Q4 2022 Rockwell Medical Inc Earnings Call
Speaker 2: Good morning and welcome to Rockwell Medical's fourth quarter and full year 2022 results conference call and webcast. Please note this event is being recorded. At this time, I would like to turn the conference call over to Heather Hunter, Senior Vice President, Chief Corporate Affairs Officer at Rockwell Medical. Heather.
Speaker 3: sales and marketing, and Paul McGarry, Rockwell Medical's Senior Vice President,
Speaker 3: Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the FCC.
Speaker 3: which are all available on our website under the investors section.
Speaker 3: These statements are subject to risks and uncertainties that could cause actual results to differ.
Speaker 3: 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 these forward-looking statements in light of new information or future events.
Speaker 3: 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 FCC.
Speaker 3: Rockwell Medical's annual report on Forum 10K for the year ended December 31, 2022, was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's fourth quarter and full year 2022 results.
Speaker 3: It can be found on Rockwell Medical's website under the investors section, along with today's press release and a recording of this webcast. Now I would like to turn the conference call over to Rockwell Medical's president and CEO , Dr. Mark Strobach.
Speaker 4: Thank you, Heather. Good morning, everyone, and thank you for joining us today for Rockwell Medical's fourth quarter in full year 2022 results conference call and webcast.
Speaker 4: We have a number of exciting accomplishments that we want to review with you this morning, so let's get started.
Speaker 4: For those of you who are new to Rockwell Medical and for those of you who have been following us for some time, I'd like to take a few minutes to remind everyone of our updated business model and strategy.
Speaker 4: Rockwell Medical is a revenue-generating healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide.
Speaker 4: Rockwell's mission is to provide dialysis clinics and the patients they serve with the highest quality products supported by the best customer service in the industry.
Speaker 4: Rockwell is the second largest supplier of life-sustaining hemodialysis concentrates products to dialysis clinics in the United States and is one of only two suppliers that have the manufacturing scalability and transportation infrastructure to service the over 7,200 dialysis clinics.
Speaker 4: in the United States along with select international markets.
Speaker 4: This positions Rockwell as an indispensable player in a large and expanding market, which in the United States alone is currently valued at approximately $380 million and is projected to grow to approximately $500 million in 2026.
Speaker 4: Our vision is to become the leading global supplier of hemodialysis concentrates to dialysis providers worldwide.
Speaker 4: After joining Rockwell Medical in July of last year, I, together with Rockwell's management team and board of directors, underwent an extensive evaluation and assessment of our businesses and determined that for Rockwell to be successful, we need to focus our efforts on enhancing our revenue-generating businesses,
Speaker 4: pause our capital-intensive businesses, and focus on improving our financial condition, de-levering this company, and drive us to profitability in 2024.
Speaker 4: We believe that the results we reported for the second and third quarter and now for the fourth quarter in full year 2022 demonstrate that we are making significant progress towards these goals and objectives.
Speaker 4: Revenue is growing, gross profit is increasing, and operating expenses are declining.
Speaker 4: The key takeaway here is that our focused and revised business model is working.
Speaker 4: Now let's turn our attention to Rockwell's fourth quarter and full year 2022 operational results.
Speaker 4: In the fourth quarter of 2022, we made a number of operational improvements to our business.
Speaker 4: First, we reacquired our distribution rights to our hemodialysis concentrates product from Baxter and terminated the exclusive distribution agreement that Rockwell originally entered into back in 2014.
Speaker 4: This transaction marked a critical inflection point for Rockwell. Removing ourselves from the Baxter agreement lifted a number of restrictive elements that made it impossible for us to grow our business and to establish long-term supply agreements with preferred economics.
Speaker 4: Reacquisition of this business allows us for the first time to control our own destiny. Our commercial team is actively transitioning the Baxter business to Rockwell, onboarding new and existing customers in the United States and abroad.
Speaker 4: establishing long-term multi-million dollar product purchase supply and distribution agreements.
Speaker 4: Tim will provide you with more details on the progress we are making with the transition and the commercial opportunities that lie ahead for Rockwell.
Speaker 4: Additionally, in the fourth quarter, we continued to improve our top-line revenue, reduced our cash burn, and streamlined our operations.
Speaker 4: We reduced headcount related to non-core areas of our business and reduced our overall G&A expense.
Speaker 4: We eliminated expenses associated with Trifaric in the US as we made the strategic decision to move away from this product and put development activities associated with the FPC platform on hold.
Speaker 4: Rockwell has several international partnerships with companies looking to develop and commercialize Trifaric in their respective countries.
Speaker 4: In 2022, Trifaric and Trifaric Avenue were approved in South Korea, and our partner, JIEL Pharmaceutical, launched Trifaric in South Korea during the third quarter. We are actively keeping track of Trifaric's market adoption and have already begun to realize revenue associated with JIEL's license and supply agreements. In addition, our partner in China.
Speaker 4: a subsidiary of Fosun Pharma, completed its pivotal phase 3 study in the fourth quarter of 2022, and we expect results from this study in mid-2023.
Speaker 4: As a reminder, these international partnerships require no capital expenditure and very little operational resources from Rockwell. While they have the potential to generate near and long-term revenue for the company, we have not factored this into our revenue forecasts.
Speaker 4: As it relates to FPC for home infusion, we announced during the fourth quarter of 2022
Speaker 4: that we put development work for this program on hold because it required significant capital expenditures and Rockwell would not realize value from this program for many years to come.
Speaker 4: As for the FPC for acute heart failure, we conducted a successful pre-IND meeting with the FDA at the end of 2022, which provided useful insight as we consider future development activities for this program.
Speaker 4: As we have discussed previously, this program is currently on hold and is available for us to reconsider once Rockwell achieves sustainable profitability.
Speaker 4: Before we get into our financial results, I wanted to take a moment to address the new way in which we presented our financials in this morning's press release.
Speaker 4: We believe that this evolved format clearly communicates our results in a more transparent, straightforward manner, and illustrates the progress we are making against our objectives and the direct impact on our earnings per share. This type of financial measurement is customary and successful.
Speaker 4: revenue generating businesses and we felt it was time to transition to this updated format of presenting our financials.
Speaker 4: I am pleased to report that for the fourth quarter 2022, we reported $19.3 million in revenue, which represented our third consecutive quarter achieving record revenue in the company's history.
Speaker 4: For the full year 2022, Rockwell generated $72.8 million in revenue, exceeding our guidance, which represents a 17.6% increase when compared to the comparable period in 2021 and the highest full year revenue to date for the company.
Speaker 4: During the fourth quarter of 2022, we entered into an amendment of our loan agreement, accelerating the pay down of our debt with a $5 million pre-payment of our existing loan, leaving Rockwell Medical with $10 million of long-term debt as of December 31, 2022. This offers Rockwell the opportunity to reduce its interest expense.
Speaker 4: by agreeing to a 10-month interest only period starting December 1, 2022 and ending with our last payment on September 1, 2023.
Speaker 4: As we look to 2023, our corporate objectives are very clear.
Speaker 4: We plan to focus on commercially growing our business by expanding it to new geographies.
Speaker 4: optimizing agreements with existing customers, adding new customers with long-term supply agreements with preferred economics.
Speaker 4: We expect to continue to focus on reducing our expenses and operating our business more efficiently.
Speaker 4: We plan to continue to find ways to enhance our financial condition and seek ways to further reduce our debt.
Speaker 4: Based on these goals and forecasted demand for our hemodialysis concentrates products in 2023, we expect to generate $78 to $82 million in revenue in 2023.
Speaker 4: At the top of that range, this represents a 13% increase in revenue over 2022.
Speaker 4: In addition, we are expecting to generate gross profit between $7 million and $9 million in 2023.
Speaker 4: The decisions we have made and continue to make are consistent with our strategy going forward to drive our business to achieve profitability in 2024 and put the company in a stronger, more stable financial position.
Speaker 4: We are well on our way and anticipate that revenue for the first quarter of 2023 will be in line with revenue of the fourth quarter of 2022, reflecting the timing of the Baxter transition and contract renewals.
Speaker 4: Now I would like to introduce you to Tim Cole, our Senior Vice President of Sales and Marketing, who leads our commercial organization here at Rockwell.
Speaker 4: Tim has more than 20 years of experience in sales and marketing at some of the largest renal care companies in the world and has successfully built renal care portfolios and significantly grown their sales.
Speaker 4: I will now turn the call over to Tim to provide you with a commercial update related to our hemodialysis concentrates business.
Speaker 5: Thank you, Mark.
Speaker 4: Since reacquiring the distribution rights for our hemodialysis products from Baxter and terminating the exclusive
Speaker 4: Our commercial strategy is now focused on two key areas. First, we're focused on transitioning the more than 700 former Baxter customers to Rockwell to ensure that our life-sustaining products continue to get to the hospitals, medical centers, dialysis centers, and health systems.
Speaker 4: commercial strategy is now focused on two key areas. First, we're focused on transitioning the more than 700 former Baxter customers to Rockwell to ensure that our life-sustaining products continue to get to the hospitals, medical centers, dialysis centers, and health systems that serve hemodialysis
Speaker 4: I'm pleased to report that this transition is on track and we've successfully assumed commercial responsibility for Baxter's customers. We're now systematically working with each of these customers to establish new agreements with preferred terms and conditions and long-term supply arrangements.
Speaker 4: Now Rockwell is capturing more of the economics associated with these customers, all of which we were unable to do previously under the Baxter Agreement.
Speaker 4: This ultimately benefits Rockwell, our stockholders, and our customers in the long term.
Speaker 6: The second strategic priority is to grow our business by adding new customers.
Speaker 6: expanding into new geographies to access portions of the hemodialysis concentrate market that was previously unavailable to
Speaker 6: In the fourth quarter of 2022, we expanded our distribution capabilities further westward into Minnesota and are excited to be working more closely with our largest partner to support their dialysis centers and an estimated 3,000 additional patients with our life-sustaining hemodialysis products.
Speaker 6: Additionally, we announced last month that we signed two new supply agreements with
Speaker 6: The first agreement is a three-year multi-million dollar product purchase agreement with Concerto Renal Services.
Speaker 6: the largest provider of dialysis and skilled nursing facilities in the United States. And the second agreement is a three-year multi-million dollar supply agreement with the largest nonprofit dialysis provider in the United States.
Speaker 6: Each of these arrangements include multi-year annual minimum purchase commitments and have the opportunity to increase as our customers' respective businesses grow. These are the first of many agreements that we anticipate establishing this year to grow our hemodialysis concentrates business and drive Rockwell toward profitability in 2024.
Speaker 6: Hemodialysis concentrates our Rockwell's core focus and competency. Given the disruptions that other suppliers have experienced recently, we are determined now more than ever to become the global leader in this market.
Customers want to work with Rockwell because we are dedicated to providing the highest quality products supported by the best customer service in the industry. I'm personally very excited about the progress we've been making and the
Now I'll turn the call over to Paul to go through our fourth quarter and full year 2022 financial results.
Thank you, Tim. Revenue for the three months ended December 31, 2022 was $19.3 million.
This represents a 26% increase over the comparable period in 2021. Revenue for the year ended December 31, 2022 with $72.8 million, which represents a 17.6% increase over the same period in 2021.
Nick Cash used in operating activities was $594,000 for the fourth quarter of 2022 compared to $9 million for the fourth
net cash use and operating activities with $17.4 million for the full year of 2022, compared with $33.5 million for the comparable period in 2021, which represents a 48% reduction in cash use and operating activities year over year.
For the three months end of December 31, 2022, Rockwell's net loss was $2.4 million or $0.20 per share, compared with the net loss of $8.9 million or $1.05 per share for the same period of 2021.
For the year end of December 31, 2022, Rockwell's net loss was $18.7 million, or $1.89 per share, compared with the net loss of $32.7 million, or $3.83 per share, in 2021. During the fourth quarter of 2022, we accelerated the pay down of our debt with the $5 million prepayment of our existing loan.
leaving Rockwell Medical with $10 million of long-term debt at December 31, 2022. Comparatively, at December 31, 2021, Rockwell's outstanding debt was $21.6 million.
Rockwell's cash and cash equivalents at December 31, 2022 was $21.5 million as compared to $27.6 million at September 30, 2022.
The reduction in our cash balance includes a $5 million debt prepayment and one-time costs associated with the purchase of equipment and severance related expenses.
Absent these one-time charges, Rockwell is moving significantly closer to becoming cash flow neutral.
Overall, we're pleased with our financial performance in the fourth quarter and full year of 2022 and remain focused on continuing to position us for future growth as we drive to its profitability in 2024.
I will now turn the call back over to Mark. Thank you, Paul. 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.
And your first question today comes from the line of Sam Silverado from HC Wainwright. Your line is open.
Thanks very much for taking my questions. Can you hear me?
Thanks very much for taking my questions. Can you hear me? We can
So I was just wondering in a general sense whether you could comment on potential drivers of upside to your current 2023 top-line guidance, and in particular how you are seeing the underlying market dynamics evolving this year so far, particularly as you look to acquire more.
What we're seeing in the dialysis market today is that there is a shift that's occurring as we come out of what I think was a...
declining period during COVID. And, you know, what we're seeing and certainly what, you know, dialysis providers are reporting is that, you know, for the first time that decline of patient census has begun to slow and that,
those businesses are beginning to start to see that leveling off and potentially now see a path in 23 or that growth to resume, meaning the increase in patient censuses. So from a dialysis perspective, I think we're through what has...
the amount of concentrates that are then used to service those patients.
I think secondly, I would comment that in the hemodialysis concentrate market, you know, we're continuing to see shifting dynamics there as well. And again, those point towards the continual need for Rockwell to supply.
the lion's share of the dialysis clinics that exist here in the US and abroad. We are fortunate that the reputation that Rockwell has for not only its customer service, not only its distribution, but as well the quality of its products, is one that is very, very important to us.
those in the industry know and therefore, are excited to access. And so, the second path to growth for us is gonna be accelerated addition of customers that we've already started and you've seen that we've announced at the beginning of the year.
Thank you. Very much appreciate that, Color. Just two other quick ones. Firstly, can you comment on how you expect RTE spending to trend during 2023, particularly in light of how low it was in the fourth quarter of 2022? And also, if you could give us a sense of what you expect to do with respect to COVID-19.
it is a key priority for us to continue to operate this business in a more efficient manner. That includes production of our products as well as the management of our organization.
What I would say to that is we are going to continue to work incredibly hard to try to find ways to continue to decrease the expenses associated with operating this business.
we are going to continue to work incredibly hard to try to find ways to continue to decrease the expenses associated with operating this business.
second on the debt, you know, the way that the Enovatus agreement is set up, we are
set to pay that off in 2024 or by 2024, we're gonna continue to look for ways to accelerate that, to again, continue to provide flexibility for our business. So we plan to, you know, we plan to, you know.
consistently follow the way that the payment schedules are contemplated in the agreement, which as I said, you know, allows us to pay that off by the end or by a period in 2024, but we're going to look for ways to accelerate that.
follow the way that the payment schedules are contemplated in the agreement, which as I said, you know, allows us to pay that off by the end or by a period in 2024, but we're going to look for ways to accelerate that. Thank you.
Your next question comes from the line of Brandon folks from Cantor Fitzgerald. Your line is open.
Hi, thanks for taking my questions and congratulations on all the progress. And just a very high level one from me maybe.
Can you help us just conceptualize or think about where you are in terms of sort of the strategy and what I mean by that is obviously tremendous progress in 2022 looks like continued you know significant progress in 2023 based on the guidance but so how much opportunity do you see to continue you know on this sort of growing concentrate and kind of optimizing the cost structure
within the next few years? How should we think about that versus maybe sort of evolving the strategy over the next few years? Thank you. Yeah, thanks Brandon. So, you know as we've discussed previously the goal and we see a path to building this business to a hundred plus million dollars in revenue.
And we think we have a path.
that allows us to do that. We've also spoken to the fact that we want to become, our primary objective is to become the leading supplier of hemodialysis concentrates worldwide. And so, again, further growth for us.
will include tapping into international markets where we do not currently provide products today. And so that's where the additional growth will come from. And then, I think, third to that,
For the first time now being outside of the Baxter agreement, we have the ability to contemplate adding new products to our portfolio. And so we are actively evaluating additional products to add that take advantage of our manufacturing being bought.
capacity and expertise, as well as our distribution capabilities to grow out a larger renal care portfolio. So those are some of the areas that I would...
say that we are focused on to growing this business, well beyond where we stand today.
Great, thank you very much and congratulations on all the progress.
Great, thank you very much and congratulations on all the progress. Thanks Brendan.
And there are no further questions. I will now turn the call back over to Dr. Strobach. Thank you, operator, and thank you everyone for joining us on today's call. It was a pleasure to provide you with an overview of our accomplishments in 2022. We are steadfast and focused on driving our overall business to profitability.
clinics, and major medical centers around the world.
We are in the business to make products that impact the patient's life. This is our passion and we take this responsibility very seriously. We look forward to sharing our progress on future calls. This concludes today's conference call and webcast. You may now disconnect.