Cumberland Pharmaceuticals Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 7, 2023

There are 5 speakers on the call.

Operator

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 1 year from today's date. I would now like to turn it over to Molly Agus, account supervisor at the Dalton Agency, who handles Cumberland Communications. Molly, please go ahead.

Speaker 1

Hello, 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 Q3 ending September 30, 2023. The release, which includes the related financial tables, can be found on the company's website at www.cumberlandpharma.com.

Speaker 1

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

Speaker 1

Please keep in mind that their discussions may include forward looking statements as defined in the Private Securities Reform Act. Those 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 downturns, 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 ks and any additional updates filed with the SEC. Any forward looking statements made during today's call are qualified by those risk factors.

Speaker 1

Despite the company's best efforts, actual results may differ materially from expectations. So information shared on this call should be considered current as of today only. Please remember that the company isn't responsible for updating any forward looking statements, whether as a result of new information or due to future developments. During today's call, there will be references to several of Cumberland's marketed brands. Full prescribing and safety information Each brand is included on the individual product websites, and the links to those sites can be found on the corporate website at www.cumberlandpharma.

Speaker 1

The company will also provide some non GAAP financial measures with respect to its 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 is also prepared to hold a follow-up conversation after the call, if that's your preference. So with that overview, I'll turn the call over to Cumberland's Chief Executive Officer, A.

Speaker 1

J. Kazimi.

Speaker 2

J. Kazimi:] Thank you, Molly, and good afternoon, everyone. I do have a slight cough today, so please bear with me. We appreciate you taking the time to join us today as we share how the year is 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 Q3 2023.

Speaker 2

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, it now reads as follows: Working together to provide unique products that improve the quality of patient care. In designing the statement, we took into account several factors. First, we wanted a mission that's designed to address the constituents we serve, which include the patients in need of care, healthcare providers, our employees, our shareholders, our partners and our community. We also wanted to reflect Cumberland's culture, where teamwork is prized, emphasized and expected in order to achieve our goals. Next, it needed to demonstrate our focus on developing, acquiring and distributing Differentiated Brands.

Speaker 2

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 it not only as an inspiration, but also as a guide in 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 Sankuso patch It's the only FDA approved prescription patch for the prevention of certain side effects in oncology patients receiving chemotherapy treatment.

Speaker 2

Caldolor is the only injectable therapy approved in the U. S. For the treatment of both pain and fever in a wide range of patients That includes children, adults and now newborns. And crystallose is the only branded prescription laxative that combines the established safety and efficacy of lactulose with the convenience and portability of a pre measured 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 Vibativ in several international markets, which should provide significant future catalyst for the brand.

Speaker 2

Tubook Pharmaceuticals Has updated Vibativ's approval in Saudi Arabia with new manufacturing information as they plan to introduce the product into the Middle East. DBPharm, our partner in South Korea, who also distributes Caldolor is awaiting the approval of Vibativ in their country. And SkyClone Pharmaceuticals, our Vibativ 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 the launch of our product in those markets. We recently announced the publication of positive results from a clinical study investigating the safety And pharmacokinetics of our Caldolor product in newborns, which supported the brand's FDA approval in infants of 3 to 6 months of age.

Speaker 2

And we're thrilled to further expand Caldolor's labeling the youngest of patients. Additionally, We expect Caldolor will be eligible for special Medicare reimbursement under the new no pain 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 their chemotherapy treatments. Our largest selling brand, Crystalose, is now beginning to benefit from its listing on the New York State Medicaid formulary.

Speaker 2

And we're glad to share today that we now have successfully transferred the manufacturing of our Vaprosol product to a new facility. Following that successful production of the first batches, we're now planning to provide supplies of a special Compounded Conovaptan product on an interim basis to the market starting at the end of this year. We then expect to file for the approval of Vaprosol 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 Q3, our product portfolio of FDA approved brands delivered combined revenues of $10,100,000 and year to date revenues totaled $30,200,000 Adjusted earnings for the quarter were $260,000 or $0.02 a share and the year to date adjusted earnings were totaled $4,200,000 or $0.29 a share.

Speaker 2

Also, I'm pleased to report That cash flow from operations this year has totaled $5,100,000 We ended the 3rd quarter with $88,000,000 in Total assets, dollars 52,000,000 in liabilities and $36,000,000 in shareholders' equity. Additionally, I'm very pleased to report that we entered into a new revolving credit loan agreement for a $20,000,000 facility expandable to $25,000,000 with a 3 year term. So with that overview, now I'd like to turn to Todd Anthony, Cumberland's Vice President, Organizational Development To further discuss our brands, Todd?

Speaker 3

Thank you, A. J. Regarding our Vibativ product, in October, we announced a new publication in the journal Agents and Chemotherapy detailing the results of the first clinical study investigating the safety and pharmacokinetics of our Vibativ injection in children 2 to 17 years of age. The results of this study suggest that a single dose of Vibativ 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.

Speaker 3

Antimicrobial resistance poses a significant challenge in the treatment of bacterial infections necessitating the development of new antibiotic therapies. We are pleased to see that Vibativ 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 Crystalose, our prescription strength laxative packaged in a convenient pre measured powder dose that dissolves quickly in just 4 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 2 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.

Speaker 3

New York State recently added 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 Caldolor, our non opioid analgesic injection Product will be eligible for special Medicare reimbursement under the new non opioids prevent addiction in the nation or no pain legislation, which was enacted as part of the Consolidated Appropriations Act of 2023.

Speaker 3

The No Pain Act requires Medicare to provide separate and more favorable reimbursement for non opioid products that are used to manage pain products that are indicated to provide analgesia without acting upon the body's opioid receptors. As a result, we believe that the No Pain Act will affect Medicare reimbursement for Caldolor. In the Medicare Hospital Outpatient Prospective Payment System proposed rule, the CMS requested that manufacturers of with potentially applicable non opioid products Submit comments in supporting clinical evidence regarding products that should be eligible for separate payment. We submitted a comment letter along with the requisite clinical information to the CMS in September of 2023 explaining why Caldolor 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.

Speaker 3

Also with the newly approved labeling A. J. Noted, Caldolor is now the only non opioid product approved to treat pain in infants that's delivered through injection. Other products in this class such as ketorolac 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 2 years of age as the safety and efficacy of that drug Has not been established for treating pain in those newborn infants.

Speaker 3

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 Sankuso, which is the only FDA approved prescription patch for the prevention of nausea and vomiting In patients receiving certain types of chemotherapy treatment, 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 San Cuso 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. Sancoosos sales are significantly lower than those we experienced last 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've reported previously, the packager for our Emeclimox Pac brand suspended their operations due to supply issues.

Speaker 3

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 baprosol product increased during the pandemic And we worked to support the expanded use of the product in hospitals and clinics during that healthcare 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.

Speaker 3

J. Mentioned, We have since transferred the product's manufacturing to a new facility. Our new manufacturing partner is working with the FDA to address several Form 483 and warning letter issues in a timely manner. Meanwhile, we're planning to provide interim supplies with a special compounded product to the market in support of critically ill patients. The companies will share in the sales of this interim compounded product, which is expected to be available in the coming months.

Speaker 3

We then expect to file for the approval to manufacture branded Vabrasol once all FDA issues at this new site are resolved. That completes my updates for today and I'll turn it back over to you, A. J.

Speaker 2

Thank you, Todd. Before we turn to the financial report, I'd like to provide an update on our ongoing clinical pipeline. Throughout the Q3, we continued to progress our Phase 2 clinical trials evaluating ifitroban, a potent and selective thromboxane receptor antagonist for patients with a series of unmet medical needs. It has now been dosed in nearly 1400 subjects and is found to be safe and well tolerated in those individuals. Patient enrollment is well underway in 2 company sponsored Phase 2 Clinical programs.

Speaker 2

1 is evaluating ifitroban in systemic sclerosis or scleroderma. It's a 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 skeletal, heart and lung muscles.

Speaker 2

We're sponsoring the FIGHT DMD trial, A multicenter, randomized, placebo controlled Phase 2 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 2 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 in over 20 medical centers of excellence across the U. S. Recent studies have shown ifetroban can both prevent and enhance resolution of lung fibrosis in multiple preclinical models.

Speaker 2

In addition to these sponsored studies, there are several other preclinical And pilot patient studies of iHetraband underway, including several investigator initiated trials. Our plan going forward is to complete each of our company sponsored studies, analyze the resulting data, announce the top line results and then decide on the best development path for the registration of ifitroban. 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 Q3 financial results. John?

Speaker 4

Thank you, A. J. For the 3 months ended September 30, 2023, Net revenue from continuing operations were $10,100,000 Net revenue by product for the Q3 of 2020 included $3,900,000 for Crystallose, dollars 2,800,000 for Vibativ, $1,900,000 was the increase though and $1,200,000 for Caldolor. Total year to date net revenue were $30,200,000 including $12,300,000 for Crystalose, dollars 6,800,000 for Vibativ, dollars 5,700,000 for Sancuso and $3,300,000 for Caldolor. Each of these brands has experienced growth in sales this year with the exception of San Cuso.

Speaker 4

Unfortunately, the brand has seen Sales deductions associated with the products transition. We are working to address these issues and believe over time Sancuso's performance will improve and therefore it's best evaluated on an annual basis. Turning to our expenditures. Total operating expenses for the Q3 were $12,000,000 slightly more than the $11,700,000 for the prior year period. Year to date expenses totaled $33,600,000 Net loss for the Q3 was $1,000,000 and when the non cash expenses are added back, The resulting adjusted earnings were $260,000 or $0.02 a share.

Speaker 4

The year to date adjusted earnings were $4,200,000 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 $800,000 cost of goods for Vibativ and Sancuso during the quarter. Year to date, the benefit is $1,700,000 That inventory was received as part of each product's acquisition. The total cash flow from operations was $5,100,000 As a reminder, the additions of Vibativ and Tancuso to our product portfolio have continued to significantly impact our financial statements.

Speaker 4

As a result of the Vibativ acquisition, A total of $34,000,000 in new assets were added, including approximately $21,000,000 in inventory, $12,000,000 of intangible assets and $1,000,000 of goodwill. The financial terms for the VIVATO transaction included A $20,000,000 payment upon closing and a subsequent $5,000,000 milestone payment. We also continue to provide royalties tied to product sales. Vibativ 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 $37,200,000 to our business and therefore is now generating a return on our $25,000,000 investment. Siencuso added a total of $19,000,000 in new assets, including approximately $4,000,000 in inventory and $14,000,000 of intangibles.

Speaker 4

The estimated value of these assets was $13,600,000 at the end of the 3rd quarter. We provided $13,500,000 at closing for the Sancoosso acquisition. There are also royalties that we pay based on the brand sales. Since we started shipping San Cuso in early 2022, The product has already provided a total cash contribution of approximately $12,200,000 And we believe it will soon begin to generate a return on our $14,500,000 investment. Turning to our balance sheet as of September 30, 2023, we had $88,000,000 in total assets, including $18,500,000 in cash and cash equivalents.

Speaker 4

Liabilities totaled $52,000,000 And total shareholders' equity was $36,000,000 On September 5, 2023, we entered into a new revolving Credit loan agreement with Pinnacle Bank for a 3 year term. The agreement provides for an aggregate principal funding amount of up to $25,000,000 It provides an initial revolving credit line with $20,000,000 of availability And the ability of Cumberland to increase the amount to $25,000,000 under certain conditions. The interest rate is based on benchmark term SOFR and is subject to one financial covenant determined on a quarterly basis. Also during the Q3 of 2023, we continued our share repurchase program, Buying 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.

Speaker 4

We are also continuing the process 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 $53,000,000 in tax net operating loss carry forwards, primarily resulting from the prior exercise of stock options. And that completes our financial report for the Q3 of 2023. Back to

Speaker 2

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 Cristalose and Cowboulware business along with the rebound in Vibativ sales.

Speaker 2

And we're pleased to share the recent pediatric studies involving favorable results with both Vibativ and Caldolor in children. We're also optimistic about the opportunity with our new manufacturing partner to provide initial supplies of compounded Vaprosol 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 crystallose And we believe that the special reimbursement associated with the No Pain Act can have a meaningful impact on Caldolor's future growth. As we move into the remainder of the year, we remain committed to our strategy, 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 fine contributions as we continue in our mission of working together to provide unique products that improve the quality of patient care.

Speaker 2

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

Operator

Thank you, sir. Ladies and gentlemen, that concludes the company's presentation, and we will now open the call for any questions. Please stand

Speaker 4

by.

Speaker 2

Well, thank you everyone for joining today's call. We do understand that many of you prefer a private discussion with And if so, please just reach out and we'll be happy to get such a call scheduled with you and hold 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.

Operator

Thank you, sir. Ladies and gentlemen, that concludes today's call. If you would like to listen to a replay of the discussion, Please visit the Investor Relations section on Cumberland's website. I would like to thank you for your participation. You may now disconnect.

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Key Takeaways

  • In Q3 2023, Cumberland’s FDA‐approved brands generated $10.1 million in net revenue (YTD $30.2 million), with adjusted earnings of $0.02 per share and $5.1 million in operating cash flow, supported by a new $20 million revolver credit facility.
  • Caldolor achieved FDA approval for use in infants aged 3–6 months, and Cumberland has submitted comments to CMS seeking special Medicare reimbursement under the No Pain Act, effective January 2025.
  • Cumberland is working with partners to register and launch Vibativ in Saudi Arabia, South Korea and China, which could serve as significant future catalysts for international sales growth.
  • Sancuso (the oncology antiemetic patch) has been fully transitioned to Cumberland, and the company has expanded its oncology sales division to address recent sales deductions and drive U.S. uptake.
  • The clinical pipeline continues to progress with Phase 2 studies of ifetroban in systemic sclerosis, Duchenne muscular dystrophy‐linked cardiomyopathy and idiopathic pulmonary fibrosis, dosing nearly 1,400 subjects to date.
AI Generated. May Contain Errors.
Earnings Conference Call
Cumberland Pharmaceuticals Q3 2023
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