Earnings call transcript: Medexus Q3 FY2025 shows revenue growth, FDA approval

Medexus Pharmaceuticals reported a strong performance in its Q3 FY2025 earnings call, with notable revenue growth and strategic advancements. The company highlighted a year-over-year increase in revenue and adjusted EBITDA, alongside important regulatory achievements. According to InvestingPro data, the company maintains a "GREAT" financial health score of 3.36, with analysts suggesting significant upside potential. The stock has shown impressive momentum, gaining nearly 70% over the past six months, though current valuations indicate the stock is slightly overvalued based on InvestingPro’s Fair Value analysis.

Key Takeaways

• Revenue for Q3 FY2025 increased to $30 million, up from $25.2 million year-over-year.
• Medexus received FDA approval for Grafapix, a key product with significant revenue potential.
• The company completed a C$30 million public offering to strengthen its balance sheet.
• Operating cash flow reached $6.7 million, indicating strong cash generation.
• Demand for Medexus’s products showed mixed growth, with notable increases in Trecando and Rupal units.

Company Performance

Medexus Pharmaceuticals demonstrated robust financial health in Q3 FY2025, driven by increased revenue and improved EBITDA. With a market capitalization of $65.41 million and a P/E ratio of 28.96, the company’s strategic focus on product innovation and market expansion, particularly in North America, has contributed to its positive performance. The FDA approval of Grafapix marks a significant milestone, positioning Medexus for future growth in the pharmaceutical market. Want deeper insights? InvestingPro subscribers get access to over 30 additional financial metrics and expert analysis.

Financial Highlights

• Revenue: $30 million, up from $25.2 million year-over-year
• Adjusted EBITDA: $5.8 million, up from $3.2 million year-over-year
• Net Income: $700,000, marking the fourth consecutive quarter of positive net income
• Gross Margin: 50.7%
• Operating Cash Flow: $6.7 million

Outlook & Guidance

Medexus is optimistic about its future, with plans to launch Grafapix commercially by April 2025. The company anticipates significant revenue potential from this product, projecting annual revenue to exceed $100 million within five years. This growth potential is reflected in analyst consensus, with price targets ranging from $4.00 to $6.62, suggesting substantial upside potential. Medexus is also investing in infrastructure to support Grafapix’s launch, with a planned investment of $4 million in Q4. For comprehensive analysis and detailed forecasts, check out the full research report available on InvestingPro.

Executive Commentary

CEO Ken Dontramont expressed confidence in the company’s growth prospects, stating, "We believe that annual product level revenue for Grafapix has the potential to exceed $100 million within five years after commercial launch." CFO Brendan Bushman highlighted the strengthened balance sheet, noting, "With this equity raise, we’ve really strengthened our balance sheet."

Risks and Challenges

• Potential challenges with terbinofine hydrochloride due to Health Canada notice of deficiency.
• The impact of international tariffs on product pricing and competitiveness.
• Managing operational expenses while investing in new product launches.
• Navigating regulatory environments in different markets.
• Sustaining growth in demand for existing products amidst competitive pressures.

Medexus Pharmaceuticals continues to focus on maintaining stability in its base business while preparing for the launch of Grafapix in the United States, reflecting a strategic balance between current operations and future growth initiatives.

Full transcript - Meredith Corporation (NYSE:MDP) Q3 2025:

Conference Operator: Good morning, everyone. Welcome to the Medexus Pharmaceuticals Third Quarter twenty twenty five Conference Call. At this time, all participants have been placed on a listen only mode. If Please note this conference is being recorded. I will now turn the conference over to your host, Victoria Rutherford, Investor Relations of Medexus.

Over to you.

Victoria Rutherford, Investor Relations, Medexus Pharmaceuticals: Thank you, and good morning, everyone. Welcome to the Medexus Pharmaceuticals third quarter twenty twenty five earnings call. On the call this morning are Ken Dontramont, Chief Executive Officer and Brendan Bushman, 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 (480) 625-5772. I would like to remind everyone that this discussion will include forward looking information as defined in securities laws.

Actual results may differ materially from historical results or results anticipated by the forward looking information. In addition, this discussion will also include non GAAP measures such as adjusted EBITDA and adjusted EBITDA margin, which do not have any standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. For more information about forward looking information and non GAAP measures, including reconciliations to net income and loss, please refer to the company’s MD and A, which along with the financial statements are available on the company’s website at www.medexus.com and on SEDAR Plus at www.cedarplus.ca. As a reminder, Medexis reports on March 31 fiscal year basis. Medexis reports financial results in U.

S. Dollars and all references are to U. S. Dollars unless otherwise specified. I would now like to turn the call over to Ken Dontrement.

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Thank you, Victoria, and thank you everyone for joining us on this call today. We’ve had a busy and exciting month post quarter. We saw the successful completion of the FDA review process for GrafaPax, and we completed a C30 million dollars public offering of common shares just last week. Between the strong fiscal Q3 and the net proceeds of the offering, we believe we are in a great position as we prepare for the launch of Graf Apex in The United States. I will speak more to these developments in a few moments, but I want to quickly hit on our financial highlights from the quarter.

We’re pleased with the fiscal Q3 twenty twenty five results, particularly our stable revenue, positive net income and strong adjusted EBITDA, which have allowed us to continue preparing for the launch of Graf Apex in the first half of calendar year twenty twenty five, meaning that we expect product to be commercially available by April 2025. Our fiscal Q3 twenty twenty five revenue was $30,000,000 an increase compared to $25,200,000 for the same period last year. Our fiscal Q3 twenty twenty five adjusted EBITDA was $5,800,000 an increase compared to $3,200,000 for the same period last year. We continue to produce positive net income of $700,000 for the quarter, an improvement of $1,200,000 over the same period last year and positive operating income of $3,800,000 an increase of 2,800,000 compared to $1,600,000 for the same period last year. These important metrics for fiscal Q3 continue to reflect the financial discipline initiatives we implemented last year in our operating cost and cost structure.

They also reflect around $1,900,000 of fiscal Q3 twenty twenty five operating expenses in support of Grafifex, which is a change from fiscal Q3 last year. Turning to our specific products, I would first like to talk about Grafifex as this product will provide a substantial uptick to our growth profile over the coming years. On January 22, we learned that the FDA had approved Grafapix, which is our branded name for Triosulfan for injection in The U. S. Grafapix holds orphan drug designation under the Orphan Drug Act, meaning that the product will benefit from at least seven years of regulatory exclusivity in the FDA approved indication.

We hold exclusive commercial rights to Grafopaxia in United States under a February 2021 exclusive license agreement with our strategic partner, Medac. We are targeting a commercial launch in the first half of calendar year twenty twenty five with product expected to be commercially available by April. We believe that annual product level revenue for GRAPHOPEX has a potential to exceed $100,000,000 within five years after commercial launch. Given the FDA approval, we do now owe a regulatory milestone payment to our partners at Medac. The amount payable to Medac is based on the language of the product label approved by the FDA.

We have determined that Medac has earned a $15,000,000 regulatory milestone amount and we are working with Medac to confirm that amount in light of the terms of our agreement. The milestone amount is payable in installments. So for a $15,000,000 milestone, we would pay $2,500,000 by 06/30/2025, ’5 million dollars by October 1 and $7,500,000 by 01/01/2026, although we have the right to temporarily defer some of these amounts. In Canada, unit demand for Trecando grew by 55% over the trailing twelve month period ending 12/31/2024. This strong performance does not yet include the effects of our successful November ’20 ’20 ’4 completion of negotiation process with the Penn Canadian Pharmaceutical (TADAWUL:2070) Alliance and subsequent decisions by participating government organizations on public reimbursement of Trecando.

To date, BC and Ontario have executed listing agreements to reimburse Trecando in those provinces. Xfinity unit demand in The United States decreased by 1% over the trailing twelve month period ending 12/31/2024. We expect that unit demand will remain stable over the remainder of fiscal twenty twenty five. This performance reflects the success of our efforts to maintain existing demand despite a reduction in allocated sales force resources to Xfinity since January 2024. Our investments in Xfinity manufacturing process improvement initiatives have greatly had a positive impact on batch yield and manufacturing costs now extending into fiscal year twenty twenty five.

Glionland unit demand in The United States grew by more than 8% over the trailing twelve month period ending 12/31/2024, as our commercialization efforts continue to result in new customers adopting the product. We continue to discuss the future of our involvement in commercializing GLEOAN in The United States with our licensing partner and will provide an update if and when warranted. RUPAL unit demand in Canada increased by 18% over the trailing twelve month period ending 12/31/2024. RUPAL’s market exclusivity granted by Health Canada expired in January 2025. We expect that RUPAL will now begin to face generic competition in Canada and we have initiated a strategy to support the product in this context.

Resuvo unit demand in The United States and MetalJect unit demand in Canada both remained strong during fiscal Q3 twenty twenty five, although the factors we have discussed in the past have continued to affect product level revenue. On terbiniphene hydrochloride, a nail lacquer to treat nail fungus infections, we recently received a notice of deficiency from Health Canada regarding our new drug submission for the product. The notice identified concerns and uncertainties associated with the design of the Phase three trial submitted to support the requested indication and the interpretation of the efficacy results. We remain focused on building our North American allergy and dermatology franchise, but in the meantime, we have redeployed resources to support other portfolio products in this therapeutic area, including RUPAL and NIDA. In sum, we continue to focus on maintaining stability in our base business and generating cash from operations as we prepare for the launch of Grapopax in The United States and other potential revenue opportunities in the future.

I will now turn the call over to Brendan, who will discuss our financial results in more detail. Brendan?

Brendan Bushman, Chief Financial Officer, Medexus Pharmaceuticals: Thank you, Ken. This quarter, we are pleased to have generated $5,800,000 of adjusted EBITDA from $30,000,000 of revenue for an adjusted EBITDA margin over 19%. We also generated $700,000 of net income. These results are due to a strong quarterly performance enhanced by in quarter customer buying patterns for Xxinity, successful execution of our targeted reductions in operating expenses and a streamlined capital structure. We also continue to generate meaningful cash from our operating activities with operating cash flow of $6,700,000 in the quarter.

Turning to the full quarterly results, total revenue for fiscal Q3 twenty twenty five was $30,000,000 which represents an increase of $4,800,000 compared to $25,200,000 for the same period last year. The $4,800,000 year over year increase was attributable in part to continuing growth in net sales of Group Howe and an approximately $2,000,000 beneficial impact of customer buying patterns of Xfinity. Gross profit was $15,200,000 for Q3 twenty twenty five compared to $12,700,000 for the same period last year. Gross margin was 50.7% for Q3 twenty twenty five, which is consistent with the 50.3% we achieved in the same period last year. Selling and administrative expenses were $11,000,000 for Q3 twenty twenty five compared to $10,700,000 for the same period last year.

As Ken mentioned earlier, we have begun making more significant investments in personnel and infrastructure to prepare for the commercialization of Graf Apex, which are reflected in SG and A expenses. These investments totaled $1,900,000 in fiscal Q3 twenty twenty five and we expect this spending to increase to approximately $4,000,000 in fiscal Q4 twenty twenty five and stabilize at around that level quarterly thereafter. Adjusted EBITDA was $5,800,000 for fiscal Q3 twenty twenty five, an increase of $2,600,000 compared to $3,200,000 for the same period last year. The increase in adjusted EBITDA was primarily attributable to the effects of our ongoing financial discipline efforts together with the effects of customer buying patterns mentioned earlier and partially offset by our GrafFX personnel and infrastructure investments. Net income was $700,000 for fiscal Q3 twenty twenty five, reflecting a $1,200,000 increase compared to a net loss of $500,000 for the same period last year.

This is our fourth consecutive quarter of positive net income and we look forward to striving for positive net income in the quarters to come. Cash on hand of $8,400,000 at 12/31/2024, compares to $7,000,000 at 09/30/2024 and $5,300,000 at 03/31/2024. We continue to generate cash from our operating activities with quarterly operating cash flow of $6,700,000 compared to $5,500,000 for fiscal Q3 twenty twenty four. As Ken previously mentioned, in January 2025, we completed a public offering of common shares for C30 million dollars of aggregate gross proceeds or C28.3 million dollars of aggregate net proceeds before expenses, which in U. S.

Dollars is approximately $20,900,000 gross or $19,700,000 net. As of December 31, we had a combined $40,900,000 outstanding under our two BMO credit facilities consisting of $3,500,000 drawn under our revolving credit facility and the remainder outstanding under our term loan facility. As always, there can be variability in quarter to quarter results, but we look forward to continuing to build the company and its portfolio in the coming quarters and beyond. Operator, we will now open the call to questions.

Conference Operator: Thank you very much. Thank you. Your first question is coming from Michael Freeman of Raymond (NSE:RYMD) James. Michael, your line is live.

Michael Freeman, Analyst, Raymond James: Thank you. Good morning, Kevin, Brendan. First, congratulations. This was a high action period here. So congrats on all your success and looking forward to the launch of Graf Apex.

My first question is on Xfinity. Apparently, we saw some strength in Xfinity purchases this quarter. I read in the MD and A that these were partially as a result of contractual purchase agreements entered into with your largest pharmacy partners. So I wonder if you could shed any light on, I guess, those contractual agreements and I guess what other sources of demand you might be seeing in Xfinity specifically? Thanks.

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Thanks, Michael, and good question. So, yes, Xfinity was significantly stronger than expectations. The partners that we’re referring to are specialty pharmacies that typically purchase this product based on what their needs are for the underlying customer demand. And it was just stronger than we had expected for that quarter. We do expect it to kind of pull back a little bit.

And so I think what the guidance that we provided historically is more in line with our expectations going forward.

Michael Freeman, Analyst, Raymond James: Okay. All right. That’s helpful. Now turning over to Gleeolan. I wonder if you could give further color on the status of that negotiation with the licensing partner.

What does the partner what would the partner need to see to continue on the agreement with you guys? And then is Medexus motivated to keep this asset and invest in sales if that was required?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes, I think as we’ve previously said, neither party is satisfied with the performance of the drug, even though we put significant effort behind it. It’s responded with single digit growth. As we pointed out this quarter, we saw 8% unit growth over the trailing twelve months, which is decent, but not sufficient for us to be excited about continuing to promote the product going forward. So the team has done a really good job on what has been kind of a mature product.

Michael Freeman, Analyst, Raymond James: Okay. So to be clear, you’ve put in a strong sales effort and you’re seeing growth, but not meaningful enough to motivate further investment in promoting this drug?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes, I think that’s pretty well stated. So we are evaluating the various options with the partner. And once we have something to disclose, we clearly will.

Michael Freeman, Analyst, Raymond James: Okay. All right. Thank you. I’ll ask John further to ask about the terbinofin and so on. Thank you.

Conference Operator: Thank you very much. Your next question is coming from David Martin of Bloom Burton. David, your line is live.

David Martin, Analyst, Bloom Burton: Thanks for taking my questions and congratulations. You mentioned you’re working to confirm the milestone amount with Medac. Have they commented on the milestone amount or your interpretation of what you owe?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: No, not at this stage. I mean, obviously, we each are reviewing the agreement as it’s described. It’s our view when we do that, the $15,000,000 milestone has been earned. And so we’re waiting for a Medex confirmation on that.

David Martin, Analyst, Bloom Burton: Okay. And second question, have you finalized pricing for Grafapix and do you expect reimbursement for Medicare by the time you launch in April?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: So we are in the process now of those reimbursement discussions. So we haven’t set the price yet. We do believe that there is a very strong cost avoidance when using our drug relative to busulfan. So we are in the midst of getting those in place, not really sure of the timing of the various payers that will come into play. We’ve obviously said that we think that product will be available by April, which is a very short time frame.

So some reimbursement will start to fall into place, but it’s going to take a few quarters before we get everything lined up.

David Martin, Analyst, Bloom Burton: Okay, thanks. That’s it for me.

Conference Operator: Thank you very much. Your next question is coming from Scott Henry of Alliance Global Partners (NYSE:GLP). Scott, your line is live.

Scott Henry, Analyst, Alliance Global Partners: Thank you and good morning. A couple of questions. I guess you made a couple of quick comments on terbenephi. That looks like a pretty significant roadblock. Is my interpretation of that correct?

That’s a pretty big delay would be my guess.

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes. So we’re in negotiation with the partner who conducted the clinical study. But a notice of deficiency obviously is a significant challenge. So we will see what that means for the future of the drug. I think it’s clear from our perspective that we won’t be investing further in the drug.

It’s yet to be determined what the partner wants to do.

Scott Henry, Analyst, Alliance Global Partners: Okay, fair enough. And then if we assume that you do the $15,000,000 is the milestone payment, first of all, congratulations on the capital raise. I know you guys have been band aiding it for a while and that’s a significant addition to your balance sheet. Do you think the capital you have now, does that kind of get you home to where you need to be to get through all of these milestones, assuming that things move somewhat in line with your forecast?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes. Great question, Scott. I’ll turn it over to Brendan for that.

Brendan Bushman, Chief Financial Officer, Medexus Pharmaceuticals: Yes. The short answer is yes. With this equity raise, we’ve really strengthened our balance sheet. We’ve always been very mindful of making sure we have as much optionality and flexibility as possible. And so with this, I feel very confident in saying we’ve very adequately sort of derisked our balance sheet and we don’t see any we don’t see ourselves in a position where we’re going to have to do anything further to sort of satisfy those obligations.

Scott Henry, Analyst, Alliance Global Partners: Okay. That’s great. That’s quite an accomplishment for you all. Another question, and I don’t even know kind of why I’m asking this question, but you sell product in Canada, you sell product in The U. S.

These tariffs, they’re not there, they were there, they’re not there. In any way, if the tariffs come back into play, does that impact your business? If you have things that cross border or go back and forth, is that an issue at all?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes, it’s a good question. Obviously, with the events of the last weekend, everyone scrambled to try and figure out what the implications might be as did we. So Brian has done some calculations in a worst case scenario and I’ll turn it over to him just to describe what that would mean.

Brendan Bushman, Chief Financial Officer, Medexus Pharmaceuticals: Yes, perfect. So and to be clear, we don’t have any inventory that moves across the Canadian U. S. Border. Our exposure would be if the tariffs were to be applied to Europe.

We do bring in a number of our products from Europe. So as a reminder, Xfinity, our largest product is manufactured in The U. S, but a number of our other large products that we sell in The U. S, Grafapex and Resubo are manufactured in Europe. So in that case, there would be a modest expectation of tariffs.

It would not be material and we are very confident in our ability to kind of manage that without any sort of adverse impact on the business.

Scott Henry, Analyst, Alliance Global Partners: Okay, great. And then another question, given that you have Graf Apex approved, I think your experience with TRICONDIGI is more important as it may be suggestive of what we could expect in The U. S. Could you talk about that experience and why you seem pretty optimistic based on your Canadian experience that this market could be ready in The U. S.

As well?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes. It’s our view that the clinical practice patterns in The U. S. And Canada are quite similar. So when we look at the uptake of Tresolvand in Canada, It’s been really strong, particularly in pediatrics, which makes sense because organ toxicity is an even bigger issue in that group of patients.

But it’s also been quite strong in adults. And all of this is prior to having any reimbursement. And so that bodes really well for The U. S. And that the hospitals in Canada have taken up the product and pay for it out of their existing hospital budgets, because one, the outcomes are better.

Clearly, survival is much better. But also there’s certain cost avoidance that where the hospital saves money as a result of using our drug rather than the other drug. So we think all of those things bode very well for uptake in The U. S. And it’s obviously very early going.

We have the launch meeting, the tandem meeting is next week, where it’s the largest meeting of U. S. Transplanters. So we’ll get a lot of feedback there, but already we’re getting inbound interest for the drug and we’re working to find a way to supply prior to commercial product being available.

Scott Henry, Analyst, Alliance Global Partners: Okay, great. Thank you for that color. Final question and I apologize for the many questions. Q3 fiscal Q3 had a lot of positive variance. When we think to fiscal Q4, should we expect revenues to look more like the second quarter than the third quarter?

Should we expect some kind of reversion to the mean? Thank you for taking the questions.

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes, that’s a great question, Scott, and we’re debating that now. We think it would be conservative to consider previous quarters as more normal. This most recent quarter, it was really strong for Xfinity and we’re not quite able to put our finger on it exactly as to why. We certainly see the increased uptake by some of our specialty pharmacy partners. And we’re trying to determine what’s happening with the underlying demand.

In our view, it looks like it’s kind of flat, so it doesn’t justify the increase in purchasing. But we don’t get to see all of the demand. It’s not 100%, it’s probably more like 70% of the demand that we see. So there could be something happening in the other segment to the positive that is driving this, but we don’t yet know. So I think to be conservative, we would guide more towards previous quarters rather than Q3.

Scott Henry, Analyst, Alliance Global Partners: Okay, great. Thank you for taking the questions.

Conference Operator: Thank you very much. Your next question is coming from David Martin of Bloom Burton. David, your line is live.

David Martin, Analyst, Bloom Burton: Thanks for taking the follow-up. You mentioned large meeting of U. S. Transplanters and inbound interest from The U. S.

I’m wondering, have you reached out to potential KOLs in The U. S. To support the drug and work towards a plan of getting it into guidelines or is that starting now?

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: Yes, it’s a great question, David. So yes, if you remember, we had brought on a bunch of people at risk prior to the decision with the FDA. So a lot of that work had already started. So yes, absolutely, we’ve been working with KOLs to help support the commercial launch and where we want to go. So absolutely that has been happening.

It’s in full force now and we’ll have a significant presence at the Tandem meeting next week.

David Martin, Analyst, Bloom Burton: Okay, great. Thanks.

Conference Operator: Thank you very much. While we appear to have reached the end of our question and answer session, I will now hand back over to Ken for any closing comments.

Ken Dontramont, Chief Executive Officer, Medexus Pharmaceuticals: I just want to thank everybody for participating in this call. We’re very pleased with the past quarter’s results. Our core portfolio continues to provide Medexus with a solid foundation as we prepare for the next phase of our growth, specifically Grafapix. We look forward to the opportunities that lie ahead in fiscal twenty twenty five and beyond. Thank you, everybody, for joining the call today.

Conference Operator: Thank you very much. This does conclude today’s conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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