Q1 2022 SWK Holdings Corp Earnings Call
Good day and welcome to the S. W. K holdings first quarter 2022 financial results call.
All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded.
I'd like to turn the conference over to Jason Rando with cheaper and a strategic advisors. Please go ahead.
Good morning, everyone and thank you for joining <unk> holdings first quarter, 2022 financial and corporate results call.
Before the market opened this morning, Esther vacate holdings issued a press release detailing its financial results for the three months ended March 31 2022.
Press release can be found in the Investor Relations section of S. W. K whole dot com under news releases.
Before beginning todays call I would like to make the following statement regarding forward looking statements.
Family, making certain forward looking statements about future expectations plans events and circumstances, including statements about our strategy future operations and the development of our consumer and drug product candidates plans for future potential product candidates and studies and our expectations regarding capital allocation and cash resources.
These statements are based on current expectations and you should not place undue reliance on these statements.
Actual results may differ materially due to risks and uncertainties.
And those detailed in the risk factors section of SMP Holdings, 10-K filed with the SEC and other filings, we make with the SEC from time to time.
So if he can't holdings disclaims any obligation to update information contained in these forward looking statements, whether as a result of new information future events or otherwise.
Joining me on today's calls Winston Black Chairman and CEO of US didn't get holdings, who will provide an update on S&P case first quarter 2022, corporate and financial results.
Please go ahead.
Yeah.
Thank you, Jason and everyone for joining our first quarter conference call.
The first quarter of 2020 Twos result show increased interest in S. W. K as preferred provider of non dilutive funding for small and midsized life science companies with differentiated products.
We completed two transactions during the quarter deploying 18, and a half million of capital.
Initial $4 2 million invested with existing borrowers.
The other life science sector is facing catheter market challenges at the moment. Our aim remains to selectively find high quality assets that are well positioned to address important patient needs.
First quarter structured debt financings included 12 million to vas oxygen therapy, whereas U S expansion and a $600 million secured loan to <unk> therapeutics to support the company as it awaits marketing approval for the treatment of urea cycle disorders.
We're pleased to help these companies meet their growth age, especially when they can help improve outcomes for patients.
We believe these transactions coupled with our quarter end income yielding assets at a $188 4 million.
Our platform is poised to take advantage of compelling investment opportunities.
It was very difficult investment climate health care and life Science.
This growth companies Germany's financings to support the commercialization of their important medical innovations, we believe our suite of financial offerings can help our clients and future clients improve medical care and transform the lives of patients.
Yeah.
This year is shaping up to be an exciting one for us to have U K and we are targeting to return.
Two our new deal origination to the historic levels.
Supporting this effort, we have in excess of $63 million of cashless revolt or to meet opportunities in the market.
And just last November and reaffirmed in early January we remained committed to focusing on and growing SMB case for specialty finance business.
Is there any board of directors now in place we are focused on advancing our work to evaluate and implement strategic measures to improve.
Our focused growth profile and capital allocation.
As part of this work as announced in our press release this morning.
What is determined.
Too loud the rights agreement or our NOL pellets or expire on its termination date at the end of this month.
We anticipate further announcements.
[noise] announcements regarding this work in the coming quarters.
So 2012, that's what became a successfully deployed approximately 638 million of capital into 45 investments.
Seven realizations are generated a realized internal rate of return of 20%.
I would now like to take time to discuss the steady progress made by our subsidiary in terrorist Biopharma.
Yeah, Rajeev calls and his team are pursuing a two pronged growth strategy maximize potential of his patella Jensen procurement technologies.
The company's expanded manufacturing facility as contract manufacturing business.
And terrorists are set to present two abstracts at the end of 2022 annual conference in June how long and researching the oral formulations of Leuprolide.
The compound incorporates pathologist technology that enables all delivery of medications that were traditionally injected or infuse.
He is also participating in the C. P. H I North America conference showcases drug delivery technology and contract manufacturing services.
And terrorists as for ongoing feasibility studies.
We are in a variety of indications that includes cancer in south and central nervous system disorders.
And these programs and terrorist partners for drug companies to engineer the drug for all delivery.
All of this process the advanced the development of the oral peptide or small molecule.
The dance to the licensing agreements between terrorists and his partners during the medium term just from a variety of sources of license income.
Turning to S&P case financings, our fastest excuse me as of March 31st S&P case total invested assets were $195 8 million a decrease of 10, 6%.
From a year ago.
That's a V. K received a 10.7 million cash payment from BD dental to resolve a long running a group position that was carried at $8 3 million.
It can be all sorts of $85 6 million cash transfer my service pharmaceuticals, and as pay offs.
Please note that the quarter and figures design portfolio movements post quarter.
At the end of the first quarter 2022, the weighted average effective yield of the.
She also familiar with 13, 9%, including non accrual positions.
The slight increase from a year ago.
Cash collections were better than forecast, leading to realize yield off of the answers to your portfolio of 22, 5% versus 16, 7% from a year ago period.
That said, we can't report non-GAAP tangible book value per share of $18.39 as of March 31, 2022.
<unk> of 12, 7% from a year ago.
Figure excludes the deferred tax asset intangible assets goodwill and contingent consideration payable.
Manage abuse tangible financing book value per share is a relevant metric did either company's core, especially finance business.
Okay.
For the first quarter of 2021 to be kept reported total revenue of $11 1 million and.
A 19% increase compared to $9 4 million for the first quarter 2021.
Revenue growth was largely driven by 2.6 months from fees and interest.
Early pay off of the two long as I noted before.
GAAP net income for the first quarter of 2022 totaled $3 5 million or 27 cents per diluted share compared to $3 4 million 26 cents per diluted share for the first quarter 2021.
For the first quarter adjusted non-GAAP net income generated by special Finance business totaled $8 4 billion, 25% increase from the first quarter of 2021.
Looking ahead there.
2022 has the potential to be approved for a year for us to have your cake and the.
The synergies between our fashion offerings and ongoing capital market needs for small and mid sized life science companies to fund innovation and build treatments to market.
As traditional roots of financing and face new challenges in the current investment climate combination of a long term investment strategy permanent capital base flexible mandate lack of regulatory constraints.
It became an advantageous position.
These dynamics, coupled with growing momentum in our tariffs offer the potential to foster sustained period of value creation for us that'd be okay.
With that well now open the call to your questions.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Karl Bowser from Lake Street Capital markets. Please go ahead.
Great. Thank you, hey, wait till they probably update and hope you're doing well.
So maybe maybe we could just chat.
Amen activity out there I mean.
Great.
I think as depressed as they are.
Yeah, I mean, yeah.
More attractive.
And equity ridiculous.
Cat space.
For a lot of different players.
The extent that's true have you seen more activity in your realm of pain as people kind of contemplate.
We're amping up their operations.
Financing through their equity.
Sure. Good question, Yeah, I think it's certainly your observation is accurate.
As equity values have been compressed.
It really highlights just really how how accretive.
Our non dilutive debt financings can be for you know for companies and.
Also you're you're right. These companies do you need to finance.
They look to grow.
That kind of puts us in a very very good spot.
Yeah, I'd, just say generally speaking the.
Kind of pipeline activity.
It's definitely brisk.
Yeah.
We are seeing a good amount of.
Yeah deals get done so yeah, just between ourselves and of course in the rest of the markets.
I think it.
It's pretty robust period out there.
And I appreciate that it sounds like the patients that you've got access to about 63 million.
You could deploy so you're probably pretty good for a while.
Right.
Is there I think an appetite for eventually.
On more leverage in your business or do you think.
You can kind of good for their eight teams around and there's plenty of activity in capital at your disposal.
I'm, just kind of curious how you're thinking about leverage going forward.
Sure Yeah, but it would be we've talked about this in the past and and.
And I'd like kind of.
Made it made an indirect reference to this during my prepared remarks today. So yeah, but we're we're definitely evaluating kind of what our optimal capital structure should look like yeah with you going back to November .
Last year and early this year.
We have made some public comments about the desire to go to kind of build out our capital structure as we think about.
You are growing this business and enhancing our return profile for the benefit of stockholders and.
And now that we're basically about five five to six weeks and with our with our New Board where were squarely focused on looking at this issue as well as you know kind of all other issues to make sure that we are kind of well positioned for the business going forward.
So yeah.
You don't have anything to announce right now regarding what that.
Quantum of debt capital may potentially look like that.
Considering putting on but yeah, but suffice to say we are evaluating that.
Yeah.
<unk> be able to make some announcements.
In the coming months.
I appreciate that and.
Yeah, if you worded essentially kind of scale up by taking more leverage.
How do you anticipate needing to kind of.
Expand your internal organization.
<unk> got quite a bit of bandwidth Hill.
Or are you at capacity and so you maybe want to add a member to tier investment team or just kind of trying to understand if you you kind of scale up and what sort of resources would you need.
Alright.
Sure.
Again, another good question.
Yeah from.
It's all resources perspective.
We.
Yeah, we definitely have capacity.
It should be more everyone works very hard yeah.
But to your point, we actually did add.
A director level investment professional you towards the end of the quarter.
Yeah, the first quarter I think think Judy started.
On March 1st.
And it's part of as part of this we yeah. We also.
They implemented a dedicated business development.
Yeah, I forgot kind of function that is W. K, so where.
Yeah, I think we're well positioned.
Yep.
We're always looking for.
For exceptional investment professionals so what.
What would definitely be on the lookout for additional resources.
We'd like to grow but at this.
At this point you know we're not currently hiring someone from that perspective.
Sure got it.
I appreciate that as well.
Lastly, I understand terrorists business, you mentioned of course that before feasibility studies.
Maybe you can just talk a little bit more about kind of.
How do you envision.
Your internal kind of belt and claim.
Playing out so you know you've got for feasibility study it.
Is the plan to kind of licensed them or.
Or do you want to kind of bring it to the FDA internally on your own just trying to kind of understand what the Cleveland games for your internal.
Yeah sure so yeah.
I guess.
One is a clarification there the.
Feasible. The feasibility studies are actually worked out that the terrorist team is doing with third party.
Pharmaceutical partners.
Yes, so those aren't necessarily all those are our assets those are partners assets that we are there.
That you wear.
No.
Evaluating using our technology to make oral versions of those assets and in.
And that visible pipeline continues to build and where it is.
Potentially be.
Yep.
A very important revenue.
Revenue driver for us because that.
Those sorts of feasibility agreements or are the things that turn into our.
The license agreement with a carrier license agreement.
On the internal.
The internal pipeline.
You work.
Yes.
Talked about.
The one program that we're really focused on and we're yes. So at this point, that's really kind of with the primary focus on it.
As good as getting that through.
Yeah its correct.
That's correct clinical trial yeah. The team has continued to look at additional opportunities to leverage our technology and I think as year goes on well.
And hopefully have some more things to say about that.
Yes.
That sounds good well.
Thank you Winston for all the updates and I'll jump back in queue here.
I appreciate it.
Again, if you have a question. Please press Star then one.
Our next question comes from Scott Jensen private Investor. Please go ahead.
Hey, good morning, Winston and Hey.
Hey, Scott uneventful.
And uneventful call in this tape as well appreciate it.
Kind of to follow on some of Kyles.
Areas of questioning in this space now that you're seeing more opportunities and obviously interest rates are going up are you able to adjust your prices that you get from your clients.
And kind of lock step with the market.
Yeah, It's a very interesting question the yeah.
Yeah on.
On one hand are you are.
Our especially that transactions are typically indexed to LIBOR.
A LIBOR and so we are getting that benefit from across the portfolio.
As well as on our new deals from from changes in LIBOR and obviously at some point, we will be moving to a new reference rate. So yes. So we do see the benefit from from that perspective.
On overall pricing.
Yeah, I think things have remained relatively constant.
The market hasn't moved.
I think all that much generally speaking.
I would say it's probably.
Plus or minus 25, 50 basis points here either way.
That said the thing that will be interesting to see is that these.
Capital market.
Hormel conditions continue into the second quarter.
Throughout the rest of the year.
How that actually last year, where we certainly will be looking to you know to take price, where we can you know I think what would the idea also that.
We do want to be mindful of.
Overburdening, our borrowers in kind of creating an issue. If you will so of course, we'll look at other other levels levers within our investment structures to try to enhance our returns for stockholders.
Excellent.
That answers my question now as far as the Leuprolide trial Hum.
Recruiting according to the.
Clinical trials Gov.
What is the timeframe, we could expect to get that phase two data since you're kind of looking at a month like yeah.
Do we have like second half of this year or first half of next year like what do we have any kind of guidance for when that might be.
Sure.
Yeah, we yeah, I, firstly I'd hope that we would we'd be able to talk about at some point this summer.
Yeah, but recruitment is taking a little bit longer.
The issues are that we're seeing.
Ah patient recruitment not all that dissimilar from what other yeah.
Part two of companies as you have noted over the last couple of quarters, Yes. So I think were for.
And you know some time kind of later in the second half of this year to be able to.
They have some results but.
Yeah at this point it really just depends on the pace of patient recruitment and the team is very focused on that and has been.
Looking to expand.
Yeah.
Okay.
Number trial centers in.
Winning additional measures to make sure that the.
But we can get the trial done kind of as expeditiously as possible.
But well.
We'll see you cause because that's really the gating factor on the timing so.
Okay.
And then they kind of fall on Kyle's point about the phase three which usually have a larger cost component or are you thinking that you would be interested or you'd be open to partnering with somebody to go to a phase III or this or would you get more value by by doing it yourself.
Sure kind of see that.
Yeah.
Yeah.
There, there's definitely an art.
On the licensing side, you know in terms of.
Do you license preclinical phase one phase two phase III post approval and yeah. It was.
With that kind of sliding siding.
Science scale as you as you dance with them.
Yeah, generally with the royalty rates and so forth kind of increasing of course at the spin spending more of your of your own money and get more risks to you know to get to those higher higher levels.
I think frankly, it depends on what the.
Out of the day to shape up and yeah, and what we think from regulatory perspective. It is required to actually get get an asset across the line I think what will.
Those were things what informs what the phase III costs would be and then will.
Essentially make that make that decision at that time.
I think though to the.
Except we are able to do.
Remonstrate, yeah in patients that were having a desired effect yeah, yeah for file of IV tube type program.
That may be the optimal time to get to a license it but.
We would of course yeah.
Consider all the factors I just mentioned as part of that analysis.
Excellent and my final question for you is is the board considering a buyback considering there sometimes are at the mall times, where the market isn't there to.
Maybe catch a stock are you thinking that maybe you guys can be one of those.
People that catches back.
Yeah.
Yeah.
Well I'll tell you what type of question.
For some frame.
And back to what I noted the LNG call my friends and myself, we might've caught it.
Sure.
Yeah, Yeah, so we're definitely thinking about that.
I think we all had hoped that we would have.
Been in a position earlier earlier this year to be able to make some more announcements on some of these.
Capital allocation type type decisions, yeah, but I think.
Now you know with our our new board really.
Really getting to work now for what we've been together five weeks six weeks.
Something like that.
We're we're definitely looking at that we're looking at that.
Everything of course from dividends and capital structure.
And so and so forth.
Yeah, I hate to be.
The first part of that was the termination to allow the riser agreements expired this month and will be.
Yep.
Doing additional analysis to good yep.
Able to make more announcements about.
Buybacks and so forth.
Months.
Great. Thank.
Thank you that's it yet and I'll hop off.
No I appreciate the interest Scott.
There are no more questions in the queue. This concludes our question and answer session I'd like to turn the conference back over to Winston Black for any closing remarks.
Thanks, Jason.
In closing I appreciate everyone's time and attention and look forward to future updates as we continue to advance as to BK Holdings I would also like to extend my sincerest wishes good health to all.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Yes.
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