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spk03: Greetings and welcome to the Adamus Pharmaceuticals Corp fourth quarter and full year 2020 conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Robert Uhl, Westwick ICR. Thank you, Robert. You may begin.
spk02: Thank you, operator. Good afternoon, everyone, and welcome to Adamas Pharmaceuticals' fourth quarter 2020 earnings conference call. Thank you for joining us today for the update, and we welcome our shareholders, analysts, and all others interested in Adamas. Joining me today is Adamas' president and CEO, Dr. Dennis J. Carlo, Chief Financial Officer Rob Hopkins, Chief Medical Officer Dr. Ron Moss, and Chief Business Officer David Margulio. The format for this call will consist of prepared remarks from management followed by Q&A. This call is being webcast and will be available for replay in the investor section of our website, AdamusPharmaceuticals.com. 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 statement 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 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 in other subsequent filings that we make with the SEC. These are available on the SEC's website. With that, I will now hand the call over to Dr. Dennis Carlo, President and CEO.
spk07: Thank you, Robert. Well, a lot has happened since our last earnings call in November. Certainly, the complete response letter the FDA delivered to us shortly after the call relating to our Zinhai data, NDA, was a surprise to say the least. But I am pleased to say that we had a very productive meeting with the agency on April 8th, during which time we came to a consensus with the FDA on the path forward. Based on our discussion and the agency's responses, There is no need to file an appeal, so we will not be filing an appeal. The review committee encouraged us to resubmit the NDA and we intend to do so within the next 45 days. Although they would not provide a specific timeline, they are sensitive to the impact of the opioid crisis and committed to work closely with us to hasten their review. Even as recently as a few days ago, the CDC reported that overdose deaths have dramatically surged during the pandemic. Now I'd like to move on to epinephrine. As we mentioned on our last call, US World Meds completed the transition of commercial responsibility for Symgepi from Sandoz at the end of October. Since US World Meds took the reins, we have seen a significant uptick in commercial efforts. One early success was Walgreens adding Symgepi to the Prescription Savings Club in January, which now has 750,000 subscribers. On the retail side, U.S. World Med has fielded a sales force to call on high prescribing doctors, while at the same time, they are seeking additional contracting opportunities on the institutional side, which includes now the Department of Defense, the Indian Health System, and the VA system. And in addition, Kroger stores are using some Jeffy as their epinephrine of choice accompanying their COVID vaccine program. So with this, we believe when we believe or expect to see those efforts translated into increase sales during the year and yet. Just need a temple. We're very encouraged by the results, both in animal studies as well as Stanford University study on the effects of temple on immune cells from coven 19 patients. Temple was shown to suppress cytokines from covert 19 simulated cells. Based on the information and data that was generated, we filed an investigational new drug application. After receiving clearance from the FDA in late February, we are preparing to begin a Phase 2-3 blinded placebo-controlled study examining the effects of Temple in COVID-19 patients early in the infection and on preventing hospitalization in subjects with COVID-19. We expect to begin the study this quarter. Dr. Moss will provide more details on the trials in a few minutes. As I previously mentioned, in addition to potential as a treatment for COVID-19, Temple has shown in Phase II studies to have a positive impact in reducing radiation dermatitis in patients undergoing treatment for cancer. We are currently working on additional formulation development and GMP manufacturing processes to support an IND to begin a Phase II-III pivotal study for the treatment of radiation-induced dermatitis, which of course is a very large commercial opportunity. I would now like to turn it over to our CFO, Rob Hopkins, to provide some highlights from the fourth quarter financials.
spk04: Rob? Thank you, Dennis. I want to begin by discussing the company's restatement of prior financial statements. On April 14, 2021, the Adamant Audit Committee, in consultation with management and our new independent auditors, concluded that the company's valuation principles used to estimate its non-cash warrant liabilities and related change in fair value of warrant liabilities was not aligned with the accounting guidance in place during 2020. The change was significant enough to restate the previous quarterly financial statements for the period ended March 31st June 30th and September 30th, 2020. The issues identified were non-cash and do not impact revenues, operating expenses, operating loss, assets or cash position for the prior periods. It's also worth mentioning that applying the new accounting guidance adopted January 1st, 2021 eliminates this notion of treating warrants as derivative liabilities going forward. Please see note number four, in the 10-K for more detail on the restatement. With that said, I want to highlight a few items from our 2020 financials. And I also encourage everyone to review our 2020 form 10-K for additional details and disclosures. First, revenues for the year decreased 25% from $22.1 million in 2019 to $16.5 million in 2020. The decrease was primarily attributable to a decline in sales of products by U.S. compounding due to the restrictions on outpatient surgery and other medical procedures caused by the COVID-19 pandemic and related impacts on sales and marketing efforts. Selling general and administrative expenses for the year ending December 31st, 2020 and 2019 were approximately $30.6 million and $25.3 million respectively. The increase was primarily attributable to the contingent liability accrual of $7.9 million related to the Nefron litigation. There were also increases in license permits and other related administrative expenses. Those increases were partially offset by decreased selling expenses at U.S. compounding. Research and development expenses were approximately 8.3 million and 10.4 million for the year ended December 31st, 2020 and 2019 respectively. The change was primarily due to a decrease in development expense of our pipeline candidates. Cash and equivalents at the end of the year was approximately $6.9 million. However, the company received approximately $5.9 million in January and $48.6 million in February from the exercise of warrants and an equity financing transaction respectively. Once again, please see our Form 10-K for additional details and disclosures. I will now turn it over to our Chief Medical Officer, Dr. Ron Moss, for an update on our regulatory and pipeline development.
spk05: Thank you, Rob. As Dennis mentioned, with regard to Zimhi, we believe that this higher dose intramuscular naloxone product is an extremely important countermeasure to combat the current opiate overdose crisis, which has definitely been exacerbated during COVID-19. In fact, the CDC this week released that there were 87,000 deaths due to drug overdoses between October 2019 and September 2020. That's a 29% increase than the previous time period before. As Dennis mentioned, we had a type A meeting with the FDA to review the comments on additional information provided on Zimhi and also to obtain concurrence on the resubmission of the NDA. The company believes the meeting was productive and a resubmission of the NDA for Zimhi is now planned within the next 45 days. The FDA did not provide a detailed timeline for review of the NDA. However, they acknowledged the need to review it rapidly because of the ongoing opiate epidemic and agreed to provide a timely review. We believe the totality of the data suggests that Zimhi has a positive benefit-risk profile and will fulfill an important unmet medical need to prevent deaths from the more potent synthetic opiates that are driving the current opiate epidemic. Before discussing our clinical plans for Temple, I wanted to provide a quick refresher on Temple itself. Temple is an antioxidant that metabolizes harmful reactive oxygen species that causes systemic inflammation. Unfortunately, few therapies have been successful so far for the treatment of early COVID-19. It is now apparent that messengers of the immune system called cytokines are released during COVID-19. The release of multiple harmful cytokines causes mortality and morbidity that can be lifelong if one survives the initial infection. This surge in cytokines ultimately may result in a quote unquote cytokine storm later in COVID-19 infection. New preclinical data and new in vitro data suggest that early treatment of Temple, with Temple, may be beneficial and this data supports the rationale for our clinical program. And results from a study in collaboration with Stanford University, TEMPL inhibited the release of multiple cytokines from activated immune cells from patients with COVID-19. These cytokines may be activated very early in COVID-19 infection and cause damage to multiple organs of the body beyond the lungs. The ability to suppress multiple cytokines from only activated immune cells may be a unique attribute of TEMPL. These encouraging results will now be submitted to a peer-reviewed journal. Additional in vivo preclinical data from a hamster challenge model in collaboration with researchers at University of Texas further supports the important role Temple may play in COVID-19. The hamster animal model challenges animals with high levels of SARS-CoV-2 virus, the same virus that causes COVID-19. The animal model results in lung pathology similar to what is seen in humans. It is an important animal model thought to be predictive of human COVID-19 infection. This animal model has been used successfully to test vaccines, antivirals, and monoclonal antibodies. We're very pleased to see the strong, consistent anti-inflammatory effects of Temple in this animal model, resulting in an attenuation of lung pathology And changes which suggested earlier and more rapid healing of the lungs after infection with the virus and animals that were treated with temple. As mentioned earlier, these results support the clinical program of testing temple early coven infection to determine the effects on inflammation and the rate of hospitalization. As announced earlier, our IMD and clinical study had been allowed to proceed by the FDA. We're now preparing for the initiation of the clinical study, working with a well-known experienced clinical research organization. We're also beginning to work on another clinical indication for Temple, the treatment of radiation dermatitis. This is a common problem and unmet medical need in cancer patients requiring radiation therapy. Radiation dermatitis can be quite debilitating and there are no approved effective therapies. We're currently working with a radiation oncology group at University of Pennsylvania to design a clinical protocol for this indication of Temple. Of note, a previous phase two study of Temple for the treatment of radiation dermatitis had shown encouraging results and provides additional data to support the design of the new study. We're also beginning to make topical drugs that will be needed for the IND in the clinical study. At this time, I will turn it over to David Margulio for an update on our partnering program. Thank you, Ron. I'd like to provide some additional color on the recent developments concerning NEFRON litigation. As we previously disclosed, in September 2018, a competitor filed suit against U.S. Compounding that later added Atomos. The matter essentially related to U.S. Compounding's hiring of a former NEFRON field salesperson. And in the suit, Nefron alleged the former employee took Nefron's confidential information to U.S. Compounding, which included, among other things, a customer list and pricing information. Though it was never established that U.S. Compounding used or financially benefited from this information in more than a de minimis way, or that the information was in fact a trade secret information, In the event of an adverse outcome in this case, there existed potential for significant compensatory damages, punitive damages, attorney's fees, and other costs. Prior attempts to resolve this matter for an amount that we viewed as reasonable failed, and the case was set for trial later this month. However, in recent weeks leading up to the trial, the court made determinations and decisions and hearings and pretrial motions which we believe were very favorable for Mefron and affected the conduct of the upcoming trial. It became clear to us that proceeding to trial involved new additional risks that we would likely, because we'd likely not be permitted to share significant arguments and testimony, we believed was favorable to our position. These recent developments and determinations by the court in combination with the usual high cost of continuing litigation and uncertainty of jury trials prompted the company to agree to settle this litigation as well as related matters. For more details on this case and the settlement, please refer to our Form 10-K filed today. Turning to product commercialization, as Dennis covered, In late October, we completed the transition of Simgepi from Sandoz to U.S. World Meds. Since November, U.S. World Meds has been freed to enter into new distribution agreements. The biggest win to date was in January when Walgreens added Simgepi to their prescription savings club. We remain very pleased with U.S. World Meds' commercial efforts to date, and we expect to see those efforts translate into more success significant increases in revenue during 2021. As we prepare to submit the NDA for Zimhi, the commercial team at U.S. World Meds is readying for the launch of Zimhi. Our shared goal is to be able to launch Zimhi in the U.S. within weeks of receiving regulatory approval. With that, I'll turn it back over to Dennis.
spk07: Thank you very much. I will conclude by listing some of the targeted milestones for this year. Number one, we intend to resubmit the naloxone or Zemi NDA to FDA within the next 45 days. Number two, we'll start a phase two, three clinical trial of Temple in COVID-19 patients in the second quarter of 2021. Number three, we'll move from nine binding term sheets to execute a purchase agreement for the sale of USC outsourcing division in the second half of 2021. We'll also increase market penetration and increase sales of Syngepi in the U.S. throughout 2021. And lastly, approval and commercial launch of Xinhai before the end of the year, before end of 2021. With that, we'll open it up to questions.
spk03: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from Elliot Wilbur with Raymond James. Please proceed with your question.
spk06: Thanks. Good afternoon. Question for Ron or Dennis. Can you just talk about some of the various funding initiatives you're pursuing with respect to Temple? I know you had outlined a couple of different sources, different sources, both respect to the radiation dermatitis trial, then obviously looking to potentially fund Temple. in COVID under the ODWS program. Just wondering if there's any updates or what, you know, kind of the status of those initiatives are.
spk07: On the radiation dermatitis, we're talking to one of the universities right now that conducted a study and we believe that they'll pay for the majority of the study for radiation dermatitis. On Temple, we're talking to the US government, both a number of different divisions within the government. And I really can't give you any more information than that other than we are in discussions with a number of divisions in the US government to help us conduct studies with Temple.
spk06: Okay. And then maybe just if we could get perhaps a little more clarity in terms of the expected timeline of the phase two, phase three? So start in second quarter, would you have full readout by the end of the year? I presume that there's some sort of interim analysis. Yes. Can you confirm that and how might that, might alter the progress of the trial based on the interim readout? Yes, Elliot, I'll turn it over to Dr. Moss to answer that question.
spk05: Yes, you are correct. There is an interim analysis in the study, and we'll be looking at the first 60 or so patients in the first interim, which right now is projected to be sometime this summer.
spk06: Okay. And so just based on that interim rate, is it just essentially kind of a go, no go? decision at that point or are there other parameters that you're sort of looking at that may be altered or modified kind of based on the ARAM rate?
spk05: That interim analysis will look at the event rates and also look at inflammatory markers and safety. So we'll have a good idea whether Temple is exerting an anti-inflammatory effect on the markers in the blood and we'll also have an idea of whether there are enough of hospitalizations occurring, whether a sample size needs a reassessment or more patients.
spk06: Okay. And I want to ask a question for, or of Dennis around the recent mission of ZIM High. Any, obviously you expect to submit in 45 days. Any material outstanding deliverables that have to be completed? on your end or essentially you have everything you need to satisfy, you know, what the agency was looking for or didn't see sort of last time around. I guess, you know, the real question is sort of based on your face-to-face with them, you know, are you comfortable that both you and the agency are sort of on the same page or at least you can, uh, make a strong case based on the factors that kind of led to the CRL last time that that shouldn't in fact be the case this time.
spk07: No, Elliot, we, uh, we don't have to add anything to the NDA. The bulk of the work was done well before that. Uh, we did come to a consensus with the FDA. I think the meeting went very, very well. Uh, we will be submitting within 45 days and, uh, there's really nothing else we have, we have to do. I think, uh, they, they did not, as I said, commit to a timeline, but they did commit to working rapidly, working with us, because obviously everybody knows the opioid crisis is quite significant and increasing as the pandemic goes on.
spk06: Okay, and then one final question. Notice that the company recently filed for some intellectual property protection covering various corporate home loans. to be like synthetic versions of corticotropin and include potential usage in COVID-19. Just wondering if there's anything that you could share there in terms of, you know, how you may be thinking about a development program involving corticotropin, if you are, in fact.
spk07: No, that's not going to be used or not intended to be used for COVID-19. We just had a little program here in which we were able to show the two peptides were able to essentially eliminate MS in a relapsing mouse model, not only in treatment, but also prevented MS in those models. No, it's not going to be used for COVID. It's just something we were doing on the side and We're looking to license it out.
spk06: OK. Thank you. Those were my only questions. Thank you very much.
spk03: Thank you. There are no further questions at this time. I would like to turn the call back over to Robert Uhl for any closing comments.
spk02: Okay, thank you, operator. That will conclude our call for today, and I thank all of you for participating, and we look forward to our next call coming up just very soon in May. All right, thanks, everyone. Have a good evening.
spk03: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.
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