Q4 2022 Cumberland Pharmaceuticals Inc Earnings Call

March 7, 2023

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Good afternoon, and welcome to Cumberland Pharmaceuticals, 2022 Financial report and company update this call is being recorded at <unk> 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 Argus.

Account supervisor at the adult and agency, who handles Cumberland Communications Mollie. Please go ahead.

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

<unk> issued a press release announcing the company's annual financial results as well as an operational update for the year ending December 31 2022.

The release, which includes the related financial tables can be found on <unk> website at www Dot Cumberland farms that dot com.

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

To provide an overall company update including a discussion of its brands pipeline and partners.

Participating in today's call are a J Kazimi <unk>, Chief Executive Officer, Todd Anthony Our Vice President organizational development, 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.

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

Additionally, there are many factors that could affect Cumberland future results, including natural disasters economic downturn public health epidemics 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 update filed with the SEC.

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

Despite 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.

Remember that the company is not 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.

The links to those sites can be found on our corporate website at www Dot Cumberland farms 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.

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

Thank you Molly and good afternoon, everyone. We appreciate you joining us as we recap another successful year here at Cumberland.

During today's call, we'll provide an update on our 2022 operational and financial results. We will also commenting on our plants.

So let's begin.

First of all I am pleased to report that Cumberland delivered significant revenue growth last year, despite continuing external challenges.

As 2022 progressed, we welcome to return to a more typical operating environment following the economic and societal effects of the pandemic.

We were excited to see enrollment in our clinical trials resume.

<unk> procedures return to a more customary levels and access for our sales reps improve.

More face to face meetings with medical professionals.

While the impact of the pandemic on the company did subside some industry challenges persisted.

Hospitals face continued staffing shortages, which had a direct impact on patient care.

And in addition, the overall economic downturn has led to a financial pressures and uncertainty across the healthcare industry.

Well, despite those challenges our diversified portfolio of FDA approved brands enabled us to achieve strong year over year revenue growth.

And that growth was led by Contributive contributions from our newest brands San Cuso, which we acquired early last year from the U S affiliate of Japan based Kyowa Kirin.

<unk> is a unique oncology support transdermal system that has a well established base of physicians.

Prescribe it to help cancer patients tolerate certain side effects associated with their chemotherapy treatments.

To help fund the acquisition, we utilized our credit facility, which has $20 million in capital available through a three year term.

Turning to our 2022 financial performance, our product portfolio delivered combined revenues of $42 million, a 17% increase over the prior year.

And same tusa was a significant driver in this growth quickly proving to be a valuable addition to our product line.

Chris <unk> and Caldolor continue their steady contributions to the revenue mix, while sales of iPad have underperformed our expectations.

However, it is important to note that both by bad of an sand cuso continue to deliver attractive returns on the investment associated with our acquisition.

Our gross margins remained attractive in 2022, resulting in a favorable EBITDA.

A total of $8 $5 million in cash generated from operations for the year.

Our balance sheet remains strong as we ended 2022 with $93 million in total assets $20 million in cash $57 million in liabilities and $36 million in shareholders' equity.

Towards the end of the year, we successfully moved into our new headquarter offices on the broad West campus near Vanderbilt University in Nashville.

This new state of the art facility will enable us to accommodate our growth support our team and better serve our patients customers and partners.

So with that overview of our 2022 results and now I'd like to turn it over to Todd Anthony Cumberland as Vice President organizational development to further discuss our brands and our team Todd. Thank you AJ.

Cumberland, we recognize that our people are among our most important assets.

Throughout the pandemic, we kept our offices open and business operating while taking measures to provide our team with a safe working environment.

During 2022, we successfully completed the transition of responsibilities for sand cuso to Cumberland from Kyowa Kirin.

We have now taken full commercial responsibility for the brand in the United States, including its national distribution marketing promotion and medical support activities.

Late last year, we were very pleased to learn that the move of the products manufacturer to a new facility was approved by the FDA.

To support Zancou, So we formed a new sales division Cumberland oncology.

It's comprised of both field based and inside sales personnel, most of whom moved over to Cumberland from Kyowa Kirin and bring extensive experience in promoting the brand.

I'd also like to provide a few updates on some of our other brands.

First I'll touch on buyback.

<unk> injectable antibiotic product designed to treat certain serious bacterial infections, including hospital acquired or ventilator associated pneumonia as well as complicated skin infections.

We are working to improve by better sales performance in 2023 to achieve that goal. We have taken a fresh look at the marketing and sales strategy and launched a series of new initiatives to increase awareness and use of this important potentially lifesaving brand.

Moving next to crystallize, our prescription strength laxative, which continues to be our largest selling product.

Packaged in a convenient pre measured powder dose it dissolve quickly in just four ounces of water for a clear taste free and grit free solution.

During 2022, we continue to support Chris flows through our field sales force as well as our partnerships with poly Pharmaceuticals, and Fox <unk> Pharmaceuticals.

We also refreshed Crystal losses award winning marketing campaign in 2022 to facilitate increased engagement with our customers and expand patient support for the brand.

As a result, it was added to the good Rx platform.

Turning now to <unk>, we continue to feature expanded labeling for its use prior to surgery. When we see the best results and significantly reducing patients pain and their need for opioids. During 2022, we continue to provide caldolor antiviral and the newer ready to use premix.

<unk> presentation.

<unk> has been a steady performer with an international contribution as well.

Meanwhile, during 2022, we work closely with our FDA approved manufacturers monitoring our supply chain, including the raw materials as well as the finished goods emerging from those facilities.

As we've reported previously the packager for a macro marks pack brand suspended their operations during the pandemic due to supply issues. The facility is now under new ownership and new management and we're currently awaiting availability of their operations were also exploring other alternate.

Is to restart the products packaging.

Additionally, we're transitioning to a new manufacturer for our <unk> product.

We have found a new facility and await the FDA approval of the plant before resuming shipments.

Before we can do so our new manufacturing partner is working with the FDA to address several form 483 and warning letter issues in a timely manner mean.

Meanwhile, we are working with them to support a special interim supply of compounded product for critically ill patients.

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

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

We understand the importance of recognizing and addressing our impact on the environment, our employees and the community.

On that front, we are pleased to announce that we have updated our sustainability metrics covering company activities pertaining to environmental social and governance issues.

Highlights from our latest sustainability metrics include providing $2 2 million doses of our products to patients.

Safely disposing of over 2750 pounds of expired and damaged products and having no product recalls or terminated clinical trials due to failure to practice good clinical standards.

Lastly towards the end of 2022, we successfully moved into our new headquarter offices on the broad West campus and the Vanderbilt Western corridor of Nashville.

We are delighted to continue our presence and participation in the Nashville, healthcare community, which represents the largest concentration of healthcare companies in the United States. Our New headquarters headquarters also keeps us close to Vanderbilt Medical Center, where we continue our collaboration to develop innovative.

New medicines.

That completes my update for today I'll turn it back to you a J very good thank you Todd.

Well before we review our 2022 financial results I'd like to provide an update on our international and partnering activities.

<unk>, our non narcotic pain relief product continues to enjoy significant market share in the South Korean market.

In addition, during 2022, we announced a new agreement with Pizza Pharmaceuticals for the registration and commercialization of Caldolor in Mexico.

Under the terms of that agreement Cumberland will be responsible for providing the product dossier and supplies and piece of it will be responsible for securing regulatory approval for the product in Mexico, and then introducing it into that market.

We believe caldolor conserve and important role and the careful management of pain, there and we're pleased to be working with pizza and hope to establish a successful partnership.

Last year, we also transitioned our distribution for Caldolor in Australia from Csl's Aquarius, two Seabrook Party limited.

Turning next to Vivat is our potent injectable antibiotics.

In March of 2022, we announced the launch of iPad is in Puerto Rico.

That announcement, followed an agreement with Verity pharmaceuticals, providing them with the rights and responsibilities to introduce the product for patients into that market.

Later in March of last year, we announced a new partnership for sat with Saudi Arabia base to book Pharmaceuticals to introduce pipe out of into the Middle East.

Arrangements provide to book has exclusive rights to distribute by that it in Saudi Arabia, and Jordan with an option to expand into other countries in the region.

Two books, a fully owned subsidiary of the Astra Industrial group, a leading publicly traded conglomerate to Saudi Arabia.

Well that was excuse me well by bad It is now approved for sale in that country.

We've added the needed new manufacturing information to the registration and look forward to next launching the project there.

Also in 2022, we entered into an agreement with the D V Farm to register and commercialize our buy that product in South Korea.

After working with them to prepare the submission for registered registering the brand there we now await approval and look forward to the launch if iPad in that country.

Meanwhile, our buyback of partner for the Chinese market.

<unk> Pharmaceuticals had their approval application in China accepted for review back in September of 2021, and we've since been supporting Sky clone and the quick request associated with review of our submission.

They are working towards the approval and believe there is significant potential for.

<unk> in their country.

As we focus our efforts on the U S. We are excited to continue building a network of other established companies to bring <unk> to patients in their countries.

Meanwhile, our ready tricks product line pre filled syringes was designed to provide an innovative delivery of methotrexate for the treatment of arthritis.

Following the FDA approval, we launched the product into the U S market during the pandemic and unfortunately face difficulties in accessing a new group of office based physicians and also quickly securing the needed insurance coverage.

However, during 2022 prescriptions for their ready tracks line did grow steadily but not to a level justifying our continued investment in the brand the FDA fees alone, we're nearing $2 million annually.

So we Reengage Nordic pharma, who previously provided us with the license for the U S rights to the line and we agreed on amending our arrangements whereby Nordic would assume responsibility for ready trucks in the United States. After June 30 of this year.

As a result, we've transferred the ready tricks of marketing authorization to Nordic <unk>.

Who in turn has provided US back the 180000 shares that we previously issued to them.

And refunded the million dollar milestone payment that we previously provided.

Nordic is also issued a credit note for $1 million and provided approximately 900000 to reimburse us for FDA fees.

We appreciate Nordics cooperation on these changes as we continue to distribute ready tricks until the end of June and then support Nordics on the product transition.

So in addition to our expanding international activities in 2022, we continue to advance.

<unk> pipeline of new product candidates to address unmet medical needs.

As many of you had been following US know, we're sponsoring three phase two clinical programs featuring our Fisher band product candidates. In these studies involve patients with aspirin exacerbated respiratory disease or AE R&D, a severe form of asthma.

And specific sclerosis.

Rehabilitating autoimmune disorder, and Duchenne muscular dystrophy, a genetic neuromuscular disease.

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

Its the first study of Duchenne muscular dystrophy awarded an FDA orphan products development funding grant.

And while patients in all three studies slowed during the pandemic. It did improve during 2022 as medical centers reopen to preclinical research and patients return for their treatments.

Last quarter, we announced that enrollment in our phase two asthma or AE R&D study had been closed a total of 56 patients were enrolled and 19 medical centers across the United States. This randomized placebo controlled trial was designed to evaluate whether our Fisher band can improve.

The Sino nasal symptoms associated with R&D.

Top line results will be announced a couple of completion of the study's data analysis.

While researchers at Brigham and Womens Hospital completed a separate investigator initiated study evaluating the impact of a future ban on the aspirin desensitization process in patients with HRD.

Asthma condition I've mentioned this.

This single Center study closed early due to poor patient accrual and because they exhausted their funding.

The researchers found no statistical difference in the dose of aspirin needed to improve the patient's total nasal symptoms full.

Full results of the study will be provided in a manuscript that occurred. The researchers are currently currently pursuing them for publication.

It should be noted.

That the results from this investigator study were inconsistent with those previously published preclinical findings and that that study also differs in design from our corporate sponsored studies.

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

We look forward to sharing findings from all of these studies as they become available and then building upon those discoveries to continue <unk> development, which we believe has the potential to benefit many patients with orphan diseases that represent unmet medical needs.

With that I'd now like to turn it over to our Chief Financial Officer, Jon Hamm to review, our 2022 financial results. John . Thank you a J for the three months ended December 31, 2022, net revenue from continuing operations were $9 1 million or nearly 10% increase.

Over the $8 $3 million in revenue recorded during the prior year period.

Net revenues by product for the fourth quarter of 2022 included $2 4 million for sand cuso $3 $8 million for Christos, one 5 million provide data and $1 8 million for Caldolor as a reminder, due to quarterly fluctuations in our customers' purchases we bill.

<unk> our performance should be assessed based on annual sales results with that in mind I am pleased to report that net revenues for the full year 2022 were $42 million up 17% over the $36 million in revenue in 2021.

Full year product revenues totaled $15 2 million for Crystal us $13 $2 million for San Cuso, seven 5 million provide batter and $4 8 million for Caldolor turning to our expenditures total operating expenses for the fourth quarter were 11.

$4 million compared.

Compared to $12 7 million for the prior year period total operating expenses for 2022 were 47 7 million up from $43 7 million during the prior year. The addition of expenses from our newest acquisition remained a primary driver of this increase.

<unk> the costs associated with the products amortization distribution marketing and selling.

The net loss for the quarter was approximately $2 $5 million and we had a net loss of $5 6 million for the year were noncash expenses are added back the resulting adjusted earnings for the year were $2 $1 million or 14, a share which was a significant three.

$3 million improvement on the adjusted loss of $1 2 million last year.

Also please note that the adjusted earnings calculations do not include the additional benefit of the $1 $5 million of vivat of NCI cuso cost of goods during the quarter, which was a $4 $8 million benefit for the full 2022 year. Those goods were received as part of <unk>.

Each products acquisition.

As a result and take into account all of these items total cash flow from operations was $8 $5 million in 2022, a $2 2 million increase over the $6 3 million during the prior year as a reminder, our financial statements have been significantly impacted by the <unk> and <unk>.

So acquisitions the financial terms for them by banner transaction included a $20 million payment upon closing and a subsequent $5 million milestone payment. We are also providing royalties based on product sales I am pleased to report that since <unk> launch in late 2018. It has delivered a.

Total cash contribution of $31 million some of our business and therefore has begun generating a return on our $25 million investment we accounted for the buyback or acquisition as a business combination a 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 million of goodwill due.

Due to the amortization of intangibles intangibles in the sale of inventory the value of these assets totaled $16 8 million at the end of 2022 turning to the <unk>.

So acquisition the financial terms included a $13 $5 million payment upon closing up to $3 $5 billion in milestone payments and tiered royalties on net product sales to <unk>.

<unk> is off to a fine start delivering approximately $10 million in cash contribution during 2022.

As with iPad, we accounted for the <unk> acquisition as a business combination we added a total of $19 million in new assets added as a result of the acquisition, including approximately $4 million in inventory and $14 million of intangible assets. The estimated value of these assets was $15.

$6 million at the end of the year 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 to provide $20 million in capital. This new line of credit provided the funding for our most recent product acquisition more recently, we amended the facility.

<unk> to increase our ability to fully utilize this line.

Turning to our balance sheet as of December 31, 2022, we had $93 million in total assets, including $20 million in cash and cash equivalents liabilities totaled $57 million, including $16 million on our credit facility total shareholders' equity was $36 million at the end of 2000.

'twenty two we.

Our corporate share repurchase program in 2022 and through the end of December we purchased a total of 368000 shares. These repurchases included those on the open market as well as those needed to fund the taxes associated with employee vested restricted shares. That's in addition to the 180.

<unk> shares that Nordic pharma returned to US lastly, I'd like to note that comprehend continues to hold over $53 million in tax net operating loss carryforwards with the majority of resolving prior exercise of stock options and that completes our financial report for the final quarter and year end of 2022.

Back to you a J. Thank you John .

In July of 2022.

Welcome Martin Brown Junior to our board of Directors Marian brought valuable legal public company healthcare and civic experience to our board and he was previously a long term board member of Brown Forman Corporation, a New York Stock Exchange listed company.

We were deeply saddened however to loose two of our dedicated board members over the last year, Joey Jacobs and Marty Cornell.

Each was an outstanding leader.

<unk> colleague and a dear friend to many.

Joey Jacobs was the legendary 11 member of the health care community. He served on our board of directors for over a decade, where his support and guidance played a critical role in advancing our mission.

As a member of various corporate and civic board throughout our region. Joey was a sought after mentor, who sound advice and guidance was instrument instrumental in growing many area health care organizations.

<unk> served as a member of our board and joined our management team in 2008 to lead our commercial efforts.

He built our entire marketing and sales organization led our product launches and played a key role in our business development initiatives.

Marty was such an integral part of our organization and we're grateful to have a team of sales and marketing executives, who have stepped up to ensure the business has continued to operate without interruption.

So overall, we're pleased to share our progress over the past year.

We remain focused on our mission of providing branded medicines to support patient care.

And we're working to maximize the potential of our commercial brands progressing our pipeline and continuing to pursue select acquisitions.

In fact, our newest acquisition <unk> has proven to have a positive impact on our business and we're encouraged by its early success.

We're honored to deliver to oncology patients throughout the country, who need it and believe that the contributions from the product will continue to be a catalyst of growth for our company.

So with a new brand to feature an improving operating environment, a growing roster of partnerships and a robust pipeline, we're very optimistic about our future and we look forward to delivering quality medicines to enhance patients' quality of life.

With that review and update let's now open the call for 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 would like to ask a question. Please press the star key on your phone followed by the.

Followed by the digit one twice that star one one please standby.

Okay.

Thank you at this time I would like to turn the call back to management for closing remarks.

Okay, well thanks, everyone for joining today's call. We do understand that many of you prefer a private discussion with management and if so please just reach out to us and we'll be happy to get a call scheduled for you.

As always we appreciate your time your interest in our company and we look forward to providing another update in the coming months.

Thank you, Sir ladies and gentlemen that concludes today's call. If you would like to listen to a replay of the discussion. Please visit the Investor Relations section on <unk> website I would like to thank you for your participation you may now disconnect.

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Q4 2022 Cumberland Pharmaceuticals Inc Earnings Call

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