Medicure Inc.

Thank you, Sheryl, and good morning to all in the call. We appreciate your interest and participation in today's call.

Joining me today is CFO James Kinley; and our recently appointed President and Chief Operating Officer, Dr. Neil Owens.

The number of patients using AGGRASTAT, our lead drug continued to increase, although modestly even in the last quarter of 2019 to now 67%, and the pricing pressure is leveling off. The revenue at the quarter ended June 30, 2019from AGGRASTAT was $6.2 million, which has increased from Q1 of $4.8 million, but lower than Q1 2018, which was $7.2 million.

We had a small negative earning of $300,000 million due entirely to a stronger Canadian dollar, and we had a positive EBITDA of $100,000, a substantial improvement from Q1. Sales of ZYPITAMAG and ReDS are still slow, but signs of growth for Q3 and Q4 are very positive.

As expected, revenue from Medicure second drug on the U.S. market, ZYPITAMAG, is still small due to getting coverage.

Insurance coverage is improving, and it is anticipated that this will begin providing growth in Q3 and Q4. The market introduction of sodium nitroprusside was delayed until August this month due to the CMO problems.

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

Clinical studies have shown that 87% reduction in heart failure readmissions for patients using a ReDS system at home for three months post-discharge versus those treated with usual care alone. This provides a fourth cardiovascular product for Medicure's marketing team in the U.S.

market. Medicure continues to retain a strong balance sheet with no debt, $45 million in cash plus the US$10 million invested in Sensible.

The final payment of the US$10 million holdback funds from the sale of Apicore is still in dispute, but insurance was obtained at the time of the sale to cover the potential dispute on this holdback. The timing of the release of the holdback or insurance proceeds is not known at the present time.

Medicure continues to defend the 660 patent against Gland who filed abbreviated new drug application seeking approval from the U.S. FDA to market a generic version of AGGRASTAT.

Medicure will pursue all legal options available to protect its product. And we anticipate this will take an extended period of time.

Medicure's focus is continue to grow sales on AGGRASTAT, again growing sales of ZYPITAMAG, ReDS device, and sodium nitroprusside for building out its cardiovascular product portfolio with the ultimate goal of growing sales and steady profitability. I would now turn the call over to CFO, James Kinley, to review and provide color on the financial statements for Q2.

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 three and six months ended June 30, 2019 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 sedar.com.

I will take you through the key highlights of financial performance for the quarter ended June 30, 2019. Total revenues for the quarter ended June 30, 2019 were $6.3 million compared to $7.8 million for the quarter ended June 30, 2018.

Net revenues from AGGRASTAT from the quarter ended June 30, 2019 totaled $6.2 million, a decrease from net revenues from AGGRASTAT for the quarter ended June 30, 2018 of $7.2 million. But up from a revenue of $4.8 million for the first quarter of 2018.

The decrease in revenues from AGGRASTAT is due to higher discounted selling prices of the product due to increased pricing pressures from generic versions of Integrilin. ReDS, which license was acquired in January 2019, contributed approximately $51,000 of net revenue for the three months ended June 30, 2019.

The comparative quarter in 2018 contains $606,000 of ZYPITAMAG revenue as the product was launched in the second quarter of 2018 and initial wholesale orders were placed during this quarter. Our goal is to maintain and grow the AGGRASTAT brand while providing product diversification in the form of ZYPITAMAG launched in May 2018, ReDS acquired an early 2019, and the upcoming launch of our generic sodium nitroprusside in the third quarter of 2019.

Turning to cost of goods sold, AGGRASTAT cost of goods sold for the quarter ended June 30, 2019 totaled $1.1 million compared to $1 million for the quarter ended June 30, 2018. This resulted in gross margins for the quarter ended June 30, 2019 of approximately 82%.

This is down from the margin for the quarter ended June 30, 2018 of 86%, with the decrease in the gross margin being due to lower net selling prices as noted earlier. Cost of goods sold for the quarter ended June 30, 2019, contained 67,000 and 135,000, respectively, pertaining to the amortization of the licenses for ZYPITAMAG and ReDS.

Selling expenses totaled $3.3 million for the quarter ended June 30, 2019, down from $3.9 million for the quarter ended June 30, 2018 and from $4.1 million for the quarter ended March 31, 2019. The reduction in selling expenses when compared to the same quarter in the prior year is a result of the ZYPITAMAG pre-launch and launch costs incurred in the quarter ended June 30, 2018.

General and administrative expenses totaled $769,000 for the quarter ended June 30, 2019, down from $1.1 million for the quarter ended June 30, 2018. The decreases primarily the result of lower stock-based compensation incurred in the quarter when compared to the same quarter in 2018.

Research and Development expenses remained consistent between the quarter ended June 30, 2019 and 2018 at $1.2 million and $1.1 million respectively. Research and Development expenses for the current period relate primarily to additional development projects, which are underway.

Medicare is in the process of developing additional generic cardiovascular products with the cost of each and a development project being approximately $2 million consistent with our research and development strategy to focus on low cost projects with higher probabilities for success and we don't expect our research and development costs to increase relative to this. The company recorded net finance income of 182,000 for the quarter ended June 30, 2019 compared to net finance income of 94,000 for the quarter ended June 30 2018.

The finance income and expense related to interest on the company's cash balances and short-term investments offset by the change in the fair value of a company's AGGRASTAT royalty obligations during the quarter. The company does not have any long-term debt on it statement of financial position and a cash balance of approximately $45.7 million at June 30, 2019, and we expect to have finance income for the foreseeable future.

The company recorded a loss of $813,000 from foreign exchange for the quarter ended June 30, 2019 compared to a foreign exchange gain of $1 million for the quarter ended June 30, 2018. The significant foreign exchange last year in 2019 resulted from decreases in the U.S.

exchange rate during 2019, which applies the significant U.S. dollar cash and short-term investment balance held by the company as at the end of each quarter.

These results in a net loss for the quarter ended June 30, 2019 of $957,000 or $0.06 per share, compared to net income of $1.6 million or $0.10 per share for the quarter ended June 30, 2018. Adjusted EBITDA for the quarter ended June 30, 2019 was $103,000 compared to adjusted EBITDA of $882,000 for the quarter ended June 30, 2018.

But up significantly from the negative $1.7 million EBITDA on the first quarter of 2019. The decrease in EBITDA compared to the same quarter in the prior year is primarily due to lower revenues between the two quarters, and the increase in EBITDA between the second quarter and first quarter of 2019 is primarily due to increased revenues and cost reductions experienced in the second quarter.

As a June 30, 2019, the company had cash totaling approximately $45.7 million compared to $71.9 million of cash and short-term investments as at December 31, 2018. As of June 30, 2019, the company had working capital of $51.2 million, compared to $72.7 million at December.

The decrease in cash, primarily related to the $10 million U.S. are approximately $13.4 million Canadian dollar investments and Sensible Medical with which we acquired approximately 8% equity on a fully diluted basis and Sensible Medical, as well as the U.S.

rights to the ReDS medical device, as well as $3.6 million use to purchase $492,000 of our own common shares under the company's normal course issuer bid. I want to remind you that there'll be an opportunity at the end of today's call for you to ask questions regarding the financial results of the company as a whole.

And with that, I'd like to turn the call over to our President and Chief Operating Officer Dr. Neil Owens for some additional commentary regarding our operations.

Thanks, James, and morning everyone. As mentioned previously in the United States, AGGRASTAT remains the number one glycoprotein IIb/IIIa receptor antagonist with approximately 67% 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 hospital environment.

We are mindful of the pricing pressure from generic integument products. As such, we remain vigilant to any market changes that require an appropriate response, so that we may remain competitive and are exploring ways to reduce costs.

Turning our attention to ZYPITAMAG, we continue to see improvements in the number of commercialized with access to ZYPITAMAG. Currently an estimated 30 million people have pharmacy benefits that cover ZYPITAMAG.

We continue to focus on ways to increase access to ZYPITAMAG including through federal markets and specialized formularies. We have been able to grow new repeat prescriptions and expect that as Access continues to improve that sales will accelerate through its execution of our marketing strategy.

The marketing and sales partnership with Sensible Medical for the ReDs device has provided us with a great opportunity to expand our product offering and diversify our revenue base. Since our launch at the end of Q1 2019, we are excited at the response and interest from both purchasers and practitioners.

Our ability to communicate how ReDs can improve patient care and decrease healthcare utilization costs has been extremely well received. We've been able to leverage existing relationships developed through the sale of AGGRASTAT with cardiologists, the Integrated Delivery Networks and group purchasing organizations to drive awareness of the device and gain access to both influencers and decision makers.

At the outset, we have been actively focused on hospitals located in regions of the United States that have high heart failure rates and high hospital readmission rates. However, as we gain traction and rise awareness of ReDs we will expand our footprint to include more territories and increase the number of hospitals.

Our focus for 2019 continues to be diversifying our revenue base, via 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 ReD device.

We're active in our search for approved revenue generating products that fit our organization. We continue to pursue products via acquisition and licensing and promotion 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 valued cardiovascular intravenous Specialty Generics.

At this time we're not going to release details about the identity of these products but they are congruent with 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 one glycoprotein IIb/IIIa inhibitor in the market.

We successfully launched ZYPITAMAG for the management of hypercholesterolemia and growth is expected as formulary coverage as expanded. The partnership on the ReDS device now provides the opportunity for us to sell a new product into that hospital market.

We have a significant commercial organization in place with a proven track record in U.S. hospital care sales.

Lastly, we have an increased focus on expanding our product offering and diversifying our revenue base. With that, I'd like to turn the call back to Dr.

Friesen for final comments.

Thank you, Neil. We're very thankful for the growth we've seen in the sales and the organization over the past years.

We have a strong balance sheet. We continue to focus on growing the business with a pipeline of cardiovascular drugs that diversify end products and diversify our revenue and asset, carefully investing to grow our profitability.

My goal and that of our board, management and staff is to continue to build this business with a stable long-term outlook to generating value for our shareholders. And as always, I want to express my sincere appreciation to our outstanding team of employees we're blessed with.

Thank you for the shareholders and your support and interest. And so now, Sheryl, I will turn it back to you to lead us through the questions-and-answer portion.

Good morning, gentlemen.

Good morning, Bob.

Good morning.

Okay. So let's start with the two enders [Ph] that are in the pipeline, and I'm wondering if 2020 guidance might be a little optimistic.

It is. We've just changed in our presentation which is on our PowerPoint.

There's been -- in one case, we're pretty much on schedule, maybe delayed a little bit, this was actually -- and the second one we were corresponding with our filing date with the FDA and working through some of that. So as always, there're some challenges, but I think we were going to achieve a drastic challenge the FDA have.

So, the one is pretty close, the second one is delayed a bit that we just updated the PowerPoint on which has just been put up on their Web site.

Okay, great. The ReDS, you've got a minimum sales limit door target with the company, is that an issue at all?

Right now we don't see there is an issue, no.

Okay, beauty, and continuing with that, you reduced the valuation of that company slightly, any particular reason for that?

It's the valuation of the company is actually -- it's formula-based. There're some different inputs that go into it similar publicly-traded companies, the U.S.

dollar exchange rate factors, and so, no, nothing on this, like the company is still as valued as we did when we invested it.

Okay, so nothing material, great.

You are right.

Okay. And so, you're actually selling the sodium nitro process right now like this month?

We're delivering it to the wholesalers right now. It might have gone -- any date, so we've got the product it's in the wholesale and there are contracts being negotiated at the present time.

Okay, great. And then lastly, ZYPITAMAG, can you give us an idea of the sort of the percentage of the insurers that you got approval for, like, what are we looking at?

Yes, it's hard to give a percentage at this time. I think that we have about 30 million lives covered, but that's at various tiers of reimbursement.

So again, the strategy is trying to improve that reimbursement tier.

Okay, and any timeline or thoughts on when -- how that's going to work out?

So I think right now our strategy is to focus on certain areas, and I think we can make good progress, and then we're continuing to expand I think into 2020 with our coverage.

Okay. And then lastly, Bert, with always cash, I'm sure lots of people are coming knocking to your door with stuff for sale.

Can you give us an idea on valuation for stuff you're seeing? Is it too expensive or how are things looking?

Interesting, I don't know what your review of the marketplace is, but our experience is that there are still fairly high values on products that are on the marketplace, and they have certain sales. The multiple on sales is still, in our opinion, too high, but there are buyers, and you know some of the examples that have happened in the last year were -- I couldn't believe the prices on the multiples.

So, our focus has been more on recently launched, although we do have we are negotiating, still negotiating some products, but we've also told, sort of announced or provided guidance on that, our focus at the present time is to be successful and drive the sales of ReDs and ZYPITAMAG. And so, we're less aggressive than we were for a while, I would say, are responsive to new acquisitions, although we see, and we're involved and looking at probably half a dozen or so at the present time, but we really want a focus on driving the ZYPITAMAG and ReDS sales in the coming months and quarters, and -- but we have incoming calls all the time, but prices are still pretty high.

Okay, great. Thank you so much.

Hello.

Good morning.

Good morning.

I had one single question, on May 28, I notice that Sensible Medical had licensed their ReDS device to Bayer, primarily that's in Europe. Have you guys reached out or finding the reach out to Bayer at any time in the near-future and maybe if you work together synergistically on the marketing of ReDS?

The Bayer agreement is not as a marketing agreement like ours is. The Bayer has an interest.

They have a study and they're agreed to use the ReDS system in some of their studies, and so they are part of the promotion. So actually that's helping us in awareness, and the cardiovascular community worldwide is fairly integrated, so the American cardiologists attend fairly aggressively, the European and vice versa.

So it's actually -- so we're aware of the program and we're aware of the other ReDS agreements that Sensible has in other parts of the world. So we are in communication with the other parts, and that is helping build awareness.

Thank you.

Okay. Thank you very much for your attendance in the call.

We look forward to further calls and appreciate your interest. Thank you again for participating on the call.