Adamis Pharmaceuticals Corp (ADMP) 2021 Q3 法說會逐字稿

Greetings.

Welcome to the Adamis Pharmaceuticals Corp.

Q3 2021 Financial Results and Corporate Update Conference Call.

(Operator Instructions) Please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Robert Uhl.

You may begin.

Thank you, operator.

Good afternoon, everyone, and welcome to the Adamis Pharmaceuticals' Third Quarter 2021 Financial Results and Corporate Update Conference Call.

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

Joining me today is Adamis' President and CEO, Dr. Dennis J. Carlo; Chief Medical Officer, Dr. Ron Moss; Chief Business Officer, David Marguglio; and Adamis' recently named Chief Financial Officer, David Benedicto.

The format for this call will consist of prepared remarks from management, followed by Q&A.

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

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 statement 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.

In addition, I would also like to say that if anyone would like to e-mail questions in during the Q&A portion of the call or at any time during the call, please feel free to do so using the e-mail address ir@adamispharma.com.

With that, I will now hand the call over to Dr. Dennis Carlo, President and CEO.

Thank you, Robert.

Well, obviously, a lot has happened since our last business update in June.

And at that time, we were looking ahead to the following: number one, FDA acceptance of the resubmitted new drug application for our ZIMHI naloxone injection product; number two, enrolling of the first patient into our Phase II, Phase III clinical trial using Tempol as a treatment for COVID-19; number three, looking forward to increasing sales of our SYMJEPI epinephrine injection product; looking to get approval of our ZIMHI treatment for opioid overdose and the subsequent commercial launch; and finally following an IND to enable the development of Tempol for another indication at which time we were targeting radiation dermatitis.

While I'm pleased to say we've made steady progress on each of these objectives, and with the exception of the commercial launch of ZIMHI, which will occur early in 2022, we have either already met or expect to meet by year-end each of these target milestones.

Well, let me move forward now with an update on ZIMHI, our naloxone product.

We submitted our NDA in May.

And in June, the FDA indicated they had accepted it for review.

In October, we received notice of approval, approximately 1 month ahead of the FDA's target action date.

I'm only speculating that the alarming increase in overdose death and worsening opioid crisis, they have contributed to the agency's expedited review.

The recent New York Times Guard entitled overdose death reached record high as the pandemic spreads, reported overdose deaths in the U.S. topped 100,000 according to the CDC data for the 12 months ending April 2021.

Our product, ZIMHI, is the highest dose naloxone product that is currently approved.

It is differentiated from the currently available products in that naloxone enters the bloodstream faster and reaches higher concentrations than either of the competing nasal products.

Every second matter during an overdose and the higher levels are especially important when dealing with the highly toxic sentinel substances.

We and our commercial partner, US WorldMeds, are very excited about introducing this product to the market, especially since they already are selling a complementary product in the area.

They are already very familiar with this space.

Now let me shift to SYMJEPI, our epinephrine product.

Since taking of commercial responsibility for SYMJEPI in late 2020, US WorldMeds has nearly doubled units sold during the same prior year period under Sandoz.

Also, market penetration remains on an upward track.

While we require continued growth before we approach our own sales expectations for SYMJEPI, we view the increase in quantity and availability of the epinephrine products in the market as positive for those patients susceptible to severe allergic reactions.

Additionally, we are very encouraged by the sales trajectory and US WorldMeds' strategy and commitment to make SYMJEPI a commercially successful product.

David Marguglio will expand on this a little bit later in the call.

Let me now move on to Tempol.

In early September, we enrolled the first patient into our ongoing Phase II/III clinical trial of Tempol for the treatment of COVID-19.

Dr. Moss will delve into more specifics on the scope and timing of the trial.

But I will say up until now, the combination of increasing numbers of vaccinated individuals and decreasing rates of COVID infection have presented challenges to patient enrollment.

To address this challenge, though, we've begun a significant expansion on the number of clinical study sites, including potential sites outside the U.S.

Now lastly some of you may have seen a webinar hosted by the NIH on Tempol and its potential use in treating COVID-19.

To date, which had been previously published by the NIH, demonstrated the antiviral properties of Tempol that could be beneficial on a number of medical conditions, including COVID-19.

We are aware of the NIH recent activities related to Tempol and its potential use in treating COVID-19, and we'll monitor -- and we'll continue to monitor those activities.

Now I'd like to remind investors, Adamis licensed exclusive worldwide rights under patent, patient that have issued, patent applications and related know-how related to Tempol for certain license fields, including the treatment of respiratory diseases, including asthma, respiratory syncytial virus, influenza and COVID-19, patents have already issued.

In addition to our work in COVID, we continue to look for additional indications for the use of Tempol and to explore options regarding funding and design of a clinical study to examine the effects of Tempol for other clinical indications with the goal of being in a position to follow an IND.

We initially explored radiation dermatitis.

But because of the recent changes in treatment regimens, i.e., shorter treatment, the incidence of dermatitis has decreased and oncologists are seeing success treating less severe cases of dermatitis with steroid creams.

We'll continue to monitor the area.

But for now, we decided to prioritize other potential uses.

Now with the recent approval of ZIMHI, it made sense to look for other opportunities in the addiction space.

Since multiple preclinical studies have suggested Tempol could play a significant role in the treatment of amphetamine and cocaine use disorder, we've decided to further explore this area.

Now lastly, I must address where things stand with the previously announced appeals that the company and our U.S. Compounding subsidiary received from the U.S. Attorney's Office for the Southern District of New York in connection with an investigation by the U.S. Attorney's Office.

The Symphony has requested a broad range of documents and materials relating to, among other things, certain veterinary products sold by USC, certain practices, agreements and arrangements relating to products sold by USC, including veterinary products and certain other matters related to the company and USC.

Also, as previously disclosed, our Audit Committee initiated an independent internal investigation.

And now I'm pleased that we have reached a stage where we are able to file our quarterly reports.

As has been disclosed in the Form 10-Q, as of the end of July 2021, the company sold assets relating to U.S. Compounding human compounding pharmacy business, certainly ceased the manufacturing both human and veterinary pharmaceutical products and is engaged in the process of selling or otherwise disposing of the remaining assets of the business and the employment of all USC employees has ended.

I would now like to introduce our longtime controller and recently named CFO, David Benedicto to provide some highlights from our recently filed financials.

David?

Thank you, Dennis.

As mentioned -- as Dennis mentioned, we are pleased to have filed today our Form 10-Q for the first 3 quarters of this year.

The sale of assets of USC and the winding down of its business resulted in a change in the presentation of financial results relating to the company and USC because of discontinued operations accounting principles.

And as a result, I will focus on the financial results for the 9 months ended September 30, 2021.

I encourage everyone to thoroughly review its form 10-Q individually for additional details and disclosures.

The business conducted through our USC subsidiary is treated as a discontinued operations as of September 30, 2021.

Accordingly, for this period, the major assets, other assets, current liabilities and noncurrent liabilities have been reported as components of total assets and liabilities separate some those balances of continuing company operations.

At the same time, the results of all discontinued operations have been reported as components of net loss, separate from the net loss of continuing operations.

Additionally, the financial statements of the comparable prior periods were reflected in conformity with the current period presentation as discontinued operations.

Reflecting discontinued operations accounting principles, the revenues for the 9 months ended September 30, 2021 and 2020 were approximately $3.4 million and $2.1 million, respectively.

The increase in revenue was primarily attributable to the US WorldMeds marketing initiatives for SYMJEPI.

The selling, general and administrative expenses for the 9 months ended September 30, 2021 and 2020 were approximately $13.2 million and $9.6 million, respectively.

The increase in expenses was attributable to an increase in legal fees.

The research and development expenses for the 9 months ended September 30, 2021 and 2020 were approximately $9.1 million and $6.6 million, respectively.

The increase in expense was primarily due to developments related to the ZIMHI and Tempol products.

Loss from discontinued operations for the 9 months ended September 30, 2021 and 2020 was approximately $10.3 million and $7.6 million, respectively.

The increase in loss was primarily due to the decrease in USC revenue and gross profit and the impairment of various tangible and intangible assets resulting from the disposal of USC.

This loss was offset by the reduction in operating expenses and the gain from the sales of assets to Fagron.

Cash and cash equivalents at the end of September 30, 2021 were approximately $28.7 million.

Based on the operating capital required by USC over the last 4 quarters, we estimate the shutdown of the division may increase the company's overall cash burn by approximately $1.2 million per quarter, starting in the fourth quarter of 2021, excluding expenses associated with the winding down of USC's business.

Additionally, over the 4 quarters, the company estimates to receive additional cash from amounts payable relating to the previously announced of certain USC assets to Fagron.

The company will be selling or otherwise disposing of the remaining assets of U.S. Compounding which includes land, the building, the machinery and the equipment.

Once again, please see our December 31, 2020 Form 10-K and our quarterly reports on Form 10-Q for additional details and disclosures.

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

Thank you, David.

As Dennis mentioned, in September, we began enrolling patients into a Phase II/III clinical trial testing Tempol in early COVID infection to determine the effects on clinical improvement, inflammation and the rate of hospitalization.

Tempol, as you know, has a unique triple mechanism of action, including antioxidant, anti-inflammatory and antiviral activity, which differentiates itself from other approved or unapproved antivirals or monoclonals.

Of note, our trial requires individuals with moderate COVID-19 symptoms to be unvaccinated and have comorbidities such as heart disease as those patients typically have worse outcomes requiring hospitalization.

We continue to enroll the trial and remain blinded to the data as required by the study design.

However, we have experienced enrollment challenges, as Dennis mentioned, precipitated by the dramatic decrease in COVID infections and increased immunizations in this country.

To mitigate this challenge, we are engaged in the process of opening new sites across the U.S. and are ready for the next COVID surge should there be one this winter as many are predicting and as we're reading in the newspapers.

It should be noted on average working with an experienced clinical research organization, new sites take 10 weeks to open and involve multiple steps.

In addition, we are also planning to consider clinical sites outside the U.S. in geographic locations where vaccination rates are lower and COVID rates are higher.

The company plans on announcing the interim analysis decision by the Data Safety Monitoring Board when it becomes available.

I want to emphasize again, the company is blinded to the data on a daily basis.

As mentioned, we will report on the trial as to the DSMB interim analysis for the first 50 to 60 patients.

Until then, we do not plan on announcing any new information publicly.

At this time, I'd like to turn it over to David Marguglio.

Thank you, Ron.

As we've previously disclosed and as mentioned a few times on this call, we sold certain assets at the end of July relating to the USC's human compounding business to Fagron.

That agreement provided that we will receive monthly payments over the next 12 months -- or excuse me, over 12-month period, an amount equal to 1 to 2x the total sales of products, certain identified customers in the book of business that was included as part of that agreement.

In addition, we've sold additional USC assets and are engaged in a process of winding down the remainder of the business and selling or otherwise disposing of any remaining assets of USC, including the land, building and the manufacturing equipment.

Please refer to our most recent filings for additional details regarding the sale of USC.

Now turning to product commercialization.

According to market data from Symphony Health, sales of epinephrine injection products in the U.S. exceeded $1.7 billion for the 12-month period ending September 30, 2021.

So it remains a very large market opportunity.

And despite marketing challenges posed by the pandemic and related lockdowns, Symphony market data indicates that for the 9 months ending September 30, 2021, SYMJEPI unit sales have increased approximately 98% versus the first 9 months of 2020.

While these numbers continue to lag our own expectations, the trend suggests that US WorldMeds is gaining traction.

And based on the overall size and growth of the market, we remain bullish on the long-term commercial potential for SYMJEPI.

Now turning to ZIMHI.

Certainly, last month's early approval was exciting.

But as quickly as the excitement came, we immediately shifted gears to preparing for commercial launch.

Since the approval, Adamis, along with our manufacturing partners, have been working closely with US WorldMeds to prepare for the launch of ZIMHI in 2022.

We will provide additional information on the status of that launch and future updates.

But in the interim, I would encourage you to explore the new zimhi.com website for additional information on the product itself and its availability in the market.

With that, I'll give it back to Dennis for closing remarks.

Thank you, David.

I'll conclude by listing number of major corporate accomplishments for 2021; number one, we follow an IND, and we initiated our Phase II, Phase III clinical COVID trial; number two, we resubmitted our NDA for naloxone and received early approval; number three, we've increased sales of our SYMJEPI epinephrine products; number four, we've sold both, the human and veterinary businesses of U.S. Compounding; number five, we began GMP production Tempol; number six, we continued working with our commercial and manufacturing partners to enable the launch of ZIMHI, our high-dose naloxone product; and number seven, we intend to file an IND for another application for Tempol by year-end.

With that, I'd like to close and like to open it up to questions.

Thank you very much.

(Operator Instructions) Our first question is from Elliot Wilbur with Raymond James.

First question, I guess, for Dr. Moss.

Maybe with respect to Tempol, I guess, given your experience to date with the compound.

Maybe you could just outline for us in terms of how you would sort of rank order the potential future opportunities in terms of clinical development programs for the asset outside of COVID-19, what you're thinking about in terms of moving that asset forward?

Sure.

Thank you for that question.

So Tempol, as I mentioned earlier, is a very unique product, particularly it's the antioxidant, anti-inflammation components.

And one of the things that we've been intrigued with is its effects on neuroinflammation.

There's multiple animal models and studies of Tempol for various models that include substance abuse disorders, stimulant abuse disorders, Alzheimer's, multiple sclerosis.

In many different models of neuroinflammation, it appears that Tempol seems to be very effective and safe.

So we will continue to look at these opportunities of other areas.

But we think because of this good brain penetration, that one particular area would be treatment of neuroinflammation and that includes methamphetamine use disorder, Alzheimer's, multiple sclerosis, et cetera.

Okay.

And then with respect to the adaptive trial Phase II, Phase III in COVID-19 patients, I think you mentioned the first -- the SMB interim look is going to occur at 50 patients.

I believe there was also a second look in that trial.

I just want to confirm that, if you could remind us at what patient count that would occur?

Yes.

There is a second interim analysis at approximately 120 subjects.

Okay.

Is there any update on some of the various funding initiatives with respect to utilization of that compound that you had been pursuing earlier in the year?

We are applying and are continually in contact with the government, but we are implying for a grant for particular indication of Tempol.

Okay.

And then one last question for you, Dr. Moss.

With respect to the NIH webinar on Tempol, anything emerging from that presentation that highlights different aspects of the product that you strongly agree with?

Or was there anything that the NIH presentation focused on that you think maybe necessarily was inconsistent with what you have seen previously or sort of how you're viewing the asset?

No, I think the program by NIH solely focused on the antiviral effects of Tempol, and we believe that its antioxidant and anti-inflammatory activity are also relevant for the treatment of COVID-19, particularly if you can't treat patients very early.

We know that the sequelae of COVID-19, the virus is very self-limited.

And the sequelae are primarily due to an overzealous immune activation that occurs.

So their presentation was devoid of that very important information.

Okay.

Maybe just following up on your response there.

So given the current evolution in terms of the advancement of various oral or potential oral therapies for the virus.

Where do you see Tempol potentially fitting in with respect to some of these newer emerging therapies?

Is it -- could it be a complementary asset?

Or are there various patient populations you think this might be more appropriate for than what we're seeing from some of the large pharma companies pursuing oral treatments?

I personally believe it's complementary to the other therapies that are out there, similar to utilizing flu antivirals, the efficacy of the antivirals may be limited depending on when they're given in disease.

And I think that Tempol, because of its anti-inflammatory activity, has broader coverage for the true sequelae.

So I could see this drug being used alone, but I can also see Tempol being used in combination with other therapies.

Okay.

And then just a couple of quick financial questions here for David.

I guess just -- could you walk us through -- I may have missed this in your prepared commentary, but if there are any upcoming cash exit costs associated with the remaining USC operations?

Yes.

Thank you for the question.

It's absolutely part of our 10-Q filing.

So currently, yes, we have estimated around $1.5 million related to the exit cost in -- with regards to the disposal of USC.

It's in the -- it's part of the (inaudible) under restructuring costs.

Okay.

And then just last question around ZIMHI.

Can you just remind us if the relationship with US WorldMeds includes anything other than simply straight royalties on commercial sales?

I can't recall if there were any associated milestones with respect to approval or launch.

But any payments outside of royalty-based obligations?

David Marguglio, you want to take that.

Yes.

Sure.

Thanks, Elliot.

Yes, there are additional milestone payments that they are all targeted to performance-based milestones.

And they are part of a combined overall revenue targets for both products.

So the success of both products together leads to cumulative total targets that lead to about a half a dozen additional milestones.

We have reached the end of the question-and-answer session, and I will now turn the call over to Mr. Robert Uhl for closing remarks.

Thank you very much, operator.

That will conclude our call for today.

I thank you for participating and for your interest in Adamis Pharmaceuticals.

Have a good evening, everyone.

This concludes today's conference, and you may disconnect your lines at this time.

Thank you for your participation.