Q3 2021 Aytu Biopharma Inc Earnings Call
[music].
Ladies and gentlemen, we thank you for your patience our conference will begin shortly again, we thank you for your patience our conference will begin shortly.
[music].
Ladies and gentlemen, we thank you for your patience our conference will begin shortly again, we thank you for your patience our conference will begin shortly.
[music].
Good afternoon, and thank you for joining us today for the a true Biopharma financial results and business update call for the fiscal third quarter ended March 31, 2021 with me. This afternoon are <unk>, Chairman and Chief Executive Officer, Josh Disbrow, and Chief Financial Officer, Richard <unk>.
Isn't that a two biopharma issued a press release earlier today with the details of the company's operational and financial results for the fiscal third quarter a copy of the press release is available on the news page of the company's website at eight.
<unk> dot com I'd like to remind everyone that today's call is being recorded a replay of today's call will be available by using the telephone numbers and conference I'd provided in the earnings press release. In addition, a webcast will be accessible live and archived on <unk> website within the investors section under events and presentations at AG Bio D.
Com.
Finally, I'd like to call your attention to the customary safe Harbor, just closing disclosure regarding forward looking information the conference call today will contain certain forward looking statements, including statements regarding the goals strategies beliefs expectations and future potential operating results of <unk> Biopharma.
Although management believes these statements are reasonable based on estimates assumptions and projections as of today may 17th 2021. These statements are not guaranteed of future performance time sensitive information may no longer be accurate at the time of any telephone telephonic or webcast replay actual results may differ materially.
Seriously as a result of certain risks uncertainties and other factors, including but not limited to the factors set forth in the company's filings with the S. E. C. H, who take undertakes no obligation to update or revise any of the forward looking statements I'd now like to turn the call over to a to C E O Josh Disbrow.
Thank you Devin.
Afternoon, everyone and thanks for joining us today this.
This quarter, we accomplished many key milestones as we continue to grow our promotion can fully with prescription therapeutics from consumer health products. While also pursuing the expansion of our late stage development pipeline with a focus on the underserved pediatric populations, notably.
Notably we closed our merger with Neo Therapeutics, which has transformed <unk> into a pretty from a $100 million annual revenue specialty pharma company with an enhanced footprint into pediatrics and adjacent specialty care segments now with the addition of <unk> three ADHD branded products <unk>, XR, ODT, <unk>, XR ODT and incentives.
New York and.
In addition to expanding our portfolio with these products, which I will touch on shortly we also expect the merger to result in annual operating cost synergies of approximately $15 million in fiscal year 2022, we've now begun the integration process of realization of these expected synergies, particularly on our commercial and general and administrative processes and.
Sure.
Subsequent to the end of the quarter in April we also acquired a late stage pediatric onset rare disease pipeline asset and brought on the executive team from Ruckus Therapeutics. This.
This acquisition fits within one of our key goals, which is to complement our pediatric centric commercial portfolio with a novel product pipeline that can be efficiently progressed serves to address areas of significant unmet medical need and supports the company's future growth potential beyond the current commercial portfolios.
Additionally, this quarter, we continued to make strides with your life. The UV a light catheter technology license from Cedars Sinai Medical Center and the completion of a pilot study in Sars COVID-19, two and the prepaid public pre print publication of that study.
And subsequent to quarter end, we announced the pre print publication of an in vitro study demonstrating a potential mechanism of action of the UV a light that may lead to the technology has demonstrated anti viral effects.
During the quarter, we took a significant step in refining our focus on building a leading pediatric company by divesting. The test, though we've returned all U S rights to the test out to a service pharmaceuticals in exchange for $7 5 million in cash paid out in equal installments of 250000 over 30 months through this divestiture, we are now able to al.
<unk> commercial resources on the Rx side of the business to the ADHD pediatric brands and fully establish ourselves as a pediatric focused company.
Rich will go into more detail shortly on the financials, but I want to take a moment to touch on revenues and our cash position net revenue for the quarter was $13 5 million compared to $8 2 million for the same quarter last year. This growth was mainly driven by our consumer Health Division, which had had multiple product launches and growth of the E Commerce channel, notably <unk>.
Both of our OTC monograph products, So <unk> <unk> and then flew to care.
While we saw a somewhat more modest net growth in our Rx Division I want to stress that these numbers include revenue contribution from the <unk> legacy business only for the period between March 19th at March 31, 2021. So the next reported quarter will represent our first quarter of fully integrated revenue.
We ended the quarter with $46 8 million in cash cash equivalents and restricted cash and that's after having paid down $15 million of principal on the <unk> term loan held by Deerfield.
Turning to our commercial products Rx.
<unk> revenue growth was largely driven by growth in <unk> heritage pediatric portfolio led by poly VI, Flor or multi vitamin and fluoride supplement product line.
Yeah.
With the close of the Nios merger on the Rx side of the business. We added core complementary ADHD products, <unk>, XR, ODT and <unk> XR ODT.
To our pediatric focus portfolio not only are these growing brands, but the accompanying sales team, we're bringing on further enhances our footprint in pediatrics, while also expanding our presence in adjacent specialty segments. We expect this will enable increased promotional opportunities for <unk> heritage products, while continuing the growth of the core ADHD brands.
As we integrate the two companies are ex portfolios.
An important initiative for us is to integrate the two heritage products into the <unk> Rx connect pharmacy network and patient support program, which we're renaming <unk> Rx connect this.
This program was developed by <unk> to improve patient access to ADHD brands through an improved patient and physician experience of predictability and consistency in getting prescriptions filled at a consistent predictable price for patients.
And our diligence leading up to the <unk> merger, we observed the benefits that the Rx connect program brought to the ADHD brands and <unk> Rx connect is a key element that should drive growth across our Rx portfolio, specifically, including the two heritage brands.
So with all the brands getting integrated now into Rx connect we expect to drive incremental product growth on.
From the consumer health side of the business are over the counter medicines, including <unk>, our OTC private label proton pump inhibitor for acid reflects reflux, which competes with <unk> <unk> is our private label OTC foam formulation of minoxidil competing with Rogaine for hair loss and flew to care as our private labels, who took his own appropriate nasal spray.
Which competes with Flonase.
E Commerce remains a strong channel in that side of the business and we believe these products continue to have significant growth potential.
And by virtue of being sold through our E. Commerce channels. These products can be sold efficiently with a lower marketing spend.
We expect to see continued trajectory of our three core OTC medicines and expect to launch new products that compete with national brands as lower cost alternatives. We're planning additional product launches to continue to build scale on the consumer health side.
Our direct consumer business also continues to drive revenue scale through a diverse range of consumer health products, we expect to launch multiple dietary supplements OTC monograph products and cosmetics through this channel through the second half of this calendar year.
Turning now to our pipeline.
<unk> is our first in class UV light based antimicrobial catheter investigational device.
We have a worldwide license from Cedars Sinai Medical center for all nasal pharyngeal in esophageal applications for Hill line last week, we reported we reported that in vitro data was published in bio archive. The manuscript concluded that UV a light increases the expression of mitochondrial anti viral signaling or maps protein within cells and the results.
First that this transmission of an increase in interest cellular maths involves cell to cell communication. These findings confirm that an increase in <unk> in response to UV, a light can be transmitted from cells directly exposed to uba light to neighboring cells that have not been directly exposed to EBITDA light and suggest further that soda cell signaling is involved in the process.
So if you're listening heal lights anti viral effect.
These findings are important as they indicate that the wavelength in form of light delivered via the <unk> device may not need to directly hit infected cells to have an anti viral effect against viruses like Sars COVID-19 two.
In March we reported data from our first in human open label clinical trial in Sars COVID-19 two patients the data show that endotracheal UV a light treatment was associated with a significant reduction of Sars COVID-19, two viral load and improvement in clinical severity scores. Additionally, the endotracheal UV a light treatment did not result in any serious adverse device.
Ex and was well tolerated the data was published in met archive in a manuscript has been submitted for peer review.
We plan to initiate a phase II trial of <unk> in COVID-19 in the second half of the calendar year and to continue discussions with the FDA and other regulatory agencies regarding the advancement of our <unk> Uba light catheter technology.
The potential commercial opportunity is large here with applications going well beyond COVID-19, ventilator associated pneumonia severe influenza and other difficult to treat respiratory infections represent large market opportunities and we are eager to fully explore <unk> full potential.
Turning now to our newly acquired product candidate in April we announced the acquisition of a global license to a 101 for Enzo storm a pivotal study ready therapeutic candidate initially targeting the treatment of vascular alias Danlos syndrome, where beds. We acquired this potential thats treatment from Rumpus Therapeutics, a privately held biopharmaceutical company folk.
On the treatment of pediatric onset rare and orphan diseases.
Beds is a rare genetic disorder typically diagnosed in childhood characterized by arterial aneurysm dissection and rupture bow rupture and rupture of the graduate uterus. There are no. There are currently no FDA approved treatments for beds and the unmet need is massive on average beds patients don't survive past their 51 Earth day.
We expect the <unk> hundred one Enzo storm pivotal trial to get underway.
Following the completion of the pivotal study protocol and submission of an IND application in the second half of this year.
We continue to identify additional growth drivers and target acquisitions, while focusing on streamlining our operations and driving annual revenue growth through a commercial model focused on growing sales and gaining G&A synergies across our business segments.
To that effect in April and as alluded to earlier, we announced an agreement with the cerus, whereby a cerus acquired all remaining rights to the test in the U S will receive $7 5 million in consideration, which is payable in 30 equal monthly payments of $250000, which began in April.
We also grew our leadership team hiring three new executives in April as part of the EUR 101 transaction, we added Rumpus Therapeutics co founders and principal executive officers Topher Brooke and <unk> as executive Vice Presidents, they will be responsible for the EUR 101 program and the development of a pediatric onset rare disease pipeline, we're very eager to draw from their <unk>.
<unk> in rare disease business and product development and commercialization.
And we appointed Richard Eisenstadt, CFO Rich is an accomplished pharmaceutical industry executive with more than 20 years experience in leading finance and accounting operations supporting clinical development and commercialization and raising capital within the life Sciences sector. Welcome Rich. We're excited to have you on board.
And with that I'll now turn the call over to rich for some additional financial highlights rich.
Thank you Josh and thank you all for joining US we ended the quarter with $46 $8 million in cash cash equivalents and restricted cash following the $15 million principal payments with Deerfield that was part of the <unk> merger following that payment there only $15 million principal remains outstanding to Deerfield payable in May two.
'twenty two.
We are now in the process of post merger integration Paul on the <unk> transaction, we had previously announced that we anticipate synergy savings of $15 million annually beginning in fiscal year 2022 from the.
Process application to realize these savings is well underway.
Net revenue for the quarter ended March 31, 2021 was $13 5 million compared to $8 2 million in the same quarter last year.
Company continues to increase sales through organic product growth.
The realization of its recently completed transactions net revenue from the consumer Health Division was $8 4 million a record for this division and an increase from $3 $5 million in the same quarter last year, which reflected results only for the period getting February 15, 2020, following the close of NFS consumer health acquisition.
Yeah.
Super Health growth was driven by multiple product launches and growth of the E Commerce channel.
Net revenue for the Rx Division was $5 1 million split three months ended March 31, 2021 up from $4 $7 million in the same quarter last year.
Ascription revenue includes net revenue per the nearest ADHD products only for the periods. Following the closed the merger on March 19 2021.
Our next quarter will reflect the full integration of net product revenues.
Cost of sales of $13 $7 million per quarter ended March 31, 2021 included a write off of $7 1 million for slow moving inventory.
Net cost of $6 6 million compares to cost of sales of $2 million for the period ended March 31 2020.
2021 costs include the fair value or market cost of the ADHD products sold in the period due to the write up of inventory returns of the asset purchase of <unk>.
The results from 2020 included the costs associated with consumer Health Division the only for the period beginning February 15 2020.
<unk> expenses and restructuring charges in the quarter ended March 31, 2021, total of 10 $6 million compared to $300000 from the same quarter in 2021.
Loss from operations was $25 7 million for the three months ended March 31, 2021 versus $4 8 million for the three months ended March 31 2020.
After backing out these one time costs and the inventory adjustment that I previously mentioned adjusted loss from operations was $8 million for the quarter ended March 31 2021.
Net loss was $25 $5 million per quarter ended March 31, 2021, or $1 41 per share versus net loss of $5 $3 million or $1 51 per share for the same period last year.
As discussed in our press release after reviewing our cost structure, we have determined that the best serve our patients and to reduce costs or be more efficient and cost effective to outsource manufacturing. Our ADHD products nearest has historically manufactured its products and its grand Prairie, Texas manufacturing facility.
<unk> identified a global contract manufacturer would take on the production of the ADHD brands and we expect that the technology transfer process will be completed over the next 18 months upon the completion of the tech transfer we will close our Grand Prairie manufacturing operations.
I will now turn the call back over to Josh for some additional commentary Josh.
Thank you rich.
So as you can see <unk> has gone through a significant transformation.
Our new company today with combined pro forma $100 million in revenue and diversified Rx and consumer health portfolio, our late stage pipeline addressing significant unmet needs and a plan to efficiently integrate the new company to reduce costs, the coming quarters will bring continuing progress in growing sales and gaining synergies and will be moving closer to the initiation.
Of the 101 program.
Proud of the team for the progress we've already made post nios and I'm looking forward to more accomplishments as we continue with our growth plans with that I'll turn the call back over to the operator for Q&A. So Devin if you can open up the line.
Thank you we will now be conducting a question and answer session.
To ask a question. Please press star one on your telephone keypad, one moment, please while we poll for questions.
Our first question comes from the line of Jennifer <unk> with Cantor Fitzgerald. Please proceed with your question.
Hey, Thanks, so much for taking my question and congrats on another quarter guys.
A few questions here I guess.
First one would be on your plans on the ADHD business to change your cost structure and with the outsourcing how should we think about the potential impact of that over the next 18 months either tier ADHD business sale.
Our opex and can you touch on what the long term impact on margins that could be that could have.
Sure I will take that.
Yes, yes, I'll take that call.
Sure.
The cost of actually transferring the technology coupon bioequivalence studies expected to be less than two and a half million dollars over the next 18 months this will be reflected in G&A.
Jennifer we have previously been doing some work and that has also gone.
G&A line on a cash basis, our partner has agreed that the per payment for approximately half of the tech transfer costs employee.
Commenced purchasing premise product.
We have historically achieved gross margins in the mid Fifty's the mid sixties growth.
AG products, which we anticipate near term will comprise perhaps 50% of our revenue we would anticipate not only having more certainty from.
Margins quarter over quarter, which of course are varied as we have historically manufacturer product on a seasonal basis.
We anticipate that this could allow us to achieve gross margins in excess of 80% although value ADHD products.
The Tech center is complete in 2023.
Okay. That's helpful. And then do you have any thoughts on the how should we should think about the incremental contribution starting next quarter. Since that's the first full quarter of ADHD products.
Is it is it going to be like historically I know, it's been like $6 million to $7 million is that what we should expect to start coming in starting next quarter.
Well.
Yes, I'll take that Josh if you want.
The ADHD products as you know.
Well first we don't give guidance, but we do anticipate that.
We should have quarter like quarter quarter over quarter.
Second calendar quarter as you know at the beginning of the <unk>.
Summer time drop off in prescriptions.
Schools being out for the summer so usually it does begin to tail off from early may through <unk>.
August so the revenue I would consider or if you looked at previous years, which should be similar to that margins will be affected negatively Jennifer because of the write up an inventory of course still in purchase.
Counting.
Have to write up your inventory fair market value. So.
<unk> our inventory is written up close to market costs are at market cost. So we won't see margins necessarily over the next quarter I think getting into the first fiscal quarter and the quarter beginning July one we will see.
Return to the margins that we historically have seen for ADHD.
Okay, and then maybe turning to the pipeline I think you may have mentioned this but can you remind us of.
So is the Pip.
Have you started those discussions with the FDA can you remind us.
When we could exactly expect an update on those plans for the pivotal trial.
Yes, I'm happy to start that and then Richard can chip in as well.
So Jennifer yes, the team at <unk> for quite a while has obviously been working on in the store and it has had a dialogue with the FDA.
And fully expecting it to be a single trial, that's required to move it towards approval.
I would expect next quarter will be in a position to nail down sort of firm estimated start dates certainly affirm submission of the IND, which we have said will be by the end of this year and realistically study starting shortly after the start of the new calendar year as how we're thinking about it so.
Thats.
I think probably the.
The cleanest way to answer that question Rich if you have anything else to add feel free.
Yeah, no that sounds good.
Okay great.
One last question on the net loss I know because of those other expenses the onetime expenses and the write off of the inventory it would've been around like 8 million net loss for the quarter or otherwise.
I think I mentioned.
And then G&A.
The impact over the next 18 months from the change in outsourcing for ADHD that should add around $2 5 million in G&A.
And then you said there could be some lingering inventory impact from next quarter. So overall, how should we think about opex.
And as for I guess day.
The next quarter, but then also moving forward moving sort of beyond.
There is a short term one one time impact.
Yes, I don't know that <unk> historically given guidance.
Who are they.
The operating expenses, but I know that the coming quarters going to still have some noise.
So it's going to be.
Higher than usual.
Okay.
Okay.
We have an agenda of our customers on the Opex line.
To reiterate Rich's point is some deal costs and some some sort of re normalization and I would expect to start to see a new normal with respect to opex starting in the new fiscal year.
In the first quarter and then certainly normalizing.
In refining and a bit more in the second the second fiscal calendar, our second fiscal quarter.
Yes.
I'll add that Jennifer is that the R&D line, which has been pretty minimal to date from <unk>.
<unk> side in fairly small I think.
You guys have been spending colleagues.
$8 million on an annual basis and most of that was salary you will see a step up in the costs that run through that obviously getting the 101 program going.
We anticipate that's going to be at $25 million to $30 million campaign over the next three years, but will ramp up over time I think the rest of this year, it's not going to be too material, it's probably going to be less from $3 million as we kept the R&D filed.
As we.
Start, bringing sites up and getting them ready per the start of the pivotal trial. The other items that will hit going forward is of course the.
Our post marketing commitments for the ADHD products per.
<unk> per year legislation.
So that's probably going to be also around the three year campaign totaling.
We think of the past $15 million and that will probably get started later on this year as well.
Okay very helpful. Thanks, guys.
Thank you Jennifer.
Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back over to Josh Disbrow for closing remarks.
Thank you Kevin and thanks, everyone for joining today's call I Hope, we were able to effectively convey our progress and our accomplishments from what was a busy and productive quarter and I'm happy to be moving our key initiatives forward rich and I look forward to updating you on our fiscal 'twenty one year end call in September until then thank you and good evening.
This does conclude today's teleconference. You may disconnect. Your lines now. Thank you for your participation and have a wonderful evening.
Okay.
[music].