Thank you and good morning, everyone. Welcome to the Medexus Pharmaceuticals fourth quarter and fiscal year end 2021 earnings call.

On the call this morning are Ken d’Entremont, Chief Executive Officer; and Roland Boivin, Chief Financial Officer. If you have any questions after the conference call or would like further information about the company, please contact Adelaide Capital at 905-330-3275.

Thank you, Tina, and thanks everyone for joining us on this call today. Before I discuss the financials, I want to note that we have changed our presentation currency to U.S.

dollars from Canadian dollars. We feel that this change better reflects our current activities, increases the comparability to peer companies and enhances the relevance of the financial statements to users.

Any numbers discussed on the call will be in U.S. dollars, unless otherwise specified.

So we continue to make progress on our growth objectives and are advancing several exciting initiatives that we believe will have a meaningful impact on the business going forward. I'd like to start by pointing out that fiscal 2021 was another record year for Medexus as we achieved 79.7 million in total revenue, or 43.5% year-over-year revenue growth and continuing to build out our business in the United States.

Thanks, Ken. As a reminder, all numbers will be denoted in U.S.

dollars unless otherwise mentioned. Total revenue reached 17.6 million and 79.7 million for the three and 12-month periods ending March 31, 2021, respectively, compared to revenue of 18.8 million and 55.5 million for the same period last year.

As Ken mentioned, while patient unit demand for IXINITY continued to grow during the fourth quarter, net sales were lower as pharmacies and wholesalers worked through inventory on hand. Our revenue for fiscal 2021 was significantly higher than fiscal 2020, due in part to the acquisition of IXINITY as well as unit demand growth of our key products in the period.

Selling and administrative expenses as a percentage of revenue decreased to 45.4% in fiscal 2021 from 55.2% for the same period last year, as we continued to leverage our platform and significantly increase revenue with only modest increases to operating expenses. Our selling and administrative expenses for the 12-month period ended March 31, 2021 increased 18% versus the comparative period which is well below our revenue growth of 43.5% over the same period.

Adjusted EBITDA for the three and 12-month periods ended March 31, 2021 was negative 1.6 million and positive 8.2 million, respectively, compared to 3.1 million and 4.4 million for the same period last year. A $900,000 expense related to IXINITY product was included in R&D expenses and negatively impacted adjusted EBITDA.

This expense was included in the R&D line as it was the result of an unexpected manufacturing expense related to the pediatric trial. This is not expected to have an impact on the timing of the trial.

Adjusted EBITDA was also impacted by an investment in the expected launch of treosulfan later this year, as Ken mentioned. Cash provided by operating activities for the three and 12-month periods ended March 31 of this year were 4.2 million and 5 million, respectively.

This compares to cash used by operating activities of 1.3 million and 1.7 million for the same respective periods last year. Net loss for the three and 12-month periods ended March 31, 2021 was 10.5 million and 28.3 million, respectively, compared to a net loss of 1.6 million and 4.7 million for the same periods last year.

The increase in reported net losses relate primarily to a non-cash unrealized loss on fair value of the embedded derivatives of our outstanding convertible debentures which are sensitive to, among other things, the fluctuations in our share price. These unrealized losses amounted to 5.3 million in the fourth quarter and 20.6 million in fiscal 2021.

We believe that adjusted net income or loss, which excludes the impact of the unrealized gains and losses on the fair value of the derivative, provides a better representation of performance of our operations because it excludes non-cash fair value adjustments on liabilities, which may be settled for shares. The adjusted net loss for the three and 12-month periods ended March 31, 2021 was 5.2 million and 7.6 million, respectively, compared to 5.1 million and 13.9 million for the three and 12-month periods ended March 31, 2020, respectively.

We maintained a solid balance sheet with 24.8 million of available liquidity at March 31, 2020, which consisted of 18.7 million in cash and cash equivalents and an undrawn credit of 6.1 million available under our ABL facility. Subsequent to the quarter, on May 27, 2021, we entered into certain amendments to our existing credit agreements with MidCap Financial.

In addition to the existing $10 million of secured term loan, an additional 5 million is now available to be drawn under the term loan facility, contingent upon certain conditions being satisfied, including conditions related to the PDUFA date for treosulfan scheduled for August 11, 2021 and the company's obligation to make payment related to the treosulfan license agreement. Operator, we will now open the call to questions.

Hi, Ken and Roland. Just a quick question.

I'm assuming the IXINITY wholesaler inventory reduction, was that a one quarter issue? Is that fair?

Yes. Thanks for the question, Andre.

I would say it's something that we've been working on over time. I think we've been making good success and movement.

COVID certainly slowed down new patient recruitment. So the inventory, we're eating away at it more quickly.

COVID in the last quarter, in particular, we kind of shut things down pretty severely. So the patient conversions slowed.

And so there was more inventory in the channel than we want. So I think it's something that we've been working on since we acquired the drug and we're making progress.

Okay. And just in terms of the IXINITY pediatric trial, when do you think those results will readout?

Yes. So once we have completed enrollment, so literally we need one more patient.

So at 100%, then it runs for six months, then we get the readout and then make the application. So we think it's a four to six month review for a supplemental?

Okay. And can you also just provide us an update on your Rasuvo pre-filled syringe, and when would you expect that to be launched or filed at the FDA?

Yes. We've kind of reevaluated that with the addition now of Cumberland kind of in the same space.

We don't think -- I doubt that we're going to watch it at this stage, because we're behind that competitive product. And we think we can defend Rasuvo more aggressively without having that pre-filled syringe.

Just one last question just in terms of treosulfan. Assuming it is FDA approved, how many patients do you think you'll target and what type of pricing do you think, like where do you think it would be priced around?

Great question. So in terms of the patient target, there's 9,000 allo transplants roughly done per year in the U.S., about 60% of those are on label for us.

And so that will be the labeled target. In terms of pricing, we're still doing the work on that.

But we think the pre-generic busulfan pricing is probably about the range that we’ll come in. We can show a pretty significant cost savings to the system as a result of fewer side effects, less hospitalization.

And then, of course, there's the improvement in overall survival.

Where was that pre-generic pricing level around?

Pre-generic, they're about $25,000 per patient.

That's it for me. Thanks, Ken.

Thanks, Andre.

Hi. Good morning.

Thanks for taking my call. Just a follow up to IXINITY.

It's understandable there's some lumpiness there, just given the nature of the drugs. But I'm just wondering if we take a step back, if you're able to characterize any market share gains in fiscal 2021 and considering some COVID challenges, and then also if you have any broad market share gain goals for fiscal 2022?

Yes. Thanks, Justin.

So I think the true measure of our performance with IXINITY is patient conversion. So patient conversion or patient uptake more accurately was 15%.

So that's actual demand. So it's more like prescriptions being filled.

So we're up 15% on the year. So that's still good performance considering that we've had a pretty rough period with COVID and face to face promotion has been extremely limited.

So we feel good about 15% patient growth. What you're seeing in our ex-factory is a result of pipeline.

So the 15% patient growth, but assume there was some inventory dynamics where we haven't necessarily seen that in the financial results. Is that fair to say?

Yes. Since day one, I think if you remember right back to the day we acquired this, all of the sales for the previous owner were coming in the last month of the quarter.

And so there was a dynamic of filling the channel in the last month of the quarter. We're trying to get away from that and have the ex-factory sales more closely match the patient demand.

And so we're slowly moving towards that. So any of these ups and downs are related mostly to channel fill and pipeline fill, not necessarily patient demand and we continue to see patient demand increasing.

So I think the long-term outlook for the drug is very good. But we've got to get through this period of a pipeline adjustment.

Okay, understood. And any expected changes as far as reimbursement or pricing for IXINITY?

No, none expected. Rare disease not tightly managed by the payers, so all the products basically get reimbursed.

Okay. And then for treosulfan, just subsequent to August 11 PDUFA date, can you remind us of the expansion plans for the sales force?

And I understood that there was also some expenses in the current quarter, if that's related to any personnel or other expenses just coming up to the PDUFA date ahead? Thanks.

Yes, correct. So, yes, there were some treo expenses in current quarter and we continue to build the team subsequent to the quarter we're just reporting.

The medical affairs team is largely built out. That's a few people in management, six MSLs; then the commercial team.

The head of the commercial team has now been hired, VP of Sales. She's planning the build out of the rest of the team, which we think will be in the 14 to 16 person range in institutions, and it might be a mix of reimbursement specialists and key account managers.

And what was the actual dollar expense in the quarter related to treosulfan?

I’m going to flip that over to Roland.

Yes, we don't show specifically what was for treo. But what I can say is that it was definitely significant and it's going to keep increasing in the next couple of quarters as we ramp up and be absolutely ready for that launch post PDUFA date.

Okay. And any indication of that ramp up in expenses in the next quarter?

I think it's related to what Ken was saying before, it’s timing of building the team. And without giving any specifics on that, we are going to keep investing and accelerating investment in treo.

Okay, understood. And thank you for taking my questions.

Thanks, Justin.

Thank you. Good morning, guys.

Thanks for taking the call. Just a few questions, some sort of building off the IXINITY discussion that's been going on so far.

Are you anticipating that there will -- are you anticipating that you'll get through the inventory in the channel as opposed to having to take returns on it and any potential write-downs of bad inventory?

Yes, good question. So no, we don't expect any write-downs of inventory.

So we don't expect any returns. They've been extremely minimal to date.

So we don't see that. But we do see balancing of the inventory.

So our monthly sort of sales are better balanced and more consistent with consumer uptake, patient uptake.

Okay, fantastic. So I think it was mentioned that there was the 900k R&D expense that was attributed to the quarter.

Is that correct for the pediatric trial?

That's correct. That was in the quarter.

That's a one-time hit.

Okay.

It won't affect the completion of the trial.

Okay. And so following the completion of the trial, do you have an anticipated level of what your quarterly R&D expenses are going to be going forward?

Yes, once trial is complete, that's the only R&D expense we have. So unless we find another project, they would basically go to zero.

We may advance the autoimmune disease product once this trial is complete, but we haven't made that final decision yet.

Okay, great. All right.

And I know you mentioned Gleolan briefly, so does that product -- is that requiring any sort of P&T approval? And if so, kind of whereabouts is that on the listing statuses?

Yes, it does. So it's kind of institution by institution, but there are a small number of institutions that do these procedures.

So it's pretty targeted. I think we've been having good success.

So there's good uptake. We're getting a lot of positive press because this fundamentally changes how surgeons go about removing these tumors.

And so there's very strong support from the clinicians, because this allows them just to do a much better job. So there's a lot of interest in it.

And so we're just going hospital by hospital, institution by institution, getting to that and to the formulary, and away we go.

Okay. All right, great.

And one last question for me kind of going back to IXINITY, you mentioned that you're looking for -- working with your manufacturing partners and improving the COGS on that product. When do you anticipate those improvements sort of rolling through, and what degree of lift that might give on the margin?

Yes, it's a long-term project changing the manufacturer of a biologic product. So we would anticipate -- we start to make small gains this year.

It's already started. So there are small improvements that are being made.

And then as we move along, the improvements become fairly significant. And ultimately, we want to bring the gross margin of that product in line with the rest of our portfolio.

And we certainly think we can do it with this COGS improvement program.

Okay, awesome. Thank you.

Hi. Thanks for taking my call.

Just on the treosulfan FDA review, I think you mentioned that the inclusion of pediatric patients on the labeling is expected to give you exclusivity. And I just wondered if you could talk a bit more about the labeling and why that's the link to the pediatric patients’ kind of indication with exclusivity?

Yes. So the Orphan Drug Act enables an extra six months if pediatric is included in the label.

We now believe that pediatrics will be in the FDA label. That's the seven and a half years exclusivity now.

And we're getting very close to the PDUFA date. So we're within two months of the approval.

And so the discussions back and forth with the FDA make us very optimistic that it will get approved at the PDUFA date and it will have a favorable label.

Thank you. That's helpful.

I guess it's the extra six months related to the pediatric indication. And the other question I had is on IXINITY which I think we have largely covered.

I guess just conscious in the comparable quarter from March 2020, I think you only recognize 85% of the quarterly revenue because of the acquisition date. So I guess with that and then the integrates, I guess you might have expected kind of growth in the 30s.

It seems quite a significant decline against that. But that's really just due to all the inventory that was held because there's quite a lot of inventory in the channel, wasn't there?

Yes, there was significant amount of inventory in the channel. So, again, I think let's go back to what really drives ex-factory sales, which is patient demand.

That's a true measure of what's happening in the market. So we know patient demand, we measure that.

It's plus 15% last year even during COVID where it was tough to get new starts. And so we feel pretty good about it.

It was expected, the inventory lumpiness from the previous owner. We saw it.

We knew that we'd have to address it. I think having the entire year that we've owned this product was COVID.

Remember, a week after we acquired this basically went into a lockdown. And so the type of patient conversion slowed from previous.

We had anticipated that through a period of 12 months we'd be able to normalize a channel, but with COVID that just wasn't possible.

Thank you. That's helpful.

Great, thank you so much. We appreciate everyone paying attention and all the great questions today.

We believe Medexus has achieved significant growth over the last few years and we continue to invest in the team and the resources to accelerate that growth. With the treosulfan PDUFA date now less than two months away, we are clearly doing everything we can to position the company for what will be our most substantial product launch to date.

We look forward to updating investors and stakeholders on our progress over the coming months. Thanks very much for participating today.