Medicure Inc.

Thanks, moderator, and good morning to everyone on the call. We appreciate your interest and participation in today's call.

Joining me today is CFO, James Kinley; and Dr. Neil Owens, President and COO.

The sales and marketing of AGGRASTAT continues to be the company’s main source of income and profit. AGGRASTAT has about 67% of the patient market and we still see some modest conversions to AGGRASTAT.

The margins have been declining but are now stabilized and Medicure is introducing programs to reverse the decline. The revenue for the quarter ending September 30, 2019 from AGGRASTAT was 5.3 million compared to 6.2 million in Q2 2019.

ReDS contributed about 117,000 of net revenue for the three months and ZYPITAMAG was 78,000. We had a net loss for the quarter ending September 30 of 599,000 compared to a net loss of 545,000 for the quarter ending September 30, 2018.

Sales of ZYPITAMAG and ReDS are still slow but insurance coverage has increased substantially which should have a positive impact in 2020. Medicure obtained a major non-dilutive influx of cash with a purchase and subsequent sale of Apicore.

US$10 million of this cash was invested to purchase shares of Sensible Medical in Q1 of 2019. And just a few weeks ago, we announced the substantial issuer bid, SIB, to use about CA$26 million to purchase 4 million shares for cancellation at a set price of $6.50 per share.

We value our shareholders and believe that this is an appropriate way to share the profits from the sale of Apicore with the owners of Medicure who have supported the growth of our company over the years. Further, we believe our recent investments and the programs initiated for our new products will provide growth in revenue and profits in the coming years.

As in the case of AGGRASTAT, which we grew from 2% to 67% of the market, it takes time and persistence to make this a reality. Our shareholders have been patient in the past and we believe the substantial issuer bid is a good way to provide a near-term value as we build an even stronger future in the coming years.

Medicure has a good cardiovascular product portfolio, a track record of growing sales and market share and a great team with energy, talent and experience to build a strong growing company. Medicure’s focus is growing the sales of AGGRASTAT, ZYPITAMAG and ReDS and sodium nitroprusside while we build out its cardiovascular product portfolio with a strong commitment to profitability.

I’ll now turn over the call to our CFO, James Kinley, to review the financials and provide some color on the third quarter.

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 nine months ended September 30, 2019, along with previous financial statements on the Investors page of our Web site and a copy of the financial statements and management's discussion and analysis can be obtained from sedar.com.

I will take you through the key highlights of financial performance for the quarter ended September 30, 2019. Total revenues for the quarter ended September 30, 2019 were 5.5 million compared to 7.4 million for the quarter ended September 30, 2018.

Net revenues from AGGRASTAT for the quarter ended September 30, 2019 totaled 5.3 million, a decrease from net revenues from AGGRASTAT for the quarter ended September 30, 2018 of 7 million. A 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.

The ReDS system, for which a license was acquired in January 2019, contributed approximately $117,000 of net revenue for the three months ended September 30, 2019 and ZYPITAMAG contributed approximately 78,000 compared to 326,000 in the comparative quarter in 2018, which contained initial wholesaler ordering. Our goal is to continue to maintain and grow the AGGRASTAT brand while providing product diversification in the form of ZYPITAMAG launched in May of 2018, ReDS acquired in early 2019 and our generic sodium nitroprusside which is now available commercially in the U.S.

market. Turning to cost of goods sold.

AGGRASTAT cost of goods sold for the quarter ended September 30, 2019 totaled 662,000 compared to 909,000 for the quarter ended September 30, 2018 with the decrease coming as a result of the mixture of product being sold with more of the larger product size being sold in Q3 of 2019. This resulted in gross margins from AGGRASTAT for the quarter ended September 30, 2019 of approximately 87%, consistent with the same quarter in the prior year.

Cost of goods sold for the quarter ended September 30, 2019 contained 65,000 and 174,000, respectively, pertaining to amortization of the licenses for ZYPITAMAG and ReDS and 578,000 relating to a write-down of expiring ZYPITAMAG product. Selling expenses totaled 3.3 million for the quarter ended September 30, 2019, down from 4 million for the quarter ended September 30, 2018.

The reduction in selling expenses when compared to the same quarter in the prior year is the result of ZYPITAMAG launch costs incurred in the quarter ended September 30, 2018. General and administrative expenses totaled $1 million for the quarter ended September 30, 2019, up from 709,000 for the quarter ended September 30, 2018 and the increase is primarily related to legal costs incurred in the third quarter of 2019 which resulted in the settlement of the patent dispute the company was engaged in with Gland, which was settled in August 21, 2019.

Research and development expenses were 976,000 for the quarter ended September 30, 2019 compared to 1.4 million for the three months ended September 30, 2018. R&D expenses for the current period relate primarily to additional development projects which are underway.

Medicure is in the process of developing additional generic cardiovascular products with the cost of each ANDA 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 R&D costs to increase relative to this. The company recorded net finance income of 116,000 for the quarter ended September 30, 2019 compared to 88,000 for the quarter ended September 30, 2018.

The finance income relates to interest on the company's cash balances and short-term investments offset by the change in fair value of the company's AGGRASTAT royalty obligation during the quarter. The company does not have any long-term debt on its statement of financial position and had cash balances of approximately 35.7 million as of September 30, 2019.

The company recorded a gain of 601,000 from foreign exchange for the quarter ended September 30, 2019 compared to a foreign exchange loss of 916,000 for the quarter ended September 30, 2018. The foreign exchange gain during the third quarter of 2019 resulted from increases in the U.S.

exchange rate during the third quarter of 2019, which applies to the significant U.S. dollar cash balance held by the company at the end of the quarter.

This results in a net loss for the quarter ended September 30, 2019 of 599,000 or $0.04 per share compared to 545,000 or $0.03 per share for the quarter ended September 30, 2018. Adjusted EBITDA for the quarter ended September 30, 2019 was negative 319,000 compared to adjusted EBITDA of 599,000 for the quarter ended September 30, 2018.

The decrease in EBITDA compared to the same quarter in the prior year is primarily due to lower revenues between the two quarters. As at September 30, 2019, the company had cash totaling approximately 35.7 million compared to 71.9 million of cash and short-term investments as at December 31, 2018.

As at September 30, 2019, the company had working capital of 43 million compared to December 31, 2018 of 72.7 million. The decrease in cash primarily relates to the US$10 million investment or approximately CA$13.4 million investment in Sensible Medical where we acquired approximately 8% equity on a fully diluted basis in Sensible Medical as well as the U.S.

rights to the ReDS medical device. 6.6 million of cash was invested in the acquisition of ZYPITAMAG as well as 4.1 million was used to purchase 751,000 of our common shares under the company's normal course issuer bid.

As previously noted, the company announced a substantial issuer bid intending to use up to 26 million in cash to purchase up to an additional 4 million common shares of Medicure from shareholders. 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 of the company as a whole.

And with that, I would like to turn the call over to our President and COO, Dr. Neil Owens for some additional commentary regarding our operations.

Thanks, James, and good morning, everyone. Medicure’s commercial team continues to execute on our strategic plan focused on the commercialization of cardiovascular products for the U.S.

market. Our product portfolio now covers acute and preventative care as well as prognostic technologies within the cardiovascular space.

Sales of AGGRASTAT remain strong and it continues to be the number one glycoprotein IIb/IIIa inhibitor used in the United States with approximately 67% market share. It is now used in more than 1,200 U.S.

hospitals. Pricing pressure from generic Integrilin products has impacted net revenue from AGGRASTAT which we are attempting to offset through efficiencies and distribution, contract negotiation and segmented pricing.

We continue to make strategic investments in the brand through marketing and generation of new clinical data. Turning our attention to ZYPITAMAG, we continue to see improvements in the number of commercial lives with access to ZYPITAMAG and expanding coverage remains a primary objective.

This has been facilitated by our control of pricing through the acquisition of the new drug application or NDA. In Q3, coverage was extended to an additional 10 million Americans leading to more than 40 million Americans having pharmacy benefits that cover ZYPITAMAG.

We expect to continue expanding coverage as bid cycles come up for review, negotiation including the federal markets and specialized formularies. Medicure announced that it has reached the preferred pricing agreement with ADAP Crisis Task Force.

The agreement opens access to ZYPITAMAG to low income, underinsured and uninsured Americans living with HIV to qualify for ADAP coverage in states where ZYPITAMAG has been adopted on to the ADAP formulary. Overall, we've been able to grow new and repeat prescriptions and expect that as access continues to improve, that sales will accelerate through execution of our marketing strategy directed to both physicians and patients.

The marketing and sales partnership with Sensible Medical for their ReDS device has provided us with a great opportunity to expand our product offering and diversify our revenue base. The device measures lung fluid levels in patients with heart failure.

Heart failure remains a significant and growing financial burden for the U.S. healthcare system.

In Q3 2019, we announced the launch of the ReDS Pro system which provides several improvements over the ReDS Vest, including ease-of-use and more rapid lung fluid measurements. The response from purchasers and practitioners we've engaged with has been very positive.

This, however, has affected the sales cycle for accounts that we are in the process of reviewing ReDS Vest as they nearly unanimously wanted to evaluate the ReDS Pro system. Our sales team has been able to leverage existing relationships developed through the sale of AGGRASTAT to drive awareness of the device and gain access to both influencers and decision-makers.

The message of how ReDS can improve patient care and decrease health care utilization costs continues to be well received. We continue to leverage existing and new clinical data.

For example, in Q3 the SMILE-HF trial study results were presented at the 2019 Heart Failure Society of America conference. This trial involved 268 patients at 43 centers in the United States.

When used as intended, ReDS guided management reduced hospital readmissions by 58%. At the outset, we've been actively focused on hospitals located in regions of the United States that have high hospital readmission rates due to heart failure.

We're also focused on contracting with GPOs and Accountable Care Organizations to facilitate access and adoption of the device. In addition to branded products, we've launched and are also developing additional cardiovascular abbreviated New Drug Applications or ANDAs for in-hospital use.

The launch of sodium nitroprusside in Q3 2019 is the first example and we're in the process of contract negotiation. While the number of units sold in the market per quarter has remained constant, there has been significant price erosion to the entry of multiple generics.

At this time, we're not going to release the details about the identity of the other products but they are congruent with the relationships and expertise we've established through AGGRASTAT and S&P. In summary, Medicure expects continued success from its lead commercial product AGGRASTAT that has become the number one glycoprotein IIb/IIIa inhibitor used in the market.

Our focus now is on growing sales of ZYPITAMAG and ReDS and expect that through the execution of our marketing plan and talented sales team, they will significantly contribute to and diversify 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 committed and dedicated sales and marketing team and very optimistic about their efforts to realize growth in sales and profitability in the coming years.

With a good balance sheet and we continue to focus business with a stable long-term outlook to generate value for our shareholders. And as always, I want to express my appreciation to our outstanding team of employees which we've been blessed with.

Thank you our shareholders for your continued support and interest. So, moderator, I'll turn it back to you to lead us into Q&A.

Thank you.

Okay. Thank you very much for your interest and your listening.

We look forward to next call and having you on the call. Thank you.