Adamis Pharmaceuticals Corp (ADMP) 2020 Q3 法說會逐字稿

Thank you for standing by.

This is the conference operator.

Welcome to the Adamis Pharmaceuticals Corp.

Third Quarter 2020 Conference Call.

(Operator Instructions) And the conference is being recorded.

(Operator Instructions) I would now like to turn the conference over to Dr. Dennis Carlo, President and CEO.

Please go ahead.

Thank you.

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

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

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

Joining me today is our Chief Financial Officer, Rob Hopkins; our Chief Medical Officer, Dr. Ronald Moss; and our Chief Business Officer, Dave 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 the website, adamispharmaceuticals.com.

I just wanted to take note 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 other subsequent filings that we make with the SEC.

These are available at the SEC's website.

Since our call in August, COVID restrictions have eased even in California.

We continue to make measures to safeguard the safety of our customers and employees.

Now regarding naloxone, we eagerly await the FDA's action on our NDA for a high-dose naloxone product, ZIMHI.

Although the FDA has provided a target action date of November 15, we don't know what impact COVID-19 will have, if any, on the FDA meeting that date.

Everyone should realize that November 15 is a target date, not one that is etched in stone.

We still strongly believe the spike in drug overdoses this year underscores the need for our higher dose naloxone product.

I remain confident in a positive outcome for our NDA.

Currently, US WorldMeds is putting a great deal of effort in preparing for the naloxone launch.

Shifting to SYMJEPI.

Since the termination of our marketing and distribution agreement with Sandoz and reassigning rights to US WorldMeds, we have seen a marked increase in unit sales.

With the full transition from Sandoz to US WorldMeds occurring last week, we expect 2021 to be the breakout year for this product as US WorldMeds is fielding a sales force visiting prescribing doctors.

And in addition, they are currently working on contracts with various institutions and pharmacy chains.

On our last quarterly call, we introduced a new acquired asset in Tempol.

As a reminder, under our exclusive license relating to this compound, we have rights to develop Tempol for the treatment of severe respiratory infections, such as COVID-19, as well as therapeutic for reducing radiation-induced dermatitis in patients undergoing treatment for cancer.

I am hopeful that Tempol can be part of the solution to the current pandemic, and that Tempol will be a significant value driver for Adamis going forward.

Dr. Moss will expand on this and describe some work we are currently conducting in collaboration with Stanford University.

As previously mentioned, in addition to its potential critical role in controlling some of the effects of COVID-19, Tempol has already been shown in a Phase II clinical study to have a positive impact in reducing radiation dermatitis in patients undergoing treatment for cancer.

Since our last call, we've been in contact with the University of Pennsylvania and a clinical cancer consortium that is funded by the National Cancer Institute.

The goal is to have 1 or both groups fund the Phase II/III clinical study utilizing Tempol for the treatment of radiation-induced dermatitis.

Currently, there are approximately 1.8 million new cancer cases diagnosed annually in the United States, and 60% of those patients will undergo radiation treatment.

As of 2018, the global market size for radiation treatment is about $5.6 billion.

In a few moments, Dr. Moss will provide a more substantial update on our development plans for Tempol.

But first, I'd like to turn it over to our CFO, Rob Hopkins, to provide some highlights from the third quarter financials.

Rob?

Thank you, Dennis.

As Dr. Carlo mentioned, I want to highlight a few items from our third quarter financials.

And I also encourage everyone to review our Form 10-Q for additional details and disclosures.

First, revenues for the third quarter decreased 27% from $5.9 million in the same quarter in 2019 to $4.3 million in the latest quarter.

This decrease was primarily attributable to the impact of COVID-19 on sales of U.S. compounded.

However, third quarter revenue increased 10% over the second quarter, so it is trending positive.

Selling, general and administrative expenses for the third quarter of 2020 was $5.8 million compared to $5.3 million during the third quarter of 2019.

The single largest contributor to this increase was wages, benefits and other compensation expenses.

SG&A expenses for the first 3 quarters of 2020 was down 14% compared to the first 9 months of 2019.

Research and development expenses were approximately $1.7 million and $3.3 million for Q3 of 2020 and 2019, respectively.

The decrease in spending was primarily due to the suspension of clinical development activities for APC-1000 and APC-5000.

Year-to-date, R&D revenues were down 18% compared to the first 3 quarters of 2019.

Cash and equivalents at the end of the third quarter totaled approximately $12 million.

This amount included an equity offering completed in September, which netted $10.7 million.

We are targeting net cash expenditures, that is cash used in operating investing activities, in the range of $4 million in Q4.

Assuming that we can meet that target and depending on the outcome of the FDA's decision on ZIMHI and future revenues from product sales, among other factors, we currently expect that we will have sufficient operating capital to carry the company at least through the second quarter of 2021.

As I stated earlier, please see our Form 10-Q for additional details and disclosures.

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

Thank you, Rob.

As Dennis mentioned, we are waiting action from the FDA on a resubmitted NDA for ZIMHI, which has a PDUFA date of November 15, 2020.

Although, of course, there are no assurances, we remain confident in the approval for this much needed product.

We also continue to work with our partners at US WorldMeds as they prepare for the commercial launch of ZIMHI.

I have been providing scientific support for many meetings with key opinion leaders, government and nongovernment groups to help them with this launch.

Some progress has also been made regarding our development of Tempol.

Tempol, as Dennis mentioned earlier, 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 COVID-19.

It is now apparent that messages with the immune system called cytokines are released during and after COVID-19 infection.

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

There is a clear need for a treatment of the so-called cytokine storm that is observed with COVID-19.

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

This new data now provides the additional scientific rationale needed to conduct clinical studies in early COVID patients with Tempol.

We are currently identifying sites that can conduct this trial.

As discussed previously, we had identified a government contract through Operation Warp Speed, that fits our strategy.

Now with the additional data from the study at Stanford, we will submit a white paper as an initial request to the government to fund a Tempol COVID-19 clinical study.

Lastly, our discussions with a large clinical cancer consortium continue to evolve on the funding, the design of a clinical study to examine the effects of Tempol for the treatment of radiation-induced dermatitis.

We are also in discussions with the Radiation Oncology Group at the University of Pennsylvania.

This is the same group previously under the direction of Dr. Stephen Hahn, who is currently the FDA commissioner, that conducted successful studies of Tempol for the treatment of radiation-induced alopecia.

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

David?

All right.

Thank you, Ron.

As Dennis mentioned before, during the third quarter, we worked closely with US WorldMeds to facilitate the transfer of sales and distribution of -- for SYMJEPI, away from Sandoz into US WorldMeds.

I'm pleased to announce that, that transition is now complete as of the end of October.

And as such, US WorldMeds is fully responsible for all sales and distribution of SYMJEPI.

US WorldMeds is now positioned to execute a number of new initiatives they have been planning to drive growth and brand awareness within both the institutional and the retail channels.

We remain very pleased with their efforts to date.

And with their path now clear, we expect to see those efforts translate into further increased sales.

With the possibility of ZIMHI approval eminent, US WorldMeds sales team has been developing a commercial launch plan.

And if ZIMHI is approved by year-end, we would expect a commercial launch in early 2021.

Lastly, our Australian partner, Emerge Health, which was acquired by GAC in June, continues to navigate the regulatory process, which we hope will result in SYMJEPI being approved in Australia in the first half of '21.

We are now in discussions with several companies for ex-U.

S. commercial rights for both SYMJEPI and ZIMHI, but we do not expect to conclude any of those discussions during the remainder of this year.

With that, I'll turn it back over to Dennis for some additional remarks.

Thanks, David.

I'll close by saying that we are -- I am very excited and enthusiastic regarding the milestones we believe we can accomplish through the remainder of this year and 2021.

I would like to go over 6 milestone with you.

Number one, we believe ZIMHI, the only high-dose naloxone product, will be approved and launched in early 2021.

Through all the efforts that US WorldMeds has put into the planning of the launch, both companies believe that substantial sales will be generated.

Number two, we believe there will be a significant increase in SYMJEPI sales.

Brand awareness is being created, both in the institutional and retail markets.

Finally, the positive attributes of SYMJEPI will be communicated and realized.

Number three, as David said, SYMJEPI approval in Australia and a generation of additional revenues to Adamis as expected in 2021.

Number four, we expect to announce new partners for SYMJEPI and ZIMHI outside the United States.

Number five, clinical studies with Tempol in COVID-19 patients will be completed and published.

Data from these studies will be used for grand permissions.

Number six, we will complete a Phase II/Phase III clinical study using Tempol to protect against radiation dermatitis.

And as I mentioned, this is a very large market.

In conclusion, I believe the completion of these 6 objectives should make 2021 a good year for Adamis and its shareholders.

I would like now to open up for questions.

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

Just a couple of financial questions upfront for Rob.

Specifically, looking at trends in the sterile compounding business, obviously saw a sequential improvement in the quarter.

Just wondering if you could talk about how the business trended over the quarter, and specifically, anything you may be seeing in the current period.

Just trying to get a sense of whether or not the resurgence of the pandemic in many locations has had a noticeable negative impact in terms of the recovery trajectory of that business.

And then second, just looking through the Q here and focusing specifically on SYMJEPI gross margins.

Looks like COGS continues to be around $1.5 million a quarter.

So you've got negative margin there.

Just wondering if that's essentially just an absorption issue, or if there was any sort of inventory write-off or something else that may have impacted that number?

Thanks, Elliot.

So yes, the first part on U.S. compounding.

We, over the last several quarters, since the pandemic began, we've noticed that the bounce back was stronger on the equine side versus the human side.

That trend continues.

We have not seen any negative impact here in the first -- in the beginning of the fourth quarter due to the resurgence, nor would we expect that.

It's really a function of hospitals and clinics allowing us to actually detail the account and get back into the same mode that we were pre-COVID.

So that basically is where we're at on the U.S. compounding side.

The second, when you're talking about SYMJEPI gross margins, we do not report a distinction between those 2 in the financial statements, but I will say that SYMJEPI sales, as David had mentioned and we talked earlier, have trended upward.

And just to remind everybody on the call that there are 2 components to SYMJEPI sales, one is manufacturing and the other is direct unit sales.

And so that also has a way of skewing that data.

So while sales are up, we did not have the same increase in manufacturing as we did in 2019.

Okay.

And then a question for Ron.

I guess with respect to either the dermatitis study or any of the submission programs under Warp Speed for COVID-19.

Any more granularity you can provide in terms of the timing there, particularly with respect to initiation of any COVID-related trials?

Is that something you think you could see green light on before year-end?

Yes.

This is Ron.

Thanks for the question.

Yes.

Well, based on the urgency of COVID, we're hoping to initiate a study in COVID patients by year-end.

With the dermatitis studies, that may be initiated next year sometime.

And that is going through the cancer consortium in University of Pennsylvania, but we're confident that we'll also have a dermatitis study ongoing as well.

Okay.

And I guess last question would be for David.

Could you just maybe in sort of general terms, kind of outline what you think may be sort of the international licensing opportunity for high-dose naloxone?

I guess I'm less familiar with the usage of the product in opioid overdose outside the U.S., and specifically, whether or not there's an already established market for high dose or not.

Yes.

It's a difficult question to answer at this point, Elliot.

We -- a lot of those discussions for ZIMHI specifically are fairly early in the process.

However, this opioid issue, although certainly worse than the United States than most places, is not exclusive to the U.S. And so there is a considerable amount of usage ex U.S., and so I think it's going to be really driven by the company-specific as far as what their area of focus is and so what that might translate into as far as opportunities within that territory.

But the ideal situation, obviously, with these -- both of these products being built on the same device would be to identify partner or partners that would be interested in partnering on both devices, both products, rather.

And so that is certainly our lead sort of strategic path right now for ex U.S.

The next question is from Jason McCarthy from Maxim.

It's Naz on for Jason.

I just had a few on each of your products.

On SYMJEPI, the conversation WorldMeds is having with institutional groups, could you give more color on that?

Are they more government groups or private sector groups?

And when can we expect potential contracts to be written and impact your financials?

Well, thanks for the question.

This is David.

I'll take a shot at this and then anybody else can fill in with additional color.

But the -- I can tell you that without getting any -- into any granularity as far as the groups that they're actually speaking to that the targeting is both institutional and retail.

And that the timing is such that -- I don't know if we completely articulated this on prior call, that US WorldMeds has certainly been conducting discussions with these efforts to contract, but has not been able to fully execute or even finalize those agreements while technically, sales were still under the umbrella of Sandoz.

So now that they've cleared that hurdle, they have the next several months to try to finalize any of those agreements.

And that's more or less the point of Dennis' comment about we really expect to see a more meaningful uptick in sales in '21 than we've seen thus far.

So I guess in summary, I'd say that the contract work is in process, but couldn't even finalize any of those agreements until the transition from Sandoz was completed.

Okay.

I understand that SYMJEPI is a different product than ZIMHI, but -- sorry, continue.

No, this is Dennis.

I just want to expand on it.

I think, we'll be -- US WorldMeds will be announcing a large retail chain store deal sometime in early '21.

Okay.

I get that SYMJEPI and ZIMHI are different products, but is there a potential, those institutional contracts could potentially read through ZIMHI assuming approval?

Like could you potentially get a contract with the same organization to also acquire ZIMHI?

Sure.

Those discussions for ZIMHI, obviously, are much earlier stage than SYMJEPI, and those can't really get any traction -- meaningful traction until after the approval.

But yes, I would say that those -- the ideal would be to put both of those products on the same contract.

Okay.

Now on ZIMHI.

Obviously, you guys have a PDUFA date later this week.

The manufacturing plant that ZIMHI is produced in, was that reinspected recently?

And is it CGMP compliant?

Or were there -- are there any 483s or anything?

No, there are no 483, no 483s, none whatsoever.

And it is CGMP compliant.

I know you guys are saying you're final launching in early 2021.

But what's look exactly the lead time -- the manufacturing lead time for ZIMHI once you guys have approval?

Well, lead time for manufacturing, in general, is around 3 months.

But I can say that we've teed up a lot of that work in advance in expectation of receiving an approval.

So that's why we're fairly confident that we would be able to facilitate a US WorldMeds launch in early '21, based on some of the work we've already done to be able to get them product very quickly on the heels of [approvals].

Your manufacturer, was your manufacturer impacted by COVID in terms of sourcing API or any of the necessary materials to produce to make finished goods?

No.

In fact, the good news is several of these items that make up the necessary sourcing material are longer lead time items, so they're something that had been sourced in quantity long before COVID.

So we've got plenty of API, plenty of syringes and other materials to facilitate the manufacturing for probably at least a year or more.

Okay.

And my final question is on Tempol.

How much would it actually cost -- or what's your estimated cost to run the COVID study and the cancer study?

Well, it really depends on the size of the studies, as you know, the cost.

For the Tempol study, we're looking at anywhere from a proof-of-concept study to up to 300 patients.

The cost for that, including the CRO, just off the top of my head, is anywhere from $4 million to $12 million, and that's why we're seeking government support for the larger Tempol study.

For the dermatitis studies, we're actually also helping to get those studies funded completely by the cancer consortium or University of Pennsylvania.

So we're hoping that most of these studies will be funded independently from the company.

Yes.

I think that's it.

Well, I think that's the -- all the questions.

We'd like to thank everybody, and we look forward to 2021.

This concludes today's conference call.

You may disconnect your lines.

Thank you for participating, and have a pleasant day.