IntelGenx Technologies Corp.

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

With me on the line are Dr. Horst Zerbe, IntelGenx's CEO; André Godin, our President and CFO; Dana Matzen, our VP, Business and Corporate Development; and Tommy Kenny, Vice President, Intellectual Property and Legal Affairs, General Counsel of IntelGenx Corp.

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 maybe 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 could 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 afternoon everyone, and thank you for joining us for the IntelGenx fourth quarter and full-year 2020 conference call.

This time we are going to break with tradition a little. First, André will review our Q4 and full-year 2020 financial results, then I’m going to review the partnership with atai that we announced earlier this month, as well as provide an update on our key pipeline projects.

Following that, we will open up the line for your questions. With that I will now turn the call over to André.

André?

Thank you, Horst. Good afternoon, everyone.

As Horst mentioned, I'll take a few minutes to discuss the company's financial performance for the fourth quarter, as well as the full fiscal year ended December 31, 2020. As we mentioned in today's press release, the positive impact of our performance improvement program continued to be reflected in the numbers.

For the fourth quarter, the total revenue for 2020 fourth quarter amounted to 790,000, compared to 68,000 in the same period last year. Greater than 11 fold increase in revenue is attributable to an increase in revenues from licensing agreements of 671,000, and an increase in R&D revenue of [$51,000].

Operating costs and expenses were 1.8 million for Q4 2020 versus 2.4 million for their corresponding three month period of 2019. The decrease is mainly attributable to a [553,000] decrease in R&D expenses, and a decrease of 127,000 SG&A, compared to the same period last year.

For Q4 2020, the company had an operating loss of 1 million, compared to an operating loss of 2.7 million for the comparable period of 2019. That's an improvement of $1.7 million in this quarter alone.

Adjusted EBITDA was negative 754,000 for Q4 2020, compared to negative 2.1 million for the same period last year, an improvement of $1.3 million. Net comprehensive loss was 1.3 million or $0.01 on a basic and diluted per share basis for Q4 2020, compared to net comprehensive loss of 2.7 million or $0.03 per share for the comparable period of 2019.

Now for the full-year. The total revenue for a 12-month period December 31, 2020 amounted to 1.5 million, representing an increase of 108% over 742,000 for the year ended December 31, 2019.

Operating costs and expenses were 7.8 million for the full-year 2020 versus 10.3 million for the corresponding 12-month period of 2019. A significant reduction of 2.5 million in operating expense from last year.

For the full-year 2022, the company had an operating loss of 973,000, compared to an operating loss of 2.4 million for the comparable period of 2019. Net comprehensive loss was 7.1 million or $0.07 per basic and diluted shares for the 12-month period of 2020, compared to a net comprehensive loss of 10.2 million or $0.11 per basic and diluted shares for the comparable period of 2019.

That's an improvement of more than $3 million. As of December 31, 2020, the company's cash and short-term investment totaled 2.2 million, which did not include the $2 million secure loan granted to IntelGenx Corp by [atai] in March 2020 – 2021, sorry.

The [indiscernible] credit facility was reimbursed before year-end, and the Bank of Montreal credit facility was also fully reimbursed in Q1 2021. I will now turn the call back to Dr.

Zerbe.

Thanks André. First on the atai partnership.

Last week, we announced our strategic partnership with atai Life Sciences, [a tech-driven] biopharmaceutical company with an attractive portfolio of psychedelic and non-psychedelic compounds intended for the treatment of mental health disorders. In the course of our dealings with atai in 2020, we realized that psychedelics have the potential to become a hugely attractive alternative for the treatment of mental health diseases.

And we became aware that our collaboration, which initially was simply a feasibility agreement, offered the company the opportunity to become a significant player in the market with significant growth potential that motivated us to approach atai in late 2020 with the proposal for negotiating a strategic partnership. Through this partnership, we will integrate our film technology with atai’s existing pipeline, and work exclusively with them in the field of compounds, skin, or treatment of mental health disorders, or compounds that have psychedelic, entactogenic, and [oneirophrenic] properties for those who are not so familiar with these entactogenic compounds are [prepared to] create empathy, and [oneirophrenic] compounds have hallucinogenic properties.

Now, through our prior collaboration with atai, during that feasibility study, we found that our film technology can address some of the unique complexities of developing psychedelic compounds for the treatment of mental health disorders, and can play an integral role in clearing a clinical pathway for atai’s existing pipeline, as well as create promising development opportunities for us. One of the critical features of our technology is the elimination or reduction of first-pass metabolism, which can reduce serum concentrations and allow for the delivery of [non-or bioavailable] compounds.

Hence, our innovative delivery system has the potential to improve the efficacy, safety, and tolerability of atai’s development candidates. We believe the combination of our technologies is a critical step towards bringing these disruptive treatments to the market and positions us solidly in the novel psychedelic therapeutic space.

Considering atai’s expertise and expected market leverage, we are thrilled to exclusively align with them on the long-term development of mental illness treatments. As part of the strategic partnership, atai will initially acquire approximately 25% off IntelGenx and has already granted as a secured loan in the amount of $2 million, of which $620,000 were used to fully repay our outstanding credit facilities with the Bank of Montreal.

atai has agreed to purchase 37.3 million shares of our common stock and 22.38 million in warrants for total gross proceeds of approximately $12.3 million. atai will have the right to subscribe for up to 130 million additional units, with each unit made up of one share of common stock and one half of a warrant.

Assuming atai exercises all warrants and additional units, atai could ultimately hold up to approximately 60% of the issued and outstanding shares. Following the transaction approval from shareholders and the TSX Venture Exchange, we then plan to use our best efforts to list on the Toronto Stock Exchange, the TSX.

[Indiscernible] to the TSX will increase our visibility and is a necessary progression as we structure our company for the long-term. This partnership will truly be transformational.

It will position us as a leading developer and manufacturer in the psychedelic therapeutic space, while also providing us with [Technical Difficulty] to continue progressing our innovative pharmaceutical film product candidates towards commercialization. And speaking about our pilot pipeline of other product candidates, there are some brief updates.

First on RIZAPORT, in August, we expanded our RIZAPORT commercialization agreement with Exeltis to include the European Union, which added 26 countries to our commercialization partnership. We have since entered into a contract manufacturing agreement with LTS Lohmann Therapy Systems in Germany for the manufacturing of commercial products for Spain and potentially other European markets.

Launch preparations are commencing and on target for the product launch in Spain in June. On Tadalafil, the revised protocol for the irritation study that FDA requested in the CRL was submitted to the agency and recently approved.

Duration of the study will be approximately eight months. On the [BD side], partnering discussions are advancing and our goal is to finalize a partnership in Q2 of 2021.

Now, moving on to cannabis films. In January, we entered into a definitive supply agreement with Heritage Cannabis for the manufacturing and supply of 10 milligram CBD filmstrips.

Stemming from that agreement, we received our first purchase order from Heritage for 50,000 CBD filmstrips. We were pleased that this initial order was recently increased to 75,000 CBD filmstrips and we expect to make the first shipment of product to Heritage at the end of this quarter.

On the THC front, we were pleased to announce in February that the USPTO granted a notice of allowance for U.S. Patent Application 16/110,737, which covers novel disintegrating oral film formulations designed for the transmucosal absorption of drug, and is intended to protect IntelGenx’ DisinteQ products.

DisinteQ has been specifically designed by IntelGenx to optimize mucosal absorption of drugs by utilizing controlled erosion as a mechanism to release THC into the oral cavity. Thus avoiding having a portion of the drug being swallowed, and [Technical Difficulty] the amount of THC that becomes subjected to unwanted oral first-pass metabolization.

The DisinteQ allowance comes at an opportune time as we respond to the multiple expressions of interest that we have already received in this distinct technology platform from potential industry partners, and further positions IntelGenx as a leading partner in the cannabis oral film field. Montelukast, the BUENA study [Technical Difficulty] as the targets [steady population] is considered to be a higher risk group for severe illness from COVID-19.

We are closely monitoring the situation and will resume enrollment under our amended protocols, as soon as practicable. In the meantime, we will continue to evaluate the trials expansion to the United States via a potential IND filing with the FDA when it is appropriate.

Animal Health, in February IntelGenx filed a new provisional patent application at the USPTO that covers the incorporation of high concentrations of active ingredients in products based on our data film, proprietary veterinary or film technology. This higher loading capability enables a formulation with the ratio of [active to polymer] of one-to-one, thereby pushing the limit of the film capabilities and distinguishing it from known oral film technology.

Accordingly, this new patent will allow us to incorporate high amounts of drug into our film, while still keeping it small enough to administer easily to companion animals. In addition, we were pleased to receive from our development partner, an undisclosed leading Animal Health company, very encouraging blood level results from the data film feasibility study announced in early 2020.

Like the atai partnership, catapulting us into a leadership position within the novel field of psychedelics, we believe this VetaFilm patent and the underlying data that supports it will help position IntelGenx at the forefront of the oral veterinary film field. In closing, I'd like to once again recognize our team for executing on our long-term strategy, and I would also like to take the opportunity to encourage our shareholders to vote for on all proposals related to the atai transaction at our upcoming annual meeting on May 11.

With that, I will now turn the question – I'm sorry. We now turn the call over for questions.

I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following Q&A. Thank you.

Hi, good afternoon, everyone. My first question, Horst is, in regards to the RIZAPORT Spain, the projected launch was supposed to be in Q1 and I believe you said it's in June; could you please shed some light on this?

Yeah. That has to do with the validation.

The regulatory requirement in the target country in Spain is such that three validation batches have to be completed in order to perform the launch. And there is, and these are relatively simple technical reasons that in the meantime, have been overcome and the validation is progressing.

Okay. So, would it be safe to say that June is going to be a definite month for the launch of RIZAPORT Spain?

Unless something really unexpected and I wouldn't know, at this time, what could happen, would happen, my answer would be yes.

Okay. And my next question is, in regards to the cannabis, or sorry, CBD VersaFilm with the heritage, so just to make sure I heard you correctly, you said that you will be delivering the first batch to Heritage by end of this quarter, which literally ends next week.

Yes, that is correct. That's the target.

The batch has been manufactured. It has been packaged.

It sits in our warehouse. We're waiting for the final analytical release.

And the very last results are coming from an external lab, that’s micro testing that's supposed to come by the end of this week or at the latest early next week. So, we are at this point still on target to deliver to ship I should say in Q1.

And so my answer is yes. We're on target for that.

Okay. And I just have two more questions.

The third question is in regards to the Suboxone VersaFilm, with Par, any update on that and a potential near-term launch?

That product has moved back a little, mostly for capacity reasons. We have to perform under FDA requirements, a so-called site change.

The site change involves the manufacturing of three full scale batches, plus we might, but that's not sure yet, we might have to repeat the biostudy. And the manufacturing of these full scale batches is going to take time and effort.

We are debating to [indiscernible] later this year, but that is still open. We have competing projects that compete for production space.

Okay. And my last question for you is, in regards to the Tadalafil, you had mentioned that the irritation study received positive feedback from the FDA, and that you were in significant discussions with a partner, and that the partnership should be announced in Q2?

Could you shed more light on that? And what are going to be your main monetary or, sorry, your main income drivers going forward in the next quarter?

You mean for this particular product or more…?

No, I'm sorry. I kind of split it into two.

I want to, if you can shed some more light on the Tadalafil and the partnership, and the next question was for André in regards to income for the company when do you guys see yourself going into the cash flow positive territory and with which products do you see that happening first?

Yeah. So, let me respond to your question pertaining to Tadalafil, and unfortunately, I can't provide any details.

These are ongoing discussions. Dana is conducting those; mainly she is on the call as well.

What I can say is that we are talking to two companies one in Canada, the other one the U.S., but I cannot provide at this point any specifics. Sorry about that.

No problem.

Yeah, so, it’s André here. We obviously were expecting to launch our CBD film next week.

So, and our RIZAPORT in Spain in June, there will be or should be also some R&D revenue and also, you know, based on the discussion we will have with our potential partner with the Tadalafil product that could also generate revenue. But in order to – been in a situation where we would be able to cover our burn rates or the cash flow positives, it's probably not going to come until 2022, and but with the obviously with the investment of atai that will allow us to get to that point, you know, without needing any further investment even though atai might invest more than 12.3 million, but we are expecting that with the 12.3 million we should be able to get to a point where we're profitable at least cash flow positive.

Okay. Thank you so much, guys.

And I wish you guys the best of luck. And I think the company has made a tremendous achievement, you know, since the pandemic and I congratulate all of you on all the hard work.

Thank you so much.

Thank you.

Thank you.

Yeah. So, thank you very much.

In closing, I just would like to thank all our investors for their ongoing support. And I would, that really comes from that and would really ask every single investor to take advantage of your voting rights and vote in favor of the atai investment.

I think that it has become very obvious through the various publications that this is a huge step forward for this company. So, all investors please contribute to making this happen.

Thank you very much again.