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spk02: Greetings and welcome to the Adams Pharmaceuticals second quarter 2022 financial results 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 is being recorded. It is now my pleasure to introduce your host, Robert Ohl, ICR of Westwick. Please proceed.
spk01: Thank you, operator. Welcome to the Atomos Pharmaceuticals second quarter 2022 financial results and corporate update conference call. Thank you for joining us today for the update. Joining me on the call will be members of the Atomos executive team, including, in his new role, CEO David J. Margulio, Chief Medical Officer Dr. Ron Moss, and Chief Financial Officer David Benedicto. They will share with us their various Atomos updates. Our format for this call will consist of prepared remarks from management, and following that, we will open it up to Q&A. This call is being webcast and will be available for replay in the investor section of the Atomos website at atomospharmaceuticals.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 could affect our business and financial results is included in our most recent annual report on Form 10-K filed 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. Now, please let me introduce the new CEO, David Margulio.
spk04: Thank you, Robert. I appreciate all of you for tuning in today to let us update you on our second quarter, and perhaps more importantly, hear how we intend to break out of this pattern of underperformance. In May of this year, I became the CEO of a company with a 40-cent share price. It was out of compliance with NASDAQ, in the middle of a product recall, part of an ongoing DOJ investigation, and holding a limited amount of cash. Add to that a horde of unhappy shareholders, and I can understand why another candidate might have been reluctant to step up to this challenge. However, I saw beyond Atomos' current situation to where we could take it. I knew the company had strong assets and could be leveraged to unlock tremendous value. To start, we have two approved products that can compete in large markets. We have an ongoing clinical trial for Temple that if it shows efficacy, could not only potentially become a blockbuster treatment for COVID, but could potentially be expanded to treat other respiratory diseases. But most importantly, we have a small yet devoted team of highly qualified and experienced individuals committed to both saving patient lives and this company. Before accepting this role, I proposed to our board what I believe to be an aggressive turnaround plan that at certain points could put significant strain on the company, our employees, and partners. It involved changing company culture, improving operational systems and processes, and establishing corporate group and individual objectives intended to put us on a path to success. The board was supportive of the plan and we are now more than two months into it. I'd like to share with you a few of these new objectives which I believe as we execute upon them should positively impact company stock price as well as rebuilding shareholder value. We must convert sales of Zimhi and Syngepi into cash flows. If we can both increase top line sales and grow margins, the resulting cash flows could potentially fund the entire company. We are challenging our commercial partner to both execute on the recent commercial launch of Zimhi, as well as, once we resume manufacturing, continue Syngepi's prior growth trend. I believe we have a good, capable partner in U.S. World Meds, and I trust they will succeed in growing sales of both products. But as a closely held private company, U.S. World Meds has little impetus to outwardly project their sales or strategies. However, going forward, they are committed to regularly providing animus with talking points, which we can in turn provide you with more visibility into their commercial efforts. I will share some of those in a few moments. To grow margins, we recently kicked off multiple projects intended to decrease the cost of our injection device. For relatively short, rather modest capital investment and a relatively short timeline, these should materially lower the cost of goods on our products. In the future, we will consider more expansive manufacturing improvements when sales volumes justify additional investment. The next objective is to broaden and advance our development pipeline. Based on our ongoing work on COVID-19, we continue to evaluate Temple for other indications. However, while we remain capital constrained in the near term, we will not advance new clinical programs without financial support from government or private entities. In the near term, I believe data from the COVID trial, if positive, will broaden both the interest and further discussions with public and private non-diluted funders. Longer term, we will continue to evaluate opportunities to acquire, license, jointly develop, or otherwise partner to expand our pipeline. The criteria for advancing any of these opportunities will be first, determining if they are both accretive and strategic for the company, then objectively measuring if we have the financial and human capital to advance them. Look folks, I understand there's a lot of frustration and fatigue among investors, but I believe that we are at a critical inflection point. We are currently challenging all of our systems and most aspects of how the company operates. We have established new corporate objectives, which as we execute on, should put us on an ascending path to new levels of success. I'm asking all of you to stay tuned, support this process, and give us a bit more time to turn Adamus around, regain your trust, and ultimately increase shareholder value. Now I would like to introduce our CFO to share with us a brief update on our recently filed financials.
spk03: David? Thank you. This afternoon, we filed our form 10Q for the quarter ending June 30, 2022. I will highlight a few parts of our financials, and I sincerely encourage you to review the 10Q for additional details and disclosures. First, as I have mentioned in prior calls, our financial statements presentation for the fiscal quarter differs from last year's. due to our sale of assets relating to the U.S. compounding subsidiary. Therefore, revenues and expenses relating to that business and those assets and liabilities are reflected in the discontinued operations items in our income statement and our balance sheet. That said, revenues for the six months ending June 30, 2022 and 2021 were approximately 1.2 million and 2.6 million, respectively. The decrease in revenues was primarily due to the manufacturing hold and recall of Samjepi in 2022, offset by the product launch sales of Samhai. Selling, general, and administrative expenses for the first six months ending June 30, 2022 and 2021 were approximately 7.6 million and 8.5 million respectively. The decrease was primarily due to decreases in compensation and legal expenses. Research and development expenses were higher the first six months of 2022 at approximately 7.5 million compared to 4.4 million in 2021. The increase was primarily related to the ongoing clinical trial for TMPL. Net loss from the prior mentioned discontinued operations for the six months ended June 30, 2022 and 2021 was approximately 0.2 million and 3.1 million respectively. The decrease loss was primarily attributed to the cessation of U.S. compounding operations. Cash and cash equivalents at June 30, 2022 totaled $8.9 million. Cash expenses for the second quarter were higher than expected due to approximately $5.2 million in disbursements relating to repayment of the second draw PPP loan, expenses related to the Syngipi recall, and employment separation expenses. We expect cash use in operations to return to a normalized level during the second half of 2022. We also expect to receive additional proceeds during the second half of 2022, which could range from collections of approximately $2 million to $3.5 million, pursuant to our sale of certain USC assets to Pagron in 2021 and from the disposition of remaining USC assets. Once again, I encourage you to review our recently filed Form 10-Q for additional details and disclosures. I will now turn it over to our Chief Medical Officer, Dr. Ron Moss.
spk04: Thank you, David. I am really pleased to share with you today that we have completed the patient enrollment needed for the next Interim Data Safety Monitoring Board meeting for our Phase 2-3 Clinical Trial to Evaluate Temple as a potential treatment for COVID-19. We are also within approximately 10 patients of enrolling the complete sample size of 248 patients and have informed the sites to pause enrollment when the 248th patient is enrolled. As a reminder, the objective of the study is to determine Temple's effect on clinical improvement, inflammation, and the rate of hospitalization in our patients with COVID-19. Our trial requires individuals with moderate COVID-19 symptoms to have comorbidities such as diabetes or heart disease, as those patients typically have worse outcomes requiring hospitalization or have prolonged symptoms. Thus, we are enrolling a specific subset of patients with moderate symptomatic COVID-19 with known risk factors. As a reminder, the trial is a double blind, which means only the Data Safety Monitoring Board knows what treatment a subject may be getting during the trial. The DSMB is composed of infectious disease experts who independently review the unblinded trial data and make a recommendation to the company. As you recall, the DSMB previously met both in March and June 2022 to evaluate the clinical and safety data from the interim analysis. Both times they recommend that the study continue without modification. Once the threshold for data cutoff has been reached, the amount of work required in preparation for a DSMB meeting is considerable. The clinical research organization engaged in monitoring and verifying the data at all of the clinical sites, and multiple statisticians and programmers prepare the analysis that will be presented to the Data Safety Monitoring Board. The blinded datasets are then reviewed first by Atomos and then the CRO will review the data before finally providing them to the DSMB for their review. The next meeting of the DSMB to review interim data is scheduled for the end of September. At that time, the DSMB will evaluate the primary efficacy endpoint, which is the rate of sustained clinical resolution of COVID-19 symptoms between Temple and placebo as well as safety in individuals who are high risk for disease progression. This will mark the first time that the DSMB has evaluated efficacy using statistics, and I expect there will be at least four outcomes. One possible outcome is that no efficacy is demonstrated. In that case, the DSMB may suggest it would be futile to continue, and the company would likely stop the trial. A second possible outcome is that the data from approximately 200 initial patients showed significant efficacy during the interim DSMB meeting. Under this best case scenario, the DSMB may recommend stopping the trial because even with a relatively small data set, it has already demonstrated efficacy. Here we would likely submit a clinical study report to the FDA along with a meeting request to discuss the findings and the next regulatory steps. A third possible outcome is that the efficacy trends for every temple are observed in the primary endpoint, but statistical significance is not yet reached. In this case, the DSMB may recommend that we continue the study and enroll additional patients to further power the data. In this case, the DSMB would estimate the number of additional patients needed to reach statistical significance on the primary outcome. This outcome would still be very encouraging. And there's a fourth possible outcome. As you know, in addition to the primary endpoint, the clinical study is reviewing secondary endpoints, including changes in inflammatory markers, hospitalizations, and all-cause mortality. Therefore, another positive outcome would be if the study fails to demonstrate efficacy on the primary endpoint, but shows significant efficacy on one or more of the secondary endpoints. Many of the measured laboratory markers may correlate with disease progression of COVID-19. Thus, the study could also provide additional proof of concept on Temple's effect on laboratory markers of disease progression. We are now closing in on the final enrollment needed for the original sample size of the study, or either a modification to the trial or the DSMB enrolling a large number of additional patients we would expect to receive top line data from this trial in the fourth quarter of this year. Now, if this trial ultimately proves successful, it really could be a game changer for our company, healthcare providers and patients. As you're aware, the FDA has already approved two other oral antivirals under emergency use authorization for outpatients with COVID-19. If the data from this trial shows positive results, We will work closely with the FDA to discuss next steps and requirements for potential EUA emergency use authorization. As you are aware, there is currently a huge need for new efficacious therapies for COVID-19, and we're hoping that TEMP fulfills that void. Regardless of what form COVID takes moving forward, we believe there will always be a medical need and large market for effective therapeutics. Finally, we are continuing to explore other potential indications for Temple and are seeking both government and non-government, non-dilutive funding to further the development of Temple for other indications. If such funding comes through, we will update you on our plans for additional clinical development. At this time, I will turn it back to David Margolis. Thanks, Ron. I will now provide a commercial update for both of our products. As you know, in March, we announced a voluntary recall before lots of Simgepi due to potential clogging of the needle. The first step in manufacturing Simgepi is completed for Atomos by Catalan Belgium. And I'm oversimplifying here, but Catalan essentially sources all the components and material necessary to formulate epinephrine, fill syringes, and insert rubber stoppers before ultimately shipping the syringes to Phillips for final assembly. During a routine inspection of a batch of filled syringes, Catalan identified a few with clogged needles. This initiated an extensive investigation that, after many months, determined that one bad batch of stainless steel needles was the cause of the failures. Working with both Catalan and their syringe supplier, we have developed corrective and preventative actions that we've shared with the FDA. We are committed to returning Syngepi to the market as soon as all stakeholders are satisfied that these corrective actions will prevent similar failures in future batches. As these actions are still being finalized, and many are outside of Atomos' direct control, I cannot provide a target date as we talk today. But I can assure you that everyone involved with the manufacturer, from the syringe supplier to U.S. World Meds is seriously working to restock Sanjepi as soon as possible. Let me shift now to the Zimhi launch. U.S. World Meds began shipping Zimhi to wholesalers at the end of March. As you may know, the first year of the commercial launch of any branded pharmaceutical is focused on setting up coverage and basic groundwork to establish a foundation upon which to grow sales. I am very pleased to share with you that US Oil Meds is meeting or exceeding their goals for the first 100 days post-launch. Feedback from the field has been very positive. Customers have indicated they see how Zimhi's higher dose and intramuscular delivery may offer significant advantages over an intranasal delivery. In the present environment where 85% of overdose deaths in the US are attributable to higher strength synthetic opioids like fentanyl and its derivatives. A product that could more rapidly provide higher levels of naloxone in a compact, easy to carry package may offer customers a one and done solution. This is especially important if the caregiver does not have immediate access to multiple naloxone devices. Looking at the market, as you would expect, The larger users of naloxone devices are in the non-retail public interest sector. This includes EMTs, police, fire, and other first responders, as well as treatment centers, harm reduction, and other public interest community groups. U.S. World Med is aggressively targeting this market, but it is a long sales cycle. The contracts that are required often take six months or more to finalize. However, once in place, they typically result in significantly larger orders. To streamline these orders, US World Meds recently launched a website which enables institutional customers to order and receive direct shipments through ZimhiDirect.com. Complementing their efforts in this sector, US World Meds is also donating quantities of Zimhi to positively contribute and partner with these organizations to combat the opioid epidemic. In the retail market for naloxone, prescribing has accelerated over the last few years due to an increased awareness of naloxone among the general public and a growing trend among doctors of co-scripting naloxone with opioid prescriptions. In order to sell into the retail sector, you must first create market access. This primarily entails adding your product to formularies of both payers and pharmacy benefit managers such that it is approved for reimbursement without significant restrictions. Creating market access is a frustratingly slow process, often taking six to 12 months to get on many formularies. UFO Med is making steady progress and recently has had significant wins with some of the largest insurers in PBMs. Unfortunately, we cannot yet share the details of those wins until the payers and PBMs publicly update their formularies. One aspect of the retail market that's a bit unique to naloxone is that most states have standing orders enabling anyone to obtain a naloxone product from a pharmacy without an individual prescription. These rules differ from state to state, and it can require a long process to add a product to the standing order. Here again, US World Med has made significant progress, and I'm pleased to say that as of today, Zimhi has been added to the standing orders in 25 states. While increasing market access, US World Med has fielded a team of 20 sales reps detailing doctors and clinics to increase brand awareness and drive scripts. They intend to grow this team as Zimhi gains more traction. To summarize the Zimhi update, the commercial launch is proceeding as planned. Market reception has been very positive, and we remain bullish on the long-term success of this product. Oh, and let me add some late-breaking news here. You may recall earlier I described our team's commitment to saving patient lives. Well, this week, U.S. World Med shared with us two recent cases which Zimhi have been successfully used to resuscitate victims of what is presumed to have been fentanyl overdoses. Both cases were one-and-done interventions, meaning that only one dose was required to resuscitate the patients, just as the product was designed and intended. My goal today was to provide you with an update that helps you understand the current state of Atomos, and how we intend to change its trajectory. Between our filings with the SEC, recent press releases, social media posts, and our discussions today, our goal is to provide investors with as much transparency as we are able within the legal and regulatory requirements. The last thing I'll mention is, if you haven't already done so, please be sure to vote your shares in the upcoming annual meeting of shareholders. With that, I'll open it up for questions.
spk02: 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. A confirmation tone will indicate 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. Once again, that's star one to ask a question at this time.
spk07: One moment while we post the first question.
spk05: Once again, ladies and gentlemen, to ask a question, please press star one on your telephone keypad.
spk07: Okay.
spk01: Hey, operator, this is Robert. I have some questions that have come in.
spk00: Okay.
spk01: All right. These are questions that have come in via email from various investors. So let me just jump right into that. An investor asks about what exactly is going to come out of the DSMB meeting at the end of September. I mean, will you know some efficacy of Temple relative to standard of care? Will they make some kind of numerical announcement in terms of the number of hospitalizations on Temple versus the number of hospitalizations for the patients not treated with Temple? So just what are you going to be able to say, you know, as a result of that analysis?
spk04: Hi, this is Dr. Moss. So as I mentioned very briefly, if the trial stops for efficacy or lack of efficacy, we'll provide summary information in the public domain. If the trial continues, we will provide some information but not very detailed information as the trial needs to be blinded if the trial continues.
spk01: So when you mentioned the top line data in Q4, is that the time when we would see something that's a little bit more revealing or what will that look like?
spk04: No, actually, this next DSMB meeting, the statistical analysis will be done on the primary endpoint. And as I mentioned before, one of four options will occur based on that statistic. So, actually, the meeting in late September will be very definitive for this trial.
spk01: Okay, perfect. Thanks for clarifying that. Some questions about your cash balance that you reported here at the end of Q2. What kind of a runway does that provide you with? And I know you said you might be getting additional revenue coming in from the divestiture of the business from before. So just talk about, you know, what your cash will fund you, the runway, and what your alternatives are for perhaps some additional cash raising.
spk04: Yeah, I'll take a swap with that, and then if David B. has any other clarifications, he can jump in. So the, you know, I think as we mentioned in the Earnings released, we expect, we had some higher than budgeted expenses in Q2, which is sort of outside of our normal quarterly burn, and we expect that the second half of the year that we will move back to a more normalized level. We expect that the cash should get us through the end of the year. And then, as you mentioned, Robert, we have additional sources of capital, which we expect will also come in during that period. But to your broader question about what we intend to do for additional capital, I think that the reality is nobody wants to raise money at these levels. So the most likely outcome would be we would look ahead to certainly post interim meeting with the DSMB, see what the results of that meeting are, what the possible impact would be to the share price before determining a financing plan going forward.
spk07: Okay, great. That's helpful.
spk01: And then also kind of a little bit of the same question, but having it in a different way. You know, with the really potentially very good news coming out in September for Temple from the DSMB, and it sounds like the Zimhi launch is really starting to gain some traction, and the story about the two patients whose lives were saved is very compelling. reason to use the product. And it sounds like you're getting closer and closer on resolving some Jeffy and getting that back out there. So, you know, wouldn't you think all of these things could have a positive impact on your share price? And then that might relieve some of the pressure to do a reverse split or, you know, even postpone a financing until some of these positive impact effects have taken and been recognized in the share price. What's your thinking with that?
spk04: Well, I think the answer to all of that is yes. And I believe we mentioned either in the proxy and or in some of our communications last month The objective of the reverse split is beyond just trying to bring the share price back into compliance with NASDAQ. Certainly that is a significant motivator. But it is also intended to bring the share price to a level that it can be purchased by more fundamental healthcare funds that might be restricted based on the present share price. And so I feel like that in and of itself put the damper on the overall stock. As well as the advantage of the split, even in the smallest of ratios, is that it opens up shares to be used to continue to fund the company. But certainly, as you alluded to, there are a number of factors on the near horizon that we think could positively affect its share price, and it's not our intention to make decisions on financing or reverse split and possible ratio until some of those events actually transpire.
spk07: Okay, great.
spk01: And then Just one more came in, and you talked about this a little in your prepared remarks, and that's on making future acquisitions. It sounds like there's not any, you know, high desire to make any sort of near-term acquisitions, but rather you'd like for Simjepi and Zimhi to play out and Temple as well. And, you know, if those are positive, then, you know, down the road at some point, you could consider additional acquisitions or product opportunities. Is that the correct message? Am I getting that right?
spk04: Yeah, I think that's right. I would add, though, that I firmly believe that in this industry, you have to continue to innovate or die, and whether that innovation is in additional indications for Temple or in licensing or acquiring a compound that we can put in our already approved device or other opportunities that might come down the pipe that, as I mentioned in my opening comments, that we felt like would be immediately accretive to the company. But until such time that we have better visibility into where the financing would come from to support any new project, that's not something that we are actively working towards.
spk01: Great. That's very helpful and clarifying. So that's it on the questions now. So with that, I think we will now conclude our call today. Once again, I would like to remind all of you that the company will be hosting its 2022 Annual Meeting of Shareholders in two days' time on August 12th. at 10 a.m. Pacific time, 1 p.m. Eastern. And thank you very much for participating and for your interest in Atomos Pharmaceuticals. If you have additional questions, please let us know. Have a good evening, everyone.
spk02: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation, and have a great day.
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