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Valeo Pharma gearing up for big growth with its strategy to bring prescription drugs to Canadian market

Valeo Pharma Inc (CSE:VPH) (OTCQB:VPHIF) (FRA:VP2) is a company on a roll. At the end of May this year, Valeo told investors that for the three months to April 30, 2021, it is projecting revenues to have risen by over 40% compared to the first quarter of its fiscal year and gross margins to have doubled. The company put this growth down to the commercial launch of its anticoagulant drug Redesca during the period. And the specialty pharma group, which specializes in bringing innovative prescription products to market in Canada, says there are more drug launches to come soon. Proactive sat down recently with Valeo CEO Steve Saviuk (SS) to find out more about the company and its growth story. PROACTIVE: For those who may not know anything about the company, can you outline what Valeo Pharma does? SS: We’re a Canadian pharmaceutical company focused, for the time being, only on the Canadian market. We’re a full-service pharma so we do everything that the typical Big Pharma would do other than develop drugs, or manufacture drugs. So our key commercial activity initially is in-licensing drugs and we do so from companies in Europe, Asia, US. These are innovative drugs that are not available in Canada. We bring them to Canada, and then we do everything after that, from the registration, all the commercial activities, as well as all the medical activities without taking on the risks and costs associated with the clinical development side of such drugs. PROACTIVE: Can you tell us a little bit more about the portfolio you’ve got and why you pick the drugs you do? SS: Well, some people refer to the company as Valeo 2.0. The company started in 2003 and we built a portfolio of drugs which we ultimately sold to Bausch Health, or what was known as Valeant Pharmaceuticals at the time. Subsequently, we focused on two therapeutic areas – neurology and oncology – so we have drugs in both of those categories. But more recently, we have launched a low molecular weight heparin biosimilar and we’ve in-licensed some major drugs from Novartis in the asthma space. So now with that we have become a respiratory, specialty products, neurology, and oncology company. The key focus as to why we would select those therapeutic areas is the ability to reach healthcare professionals with a relatively small sales force. The other aspect is that we’re looking for innovative drugs, so drugs that really bring a benefit to patients, to healthcare providers, whether it be with less side effects, better efficacy, or potentially even a lower price. PROACTIVE: You mention there the Novartis deal struck in March this year for asthma drugs Enerzair Breezhaler and Atectura Breezhaler. Can you explain what this means for the company and your growth this year? SS: It puts us into a totally different league. Asthma is a big area in Canada. The asthma maintenance market is about C$800 million per year. These two new asthma drugs, they are new, they were just approved last summer by Health Canada, and are top of the class. They’re the best drugs in the category. They definitely will bring benefits to asthma patients. So the size of the market is big. The products themselves are first in class, best in class, with a clear benefit over the existing standard of care. And what it does for us is it changes us from a company that had mid-40s employees – we’re going up to about C$120 million revenue growth, with up to C$160 million projected in five years, from about C$8 million last year. So huge growth, largely on the back of these two drugs. Obviously, we have others (drugs). We have about a dozen drugs that we currently commercialize, including these two asthma drugs. But these two asthma drugs will be 60% of that revenue, and then our other drugs will provide the balance. PROACTIVE: Where else are you expecting to see more growth in the coming year? SS: The other focus is a drug called Redesca, which we launched about a month ago. Redesca is a blood thinner –  an anticoagulant. It’s a large market in Canada ($200M), it’s an injectable drug. It’s the first of what’s known as a biosimilar. So it’s a drug that’s biologically equivalent to an existing drug. Sales are doing very well. I would say almost exceeding our early expectations. We expect this drug will be about a C$30 million a year annual revenue drug within 24 months. So again, in the short term, this will be the big driver – Redesca. In the medium term and I mean, nine months out, you will start seeing the asthma drugs really kicking in and those three will drive our quarterly growth going forward, at least as we see it today. I mean we’re always looking at in-licensing more drugs and we have a number of them already in discussion. So I would say to you now, people stay tuned. We have a very diversified portfolio, but obviously, these three are the key. PROACTIVE: Your Q1 results clearly showed a growing company. Can you outline the path you hope to take towards profitability? SS: I think you’ll see better results in Q2. I don’t think, I know. We haven’t mentioned anything publicly about that, but it will be a much better quarter than Q1, because of the launch of Redesca. Had we not done the Novartis deal we would be a profitable company going forward. I mean the Redesca launch is certainly generating enough cashflow for that. With the licensing from Novartis of these two key products, there will be a 3Q dip into continuing negative cashflow followed then by even stronger positive cashflow. So I would say mid-year next year, 2022, look to us to be starting to be very profitable going forward and no turning back. PROACTIVE: In January this year, you brought on a new president and chief operating officer, Frederic Fasano. What does he bring to the table? SS: I look at our company and think how are we going to get to where we would like to go in terms of revenue. There are two aspects. One is the products, clearly you need world-class products that have that revenue potential. But the second thing you need to do and equally important is you got to execute and to execute means you have to have the people that have the experience to execute. Fred comes to us with 25 years of Pharma experience, ten years running Servier in Canada, which is quite a substantial company. An entrepreneurial spirit and really the leader in building out this management team as we are building out our sales force. You need people that have taken a company to a certain level that we aspire to get to. And Fred has done that. And as a result, now the management team is stronger. And I think we’ve taken a lot of the risk out of the execution part. So I think we have the products to drive us. And we have a great and getting better, even greater management team. We’ll make some announcements on that front shortly, because we’ve been hiring a lot of people and I think we haven’t given the market a sense of that. Sales coverage across Canada is starting shortly and again expanding the internal team a bit to take over, with a stronger medical department –  the things you need to execute and grow to that level of revenue. PROACTIVE:  We were talking earlier about the coronavirus (COVID-19) pandemic. Does that change anything in your strategy or do you think there’ll be different opportunities for a company like yours because of it? SS: I think there’s a couple of factors there. Number one, I think the way Pharma companies interact with healthcare professionals has changed in the last year. There’s much more digital outreach. I think that will continue. I think there will be a swing back to face-to-face visits but I think a lot of people realize that there’s a lot of efficiency by having these type of discussions rather than waiting an hour in a doctor’s office, which serves not much. I think our reps will be much more effective. As for products, we actually have a product we haven’t spoken about yet. It’s called Hesperco. It’s a flavonoid so it’s a naturally occurring substance – it’s considered a natural product. The medicinal ingredient is called hesperidin and there is a clinical trial currently underway at the Montreal Heart Institute using our product for treatment of patients that have symptoms from COVID-19. The trial is fully enrolled, a 216 patient, placebo-controlled, double-blind trial, we expect a summer readout. If the results are what we would anticipate that’ll be a fourth product that will swing in as a strong revenue contributor. And one thing that I need to further highlight is the fact that we do not take on R&D risk, we don’t take the clinical development risk. You say, Steve, you just talked to me about a clinical trial? Well, actually, that trial was funded by the Institute itself because the data we presented in terms of pre-clinical was so compelling they felt that they needed to do it. So I’m quite encouraged about this trial. It’s potentially another product that will have a really strong appeal -worldwide, we have the worldwide rights to that product. Contact the author at giles@proactiveinvestors.com

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