Q1 2021 Cumberland Pharmaceuticals Inc Earnings Call

Ladies and gentlemen, please standby your conference will begin momentarily. Thank you for your patience.

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Thank you for joining Cumberland Pharmaceuticals, first quarter 2021 financial report and company update.

This call is being recorded at the company's request and will be archived on covenants website for one week from today's date.

Now I would like to introduce Erin Gull, who is responsible for corporate relations at Cumberland Aaron. Please go ahead.

Good afternoon, everyone. Today, we issued a press release containing the company's financial results.

Corporate update for the first quarter ended March 31st 2021.

That release with related financial table is available on our website at Cumberland pharma dotcom.

Please note that today's discussion may include forward looking statements as defined in the private Securities Reform Act of 1995.

Because any such statements reflect the company's current views and expectations concerning future events and may involve risks and uncertainty.

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 in our form 10-K, and any additional updates we filed with the SEC.

And any forward looking statements made during today's call are qualified by those risk factors.

Also despite our best efforts actual results could differ materially from our expectations and the information shared on this call should be considered current as of today only.

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 development.

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 sites can be found via 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 on the financial tables in our earnings release that was issued earlier today.

So with US on today's call are a J kazimi come on line as Chief Executive Officer, Marty for now our Chief Commercial Officer, and Michael Bonner, Our Chief Financial Officer, We will start today with an overview of our progress during the first quarter and will follow with a discussion of our commercial activities will then review our financial results and then finish with closing remarks before we open the call.

Any questions.

I will now turn the call over to AJ Kazimi Cumberland as Chief Executive Officer to begin the discussion of our corporate update and company performance.

Well good afternoon, everyone. Thank you for joining us as Aaron noted today will provide an overall company update along with a review of our first quarter financial results.

Well the novel Coronavirus continues to affect our lives over a year. After its arrival in the U S. However, we remain hopeful.

With a growing number of Americans fully vaccinated.

New cases of the virus in decline.

Good to see an overall reopening of our country, which is now underway.

Throughout the pandemic Cumberland encountered the most challenging operating environment, we've ever faced as a company.

Our business and our clinical staff perfected as fewer patients sort of elective surgeries and our access to medical facilities with substantially limited.

As a result, we adjusted our market strategies retooled, our sales communications and we reinvented the way in which we operate our business.

While our brands were negatively impact at that time.

We're fortunate to have a diversified product portfolio, which provided overall revenue growth of 9% for the full year 2020.

And as you've previously seen our products generate strong performances at different times during the year, which is why we always suggest that you evaluate our progress on an annual basis as our quarterly progressions could vary.

During the first quarter of 2021.

Pleased to report a strong financial performance. Despite the continued influence of the pandemic.

Total revenues were $10 5 million.

A 26 and a 5% increase over the prior year period.

This favorable performance was led by growth in our buy that is and that resolved brands.

Adjusted earnings for the period were $1 1 million or seven cents a share a significant improvement compared to a loss of three sets of share during the same period last year.

Cash flow from operating activities was $1 8 million for the quarter.

Double the prior year period about.

Additionally, we ended the first quarter with over $93 million in total assets $46 million in total liabilities and $47 million and shareholders equity.

Meanwhile, we have been closely monitoring our supply chain, including the facilities that provide the raw materials, along with those that manufacture our products and we overbid overseeing the resulting finished goods shipped to us and then onto the warehouses that support our country's hospitals and retail pharmacies.

While enrollment of new patients was limited during much of 2020.

Many of our clinical sites have recently reopened and resumed screening of patients with potential admission into our clinical studies.

And as a reminder, we're sponsoring phase II clinical programs that evaluate alright fisherman product candidate in patients with cardiomyopathy associated with Duchenne muscular dystrophy.

Systemic sclerosis, or scleroderma, a debilitating autoimmune disease, and aspirin exacerbated respiratory disease or <unk>.

The year form of asthma.

Our plan is to await results from all of these studies before deciding on the best development path for the registration of <unk>, our first new chemical entity.

So with that overview I'd now like to turn to Marty Cornell Marty's, Cumberland as Chief commercial officer, and he's our also our newly appointed President of the Cumberland farms sales Corp.

Marty can you please share your update on our marketing and sales activities.

Thank you a J D.

During the first quarter. This year, we held a successful national sales meeting to help support and equip our sales teams and their efforts to build our brands while navigating the current health care landscape.

The meeting was held virtually among our sales personnel, who participated from across the country.

As a reminder, we have two national sales divisions, one calling on key hospital accounts across the country and the other division, calling on select office based physicians.

Our primary target markets, where hospital acute care and office based gastroenterology.

These medical specialties are characterized by relatively concentrated prescriber bases.

Can be supported effectively by our team of experienced sales professionals.

Both of our sales divisions altered many of their promotional tactics.

More electronic and telephonic communications. Additionally, we augmented those activities with an enhanced internal sales capability, reaching out to hospitals and physician offices directly from our headquarters.

These are innovative and efficient ways to expand our reach add new coverage and ensure awareness of our products allowed us to stay on a growth trajectory during the pandemic.

Moving to our commercial products, we were pleased to see recent.

A recent publication supporting the use of our vast resolved brand in patients with COVID-19.

The health outcomes predictive evaluation, our hope COVID-19 registry analysis was an international study of over 4000, COVID-19 patients was recently published and showed that patients hospitalized with COVID-19 had a high risk of developing high point.

Premier while hospitalized.

<unk> is an imbalance of the serum sodium to body of water.

And it's the most common electrolyte disorder among hospitalized patients.

Severe hyponatremia has long been recognized as a direct cause of death or permanent neurological problems in hospitalized patients.

Hope study demonstrates the high prevalence of hyponatremia in COVID-19 patients and the need to treat this electrolyte imbalance.

That resolved treats hyponatremia and can normalize serum sodium levels with a proven day. One response, helping these patients spend fewer days in the intensive care unit.

That result is the only intravenously administered brand.

For the treatment of Hyponatremia and is essential for patients who are intubated are not able to take medications orally, which is especially important for COVID-19 patients.

Additionally, our <unk> product, which used to help COVID-19 patients who develop these types of bacterial infections in their lungs by body is a potent antibiotic designed for difficult to treat infections is FDA approved to treat both hospital acquired.

And ventilator associated pneumonia that results from susceptible organisms.

During the last year, we were pleased to hear of iPad is being used to help COVID-19 patients who develop these secondary bacterial pneumonia and other gram positive infections, while in the hospital.

We subsequently compiled a case study dossier outlining several real world instances, whereby battery to effectively and safely treated these COVID-19 patients.

Recently, the centers for Medicare and Medicaid services have changed their reimbursement for certain procedures conducted ambulatory care outpatient surgery centers. These changes now allow for reimbursement of certain procedures conducted at outpatient surgery centers.

<unk> that were previously reimbursed only in hospitals.

These ambulatory centers typically provide easier physician access and may eliminate the lengthy formulary approval process with their focus on patient throughput such centers are an excellent environment for the ready to use caldolor product, especially since they typically do not have a <unk>.

Pharmacists on staff.

Lastly, we continued to soft launch of already tracks Methotrexate line of products during the first quarter.

And we're very encouraged by the positive feedback we've been receiving regarding this innovative delivery system.

<unk> is FDA approved for the treatment of active rheumatoid arthritis juvenile idiopathic.

Idiopathic arthritis, and severe psoriatic arthritis.

We've implemented a modest increase in our sales force to expand our coverage of the rheumatology market for this brand and created a positioning and market strategy in preparation for the full launch of the product.

Given the ongoing issues with physician office access during the pandemic along with the need to manufacture additional product supplies. We will undertake the full launch of ready trucks once the country fully reopens and we have a majority of third party reimbursement approvals in place for that reason we're target.

During the fall of 2021 for the launch.

Based on the positive feedback, we're receiving since the soft launch.

We believe that ready trucks will be a valuable addition to the product portfolio and provide a significant contribution to our business for years to come.

That completes today's updates on our commercial efforts a J I'll turn the call back over to you. Thanks, Marty I'd now like to ask our senior director and Chief Financial Officer, Michael Bonner for the financial review Michael.

Pleasure a J for the three months ended March 31, 2021, net revenues from continuing operations were $10 5 million, a 26, 5% increase over the $8 3 million.

During the prior year period.

We also recorded an additional half a million in the first quarter of this year as discontinued operations associated with the return of rights to the two products that we no longer distribute.

Net revenues by product for the first quarter included $5 1 million <unk> 3 million for Crystal less $1 5 million for Cal more than one 1 million per that resolved.

Total operating expenses for the quarter were $10 9 million compared to $10 $2 million per the prior year period.

This increase in expenses resulted primarily from the additional cost of goods associated with our growth by that of sales during the quarter.

Recall that significant by bad inventory was transferred to Cumberland as part of the acquisition of the assets associated with the brand.

Based on the acquisition accounting fair value of the inventory included a significant step up of our actual manufacturing cost.

Future lots of the product manufactured per Cumberland are expected to have a much lower cost associated with our supply and sales.

Adjusted earnings for the first quarter were $1 1 million or seven cents per share a significant turnaround from the loss of <unk> 4 million or loss of <unk> <unk> per share during the prior year period.

Please note that the adjusted earnings calculation does not include the benefit of the half million received for the return of two products. We no longer distribute it also excludes the benefit of the buyback of cost of goods sold during the quarter, which was paid for as part of the products acquisition.

As a reminder, the financial terms for the <unk> acquisition included a $20 million payment upon closing.

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.

From the products launch in late 2018 through the end of the first quarter of 2021. The product has delivered a total cash contribution of approximately $23 million, which we believe compares favorably to the $25 million in upfront payments to acquire the brand.

We accounted for the buyback of acquisition as a business combination a total of $34 million in new assets were added as a result of the acquisition, including $21 million in inventory 12 million of intangible assets and $1 million of goodwill.

Due to amortization of intangibles and sales of inventory the value of these assets totaled $24 million at the end of the first quarter.

Net income was <unk> 2 million for the quarter, a significant improvement of the $1 million loss from the prior year period.

Cash flow from operating activities was $1 8 million during the during Q1 of 2021, which was double the 0.9 million from the prior year period.

Turning to our balance sheet as of March 31, 2021, we had $93 3 million total assets, including $24 9 million in cash and equivalents.

Liabilities totaled $46 5 million, including $15 million on our credit facility.

Total shareholders equity was $47 million at the end of the quarter.

Meanwhile, as we previously announced Cumberland received the funding of a loan in 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 long hoped for and the need for any employee layoffs or furloughs as we experience the impact and uncertainty of the pandemic.

The proceeds of the loan were used to fund payroll and related qualifying expenses.

As a result at the end of 2020, we submitted a request for the loan forgiveness.

The request was approved by our lender and is pending the approval in the U S small business administration.

The loan is listed on our balance sheet as in other current liability and we will eliminate the debt and recorded as other income.

If and when that forgiveness is fully approved.

Additionally, during the pandemic, we began to decrease the number of shares repurchased during the first quarter of 2021, we repurchase an additional 155000 Cumberland shares.

These repurchases, including 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 has over $44 million in 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. Okay. Thank you Michael what we reported to date Cumberland was able to deliver another successful quarterly performance in spite of the challenges of operating during the pandemic.

And as I stated earlier, we're grateful we were able to keep our business operating in our organization intact during those difficult times.

We once again posted solid year over year revenue growth and improved cash flow from operations, which speaks to the strength of the business the diversity of the product portfolio and the <unk>.

<unk> fastest the commercial organization.

Over the past year, we quickly adjusted market strategies, better promotional activities and we reinvented the way, we interact with our customers and support the patients who need our medicines.

We've continued to expand our product portfolio through a series of successful business development initiatives and we now feature seven FDA approved brands, along with a robust pipeline of new product candidates in late stage development.

What we're seeing with the markets we serve.

Do anticipate double digit revenue growth for the full year 2021.

We also expect continued.

Cash flow from operations and positive adjusted earnings in 2021 as well.

Our goal is to deliver sustainable growth and profitability.

During this year, we will focus on maximizing the potential of our existing brands, while continuing to build a portfolio of differentiated products.

As a result, we are pursuing opportunities to expand the use of our FDA approved products into additional patient populations. While also developing several new product.

New product candidates that address poorly met medical needs.

Our commercial brands combined with the new products from our pipeline can.

Can be important growth contributor to our business for years to come.

And the addressable markets for these products are quite large for a company of our size and maximizing these opportunities can have a significant impact on our value.

Additionally, we are actively pursuing opportunities to acquire new marketed products as well as late stage development product candidates and our target medical specialties.

We continue to efficiently manage the business as we emerge from the pandemic, while remaining dedicated and focused on our mission of advancing patient care to the delivery high quality medicines.

So with that review and update now let's open the call to any questions. You may have operator. Please proceed.

Thank you Sir.

Ladies and gentlemen that concludes the Companys presentation, and we will now open the call for any questions. If you would like to ask a question. Please press the star key followed by other digit one on your Touchtone telephone.

One moment for questions.

Well. Thank you everyone for joining our call today and as I've mentioned in the past, we do understand that many of you prefer a private discussion with management and.

So please just reach out to us if you'd like to hold such a call.

We do appreciate your time and your interest in our company and we look forward to providing another update after the end of the second quarter.

Thank you Sir.

Ladies and gentlemen.

That concludes our conference call for today.

I would like to listen to a replay of the conference. Please dial 8558592056, using the access code.

790 733 to five.

A 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.

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