Mr. Sylvain Chretien reports
PEDIAPHARM ANNOUNCES FIRST QUARTER FINANCIAL RESULTS
Pediapharm Inc. has filed its unaudited financial results for the first quarter ended June 30, 2015. (All dollar amounts are expressed in Canadian currency, and results are reported in accordance with international financial reporting standard accounting principles.)
Highlights for the period ended June 30, 2015
On May 5, 2015, the company announced that it received a notice of deficiency-withdrawal letter from Health Canada regarding its new drug submission for Easyhaler Budesonide. The company's file is eligible for the reconsideration process, which is part of normal regulatory actions available to sponsors. On Aug. 4, 2015, Pediapharm has submitted its reconsideration package to Health Canada regarding Easyhaler Budesonide. The company's objective remains to obtain a marketing approval by the end of 2015.
On June 8, 2015, Pediapharm and G. Pohl-Boskamp GmbH & Co. KG announced the extension of their exclusive Canadian distribution agreement for NYDA until at least 2021. The revised agreement includes additional renewal clauses and similar terms and conditions as were included in the previous agreement. Furthermore, the revised agreement does not contain any material financial changes from the previous agreement.
NYDA's continued sales performance in the first quarter of fiscal 2016 is in line with the annual projected forecast. For the month of June, 2015, the product captured 25.0-per-cent market share in dollars in Canada (IMS data from June, 2015). This excellent performance is the result of a well-targeted marketing and promotional investment made by the company with the key objective to fully exploit the sales potential of NYDA.
The company has entered in discussion with numerous potential partners for the launch of its Naproxen Suspension in the United States. The objective is to finalize an agreement by the end of the 2015, with a product launch estimated to be in January to March, 2016.
Recent highlights
On July 24, 2015, the company submitted to the Canadian health authorities its regulatory dossier of rupatadine, a novel generation of antihistamine to treat the symptoms of allergy and urticarial in both adults and children. Rupatadine has a unique dual activity by blocking both histamine H1 and platelet-activating factor receptors, thus, providing additional anti-allergic benefits to patients. It comes in a once-daily formulation and is also available in the form of suspension (liquid) for children.
The Canadian second-generation antihistamine market is estimated to be $105-million, of which $17-million is from products with a prescription status, which are growing at a rate of approximately 15 per cent. The entire antihistamine market was approximately $120-million in 2013 (IMS data in 2013).
"The financial results of this quarter are in line with our projections," stated Sylvain Chretien, president and chief executive officer of Pediapharm.
He added: "With the seasonality associated with head lice treatments, revenue from NYDA, which represents roughly 70 to 75 per cent of our total revenue, has historically been lower in the first two quarters of the calendar year. With its ongoing strong performance in the market as shown by its 25-per-cent dollar market share in June, 2015 (IMS data in June, 2015), NYDA's revenue is expected to grow significantly in the upcoming quarters, which will improve our bottom line significantly. We have also invested in three new product filings with Health Canada, all from deals signed in 2014. Our future remains promising given our current product portfolio, our product pipeline, as well as potential upcoming and selected business opportunities."
The company's focus remains to execute its commercial plan with existing products, such as NYDA, a revolutionary treatment indicated for eradication of head lice and its eggs. NYDA reached over $2-million in revenue in fiscal 2015, is expected to reach $3.2-million in fiscal 2016 and has the potential to achieve annual peak revenues of $6-million to $8-million by fiscal 2018.
Pediapharm has a product pipeline of secured exclusive agreements, which management believes will enable the company to obtain its corporate annual revenue goal of reaching between $35-million and $40-million within the next five to six years. As described herein, projected annual peak sales to be generated from existing licences/products that have not yet been launched and/or require Health Canada approval are estimated at $35-million. The company intends on filing two additional products over the next few months for estimated Health Canada approvals before December, 2016.
The attached chart contains information on the secured exclusive agreements that are expected to be launched in the next 18 months. This chart is identical to the one presented in the last management's discussion and analysis of the company dated July 20, 2015.
Pediapharm product pipeline
PEDIAPHARM PRODUCT PIPELINE
Product Partner -- Indication Market size Est. annual Est.
country (Cdn $) peak sales launch
(Cdn $)
Pediapharm Acquired from Juvenile Suspension/ 5M based on Q1 2016
Naproxen Roche -- rheumatoid liquid: 50- milestone
Suspension USA arthritis & 80M payments and
USA* other medical (internal royalties
pain estimate)
conditions tablets:
greater than
500M
(internal
estimate)
Easyhaler- Orion -- Asthma 195M 15M Q1 2016
Budesonide Finland
**
Cuvposa Merz Severe 25M 5M Q4 2016
** Pharma -- USA drooling --
cerebral
palsy
Cetraxal- Salvat Ear 25M 4M Q4 2016
Plus** Labora- infection,
tories -- swimmer's ear
Spain
Rupatadine Uriach -- Antihistamine 120M 6M Q4 2016
** Spain (RX
indication)
Total 365M+ 35M
* U.S. product to be outlicensed to a U.S. commercial partner
** Canadian licence which requires Health Canada approval
Now that Pediapharm has positioned itself with a strong pipeline as shown herein, the company's core strategy regarding business development has recently evolved to focus more on acquisitions of products with existing sales and on co-promotion for products already approved in Canada. The key objective is to generate profitability in a timely fashion while pursuing the regulatory process of the agreements signed in 2014. In parallel, Pediapharm will still assess exclusive licensing agreements (commonly known as in-licensing).
Furthermore, before the end of 2015, the company intends to sign an agreement with a U.S. commercial partner for the selling and marketing of its first product acquisition in the United States, namely the Pediapharm Naproxen Suspension. Pediapharm believes that with this agreement, the company will reach profitability more rapidly.
With the excellent sales momentum of its current marketed products portfolio, including NYDA, the company continues to make positive steps toward generating positive cash flow. The recent launch of Pediapharm Naproxen Suspension in Canada and the expected launch of Pediapharm Naproxen Suspension in the U.S. through a partner, as well as the potential launch of Easyhaler-budesonide in 2016 assuming Health Canada's approval, will positively impact revenue and profitability for years to come. In parallel, the company is in the process of assessing potential product acquisitions and strives to add more products to its portfolio within this fiscal year. Pediapharm is a growth company in the high-margin specialty pharmaceutical industry, and when opportunities arise to feed that growth, it may raise incremental capital to provide for necessary financing and flexibility.
Review of operating results for the period ended June 30, 2015
For the three months ended June 30, 2015, revenues reached $605,642 compared with revenues of $885,260 in the three months ended June 30, 2014. Revenue from sales of Pediapharm-branded products increased by $110,658 while revenue from commissions decreased by $390,276 as a result of the termination of the company's promotional sales agreements with Sanofi Canada for Suprax and Allerject, effective June 30, 2014.
For the three months ended June 30, 2015, selling and administrative expenses were $1,999,890 (2014: $1,716,187). The main reasons for this increase are the additional efforts associated with the five agreements signed in fiscal 2015 and the expenses associated with the additional marketing expenses, in support of the expected revenue and profit growth of new products such as Pediapharm Naproxen Suspension in Canada and in the U.S., as well as NYDA, which is expected to keep growing significantly. Finally, since 90 per cent of the company's revenue comes from sales of Pediapharm-branded products (2014: 49 per cent) versus revenue from commissions, expenses such as cost of goods and royalties increase accordingly.
The comprehensive loss for the three months ended June 30, 2015, was $1,594,646 compared with $812,707 in the three months ended June 30, 2014. The additional efforts associated with the five agreements signed in fiscal 2015 and the additional efforts in marketing and sales are the main reasons for the increased loss. There is also an expense of $168,779 in interest payable on the convertible debentures in the three months ended June 30, 2015.
FINANCIAL HIGHLIGHTS
June 30, 2015 June 30, 2014
(three months) (three months)
Revenue from products $542,168 $431,510
Revenue from commissions 63,474 453,750
Total revenue 605,642 885,260
Selling and administrative expenses 1,999,890 1,716,187
Net (loss) (1,594,646) (812,707)
We seek Safe Harbor.
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