IntelGenx Technologies Corp.

Thank you. Good morning, everyone, and thank you for joining us on today's call.

With me on the line are Dr. Horst Zerbe, IntelGenx's CEO; and André Godin, our President and CFO.

Before we begin, I would like to remind you that all amounts mentioned today are in U.S. 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 may be required by U.S. 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 risks and assumptions can be found in our filings with the U.S.

and Canadian securities commissions.

I would now like to turn the call over to Dr. Zerbe.

Horst?

Thank you, Steve. Good morning, and thank you for joining us for the IntelGenx Fourth Quarter and Year-end 2019 Conference call.

On the call, I would provide a corporate update and discuss the progress we have made on our key pipeline projects. Following that, André will review our Q4 and full year 2019 financial results.

Following that, we will open up the line for any questions.

First, an update on RIZAPORT. As of this morning, we have not received any communication from the FDA regarding our response to the complete response letter we received in 2019.

The most recent communication occurred about 1 month ago when we contacted FDA regarding the status, and we were informed that the application is still the active review and that FDA might get back to us with any additional questions. As soon as we hear from the agency, we will inform investors about the response and any next steps.

We do remain committed to working very closely with the FDA to make this innovative oral film product available to people suffering from migraines in the U.S. We believe that RIZAPORT is an attractive therapeutic alternative for migraine patients, specifically for the 80% of migraine sufferers that experience migraine-related nausea.

RIZAPORT is also attractive to patients suffering from the dysphagia or difficulty swallowing.

Subsequent to year-end, we signed a binding term sheet with Orivas for the commercialization of RIZAPORT in Lithuania, Latvia, Estonia and Poland. Orivas has the right of first refusal for a predefined term to include the Republic of Belarus and/or the Republic of Ukraine, as well as any of Finland, Denmark, Sweden and Norway, for this agreement to further advance RIZAPORT's distribution to new markets.

Moving on to Tadalafil. And as we earlier reported, a clinical trial protocol or an irritation study requested by FDA was submitted to FDA for review.

We expect FDA's feedback and approval before the end of Q2 2020. We conducted a successful kickoff meeting with Aquestive, our partner for this product, and achieved alignment with Aquestive on deal terms.

All data and negotiation authority has been transferred to IntelGenx, so we have started an active outreach to potential partners in the U.S.

Moving on to cannabis-infused films. We discussed -- we are developing a cannabis-infused film in collaboration with our partner, Tilray.

As discussed on our last call, we collaborated with Tilray to select a cannabis-infused VersaFilm prototype for manufacturing scale-up which began in October and has now been successfully completed. We are currently in contact with the cannabis licensing group at Health Canada, which is reviewing our application for a microprocessing license and expect to receive that license sometime in April.

That license will enable us to begin commercial production with product sales expected to begin in Q3 of this year. Our operations team is working closely with Tilray to coordinate launch preparations.

We believe that our cannabis-infused oral film will be an attractive alternative among the new formats of cannabis products that are now authorized for sale. We're looking forward to providing more details on the product closer to commercial launch.

Moving on to Montelukast. We were pleased to announce that Health Canada issued a no objection letter in response to our amended clinical trial application, the ongoing Montelukast VersaFilm Phase IIa, the so-called BUENA clinical trial in patients with mild to moderate Alzheimer's disease.

The CTA was based on additional efficacy testing of Montelukast in an Alzheimer's disease mouse model conducted in collaboration with Professor Aigner's group at the Paracelsus Medical University in Salzburg. This testing demonstrated that Montelukast dose-dependently improves cognitive outcome, with higher doses significantly increasing the mice's cognition in 2 behavioral tests.

And Health Canada's no objection letter enables us to continue the BUENA trial at an increased daily dose. Unfortunately, the current COVID-19 situation will affect the enrollment under the amended protocol because the target study population is considered a high-risk group in terms of potential for infection with the virus.

We have therefore informed Health Canada that we are on a temporary recruitment hold. Realistically speaking, we believe that enrollment under the new amended protocol will commence by mid-June.

We continue to evaluate the trial's expansion for the United States via a potential IND filing with the FDA. We expect the IND to be filed sometime in the second quarter of 2020.

We were contacted by several shareholders who were concerned about the black box warning that the FDA has imposed on Montelukast-containing products. We do not think that this will, in any way, affect the currently ongoing BUENA study or the future product.

We are -- the reason for that is that we are already mentioning those neuropsychiatric effects that the FDA is addressing in that black box warning in the informed consent form and to investigators and to studies there. Besides that, the incidence of these neuropsychiatric effects is extremely low with an occurrence of less than 0.01%, meaning less than 1 in 10,000 patients.

Moving on to animal health. Subsequent to year-end, we made our foray into the animal health market by signing a feasibility study agreement with a leading animal health industry player.

We will be conducting a feasibility study on an undisclosed molecule for buccal absorption using our VetaFilm platform. And assuming successful feasibility, we will have exclusive rights to further develop, manufacture and supply the product.

This agreement demonstrates the versatility of our oral film technology and the potential for this delivery method to become more widely used in veterinary settings.

So with that, I would like to now turn the call over to our President and CFO, André Godin, who will review our financial results. André?

Thank you, Horst. Good afternoon, everyone.

First, as mentioned, I'll take a few minutes to discuss the company's financial performance for the fourth quarter and full year ended December 31, 2019.

The total revenue for the fourth quarter of 2019 amounted to $68,000 compared to $651,000 in the same period last year. The decrease is mainly attributable to a decrease in R&D revenue.

The operating costs and expenses were slightly lower this year at $2.4 million for Q4 2019 versus $2.9 million for the corresponding 3-month period of 2018. The decrease is mainly attributable to a $1.1 million decrease in R&D expenses that is partially offset by a $671,000 increase in SG&A for the same period last year.

For Q4 2019, the company had an operating loss of $2.4 million compared to an operating loss of $2.2 million for 2018. Adjusted EBITDA was negative $2.1 million for Q4 2019 compared to $2 million for the same period last year.

Net comprehensive loss was slightly below at $2.7 million or $0.03 per basic and diluted per-share basis versus $2.9 million last year or $0.03 as well per share for both period of 2018.

Now for the year, for the full calendar year and fiscal year, total revenue for the 12-month period of 2019 was $742,000 compared to $1.8 million last year. The decrease is mainly attributable to $1.5 million decrease in R&D revenue, partially offset by an increase of $372,000 in milestone -- R&D milestone revenues.

Our operating costs and expenses for the 12-month period was about $0.5 million lower than last year at $10.3 million for the full year of 2019 versus $10.8 million for the corresponding 12-month period of 2018. The decrease is mainly due to $1.3 million decrease in R&D, which is partially offset by an increase of $800,000 in SG&A.

For the 12-month period of 2019, the company had an operating loss of $9.6 million compared to an operating loss of $9 million for the comparable period of 2018. Adjusted EBITDA for the 12-month period ended December 31, 2019, was negative $8.5 million compared to negative $7.9 million for the 12-month period ended December 31, 2018.

Net comprehensive loss was $10.3 million or $0.11 per share for 2019 and compared with comprehensive loss of $10.7 million (sic) [ $10.6 million ] or $0.14 per share for 2018.

As at December 31, the company's cash and short-term investments totaled $1.9 million compared to $11 million as of December 31, 2018. As everybody knows, subsequently to the year-end, we closed an offering for gross proceeds of CAD 8.2 million.

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

Thanks, André. In closing, I'm pleased with the progress IntelGenx has made since the beginning of 2019.

Our efforts have positioned us to achieve important milestones in the coming months, including commercialization of a cannabis-infused VersaFilm as well as reporting initial results from our BUENA clinical trial. We're looking forward to updating you on our continued progress.

I will now turn the call over for questions. I'd like to remind you that our forward-looking statements apply to both our prepared remarks and the following QA.

Thank you.

My first question is on the ongoing pandemic situation. So you mentioned in your remarks that you expect the enrollment in the Alzheimer's disease study to be delayed.

Are there any other effects on your other operations in terms of manufacturing or preclinical development?

Thanks for the question. The quick answer is no.

We received an exemption from the Québec government from the current shutdown that is in effect all over the province. However, the exemption applies to companies that perform pharmaceutical production, research and provide laboratory services.

We fall into that category. And so therefore, we are continuing operations, however, on a -- at a reduced level.

All our admin staff works from home. So in the lab, we have research and development work ongoing to the extent necessary and possible, and we are conducting production activities in the back with our production staff.

So we try to maintain operations, albeit with -- by applying an abundance of caution and leaving everybody and anybody who is not essentially required here on the premises at home.

Great. That's nice to hear.

My second question is on the Tadalafil clinical study. So do you already have the product ready to make and just waiting for the sign-off from the FDA before you can start that study?

I'm sorry. Can you repeat the first part of it?

Do we have already what?

That the product already made and you're just waiting for the FDA to sign off on the protocol before you're ready to start the study.

Yes. We're waiting for the clinical trial application to be approved by FDA.

And following that, we can initiate the study. The CRO has been lined up.

Excellent. So that's all ready to go then.

My final question is on the balance sheet. Just wondering if you can provide a bit more color on the cash runway following the latest raise.

Cash runway.

I mean, as Horst mentioned, now we're -- obviously, even though things are moving in the back, there is quite a bit of cost savings. And also, I mean, all the creditors are very understanding, I can talk about our bank loan or rent and everything, so we're getting a lot of breaks financially, which is very helpful, considering the situation.

So I don't see any issues for at least a good 6 months at minimum in terms of cash burn. I mean, obviously, that will depend also on our potential launch for our cannabis film and potential status with riza, whether we get approved or not and when.

So -- but for the time being, there is no concern in cash flow.

Yes. I have a few questions, if I may.

The first question is regarding the cannabis product. You mentioned that you expect the license approximately in April, and this could lead to sales in about -- approximately in Q3.

Can you provide a bit more of color on -- if Tilray has already given any guidance about a potential purchase orders, initial stocking. When will be the procedure, probably time lines, how much will take production and then that you can invoice on stuff like this?

Would be -- could you have a bit more of details about that?

The second question here also, how you see the market in Canada. You have the impression that on the first -- on the one side, the arrival of edibles have brought some dynamics to the market.

What is your impression how it's -- of the market? And if there's going to be any -- what's your expectation about potential impact on -- of the COVID-19 on this market.

Probably it's not that easy if that continues to promote the product.

The second question is similarly on RIZAPORT, assuming an approval anytime soon. Can you give some more feedback?

What type of preparation have you taken together with your partner for the commercialization? And what impact do you expect also from Gensco for their sales to be able to promote the product given the current crisis?

So I think, in general, would be if you expect any impact on potential sales of these 2 products that are going to be launched in this year.

And my third question is regarding financials. It's a follow-up question on the previous one.

Can you give a bit more guidance about how do you expect key positions like sales or R&D or CapEx to develop in 2020 compared to 2019 that would give us a better idea of how your potential run rate would look compared to the previous year?

Okay. So I will try to respond to your first 2 questions.

And the third one -- for the third one, I'll turn over to André. So to start out with a couple of questions on our cannabis product.

With respect to the status of our license, that was the first part of your question, we are currently in very active -- in a very active dialogue with the review group at Health Canada or the review group for cannabis licenses. They have completed a first part of the review and are now reviewing the so-called evidence package, which deals with mostly security provisions on the premises and things like that.

According to them, the review of the evidence package, and with that, the review of the entire application should be completed in early April -- actually the first week of April. And then according to the reviewer, it usually takes about weeks to issue the license.

And so therefore, we incorporated the statement that we -- in our presentation that we expect license to be issued by mid-April.

Now moving on to the second part of your cannabis-related question that we refer to our production activities. We are in the process of preparing ourselves to move forward with commercial production as soon as we have the license in our hands.

The first step will be that we will order a -- that we will order the API, the active ingredient, from Tilray. Tilray has explained to us that they have the material and are waiting to receive the request for shipment, but they can only ship once the license has been issued.

We have all the other excipients that are required for processing in-house. So immediately upon receipt of the API, which is, of course, controlled by Tilray, we can commence commercial production.

Then we will ship the product, which then will be in its secondary packaging. Tilray will then apply the final labeling in accordance with the labeling provisions that were imposed by Health Canada and then can go into the market.

So we expect the product to be -- but again, I want to stress, we are not in control of the launch. Tilray is.

But based on what we hear from them, we expect the product to be on the market in, I believe, early Q3 or late Q2.

Yes.

Late Q2. So that's the best I can say with respect to the expected launch.

You then asked a question about the market. Again, there is not much experience available.

What we believe is a great opportunity for us is the fact that there is no oral film on the market as yet, at least here in Canada, so we have a great opportunity to be the first cannabis film on the market here in Canada. And I think that presents a great opportunity, but I can really not go beyond this more qualitative statement.

Moving on to rizatriptan. I mentioned before in the -- in my introductory remarks that, as of this morning, we have not received anything from the agency.

So I really don't know what the status is. We reached out to them about a month ago, and we're told that the application is, and I quote them "under active review" and that they would get back to us with any questions they might have, and we haven't heard from them ever since.

Gensco is waiting for the approval, and they are doing their part to get the product to market ASAP. We expect shipment of first-launch quantities in early Q3 in August, September time frame, and Gensco should then launch soon thereafter.

That is under the assumption that we will receive approval over the next -- yes, whenever that may be the case. What we do see is heightened interest in the product in a number of European markets that goes above and beyond just Spain.

We have confirmed interest or existing agreements at this point in more than 20 countries in Europe. So that's regarding riza.

And for the financial question, I will turn over to André.

Yes. So regarding the CapEx or the standing for 2020, we haven't given the guidance.

But what I can say, there are potentially 2 product launch that would, in fact, reduce the burn rate. There is also the -- which would impact the burn rate but could also negatively impact the burn rate of the Montelukast trial that will resume at some point in 2020, but we don't know because of the COVID-19 situation when we'll be in a position to resume the trial, especially because the population in this trial are mostly at risk.

So we're expecting to have a lower burn rate than last year. But then again, that will depend on market launch for our 2 products and when Montelukast will resume.

But in all, I believe that we'll -- and we're obviously very, very -- managing our money very tightly, very closely. So that's why we expect not having to -- not the same level of burn rate as 2019.

Okay, understand. Probably a follow-up question on RIZAPORT.

Is there any update on the process on the EU registration, meaning the filing for transfer of the manufacturing site, and can you update if there's any moves on that site?

Yes. We're currently pursuing 2 alternative strategies.

One is, as you correctly mentioned, the transfer of the manufacturing from the initial European manufacturer to our operation here, that requires the completion of validation batches which we are producing over the next, well, 4 to 6 weeks. And once we have the results from those validation, ADA, they will be submitted to the Spanish authority for -- to satisfy their information demands for the site change.

Alternatively, we are pursuing a strategy which we try to reactivate the contract manufacturer that is listed in the initial application to step in for the manufacturing of initially the Spanish and subsequently European supplies. We believe that, that strategy can accelerate the launch of the product in Europe, simply because of the fact that, that company -- or that manufacturer has already been approved by FDA -- I'm sorry, by the Spanish authority and by European authorities as the licensed manufacturer.

And then whichever strategy gets us quicker to the market is the one that we will eventually implement. At this point, we're pursuing both in parallel.

IntelGenx is a micro-cap company. It's cash-strapped.

We've just heard that we have 6 months of cash, which means that the company is in a [ perilous ] situation in the sense that you will have to come back to the market in some form at a time when markets are very weak. You received -- you raised funds recently at a very low price, a price which for long-standing shareholders like myself, is a little distressing.

And my question for you is this, in these circumstances, was it really appropriate for you to be awarded a pay rise shortly after the cash was raised and before the complete response letter was received from the FDA? My concern is that the optics of this are extremely poor.

It fuels the arguments of those who say that what this company does is raise cash and then use that cash to pay higher salaries and bonus to executives. You are the largest shareholder in the company.

And I have to say that, if I were in your position, I would have said I would not approve a pay rise, simply because we're all in this together, you and your shareholders, and you should be acting in moderation in those circumstances. What do you have to say about that?

Honestly, I'm a little reluctant to discuss my personal remuneration in public, but I want to say this, 2 comments on this. The first one is we are, of course, very aware of the impression that any pay raise or other remuneration like bonus payments or so might convey to the public.

And I can tell you, mostly André and myself, but more generally speaking, amongst the executive group, we are in discussions about how to signal to the public and to our investors that we are aware of the need to manage our finances very tightly, and that, that might include any monies that are being paid to executive management. What you don't know, because you don't see it, is that we have already forgone certain payments that we were entitled to as a sign, in this case, to the Board that we are assuming responsibility for the financial situation.

I'd like to leave it at that point, André, unless you want to add comments about how we manage our finances, also from a salary standpoint.

Yes. I think that there's obviously some information that will be released in the proxy that will demonstrate that, like Horst said, that we have basically demonstrate for -- because of the financial situation, because of the COVID-19 situation.

But as of now, it's not public knowledge, but you will see that we forfeit the bonus payments, we forfeit some money that we were entitled to. So that will demonstrate, I guess, the -- and show that all executives here are aware of the situation and are doing something about it.

In terms of cash situation, it's always -- and sometimes, it's not easy because the market situation right now, as you know, is quite difficult. But having said that, I am already pursuing several non-dilutive option.

And hopefully, some of them or one of them could be successful so that, at least, we don't have to wait. We could refinance some debt.

We could maybe solidify our balance sheet with non-dilutive or much less dilutive instrument and not having to wait for 3, 4, 5, 6 months to do so. Even though the market should be, in general, better, it's always when you have cash in the bank that you should look to get more.

But since the stock price is quite low, then obviously, equity is not an option. So other options are being contemplated.

And hopefully, we'll be able to solidify our balance sheet in the short to near term and not depend on the market situation because everybody -- nobody knows when this thing will end, and so it's prudent to do it this way.

I believe my question was already answered. It would have been posted to Mr.

-- M. Godin.

André, regarding the cash burn rate, the only thing I could possibly add is would you care to or are able to comment on your average cash burn rate quarter per quarter over the past fiscal year?

Comment? I mean yes.

I mean our cash burn rate was roughly $3 million -- $2 million to $3 million per quarter over the last -- past -- I mean it went down towards the end of the year. One of the reasons for that is that there was -- like we said earlier, there was no bonus paid this year, nobody, and also the Montelukast trial being put on hold.

So that's out saving a little bit of money. But like we're trying to keep our spending at the minimum, and that's always been the case over the last year or so.

But we have a large infrastructure. We have large manufacturing facility, so we need -- and we're a GMP facility, as you know.

So that's quite costly. So we need -- even though we're trying to be cautious about spending our money, there's -- we have quite a bit fixed costs that we have to maintain.

And hopefully -- and like we've been operating the plant for most of 2019 for submission batches; different programs; obviously Montelukast, producing the drug for the trial, the BUENA trial. So our fixed costs and variable costs that are directly related to our operation are -- have gone up.

So -- but it is money well spent because we need to submit all these products to FDA to get them approved union -- and European Union, sorry, in the case of cannabis to Health Canada. But hopefully, we're expecting to launch products in 2020, as you know.

So that will -- with basically more or less the same fixed costs, then we'll be able now to generate revenue. So that's why we're expecting in 2020 to reduce our cash burn.

I have a quick question regarding RIZAPORT. Are you planning on contacting the FDA the next day or 2 since you contacted them a month ago, way before the due date and to see what's the status on that?

We have already, but we haven't received a response yet, and we will continue to reach out.

Yes. But you indicated originally that you contacted them a month ago.

What I'm saying, if you don't hear from them the next day or 2, would you plan on contacting, let's say, sometime early next week if you haven't heard anything by then?

Well, it could be as early as today that we will reach out to them.

Okay. That concludes the year-end 2019 conference call.

Again, thank you all very much for your continued support, and a big thank you to staff here at IntelGenx for their confidence and hard work. So thank you very much again, and goodbye.