Medicure Inc.

Thank you, Colin and good morning and welcome to all on our call. We appreciate your interest and participation in today’s call.

Joining me today is the Chief Financial Officer James Kinley; and Dr. Neil Owens, President and Chief Operating Officer.

The good news for this quarter is that both the income and EBITDA were positive, a positive change from the losses that have been reported in the previous five quarters and this positive news, despite the decline in business this quarter due to COVID-19. Medicure has a strong balance sheet with over 11 million cash and no debt.

Medicure has again successfully adjusted to the realities of this business and sales and enabled to accommodate the challenges. The sales of AGGRASTAT were down substantially because of reduced procedures to the COVID but we're starting to see some slow recovery from the significant dip.

Our focus of the business has shifted more strongly to the AGGRASTAT franchise and growing the ZYPITAMAG business, more directed marketing to patient as well as the health care providers. The revenue for the quarter was CAD2.7 million, which is down from CAD6.3 million for the same quarter in 2019.

AGGRASTAT was the vast majority of that at CAD2.6 million and over 100,000 for ZYPITAMAG and none for ReDS, 17,000 for sodium nitroprusside. We had a net income for the quarter of 19,000, although small, it is positive.

Medicure has reduced operating expenses on the ReDS with the goal of transitioning to sales and marketing to a new team and retaining the value investment in Sensible Medical. As mentioned, the main focus of the present is on the sales and marketing of AGGRASTAT and ZYPITAMAG, which continue to have great margins and potential.

We believe the past few quarters investments and programs for our new products will provide the growth in revenue and profits for the coming quarters and years. It takes time and persistence to make this a reality.

Our shareholders have been patient in the past and we believe this substantial issue of returning CAD26 million to our loyal shareholders was a good way to provide near-term value as we build an even stronger future. Medicure has a good cardiovascular product portfolio, a track record of growing sales and markets, and a great team with energy, talent and experience to build a strong growing company.

I'll now turn it over to CFO, James Kinley to review and provide some color on the financials for the quarter.

Thank you, Albert. 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 30th, 2020, along with previous financial statements on the Investors page of our website, and a copy of the financial statements and management's discussion and analysis can be obtained from sedar.com. I will now take you through the key highlights of financial performance for the second quarter ended June 30th, 2020.

Total revenues for Q2 2020 were CAD2.7 million, compared to CAD6.3 million for Q2 2019. Net revenues from AGGRASTAT for the quarter ended June 30th, 2020 totaled CAD2.6 million a decrease from net revenues from AGGRASTAT for the same quarter of 2019 of CAD6.2 million.

The decrease in revenues from AGGRASTAT is due to a decrease in procedures performed in the quarter due to COVID-19 and higher discount and selling prices of the product due to increased pricing pressures from generic versions of Integrilin, when compared to Q2 of 2019. The company earned revenues from ZYPITAMAG for Q2 2020 of CAD103,000 compared to CAD9,000 for Q1 2019.

The company will continue to focus on ZYPITAMAG and expects revenues to grow through the second half of 2020 and beyond. There were no revenues recorded from ReDS during Q2 2020, compared to 51,000 in the same quarter of 2019, and the company earned CAD17,000 of revenue from SNP during Q2 2020.

Turning to cost of goods sold. AGGRASTAT cost of goods sold for Q2 2020 totaled CAD715,000, compared to CAD1.1 million for Q2 2019.

This resulted in gross margins for the quarter of approximately 72%, a decrease from the approximately 82% for the same quarter in the prior year. ZYPITAMAG cost of goods sold for Q2 2020 totaled CAD744,000 Turning to cost of goods sold AGGRASTAT cost of goods sold for Q2 2020 totaled 715,000 compared to 1.1 million for Q2 2019.

This resulted in gross margins for the quarter of approximately 72%, a decrease from the approximately 82% for the same quarter in the prior year. ZYPITAMAG cost of goods sold for Q2 2020 totaled 744,000 and includes 10,000 relating to products sold to customers 627,000 from amortization of ZYPITAMAG intangible assets, 104,000 relating to -- the write down of expiring inventory and 3,000 relating to royalties on the sales of ZYPITAMAG resulting from the acquisition of the product in September of 2019.

Removal of the amortization and write down would result in a strong gross margin for the product of approximately 87%. ReDS cost of goods sold for Q2 of the prior year totaled 176,000 pertained to amortization of the ReDS license prior to the impairment recorded over those intangible assets in Q4 of 2019.

And additionally SNP cost of goods sold during the quarter totaled 17,000. Selling expenses totaled 971,000 for Q2 2020 down significantly from 3.3 million for Q2 of 2019.

The reduction in selling expenses when compared to the same quarter in the prior year, is due to significant reductions in spending pertaining to travel and conference attendance as a result of COVID-19, as well as cost reductions primarily pertaining to ReDS selling costs, including previous headcount reductions implemented by the company during 2019 and into 2020. Additionally, during Q2 of 2020, the company reported a recovery of salary expenditures of 248,000 through government assistance resulting from the Canadian emergency wage subsidy within selling expenses.

General and administrative expenses totaled 770,000 for Q2 2020, consistent with Q2 2019 G&A costs of 769,000. During Q2 2020, the company recorded a recovery of salary expenditures of 43,000 from government assistance resulting from the Canadian emergency wage subsidy within general and administrative expenses.

This as well as other cost savings were offset by higher legal expenses resulting from the company's defense of a challenge against its patent for AGGRASTAT. Research and Development expenses for Q2, 2020 totaled 98,000 compared to 1.2 million for Q2 2019.

The significant decrease is the results of our recovery of 677,000 of FDA fees previously paid, which will be refunded as a waiver for these fees was successfully received in the quarter. Additionally, timing of various development projects which were underway contributed to the decreases.

During Q2 2020, the company reported a recovery of salary expenditures of 34,000 through government assistance resulting from the Canadian emergency wage subsidy within research and development expenses. Medicure is in the process of developing additional cardiovascular products within the development costs being approximately 2 million each 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 finance income of 380,000 for Q2 of 2020, this relates to our recovery of accretion on the company's AGGRASTAT royalty obligation as well as interest on cash held by the company.

This compares to finance income for Q2 of 2019 of 182,000, which relates to interest on cash held by the company partially offset by accretion of the company's royalty obligation. The company recorded a foreign exchange gain of 278,000 for Q2 2020, compared to a loss of 813,000 for Q2 of 2019.

The change relates to changes in the U.S. dollar exchange rate during the respective periods, which lead to the foreign exchange gains and losses as it applies to the significant US cash balance held by the company at the end of both periods.

This results in net income for the quarter of $19,000 or zero per share, compared to a net loss of $957,000, or $0.06 per share for Q2, 2019. The change in net income or loss is due to reductions in operating expenses as previously noted, and foreign exchange gains in Q2, 2020, which were partially offset by decreased revenues.

Adjusted EBITDA for Q2, 2020 was $263,000 compared to adjusted EBITDA of $103,000 for Q2 2019. The change is primarily due to lower operating expenses partially offset by lower revenues experienced during the quarter.

As at June 30 2020, the company had cash totaling approximately $11.2 million compared to $13 million as of December 31, 2019. As at June 30 2020, the company had net working capital of $19.1 million consistent with net working capital at December 31, 2019 of 19.7.

As of June 30 2020, the company did not have any debt recorded on its statement of financial position. I want to remind you that 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 would like to turn the call over to our President and Chief Operating Officer, Dr. Neil Owens for some additional commentary regarding our operations.

Thank you, James. And good morning, everyone.

First, to provide some perspective on the effects of the COVID-19 pandemic in Q2, there was an impact on the sales and marketing of Medicure's products. As we are focused on US market which has and continues to record high infection and hospitalization rates.

There is no impact on manufacturing, inventory, distribution or product development. More specifically, starting in April hospitals started to reduce the number of elective procedures, which reduced the demand for AGGRASTAT.

However, this returned to typical levels by mid-May. All meetings with health care professionals have been virtual since mid-March.

However, there was an immediate accommodation of this approach by US clinics, which meant that marketing of ZYPITAMAG was impacted to a lesser extent. This change has resulted in reduced selling costs and because of the cost effectiveness of virtual meetings, the sales team will likely benefit from this approach even when US travel resumes.

The sales for the ReDS device was by far impacted the most by COVID-19 where hospitals are facing tremendous financial pressure and have put most capital equipment purchases on hold. Because of the reduced revenue seen early in Q2, there was a concerted effort to be as efficient as possible with spending.

And as a result, we significantly reduced selling costs while still striving to make every effort to increase sales. Despite the decrease in sales in Q2, AGGRASTAT maintains the majority of the patient market share in the United States.

We have renewed our focus on working with key opinion leaders to effectively market and AGGRASTAT remains the preferred glycoprotein in vitro inhibitor in more than 1200 US hospitals. We also continue to work with hospital pharmacists to make AGGRASTAT the preferred IV antiplatelet agent as the remaining cost savings opportunities by doing so.

In order to reduce the costs of distribution of AGGRASTAT, in Q2, we launched the Medicure Direct portal, which allows hospitals to make bulk purchases directly from Medicure, which is a more cost effective approach for both parties. We've also made adjustments to our contract pricing which includes price increases of certain product formats.

We continue to make selective investments in AGGRASTAT including clinical research that we believe will help expand the market and new indications, which can extend the life cycle of the product. In Q2 the first clinical studies to compare AGGRASTAT to cangrelor was published in the journal of circulation, which was an investigator sponsored study led by Dr.

Marco Valgimigli called FABOLUS-FASTER, supported by an unrestricted educational grant from Medicure. The study showed significant superiority of AGGRASTAT over cangrelor in terms of platelet inhibition and patients undergoing PCI.

While only published recently, the study has generated a lot of discussion within the cardiology community and has been downloaded more than 1,500 times as an open access article. We recommend reviewing Medicure’s press release on the study for further details.

Turning our attention to ZYPITAMAG through bids and negotiation there was further expansion in pharmacy benefit coverage in Q2 with more than 150 million Americans now receiving commercial and Medicare part D coverage for ZYPITAMAG, including a small percentage of preferred unrestricted access to the products. We continue to expand coverage as bid cycles come up for review and negotiation.

In conjunction to coverage Medicure is focused on making access to the ZYPITAMAG as straightforward as possible for physicians and patients. In Q2 Medicure announced the launch of a direct to patient online pharmacy program for the distribution of ZYPITAMAG.

The program offers many advantages to increase patient access, including home delivery at no added cost, no added pharmacy fees and refill reminders directly to their mobile device. The program also offers advantages to prescribers as there is support for prior authorizations and the product is shipped nationwide.

There is still a savings card program in place for patients who prefer to fill their prescription at their local pharmacy. We continue to focus on adding new prescribers, new patients and having a high refill rate.

We are increasing our focus on digital and social media advertising to consumers to explain the benefits of ZYPITAMAG over other stands and its accessibility in terms of price and home delivery. Our team remains motivated and driven to increase sales and fulfills the ZYPITAMAG market potential.

As mentioned the sales of ReDS device was highly affected by COVID-19 and as a result, there were no sales in Q2. Because of the slow sales cycle and lower margins the focus has shifted to transitioning the sales and marketing to a new team and retaining the value of investment in Sensible Medical.

As mentioned in terms of branded products, the main focus of presence is on the sales and marketing of AGGRASTAT and ZYPITAMAG which can continue to have high margins and great potential. In terms of our generic products, the sales of sodium nitroprusside or SNP were impacted to some extent in Q2 due to COVID-19.

However, we believe that as caseloads have increased SNP can provide a modest revenue to the company. Medicure continues to develop additional cardiovascular abbreviated, new drug applications or ANDAs for in hospital use and are targeting the next end to launch in Q1 2021.

We believe this end we'll have higher margins and less generic competition compared to SP. We continue to evaluate branded products and products with high market share potential to add to Medicures product portfolio and those that would align well with our focus and context in US cardiovascular market.

In summary, although there have been challenges presented by COVID-19, there remains significant opportunity from AGGRASTAT, ZYPITAMAG and our future cardiovascular products. Despite reduced revenue because of controlled spending, we're pleased we can still report a positive income and EBITDA in Q2.

Our team wants our investors to know that, we are driven and dedicated to growing revenue and making Medicure a long-term success. With that, I'd like to turn the call back to Dr.

Friesen for final comments.

Thank you, Neil. The past five quarters were a period of transition.

There was considerable learning and adjustments, which will be the basis of the market push for the coming quarters. We're thankful for AGGRASTAT and ZYPITAMAG, the additional cardiovascular assets and a strong balance sheet.

We continue to focus on growing the business with a pipeline of cardiovascular products that will further diversify our revenue and asset. We're carefully investing to grow, our future profitability.

My goal and that of our Board management and staff is to continue to build this business with a stable, long-term commitment to generating value for our shareholders. And as always, I want to express my great appreciation to the outstanding team of employees that we have been blessed with.

Thank you to our shareholders and for the continuous support and interest. And Colin, I'll turn it back to you to lead us through the Q&A.

Yes. Good morning, Albert, Neil and James.

It's nice that you were profitable as you were sort of indicated. I assume the sales into July and August are improving and the profitability won't continue going forward.

Thank you, Sam. Thanks for being on the call and the question.

Right now we see the continued growth in sales and we haven't made, we've had a practice of not making guide, providing guidance, projections. But things continue to encourage the revenue and profitability in the coming quarters.

Well, that's good. I guess the AGGRASTAT should be easier to sell with the COVID-19 less of a problem and has that sort of significantly improved the AGGRASTAT?

I would say the growth has been modest, but steady. There's still, access to hospitals is still very restricted in the US.

And so, but there is growth. But I wouldn't say, I don't know if you're asking me whether there's a very significant jump.

There isn't a huge jump because of the reduction or the control of COVID. And COVID is, we would see is modestly under control.

There's still a second wave and still concerns about ongoing issues.

The fact that you had the significant foreign exchange gain, I assume, based on the cash, this will continue right now that's based on the way the currency is now?

We're kind of -- we're seeing a bit more strengthening of the Canadian dollar in -- near the end of Q2 and into Q3. We also converted from US to Canadian, fairly significant number during the quarter when the rates were fairly high.

So, I don't think we see swinging the other way to what we were had in Q2 of 2019. But the gain may not be sustainable throughout the year or we may not see significant gains going forward.

Okay. And you purchase your stock in the with the official normal of course issue a bid.

The 131,000 and how much did you buy in July and August, and how much do you have left to buy?

So, the purchase that was made in Q2 was actually the completion of the previous normal course issuer bid, which expired at the end of May. We have renewed the normal course issuer bid for another year.

But as of today, we haven't made purchases under that, under that NCIB. I think it's about 500,000 shares that we have the ability to buy.

Okay, and as far as the use of cash. Do you have any plans to use the cash going forward any in other words, do you expect to use a significant amount of cash or modest.

So, that by the end of the September quarter, we will have reduced some of the cash?

We have no programs then we committed right now to use the cash. But, and actually we, as the during Q2, we received a waiver on FDA fees, which was actually refunded in July.

So, we will actually see a bit of a pickup in cash into July. And we don't really have any significant cash outlays for Q3 other than in terms of normal operating expenses.

All right. It sounds good.

Good luck, hope you continue the profitability and the improvement and you could get some. Did you see any significant offerings of stocks that you weren't able to buy going forward?

Or how does that work?

We haven't, I don't, I guess we're not aware of any.

Okay.

There hasn't been a lot of trading and that doesn't seem to be a lot of selling or buying.

Okay, good luck. And we'll just have to keep on the hopefully, the products sell more.

Good luck.

Could you just give the description you have the sales force dedicated to AGGRASTAT. And ZYPITAMAG, how many people do you have dedicated to each?

Can they cross sell? Just give me a sense on what the foots are the ground you have in marketing those two drugs?

Neil, do you want to address the question or?

Sure? Yeah, good morning.

So basically, we did make some reductions in headcount, but those are mostly at the management level. And so we've tried to maintain our sales force as much as possible.

The sales and marketing team is about 20. And there is crossover in terms of some of the sales.

We've tried to keep some people dedicated to decide certain AGGRASTAT or as ZYPITAMAG really based on performance. But there is crossover of some products.

Obviously, the game has changed slightly with COVID-19. So we have virtual meetings.

We're not limited in terms of who we can reach out to? And in many cases, we're actually being more successful in terms of booking meetings.

So to answer your question, there is some crossover. But we also have some staff dedicated to the products if they're really performing in a way that we want them to right now.

Great. The sales on AGGRASTAT that went from 6.2 to 2.6 because of COVID.

Are those sales lost or do you think if things get better in the United States, you'll recover those sales opportunities.

Again, some of that reduction was a vast majority that majority of that due to lost COVID and procedures. And whether we will recover all of it, I think it's hard to predict.

I don't know if Neil do you want to add any more color?

Yeah, so I think that there will be some recovery. As a class, we've seen some trending down overall, which is why we're kind of still maintain that market share majority.

So we're finding though is that -- it's still a mainstay. Physicians are still very happy with AGGRASTAT.

They still know that they need to use it. Obviously they trust the product.

I think the one of the challenges is just kind of getting access to those physicians, especially interventional cardiologists. It's a little more challenging to reach them virtually.

So that's just one of the challenges. But I think with some of the new data that we have coming out it's really spurred, or conversation and it's kind of put AGGRASTAT back in the limelight.

Right. Now, you mentioned in your prepared remarks, there is a generic with AGGRASTAT.

Can you give me a sense of the interplay between the generic competition and your branded AGGRASTAT. Is it's simply, question of put me in the room your salesperson trying to market.

Your value-added AGGRASTAT versus the generic competition. What's the sales pitch on that?

Neil, did you want to address that or.

Sure, yeah. So there's actually no generic of AGGRASTAT in U.S.

We're the only branded AGGRASTAT. What we face is this competition from a different drug called Integrilin or after active fiber type.

There are some nice advantages of AGGRASTAT over. I mean, these are brand name Integrilin.

So for a single bolus, instead of a double bolus where room temperature storage and instead of refrigerated. On average, we actually have higher segment inhibition.

So there are some administrative conveniences. And I would say that the single bolus instead of a double bolus is a big factor.

Also, we've seen a trend towards short fusion to be trade administration, and we're the only to be trade with short infusion on label. So, it's more, I think that our pitches is more so, you can use it in a contemporary way and I would say that's kind of the main selling features.

One last one you mentioned, patent challenge, that's ongoing with AGGRASTAT how much of a competitive threat to your protective mode is that.

Hey, we're negotiating a settlement, which might provide a short period of time for the competitive to keep them out of the market and give them a few months entry. So rather than spend a lot of legal fees and battling, we're looking at a potential settlement.

If not, we will defend the position. We believe our patent is strong and can take a very aggressive defense against patent infringement.

You have a very interesting story with a strong balance sheet. Are there any thoughts of reverse splitting the stock so that it's, you know, trades at a higher level of that a whole different constituency of potential investors might be interested in your company stock.

I understand the question wasn't so long ago then start traded at $4, $5 and $6, just a number of factors that seem to put selling pressure on the stock. And, as we reported, we've gone through a number of quarters where we've transitioned from originally fairly substantial profits through trying to rebuild a couple of products, investing in products and back now to our profitability.

So we think we have potential to grow the business very substantially and see growth in share price. We're not considering the stocks.

Okay. And one last one is the prior caller kind of asked it, but what do you think your cash burn will be for the balance of this calendar year?

Right now, we're not projecting a reduction in cash.

Thank you again for being on the call and look forward to further reports after Q3. Wishing all the best for the day.