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. On July 31st 2023, Medexus announced preliminary revenue for Q1 2024. The Company was expecting to deliver total revenue between $31 million and $31.5 million USD for fiscal Q1 2024, representing record quarterly revenue for Medexus and a year-over-year increase of at least 34.5% compared to fiscal Q1 2023. All figures are in US Dollars.

Today, Medexus announced its actual Q1 2024 results. Record total revenue of $31.6 million in fiscal Q1 2024, a year-over-year increase of 37%. This represents the strongest quarterly revenue in Medexus’s history.

A record adjusted EBITDA of $6.6 million in fiscal Q1 2024, a year-over-year increase of $4.7 million. This represents the strongest quarterly Adjusted EBITDA in Medexus’s history.

Operating profit of $4.8 million in fiscal Q1 2024, compared to $0.0 million in fiscal Q1 2023. Net income of $0.7 million in fiscal Q1 2024, compared to $(1.4) million in fiscal Q1 2023. Adjusted net income of $0.6 million compared to $(3.6) million in fiscal Q1 2023. And a cash position of $15.8 million at June 30 2023.

Ken d’Entremont, Chief Executive Officer of Medexus, commented, “We are very pleased to report another great quarter, with continued strength and stability across the company’s base business, and notably strong Rupall performance driving this latest quarter’s record revenue. These results demonstrate the robustness of our product portfolio and our ability to generate revenue growth and positive operating profit, net income, and Adjusted EBITDA.”

Marcel Konrad, Chief Financial Officer of Medexus, further noted, “Our cash position has continued to improve in the first quarter of fiscal year 2024, increasing from $13.1 million at March 31, 2023 to $15.8 million at June 30, 2023. In July, we used some of this cash to repurchase and cancel C$1.7 million principal amount of convertible debentures under our NCIB. Adjusting for that transaction, we continue to expect to have approximately $20 million of total cash at September 30 – assuming successful execution of our cash management plan, and not including any additional amounts that may become available under the $20 million uncommitted accordion facility with BMO.”

In terms of operational highlights when it comes to the product line:

IXINITY: Demand in the US remained strong during the quarter experiencing a slight decrease over the trailing 12 month period ended June 30 2023 reflecting the effects of lower observed average quantities of product consumed by newer patients. Medexus’s sales and marketing initiatives also benefited from resumption of in-person selling since mid-financial year 2023. Medexus has also continued to invest moderately in its IXINITY manufacturing process improvement initiative, which has had a positive impact on batch yield and manufacturing costs, expected to be offset by increases in direct costs of Medexus’s third-party contract manufacturing arrangements.

Rasuvo: Medexus maintained its market leading position with an estimated >80% unit share and unit demand remains strong. However, competition in the US branded methotrexate market continues to adversely affect Rasuvo product-level revenue. Medexus implemented effective unit-level price reductions to defend and grow its strong market position.

Rupall: Unit demand in Canada remained strong which is reflected in the unit demand growth of 26%. This strong performance reflects successful execution of the company’s sales and marketing initiatives to sustain the product’s strong performance over the six years since launch, as well as the timing of certain orders during the quarter. Medexus continues to evaluate appropriate business-planning options well in advance of Rupall’s Health Canada market exclusivity expiration date of January 2025.

Gleolan:  Medexus continued to execute the company’s post-transition commercial plan including new sales and marketing initiatives, including application of additional existing sales force resources to expand and deepen market coverage. Medexus is also engaging in active inventory management to optimize the product’s working capital position over the coming quarters. In May 2023, Medexus presented data at ISPOR 2023 demonstrating a 33% cost savings with Gleolan, compared to conventional white light surgery, in US patients with high-grade glioma.

Metoject: Unit demand increased by 12% in spite of direct generic competition. In the three-month period ended June 30, 2023, unit demand for Metoject benefited from unanticipated shortages of competing product inventory. Medexus continues to implement effective unit-level price reductions to defend and grow its strong market position.

When it comes to product pipeline highlights:

Treosulfan: Medac continues to work towards resubmission of the new drug application (NDA) for treosulfan. Based on Medexus’s assessment of the FDA’s feedback and discussions with medac, Medexus continues to expect that it will take medac a period extending into the first half calendar year 2024 to collect and submit the information requested by the FDA. In light of the ongoing delay in medac’s response to the FDA’s requests in respect of the treosulfan NDA, the FDA’s review of the treosulfan NDA has now continued beyond the agreed outside date for FDA approval set out in the treosulfan license agreement, which provides that milestone payment amounts are subject to renegotiation and adjustment during an agreed negotiation period, which is currently underway.

Topical Terbinafine: Medexus has made progress on preparing the new drug submission seeking Health Canada approval of terbinafine hydrochloride nail lacquer to treat fungal nail infections, and continues to expect to submit later in calendar year 2023.

The stock has continued the trajectory I outlined in my previous analysis of Medexus stock.

The breakout triggered with a close over $1.40 and the breaking of the trendline pattern. We then took out the $1.80 resistance zone and completed the retest seeing buyers step in. The stock then gapped up and closed above the recent highs around $2.20 based on preliminary earnings. The run up to earnings saw the stock take out the $2.50 resistance zone and make its way to our next resistance zone around $3.40.

The stock is now pulling back but this should be expected as profits are being taken after a major move. The uptrend is in play, and $2.50 is the support zone we are working with. The next rally will come with a breakout and close above $3.40, which would set the stock up for a move past $4.00.

The technicals look prime, and the stock has the fundamentals to back it up.