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spk02: Good afternoon ladies and gentlemen and welcome to the Adamis Pharmaceuticals third quarter 2022 financial results conference call. At this time all lines are in a listen-only mode. If at any time during this call you require immediate assistance please press star zero for the operator. This call is being recorded on Monday November 14th 2022. I would now like to turn the conference over to Robert Robert Houle with ICR Westwick. Please go ahead.
spk04: Thank you, operator. Welcome to the Atomos Pharmaceuticals third 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 Chief Executive Officer David Margulio 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 have a Q&A session. This call is being webcast and will be available for replay in the Investors section of our website, atomospharmaceuticals.com. In today's call, we will make certain forward-looking statements regarding our business based on current expectations and current information. These 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 hand the call over to David Margulio, CEO of Atomos.
spk03: Thank you, Robert. I appreciate all of you for tuning in today for our third quarter update. After our clinical trial, examining the effects of Temple and COVID-19 treatment failed to achieve its primary endpoint. We paused and now have halted further development of Temple beginning at the end of September. In early October, we announced we had initiated a process to explore strategic and financing alternatives for the company. Those alternatives include partnering or outright sale of one or both of our commercial products, Simjepi and Zimhy, or the sale, merger, or reverse merger of the company. All of these options would have the objective of maximizing shareholder value. The company hired our longtime investment bank, Raymond James, as strategic advisor to assist and evaluate potential alternatives. We are presently actively involved in communications with third parties regarding which regarding this process, which could result in one or more possible transactions. While engaged in the process, we have implemented significant and successful expense reduction measures, including stopping all development programs and reducing employee headcount to just those individuals directly involved in either the manufacturing of our commercial products, maintaining regulatory compliance, or supporting the strategic process. These measures were necessary to preserve the company's limited cash while determining our path forward. Over the last few months, we've weathered a near perfect storm of both micro and macro events, which have severely limited the company's ability to operate. However, I'm confident that this process we began in October will conclude with one or more good options that will enable us to reset our strategy and place the company on a path to increasing shareholder value. While there can be no assurance that this process will result in a transaction and we have not established a schedule for completion of the review process, I expect that in the coming weeks we will have a better sense of where this process is likely to head. But until the company enters into a definitive agreement or otherwise determines that our disclosure is necessary or appropriate, we will not expect to disclose or provide updates concerning developments related to the process or the companies engaged in the process. I'd now like to turn it over to our CFO, David Benedicto, to provide a brief update on our recently filed third quarter financial results.
spk05: Thank you.
spk01: This afternoon we filed our Form 10-Q for the quarter ending September 30, 2022. I will discuss a few items relating to our financials and I encourage you to review the 10-Q for additional details and disclosures. Despite still being negatively impacted by the SEMGEPI recall, total net revenue for the quarter ending September 30, 2022 was $1.5 million compared to $760,000 for the same quarter in 2021. This 98% increase was primarily due to sales of SEMHAI. the absence of sales for SEMGP resulting from the 2022 product recall, and the recognition of deferred revenue under the US World Meds Agreement, offset by the cost of the SEMGP recall. Selling, general, and administrative expenses were approximately 2.5 million for the quarter ending September 30, 2022, versus 4.8 million in the quarter ending September 30, 2021. The 48% decrease was primarily a result of reductions in legal and advisory fees and a reversal of accrued bonus expenses. Research and development expenses were lower for the third quarter of 2022 at approximately 2 million compared to 4.6 million in 2021. The 57% decrease was primarily related to lower development spending for Temple and Zemhai. Net loss for the combined discontinued and continued operations for the quarter ended September 30, 2022 was approximately 4.4 million compared to 12.4 million for September 30, 2021, a 64% decrease. Cash and cash equivalents at September 30, 2022 totaled 2.4 million. We expect to receive additional proceeds between now and the end of the first quarter of 2023, which could range from approximately 3 million to 4 million from the disposition of the remaining U.S. compounding assets. While there are no guarantees, we are endeavoring to implement further reduction measures to cut operating expenses, to manage the company's limited cash to both continue critical operations and provide the time required to conclude one or more potential strategic transactions. Once again, I encourage you to review our recently filed Form 10-Q for additional details and disclosures.
spk05: I will now turn it back to David Margulio. Thanks, David.
spk03: I'd now like to provide you with a brief update on our commercial products for both Simgepi and Zimhy. As you know, in March, we announced a voluntary recall of certain batches of Simgepi due to quality issues at one of our manufacturers. I am pleased to announce today that following corrective actions, Catalan has now resumed operations at their Belgium facility, and they have scheduled a new batch of some Jeffy to be manufactured in November. Without any further delays, we would expect some Jeffy to be back in the market before the end of Q1 23. Prior to that recall, it seemed likely that 2022 would be the year that Semjepi reached break-even and began producing positive cash flow for Atomos. We expect that U.S. WorldMeds can regain their prior momentum, and we are hopeful that 2023 will be that banner year that we expected for 2022. Shifting to Zimhai, on our last call, I provided a substantial summary of how U.S. World Meds is approaching the commercial launch of Zimhi, including their areas of focus within the retail and non-retail markets. I also attempted to establish the expectation that the heavy lift in the first few quarters of any drug launch is laying the necessary foundation through a tedious process of adding the drug to the formularies of both insurers and prescription benefit managers, contracting directly with customers, etc., You may have noticed an uptick in media coverage of Zimhai over the last couple of months. In fact, there have been 470 distinct media mentions of Zimhai since August 31st, with at least eight of those stories highlighting individual lives that have been saved by Zimhai. It's exciting to track this increased media exposure as the market becomes more and more aware of Zimhai. Additionally, U.S. World Meds continues to grow the size of its commercial team focused on Zimhi. Last month, they added a new director of medical affairs to focus on better positioning Zimhi in the market. Their team is also actively engaged with opioid task forces in more than a dozen states and multiple federal agencies. All of this foundational work is just now starting to convert into increase in sales. Our third-party sales and prescription data shows that unit sales of Zimhi increased 90% in the third quarter of 2022, nearly doubling the second quarter. Now, there's still a long way to go to reach total unit sales at a level that's meaningful and establishing cash flow for Atomos, but it's certainly directionally positive. So to summarize the commercial update, we expect Semjepi to re-enter the market in the first quarter of 23. The commercial launch of Zimhi is proceeding as planned, and we look forward to stronger sales in Q4 and look ahead to more meaningful revenue for both products in 2023. That concludes our initial remarks. Before I open it up to questions, I'll share that following our second quarter call, we received positive feedback regarding the format that we had used for Q&A. So we're going to continue that format today, having Robert consolidate the most frequently asked questions from investors. Robert?
spk04: Thank you, David. Let's kick it off with this one. And this one has to do with your cash balance of $2.4 million at the end of September. So this investor is asking, will you be out of cash by the end of the year if no additional proceeds come from the U.S. compounding liquidation? And what is your confidence level in receiving the $3 to $4 million of additional proceeds that you discussed in your remarks?
spk01: No. This is David Benedicto. No. We have a plan to manage expenditures to coincide with the receipt of the additional proceeds. We are confident on the receipt, but we remain uncertain where actual proceeds will fall within the estimated range.
spk04: Okay, great. Now, shifting over to the SimGepi and getting that back on the market, when does the newly manufactured SimGepi from Catalan get shipped to your fill and finish contract manufacturer? And when should we expect product to be available to patients? you know, and on the shelves of the pharmacy. Just help us understand the steps and where, you know, there might be some additional delays or unanticipated bumps in the road, if any.
spk03: Yeah, certainly. So the process starts, of course, in JEPI at Catalan in Belgium. And at that site, they formulate epinephrine and fill it into syringes and insert rubber stoppers. before that has been evaluated for release. It goes through all its release testing and eventually shipped to Phillips Metasize for what their part of the supply chain entails, which is they manufacture all of the plastic components for the device and assemble the device around the syringes add all of the labeling and package inserts and secondary packaging, and then that product is shipped from Philips to US World MES for distribution. So as far as the timing as it relates to the restart, as I mentioned, we are currently on schedule with Catalan to manufacture a batch of Sumjepi in November, and assuming that there are no further delays, The product should be released sometime towards the end of January, shipped to Philips, and then as Philips begins their assembly process, they will send that product out as it's completed to U.S. World Med. So we're saying by the end of the first quarter, but we are certainly working towards accelerating that timeline.
spk04: Okay, great. Let's jump over to one that comes in fairly often. Just can you remind us where you are in the NASDAQ delisting process? Is there a scenario where you might have to go to an OTC listing before the strategic process has been completed?
spk03: Well, just to refresh everybody's recall here, we received a notice earlier this year from NASDAQ regarding our out of compliance share price and they gave us at that time until December 27th to regain price compliance and we're quite aware of the delisting process and we are communicating with NASDAQ and will intend to communicate further with NASDAQ as this strategic process becomes clear and at which time we expect to either file an appeal or some other form of request of additional time to regain that compliance. It is certainly our expectation that we will maintain a listing on NASDAQ, at least for a period of time to get through this process that we're currently in. but we have no reason to believe otherwise. So that's currently where our confidence is.
spk04: Okay, great. Let's talk about switching over to Zimhi a little bit. You know, generic Narcan is available, and I think it's been quite readily accepted by the marketplace. Is The availability of the generic Narcan having any kind of a negative impact on the Zimhi launch and its acceptance?
spk03: Well, the impact has really been to pricing as the entrance of generics and the response to buy some of the branded products has been lowering the price overall for Narcan, which we view as a net positive for the market. as we have long stated that more naloxone in the market should lead to fewer and fewer deaths, which is our objective, obviously. Now, as far as how that, what that translates to as far as our ability to sell Zimhi, I don't think that it impacts the ability to sell it given the differentiating characteristics of Zimhi. through its different route of administration and its significantly higher dose, we think that those benefits stack up well regardless of whether we're talking about branded products or generics. So really the impact is just on possible margins. And I think I commented on our prior call that we have undertaken a couple of measures and we intend to undertake additional measures to further reduce our cost of goods on the product so that we can maintain margins even at lower selling prices.
spk04: Okay, great. So what can you tell us about the early adopters of Zimhi? And has U.S. World Med had success with this type of customer? And why do you think they've been successful or why not?
spk03: Well, they are, you know, I think as I described in some detail on the last call, targeting a number of different areas of the market. But what we deem to be low-hanging fruit, you know, pre-launch and certainly the success in tapping into this market has proven this out, is in first responders. and any group, frankly, that has to use naloxone on a regular, if not daily basis. For those groups, they immediately recognize the benefit of the higher dose and the faster uptake of naloxone from the route of administration. So I think that's where they've seen early success, and I expect that that will be going forward, a strong supporter and customer for the product.
spk04: Okay, great. Thanks for that. Let's see, this one, oh, this investor is now jumping back to SimJepi for a pretty good question here. Could U.S. World Meds decide not to relaunch SimJepi due to the recall and adverse market conditions that have changed? What are the terms of the agreement that would allow them to exit the contract?
spk03: Yes, so without getting into the specifics of the agreement, I can tell you that I think I mentioned earlier that U.S. World Meds was in the process of revising forecasts for 2022 before the recall. So it is our expectation that they will be able to get back that momentum that they had at the beginning of 22. And I believe that they are eager to get back into the market with the product. And we've not been given any indication otherwise.
spk04: OK. Great. Let's see. Here's one about financial modeling and forecasting. What would be a reasonable estimate for monthly revenue that you were receiving from the sale of U.S. compounding, and when does this stream of cash end?
spk05: Yeah, I'll let David B. take that.
spk01: With regards for Grown, we have received all of the expected revenue from the sale of certain assets to them. What remains are the expected proceeds from the sale of the building, land, and the remaining manufacturing equipment, which we expect could range from $3 million to $4 million. Thank you.
spk04: Okay, great. And then here's one more. Assuming the strategic process currently underway results in a definitive agreement, will it require shareholder approval, you know, a shareholder vote?
spk03: Yeah, so I guess the answer depends on the outcome of that process and, frankly, the nature of the agreement that is the result. If it's a transaction that requires shareholder approval, then absolutely we will be putting together a proxy and describing the transaction and soliciting shareholder approval, and we would expect
spk04: that process to begin right on the heels of of signing any sort of definitive agreement okay um great uh that okay we we we've we've come to the end of the questions that have been submitted to me so at this time i'd like to thank everyone for listening to our call and for your interest in adamus pharmaceuticals and thanks to the management team for uh their discussion of where they think they're headed and for the good financial reporting that they have put out now for the third quarter. So thanks, everyone. And if you have additional questions, please contact us. All right. Thanks, everyone. Have a good evening.
spk02: Ladies and gentlemen, this concludes your conference call for today. We thank you for joining and ask that you please disconnect your lines. Thank you.
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