Release Date: September 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Respiratory business unit demonstrated a 29% revenue growth in Q3 2024 compared to Q2 2024.
- Specialty products, particularly Redesca, showed a 21% growth over the prior quarter.
- Year-to-date revenues of $40.3 million are nearly in line with the previous year's $40.8 million.
- Cost-saving initiatives have been implemented, leading to operational efficiencies and reduced OpEx.
- Targeting EBITDA positive status by the first quarter of 2025.
Negative Points
- Total revenues for Q3 2024 decreased by 11% compared to Q3 2023, primarily due to the termination of Xiidra.
- General and administrative expenses increased by $1.1 million to $1.2 million due to transformation and restructuring costs.
- Net loss for Q3 2024 was $8.2 million, a 40% increase compared to $5.8 million in Q3 2023.
- Gross profit decreased by 12% year-over-year, impacted by the loss of Xiidra.
- Ongoing financial challenges, including the need to extend a CAD10 million repayment and manage convertible debt due at the end of the year.
Q & A Highlights
Q: The CAD10 million that was due August 31, and that's since been kind of extended or initial prepayment with a bit of that extended. Is that USD10 million or CAD10 million? And then so what is the net balance that's being extended week-to-week?
A: It's CAD10 million and that balance continues to be CAD10 million. That's extended week-to-week.
Q: The payment from Novartis for the Xiidra transaction, has that been reflected in this quarter? Or is that something that will be reflected next quarter?
A: The transaction as it continues with the reconciliation with Novartis, we've made a number of elements that are inputs into this transaction. So from a cash flow standpoint, it will no longer be generating the full face value of that. We've been operating as we have a number of assets with Novartis on this front. As in any good deal you always go through reconciliations with regards to customer acquisitions, transfer price, all that good stuff. And so as we have a consequent level of business, the goal was to minimize the level of cash flows that have been going on between us. There is still going to be an amount, but it's not going to be the full [CAD5.8 million] that was previously announced.
Q: I noticed there's a big swing in the working capital, specifically, I think, around the inventory, was some of that related to Xiidra, like kind of returning whatever remaining inventory of Xiidra that you had to Novartis? Or is there other just kind of rebalancing of inventory levels that fed that?
A: I would say it's more the latter, where we rebalanced our inventory levels to a lower level, still supporting and being able to serve demand, but something that is probably a little bit more reflective of our means, ambition and the need for us to be a little bit closer to just in time, rather than having five months of stock.
Q: For the convertible debt, it's due kind of at the end of the year, no specific mention. Are you still looking at discussions or negotiations or options around refinancing that or pushing that out working with the holders there?
A: We've got a number of initiatives that we're working on -- working with the larger debenture holders to look at extending and looking at a few options there. So we're in discussions with them, and we're working with them. And there are a few initiatives on the goal right now, which will help us with that. We hope to be able to announce those soon.
Q: Good to hear Redesca seeing some growth. I think I heard 18% growth. Is that year over year or quarter over quarter? And is that kind of starting to see some impact from Ontario? Or is the kind of Ontario opportunity still a quarter to come thing?
A: Ontario hasn't really hit yet. We expect some explosive growth for Redesca in coming months and quarters. We were hoping that Ontario would kick in earlier. So the numbers that you're seeing the quarter-on-quarter growth of the year, year-over-year growth is not reflective of the big push that we are expecting to happen within the next few months.
Q: On the respiratory side, great to hear, again, growth -- underlying growth there. Is that a tracking with what you're expecting? Are you happy with that level of growth, both on the prescription prescribers as well as the financial revenue growth?
A: If you look at the prescription and the adoption it's quite good, are we satisfied? No. We want a faster adoption and higher growth. So we keep pushing for much higher adoption, much higher growth. But we're happy that there is this consistent growth, but we expect more and we're pushing for a better adoption as we go forward on this entire portfolio.
Q: Is there a kind of a key barrier for that growth? Is it just competitive nature of that indication? Or there -- I know there's the Quebec reimbursement, if they sell to fill at these forms, like what is the main kind of thing pushing against kind of the growth that you'd like to be seeing?
A: Overall, if you take a step back, so there are some very large established players in this market. So it takes a large share of voice to push the needle. Fortunately, the products or the product portfolio is unique and has a great value proposition. So we don't believe we have to spend our way to growth the way others have done in this area. However, that value proposition is still has to be recognized by INAS and Quebec and others, the way we want it to do. So we're working hard on getting that value proposition really registered with INAS and RAMQ and move towards much better access to the product.
Q: In terms of the restructuring costs, are there any kind of expected ongoing restructuring costs? Or is this quarter kind of reflect the majority of those severance and other fees related to the change in head count and other restructuring?
A: The bulk of the restructuring is done because of the large restructuring we did with asthma. But as any good company, we need to continuously clean up and make sure that we've got the right structure. As you can see with the results, I'm pushing for a lower OpEx. So there will be continued OpEx optimization, both on head count and on other areas of OpEx. But it will not be to the extent that it was done in -- with that one-time restructuring of the respiratory, but it will -- we will continue with the cleanup for the next few quarters. And in terms of one-time -- other one-time cost charges, I think this quarter, it included many of the one-time charges. However, we expect a little bit more in Q4 2024. That way, our 2024 is going to be all clean and then on to a much better, cleaner 2025 without any of these onetime charges in our feet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
