Q1 2020 Earnings Call
Hello E G.
So much request.
Conference will be recorded.
That's a reminder, all participants will be in listen only mode.
The presentation, there will be an opportunity to ask question.
[laughter] cookie hearing the comp trend right correct darkie, although by zero on your telephone for operate [laughter].
No matter, how did you over to having a cat.
That's a relation who are true so difficult.
Please go ahead.
Thank you good morning, and welcome to buy a Frontera earnings conference call for the first quarter 2020 yesterday, we issued a press release announcing financial results for the three months ended March 31st 2020 <unk>.
We encourage everyone to read the press release as well as the quarterly report both of which are available on our website at www <unk> Dot com.
Please note that certain information discussed on the call today is covered under the Safe Harbor Harper provisions of the private Securities Litigation Reform Act, we caution listeners that during this call my friend tariff management will be making forward looking statements.
Actual results could differ materially from them stated or implied by these forward looking statements due to risks and uncertainties associated with the company's business.
All risks and uncertainties I keep it in a qualified but a cautionary statements contained in bio from Teva press releases and SEC filings.
This conference call contain.
Sensitive information that is accurate only as of the date of Thislife broadcast today.
On May 20-F, 2000 and twinkie.
Hi from Tehran undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances. After the date of this conference call.
With that I would now like to trying to call Hermine Liberec our CEO.
Thank you Pamela.
Thank you today very much ladies and gentleman for taking the time to participate in today's calls.
With me today as Thomas.
Our CFO, who will present the final financial results in the second.
I will then summarize the general business development and clinical updates.
We'll provide an update on the current status of our commercial efforts.
I will then also briefly comment on the upcoming annual general meeting of the portfolio company measures.
But first let's have a look at the financial results of the first quarter.
So that's I would like to hand over to Thomas Shuffle.
Thank you Harman.
Good afternoon, everyone on the call that come to buy Frontera.
And thanks for joining us today I would like to start by giving you an overview of to financial results for the first quarter of 2020.
For the period from January 1st to March 31, 2020, consolidated sales of 6.5 million euros reflect a decrease of 5%.
Compared to the same period of last year.
Following the fourth quarter of 29 team.
Plus to best quarter in the company's history to date.
We experienced a mixed business performance into first quarter.
In early trade trendy space in our largest market to United States were slightly lower than expected Q2, stockpiling and lose by doctors at the end of 29 team.
Prior to the price increase effective as of January 1st.
Between mid February and mid March 2020, we've identified able to generate sales revenue inline with our original budget. However, due to to Corona virus crisis in the second half of March revenue dropped close to zero.
While we were able to achieve product sales of 4.2 million euros in our largest market into first quarter. This represents a decline in sales of 19% compared to 5.2 million euros in the same period last year.
Sales in Germany kicked off the new very strongly clearly exceeding our expectations.
Despite falling phase because in Mark products is the first quarter of Twentytwenty rose by 22%.
1.3 million Euro.
Contributing to this positive development, our marketing and sales activities in connection with the label extension for Hemen loose approved by the European Commission in March.
We also succeeded increasing our assays in the other European countries.
During the reporting period from <unk> point 6 million euros in Q1, 2019 2.8 million euros this year.
Apart from a loss of shipments to license partners to extremely positive business development in Spain. Prior to the start of trick jumped on regulations, there was particularly noteworthy no 30.
Gross profit of sales declined to 5.7 million euros compared to 5.9 million in the same period last year across margin remained almost unchanged at 88%.
We had to 86% into first quarter Nike.
Research and development cost amounted to 1.3 million euros compared to 1.1 million and the first quarter 29 King.
R&D costs, primarily include costs for clinical studies as well as regulatory expenses.
Feeds from May TV, and extending our regulatory approval.
General administrative expenses amounted to 2.2 million euros compared to about 2 million in the previous year period.
The increase of about 13% this mainly due to the further development of our organizational structures.
Cost of to previous here.
Excuse me.
Sales and marketing costs totaled 8.7 million euros, as steep increase of 3.1 million or 57% compared to the same period in 2019.
This increase is primarily due to the periodic amortization of to exceed license in the amount of.
From 1000 euros.
As well as the external extra ordinary impairment in the amount of 2 million.
Resulting from the revaluation of Dick CP license in light of to current market situation.
Both impairments are non cash items.
Just a brief explanation.
The Coovick 19 pandemic wasn't so quick none the testing even person meeting of the applicable accounting guidelines.
This means that we have prepared our financial statements for 20 1950 information available as of December 31, 2019 to Corona crisis was not reflective therefore in these figures.
At the end of the first quarter, we have no reassessed the business plan for CP has performed an impairment test on the license.
Based on the lower business expectations for CP from today's point of view.
This resulted in a write down of stipulate license in the amount of approximately 2 million euros.
In this context. This also reduces to purchase price liability profile for the profit share to be paid to Monroe at a later date.
For this purpose, we have recorded an income of point 4 million euros and the other income.
We have also adjusted to interest accrued from to performance component of the be loan.
This interest component is dependent on the market capitalization of buyer Frontera since the market cap on March 31 was significantly lower than on December 31, 2019, an adjustment of 200000 euros.
Lets mazes and the effect on other income.
The first three month of 2020, the loss before tax amounted to 5.5 million Euro and declined 2.9 million euros compared to a loss of 2.6 million in the prior year period.
This case is mainly due to the negative sales development described earlier.
We havent caustic CP license as fellas further expanding our operating activities.
Cash cash equivalents amounted to 7.8 million as of March 31, compared to 11.1 million as of December 31.
This means that we currently still have sufficient liquidity available. However in order to be able to maintain business operations reliably over a period of at least 12 month at adequate to finance.
Growth opportunities, we will require additional funding in the course of this year.
To this end, we have proposed and authorized capital increase to the annual general meeting to be heard on May 28.
It is currently impossible to foresee how long and how strongly to pandemic will affect the economy.
Still no reliable estimate on more precise quantification of to specific applications for sales and earnings can be made for the 2020 finished the year for this reason buyer for terrorists ability to forecast to significantly impaired at this time.
And its initial budget for the 2020 finished the year to group had a fumed, 25% increase in revenue compared to previous year.
And operating costs at approximately the same level thats been previous year.
However, the effects of to Corona Vars pandemic may lead to a significant deviation from previous protections and to a notice of the decline in sales compared to previous plans.
The anticipated reduced revenue, but also have a negative impact on the profitability at the liquidity of to group and the 2020 financial here as to lack of revenue may not be fully offset by cost reduction measures.
I would now like to hand over to them and do it again.
So that he can provide you with an update on current operational and strategic developments. Thank you.
Thank you Thomas.
So is developed very positively at the beginning of the year before the call that 19 pandemic of the associated with applications has a strong impacts on our business.
With the restructuring of all USS organization, we were able to further improve the positioning of all products of further at Charlotte market penetration.
In particular already well established product on the news.
We'll benefit from the experience gains and methodically journalist markets data, which will allow us to market it more efficiently and an a mall targeted manner once business activities have fully resumed.
Since March official accommodations for the American Academy of Dermatology, the largest dermatology organization in the United States to provide patients with remotes diagnosis and treatment where possible book where possible during the crisis.
Resulted in a significantly.
Significant decline and the number of patients treated in dermatology practices.
As well as simple plex disclosures.
After sales of all products have to hopes to almost zero. We currently expect the situation to improve soon due to the increasing relaxation of measures to combat the cohort of islands in some use states.
Medical offices are already reopening and patients are increasingly willing to visit the doctors for treatment of up to Nickolatos sees.
At present, we are already observing a slowly kovalyov all us business.
But cannot yet associates dynamics conclusively.
In some U.S. states sets representatives are beginning to visit doctors' offices again.
Apart from that our focus in the USA is currently on Clipper preparatory work in order to take full advantage of the business opportunities arising from the expected pent up demand for photodynamic therapy, and thus are multiples as quickly and effectively as possible after the causes.
In addition, we expect further goals in the USA from an equally more efficient exploitation of the market potential Sophie.
In Germany.
Marketing and sales were able to successfully used the label extension as well as the curve on study data to Q communicate the advantages of our loose to dermatologists, even during the crisis or but only in the listen all electronic format.
It was precisely during this period that the advantages of daylight PTT, which can be performed with all direct contact with a doctor and then consistently good weather.
Became available in fact, we are told that some patients a cumulative preferred to undergo PDG at the moment.
Because the cone contact with selections Mems that they had fewer concerns about the potentially visible side effects of the treatment.
Although our sales to wholesalers has declined significantly in April pharmacy sales suffered considerably less as a result.
And Spain revenue growth was exceptionally strong polyol towards a slick blocked on restrictions introduced to the cover cobot 19 pandemic.
Which makes us confident that revenue will recover quickly once so restrictions are lifted.
And generally following the reorganization of the U.S. subsidiary Bioflo until Inc.
We also was talk just the sales organization in Europe.
Biopharm Telus worldwide sales organization all stands on two pillars sales and marketing in the USA.
Until its largest market and the unified management of all sales organizations in Europe.
There was also positive news beyond our geographical markets subsequent to the and off the first quarter on April 20 Twentytwenty.
We signed an exclusive licensing agreement with mobile hole for the commercialization and further development of among lose in all indications and East Asia and also uranium.
This partnership gives us the opportunity to generate long term revenues in markets at low cost and low business risk that we will not be able to serve with our own resources in the foreseeable future.
At the same time it allows us to focus on the USA anew loop, which are the most significant and already established markets for us.
The agreement with Mole has a total of 15 years from the commencement of sales and includes milestone payments royalties on sales and above all and immediate upon payment of 6 million new rules.
This onetime payment has already been received and is currently helping both on table to ensure the necessarily level of liquidity and maintain business operations during the unprecedented crisis.
Alongside our commercial achievements since the beginning of the yield.
We also recorded further successes on the regulatory resort in March the European Commission of post the label extension for multiples to include the treatment of attend Nickolatos says on the extremities as well as a tongue neck.
This puts some of those one step ahead of its competitive product.
Furthermore, the European Commission has allowed the inclusion of an additional superiority claim compared to the competitor product into the AMOLED loose product information.
Compared to the pad to competitor products metrics and look sale.
The follow up of the comparative study will stay like PDG showed significantly lower the cohort slates.
During the reporting period to first patients enrolled in the pharmacokinetic study in the USA were treated to evaluate the safety of PDT using fleet tubes of on the rules.
This study is simply that was it for the treatment of large our body iOS with several tubes of our models and aligning reimbursement modalities with those of our us competitor product.
Following a temporary interruption of to study patients cleaning has already been resumed following the first relaxation of the context band in the USA.
We're also working diligently to compete complete the development at the application for approval of the new be of older led excel them.
Which enables the application of among those two larger areas.
And we are continuing to pursue patient recruitment in the first police study for the treatment of basal cell carcinoma with our models in the United States.
Despite the difficult conditions, we're striving to maintain the values clinical trials and to meet the communicated timelines to the extent possible.
In addition, we are preparing studies to include to treatment of active Nicola doses as opposed to fully since the covenant label in the USA or to cover set and Scott.
This will replace the approval for all key market to the same level as we have already achieved in Europe.
The faced lease study for the treatment of basal cell carcinoma with on the loose in the United States is an additional focus of the ongoing development of under lose.
Patient recruitment has also assumed after the call novatels related interruption.
Despite the difficult conditions, we are working intensively to maintain the valleys clinical studies and to meet the communicated timelines as far as possible.
An additional quite substantial market for PDG in the USA is moderate to severe acne.
After the U.S. food and look of Ministration has already responded to our proposed clinical development plan for necessarily clinical trials are expected to begin this year, assuming the company can commit the necessarily financial resources.
The faster we can implement our study pulled from the faster we can expand all says activities primarily in our major markets the U.S.
The study Polk requires considered over the last financial resources, but ultimately serves as an investment.
Into the continued for future goals of bio from Teva.
All these promising long term initiatives require additional financial resources for investment in future growth.
This is why we have decided to propose and all of US capital increase of up to 20% of our share capital to the annual General meeting scheduled for May 28 Twentytwenty.
We touched all shareholders with support this proposal.
The capital increase is vitally important for biopharm, Teva and for its future development.
It would provides the company with sufficient liquidity and the medium term as well as provides important flexibility for its strategic goals projects.
Above all the pull seats on the capital increase would enable us to better explored the existing marketing market potential for October Nickolatos us with on the loose and fall in Petai goal and most of its certainly who all the organized sets talked to in the United States.
Furthermore, the guaranteed progression of clinical trials will pave the way for the development of potential new coal markets such as the treatment of acne with our models in the U.S.
This capital increase is planned to be offered as lives of falling to all shareholders.
Each shareholder will have the opportunity to participate in the capital measure regardless of his or her approval at the end solution General meeting.
The annual general meeting will amount to create the necessarily flame book for the capital increase.
The decision on participating and the company's financing remains entirely with the shareholders.
Despite the impacts of the colon pandemics this strategic goals diverse, which allow which will all biopharm tale of two profit and the long term remain intact.
Acting Nickolatos. This is a large markets both in the USA and in Europe.
Reimbursement framework in the USA continues to expand.
We continue to be granted important label extensions form a loose daylight pgts, gaining additional acceptance and you look at.
The demand for new antibiotics is on dips undisputed.
The strategic deployment of the proceeds should significantly accelerated revenue growth once the acute kohona vivus causes is behind us.
We expect a return to the goals pass later this year.
We believe that given the necessarily financial resources Biopharm Taylor has the potential to emerge stronger from the causes than there was before.
I would now like to open the line for questions and thank you.
Oil.
Time.
Thank you.
Well now begin our key when a session.
You have a question for our speakers.
I doubt zero one on your telephone keypad now to enter the Q.
What's your name has the and now.
You can ask a question.
We find your question answered before you get a sense to speak.
Dow zero to cancel your question.
If we are using a speaker equipment today, please flip the handset before making a collection.
Our first question is from Bruce Jackson from the Benchmark Company Bruce you may not begin the question.
Thank you.
A couple of questions for tomorrow.
On the cash flow for the first quarter can do you happen to have the operating cash flow number and the Capex number.
The Capex is pretty much zero.
Since we are typically a company that does need capital expenditures for fluids business, we don't need any production equipment into one.
And other than this we do not prepare cash flow statements on a quarterly basis fee would do this on the new semi annual report.
Okay and then.
At the income statement going forward in particular, the the operating expense line I know that you Bob instituted a number on cost management programs evolve so.
You've had some change in your litigation expense do you have a do you have out like in general.
Target for operating expenses going forward as it can be down over first quarter about the same are at some point, we'll be moving moving back up.
Yes.
So one VF this one extra already nearly item, India and the operating expenses for 52 million impairment on CP license persists and recorded under and versus cost if you.
Take that are those key creation, we would still expect that our operating expenses go down will become lower in Q2.
Simply because.
Measures, we've taken the cost reduction measures taken were effective.
Beginning on March so at least in January and February before the crisis, we missed and operating.
Kind of at full expenses.
So in general.
Okay, and say is costing.
We'll be reduced in Q2 and going forward.
With regards to.
Two legal expenses.
These are already significantly lower than the quarterly level, we experienced in 2018 and 2019.
However.
Difficult to predict.
How these are going to you.
Turning out in the future simply because the most important at the most expensive try to FDA to the litigation in Massachusetts.
And for that going be waiting for for the junction, Massachusetts tool.
To rule on.
On further proceedings and on the timeline.
Currently.
There is.
Hardly or no activity on on the trial and therefore.
Almost zero expenses these days.
Okay, great steps some that's helpful and.
And then.
Her mind, you mentioned that.
You talked a little bit about seppi can you just remind us.
Where you where you are on the marketing plans for that product down there are some some things that need to be put in place in terms of the the marketing.
Framework in distribution and.
Is that something that you are wrapping up right now.
Yes, so it's clearly so something that we intend to ramp up in the in the course of the yield.
After we took the overall or when we took it over last year savvy soapy wasn't cohort poly a single insurance company.
In the United States and because of the hunt.
Created a loss with every two sold.
Some and we are far away from this low or no more than handled 50 million euros citizens are actually coverage for CP.
Without any the condition.
And that of course changes the situation with serpico domestically. So we do expect that small one Steve.
The co owner classes over an hour reps can go out and start talking about it in the and believe the first time with Lilia intensively. The so we see sales folks appeals of coming onboard peddling.
All right those are the questions ahead. Thank you very much.
Thank you Bruce Thank you.
Thank you.
If we had a question for our speakers, please doubts airwatch and telephone keypad now and to the Q.
Moving onto next question from Thomas Lesson from Lake Street capital markets.
Next we'll now begin the question.
Good morning, Good afternoon, guys. Thanks for taking the questions.
And one for you mentioned FDA feedback on the acne study design could you provide a little bit of detail on on what what that study might look like and I know timings dependent on on capital, but just some more information on.
Or any color that you to provide would be great.
Well, that's that's really straightforward. So so the FDA gave us indications for some details that they'd like to see which didnt change overall our plan. So basically what we won't be tied to do as we turn to stick with the same concentration all from here to think.
And that we also use and the Columbia AMR loose.
But we play with the incubation time, so we do the clinical title.
With different incubation times of the phase two trial of different incubation times and than placebo.
Select the best incubation time for firstly targets.
And.
If we assume that starts let me ask it differently what over what time period do you think I could be completed the phase two studies, assuming the capital was in place.
I think the study can be performed.
Relatively quickly because there's so many patients alltel, who would be willing to go into the study. The phase. Two study also doesn't have extensive follow up.
Which of course will be an interesting question to ask about term, we reserves that consistent over the first lien clients. So this could actually be done.
Probably in Nevada Years' time.
Great.
And then with respect to the to the US Salesforce could you comment on how many reps are currently employed and and the second question to that is during the crisis have David engaging with the customers virtually or have they been largely at a standstill given office closures et cetera.
In the U.S., we can only half of 30 labs, all del Sol, we reduced the number overlap slightly.
When we went into cost cutting measures.
Also give us an opportunity of course to optimize the says territories.
The same time.
[music].
And during the crisis basically the did fleet things they did stay in contact with the.
With the doctors virtual LIBOR, though that was possible.
A number of large number of the dermatology offices were just closed but other stayed open.
And the hubs due to the chance to actually be in touch.
But they also CWIP out and that was the major task for them to have the per pound for the time after.
So basically.
To go highs and prioritize the customer base in the in the territories and plan for the time.
And that can actually go all physically again.
Some an unparalleled the world's claims by.
Our our new marketing staff.
About the bulk of sales efforts.
And where we want to put our core efforts afterwards.
So, let's flip them busy.
During those times and no as I said before.
In some states.
Perhaps can already start to go out in Germany Reais.
Just on the side in Germany, we have so thats starting to go all this week.
So, it's all sort of loosening up a little bit obviously not everywhere in the United States in all the northeast is still pretty much close for the somewhere in the center and also in the in the and the Salt East zone in the West.
First visits already possible again.
Thanks for all that detail just one final one from me.
Following up on Bruce's question about Seppi.
Over the well ticket time period that I'm, just trying to understand what the magnitude of of that sales opportunities for you whether thats. This year next year.
Whatever time period, you think is appropriate what kind of sales goal are you looking out for that product.
Hello.
I'd say one of them to half to 2 million.
Revenue this year provided that become recall back to normal fairly soon.
In United States, but certainly not going to be peak sales.
Thats, something we going to going to experience in a couple of years only.
Okay.
I would say that certainly has more than double digit.
Millions in revenue numbers on annual basis.
Great. Thanks, guys I appreciate taking my questions.
Thank you.
Thanks, Tavis bank. Thank you.
We have a question for our speakers. Please doubts airwatch on its head on key Pat to enter Q.
And there are no further questions at this moment I'll hand, the session back to your Pamela. Please go ahead.
Thank you everyone for joining us today and enjoy the rest a few days.
Yes. Thank you very much thank you.
Ladies and gentlemen, thank you thought your attendance based core has been conclude that you may disconnect.
[music].