Adamis Pharmaceuticals Corp (ADMP) 2019 Q3 法說會逐字稿

Good day and welcome to the Adamis Pharmaceuticals Corp.

Third 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.

Please go ahead, sir.

Thank you.

I'm Dennis Carlo, President and CEO of Adamis.

Thank you for joining us today for the update, and welcome to our shareholders, analysts and anyone new to Adamis.

Joining me today is our Chief Financial Officer, Rob Hopkins; our Chief Medical Officer, Dr. Ronald Moss; and our Chief Business Officer, David Marguglio.

Once again, the format for this call will consist of some remarks from management, followed by an opportunity for some questions.

This call is being webcast and will be available for replay in the Investors section of our website, adamispharmaceuticals.com.

I will remind everyone that in today's call, we will make 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 in the future any forward-looking statements made today.

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

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

These are available at the SEC's website.

I would like now to transition into a discussion on ZIMHI.

I know the topic is on everyone's mind, and the regulatory status of our high-dose naloxone product ZIMHI.

As we suggested in a press release November 4, the FDA delivered neither trick nor treat on October 31, the PDUFA date.

[I can honor for] anything positive or negative from this but instead believe the agency is simply taking more time reviewing the file.

The company believes there is an immediate and obvious need for a high-dose naloxone product, and we remain committed to bringing ZIMHI to the market.

Discussions with potential commercial partners for ZIMHI have been ongoing for several months, and I anticipate we will be able to announce our commercial plans in the very near future, either before or very soon after receiving approval.

Turning to SYMJEPI.

On our second quarter investor call in August, I alluded to a few initiatives that Sandoz was undertaking to fully launch SYMJEPI.

Since July, Sandoz has implemented several.

However, their rollout has been slower than we anticipated.

Critical to maximizing SYMJEPI's success is to visit the top prescribing allergists.

We believe the Sandoz team is now targeting allergists and primary care physicians in their commercial efforts.

Additionally, the symjepi.com website went live earlier this month and now supports the needs of the allergy patient with online resources like administration instructions, product brochure, doctor discussion guide and anaphylaxis action plan.

The website also links patients to the PillPack program, an Amazon company.

This allows the patient to receive convenient home delivery of SYMJEPI.

We've also observed promotion, including targeted electronic marketing and participation at the largest allergy and pediatric conferences.

We expect the increased commercial activities will result in increased SYMJEPI sales.

Adamis remains confident in the value of SYMJEPI.

We are waiting for the activities recently initiated by Sandoz to turn into significant sales dollars.

We at Adamis believe familiarizing physicians, patients and caregivers with SYMJEPI is an important component to a successful launch.

Once they see the small size and how easy to use and reliable SYMJEPI is, we believe demand will follow.

Between ZIMHI and SYMJEPI, it may seem that we are simply waiting on others.

But we continue to make progress on the matters within our immediate control.

In a few minutes, I will ask Dr. Moss to describe how we have continued to progress our pipeline while operating within a smaller R&D budget.

Before that, Rob Hopkins, our CFO, will provide some highlights from our third quarter financials, including how we continue to increase revenues and decrease expenses.

Rob will also explain how some of our last year's capital expenditures have allowed us to incorporate new automation components into our device manufacturing lines, which should come online in early 2020 and will more than double our potential output capacity and decrease costs for both SYMJEPI and ZIMHI.

In addition, we've made progress in our out-licensing efforts for SYMJEPI outside the U.S., where we finalized an agreement with Emerge Health for Australia and New Zealand this quarter.

Dave Marguglio will provide additional color on that effort as well as our ZIMHI commercial process.

Before I turn it over to the other team members, I'd like to share my thoughts regarding the future.

As I said on our last call, I firmly believe that Adamis is greatly undervalued, and I still believe that Adamis is greatly undervalued.

Once ZIMHI is approved, Adamis will have 3 commercial FDA-approved products capable of competing in large markets where we believe our products have competitive advantages and where they can potentially save more lives.

I believe all of this will equate to success and eventually lead to a higher stock price.

The foundation is now in place from which sales can build.

Sales will trump everything else.

And by the way, since I used the word trump, I believe President Trump has a vested interest in helping to eliminate the opioid crisis.

Over 100 individuals die every day due to the opioid problem, and I believe ZIMHI will have a positive effect in reducing this number.

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

Thank you, Dennis.

Before jumping into the financials, I want to expand on Dennis's comment about manufacturing.

We have been working with our manufacturing partner to design and build a new line incorporating several forms of automation and other improvements over the current assembly line.

Now completed, we will begin transitioning the manufacture of SYMJEPI and eventually ZIMHI over to the new line.

We expect the gains and efficiency from the new line will translate into a reduction in manufacturing costs that we believe should recover the CapEx within 12 to 18 months, depending on volume.

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

First, Q3 revenue grew 54% over the third quarter of 2018, approximately $5.9 million and $3.8 million, respectively.

Revenues increased by approximately 52% from $10.9 million to $16.6 million for the first 9 months of 2018 versus the same period in 2019.

This increase was attributable to the growth at U.S. Compounding and revenue related -- relating to SYMJEPI.

Gross profit for the third quarter grew 25% from the third quarter of 2018, approximately $1.9 million and $1.5 million, respectively.

This increase was attributable to SYMJEPI and increasing margins at U.S. Compounding.

Selling, general and administrative expenses for the third quarter decreased over 24% from the second quarter of 2019, approximately $5.3 million and $7.0 million, respectively, and decreased 19% over the third quarter of 2018.

The single largest contributor to the decrease from Q2 to Q3 was a reduction in equity compensation.

Research and development expenses decreased approximately 15.1% from $3.9 million to $3.3 million for the third quarter of 2018 versus the same period in 2019.

The decrease was primarily due to a reduction in developmental costs of our product candidates.

We anticipate that R&D expenses will continue to decrease in the fourth quarter of 2019.

Cash and equivalents at the end of the third quarter was approximately $12.1 million.

Net cash used in operating and investing activities for the third quarter of 2019 decreased almost 7% from the second quarter of 2019.

Our goal for the final quarter of 2019 is to keep cash expenditures, that is cash used in operating and investing activities, in the range of $3 million to $4 million.

If we meet our spending goals for the remainder of 2019, it should represent a reduction of approximately 37% from net cash used in operating and investing activities for 2018.

Now assuming we can meet our goal to keep net cash expenses in the range of $3 million to $4 million during the final quarter, we currently expect that we will have approximately 9 to 12 months of operating capital.

Although, of course, there can be no assurance it's possible, we feel that this provides Adamis additional time to allow operating activities to generate sufficient cash flow to cover operating expenses.

Please review our Form 10-Q for additional details and disclosures.

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

Thanks, Rob.

I would like to provide an update on our high-dose naloxone injection product, ZIMHI.

Naloxone is an opioid antagonist and is considered the treatment for immediate administration to treat opioid overdoses.

Accidental opioid overdoses continue to be a significant public health problem in the U.S., with the more potent opioids such as fentanyl being a significant driver of the current epidemic.

That is why we believe there is a public need for our higher-dose ZIMHI product candidate.

As a reminder, we filed an NDA for ZIMHI at the end of 2018, and the FDA provided us with a target action date of October 31, 2019.

As Dennis just mentioned, we are still waiting for a decision on the application from the agency.

We have completed 2 pharmacokinetic studies of ZIMHI, which have been submitted to the FDA, and we expect to publish the results soon.

In the first study, we compared 5-milligram intramuscular injection of ZIMHI to 2-milligram intramuscular injection of EVZIO.

The results revealed significantly higher levels of naloxone in the blood in the ZIMHI group compared to the EVZIO group.

The second study, which served as our comparator for the NDA, examined the pharmacokinetics of ZIMHI compared to a generic 2-milligram intramuscular dose.

The results demonstrated that ZIMHI had higher levels in the blood compared to the 2-milligram intramuscular dose.

Most importantly, the levels of naloxone were significantly higher for ZIMHI group as early as 2.5 minutes.

This specific analysis was requested by the FDA.

We believe that these are important results as the timing for a successful resuscitation from an opioid overdose is absolutely critical.

Brain death occurs within minutes.

The results of these studies suggest greater and more rapid bioavailability of ZIMHI compared to the current intramuscular or intranasal doses of naloxone.

If our product is approved by the FDA, we believe our high-dose candidate could be an important part (technical difficulty) doses.

As we discussed on our last quarterly call, we have slowed development of our other pipeline (technical difficulty).

With respect to our dry powder inhaler platform, we are continuing development of a fluticasone dry powder inhaler product candidate for the treatment of asthma.

We pan -- plan to complete the ongoing in vitro work by the end of the year so as to provide proof of concept.

We believe this proof of concept should help future efforts to out-license the product or find a partner to further provide funds for further clinical development.

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

David?

All right.

Thank you, Ron.

On October 1, we were pleased to announce that we have partnered with Emerge Health in order to obtain the regulatory clearance and eventually market SYMJEPI in Australia and New Zealand.

And we are continuing to evaluate additional opportunities to market SYMJEPI outside the U.S. We are in discussions with multiple groups for ex U.S. territories, and we will announce those partnerships when they are finalized.

As Dennis suggested, we believe that we are late in the process that began several months ago to identify a commercial partner for ZIMHI.

Unfortunately, I can't -- I cannot today provide you with the names of the companies in the process or their proposed deal structures.

If ZIMHI's approval is further delayed, it could delay the commercial agreement.

However, assuming the FDA provides a favorable determination in the coming weeks, I feel confident that we'll be able to announce a commercial distribution agreement closely following an approval.

Again, our overall goal remains to compress the time line from an approval to a commercial launch.

Therefore, I believe the timing of the announcement of the commercial agreement relative to an approval is of less importance than the timing from the approval to commercial launch.

With that, I'll open it up to a few questions.

(Operator Instructions) Our first question comes from Elliot Wilbur of Raymond James.

A question for Dennis and the team as well.

A company recently presented data on high-dose naloxone or ZIMHI at the IVH (sic) [IHV] conference, and obviously, a lot of important administration officials were present.

Curious as to what the general feedback, level of receptivity may have been with respect to the asset.

And if you could comment further on potential partnership for the asset, timing aside.

Maybe just give us some color or characterization on what you're thinking about in terms of partnership characteristics, whether you're looking for a company with simply domestic capabilities of a international pharma company, a company more along the lines of a classic spec pharma company or a larger platform.

Just curious as to what type of interest you've been getting and where that may lead you in terms of the type of partner that you select.

Thanks.

This is Dennis.

The response we got from the presentation that Dr. Moss gave at the virology conference was excellent.

Ron did a great job, and we'll let him speak about that.

Ron, why don't you talk about what happened at the conference?

Sure.

So as everyone is aware, we presented at a conference where there were a number of public health officials from CDC, from National Institute on Drug abuse and the NIH all participated in this very important conference.

And the data was very well received.

We presented a number of different sets of data.

One was pharmacokinetic data, and the other was data utilizing a pharmacokinetic model suggesting that with the higher doses of fentanyl that are currently seen in overdose victims, higher doses of naloxone are required in order to knock the opioids off the receptors.

So I think the data was very well received, and I think we have a good scientific basis on why the higher doses that are seen in ZIMHI should result, hopefully, in more successful resuscitations from opioid overdoses.

And Elliot, the PK data showed that ZIMHI shows higher blood levels than any of the other products that are currently being marketed today.

So the second was --.

Yes.

This is David.

I'll field the part about what we're looking for in a partner.

So the focus has initially been on the U.S. market.

And the overall objective is to try to maximize the value for ZIMHI in the U.S. market.

We think that one of the keys to being able to do that is identifying among these groups that we're speaking to the ones that have an existing commercial infrastructure that we think enables them to launch it very quickly, as I alluded to earlier, but also have demonstrated success in that particular niche within the market.

And so one of the things that we are particularly looking at are companies that have an existing product that we think are complementary to ZIMHI, therefore giving them a means of leveraging that asset in launching our product.

Okay.

I have a follow-up question on SYMJEPI.

It looks like units purchased by pharmacies in September were at the highest level since launch of the product, which is encouraging given that wasn't necessarily due just to seasonality here.

But anything else you guys can say in terms of what may be happening sort of behind the scenes there?

Just obviously hard to [get this here].

On the outside looking in around the asset, you guys have a much clearer line of sight there and you've got 6 -- 7 weeks of data sort of post the end of the quarter.

Just to give us a sense of what may be happening in terms of new initiatives that may be driving continued momentum of what we saw in September.

Yes.

Elliot, this is Dennis.

As I mentioned, I think the progress has been slower than we anticipated.

But I think Sandoz is now moving in the direction which we all believe will be fruitful, that is actually talking to the key allergists.

As you know, they have to be informed about SYMJEPI, learn how to use it, et cetera, look at it, learn how to write prescriptions.

So the allergists and pediatricians are now seeing the product.

There's been a number of conferences they've gone to now, the big allergy conferences and the pediatric conferences.

There's a telemarketing program going on.

There's also the program with Amazon going on now.

So I think that they're moving in the right direction, a little slower than we thought, but I think Sandoz has a good track record, and I still believe that SYMJEPI will be a success in their hands.

Okay.

Last question, and I apologize if I missed this in your prepared commentary.

Just talk about the trends in U.S. Compounding a little bit, numbers up year-over-year but have been kind of relatively flattish over the last couple of quarters.

Anything on the near-term horizon that may accelerate revenue trends there?

And where are you on an operating basis in terms of a prior objective of reaching cash flow breakeven with respect to that business?

Yes.

Elliot, it's Rob Hopkins.

Yes.

We're already cash flow breakeven on that operation and have been since towards the end of the second quarter of this year.

Going forward, for the fourth quarter, new initiatives.

We've signed up a couple of smaller GPO, group purchasing organizations.

We -- while you sign them up, it does take a while for that uptake to occur.

We've made some decent -- really good improvements on our sales team.

And we think while it looks flat quarter-over-quarter, we do expect some increase over the -- into the fourth.

And I'd say -- you're asking for what we're looking at in 2020.

I'd say anything under a 25% growth margin -- or a 25% growth in sales year-over-year between '19 and 2020 would be disappointing.

Our next question comes from Jason McCarthy of Maxim Group.

Can you talk a little bit about the compounding business?

I know -- some more, at least.

I know you've put a tremendous amount of effort into kind of overhauling and streamlining that business.

And talk a little about the number of products that are really leading the revenue growth from here.

And where do you see this ultimately growing to?

This -- is this an asset that, once it becomes profitable, could even be monetized through M&A?

Well, yes, of course, any asset that sits in our books could be monetized depending on future growth.

But yes, I think the big success in U.S. Compounding is actually simplifying.

We had -- when we acquired the asset over 3 years ago, the number of products offered was really, in my, our opinion, quite confusing to the marketplace.

So after some analysis, we think the primary future growth of U.S. Compounding is going to be in the hospital or our syringe business.

That's where we're making our largest bet.

And to give it -- and I don't want to get too far into the weeds, but when a hospital produces these prefilled syringes in house, they only have 72-hour dating.

So it's very difficult for a hospital to plan inventory control.

Knowing as much as we know about the hospital business, the ebb and flow of a surgical unit, you need a little bit more dating.

We can offer up to 6 months dating on our products, guaranteed sterility through external testing.

And so we think that the value add over doing that in house for each hospital is definitely where we're going to grow the business.

And then just jumping back to the naloxone on ZIMHI.

Just more of a broad question.

How has, if at all, the attention in the media around opioids and lawsuits and everything that's going on there impacted or maybe even bolstered partnering discussions for naloxone for overdose?

Sure.

That's, it's a great question.

And I think we have looked at this from the very beginning as a high-profile product that we think brings a lot of attention to any would-be partner in a very positive manner.

So we think that -- obviously, as that attention in the media continues to increase, that, that just presents even a better opportunity for a potential partner to take advantage of the goodwill out there we feel that will be instilled upon whomever commercializes this product in excess of whatever financial benefits that the product actually represents.

Listen, thank you very much.

We appreciate it, and we look forward to our next call in a few months.