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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen, and welcome to the Miravo Healthcare Q3 2022 Results Conference Call. [Operator Instructions] This call is being recorded on Monday, November 14, 2022. I would now like to turn the conference over to Mr. Jesse Ledger, President and CEO. Please go ahead, sir.
Great. Thank you, and good morning, everyone. Thank you for joining our call today. On the call with me this morning from Miravo is Mary-Jane Burkett, Miravo's Vice President and Chief Financial Officer; and Tina Loucaides, Miravo's Vice President, Secretary and General Counsel. This morning's call makes reference to a presentation on our website that should be viewed concurrently. If you have not downloaded this presentation, I would invite you to do so now by visiting www.miravohealthcare.com and scrolling down to the bottom of the page. You can then click on the link. Before we begin, I would like to remind everyone that some of the statements made during this presentation may be considered forward-looking. The company cautions investors that results of future operations may differ from those anticipated. We urge you to review the cautionary statements and other information contained in the company's filing on SEDAR, including the company's Q3 2022 financial statements and MD&A and the annual information form for fiscal 2021, which identifies certain factors and risks that could cause actual results to differ materially from those projected in any forward-looking statements made during the meeting. Copies of the annual information form and other filings are available online. Today's presentation also includes reference to certain financial measures that do not have a standardized meaning under IFRS. These measures include adjusted total revenue, adjusted EBITDA and cash value of loans. Miravo believes that shareholders, investment analysts and other readers find such measures helpful in understanding Miravo's financial performance and the company's Deerfield loans. For a description of how Miravo defines these non-IFRS financial measures as well as the reconciliation of these measures, please refer to Slides 17 and 21 of the presentation, which is posted on the Miravo website as well as Miravo's management discussion and analysis filed on SEDAR. The Miravo business boasts a diversified revenue-generating product portfolio. Our 3 key growth assets, the Blexten franchise, Cambia and Suvexx, continued to perform well resulting in a 32% growth in revenue related to these products over the third quarter of 2021. We are continuing to see organic growth of our key promoted brands through market share expansion and look forward to the upcoming launch of Suvexx in Europe. Our scalable commercial infrastructure is ready to accommodate new products, which we are actively pursuing to complement our current business. In May of 2022, a generic version of Pennsaid 2% was approved in the United States and launched at-risk shortly thereafter. In August of 2022, Miravo's U.S. partner for Pennsaid 2%, Horizon Therapeutics announced it would be winding down the business segment that currently promotes and sells Pennsaid 2% in the United States in response to the market erosion resulting from a generic version launch. Horizon recently announced that the wind down of this business segment is anticipated to be substantially complete by the end of 2022. As most of you know, Pennsaid 2% is exclusively manufactured at Miravo's manufacturing facility in Varennes, Quebec. Since the at-risk generic launch occurred, Miravo has conducted a thorough evaluation of its manufacturing operations and has determined that the continued operation of its manufacturing facility is no longer viable as a result of this lost revenue stream. Miravo is currently exploring strategic alternatives to monetize our manufacturing facility and related intellectual property while winding down our manufacturing operations. We anticipate that a wind down of our manufacturing operations will conclude during the second half of 2023, depending on various factors, some of which are beyond the company's control. We remain committed to enhancing profitability and cash flow generation while advancing our strategic growth objectives. Exiting our involvement with direct manufacturing will improve our gross profit margins and better focus the company's efforts and resources on advancing the key growth engines of our business, our Commercial Business segment and our International Licensing and Royalty Business segments. Mary-Jane Burkett, Miravo's Vice President and Chief Financial Officer, will now take you through our financial results for the third quarter of 2022.
Thanks, Jesse. Adjusted total revenue was $18.2 million and $57.3 million for the 3 and 9 months ended September 30, 2022, compared to $17.1 million and $51.6 million for the 3 and 9 months ended September 30, 2021. The $1.1 million increase in adjusted total revenue in the current quarter was primarily due to a $2.6 million increase in revenue from the Commercial Business segment, offset by a $1.5 million decrease in revenue from the Licensing and Royalty Business segment and $0.1 million in amounts billed to customers for existing contract assets. Revenue attributable to the Commercial Business segment increased during the 3 months ended September 30, 2022, due to a $2.5 million increase in sales of the company's promoted products, Blexten, Cambia, Suvexx and NeoVisc, and a $0.1 million increase in sales of the company's mature products. Revenue attributable to the Licensing and Royalty Business segment decreased during the 3 months ended September 30, 2022, due to a $1 million reduction in the ex-U.S. Vimovo royalties due to the expiry of the royalty term in certain territories and a $0.3 million reduction in Yosprala royalties, as the company's entitlement to royalties on Takeda's net sales of Cabpirin ended with patent expiry on May 31, 2022, and a $0.2 million reduction in the U.S. Vimovo royalty. The $5.7 million increase in adjusted total revenue in the 9 months ended September 30, 2022, was primarily attributable to a $7.7 million increase in revenue from the company's Commercial Business segment and a $2.2 million increase in amounts billed to customers for existing contract assets, offset by a $1.8 million decrease in revenue from the Licensing and Royalty Business segment and a $2.4 million decrease in revenue from the company's Production and Service Business segment. Revenue attributable to the Commercial Business segment increased during the 9 months ended September 30, 2022, due to an $8 million increase in sales of the company's promoted products, Blexten, Cambia, Suvexx and NeoVisc, offset by a $0.3 million decrease in revenue for the company's mature products. The $1.8 million decline in license revenue during the 9-month period was primarily attributable to a $1 million reduction in the ex-U.S. Vimovo royalties due to the expiry of the royalty term in certain territories, a $0.8 million reduction in the U.S. Vimovo royalty due to a step down in royalty to 5% of net sales compared to 10% of net sales for a portion of the comparative 9-month period and a $0.3 million reduction in Yosprala royalties. In the 9 months ended September 30, 2022, the company received $2.3 million or USD 1.8 million for our Yosprala-related milestone revenue billed to Takeda for its then existing contract asset. The $2.4 million decrease in product sales from the Production and Service Business segment during the current 9-month period was primarily attributable to a decrease in Pennsaid 2% and Pennsaid sales. Adjusted EBITDA was $5.7 million for the 3 months ended September 30, 2022, compared to $7 million for the comparative quarter. During the 3 months ended September 30, 2022, a $1.6 million increase in gross profit from the Commercial Business segment was more than offset by a $1.5 million decrease in gross profit contribution from the company's Licensing and Royalty Business segment and a $0.5 million decrease in gross profit contribution from the company's Production and Service Business segment, and a $0.4 million increase in sales and marketing expenses and a $0.4 million increase in general and administrative expenses. Adjusted EBITDA was $19.1 million for the 9 months ended September 30, 2022, compared to $18.8 million for the 9 months ended September 30, 2021. During the 9 months ended September 30, 2022, a $4.7 million increase in gross profit from the Commercial Business segment and a $2.2 million increase in amounts billed to customers for then existing contract assets was more than offset by a $2.3 million decrease in gross profit contribution from the Production and Service Business segment and a $1.8 million decrease in contribution from the License and Royalty Business segment, a $1 million increase in sales and marketing expenses and a $1.4 million increase in general and administrative expenses, net of a $0.2 million reduction in stock-based compensation expenses. During the 3 months ended September 30, 2022, the company repaid USD 2.5 million of the amortization loan to Deerfield, reducing its cash value of loans outstanding to USD 80.6 million. Since the inception of the Deerfield financing on December 31, 2018, the company has repaid USD 37.9 million towards the Deerfield loans. The interest rate for both the amortization loan and convertible loan is fixed at 3.5%. The company anticipates making a USD 2.5 million payment to Deerfield in the coming week. The company currently has 11.4 million shares outstanding. Attached to the company's amortization loan are 25.6 million warrants issued to Deerfield at a CAD 3.53 strike price, of which 15.1 million are currently classified as flexible exercise shares. The company's convertible loan may be converted into common shares of the company at Deerfield's option at USD 2.70 per share conversion. Miravo shares closed at $0.95 per share on November 9. The company's amortization and convertible loans mature and outstanding warrants expire on December 31, 2024. As at September 30, 2022, the company had cash on hand of $31.3 million with an enterprise value of $86.1 million. Jesse will now continue with our business updates.
Thanks, Mary-Jane. Blexten demonstrated continued year over prior year quarter growth of total prescriptions, or TRx and TRx market share. Blexten Q3 and year-to-date 2022 TRx increased 27% and 21% over the same periods in 2021. Blexten Q3 2022 TRx market share increased to 20.7% compared to 17.6% for the comparable quarter in 2021. We expect ongoing year-over-year growth and market share gains in the prescription antihistamine market in the quarters to come. Blexten's #1 competitor still controls nearly 50% of the market, and we anticipate there is plenty of growth potential remaining in this market for Blexten. Turning to our second key growth product, Cambia's Q3 and year-to-date 2022 TRx increased 7% and 5% over the comparative periods in 2021. Cambia Q3 2022 TRx market share was 5.1%, an increase from 4.9% in the comparable quarter in 2021. Cambia benefits from patent protection in Canada through mid-2026. Our third growth product is the acute migraine treatment, Suvexx. Suvexx was commercially launched in Canada in September 2020. So we are now into our second full year of commercial activity. Suvexx Q3 and year-to-date 2022 TRx increased 86% and 94% over the comparative periods in 2021. Suvexx Q3 2022 TRx market share was 1.1% compared to 0.6% in a comparable quarter in 2021.
We have achieved concrete value drivers in 2022. Earlier this year, we launched Blexten Pediatric after obtaining Health Canada approval in August 2021. Blexten pediatric is indicated for the treatment of seasonal allergic rhinitis and chronic spontaneous urticaria in children as young as 4 years of age and includes 2 new dosage formats, an oral solution and a quick melt tablet. The quick melt tablet is a unique offering in the Rx allergy market and differentiates us from our competition by making an easy-to-administer pediatric formulation available as a prescription alternative. From June through September 2022, our European partner, Orion, received approval for their Suvexx marketing authorization applications in bottle format and also in blister pack format in Denmark, Finland, Hungary, Lithuania, Latvia and Sweden, with Estonia and Norway having received marketing authorization for the bottle format. Suvexx will benefit from 10 years of data exclusivity in connection with the granted marketing authorization in the European Union. During Q2, we filed U.S. Canadian, European and global PCT patent applications for our reformulated and improved version of Resultz. This new formulation maintains the original claims but is now enhanced with a 100% effectiveness claim for killing nits or the lice eggs in addition to the head lice. The company believes this enhanced efficacy against nits adds value to existing Resultz partners as well as other companies active in the head lice category globally, who may be interested in licensing this technology. The company has started the partnering process for this new intellectual property during the third quarter. In the fourth quarter of 2022, we anticipate regulatory approval decisions for the blister pack format of Suvexx in Estonia and Norway and in Poland for the bottle and blister pack formats. In the first half of 2023, we anticipate a Suvexx regulatory approval decision in South Korea. And we anticipate that Orion, our European partner, will commercially launch Suvexx on a country-by-country basis throughout the European territories of their license arrangement with us, subject to receipt of marketing authorization for the blister pack format in each respective country. Miravo's diversified product portfolio, scalable commercial infrastructure and experienced management team, provides a strong platform for the next phase of our growth story. The $31.3 million of cash on hand provides us with capital for new business development deals, which are currently in progress, and our quarterly earnings continued to be robust, driven by the growth of our Commercial Business segment and new international partnering arrangements. That ends our formal remarks. We are now pleased to answer questions that you may have with respect to the company, its financial statements and its operations during the quarter and year-to-date.
[Operator Instructions] First question comes from David Martin with Bloom Burton.
Only one question for me. Congratulations on the good quarter. As you wind down manufacturing, do you have alternate plans for Pennsaid 2% in rest of world markets as far as a contract manufacturer for that product?
Yes. So I guess the short answer is yes. We're working through that right now. We're in discussions with our various partners about -- the existing partners about their continued desire to commercialize the product in certain territories. And so we're evaluating this on a country-by-country basis. And we likely will be transferring manufacturing to a third party in order to allow for the continued availability of Pennsaid and Pennsaid 2% in certain geographies, but that's a work in progress right now. But all of that, we anticipate will be finalized within the time lines that we had indicated sort of in the second half of next year. And as it stands right now, we've got a full book of orders to help supply our partners with finished product to be able to bridge them for any period of time where we may be waiting to complete a tech transfer to a third party.
[Operator Instructions]
I did receive an e-mailed question, maybe I'll just address. This has came from one of our investors asking about an update on business development. And I made the comment during my remarks before that we do have a number of transactions that we're working on currently. And they're in advanced discussions, obviously, and I've said this before, it's always difficult to pin down the timing for business development transactions. But we do have a number of assets that we're getting very close on that would be very complementary to our existing product portfolio, would fit nicely with our existing commercial infrastructure, and we're working diligently to get these transactions across the finish line in the near future. But unfortunately, that's about all I can say at this point about business development. But it is, I can assure you, our #1 priority to find some additional assets to put into our portfolio.
There are no further questions on the phone line, Mr. Ledger, over to you.
Great. Well, thank you, everyone, for your questions, and thank you for listening into the call today. If we were unable to answer your question during the meeting or if you'd like to follow up with us after the meeting, please reach out through the Investor Relations contact information on our website. And thanks again, everyone, for listening to our Q3 2022 earnings call, and thank you for your continued support.
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.