Q3 2020 Cumberland Pharmaceuticals Inc Earnings Call
Please note that this conference call is being recorded at the company's request and will be archived on Cumberlands website for one week from todays date now I would like to introduce Alan Cole, who handles corporate relations at Cumberland Aaron. Please go ahead.
Good afternoon, everyone earlier today, we issued a press release containing the company's financial results for the third quarter ended September Thirtyth 2020, you can find a copy of that release on our website at www Dot Cumberland.
Huh.
Please note that today's discussion may include forward looking statements as defined in the private Securities Reform Act to 1995.
And 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 epidemic.
And on the downturn and other events beyond our control.
She's are described under the caption risk factors in our form 10-K, and any additional updates filed with the FTC.
And also any forward looking statements made during today's call are qualified by those risk factors.
Despite our best efforts actual results could differ materially from our expectations and the information shared on the call today should be considered current as of today only.
Please remember that the company does not assume any responsibility to update any forward looking statements, whether as a result of new information or due to future development.
During the call today, we will be referring to several of our marketed brands and full prescribing and safety information for each brand can be found on the individual product web site at.
And the links to those products I can be found on our corporate site at Cumberland pharma Dot com.
Also today, we'll 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 financial tables.
With us on today's call are A.J., Kazimi Cumberlands, Chief Executive Officer, Marty for now our Chief Commercial Officer, and Michael Bonner, Chief Financial Officer well.
Well start today with an overview of our progress during the third quarter and will follow with a discussion of our commercial activities and then overview, our financial results and finish with the closing remarks before opening the call to any questions.
I will now turn the call over to A.J., Kazimi Cumberlands, Chief Executive officer to begin a corporate update and discussion of the company's performance.
Good afternoon, everyone and thank you for joining us I'd like to start by saying Oh, you and your families are safe and well.
As we move to the close of 2020, we certainly recognize has been a particularly difficult year with the pandemic impacting all our daily lives.
Our thoughts continue to go out to those who have suffered especially those with life threatening or health conditions as well as those who have lost her job through their businesses as a result of the pandemic.
And I'd like to provide a special thanks to our team for their steadfast efforts during these difficult times.
I'm pleased to report that our facilities continue to remain open, including our headquarter offices NRC IGI laboratories will.
Well the pandemic has impacted hospital admissions and physician office visits we're very fortunate that our business has remained steady our portfolio with F.D.A. approved brands delivered combined revenues of $9.3 million during the third quarter a 33%.
Increase over the prior year period.
As we've previously stated our performance should be evaluated on an annual basis and we were also pleased to see an overall, 8% increase in year to date revenues through September when compared to 2019.
Furthermore, we delivered 4.5 million in cash flow from operating activities year to date.
More than double the prior year period.
Adjusted earnings for the third quarter 4.2 million or two cents a share also a significant increase over last year.
Our balance sheet at the end of September included $96 million in total assets with over 26 million in cash.
Total liabilities were a proxy the approximately 48 million, resulting in 48 million of total shareholders equity as well.
During the quarter or by better product was used to help hospitalized tobi patients who go onto the belt bacterial infections in their looks.
By bad if so potent antibiotic design for difficult to treat infections and Jeff you approved to treat hospital acquired and ventilator associated bacterial pneumonia that can result from covidien flu or other infections.
It's been very rewarding to alert of cases from around the country, where by bad. It has been successfully used to cure pneumonia and those type of patients.
Meanwhile, we're finalizing plans for the launch of our newly FD approved ready tricks product line.
Given the Pandemics continued impacts on physician access we've decided to implement a soft launch this month.
And we will follow with a full commercial launch of the brand next spring.
Additionally, we do have a modest expansion underway for both our field and our hospital sales forces as we prepared for launching this new product line.
Furthermore, we announced two favorable study publications during the third quarter for caldor or I'd be profit for injection, which added to the growing library of literature supporting the brand.
On the clinical front enrollment in our studies significantly slowed during the pandemic due to the decrease in patient admissions to medical centers across the country.
However, we have started to see an improvement as some centers have begun to reopen at a return of patients eligible for our trials at those sites.
We're fortunate to have a robust clinical pipeline of promising candidates designed to treat poorly met medical needs. As we've previously noted success in any of those programs could have a significant impact on our company and help us further build and diversify our business so with that overview I'd like to now.
Ask Marty Cornell Cumberlands, Chief commercial officer to share his update on our soft marketing and our sales activities already.
Thank you.
As a Jay mentioned dependent make is affecting how many businesses are running 2020, and we've taken measures to lessen its impact on Cumberland as much as possible.
We are focused on protecting every one safety and well be well.
While also continuing to supply and support our medicines for the patients who need them.
Recall, we launched our next generation council or product.
The beginning of 2020.
For the new presentation in a pre mixed bag.
This ready to use product contains 800 milligrams of ibuprofen and a patented 200 milliliter formulation designed for injection.
It offers hospitals and medical facilities improved dosing accuracy and cost savings, while managing pain and reducing opioid consumption.
As a nonsteroidal anti inflammatory drugs, Calvin or maybe use as the sole method of treatment for mild to moderate pain or as part of a multi modal treatment for severe pain.
During the third quarter, we announced new data from a clinical study featuring capital or was published in the journal.
The predict Trump.
The study evaluated the efficacy of capital or in the management of acute pain, and orthopedic trauma patients and monitored the use of opioids in those patients.
The results of this level, one trauma center study demonstrated that.
The use of travel or significantly reduced opioid consumption.
Moreover, pain was more effectively control with caldor, when compared to standard of care narcotics.
Additionally, important results from a review of nine clinical studies evaluating Caldor was also recently published.
This comprehensive review was presented in the journal clinical therapeutics and involved over a thousand adult patients.
With over 750, receiving caldor and another 300, receiving placebo or character medication.
The data compiled in this review noted that the use of capital or decreased surgical strips and improved post surgery recovery.
The study also determined that patients given capital or experienced less post operative pain and in turn decreased opioid use.
We're currently selling both the capital or vials and the Premixed bags and are pleased with the new ready to use presentation comprises over half of the branch sales.
While the national launch of our next generation Council or got off to a fine start it.
Was unfortunately impacted by the pandemic and postponement of elective surgeries none.
Nonetheless, we do expect even stronger performance of that product has more accounts gain access to the new presentation and wants to country fully reopens.
Meanwhile, we're now ready to launch ready trucks are FDA approved injectable methotrexate product line.
Launched suppliers have arrived and we will hold a virtual sales meeting to kick off our efforts as Adrian mentioned, we're starting with a soft launch given the limitations on access to physicians offices.
Please note that we will focus on Rheumatologists and supported the brand and that this is a new medical specialty for our company.
As we establish these new relationships and learn from the soft launch activities. We plan to follow with a full national launch of the brand in the spring of next year.
To support this new product, we are implementing a modest expansion of our field sales force with a goal of covering up to 80% of the rheumatology market potential.
We do believe that ready Trex will be a valuable addition to the portfolio and provide a significant contribution to our business.
Our national sales teams have continued to remain engaged in communication with health care professionals to support the patients who can benefit from our medicines.
However, during the year, we implemented new methods of interaction such as Telefonica electronic and video conferencing communications.
We established new procedures to document and monitor productivity and the results indicate the resourceful and steadfast efforts to maintain awareness of the benefits and the use of our brands.
We supplemented those national sales activities with an enhanced internal sales capability, reaching out to hospitals and physician offices from our headquarters.
We also launched a national digital media activity.
And a series of virtual medical meetings this year.
We believe that all these efforts represented an innovative and efficient way to expand our reach.
Add new coverage and assure awareness of our products during these unparalleled time.
Cobbling relies on a group of pool FDA approved manufacturers to supply our line of branded pharmaceutical products.
And we've been carefully monitoring our supply chain during the pandemic and resulting economic impact.
You may be aware of the us drug shortages that have resulted from the pandemic pharmaceutical manufacturing plants worldwide.
Overall, our supply chain has been intact with one recent exception.
Unfortunately, our metal unlocks pack supplier encountered financial difficulties due to the impact of the pandemic and as a result their operations are currently suspended.
Well there is some element flummox pack in the distribution channels, we've depleted our inventory of the profit.
We are awaiting a resumption of packaging at the current facility. While also pursuing other alternatives to provide the needed supply of the profit.
That completes todays update on our key commercial efforts EG I'll turn the call back over to you. Thank you Marty I'd now like to ask our Chief Financial Officer, Michael Bonder for the financial review Michael Thank.
Thank you A. J.
For the three months ended September Thirtyth 2020, net revenues from continuing operations were 9.3 million, a 33% increase over 6.9 million during the prior year period.
We also reported an additional 750000 in the third quarter of this year as discontinued operations associated with the return of rights to two products that we no longer history.
Net revenue by product for the third quarter included 3.6 million for Kristalose 2.8 million for that matter and 1.4 million from California.
Total operating expenses for the quarter were $10.5 million compared to 10.1 million from the prior year period.
Main driver of this change was the increase in cost of goods sold associated with the growth in sales and by that.
Recall that significant five added inventory was transferred to Cumberland as part of the acquisition of the brand during 2018.
As part of the acquisition accounting fair value of these units sold included a significant step up over actual manufacturing costs.
The resulting adjusted earnings for the third quarter were 0.2 million or two cents per share.
Nipigon turnaround from the loss of 1.7 million a loss of 11 cents per share during the prior year period.
Year to date cash flow from operating activities in the third quarter.
I have 2020 was 4.5 million more than double the $2.2 million for the same period in 2019.
As a reminder, the financial terms for the buyback 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.
We accounted for the buyback of acquisition as a business combination.
Total of $34.2 million in new assets were added as a result of the acquisition, leading 21.5 billion inventory.
$11.8 million of intangible assets and 0.9 they will.
Due to amortization of intangibles and sales of inventory.
You have these assets totaled $26 million at the end.
Third quarter.
Five that it has been a very important contributor to our business from the products launch in late 2018 into this years third quarter. The product has delivered a total of 16.4 million in cash contribution.
At the end of 2019, we completed our commercial support and returned to us rights to a file integrity.
This year, we began to present the operating results for these products as a discontinued business line. This.
This results in the sales and direct expenses as a product having been removed from prior year reporting and incorporated into a single line described as discontinued operations the bottom of our income statement.
That line this historic revenue with the historic direct expenses associated with two brands.
During the third quarter, there was a zero point $8 million benefit from discontinued operations compared to $1.3 million 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 September Thirtyth 2020, we had over 96 million in total assets, including 26.6 million in cash and cash equivalents liabilities totaled 48.2 million, including $17 million on our credit facility and net reduction of $1.5 million from year end.
Total shareholders' equity was $47.9 million at the end of quarter.
Meanwhile, as we previously announced Cumberland received the funding of alone in the amount of $2.2 million for such as Ha protection program under the Federal Cares Act.
The resulting loan held for rent the need for any employee layoffs or fertilizer as we experienced the impact.
The proceeds of the loan reviews to fund payroll and related qualifying therefore.
Therefore in October we submitted a request for the loans forgiveness. The request was approved by our lender and we'll next requires the approval of the us small business administration.
Additionally, given the uncertainty associated with pandemic.
We began to significantly decrease the number of shares repurchased this year.
During the third quarter, we repurchased an additional 100000 Cumberland shares which included repurchases to fund this taxes associated with employee vested restricted shares.
Finally, I'd like to know the company has also also has over 44 million tax net operating loss carry forwards, resulting from the prior exercise of stock options.
That completes our financial report I will turn it back over to you.
Thank you Michael So overall, our third quarter was quite successful in view that all the challenges of operating a business in the wake of the pandemic, we were able to generate solid financial performance and also advance on important initiatives during.
During the quarter, we continue to implement procedures to monitor the productivity of our sales organization and also redirect their promotional efforts despite being faced with numerous challenges we rapidly adjusted to the changing landscape as our team applied creative ways to support our brands and interact with our.
Our customers, we are especially pleased with our favorable quarterly financial performance, we posted both sequential and year over year revenue growth, which is no small feat, we feel independent make operating environment. That's.
That speaks to the durability of our product portfolio as well as the commitment of our commercial organization.
The catalyst for our business moving forward remain the same and they include contributions from the buy bed of acquisition.
Introduction of the new Caldor formulation.
Launch the launching of the ready Traex product line as well as further development of the company's clinical programs. So our commercial brands combined with new products from our pipeline will be important growth contributors to our business for years to come.
The addressable markets are quite large for a company of Cumberland size, it and if we're able to maximize the potential. These opportunities. We believe we could have a significant impact on our value.
We'll continue to focus on these growth drivers, while also managing our operations with financial discipline.
We're working on multiple fronts to build the value of Cumberland.
And we'll also continue our business development efforts as we seek selective additions that complement our commercial portfolio.
And I'd just like to close by noting that we are headquartered here in Nashville, Tennessee, which has the largest concentration of health care companies in the country.
Part of this local community, which is on the front lines in the battle against the novel Corona virus.
Furthermore, we're also part of the biopharmaceutical industry, which is providing the testing treatments and preventative solutions for this devastating disease.
Our medical director Dr., Todd Rice also oversees the intensive care units at the Vanderbilt Medical Center, where he supervises all covert care there.
And Dr. Rice is leading a national clinical study to determine of antibody rich kontulis plasma can alleviate or even cure COVID-19.
He is the principal investigator of this study over at Vanderbilt.
Which involves say a $30 million $34 billion trial.
Enrolling a thousand patients 50 medical centers across the country.
And if the use of convalescent plasma is proven to be a benefit to patients with COVID-19 could indeed become an important advance in the fight against the Corona virus and we wish him and his colleagues at Vanderbilt well in their quest to evaluate that possibility.
Here at Cumberland, we are grateful to be part of the healthcare community in Nashville, the the national biopharmaceutical industry and we're also grateful for our association with both Dr. Rice and Vanderbilt University. It and were all working to deliver medicines to help COVID-19 patients while also working to develop.
The new ones for the future.
And as we move to the last quarter through the last quarter of 2020, I just like to thank our team for all their hard work and their dedicated efforts during such a challenging year. We are confident we have the key pieces in place to help us build our business and deliver on our goal of improving patient care through the.
Delivery of high quality medicines.
So with that overview and update now let's open the call to any questions. You may have operator would you. Please proceed.
Yes.
Of course, ladies and gentlemen that concludes the company's presentation.
Well now open the call for any questions. If you like to ask a question. Please press the star key followed by the digit one on your Touchtone telephone.
Once again that star one to ask a question.
And our first question on Capex land, James Terwilliger from Northland Capital you may begin.
Hey, guys can you hear me.
Yes.
Okay. Congrats on the tone of the conference call It seems very.
Positive concerning your performance for the quarter, especially in Lisa Cobot cloud I'm kind of new to the name can you tell me anything more about the red at Trex launch, you're going to do and limited or soft launch, which makes a lot sense and then.
When does that pick.
Pick up momentum and how should we think how should I think about that and and 2021.
Okay Alright.
Yes.
As you noted, we're we're going to use a soft launch.
Because this is.
A new medical specialty and there is limited access to.
The physician's offices, so we want to build relationships.
During the.
The next few months will go with a full launch.
In the in the springtime.
And.
That point.
Kind of unleash all of the.
Resources that we have.
Bill to effectively launch this product, but do it with the knowledge that we've gained during this soft launch period. So we would expect.
Modest sales.
Through the balance of this year, we're third gradually increasing sales as we move into 2021.
Okay, great I'm going to jump back in queue with another question, but thanks for taking my questions and congrats on a good quarter under difficult circumstances. Thank you.
Once again that star one for question Star one.
One moment for questions.
And once again Thats star one.
I don't have any further questions at this time I would.
To turn the call back over to management for any closing remarks.
Sure we do understand that many of you prefer a private discussion with management and if you'd like to do so please just reach out to air in goal here and she can help us a schedule such a call for you. We certainly appreciate your time and interest in Cumberland and we do look forward to providing another update after the end of the third quarter.
Yes.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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