Medexus CEO (MDP.T) on creating Canada’s specialty pharma success story

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. Yet this story the retail investment community who wrongfully gauged Medexus on a scale traditionally used for companies like Eli Lilly when Medexus announced on Aug 3, 2021, that the FDA had requested more information for its application on treosulfan, a new previously approved drug it was trying to take to the U.S. market.

With developers like Eli Lilly, this type of response typically spells disaster for the developer as it not only has to spend more money to complete new trials for the requested data, but there is an increased possibility that the drug will not get approved.

However, in Medexus’ case, the data existed and just needed to be put together and resubmitted to the FDA. Remember, the drug had already been approved in other jurisdictions, but the market took this news hard and share price plummeted from $7.31 CAD per share on July 30, 2021 to $3.02 by August 20, 2021.

All the while, Medexus continued to grow its revenues with a stable portfolio. Yes, the road to getting FDA approval for treosulfan has had its share of challenges since, but it has never been taken off the table and Medexus continued to grow outside of that.

In fact, the company began announcing record quarterly and fiscal year revenues in June 2022, and every quarter since continued to reach record revenue levels still without treosulfan. The disconnect between the company’s performance and its valuation was staggering, considering the company announced revenues of $76.7 million USD for fiscal 2022 and trades today at a market cap of $35.11 million CAD.

Medexus’ valuation is nothing less than an enigma. The specialty pharma company, headquartered in Bolton, Ontario, is a Canadian success story that no one seems to understand. The latest tempest in a teapot to hit Medexus, is the expiry of convertible debentures, this year, that some naysayers are questioning if the company is prepared to handle.

However, Ken d’Entremont, director and CEO of Medexus, took this particular bull by the horns during the company’s latest quarterly earnings call to explain how the company was already putting together plans to deal with this event and wouldn’t be subject to the potential damage that these same naysayers claimed were imminent.

According to Medexus’ latest MD&A, where management noted it was making progress on securing options to manage the convertible debentures. Remember, these debentures were issued as part of the capital to initially build the company and not the result of bad management in the meantime. Basically, they are the necessary cost of doing business and should be viewed as such.

So, Medexus is growing into a powerhouse specialty drug distributor and if it is able to bring treosulfan online, it could stand to make another $100 million USD in revenue per year. Remember the company is still trading at a $35.11 million CAD market cap. Doesn’t seem right, does it?

Ken d’Entremont sat down with our own Jody Vance and Equity Guru founder Chris Parry in two different interviews to outline the company, its current portfolio, where it stands with treosulfan and what plans are being put in place to deal with the expiring convertible debentures.

Enjoy!