Q4 2020 Aytu BioScience Inc Earnings Call
Thank you for your patience the coffers believe beginning in just a few minutes yeah. We want to thank you for your patience.
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Thank you for joining us for <unk> to <unk> fourth quarter fiscal 2020 business update call.
With me. This afternoon are H is chairman and Chief Executive Officer, Josh This stuff and Chief Financial Officer, Dave Queens.
I too bio science issued a press release earlier this afternoon with details of the company's operational and financial results for the fiscal second quarter.
A copy of the press release is available on the news page of the company's website at <unk> to bio dotcom I'd like.
I'd like to remind everybody that today's call is being recorded a replay of today's call will be available by using the telephone numbers and the conference I'd provided in the earnings press release and then.
In addition, a webcast will be of the alcohol live and archived H is let's say within the investor section under events and presentations I to bio dot com.
Finally, I would also like to call your attention to the customary safe Harbor disclosure regarding forward looking information the conference call today will contain certain forward looking statements, including statements regarding the goals strategies beliefs expectations and future potential operating results of eight to buyers.
Yes.
<unk> management believes these statements are reasonable based on estimates assumptions and projections as of today October 620, 20. These statements are not guarantees of future performance.
Sensitive information may no longer be accurate at the time of any telephonic.
Thats replay.
Actual results may differ materially as a result of risks uncertainties and other factors, including but not limited to the factors set forth in the Companys filings with the FTC.
Hey, two undertakes no obligation to update or revise any of these forward looking statements I would now like to turn the call over to hate to see you know Josh differently.
Thank you Sherry.
Good afternoon, everyone. Thanks for joining todays call for the fourth quarter and fiscal year ended June Thirtyth 2020.
This last quarter or fiscal 2020 was particularly notable for the company as we posted by far our highest revenue quarter in history with 14.9 million.
This quarters revenue was two times higher than all of fiscal Nineteens revenue combined so the plan that started last summer to transition the company to a fully integrated Rx and consumer health specialty pharmaceutical company is taking fail.
Before getting into today's prepared comments, let me first acknowledge that we are filing a few days beyond the originally planned filing date for this 10-K, but it has been for good reason put.
Putting together two public companies along with a significant asset purchase from several core and bringing on a new cobot 19 rapid test product line wasn't extremely heavy lift, but I think you'll see with our results that the effort it's been more than worth it and these transactions are paying off.
The June quarter was the company's first full quarter of integrating the two heritage in several core Rx businesses, along with the recently acquired and Novus consumer health business. The integration of these three businesses has gone well not only did we post all time high in revenue. This quarter. We also reported and an adjusted EBITDA loss of just 1.7 million is.
We grew revenues and rationalize overlapping areas and remove redundant expenses.
Also we ended the year with over 40 million 48 million in cash restricted cash cash equivalents. So we believe we have adequate cash to operate going forward and reach profitability at current spending levels and.
Importantly last quarter, we sold our first cobot 19 rapid test having received test kit inventory just prior to the beginning of the June quarter.
We sold a substantial quantity of cobot tests in the quarter and these tests sales augmented our core Rx and consumer health businesses that is to say we had a core business before cobot. There's continued to hold strong through code and that core business has been augmented not supplemented by test sales.
As we begin to come out of the cobot crisis and built the company going forward, we are expecting growth for the whole business.
The whole business not just cobot test sales those.
Those that follow the company prior to the March 2020 timeframe will recall that last year, we undertook a plan to transform the company. We started on a plan to create an integrated Rx and consumer health specialty company and that began with the announcement last September of our planned merger with Inovas Pharmaceuticals, and followed with our announcement in October of the acquisition.
Oh, the CIRCOR pediatric product portfolio both.
Both transactions are now closed and integrated it with today's revenue numbers you can see we're on an approximately $60 million revenue run rate across the combined business segments.
Couple of the core business growth with what we're developing with he'll light and the cobot test kits and we've never been better positioned.
Importantly in the June quarter, our core businesses actually grew over the same quarter last year. The business grew during the cobot 19 pandemic over the previous year. The stack demonstrates the strength of both Rx and consumer health franchises. This also demonstrates that we've established a firm foundation from which to grow as the world starts to get back to norm.
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Most importantly, perhaps this growth establishes that we're not just the cobot test company, we're quite a bit more than that was seven core prescription products and almost two dozen consumer health products that are shaping the growth the company's growth trajectory going forward.
While the cobot test sales have and will continue to play an important role for the company, we're quite enthusiastic about our core businesses and their prospects for growth. We did sell test kits in our Q4 2020 and test.
In test kit sales were actually higher in the September quarter than in the June quarter. So we've.
So we've sold more antibody kits this quarter than last and we're now adding an antigen test kit to the portfolio as an additional cobot offering to our customers the.
The key takeaway here quite simply is that our business is strong and it's grown beef.
Before I detail the elements that led to our strong Q4, and some strategic updates I'll hand, it over to Dave now to brought provide an overview of our financials for the quarter in the last fiscal year Dave.
Thank you Josh and thank you all for joining US today I'll review, our financial results for our fourth quarter and the fiscal year ended June Thirtyth 2020.
I'll begin today with an observation that despite the disruption in our country is injured and the way to the cobot 19 pandemic H II has been focused on integrating the operations of three businesses and executing a new growth opportunities.
In the past two quarters. We also quickly adapted our business processes and shifted staffing to enable the acquisition distribution of test kits advance the development of our promising Hilight technology and launched.
And launch new products this quarter from our consumer health platform.
In terms of our business organization following the share a car and I know this transactions we refer to the you know this business is our consumer health segment.
The our ECS segment includes our primary care portfolio.
Pediatric portfolio acquired from share core in our medical devices and diagnostics.
And now for our financial results. This has been a most productive period for 82 and our results prove it out.
Net revenue for the full fiscal year ended June Thirtyth 2020 was $27.6 million compared to 7.3 million reported for the year ended June Thirtyth 2019.
Net revenue for Q4 was an all time high of 14.9 million, which is nearly two times. The 8.2 million reported last quarter and close to nine times, the 1.7 million reported for the year ago fourth quarter.
The substantial Q4 revenue growth was due to the inclusion for the first time full quarters of revenue from both the pediatric portfolio and to know this.
As a reminder, both transactions were announced and closed during fiscal year 2020.
With these transformational transactions now integrated we are clearly a different company today.
For the 2020 fiscal year gross profit was $20.1 million, representing a 72.7% gross profit margin across all four quarters.
Gross profit for Q4 was $10.3 million, representing gross profit margin of 69.2%.
Cost of sales for our fourth quarter was higher than normal due to year end inventory cleanup, which resulted in write offs of approximately 1.3 million in our Rx segment.
Operating expenses, excluding cost of sales were 16.9 million for the fourth quarter compared to 11 million last quarter and 5.6 million in the year ago fourth quarter.
The expansion from last quarter was largely due to recognizing a full quarter of aid to consumer health operating expenses.
And 1.3 million a few late development cost.
We also recognized a few less significant cost increases related to the larger scale of the overall operations costs, such as insurance regulatory and some personnel cost.
Subtracting out non cash operating expenses of 2.8 million. This year light investment of one point Threemillion and approximately 800000 of transaction costs adjusted cash based operating expenses were $12.1 million for Q4 2000.
20.
This level of adjusted cash based operating expenses in the range of what we expect for the core operation going forward.
This expense level excludes investment and the Hilight development program and potential new business development opportunities.
We make these adjustments to provide an apples to apples comparison of the financial performance of the core operations.
Making these adjustments removing non cash expenses and adding back transaction in here like cost of the Q4 2020 income statement results in an adjusted EBITDA loss of approximately $1.7 million.
This Q4 performance compares favorably to the adjusted EBITDA loss of $2.8 million last quarter and $3.7 million for the year ago fourth quarter.
Using the adjusted EBITDA metric allows us to show more clearly the progress has been made toward our goal of building a profitable operating company.
You can see our adjusted EBITDA calculation in the earnings release, the wires within the past hour.
For fiscal year 2020, our adjusted EBITDA loss was $11.1 million compared to 13.6 billion in fiscal years 2019.
We expect to make further progress in eliminating the adjusted EBITDA loss during our current fiscal year.
Net loss for the fourth quarter was $3.1 million compared to 5.3 million last quarter, and 14.5 billion in the year ago quarter.
Contributing to the 3.1 million net loss for Q4, we recognized a gain of $5 million due to the change in the fair value of contingent consideration, which was offset by $1.5 billion of net interest expense.
EPS for Q4 was a loss of three cents.
Based on a 113.4 million weighted average shares outstanding.
Compared to a net loss of a dollar for for Q4 2019 based on 13.9 million shares outstanding.
For the fiscal year, our net loss was 13 point Sixmillion, which was cut in half compared to our $27.1 million net loss in fiscal year 2019.
Loss per share was 30 cents for fiscal year 2020, based on 45.2 million weighted average shares outstanding there.
That compares to a loss of $3.48 per share in fiscal years, 2019, which was based on a share count of 7.8 million.
And the balance sheet. The picture is also improved substantially.
As of June Thirtyth, we had total assets of $153 million against 58 million in liabilities $95 million of stockholders equity.
It's more than four times of 35 million dollar asset value at the same time last year.
During the fourth quarter, we paid down $50 million of debt that was assumed in the center core transaction and extinguished an additional $1.9 million of assumed debt and liabilities.
[noise], we had $48.3 million of cash on the balance sheet as of June Thirtyth 2020, and the company is positioned better than ever.
With that I'll hand, the call back over to Josh. Thanks, Dave. So you just as you just heard from Dave Our performance was strong in Q4 and for fiscal 2020. It was indeed, our best quarter in best year, yet and the pieces from the two acquisitions. These last few quarters have come together.
We have more work to do to continue to optimize efficiencies, but we're clearly headed in the right direction with a dramatically reduced adjusted EBITDA and record revenue.
Both of our revenue streams from the consumer health and Rx segments performed well contributing to the strong consumer health results with organic growth within the core consumer health product lines of diabetes supportive care sexual wellness and urinary bladder health.
Additionally, the E commerce business for consumer health was stronger. Furthermore, our newly launched consumer health products regarding an over the counter minoxidil foam for hair growth is on track to contribute revenue in excess of seven figures in its first 12 months from watch that makes it a solid new contributor to our consumer health segments growth.
On the Rx side revenue was 7.9 million a significant increase increase compared to Q threes 4.7 million.
Contributing to Rx revenue with solid contribution from the pediatric franchise. The former CIRCOR business additional value was created within the test, though gaining preferred status on express scripts National formulary and then a test those permits to Genesis study results published in the journal of Urology we've.
We expect both of these developments are driving a test of prescription growth in the coming quarters.
Rx growth was fueled by a relatively balanced contribution across our key products and improve sales execution. Despite the impact cobot has had on sales reps accessing physician offices Q4 represented a record revenue quarter for the Rx business and showed significant growth over previous quarters. This is a testament to our ongoing execution and the.
Clinical value of our products.
Also I'm pleased to see our sales rep call activity now picking back up to pre cobot levels in the current quarter to further drive prescription growth across the portfolio.
So that summarizes our operational performance now I'll shift to our new developments from a cold.
From a coded 19 standpoint Q4 was extremely active in April we announced the global licensing of the heel light ultraviolet light technology platform from Cedars Sinai Medical center at <unk>.
Previously described he'll light is a novel Endo tracheal catheter emitting ultraviolet light that has demonstrated broad antimicrobial activity in published preclinical studies.
We believe he'll light has great potential as a first in class treatment for severely ill patients intubated in the IC you in the near term as a potential cobot 19 treatment for those most severely ill patients.
To be clear, we see broad potential application well beyond he'll lights use encoded and has the potential for significant use in other conditions, including ventilator associated pneumonia severe influenza and other infections as you do.
As you'd be light is agnostic so to speak to the pathogens that kills it is so different in the way it does it the anti microbial applications for he'll light abroad.
We and our partners move quickly to interface with the FDA to advance your life and I'm happy to share an important update now today.
Today, I'm very pleased to share that the first ever he'll like clinical study has been approved and is now underway.
His first of its kind clinical study is a single site study initially, but we're already planning to extend the study two additional sites once the clinical data have been collected which should occur fairly quickly. The development team will move forward with additional regulatory discussions and add in those additional clinical sites.
We're thinking globally about the he'll let opportunity we're already engaged with leading centers in Europe. We've also initiated discussions with perspective commercial partners. This is.
This is an exciting clinical program, but I'm glad to say is now underway for the.
For the benefit of our listeners I want to make a point about our communications O'neill like you'll note that we have not provided up to the minute updates on he'll light in that in no way means substantial progress is not being made quite to the contrary a lot has been done with hilight in a very short period of time, we're moving at a rapid pace to say, the least but out of a strong sense.
Of respect for a study partners and all of those involved we are keeping the hilight updates to the most relevant milestones. This is important to preserve the integrity of the study and to ensure we keep the focus on making good steady progress you'll be made aware of the relevant developments. So for now just know that very good progress is being made.
Moving on to other developments subsequent to quarter end, we signed a distribution agreement for another cobot rapid test antigen test. This rapid test developed by Pinnacle IBT Corporation is a lateral flow immuno assay that delivers a result in 15 minutes. The test has strong clinical performance and we're excited to have access to this much needed product product.
In a clinical validation study the test demonstrated 100% specificity and 86.7% sensitivity.
When nasal Ferrand Youll swap results were compared with RT PCR the test positive predictive value is 100% and negative predictive value is 97%. These.
These results and other data have been included in an emergency use authorization submission to the FDA in that process as a moving its moving along well having just received an update today.
Finally, with respect to our cobot efforts in Q4, we sold a significant number of antibody rapid test over the last few quarters, we sold to a wide range of customers, including global oil and gas companies large and small municipalities hospitals clinics, a wide range of first responders and others and as I noted earlier, we sold more antibody test in the September.
Per quarter than we did in the June quarter.
So we're doing our part to helping the cobot fight and we're happy to be contributing.
While the rapid test present, an opportunity to help in the fight now he'll it represents an opportunity for the near and mid term and we hope in the long term and for years to come.
With such a broad set of potential clinical applications, we envision he'll light if successful to become an important tool in hospital IC use around the world for years to come.
Antimicrobial resistance is a global problem and attacking it in a non traditional way may prove to be a better way to treat difficult infections and rely less on traditional antibiotic anti viral therapy.
So in conclusion Q2 was an exceptional quarter transformational in numerous ways, we generated $14.9 million in quarterly revenue a company record by a wide margin.
We posted a substantially narrowed adjusted EBITDA loss, we finished the quarter with over $48 million on the balance sheet. After having paid off the $15 million Deerfield obligation. We advanced our efforts on the cobot 19 front capped off with today's announcement that the heel light study is now underway also in Q4, we added to our public profile by being added to the <unk>.
Russell 2000 index ensure.
In short we have.
We have strong momentum to grow shareholder value in fiscal 21, and onward and I could not be more pleased with our current position.
So thanks for listening to our prepared remarks, I'll now ask our operator to open up the question for analyst questions open up the call rather for analysts questions.
Thank you at this time, we'll be taking questions from our covering analysts if he would like to ask a question. Please press star one on your telephone keypad a confirmation until indicate your line is in the question queue. You May press star two if he would like to remove your question from like you and for participants using speaker equipment.
May be necessary to pick up the handset before pressing the sarkies.
Our first question is from Jeffrey Cohen with Ladenburg Thalmann. Please proceed.
Hi, Josh and Dave how are you.
Hi, Jeff Hey, Jeff.
So okcupid your few questions. So I just wanted to ask from showed the.
Antibody antigen chairs are and will be following a dirty the Rx portfolio correct.
Correct.
Okay got it and could you talk about the the R&D expenditure for the quarter, we said.
Primarily or majority based from if you like the 1.5 million.
Hi, Jeff Yes, it was.
Almost all feel like we had a little bit in our test kits, but 1.3 million was hilight.
Okay.
Note about that is it's it's none of it is that we're not able to capitalize it. So these are these all have to be run through the PML.
Got it and it looks like.
There will be expected enrollment of five patients at Cedar Sinai would you expect that to read out in the coming weeks or are.
Further along.
So that's that's part of my commentary around just how will I will update the public in general, we obviously want to give deference to our partners and the.
The short answer is it's not a long period of time to expect to have those results available and we would expect to roll right into a larger multicenter study here in the relative near term, but not putting a specific timeframe on it other than it's not going to take too terribly long to enroll to enroll a small number of patients like that.
Okay got it was there any antigen test kit revenue from Q4.
Oh, no that we have.
We have not sold antigen tests in Q4.
Got it and could you talk about Dave what was the cash use for the fourth quarter I Didnt catch the.
The EBIT.
EBITDA loss, but I didn't catch the cash use for the quarter.
Yes, so Jeff the the cash uses Oh, that's a little bit more complex. This quarter. You know we did have some debt pay downs via the $15 million piece from Deerfield.
And then I know another couple of million that we inherited some from I know this and then some liability pay down from the second quarter transaction. So those together by 17 million and then.
You know the basically the the EBITDA loss adjusted EBITDA loss of 1.7, if you add that to your actual cash costs that we factor out of adjusted EBITDA.
They were transaction costs and Hilight investment.
You could add those are though.
So the 1.7, and then add the balance sheet and this is all operations and the balance sheet. We did have some inventory stocking in the fourth quarter.
To the tune of about a net of 3.5 million, so which is heavier than normal, but you know with putting the two companies together and making sure we've got the right.
Product stocked up to so.
Yeah, there was some transition lumpsum inventory purchases.
In the fourth quarter, so that's about how the operating cash outflow.
Outflow work so.
Okay got it the the 2 million payment.
Under the CVR was as a result of CIRCOR hitting milestones on the revenue front is that correct.
So they did earn the milestone was paid in equity and.
That's the Novus milestones.
Yes, sorry, the Innovus milestones yeah. They did.
That was achieved yes.
Okay got it I misspoke it was an okay and then lastly on.
Any commentary on the BD front as far as any specific areas of focus are specific areas of holes in your portfolio that you determine mosquito beneficial.
The short answer is nothing to share specifically, Jeff other than we continue to apply the same filters of products that you know that fit generally speaking within the core areas on both the consumer and the Rx side.
And it's going to be an ongoing part of how we grow going forward. We obviously have a good growing core.
Core business, but we'll continue to look at other things and be opportunistic so looking both Rx and consumer.
Things that potentially have some area of overlap Rx products that could potentially be sold through the consumer platform and vice versa. So.
But nothing nothing specific to share at the moment.
Okay got it that does it for me nice readout. Thank you.
Thank you Jeff.
Our next question is from Vernon Bernardino with H.C. Wainwright. Please proceed.
Hi, guys.
Thanks for taking my question and congrats on the strong results.
Looking forward to.
Next fiscal year.
Just had a few questions as far as I highlight was concerned.
Obviously highlights a different product from.
The rest of the portfolio.
What are your preparations.
They are undertaking to perhaps.
Position on the product.
As far as education is concerned.
Upon its losses.
Lots as an approved product.
Yeah. Good question. So obviously he'll light is.
To some degree a moon shot, it's a big opportunity and one that frankly, you could build an entire company around and so.
A fair amount of work has already been done at this early stage from a commercial development standpoint, So as I mentioned in my prepared remarks, we've already engaged with commercial or perspective commercial partners.
To evaluate the opportunity we've formed US scientific advisory board already so some experts from around the world.
In infectious disease, and pulmonary and critical care medicine. So that's well underway, we've begun to obviously scale the relatively small scale, but scale manufacturing from a pilot standpoint identify suppliers. So we have require.
Request for proposal out and already bids back in so we can obviously assess what our costs are going to be.
And then obviously have been get began to engage thought leaders from around the world just in general So a fair amount has been done already and obviously now that we are underway with the clinical study.
And soon to be we think underway with a larger scale study and then continuing discussions from a regulatory standpoint, we'll then start to build out the commercial development. So we obviously still need.
We obviously still need to understand everything that we have here with respect to the the clinical profile of the product, but we're optimistic that it's going to prove out to be a product that has good clinical promise and obviously, we'll we'll build out a commercial plan and infrastructure accordingly.
Now regarding the work that has already been done how are.
Clannish.
Clinicians of viewing the product that they see as something.
They could readily just add too.
And I imagine it would be and and.
Infectious those who specialize in.
Specialize infectious disease treatment.
And and infections in general that this is something that could add to the armamentarium. They have in their clinical sites or can be standalone things for example that given that primary care physicians be able to add on Sunday.
Yes, so a lot of potential in that.
In how I'll answer this but obviously a lot sort of within that question. So the short answer is we view this as a relatively straightforward and very cost effective add on to for a patient that's intubated already in the IC, you and very costly to the system. So if you think about the daily cost of an IC patients its tremendous and so the the ability to add some.
I think as cost effective as he'll light on too.
To improve outcomes minimally reduce viral and bacterial load and potentially improve.
The outcomes to the point of minimizing number of days within the IC, you and getting patients to discharge faster the value proposition. There has the potential to be enormous so just on the basis of simply adding it onto what is already a very expensive very resource intensive patient is exciting and then you think about build out applications in the outpatient side.
Setting and while this isn't anything that we have.
Put sort of clinical protocols around and in specific planning around we have I'll keep I'll remind you we have licensed global rights to not just us off a deal and tracheal applications, but also nasal ferrand Geo applications. So you think about patients that may present, very early with a severe infection like cobot 19, the ability to.
We treat those patients with a with some.
With something other than something going down a breeding to something going through the needs. A fair. That's that's very exciting to think about because that's a huge number of patients and as you can.
And as you think about brought applications again beyond a critical illness like coded, which obviously the application for a patient presenting with the severe respiratory illness in the emergency room, that's a significant number of patients by definition. Many more patients are in the in the E R than our than end up in the use of the funnel so to speak as much larger there.
Then it gets even larger when you think about patients that have chronic infections chronic rhinosinusitis crew.
Chronic bacterial infections chronic bronchitis and these are patients that have been through the gamut with respect to how they have been treated and the number of antibiotic courses that they've already been exposed to so I get very excited when I think about the build up build out applications beyond that so it's very very broad based.
We're taking it one step at a time, we think theres a near term opportunity to gain proof of concept here in the intubated inpatient setting and obviously expand out from there as appropriate so a lot of potential to say the least.
Thanks.
Helpful Second question.
I have.
Regarding oh.
Copa testing Oh, I'm, just wondering if you could make a general comment as to how you're seeing these days.
As far as.
The distribution if you are able to.
And direction that antigen antibody testing is going to go.
Going.
I would say in general it continues to all be about turnaround times and decentralization. So there continues to be bottlenecks, we hear about it daily and the national and local news and right here in our own communities. So we see we have with two rapid test that can be deployed from virtually anywhere is very important in the fight we don't see.
Testing and the need for testing going away anytime soon.
And right when it looks like we've got areas under control, we see areas Spike back up and obviously the need for test and to continue and I think there's going to continue to be a balance between the need for diagnostic tests like the antigen test in PCR testing as well as surveillance or allergy testing as we have obviously with the antibody test so they'll continue to be a role for both even on the.
Other side of a vaccine, we obviously don't expect.
Broad distribution of the vaccine in the immediate term in fact, that's very recent news here over the last couple of days with the FDA stepping in.
Very clearly establishing that the rigor for approval is higher than potentially previously thought.
So thats going to delay the time of having a a vaccine out there and even then we know that it's going to take a while to get broad distribution. So there's going to be a continuing need for diagnosis and there's going to be a continued need for surveillance. So but again, it's going to come down to turnaround time and rapid near term near near patient site of testing.
Terrific. Thanks for taking my question I appreciate the comments.
Thanks.
Thank you we have reached the end of our question and answer session I would like to turn the conference back over to management for closing remarks.
Thanks, very much thanks for the questions and thanks to everyone for joining todays call. We appreciate your interest and continued support are they too and we look forward to speaking with you again on our Q1 fiscal 21 call coming up in November. Thanks, again have a good evening.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and have a wonderful evening.