Q1 2020 Earnings Call
[music].
Welcome to people already Ci first quarter Twentytwenty earnings Conference call. Today's conference is being recorded and at this time I would like to turn the conference over to Mr., Richard Hurley, Vice President of Investor Relations. Please go ahead Sir.
Thank you operator.
Good morning, Thank you for joining luggage you called it Scott first quarter 2000 2020 results.
Colleagues Vice President.
On the call today are members of the executive team, which includes gave a cheaper CEO, Richard Haig's, President and CEO, Oh, Gee Patterson interim CFO.
Before you again, I would like to remind everyone that today's discussion.
Forward looking statements.
Future expectations plans and prospects would constitute forward looking statements for the purposes or the safe Harbor provisions.
Private Securities Litigation Reform Act.
We cautioned that these forward looking statements are subject to risks uncertainties and may cause actual results could differ materially from does indicate it.
These forward looking statements are based on our current expectations and may differ materially from actual results due to a variety of factors that are more fully detailed under the caption risk factors in our filings would be happy to see.
Putting our annual report on form 10-K for year ended December 31st 2019 as was the 10-Q during the quarter ended March 31st 2020, <unk>, Yes, we see today.
Any forward looking statements made on this call speak only as of today.
Monday May 11 2012.
And we disclaim any obligation to update such statements reflect events or circumstances that occur after today's call except as required by law.
I'd like to highlight.
Participants on the call, but could they be important.
Making it available to investors.
A replay will be available on our website under Investor Relations section.
We also completed call.
Additionally, it is the property of clarity.
<unk> distribution retransmission well rebroadcasted called any form what's out there did you use expressed written consent is strictly prohibited.
Now I'd like to turn call over to David.
[noise] Thanks rich.
Good morning, everyone and thank you all for joining us today I'd like to begin today's call by highlighting the achievement of an encouraging milestones.
Three separate skin cheap publications involving a wide range of humans are recently published were accepted for publication. This is a testament to the value we believe skin Ci offers patients.
Richard He will go into greater detail during his prepared remarks, but we're pleased to report that the data from our get few pilot study was accepted for publication in the International didn't Journal one study involving a war fighter was published in Cheerios and another case series of 15 patients was accepted for publication.
In plastic and reconstructive surgery.
The open.
Now I'd like to address a few important points regarding our recent decision to pursue a b away for skin Ci.
First why we made this decision.
We received preliminary feedback from the FDA, which indicated that a BLE pathway for skin G would be most appropriate.
The catalyst for this decision was not a formal designation for final determination from the FDA rather we made this decision decision because we believe that it's the BLE pathway for skin T. will create more valuable asset as a result of the clinical data that will support our submission and the benefits from regulatory exclusivity.
That could be gains will be alike.
We also think that we are more likely to be successful by taking a collaborative approach with the FDA and that a pivot to making polarity T. Primarily a clinically stage development company is in the best interest to shareholders.
Second we are hopeful that we'll be able to leverage our existing data to demonstrate the safety and effectiveness of skin G.
Over the past two years, we have been actively engaged in a clinical development program, which includes a completed skin T. study in burn blues are ongoing randomized control trials in diabetic foot ulcers, and venous leg ulcers and outcomes data for many of the approximate 700 skin T clinical cases completed to date.
Importantly, there had been zero report reported adverse reactions to skin Ci since the launch of this product.
We intend to submit these data set this data to the FDA and are hopeful they will be considering consider it a clinical package to support it be alike.
Certain cost cutting and organizational changes related to our new strategy will be in addition to the steps we've already taken to reduce our operating expenses.
It is important to note that until the FDA has determined the precise development program for a delay for skin Ci it would be prudent for us to speculate on the potential costs requirements in time frames, we will provide investors a periodic updates over the next several months as we meet with the FDA would agree on a development plan.
It is also important to recognize that in the weeks prior to receiving preliminary feedback from the FDA, we had already taking several steps to reduce operating expenses in response to the Covidien 18 pandemic.
We took several meaningful sac meaningful steps to reduce our operating expenses by lowering payroll expenses in cutting discretionary spend across the entire organization.
We believe these cuts will bring our monthly cash burn rate down below 3 million by the end of Q2, assuming zero contribution from skin T cells now given the change in our strategy. Our goal is to close the year with a cash burn of less than 2 million per month, which we would consider a base case cash burn.
For the business absent BLE related expenses.
We expect the second quarter will be a period of transition due to notice periods required for certain reductions. So we expect to see the impact of these cost savings in the third and fourth quarters of 2020.
Fourth and finally, we are significantly scaling back our commercial operations, we plan to continue to offer skin T. and a limited basis. During this transition subject to the future just future discussions with the FDA.
We believe this approach will allow us to maintain connectivity with our key opinion leaders while at the same time significantly reducing costs associated with the commercial salesforce and related functions.
The most important thing I hope investors take away from today's call is our commitment to execute on the following three specific eject objectives, one working closely with the FDA to determine the most efficient development pathway to obtain a B.L.A. for skin Ci.
To generating the necessary clinical data to support at the at least admission and approval for skin cheap.
Three significantly reducing and managing Casper.
Now, let's move onto commercial metrics, the commercial metrics for skin tea in the first quarter of 2020 compared to the first quarter of 2018 were as follows one paid cases in 2000 in Q1 2028 cases were 81 versus 41 in Q1 18.
<unk> revenue in Q1, 2020 was 428000 versus preliminary guidance of 350 to 450000.
And versus 297000 in Q1 of 19.
New paid users were 24 in Q1 of 2020 versus 18.
In Q1 of 2018 can repeat paid users in Q1 2020 were 28 versus nine in Q1 of 18.
Please note that going forward, we plan to focus more on clinical development catalysts relevant to our be law in our performance metrics.
Now I'd like to turn the call over to Richard hate to provide an update on hopper on operational aspects of the business and some of the steps we're taking as we go through this transformation Richard.
Thanks, David.
Than previously involved to autologous products that will ultimately approved of the deal like pathway.
I'm confident that the snowmobile opened since the right decision for the company as a successful outcome should address two critical areas or the limited skin to you adoption in the past.
First as regulatory clarity.
Given the nature of the 361 pathway products in this class are inherently susceptible this is significant.
Yes.
Health care providers in their hospital systems and payers.
The only approval provides validation so confidence that a product is clearly safe and effective it was manufactured at least according to strip standards.
Second the development and delivery of the comprehensive clinical data required to receive approval.
Early adopters of some positive outcomes of skin.
Based on this real world experience, we believe that through the BLA pathway still deliver results to demonstrate its value so wide range of wound care physicians and patients.
In addition to my own experience with other people on the team was expensed extensive backgrounds in a variety of regulatory pathways.
Biologics and medical devices as well as possessing experience with GMP manufacturing.
Additionally, we will be engaging with outside consultants.
Specific expertise and then care to assist our team in the development of the comprehensive delayed strategy.
As David mentioned significantly spilling darker commercial operations tend to maintain productivity with our key opinion leaders.
These physicians have expressed a strong desire for continued to access the skin that patients and also a willingness to support our new classes the direct interaction.
Good.
Unfortunately, the differentiated value that's been beaten brings to their patients, especially those with public schools and limited treatment alternatives.
We're grateful for their support inflows relationships, which is a direct result of the compelling outcomes if its burns with skin.
Regarding our clinical trials, we currently have to ongoing multi center randomized clinical trials one for Vietnam is one for values and the didn't trial specified target enrollment so the illumina houses.
Has already been met the 61 patients currently enrolled.
And if you.
Trial or Clemens wanted six patients enrolled.
Previously recorded the pilot valuations.
Well use.
We'll applications.
Well supported the.
That's the bars and.
Given the importance of rigs impossible.
We look forward to presenting the data from these larger studies as we focus on.
As David mentioned previously we plan to meet with that.
And as possible to discuss our pivot to immediately and the development plan until that time, you cannot speculate what extent our current 12.
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I think part of the club package the supportive.
In the meantime will tend to work closely with our consoles.
Since the extensive experience related to the BLE submission process as we develop on strategy the clinical trials.
As a result, we will limit investments or any other trials outside of that yet.
And so our strategy is fully developed.
That said, we continue to see the publication of clinical outcomes in patients treated with which we believe is an important validation of our technology and the tremendous promise of this problem.
There are multiple mems scripts in various stages.
At this time, we do not expected itself was a publication processes, maybe what's your simple but.
Yes.
Now I'd like to offer some additional details pertaining to the publications that David mentioned.
Lastly, the peer reviewed article entitled successful treatment of war zones dramatically lower extra moon.
Suppose tendons want apologists homologous skin onshore was published materials.
Its case involved.
Part of itself or equal to square centimeter War spoke tendons want accident.
Finally, after the application it's been.
The one was completely closed and remain close at the most recent follow up 16 weeks post the application.
The company would probably have been able to play apartment sold is remarkable.
We're pleased to report that its.
Okay study has been accepted for publication in plastic and reconstructive surgery Global open, which demonstrated closure of 15 acute and chronic wounds in both pediatric and adult patients ranging in size and 27 4800 square centimeters with a single application and skin.
This landmark paper fill clinical utility, it's been close and difficult to treat loans.
Therapies.
At this and the data from our pilot study that sensations socialism that.
It was it's also true that was thinking had been accepted for publication.
International one barrel.
We thought we draw that strength and inspiration from these publications.
The decision to pursue a deal like this.
Shifting strategy than company.
The patient outcomes that I just described a drive us keep is committed to developing and executing a strategy in collaboration with the new agents or that's made available the entire they're committed.
We look forward to providing updates on our progress throughout 2020.
Well I'd like to turn the call over to James Patterson for financial update.
Thank you Richard and good morning, everyone.
For the first quarter of 2020, we reported approximately 933000 total revenues, which includes revenues from skin D, which we refer to as products and our 10-Q.
Revenues from the sale of contract research services, which we refer to it services and within Q.
Revenues from products during the quarter were 428000.
Revenues from services were 505000.
For the first quarter 2020 cash used in operations were 13.9 million, which included approximately 1.2 million of issuance fees from the February ratings.
The cash used in operations net of these issuance. These was 12.7 million were approximately 4.2 million per month, which is lower than the cash used in operations during the fourth quarter.
As noted in our April 21st press release and by David earlier on the call we've already taken action to further reduce.
Future cash burn by reducing payroll expense, adopting a salary and wage reduction and reducing discretionary spending across the organization to minimal levels.
As discussed in our April Thirtyth press release, updating corporate strategy and regulatory pathway for skin TV, we're substantially reducing commercial operations and other functions to further the decrease cash burn.
We finished the first quarter of 2020 39.5 million of cash cash equivalents and short term investments on our balance sheet and we believe there's sufficient liquidity on the balance sheet. The Thunder operations beyond the next 12 months.
Our highest financial priority, it's a reduction of cash burn to enable to be lay for skin dee.
I'd now like to turn the call back over to David feeder for some concluding remarks.
Thank you Jake I'd like to conclude by saying that we remain passionate and our mission to see skin Ci achieved widespread adoption and improved the lives of people living with debilitating cutaneous defects while at the same time delivering long term value to our shareholders. We firmly believe that are just decision to pursue a B.L.A.
Is the appropriate pathway for us to accelerate and achieve both of these objectives.
Thank you for joining the call today I'd now like to turn the call back over to the operator and open it up for Q1 day. Thank you.
You can ask a question. Please signaled by pressing star why not your telephone keypad. If you are using a speaker phone. Please make sure immune function is turns off to a larger signal to reach our equipment again press star one to ask the question anyway, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
Yeah.
Our first question comes on line of Kevin Degeeter from Oppenheimer. Please go ahead.
Hi, guys.
Thanks for the call appreciate transparency is extremely helpful.
Maybe a couple questions with regard to clinical trial enrollment appreciate it if you add value enrollment updates could you speak to the current trends in light of your restrictions.
Around Kobe 19 and costs on outpatient procedures you are those studies firstly can part of the assays are still actively enrolling patients and ill do you feel you have.
Data to speak to some sort of enrollment metrics over the coming weeks and months for both of those programs.
Hi, Thanks, Kevin if you recall, we actually have next stop going the line I'd like Nick Nick maybe you can answer Kevin's question most adequately.
Sure Hi, Kevin Good things for the question. So we have gotten numerous steps to.
Make sure we follow the trials closely during his time period.
And thankfully, we had walked any patients lobby to cope with 19 or see any shutdown of our sites wound care is considered.
A critical for patient care as these untreated ulcers can become infectious and bring patients into the hospital and possible loss of wind. So most of actually all of our sites have remained open they continue to enroll.
We did see some decreased rates during March but nothing incredibly significant has continue to enroll through April and may as well. So it's hard to totally no. How in the next couple of months will proceed but we're thankful that the trials have continues to roll. These continued to closely followed where patients fees.
Water sites to.
Be able to see the patients virtually if needed.
And other things that's going to that seems to have recommended to make sure that we're happy to save trial, but we can we anticipate continue enrolling in trials and potentially finishing beat your view enrollment by the end of this year.
Terrific appreciate that up there and just a clarification question, Yeah, there's language and the 10-Q that just sort of highlights.
Our 2020, you know as the end of the 36 months seven.
Yeah FDIC.
Enforcement discretion period around a 361 can you talk about what that means and what that doesn't mean I'm, particularly in light of the company's ongoing dialogue regarding a submission.
Yeah sure Kevin I mean, I will we are absolutely a waiting for to meet with the FDA to get clarity around you know our.
Pathway forward from the standpoint of really what their expectations are now whether or not the FDA. You know after that period tells us that we can or cannot market. This.
Skin. She is a product that we are not making a debt that they will allow us to we want to make sure that we are working with him in collaboration doing everything possible to make sure that we are respectful. During this process. We don't know what their their requirements will be if the you know are going to take action in may.
People removed phonics from market.
We're not going a bit on the fact that they will or won't.
In a wait and make sure that we have very.
Hi level in direct conversations with them to get some.
You know really you know better information around them.
Your next what lot of fat doing one last one down there I'll get back and write off day with regard to.
Yeah I T. Upon review you know you had some success outside the U.S. at the last.
Six months out can you talk specifically about the U.S. filings and expectations.
For the balance of 2020, well for a potential update.
For Cabot you know we are still remain very confident that we will be receiving a U.S. gotten as far as timing is concerned.
You know when you're when you're dealing with the patent office you don't have necessarily full clarity on that so although we have been very successful receding patents outside of the U.S.
We still remain very confident in our ability to reduce it to retain a U.S. baton and it's just a matter of time.
Thanks, I suppose and thank so much there.
Thank you Kevin.
Okay, well take our next question from Kristen that clarifies Cantor Fitzgerald. Please go ahead.
Hi, good morning, Thanks for taking my questions and I hope that everyone on your team.
Time. So my first question is a follow up from one Kevin I wanted to talk a little bit more in depth about what the virtual challenge that relate to the ongoing trials could you talk about whether you see any challenges related to collecting any data from closure and patients and how specifically physicians are looking to measure.
Closer virtually.
Sure I'll actually a push that question back to make shopko Nick.
Yeah, Hi, Chris and Yeah. It's a great question. So that these are measures that we put in place to allow for flexibility as a patients is unable to be seen.
And Ah things would be I haven't actually had to fully utilize the virtual visits but again, we've kind of put that in place given the uncertainties and those are some of the recommendations that CDC other groups that put forth to to allow for this we've also allowed for a little bit more flexibility in some of the timing of the visits but I'm actually in general.
The sites have been very good at being able to closely followed the patients and make sure that there that they're healthy unsafe as you know part of our protocols that these patients have the dressing change each week. So this will only be allowed for patients that can actually physically addressed themselves and many of them a world.
Our assistance, but to your point all of our patients are seeing a weekly per protocol and then have you lose out or documented.
Higher fee and in that process using digital for them to treat that boy this measure.
Software system, So and you know those virtual visits can only be used to sparingly because ultimately they need those intermittent visits to track the closure time.
And be able to get into that Threed software that only the site pads as well as the high quality documentation that's required to confirm closure. So you know for the B the final visits or something the a virtual does it would not be acceptable, but for perhaps some of the interim visitor to a virtual does it could be.
Use just to ensure that the patient save that there's not symbolically infection with the losing about the dressing is appropriate.
Okay. Thank you Mick and you discussed the possibility of continuing to market.
He has to do you think you want on a limited basis. So I wanted to ask me, specifically defined limited basis, and where the focus might be there.
Sure aren't you know, we decided to you know for several reasons Kristen.
You know limits on it on Uh huh.
Skin chief marketing to are really too you know the physicians are the acute care wells that have really supported this product.
They have really define the fact that they want this product in their hands. We also recognize the importance of those relationships.
When you know presenting to the FDA and and putting our package together essentially so we decided that having a limited Lynn very limited.
Marketing effort to make sure that we preserve and maintain our kalo relationships.
At the same time, not conserve our cash right, making sure that we're we're not spending to build out a very expensive commercial effort. We felt that was the most appropriate thing to do so when it when I look at the landscape of of physicians are doctors that we're engaged with right now and how supportive they've been of this product the core focus is.
Here is to really make sure that we're able to continue to drive you know the clinical evidence necessary to go down this pathway.
With the keys, you know supporters of the K wells that have really been side by side with us through this entire process and it's very important to us to maintain those relationships and I think it's very important for this process as well.
And even then my last question here is.
Last quarter, you had recognized that you were going to implement new pricing strategies that are needed to the larger going so I wanted to ask if that's still a priority for the company you know considering the new change to pursue the B.L.A. route and whether or not you haven't I think there. Thank you.
Yes, sure Chris and so we did a design and your pricing structure that we were Super confident on you know that was right around the time covert came into play. What's interesting is we were fortunately I'm able to roll that out with certain you know providers not all but.
Certain providers based on.
Having meetings with them and really lining to stop we are really confident that that was the right decision to where we frankly did see some on in either base case development around that we will continue to offer that pricing as we move forward. You know you know based on our strategy.
Because it's the right thing to do and you know again, we'll do that in a way that's limited based on the Salesforce, but but we do we do intend to keep that pricing structure that new pricing structure in place and roll it out to anybody using the product.
Thank you.
No well now take our next question from a slam pack Ramakanth of H.C. Wainwright. Please go ahead.
Thank you.
Thank you David.
Yes.
My first question is Apollo from.
Kevin.
Regarding.
Collections on that soon to be.
You know pool criteria.
It's one thing that they just don't CFR closed 71.
HM.
Okay.
Right.
Mm Hmm.
Doug.
The only be.
And.
He brought it up.
You are thinking you may not be able to do.
Comply with those criteria.
So you will.
Yeah, They put show.
Sure. Thank you I'll turn it to Richard Richard would you like to take that one.
Sure. Thank you yeah. That's the question okay.
Certainly we've done an extensive analysis of the 361 criteria.
Obviously those are part of the a part and parcel of conversations that we have with 58 I'm Gonna, we certainly feel like Oh, we have.
Good case, a permitting those criteria as we mentioned earlier the.
So a different leaves certainly some certain areas you know so going forward.
Until we can have a deeper discussion.
Oh, we can't make a determination as to how that ultimately.
Besides our ability to market was part of going forward.
But it's sort of a clear that well from from this point forward until we have those discussions.
Continue to do that what's out as.
Well felt confident that through since the one wasn't <unk>.
Yeah.
And they felt a little bit differently and we felt that David described builder that that's path forward here was to be collaborative with the FDA and work towards real life. So so that's where we stand right now that's what we have those future meeting.
Probably not a focus.
Oh.
Well.
Upon them or go to market the pot of gold.
Okay. Thank you.
Well follow.
Yeah.
Uh huh.
Hello.
Hello.
No problem.
It was mentioned it changes.
Right.
Mr. <unk> taxes are you done with your question Sir.
I have one additional question.
Go ahead.
So these are the B.L.A.
Yeah.
Couple of pilots.
I'm going.
[music].
Yeah.
We will be sufficient.
Yeah. This.
It's quite a whole multiples.
To do.
Well I'd say that are you know believe here as you know we are you know what we need to communicate with the FDA to get more information you know we are really confident in a lot of the you know as we talked earlier about the 700 plus patients that have been treated with no adverse reactions.
The trials that were running we're really confident that you know on the skin tea is is it amazing product and we've got a lot of of data on that but we don't know what's going to be asked from us. So until we meet with the FDA and get more clarity or we're not sure what exactly is going to be asked of them. We're trying to be very transparent with them and trying to be.
Very open we hope to meet with them in a range and meeting with them.
As soon as we can and once we do so and we have more information we will absolutely report back to the street on what their findings are.
Okay. Thanks for taking my questions. Thanks, Thanks, Okay.
Ladies and gentlemen, if you have any additional questions. Please press star one now well pause for just a moment.
And we have no further questions on the audio fines I'd like to hand, it back over to Mr. hardly for webcast questions City. Thank you.
Thank you operator.
One of a tangential question, but one of the questions we.
Webcast is when do you expect filed would be away with with yet yeah.
Yeah. That's is in response to that it would be very similar to the last question, which is you know once we have you know more specific information about you know we will have more specific information around timelines once we meet with them and again, we're hoping that we can arrange the meeting.
You know, let's say in late second early third quarter of 2020 and at that time have more information around the on the timeframe. So filing et cetera, and then we promise to report back to the street, a timely fashion sounds weekend on any doctor on any update side going forward.
Back to you rich.
Yeah, and still a one more.
Question for the team.
The question is assuming a successful be away.
When would you.
On to ramp commercial operations Bakken at a later date or would you plan to rent commercial operation doctoral later date.
Right now our main focus is pursuant to the pursuit would be away I mean that as are absolutely focus as we get down the road and we are a you know we have a more much more clarity around our cash position and where we stand a we'll be able to answer. This question is much more directly but right now our focus is to make sure.
We're doing everything necessary to obtain a de la that is our you know one of our core three focuses and you know what again as we get down the road, we understand our capital position and needs and you know et cetera, we'll have more information around that but right now it's too early to answer.
That's correct.
There are I've seen no further questions on the webcast I believe and there are no more audio questions gentlemen, can you confirm that you would like me to close off.
All right yes.
Perfect. Thank you everyone for joining us today. We appreciate your participation you may now disconnect your lines and how about wonderful day, everyone take care.
Thank you operator.
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