Earnings Transcript for IGXT - Q1 Fiscal Year 2022

Operator: Good afternoon, ladies and gentlemen, and welcome to the IntelGenx First Quarter 2022 Financial Results Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Abby Hardy [ph] Investor Relations. Ma’am, the floor is yours.

Unidentified Company Representative: Thank you, operator. Good afternoon, everyone, and thank you for joining us on today’s call. With me on the line are Dr. Horst Zerbe, IntelGenx’s CEO; André Godin, our President and CFO; and Dr. Dana Matzen, the company’s Vice President of Business and Corporate Development. Before we begin, I would like to remind you that all amounts mentioned today are in U.S. dollars, unless otherwise mentioned, and today’s call may contain forward-looking information that represents our expectations as of today and, accordingly, are subject to change. We do not undertake any obligation to update any forward-looking statements, except as may be required by U.S. and Canadian securities laws. A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risks, and results may differ materially. Details on these risks and assumptions can be found in our filings with the U.S. and Canadian securities commissions. I’d now like to turn the call over to Dr. Zerbe. Horst?

Horst Zerbe: Thank you, Abby. Good afternoon everyone, and thank you for joining us for the IntelGenx first quarter 2022 conference call. On today’s call, I will provide a corporate update and discuss the progress we’ve made on our key pipeline projects. Then, André will review our first quarter 2022 financial results. Following that we will open up the line for your questions. Although we continue to progress each of our development programs during the first quarter today’s corporate update will be brief. Our material news flow, which we expect will be heavier as the year progresses was relatively light this quarter. So first on the atai partnership, in September, we entered into an amended and restated secured loan agreement with our partner ATAI Life Sciences. The loan committed $6 million in future financial support to IntelGenx and helped us to meet certain requirements in conjunction with our uplisting with the TSX in October. During the first quarter of this year, we have received our third term loan from atai in the amount of $3 million, which we will use for working capital. Moving on to RIZAPORT. We’re meeting with Exeltis test next week to discuss the internal analysis on commercializing in additional countries. On Tadalafil there’s no update at this time certainly not from the last March investor call, everything is progressing however. Moving on to cannabis, we received an additional purchase order from Heritage for reselling our CB4 Control film to one of the top three license producers in Canada. Montelukast, the resumption of patient enrollment and dosing in our Phase 2a BUENA clinical trial in patients with mild-to-moderate Alzheimer’s disease was definitely the highlight of the first quarter. The proof-of-concept study will assess Montelukast VersaFilm safety, feasibility, tolerability, and efficacy for the treatment of mild-to-moderate Alzheimer’s disease and is proceeding under the amended protocol with the higher daily dose that was previously cleared by Health Canada. In addition, we’re in early discussions to expand the therapeutic use of Montelukast to COVID-19 and Parkinson’s disease. Now moving on to animal health. We finalized the formulation development and completed a clinical batch for an undisclosed partner project. Again, the progress we continue to make is not reflected by this quarters lighter news flow, which we expect will be a short-term trend. We look forward to updating you on our progress in the coming quarters. With that, I would now like to turn the call over to André for review of our financial results. André?

André Godin: Thank you, Horst. Good afternoon, everyone. As Horst mentioned, I’ll take a few minutes to discuss the company’s financial performance for the first quarter ended March 31, 2022. The total revenue for 2022 first quarter amounted to $237,000 compared to $286,000 in the same period last year. The change is mainly attributable to decrease in product revenue of $160,000, partially upset by increases in R&D revenues of $99,000 and royalties of $12,000. Operating costs and expenses were $2.6 million for Q1 2022 versus $2.2 million for the corresponding three-month period of 2021. For Q1 2022, the company had an operating loss of $2.3 million compared to an operating loss of $1.9 million for the comparable period of 2021. Adjusted EBITDA was negative $2.1 million for Q1 2022, compared to $1.7 million for the same period last year. The net comprehensive loss was $3 million or $0.02 on a basic and diluted per share basis for Q4 – for Q1 2022, compared to net comprehensive loss of $2.2 million or $0.02 per share for the confirmable period of 2021. I will now turn the call back to Dr. Zerbe. Horst?

Horst Zerbe: Thanks, André. In closing, I’d like to once again, recognize our team for executing on our long-term strategy. And with that, I will now turn the call over for questions. I would like to remind you that our forward-looking statements apply to both our prepared remarks and the following QA. Thank you.

Operator: [Operator Instructions] The first question is coming from Hugh Kelly, who is a Private Investor. Hugh over to you.

Hugh Kelly: Thank you. Good afternoon folks. One question is on the last call we talked about the scheduling meeting with the FDA on status of RIZAPORT Complete Response Letter. Do you think there’ll be scheduled between now and the end of the second quarter, Dr. Zerbe?

Horst Zerbe: Thanks, Hugh. Yes. I think that is going to be the case. We’re progressing for plan meeting where right now in the process of gathering the stability data required to put together the application for the meeting. So in short, yes, the meaning is going to be scheduled according to plan.

Hugh Kelly: Okay, thank you.

Operator: Thank you. Your next question is coming from Trevor Ricks, a Private Investor. Trevor, please ask your question.

Trevor Ricks: Hey, I was just, wondering, it shows that there’s $750,000 in accounts receivable. Do – what is that for? And when do you expect to receive that?

André Godin: Yes, it’s a multiple things. There is, GSC in QST [ph], so tax, sales tax that were supposed to get back. There are also some receivable from Zaramed [ph], one of our main customer as well as some receivable from – also from the government on investment tax credits. So, and it should all be received, I would say in Q2 most likely. So it shouldn’t be there or most of it shouldn’t be there by the end of this quarter.

Trevor Ricks: Okay. And on the revenue side as well, I saw it was all logged in Europe. There was no revenue from Canada, in terms of royalties and income from RIZAPORT and CBD, are you able to distinguish how much of the $237,000 is from each or any specific numbers on that?

André Godin: Most of it is from R&D revenue. And, the royalty is, I would say it’s about $15,000 on each – both, from the RIZAPORT Spain and CBD.

Trevor Ricks: Okay. Also, do you have a current patient enrollment number for the BUENA study?

Horst Zerbe: Yes. We’re right now at, regarding the increased dosing, we’re now in the process of enrolling the sixth patient. So in total we are around 30.

Trevor Ricks: Okay. Thank you. And then one question about Tadalafil, I’ve noticed that fails to mention anything to do with their involvement in Tadalafil or anything like that. Do you know why that is?

Horst Zerbe: Dana, do you want to respond to that?

Dana Matzen: That’s just speculative. I mean, the end, we don’t know why they don’t mentioned it. One, I guess idea is that Tadalafil is certainly a little bit non strategic for them, they’re mostly focused on their CNS programs, and Tadalafil for its outside that focus, but at the end of today, this is all its speculation.

Trevor Ricks: And they’re not dragging their feet on anything that we’ve done kind of behind the scenes with them that you’ve noticed at all have that?

Dana Matzen: No. We have weekly team meetings. We’re actually progressing quite nicely on the last items that we need to do and notice is a full team effort. So there is just certainly a strong collaboration between the companies.

Trevor Ricks: Okay. That’s good. And regarding the additional purchase order from the, what is the one of the top three licensed producers in Canada? Is there, are you able to say how big that order was? So what we can expect for revenue from that?

Dana Matzen: So we received a order for full batch. Again, this is for 200, 000 – 220,000. This is good news for us. Our partner Heritage, as you know, is selling the product in Canada, also selling it to reseller or distributing it to resellers. So there are a bunch of companies that are also selling our brand, within their channels. And one of the recent purchase order that we received is a signal that there’s an uptake in the market, because that, that AP, received a small order recently and just ordered again. So there is just certainly quite an activity right now on the marketing and distribution site for our CB4 Control film in Canada.

Trevor Ricks: Okay. Did you say 200 or 20?

Dana Matzen: I said 200,000 to 220,000, so that’s kind of the range.

Trevor Ricks: Okay. And do you know if Heritage has any plans? I know they’re trying to expand into the U.S. I believe in Missouri, is that something that we would be involved with as well?

Dana Matzen: At this moment due to federal legislations, we cannot cross border with our products to the U.S. one would have to manufacture within the U.S. to distribute there. So, we have discussions about how we could enter that market, and we’re certainly very opportunistic on it at this moment. There are no concrete plans that we can share.

Trevor Ricks: Okay. And I just have one more question, sorry for the bunch. I know in terms of the generic, Suboxone that we’ve been in litigation with in the past, I believe the agreement was that it came off patent we were allowed to sell at January 1, 2023, which is coming up. Do we have any plans for marketing or application of that or where does that kind of stand?

Horst Zerbe: Maybe, Dana, Tommy is going to respond to that.

Tommy Kenny: Yes. So it’s not off patents. Some patents are still there. We do are able to launch our product, but right now, we don’t have anything to tell investor as to when we will launch the product because nothing is firm at the moment.

Trevor Ricks: Okay. And then, I do believe I saw a, we recently got a CRL in March. Is there – are you able to comment on that as well?

Tommy Kenny: Yes. The CRL, it’s Tommy here. The CRL that we received it for an undisclosed project on our pipeline. So hopefully we can answer quickly and move this project toward approval as soon as possible. Things are looking good in that respect.

Horst Zerbe: Just to add to that, it’s Horst Zerbe here. This was entirely an expected CRL. It is in that sense, really minor. We were prepared to receive it, our partner, which we cannot disclose was expecting that and we are – as we speak, responding to that.

Trevor Ricks: Okay. And do you have a timeline for when you might resubmit on that?

Horst Zerbe: It’ll be Q3.

Trevor Ricks: Okay. Thank you so much. I think that’s all I have for now. I appreciate it.

Horst Zerbe: You’re welcome.

Operator: Thank you. Our next question is coming from Hugh Kelly, who is a private investor. Hugh, over to you.

Hugh Kelly: Dr. Zerbe one more question is on the, any update with Tommy [ph] of, how things are progressing looking with the two-way arbitration?

Tommy Kenny: Well, the arbitration is still ongoing. The nature of the arbitration process is that it is confidential and this is why, that firm was chosen when we entered into the agreement. So, I cannot disclose anything more. I will be happy to let the investor community know what the outcome of the proceeding is once we get there. But right now, things are progressing. I don’t know the full; we don’t have a full scheduling order at the moment. So, I cannot tell you when it will be completed, but things are progressing.

Hugh Kelly: Okay. Thank you, Tommy. That’s my end of my questions.

Tommy Kenny: Thank you.

Horst Zerbe: Thank you.

Operator: Thank you. Your next question is coming from Colin Taylor, who is Private Investor. Colin over to you.

Colin Taylor: Hi, thank you for taking my question, a long time investor. So quarter-after-quarter, I feel that we do not have a product that we’re focusing on. We have multiple products that we’re trying to get to market, and it’s part frustration on what is the problem with management, executing on business lines that we already have that are developed. And why can’t we expand on those? Thank you.

Horst Zerbe: I think we’ve demonstrated over the past quarters that we are executing. We brought one product to the market in Spain, one of our legacy products; we brought the cannabis film to the market. We’re expanding they are quite rapidly also, as Dana expanded, there have been setbacks. I’m the first one to admit that, but I think, you should also recognize that we have or that we are trying to learn from our mistakes, fix them and move on. And I think the most recent successes in terms of those launches, I mentioned do and prove that.

Colin Taylor: Okay. Yes. I strongly favor a more monetized approach and in the way that we do business and understand that we’re not a research and development company anymore. So, I look forward to, increasing our numbers, increasing our sales for established business lines. So thank you for my consideration and my call.

Horst Zerbe: You’re welcome.

Operator: Thank you. The next question is coming from Adams Tobero [ph], the Private Investor, Adam, please post your question.

Unidentified Analyst: Hey everyone. Thanks for taking my question. I have two questions. The first one is, I’m sorry if I might have missed this early in the call, if you mentioned it, but is there any info regarding the pet medications that you can give to us investors, regarding like what’s going on with negotiations? Where we at timelines, maybe of when we might hear about any of the companies that you have partnered with in regards to the pet medications?

Horst Zerbe: Dana?

Dana Matzen: Yes, I can take that question. So, we’re having a strong, VetaFilm campaign running right now where we’ll be at trade shows. We have several partners lined up in various stages of the term sheet discussions. As Horst mentioned previously, we have a company where we are submitting the clinical tri samples, on our VetaFilm program at the end of the day, we’re doing what we can to advertise it and we’re at different features. So this is the normal process with a new platform it’s highly innovative in the market that hasn’t seen much innovation over the last decades. If you think about what are out there in terms of medicines for animals, you don’t have a lot of innovation, so there’s a little bit of a barrier that we have to break, but we’re progressing and I’m sure in the future, you would [Audio Gap]

Horst Zerbe: So, the answer is no, but to be fully correct, prior to entering into the deal with atai, we had a deal in place with another psychedelics company that, agreement has been completed. And so now we are fully focused and exclusively dealing with atai.

Unidentified Analyst: Understood. So, I assume that was [indiscernible] to build on that question is, are you guys expecting to get another loan from atai at some point soon? And how has everything been going in terms of your relationship back and forth with atai and the way they’ve been supporting you?

Horst Zerbe: The relationship I can comment, André will certainly comment on the financial part of the question. The relationship has been and continues to be very good. It’s a very, yes partner like and collaborative relationship. I can only say the best and the interaction occurs at different levels at the corporate level, as well as at the project level. And like I said, at both levels, the communication is really excellent. André you want to comment on the financial part of the question?

André Godin: Yes. So in September of 2021, we signed an addendum to the existing loan, for an additional $6 million we’ll receive the first $3 million in January of this year. And there’s an additional $3 million that will be received in January of 2023 for the total of $6 million. So there’s still $3 million to come.

Unidentified Analyst: Okay. Awesome. Thank you so much for answering my question and I really appreciate the work you guys are doing.

Horst Zerbe: Thank you.

André Godin: Thank you.

Operator: Thank you. Your next question is coming from Lindsey Murphy, a Private Investor. Lindsey, please ask your question.

Lindsey Murphy: Hi. Yes. Thank you for taking my question. I was wondering if the manufacturing facility in Montreal is ready to produce volumes of the RIZAPORT and Tadalafil, excuse me.

Horst Zerbe: The second one was Tadalafil?

Lindsey Murphy: Yes, yes. Apologize.

Horst Zerbe: Yes, Tadalafil we wouldn’t manufacture ourselves under the deal that we have with Aquestive. They would be responsible for the manufacturing and a short answer for the RIZAPORT part of the question is yes, we’re prepared to handle any volumes.

Lindsey Murphy: Okay. Thank you.

Horst Zerbe: You’re welcome.

Operator: Okay. We have another follow up question from Adam Tobero [ph]. Adam, please ask your question.

Unidentified Analyst: Yes, sorry about that guys. Are we still on track to being cash flow positive by early next year?

Horst Zerbe: Yes. No, we’re not. We will be cash flow positive at some point next year. We are looking to launch two products next year, and as soon as those launches are done, then we would turn cash flow positive, but they, we will not be happening in Q1, but sometimes during 2023.

Unidentified Analyst: Are you guys are liberty – to mention what products those are?

Horst Zerbe: I mean one for sure not, one is confidential. And the other one other, would be the migraine film. Yes.

Unidentified Analyst: Okay. All right. Awesome. And in regards to, I remember during the webcast, you mentioned the migraine films are being very well received in Spain and also by the company that you partnered with. Is this still the staying sentiment going around?

Horst Zerbe: Dana?

Dana Matzen: Yes, of course. As Horst mentioned during the intro, that we actually have a meeting with them next week to discuss the strategy for the additional countries, if you might remember, this has the right for all European countries at this moment, the product is only commercialized in Spain. So certainly we are very interested to learn about the strategy about launching an additional countries, but they’re very happy with the product and receiving great feedback also from the market.

Unidentified Analyst: Right. That’s awesome. That’s great to hear. Congratulations. Thank you for answering my question.

Horst Zerbe: Thank you.

André Godin: Thank you.

Operator: Thank you. We have a question now from Jeff Hamilton, a Private Investor. Jeff over to you.

Jeff Hamilton: Hello, and thanks for taking my call. I was wondering if you could provide any update on the Tilray situation, arbitration with them and timeline of when that may be resolved. Thank you.

Tommy Kenny: It’s, Tommy here, as I mentioned a little earlier, unfortunately the nature of arbitration is that it’s confidential. What I can say is that the arbitration is progressing, but we don’t yet have an idea of when it will be completely terminated, completely completed. We should get a decision by an arbitrator at the end of the process, but right now we’re still in the beginning of the process. So I would expect maybe to be able to give you more information once we have a fixed scheduling order, which could be in the next call, but, at the moment I cannot give more timeline update as to that. And as for the relationship, well, we’re in arbitration, so I guess it says a lot.

Jeff Hamilton: Okay. Thank you.

Operator: Okay. We have another question in from Hugh Kelly. Hugh the floor is yours.

Hugh Kelly: All right, yes. Thank you again. I should have said this earlier, Dr. Zerbe, nice presentation at the Bloom Conference. Great detail in your presentation. I wanted to say thank you for that. And the, one quick question on the atai is, there were discussions about working another potential indication, product number three. Is that still ongoing?

Horst Zerbe: That is still ongoing. Dana, you are closer to that. You want to add anything?

Dana Matzen: No, at this moment, we have the discussion between the different R&D teams to discuss the feasibility timeline and potential budget. They’re very interested. So, I can’t really agree very more at this moment. This is the before we sign agreements, but yes we are. We’re progressing on that.

Hugh Kelly: Okay. Thank you, Dana. Thank you.

Dana Matzen: Sure.

Operator: Okay. There appears to be no more questions in the queue. I will now hand back over to Horst for closing remarks.

Horst Zerbe: Good. Thank you. So this concludes our Q1 2022 investor update call. Once again, I’d like to thank the entire IntelGenx team for its hard work and dedication of our directors for their continued support of the management team, and finally our investors for continuing to believe in and supporting us. Thanks to you all and goodbye.

Operator: Thank you, ladies and gentlemen, this does conclude today’s conference call. You may now disconnect your phone line and have a wonderful day. Thank you for your participation.