Q2 2020 Cumberland Pharmaceuticals Inc Earnings Call
Please note that this call is being recorded and will be archived on cumberlands bed side for one week something they speak.
I would now like to introduce having golf, who handles corporate relations for Cumberland Evan.
Good afternoon, I hope, everyone is safe and well earlier today, we issued a press release containing the Companys financial results for the second quarter ended June Thirtyth 2020.
A copy of that release, which also includes a corporate update N series, a financial tables for the period can be found on our website at www dot cover lens pharma dotcom.
No that today's discussion may include forward looking statements as defined in the private Securities Reform Act at 1995.
Because any such statements reflect the companys current views and expectations concerning future events. They may involve risks and uncertainties.
Additionally, there are many factors that could affect the company's future results, including but not limited to natural disasters public health epidemics economic downturns and other events beyond our control.
Those issues are described under the caption risk factors air form 10-K, and any update to file with the FCC.
Any forward looking statements made during today's call are also qualified by those risk factors.
And despite our best efforts actual results could differ materially from our expectation and the information shared on the call would be considered a should be considered current as of today only.
Please remember that the company does not assume responsibility to update any forward looking statements, whether as a result of new information or due to future development.
During today's call will be referring to several of our marketed brands and full prescribing and safety information for those brands can be found through the links to each individual product website located on our corporate site at Cumberland Pharma dotcom.
Oh, so today will provide some non-GAAP financial measures with respect to our performance.
An explanation and reconciliation to GAAP measures can be found in our earnings release, and it's fine financial table.
And also with us on the call today, our A.J. Kazimi Cumberlands, Chief Executive Officer, Marty her now our Chief commercial officer, and Michael Brown, Our Chief Financial Officer on.
On the call today, we'll start with an overview of our progress during the second quarter and will follow with a discussion of our commercial activities.
Well then review our financial results and finished with the closing remarks before opening the call to any questions you may have.
Now I'd like to turn the call over to AJ to begin our corporate update and discussion of the company's performance.
Thanks Aaron.
Good afternoon, everyone and thank you for joining us.
I Hope you and your families are doing well during these difficult times and we'd hope I know for significant relief from the impact of the novel Corona virus, which unfortunately continues to affect our health care system, the economy employment and at all or daily lives.
Our thoughts go out to all those who are suffering, especially those who were about that.
Resulting a life threatening conditions.
As well as those who have lost their jobs where their businesses.
But I'd also like to acknowledge and thank the team here for their continued dedication invaluable contributions in keeping our company going during these unprecedented times.
I'm pleased to report that our facilities have remained open and we continue to operate our business and we have not had any employee furloughs.
We're also working to maintain or ongoing compliance with the many laws and regulations that we fall wonder as a publicly traded pharmaceutical company.
Cumberland has face the same headwinds affecting other companies that rely on hospital admissions and patient visits to drive their revenue and the second quarter months a they brought in May this year were particularly difficult as it has less pay since patient sought care in in our access to men.
Cool facilities substantially limited.
Several of our brands word negatively impacted by by the Lockdowns the postponement of physician office visits and the postponement of elective procedures.
However, we're very fortunate to have a diversified product portfolio with other brands delivering a strong performance and during the quarter. There was also an increased contribution from our international business as well.
As a result, our total revenues for the second quarter were 9.6 million.
15% so over the first quarter this year and all show up 2% over the prior year period.
Our adjusted earnings for the quarter were $1.2 million or eight cents a share.
Compared to 0.8 million or five cents a share during the same period last year.
Cash provided by operations grew to $3.7 million during the first half of Twentytwenty, which is more than double the 1.5 billion operating cash flow. We saw during the first half of last year.
Meanwhile, during the second quarter, we made a special effort to support the medical professionals treating patients symptoms associated with covert 19 infections, such as pneumonia, hi, fevers and electrolyte imbalance is we announce supply initiatives for access to our acute care brands.
Which included special financial arrangements for hospitals and clinics using these products during the crisis.
Also during the second quarter, we announced the release of our first sustainability report, which detailed cumberlands compliance activities ethical marketing drug safety employee practices and community involvement. This inaugural report outlined our activities associated within virus.
Mental social and governance or E.S.G. matters, and it's designed to address the interests of our shareholders our employees our partners as well as our community.
On the clinical front enrollment in our studies significantly slowed due to the decrease inpatient admissions to medical centers across the country and however, we did work to ensure that patients who have already entered into wunder bar studies continue to receive their medication.
Hey, we also took the opportunity to provide sites with fresh supply if study drug. So they were ready to go as their medical centers reopened.
During the quarter, we also closely monitored our supply chain with raw materials flowing into our international manufacturing facilities and finished product arriving at our warehouses.
As a result weekly shipments have continued to the distribution centers that supply our nation's hospitals and retail pharmacies.
So with that overview I'd now like to turn to Marty Cornell Cumberlands, Chief commercial officer to share his update on our marketing and sales activities Marty.
Thanks JJ.
And then Jay mentioned, the second quarter was a difficult one in terms of access to medical facilities.
We also noted a steep declines in patient visits to doctors offices and the number of elective surgeries, especially in the first two months with the quarter.
We believe these changes in health care were due to the stay at home orders across the country as well as patient concerns about visiting facilities, where they could be exposed to infection.
During the second quarter, we made the decision to keep our commercial organization intact. Many of our employees provide the primary sources financial support for their family.
That turned out to be a good decision as our revenue was up both sequentially every quarter.
But also year over year.
Although not familiar with a company we have an experienced sales organization, what's significant tenure at Cumberland and bass industry experience.
Our brand or promotion sensitive and we wanted to ensure that we had an established trained sales organization ready to support our products as a country reopened.
During the quarter, our commercial organization continue to remain engaged in communication with health care professionals to support the patients who can benefit from our medicines. However, we shifted much of their activities from personal visits to telephonic and electronic communication.
We also establish new procedures to document and monitor their productivity.
The results indicated resourceful and steadfast effort to maintain awareness or the benefits and the use of our brands and we appreciate those fine effort.
We supplemented these national field effort with an enhanced internal sales initiative, reaching out to hospitals physician offices from our headquarters.
We also launched a national digital media activity and a series of virtual medical meetings.
We believe that all these efforts represented an innovative and efficient way to expand our reach add new coverage and ensure awareness of our products. During these unprecedented times.
Meanwhile, we also continue to facilitate the publication in discrimination of new clinical data associated with our products.
One publication highlighted the positive clinical outcomes that resulted from treating patients with bacteremia or Endo card I just with my bad.
This publication is your sub analysis of the tell dancing observation will use registry or tourist study conducted to record population characteristics prescription information and a real world clinical outcomes for patients with Gram positive infections treated with by bad.
Recall that my body, there's a potent and FDA approved antibiotic for the treatment of certain serious bacterial infections, including hospital acquired and ventilator associated bacterial pneumonia.
It addresses a range of Gram positive bacterial pathogens, including those that are considered difficult to treat and multi drug resistant such as Murcia and M.S. says hey.
In the tour study positive clinical response was achieved an over 74% to the patients.
This analysis suggests by bad it is a promising and viable option for patients with bacteremia or endo card items, including those with myrtia or other susceptible pathogens.
Furthermore, two studies examine longer term resistance trends of by bad it as part of a seven year anti microbial surveillance program.
These global clinical trials reported that by bad it maintained excellent anti microbial activity against multi drug resistant pathogens, including Gram positive and staff or I guess I actually.
The study also documented to sustained in vitro anti microbial activity and spectrum of by bad.
For many years after its clinical approval.
Another publication presented new data and concluded that our council or product significantly reduce the amount of opioids required to manage pain after traumatic injury.
This study evaluated the efficacy of caliber war and the management of acute pain, and orthopedic trauma patients and monitored the use of opioid in those patients.
The results of this level one trauma center study demonstrated that the use of caldor significantly reduced opioid consumption.
Moreover, pain was more effectively controlled with caldor compared to standard of care narcotics.
As a nonsteroidal anti inflammatory drug are insured.
I'll be more may be used at the sole method of treatment for mild to moderate pain or as part of a multi modal treatment for severe pain.
We launched our next generation caldor product at the beginning of 2020 with a new presentation in a pretty mixed bag.
This is ready to use product contains 800 milligrams of ibuprofen and a 200 millimeter patented formulation for injection.
It offers hospitals in medical facilities improved dosing accuracy and cost savings, while managing pain, and fever, and reducing opioid consumption.
We also continue to prepare for the launch of our FDIC approved injectable methotrexate product line ready tricks.
We are implementing a modest expansion of our field sales force with the goal of covering up to 80% of the rheumatology market potential.
Additionally, we are establishing a national group of physician experts Jewish advise us on the positioning and messaging for the brand as we prepare a full range of marketing promotional and patient support materials.
That completes todays update on our key commercial effort, Hey, Jay I'll turn the call back over to you.
Thanks, Marty I'd now like to ask our Chief Financial Officer, Michael bought or for the financial review Michael. Thank you AJ for the three months ended June Thirtyth 2020, net revenues from ongoing operations for 9.6 me. We also recorded an additional 750000.
Colors and discontinued operations during the quarter as consideration for the return of rights to two products. So we no longer feature.
The second quarter revenues for for continued operations were up 15% over the first quarter and up 2% over the 9.4 million in the prior year period.
Net revenues by product for the second quarter were led by 3.5 million for Kristalose 3.3 million for by Bad and also included 1.2 main for count lore, and 0.6 million for season.
We had particularly strong international orders in the quarter. However, it's important to note that those orders do tend to be more episodic in nature and are better viewed over time to understand their impact on our business.
Total operating expenses for the quarter were 11.2 million compared to 10.8 main for the prior year period. The main driver of this change was the increase in cost of goods sold associated with the growth in sales of by bad of.
Recall that significant by bad of inventory was included in the brands acquisition price the cost of goods sold well stepped up over actual manufacturing costs and is also a noncash item.
These and other non cash expenses, such as amortization and stock compensation or added back and our calculation of adjusted earnings we use adjusted earnings to manage our business and we believe it is an important metric for understanding our business.
The resulting adjusted earnings for the second quarter were 1.2 million or eight cents per share a significant increase over the zero point eightmillion five cents per share during the same period last year.
Year to date cash flow from operations was 3.7 million through the second quarter of 2020, which is more than double the 1.5 million operating cash flow for the first half 2019.
As a reminder, the financial terms for the by Bad of acquisition included a 20 million dollar payment upon closing.
This initial payment was funded by revolving credit facility.
We subsequently provided a $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 to the buyback of acquisition, including 21.6 million in inventory 11.8 million of intangible assets in 0.9 main of goodwill.
Due to amortization of intangibles and sales of inventory the value of these assets totaled 27 million at the end of the second quarter.
By bad if it's been an important contributor to our business from the products launch in late 2018 through the into this year second quarter, a product has delivered a total of 14.4 million in cash contribution.
At the into 2019, we concluded our commercial support and returned the U.S. rights to a file in touch. It. This year, we began to present the operating results of these products as a discontinued business line.
This results in the sales and direct expenses are the products, having been removed from prior year reporting and incorporated into a single line described as discontinued operations at the bottom of our income statement.
That line Nets historic revenues, where the historic direct expenses associated with the two brands.
During the second quarter, there was 0.7 million benefit from discontinued operations similar to the zero point Eightmillion for the same period in 2019.
The total contribution from discontinued operations. This year was primarily the result of the quarterly payments. We are receiving this year and next associated with the agreement to return those two brands.
As of June 30, 2020, we had 97 million in total assets, including 27.4 million in cash and investments liabilities totaled 49.1 million, including $17 million on our credit facility and net reduction of 1.5 million from year end.
Total shareholders equity was 48.5 million at the ended the quarter.
Meanwhile, in April Cumberland received the funding of alone and the amount of approximately 2.2 million pursuant to the Paycheck protection program under the Federal Cares Act.
We carefully assess and provided information on our payroll and other qualifying expenses to our bank determine the amount of funds, we recall if I had to receive.
We submitted the application after carefully considering and confirming that we met the relevant eligibility requirement criteria.
The resulting loan help prevent the need for any employee layoffs or fertilize has the experience the impact of the code 19 pandemic.
Given the uncertainty associated with the pandemic we began.
Difficultly decrease the number of shares repurchased.
During the second quarter, we repurchased an additional 141463 Cumberland shares which included a significant number to fund the taxes associated with employee vested restricted shares.
Finally, I'd like to note that Cumberland has over 44 million and tax net operating loss carry forwards, resulting from the prior exercise of stock options.
That completes our financial Port I'll turn it back over to you AJ.
Thank you Michael.
Well as you've heard today, our second quarter was very illustrative of our strategy and our organization.
Despite being faced with numerous challenges we rapidly adjusted to the changing landscape as our commercial team applied creative ways to support our brands and interact with our customers. We also solve the benefits of our diversified portfolio and diversified customer base and.
We'll continue that diversification strategy as we look to expand our project line, both through acquisitions as well as internal development.
Our key catalyst for 2020 remain the same.
Contributions from divide that of acquisition.
Gross of our next generation caldor product and the pending launch of our new ready Trex product line.
As you know the cobot 19 pandemic is affecting how many businesses are run here in 2020, and we're taking measures to lessen its impact on us as much as possible.
We're focused on protecting our employee safety and well being well also staying open for business to supply our medicines for the patients who need them.
And we'll continue to utilize you successful practices, what while managing our operations financial discipline.
Working to maintain a favorable financial position.
And I'm, particularly pleased that the organization was able to remain intact during such trying times. Thanks in part to the assistance from the payroll protection program.
Additionally, we are fortunate to have a robust pipeline a promising candidates in phase two clinical trials success in any of those programs can have a significant impact on our business and Hell take our company to a new level.
And finally, I'd just like to once again acknowledge and thank our outstanding team for their dedication and resolved. During these trying times their efforts have enabled us to continue on our mission of improving patient care to the delivery of high quality pharmaceutical products, So with that review and update.
Now, let's open the call to any questions you may have operator. Please proceed.
Thank you, Sir ladies and gentlemen that concludes the company's preservation and we'll now open the call for any questions. If you would like to ask a question. Please press the star Acai, followed by the digits one on your Touchstone telephone.
Our first question comes from the line of Andrew Dsilva wed be writing FBR.
So your question.
Hey, great. Thank you very much good to hear everyone's sounds healthy I just a few quick questions for me.
Just.
Curiosity.
I can dial in my model what is the other revenue for the quarter and does that line include international sales or is it just see t. related revenue right now.
Likely won't take that one please yes, I give you a background. It is primarily cici. It also reflects a payment that we receive from Nordic as well during this quarter.
And what was what was the now.
The amount was 500000 for Nordic as other revenue.
Oh I meant for the other just the other when you total line.
With that eight around $800000.
Yes, a that it was right at 900000 for other revenue.
500000 of it was Nordic Nordic payments for the trucks and the remainder, we'll see T. and grant related funding.
Perfect perfect. Thank you very much and then just [noise].
Yeah, good transition as it relates to some of your more recently approved offerings can you help me better time, they're ready Trex launch and then also can you give us a sense of what percent of caldor sales are are they are ready to use version versus the original formulation.
Well I'll start by commenting on the timing of the ready Trex launch we're looking at a later this year to being a position to you I make that brand available. It really is dependent upon the arrival of the log supplies.
And so we're thinking in terms of late Q3 early Q4, when those are expected to show up Marty can you talk about the breakdown of the capital we're ready to use versus the old presentation.
Sure.
Andy the the.
Current breakout is approaching 60% for the next generation product and 40% for the for the original Oh Vile a presentation.
As you might expect a overall development has been a affected by the postponement of elective surgeries, but but the oh the uptake of the next generation product as a percentage of total business is is is growing each month.
Okay. Okay. That's good to hear and I just as it relates to your business, it's fair to assume.
The trough.
Relates to the pandemic.
Already passed and within the first half of a of the second quarter or are you seeing.
A lingering low still take place and then.
As it relates to the cadence you covered 19, you mentioned utilizing a like tele rep protocols how is that.
From a from a.
As you make your engagement standpoint, working out for you are you able to get in contact with decision makers a efficiently.
Or.
Do you assume like down the road you still need to eventually gravitated to actually going back in the field.
So I'll start and then I'll ask Marty to help regarding the all continue to impact of Accuvant 19.
I mentioned we.
We had hoped but now that.
We would have seen the end of the of the pandemic, but unfortunately, that's not been the case edited it continues to impact our business in the third quarter.
And that's tied directly to Oh.
Oh lack of a patient visits to all hospitals on the one hand for Ah things like are you like to surgery, but also a you know issues with patients not wanting to go to visit doctors' offices concerned that they might get infected. So there is an ongoing impact it from Q2 into Q3, but.
As you pointed out you know we may have hit a low point.
In April and May.
Marty can you talk a little bit about.
What we're doing out there in the in the field.
In response to the second part Andy's question.
Well certainly you know we have we've learned a bit.
During this during this period and I mean.
The two key important points, there's nothing that is Ah that is more powerful then face to face contract or with physicians and other key decision makers. So as a as the country reopens Oh, we will continue to expand our our face to face.
Contact, but we've also learned that Oh that these other methods that we've been using as a replacement do have a role when they can help us build frequency of contact and a and provide an additional way to oh reach out to a positions and to provide a useful information across the.
A whole spectrum of health care providers. So we will expand our our activities in that area in the future as well.
Alright, great. That's everything for me I'll take a the rest of my questions offline.
Just a lot going forward this year.
Thank you.
Thank you again, if you would like to ask a question lease spreads and Starkey followed by the digits one on your touched on telephone.
Okay, well. Thank you everyone for joining our call today as I mentioned in the past we understand that many of you prefer a private discussion with management and if so please just reach out to Aaron goal here and she can help schedule such a call. We appreciate your you time and today and your interest.
Uncovered Lynn and we do look forward to providing another update at the end of the third quarter after the into the third quarter.
Thank you and and Goodbye.
Thank you, Sir ladies and gentlemen that concludes our conference for today, if you would like to listen to a replay of todays conference be style eight five by each slide nine zero fivesix using the access code GQ floor 7089, I was there anything <unk> a replay of the webcast will.
The available on the company's bed side I would now I could say I would like to thank you for your participation you may now disconnect.
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