Adamis Pharmaceuticals Corp (ADMP) 2019 Q1 法說會逐字稿

Good day, and welcome to the Adamis Pharmaceuticals Corp.

First Quarter 2019 Conference Call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Dr. Dennis Carlo, President and CEO of Adamis Pharmaceuticals.

Please go ahead, sir.

Thank you.

Hello and welcome to Adamis Pharmaceuticals' First Quarter 2019 Earnings Conference Call.

I am Dr. Dennis Carlo, President and CEO of Adamis.

First of all, I'd like to thank everyone for joining us today.

With the launch of SYMJEPI, Adamis' first commercial product this year.

The directors and the management team thought it made sense to begin (inaudible) quarterly conference calls.

In addition to me, I have on today's call Chief Financial Officer, Rob Hopkins; the Chief Business Officer, Dave Marguglio; and our Chief Medical Officer, Dr. Ronald Moss.

(Operator Instructions) This call is being webcast, and you can refer to the company's press release regarding the quarter and company developments at adamispharmaceuticals.com, in the Investors section of our website.

But before I actually begin the presentation, I will do away with the mandatory legal remarks.

I'd like to remind you that in today's call, we will be making certain forward-looking statements regarding our business based on current expectations and current information.

Those statements speak only as of today, and except as required by law, we do not assume any duty to update the forward-looking statements made today.

Of course, any forward-looking statements involve risk and uncertainties, and our actual results could differ materially from those anticipated by any forward-looking statements that we may make today.

Additional information concerning the factors that could affect our business and the financial results is included in our most recent annual report, Form 10-K with the Security and Exchange Commission and the other subsequent filings that we make with the SEC.

These are available at the SEC's website.

I'd like to move now into the formal part of the presentation.

Well, first of all, I'd like to extend a special welcome to our shareholders, analysts and anyone that is new to Adamis.

As most of you know, I've been with Adamis from the beginning.

Despite some major challenges and obstacles along the way, I and the management team have never been more excited and optimistic about where we are as a company.

I believe that 2019 will be a positive year for Adamis.

I believe we are moving from a development-stage company with product candidates in the pipeline into a commercial-stage company with multiple sources of revenue and closer to our goal of company-wide profitability.

Currently, I anticipate revenues from 3 different sources for our company: first, subjecting SYMJEPI sales, mainly coming from Sandoz retail launch, which as they made public yesterday, should occur shortly; second, sales from the U.S. Compounding, which have been steadily increasing; and finally, upfront payment and sales from anticipated commercialization of our naloxone product.

Our product development is focused on improved methods of delivering well-known drugs that we believe have the potential to compete with large, well-established markets.

Adamis' first product developed utilizing this approach is our epinephrine injection product, SYMJEPI.

As you know, SYMJEPI injection has been approved by the FDA for the treatment of anaphylaxis in both 0.3-milligram and 0.15-milligram dose [products].

In January of this year, we were very pleased to announce that our commercial partner, Sandoz, a division of Novartis, started the first of a multiphase launch for SYMJEPI in the U.S. market.

As Sandoz continues to ramp up sales of the 0.3-milligram dose in the institutional channel, we look forward to the addition of the 0.15-milligram dose and the launch of both into the much larger retail market in the near future.

With the continued rollout of SYMJEPI into this larger retail market, we Adamis anticipate that the revenue stream to our sales will increase in future quarters.

Our second source of revenue is from U.S. Compounding, our wholly owned drug outsourcing facility.

This Compounding was acquired in 2016.

At the time, it was a depressed asset with limited sales but sales have been reasonably robust in the past.

Consequently, we believe there's a pent-up demand for the product and sales would ramp up rapidly.

Well, that turned out not to be the case.

I am personally very, very disappointed.

It's taken us longer than we originally thought to turn this asset around.

However, the good news today is I can report that we believe we've turned the corner.

We've made significant changes over the last few months, including the elimination of lower-margin products, deduction and operating cost and overhead, changes to senior management and investments and improvements to manufacturing processes with the goals of improving overall efficiency, reducing operating expenses and improving the margins.

Net sales for the division have generally been growing consistently for the last 2 years.

Last year's sales, 2018, were $15.1 million.

For the first half of 2019, we expect net sales for this division to be approximately $10 million and, by year-end, to total $22 million.

If we achieve those goals, it would represent a 45% increase over 2018, and we would expect the division to be net positive for Adamis.

I'd like to now move onto naloxone, our third source of revenue.

As you know, at the end of 2018, we submitted a new drug application for our naloxone injection product.

In March, we announced that the FDA had accepted our NDA to review and provided an October 2019 PDUFA date.

Currently, we are in active discussions with multiple potential commercial partners.

Our product is unique compared to other products on the market, in that it contains 5 milligrams of naloxone.

We believe this higher dose of naloxone is necessary to overcome overdoses due to the more powerful synthetic opioids such as fentanyl.

In fact, our recent market research suggests that this product will be well received and will fill an unmet medical need.

Before I turn the call over to Rob, I want to underscore again how optimistic and excited I am about the remainder of 2019.

We have come a long way.

As I previously said, I believe we've turned the corner and that Adamis has never been in such a good position.

With all the possible developments, milestones and the 3-future revenue streams ahead, I truly believe we'll be a very good company, a very good year for your company.

There's an old saying that states that a path with no obstacles usually leads to no place.

Well, we've had our share of major obstacles and challenges.

Now I believe we are on the path to success.

I will now turn the call over to our CFO, Rob Hopkins, for a discussion of financial results.

Rob?

Thank you, Dennis.

I would like to highlight a few points on this call and encourage everyone to review our Form 10-Q for additional details and disclosures.

First, our Q1 revenue grew 18% over the last quarter of 2018 and 53% versus the first quarter of 2018 approximately $4.9 million and $3.2 million, respectively.

This increase was attributable to the continued growth at U.S. Compound that Dennis mentioned earlier and, in part, from the initial launch of SYMJEPI.

Selling, General and Administrative expenses for the first quarter increased 23% over the first quarter of 2018, approximately $8 million and $6.5 million, respectively.

The single largest contributor to this increase is the annual maintenance fee that we paid to the FDA for SYMJEPI.

Research and development expenses for the first quarter of 2019 decreased $5.6 million from the fourth quarter of 2018.

The bulk of this reduction in costs was due to the completion of 2 late-stage development projects: naloxone and tadalafil.

Cash and equivalents at the end of the first quarter was $9.2 million.

Our goal for the last 3 quarters of 2019 is the key cash expenditures, that is cash use and operating and investing activities, in the range of approximately $9 million to $12 million.

If we meet our spending goals for the remainder of 2019, it should represent the reduction of approximately 50% from our operating expenses for 2018.

We believe that the combination of reduced spending, cash on hand and increase in cash flows from Sandoz and U.S. Compounding, plus anticipated license fees or payments if we enter into a commercialization agreement relating to the naloxone product, would provide sufficient funding for the company through the end of 2019.

Now to the possibility of Adamis conducting a financing in 2019.

If we did an equity financing this year, we would expect it to be much smaller than our public offerings in the recent years.

But as discussed, we believe that the combination of reduced spending, cash on hand and increase in cash flows from Sandoz and U.S. Compounding, plus the anticipated license fees or payments if we enter into a commercialization agreement relating to our naloxone product, would mitigate any need for an equity financing.

With that, I will turn it over to our Chief Medical Officer, Dr. Ron Moss, for an update on our development pipeline.

Thanks, Rob.

I would like to spend the bulk of my time discussing our most advanced product candidate, our high-dose naloxone injection, or APC-6000, product.

Naloxone is an opioid antagonist.

It is considered the drug of choice for immediate administration to treat opioid overdoses.

Naloxone works by blocking or reversing the toxic effects of the opioids, including loss of consciousness, decreased breathing and extreme drowsiness.

Without adequate opioid reversal by naloxone, death can occur.

Common abuse opioids include morphine, heroin, oxycodone, hydrocodone and, more recently, the more potent synthetic opioids, such as fentanyl and related drugs.

Of particular concern is the rise of the synthetic opioid abuse.

Fentanyl is approximately 100x more potent than morphine while carfentanil, a fentanyl analog, is 10,000x more potent than morphine.

Accidental opioid overdoses, unfortunately, have become a public health crisis in the U.S., with the number of death due to opioids increasing fivefold since 1999.

According to the Center for Disease Control, in 2017, drug overdoses resulted in approximately 72,000 deaths in the United States or nearly 200 people per day are dying.

Drug overdoses are now the leading cause of death for Americans under 50 and the proliferation of more powerful synthetic opioids such as fentanyl and its analogs could result in future increases in the number of deaths.

Indeed, recent studies have revealed an 80 -- 87% increase in deaths associated with the more potent synthetic opioids, such as fentanyl.

With this dramatic increase in the abuse of synthetic opioids, we and others have recently published studies suggesting that the current-recommended doses of naloxone may be inadequate.

Repeat dosing of naloxone, particularly in the cases of the more potent synthetic opioids, suggests to us there is a need for a higher-dosage product.

This was the stimulus for Adamis to develop a higher-dose naloxone injection using the already-approved user friendly SYMJEPI device.

As Dennis already mentioned, we filed an NDA for a high dose naloxone product at the end of last year and received a notice from the FDA in March that it was determined that the NDA was sufficiently complete to permit a comprehensive review and the agency provided with a target action date of October 31, 2019.

If this product is approved by the FDA and launched, we believe our high-does candidate could be an important part of the solution to this growing public health crisis of opioid overdoses.

In order to focus our resources on our naloxone product and in efforts to reduce operating expenses, as Rob described, we have slowed development of our other pipeline product candidates.

This includes the delay in the continuation of the start of patient enrollment for a Phase III study of beclomethasone for asthma and a hold on our sub-legal tadalafil product for the treatment of erectile dysfunction.

We will prioritize future development for these products based on the availability of capital to support them and our ongoing evaluation of commercial potential.

I would now like to introduce our Chief Business Officer, David Marguglio, for an update on outlicensing efforts.

Thank you, Rob.

Obviously, the most important licensing development in the first quarter was Sandoz launch of our SYMJEPI injection product.

As they -- we stated back in January, they initially launched into hospital and clinic market in the U.S. And as Sandoz recently announced, they are actively preparing for the introduction of both the 0.3- and the 0.15-milligram products into the larger retail market in U.S. To support that effort, Sandoz has also launched a new savings program in which eligible patients can pay nothing out of pocket for their SYMJEPI prescriptions.

Also, the SYMJEPI website is now live to provide instructions for use and other helpful information for the product.

For the most up-to-date information on the SYMJEPI launch, please refer to the Media Releases section of Sandoz' website.

Certainly, the progress to get SYMJEPI fully launched in the U.S. has been slower than we had initially hoped.

But the expectation of a launch in the retail market in the near future, we remain confident in Sandoz' ability to execute, and we steadfastly believe that Sandoz is the right partner for this product.

Regarding ex-U.

S. rights for SYMJEPI, we are currently in discussions with several potential commercial partners to market and distribute SYMJEPI in territories outside the U.S. The pace of those discussions was slowed last year so that we could gain more experience with our commercial supply chain and engage if we would have a reasonable manufacturing capacity to supply product outside the U.S. We restarted those licensing discussions in the first quarter, and those discussions are ongoing.

Lastly, we are also in discussions with multiple potential partners for the commercial rights to our naloxone injection product.

Our current goal is to be able to announce the commercialization plan for naloxone prior to an approval of the product.

If we are successful in licensing commercial rights for naloxone, it is possible that agreement would include upfront cash payments to Adamis in 2019.

And with that, I think we will open it up to questions.

(Operator Instructions) And we'll go first to Elliot Wilbur with Raymond James.

First question around the beclomethasone asset.

I guess prior to putting or pausing continued enrollment in the trial, can you just give us an update in terms of where exactly you stand on that product with respect to enrollment?

And then remind us of what the trial size ultimately is going to be?

Sure.

This is Ron Moss.

We began the work that preceded the patient enrollment.

So the study was prepared to sign-up centers, gaining the review board's approval, et cetera.

However, with the delay of the full launch of SYMJEPI, we determined to hold off enrolling patients into the study.

Until such time, we have better visibility into the revenue resources that Dennis described.

This study is a very -- fairly large study.

It involves approximately 550 patients, and there's actually 2 studies that are identical or in size that are part of the Phase III program.

Okay.

And I guess from just interim-planning perspective from start to finish, how long will you expect trial duration to be...

.

The current estimated -- yes.

So the estimated timeline, once we start enrolling to the time, we'll receive the clinical study report, approximately 18 months.

I want to ask a couple of lines of questions around SYMJEPI as well.

Obviously, the supply chain continues to experience shortages, at least in terms of product being supplied by Pfizer.

You can see that in terms of Teva grabbing additional share from Mylan, accelerated quite a bit last couple of weeks.

So it seems like an opportune time to kind of go full-court press with SYMJEPI.

A little bit hard to see from our vantage point in terms of what's happening there.

Looks like you shipped about $0.5 million in the quarter.

But anything you could say there in terms of, kind of, the feedback you're getting from Sandoz with respect to market interest in the product?

Where you're having success?

Where they may see some wins?

And anything you could say in terms of forward visibility with respect to future purchase orders and the like would be helpful.

Sure.

So I know -- it's a great question, and I know everybody is dying to -- for us to provide some sort of guidance for what Sandoz is doing and get some feedback as you've asked for as far as what the market looks like right now.

But the challenge that we have is that the process is completely controlled -- the commercialization process is completely controlled by Sandoz.

So we are not able to comment on what their sales efforts are, including any feedback.

However, Sandoz has assured us that they are certainly open to any sort of questions, and they've also stated that as they roll this product out that they will provide as much detail as they can on where and what channels that they will be in.

I just wanted to comment.

This is Dennis.

First of all, as you know, they are a Swiss company.

They are known to be very methodical and very analytical.

We all know that they move at their own pace.

But when they do, when they are ready, they commit and they produce.

So do I wish things would move faster?

Yes.

But did we make the right choice?

I'd say, yes.

They have a proven track record, and I truly believe that once they are launching in this -- in the full market that it will be very successful.

I'd like to bet on winners and made one in the past.

Okay.

And I just wanted to ask one last one line of question, perhaps around the naloxone assets.

Certainly seems like potential high-value addition to the portfolio.

I know you mentioned you're in partnership discussions.

Just kind of curious in terms of the level of interest you're seeing in the asset that.

Any descriptors you can provide in terms of sort of the types of players who are looking at this.

I mean that asset -- those assets right now seem to be kind of in the hands of small, maybe midsize spec pharma players, but there's probably a couple products out there in development that maybe in the hands of a larger pharma.

So I'm just kind of curious what your -- what kind of inbound you're getting interest -- what kind of inbound interested you're getting with sort of the type and size and scale or some of the potential partners that you're talking to?

Sure.

Well, the -- as we mentioned, we are in discussion with a number of them, and they vary in size and they vary in focus.

But the upside, as far as the amount of interest in the product is that it is obviously a very -- or highly visible product right now.

And certainly, there is a lot of impetus to come up with a solution.

So we are very, I think, pleased with the progress of those discussions with those -- with truly this type of process, obviously those discussions are subject to confidentiality.

So we can't provide a lot of detail as far as who the parties are and even what necessarily is their size and shape.

But I can tell you that the interest has certainly been high.

And then just maybe a follow-up.

Just what do you see as the sort of the gating factors to ultimately, potentially, being successful and realizing a partnership on the asset, just a matter of sort of coming to mutual agreement in terms of the value that each party should obtain as a result of agreement?

I mean really thinking speaking more specifically about approval, do you think that potentially company share, the ultimate economic value, could increase significantly with approval?

I mean it seems to be something that is relatively low from a regulatory risk perspective.

So I'm not sure that would necessarily be a gating factor but just curious on your perspective there.

Well, certainly, the strategy that we are undertaking with naloxone is different than what we went through with SYMJEPI.

SYMJEPI obviously, having gone through a process of executing a commercial agreement and then receiving its CRL and having to unwind that agreement.

When we started the process up again during our last NDA filing and maybe just choice to wait until we had approval rather than going through that process again.

So with naloxone, we have chosen a different part.

And as I mentioned before, the objective is to be able to announce a commercial plan prior to an approval.

As far as what the impediments might be for getting a deal done, each of these opportunities looks completely different.

So from our perspective, the critical element is, upon hearing what the commercial plan is for these different parties, making our determination as to which group we think will be able to ultimately bring the most value to the product in the marketplace.

And we'll go next to Jason McCarthy with Maxim Group.

I don't know if I had missed it earlier, could you provide the breakout of the Compounding business revenue versus any revenue from SYMJEPI?

And Mark, can you give us a little bit more clarity with the beclomethasone and the tadalafil now delayed?

And just until you get some more capital to move them forward, how can we think about the operating expense lines in the model?

This is Rob Hopkins.

I can point you, Jason, to Page 10 in the 10-Q where do we break down the SYMJEPI revenues versus U.S. Compounding.

And it was during our opening remarks that we discussed, the growth quarter-over-quarter, looking back at 2018 and then quarter-over-quarter between 2018 and 2019.

So yes, Page 10, it does break that down.

And for example, U.S. Compounding of about $4.4 million in revenue and the outsourced manufacturing of this title, $465,000.

Okay.

And on -- with the delayed trials, can you give us a sense of the cost savings in terms of R&D and SG&A expense?

Well, as far as cost savings, I mean just comparisons again in our opening remarks, we talked about the difference between this first Q and the first quarter in 2018, and it was reduced by $6.5 million.

Going forward, these -- since we have slowed down our pipeline development, we do feel that to stay within our cash and net cash parameters that we have on hand a combination with the increasing cash flows in Sandoz and USC and a possible upfront payment on naloxone.

Okay.

And just real quick on...

It's about half of -- I'm sorry, it's about half of what we have spent in the past.

Okay.

Just really quick on naloxone with the NDA accept date.

Can you just provide some clarity on the review timeline?

Is it expected to be a slow, 10- to 12-month review period?

Well, this is Ron Moss.

Our PDUFA date, as we mentioned earlier, is October 31.

We've had very positive interactions with the FDA, and they've interacted us and told us that they're going to review the NDA in a rapid fashion.

However, it's impossible to predict that it will be faster than the PDUFA date.

But certainly, we have a follow-up PDUFA date of October 31.

We'll take our next question from Jason Kolbert with Dawson James.

Guys, great job.

I really am interested to see, kind of, how the cash conservation plays out, especially versus all the catalysts that you have ahead, especially with potential for another deal.

I'd like to talk with you a little bit about what the dynamics of the auto-injector market is looking like today?

I mean a lot of things have happened in terms of auto-injectors and epinephrine.

A lot of pricing has been shifting around.

So help me understand what did you and Novartis learn from launching in the hospital clinic's market?

And what do you see happening in the retail market?

Certainly, it's going to be very exciting, and I can understand Novartis' time and effort to make that a 0 co-pay with a really dynamic website for patients.

That's going to be a really unique distinguishing feature.

But can you talk with me just a little bit maybe, David, you can get into it, on what are the dynamics of the retail market today?

Where is pricing going?

Who's got what market share?

How -- what's the overall market size today?

So -- yes, thank you for the question, Jason.

So obviously, the market is fairly stable as far as both size and pricing over the last few years.

So we see the market continuing to grow in low double-digit year-over-year.

We also see that the institutional side, which includes hospitals and clinics, represents about 15% to 20% of that overall market.

So obviously, the retail side is the bulk of the market.

With respect to pricing on institutional side versus retail, it's difficult to say because it really varies depending on the customer on the institutional side and, really to some extent, on the payer -- on payer-by-payer on the retail side.

I mean all we can do as far as approximating where we are relative to competition is sort of look at the vac price of the publisher -- wholesale acquisition price for the competitors versus our product.

And as Sandoz has stated that the product was launched with the $250 price for the -- to impact SYMJEPI.

If you look at other products on the market, you'll find that the lowest-stated vac price is currently at $300.

So before any sort of discounting, negotiating or contracting, it already represents significant savings to even the generic products that are on the market.

And what -- that's for 2 units, right?

That's correct.

All of the pricing I mentioned was for 2 units.

Okay.

Good.

And can we switch gears a little bit and talk about kind of the opioid crisis?

I mean it's almost impossible to get legally pain medication, but I guess that hasn't really stemmed kind of the black market.

So I mean has the need for a naloxone product die down at all?

And are you seeing partnering interests running very high here?

It sounds like there is a lot of inquiries.

You sound very hopeful of a partnership this year.

So this is Ron.

The epidemiology is suggesting that the overdoses are not yet slowing down, and we believe once again, this might be due to inadequate dosing.

So our approach, we think, is unique.

Higher doses, we think, may save more lives and speaking to people in the field, there isn't any slowing down of this epidemic at this point in time.

And at least others feel, as well as we do, that there's a need for a higher dose of product.

Many of these people will only have one opportunity for resuscitation reversal with naloxone.

So we think the higher-dose product makes a lot of sense, and there's going to be a lot of interested parties in the field once we get out there, and we get this approved.

And Ron, remind me if I were to switch gears to [tadalafil] whether there is any sublingual versions out there today?

Not that I know of.

Okay.

So that would be kind of unique.

And is there a different onset on sublingual versus oral?

There should be a faster onset for most sublingual medicines.

Yes.

I would think so, and I would think that, that would be a very distinguishing product attribute, so I think we'll all be looking forward to that.

I know Dr. McCarthy talked a little bit about the pharmaceutical Compounding business, and you referred him to page 10.

I just would like to talk a little bit about what are the dynamics that have allowed that business to turn?

And where do you think that business could peak out over the next couple of years?

Well, this is Rob.

Where could it peak out?

Hard to say.

There is approximately, in any given time, 60-plus compounders in the 503B space.

One of the things that we learned through this process in the early years with the compounding business was have the ability to consistently produce products in the space.

There is common shortages, manufacturing issues and one of the things that Dennis didn't allude to that is part of the success story of U.S. Compounding is having solved the manufacturing process.

Okay.

Why don't we -- I believe we have time for just one more question.

We'll go next to [Eric Belich] with Adamis Pharmaceuticals.

Yes.

I had just a quick question here.

I've been an investor for 10 years, and I see that you're mentioning, for the whole year, that you guys have refined cash flow for 2019 (inaudible).

But my question is for the long run.

Are you guys looking as a small company to grow out of San Diego, you guys are looking to expand and just get bigger and bigger.

Many investors are wondering we heard through different feedbacks some rumors of bigger companies looking to possibly merge or even consider buying.

Are you guys looking as to grow singly, handly just get larger and larger?

And that is my question.

Right now -- this is Dennis Carlo.

Right now, we're focused on growing, and we can't predict the future right now.

Anything could happen.

Obviously, I've been in companies that were purchased in the past, but we are growing our business right now.

That's what we're focusing on.

And ladies and gentlemen, that does conclude our question-and-answer session for today.

I'd like to turn the conference back over to Dr. Carlo for any additional or closing remarks.

Yes.

Okay.

I'd like to end the formal part of the call today.

But before I close, I'd like to go over what I consider the 3 stages of truth.

Many of you know for a number of years, I worked hand-in-hand with one of the most well-known scientists in the world, Dr. Jonas Salk, who discovered the polio vaccine.

Dr. Salk would often tell me, "Dennis, there are 3 phases of truth: the first stage is it can't be true; the second stage is if it's true, it's not important; and the third stage is we knew it all along." The Polio vaccine development went through those 3 stages.

At first, most of the prominent scientists in the United States believed the polio vaccine would never work.

And of course, when it did, many said we knew it all along.

I believe we're approaching the third stage of truth at Adamis, we knew it all along.

We've had many, many naysayers over the years but we persisted, we persevered, we never, never, never gave up, and we just focused on our objectives.

I believe by year-end, many will be saying we knew all along it would be successful.

I look forward to our next quarterly conference call, and I thank you for the time and continued interest in Adamis.

And ladies and gentlemen, that does conclude today's conference.

Thank you for your participation.

You may now disconnect.