participating sites by generating investor interest and sharing successful recruitment approaches from the other sites. Posters, media broadcasts and existing Alzheimer disease advocacy groups are other methods we are considering to increase enrollment.

With that, I would now like to turn the call over to our CFO, Andre Godin, who will review our financial results. Andre?

Thank you, Horst. Good morning, everyone.

As Horst mentioned, I'll take a few minutes to discuss the company's financial performance for the 2018 fourth quarter ended December 31, 2018 as well as the full year results. Total revenue for 2018 fourth quarter were 650,000, compared to 1.5 million for the same period last year.

The decrease is mainly attributable to a decrease in deferred revenue of 940,000. This is following the [indiscernible] monetization and that's partially offset by an increase in R&D revenue of 129,000.

So if we exclude the deferred revenue, which is a non-cash item, we would have had an increase in revenue of approximately 100,000 from 2017 fourth quarter to 2018 fourth quarter. Also, the operating costs and expenses were 2.9 million for the fourth quarter versus 2.3 million for the corresponding three month period of 2017.

This increase is mainly attributable to increase in R&D of 1.3 million and that's partially offset by a decrease in SG&A of 588,000 compared to the same period last year. Also for Q4 2018, the company had an operating loss of 2.2 million compared to an operating loss of 850,000 for the comparable period of 2017.

Adjusted ea was negative 2 million for Q4 of 2018 compared to negative about 600,000 for the same period last year, mainly attributable to decrease in revenue and SG&A and also increase in R&D. The net comprehensive loss was 2.9 million or $0.03 on a basic and diluted per share basis for Q4 2018 compared to net comprehensive loss of 1.1 million or $0.02 per share for the comparable period of 2017.

If we look now at the year-end results, the total revenue for the 12 months ended December 31, 2018 was 1.8 million compared to 5.2 million for 2017. And again like I said for the -- mentioned for the fourth quarter, if we remove the non-cash deferred revenue accounted for in 2017, we would have had a stable revenue at roughly 1.8 million from year to year.

Also on operating costs and expenses, they were 10.8 million for the full year versus 7.7 million for the corresponding 12 month period of 2017. The increase is mainly due to 95% increase in R&D expenses and that's mainly because of the Montelukast clinical program and a 26% increases in SG&A expenses.

For the 12 month period of 2018, the company had an operating loss of 9 million compared to an operating loss of 2.5 million for the comparable period of 2017. The adjusted EBITDA for the full year was negative 7.9 versus negative 1.4 for the same 12 month period ended December 31, 2017.

Again, the main drivers are the decrease in revenue and increase in R&D and SG&A. And I would like to remind everyone that the decrease in revenue were mostly last year driven by deferred revenue and non cash revenue.

The net comprehensive loss was 10.7 million or $0.14 per share for the 12 month period of 2018 compared to net comprehensive of 2.7 million or $0.04 per share for 2017. As at December 31, 2018, the company’s cash and short term investment totaled USD11 million compared to 4.9 million as at December 31, 2017.

I would like now to turn the call back to Dr. Zerbe to conclude our remarks.

Thanks, Andre. I would like to close by acknowledging the support of our board of directors for their guidance, for shareholders for sticking with us, most importantly the ongoing hard work and dedication of our staff, heartfelt thank you to all of them.

I will now turn the call over for questions. I would like to remind you that our forward looking statement apply to both our prepared remarks and the following Q&A.

Thank you.

Hi, fellas. Thanks for taking the questions.

First, I have a commercial based question that I want to jump over to the Montelukast program. On RIZAPORT, can you guys kind of map out where Maxalt was at its peak before it was genericized, what the peak revenue looked like?

And really what the expectations could be in the United States because we have seen a lot of activity on the prophylaxis side, even from large, big biotechs like [indiscernible] and Emgality from Lilly and Amgen, where does RIZAPORT fall in terms of potential revenue in the US. And my second question is around Montelukast where, correct me if I'm wrong, you have enrolled 14 patients of the target 70 patients in this study.

And like my prior question, given all the activity in the space, particularly around Biogen and the A Beta hypothesis, we've seen a lot of activity and highlights around non A beta targeting companies and is there an opportunity here for Montelukast to really maybe accelerate in terms of enrollment?

Thanks, Jason for a question. First, to respond to your question pertaining to RIZAPORT, maxing sales at peak prior to genericization were roughly 600 million -- between 500 million and 600 million in the US.

And the pricing, despite genericization has been quite stable. So I discussed that recently, as recently as last week with our licensee, Gensco Pharma, so they expect to be able to price the product quite comfortably, but I think -- obviously I won't be able to provide any details on that.

And again, a second more qualitative comment in that regard, he has been in discussions with payers in anticipation of the product launch and has received very good response. Again, I'm not at liberty to disclose any details there.

But our partner is confident that they will, a, be able to price the product comfortably, and secondly, that sales levels will be significant. He indicated to me that they might have to increase their initial order size with respect to Montelukast.

And of course and we, as a company, of course, are fully aware of the recent developments and the obvious failure that these various beta amyloid studies suffered. I'm very pleased to say that more recent voices in the literature point to non amyloid based studies and recommend follow those.

And obviously our Montelukast study is a -- or our Montelukast treatment, I might say, is a non-amyloid based treatment. So we continue to be very optimistic with respect to the anticipated outcome of our phase 2a study.

Okay, great. And I just want to jump quickly back to RIZAPORT and Gensco, in terms of, the PDUFA is coming up basically in like 10 days or so, how has the manufacturing and commercial preparations have been going, maybe you can update us on manufacturing production, is the company -- is your partner positioned to start marketing essentially right away post PDUFA?

We don't expect that to be the case. Obviously, the launch date is the sole decision of our commercialization partner and the commercialization partner, Gensco, connects the launch date to the amount of shelf life or -- to the length of shelf life that FDA will assign to the product.

At this point, I can say and the launch is going to happen, but I am reasonably certain that it will not be right after the PDUFA date. Another aspect to consider is that FDA and that is probably the rate limiting step for the launch date, FDA has not yet approved the brand name.

Our partner has applied for a new brand name and the order for the packaging material that would obviously contain the new brand name has not been placed and can only be placed once FDA has approved a new brand name. Now, the lead time at our manufacturer for the pouch stock is quite long, 14 weeks.

We are in discussions with them to cut that back significantly, but we will obviously only be able to launch product once we have the idea as to when we can receive a packaging material.

Good morning, guys and thank you for taking my questions. My first one is on RIZAPORT as well.

Could you give us a little bit more detail on the economics of the agreement? Because I noted that in your press release, you had said that you're expected to receive regulatory and commercial milestones for the product as well as royalties, with that milestones potentially coming up, could you give us some ballpark numbers on those?

I can’t be specific to the number, but principally speaking, we have agreed with Gensco on a transfer price. That transfer price includes a profit margin.

Andre, if you can chime in, but what I recall that is in the double digit percentage range, right? And then -- on the back end, maybe I turn over to you to comment on the profit split.

Yeah. I mean, yeah, like Horst mentioned, I mean, there is a fairly interesting margin on the manufacturing side and we have profit sharing model with Gensco, which is very favorable.

So, I mean it is very interesting potential return for us. In terms of numbers, I wouldn't want at this point, I mean Horst mentioned a little bit earlier, I mean, we have discussed some quantities, but those quantities are, at this point, confidential.

And Gensco might also be looking at increasing these and that will probably depend on when the launch will take place after all the milestones have been obtained. Like we said earlier, Horst said earlier, I mean, we obviously need an approval from FDA, but we also need the brand name to be approved and like to manufacture basically the product, it could be a very interesting product in terms of revenue.

But I think that we’ll be in a better position to basically discuss any kind of total revenue number, which would be comprised of both manufacturing margin as well as profit sharing revenue, when we have a little bit more clarity on the launch date, as well as clarity on the opening order, because at this point, even though we have indication, we don't have a firm number yet. So -- and I wouldn't want to give a guidance to the market on these numbers, not being in a position to really, really support those numbers.

But it could be a very interesting product for the US and for the rest of the world as well as being the first migraine film ever commercialized worldwide. So that could be very, very interesting, revenue generating product for both Gensco and IntelGenx.

My second question is on the Tadalafil product. So, I may be confused here, but right now, you guys are waiting for the amendment to the Lilly agreement and how long would that take and also you said the 505(b)(2) application for your partner product is on hold right now.

Would that go ahead once the agreement is finished, or are there any other hurdles before that?

Sean, the -- we agreed with Lilly on the terms of the amendment to Lilly almost two months ago. So we're waiting for Lilly to get back to us with the executed amended agreement and like I mentioned before, the agreement with the partner has been fully negotiated.

It is ready to be executed literally on the day we receive the executed amendment from Lilly.

And once you receive that, the 505(b)(2) will go ahead directly. There is no other stuff?

That's correct. The partner received -- I might disclose that, partner received a complete response letter, which the parties agreed to respond to jointly.

And that is in preparation.

I see. Okay.

Thank you for the additional color. My final question is on your cannabis pipeline.

So again, could you provide us with a little bit of economics on that? Who's paying for the development?

What are the potential products being developed and also, what's the collaboration agreement like for the future products?

And we are at this point, developing an oral film product. I mean, that is along the lines of where the emphasis of our R&D and manufacturing activities rise.

Edible film products are expected to be legalized in October. Health Canada indicated October 17 as the latest announcement date.

And so, the plan is, I should say, the agreed upon plan between Tilray and IntelGenx is to have an oral film product to be on the market as soon as possible following the legalization of edible cannabis products in Canada. And based on what has been published by the authorities to date, films would fall under the definition of edible products.

As far as the sales expectations, I don't want to comment on that speculations have been wild, as I'm sure, you know Sean. We have a very powerful partner in the space.

Tilray is the second biggest cannabis company. So we expect significant revenues from that product, but we have not seen any forecasts from the partner yet.

They are working on that. And so any predictions would be wildly speculative at this point.

Thanks. My question – I was mostly wondering about what the cost and revenue split will be like.

Right now, is IntelGenx funding all of the development costs for the product or is Tilray contributing to that. And also, for the future profit sharing, would it be similar to say what you have for RIZAPORT where you'll be manufacturing this and then have a transfer price to Tilray to market?

Is that the sort of arrangement you have?

It's similar and thanks for reminding me. I forgot about that part of your question.

Tilray is paying for the development. The commercial arrangement is such that we have agreed on a transfer price for the product, which includes a two digit profit margin.

In addition to that, we are entitled to a royalty on Tilray’s sales, which is in the upper single digits.

Sean, just one second. I just want to clarify something, the development costs are, I mean, Tilray is paying for most of it, but it's 80-20.

So, basically IntelGenx needs to pay 20% of the development costs.

Good morning. Can you clarify, if you wouldn't mind Horst on the Montelukast development in terms of the clinical trials, you had said previously that you would look at dosing changes potentially, sometimes into the clinical trial maybe later this year in the fall I, I believe, and will there be any kind of announcement once you look at that data and make a determination as to when, whether or not you change the dosing?

First of all, Pat, thanks for the question. At this point, we're not planning any dose.

We’re dosing currently at the maximally approved single dose and that continues to be the case. However, if the initial – if the mid-point data evaluation should suggest that we are under dosing, we might have the option to increase.

But that is not really expected based on anecdotal data that we see. But if so, we would certainly contemplate that.

I'm sorry, what was the second part of your question?

Will there be any announcement to, when you look at that mid-term data, will you be making any press release regarding that data?

At this point, that is what we're planning to do. Yeah.

Okay. And can you update us on Suboxone in terms of where that stands or are the products that have been launched, are they all at risk.

And can you just update us where you guys stand with that product?

That -- just prior to this call late last week, we had an exchange with our commercialization partner, Endo Ventures and they explicitly advised us not to disclose any details on any progress that we're making with that particular product. So I'm sorry, but I'm not at liberty to disclose any details there.

Then, you asked about -- yeah, you asked about the competitive situation, you want me to comment on that one as well.

Sure.

I mean, [indiscernible] launched, at risk and there's a second product right now on the market at risk. I want to emphasize that there is still litigation pending, Orange Book patents are still being litigated.

A decision is being expected for early next year, maybe late this year. It is possible that it prevails and that as a consequence of that, those two products may have to be withdrawn from the market and that the current marketers may have to pay significant penalties, talking about triple damages here under the law.

So we -- and together with our partner, we're watching situation very closely. We're monitoring the litigation situation.

But that's the extent of what I can provide at this point.

Yeah, and then again, I would like to thank everybody on the call for their continued support of the company. And with that, I'd like to conclude my comment.

Thank you.