Cumberland Pharmaceuticals Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 9, 2023

Key Takeaways

  • Couperlin reported Q1 net revenues of $9.2 million—flat versus Q4 but down year-over-year due to shipment delays and returns—while cutting operating expenses by 14%, achieving an 86% gross margin, $0.2 million net income and $1.7 million of adjusted earnings ($0.11 per share).
  • The company expects its non-opioid analgesic Caldolor to qualify for special Medicare reimbursement under the new No Pain Act, effective early 2025 with CMS guidelines due in 2024.
  • Couperlin secured a nearly $2 million refund from the FDA via a barrier-to-innovation waiver on program fees for its ReadyRefs product line, freeing up capital for clinical development.
  • Key brand transitions include full U.S. commercialization of Sancuso (with a newly FDA-approved manufacturing site) and the handoff of Reditrex to Nordic Pharma, resulting in a $1 million refund, $1 million credit and return of 180,000 shares.
  • The pipeline advances ifetroban through Phase 2 trials in systemic sclerosis and Duchenne muscular dystrophy, with asthma study results pending and a new interstitial lung disease trial set to launch this summer.
AI Generated. May Contain Errors.
Earnings Conference Call
Cumberland Pharmaceuticals Q1 2023
00:00 / 00:00

There are 5 speakers on the call.

Operator

Good afternoon, and welcome to Couperlin Pharmaceuticals First 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 Julia Modis, Senior Account Manager at the Dalton Agency, who handles Cumberland's Communications. Julia, Please go ahead.

Speaker 1

Hello, everyone, and good afternoon. Thanks for joining today's call. Earlier today, Cumberland issued a press release announcing the company's financial results and operational update for the Q1 ending March 31, 2023. The release, which includes the related financial tables, can be found on Cumberland's website at ww. Humberlandpharma.com.

Speaker 1

Company management will share an overview of those financial results during today's call. They'll also provide an overall company update, including a discussion of its brands, pipeline and partners. Participating in today's call are A. J. Kazimi, Cumberland's Chief Executive Officer Todd Anthony, Vice President of 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 downturn, public health epidemic, 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 is 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 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.sunburnlaw.com.

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 I'll turn the call over to Cleveland's Chief Executive Officer, A. J. Kazimi.

Speaker 2

J. Kazimi:]

Speaker 3

Thank you, Julia. Good afternoon, everyone. We do appreciate you've taken the time to join us as we share how the year has gone so far. As Julia mentioned, during today's call, will provide both the company update as well as a review of our financial results for the Q1 2023. So let's get started.

Speaker 3

During the Q1, we continued to face challenges in our operating environment ranging from workforce shortages at healthcare facilities, Supply chain interruptions, rising interest rates, the overall economic downturn and now the recent banking crisis. Despite these difficulties, our team has been working diligently through these headwinds and they remain dedicated to delivering our FDA approved products for the patients who need them, while also advancing the development of our new medicines for the future. There have been 2 important recent developments that I'd like to share with you. First, we expect that Caldolor will be eligible for special Medicare reimbursement under the new No Pain legislation. No Pain stands for non opioids prevent addiction in the nation and it 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 during surgeries conducted in an outpatient hospital department or in an ambulatory surgical center. This legislation applies to products that are indicated to provide analgesia without acting on the body's opioid receptors. As a result, we understand that the No Pain Act will affect Medicare reimbursement for Caldolor, our non opioid analgesic injection product. The act is scheduled to go into effect in early 2025 and we expect CMS to issue the reimbursement guidelines for Caldolor in 2024. 2nd, we were very pleased to learn that the FDA decided to grant a barrier to innovation waiver for drug program fees that we had previously paid for our ReadyRefs product line.

Speaker 3

As a result of this waiver, the FDA will provide us with a refund of nearly $2,000,000 The FDA granted this barrier to innovation waiver after concluding that we did meet the statutory criteria Based on the innovation associated with our ifitroban clinical development programs, the request for the waiver provided the rationale that the funds could be better used to advance our clinical programs, which are designed to address a series of unmet medical needs. So meanwhile, we've largely completed the transition of Sancoosso, our newest brand from the U. S. Affiliate of Japan based Keyvocern, Inc. Sankuso is the 1st FDA approved dissolvable prescription patch to help oncology patients tolerate their chemotherapy treatments and has been an important contributor to our business since it joined our product line last year.

Speaker 3

We're also pleased to announce that the FDA has approved the manufacture of Sankuso At a new facility, which will be our source of the product's future supplies. We continue with the transition of Reditrex to Nordic Pharma and our distribution of the product line will conclude at the end of June. We've already the marketing authorization to Nordic and we'll cooperate with them as they assume commercial responsibilities for the brand. Recall these new arrangements resulted in a $1,000,000 refund to us, a $1,000,000 credit for us and a return of the 180,000 shares that we get issued to Nordic. We're also now settled into our new headquarter offices on the Broad West Campus in the Vanderbilt West End Quarter of Nashville.

Speaker 3

This new location allows us to remain close to the Vanderbilt Medical Center and continue our collaboration there, while also maintaining our presence in the national healthcare community, which represents the nation's largest concentration of healthcare companies. Turning to some highlights on our financial performance during the Q1. Net revenues were $9,200,000 similar to the Q4 of 2022. These revenues were down from the same quarter last year, primarily due to a delay in international shipments and an unusual number of product returns. However, our operating expenses were also down nearly 14% from the prior year period and our gross margins improved to 86% for the Q1.

Speaker 3

We posted net income of $200,000 for the quarter and adjusted earnings were $1,700,000 or $0.11 a share. Total assets at the end of March were $89,000,000 and total liabilities $53,000,000 and total shareholders' equity $36,000,000 So with that overview, I'd now like to turn to Todd Anthony, Cumberland's Vice President, Organizational Development to further discuss our team and our Brads. Todd?

Speaker 4

Thank you, A. J. During the Q1, we hosted our spring national sales meeting here in Nashville. We invited our colleagues from across The country to join us for the planning and coordination of our activities during 2023. At this meeting, we emphasize the need to foster Collaboration among our field based sales, medical and national account teams as they interface with our customers.

Speaker 4

Recall, we now have 3 sales divisions. 1 focused on Caldolor and Vibativ for key hospital accounts, Another supporting Cristalose with select office based physicians and our newest who features Sancuso at oncology clinics. We are also working to ensure that our corporate culture, which has been fostered at our headquarters, is also communicated to and integrated into our national field based colleagues. At Cumberland, we are proud to continue expanding our portfolio of FDA approved products, I'd like to offer an update on each of our major brands. Vibativ is our potent injectable antibiotic Product designed to treat certain serious bacterial infections, including hospital acquired or ventilator associated pneumonia, as well as complicated skin infections.

Speaker 4

In 2023, we will continue to work to improve Vibativ sales performance with upgraded marketing and sales strategies that feature new initiatives to increase awareness of this important Potentially life saving brand. Crystalose, our prescription strength laxative is packaged And a convenient pre measured powder dose, which dissolves quickly in just 4 ounces of water for a clear, taste free and grit free solution. We continue to support Crystalose, our largest brand through our field sales force as well as 2 successful co promotion partnerships. The brand performs best where we have state Medicaid coverage. The state of New York has recently added Crystalose to their Medicaid formulary And we are implementing a special initiative to increase our presence and share a voice in that market.

Speaker 4

Moving on to Caldolor, our injectable Ibuprofen for the treatment of pain and fever. We continue to feature the expanded labeling for Caldolor's use Prior to surgery, when we see the best results in significantly reducing patients' pain and their need for opioids. We continue to provide Caldolor in a vial and the newer ready to use premixed bag presentations. Caldolor has been a steady performer with an international contribution as well. Completed the transition of San Cuso to Cumberland from Kiawacaren and have taken full commercial responsibility for the brand in the United States, including its national distribution, marketing, promotion and medical support activities.

Speaker 4

Late last year, we were pleased to learn that the products manufacturer at a new facility was approved by the FDA. Reditrex, our product line of prefilled syringes launched in the U. S. Market and faced difficulties in accessing a new group of office based physicians and in quickly securing the needed insurance coverage. While ReadyTrex prescriptions have Steadily grown, the volume did not justify our continued investment in the brand.

Speaker 4

We have amended our agreement with Nordic Pharma, who previously provided us with the license for the U. S. Rights for the line and Nordic will assume responsibility for products in the U. S. After June 30 this year.

Speaker 4

As a result, we have transferred the ReadyTrek's marketing authorization to Nordic. They have returned the 180,000 shares we previously issued and refunded the $1,000,000 milestone payment we had provided. Nordic has also issued a credit note for $1,000,000 and provided approximately $900,000 to reimburse us for FDA fees. As we've reported previously, the packager for our Omeclimox brand Suspended their operations due to supply issues. The facility is now under new ownership and new management and we are currently awaiting availability of their operations.

Speaker 4

We are also exploring other alternatives to restart the product's packaging. Additionally, we're transitioning to a new manufacturer for our vaprostol product. We have found a new facility and await the FDA approval of the plant before resuming shipments. Our new manufacturing partner is working with the FDA to address in a timely manner Several form 483 and warning letter issues. Meanwhile, we are working with them to prepare a special interim supply of compounded product for critically ill patients.

Speaker 4

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

Speaker 3

Very good. Thank you, Todd. Before we turn to the financial results, I'd like to provide an update on our international activities and our clinical programs. During the Q1, we continue to support several international partners and their efforts to register our brands in their countries. Pisa Pharmaceuticals is preparing their submission for the approval of Caldolor in Mexico.

Speaker 3

Tubook Pharmaceuticals Is updating their product approval in Saudi Arabia with new manufacturing information as they plan to introduce Vibativ into the Middle East. DBPharm, our partner in South Korea, who also distributes Caldolor, has now submitted for the approval of Vibatas in their country. And our Vibatas partner for the Chinese market SkyClone Pharmaceuticals has continued to respond to regulatory inquiries as they seek approval for Vibativ in their country. We now await the approval of these 4 key initiatives and look forward to the launch of our products in those countries. In addition to our expanding international activities, we continue to advance our pipeline of new product candidates designed to address unmet medical needs.

Speaker 3

We're advancing a series of clinical programs to evaluate ifitroban, Our first new chemical entity. Recall, we hold the worldwide rights to ifetroban, which has now been evaluated in 1400 patients resulting in an outstanding safety database in support of the product. Enrollment continues in our Phase 2 studies of patients with both systemic sclerosis and with Duchenne muscular dystrophy. We previously closed enrollment and our Phase 2 study in patients with a severe form of asthma. We then conducted a quality review of the data in clinical sites, Close that database for analysis and we are now awaiting receipt of the top line initial results.

Speaker 3

Additional preclinical and pilot clinical studies of ifetroban are also underway, including several investigator initiated studies. Meanwhile, we've recently submitted an application to the FDA for our 4th Phase 2 clinical program, which will evaluate the use of ifitroban to treat patients with interstitial lung disease. With FDA clearance, We expect this study to launch this summer. Our plan going forward is to complete each of our company sponsored studies, Analyzing the data, announcing the top line results and then deciding on the best development path for the registration of ifetroban, Which we continue to believe has the potential to benefit many patients with orphan diseases that represent unmet medical needs. So with that international and clinical update, I'd now like to turn it over to our Chief Financial Officer, John Hamm, to review our Q1 financial results.

Speaker 3

John?

Speaker 2

Thank you, A. J. For the 3 months ended March 31, 2023, net revenue for Continuing operations was $9,200,000 Net revenues by product for the Q1 of 2023 included $4,300,000 for Cristalose, dollars 1,900,000 for San Cuso, dollars 1,800,000 for Vibativ and $900,000 for Caldolor. I'd like to note that net revenue for the quarter was impacted by a delay in international shipments and an unusual amount of Sancoosso returns. Therefore, we continue to believe that our performance is best evaluated on an annual basis.

Speaker 2

Turning to our expenditures. Total operating expenses for the Q1 were $10,700,000 Net income for the quarter was $200,000 and When the non cash expenses are added back, the resulting adjusted earnings were $1,700,000 or $0.11 a share. Also, please note that the adjusted earnings calculations do not include the additional benefit of the $500,000 cost of goods for Vibativ and Sancuso during the quarter. That inventory was received as part of each product's acquisition. As a reminder, our financial statements have been significantly impacted by the Vibativ and Sancuso acquisitions.

Speaker 2

We accounted for the Vibativ acquisition as a business combination. A total of $34,000,000 in new assets were added as a result of the acquisition including approximately $21,000,000 in inventory, dollars 12,000,000 of intangible assets and $1,000,000 of goodwill. Due to the amortization of intangibles and the sale of inventory, the value of these assets totaled $16,300,000 at the end of the first quarter. The financial terms for the Vibativ 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.

Speaker 2

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 $33,000,000 to our business and therefore has begun generating a return on our $25,000,000 investment. Turning to Sankuso, we also accounted for the acquisition as a business combination. We added a total of $19,000,000 in new assets including Approximately $4,000,000 in inventory, dollars 14,000,000 of intangibles. The estimated value of those assets was $15,000,000 at the end of the Q1. We provided $13,500,000 at closing for the San Cuso acquisition.

Speaker 2

During the Q1, we provided another $1,000,000 milestone payment based on the successful FDA registration of the product's new manufacturing facility. There are also royalties that we pay based on the brand sales. Since we started shipping San Cuso early last year, the product has already provided a total cash contribution of approximately $11,000,000 approaching a return on our $14,500,000 initial investment. We continue to hold a bank line of credit, which provides up to $20,000,000 in capital, and we accessed that line to help fund the San Cuso acquisition. At the end of the Q1, the balance outstanding on this loan was $16,000,000 The refund of the FDA fees associated with the waiver was other income during the Q1 along with the receivable, which is expected to be paid in the 2nd quarter.

Speaker 2

As of March 31, 2023, we had $89,000,000 in total assets, including $16,000,000 in cash and cash equivalents. Liabilities totaled $53,000,000 and total shareholders' equity was $36,000,000 Also during the Q1 of 2023, we continued Our share repurchase program, buying a total of 87,000 shares. These repurchases, including those on the open market, as well as those needed to fund the taxes associated with employee vested restricted shares. We are also in the process of establishing new trading plans for our board members Who will purchase Cumberland shares over 2023 to increase their holdings in the company. Lastly, I'd like to note that Cumberland continues to hold over $57,000,000 in tax net operating loss carry forwards with the majority resulting from the prior exercise of stock options.

Speaker 2

And that completes our financial report for the Q1 of 2023. Back to you, A. J. J.

Speaker 3

Muse:] Thank you, John. Earlier this year, we released our 2022 annual report, which includes the financial results and milestones from last year as well as our updated sustainability metrics. We also recently held our annual shareholder meeting. All of the proposals presented in our proxy were approved, including the reappointment of 3 directors to the Board. We look forward to providing updates on further new developments as the year progresses, And we remain focused on our mission of providing branded medicines to support patient care and improve their quality of life.

Speaker 3

So now let's open the call to any questions you may have. 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.

Speaker 3

Well, thanks everyone for joining today's call. We understand that many of you prefer a private discussion with management. And if so, please just reach out to us and we'll be happy to get such a call scheduled for you. As always, we appreciate your time and your interest in Cumberland and we 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 of Cumberland's website. I would now like to thank you for your participation. You may now disconnect.

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