Q4 2020 Teligent Inc (NEW JERSEY) Earnings Call

Ladies and gentlemen, thank you for holding for the Telegent and incorporated fourth quarter 2020 results Conference. Please continue to hold the conference will begin and approximately one minute.

Once again, thank you for holding for your Telegent incorporated fourth quarter, 2020 results call. Please continue to hold the conference will begin and approximately one minute. Thank you for holding.

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Hello, and welcome to the intelligent incorporated first quarter 2020 results Conference call. My name is Michelle and I will be the operator for today's conference at this time all participants are in a listen only mode.

And now I would like to turn the call over to Mr. Philip Jaco Mets, Sir you may begin.

Thank you operator, and welcome to all of you for joining our fourth quarter and year end 2020 earnings call.

Before we begin and we want to draw your attention to our legal disclosure regarding forward looking statements risk factors summary, and risk factors contained in our recently filed form 10-K.

During the course of this conference call. The company will make forward looking statements regarding the impact and potential results arising from recent strategic actions taken by the company and future events and.

Clothing statements about financial business, and commercialization plans and strategies anticipated in fiscal year, 2021 and beyond.

We encourage you to review the company's past and future filings with the SEC, which identify specific factors that may cause the actual results or events to differ materially from those described and these forward looking statements.

You can find the SEC filings and the Edgar database at Www Dot FCC dot Gov, or and the Investor Relations section at the company's website at Www Dot Telegent Dot com.

Please note that any comments made on today's call speak only as of today may 4th 2021 and may not be accurate at the time of any replay or transcript rereading.

I would like to now and this call over to Timothy be Sawyer.

Our president and Chief Executive Officer, Tim.

Thank you Philip.

Good afternoon, and I'd like to thank all of you for joining us today and intelligence fourth quarter at year end 2020 earnings call.

As you are aware joining me on today's call is Philip Jaquez Intelligence Executive Vice President and Chief Legal Officer, who is also responsible for Investor Relations and I'm happy to introduce intelligence, New Chief Financial Officer, Ernie the pellet Antonio.

Who has recently joined our executive team.

I'd like to begin by first and foremost acknowledging the hard work of our dedicated employees over the past several months as we all know 2020 was and exceedingly challenging year for so many of US I can tell you that my fellow intelligent colleagues are some of the most resilient thoughtful and.

Dedicated professionals that I've ever had the honor to work alongside from my perspective, our company has emerged through this adversity and hardship with stronger relationships a renewed focus on both personal and professional growth.

And the recognition that tremendous opportunities lie ahead for us as we work together and transform intelligence and to a leading specialty pharmaceutical company.

Yeah.

I'd also like to personally thank our senior lenders and strategic investment partners Ares capital management, Silverback asset manager and and not in <unk>.

Our capital management for their shared vision and commitment to see intelligent reemerge as a leading generic pharmaceutical company is truly inspiring and we're grateful for their continued support.

Assured we're working diligently every day to make sure that confidence that confidence and trust will be rewarded.

Now.

Let us review the specific accomplish accomplishments in 2020.

Back in February I joined Telegent to help lead the company through its next phase of growth and.

And only a few weeks on the job it became abundantly clear that while our company had strong had a strong talent pool.

We also needed to be opportunistic about adding new talent, where it made sense and.

<unk> and Philip documents join intelligence as executive Vice President and Chief Legal Officer, and corporate Secretary Philip brings a wealth of experience within the pharmaceutical industry and he has held senior leadership positions across legal compliance and business operations. His leadership and insights are already proven and vital to our.

Mission and will be greatly valued as we execute going forward.

Soon after Philipp joined we also announced that John cell and Tonneau was appointed chairman of the Board John has been a director of intelligence since 2015.

And brings to the chairman's role extensive senior leadership as a former executive with Bristol Myers Squibb, where he was president of the Bristol Myers Health care group.

More recently, we've taken additional steps to deepen our corporate governance and advisory talent on our board of directors and February of this year.

Telegent appointed industry veteran William Smart and financial expert Carter Pate.

To its board of directors.

And we believe that these additions at our board level will provide telegent with the strategic vision to help guide the company through its next critical phase of growth.

As already mentioned.

I'm also pleased to introduce Ernie detail Antonio who has recently joined Telegent as our Chief Financial Officer, Ernie is a highly talented and experienced finance professional.

Who has a long track record of success throughout his career.

He has extensive experience serving as a chief financial officer.

With both public and private pharmaceutical and health care companies will be an invaluable asset to our management team.

Next.

Let me just let me turn to discussing intelligence significantly improved financial condition.

Beginning in the Middle of 2020, we have completed a series of financial arrangements that have been nothing short of transformational towards improving the liquidity and balance sheet of our company.

Following the completion of intelligence series C convertible financing and exchange and July.

And the series D convertible note exchange in September.

We announced a series of strategic actions. This January.

And partnership with our senior lenders and series C noteholders to recapitalize and enhance the company's financial condition.

First we completed a $77 million debt for equity exchange with our series C Noteholders and senior secured lenders. This transaction along with the previously mentioned financing from earlier in 2020 as resulted in aggregate debt reduction of $118 million.

And since June 30 of 2020.

We also amended our second lien credit agreement to provide an additional $4 $6 million and financing.

Support the company's ongoing liquidity.

Finally, intelligent completed and aftermarket equity offering during the first quarter of 2021, raising gross proceeds of approximately $38 $5 billion.

Backed by the support and confidence of our senior lenders and strategic investment partners intelligent and significantly reduced debt and increased its cash position and this dramatic improvement to our capital structure will enable us to more effectively execute on multiple business and multiple business and operational initiatives as we move forward.

In parallel with securing new financial arrangements to decrease our debt and improve our liquidity. The company has taken significant steps to address quality control issues.

As previously disclosed the company received a warning letter from the FDA and November of 2019, following and inspection from April.

To may 20th of 2019 of it's Puma and New Jersey manufacturing facility.

Following the company's submission of our response to the FDA and April of 2020 on.

On August 13th.

The company received an additional comment letter from the FDA and which the FDA indicated that it had reviewed the company's responses and deemed them to be inadequate.

They failed to address and or provide supporting documentation to several of the concerns raised and the FDA warning letter.

The company has since provided the FDA with supplemental submissions and outlining certain additional changes and its quality practices additional documentation to support previous and ongoing independent assessments.

Updates to the company's organizational structure and further details regarding ongoing remediation projects to ensure all of our products are safe effective and compliant.

As part of a comprehensive effort to significantly boost our quality initiatives, we appointed a new vice president of quality and the fourth quarter of 2020.

And also maybe series of support staff additions to further improve our reporting and compliance functions and.

One of the most important aspects of quality control and making sure that the company has the talent level and supporting organizational structure in place. So that work product is constantly and efficiently cross checked. These added resources will help us accomplish that objective going forward.

As part of the company's efforts to remediate the issues identified and the FDA warning letter and to strengthen its quality systems. The company undertook and completed a comprehensive review of all of our products during the fourth quarter of 2020.

While the review did not identify material issues with many of the company's products. It did identify issues of non conformance with respect to certain products, which has resulted in some recalls and hoping the production of certain products, which the company is actively reviewing and Remediated. The company is continuing to work diligently.

And lead to remediate all issues cited by the FDA.

And those resulting from its internal and comprehensive quality review.

And we will have and.

And have and will continue.

To have active communications with the FDA regarding its project progress.

Okay.

Just on management's current assessment of these remediation efforts the company believes it will be ready to inform the FDA inspection.

And inspection readiness during the third quarter of 2021.

However, since the company does not control the timing of the FDA reinspection of the facility, we cannot predict when the FDA will perform.

Right Reinspection.

However, this remains important to us because lifting of the warning letter will allow the site to be eligible to receive FDA approvals.

For the pending applications as they are finally reviewed by the agency <unk>.

As a reminder, we currently have seven pending topical andas and three mbas.

With an estimated <unk> of market value of approximately $140 million.

Let me reassure our investors every day, we are working diligently to fully address these issues and we continue to make substantial progress on that front.

I continue to see outstanding teamwork across all of our departments on a daily basis.

And this teamwork is creating a culture of excellence.

Laser like focus on addressing the details and a shared sense of responsibility for generating the highest quality work product to help move the company forward for.

For these reasons I remain optimistic and confident that intelligent is now capable of delivering exceptional high quality results to its partners and customers.

Now, let me address the ongoing response to the COVID-19, pandemic and alignment with the directives and the state and New Jersey as a pharmaceutical manufacturing facility. We are still considered essential we have and will continue to remain open as long as the conditions remain safe for our employees and order to continue to supply our products to the patients that need them.

The company has taken several preventative measures to help ensure business continuity, while maintaining safe and stable operations. We've directed all of our non <unk>.

Production personnel to continue to work from home and <unk>.

Gordon with state and local guidelines.

And we are currently finalizing our return to office protocols.

We have implemented social distancing measures on the site.

To protect our employees and our products are.

Our employees are provided with daily personal protective equipment upon their arrival to the site and we have implemented temperature monitoring services at our newly established single point of entrance.

We've also implemented a more frequent and standardization process sub debt facility.

And finally, we are encouraging all of our employees to see cracks vaccinations when they're eligible.

Now, let me turn the call over to Ernie de Paolantonio for a review of Telegent fourth quarter and year end financial results.

Alrighty.

Thank you Tim and good afternoon, everyone first I want to say, how enthusiastic I am to be joining the intelligent team. During this opportune time I look forward to contributing to the revitalization of the company as well as our prospects of growth and the coming months.

Now on to the financials consolidated net revenue for the fourth quarter of 2020 was $29 9 million, bringing full year, 2020 revenues to $45 3 million versus $16 million for the fourth quarter of 2019, and $65 9 million for the full year of two.

2019.

The decline was driven primarily by suppressed slower customer orders due to COVID-19, and our product remediation efforts and our portfolio of products.

Gross margin for the fourth quarter was a negative 52, 1% versus a positive 12, 2% over the prior year.

Increased costs for quality remediation and higher reserves for excess and obsolete inventories contributed to the negative margin and the fourth quarter of 2020.

And fourth quarter total operating expenses were unfavorable $2 3 million compared to the fourth quarter of 2019 total selling general and administrative costs were $3 7 million higher as higher salary and consulting expenses more than offset lower bad debt expenses and the fourth quarter.

Research and development expenses were lower by $1 4 million and salary insurance and <unk> expenses were lower and.

Part due to a prior write off of API cost and the third quarter.

Given the current forecast of short term unprofitable U S operations, the uncertainty regarding the timing of the FDA and lifting of the warning letter and other factors accounting rules required that we perform a formal assessment of recoverability regarding our buner plant as well as various.

And we'll assets, including trademarks technology and other intangible assets.

As part of this assessment that unit plant could not be assumed to have the FDA warning letter and lifted which had a significant impact on its assume value. As a result, we recorded a non cash total impairment charge of $93 2 million and the fourth quarter.

And as Tim noted earlier, we remain optimistic about Remediated the warning letter and are focused on that effort.

It is important for our investors to understand that as we put these one time charges behind us.

And forward, we anticipate that our improved productivity and utilization of our existing asset base, including the per unit facility, along with a more rational cost structure should help us generate favorable year over year operational and financial performance comparisons.

With respect to full year financial performance the company posted $45 3 million of revenue compared with $65 9.002 million 19.

And COVID-19 has affected and user product use and disrupted the business for the better part of 2020, along with lower sales attributable to our product quality remediation efforts.

2020 cost of revenues as a percent of total revenues increased 108% versus 64% and 2019.

Cost of revenues increased by $6 7 million, despite lower revenues due to higher remediation costs and inventory reserves.

Selling general and administrative expenses were $6 2 million higher due to higher salary and consulting costs regarding restructuring of the company as well as charges related to the impairment of intangibles and other assets.

Research and development expenses were $3 1 million lower due to lower salary and related expenses and lower research activities as part of an effort to conserve cash.

With the equity range and the first quarter and our continued focus on cash conservation, we estimate that our cash and that's a runway carrying and the company towards the end of 2021 or into the first quarter of 2022.

I will now turn the call back over to Tim.

And then.

Yeah.

Thanks, very much Arnie.

In summary, we believe that intelligence is undergoing a significant transformation.

With respect to its improved financial condition, and the quality initiatives being implemented throughout its operations and manufacturing capabilities.

<unk> our recent successes, we continue to work diligently with our with both our financial and strategic advisors to critically assess all of the strength of the company that we can leverage moving forward.

We will look forward to reporting more on these activities in the coming months as we complete our work and our assessments as I've stressed on today's call with our investors intelligence success is rooted and teamwork accountability and and intense focus on making sure we get the details correct and I'm seeing this level of commitment every day and debt.

Every level within our company for those reasons I remain very confident and our future and I look forward to reporting on our additional progress throughout 2021.

Thank you for taking the time to join US today and I'd now like to turn the call back over to the operator for the question and answer answer session Michelle.

Thank you Sir we will now begin the question and answer session. If you have a question. Please press Star then one on your Touchtone phone.

If you wish to be removed from the queue. You May press the pound sign are the husky.

Also if you're using a speaker phone and you may need to pick up on your handset first before pressing the numbers once again to ask a question. Please press star one on your Touchtone phone at this time.

And so we are standing by for questions.

Okay.

Okay.

Okay.

Okay.

And it doesn't appear that we have any questions at this time.

So with that I guess I would like to say thank you to all of you for your participation and.

And we appreciate it and we'll look forward to keeping you updated on the progress that we're making with telegent throughout 2021 and.

And I wish you a great day, thanks and.

Have a good one bye.

Thank you ladies and gentlemen, this will conclude today's teleconference. Thank you for participating you may now disconnect.