Medicure Inc.

Albert Friesen - President & Chief Executive Officer James Kinley - Chief Financial Officer Kevin Taylor - Vice President of Commercial Operations

Thanks, Sylvia. And good morning to you all.

We appreciate your interest and participation on today’s call. Joining me on the call is our CFO, James Kinley; and our Vice President of Commercial Operations, Kevin Taylor.

For the number of patients using AGGRASTAT, our main drug continues to increase throughout 2018 to approximately 65% of the patient market by the end of 2018, up from the 63% reported in the third quarter of 2018. The revenue for the quarter ending December 31, 2018 from AGGRASTAT was $8.2 million, which is up from the $7 million revenue recorded Q3, 2018.

As expected, revenue from Medicure’s second drug on the U.S. markets ZYPITAMAG, is still small as we wait for the various insurance coverages to start, which was anticipated in the first half of 2019.

Our marketing team has experienced a lot of interest in ZYPITAMAG, so we anticipate good uptake as coverage begins. The market introduction of our third drug, Sodium Nitroprusside is delayed until Q2, 2019 due to a CMO challenge, which has now been corrected.

In January 2019, Medicure acquired U.S. marketing rights for ReDS system.

ReDS is a noninvasive FDA approved medical device that provides an accurate measurement of lung fluid, which is important in the management of congestive heart failure. Lung fluid measurements are used in guiding treatment and monitoring of heart failure patients condition and mainly to a significant decrease in readmissions and hospital costs.

Clinical studies have shown an 87% reduction in heart failure readmission rates for patients using the ReDS system at home for three months, post-discharge versus those who were treated with usual care alone. This provides the fourth cardiovascular product for Medicure’s marketing team for the U.S.

market. Medicure had previously reported its plan to have at least five cardiovascular products on the market in the U.S., by the end of 2020, which we believe can be met and possibly exceeded.

Medicure also closed Q4, 2018 with a strong balance sheet, highlighted by $72 million in cash and short-term investments and no debt. The final payment of US$10 million and the holdback funds for the sale of Apicore is still in dispute, but insurance was obtained at the time of the sale to cover off potential disputes on this holdback.

The timing of the release of the holdback or insurance proceeds is not known at the present time. Medicure continues to vigorously defend the 660 patent against Gland, who filed an abbreviated new drug application seeking approval from the U.S.

FDA to market a generic version of AGGRASTAT. Injection before the expiration of the 660 patent.

Medicure will pursue all legal options available to protect the product, and we anticipate this will take an extended period of time. Medicure’s focus is continuing to grow sales of AGGRASTAT, begin the growth sales of ZYPITAMAG, the ReDS device and Sodium Nitroprusside while building out its cardiovascular product portfolio, with the ultimate goal of continue to grow sales and profitability.

I’d now like to turn the call over to the CFO, James Kinley, to review and provide color on our financial results for 2018. James.

Thank you, Bert. And good morning, everyone.

A couple of quick items to note, before I start. All dollar figures are in Canadian dollars, unless otherwise noted by each presenter.

And as a reminder, you can obtain a complete copy of our financial statements for the year-ended December 31, 2018 along with previous financial statements on the Investors page of our website and a copy of the financial statements and management discussion and analysis can be obtained from www.sedar.com. I will take you through the key highlights of financial performance for the year-ended December 31, 2018.

Total revenues for 2018 were $29.1 million compared to $27.1 million for the year-ended December 31, 2017. Net revenues from AGGRASTAT for the year-ended December 31, 2018 totaled $28.5 million, an increase from net revenues from AGGRASTAT for the year-ended December 31, 2017 of $27.1 million.

Net revenues from AGGRASTAT for the three months ended December 31, 2018 totaled $8.2 million, an increase from net revenues from AGGRASTAT for the three months ended December 31, 2017 of $5 million. The increase in revenues from AGGRASTAT is due to higher volumes of products sold as well as a higher U.S.

dollar exchange rate throughout 2018 when compared to 2017, which offset decreases to revenues as a result of higher discounted selling prices of the product due to increased pricing pressures from generic versions of Integrilin. ZYPITAMAG, which was launched commercially in May 2018, contributed approximately $700,000 of net revenue for the year-ended December 31,2018.

Our goal is to continue to maintain and grow the AGGRASTAT brand while providing product diversification in the form of ZYPITAMAG, launched in May 2018; ReDS, acquired in early 2019; and the upcoming launch of our generic Sodium Nitroprusside in mid-2019. Turning to cost of goods sold, AGGRASTAT cost of goods sold for the year-ended December 31, 2018 totaled $3.7 million compared to $3.5 million for the years-ended December 31, 2017.

This resulted in gross margins for 2018 of approximately 87%, consistent with the margins for 2017. The slight increase in AGGRASTAT cost of goods sold is due to increased volume of the product sold.

ZYPITAMAG cost of goods sold totaled $429,000 for the year-ended December 31, 2018, but contained $196,000 of amortization, relating to the ZYPITAMAG license. Removal of the amortization resulted in the gross margin for the product of approximately 65%.

Selling, general and administrative expenses totaled $19.5 million for the year-ended December 31, 2018 compared to $14.9 million for 2017. If we remove stock-based compensation and non-cash expense recorded during the years-ended December 31, 2018 and 2017 respectively of $1, 623,000 and SG&A expenses would have been $18.5 million and $14.3 million, respectively.

SG&A expenses consist of costs, associated with our commercial team and the ongoing sales and marketing of AGGRASTAT and ZYPITAMAG, as well as costs associated with the commercial launch of ZYPITAMAG, which accounts for the increase in SG&A expenses for 2018 due to additional marketing expenses, launch activities and additional headcount relating to the additional product. Additionally, corporate level expenses and business development activities are included within SG&A expenses and have increased year-over-year, as the company continues to look at expansion of its product offerings.

Turning to research and development expenses, which for the year-ended December 31, 2018, totaled $6.7 million compared to $5.1 million for the year-ended December 31, 2017. R&D expenses for the current year relate primarily to our additional and our development projects, which are underway and have increased for the year-ended December 31, 2018 compared to 2017 due to the timing of expenses related to these projects.

The 2017 R&D expenses primarily related to the completion of moving our AGGRASTAT manufacturing to new facilities for the 250 mL Bag and other R&D costs associated with our first ANDA that has now been approved by the FDA. While 2018 consisted of the completion of the first ANDA, which was approved in the summer of 2018, and significant costs associated with the majority of the development pertaining to the company’s other ANDA development projects, as well as other product development activities.

Medicure is in the process of developing additional generic cardiovascular products, and we expect to have more than five products including AGGRASTAT, ZYPITAMAG, ReDS, SNP, as well as our generic development products on the market by 2020. The cost of each ANDA development project is approximately $2 million each, consistent with our research and development strategy to focus on low-cost, quick-to-market projects with higher probabilities for success, and we don’t expect their R&D cost to increase relative to this.

As noted earlier, the company received notice from the buyer of the Apicore of potential claims against the holdback receivable. In respect to these potential claims against the holdback, the company recorded a reduction of the holdback receivable and the statement of net income of $1.5 million for the year-ended December 31, 2018.

In the prior year, 2017 the company recorded an impairment loss of $636,000 relating to the license that was acquired regarding Prexxartan as a result of uncertainties surrounding the product. The company recorded finance income of $1.1 million for the year-ended December 31, 2018.

This relates to interest on the company’s cash balances and short-term investments, offset by the change in fair value of the company’s royalty obligation during 2018. For 2017, the company recorded finance expense of $837,000, relating to the change in the royalty and interest on the MIOP loan, which was repaid in the fourth quarter of 2017.

The company entered 2018 and 2019 with no long-term debt on its statement of financial position, and with cash and short-term investment balances of approximately $72 million as at December 31, 2018. We expect to record finance income for the foreseeable future.

The company recorded a gain of $6.5 million from foreign exchange for the year-ended December 31, 2018 compared to a foreign exchange gain of $175,000 for the year-ended December 31, 2017. The significant increase of foreign exchange gains during 2018 resulted for the increases in the U.S.

exchange rate during 2018, which applies to the significant U.S. dollar cash and short-term investment balances, held by the company during 2018.

The company recorded income tax expense of $897,000 during the year-ended December 31, 2018 primarily from income taxes on our U.S. commercial business.

In 2017, the company recorded an income tax recovery of $9.1 million as a result of usage of tax losses in connection with the gain on the sale of the divestiture of Apicore. For the year-ended December 31, 2017, the company had recorded $31.9 million from discontinued operations, which consisted of the results of the Apicore business, the gain on the sale of the business which is now been completely divested, as well as interest relating to the $60 million loan which was used to finance the acquisition of Apicore and has since been repaid in full during the fourth quarter 2017.

This results in net income for the year-ended December 31, 2018 of $3.9 million or $0.25 per share, compared to $43.4 million or $2.78 per share, which included net income from continuing operations of $11.5 million, $0.74 a share and net income from discontinued operations of $31.9 million or $2.04 per share for the year-ended December 31, 2017. Net income for the three months-ended December 31, 2018 totaled $1.5 million or $0.10 per share compared to $51.4 million or $3.27 per share, which again included continuing operations of $7.2 million or $0.46 a share and discontinued operations of $51.4 million or $2.81 per share for the year-ended December 31, 2017.

Adjusted EBITDA for the year-ended December 31, 2018 was $190,000 compared to adjusted EBITDA of $4.8 million for the year-ended December 31, 2017. The decrease is primarily due to higher SG&A expenses, primarily associated with the launch of ZYPITAMAG and the higher R&D expenses associated with the company’s product development projects during 2018.

As at December 31, 2018, the company had cash and short-term investments totaling approximately $72 million compared to $5.3 million as at December 31, 2017. This consisted a $24.1 million of unrestricted cash and $47.7 million of short-term investments in the form of term deposits with maturities of greater than three months and less than one year.

As at December 31, 2018, the company had working capital of $72.7 million compared to December 31, 2017 of $70.9 million. The company received cash from operating activities of $742,000 for the year-ended December 31, 2018 compared to $21.9 million for the year-ended December 31, 2017, which primarily resulted from changes in working capital at Apicore in 2017.

As previously noted, as at December 31, 2018, the company did not have any debt recorded on its statement of financial position. Additionally, during the year-ended December 31, 2018, the company purchased 441,000 of our own common shares that were canceled under the company’s normal course issuer bid announced in May of 2018, at a cost to the company of $3 million.

The company continues to feel that its underlying value exceeds the current share price, and purchases continue under the normal course issuer bid, including the purchase of 160,000 shares for approximately $1 million between December 31, 2018 and today. I want to remind you, there will be an opportunity at the end of today’s call for you to ask questions regarding the financial results and the company as a whole.

And with that, I’d like to turn the call over to our Vice President of Commercial Operations, Mr. Kevin Taylor, for some additional commentary regarding our operations.

Thanks, James. And good morning, everyone.

As mentioned previously, AGGRASTAT remains the Number 1 glycoprotein IIb/IIIa receptor antagonist with approximately 65% of market share. This tremendous accomplishment has been achieved through an incredible amount of work done by the Medicure team.

We continually focus on maintaining that market share held by AGGRASTAT and look for subsequent growth by exploring new opportunities within the hostile environment. We’re mindful of the pricing pressure though from generic integument products and as such, we remain vigilant so that any market changes that require an appropriate response, so that we can remain competitive.

Turning our attention to ZYPITAMAG, we are now one year into the launch and have seen almost a doubling of the percent of commercial lives with unrestricted formula access to ZYPITAMAG. This increase to 36% represents an estimated 30 million people who now have pharmacy benefits that cover ZYPITAMAG.

To capitalize on this growing population of covered patients, we have begun executing a new sale strategy that will target payers, patients and health care practitioners who already exist in the ZYPITAMAG value chain. We expect by Q3, 2019, these efforts will have a positive impact on ZYPITAMAG growth.

And with respect to our recent agreement with Sensible Medical on the ReDS device, this marketing and sales partnership agreement has provided us with a great opportunity to expand our product offering and diversify our revenue base. We have only been active in the field for about 90 days with the device and are excited at the response and interest from both purchasers and practitioners.

Our ability to communicate how ReDS can improve patient care and decrease health care utilization costs, have been extremely well received. We’ve been able to leverage our existing relationships with cardiologists, the integrated delivery networks and group purchasing organizations to drive incredible awareness of the device and gain access to both influencers and decision makers.

Initially, we are actively focused on hospitals located in regions of the United States that have very high heart failure rates. However, as we gain traction and raise awareness of the ReDS device, we will expand our footprint to include more territories that increase the number of hospitals we [inaudible].

Our focus for 2019 and beyond is to continue to diversify our revenue base. The access, our U.S.

sales organization has to acute cardiology specialists as well as hospital pharmacy and hospital system administration is an asset that can be applied to other products such as the ReDS device. We are active in our search for approved revenue generating products that fit our organization.

We continue to pursue products via acquisition, in-licensing and co-promotional opportunities. Moreover, we are exploring low risk, low cost and quick to market drug development projects.

We’re also developing additional abbreviated new drug applications or ANDAs for high-value cardiovascular intravenous specialty generics. At this time, we’re not going to release the details about the identity of those products, but they are congruent with the relationships and expertise we have established with AGGRASTAT.

In summary, Medicure expects continued success from its lead commercial product, AGGRASTAT, that has become the Number 1 used GP IIb/IIIa inhibitor in the market. We successfully launched ZYPITAMAG for the management of hypercholesterolemia and growth is expected as more coverage continues to expand.

The partnership on the ReDS device now provides the opportunity for us to sell a new product into the hospital market. We have a significant commercial organization in place with a proven track record in acute care hospital sales in the United States.

Lastly, we have an increased focus on expanding our product offering and diversifying our revenue base. And with that, I’d like to turn the call back over to Bert for final comments.

Thanks, Kevin. We’re very thankful for the growth we’ve seen in our sales and organization over the past years.

We have a strong balance sheet, and we continue to focus on growing the business with pipeline of cardiovascular products that will diversify our revenue and asset base, carefully investing to grow the future profitability. My goal and that of the Board’s Management staff is to continue to build this business with a stable, long-term outlook to generating value for shareholders.

And as always, I want to thank our outstanding team of employees who really made this happen, which we’ve been blessed with. And also thank you, for the shareholders for your continued support and interest.

So, Sylvia I’ll turn it back to you to lead us through the Q&A at this time. So welcome all questions.

Good morning gentlemen.

Good morning.

Good morning Bob.

In Q4, SG&A and R&D seemed to have jumped versus Q3. Can I get a little more color on that, and should I use that as a run rate going forward?

So the fourth quarter increase in SG&A primarily relates to marketing activities, pertaining to the ZYPITAMAG, namely conference attendance, advertisements, headcount and consulting activities. It was higher than the previous quarter, but I don’t see it getting much higher than that.

I would probably - if you want to look to Q2 through Q4, average those out going forward. And in regards to the R&D expenses.

Our R&D expense won’t be even throughout the year. Q4 has spiked up due to some higher costs associated with our two ANDA that are under development, particularly the third ANDA.

So again, I think it’s probably more of an average throughout the year that would be the go-forward rate.

Okay. Great.

And can you tell me the FX rate you used in the quarter versus last year?

Good question. I believe it was 1.34 in the quarter.

Let me just pull it up here for you though. The current year was 1.32 and the prior year it was about 1.25.

Okay. Perfect.

Any color on Prexxartan, what’s happening with that?

There’s nothing really. We are keeping in touch.

There’s no activity, in terms of legal action at the present time. There’s just a bit of positioning and negotiating.

Okay. And could you remind us again how the two ANDAs are coming along, and do you have any timing when you might be submitting them?

Well, one is shortly, I know that and I’m not sure about the other. It’s in the coming months.

So they are being submitted in the next [inaudible] but one is pretty sure.

Okay. And then lastly, can you give me just a little color on sort of the M&A pipeline?

What you’re seeing out there, valuations, that sort of thing?

In purchasing products, valuations still are still pretty high, but we are getting a lot of interest and approaches by companies. We’re looking at our marketing team.

And, I would say right now we’re focused really on the existing two products before we take on too many more to really get ZYPITAMAG and ReDS going. So that’s our present focus.

So I would say, just in general, that’s our focus right now and being fairly picky about any other opportunities.

Okay, great. Thanks very much.

Yes hi. Thanks for taking my question.

Can you talk about why you decided to make a US$10 million investment in Sensible, and maybe talk about why you thought the valuation was the right number?

Valuation was based on the last investment. So it was independent investment.

Typically when people were being approached, they want upfront money or purchase price, or fees to enter into agreements. And we didn’t want to have a sunk cost, and we negotiated an investment.

We think the company has other good technology, good opportunities to grow as do the other investors. So it’s a way of taking our cost of investing or cost of reacquiring a product and actually hoping to get a double return on the investment as well as the product.

Okay. Thank you.

Okay. Thank you everybody for joining the call.

Appreciate the interest and look forward to filling you in on the first quarter of this year. Thank you.