Q1 2021 Repro Med Systems Inc Earnings Call

Greetings and welcome to the Corium Medical systems fourth quarter 2021 earnings Conference call. At this time all participants are in a listen only mode of question and answer session will follow the formal presentation at the.

And it really should require operator assistance during the conference. Please press Star Zero and your telephone keypad. Please note. This conference is being recorded.

I will now turn the conference over to your host Greg till the check Mr. Joel The check you may begin.

Thank you Alex and good afternoon, everyone earlier today Cobra and medical systems for at least financial results for the first quarter 2020 one copy of the press release is available on the company's website.

During this call we will make certain forward looking statements regarding our business plans and other matters.

These comments are based on our predictions and expectations as of today.

Full of event of results could differ materially due to many risks and uncertainties, including those mentioned and the associated press release.

And our most recent filings with the SEC.

Okay.

We assume no obligation to update any forward looking statements and.

Current listeners to have our press release and front of you, which includes our financial results as well as commentary on the quarter.

During the quarter management will discuss certain non-GAAP financial measures and our press release and in our filings with the SEC.

Each of which are posted on our website.

And you will find additional disclosure regarding these non-GAAP measures, including reconciliations of these measures with comparable GAAP measures and our press release and those filings for.

For the benefit of those listening to the replay. This call was held and recorded on Wednesday May 12, 2021 at approximately 430 P M Eastern time.

Since then the company May have made additional comments related to topics discussed and.

And please reference the company's most recent press releases and filings with the ex U shape.

Joining us on the call today is Linda the RB President and CEO of Cobra Medical system, and Karen Fisher of Coast Chief Financial Officer.

We are excited to have Linda joining us.

From a successful 25 year career, and I couldn't tickets and with a great breadth and depth of experience and global business leadership roles. Linda. Please go ahead.

Thanks, Greg.

Good afternoon, everyone and thanks for joining us today.

During today's call I would like to share my thoughts and three key areas for.

First I would like to share my excitement and joining for medical at this time and its evolution.

I will then go over a few highlights from our first quarter and my early thoughts on the opportunity of hat.

I will then turn it over to Karen to discuss the quarterly financials in more depth before ending with a few closing remarks.

When I was approached with the opportunity to lead cargo medical and it was a great fit for several reasons. It's a company with the strong purpose with the leading market position and the growing space.

The company that has the ambition and the opportunity to be a global leader.

And it's the company, where I could grow and develop the team.

Over the past for weeks I've had the opportunity to talk with and work alongside our dedicated employees and have met with many of our customers.

During these discussions my initial thoughts about the company were confirmed.

Core of medical and pros the daily qualities of lives for patients with the core of freedom integrated infusion system.

Has the potential to increase our leadership and a growing global home infusion market.

And has a tremendous emerging opportunity and the <unk>.

Pharmaceutical drug delivery space.

I'm excited to join this team merging my skills and capabilities gained over the last 25 years.

That was the most relevant tomorrow or the decades spent building and leading strong performing and diverse global teams.

The development and commercialization of multiple product and service innovations.

And delivering drug delivery device solutions to patients and the home.

Working in partnership with pharmaceutical companies.

I look forward to working with the team here at coram and defining and executing on our current strategic plan.

As we evolve it to drive even more meaningful value for our customers and shareholders.

Turning to our results for the first quarter, our revenues were affected by one time prior year purchases.

And as well as the current year of COVID-19 impact on new patient starts.

2020 was the complex year for our business as the pandemic affected ordering patterns from our customers and the U S and abroad.

As well as our initiatives and novel therapies.

I'm encouraged by several key fundamentals from the quarter.

We are very excited by the sequential revenue growth from Q4 2020.

For Q1 2021.

Which together with the review of our inventory levels at our distributors reaffirms that there is no excess inventory and the channel.

Additionally, our end user sales data, which measure sales to the specialty pharma channel confirms strong sequential quarterly growth and our new pump placements as a measure of new patient starts.

Further, although we can't necessarily rely on us to be indicative of the full quarter April net sales exceeded the monthly sales of each of the prior six months.

Looking ahead, a few comments on our critical areas of focus over the next several quarters.

First and the U S market we.

We will continue to advance our efforts to have newly diagnosed <unk> patients start their therapy with the core of freedom system.

We will review the larger U S market opportunity to convert the 75% plus patients who received IV IV therapy.

Therapy, and a hospital and clinic setting.

The sub Q working in partnership with our pharmaceutical customers.

And Europe, we will accelerate our focus on growth our distribution and reimbursement.

And finally, a significant opportunity for core of medical as the market leader and delivering millions of safe sub Q large volume home infusions of annually is to expand our focus on indications with new drug therapies.

As the foundation for these plans, we will review our portfolio and build out the team necessary to take core of medical to the next level.

We look forward to sharing our progress.

I will now turn the call over to Karen who will take you through our first quarter results.

Thank you Linda and good afternoon, everyone.

Total net sales for the first quarter of 2021 were $5 4 million a decrease of 14% from $6 3 million and the first quarter of 2020.

The strong sequential quarterly growth versus Q4 2020.

The biggest drivers of the decline were lower novel therapy sales of 400000, due to nonrecurring and clinical trial and lower domestic core pump sales of 400000.

Primarily related to ordering patterns and a onetime pharmaceutical customer pump purchase.

Domestic core business also reflected our first quarter of 2021, Mark has slowed down and the growth of new patient starts for sub Q <unk> therapy as the pandemic continued to delay provider visits and new diagnoses.

With our sequential quarterly growth of new pump placements. We are encouraged that market growth is returning to pre COVID-19 levels.

International revenues were $1 million flat with prior year net of onetime purchases, we saw double digit growth and it was the strongest quarter of the last for.

Gross margin for the first quarter of 2021 was 59, 5% 30 basis points lower than the same period of 2020, primarily due to lower volume and pump sales, where we have higher gross margin.

This was partially offset by favorable production variances.

Selling general and administrative expenses were $5 million for the first quarter of 2021 compared to $2 9 million for the same period and 2020.

This increase is mostly due to $1 3 million and costs associated with leadership changes, which includes non cash equity expense of 400000 and the recruitment of two new board members.

Further contributing to the increase was higher salary and related benefits of 600000.

From new hires and the second half of last year to support commercialization and business development and medical affairs for novel therapies initiatives.

Net loss for the quarter of 2020 one.

Whereas $1 3 million compared to a net gain of 400000 and for the first quarter of 2020, driven by lower gross profit and higher selling general and administrative expenses as previously described.

Offsetting the loss was the tax benefit of 500000, resulting from book to tax differences related to stock option expense.

Diluted earnings per share was negative <unk> for the quarter compared to one cents diluted earnings per share for the same period last year.

On a non-GAAP basis, adjusted diluting earnings per share was zero cents for the quarter of <unk>.

2021, and two for the same period of 2020.

Non-GAAP adjusted EBITDA for the first quarter of 2020, one was negative 400000 compared to $1 3 million for the first quarter of 2020.

Turning to our balance sheet. We ended the first quarter of 2021 was $26 8 million and cash compared to $27 3 million at the.

At the year ended 2020.

And our inventory position grew from $6 8 million at December 31, 2020 to $8 1 million at March 31, 2020, one due to the efforts to transition of our manufacturing to our secondary source.

As you know the board authorized a stock buyback and Q4 of last year for $10 million of which we have used $3 5 million and have not made any repurchases in Q1.

We are and the process of reviewing our strategic plan and cash requirements for the board and we will update you accordingly.

I will now turn the call back over to Linda for closing comments.

Thank you Karen.

Today marks my one month anniversary with the company and what amount of its Ben I want to thank our analysts and our long term shareholders, who took the time early and our relationship to per share their thoughts and feedback on core of medical.

I appreciate your time and your feedback and I want to assure you that we are committed to increase visibility with respect to our business and our results.

I, especially want to thank the incredible team here at core of medical who have done a great job through this pandemic and keeping the company growing and fully operational.

We are continuing to execute and evolve our strategic plan.

And to improve the quality of life for our patients and provide further value add to our customers and.

And maximize long term value creation for our shareholders.

We look forward to sharing our updated plan with you later this year.

I'll now turn the call back over to the operator for Q&A.

Thank you at this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May press star two if you'd like to hear of moving a question from the queue for participants using speaker equipment and may be necessary to pick up your handset before pressing the star.

Archie.

Our first question is from Matt O'brien with Piper Sandler. Please proceed with your question.

Hi, Good day.

Actually true Raj the fat.

First off window, welcome and and congrats.

I was just wondering if you could speak to some of your strategic priorities over the next.

All of the months, there's obviously been a couple of dynamics and the and all of the fed COVID-19.

A lot of the place over the last year or so so you know maybe you could speak to where your focus will be or what do you want investors over and over the next couple of months.

Yeah. Thanks drew.

So I think first focus is you know the team here has done a great job of ensuring that every.

New drug that's coming into the <unk> space is using the core of of freedom system. So continuing to ensure that in the <unk> market. We are capturing all of new drugs coming into that space.

The second clearly is ensuring that every one of those new patients that get started start on a core of freedom system and with share today I think the team has continued to do a great job. There. So continued energy there and.

Okay.

The.

Opportunities that I see.

Putting further focus on first is.

The biggest part of the U S market today is the conversion from IV therapy to Iag's, sorry, sub Q <unk> therapy, and the home that today over 75 per cent of patients are still doing other IV IGT therapy and of Haas.

Spittle setting so that's first and second as Europe really accelerating our efforts in Europe on the reimbursement and distribution side and then finally, an initiative that we started last year with was success.

Is the novel therapies initiative, so with the core of freedom system and the millions of safe infusions, we deliver every year I think it's a great opportunity for future candidates and the pipeline.

Okay Super Super helpful.

And then just turning to the performance and the quarter.

Thank you referenced COVID-19 is having an impact new patient starts and sub Q and new diagnoses and general.

So you know as we're just kind of thinking about 'twenty one from the cadence perspective, maybe you could help us understand how it trended through the quarter I think I caught your comment that.

Correctly that you said April was the strongest month out of the last six and then the second parts of that question. Just your overall comfort level of comfort level and core route delivery and some year over year growth and 21.

Yeah. So first maybe just.

Just start overall on the quarter.

I mentioned that we saw some overall slowdown and we look at data sources that we buy externally and we saw overall slowdown and the market still some growth and the market, we expect that to rebound with vaccinations.

<unk> and we're encouraged of what we also look at is are our new pump placements and.

And we're seeing a trend and our new pump placements month on month that are growing.

Very healthy.

In terms of our overall outlook.

Outlook for the year, we don't guide for the year I would say that April was strong I would say, we should see the overall category come back to high single digit low double digit and expectations would be that we track with or or slightly outperformed the overall category.

Okay. That's helpful and then last one for me.

The press release, I think part of that $1 3 million you called out was associated with new hires.

Historically the business has.

And run through distributors and and large portion. So I guess it is the intention to build out of.

The larger direct sales force and if so is there anything we need to be thinking about from the SG&A modeling perspective. Thank you.

Yep Yep.

Robert Blake.

I would say to two opportunities that will focus on one is as you mentioned, we will do this and close correlation with our market data that we purchased to understand where we have areas of opportunity either on a share basis. Our large areas that are heavily I V.

Focus so if we find those areas putting a wrap in those places where we can quickly gain share and our new starts will be a top priority for us. So yes, you can you can.

Absolutely think about it as adding some commercial efforts there and then secondly is.

And the R&D area.

As we begin to work with the pharmaceutical companies and understanding the requirements there both for testing with their drugs.

And for future portfolio of evolution.

This would be the two biggest places that I see as adding Ah at SG&A.

Okay. Thank you.

Thanks drew.

Thank you. Our next question is from Alex Nowak with Craig Hallum Capital Group. Please proceed with your question.

Great. Good afternoon, everyone and welcome Linda I, just wanted to the touch on the the last piece there.

You know around the new market dynamics and your ordering has been pretty lumpy historically and that's obviously a distorted what's been the underlying growth rate out there. So what sort of improvements do you plan to make or are there any improvements to help kind of smoothed out those lumpy ordering practices to distributors and pharma and then ultimately tie your underlying share.

Goes back to the cause of the band that you're saying.

And so Alex the the easiest way to lump out.

Smoothed out the lumps as to make the business bigger.

So that would be my first response is obviously to grow the business overall, but we have really focused a lot over the course of the I would say the last several months the team prior to me with gentlemen, and certainly me and the last month to ensuring that we have a keen handle on not only our <unk>.

Distributor.

Inventory levels, but also our specialty pharma inventory levels that are and the channel. So.

We're going to we're going to monitor those but when the business.

One big order from a distributor of that falls behind the quarter by a few days can affect things, but at least we will have visibility to those and we can talk you through those as they occur but overall the biggest way to do it is we're going to grow the business.

No. That's good to hear it you know as you see the new sub Q I do drugs come online. This year more so exemplifying cook of true I guess, what are you hearing out there from the pharma companies about those rollouts of the drug spin out there for a few years now really starting to get going according to the script volume, but what are you hearing specifically about the.

The uptake there.

Yeah, I would say overall of the.

As you said the the starts happened late late in 2019. So with 2020, there are really just getting started for us right now.

I would say probably the biggest opportunity. We see is is the pre felt that one of those indications has could be could be and interesting start for them to gain some share of overall share in the marketplace, but.

I think overall, having two new drugs and a and a category can only do one thing which is grow the overall category, which we look at as a positive.

And that makes sense and maybe just pivoting over to the hematology drugs launching which should be the summer just how you anticipate and the rollout there and then the ramp up of demand going into that approval and then ultimately once that product starts of sell through and of the market. Just curious how you're modeling it or just generally thinking about it.

Yeah, what I would say Alex is will be more comfortable talking about that next quarter. As you know that drug is expected to habits.

<unk> date of May 19th So we look forward and anticipate and then you know we've got lots of modeling that we're doing on that and but I would say, it's probably a little too early to share all of that data publicly.

Yes that makes sense and maybe just the bigger picture question on the pipeline here I think one of the challenges of investors had is the pipeline has always been pretty opaque and we know who is involved with farm of what we just don't quite know where so as you're going forward here and again not looking for for a specific this quarter, but as you go forward start the review of the car.

Contracts and learn the business, how do you plan to communicate the opportunities there the the numbers and the pipeline and communicate that back to investors.

Yeah, So great question, and and I would say one of the biggest areas of focus right. Now has been a review of of how we internally are going to look at that pipeline and review it on a monthly and weekly basis as necessary. So I would say well will come and we'll talk to you about it relative.

<unk> two.

For example, I called one out today right, we see pre filled prefilled popping it into a core ROE of freedom system is of great opportunity to improve patient convenience around the top two IV therapy. So you'll hear us talk about the overall class of pre felt.

He will talk about overall drug classes like <unk> will talk about you know you can.

And I will talk a lot about oncology and the coming call and and where we think our opportunities may exist.

The way that we think about it is one of the drugs that are currently on market that today may be low hanging fruit for us because they may use a type of administration and to the body I E. A push from the strength system that are not always very convenient and so those are the first candidate of of targets, we'll look at.

Second is anything that.

And it has had and expanded IV the sub two indication that may not being used on the market today, and then third and finally, we'll be drugs and development with the sub Q indication. So those of the general three areas, we'll talk to you about and how specific we get on the candidates names, although probably lots of code names that we release and tell a lot.

Until obviously the the the drug this is of marketed drug are or the partners and are positioned to talk about it publicly.

No that makes it that makes a ton of sense I appreciate the update. Thank you. Thank you Alex.

Thank you. Our final question is from Kyle Rose with Canaccord Genuity. Please proceed with your question.

Great. Thank you for taking the questions.

And congrats on the opportunity.

Linda and a lot's been asked but I just wanted to maybe think more.

Higher level I mean, I appreciate you talking about the you know the answers with respect to predictability of the ordering patterns and maybe just help us.

I understand you've been there 30 day or one month.

When you look at the channel now do you are we balanced that are at a normal run rate on a go forward basis is there any sort of destocking or restocking that needs to happen to get to a normal state at this point moving forward.

And then secondarily just on the demand side, and obviously of patients have an impact of getting in to see physicians do you think that there's a backlog building up or is it just.

You resumed status quo on a go forward basis, when when patients are able to get and to physician offices.

Okay. So first just I'll reaffirm we think the business now is out of normal state. We have reviewed not only inventory levels at our largest distributors, but also in the channel itself and our specialty pharma channel and we are confident that that we don't have to work through.

And that any.

Any further now of course youre going to continue to see those year on year comparator and Q2 and Q3 so.

And we obviously will be talking about that for the coming two quarters.

On the demand.

Yes.

That's a great question and I wish I had further insight for you I guess, what we look at is we look at our new our new pump starts which is our biggest indicator that we have of new patient starts and I would say, we've seen that demand for our new pumps growing.

You know at a pretty healthy pace, both true quarter, one and then again we saw a.

A big month for Us in April.

Great and then just the the last question I have is just we get questions from investors just around the overall.

Impact COVID-19 had on plasma supply and plasma donations.

Through the last call it 12 to 18 months.

And how that might trickle down to the supply chain over the course of of the next 12 to 18 months just any commentary there around conversations you've had with your pharma partners.

Do you think that might be and issue.

Or is that is that something you are not worried about.

So at this point of what we've heard is that.

They had talked about shortages earlier in the year and what we're hearing of blade as they think they've worked through most of that but do we still see a lag effect that could occur from something that happened six months of DAU I think if we do we'll see it impact ex U S markets rather than U S markets is what we're understanding of.

So.

I think it's a it's a great question, but I haven't heard of anything that.

Overly concern for us in this area.

Great. Thank you very much for taking the questions.

Thank you thanks Kyle.

Ladies and gentlemen, we have reached the end of the question and answer session I will now turn the call over to the Windows RB for closing remark.

Alright. So thank you all to all of you for joining us on my first quarter as CEO of core of medical I look forward to many more and I look forward to speaking with you in person.

Thank you operator.

Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation have a great day.

Okay.

Yeah.