Adamis Pharmaceuticals Corp (ADMP) 2020 Q4 法說會逐字稿

Greetings, and welcome to the Adamis Pharmaceuticals Corp.

Fourth Quarter and Full Year 2020 Conference Call.

(Operator Instructions) As a reminder, this conference call is being recorded.

It is now my pleasure to introduce your host, Robert Uhl, Westwicke ICR.

Thank you, Robert, you may begin.

Thank you, operator.

Good afternoon, everyone, and welcome to Adamis Pharmaceuticals' Fourth Quarter 2020 Earnings Conference Call.

Thank you for joining us today for the update, and we welcome our shareholders, analysts and all others interested in Adamis.

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

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 on the SEC's website.

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

Thank you, Robert.

Well, a lot has happened since our last earnings call in November.

Certainly, the complete response letter the FDA delivered to us shortly after the call relating to our ZIMHI data NDA was a surprise to say the least.

But I'm pleased to say that we had a very productive meeting with the agency on April 8, during which time, we came to a consensus with the FDA on the path forward.

Based on our discussion and the agency's responses, there is no need to file an appeal, so we will not be filing an appeal.

The review committee encouraged us to resubmit the NDA, and we intend to do so within the next 45 days.

Although they would not provide a specific time line, they are sensitive to the impact of the opioid crisis and committed to work closely with us to hasten their review.

Even as recently as a few days ago, the CDC reported that overdosed deaths have dramatically surged during the pandemic.

Now I'd like to move on to epinephrine.

As we mentioned on our last call, US WorldMeds completed the transition of commercial responsibility for SYMJEPI from Sandoz at the end of October.

Since US WorldMeds took the reins, we have seen a significant uptick in commercial efforts.

One early success was Walgreens adding SYMJEPI to the Prescription Savings Club in January, which now has 750,000 subscribers.

On the retail side, US WorldMeds has fielded a sales force to call on high-prescribing doctors; while at the same time, they are seeking additional contracting opportunities on the institutional side, which includes now the Department of Defense, the Indian Health System and the VA System.

And in addition, Kroger stores are using SYMJEPI as their epinephrine of choice accompanying their COVID vaccine program.

So with this, we believe or expect to see those efforts translated into increased sales during the year ahead.

Shifting to Tempol.

We're very encouraged by the results both in animal studies as well as Stanford University study on the effects of Tempol on immune cells from COVID-19 patients.

Tempol was shown to suppress cytokines from COVID-19-stimulated cells.

Based on the information and data that was generated, we filed an investigational new drug application.

After receiving clearance from the FDA in late February, we are preparing to begin a Phase II/III blinded, placebo-controlled study examining the effects of Tempol in COVID-19 patients early in the infection and on preventing hospitalization in subjects with COVID-19.

We expect to begin the study this quarter.

Dr. Moss will provide more details on the trials in a few minutes.

As I previously mentioned, in addition to potential as a treatment for COVID-19, Tempol has shown in Phase II studies to have a positive impact in reducing radiation dermatitis in patients undergoing treatment for cancer.

We are currently working on additional formulation development and GMP manufacturing processes to support an IND to begin a Phase II/III pivotal study for the treatment of radiation-induced dermatitis, which, of course, is a very large commercial opportunity.

I would now like to turn it over to our CFO, Rob Hopkins, to provide some highlights from the fourth quarter financials.

Rob?

Thank you, Dennis.

I want to begin by discussing the company's restatement of prior financial statements.

On April 14, 2021, the Adamis Audit Committee, in consultation with management and our new independent auditors, concluded that the company's valuation principles used to estimate its noncash warrant liabilities and related change in fair value of warrant liabilities was not aligned with the accounting guidance in place during 2020.

The change was significant enough to restate the previous quarterly financial statements for the periods ended March 31, June 30 and September 30, 2020.

The issues identified were noncash and do not impact revenues, operating expenses, operating loss, assets or cash position for the prior periods.

It's also worth mentioning that applying the new accounting guidance adopted January 1, 2021, eliminates this notion of treating warrants as derivative liabilities going forward.

Please see note #4 in the 10-K for more detail on the restatement.

With that said, I want to highlight a few items from our 2020 financials, and I also encourage everyone to review our 2020 Form 10-K for additional details and disclosures.

First, revenues for the year decreased 25% from $22.1 million in 2019 to $16.5 million in 2020.

The decrease was primarily attributable to a decline in sales of products by U.S. Compounding due to the restrictions on outpatient surgery and other medical procedures caused by the COVID-19 pandemic and related impacts on sales and marketing efforts.

Selling, general and administrative expenses for the year ending December 31, 2020 and 2019, were approximately $30.6 million and $25.3 million, respectively.

The increase was primarily attributable to the contingent liability accrual of $7.9 million related to the naloxone litigation.

There are also increases in license permits and other related administrative expenses.

Those increases were partially offset by decreased selling expenses at U.S. Compounding.

Research and development expenses were approximately $8.3 million and $10.4 million for the years ended December 31, 2020 and 2019, respectively.

The change was primarily due to a decrease in development expense of our pipeline candidates.

Cash and equivalents at the end of the year was approximately $6.9 million.

However, the company received approximately $5.9 million in January and $48.6 million in February from the exercise of warrants and an equity financing transaction, respectively.

Once again, please see our Form 10-K 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 pipeline development.

Thank you, Rob.

As Dennis mentioned, with regard to ZIMHI, we believe that this higher-dose intramuscular naloxone product is an extremely important countermeasure to combat the current opioid overdose crisis, which has definitely been exacerbated during COVID-19.

In fact, the CDC this week released that there were 87,000 deaths due to drug overdoses between October 2019 and September 2020.

That's a 29% increase from the previous time period before.

As Dennis mentioned, we had a Type A meeting with the FDA to review the comments on additional information provided on ZIMHI and also to obtain concurrence on the resubmission of the NDA.

The company believes the meeting was productive, and a resubmission of the NDA for ZIMHI is now planned within the next 45 days.

The FDA did not provide a detailed time line for a review of the NDA.

However, they acknowledged the need to review it rapidly because of the ongoing opioid epidemic and agreed to provide a timely review.

We believe the totality of the data suggests that ZIMHI has a positive benefit/risk profile and will fulfill an important unmet medical need to prevent death from the more potent synthetic opiates that are driving the current opioid epidemic.

Before discussing our clinical plans for Tempol, I wanted to provide a quick refresher on Tempol itself.

Tempol is an antioxidant that metabolizes harmful reactive oxygen species that cause systemic inflammation.

Unfortunately, few therapies have been successful so far for the treatment of early COVID-19.

It is now apparent that messengers of the immune system called cytokines are released during COVID-19.

The release of multiple harmful cytokines causes mortality and morbidity that could be lifelong if one survives the initial infection.

This surge in cytokines ultimately may result in a "cytokine storm" later in COVID-19 infection.

New preclinical data and new in-vitro data suggest that early treatment of Tempol -- with Tempol may be beneficial, and this data supports the rationale for our clinical program.

In results from a study in collaboration with Stanford University, Tempol inhibited the release of multiple cytokines from activated immune cells from patients with COVID-19.

These cytokines may be activated very early in COVID-19 infection and cause damage to multiple organs of the body beyond the lungs.

The ability to suppress multiple cytokines from only activated immune cells may be a unique attribute of Tempol.

These encouraging results will now be submitted to a peer-reviewed journal.

Additional in-vivo preclinical data from a hamster challenge model in collaboration with researchers at University of Texas further supports the important role Tempol may play in COVID-19.

The hamster animal model challenges animals with high levels of SARS-CoV-2 virus, the same virus that causes COVID-19.

The animal model results in lung pathology similar to what is seen in humans.

It is an important animal model thought to be predictive of human COVID-19 infection.

This animal model has been used successfully to test vaccines, antivirals and monoclonal antibodies.

We are very pleased to see the strong, consistent anti-inflammatory effects of Tempol in this animal model, resulting in an attenuation of lung pathology and changes, which suggested earlier and more rapid healing of lungs after infection with the virus and animals that were treated with Tempol.

As mentioned earlier, these results support the clinical program of testing Tempol and early COVID infection to determine the effects on inflammation and the rate of hospitalization.

As announced earlier, our IND and clinical study have been allowed to proceed by the FDA.

We are now preparing for the initiation of the clinical study, working with a well-known experienced clinical research organization.

We are also beginning to work on another clinical indication for Tempol, the treatment of radiation dermatitis.

This is a common problem and unmet medical need in cancer patients requiring radiation therapy.

Radiation dermatitis can be quite debilitating, and there are no approved effective therapies.

We're currently working with a radiation oncology group at University of Pennsylvania to design a clinical protocol for this indication of Tempol.

Of note, a previous Phase II study of Tempol for the treatment of radiation dermatitis had shown encouraging results and provides additional data to support the design of the new study.

We're also beginning to make topical drugs that will be needed for the IND in the clinical study.

At this time, I will turn it over to David Marguglio for an update on our partnering program.

Thank you, Ron.

I'd like to provide some additional color on the recent developments concerning Nephron litigation.

As we previously disclosed, in September 2018, a competitor filed suit against U.S. Compounding that later added Adamis.

The matter essentially related to U.S. Compounding's hiring of a former Nephron field salesperson.

And in the suit, Nephron alleged, the former employee took Nephron's confidential information to U.S. Compounding, which included, among other things, a customer list and pricing information.

So it was never established that U.S. Compounding used or financially benefited from this information in more than a de minimis way or that the information was, in fact, a trade secret information.

In the event of an adverse outcome in this case, there existed potential for significant compensatory damages, punitive damages, attorneys' fees and other costs.

Prior attempts to resolve this matter for an amount that we viewed as reasonable failed, and the case was set for trial later this month.

However, in recent weeks, leading up to the trial, the court made determinations and decisions and hearings and pretrial motions, which we believe were very favorable for Nephron and affected the conduct of the upcoming trial.

It became clear to us that proceeding to trial involved new additional risks that we would likely -- because we'd likely not be permitted to share significant arguments and testimony we believe was favorable to our position.

These recent developments and determinations by the court, in combination with the usual high cost of continuing litigation and uncertainty of jury trials, prompted the company to agree to settle this litigation as well as related matters.

For more details on this case and the settlement, please refer to our Form 10-K filed today.

Turning to product commercialization.

As Dennis covered, in late October, we completed the transition from -- of SYMJEPI from Sandoz to US WorldMeds.

Since November, US WorldMeds has been free to enter into new distribution agreements.

The biggest win to date was in January when Walgreens added SYMJEPI to their Prescription Savings Club.

We remain very pleased with US WorldMeds' commercial efforts to date, and we expect to see those efforts translate into more significant increases in revenue during 2021.

As we prepare to submit the NDA for ZIMHI, the commercial team at US WorldMeds is readying for the launch of ZIMHI.

Our shared goal is to be able to launch ZIMHI in the U.S. within weeks of receiving regulatory approval.

With that, I'll turn it back over to Dennis.

Thank you very much.

I will conclude by listing some of the targeted milestones for this year.

Number one, we intend to resubmit the naloxone or ZIMHI NDA to FDA within the next 45 days.

Number two, we'll start a Phase II/III clinical trial of Tempol in COVID-19 patients in the second quarter of 2021.

Number three, we'll move from nonbinding term sheet to execute a purchase agreement for the sale of USC outsourcing division in the second half of 2021.

We'll also increase market penetration and increase sales of SYMJEPI in the U.S. throughout 2021; and lastly, approval and commercial launch of ZIMHI before the end of the year -- before end of 2021.

With that, we'll open it up for questions.

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

A question for Ron or Dennis.

Can you just talk about some of the various funding initiatives you're pursuing with respect to Tempol.

I know you had outlined a couple of different sources, both respect to the radiation dermatitis trial and obviously looking to potentially fund Tempol in COVID under the OWS program.

Just wondering if there's any updates or what kind of the status of those initiatives are.

On the radiation dermatitis, we're talking to one of the universities right now that will conduct the study, and we believe that they'll pay for the majority of the study for radiation dermatitis.

On Tempol, we're talking to the U.S. government, both in a number of different divisions within the government.

And I really can't give you any more information than that other than we are in discussions with a number of divisions in the U.S. government to help us conduct studies with Tempol.

Okay.

And then maybe just if we could get perhaps a little more clarity in terms of the expected time line of the Phase II, Phase III.

So start in second quarter, would you have full readout by the end of the year?

I presume that there's some sort of interim analysis.

Can you confirm that?

And how might that -- might alter the progress of the trial based on the interim readout?

Yes.

Elliot, I'll turn it over to Dr. Moss to answer that question.

Yes, you are correct.

There is an interim analysis in the study and looking at the first 60 or so patients through that first interim, which right now is projected to be sometime this summer.

Okay.

And so just based on that interim read, is it just essentially kind of a go, no-go decision at that point?

Or are there other parameters that you're sort of looking at that may be altered or modified kind of based on the interim read?

That interim analysis will look at the event rates and also look at inflammatory markers and safety.

So we'll have a good idea of whether Tempol is exerting an anti-inflammatory effect on the markers in the blood, and we'll also have an idea of whether there are enough hospitalizations occurring, whether a sample size needs a reassessment or more patients.

Okay.

And I want to ask a question for -- or of Dennis around the resubmission of ZIMHI.

Any -- obviously, you expect to submit in 45 days.

Any material outstanding deliverables that have to be completed on your end?

Or essentially, you have everything you need to satisfy what the agency was looking for or didn't see sort of last time around.

I guess the real question is sort of based on your -- the face to face with them, are you comfortable that both you and the agency are sort of on the same page or at least you can make a strong case based on the factors that kind of led to the CRL last time that, that shouldn't in fact be the case this time.

No, Elliot, we don't have to add anything to the NDA.

The bulk of the work was done well before that.

We did come to a consensus with the FDA.

I think the meeting went very, very well.

We will be submitting within 45 days, and there's really nothing else we have to do.

I think they did not, as I said, commit to a time line, but they did commit to working rapidly, working with us because there -- obviously, everybody knows the opioid crisis is quite significant and increasing as the pandemic goes on.

Okay.

And then one final question.

I noticed that the company recently filed for some intellectual property protection covering various corticotropic hormones.

Looked to be like synthetic versions of corticotropin and include potential usage in COVID-19.

Just wondering if there's anything that you could share there in terms of how you may be thinking about a development program involving corticotropin, if you are in fact.

No, Elliot.

That's not going to be used or not intended to be used for COVID-19.

We just had a little program here in which we were able to show the 2 peptides we're able to essentially eliminate MS in a relapsing model -- mouse model, not only in treatment but also prevented MS in those models.

But no, that's not going to be used for COVID.

It's just something we were doing on the side, and we're looking to license it out.

There are no further questions at this time.

I would like to turn the call back over to Robert Uhl for any closing comments.

Okay.

Thank you, operator.

That will conclude our call for today, and I thank all of you for participating.

And we look forward to our next call coming up just very soon in May.

All right.

Thanks, everyone.

Have a good evening.

This concludes today's conference.

You may disconnect your lines at this time.

Thank you for your participation.

Have a wonderful evening.