Q3 2022 Cumberland Pharmaceuticals Inc Earnings Call

Good afternoon, and welcome to Cumberland Pharmaceuticals, third quarter, 2022 financial report and company update.

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

I would now like to turn it over to Molly.

Supervisor at adult and agency, who handled the Cumberland Communications Mollie. Please go ahead.

Hello, everyone and good afternoon, and thanks for joining today's call.

Earlier this afternoon Cumberland issued a press release containing financial results for the third quarter of 2022, along with a company update.

The release, which includes the related financial tables can be found on Cumberland website at Www Dot Cumberland pardon My dotcom.

Management will share an overview of those financial results during today's call.

He'll also provide an overall company update including a discussion of its brand pipeline and partners.

Debating in today's call are a J Kazimi, Cumberland, Chief Executive Officer, and Jon Hamm, Chief Financial Officer.

Please keep in mind that there are discussions may include forward looking statements as defined in the private Securities Reform Act of 1995.

These statements reflect the company's current views and expectations concerning future events that may involve risks and uncertainties.

Additionally, there are many factors that could affect future results, including natural disasters economic downturn public health epidemic.

International conflicts and others that are beyond the company's control.

Those issues are described under the caption risk factors in Cumberland Form 10-K, and any additional updates filed with the SEC.

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

The company's best efforts actual results may differ materially from expectations. The information shared on this call should be considered current as of today only.

Please remember that the company is it responsible for updating any forward looking statements, whether as a result of new information or due to future developments.

During today's call there'll be references to several of Cumberland marketed brands.

Prescribing and safety information for each brand is included on the individual product websites and the links to those sites can be found on our corporate website at www Dot Cumberland pharma Dot com.

The company will also provide some non-GAAP financial measures with respect to performance and explanation and reconciliation to GAAP measures can be found in the financial tables in the earnings release that was issued earlier this afternoon.

If you have any questions. Please hold them until the end of the call at which point, we'll be happy to answer them.

With that overview I'll turn the call over to Cumberland, Chief Executive Officer, a J kazimi.

Thank you Paul and good afternoon, everyone. We appreciate you joining us.

You'll hear today.

Another active and productive quarter here at Cumberland.

An update on the latest developments and review our financial results for the third quarter 2022.

So let's get started.

I'm pleased to report that Cumberland.

A successful third quarter delivering on our goal of double digit revenue growth for the period.

Our line is FDA approved brands generated $11 4 million in revenue.

One $4 million and adjusted earnings or 10 cents a share.

Our sales organization continues to navigate the challenges in the marketplace and we are.

We're starting to see a return to a more typical selling environment.

However, we are still seeing staffing shortages at hospitals clinics and physician offices.

Impacting the number of patient procedures.

The facilities business.

Still we experienced strong year over year financial performance.

By contributions from our newest brands too so it's off to a great start.

According to product through our new sales division covered with oncology.

During the third quarter, we largely completed the transition of <unk> from Q adhering to here at Cumberland.

Dallas assumed full commercial responsibility for the product in the U S, including its marketing promotion and distribution and medical support activities.

Already we've seen sand through so quickly becoming one of our most important brand and a significant contributor to our business.

To fund this acquisition recall, we extended our bank line of credit for a new three year term.

Expanded that facility to provide us a $20 million in capital.

So.

First and only FDA approved prescription patch.

For the prevention of nausea, and vomiting in patients receiving certain types of chemotherapy treatment.

By addressing these issues, we can help patients tolerate and continue the need of treatment for their cancers.

To support the increase though as I mentioned, we formed a new specialty sales division coupled with oncology.

And we also entered into a new co promotion agreement with Verily Pharmaceuticals, the feature set.

International oncology sales organization.

<unk> team completed their training and then launched their promotion during the third quarter.

They already will promote the product across the U S for an initial three year term.

The option to extend for an additional two years.

And Verity and Carlos will share in the incremental contribution margin, resulting from their efforts.

Our teams are working closely a joint marketing and sales initiatives and we look forward to expanding the number of cancer patients who can benefit from this brand.

With the addition of <unk> sales our product portfolio decisions combined revenues of 11 4 million during the third quarter.

41% increase over the prior year period.

Adjusted earnings for the third quarter were $1 4 billion.

Or 10 cents a share while year to date cash flow from operations was $5 6 million.

A 28% increase over the same period last year.

As a result of the <unk> acquisition, our total assets grew to $91 billion by the end of the third quarter, including $19 $5 million in cash.

Total liabilities were $53 million, including $17 7 million on our revolving line of credit.

Shareholders' equity was $38 million as of September 32022.

Now typically hand, the call over to our Vice President Todd Anthony for an update on our <unk>.

And our brands, but unfortunately, Todd has taught us out today recover recovery from a recently elective surgery.

We wish him well and I'll go ahead and give a brief update on his behalf.

I'd first like to touch on by that are potent injectable antibiotic.

To treat serious bacterial infections, including hospital acquired ventilator associated pneumonia.

As well as the complicated skin infections.

Earlier this year, our marketing and sales leadership took a fresh look.

How we can best support by bat over they launched a series of new initiatives.

Increased the brands awareness and use of this important potentially.

Lifesaving Brad.

Based on the implementation of those initiatives.

We are beginning to now see an improvement brands performance.

I'd like to discuss crystallize, our prescription strength laxative package in the convenient pre measured powder dose, which dissolve quickly just four ounces of water, providing a clear taste for the AD.

Free solution.

Crystals continues to benefit from the support of our co promotion partners with feature the brand with physicians and facilities that cover the does not cover.

Ward, winning marketing campaign has also been refreshed for 2022 to support increased engagement with our customers and we've expanded patient support for the brand, which has recently been added to the good Rx platform.

Turning now to <unk> I'd like to remind you that late last year, we received FDA approval for its use just prior to surgery, which results in patients with the procedures and significantly less pain and also heating significantly fewer opioids.

We continue to see growth in our ready to use presentation of caldolor as more patients return for elective surgeries.

Additionally, international shipments have contributed nicely to the brand's performance over the year.

And now I'd like to touch on our newest product in the portfolio the same Houston, which I did mentioned earlier.

And you see with us in Houston supply 24, 48 hours before receiving chemotherapy.

Prevent nausea, and vomiting for up to five consecutive days.

Alternative oral treatments must be taken several times a day.

This five day period to deliver the same therapeutic doses and you're making.

Can be difficult for some patients who are experiencing nausea, when they tried to swallow.

We're very excited about I believe in the potential of <unk> and we're honored to delivery to cancer patients throughout the country.

Next I'd like to share an update on already tracks product line, which we launched in the fourth quarter of last year.

It's our methotrexate a pre filled syringe is designed for the space.

Simple treatment of active inventory.

Pathing and severe psoriatic arthritis.

Pre filled syringes assure accurate and safe dosing.

<unk> retractable extra things 29 gauge needle that reduces pain as well as the risk of needle sticks.

Already trip sales last year and early this year were limited as our initial stocking of the product began moving through the distribution channels.

Quarterly prescriptions for the product are now growing steadily and thats, resulting in increase in our shipments and our quarterly sales.

As we announced during our prior earnings call <unk> is now covered by a growing number of managed care plans, including those associated with it.

And so as United.

Meanwhile, during the third quarter, we entered into an amendment to our agreement with <unk> pharma.

Previously provided us with a license for the U S rates fraud rates credit slides.

Based on the amendment Nordic May assume responsibility for distributing methotrexate products in the U S. After March 31 of next year.

Until that both continue to commercialize and support ready trucks during a transition period falling in return of the license.

We'll provide comfort.

Royalty on their future sales of the product through April 2035.

Cumberland will transfer the marketing authorizations associated with the <unk> line to Nordic and in return Nordics. Returning 180000 shares we issued to them associated with the original license and they will refund the $1 billion, we paid debt following the <unk> approval.

United States Nordics also issuing the credit note in favor of a couple of conferences and the imbalance of another $1 million for the unpaid milestone due from us.

With the launch of the line.

Together the companies will continue to collaborate on any transition and ongoing commercialization of the product line.

Meanwhile, during the third quarter.

Closely.

The FDA approved manufacturers that supply our products.

Monitoring our supply chain.

<unk>, the raw materials as well as the finished goods from those facilities.

As previously reported the package here for our medical box pack brand.

Unable to provide us with supplies of that product having encountered difficulties. Therefore suspending the operations during the pandemic.

The facility is now under new ownership and new management.

Currently awaiting its availability.

In order to potentially engage the packaging of new supplies for the product.

Also we're transitioning to a new manufacturer for our that resolve product.

Last year, we shipped all remaining inventory of that resolved and we notified the FDA that supplies of the products were no longer available at that time.

Since then we've transferred the manufacturing to a new facility and we do a wait FDA approvals for that plant before resuming shipments of the brand.

Our new manufacturing partner is working with the FDA to address several form 43, 44, 83 and warning letter issues at risk.

Seat in a timely manner.

Meanwhile, we are working with them to support a special interim supply compounded product.

Ill patients, while we're awaiting the needed facility to relaunch needed approval is still needed facility approval to relaunch that result.

We support our portfolio of FDA approved medicines through our three national sales divisions, including our newest Cumberland oncology.

Our hospital Division calls on key institutional accounts across the country and our field sales division cover select office based physicians.

So with that overview I'd now like to turn to Jon Hamm cover that as Chief Financial Officer.

Is that a review of the third quarter financial results John .

Thank you AJ.

The three months ended September 30 of 2022 net revenues from continuing operations were $11 4 million, a 41% increase over the $8 $1 million in revenue recorded during the prior year period.

Net revenues by product for the third quarter of 2022 included $4 million received $3 9 million for Crystal was $1 $9 million to provide data and $9 million for Calvin.

Importantly, given the quarterly fluctuations in buying patterns from our customers. We believe that our performance should be assessed based on annual sales results.

Year to date net revenues were $32 $9 million up 19% from the $27 $7 million in revenue during the first nine months of 2021 year to date product revenues totaled $11 $4 million for crystals.

$10 $8 million were seeing cuso 6 million provides data and $3 1 million for calendar <unk>.

Total operating expenses for the third quarter were $11 $7 million compared to $9 6 million for the prior year period.

Primary driver of this increase was the addition of <unk> expenses, including those associated with their products amortization distribution marketing and sell it here.

Year to date expenses totaled $36 3 million compared to $31 million from the first nine months of 2021 again, the new <unk> expenses were the main contributor to this increase net loss for the quarter was $408000 and year to date, we have a net loss of $3 1 million.

<unk>.

When noncash expenses are added back to resolving adjusted earnings for the third quarter were $1 4 million a significant improvement of the adjusted loss of $327000 last year. The year to date adjusted earnings were $1 $7 million also signet.

<unk> increase over the $723000 during the same period last year.

Also please note that those adjusted earnings do not include the additional benefit of the $1 $4 million of bi data in <unk> cost of goods through quarter year to date, the benefit of $3 $3 million. Those goods are received as part of each product acquisition.

Total cash flow from operations was $5 6 million up 28% over the first nine months of 2021.

Like to remind you that our financial statements have been significantly impacted by the fact that it seems cousteau acquisition.

<unk> terms from the buyback transaction included a $20 million payment upon closing and the subsequent $5 million milestone payment. We also provide royalties based on product sales I am pleased to report that since by bats launch in late 2018.

They're in a total cash contribution of $30 million to our business and therefore has begun generating a return on our $25 million investment.

Accounting for the buyback or acquisition as a business combination and total of $34 million in new assets were added as a result of the acquisition, including approximately $21 million in inventory $12 million of intangible assets and $1 billion of goodwill due to the amortization of intangibles and sale of inventory.

The value of these assets totaled $17 million at the end of the third quarter turning to the <unk> Q.

<unk> acquisition, the financial terms included a $13 $5 million payment upon closing up to $3 $5 million in milestone payments and tiered royalties from net product sales to <unk> is off to a fine start delivering $8 million in cash contribution during the first three quarters.

22, as we flagged that we accounted for the <unk> acquisition as a business combination we are done.

The final valuation of the <unk> transaction and on a preliminary basis, we estimate a total of $19 million in new assets and as a result of the acquisition, including approximately $5 million in inventory $12 million of intangible assets and $1 million of goodwill the estimated value of these assets.

$15 million at the end of the third quarter.

Previously we renewed our line of credit for a new three year term during the first quarter of 2022, we expanded our use of the facility by $20 million in capital. This new line of credit allowed us to acquire the U S rights to <unk> more recently, we amended the facility to increase our ability to full.

Utilizing this line.

Turning to our balance sheet as of September 32022, we had $91 $4 million in total assets, including $19 $5 million of cash and cash equivalents.

<unk> totaled $52 $9 million, including $17 $7 million on our credit facility total shareholders' equity was $38 million at the end of the third quarter. During the quarter. We continued our corporate share repurchase program and repurchased a total of 33000, Google Ishares.

These repurchases included those on the open market as well as those needed to fund the taxes associated with employee vested restricted shares year to date, we have repurchased a total of 291000 shares a group of our board members also continued to purchase Cumberland shares through trading plan designed to increase their holdings.

The company so far in 2022 their purchased a total of 28000 shares I'd also like to note that Cumberland continues to hold over $56 million.

Tax net operating loss carryforwards, primarily resulting from the prior exercise of stock options and that completes our financial report for the third quarter of 2022 back Uhm.

John .

We're working to build an innovative pipeline of new product opportunities and many of you who have been following us know responsory three phase two clinical programs, featuring alright picture band product candidate <unk>.

These studies involve patients with aspirin exacerbated respiratory disease, a severe form of asthma.

<unk> <unk> assistant rehabilitating autoimmune disorder and.

Could you shed muscular dystrophy genetic neuromuscular disease.

This third program is being funded by a $1 million grant provided by the Fda's office orphan drug products.

While patient enrollment in these studies slow significantly last year during the height of the pandemic.

This year enrollment has improved as medical centers reopened to clinical research and patients again returning for their treatment.

Today, I am announcing the closure to enrollment.

Phase III R&D clinical study.

This randomized placebo controlled trial designed to evaluate whether <unk> can improve the symptoms that patients without pass through desensitization.

A total of 56 patients were enrolled in 19 medical centers across the U S. Top line results will be announced.

<unk> studies data analysis.

We're also working on an application to the FDA for a fourth phase III clinical program, which will evaluate the use of <unk> to treat patients with progressive fibrosis interstitial lung disease.

In addition to our company sponsored studies. There are also several investigator initiated studies underway with a picture of it at various stages of completion.

For these studies cover than typically supplies <unk> drug product as well as this placebo for the research groups involved.

So our plan going forward is to complete each of our company sponsored studies.

Annualized the final data announced top line results and then decide on the best development path for the registration of <unk>, Japan, which we continue to believe has the potential to benefit many patients.

Orphan diseases that represent unmet medical needs.

Next I'd like to provide an overview of a few international activities underway, starting with caldor or intravenously to delivery formulation of ibuprofen.

In October we signed a new agreement with <unk> pharmaceuticals for the exclusive supply and distribution of Caldolor in Mexico.

Under the terms of the agreement Cumberland will be responsible for providing the product Garcia and supplies.

Pizza will be responsible for securing regulatory approval and then commercializing the product in Mexico.

Pieces and established presence in Mexico with a strong distribution network that makes him a natural fit as a partner for that market.

We believe Caldolor and service important role and the careful management of pain there.

He used to work with pizza to establish new partnerships.

Turning to <unk>, our injectable antibiotics and.

In March we announced a new partnership with Savi base to book pharmaceutical too.

To introduce <unk> into the middle East.

The arrangement provides to book with the exclusive rights to distribute bypass Saudi Arabia and Georgia.

Most of the option to expand to other countries in the region.

To book, a fully owned subsidiary of the Astra Industrial group, a leading publicly traded conglomerate based in Saudi Arabia.

By that it is now approved for sale in that country.

We are in the process of adding new manufacturing information to the registration as we begin planning for the launch of the product there.

Meanwhile, our partner in China.

Sky Club Pharmaceuticals has had their application.

<unk> in China accepted for review in 2021 last September .

Since then we've been supporting Sky club and their requests associated to the review of that submission.

We look forward to the results the potential launch of buyback and is that important market.

While we remain focused on promoting caldolor and <unk> added here in the United States. We're excited to bring the product to patients in other countries and partnerships like those before them that just described.

Forming companies like Pisa cap book and Skype.

So overall Cumberland has had another successful quarter.

And we remain focused on our strategy of maximizing the potential of our commercial brands.

We're seeing our pipeline and continuing to pursue select do acquisitions.

We're particularly encouraged by the arrival of St Cuso, and its positive impact on our business and we are honored to delivery to oncology patients across the country, who need it and believes that the contribution from the product are serving as a catalyst for the growth of our company.

And finally I'm pleased to announce that as we announced last week, we've been able to move our new headquarter offices onto the broad west campus and the Vanderbilt Westin quarter, Curt Nashville, Tennessee.

We are delighted to continue our presence and participation in the Nashville, healthcare community, which represents the largest concentration healthcare companies here in the country.

This move allows us to accommodate our recent growth and plan to serve it helps us to better serve international base of customers and partners.

So in closing I'd, just like to say with new products to promote and improved selling environment in our robust pipeline.

Very optimistic about our future.

We do expect a strong finish to 2022, enabling us to achieve our goal of double digit revenue growth for the year.

I'm also confident that our well located state of the art New headquarters will play an important role in the company's future success.

With that review and update.

Also any questions you may have operator. Please proceed.

Thank you Sir.

Ladies and gentlemen that concludes the company's presentation and we will now open the call for any questions.

If you'd like to ask a question. Please press the star key.

Followed by the digit 120 <unk>.

One one please standby.

Thanks, everyone for joining today's call and we do understand that many of you prefer a private discussion with management.

And if so please just reach out with us and will be happy to hold such a call and get one scheduled with U S.

As always we appreciate your time and interest in Cumberland, and we look forward to providing another update after the end of the year.

Thank you Sir ladies.

Ladies and gentlemen that concludes today's com, if you'd like to listen to a replay of the discussion. Please visit the Investor Relations section on <unk> website.

Like to thank you for your participation you may now disconnect.

Yes.

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The conference will begin shortly to raise Johan during Q&A you can dial one one.

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