Q1 2020 Earnings Call
[music], ladies and gentlemen, thank you for standing by welcome to.
The Cumberland Pharmaceuticals, 2021st quarter earnings Conference call.
There's some all participants lazanda listen only mode I see the speakers presentation. There will be a question. The next recession, let's ask a question during this session, which press star one when your telephone.
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Good afternoon, everyone on this call. This afternoon, we issued a press release containing the Companys financial result in corporate update for the first quarter ended March 31st 2020 that release, which included a series of financial tables for the period can be found on our website at www Dot Cumberland pharma dotcom.
Also please note that on today's call. We may talk about forward looking statements within the meaning of the private Securities Reform Act of 1995, and because of these statements reflect the company current views and expectations concerning future events.
Any such forward looking statements may involve risks and uncertainties.
There are many factors that could affect the company's future results.
But not limited to natural disasters public health epidemic and other that's beyond our control as more fully described under the caption risk factors in our form 10-K, and any updates we filed with the FCC.
Any forward looking statements made during today's call our qualified by those risk factors.
And despite our best efforts actual results could differ materially from our expectations and the information shared on today's call should be considered current as of today only.
Please remember that the company doesn't assume any responsibility to update forward looking statements, whether as a result of new information or does your future development.
Also during today's call will be referring to several of our marketed brands full prescribing and safety information for each brand can be found or links to each of the individual product website on our corporate side at Cumberland pharma dotcom.
Also will provide some non-GAAP financial measures with respect to our performance today and an explanation and reconciliation to GAAP measures can be found in our earnings release and financial table.
With us on today's call or A.J., Kazimi, Cumberlands, Chief Executive Officer, Marty CRE now, our Chief commercial officer, and Michael Brown, Our Chief Financial Officer, and I'll now turn the call over and AJ to begin our corporate update and discussion of the company's performance.
Good afternoon, everyone and thanks for joining us.
We appreciate your participation today and the cold and as Aaron noted we provided an overall company update all along with a review of our first quarter financial results.
I'll begin with the overview discussion of recent company developments and then Marty will provide an update on or commercial activities. All share report on her clinical efforts and Michael will summarize our first quarter financial results.
Before we finish with some closing remarks, and then open the call to any questions.
So I'd like to start by saying on behalf of all of us at Cumberland.
Or thoughts do you go out to those suffering from the novel Corona virus as well as those who have walks through employment.
We'd also like to extend our sincere gratitude to everyone on the front lots that were treating patients and performing a central jobs that allow our country in society to function.
And I'd like to take our outstanding team for their dedicated efforts to keep our medicines available for those patients that need them.
I'm pleased to report Cumberland has remained open for business during the pandemic.
That's were considered to be the central business by the United States Department of Homeland Security.
And turning to our first quarter financial result, So I'm also pleased to report a solid performance despite the impact of the pandemic.
You see total revenues from ongoing and discontinued operations were $9.1 million.
Revenues from the ongoing operations were 8.3 million during the quarter and we also received 750000, an additional revenue associated with the return go the U.S. rights to with <unk> in total.
Recall that divestiture resulted from our strategic review and our Reprioritization of the company's product portfolio.
Adjusted earnings for the first quarter were point 2 million or one cents a share.
And we ended the period with 97 million in total assets 47 million in total liabilities and 50 million of shareholders equity.
As you May have read Cumberland announced several national initiatives to help medical facilities treat patients with these symptoms and they conditions associated with cobot 19 infections, such as pneumonia, hi, Steve hers and electrolyte imbalances.
These efforts involved the availability of special supply arrangements to help hospitals access or acute care brands. During this health care emergency.
Furthermore, I'm pleased to announce this afternoon.
Recently released our first sustainability report.
It articulates the company's activities associated with environmental social and governance matters or E. G.
The report details Cumberlands community involvement or ethical marketing compliance employee practices and safety of our drugs.
We recognize that these he or she she's had become and Fortunately a increasingly aborted the investment community and we're very pleased to share the policies and practices that we built into our daily operations.
Cumberlands Board has appointed Caroline young as the company's first E.S.G. Board director.
She's a former president of the Nashville Health Care Council. The association of the largest concentration of health care organizations in the country.
Kurt currently Carolinas Executive director of Nashville held.
And initiative launched with former center majority leader Dr. Bill Frist that focuses on improving the health of citizens in this part of the country.
Our dog U.S.G. report notes that during 2019, Cumberland provided nearly 4 million patient dose is a bar products, we safely disposed of nearly 10000 pounds of expired and damage goods and we had no product recalls.
We also had no products listed on the FDIC safety alert database.
No products identified in the F.D.A. adverse event reporting system during 2019.
The sustainability metrics featured in this report are central to our commitment to fulfilling our mission of delivering high quality medicines that improve patient care.
These CSG metrics also address the interests of our shareholders our employees our partners as well as our community.
The publishing of this inaugural he asked you report represents a milestone for our company and we look forward to updating it and building upon the foundation of corporate responsibility that we've been able to establish here at Cumberland.
So I'd now like to turn the call over to Marty Cornelle, our chief commercial officer.
Got you with a review of our commercial activities Marty.
Thanks JJ.
Here at Cumberland, we're taking appropriate action to protect our employees secure our supply chain and support the patients who can benefit from our medicine.
Given the changes and access to hospitals and physician offices, our national sales organization has shifted their promotional efforts to other forms of support including electronic and telephonic communications.
Our primary target markets or hospital acute care and office based gastroenterology.
These medical specialties are characterized by relatively concentrated prescriber bases that can be supported effectively by our team of experienced sales professionals as they make calls provide information and supply product samples as requested.
We held a very productive national sales meeting during the first quarter. This year and provided our sales division with additional training and support for navigating the current healthcare landscape.
It was our first virtual sales meeting held over three days with good participation and all agenda items cupboard.
Additionally, we augmented our internal <unk> commercial capabilities through targeted use a digital media and a series of Copromotion partnerships.
We believe that all these arrangements represents an efficient way to expand our reach round out our coverage and ensure the survival of our company. That's the novel Corona virus impacts the country.
We plan for two launches during 2020. The first involves our next generation caliber war product, which we launched during the first quarter of this year.
This new injectable ibuprofen formulation comes in are ready to use bag that can be administered without dilution.
Further treatment to pain and fever.
That's a nonsteroidal anti inflammatory drug or inset Calvin or maybe you said the sole method of treatment for mild to moderate pain or as part of a multi modal treatment for severe pain. The new presentation of caliber lore comes in a pretty mixed bag containing 800 milligrams of ibuprofen.
And then a 200 milliliter patented formulation for injection.
This ready to use product provides health care professionals, a formulation that is easy to administer and less expensive to prepare.
It can help manage the treatment patient pain and fever, while reducing opioid consumption.
Well then that will launch of our next generation Caldor got off to a fine start it has been interrupted by the Corona virus pandemic.
As you May know overall hospital admissions have slowed and many elective surgeries had been postponed we look forward to supporting the patients who can benefit from caldor as the company as the country reopens.
We're also preparing for the launch later this year of our recently Ft approved ready Trex line of injectable methotrexate products.
Meanwhile, as AJ mention we announced three national initiatives during the rise of the Corona virus pandemic to help hospitals and clinics support patients with symptoms associated with covert 19 related infection.
Our first initiative involves by bad it our newest product.
We launched the National program to support the treatment to patients with hospital acquired and ventilator associated pneumonia related to the outbreak of the novel Corona virus.
As you recall by bad either as a patented F.D. approved injectable anti infective that addresses a range of Gram positive bacterial pathogens.
Putting those that are considered difficult to treat and multi drug resistant.
Such as Murcia and N.S.S.A.
Pneumonia caused by secondary bacterial infections. This common among patients with viral respiratory conditions.
The risk of such infections grows as hospital see more patients with respiratory symptoms associated with cobot 19.
We sponsored a key program with several experts across the country to provide information on the management of complicated respiratory infections, resulting from cobot 19.
We have a stable insufficient supply of my body to support not only the current demand, but also the potential increase demand due to potential shortages of other antibiotics, such as vancomycin and daptomycin.
Secondly, we announced the national initiatives to support hospitals and clinics that use council or for the treatment to patients with fever fear hypothermia and other symptoms associated with cold with 19 infection.
Because of the potential dangers of high fever recent guidelines from the society of critical care Medicine suggests that king.
Clinicians consider using pharmacologic agents for controlling fever in cobot 19 patients.
Some patients with high fever, or unable to swallow or retain oral anti epileptic drugs or retain <unk> rectal suppose it George our initiative included the availability of special supply and financial arrangements, including favorable pricing and payment terms for hospitals and clinics.
To help ensure timely access to capital or doing this healthcare crisis.
Caldor offered these patients relief as it is the only injectable nonsteroidal anti inflammatory drug.
A proof for the treatment to fever, and United States.
Our third initiative included increased availability of Vaprisol to treat critical care patients would hypernatremia during the covert 19 pandemic recall vaprisol isn't hefty approved treatment for hypernatremia, a condition that is particularly prevalent among <unk>.
See you patients.
Hypernatremia frequently occurs when the concentration of sodium in a patient's Florida's abnormally low.
It can lead to neurologic dysfunction decreased mental function and cerebral edema. Among other complications. It is our hope that this enhanced access to that proposal will help lead to shorter I see you stays and therefore free up potentially lifesaving I see you beds that could be carbon shorts.
Supply during this time.
Similar to the other two initiatives there were special financial arrangements, including favorable pricing and payment terms for hospitals and clinics to help ensure timely access to vaprisol. During this crisis.
That completes todays update you on marketed products, they Jay I'll turn the call back over to you.
Thanks for that update Marty.
Now I'd like to review the product development efforts underway here at Cumberland.
We believe that FDA approved brands are valuable assets, we continue to explore new ways or products can be delivered and new patient populations that they can benefit.
For example, our caldor product is now available nationally in the new presentation that Marty mentioned.
Product was initially approved for the treatment of paper, that's a pain and fever in adults. We then secured approval for excuse in pediatric patients six months or the age and older.
If you've been following Cumberland you remember that last year, we initiated a study to evaluate caldor in newborns from birth to six months of age.
Well the trial enrolled 24 newborns that for medical centers around the country and it was designed to evaluate the safety and pharmacokinetics of capital to work in these youngest of patients.
We completed enrollment in that Multicenter study and then announced topline results during the first quarter of this year.
Caldolor was well tolerated in these very young children.
And very importantly, there were no safety concerns noted.
We have finalized the study reports submitted it to the FDA and are now preparing for an appropriate publication.
Meanwhile, we've also been evaluating or new chemical entity I vitruvian through a series of clinical programs I.
That's it your bad selective and posted antagonist that blocks activation the thrown box in receptor.
This receptors founded many tissues and plays a key role in multiple biological processes.
Because of its activity had mechanism of action, we're investigating that fits your bad for several patient indications that represent unmet medical needs and potential orphan drug candidates.
We have completed three pilot phase two studies involving patients suffering from a battle renal syndrome from portal hypertension.
And from aspirin exacerbated respiratory disease, a severe form of asthma.
We're currently evaluating I fits your band three additional phase two clinical studies.
The first involves a follow on study to the one already completed in the patients with severe asthma that I mentioned.
The next as a study in patients with systemic sclerosis or scleroderma.
D. ability rating autoimmune disorder characterized by diffuse fibrosis of the skin in internal organs.
And we also initiated a clinical trial that fits your bed in patients with the cardiomyopathy associated with Duchenne muscular dystrophy.
A rare fatal genetic neuromuscular disease their results the deterioration of the skeletal heart and lung muscles.
Enrollment in these studies is currently limited.
Due to the decreased patient flow with other restrictions associated with the cobot 19 pandemic at the medical centers across the country, we're working with.
And while we await for resumption of new enrollment we are working to ensure that patients who have already entered into a study continue to receive their medication.
We're also taking this opportunity to ensure that all sites received a fresh supply of study drug. So they are ready to go as the country reopens. This summer.
Our plan regarding these programs is to await the results from these three additional studies before then deciding on the best path for approval.
That your bad our first new chemical entity.
That completes the clinical update and now I'd like to turn to our Chief Financial Officer, Michael Potter with the financial review Michael.
Thank you AJ for the three months ended March 31st 2020, net revenues from ongoing operations were 8.3 million.
We also recorded an additional $750000 during the first quarter associated with the return of the U.S. rights to OSI LNG project.
Total revenue from the ongoing and discontinued operations in the first quarter was 9.1 million.
During the prior year period net revenues from continuing operations were 8.7 million, which excludes sales from the divested products rights I mentioned.
Net revenues by product for the first quarter included 3.3 million for Kristalose 2.4 million for by bad of 1.1 million for capital or 0.7 million for Acetadote.
Total operating expenses for the three month period were 10.2 million similar to the 10.1 million for the prior year period.
Adjusted earnings for the first.
For the first quarter were 0.2 million or one cents per share compared to 0.7 million or four cents per share during the same period last year.
As of March 30, Onest 2020, we had 97.3 million in total assets, including 27 million in cash and investments.
Liabilities totaled 47.5 million, including 18.5 million our credit facility.
Total shareholders equity was 49.9 million at the ended the quarter.
As a reminder of the financial terms for the buyback of acquisition included a 20 million dollar payments are theravance upon closing.
The initial payment was funded by revolving credit facility Pinnacle Bank.
We subsequently provided their advanced for the $5 million milestone payment and are providing royalties based on product sales.
Also recall, we accounted for the acquisition as a business combination a total of 34.2 million a new assets were added as a result of the buyback of acquisition, including 21.6 million in inventory 11.8 million of intangible assets and 0.9 million of goodwill.
Due to amortization of intangibles and sales of inventory the value of these assets totaled 29 million at the ended the first quarter.
By bad it has been an important contributor to our business from their products launch in late 2018 through the end of this year's first quarter. The product has delivered a total of 12.2 million in cash contributions.
We also continue to execute on our share repurchase initiative during 2020 during the first quarter, we repurchased an additional 165000 Cumberland shares.
At the into 2019, we completed our commercial support and returned the U.S. rights to at Island Totex.
Beginning this quarter, we're presenting the operating results of these products as a discontinued business line.
This results in the sales indirect expenses of the products being removed from prior year reporting and incorporated into a single line described as discontinued operations at the bottom of our income statement.
That line will net the historic revenue with the direct expenses associated with the two brands.
However, it's important to note that it will not include any indirect expenses such as those associated with our marketing and sales organization.
Redirected their focus to our three key hospital brands.
In addition, we will receive a total of 5 million in payments over the next two years associated with the agreement to return those two brands.
These payments are being provided each quarter with the first 200 over the first $750000.
Received during Q1 of this year accounted for in discontinued operations with no associated expenses.
Meanwhile, Cumberland recently received the funding of alone from Pinnacle Bank in the amount of approximately 2.2 million pursuant to the Paycheck protection program under the Federal Cares Act.
We apply for this loan after carefully considering with our bank the eligibility criteria to participate in this program and determining that Cumberland met those criteria, we evaluate didnt provided information on our payroll and other qualifying expenses to determine the amount of phones to apply for.
Number one is not laid off or furloughed any employees as a result of the cobot 19 pandemic and thanks to assistance from the Paycheck protection loan. We currently do not foresee doing so.
We do you continue to monitor and evaluate changes to this program as they emerge and we'll take appropriate action if necessary.
Finally, it's important to note. The Cumberland has also has averaged 44 million and tax net operating loss carry forwards, resulting from the prior exercise of stock options.
Completes our financial report I'll turn it back over to you AJ.
Thank you Michael.
Well as you can see we continue to make progress towards our goal of building a specialty pharma business that deliver sustained growth profitable operations and long term value.
Our key catalyst moving forward remain the same.
They include contributions from divide that it acquisition.
Rolling out our new capital or product.
And launching already Trex product line.
And we believe all three brands can be important contributors to our business for years to come.
We also believe we can that significant value by progressing and expanding our clinical programs.
Feature product candidates that address markets that are quite large for a company our size.
Presently we are facing the same headwinds that are affecting all companies that rely on hospital admissions and patient visits any elective surgeries to drive their revenue.
Therefore, we are implementing measures to try to lessen the impact of the Corona virus honor business here in 2020.
Given the limited visibility of both the positive and negative impacts of Kobin 19. At this time, we believe it's prudent for us to withdraw our previously issued Twentytwenty guidance.
Meanwhile, we continue to monitor the national health and economic situation. So we can maintain or employee safety and well being well also keeping our business operating and secure.
As always were manage our operations the financial discipline, and we'll work to maintain a favorable financial position.
And please note the interests of this organization.
Our management and our shareholders remain closely allied given the significant insider ownership in the company.
And finally I just like to say, we remain focused on our mission of advancing patient care to the delivery of high quality pharmaceutical products and we aim to deliver on that mission here in 2020 and beyond.
So with that review and update now let's open the call to any questions. You may have operator can you. Please proceed.
Thank you.
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Yes.
And our first question comes from the line of Andrew Dsilva with B. Riley FBR. Your line is now open.
Yes, thanks, good afternoon, great to hear everybody sounds healthy.
A couple quick questions on my end he just to start having have you seen the need for purchasing or stocking for any offerings during the quarter to quarter due to cover 19, So I'm thinking specifically about vaprisol are about that as they seem to fit the bill there.
Marty will take that one.
Yes.
We're not really seen a lot of forward purchasing we did have a as we related Andy a three a special programs.
They were really designed to meet.
Our current current needs as opposed to forward stocking. So I think that Oh, I think that it's safe to say that that's the country reopen so we can expect a fairly normal pattern of purchasing for our products to emerge.
Okay, Great and then just as it relates to your exposure to elective procedures you have any sense of maybe up typically what percent of your business is tied to elective procedures.
Marty well for Caldor, it's a it's a very significant percentage and the Oh, the surgeons that Oh, we maintained consistent contact with our saying that.
As for hospitals open up there's going to be a a pretty significant backlog of patients coming in that have not been able to get access for elective procedures. During oh during the pandemic and Uh huh. So we know we will expect to see a hopefully some benefit from that Oh for.
For Calvin or as a as the hospitals reopened and a amnesia elective a this backlog of elective surgeries are in fact.
Gets realized.
Got it got it perfect and then I just to cut the two more quick was as it relates to read it tracks are you still on track to launch this year and Alex you just lump my last question here as well I can can you also give us a sense when we should expect you to initiate a phase three or a pivotal study.
For any of that fit your bad indications.
I was just kind of looking over some notes you think you commenced a the HRS study back in 2011, So just curious maybe whats a realistic timeline before.
We see these advanced cat.
The pivotal.
Already can you start with the outlook and plans for ready Trex, then I'll be happy to handle the clinical questions.
Certainly are ready Trex is a is on track for ER for a launch later this year.
Were.
Actively engaged in.
Uh Huh development of a panel of experts have a.
About completing a the final stages of our market research developing our Ah Ah draft promotional material.
And that patient support material. So there is.
There's a full catalog of activities underway.
And now we expect that we will be in a position to to watch their product later this year.
Thank you Marty and then on the clinical front as I mentioned to you know we did complete the capital where pediatric study and wrapped up a that effort with Oh finalizing the report and sending it off to the FDA.
However, as I'd mentioned enrollment in the I sit your band studies has slowed ran a bit of a low at the moment because of the closure.
And a change of access at the country's hospitals are they the various sites, where we are doing the work.
You know, we expect that she rebound as the country reopens and the years goes on yeah. We it's very hard to predict when these studies are going to be done and we moved to phase three because all tied to patient enrollment you did mentioned to pad or renal syndrome and again.
We did three Vitruvian studies got three more underway and rather than go broadly in parallel.
We're going to do is pick the programs that would help us get to the market the fastest and really focus our resources and our efforts in driving those and it will make that decision. Once we have the data from the three studies that are underway.
Okay great.
Actually add on as it relates for example, a to the HRS study.
I guess.
It's been completed its my understanding the phase twos been completed for a little while now I'm.
What more additional information do you need to be able to decide if you're going to.
Progressed it in to next stage in clinical development and that [noise].
I'm happy you asked that question, it's a matter of the seeing the data from the other studies, so we can determine where to deploy our deploy our resources.
Okay, Yeah, we want to be careful about our R&D spend to keep it in line with our revenues you know to maintain positive cash flow from operations, which we've been able to achieve.
Okay, No I get what you're saying how that makes sense, all right, great well, hey, I'm glad to hear a everybody's sounds healthy in best of luck on board.
Thank you.
Thank you and as a reminder, ladies and gentlemen task question would just needs to press star one on your telephone withdraw your question. Please press the pound key.
Well. Thank you everyone for joining the call today and as we've mentioned in the past we understand that many prefer a private discussion with management.
That's fine if you'd like to do that just please reach out to layer in goal here and she'll help us schedule such a call. We appreciate your time and interest in our company and we do look forward to providing another update after the end of the second quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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