Medexus Pharmaceuticals - Pharmaceutical Blockbusters

[Pohjolan_Eka]

Medexus is a small Canadian company specializing in the sale of pharmaceuticals:

The company’s business model is to acquire and license medicines for sale. Its own development work is quite minimal and focuses on improving marketability:

The company’s sales focus on the world’s largest pharmaceutical market, North America. Outside of North America, medicines are licensed to third parties:

The company has acquired quite a few different products, so revenue streams are diversified. The US market naturally dominates revenues:

In February 2020, the company acquired IXINITY, the crown jewel of its portfolio, at an affordable price of $30 million. The drug has sold very strongly and significant further growth is expected:

The company’s arthritis drug Trispan is expected to achieve great success, and Medexus anticipates receiving FDA approval for US sales during 2022:

Also, the results for the bone marrow transplant drug Treosulfan are convincing, and the company aims to start sales in the US in late 2021:

Gleolan, which “glows” in brain tumors, is the company’s newest pharmaceutical product, with regular sales having started in Canada in early February 2021.

In addition, the company has a host of other pharmaceutical products:

The company has been growing at an astonishing rate for years, and the revenue growth rate only accelerated to 94% in Q3:

The management’s 12% ownership of the company is surprisingly small. There are a large number of outstanding warrants, which will inevitably dilute the shareholders’ stake if the share price rises. However, this will generate a fair amount of capital that can be used to finance the acquisition of new drugs:

The company also recently raised additional capital through a share issue, so there are no acute cash concerns:

Medexus’s management is very experienced, and the company has invested in quality and expertise in its recruitments. Management and employees are also compensated quite generously:

Investor presentation, the source of the images:

https://d1io3yog0oux5.cloudfront.net/_10a7d35bf2f250887476aaa71e9d1d6b/medexusinc/db/706/5933/pdf/Medexus+Investor+Presentation+-+December+2020.pdf

Medexus quarterly reports:

Financial Results

Analyst target prices:

https://www.marketscreener.com/quote/stock/MEDEXUS-PHARMACEUTICALS-I-49601873/consensus/

[tankerous]

Good that this also has its own thread. The management’s relatively small ownership stake is a minor blemish here. Otherwise, things are pretty much in place as long as we keep making good acquisitions in the future. At the same time, the share of sales and administrative expenses in relation to turnover will decrease.

Often, people lament that economists are in charge, when engineers should be at the helm. Here, however, we need good salespeople for things to rock. The CEO also likes to frequently talk about the company’s progress in various communication channels and perhaps pump it up a bit at the same time.

[Pohjolan_Eka]

This Q3 was really impressive:

Good progress on the product front:

In addition, the company is dual-listing on the US stock exchange!

The SG&A expense ratio did make me wonder The direction is clearly right, but I would really hope those costs would decrease faster. I’m a bit afraid here that some of the scalability will be lost to high sales bonuses and high base salaries for staff:

[Pohjolan_Eka]

@tankerous

The CEO also often likes to talk about the company’s progress on various communication channels and perhaps pump it up a bit at the same time.

Yes, that seems to be the case. Here are a couple of longer videos where the CEO explains the company’s business:

Medexus Pharmaceuticals (MDP-TSX.V) Interview with CEO Ken d'Entremont

Medexus Pharmaceuticals (TSXV: MDP, OTC: MEDXF) Operational Update

[Porssimajava]

And here’s a fact about the timing of the Nasse listing, according to Eka:

https://twitter.com/PohjolanEka/status/1366837675710418948?s=20

[Pohjolan_Eka]

Those facts are pretty soft, considering that even the date for submitting the listing application is incorrectly stated as January 25th, when the correct date is January 21st

That 4-6 weeks comes from Nasdaq’s listing guide. Who knows how much congestion there is at the stock exchange right now and what the actual processing times for applications are. I guess the listing will happen sometime in March

[Fisu]

@tankerous

Management’s relatively small ownership stake is a minor flaw here.

At least the CEO owns 8% of the company, so he has skin in the game.

At 49:40 they talk about valuation, and then immediately about listing. So the video is from December; I had previously linked it in the Ostin/myin thread, and it’s the same one Eka had also posted in this thread.

Medexus Pharmaceuticals (MDP-TSX.V) Interview with CEO Ken d'Entremont

[JNivala]

An interesting company. I like the company’s strategy of focusing on “niche areas” in medicine; for example, the company’s new products Ixinity and Gleolan are such examples. Often in these areas, competition is smaller (and there is a lack of effective treatments), but globally there is still good market potential. The risk is also substantially smaller compared to companies that are purely developing only 1-2 drug candidates and are still in some phase II stage.

Furthermore, 92% of the total revenue in 2020 came from this rapidly growing sector (vs. “mature phase products” 6%), so sharp growth is expected in the near future.

Additionally, it should be mentioned that because I unfortunately have experience with glioblastoma due to my late mother (+ I have also done research related to glioblastomas), all innovations that can improve the prognosis of the disease are relatively close to my heart. My detailed understanding of Gleolan is still in progress, but at least the company’s slides show that Gleolan improves the accuracy of resection in a way that would have clinical significance for the survival prognosis.

I will continue to familiarize myself with it, but an initial position was taken in this. Possibly more when I can get a deeper understanding of the case.

[Pohjolan_Eka]

Medexus’s Investor Presentation has been slightly updated:

https://d1io3yog0oux5.cloudfront.net/_889b1d57e05e9a7f0c1683f1e647294d/medexusinc/db/706/5933/pdf/Medexus+Investor+Presentation+-+March+5+2021.pdf

A few quick observations:

Transformative in-license of Treosulfan for the U.S. provides strong, near-term growth and potential to be the first in a new conditioning treatment class of chemotherapy

The investment case has now shifted from hyping Ixinity to hyping Treosulfan.

$100M+ revenue run rate with $15.2M of available liquidity**
**As at December 31, 2020: does not include February 2021 $32.5M equity financing

There’s a huge amount of cash, but it will certainly be needed in the near future to support growth. The size of the sales network has been increased again:

*Salesforce assumes 19 additional representatives required to support the launch of treosulfan

19 new sales reps! 19 NEW SALES REPS!!! Treosulfan is, of course, expected to generate a lot of revenue and money, but this company is still in full loss-making growth mode This is a beautiful sight for an investor coming from the Finnish dividend-hoarding culture.

The negative aspects of the company can really be summarized on this updated capital/ownership slide:

The amount of dilution from warrants and debt.. ugh and management ownership has remained quite thin. Well, fortunately most of the warrants expire in 2023, and that will provide more money to support growth.

Active Business Development Efforts to:
Add near-term products via license, acquisition and co-promotion to leverage commercial organization
Leverage experience and knowledge in specialty therapeutic areas including rare disease, oncology, auto-immune disease, hematology, and allergy
Continue focus on US and Canadian territories with near-or-on market de-risked products
Transact on accretive products that will positively contribute to margin and long-term value
Explore creative strategic partnerships, including ex-US partnerships for IXINITY

It seems there are no plans to rest on laurels after the commercialization of Treosulfan either; new business is constantly being sought for acquisition/licensing. More explosive growth and financing rounds are definitely coming

Value drivers summarized:

[Gremeor]

I just had to buy shares in this company, as things seem to be rolling along nicely A bit of diversification for me into tech and energy stocks, but I’ll double-check this with the wiser folks here:

IXINITY’s sales were already 32 million in 2019, and only 4% of the US market has been captured so far?

Indeed, there’s also been a small change in how revenue streams are divided between mature and growth phase products in this updated March version. (In the thread’s opening post, it was Mature phase 6% and Growth phase 92% of revenue)

P.S. Big thanks to @Pohjolan_Eka for bringing this company to light.

[Pohjolan_Eka]

Medexus CEO again on YouTube telling how the business is doing:

Medexus Provides Update on Business Development Projects, Licensing Deals and 2021 Growth Drivers

Nasdaq listing not until April

[Junkbondking]

{“content”:“Opinion: will the listing have any impact on the share price?\n\nI’ve been involved in a couple of cases where companies have been listed there, and the share price reaction has been practically non-existent.\n\nI think I once read some academic study on the subject, and if I recall correctly, it did conclude that historically it would have caused a short-term rise in share price.”,“target_locale”:“en”}

[tankerous]

Personally, I don’t expect anything from the Nasdaq listing. It will be useful later if/when the company squeezes out a couple of good earnings reports this and next year. Salespeople doing their sales thing. I wouldn’t be surprised if management cashes in on good stock bonuses from the listing.

[Pavel]

Correct me if I’m wrong, but is it moving from the OTC list to Nasdaq on the US side? That would be a pretty big deal in my opinion, because as far as I understand, many US brokers don’t allow trading on the OTC list. That’s what they always write on Yahoo, anyway.

[Gremeor]

At 6 minutes, the CEO mentions how there’s still some way to go in terms of valuation compared to peers. Have these peers been mentioned in this thread yet? Or in any company slide set that I might have missed?

[tankerous]

I’ve often read similar texts, but I don’t think Robinhood investors would be involved here. It’s such a boring company, after all. I hope I’m wrong, but there are thousands of stocks listed on Nasdaq and NYSE. The OTC list also has many relatively large companies that investors have found, like Semler or Acuity Ads.

[Pavel]

Yeah, it’s possible I’m a victim of fake news. However, on this forum too, every week some new company is under investigation, and then half of them report that you can’t get that particular stock or market from this and that broker at all. It’s on this basis that I surmised that Nasdaq is everywhere, but those OTC stocks are a bit questionable, not just with Robinhooders. I don’t know how much truth there is to the idea that even institutions expect some Nasdaq listing from companies, or that few look at many OTC stocks. Based on these points, I would assume that trading might increase quite a bit more.

In the US, these listings are also some kind of anomalies that often cause a price spike. I owned Biolase for some time before the correction, and there, at least, the company had an absolute desire to stay on the Nasdaq list, even if it meant doing a reverse split for it. Then, when its survival was confirmed, it certainly perked up. US investors always seem to get excited about all kinds of deadlines anyway, no matter how significant or insignificant the event. In some other countries, moving to different lists hasn’t, in my opinion, excited investors as much. This would now be quite sensible anyway, that the rise goes with the fundamentals, unless institutions truly only open positions on the Nasdaq side.

[tankerous]

Yeah, that makes sense. I might be too cynical about it, because there’s been so much talk about Nasdaq with this company. People talk about it like a silver bullet that will immediately double or triple the company’s value. Some hero on Twitter calculated that it would be four times more valuable if, after the ‘resurrection,’ Medexus were valued at the same multiples as similar US companies.

[Pavel]

Okay, let’s stop the off-topic discussion here before someone bothers to flag a bunch of messages again, even though it’s relevant to the company’s IPO. But I constantly encounter the same jargon myself. For example, regarding those blockchain companies, the milder rise of Hive compared to Riot is discussed on Yahoo precisely based on the idea that Hive isn’t on Nasdaq yet, and then it would somehow boom and rocket . But unless there’s some special “institutions don’t buy from OTC pink sheets but wait for Nasdaq,” then it’s a bit flimsy as a basis for a huge rocket, even if it becomes available to more brokers. I can’t access OTC either, but Medex is also on the Canadian side.

I had a little time, and this explained the OTC market well and how/why there are even big companies there, and that it’s divided into several different sections.

Huoltotyö

[Fisu]

From the interview:

• 2/3 of a major late-stage negotiation was completed (Treosulfan and Triamcinolone Hexacetonide), and hopes that the third will also be completed.
• Treosulfan approval is hopefully expected in August, with sales beginning in September or October.
• Treosulfan has the potential to double current revenue.
• The same company with whom the Treosulfan deal was made may also bring additional products and opportunities. This could be a very lucrative collaboration; Medexus already has at least 2 deals with them.
• New medicines are sought in areas where the company/network/salespeople are already specialized. Cost-effective and easy to roll out new products.