Q1 2022 Rockwell Medical Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the Rockwell Medical first quarter 2022 results call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question at that time. Please press star one on your telephone.
As a reminder, this conference call is being recorded.
At this time I would like to introduce Jason the CECO <unk> Investor Relations. Please go ahead.
Good afternoon.
Jason Finkelstein of Argot partners, the Investor Relations representative for Rockwell Medical joining me from Rockwell Medical on todays call are Dr. Russell Ellison, President and Chief Executive Officer, and Russell Skip that executive Vice President Chief Financial Officer, and Chief Business Officer, Dr. Marc Hoffman, Chief Medical Officer.
At Kimco senior Vice President of sales and marketing will be available for Q&A.
Before we begin I would like to remind everyone. This conference call and webcast will contain forward looking statements about the company and the meeting of the federal securities laws, including but not limited to the types of statements identified as forward looking.
Oh World Tour on Form 10-K, and our subsequent periodic reports filed with the SEC, which are all available on our website in the Investor Relations section.
These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward looking statements reflect our opinions and expectations only as of today, except as required by law, we specifically disclaim any obligation to update or revise revise these forward looking statements in light of new information.
Or future events.
Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward looking statements are discussed in greater detail in our periodic reports filed with the SEC.
This conference call can be accessed a rockwell medical's Investor Relations webpage. The call is being recorded for audio rebroadcast can also be accessed on the same web page at this time I would like to turn the conference call over to Rockwell Medical's, President and Chief Executive Officer, Dr. Russell Ellison Russell.
Thank you Jason good afternoon, and thank you for joining us.
Rockwell medical.
He is a biotech company.
But with revenue.
And that makes us fairly unique.
We have a proprietary drug technology.
Old ferric pyrophosphate citrate or F. P C.
Which is a next generation therapy.
Iron deficiency.
Iron deficiency is a significant problem in many different patient population.
We believe we have a significant opportunity with FTC in the rapidly growing area of home infusion therapy.
Where we are confident that there is a large unmet need for effective therapy.
F. P C can effectively address that unmet need.
That F. P C can be safely administered at the home setting.
And based on our prior experience we can efficiently.
<unk> navigate the clinical and regulatory process.
Finally, we are reengineering, our dialysis products business.
Which will generate a gross profit for the first time in several years.
This is a business that Rockwell was originally founded on.
This is a business that we believe may be able to generate a modest amount of cash flow to help fuel our growth opportunities for FTC.
We have made meaningful progress to improve this business.
Which we expect will reduce our cash burn and dialysis by about $15 million on an annualized basis.
With respect to home infusion therapy, we're pleased to be.
Soon beginning our phase II clinical trial with a P C in patients receiving infusion therapy in the home setting.
Health care is increasingly shifting to the whole.
It was recently reported that Medicare is providing funding for states to expand home and community based health care services and to increase access Mckinsey and company reported in February that up to $265 billion worth of care services for Medicare beneficiaries could shift to the home by 2025.
This rapid growth is driven by a lower cost of care and a higher patient satisfaction.
Home infusion therapy in which various medications are given by our <unk>.
IV infusion at home rather than an infusion center is a rapidly growing segment of home health care.
Many patients that are receiving infusion therapy at home suffered from diseases like Gi disorders heart disease and cancer that are associated with iron deficiency, which is extremely difficult to treat with the traditional forms of iron.
Iron deficiency in period.
Because iron is critically important for the body.
It's a necessary building block for Red blood cell and it serves as a fuel for muscle energetics.
Both four organs like the heart as well as skeletal muscle.
Mild iron deficiency may sometimes be treated with oral supplements or dietary changes.
But moderate to severe iron deficiency is typically accompanied by inflammation, which blocks the absorption of oral iron.
Untreated iron deficiency anemia is associated with serious complications.
<unk> organ dysfunction infection extended hospital stays severe fatigue and depression.
Prescription IV iron is the most common treatment for addressing more severe cases.
But the current products have limitations.
They require an outpatient visit for administration.
And are associated with the.
Risk of rare, but severe reactions.
Cuz of inflammation.
Iron can be stored in the liver and not be readily accessible the tissues. So high doses are required.
However, even with the limitations of current iron therapy.
The global IV iron market exceeds $1 billion annually.
In December we received feedback from the FDA regarding our investigational new drug application in support of our proposed phase II trial of FPC as home infusion therapy.
The study proposal includes a novel dosing regimen, one that is fine tuned to match the preferences of caregivers and patients receiving health care at home.
F D. A requested additional preclinical data related to the chemical stability in the microbiology of the administration materials that we propose for the study.
We have successfully completed these lab experiments and on May six we provided F D. A with the requested supplemental data.
Rockwell must wait 30 calendar days from the data submission before initiating any clinical trial as the FDA reviews the submission.
We do remain confident in the potential of the FPC and are prepared to move forward with the initiation of the phase II trial in June .
Pending the review and clearance of our application by the FDA.
Our planned phase II trial in home infusion will be the first randomized controlled trial of IV iron ever done in the home setting a true blue water opportunity.
For the development of FPC in this indication we plan to leverage the predictable kinetics of the drug along with its excellent safety profile, which has been established and randomized trial and subsequently in more than one and a half million doses administered in hemodialysis patients in clinical practice.
This trial will be our first step towards bringing FPC to a broader group of patients separate and distinct from the dialysis population.
We estimate the total addressable market for F. P C. In the home infusion setting to be over $600 million in the U S alone.
Now turning to dialysis.
We are reengineering, our dialysis concentrate business, which in the second half of this year is expected to generate a gross profit for the first time in several years. This is a business that we believe may be able to generate a modest amount of cash flow in the future to help fuel our growth opportunities for our P. C.
We've made meaningful progress to improve this business, which we expect will reduce our cash burn.
From these activities by about $15 million.
On an annualized basis.
In addition, going forward, we have some protection against inflationary price increases in certain key supply costs.
The supply chain problems that the U S has experienced over the past couple of years have had a severe impact on the supply of concentrates dialysis clinic, causing some clinics to encountered serious shortages.
However, Rockwell medical has been working to revise certain terms of its supply contracts with customers in an effort to stabilize its concentrates business and last month, we announced an amended and expanded agreement to supply our concentrate products to our longtime customer and partner Davita, Inc.
Which is a leading provider of kidney care in the U S with a market capitalization of approximately $10 billion.
The amended supply agreement is designed to enable Rockwell medical's concentrate business to potentially operate profitably in the future with the aim of building a steady reliable supply of lifesaving concentrates in the U S.
With dialysis concentrates accounting for approximately 98% of our 2021 revenue.
And with approximately 90% of our 2021 sales coming from distributors and customers for use in the U S.
This new agreement is a significant milestone for Rockwell.
In addition to the revised agreement Davita will also invest up to $15 million in Rockwell 7.5 million has already been funded and is convertible at $1 per share davita.
Davita may potentially invest another $7 5 million.
Next I'll turn to our pharmaceutical products Triferic and Triferic Avenue, which is ferric pyrophosphate citrate for use in dialysis patients.
Since the commercial launch of Triferic in 2019, and the launch of Triferic Avenue in 2021 market adoption has been limited.
Despite our sustained efforts to market the products.
Sales in the U S have not met our expectations, especially.
Considering what we believe is a differentiated product profile.
Dialysis is paid for under Medicare's bundled and capitate the reimbursement scheme.
Discourages clinics from adopting innovative products.
We also faced significant competition from other forms of IV iron, which had been well established in the market.
Due to these headwinds we have curtailed our investment in the promotion of Triferic can Triferic Avenue in the U S and instead have been seeking a commercial partner for these products that has a more diverse portfolio and with the commercial horsepower that can drive triferic adoption.
For the right company, we believe that Triferic and Triferic Avenue have strong potential to grow in the meantime, Triferic can Triferic Avenue continue to be supported by Rockwell medical and are commercially available to clinics and patients.
Despite our challenges with these products domestically, we believe that international sales of Triferic can ultimately be a strong source of revenue and value in the coming years as dialysis payer models in many countries outside the U S are more accommodating for innovative products.
Our international partners continue to make solid progress with Triferic and South Korea jail pharmaceutical received regulatory approval in January from the Korean regulatory authority and is preparing for commercial launch in.
In Turkey, our partner drug as Stan has initiated the process required to gain regulatory approval from the Turkish authorities.
In China, our partner one bank Pharmaceuticals completed patient enrollment ahead of schedule and its phase III study and our partner in India. Some pharma has a clear path forward with guidance from the regulatory authority and anticipate launching the required clinical trial in this quarter.
I'm pleased with all the progress we have made in a short period of time.
We will continue to work to bring value to the health care community to patients and to our shareholders.
With that I.
I'll turn the call over to Russell Gibson, our Chief Financial Officer, and Chief Business Officer for a brief financial overview Russell.
Thanks Russell.
We ended the first quarter of 2022 with cash and cash equivalents of approximately $9 9 million.
Of course this figure does not include the seven and a half million dollar investment from Davita, which closed in April .
Revenues were $16 $1 million for the first quarter of 2022 compared to $15 $5 million for the same period last year.
The increase of $7 million was primarily due to an increase in sales of dialysis concentrate product from Baxter and our international customers. We expect our concentrate sales to continue to grow due to our new arrangement with Davita.
Our cost of sales during the first quarter of 2022 was $16 $9 million, resulting in a gross loss of $800000. During the period and that was compared to cost of sales of $15 $1 million and a gross profit of 400.
<unk> thousand dollars during the same period last year.
Gross profit decreased by $1 $2 million due to significant supply chain related inflationary pressures related to the concentrate segment.
As Russell mentioned earlier.
The agreements allow us to be able to pass through certain inflationary costs, which help us set this unusual time.
As a result of these changes the company expects an improvement in margins for the remainder of 2022 and 2023.
Our cash used in operating activities was about $9 $8 million in the first quarter, which included some seasonal items as I mentioned last year like some of these seasonal items Ehrlich annual cash bonus payments for our key employees and these are the employees that producers deliver our product today.
And day out through Pandemics supply chain breaks to nice stores, an increase in accounts receivable due to our annual true up milling with Baxter and our seasonal reductions of certain payables and prepaid items.
Good.
Due to the updated pricing with Baxter, our updated arrangement with davita or cost cutting efforts related to our supply chain and seasonal factors. We expect this figure to dropped significantly over the rest of the year.
Overall, we expect $11 million reduction in our 2022 cash burn due to our efforts in the concentrate business, which is about a 15 million dollar impact on an annualized basis.
I'll now turn the call back to Russell Ellison for closing remarks Russell.
Thanks Russell.
I'll close by saying that Rockwell medical as a development stage biopharmaceutical company is fortunate to have a steady and ultimately improving revenue stream from our dialysis products, which are an important differentiator compared to many development stage biopharma companies with no <unk>.
Revenue.
In defence, we're a biotech company.
With revenue.
We have a proprietary drug technology, ferric pyrophosphate citrate or FPC.
Which is a next generation therapy for iron deficiency.
A major problem in many different patient populations.
We expect to soon begin a phase II study, where we believe we have significant opportunity with FTC in the rapidly growing area of home infusion there.
Where we are confident there's a large unmet need for an effective iron therapy that FPC will effectively address that need.
That FPC can be safely administered and based on our prior experience that we can efficiently navigate the clinical and regulatory process.
Finally, we are reengineering, our dialysis products business.
Which will generate a gross profit for the first time in several years we've.
We've recently taken big steps to improve this business.
This is a business that we believe may be able to generate a modest amount of cash flow to help fuel our growth opportunities for FPC.
And ultimately reduce our need for capital.
We have made meaningful progress to improve this business.
Which we expect will reduce our cash burn in dialysis by about $15 million on an annualized basis.
We are making progress at Rockwell.
So thank you for joining our call today and for your interest in Rockwell medical.
I want to thank our shareholders for their patience and belief in our efforts to unlock the value of this company.
With that I'll turn the line over to the operator for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key our first question comes from Brandon Folkes with Cantor Fitzgerald.
Your line is open.
Hi, Thanks.
My questions and congratulations on all the progress.
Let me just can you talk about the implications of the Davita agreements and how this could drive.
She followed suits and maybe just give me some more pricing power at the customers' needs.
And then similarly, how do you think about the impact on your P&L going forward can you just elaborate on the statement of that operating profitably in the future how should we think about timing of it.
Heating and box.
Thanks, very much Brandon I think Russell skips the other Russell.
We will as well.
Well positioned to answer your question Russell.
Sure. Thank you thanks for the question Brandon.
I think.
As I.
Rather than focus specifically on the Davita agreement really I think it makes more sense to focus on the impacts.
Two our dialysis business up overall everything we're doing.
Looking at these the agreements we have with our customers looking at the supply chain.
And creating efficiencies and so we've been talking about for the last year and then importantly also.
Kicking off the joint cost cutting efforts that we are.
Talked about with Davita in terms of how we're going to.
We're going to be operating in the future.
Okay.
We've been doing a lot of supply chain analysis.
For a while and we're starting to see some of that pay fruit, but at the same time.
The global supply chain issue in Chad.
Have affected us as Russell mentioned in.
Prepared comments affected us just like everybody else and had a big impact on our costs. So.
Don with respect to the new agreement the joint cost cutting the efforts.
Of our efficiency efforts, which we call a whiteboard process is that we expect as Russell mentioned.
On a go forward basis, so to answer your question as we think forward.
We should be reducing about $15 million or having a.
A $15 million improvement in the economics of our dialysis business. If you think about it on an annualized basis recall that.
Although the quarter, we just reported we showed a small increase in sales already in the first quarter.
Yes.
The updated agreement with Davita that didn't take effect until may 1st.
So we are expecting to see improvement both on the top line and the bottom line as we proceed throughout the rest of the year. All of this clearly is also subject to all of the other issues that we're seeing from a macroeconomic basis. So all of this I do refer you back just forward looking statements because.
As we're seeing globally things are changing quite frequently but based on our efforts and what we're doing we're seeing that those kind of effects moving forward and and yet still we think that theyre going to have a pretty significant effect on our 2022.
I expect that we'll be reporting additional topline and margin improvement as early as our next quarterly filings and as we proceed.
The key also I think as you're thinking about Rockwell and looking in the future.
It's really understanding that a lot of the future growth in this business is going to be driven interestingly also by these cost cutting efforts and the efficiency measures that we want to put in place because I think what that does is just makes our products all the more competitive and <unk>.
Laos us to grow not only on the top line from a.
Our pricing perspective, but also from a volume perspective, and these are all things that we're looking forward to achieving in the in the upcoming months quarters and years.
So I don't know if that answer your question hopefully with as much guidance as I can.
That was very helpful. Thanks, So much and then you did sort of onto my next question because I was going to go.
But the Opex line and the discipline there so maybe if I just hop across and ask another question. If I may add on the home infusion trial.
You talked about waiting for feedback from the FDA.
The gating factors before beginning a trial and then once the trial begins how should we think about news flow from where we sit.
That's a great question Brandon so.
No really the rate limiting step right now is.
The clearance of the IND that is to say.
The FDA doesn't have any further.
Further requirements by June 6th.
In the meantime, we have been.
Working on study startup activities and.
We expect to.
I have the first patient in assuming this clear.
In August .
And.
That would give us and also we anticipate and this is still early days because we haven't started recruitment.
Turning to our plan we would have.
The last patient out in July 2023.
But that all can pinch thick.
Everything going well, but that's how it's looking now.
Thank you that's very helpful and congrats again on the progress.
Sure.
Thank you. Our next question comes from Rob <unk> with H C. Wainwright Your line is open.
Hi, This is Matt on for Rob Thanks for taking our questions. So just to follow up on the FPC phase III trial.
Do you anticipate any impacts from COVID-19 on the recruitment process.
That's a that's a really great question because that.
Actually yeah.
If anything really put home infusion on the map.
And its utility it was COVID-19.
And.
I can tell you that.
In the home parental nutrition space.
That has really increased to the point, where we're just barely keeping up with supplying the nutrient bags.
So we really think that the trend has been clearly too.
Giving medicines that IV medicines at home more frequently than even before.
Our initial round of.
Talking to investigators.
We really.
We're pretty comfortable with this actually our chief Medical Officer, Marc Hoffman from the call. So Mark do you want to add any more color to this.
The only thing I would add to that Russell is that.
Because it is a home setting study.
Everything has been designed to be remote so whereas in the traditional clinical trial patients would have to come into the office frequently for visits and assessments. This study has been specifically designed to emulate the use of the product in the home, which as Russell mentioned has the advantages of not going into an off.
This not being exposed to other patients not being exposed to other diseases, specifically with respect to Covid. We know that Covid has not gone forever, but COVID-19 is one of those things. If you look at clinical trials over the past 18 months a COVID-19 positive tests is generally one of those things where you can re screened somebody.
If that is the only criteria by which a patient misses eligibility and we factor that into our study design.
That's great color. Thank you.
We read your poster presentation with interest.
Revealing deficiencies in the management of <unk>.
And then in particular the consensus among Acp's.
The hemoglobin level that should trigger therapeutic intervention.
The question is are you planning on any campaigns to communicate this data to HCP.
That's a great question.
So.
Right now with respect to launching the phase two trial recruiting investigators patients.
The answer is beyond that no.
I think the time for that.
It's probably going to be in parallel with phase III in the sense of a lot of peer to peer communication to get the awareness.
Of iron deficiency anemia, and the heads of.
Physicians, who.
Our prescribing home infusion treatments.
This is obviously the obvious clear ones that are the Gastroenterologists, who will do home parental nutrition for short bowel syndrome, ulcerative colitis that kind of thing, but there's also many other specialties, where this is import patients who have inflammation and are treated at home.
Patients who have.
Oncology drugs at home.
All of those have a high.
The prevalence of anemia incidence of anemia, and thats largely due to the inflammation induced.
Because that inflammation reduces the absorption of buyer.
<unk>.
I think that awareness amongst physicians that aid that this problem that be.
For your home infusion patients this is a.
Hey potential solution.
Is really quite well suited to home to the home.
I think all of that is pretty much in parallel.
As we recruit for the Phase III program.
At that time.
Okay. Thanks for that color and just finally wondering from a strategic perspective do you plan to follow the ongoing ex U S clinical trials of Triferic with FTC.
Has there been any interest from your partners in Canada and Asia in doing so.
You mean in home infusion.
If that's your question.
Yes.
No not yet.
Our partner in Korea is just starting.
And India is.
Still involved in the regulatory process for dialysis and have to do a trial.
So those are two fairly large ones.
They are right now focused on dialysis I mean, the good news is that.
Korea is going to be certainly first.
But we're happy to keep.
Apprised of whole infusion situation so that they can.
<unk> to that with whatever they have to do a locally same would apply to India, although I expect.
In India, there probably is a market we haven't really looked at it very carefully.
So I don't really see in the <unk>.
Near term the international side.
Going to be very active I think by the time, we get into phase three once we've got our clinical proof of concept data, that's what I would expect our partners too.
Start working in this.
Okay, great. Thanks for taking my questions and congrats on your progress.
Sure. Thanks, a lot.
Thank you.
This concludes the Q&A session now I'll turn it back to Dr. Allison for closing remarks.
Well.
<unk>.
I wanted to thank you all for joining us.
Thank you for your excellent.
Excellent questions and as I said.
Your patience with us and your support of the company and I look forward to our next quarterly call.
Any individual discussions you may want to have so thanks very much.
This concludes today's conference call. Thank you for participating you may now disconnect.
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