Cumberland Pharmaceuticals Inc (CPIX) 2013 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to Cumberland Pharmaceuticals' fourth-quarter 2013 earnings conference call. During the company's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. This call is being recorded, and a replay will be available for one week shortly following its conclusion.

At this time, I would like to turn the call over to Elizabeth Davis, who handles Corporate Relations for Cumberland Pharmaceuticals. Please go ahead.

Hello, everyone. Today, we issued a press release featuring our fourth-quarter 2013 financial results and company update. If you have not seen our press release issued today, you can access it on our website at www.cumberlandpharma.com.

Before we begin, we would like to advise you that this call will include forward-looking statements which reflect our current views about future events. Such forward-looking statements are subject to risks outlined in the Safe Harbor section of today's press release, and are detailed in our 10-K and 10-Q reports on file with the SEC.

Despite our best efforts, actual results could differ materially from our expectations. Information shared on the call today should be considered current as of today only, and please remember that the company assumes no duty to update it. We post and maintain a current version of our corporate presentation, as well as other press releases and company updates, on the Investors portion of our website.

Also please note that this conference call is being webcast through our website and will be available there.

I will now turn the call over to our Chief Executive Officer, AJ Kazimi.

Thanks, Elizabeth. Good afternoon, everyone, and thank you for joining us as we review our 2013 results and discuss our strategy for 2014. With me on today's call are Cumberland's Chief Commercial Officer, Marty Cearnal, and our Chief Financial Officer, Rick Greene. We will start by reviewing 2013 and recent developments, and then provide an update on our products, followed by a discussion of our financial performance for the year. Finally, we will outline our strategy for 2014 before opening the call to any questions.

So let's begin. If you have been following the company over the past year, you are well aware that 2013 brought new challenges testing the entire Cumberland organization. I am pleased to report that our team rose to the occasion and has never been more energized. The company was faced with a decision, you see, whether to change strategy, given the FDA's approval of a generic competitor to our Acetadote product. Should we preserve our corporate infrastructure or enact significant expense reductions to maintain profitability, which could jeopardize our development and commercial capabilities? Given our ability to respond to the challenges, the potential of our marketed and pipeline products, as well as our financial strength, we determined that staying the course was the best approach for building the future value of our company.

We developed a companywide action plan with specific objectives, and have been successfully executing them. We did not stand still when Acetadote, our largest revenue product, came under generic competition. We deployed a countermeasure strategy in a timely fashion. We quickly launched our authorized generic through Perrigo Company in order to also participate in the generic segment of the market.

And as a reminder, both Acetadote and our authorized generic contain our new formulation, which is free of any preservatives, stabilizing, or chelating agents. As a result, I am pleased to report that, in 2013, we were able to maintain a majority share of the market between the sales of Acetadote and our authorized generic.

Also in 2013, we brought a heightened focus of business development to help reestablish our path to profitability and topline growth. That goal also yielded positive results as we now have two exciting new products which are generating considerable enthusiasm within the ranks of Cumberland.

Today, we are very pleased to announce the addition of a fifth commercial product to our portfolio. Vaprisol, an injectable hospital product used in the critical care setting, represents a very complementary addition for our hospital sales force. This patented product was developed and registered by Astellas and launched in 2006. It is one of two branded prescription products indicated for the treatment of hyponatremia, an electrolyte disturbance in which the sodium ion concentration in the plasma is lower than normal. This can be associated with a variety of critical care conditions, including congestive heart failure, liver failure, kidney failure, and pneumonia. The product is a vasopressin receptor antagonist that raises cerium sodium to appropriate levels and promotes free water secretion. We are pleased to work with Astellas to acquire and transfer this valuable brand.

Our other new product is Omeclamox-Pak, which we added to our portfolio last fall. We launched our efforts to support this brand in January of this year. Our partner for this product, Pernix Therapeutics, continues to promote Omeclamox to the primary care community. Our field sales force promotes it to gastroenterologists, which are the most productive of -- represent the most productive prescriber base for this product.

As a result of these two new product additions, Cumberland's revenue stream has never been more diversified, and we are very optimistic about our future.

Other highlights in 2013 include Caldolor becoming our fastest growing product, with sales nearly doubling over the prior year. During the year, we continued developing important new clinical data to support Caldolor for use in both adults and in children. On the international front, we added agreements to register and commercialize Caldolor in the Pacific Rim, South America, and the Arabian Peninsula. Registration activities for Caldolor progressed through our existing partnerships in China, India, and Indonesia. And we're also supporting the product's commercialization in Canada, Australia, and South Korea.

Furthermore, we believe we can deliver important new products to our internal development team, which is responsible for taking two of our products through the FDA approval process. Our lead development candidate is Hepatoren, which we continue to progress in 2013 through a series -- through a Phase 2 study in patients suffering from life-threatening liver and kidney failure.

Well, as you have just heard, our management team has been working diligently to return Cumberland to profitability and to renew our trajectory. Our goal is to continue to build a diversified portfolio of specialty pharmaceutical products. We are continuing our business development efforts, and delighted with the recent agreements for both Omeclamox-Pak and Vaprisol. We feel that both these brands are excellent strategic fits for our company as they complement our core focus.

I would now like to ask Marty Cearnal to provide an update on our marketed products. Marty?

Thank you, AJ. Let's begin with our newest products, Vaprisol and Omeclamox-Pak.

We are excited about the addition of Vaprisol, our newest injectable hospital product. As AJ mentioned, it is used to treat hyponatremia in the hospital critical care setting. Vaprisol has been commercially available since 2006, but has not been actively promoted since 2012. Our first order of business will be to seamlessly transfer the commercial supply, distribution, and medical support of the product to ensure no disruption in the marketplace. Meanwhile, we are beginning preparations to relaunch active promotion by our hospital sales force during the first half of the year. Then we will build upon this initial experience and fine-tune our sales and marketing activities to highlight those product attributes that resonate with prescribers and support our efforts to grow this new brand. This product overlays well with our existing calling efforts with the hospital sales force, which will feature Vaprisol alongside our Caldolor and Acetadote brands.

Our second new product is Omeclamox-Pak. We launched our commercial efforts to promote this brand in January. Cumberland promotes the product to gastroenterologists across the United States through our field sales force, which also promotes our Kristalose brand.

As you may know, many stomach ulcers are caused by an infection by the bacteria Helicobacter pylori, or H. pylori, which colonize in the stomach and duodenum. When present, this bacterial infection has been proven to be the cause of over 90% of duodenal ulcers. These ulcers commonly cause abdominal pain and may lead to serious bleeding. In the United States, the prevalence of H. pylori is approximately 30% to 40% of adults, and its eradication has been shown to reduce the risk of duodenal ulcer recurrence.

Omeclamox-Pak is a branded, prescription product that combines three key ingredients -- omeprazole, amoxicillin, and clarithromycin -- for the treatment of H. pylori infection and related ulcer disease. Omeclamox is prescribed over a shortened treatment period of 10 days, and has the lowest pill burden of available combination products to treat H. pylori.

Together, these attributes offer the opportunity for higher compliance, which is so important in antibiotic therapy. With over half of its prescriptions written by gastroenterologists, we believe that Omeclamox is an excellent fit for our field sales organization.

As we move into 2014 with Acetadote, we will continue to feature the EDTA-free message at all levels in distribution and promotion. We feel that maintaining sales promotion coverage at key medical facilities and at all poison control centers, combined with implementing new promotional strategies that will initially focus on selected accounts before expanding to broader coverage of additional medical facilities.

Caldolor is now available in over 1000 medical facilities across the United States. Our hospital force is expanding the product's use and helping many more patients in these key accounts that have already stocked the brand. We will continue with that pull-through strategy in 2014 to build volume and increase the number of patients treated in already stocked accounts. We will also be launching new promotional and medical initiatives to support the Caldolor brand.

We have launched a new marketing strategy for Kristalose, positioning the product at a higher price more in line with the other branded products in this category. This new strategy will allow us to better support the product for patients and offer new opportunities to partners with managed care providers. We will continue to feature Kristalose through promotional campaigns covering all high potential users of the product. We are also utilizing a new couponing program with an e-prescribing feature to enhance patient access to Kristalose.

That completes the update on our marketed brands. I'll now turn it over to Rick Greene for a financial review.

Thank you, Marty. For the full year ended December 31, 2013, Cumberland's net revenues were $32 million compared to $48.9 million in the prior year. Net revenue for Acetadote in 2013 was $18.8 million compared to $37.5 million in 2012. Acetadote revenue included $9.2 million from our authorized generic in 2013 compared to $0.3 million in 2012. Net revenue for Kristalose in 2013 was $9.1 million, similar to the prior year. Net revenue for Caldolor in 2013 was $2.1 million, more than doubling the prior-year sales. Our newest product, Omeclamox-Pak, contributed $1 million of revenue in 2013.

During the fourth quarter of 2013, net revenues were $8.1 million, down from $13.7 million during the corresponding period in 2012. For the three months ended December 31, 2013, net revenues were $3.7 million for Acetadote, including $2.2 million from our authorized generic, $2.8 million for Kristalose, $1 million for Omeclamox-Pak, and $600,000 for Caldolor.

For the year ended December 31, 2013, our total operating expenses were $35.8 million compared to $40 million for 2012. Total operating expenses for the three months ended December 31, 2013 were $10.6 million compared to $10.4 million for the prior-year period.

We ended 2013 with a net loss of $2.2 million compared to net income of $5.8 million in 2012. The net loss for the fourth quarter was $1.5 million compared to net income of $1.8 million for the same period in 2012.

Diluted loss per share for the year ended December 31, 2013 was $0.11 compared to earnings per share of $0.30 for 2012. The diluted loss per share for the fourth quarter was $0.08 compared to $0.09 in earnings for the fourth quarter of 2012.

At the end of the year, we had $54.9 million in cash reserves, which included cash, cash equivalents, and marketable securities. Total assets at December 31, 2013 were $87.6 million compared to $98.6 million at the end of 2012.

We were cash flow positive from operations during 2013. During the year, we used cash to pay off our line of credit, invest in the rights for Omeclamox-Pak, fund our Acetadote patent defense, and continue our share repurchase program. During 2013, we actively repurchased Cumberland shares, and have now bought back a total of 3.5 million shares since we launched the initiative in 2010.

That completes the financial report for both the full year and the fourth quarter of 2013. I will turn it back over to you, AJ.

Thanks, Rick. I would like to take a brief moment to summarize our strategic focus for 2014, as we manage the company in a way to maximize the next phase of Cumberland's growth. Our plan for 2014 is to continue to build a diversified specialty product portfolio while deploying our resources to sustain long-term profitability.

We are very optimistic about the opportunities that Vaprisol and Omeclamox-Pak will offer Cumberland. Our sales organization is enthusiastic about promoting both of these products. Our company will continue to monitor market conditions and fully support our Caldolor, Kristalose, and Acetadote brands.

We will focus our development efforts on accelerating our pipeline candidates while also advancing new clinical programs. We will conclude the analysis, reports, and publications for the completed Caldolor studies, and update the comprehensive safety and efficacy data set for that product.

We plan to continue expansion of our international activities through selectively chosen partners and will organize our manufacturing network in order to establish an uninterrupted supply of high-quality products. We want to maintain our new momentum in business development and continue to pursue additional opportunities to acquire new commercial or late stage development products.

Management remains committed to maintaining a strong balance sheet, returning the company to profitability, and placing revenues back on a growth trajectory. We do expect to return the company to profitability for the full year 2014. We believe our stock represents an attractive investment opportunity, and will continue repurchasing shares with excess cash.

So, in closing, while we faced new challenges in 2013, we emerged here in 2014 with a leaner, more diversified company powered by an outstanding team of individuals throughout this organization. And I would like to take this opportunity to thank each of them for their dedicated efforts and many contributions. The interest of this organization, its management, and our shareholders remain closely aligned. We will continue to focus on our mission on improving patient care through the delivery of high-quality pharmaceutical products.

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

(Operator Instructions). And I see no questions at this time. I would like to turn the call back over to management for any closing remarks.

Okay. Well, I would just like to thank everyone for joining our call today. We do appreciate your time and interest in Cumberland, and look forward to providing you with another update following the close of the first quarter.

Thank you, sir. Ladies and gentlemen, that concludes our conference for today. If you would like to listen to a phone replay of today's conference, please dial 855-859-2056 using the access code 24879662 through August 15. Alternatively, a replay of the webcast will be available on the company's Investor Relations website.

I would like to thank you for your participation. You may now disconnect.