Medexus Pharmaceuticals Inc (CVE:MDP) (OTCMKTS:PDDPF) (FRA:P731) CEO Ken d’Entremont provides an overview of the company and highlights its latest financial reporting. The company is the results of the recent amalgamation of three specialty pharmaceutical companies: Pediapharm Inc, Medexus Inc, and Medac Pharma. As d’Entremont explains, the combined entity provides Medexus Pharmaceuticals with a footprint in both Canada and the United States, while expanding its therapeutic expertise to include pediatrics, autoimmune diseases, oncology, and rheumatology. The merger was undertaken to allow the company to rapidly scale. Further, Medexus Pharmaceuticals can now drive revenue while opex stays flat, benefiting from the organic growth of a larger product portfolio. Medexus Pharmaceuticals announced Q3 Fiscal 2019 revenues of $14.4 million, a 512 percent increase year-over-year.
Narrator: Medexus Pharmaceuticals Inc. is a Montreal-based specialty pharmaceutical company focused on the therapeutic areas of autoimmune disease and pediatrics.
The company’s leading products are Rasuvo and Metoject, unique formulations designed to treat rheumatoid arthritis and other autoimmune diseases.
Another leading product is Rupall, an innovative allergy medication with a unique mode of action.
Medexus Pharmaceuticals Inc. trades on the TSX Venture under the ticker symbol MDP.
[stock_chart symbol=MDP:TSV” align=”left” range=”1M”]
James West: Ken d’Entremont is here with me now. He’s the CEO of Medexus Pharmaceuticals, trading on the TSX Venture under the symbol MDP. Formerly, you might recognize this name, as it used to be Pediapharm, but you weren’t CEO then.
Ken d’Entremont: That’s correct, I was not. I was –
James West: New name, new CEO…
Ken d’Entremont: New everything. New business.
James West: New business.
Ken d’Entremont: It’s a new business.
James West: Give us an overview, Ken: what’s new with Medexus?
Ken d’Entremont: Well, it’s a specialty pharma company that we’ve taken three distinct organizations and put them together, basically to increase scale: Pediapharm, Medexus, which is the company that I founded, and Medac, which is a company that we purchased. All had the same problem: we lacked scale. So we put the three organizations together, you end up with an organization that is EBITDA-positive, very strong revenue growth, with a very strong pipeline.
James West: Wow.
Ken d’Entremont: So we’re really happy about where we are.
James West: Okay. So Pediapharm used to be focused on kids’ medications.
Ken d’Entremont: Correct.
James West: What was the focus of the other two companies?
Ken d’Entremont: So my company, Medexus, was rheumatology focused in Canada. We had several agents for rheumatoid arthritis, osteoarthritis, juvenile idiopathic arthritis, was arthritis in children. And the Medac pharma business was the same, with a similar product called Rasuvo, focused on rheumatoid arthritis.
So obviously, that was a perfect fit for us, because we were focused in that therapeutic area, and rolling together with Pediapharm was a good move, because they were publicly traded and they had a very similar business model, just in a different therapeutic area.
James West: Sure. So yesterday, you announced Q3 financials ending December 31st, and by all accounts it’s very positive. Revenue up 512 percent to 14.4 million; gross profit up 657 percent to 8.9 million. Is this a direct result of the combination of these three entities?
Ken d’Entremont: Yeah, absolutely, yes. So we’ve put all three entities together; all were growing, all were either producing positive EBITDA or about to produce positive EBITDA. So you put the three entities together and you have a very strong company.
So I think the quarter that we announced, we’re very happy with these results, but we think it’s very reflective of what we’ll do next year. And we will continue to drive revenue while our OpEx stays flat. So our expenses aren’t going to change a lot; all the growth that we’re getting is from organic growth of products already in our portfolio.
James West: Sure, okay. And what is your best-selling product at this point?
Ken d’Entremont: Rasuvo, which is an auto-injector of methotrexate used to treat rheumatoid arthritis and psoriasis. Methotrexate is a drug of choice in rheumatoid arthritis, and is often used early on in the disease and then continued on as other drugs are added. So for sure that is our number one product, but we also have a very exciting product in Rupall. Rupall is an antihistamine, a prescription antihistamine, which is really best in class. So that product is growing dramatically, more than doubling year-over-year, as people move into branded antihistamines.
So we’re stealing share from generic antihistamines that are prescription, and also from over the counter antihistamines, because this is just a better product.
James West: Interesting. So tell me: how do the economics of this work for the company when you acquire an off-patent drug, or rather, a successful drug that’s not yet licensed into this territory? How does that all work?
Ken d’Entremont: Yeah, typically, when we go to license a drug, we want to keep the upfront payments low or zero. We really position ourselves as excellent commercial operators, and the revenue that the licensor is going to get is mainly tied to the unit sales that we generate.
So the greatest benefit they could have is by having a good commercial operator.
James West: Interesting. So then, do you become more attractive to the manufacturers of these drugs as an expanded entity?
Ken d’Entremont: Absolutely. Yeah, it gives us two territories, the US and Canada. It gives us several different therapeutic areas; rheumatology, autoimmune disease, oncology, and pediatrics. So those therapeutic areas, we can license more products. In fact, we have a rich pipeline of products that we will be announcing and launching soon.
James West: Okay. What kind of companies do you compete with to acquire these drugs?
Ken d’Entremont: Companies have competed in our same space, but really, we position ourselves as excellent commercial operators, so we have a good track record. The growth that we’re showing on Rasuvo and Metoject and Rupall, all is spectacular. We’re seeing some of these products double year-over-year, so that’s a very strong argument for future licensing opportunities. We can demonstrate that we’ve done it in the past; we can certainly do it with those new products.
James West: Okay. If I were to ask you what is the combined market size for your entire portfolio of drugs, what would that be?
Ken d’Entremont: Oh, that’s a difficult question, because we look at therapeutic area by therapeutic area.
James West: Okay.
Ken d’Entremont: But, for instance, Rasuvo, which is our US drugs, it competes in a marketplace that’s about a $400 million USD marketplace on an annual basis. And we currently just have a small share of that, and we expect it to grow fast.
James West: So is that the underlying strategy of the whole company, is to acquire the best in class drugs for each different therapy and then market it and commercialize it?
Ken d’Entremont: Yes, it absolutely has to have a patient benefit – something that’s not currently well serviced. So you know, our strategy is, license those products, make the calls on the physicians, convince them that that is the best drug for patients, and then deliver it through retail pharmacy or hospitals.
James West: Interesting. How’s the growth trajectory looking for the next 12, 24, 36 months?
Ken d’Entremont: Very strong growth. You know, we reported $14.4 million worth of revenue last quarter; we expect that growth in the low 20 percent range next year. So we’re seeing really solid growth, both on revenue and EBITDA.
James West: Yeah. Do you – what category does this fall under in terms of, like, for a asset class? Like, it’s not purely biotech per se…
Ken d’Entremont: No, no, it would be specialty pharma.
James West: Specialty pharma.
Ken d’Entremont: So, definitely specialty pharma, but in a specific therapeutic area. You know, we target rheumatology, pediatrics, speciality oncology.
James West: Okay, and so, what is the sort of conceptual size of this company in the next five years? Can it be a billion-dollar company, a $10 billion company?
Ken d’Entremont: Yeah, we expect to be a leading specialty pharma company. You know, currently market cap between 60 and 100 million, depending on how you calculate that; we see ourselves at least 10 times that. With the assets that we have, and the assets that we believe we can bring in, we’re currently are sitting on $30 million worth of cash, so obviously our balance sheet is really strong. So, future business development, we have the assets and the strength to go out and license more, and obviously more mergers and acquisitions is a possibility as well.
James West: Wow, fantastic. And then, so what are the big catalysts that you’re looking to hit in 2019?
Ken d’Entremont: Just to keep driving organic growth with the three products that I mentioned: Metoject, Rasuvo, Rupall, drive that strongly, and then launch new products. We have two new products that we expect to announce within the coming weeks that will add to our revenue growth, and then out there doing more business development: finding new products that we can bring to both marketplaces.
James West: All right, Ken, that’s a great update, or I guess it’s kind of like a new company altogether with the combination, but great to hear the story, and we’ll be following with interest. Thanks for joining me today.
Ken d’Entremont: Thanks for having me.
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