Q4 2020 Cumberland Pharmaceuticals Inc Earnings Call
Thank you for joining the Cumberland Pharmaceuticals fourth quarter, 'twenty, and 'twenty financial report and company update.
This call is being recorded and your company's request and will be archived on Cumberland website for one week from today's date.
Now I would like to introduce Erin Gull, who is responsible for corporate relations at Cumberland.
Erin Please go ahead.
Good afternoon, everyone.
Earlier today, we issued a press release containing the company's financial results for the fourth quarter and the full year ended December 31st 2020, you can find a copy of that release on our website at www Dot Cumberland pharma dotcom.
Please note that today's discussion may include forward looking statements as defined in the private Securities Reform Act of 1995, and because any such statements reflect the company's current views and expectations concerning future events that may involve some 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 and our form 10-K, and any additional updates we filed with the SEC.
Any forward looking statements made during today's call are 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.
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 developments.
During today's call, we'll be referring to several of our marketed brands and full prescribing and safety information for each brand can be found on the individual product websites and the links to those product sites can be found via our corporate site at Cumberland pharma dotcom.
Also today, we'll provide some non-GAAP financial measures with respect to our performance and explanation and reconciliation to GAAP measures can be found and the financial tables and our earnings release that was issued earlier today.
With me on today's call are a J kazimi come on as Chief Executive Officer, Marty <unk>, Our Chief Commercial Officer, and also Michael Bonner, Our Chief Financial Officer.
And they will start with an overview of our progress during the fourth quarter and follow with a discussion of our commercial activities. We will then review our financial results and will finish with closing remarks before opening the call to any questions.
I'll now turn the call over to a J Kazimi Cumberland Chief Executive officer to begin the discussion of our corporate update and company performance.
Good afternoon, everyone and thank you for joining us.
Aaron noted today will provide an overall company update along with a review of our fourth quarter and full year, 2020 financial results well, what a year it's been like.
Like many other companies we encountered a variety of challenges as a result of the pandemic and and I'm pleased to report that our team rose to the occasion, just despite the significant headwinds we faced.
On balance we were able to successfully manage through the most difficult operating environment, we have faced as a company.
Importantly, our facilities remained open and our operations continued and we were able to keep our organization intact and it.
Just like to start by recognizing and thanking our team for their dedicated efforts, which enabled Cumberland to support the patients who rely on our products.
And as we've previously stated the decline and hospital admissions and food and physician office visits has negatively impacted several of our brands.
Fortunately, though that the diversity of our product portfolio and our customer base helped to mitigate that impact.
Moreover, we adjusted certain market strategies, and and we reinvented the way in which we operate and our business and interacted with our customers.
Changes and the access to medical facilities and providers required us to employ innovative methods of communication and support.
And as a result of all those efforts we were and we were able to deliver continued growth during 2020.
Our fourth quarter revenues were $10 million up 10% over the prior year period, and our revenues for the full year were 37 million growing 9% over the prior year.
The favorable performance was led by our two largest brands by bad as and Crystal loose.
During 2020 provide that of product was used to help COVID-19 patients who developed bacterial infections and their lungs.
It's a potent antibiotic designed for difficult to treat infections.
By bad it is FDA approved to treat both hospital acquired and eventually to associated pneumonia that results from susceptible organisms and it's been very rewarding to alert us of cases from across the country, whereby bad and it has been successfully used to cure secondary bacterial pneumonia.
And.
Hospitalized COVID-19 patients.
Crystal Lewis Meanwhile, benefited from the support of our co promotion partners.
The feature of the brand with physicians and facilities that we don't cover.
We were able to augment our capabilities through the successful implementation of these sales collaborations, which help result, and crystal lowest growth last year.
Meanwhile, we have been closely monitoring our supply chain, including the facilities that supply the raw materials, along with those that manufacture our products. We oversaw the resulting finished goods that were being shipped to us and then on two warehouses that support the country's hospital and retail pharmacy.
Yes.
Understandably enrollment and our clinical studies did decline during 2020 due to closures and restrictions and the institutions that we're recruiting are needed patients. We have been working with the study sites as they begin to reopen and we do look forward to a resumption of patient accrual on a more.
Normalized basis, as we worked with the completion of each of the clinical trials.
During 2020, we were also able to maintain compliance with the many required and instead apply to us as a publicly traded and pharmaceutical company.
Included in those efforts was our successful hosting of and F. D. A audit of our corporate facility and our processes here.
So with that overview and.
And now like to turn to Marty Cornell Cumberland Executive Vice President and Chief commercial officer to share his update on our marketing and sales activities Marty.
Thank you very true.
Following an incredibly dynamic year of change, we remain steadfast and navigating through the challenges and the pandemic and maximizing the potential of our commercial portfolio.
Does that and we announced several national initiatives to help medical facilities treat patients with the conditions associated with Covid infections, such as pneumonia high fevers and electrolyte imbalances and.
Additionally, our national sales organization altered many of their promotional tactics and using more electronic and telephonic communication we.
We supplemented those activities with an enhanced internal sales capability, reaching out to hospitals and physician offices directly from our headquarters.
We also established new procedures to document and monitor the productivity of our sales team.
The results indicated a resourceful and steadfast effort to engage our customers and communicate the benefits of our brand.
We believe these innovative and efficient ways to expand our reach and new coverage and ensure awareness of our products allowed us to stay on a growth trajectory. During these unparalleled times.
And as many of you have been following US know earlier this year, we launched our F. D. A approved next generation caldolor product as a nonsteroidal anti inflammatory drug caldolor or may be used as the sole method of treatment from mild to moderate pain or as part of a multimodal treatment for severe pain.
The next generation product features and easier to administer presentation and an improved patented formulation. This ready to use product contains 800 milligrams of ibuprofen and a patented 200 milliliter formulation designed for injection.
And offers hospitals and medical facilities improved dosing accuracy and cost savings, while managing pain and reducing opioid consumption.
We're currently selling both the Caldolor vials and the Premixed bags and are pleased that the new ready to use presentation now comprises over half of the branch sales.
While the national launch of our next generation Caldolor got off to a fine start it was unfortunately impacted by the pandemic and the postponement of elective surgeries.
As a result, we believe that the potential of our next generation Caldolor was not fully realized due to the COVID-19 constraints put on health care facilities. Nonetheless, we do expect a stronger performance of the product and it's elective surgeries fully resume and as more facilities gain.
Access to the new presentation.
And 2020, we had two favorable investigator trials published comparing caldolor to other pain treatments and adult patients, adding to the growing body of literature and supported the brand.
A clinical study that evaluated the efficacy of Caldolor, and the management and acute pain and orthopedic trauma patients and monitor the use of opioids and those patients was featured in the journal of orthopedic from.
The results of this level one trauma center study demonstrated that the use of caldolor significantly reduced opioid consumption.
Moreover, pain was more effectively controlled with caldolor compared to standard of care narcotics.
The journal of clinical Therapeutics reported on and analysis of nine published clinical studies evaluating caldolor.
This comprehensive review involved over 1000 adult patients with over 750, receiving caldolor and another 300, receiving placebo or comparator medications.
This analysis found that the use of Caldolor decreased surgical stress and improved post surgery recovery and also determined that patients get and Caldolor experienced less post operative pain and decreased opioid use and.
In addition to these new Caldolor publications and there were also important manuscripts reporting on new findings associated with the use of buybacks.
One publication and presented a sub analysis of the telematics and observational use registry. Our tour study conducted to record population characteristics prescription information and real world clinical outcomes of patients with Gram positive infections treated with my bad.
And addressed a range of Gram positive bacterial pathogens, including those that are considered difficult to treat and multi drug resistant such as MRSA and M. S. I say.
This publication reported that a positive clinical response was achieved and over 74% of patients receiving by that and it concluded that by bad it is a promising and viable option for patients with bacteremia endocarditis, including those with MRSA or other resistance.
Pathogens.
Two additional newly published studies examined longer term resistance trends of by bad it as part of a seven year antimicrobial surveillance program.
These global clinical trials reported by battery and maintained excellent and.
The anti microbial activity against multi drug resistant pathogens. These studies also documented this sustained in vitro antimicrobial activity and spectrum of by bad debt for many years after its clinical approval.
Lastly, we into 2020 with the with a brand new product introduction, we posted initial sales for our ready trucks.
<unk> second line of products, which are FDA approved for the treatment of active rheumatoid arthritis, juvenile idiopathic arthritis, and severe psoriatic arthritis, and given the ongoing issues associated with physician access during the pandemic along with the need to manufacture additional.
Product supplies, we're targeting September for the full ready treks launch.
We are very encouraged by the positive feedback we've been receiving regarding this innovative delivery system.
We've implemented a modest expansion of our field sales force to expand our coverage of the rheumatology market potential for this brand and we believe that ready trucks will be a valuable addition to the portfolio, providing a significant contribution to our business for years to come.
That completes today's updates of our commercial efforts a J I'll turn the call back over to you.
Many thanks, Marty for that update.
Now like to ask our senior director and Chief Financial Officer, Michael Bonner for the financial review cycle.
Thank you AJ for the three months ended December 31, 'twenty 'twenty net revenues from continuing operations were $10 3 million, a 10% increase over the $9 3 million and revenue during the prior year period.
We also recorded and additional 0.9 million and the fourth quarter of this year as discontinued operations associated with the return of rights to two products that we no longer and distribute.
Net revenue and spot product for the fourth quarter included $5 2 million for Crystal is $2 3 million for buyback of $1 7 million for Caldolor and <unk> 9 million for any tracks net.
Net revenues for the full year 2020 were $37 4 million.
Which was an eight 9% increase over the prior year.
In addition, we recorded a total of $3 2 million during the full year for discontinued operations associated with it and two products, we no longer distribute.
Annual 2020, net revenue as byproducts, including $15 6 million from Chrysalis $10 9 million provide that is $5 3 million for Caldolor $1 9 million for a senior debt and zero point $9 million already tracks our newest brand.
Total operating expenses for the quarter were $12 million down from $12 7 million from the prior year period.
Total operating expenses for the full year 2020 were $43 8 million similar to the $43 7 million during the prior year.
Cost of goods sold increased during 2020 compared to the prior year due to the growth and sales of buyback of.
Recall that significant by bad debt inventory was transferred to Cumberland as part of the acquisition and the assets associated with the brand.
Based on the acquisition accounting and the fair value of this inventory included a significant step up over actual manufacturing cost.
Lots of the product manufactured for Cumberland are expected to have a much lower cost associated with their supply and sale.
Amortization expenses grew due to the buyback or acquisition.
Both marketing and sales and research and development expenses decreased during the fourth quarter and full year 2020.
The resulting adjusted earnings for the fourth quarter were 0.2 million or one cent per share a significant turnaround from the loss of $1 9 million or loss of <unk> 12 per share during the prior year period.
Adjusted earnings for the full year were a negative <unk> 1 million or a loss of one cents a share a significant turnaround from prior year's loss of $3 4 million, which represented a loss of 22 cents per share.
Please note that the adjusted earnings calculation does not include the benefit of the $3 million on payments received for the two products returned it also excludes the benefit of the $3 4 million of buyback of cost of goods sold during the year, which was received with the product's acquisition and 2018.
As a result, a total of $5 4 million and cash flow was provided from operations and 2020 compared to $3 1 million from the prior year.
As a reminder, the financial terms for the buyback or acquisition included a $20 million payment upon closing this.
This initial payment was funded by our revolving credit facility.
We subsequently provided a $5 million milestone payment and are providing royalties based on product sales.
By Bad and has been an important contributor to our business from the products launch and late 2018 to the end of 2020.
The product has delivered a total cash contribution of $18 million, which we believe compares favorably to the $25 million and upfront payments to acquire the brand.
We accounted for the buyback or acquisition as a business combination a total of $34 million and new assets were added as a result of the acquisition, including approximately 21 million and inventory.
<unk> million dollars of intangible assets and $1 million of goodwill.
And the amortization of intangibles and sales of inventory the value of these assets shown on $25 million at the end of the fourth quarter.
At the end of 2019, we concluded our commercial support and returned the U S rights to ethyol and <unk> Okay.
During 2020, we no longer distribute the two brands and began to present their operating results as a discontinued business line.
Gross product sales and direct expenses were removed from 2019 as reporting and incorporate it into a single line described as discontinued operations at the bottom of our income statement.
That line net both the historic and current revenue was direct expenses associated with two brands during the fourth quarter of 2020, there was a zero point $9 million benefit from discontinued operations compared to $2 4 million from the prior year period.
For the full year 2020, the benefit was $3 2 million compared with $5 7 million during the prior year.
The main contributor to the discontinued operations for 2020 was the $3 million and payments associated with the agreement to return on the two brands.
And those payments will continue through the end of 2021 with and an additional 2 million to be paid and quarter equal quarterly increments through Q4 of 2021.
Turning back to our balance sheet as of December 31, 2020, we had over 96 million and total assets, including $24 8 million and cash and equivalents.
Liabilities totaled $49 6 million, including $15 million on our credit facility.
Which represented a net reduction of $3 5 million on that line compared to the prior year.
Total shareholders equity was $47 million at the end of 2020.
Meanwhile, as we previously announced Cumberland received the funding of a loan and the amount of $2 2 million at the beginning of the second quarter of 2020 pursuant to the Paycheck protection program under the Federal Cares Act.
The resulting loans helped to prevent the need for any employee layoffs or furloughs as we experience the impact and uncertainty of the pandemic.
The proceeds alone were used to fund payroll and related qualifying expenses.
Therefore in October we submitted our request for the loans forgiveness. The request was approved by our lender and will next require the approval of the U S small business administration.
And as listed on our balance sheet has and other current liabilities and we will eliminate the debt and recorded as other income if and when the free giving us is fully approved.
Additionally, during the pandemic, we began to decrease the number of shares repurchased during the fourth quarter, we repurchased an additional 96000 Cumberland shares resulting in a total of just over 500000 shares repurchase for the year.
These repurchases included those on the open market as well as those needed to fund the taxes associated with employee vested restricted shares.
Finally, I'd like to note that Cumberland also has over 44 million and tax net operating loss carryforwards, resulting from the prior exercise of stock options.
That completes our financial report I'll turn it back over to you a J.
Michael.
And I stated earlier, we're grateful that we've been able to keep our business operating and our organization intact during 2020.
Over the past year, we quickly adjusted market strategies and promotional activities reinventing, how we interact with our customers and support the patients who need our medications.
As a result, and despite the challenges we faced we were still able to post annual revenue growth and improved profitability during 2020 as you heard.
We've continued to expand our product portfolio through a series of successful business development initiatives and we now feature set and FDA approved brands with a robust pipeline and a new product candidates in development.
And the catalyst for our business moving forward include the growing contributions from the buyback of the acquisition and the Crystal those co promotions.
Speed and availability of our next generation Caldolor product.
And the potential of our newly introduced ready Trek slide.
And the further development of the company's clinical programs.
Our commercial brands combined with the new products from our pipeline will be important growth contributors to our business for years to come.
The addressable markets for these products are quite large for a company of Cumberland and size and maximizing these opportunities can have a significant impact on our value.
Our organization is focused on realizing the potential of our existing brands, while continuing to add select differentiated products.
And I'm confident we can build upon the success, we had in 2020.
We'll also continue to efficiently manage the business through these challenging times, while remaining dedicated and focused on our mission of advancing patient care through the delivery of high quality medicines.
And we're grateful to be working and the biopharmaceutical industry, which is developing and delivering new treatments and prevention, including those for life threatening COVID-19 infections.
So with that review and update now let's open the call to any questions you may have on.
Operator. Please proceed.
Thank you, Sir ladies and gentlemen that concludes the company's presentation and.
And then we'll now open the call for any questions.
If you would like to ask a question. Please press the Sparky followed by the day gets one on you touched on the telephone.
Yeah.
Our first question comes from the line of Steve Krueger of <unk>.
And for site investments your line is open.
Good afternoon.
Could you give us some sense of where.
And what are your greatest opportunities for revenue growth are.
And I look at the lineup of branded products that you have and.
And most of them seem to be somewhat mature and are in their revenue growth and.
Just wondering are you know where the greatest opportunity for growth wise at this point, where do you see that.
Marty you want to take that one.
Uh huh.
Alrighty.
Yeah.
I'm, sorry, Oh, I had my phone on mute.
If you take a look at our or on a product sales year on year, you'll still see theres significant growth opportunity and several of our products are crystal most had a very strong year. This year and we expect our AR with the co promotion activities that we've developed that that product will continue to.
Grow.
<unk> had a very good year on year growth and we expect that to continue caldolor with the introduction of the new presentation represents a continuing growth opportunity and of course ready track shows and new product introduction are also represents a growth opportunity.
In terms of our inline products I think there are four of our in line products that represent opportunities for continued growth and then on top of that a D. A.
The pipeline products are.
And that we are developing a represent very significant opportunities for the future.
Somebody could you maybe give me some sense of the order of magnitude of the growth opportunity.
You know and in aggregate are we talking about.
Company, that's and expecting to grow at 10% a year or.
Do you see something and the pipeline that are is.
It is going to accelerate the growth and a meaningful way.
We don't really provide the guidance, especially going into a a year. That's still contains a component of the of the pandemic, but.
A J Oh I don't know how much we want to talk about some of the Oh some of the future products, but when we talk about a fisherman.
Uh Huh products down the road, we're talking about order of magnitude changes.
Okay.
So and fixture band would be in that category, how 'bout ready trucks of iPad of to you do you see them being you know real order them and you know game changer and kind of.
Products, possibly for the size of the company, but what we've said is that we expect Oh my bad it to to grow and the range of $20 million to $30 million product overtime and it had.
The Oh and nice year on year growth this year and we certainly have.
And I've seen and in terms of ourselves and that product double over the last two years.
The ready trucks are we've said.
And that product is a $30 million to $40 million a sales potential out over the next several years. So just between those two products are and how we see a significant opportunity.
That's great. That's very helpful. Thanks, Another question inventories are.
And can you tell us what are what's included in the non current inventory.
Michael.
Yes.
The non current inventory is made up primarily of API.
And and some.
Work in process inventory for buybacks and so it was related to the buyback or acquisition.
So I mean, why do you characterize it as non current I mean.
Debt to me. It means you don't expect to sell it within the next 12 months.
That's correct, it's gonna be it's multiple years of API. It does not expire that we expect to use for multiple years for the product and that was a are really good at is we've added the product.
Okay, and if I look at the AR and inventory turn ratio.
And it's very high.
And like he's got and total anyway and in aggregate over two years' worth of inventory do you have any plans to bring that down to.
No more rational number more in line with that.
With typical book business practice, a wood would say.
Yes, no again no you know we are acquired five that is and with that acquisition came quite a bit of inventory.
And we have been working that down and we'll continue to do so which should bring our overall inventories down overtime.
Do you have any kind of a guidance.
Target for what kind of inventory turn rate is your ultimate goal again, let's say and the next two or three or four years yeah.
No not yet but.
But the other issue here is that you know we want to be cautious with the API inventory because we wanted to make sure that we have plenty of all raw materials to supply our markets and one of the barriers to entry for our business is the difficulty and manufacturing.
On the API as we use so even though it seems like we may be we have a little extra inventory on hand, we think that's prudent for a two making sure we continue to supply our important brands here.
Yes.
Okay, great. Thanks.
And again, if you would like to ask a question. Please press the Sparky followed by that day, just one on your Touchtone telephone.
Yeah.
Okay, well I just wanted to thank everybody for joining us on today's call and as I've mentioned in the past, we do understand that many prefer a private discussion with management and we're certainly available on <unk>. If that's what you would like to do just reach out to Erin gull here to hold such a call.
We appreciate your time and your interest and our company and our activities and we do look forward to providing another update after the end of the next quarter.
Thank you, Sir ladies and gentlemen that concludes our conference for today, if you would like to listen to a replay of today's conference. Please.
<unk> Dayal H 55859.
056, using the access code seven 0057.
Seven eight.
Oh, sorry, Lee and replay of the webcast will be available on the company's website.
I would like to thank you for your participation you may now disconnect.
Yeah.
Okay.
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Yes.
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