Specialty pharmaceuticals is a unique niche in the pharma sector. Where companies like Eli Lilly pour billions into developing a drug candidate from scratch with the very real possibility that the drug will fail during trials and never make it to market, specialty pharma companies, like Medexus Pharmaceuticals (MDP.T), find already approved drugs from other jurisdictions and bring them to the North America market. Drug development risk averted.

Medexus has methodically built a diverse drug portfolio in both the U.S. and Canada that generates a sustainable growing revenue. We have seen this with recent quarterly earnings which have continued to break company records. Preliminary fiscal Q4 2023 and full year 2023 financial are expected to be another record breaking results for the company with full revenue of US$107-108 million representing record annual revenue and a year-over-year increase of at least 39.5%.

Earlier this year, there was a buzz on discussion boards when it came to Medexus and a series of debentures expiring next year. The discussion boards haven’t been positive, but is there a basis for concern? Or is this just the normal course of business?

Equity Guru founder, Chris Parry, sat down with Medexus director and CEO Ken d’Entremont to get the skinny on the company’s debenture situation.

Today, the company announced news related to debentures.

Medexus announced that the Toronto Stock Exchange has accepted Medexus’s notice of intention to make a normal course issuer bid (NCIB) for its 6% unsecured convertible debentures due 2023 (TSX:MDP.DB).

Under the NCIB, Medexus may purchase for cancellation up to C$4,132,100 principal amount of convertible debentures, representing approximately 10% of the public float as defined under TSX rules. As of May 1, 2023, C$41,546,000 principal amount of convertible debentures were outstanding.

“We believe that purchases of our convertible debentures will allow us to deleverage our balance sheet,” said Ken d’Entremont, Medexus’s Chief Executive Officer. “This would lead to lower overall debt levels and reduced future debt service obligations, particularly as we approach the October 2023 maturity of the convertible debentures.”

“We will carefully monitor the market price of the convertible debentures,” added Marcel Konrad, Medexus’s Chief Financial Officer. “Any purchases we make under this new NCIB will benefit the company and its investors by reducing the principal amount of convertible debentures outstanding at maturity, smoothing out our capital outlays during this period, and seeking to uphold a stable and orderly market for both the convertible debentures and our common shares.”

Purchases under the NCIB may commence on May 15, 2023 and continue through October 16, 2023 or such earlier date as Medexus completes the maximum aggregate purchases permitted under the NCIB. The NCIB will be conducted by means of open market transactions through the facilities of the TSX or alternative Canadian trading systems. Accordingly, under TSX rules and policies, purchases under the NCIB on any trading day will be limited to a maximum of C$1,620 principal amount, being 25% of the ADTV, other than any purchases made in accordance with the TSX’s block purchase exception.

Medexus stock is down -7.69% on the news and is sitting at a market cap of just over $26.58 million.

Medexus saw a reaction at the major resistance zone at $1.70. The reaction is evident by the long wick candle printed on April 11th 2023. However, a positive for bulls is the stock has not broken below the recent lows printed at the $1.23 zone. a zone which may be tested once again with the current drop in the stock. Buyers have stepped in and defended this support zone in the past, with wicks on candles printed from April 28th-May 2nd 2023 indicating a strong presence of buyers who are protecting this support.

Going forward, a break and close above the $1.70 zone would be bullish. Not only would this take out a resistance zone, but also see us close above the downtrend line which I have drawn out. This downtrend line is connecting all the lower highs, meaning the stock is in an interim downtrend. Given the three times we have tested $1.23, and seeing buyers jump in and a bounce, it is pointing to a bottoming here.