Cumberland Pharmaceuticals Inc (CPIX) 2023 Q3 法說會逐字稿

Good afternoon, and welcome to Cumberland Pharmaceuticals Third Quarter 2023 company update and financial report. This call is being recorded at Cumberland's request and will be archived on the Company's website for one year from today's date. I would now like to turn it over to Molly Aggas, Account Supervisor at the Dalton Agency who handles Cumberland's communication. Molly, please go ahead.

So everyone, good afternoon. Thanks for joining today's call earlier today, Cumberland issued a press release announcing the company's financial results, with an operational update for the third quarter ending September 30, 2023. The release, which includes the related financial tables, can be found on the company's website at www.cumberlandpharma.com.

During today's call, management will share an overview of the financial results. I'll also provide an overall company update, including a discussion of its brand pipeline and partners. Participating in today's call are A.J. Kazimi, Cumberland's Chief Executive Officer, Todd Anthony, Vice President, Organizational Development, and John Hamm, Chief Financial Officer.

Please keep in mind that their discussions may include forward-looking statements as defined in the Private Securities Reform Act. These statements reflect the company's current views and expectations concerning future events and may involve risks and uncertainties. There are many factors that could affect Cumberland's future results, including natural disasters, economic downturn, public health epidemics, international conflicts and others that are beyond the company's control.

Those issues are described under the caption risk factors in Cumberland's Form 10-K and any additional updates filed with the SEC. Any forward-looking statements made during today's call are qualified by those risk factors despite the company's best efforts, actual results may differ materially from expectations. So, the information shared on this call should be considered current as of today only. Please remember that the company is responsible for updating its forward-looking statements, whether as a result of new information or due to future development.

During today's call, there will be references to several of Cumberland's marketed brands, full prescribing and safety information for each brand is included on the individual product website and the links to those sites can be found on the corporate website at www.Cumberlandpharma.com. The Company will also provide some non-GAAP financial measures with respect to performance.

An explanation and reconciliation to GAAP measures can be found in the financial tables of the earnings release that was issued earlier today. If you have any questions, please hold them until the end of the call. At which point, we'll be happy to answer them. Management also prepared to hold a follow-up conversation after the call, if that's your preference.

With that overview, I'll turn the call over to Cumberland, Chief Executive Officer, A.J. Kazimi.

Thank you, Molly, and good afternoon, everyone. I do have a slight cost today. So please bear with me. We appreciate your taking the time to join us today as we share how the year's going, as Molly mentioned during today's call, we'll provide both the company update as well as a review of our financial results for the third quarter 2023.

I'd like to start by mentioning that we've recently refined our mission statement to better capture the spirit of what we endeavor to do here each day at Cumberland that now reads as follows working together to provide unique products that improve the quality of patient care.

In designing this statement, we took into account several factors. First, we've wanted a mission that's designed to address the constituents we serve, which include the patients in need of care, health care providers, our employees, our shareholders, our partners and our community. We also wanted to reflect Cumberland's culture. Routine work is prized, emphasized and expected in order to achieve our goals.

Next, I needed to demonstrate our focus on developing, acquiring and distributing differentiated brands. And finally, it emphasizes that the patient is at the core of everything we do, our collective efforts are directed at providing better alternatives for poorly met medical needs. Our hope is that everyone across our organization will embrace our newly refined mission statement and use and not only as an inspiration, but also as a guide and supporting the achievement of our goals. Our strategy for fulfilling this mission is to build a portfolio of specialty pharmaceutical brands.

Touching on a few, our Sancuso patch is the only FDA-approved prescription patch for the prevention of certain side effects in oncology patients receiving chemotherapy treatments, Kyowa Kirin, the only injectable therapy approved in the US for the treatment of both pain and fever in a wide range of patients that includes children, adults and now newborns.

At Kristalose is the only branded prescription laxative that combines the established safety and efficacy of lactulose with the convenience and portability of a pre-merger dose. So now as we reflect on the progress we've made throughout 2023, we are pleased to share a number of exciting updates and growth opportunities for our product portfolio.

For example, we continue to work with our partners in their efforts to register and launch by batteries in several international markets, which will provide significant future catalysts for the brand. To book Pharmaceuticals has updated by FDA-approval in Saudi Arabia with new manufacturing information, as we plan to introduce the product into the Middle East.

DB pharm, our partner in South Korea, who also distribute capital or is awaiting the approval of that in their country. In Sky clone Pharmaceuticals, our Vibeative partner for the Chinese market has continued to respond to regulatory inquiries as they seek approval in their country. We now await the approval of these three initiatives and look forward to launch our products in those markets.

We recently announced the publication, a positive results from a clinical study investigating the safety and pharmacokinetics of our caliber lower product in newborns, which supported the brand's FDA-approval in infants of three to six months of age and were thrilled to further expand countermeasures labeling the youngest of patients.

Additionally, we expect calendar Laura will be eligible for special Medicare reimbursement under the new NOPAIN legislation. The Act is scheduled to into effect in early 2025, and we expect CMS to next issue regulations for implementing the Act and the amount of the separate reimbursement.

Meanwhile, we've completed the expansion of our oncology sales division as we work to expand the use of our newest brand, Sancuso to help cancer patients tolerate the chemotherapy treatments. Our largest selling brand Kristalose is now beginning to benefit from its listing on the New York State Medicaid formulary. And we're glad to share today that we now have now successfully transferred the manufacturing of our Vaprisol product to a new facility.

Following that successful production of the first batches, we're now planning to provide supplies of a special compounded conivaptan product on an interim basis to the market starting at the end of this year, we then expect to file for the approval of Vaprisol at the new plant in order to then relaunch the branded version of the product in the future.

Turning next to some highlights on our financial performance. During the third quarter, our product portfolio of FDA-approved brands delivered combined revenues of $10.1 million and year to date revenues totaled $30.2 million and adjusted earnings for the quarter were $260,000 or $0.02 a share. And the year to date adjusted earnings were totaled $4.2 million or $0.29 a share.

Also, I'm pleased to report that cash flow from operations this year has totaled $5.1 million, and we ended the third quarter with $88 million in total assets, $52 million in liabilities at $36 million in shareholders' equity.

Additionally, I'm very pleased to report that we entered into a new revolving credit loan agreement for $20 million facility, expandable to $25 million with a three year term. So with that overview, now I'd like to turn to Todd Anthony Cumberland, Vice President, Organizational Development, to further discuss our brand's top.

Thank you, A.J. Regarding our Vibativ product in October, we announced a new publication in the journal Antimicrobial Agents and Chemotherapy, detailing the results of the first clinical study investigating the safety and pharmacokinetics of our Vibativ of injection in children 2 to 17 years of age. The results of this study suggests that a single dose of Vibativ, it can be safely administered to children to fight certain serious skin and lung infections in those patients.

Vibativ is an intravenous antibiotic approved by the FDA for the treatment of hospital-acquired and ventilator-associated bacterial pneumonia as well as complicated skin and skin structure infections caused by certain gram-positive bacteria. Anti-microbial resistance poses a significant challenge in the treatment of bacterial infections, necessitating the development of new antibiotic therapies. We are pleased to see that five out of sales continue to improve and are up 13% year to date as we have a number of new initiatives underway to improve the brand's performance.

Turning next to Kristalose our prescription strength, laxative packaged in a convenient pre measured powder, does that dissolves quickly in just four ounces of water for a clear taste free and grit free solution. It continues to be our largest selling product and is benefiting nicely from the support of our two co-promotion partners. With this year's sales up 8% over the prior year period.

Additionally, we found that the brand performs best in states where we have Medicaid coverage. New York State recently added Kristalose to its Medicaid formulary, and we are implementing a special initiative to increase our presence and our share of voice in that state. We believe that this new coverage is contributing to the growth of the product.

As A.J. mentioned, we believe Calvo our Non-Opioids analgesic injection product will be eligible for special Medicare reimbursement under the new Non-Opioids prevent addiction in the nation or NOPAIN legislation, which was enacted as part of the Consolidated Appropriations Act of 2023 NOPAIN Act requires Medicare to provide separate and more favorable reimbursement for Non-Opioids products that are used to manage pain during surgeries conducted in hospital outpatient departments or ambulatory surgical centers.

This legislation applies to products that are indicated to provide analgesia without acting upon the body's opioid receptors. As a result, we believe that NOPAIN act will affect Medicare reimbursement for capital or in the Medicare hospital outpatient prospective payment system proposed rule. The CMS requested that manufacturers of with potentially applicable Non-Opioids products, submit comments and supporting clinical evidence regarding products that should be eligible for separate payments.

We submitted a comment letter along with the requisite clinical information to the CMS in September of 2023 explaining why Caterpillar should be included and separately reimbursed. The Act is scheduled to go into effect in early 2025 and will apply to those products that are furnished between January 1, 2025, and January 1, 2028.

Also with the newly approved labeling, A.J. noted capital or is now the only Non-Opioids product approved to treat pain in infants that's delivered through injection. Other products in this class, such as Qatar, Elek and meloxicam are not approved for use in children as the safety and efficacy of those drugs have not been established for pediatric patients.

Acetaminophen injection is not approved for treating pain in children less than two years of age as the safety and efficacy of that drug has not been established for treating pain in those newborn infants. We are thrilled to further expand the product's labeling for use in patients of nearly all ages and believe the product is beginning to benefit with sales up 8% so far this year.

Moving now to Sancuso, which is the only FDA approved prescription patch for the prevention of nausea and vomiting in patients receiving certain types of chemotherapy treatments. We assumed commercial responsibility for the product in the United States, including its marketing, promotion, distribution, manufacturing and medical support activities early last year and as of September 2023 have fully completed the transition of Sancuso to Cumberland.

As we previously reported, the FDA-approved moving the products manufacturer to a new facility and the production of supplies for Cumberland at this plant is now underway Sancuso sales are significantly lower than those we experienced last year, due to an inordinate amount of sales deductions. We are working to improve that performance and are also now supporting the brand through our expanded oncology sales division, which is comprised of both field-based and inside sales personnel.

As we reported previously, the packager for our Omeclamox-Pak brands suspended their operations due to supply issues. That facility is now under new ownership and new management, and we're currently awaiting availability of a potential supply from their operations. We are also exploring other alternatives to restart the product's packaging demand for our Omeclamox-Pak product increased during the pandemic, and we worked to support the expanded use of the product in hospitals and clinics during that health care crisis.

We then shipped all remaining inventory of the product and notified the FDA that supplies of the product were not currently available. As A.J mentioned, we have since transferred products manufacturing to a new facility. Our new manufacturing partner is working with the FDA to address several forms 43 in warning letter issues in a timely manner.

Meanwhile, we're planning to provide interim supplies with a special compounded kind of active product to the market in support of critically ill patients. The companies will share in sales of this interim compounded product, which is expected to be available in the coming months. We then expect to file for the approval to manufacture branded Vaprisol once all FDA issues at this new site are resolved.

That completes my update for today, and I'll turn it back over to you, A.J.

Thank you, Todd. Before we turn to the financial report, I'd like to provide an update on our ongoing clinical pipeline. Throughout the third quarter, we continued to progress our Phase II clinical trials evaluating a future event, a potent and selective thromboxane receptor antagonist for patients with a series of unmet medical needs. It has now been dosed nearly 1,400 subjects and is found to be safe and well tolerated in those individuals.

Patient enrollment is well underway in two company-sponsored Phase II clinical programs. One is evaluating, et cetera, ban in systemic sclerosis or scleroderma it's a big deal, debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs. Enrollment in that study is well underway.

The other ongoing clinical program involves the cardiomyopathy associated with Duchenne muscular dystrophy or DMD. It's a rare and fatal genetic neuromuscular disease that results in deterioration of the skeleton, Heart and Lung muscles. We're sponsoring the five DMD trial a multicenter, randomized, placebo-controlled Phase II study enrolling patients across 10 centers in the United States that specialize in DMD.

We have completed enrollment in the younger age group of patients and now are working to finish enrollment in the older patient group with DMD. Meanwhile, earlier this year, we announced that the FDA cleared the investigational new drug application for a Phase II study in patients with idiopathic pulmonary fibrosis or IPF.

It's the most common form of progressive fibrosis interstitial lung disease. And as a result, we're in the process of initiating our fighting fibrosis trial designed to enroll 128 patients and over 20 medical centers of excellence across the US. Recent studies have shown that Trubion can both prevent and enhance resolution of lung fibrosis in multiple preclinical models.

In addition to the sponsored studies, there are several other preclinical and pilot patient studies that have been underway, including several investigator initiated trials, our plan going forward is a complete each of our company-sponsored studies, analyzing the risk, analyze the resulting data, announce the top-line results and then decide on the best development path for the registration of a future bank. And we continue to believe it has the potential to benefit many patients with orphan diseases that represent unmet medical needs. So with that update on our ongoing clinical trials.

I'd now like to turn it over to our Chief Financial Officer, John Hamm, to review our third quarter financial results. John?

Thank you, A.J. For the three months ended September 30, 2023, net revenue from continuing operations were $10.1 million. Net revenue by product for the third quarter of 2023 included $3.9 million for Kristalose, $2.8 million for Vibativ of $1.9 million -- in $1.2 million for Caldolor, more total year to date, net revenue were $30.2 million, including $12.3 million for Kristalose, $6.8 million for Vibativ of $5.7 million for Sancuso and $3.3 million for Caldolor each of these brands has experienced growth in sales this year with the exception of Sancuso. So unfortunately, the brand has seen sales deductions associated with the products transition. We are working to address these issues and believe over time, Sancuso, those performance will improve and therefore, it's best evaluated on an annual basis.

Turning to our expenditures, total operating expenses for the third quarter were $12 million, slightly more than the $11.7 million for the prior year period. Year to date expenses totaled $33.6 million. Net loss for the third quarter was $1 million. And when the non-cash expenses are Vibativ, the resulting adjusted earnings were $260,000 or $0.02 a share year to date adjusted earnings of $4.2 million or $0.29 a share. Both net income and adjusted earnings have improved significantly over the last year.

Also, please note that the adjusted earnings calculations do not include the additional benefit of the $0.8 million cost of goods provide that of Sancuso during the quarter year to date, the benefit is $1.7 million that inventory was received as part of each product's acquisition. So total cash flow from operations was $5.1 million.

As a reminder, did the additions of Vibativ, Sancuso to our product portfolio have continued to significantly impact our financial statements as a result of the buyback of acquisition, a total of $34 million in new assets were added, including approximately $21 million in inventory, $12 million of intangible assets and $1 million of goodwill.

The financial terms for the buyback of transaction included a $20 million payment upon closing and his subsequent $5 million milestone payment. We also continue to provide royalties tied to product sales. Vibativ of was our largest acquisition and I'm pleased to report that since we assumed responsibility for the product in late 2018, it has delivered a total cash contribution of $37.2 million to our business.

And therefore is now generating a return on our $25 million investment Crusoe and a total of $19 million in new assets, including approximately $4 million in inventory and $14 million of intangibles. The estimated value of these assets was $13.6 million, at the end of the third quarter.

We provided $13.5 million at closing for the Sancuso acquisition. There are also royalties that we pay based on the brand sales. Since we started shipping Sancuso in early 2022. The product has already provided a total cash contribution of approximately $12.2 million, and we believe it will soon begin to generate a return on our $14.5 million investment.

Turning to our balance sheet. As of September 30, 2023, we had $88 million in total assets, including $18.5 million in cash and cash equivalents. Liabilities totaled $52 million and total shareholders' equity was $36 million.

On September 5, 2023, we entered into a new revolving credit loan agreement with Pinnacle Bank for a three year term, the agreement provides for an aggregate principal funding amount of up to $25 million. It provides an initial revolving credit line with $20 million of availability and the ability of Cumberland to increase the amount to $25 million under certain conditions.

Interest rate is based on benchmark terms so far and is subject to one financial covenant to determine on a quarterly basis. Also, during the third quarter of 2023, we continued our share repurchase program filing a total of 117,000 shares. These repurchases included those on the open market as well as those needed to fund the taxes associated with employee vested restricted shares.

We are also continuing the process of implementing new trading plans for our Board members who will purchase Cumberland shares over the remainder of 2023 to increase their holdings in the Company. Cumberland continues to hold over $53 million in tax net operating loss carryforwards primarily resulting from the prior exercise of stock. And that completes our financial report for the third quarter of 2023. Back to you, A.J.

Thank you, John. Overall, Cumberland has had a successful year to date and we are encouraged by our progress. It's been particularly good to see the recent growth in our Kristalose and Caldolor business along with the rebound in Vibativ of sales. And we're pleased to share the recent pediatric studies involving favorable results with both Vibativ and Caldolor --

We're also optimistic about the opportunity with our new manufacturing partner to provide initial supplies of composite Vaprisol to help critically ill patients. And we're excited about the expansion of our oncology sales division and opportunity to further help cancer patients. It's good to be on the New York State Medicaid formulary for Kristalose. And we believe that the special reimbursement associated with the NOPAIN act can have a meaningful impact on Caldolor future growth.

As we move into the remainder of the year, we remain committed to our strategies seeking to maximize the potential of our commercial brands progressing our pipeline and also pursuing select acquisitions. As always, I'd like to extend a special thanks to the entire Cumberland team for their dedication and many fund contributions as we continue in our mission of working together to provide unique products that improve the quality of patient care.

So with that, let's open the call to any questions. Operator, please proceed.

Thank you, Sir (Operator Instructions)

Well, thank you, everyone, for joining today's call. We do understand that many of you prefer a private discussion with management and if so, please just reach out and we'll be happy to get such a call scheduled with you. It holds such a discussion. As always, we appreciate your time and your interest in Cumberland, and we'll look forward to providing another update in the coming months.

Thank you.

(Operator Instructions) If you would like to listen to a replay of the discussion, please visit the Investor Relations section on Cumberland's website. Would like to thank you for your participation. You may now disconnect.