investor presentation - merus labs - a specialty pharma ... · pdf fileinvestor presentation...

Investor Presentation

Barry Fishman

Chief Executive Officer

Winter 2017

INVESTOR PRESENTATION 2

Forward Looking Statements and Non-IFRS Measures

1. Forward Looking Statements: This Presentation contains “forward-looking information” within the meaning of applicable Canadian securities legislation, and “forward-looking statements” within the meaning of United States securities legislation. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements in this Presentation include, but are not limited to, statements related to (i) projections regarding Gross Basis Revenue, EBIDTA and Adjusted EBITDA for future financial periods, (ii) the Company’s ability to increase gross margins for its products, (iii) the Company’s ability to expand its business by completing future acquisitions, and (iv) the Company’s ability to expand its business by demand creation. These forward-looking statements are based on management’s reasonable assumptions, estimates, expectations, analyses and opinions, which are based on management’s experience and perception of trends, current conditions and expected developments, and other factors that our management believes relevant and reasonable in the circumstances, but which may prove to be incorrect. Assumptions have been made regarding, among other things: (i) the Company’s ability to increase demand and lower costs for existing products, (ii) the Company’s ability to complete and finance future product acquisitions, (iii) the Company’s ability to maintain sales of current pharmaceutical products within projected volumes, (iv) the cost of servicing debt, (v) product manufacturing costs, and (vi) costs of operations. The Company’s actual results, product acquisitions and financial position could differ materially from those anticipated in such forward-looking statements as a result of numerous factors, risks and uncertainties, many of which are beyond the Company’s control. Management considers the assumptions on which these forward-looking statements are based to be reasonable at the time they were prepared, but cautions that these assumptions regarding the future events, many of which are beyond the control of the Company, may ultimately prove to be incorrect. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following: general economic and business conditions, changes in demand for the Company’s products, changes in competition, the ability of the Company to integrate acquisitions or complete future acquisitions, the Company’s ability to complete any required financing, interest rate fluctuations, the ability to reduce manufacturing costs, currency exchange rate fluctuations, dependence upon and availability of qualified personnel and changes in government regulation. For a further discussion of risks relevant to the Company, see our Annual Information Form for the year ended September 30, 2015 available on SEDAR at www.sedar.com and our Annual Report on Form 40-F for the year ended September 30, 2015 filed with the SEC on the EDGAR filing system at www.sec.gov, as well as the Company’s subsequent ongoing continuous disclosure filings that can be found on SEDAR and EDGAR, including the Company’s Q3 MD&A.

2. Non-IFRS Financial Measures:

• Gross Basis Revenues: For products that are in the transition phase during a reporting period, the Company presents “Gross Basis Revenue” which is a non-IFRS measure that the Company defines as the revenue that the Company would have received had it held title to and sold its products directly to its customers during the transition period. Gross Basis Revenue is calculated from revenue, as reflected in the Company’s financial statements, by adding back the cost of goods sold and selling expenses that are associated with the revenue as reported by the vendor.

• EBIDTA: Earnings before interest expense, taxes, depreciation and amortization.

• Adjusted EBITDA: Earnings before interest expense, taxes, depreciation, amortization, impairment charges, non-cash stock based compensation, foreign exchange and derivative gains or losses, investment income or expense, and acquisition cost.

• Reconciliations: Reconciliations of Gross Basis Revenue to revenue and EBITDA and Adjusted EBITDA to net loss, being the most directly comparable IFRS measures, are included in the Company’s MD&A for the three and nine months ended June 30, 2016, as filed on SEDAR at www.sedar.com. These non-IFRS measures are not recognized under IFRS, do not have a standardized meaning and may not be comparable to similar measures presented by other companies.

http://www.sedar.com/





http://www.sec.gov/

http://www.sec.gov/

http://www.sec.gov/

http://www.sec.gov/

http://www.sec.gov/






INVESTOR PRESENTATION

Merus Labs in

3

40+ country platform

(Europe focus)

12 marketed Rx

legacy products

10+ BD “pipeline”

products

F16 Gross

Basis Revenue

$111M

>25%

cash flow yield per share1,2

Favorable Tax

Structure

>$10M

annual value creation being implemented

F16 Adj.

EBITDA

$43M 2

1, 2


The Foundation of our Business

4

VISION To be the Pan-

European and

Canadian leader in

small and mid-sized

specialty medicines by

being nimble and

entrepreneurial.

MISSION We are an international

specialty

pharmaceutical

company focused on

profitable growth,

creating value and

improving health.

VALUES Creativity

Accountability

Respect

Excellence

Speed


Business Highlights

5

Summary P&L Key Highlights Near-term Profit Enhancers

Fiscal 2017E Product Sales

Demonstrated ability to

optimize revenue

Sintrom and Emselex

tech transfers

Strong and increasing

profitability levels

New PV/MI partner and RA

capabilities in-house

Efficient tax structure

Sales optimization,

including new market

launches

High EBITDA cash

conversion rate

Nitrates – portfolio

optimization

(medium-term)

Nitrates 37%

Sintrom 24% Emselex

21%

Sanofi 7%

Salagen 6%

Estraderm 3%

Vancocin 2%

By product By geography

27.1

66.1

111.4

2014A 2015A 2016A

Sales (CAD M’s) Adj. EBITDA (CAD M’s)

13.3

32.6 43.2

2014A 2015A 2016A

Rest 32%

Spain 17%

Germany 11%

UK 10%

France 8%

Italy 7%

Netherlands

6%

Canada 5%

Korea 4%


Acquired product portfolio

Built platform for growth

First Phase of Growth Plan Achieved

6

2015 2016 2017 2018 2019 2020+ 2011 2012 2013 2014

1 • Pursued low risk strategic acquisitions:

• Grew the portfolio from 2 to 12 products in the past 2.5 years

• Developed a robust business model with diversified, stable cash flow

• Achieved scale, generating over $C111M in F16 net sales

2 • Established a Pan-European platform

• Significantly enlarged the platform to over 40 countries

• Enhanced internal capabilities and capacity

• Developed key relationships with strategic partners

Phase 1 Phase 2

Building the platform Growth and scale


Product Brand Date Acquired Acquisition Partner Therapeutic Area Net Sales %

February 2016 Cardiovascular 37%

September 2014 Cardiovascular 24%

July 2012 Urology 21%

February 2016 Women’s Health 7%

May 2015 Oncology Support 6%

May 2015 Women’s Health 3%

May 2011 Infectious Disease 2%

Stable, Profitable Portfolio of 12 Products

Nitrates

Sanofi

7

1


Growth Drivers

8

Acquire targeted products

Inject discipline

Proprietary deals

Integrate acquired products

Productive outsourcing

Internal competencies

Optimize product potential

Market expansion

Margin expansion


Primed for Next Phase of Growth

9

• Optimize existing portfolio of legacy Rx products

• Cost efficiencies and sales optimization are key focus areas

• Capacity to leverage the platform and realize synergies

• Potential for geographic expansion into new markets

Optimize existing portfolio

• Strong cash flow base from legacy Rx products, to fund new growth Rx products

• Focus will be on demand creation, driving new prescriptions and new launches

• Robust pipeline of potential acquisition opportunities

Pursue growth assets

Legacy Rx

Growth Rx

1

2

A highly

scalable

platform

2015 2016 2017 2018 2019 2020+ 2011 2012 2013 2014

Phase 1 Phase 2

Building the platform Growth and scale


Driving Incremental Profit

10

Create Demand

Profit Levers

Optimize Prices

Reduce Costs

Optimize

Pricing

Improve

Access

New

Markets

Cost

Efficiencies

Product

Rationalization

Generic

Defense

Line

Extensions

Selective

Promotion


2017 Optimization Initiatives

11

Peak Annualized Profit Impact Optimization Initiative

Initiative #1 Technology Transfers

Initiative #2 Geographic Expansion

Initiative #3 OPEX Efficiencies

Initiative #4 Capital Structure Revisions

Fully realized value: ~ $8M per year

(>40% reduction in Sintrom manufacturing costs)


(Regulatory & compliance efficiencies)


(Emselex new market launches – 4 CEE counties)

Fiscal 2017 Adjusted EBITDA Guidance Range: $44 to $48 million


Pan-European Focus

Europe is the World’s Second Largest Pharma Region

• Rx market size €200+ billion

• 30+ separate markets require customized strategies

• Available “regional” acquisitions

• Higher brand loyalty vs. North America

Merus Labs is Well-Positioned to Succeed

• Effectively navigates the complexity of the market

• Proven commercial partnerships

• Deep internal expertise in top 5 countries and beyond

• Track record of value-creation and new launches

• Effective tax structure

12


13

Internal Expertise, Supported by External Network

Supply Compliance Go-to-Market

Pan-EU Platform

• Strong internal infrastructure

complimented by expert

compliance

Demand Creation Focus

• Internal commercial expertise in

managing a wide-ranging network of

distribution and promotion partners

Proven CMOs

• Internal supply chain expertise

supervising highly reliable CMOs

Selected example partners


Two Strategic Business Segments

14

Legacy

Rx

Growth

Rx

Margin Expansion Focus (cost synergy, platform leverage)

Demand Creation Focus (driving new prescriptions, new launches)

Strong Base of Cash Flow Moving Up the Value Chain


Target Growth Product Profile

15

S and select markets

$100M+ in revenue

BOTC/BTC

New launches, in-licenses

Promotional sensitivity

Animal health, devices

Submitted/approved in developed market

Valued competitive advantage

Concentrated prescriber base

Leverages existing platform

Acceptable access and price

Strong barriers to entry

bb

Key Criteria

Peak sales above €25 million for Europe


Strategic Shift from Legacy to Growth Assets

16

Transforming our approach to drive organic growth

People Support Process

Robust Valuation

Modeling

Enhanced Due

Diligence Network

Strengthened

Asset Hunting


Experienced Team, Driven to Succeed

17

Therapeutic Area Successes Cardiovascular, CNS, Dermatology, Gastrointestinal, Immunology, Infectious Disease, Oncology, Nephrology, Neurology, Urology and Women’s Health

Accelerated Path to Profitability Contributed to market leadership positions with Avelox®, Cipro®, Copaxone®, Lantus®, Botox®, Humulin®, Zyprexa® and others

Efficient Product Integration Collectively launched dozens of products; efficiently managed regulatory, market access, pricing, supply, distribution and promotion

Creative Lifecycle Management Multiple initiatives to optimize molecule franchise value, including new formulations, indications, reimbursement schemes and authorized generics


Financial Summary

18

Enterprise value ~$263

Net debt (initial rate – 4.5%) ~$140

Market cap ~$123

Shares outstanding Basic: 117

Preferred shares 4.5

Options outstanding 5.6

Average daily trading volume (TSX) ~450K shares

(Canadian Dollars – Millions – FQ1/17)


• Strong pipeline of >10 products with >$600M of est. peak sales

• Targeting growth assets to compliment legacy Rx portfolio

Active pipeline

4

• Existing legacy portfolio provides a stable base

• Available capabilities to growth the business

Primed for growth

3

• Pan European platform, present in over 40 countries

• Nimble to adapt and grow inline with business strategy

Scalable platform

2

Key Takeaways

19

• 12 products creating a robust revenue mix

• Strong presence across multiple therapeutic areas

Diverse portfolio

1

• Strong profitability with excellent margins

• Healthy cash flow and high cash conversion rates

Strong financials

7

• Roadmap to improve profitability with legacy Rx portfolio

• Optimization initiatives; volume and profitability improvements

Profit enhancements

6

• Track record of doing deals and turning around products

• Highly experienced across full breadth of the European market

Talented team

5

INVESTOR PRESENTATION 20

Our Real Competitive Advantage

Nimble. Responsive. Focused.

Talented & motivated people

Entrepreneurial spirit & culture

Thank You !

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