Q2 2022 Rockwell Medical Inc Earnings Call

need to patience.

Rockwell has developed a core expertise in manufacturing and delivering hemodialysis concentrates and is the second largest supplier of hemodialysis concentrates in the United States. We manufacture our concentrates under CGMP regulations at our three facilities located in Michigan, Texas and South Carolina from which we deliver these products to dialysis clinics throughout the United States. We also manufacture mixers that are used by clinics in our Iowa facility. At the start of 2022, we began an initiative to restructure our concentrates business, the first step of which was to expand our relationship with our largest customer, DaVita, which is one of the leading providers of kidney care services in the U.S. During the second quarter of 2022, we successfully renegotiated our supply agreement and expanded our partnership with DaVita, which included a $15 million investment in Rockwell. We are excited to be working even more closely with DaVita to support their dialysis centers and the patients they serve. Additionally, we continue to explore new ways to improve our supply relationship with Baxter and our international customers, all of which would afford us the opportunity to support more dialysis patients and make our concentrates business more valuable to Rockwell and its stockholders. These efforts to restructure our concentrates business are now beginning to be positively reflected in our financial results. The second quarter of 2022 generated the highest quarterly revenue to date for Rockwell. We increased our top line revenue to $18.7 million in the second quarter of 2022, a 16% increase over the first quarter of 2022, and a 24% increase year over year over the second quarter of 2021. We plan to continue to drive top line revenue growth by adding additional clinics and further supporting our existing customers. We are also working on a number of operational efficiencies and cost cutting measures that we believe will right size our efforts for the revenue we generate.

while simultaneously being prepared for the future growth of this business. These changes should ultimately translate into improved financial performance of our concentrates business as we drive our overall business towards profitability. We expect to have more to say about these changes in the coming months.

simultaneously being prepared for the future growth of this business. These changes should ultimately translate into improved financial performance of our concentrates business as we drive our overall business towards profitability. We expect to have more to say about these changes in the coming months. Now let's turn to Trifaric.

Triferic is an FDA-approved treatment indicated for the replacement of iron to maintain hemoglobin in adult patients with hemodialysis-dependent chronic kidney disease.

In the U.S., we continue to focus on serving our current customers.

As first reported in 2021, we made the strategic shift away from supporting Triferic with a full commercial organization for the U.S.

and therefore are in the process of seeking a U.S. partner that can apply the appropriate commercial efforts to support triphoric products going forward.

We are working diligently with our international partners to bring our products to market in their respective territories.

Let me update you on the progress our partners have made.

In South Korea, JL Pharmaceutical received regulatory approval for both Trifaric and Trifaric Avenue in January of 2022 from the Ministry of Food and Drug Safety.

Jail confirmed that in July they commercially launched Trifaric in South Korea.

We are excited to see our product making its way to patients and look forward to updating you on jails progress to commercialize Triperic.

In China, our partner, Wangbang Biopharmaceuticals, enrolled the final patient in its pivotal phase 3 clinical trial, six months ahead of schedule, totaling 442 patients.

In Turkey, our partner, Drogsan Pharmaceuticals, initiated the process required to gain regulatory approval from the Central Drug Standard Control Organization.

Drogsan has applied and awaits for approval from an accelerated review process for Trifaric with the Turkish Regulatory Authority.

And in India, our partner Sun Pharma has a clear pathway forward with guidance from the Central Drug Standard Control Organization and is preparing to initiate the required clinical trial before the end of the year.

We will work to continue to work with our partners outside the U.S. to bring Trifaric to the market.

We believe this strategy will provide Rockwell near-term revenue that will positively impact our bottom line.

FPC for home infusion is our follow up to tri-fairec and utilizes the FPC platform in the home infusion setting.

Home infusion therapy, where various medications are given by infusion therapy in the home rather than at an infusion center, is a rapidly growing segment of home healthcare.

Many patients who receive home infusion therapy suffer from chronic diseases that are associated with a high incidence of iron deficiency and anemia.

Current treatment options are not well suited for use in the home setting, and there are currently no approved intravenous therapies for treatment of iron deficiency anemia in the home.

If approved, FPC would be the first intravenous therapy to treat iron deficiency anemia that is approved to be administered at home.

During the second quarter of 2022, Rockwell provided the FDA with supplemental data including information on a new presentation of Trifaric Avenue to be used in our clinical studies and to commercially support our investigational new drug for IND application.

The FDA has placed this product on clinical hold and requested that additional data related to microbiology and short-term stability of this formulation be provided to support the application.

We engaged an outside organization to conduct these studies on our behalf.

These studies are underway and should be completed in the third quarter of 2022.

In our R&D pipeline, we are also exploring FPC's impact on the treatment of hospitalized acute heart failure patients.

We believe that FPC may deliver rapidly bioavailable iron to the heart and improve cardiac energetics during hospitalization.

This effect could help patients recover faster resulting in shorter hospital

If so, these outcomes would translate into a meaningful reduction in healthcare costs in human suffering.

We will be submitting a pre-IND meeting request to the FDA during the third quarter of 2022 and expect to meet with the FDA during the fourth quarter of 2022.

Finally, in addition to focusing on our base business, we are aggressively looking at ways to grow our business.

We are currently looking at new product opportunities to pair alongside our concentrates business, which would enable us to leverage our significant manufacturing and distribution capabilities and customer relationships.

These opportunities could improve both our top line and bottom line.

Furthermore, we are evaluating new in-licensing opportunities for our pharmaceutical business.

products that seek to treat diseases in our core therapeutic areas.

We believe that Rockwell's future will include multiple products generating multiple revenue streams, and we look forward to sharing more on these opportunities on future calls.

As I discussed earlier, our goal is to drive our business to profitability.

to access near-term revenue through our existing trifaric business in the US and outside the US, to develop longer-term revenue streams in the form of FPC for home infusion and acute heart failure.

and to initiate business development efforts.

All would provide longer-term sustainable growth for our business and support our mission to provide life-sustaining products for patients suffering from blood disorders and diseases associated with the kidney.

Now I will turn the call over to Russell to provide you with our financial updates for the quarter. Russell?

Thank you, Mark.

During the second quarter of 2022, Rockwell raised a total of $30 million, which included $15 million from our longtime partner, Davina.

As a result, our cash and cash equivalents as of June 30th, 2022, is approximately $30.8 million.

This compared to cash and cash equivalents of $9.9 million at March 31st.

2022 and $13.3 million at the end of 2021.

As Mark mentioned earlier, the second quarter of 2022 generated the highest quarterly revenue to date for Rockwell.

Our revenue was $18.7 million for the three months and on June 30th. This represented a 16% increase quarter over quarter compared to $16.1 million for the three months ended March 31st.

2022, and a 24% increase year over year compared to the $15.1 million for the three months ended June 30, 2021.

For the second quarter of 2022, we realized a gross profit of $1.7 million. This compared to a gross loss of $786,000 for the first quarter of 2022.

a gross loss of approximately 262,000 for the second quarter of 2021.

The gross profit increased during the second quarter of 2022 due to improved performance of our business, including price adjustments with some of our customers to reflect the changes in expenses associated with materials and inflation.

Our team's efforts to keep costs down during the second quarter of 2022 is especially commendable in light of the fact that transportation costs during that quarter continue to increase in unprecedented rates nationwide.

Cash used in operating activities for the three months ended June 30, 2022 was $5.8 million compared to $9.8 million for the three months ended March 31, 2022, representing a 40% decrease quarter over quarter.

During the second quarter of 2022, Rockwell Medical affected a 1 for 11 reverse split of the company's issued an outstanding common stock.

The reverse split was primarily intended to bring the company into compliance with the minimum bid requirements for maintaining its listing on the NASDAQ capital market.

which the company achieved on May 31st, 2022.

Finally, we are committed to de-levering our business with the payments made to Novartis over the quarter have reduced our debt to $16.5 million.

And we expect to continue to reduce this over the coming quarters.

I will turn the call back over to Mark for his closing remarks. Mark. Mark.

Thank you, Russell. Operator, please open the phone lines for any questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad.

We'll pause for just a moment to compile the Q&A roster.

Your first question comes from Ram Sivaraju. Your line is open.

Rom, your line is open.

Your next question comes from the line of Brandon Foulkes. Your line is open.

Hi, thanks for taking my questions and congratulations on the progress and congratulations, Mark. Maybe just three for me, sort of high level, how should we think about the three pillars? Well, I guess that's my term, rather yours, but just being a concentrates business, maybe try to bear it in the pipeline in terms of driving value going forward. How should we think of each of those three contributing?

And then maybe just elaborate a little bit on the strong revenue we saw in the quarter. Is this sort of fruits of these renegotiated contracts coming through? Maybe just any color in terms of can just maybe just remind us when those renegotiated contracts kicked in if they did. Otherwise any color and volume there.

And then maybe lastly, just can you elaborate a little bit on the FDA?

on the Home Infusion program and sort of what they need to see to kind of move forward there and maybe what you need to see to move that program forward yourselves as well. Thank you.

Great, thanks Brandon for the questions. Yeah, so let me address each one.

So the way that we think about our business is really, as I mentioned earlier, we are trying to drive profitability of our overall business. And therefore, we are looking to maximize the value of our sort of three areas of focus. First is the concentrates business. As you can see from the quarter, we are making significant improvements through the restructuring of that business. And we think on a short-term basis that's what's going to help us drive profitability.

In the nearer term, we're looking at Trifaric as an opportunity that's registered and being commercialized in the United States, as well as our existing relationships with our international partners will, that product is further developed and approved, will start to generate additional revenue for the company here in the near term. And then the longer term opportunity is with the FPC platform in home infusion and acute heart failure. So that's how we're sort of.

to improve our relationships with our existing customers.

And as a result of that, we're seeing this meaningful improvement in revenue. This primarily results from a couple of things. Again, one is additional volume that is being sold as more and more clinics need our products. But secondly, and probably more importantly, is the adjustments that were made to these agreements to reflect price.

As our material costs have increased, as inflation has impacted our business, as the cost of distribution has increased, we've altered our pricing scheme and that has allowed us to adjust accordingly based on those changes.

And then the last question I believe was around

the FPC home infusion program. So we're taking this in a systematic way. The agency's question as it relates to this formulation, because it's a new formulation and is generated effectively through a compounding strategy of our Trifaric Avenue product, the agency has asked, as it typically does in formulation situations like that for...

stability studies and microbiology studies. It's not unusual for the agency to request that and so we're carrying out those studies. Based on the results of those studies, this is a formulation that we can then move forward. You know, we will then refile our IND application and address overall sustainability scenarios and

you know, seek to begin our clinical development work.

If we are, this formulation obviously is

does not meet the standards that the agency requires, then we're going to need to effectively reformulate. And that could then potentially delay the start of our clinical work.

So hopefully that answered your questions, but I appreciate the questions.

Yeah, very comprehensively. Thanks very much, Mark.

Your next question comes from the line of Ram Silvaraju. Your line is open.

I think we're having technical difficulties getting to Ram.

ecosystem for reg Roots. Yeah.

There are no further questions at this time. I now turn the call back over to Dr. Strobek.

Thank you, operator, and thank you, everyone, for joining us on today's call. It was a pleasure to introduce myself and provide you with an overview of our second quarter achievements and the tremendous opportunity that lies ahead for Rockwell.

I want to thank Rockwell's employees for their continued commitment and dedication during what has been a challenging time.

We are in the business to make products that impact a patient's life. This is our passion and we take this responsibility very seriously.

We made a number of improvements in our business but recognize that there is still a lot of work ahead of us.

We are inspired by that challenge and look forward to sharing our progress along the way.

This concludes today's conference call. You may now.

You You

operator.

available operator.