Q3 2023 Societal CDMO Inc Earnings Call

November 8, 2023

Speaker 1: Good day, ladies and gentlemen, and welcome to CIDO CDMO 3rd Quarter 2023 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we'll conduct a question-and-answer session, and instructions will follow at that time.

Good day, ladies and gentlemen, and welcome to the final C. D M O third quarter 'twenty 'twenty financial results Conference call.

At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.

Speaker 1: As a reminder, this conference call may be recorded. I will now hand the conference over to Stephanie Diaz of Societals Investor Relations Group. Please go ahead.

As a reminder, this conference call maybe recorded.

I like to hand, the conference over to Stephanie Diaz of societal Investor Relations Group. Please go ahead.

Speaker 2: Hello and thank you for joining us. On today's call, we have David Enloe, President and CEO , and Ryan Lake, Chief Financial Officer.

Hello, and thank you for joining us on today's call, we have David and low President and CEO and Ryan Lake Chief Financial Officer.

Speaker 2: Today, we will be providing an overview of Societals contract development and manufacturing business, including updates on corporate activities and financial results for the quarter, and nine months ended September 30, 2023. After our prepared …

Today, we will be providing an overview of societal contract development and manufacturing business, including updates on corporate activities and financial results for the quarter and nine months ended September 32023.

After our prepared remarks, we will welcome your questions before.

Speaker 2: Before we begin, I'd like to caution that comments made during this conference call. Today, November 8, 2023, we'll contain certain forward-looking statements within the meaning of the private securities litigation reform act of 1995, concerning the current beliefs of the company, which involve a number of assumptions, risks, and uncertainties.

Before we begin I'd like to caution that comments made during this conference call. Today November eight 2023 will contain certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 concerning the current beliefs of the company, which involve a number of assumptions risks and uncertainties.

Speaker 2: Actual results could differ from these statements, and the company undertakes no obligation to revise or update any statement made today. I encourage you to review all of the company's filings with the Securities and Exchange Commission concerning these and all other matters.

Actual results could differ from these statements and the company undertakes no obligation to revise or update any statements made today.

I encourage you to review all of the company's filings with the Securities and Exchange Commission concerning these and other matters.

Speaker 2: Our earnings press release and this call will include discussion of certain non-GAAP information.

Our earnings press release, and this call will include discussion of certain non-GAAP information you can find our earnings press release, including relevant non-GAAP reconciliations on our corporate website at societal C. D. M O dot com with that I will turn the call over to David Enlo societal as president and CEO.

Speaker 2: You can find our earnings press release, including relevant non-GAAP reconciliations, on our corporate website at societalcdmo.com.

Speaker 2: With that, I will turn the call over to David Enloe, Decidal's President and CEO .

Speaker 3: Thank you, Stephanie, and thank you to everyone participating today via webcast.

Thank you Stephanie and thank you to everyone participating today via webcast.

Speaker 3: During the third quarter, societal continued the important work of delivering high value manufacturing services to our customers, as well as adding multiple new and existing customer projects to our pipeline.

Speaker 3: In addition, during the period we opened a new revenue channel by securing a Schedule One controlled substance manufacturing license from the Drug Enforcement Agency that will allow us to expand our work beyond Schedule Two products to manufacture for the growing psychedelic drug market.

In addition, during the period, we opened a new revenue channel by securing a schedule one controlled substance manufacturing license from the drug enforcement agency that will allow us to expand our work beyond scheduled two products to manufacturer for the growing second delek drug market.

Speaker 3: Importantly, during the quarter, the company also took steps to secure its financial position and lighted the financing challenges that continue to impact many of our customers and indirectly impact societal immediate pipeline.

Importantly, during the quarter. The company also took steps to secure its financial position in light of the financing challenges that continue to impact many of our customers and indirectly impacts the sidles immediate pipeline.

Speaker 3: To further stabilize our financial standing, we restructured our debt in certain covenants with our creditors to provide additional financial flexibility to the company.

To further stabilize our financial standing we restructured our debt and certain covenants with our creditors to provide additional financial flexibility to the company.

Speaker 3: Societal also successfully closed a public offering of common stock, raising gross proceeds of $8.3 million and initiated a corporate restructuring that is expected to result in annualized savings to the company of approximately $5.5 million.

<unk> will also successfully closed a public offering of common stock raising gross proceeds of $8 $3 million and initiated a corporate restructuring that is expected to result in annualized savings to the company of approximately $5 $5 million.

Speaker 3: The efforts of the third quarter demonstrated the company's ability to continue to attract new pipeline projects, raise capital, and rapidly reorient the business to best serve existing and new customers despite today's challenging market conditions.

The efforts of the third quarter demonstrated the companys ability to continue to attract new pipeline projects raise capital and rapidly reorient the business to best serve existing and new customers. Despite today's challenging market conditions. When we combine these achievements with our expectations for 2020.

Speaker 3: When we combine these achievements with our expectations for 2024 and 2025, we believe we are firmly on the path to a steadily growing business generating positive cash flow.

For 2025, we believe we are firmly on the path to a steadily growing business generating positive cash flow.

Speaker 3: I will provide a more detailed review of all of our Q3 2023 achievements following an overview of our financial results for the quarter ended September 30, 2023. For that, I'll turn the call over to Ryan.

I'll provide a more detailed review of all of our Q3 2023 achievements following an overview of our financial results for the quarter ended September 32023 for that I'll turn the call over to Ryan.

Speaker 3: Thank you, David. Good afternoon, everyone. Before I begin, in addition to the brief financial overview, I'll provide on the call today additional details on our financial results for the third quarter. And nine months and a September 30th, 2023 are included in our press release issued prior to this call and in our form 10Q, which is on file with the SEC.

Thank you David Good afternoon, everyone before I begin in addition to the brief financial overview I will provide on the call today additional details on our financial results for the third quarter and nine months ended September 32023 are included in our press release issued prior to this call and in our Form 10-Q, which is on.

File with the SEC.

Speaker 4: I'll now begin with the results for the third quarter. Revenues for the quarter ended September 30, 2023, where 23.6 million compared to 21.6 million for the comparable 2022 period.

I'll begin with the results for the third quarter revenues for the quarter ended September 32023, or $23 6 million compared to $21 6 million for the comparable 2022 period.

Speaker 4: The increase of 2 million was primarily driven by an increase in revenue from the company's largest commercial customer taba due to the continued pull-through and demand during the quarter, resulting from market share gains against the sole competitor for the RAPML SR product.

The increase of $2 million was primarily driven by an increase in revenue from the company's largest commercial customer. However, due to the continued pull through in demand during the quarter, resulting from market share gains against the sole competitor for the rapid molecular products as well as a catch up in shipments to Teva from Q2 during which as mentioned.

Speaker 4: as well as a catch up and shipments to Tevo from Q2, during which, as mentioned in last quarter's earnings call, saw a decrease in shipments due to the company's scheduled shutdown of the company's packaging line to implement upgrades required to comply with the new serialization aggregation compliance.

In last quarter's earnings call saw a decrease in shipments due to the company's scheduled shutdown of the Companys packaging line to implement upgrades required to comply with the new serialization aggregation compliance standards.

Speaker 4: In addition, there was an increase in shipments to Lynette for Verapamil PM due to timing of customer orders during the year. Further, the company had its first shipment to Otsuka commercial batches during the quarter. Offsetting these increases were a decrease in Novartis and InfectaFarm shipments due to timing of customer orders as well as prior year inventory billed for InfectaFarm as a then new customer.

In addition, there was an increase in shipments to learn that for rapid LTM due to timing of customer orders during the year.

Further the company had its first shipment to otsuka commercial batches during the quarter offsetting these increases were a decrease in novartis and in fact, a farm shipments due to timing of customer orders as well as prior year inventory builds for infective farm as other than new customer.

Speaker 4: Cost of sales for the quarter ended September 30th, 2023, with 19.9 million compared to 16.1 million for the comparable period of 2022.

Cost of sales for the quarter ended September 32023 was $19 9 million compared to $16 1 million for the comparable period of 2022.

Speaker 4: The increase of $3.8 million was primarily due to higher commercial manufacturing revenue and higher fixed costs to support the newly installed Aseptic Fill finish line that has expanded the company's capability.

The increase of $3 8 million was primarily due to higher commercial manufacturing revenue and higher fixed cost to support the newly installed <unk> fill finish line that has expanded the company's capabilities.

Speaker 4: In addition, there were $0.7 million of restructuring costs recorded during the current year period.

In addition, there were $7 million of restructuring costs recorded during the current year period.

Speaker 4: Selling General Administrative Expenses for the third quarter of 2023 at $5.3 million were relatively consistent with the comparable prior year period of $5.1 million.

Selling general and administrative expenses for the third quarter of 2023 of $5 3 million were relatively consistent with the comparable prior year period to $5 $1 million included within the current year period was <unk> 4 million of restructuring costs.

Speaker 4: included within the current year period was $0.4 million of restructuring costs.

Speaker 4: Interest expense was $3 million for the three months ended September 30th, 2023, a decrease compared to $3.6 million for the comparable period of 2022.

Interest expense was $3 million for the three months ended September 32023, the decrease compared to $3 6 million for the comparable period of 2020 to the.

Speaker 4: The decrease of 0.6 million was primarily due to a significantly reduced amount of aggregate principal and lower interest rates under the company's refinanced debt as compared to the borrowings outstanding during the period that ended September 30, 2022.

The decrease of <unk> 6 million was primarily due to a significantly reduced amount of aggregate principle and lower interest rates under the companys refinance debt as compared to the borrowings outstanding during the period ended September 32022.

Speaker 4: For the quarter ended September 30, 2023, the company recorded a net loss of 4.6 million or 5 cents per diluted share as compared to a net loss of 3.3 million or 6 cents per diluted share for the comparable period of 2022. EBITDA, as adjusted for the period, was 2.8 million compared to 3.8 million in the prior quarter of 2010, where you are flawless of success or 1.25 million per shot and that is not claimed zad.

For the quarter ended September 32023, the company recorded a net loss of $4 6 million or <unk> <unk> per diluted share as compared to a net loss of $3 3 million or <unk> <unk> per diluted share for the comparable period of 2020 to.

EBITDA as adjusted for the period was $2 8 million compared to $3 8 million in the prior year period.

Speaker 4: The 1 million decrease in EBDA is primarily due to higher expenses during the period as discussed previously.

The $1 million decrease in EBITDA is primarily due to higher expenses during the period as discussed previously.

Speaker 4: I'll now review the results for the nine months ended September 30th, 2023.

I will now review the results for the nine months ended September 32023.

Speaker 4: Revenue for the nine month ended September 30th, 2023 was 66.9 million compared to 65.9 million for 2022.

Revenue for the nine months ended September 32023 was $66 9 million compared to $65 9 million for 2022.

Speaker 4: The increase of 1 million in revenue was primarily driven by increases in revenue from Tevinlandat, as well as an increase in pre-commercial development revenues, which were partially offset by a decrease in the Vartisan Infective Farm revenues as discussed previously.

The increase of $1 million in revenue was primarily driven by increases in revenues from <unk> as well as an increase in pre commercial development revenues, which were partially offset by a decrease in novartis and in fact, the farm revenues as discussed previously.

Speaker 4: Cost of sales for the nine months ended September 30th, 2023, was 56.5 million compared to 49.6 million in 2022. The cost of sales increase of 6.9 million was primarily due to mix of revenue and related fixed cost absorption, including increased costs associated with the new Aceptic Fill Finish line that has expanded the company's capabilities and increased material cost.

Cost of sales for the nine months ended September 32023 was $56 5 million compared to $49 6 million in 2022.

Cost of sales increase of $6 9 million was primarily due to mix of revenue and related fixed cost absorption, including increased costs associated with the new <unk> septic fill finish line that has expanded the company's capabilities and increased material costs. In addition, there were $7 million of restructuring costs for <unk>.

Speaker 4: In addition, there were .7 million of restructuring costs recorded during the current period.

During the current year period.

Speaker 4: selling general and administrative expenses for the nine month ended September 30th, 2023, were 15.2 million compared to 15.9 million in 2022.

Selling general and administrative expenses for the nine months ended September 32023 were $15 2 million compared to $15 9 million in 2022.

Speaker 4: The decrease of .7 million was primarily related to lower public company costs and administrative costs than the prior year, offset by .4 million of restructuring costs recorded in the current year period.

The decrease of <unk> 7 million was primarily related to lower public company costs and administrative costs than the prior year offset by <unk> 4 million of restructuring costs recorded in the current year period.

Speaker 4: Interest expense was $7.4 million and $10.5 million for the first nine months of 2023 and 2022 respectively. The decrease of $3.1 million was primarily due to a significantly reduced amount of aggregate principle and lower interest rates under the company's refinance debt, as compared to the borrowings outstanding during the period ended September 30th, 2022.

Interest expense was $7 4 million and $10 5 million for the first nine months of 2023 and 2022, respectively. The decrease of $3 1 million was primarily due to a significantly reduced the amount of aggregate principle and lower interest rates under the company's refinance debt as compared to the borrowings outstanding during the <unk>.

And at September 32022.

Speaker 4: For the nine months ended September 30th, 2023, societal reported a net loss of 12.5 million or 14 cents per diluted share compared to a net loss of 10.7 million or 19 cents per diluted share for 2022. EBITDA as adjusted for the first nine months was 6.3 million compared to 10.6 million in the prior year period.

For the nine months ended September 32023, societal reported a net loss of $12 5 million or <unk> 14 per diluted share compared to a net loss of $10 7 million or <unk> 19 per diluted share for 2022 EBITDA.

EBITDA as adjusted for the first nine months was $6 3 million compared to $10 6 million in the prior year period.

Speaker 4: The $4.3 million decrease in EBITDA is primarily due to a mix of revenues and related fixed cost absorption offset by reduced selling, general, and administrative costs.

The $4 $3 million decrease in EBITDA is primarily due to a mix of revenues and related fixed cost absorption offset by reduced selling general and administrative costs.

Speaker 4: This concludes my financial overview. Those interested in reviewing our non-GAP reconciliation, please refer to our 8K filing or the press release issue today. I'll now turn the call back over to David for an update on operations and achievements during the period. David.

This concludes my financial overview.

For those interested in reviewing our non-GAAP reconciliations please refer to our 8-K filing or the press release issued today I'll now turn the call back over to David for an update on operations and achievements during the period.

Good.

Thanks, Brian.

Speaker 3: Before addressing the events of the quarter, I want to quickly discuss two matters that fall outside of our specific Q3 achieve.

Before addressing the events of the quarter I want to quickly discuss two matters that fall outside of our specific Q3 achievements.

Speaker 3: The first is the company's land sale that we announced in August 2022, and the second is the projected margin growth of our Berafamel business.

The first is the company's land sale that we announced in August 2022, and the second is the projected margin growth of our <unk> business. Many of you have requested updates on these efforts, which I am happy to provide today.

Speaker 3: Many of you have requested updates on these efforts, which I'm happy to provide today.

As a reminder, societal signed a sales and purchase agreement to sell approximately 121 acres of lakefront land to David Weekley homes, and established homebuilder for $9 $1 million.

Speaker 3: As a reminder, societal sign to sales and purchase agreement to sell approximately a hundred and twenty one acres of Lakefront land to David Weekly Homes and establish home builder for $9.1 million.

Speaker 3: The land is located adjacent to societal manufacturing facility and Gainesville, Georgia.

The land is located adjacent to societal as manufacturing facility in Gainesville, Georgia.

Speaker 3: While the land sale process is taking longer than originally expected to close, the transaction is still advancing, with all parties involved working together to obtain the necessary permits and approvals needed prior to closing.

While the land sale process is taking longer than originally expected to close the transaction is still advancing with all parties involve working together to obtain the necessary permits and approvals needed prior to closing.

Speaker 3: I'll now provide an update on Societals Burrapamil Business. As a reminder, Societal CDMO owns the NDA and the drug master file for Burrapamil, along approved calcium channel blocker for the treatment of hypertension.

I will now provide an update on <unk> business as a reminder, societal CMO owns the NDA and the drug Master file <unk> mill, along approved calcium channel blocker for the treatment of hypertension.

Speaker 3: Societals longstanding partners for the marketing of this product are Teva and Lynette.

<unk> long standing partners for the marketing of this product are Teva and <unk> the.

Speaker 3: The company's current Burrapa Mill marketing and distribution contracts expire at the end of 2024.

The company's current verapamil marketing and distribution contracts expire at the end of 2024.

Speaker 3: As we begin planning for those contracts to be revisited, early indications give us confidence that the economics of the new Varape Mill contracts will be measurably improved for societal. We believe that these improved economics will further strengthen our financial position and facilitate the continued growth of our CDMO business.

As we begin planning for those contracts to be revisited early indications give us confidence that the economics of the new <unk> contracts will be measurably improved for societal. We believe that these improved economics will further strengthen our financial position and facilitate the continued growth of our <unk> business.

<unk>.

Speaker 3: I will now spend some time discussing key activities during the period.

I will now spend some time discussing key activities during the period.

Speaker 3: During the third quarter, Societals successfully executed a number of important objectives with the intent not only of strengthening our customer base and backlog, but also establishing a stronger financial platform from which to navigate the challenging financial environment that continues to impact the businesses and related decision-making of many of our existing and prospective customers.

During the third quarter societal successfully executed a number of important objectives with the intent not only strengthening our customer base in backlog, but also establishing a stronger financial platform from which to navigate the challenging financial environment that continues to impact the businesses and related decision making.

Many of our existing and prospective customers.

Speaker 3: I'll first highlight two Q3 achievements that we believe will support the company's organic growth of Jeff.

I'll first highlight two Q3 achievements that we believe will support the company's organic growth objectives first during the quarter. The company announced that it has taken another step to expand our services by securing a schedule one license to manufacturer in support of psychedelic drug.

Speaker 3: First, during the quarter, the company announced that it has taken another step to expand our services by securing a DEA schedule one license to manufacture in support of psychedelic drug development without committing any additional capital invest.

<unk> without committing any additional capital investment this strategic expansion is a natural fit for the company based on our decades of experience in manufacturing and handling controlled substances. We believe this unique experience positions societal well to address the emerging and psychedelic therapy sector as well as.

Speaker 3: This strategic expansion is a natural fit for the company, based on our decades of experience in manufacturing and handling controlled substances.

Speaker 3: We believe this unique experience positions the societal well to address the emerging psychedelic therapy sector, as well as the growing number of ongoing and planned clinical trials in this area.

The growing number of ongoing and planned clinical trials in this area.

Speaker 3: Also during the quarter, the company continued to successfully add multiple new and existing customer projects to our pipeline.

Also during the quarter. The company continued to successfully add multiple new and existing customer projects to our pipeline.

Speaker 3: During the quarter, we signed our first government contract with the NIH for a project to be conducted at our Gainesville, Georgia facility.

During the quarter, we signed our first government contract with the NIH for a project to be conducted in our Gainesville, Georgia facility.

With respect to our existing customers the new work agreement signed during the quarter span a range of capabilities highlighting the quality of our services and the trust we have earned from our clients.

Speaker 3: With respect to our existing customers, the new work agreement signed during the quarter of span a range of capabilities highlighted in the quality of our services and the trust we have earned from our clients.

Speaker 3: Given today's market dynamics that continue to create financing risk for drug developers, it's important to emphasize that societal continues to win important projects being advanced by both new and existing customers.

Given today's market dynamics that continue to create financing risk for drug developers. It's important to emphasize that societal continues to win important projects being advanced by both new and existing customers. We are grateful for their trust and partnership and we view this as a strong indicator for our ability to.

Speaker 3: We are grateful for their trust and partnership, and we view this as a strong indicator for our ability to build our customer base, project pipeline, and backlog in the future.

Build our customer base project pipeline and backlog in the future.

Speaker 3: And while we remain confident that today's financing challenges are temporary, we also believe that it is critical for organizations like Societal to meet the needs of the changing market. For that reason, during the period, the company renegotiated our debt structure and certain covenants with our creditors to provide us with additional breathing room as we weighed out the current financing conditions.

And while we remain confident that todays financing challenges are temporary we also believe that it is critical for organizations like societal to meet the needs of the changing market.

For that reason during the period the company renegotiated our debt structure and certain covenants with our creditors to provide us with additional breathing room as we wait out the current financing conditions, specifically among other benefits the new terms differ a previous mandatory payments reduce certain payments.

Speaker 3: Specifically, among other benefits, the new terms defer previous mandatory payments, reduce certain payments, and lower certain minimum liquidity and fixed charge coverage ratio.

And lower certain minimum liquidity and fixed charge coverage ratios.

Speaker 3: Given this improved debt structure, we were able to further fortify our financial position during the third quarter by closing a public offering of common stock, raising gross proceeds of approximately $8.3 million. These funds will provide added operating flexibility during this time when several projects are being deferred, depending on the correction of the fundraising environment.

Given this improved debt structure, we were able to further fortify our financial position during the third quarter by closing a public offering of common stock raising gross proceeds of approximately $8 $3 million. These bonds will provide added operating flexibility. During this time when several project.

Or being deferred pending a correction of the fundraising environment.

Speaker 3: Concurrent with the closing of this financing, which was largely supported by many of the companies existing investors, the company's board of directors appointed Wayne Weissmann, Societals, previous board chairman, to the position of executive chairman, and Matt Arns joined the board as a new director.

Concurrent with the closing of this financing, which was largely supported by many of the company's existing investors. The company's board of directors appointed Wayne Weisman societal previous board chairman to the position of executive Chairman and Matt Orange joined the board as a new director, Matt as a senior.

Speaker 3: Matt is a Senior Portfolio Manager with First Light Asset Management, one of society's largest investors and a long time supporter of the company.

Portfolio manager with first slight asset management, one of societal as largest investors and a longtime supporter of the company that has a track record of success supporting Microcap small cap and mid cap healthcare companies and we are thrilled to have expanded access to his experience and guiding companies towards growth.

Speaker 3: Matt has a truck record of success supporting microcaps, small cap and mid cap healthcare companies. And we are thrilled to have expanded access to his experience in guiding companies towards growth and sustainable profitability.

And sustainable profitability.

Speaker 3: Another important undertaking during the third quarter was the initiation of a strategic re-alignment designed to right-size the company and increase cost efficiencies by focusing internal operations on later stage programs.

Another important undertaking during the third quarter was the initiation of a strategic realignment designed to rightsize the company and increased cost efficiencies by focusing on internal operations on later stage programs as part of this realignment societal reduced its workforce by 26 positions.

Speaker 3: As part of this re-alignment, societal reduced its workforce by 26 positions or 9% across all aspects of the business effective September 20, 2023. We also eliminated nine open positions.

Four 9% across all aspects of the business effective September 22023.

We also eliminated nine open positions. It is important to note that a significant majority of the cuts will impact the portion of the business supporting earlier stage services, which are most acutely affected by the current financing environment.

Speaker 3: It's important to note that a significant majority of the cuts will impact the portion of the business supporting earlier stage services, which are most acutely affected by the current financing and buyer.

Speaker 3: While it was difficult to take these steps, as I stated in my opening comments, these moves are expected to result in annualized savings of approximately $5.5 million.

While it was difficult to take these steps as I stated in my opening comments. These moves are expected to result in annualized savings of approximately $5 $5 million when.

Speaker 3: When combined with our improved debt structure, as well as the proceeds from our recent financing, we believe that we are well positioned not only to weather today's difficult environment, but we believe we have created a path to future growth, cash flow positivity, and ultimately sustainable profitability.

Bind with our improved debt structure as well as the proceeds from our recent financing. We believe that we are well positioned not only to weather today's difficult environment, but we believe we have created a path to future growth cash flow positivity and ultimately sustainable profitability.

Speaker 3: Hand in hand with the reduction of our workforce, we have also made decisions to scale back or discontinue aspects of our operations, which will impact the company's manufacturing capacity and accordingly our revenue generating capability.

Hand in hand, with the reduction of our workforce. We have also made decisions to scale back or discontinue aspects of our operations, which will impact the company's manufacturing capacity and accordingly are revenue generating capability.

Speaker 3: Specifically following the review of our entire project pipeline, we have made the decision to eliminate several one-off transactional projects that contributed little to cash flow on a net basis.

Specifically following a review of our entire project pipeline. We have made the decision to eliminate several one off transactional projects that contributed little to cash flow on a net basis.

Speaker 3: We have also opted to discontinue certain early stage operations that have been recently underutilized as a result of the financing market pullback.

We have also opted to discontinue certain early stage operations that have been recently underutilized as a result of the financing market pullback.

Speaker 3: While we believe these decisions will drive improved cash flow for the company, they will also reduce the company's overall revenue generating capacity in the near term by approximately 5 to 10%.

While we believe these decisions will drive improved cash flow for the company. They will also reduce the company's overall revenue generating capacity in the near term by approximately 5% to 10%.

Speaker 3: While the company continues to prioritize achieving sustainable profitability in the future, we believe that it is our first priority to establish a healthy cash flow today to sustain the company in the current financial environment.

While the company continues to prioritize achieving sustainable profitability in the future. We believe that it is our first priority to establish a healthy cash flow today to sustain the company in the current financial environment.

Speaker 3: As a result of our restructuring and our strategic refocusing of assets, we are today resetting our 2023 revenue guidance to account for the discontinuation of certain programs and services to between 92 and $94 million. And EBITDAW as adjusted guidance to between $11.5 and $13 million.

As a result of our restructuring and our strategic refocusing of assets. We are today resetting our 2023 revenue guidance to account for the discontinuation of certain programs and services to between 92 and $94 million and EBITDA as adjusted guidance to between <unk> <unk>.

Seven 5% and $13 million.

Speaker 3: Given the achievements of the quarter combined with our leaner and highly focused operation, I wish to emphasize the optimism we have for the future of societal CDMO.

Given the achievements of the quarter combined with our leaner and highly focused operation I wish to emphasize the optimism we have for the future of societal CMO.

Speaker 3: We have high conviction that the current market valuation of our company is not at all reflective of nor indicative of the real value of the company we have built and continue to grow every day. When we view the company's 2023 achievements today in the context of expectations for 2024 and beyond, we have bullish on our prospects for growth in the near future.

We have high conviction that the current market valuation of our company is not at all reflective of nor indicative of the real value of the company. We have built and continue to grow every day when we view the company's 2023 achievements to date and the context of expectations for 2020 for MB.

And we are bullish on our prospects for growth in the near future design.

Speaker 3: As I have outlined today, the third quarter was a highly productive time during which the company's operational performance was strong.

As I have outlined today, the third quarter was a highly productive time during which the company's operational performance was strong.

Speaker 3: During the period our team added new projects for both new and existing cuts.

During the period, our team added new projects for both new and existing customers. These projects span a range of societal capabilities and we believe speaks to the growing strength of our reputation within the industry and track record of success with our existing customers.

Speaker 3: These projects span a range of societal's capabilities, and we believe speak to the growing strength of our reputation within the industry, and track record of success with our existing customers.

Speaker 3: As a result of our rebranding and related marketing activities, as well as the consistent efforts of our business development team, the past couple of years, the company's name recognition has increased in the CDMO space and resulted in the strong lead generation that continues to fuel our product pipeline.

As a result of our rebranding and related marketing activities as well as the consistent efforts of our business development team. The past couple of years. The company's name recognition has increased in the <unk> space and resulted in the strong lead generation to continues to fuel our product pipeline.

Speaker 3: While we have scaled back much of our early stage work, we continue to successfully support several early stage programs that are advancing through the clinic, each with increasing manufacturing demands. And importantly, we are executing on more than 10 programs, which are either commercial tech transfers or programs in phase three testing that are moving toward approval filings. These phase three to commercial ramping activities are highly profitable for the company.

While we have scaled back much of our early stage work. We continue to successfully support several early stage programs that are advancing through the clinic, each with increasing manufacturing demands and importantly, we are executing on more than 10 programs, which are either commercial tech transfers or.

Programs in phase III testing that are moving toward approval filings. These phase III to commercial ramping activities are highly profitable for the company keep in mind that we only had one such project only a couple of years ago. We're very excited to have such a strong portfolio of projects at this stage.

Speaker 3: Keep in mind that we only had one such project only a couple of years ago. We're very excited to have such a strong portfolio of projects at this day.

Speaker 3: Beyond this, the company opened what we hope will ultimately become a significant new business channel by securing a licensed manufacturer and support a psychedelic drug development.

Beyond this the company opened what we hope will ultimately become a significant new business channel by securing a license to manufacture in support of psychedelic Strug development.

Speaker 3: Given our years of experience handling controlled substances, we believe we are uniquely qualified to support the emerging psychedelic therapy sector, as well as the growing number of ongoing and planned clinical trials in this area. And we're very excited to be working in this innovative area of drug development.

Given our years of experience handling controlled substances. We believe we are uniquely qualified to support the emerging psychedelic therapy sector as well as the growing number of ongoing and planned clinical trials in this area and we're very excited to be working in this innovative area of drug development.

Speaker 3: Over the last few months, we've also had a number of notable corporate achieves.

Over the last few months. We've also had a number of notable corporate achievements during the third quarter, we initiated a strategic reorganization favorably restructured our debt and raise funds in a very challenging market. As a result, our balance sheet has improved significantly in recent quarters and we believe our finance.

Speaker 3: During the third quarter, we initiated a strategic reorganization, favorably restructured our debt, and raised funds in a very challenging market. As a result, our balance sheet has improved significantly in recent quarters, and we believe our financial standing will continue to strengthen in 2024 due to a number of facts.

Standing will continue to strengthen in 2024 due to a number of factors as discussed earlier during 2024, we expect to close the land sale further lowering the companys debt and interest expense. In addition in 2024, we expect to pay off the note related to the acquisition of Iris.

Speaker 3: As discussed earlier, during 2024, we expect to close the land sale further lowering the company's debt and interest expense. In addition, in 2024, we expect to pay off the note related to the acquisition of irises, which will reduce our non-operational cash obligation.

<unk>, which will reduce our non operational cash obligations and finally, we expect to execute new marketing contracts for rapid mill that we believe will increase our profit levels due to favorable economics for this important part of our revenue portfolio.

Speaker 3: And finally, we expect to execute new marketing contracts for Verapamil that we believe will increase our profit levels due to favorable economics for this important part of our revenue portfolio.

Speaker 3: When you consider these achievements and our building of a CDMO over the past three to four years on the back of an enterprise with legacy commercial manufacturing experience measured in decades, and combine that with increasingly optimistic projections for CDMO outsourcing trends in our industry, particularly in the U.S. right now.

When you consider these achievements and our building of a CMO over the past three to four years on the back of an enterprise with legacy commercial manufacturing experience measured in decades, and combine that with increasingly optimistic projections for CDMA outsourcing trends in our industry, particularly.

In the U S. Right now we believe the societal <unk> is well positioned to achieve steady growth in the near term and are positioned to reach positive cash flow in 2025.

Speaker 3: We believe that societal CDMO is well positioned to achieve steady growth in the near term and are positioned to reach positive cash flow in 2020.

Speaker 3: This concludes my prepared remarks for today. We can now open up the call for questions.

This concludes my prepared remarks for today, we can now open up the call for questions operator.

Speaker 1: Thank you. Ladies and gentlemen, if you'd like to ask a question, please press star 11 on your telephone. Again, to ask a question, please press star 11. One moment for our first question.

Thank you, ladies and gentlemen, I would like to ask a question. Please press star one on your telephone again to ask a question. Please press star One line one moment for your first question.

Speaker 1: Our first question comes from Atlanta, Sean Dodge of RBC Capital Market, your land is...

Our first question comes from a line of Sondage of RBC capital markets. Your line is open.

Speaker 5: Yep, thanks. You're right, Dan. David, the cuts you're making to the earlier stage services and capacity. Should we think about these and things?

Yes. Thanks.

Noon, David cuts, you're making to the earlier stage services and capacity.

Should we think about these as being.

Speaker 5: somewhat temporary and that they could be added back or resumed at some point when the macro recovers or these more kind of permanent modifications you're making to the kind of the long range revenue generating capacity of the company.

Somewhat temporary and I think it would be added back a resumed.

Some point when the macro recoveries or are these more.

A kind of permanent modifications you are making to that.

The long range revenue generating capacity of the company.

Speaker 3: Yeah, Sean, thanks for the question. I definitely would say it's the former. We're really responding to the rate by which these early stage programs are being decided upon.

Yeah, Hey, Sean Thanks for the question I definitely would say it's the former.

We're really responding to the rate by which these early stage programs are being decided upon and.

We see a lot of proposal activity.

We have a lot of lead identification, but then we see those those programs being proposed on and then held.

Speaker 3: held until further notice by the sponsors. And so we needed to ratchet down that part of the organization to be more appropriately aligned with the pace by which the work was coming to us.

Until further notice by the sponsors and so we needed to ratchet down Thats part of the organization to be more appropriately aligned with the pace by which the work was coming to us.

Speaker 4: but it could definitely be put back in place. And we've got a fully functioning organization there, just a smaller version.

But it could definitely be put back.

And in place and we've got a fully functioning.

Organization, they're just a smaller version of it.

Speaker 5: Okay, great. And then the timeline on the restructuring, it sounds like a lot of that was kind of put in place as of September 30th. You said five and a half million of annual savings. Will you realize any of that this year or should we think about that being kind of more incremental for next-

Okay, Great and then.

The timeline on the restructuring it sounds like a lot of that.

It was kind of put in place.

Timber 30, you said $5 5 million of annual savings.

Will you realize any of that this year or should we think about that being kind of more incremental for next year.

Speaker 4: I've shown it trying and so I would say that we expected to be roughly net neutral for 2023 and that expected saving was to really start to be materialized at the beginning of the

Hi, Sean it try and so I would say that we expect it to be roughly net neutral for 2023, and our expected savings to really start.

Materialized in the firm.

First quarter of next year.

Speaker 5: Okay, great. And then just last one for me, David, I think you said you all now are involved in 10, if I heard right, 10 late phase and commercial engagement. Is there some 15 give us a one, all of those should begin to ramp and contribute to revenue? Is that something you expect to see being pulled through kind of in mass in 2024, these more engagements, but they're gonna take a little bit longer to, I guess, to kind of iron out.

Okay, Great and then just last one for me David I think you said.

You all know our involvement in 10, if I heard right 10 late phase and commercial engagement.

Is there something you can give us.

When all of those should begin to ramp and contribute to revenues is that something you expect to see being pulled through kind of a math in 2020 for these more engaging theyre going to take a little bit longer.

<unk>.

I guess to kind of iron out.

Speaker 3: Yeah, no, a good question. I would say that

Yes, good question.

I would say that.

Sure.

Speaker 3: You know, the average tech transfer might take between 18 months to, two and a half years.

The average tech transfer might take between 18 months, two two and a half years.

Speaker 3: and they're starting at different points in time. And we're obviously seeing revenue throughout that tech transfer process. So each of those programs that we've alluded to is in motion.

And they're starting at different points in time.

And we're obviously seeing revenue throughout that tech transfer process. So each of those programs that we've alluded to is in motion and as part of our revenue profile at this point.

Speaker 3: and is part of our revenue profile at this point.

Speaker 3: But, you know, the part that I'm really trying to emphasize is that as they become commercial, we really get to pull them into the way we have historically conducted business in such a fantastic way, which is through our supply chain organization with forecast.

But the part that I am really trying to emphasize is that as they become commercial we really get too to fold them into.

Our the way we have historically conducted business in such a fantastic way, which is through our supply chain organization with forecast and the ability to plan for those in.

Speaker 3: and the ability to plan for those and put them into the engine that we've built that is delivering between 98 and 100% on time and full on a yearly basis. And so I think it's good for the business that those get approved. And we see it's actually more like 12 or 13 of those programs. So the greater than 10 is real. And we're really excited about the growth that we've been able to see in that part of our business. Okay.

Put them into the engine that we've built that is delivering between 98 and 100% on time in full on a yearly basis and so.

I think it's good for the business that those get approved and we see its actually more like 12 or 13 of those programs the greater than 10 is.

And we're really excited about the growth that we've been able to see in that part of our business.

Okay great.

Great. Thanks again for the time.

Speaker 6: All right, thanks. Thank you.

Alright. Thanks.

Thank you one moment please.

Speaker 1: Our next question comes from a lot of Matt Uick of Craig Hallam, the Alliance Open.

Our next question comes from the line of Matt Hewitt.

Of Craig Hallum. Your line is open.

Speaker 7: Good afternoon. Thank you for taking the questions. Obviously, a very busy quarter, and quite frankly, a busy year. Maybe first up regarding the market. Obviously, it's been a challenging environment, to say the least. But have you seen any changes over the last 90 days?

Good afternoon, and thank you for taking the questions. So obviously, a very busy quarter.

Quite frankly busy year, maybe first off regarding the market. Obviously, it's been a challenging environment to say the least but have you seen any changes over the last 90 days.

Speaker 7: Some companies out there are saying that they're starting to see some green shoots emerging and some customers starting to talk about programs and projects and maybe those could start here, Kee4, but more likely, Kee1 of the new year. But what have you heard over the past 90 days?

Some companies out there are saying that they are starting to see some green shoots emerging in some customers starting to you.

Talk about.

Programs and projects and maybe those could start here in Q4, but more likely Q1 of the new year, but what have you heard over the past 90 days.

Speaker 8: Mm-hmm. Yeah. Thanks, Matt. This is David, obviously.

Yes, Thanks, Matt.

This is David.

Obviously.

Speaker 8: Yeah, you know, thinking back to a couple of weeks ago at the CPHI conference in Barcelona, the tone and tenor was, I would say,

Yes.

Thinking back to a couple of weeks ago at the CPA cost per ounce in Barcelona.

The tone and tenor.

I would say.

Speaker 8: I don't want to exaggerate, but it was definitely more upbeat and I would say sort of quietly confident than a year, the year of a prior, right? Which was the beginning of the downturn last year. So it feels like the industry has accepted and embraced the new normal. Certainly there are a lot of cell and gene therapy programs that are, you know, you know.

Don't want to exaggerate, but it was definitely more upbeat.

And I would say sort of quietly confident that of Europe. The euro prior right, which was the beginning of the downturn.

Year so.

It feels like the industry has accepted and embraced the new normal.

Certainly there are a lot of cell and gene therapy programs that are.

Speaker 3: cycling through the system for good and bad and face with some challenges there, but we are having more positive conversations with companies who have programs that they intend to move forward.

No.

Cycling through the system for.

For good and bad and faced with some challenges there but.

We are having more positive conversations with progress with companies, who have programs that they intend to move forward and.

Speaker 8: And it looks like we're back to 2019 capital funding levels.

It looks like we're back to 2019.

The capital funding levels and it also looks like people are willing to accept that that's going to be.

Speaker 8: and it also looks like people are willing to accept that that's going to be where we stay for a while and I think that that...

Where we stay for a while and I think that that that clarification and that lack of uncertainty.

Speaker 3: that clarification and that lack of uncertainty.

Speaker 3: is what everybody has been looking for. And so, I can't point you specifically to spaces and say green shoot here, green shoot there, but definitely the tone and tenor and attitude.

As what everybody has been looking for and so I can't point, you to specifically to spaces and say green shoot here green shoot there, but definitely the tone and tenor and attitude is one we've got to move forward and we've got to continue to develop our pipeline and our products.

Speaker 3: is we've got to move forward and we've got to continue to develop our pipeline and our product.

Speaker 7: That's very helpful. Thank you. And then regarding the new psychedelic opportunity, obviously, it's very early days. But given your track record, given your already participating in the schedule two market, you know, are you having some conversations? Is that an area where given what seems to be a lot of excitement about that market? Is that an area where you think that you could have a contract within the next quarter or two, just trying to figure out the timing on one...

That's very helpful. Thank you and then regarding the new psychedelic opportunity obviously.

It's very early days, but given your track record given.

You are already participating in the schedule to market.

Are you having some conversations.

Is that an area, where given what seems to be a lot of excitement about that market is that an area, where you think that you could have a contract within the next quarter or two just I'm just trying to figure out the timing on one when that first one might come through.

Speaker 7: One that first one might come through.

Speaker 8: Yeah. I mean, that part of the market is certainly getting a lot of attention. It's early days as you pointed out first, but they too are...

Yes.

I mean that part of the market is certainly getting a lot of attention. It's early days as you.

Pointed out first but.

They too.

Or are struggling from a financing perspective, but I do definitely see green shoots in that space, you've seen a couple of acquisitions.

Speaker 3: are struggling from a financing perspective, but I do definitely see green shoots in that space. You've seen a couple of acquits.

Speaker 3: One from a major Japanese pharmaceutical company that bought a small Jeff excuse me a small Canadian psychedelic firm and we found that to be encouraging news and invalidating for it for the space, right?

One from a major Japanese pharmaceutical company that bought a small Jeff excuse me a small Canadian psychedelic firm and we found that to be encouraging news and validating for the space right.

Speaker 3: And so I would say Matt, we're bullish. I don't want to say in Q1 or Q2, there's going to be a contract, but there have been several conversations with companies in the space, and we're definitely doing everything we can to make sure that we're created the awareness that we're ready to support those programs.

And so I.

I would say, Matt we're bullish I don't want to say in Q1 or Q2, there is going to be a contract, but there have been <unk>.

Several conversations with companies in the space and we're definitely doing everything we can to make sure that were created the awareness that.

That we're ready to support those programs.

Speaker 7: That's great. And then maybe the last one, and I'm not sure if this is for you Orion, but from a gross margin perspective, obviously there was a little bit of a hit in Q3 from some of the restructuring charges. But should we anticipate a little bit of improvement even beyond that in the fourth quarter? And I realize it's still early maybe you haven't kind of worked through this yet, but how should we be thinking about gross margins next year? Thank you.

That's great and then maybe the last one.

<unk> fourth quarter and I realize it's still early maybe you haven't kind of work through this yet, but how should we be thinking about gross margins next year. Thank you.

Speaker 4: Thanks Matt. So we do expect improvement in gross margins. I think in the high 20% range, so for the year that should bring us to kind of 19, 20% gross margin range.

Thanks, Matt So we do expect improvement in gross margins I think in the high 20% range for the year that should bring us to kind of 19% to 20% gross margin range for the year based on the guidance that we put forward we haven't provided guidance.

Speaker 4: 40-year-based on the guidance that we put forth. We haven't provided guidance yet for 2024, but just thinking about a couple of things that are extremely important for us as we are planning for 2024, we're always looking at ways to have we to reduce our cash burden and prioritize our spend on strategic value and growth drivers. And we are looking at ways to reduce our cash burden and prioritize our spend on strategic value and growth drivers.

Yet for 2024.

Just thinking about a couple of things that are extremely important for us as we are planning for 2024.

We're always looking at ways of how we can reduce our cash burn prior to prioritize our spend on strategic value and growth drivers.

Speaker 4: We do expect to generate positive cash flow from operations next year and also be free cash flow positive in 2020.

We do expect to generate positive cash flow from operations next year can also be free cash flow positive in 2024.

Speaker 4: In addition, we have debt service payments and expected gross proceeds from the land sale that that David mentioned earlier.

Additionally, we have debt service payments and expected gross proceeds from the land sale that David mentioned earlier.

Speaker 4: And that would result in a reduction of our debt balance from roughly 40 million to 25 million by the end of 2024. So we still have a few cards to play in terms of improvement and not only the balance sheet, but also margin improvement next year. And heading into 2025 through renegotiated contracts with RAPML.

That would result in a reduction of our debt balance from roughly $40 million to $25 million by the end of 2024. So we still have a few cards per client in terms of improvement in not only the balance sheet, but also the margin improvement next year.

And heading into 2025 through renegotiated contracts with rational.

That's very helpful. Thank you very much.

Okay.

Speaker 1: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 11 on your telephone. Again, to ask a question, please press star 11. One moment, please.

Thank you again, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone again to ask a question. Please press star one line.

One moment please.

Thank you one moment please.

Okay.

Speaker 1: We do have a question from Max Mark of William Blair. Your line is open.

We do have a question from Max Smock of William Blair. Your line is open.

Mr. Martin Your line is open.

Thank you one moment please.

Okay.

Speaker 1: I'm sure no further questions of this past back over to David Inlow for any closing remarks.

I'm showing no further questions at this time.

Tobacco over to David <unk> for any closing remarks.

Speaker 3: Many thanks to all of our clients, supply chain, and other service providers and partners, and particularly to our excellent societal team. We look forward to many great achievements in the months ahead. Thank you again for participating today and for your continued support of societal CDMO.

Many thanks to all of our clients supply chain and other service providers and partners and particularly to our excellent societal team. We look forward to many great achievements in the months ahead. Thank you again for participating today and for your continued support of societal CDM.

Sure.

Speaker 1: Thank you. Ladies and gentlemen, this is us with today's conference. Thank you all participating and have a great day. You may all disconnect.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating and have a great day you may all disconnect.

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Speaker 1: Good day, ladies and gentlemen, and welcome to societal CDMO third quarter 2023 financial results conference call. At this time, all participants are in a listen only mode. Later we'll conduct a question and an introduction and instructions will follow that time.

Good day, ladies and gentlemen, and welcome to <unk> third quarter 2023 financial results Conference call. At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will follow at that time.

Speaker 1: As a reminder, this conference call may be recorded. I would not say hand the conference over to Stephanie Diaz of the Society of the Investor Relations Group. Please go ahead.

As a reminder, this conference call maybe recorded.

Not to hand, the conference over to Stephanie Diaz.

<unk> Investor Relations group. Please go ahead.

Speaker 2: Hello and thank you for joining us. On today's call we have David and Lowe, President and CEO and Ryan Lake Chief Financial Officer.

Hello, and thank you for joining us on today's call, we have David <unk>, President and CEO, and Ryan Lake Chief Financial Officer.

Speaker 2: Today we will be providing an overview of societal contract development and manufacturing business, including updates on corporate activities and financial results for the quarter, and nine months ended September 30, 2023. After our prepare.

We will be providing an overview of societal contract development and manufacturing business, including updates on corporate activities and financial results for the quarter and nine months ended September 32023.

After our prepared remarks, we will welcome your questions.

Before we begin I would like to caution that comments made during this conference call. Today November eight 2023 will contain certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 concerning the current beliefs of the company, which involve a number of assumptions risks and uncertainties.

Actual results could differ from these statements and the company undertakes no obligation to revise or update any statements made today.

Encourage you to review all of the company's filings with the Securities and Exchange Commission concerning these and other matters.

Speaker 2: Our earnings press release and this call will include discussion of certain non-GAAP information.

Our earnings press release, and this call will include discussion of certain non-GAAP information.

Speaker 2: You can find our earnings press release, including relevant norm gap reconciliation on our corporate website at societalcdmo.com.

You can find our earnings press release, including relevant non-GAAP reconciliations on our corporate website at societal CMO dot com with that I will turn the call over to David Hello, societal as president and CEO.

Speaker 2: With that, I will turn the call over to David Anelo, societal's president and CEO .

Speaker 3: Thank you, Stephanie, and thank you to everyone participating today via webcast.

Thank you Stephanie and thank you to everyone participating today via webcast.

During the third quarter societal continued the important work of delivering high value manufacturing services to our customers as well as adding multiple new and existing customer projects to our pipeline. In addition, during the period, we opened a new revenue channel by securing a schedule one controlled substance manufacturing license.

Speaker 3: In addition, during the period, we opened a new revenue channel by securing a Schedule One controlled substance manufacturing license from the Drug Enforcement Agency that will allow us to expand our work beyond Schedule Two products to manufacture for the growing psychedelic drug market.

From the drug enforcement agency that will allow us to expand our work beyond scheduled two products to manufacturer for the growing psychedelic drug market.

Speaker 3: To further stabilize our financial standing, we restructured our debt and certain covenants with our creditors to provide additional financial flexibility to the company.

To further stabilize our financial standing we restructured our debt and certain covenants with our creditors to provide additional financial flexibility to the company.

Speaker 3: The efforts of the third quarter demonstrated the company's ability to continue to attract new pipeline projects, raise capital, and rapidly reorient the business to best serve existing new customers despite today's challenging market conditions.

The efforts of the third quarter demonstrated the companys ability to continue to attract new pipeline projects raised capital and rapidly reorient the business to best serve existing and new customers. Despite today's challenging market conditions. When we combine these achievements with our expectations for 2020.

Speaker 3: When we combine these achievements with our expectations for 2024 and 2025, we believe we are firmly on the path to a steadily growing business generating positive cash flow.

Four and 2025, we believe we are firmly on the path to a steadily growing business generating positive cash flow.

Speaker 3: I will provide a more detailed review of all of our Q3 2023 achievements following an overview of our financial results for the quarter-ended September 30, 2023. For that, I'll turn the call over to Ryan.

I will provide a more detailed review of all of our Q3 2023 achievements. Following an overview of our financial results for the quarter ended September 32023 for that I'll turn the call over to Ryan.

Speaker 4: Thank you, David. Good afternoon, everyone. Before I begin, in addition to the brief financial overview, I'll provide on the call today. Additional details on our financial results for the third quarter and nine months and a September 30th, 2023 are included in our press release, issued prior to this call and in our form 10Q, which is on file with the SEC.

Thank you David Good afternoon, everyone before I begin in addition to the brief financial overview I'll provide on the call today additional details on our financial results for the third quarter and nine months ended September 32023 are included in our press release issued prior to this call and in our Form 10-Q, which is on.

File with the SEC.

Speaker 4: I'll now begin with the results for the third quarter. Revenues for the quarter ended September 30th, 2023, where 23.6 million compared to 21.6 million for the comparable 2022 period.

I'll begin with the results for the third quarter revenues for the quarter ended September 32023, or $23 6 million compared to $21 6 million for the comparable 2022 period. The increase of $2 million was primarily driven by an increase in revenue from the company's largest commercial customers. However, due to the.

The continued pull through in demand during the quarter, resulting from market share gains against the sole competitor for the rapid molecular products as well as a catch up in shipments to Teva from Q2 during which as mentioned in last quarter's earnings call saw a decrease in shipments due to the company's scheduled shutdown of the Companys <unk>.

Speaker 4: As well as a catch up in shipments to Tevo from Q2, during which, as mentioned in last quarter's earnings call, saw a decrease in shipments due to the company's scheduled shutdown of the company's packaging line to implement upgrades required to comply with the new serialization aggregation compliance.

<unk> line to implement upgrades required to comply with the new serialization aggregation compliance standards.

Speaker 4: In addition, there was an increase in shipments to Lynette for Verapimil PM due to timing of customer orders during the year. Further, the company had its first shipment to Otsuka commercial batches during the quarter. All setting these increases were a decrease in the vartisan-infectiform shipments due to timing of customer orders, as well as prior year inventory builds for infectiform as a then new customer.

In addition, there was an increase in shipments to Lynette for rapid mill PM due to timing of customer orders during the year.

Speaker 4: Cost of sales for the quarter ended September 30th, 2023, was 19.9 million compared to 16.1 million for the comparable period of 2022.

Cost of sales for the quarter ended September 32023 was $19 9 million compared to $16 1 million for the comparable period of 2022.

Speaker 4: The increase of 3.8 million was primarily due to higher commercial manufacturing revenue and higher fixed costs to support the newly installed Aseptic Filth Finish line that has expanded the company's capability.

Speaker 4: In addition, there were .7 million of restructuring costs reported during the current year period.

In addition, there were $7 million of restructuring costs recorded during the current year period.

Speaker 4: Selling General Administrative Expenses for the third quarter of 2023 at $5.3 million were relatively consistent with the comparable prior year period of $5.1 million.

Selling general and administrative expenses for the third quarter of 2023 of $5 3 million were relatively consistent with the comparable prior year period to $5 1 million.

Speaker 4: within the current year period was 0.4 million of restructuring costs.

Included within the current year period was <unk> 4 million of restructuring costs.

Speaker 4: Interest expense was 3 million for the 3 months ended September 30th, 2023. A decrease compared to 3.6 million for the comparable period of 2022.

Interest expense was $3 million for the three months ended September 32023, the decrease compared to $3 6 million for the comparable period of 2022.

Speaker 4: The decrease of 0.6 million was primarily due to a significantly reduced amount of aggregate principal and lower interest rates under the company's refinance debt as compared to the borrowings outstanding during the period it ended September 30th, 2022.

The decrease of <unk> 6 million was primarily due to a significantly reduced amount of aggregate principle and lower interest rates under the company's refinance debt as compared to the borrowings outstanding during the period ended September 32022.

Speaker 4: For the quarter ended September 30, 2023, the company recorded a net loss of 4.6 million or 5 cents per diluted share as compared to a net loss of 3.3 million or 6 cents per diluted share for the comparable period of 2022. Ibadah as adjusted for the period was 2.8 million compared to 3.8 million in the prior year period.

EBITDA as adjusted for the period was $2 8 million compared to $3 8 million in the prior year period.

Speaker 4: The 1 million decrease in EBDA is primarily due to higher expenses during the period as discussed previously.

The $1 million decrease in EBITDA is primarily due to higher expenses during the period as discussed previously.

Speaker 4: I'll now review the results for the nine months ended September 30th, 2023.

I will now review the results for the nine months ended September 32023.

Speaker 4: Revenue for the nine month ended September 30th, 2023 was 66.9 million compared to 65.9 million for 2022.

Revenue for the nine months ended September 32023 was $66 9 million compared to $65 9 million for 2022.

The increase of $1 million in revenue was primarily driven by increases in revenue from Kevin on that as well as an increase in pre commercial development revenues, which were partially offset by a decrease in novartis and in fact, the farm revenues as discussed previously.

Speaker 4: Cost of sales for the nine months ended September 30, 2023, was $56.5 million compared to $49.6 million in 2022. The cost of sales increase of $6.9 million was primarily due to mix of revenue and related fixed cost absorption, including increased costs associated with the new aseptic fill finish line that has expanded the company's capabilities and increased material costs.

Cost of sales for the nine months ended September 32023 was $56 5 million compared to $49 6 million in 2022.

Speaker 4: In addition, there were .7 million of restructuring costs recorded during the current period.

In addition, there were $7 million of restructuring costs recorded during the current year period.

Speaker 4: Selling general and administrative expenses for the nine-month end of September 30, 2023, were $15.2 million compared to $15.9 million in 2022.

Selling general and administrative expenses for the nine months ended September 32023 were $15 2 million compared to $15 9 million in 2022 to.

Speaker 4: The decrease of .7 million was primarily related to lower public company costs and administrative costs than the prior year offset by .4 million of restructuring costs recorded in the current year period.

Speaker 4: Interest expense was $7.4 million and $10.5 million for the first nine months of 2023 and 2022, respectively. The decrease of $3.1 million was primarily due to a significantly reduced amount of aggregate principal and lower interest rates under the company's refinanced debt as compared to the borrowings outstanding during the period ended September 30, 2022.

Interest expense was $7 4 million and $10 5 million for the first nine months of 2023 and 2022, respectively. The decrease of $3 1 million was primarily due to a significantly reduced the amount of aggregate principle and lower interest rates under the companys refinance debt as compared to the borrowings outstanding during the peer.

<unk> ended September 32022.

Speaker 4: For the nine months ended September 30th, 2023, societal reported and that lost a 12.5 million or 14 cents per diluted share compared to a net loss of 10.7 million or 19 cents per diluted share for 2022. EBITDA as adjusted for the first nine months was 6.3 million compared to 10.6 million in the prior year period.

For the nine months ended September 32023, societal reported a net loss of $12 5 million or <unk> 14 per diluted share compared to a net loss of $10 7 million or <unk> 19 per diluted share for 2022.

EBITDA as adjusted for the first nine months was $6 3 million compared to $10 6 million in the prior year period.

Speaker 4: The 4.3 million decrease in EBITDA is primarily due to a mixture revenues and related fixed cost absorption offset by reduced selling general administrative costs.

The $4 $3 million decrease in EBITDA is primarily due to a mix of revenues and related fixed cost absorption offset by reduced selling general and administrative costs.

Speaker 4: This concludes my financial overview for those interested in reviewing our non gap reconciliations. Please refer to our filing or the press release issue today. I'll now turn the call back over to David for an update on operations and achievements during the period. David.

This concludes my financial overview for.

For those interested in reviewing our non-GAAP reconciliations please refer to our 8-K filing or the press release issued today.

I'll now turn the call back over to David for an update on operations and achievements during the period David.

Thanks, Brian.

Speaker 3: Before addressing the events of the quarter, I want to quickly discuss two matters that fall outside of our specific Q3 achieved.

Before addressing the events of the quarter I want to quickly discuss two matters that fall outside of our specific Q3 achievements. The first is the company's land sale that we announced in August 2022, and the second is the projected margin growth of our <unk> business. Many of you have requested updates on these efforts.

Speaker 3: The first is the company's land sale that we announced in August 2022, and the second is the projected margin growth of our Barrapa Mill business.

Speaker 3: Many of you have requested updates on these efforts, which I'm happy to provide today.

<unk>, which I'm happy to provide today.

Speaker 3: As a reminder, societal sign to sales and purchase agreement to sell approximately a hundred and twenty one acres of Lakefront land to David Weekly Homes an established home builder for $9.1 million.

As a reminder, societal signed a sales and purchase agreement to sell approximately 121 acres of lakefront land to David Weekley homes, and established homebuilder for $9 $1 million.

Speaker 3: The land is located at Jason to Societals manufacturing facility and Gainesville, Georgia.

Land is located adjacent to societal as manufacturing facility in Gainesville, Georgia.

Speaker 3: I'll now provide an update on Societals Borapamil business. As a reminder, Societal CDMO owns the NVA and the drug master file for Borapamil, along a proof calcium channel blocker for the treatment of hyper-tension.

I will now provide an update on societal <unk> business as a reminder, societal CMO owns the NDA and the drug Master file for <unk>, along approved calcium channel blocker for the treatment of hypertension.

Speaker 3: Societal's longstanding partners for the marketing of this product are Teva and Lynette.

Societal as long standing partners for the marketing of this product are Teva and <unk>.

Speaker 3: The company's current verapamil marketing and distribution contracts expire at the end of 2024.

The company's current verapamil marketing and distribution contracts expire at the end of 2024.

Speaker 3: As we begin planning for those contracts to be revisited, early indications give us confidence that the economics of the new Varapamil contracts will be measurably improved for societal. We believe that these improved economics will further strengthen our financial position and facilitate the continued growth of our CDMO business.

As we begin planning for those contracts to be revisited early indications give us confidence that the economics of the new <unk> contracts will be measurably improved versus cycle. We believe that these improved economics will further strengthen our financial position and facilitate the continued growth of our CMO business.

<unk>.

Speaker 3: I will now spend some time discussing key activities during the period.

I will now spend some time discussing key activities during the period.

Speaker 3: During the third quarter, Societal successfully executed a number of important objectives with the intent not only of strengthening our customer base and backlog, but also establishing a stronger financial platform from which to navigate the challenging financial environment that continues to impact the businesses and related decision making of many of our existing and prospective customers.

During the third quarter societal successfully executed a number of important objectives with the intent not only are strengthening our customer base in backlog, but also establishing a stronger financial platform from which to navigate the challenging financial environment that continues to impact the businesses and related decision.

Many of our existing and prospective customers.

Speaker 3: I'll first highlight two Q3 achievements that we believe will support the company's organic growth objective.

I'll first highlight two Q3 achievements that we believe will support the company's organic growth objectives first during the quarter. The company announced that it has taken another step to expand our services by securing a day a schedule one license to manufacturer in support of psychedelic drug.

Speaker 3: First, during the quarter, the company announced that it has taken another step to expand our services by securing a DEA Schedule I license to manufacture in support of psychedelic drug development without committing any additional capital investment.

Speaker 3: This strategic expansion is a natural fit for the company based on our decades of experience in manufacturing and handling controlled substances.

Speaker 3: We believe this unique experience positions societal well to address the emerging psychedelic therapy sector, as well as the growing number of ongoing and planned clinical trials in this area.

As the growing number of ongoing and planned clinical trials in this area.

Speaker 3: Also during the quarter, the company continued to successfully add multiple new and existing customer projects to our pipeline.

Also during the quarter. The company continued to successfully add multiple new and existing customer projects to our pipeline.

Speaker 3: During the quarter, we signed our first government contract with the NIH for a project to be conducted at our Gainesville, Georgia facility.

During the quarter, we signed our first government contract with the NIH for a project to be conducted in our Gainesville, Georgia facility.

Speaker 3: With respect to our existing customers, the new work agreement signed during the quarter span a range of capabilities highlighting the quality of our services and the trust we have earned from our clients.

Speaker 3: Given today's market dynamics that continue to create financing risk for drug developers, it's important to emphasize that Societal continues to win important projects being advanced by both new and existing customers.

Given today's market dynamics that continue to create financing risk for drug developers, it's important to emphasize the societal continues to win important projects being advanced by both new and existing customers. We are grateful for their trust and partnership and we view this as a strong indicator for our ability to be.

Speaker 3: We are grateful for their trust and partnership and we view this as a strong indicator for our ability to build our customer base project pipeline and backlog in the future.

Build our customer base project pipeline and backlog in the future.

Speaker 3: And while we remain confident that today's financing challenges are temporary, we also believe that it is critical for organizations like societal to meet the needs of the changing market. For that reason, during the period, the company renegotiated our debt structure and certain covenants with our creditors to provide us with additional breathing room as we wait out the current financing condition.

And while we remain confident that todays financing challenges are temporary we also believe that it is critical for organizations like societal to meet the needs of the changing market.

For that reason during the period the company renegotiated our debt structure and certain covenants with our creditors to provide us with additional breathing room as we weighed out the current financing conditions, specifically among other benefits the new terms differ a previous mandatory payments reduce certain payments.

Speaker 3: Specifically, among other benefits, the new terms defer previous mandatory payments, reduce certain payments, and lower certain minimum liquidity and fixed charge coverage ratio.

<unk> and lower certain minimum liquidity and fixed charge coverage ratios.

Speaker 3: Given this improved debt structure, we were able to further fortify our financial position during the third quarter by closing a public offering of common stock, raising gross proceeds of approximately $8.3 million. These funds will provide added operating flexibility during this time when several projects are being deferred pending a correction of the fundraising environment.

Deferred pending a correction of the fund raising environment.

Speaker 3: Concurrent with the closing of this financing, which was largely supported by many of the company's existing investors, the company's board of directors appointed Wayne Weissman, Societal's previous board chairman, to the position of executive chairman, and Matt Arnes joined the board as a new director.

Concurrent with the closing of this financing, which was largely supported by many of the companys existing investors. The company's board of directors appointed Wayne Weisman societal previous board chairman to the position of executive Chairman and Matt Arens joined the board as a new director, Matt as a senior.

Speaker 3: Matt is a senior portfolio manager with Firstlight Asset Management, one of Societal's largest investors and a longtime supporter of the company.

Portfolio manager with first slight asset management, one of societal as largest investors in a long time supporter of the company. Matt has a track record of success supporting Microcap small cap and mid cap healthcare companies and we are thrilled to have expanded access to his experience and guiding companies towards growth.

Speaker 3: Matt has a track record of success supporting micro cap, small cap and mid cap health care companies, and we are thrilled to have expanded access to his experience in guiding companies towards growth and sustainable profitability.

<unk> and sustainable profitability.

Speaker 3: Another important undertaking during the third quarter was the initiation of a strategic realignment designed to right size the company and increase cost efficiencies by focusing internal operations on later stage programs.

Another important undertaking during the third quarter was the initiation of a strategic realignment designed to right size the company and increased cost efficiencies by focusing on internal operations on later stage programs as part of this realignment societal reduced its workforce by 26 positions.

Speaker 3: As part of this realignment, Societal reduced its workforce by 26 positions, or 9%, across all aspects of the business, effective September 20, 2023. We also eliminated nine open positions.

We're 9% across all aspects of the business effective September 22023, we also eliminated nine open positions. It is important to note that a significant majority of the cuts will impact the portion of the business supporting earlier stage services, which are most acutely affected by.

The current financing environment.

Speaker 3: While it was difficult to take these steps, as I stated in my opening comments, these moves are expected to result in annualized savings of approximately $5.5 million.

While it was difficult to take these steps as I stated in my opening comments. These moves are expected to result in annualized savings of approximately $5 $5 million when combined with our improved debt structure as well as the proceeds from our recent financing. We believe that we are well positioned not only to.

Speaker 3: When combined with our improved debt structure, as well as the proceeds from our recent financing, we believe that we are well positioned, not only to weather today's difficult environment, but we believe we have created a path to future growth, cash flow positivity, and ultimately sustainable profitability.

Whether today's difficult environment, but we believe we have created a path to future growth cash flow positivity and ultimately sustainable profitability.

Speaker 3: Hand in hand with the reduction of our workforce, we have also made decisions to scale back or discontinue aspects of our operations, which will impact the company's manufacturing capacity, and accordingly, our revenue generating capability.

Speaker 3: Specifically, following a review of our entire project pipeline, we have made the decision to eliminate several one-off transactional projects that contributed little to cash flow on a net basis.

Specifically following a review of our entire project pipeline. We have made the decision to eliminate several one off transactional projects that contributed little to cash flow on a net basis.

Speaker 3: We have also opted to discontinue certain early stage operations that have been recently underutilized as a result of the financing market pullback.

We have also opted to discontinue certain early stage operations that have been recently underutilized as a result of the financing market pullback.

Speaker 3: While we believe these decisions will drive improved cash flow for the company, they will also reduce the company's overall revenue-generating capacity in the near term by approximately 5 to 10 percent.

While we believe these decisions will drive improved cash flow for the company. It will also reduce the companys overall revenue generating capacity in the near term by approximately 5% to 10%.

Speaker 3: As a result of our restructuring and our strategic refocusing of assets, we are today resetting our 2023 revenue guidance to account for the discontinuation of certain programs and services to between 92 and 94 million dollars. And EBITDAW as adjusted guidance to between $11.5 and $13 million.

As a result of our restructuring and our strategic refocusing of assets, where today resetting our 2023 revenue guidance to account for the discontinuation of certain programs and services to between 92 and $94 million and EBITDA as adjusted guidance to between 11.

Five and $13 million.

Speaker 3: Given the achievements of the quarter combined with our leaner and highly focused operation, I wish to emphasize the optimism we have for the future of societal CDMO.

Given the achievements of the quarter combined with our leaner and highly focused operation I wish to emphasize the optimism we have for the future of societal CMO.

Speaker 3: We have high conviction that the current market valuation of our company is not at all reflective of nor indicative of the real value of the company we have built and continue to grow every day. When we view the company's 2023 achievements today in the context of expectations for 2024 and beyond, we are bullish on our prospects for growth in the near future.

And we are bullish on our prospects for growth in the near future.

Speaker 3: As I have outlined today, the third quarter was a highly productive time during which the company's operational performance was strong.

As I have outlined today, the third quarter was a highly productive time during which the company's operational performance was strong.

Speaker 3: During the period our team added new projects for both new and existing cuts.

During the period, our team added new projects for both new and existing customers. These projects span a range of societal capabilities and we believe speak to the growing strength of our reputation within the industry and track record of success with our existing customers.

Speaker 3: These projects span a range of societal capabilities and we believe speak to the growing strength of our reputation within the industry and track record of success with our existing customers.

Speaker 3: Keep in mind that we only had one such project only a couple of years ago. We're very excited to have such a strong portfolio of projects at this stage.

Speaker 3: Beyond this, the company opened what we hope will ultimately become a significant new business channel by securing a license to manufacture in support of psychedelics drug development.

Beyond this the company opened what we hope will ultimately become a significant new business channel by securing a license to manufacture in support of psychedelic Strug development.

Speaker 3: Over the last few months, we've also had a number of notable corporate achieves.

Speaker 3: During the third quarter, we initiated a strategic reorganization favorably restructured our debt and raise funds in a very challenging market. As a result, our balance sheet has improved significantly in recent quarters. And we believe our financial standing will continue to strengthen in 2024 due to a number of facts.

Speaker 3: As discussed earlier, during 2024, we expect to close the land sale, further lowering the company's debt and interest expense. In addition, in 2024, we expect to pay off the note related to the acquisition of irises, which will reduce our non-operational cash obligation.

When you consider these achievements and our building of a CMO over the past three to four years on the back of an enterprise with legacy commercial manufacturing experienced measured in decades, and combine that with increasingly optimistic projections for CDMA outsourcing trends in our industry, particularly.

In the U S right now.

Speaker 3: We believe that Societal CDMO is well positioned to achieve steady growth in the near term and are positioned to reach positive cash flow in 2025.

We believe that societal <unk> is well positioned to achieve steady growth in the near term and are positioned to reach positive cash flow in 2025.

Speaker 3: This concludes my prepared remarks for today. We can now open up the call for questions. Operator.

This concludes my prepared remarks for today, we can now open up the call for questions operator.

Thank you, ladies and gentlemen, I would like to ask a question. Please press star one on your telephone again to ask a question. Please press star One line one moment for our first question.

Speaker 1: Our first question comes from the line of Sean Dodds of RBC Capital Markets. Your line is open.

Yeah.

Our first question comes from a line of Sondage of RBC capital markets. Your line is open.

Speaker 5: Yep, thanks. You're right, noon. David, the cuts you're making to the earlier stage services and capacity. Should we think about these as being?

Yes. Thanks.

Afternoon.

David the cuts, you're making to the earlier stage services and capacity.

Should we think about these as being.

Somewhat temporary and I think it would be added back a resumed.

Some point when the macro recovery or are these more.

Kind of a permanent modifications youre, making to that.

Kind of a long range revenue generating capacity of the company.

Speaker 3: Yeah, Sean, thanks for the question. I definitely would say it's the former. We're really responding to the rate by which these early stage programs are being decided upon.

Yeah, Hey, Sean Thanks for the question I definitely would say it's the former.

We're really responding to the rate by which these early stage programs are being decided upon.

Speaker 8: We see a lot of proposal activity. We have a lot of lead identification, but then we see those programs being, you know, proposed on.

We see a lot of proposal activity.

We have a lot of lead identification, but then we see those those programs being proposed on and then held.

Until further notice by the sponsors and so we needed to ratchet down Thats part of the organization to be more appropriately aligned with the pace by which the work was coming to us.

Speaker 3: But it could definitely be put back in place. And we've got a fully functioning organization there, just a smaller version.

But I could definitely be put back.

And in place and we've got a fully functioning.

Organization, they're just a smaller version of it.

Speaker 5: Okay, great. And then the timeline on the restructuring, it sounds like a lot of that was kind of put in place as of September 30th. You said 5 and a half million of annual savings. Will you realize any of that this year, or should we think about that being kind of more incremental for next year?

Okay, Great and then.

The timeline on the restructuring it sounds like a lot of that was kind of put in place.

However, 30, you said $5 5 million of annual savings.

Will you realize any of that this year or should we think about that being kind of more incremental for next year.

Speaker 4: Hi, Sean, it's Ryan. So I would say that, you know, we expect it to be roughly net neutral for 2023 and that expected savings to really start to be materialized at the beginning of the year.

Hi, Sean it thrive and so I would say that we expect it to be roughly net neutral for 2023, and our expected savings to really start.

Materialized in the first quarter of next year.

Speaker 5: Okay, great. And then just last one for me, David, I think you said you all now are involved in 10, if I heard right, 10 late phase and commercial engagements. Is there some sense you can give us of when all of those should begin to ramp and contribute to revenue? Is that something you expect to see being pulled through kind of in mass in 2024, these more engagements that are going to take a little bit kind of longer to, I guess, to kind of iron out?

Okay, Great and then just last one from me David I think you said.

You all know our involvement in 10, if I heard right 10 late phase and commercial engagement.

Is there some thinking and give us some.

When all of those should begin to ramp and contribute to revenues is that something you expect to see being pulled through kind of a math in 2020 for these more engaged theyre going to take a little bit longer.

I guess to kind of iron out.

Speaker 8: Yeah, good question. I would say that.

Yes, good question.

Would say that.

Speaker 3: You know, the average tech transfer might take between 18 months to two and a half years.

Yes.

Average tech transfer might take between 18 months to two five years.

Speaker 3: and they're starting at different points in time, and we're obviously seeing revenue throughout that tech transfer process. So each of those programs that we've alluded to is in motion.

And they're starting at different points in time, and we're obviously seeing revenue throughout that tech transfer process. So each of those programs that we've alluded to is in motion and as part of our revenue profile at this point.

Speaker 3: and is part of our revenue profile at this point.

Speaker 3: But, you know, the part that I'm really trying to emphasize is that as they become commercial, we really get to fold them into the way we have historically conducted business in such a fantastic way, which is through our supply chain organization with forecasts.

But.

The part that I'm really trying to emphasize is that as they become commercial we really get too to fold them into.

Our the way we have historically conducted business in such a fantastic way, which is through our supply chain organization with forecast and the ability to plan for those in.

Speaker 3: and the ability to plan for those and, you know, put them into the engine that we've built that is delivering between 98 and 100 percent on time and full on a yearly basis. And so I think it's good for the business that those get approved and, you know, we see it's actually more like 12 or 13 of those programs. So the greater than 10 is, you know, real and we're really excited about the growth that we've been able to see in that part of our business.

Put them into the engine that we've built that is delivering between 98% to 100% on time in full on a yearly basis and so.

I think it's good for the business that those get approved and we see its actually more like 12 or 13 of those programs. So the greater than 10 is.

And we're really excited about the growth that we've been able to see in that part of our business.

Okay great.

Great. Thanks again for the time.

Speaker 6: All right, thanks. Thank you.

Alright. Thanks.

Thank you one moment please.

Speaker 1: Our next question comes from the line of Matt Hewitt of Craig Hallam. Your line is open.

Our next question comes from the line of Matt Hewitt of Craig Hallum. Your line is open.

Good afternoon, and thank you for taking the questions, obviously very busy quarter.

Quite frankly, a busy year.

Maybe first off regarding the market, obviously, it's been a challenging environment to say the least but have you seen any changes over the last 90 days.

Speaker 7: Some companies out there are saying that they're starting to see some green shoots emerging and some customers starting to, you know, talk about programs and projects and maybe those could start here Q4, but more likely Q1 of the new year. But what have you heard over the past 90 days?

Some companies out there are saying that theyre starting to see some green shoots emerging in some customers starting to you.

Talk about programs and projects and maybe those could start here in Q4, but more likely <unk>.

Q1 of the new year, but what have you heard over the past 90 days.

Speaker 8: Yeah, thanks, Matt. This is David, obviously.

Yes, Thanks, Matt.

This is David.

Obviously.

Speaker 3: Yeah, you know, thinking back to a couple of weeks ago at the CPHI conference in Barcelona, the tone and tenor was, I would say...

Yes.

Thinking back to a couple of weeks ago at the CPA cost per ounce in Barcelona.

The tone and tenor.

I would say.

Speaker 3: I don't want to exaggerate, but it was definitely more upbeat and I would say sort of quietly confident than the year of prior, right? Which was the beginning of the downturn last year. So it feels like the industry has accepted and embraced the new normal. Certainly there are a lot of cell and gene therapy programs programs that are, you know,

Don't want to exaggerate, but it was definitely more upbeat.

And I would say sort of quietly confident that of Europe. The yearbook prior right, which was the beginning of the downturn.

Year so.

It feels like the industry has accepted and embraced the new normal.

Certainly there are a lot of cell and gene therapy programs that are.

Speaker 3: Cycling through the system for good and bad and and and faced with some challenges there, but we are having More positive conversations with program with companies who have programs that they intend to move forward

No.

Cycling through the system for.

For good and bad and faced with some challenges there but.

We are having more positive conversations with progress with companies, who have programs that they intend to move forward and.

Speaker 3: And, you know, it looks like we're back to 2019 capital funding levels.

It looks like we're back to 2019.

The capital funding levels and it also looks like people are willing to accept that that's going to be.

Speaker 3: And it also looks like people are willing to accept that that's going to be where we stay for a while. And I think that that

Where we stay for a while and I think that that that clarification and that lack of uncertainty.

Speaker 3: that clarification and that lack of uncertainty.

Speaker 3: is what everybody has been looking for. And so, I can't point you specifically to spaces and say green shoot here, green shoot there, but definitely the tone and tenor and attitude.

Is what everybody has been looking for and so I can't point, you, specifically those spaces and say green shoot here green shoot there, but definitely the tone and tenor and attitude is one we've got to move forward and we've got to continue to develop our pipeline and our products.

Speaker 3: is one of we've got to move forward and we've got to continue to develop our pipeline and our product.

Speaker 7: That's very helpful. Thank you. And then regarding the new psychedelic opportunity, obviously, it's very early days. But given your track record, given your already participating in the Schedule 2 market, are you having some conversations? Is that an area where given what seems to be a lot of excitement about that market? Is that an area where you think that you could have a contract within the next quarter or two just trying to figure out the timing on one?

That's very helpful. Thank you and then regarding the new psychedelic opportunity obviously.

It's very early days, but given your track record given.

You are already participating in the schedule to market.

Are you having some conversations.

Speaker 7: when that first one might come through.

Speaker 8: Yeah, I mean, that part of the market is certainly getting a lot of attention. It's early days, as you pointed out first, but they, too, are.

Yeah.

That part of the market is certainly getting a lot of attention. It's early days as you.

Pointed out first but.

They too.

Or are struggling from a financing perspective, but I do definitely see green shoots in that space <unk> seen a couple of acquisitions.

Speaker 3: are struggling from a financing perspective, but I do definitely see green shoots in that space. You've seen a couple of acquisitions.

Speaker 3: One from a major Japanese pharmaceutical company that bought a small, excuse me, a small Canadian psychedelic firm and we found that to be encouraging news and validating for the space, right?

One from a major Japanese pharmaceutical company that bought a small Jeff excuse me a small Canadian psychedelic firm and we've found that to be encouraging news and validating for the space right.

Speaker 3: And so, I would say, Matt, we're bullish. I don't want to say in Q1 or Q2, there's going to be a contract, but there have been several conversations with companies in the space, and we're definitely doing everything we can to make sure that we've created the awareness that we're ready to support those programs.

And so.

I would say, Matt we're bullish I don't want to say in Q1 or Q2, there is going to be a contract, but there have been.

Several conversations with companies in the space and we are definitely doing everything we can to make sure that were created the awareness that.

But we're ready to support those programs.

Speaker 7: That's great. And then maybe the last one, and I'm not sure if this is for you, Orion, but from a gross margin perspective, obviously there was a little bit of a hit in Q3 from some of the restructuring charges, but should we anticipate a little bit of improvement even beyond that in the fourth quarter? And I realize it's still early, maybe you haven't kind of worked through this yet, but how should we be thinking about gross margins next year? Thank you.

That's great and then maybe the last one.

Sure. If this is for you Ryan but from a gross margin perspective, obviously, there was a little bit of a hit in Q3 from some of the restructuring charges, but should we anticipate a little bit of improvement even beyond that in the fourth quarter and I realize it's still early maybe you haven't kind of work through this yet, but how should we be thinking about gross margins next.

At year. Thank you.

Speaker 4: Thanks, Matt. So we do expect improvement and gross margins. I think in the high 20% range show for the year that should bring us to kind of 1920% gross margin range.

Speaker 4: 40-year-based on the guidance that we put forth. We haven't provided guidance yet for 2024, but just thinking about a couple of things that are extremely important for us as we are planning for 2024, we're always looking at ways to have we to reduce our cash burden prior to our standards on strategic value and growth drivers.

Yet for 2024.

Just thinking about a couple of things that are extremely important for us as we are planning for 2024.

We're always looking at ways, how we can reduce our cash burn prior to prioritize our spend on strategic value and growth drivers.

Speaker 4: We do expect to generate positive cash flow from operations next year and also be free cash flow positive in 2024.

We do expect to generate positive cash flow from operations next year and also the free cash flow positive in 2024.

Speaker 4: In addition, we have debt service payments and expected gross proceeds from the land sale that David mentioned earlier.

In addition, we have debt service payments and expected gross proceeds from the land sale that David mentioned earlier.

Speaker 4: And that would result in a reduction of our debt balance from roughly $40 million to $25 million by the end of 2024. So we still have a few cards to play in terms of improvement in not only the balance sheet, but also margin improvement next year and heading into 2025 through renegotiated contracts with Rathamil. Thank you.

And that would result in a reduction of our debt balance from roughly $40 million to $25 million by the end of 2024. So we still have a few cards per client in terms of improvement in not only the balance sheet, but also the margin improvement next year.

And heading into 2025 through renegotiated contracts with rationale.

That's very helpful. Thank you very much.

Okay.

Speaker 1: Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 1-1 on your telephone. Again, to ask a question, please press star 1-1.

Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone again to ask a question. Please press star one one.

One moment please.

Okay.

Speaker 1: I'm showing no further questions at this time. Back over to David Inlow for any closing remarks.

Showing no further questions at this time.

Back over to David <unk> for any closing remarks.

Many thanks to all of our clients supply chain and other service providers and partners and particularly related to our excellent societal team. We look forward to many great achievements in the months ahead. Thank you again for participating today and for your continued support of societal CDM.

No.

Speaker 1: Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating and have a great day. You may all disconnect.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating and have a great day you may all disconnect.

Q3 2023 Societal CDMO Inc Earnings Call

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