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Operator
Good afternoon, everyone, and welcome to A2 Biopharma's fourth quarter and fiscal year 2022 financial results conference call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Robert Bloom, with Lithium Partners. Sir, the floor is yours.
Robert Bloom
All right, thank you very much. Good afternoon, everyone, and as the operator said, thank you for joining us for today's A2 conference. Biopharma Fourth Quarter and Fiscal Year 2022 Financial Results Conference Call. Joining us on today's call is A2's CEO, Josh Disbrow, and the company's Chief Financial Officer, Mark Oakey. At the conclusion of today's prepared remarks, we will open the call for a question and answer session. I'd like to remind everyone that today's call is being recorded. A replay of today's call will be available by using the telephone numbers and conference ID provided in the earnings press release issued earlier today. Finally, I'd also like to call to your attention the customary safe harbor disclosure regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations, and future potential operating results of A2 BioPharma. Although management believes these statements are reasonable based on estimates, assumptions, and projections as of today, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties, and other factors including, but not limited to, the factors set forth in the company's filings with the SEC. A2 undertakes no obligation to update or revise any of these forward-looking statements. With that said, I'd like to turn the event over to Josh Disbrow, Chief Executive Officer of A2 Biopharma. Josh, please proceed. Thank you.
Biopharma Fourth Quarter
Thank you, Robert, and welcome everyone. I'm pleased to be sharing this fiscal 22 full year and Q4 review on the call and look forward to holding these quarterly calls going forward. I'm extremely pleased with the traction we're achieving in our commercial operations. We attained record fourth quarter and fiscal year net revenues, which are being driven by strong growth in our prescription business and high single-digit annual growth in our consumer health segment. As you saw in today's press release, the $18.7 million in prescription revenues was a new quarterly record for the company and up 28% compared to last year's fourth quarter. The growth is largely being driven by the continuing execution of our sales force and the leverage we're gaining through A2 RxConnect, our novel and proprietary patient access program. RxConnect enables affordable, predictable, hassle-free patient access to A2's prescription products and, along with our sales force, is a cornerstone of our Rx business. Our sales force is making incremental strides with our physician and patient-centric messaging, and we're experiencing tailwinds from the growth of our key prescription markets, particularly within ADHD. I'll expand more on all of this in a moment. Another milestone to highlight during the quarter was the achievement of positive adjusted EBITDA within our prescription segment. This milestone was achieved through a combination of operational improvements, commercial execution, strong prescription trends, and positive market drivers. We believe these trends bode well for us as we enter fiscal 23, particularly as we continue both our top-line growth and margin improvement through the outsourcing of production of Adzenis XR-ODT and Cotempla XR-ODT to a contract manufacturer to further improve our bottom line. Now, there will always be some seasonal variations that impact our commercial operations in any given quarter, and in particular, our first fiscal quarter with kids out of school and the ADHD markets going softer. However, we are feeling great about the traction we are generating and are seeing solid prescription growth. We're seeing continuing growth as we're nearly through our first fiscal quarter of 23, and we expect this to continue. On the development front, as announced in July 22, We initiated our global phase 3 PREVENT clinical trial of enzastorin, which we call AR101, for the treatment of patients with Col3A1 positive vascular Ehlers-Danlos syndrome, or VEDS. PREVENT stands for prevention of ruptures with enzastorin for vascular Ehlers-Danlos syndrome. VEDS is a rare genetic disorder typically diagnosed in childhood and characterized by arterial aneurysm, dissection rupture, bowel rupture, and rupture of the gravid uterus. We've begun patient identification and study site contracting and have received regulatory clearance to initiate this registrational study in the United States and in numerous countries in Europe. I'll expand more on this momentarily, but needless to say, we are excited to have advanced AR101 to this critical point following several regulatory milestones this past year. So before I dive into more specifics, I believe A2 is well positioned going forward. We expect continued growth in our portfolio of prescription and consumer health products. and this organic growth, when coupled with operational and manufacturing efficiencies, as well as portfolio prioritization, that should drive us towards positive adjusted EBITDA for our complete commercial business. This solid base, coupled with the clinical advancement of AR101, provides us with the unique ability to have a solid, fundamentally driven commercial business, coupled with a high-value pipeline opportunity. To us, this puts A2 in a very exciting position. Let's dive into the commercial business a bit more, beginning with our prescription segment. As a reminder, within prescription, we operate primarily in two areas, ADHD and pediatrics. We acquired our ADHD product portfolio in March 21 with the acquisition of Neos Therapeutics. The portfolio includes extended release stimulant medications formulated in patient-friendly, orally disintegrating tablets that utilize the Neos-developed microparticle modified release drug delivery technology platform. Edzenis XR-ODT and Cotempla XR-ODT are the first and only FDA-approved amphetamine and methylphenidate extended release orally disintegrating tablets, respectively, for the treatment of ADHD. And they are finding a well-earned position in this large and growing ADHD stimulant category. Mark will hit a bit more on the numbers, but across the board, we are seeing strong growth in the ADHD products, which contributed to $12.2 million in fourth quarter revenues and $42.9 million for the fiscal year. The fourth quarter numbers, which showed 21% growth, was on an apples-to-apples basis given a full quarter of operations in last year's fourth quarter, highlighting the traction we were achieving. I touched on this at the beginning, but to iterate, the key drivers to growth can largely be attributable to three things. Overall growth in the ADHD market as we continue to come out of the pandemic and see a normalization of diagnoses. Second, a young, energized, and highly motivated sales force that is getting better and making more consistent strides with overall targeting and improvement of sales execution. We have a great team in the field, one that is populated with mostly new to industry sales professionals who are very hungry. They're getting their legs under them, following turning over much of the sales force in favor of this lower cost, higher upside profile. And we're excited about the traction they're all getting. And finally, the leverage we're gaining through A2Arcs Connect. As we continue to cultivate our roughly 1,000 pharmacies in the key markets across the country, our improved distribution channel drives growth for all of our prescription products. A2Arcs Connect is a hidden gem of sorts for us and one we believe can be leveraged further in the future with our current products and new products we may bring into the portfolio. One of the keys to continued improvement on the bottom line is the expected tech transfers of both Azenis and Cotempla. The process is well underway with the prospective contract manufacturer, including the conduct of the bioequivalent studies and other FDA-mandated work. It is our goal of having everything finalized and the CMO manufacturing our products in calendar 23. The site change stands to improve the gross profit margin of the ADHD products by 15% or more, a meaningful step change that, if achieved, will further improve our improving P&L. On the pediatric side, our portfolio includes Polyviflor and Triviflor, two complementary prescription fluoride-based multivitamin products that contain combinations of fluoride and vitamins in various formulations. We also market Carbonyl-ER, an extended-release carbenoxamine-based antihistamine suspension indicated to treat numerous alerted conditions for patients two years of age and older. These products serve established pediatric markets and offer distinct clinical features and patient benefits over the branded and generic competitive products. During the quarter, we achieved 64% growth in revenues from our prescription pediatric segment, with revenues growing to 6.1 million in the quarter. Again, the key driver here is the same improvement in Salesforce execution and the RxConnect leverage we discussed, combined with a solid payer environment, particularly for the multivitamins, which has provided some tailwinds for the products. Overall, we feel confident about the traction we are achieving in our prescription segment. As mentioned, we experienced 28% revenue growth in the fourth quarter, which produced a positive $1.1 million in adjusted EBITDA. With continued growth and the cost reduction measures in place, we believe we can only continue to improve upon this in the quarters to come. Let's transition to our consumer health segment now. For fiscal 22, net sales were $35.5 million within the consumer health segment, an increase of 8% compared to fiscal 21. We achieved this high single-digit year-over-year growth despite some short-term supply chain disruptions, which is something most of us have experienced as of late, but we believe these disruptions have been addressed. For those not familiar, within consumer health, our core products focus in categories such as hair loss, digestive health, urological health, diabetes management, and allergy. All products are intended to be used by consumers on a regular basis, and as such, we offer a monthly subscription program to allow for ongoing use and to simplify product ordering and use by customers. We sell directly to consumers through e-commerce platforms, including branded websites and the Amazon platform. Additionally, the segment sells products through our proprietary sales and marketing platform, which focuses primarily on direct mail, allowing customers to purchase directly through business reply or through call centers with shipment directly to their homes. The high single-digit growth for the year within consumer health was primarily due to solid growth in the Amazon channel, coupled with new product launches. Importantly, we made a strategic decision prior to fiscal 22 and through the year to pivot our efforts more to the online channel, with a primary focus on improving our visibility on and sales through Amazon. While we could have driven revenue by continuing to focus on the direct mail-centric business, very clearly to us, the opportunity to scale this consumer business and to generate profit lies with driving growth of the online business. This shift to more e-commerce has borne fruit, and this channel will be our primary focus going forward on the consumer side while we supplement with the direct-to-consumer sales of dietary supplements and personal care items. I do want to point out again that we were a bit constrained during the fourth quarter this year due to some supply chain issues with some purchase orders being delayed. This was not unique to us, and we believe the issues have been resolved. During the year, we had a consumer segment adjusted EBITDA loss of $4.9 million in this business and a $2.1 million loss in Q4, again noting that Q4 supply chain disruptions lowered our revenue line, which in part contributed to this uptick in EBITDA loss. As we look to the future, our goal continues to be to significantly shrink these losses each quarter, with the goal to run the business with positive adjusted EBITDA in the relative near term, given the revenue growth and operating improvements we believe are ahead. We're excited about the brand's performance through our online channels and the pipeline of OTC medicines that we are rolling out over the coming quarters. We continue to add new brands to the platform, inclusive of the Amman Pharma sterile eye, ear, and nose products, along with other products in the allergy category for which we just signed a supply agreement. So when you look at this from a 30,000-foot view, I believe we have a solid, fundamentally driven commercial business. Fourth quarter revenues were up 17% to $27.4 million, placing us on an annual run rate in excess of $100 million. Our prescription segment was adjusted EBITDA positive in Q4 with expectations for further growth and cost reductions going forward, both of which should benefit the bottom line. With continued growth in our consumer health segment, we believe we can drive the total commercial businesses, both RX and consumer, to positive adjusted EBITDA as well in the coming quarters. This is exciting to see this component of our business have the potential to be self-sustaining in the relative near term, which dramatically changes the way we think about funding on a go-forward basis. We recognize there are a lot of moving parts within the business, and we hope this detailed breakdown provides you the added detail to see the operational achievements we are making within our commercial ops. So with that, let's transition to our development pipeline, led by our development of AR101, Enzastorin, for the treatment of patients with COL3A1-positive VEDs. As I mentioned, in July, we announced the initiation of the global Phase 3 PREVENT trial of AR101. The PREVENT trial is a prospective Phase 3 global randomized double-blind placebo-controlled efficacy study designed to evaluate Enzastorin in patients with genetically confirmed COL3A1-positive VEDs. The primary aim of the trial is to determine whether enzastorin reduces the occurrence of VEDS-related arterial events requiring medical intervention compared to placebo or standard of care. We expect to enroll approximately 260 COL3A1 confirmed VEDS patients in the PREVENT trial. As added background, AR101 is an oral investigational first-in-class small molecule serine-threonine kinase inhibitor of the PKC MAPK-ERK pathway. AR101 has been studied in more than 3,300 patients across a range of tumor types in trials previously conducted by Eli Lilly. Dr. Hal Dietz of Johns Hopkins developed the first preclinical model that mimics the human condition and recapitulates VEDS, and this model serves as the basis for the plausible clinical benefit and rationale for conducting a clinical trial with AR101 in VEDS. This knock-in model has the same genetic mutation most prevalent in VEDS patients, and is representative of the human condition in both the timing and the location of vascular events. The model has generated identical structure histology and mechanical characteristics, and unbiased findings have now demonstrated that vascular structure alone does not lead to vascular events. It is increasingly understood that through objective comparative transcriptional profiling by high throughput RNA sequencing of the aorta, excessive PKC ERK cell signaling is the purported driver of disease. To establish that further, the PKC inhibitor enzastorin, or AR101, was studied in the Dietz lab and proved efficacious in multiple preclinical models and indeed prevented death due to vascular rupture. So based on this research, nature has seemingly found a way to treat this devastating disease by turning down this aberrant cell signal, leading to a reduction in arterial events. We have secured exclusive global rights to AR101 in the fields of rare genetic pediatric diseases outside of oncology and also have global rights to the intellectual property developed by Dr. Dietz surrounding these VEDS-related treatment methods. In December 21, the FDA granted orphan drug designation to AR101 for the treatment of EDS inclusive of VEDS, allowing for seven years of marketing exclusivity in the United States. In March of 22, we also received orphan designation in the EU, allowing for 10 years of marketing exclusivity in the EU. The FDA has cleared the IND application for AR101, which enables us to proceed with initiating a pivotal clinical trial for AR101. In terms of upcoming key milestones for AR101, we are awaiting one more country approval in Europe to reach our stated objective of five country study sites. We have been approved in the U.S. plus four of the five European countries. And once we receive the final European country approval, we'll be in a position to dose the first patient. At this point, we expect to start screening patients in late 22 with first patient enrollment in the early part of 2023. We look forward to reporting on the progress in the months to come. Now, a quick update on HealLight. In April 22, we announced positive preclinical data in ventilator-associated pneumonia, or VAP, for HealLight, our proprietary UVA light endotracheal catheter. Based on these positive data, we have now initiated a second, larger pig study at the Hospital Clinic de Barcelona under the supervision of Dr. Tony Torres, and we expect this study outcome to guide the further development of HealLights for patients with VAP. Following the completion of this porcelain study, we now expect to explore monetization opportunities for HealLight, potentially in the form of regional or global out-licensing arrangements. We do not anticipate further significant development without a partner to finance further development. Partnering could be in the shape of out-licensing a portion or all of commercial rights to Helite in exchange for meaningful consideration. Before I turn it over to Mark, I'd like to remind all stockholders about the special meeting of stockholders that is scheduled for next Wednesday, October the 5th. We have received a significant number of votes already, and we appreciate the support our stockholders have shown as the meeting approaches. We're pleased with where we are in the vote tally. I'll remind you that we are asking for a vote in favor of enabling our board of directors to authorize reverse split if it should become required in order to maintain our NASDAQ listing. I want to note that while a vote in favor of the reverse split gives the board the authority to implement a reverse, it would not require that the board affect it at this time. We expect to implement a reverse split only if it truly becomes necessary after further discussions with NASDAQ around potential extensions, which they may very well allow. If an extension to the 180-day grace period is granted by NASDAQ, we expect to take all the time needed to increase the share price without having to affect a reverse split. If we are granted an additional 180-day grace period by NASDAQ, that extension would take us into May of 2023. So we would have that long to evaluate the share price and general market conditions to see whether a reverse split does indeed have to be implemented at that time. So next week's vote, if in favor, will give us the ability to affect a reverse stock split but does not obligate us to do so in the near term. We do believe having this vote in hand is important in the event that we do need to affect a reverse split at the appropriate time in order to maintain our NASDAQ listing. Thanks for your support in this important matter as we approach next week's meeting. With that overview and my initial comments now complete, let me turn it over to our CFO, Mark Occhi, to add some additional color to the numbers.
Robert
Thank you, Josh. And welcome to everyone joining us on this call. Let me build upon comments that Josh has already provided, starting with revenue. Net revenue for the fourth quarter of fiscal 2022 was $27.4 million, compared to $23.5 million for the fourth quarter of fiscal 2021, a 17% increase. For the year, net revenue was $96.7 million, compared to $65.6 million for fiscal 2021, a 47 percent increase. Breaking down the quarter, net revenue from prescription sales in the fourth quarter of fiscal 2022 was $18.7 million, compared to $14.6 million in the same quarter last year, an increase of 28 percent. ADHD experienced 21 percent growth in net revenue to $12.2 million in the fourth quarter of fiscal 2022, compared to $10.1 million during the fourth quarter of 2021. The prescription pediatric portfolio experienced 64% growth in net revenue to $6.1 million in our 2022 fourth quarter, compared to $3.7 million in our fourth quarter of 2021. For the fourth quarter of 2022, net revenue from the consumer health franchise was $8.7 million, compared to $8.9 million in the same quarter last year, a decrease of 2%. This decrease was largely driven by the short-term supply chain disruptions Josh mentioned earlier. Looking at the year, net revenue from prescription products for fiscal 2022 was $61.1 million compared to $32.7 million in fiscal 2021, an increase of 87%. ADHD experienced 294% growth in net revenue to $42.9 million in fiscal 2022. compared to fiscal 2021. As a reminder, the ADHD products were acquired in March of 2021 and reflect a prior year stub period of ownership. Prescription pediatrics experienced 29% growth in net revenue to $16.1 million in fiscal 2022 compared to $12.4 million for fiscal 2021. Net revenue for fiscal 2022 from the consumer health franchise was $35.5 million compared to $33 million last year, an increase of 8%. You will notice in the press release that we have a small amount of other prescription revenue both this year and last year. This other pertains to COVID-19-related test kits and discontinued or deprioritized products. While the amounts were relatively small in the fourth quarters of both years, they were larger in the context. of the full year where sales decreased from $9.4 million in 2021 to $2.2 million in 2022. Again, this is largely due to decrease in COVID-related test kits. Despite the loss of revenue from these older discontinued or deprioritized products, we still grew prescription revenue 87% following the NEOS acquisition. Gross margins were 54% in both the 2022 fourth quarter and full fiscal year, compared to 48% and 44%, respectively, in the same periods in fiscal 2021. This improvement in gross margin percentage was primarily driven by improvements in the ADHD and pediatric product lines, the result of cost reductions and greater volumes. On the OpEx side, for the fourth quarter of 2022, Including impairment expense and amortization of intangible assets, operating expenses were $21.1 million compared to $25.6 million in the same period a year ago, a decrease of $4.5 million. Research and development expenses were $3.7 million in the fourth quarter of 2022 compared to $4.8 million in the 2021 fourth quarter. Of this $3.7 million, 1.5 was a milestone payment earned upon the achievement of an AR-101 regulatory milestone. Looking at the full year, excluding impairment expense and amortization of intangible assets, operating expenses were $84.3 million in fiscal 2022 compared to $69.2 million in fiscal 2021. The change was primarily the result of the acquisition of NEOS, which was completed in March 19th, 2021. Research and development expenses were $14.4 million in fiscal 2022, compared to $5.6 million in fiscal 2021. The increase in R&D was primarily related to investments made to advance AR 101, inclusive of $4 million in milestone payments earned, which were paid in a combination of cash and stock. During the fourth quarter of 2022, Net loss was impacted by an impairment of $10.8 million due to the $8.6 million impairment of goodwill associated with our 2022 Inovus acquisition, driven by the decline in A2's market capitalization, and $2.2 million impairment due to the discontinuation of certain consumer products. For the full fiscal year, the company recognized a total impairment expense of $75.5 million, This consisted of impairments of $65.8 million of goodwill, again, a function of the decrease in our market capitalization, $7.1 million of intangible assets, $2 million of inventory, $.4 million of other assets, and $.2 million of property and equipment. The impairment expense related to write-down of assets, excuse me, the impairment expense related to the write-down of assets was due to the discontinuation of commercialization, commercializing certain products in both our prescription and consumer segments. During fiscal 2021, the company recognized impairment expense of $12.8 million related to the impairment of Tuzistra and the Testo, licensed intangible assets, which were divested on March 31, 2021. Net loss for the fourth quarter of 2022 was $17.7 million, or 49 cents per share, compared to $19 million, or 81 cents per share for the same quarter last year. For the year, net loss was $110.2 million, or $3.75 per share, compared to $58.3 million, or $3.48 per share in fiscal 2021. Again, net loss was significantly impacted by the impairment expenses of $75.5 million in fiscal 2022 and $12.8 million in fiscal 2021. Given the impact from the impairments, the bifurcation between our commercial operations and our development operations, we have included tables in the press release that help provide added color to our operations. These tables labeled 1A and 1.2 help to calibrate the impact of certain items, including depreciation and amortization, impairment expenses, and other non-cash items. We encourage everyone to review the tables in detail for what add-backs were made. For the quarter, adjusted EBITDA from our prescription and consumer segment was only a negative $961,000 compared to a negative $8.2 million in last year's fourth quarter. For the full year, this was a negative $10.4 million compared to a negative $30.8 million in fiscal 2021. Breaking it down by operating segment, prescription adjusted EBITDA was a positive $1.1 million compared to a negative $5.5 million in the fourth quarter of 2021. For the year, prescription adjusted EBITDA was a negative $5.5 million compared to a negative $25.5 million in 2021. In the consumer health segment, adjusted EBITDA was a negative $2.1 million for the fourth quarter of 22 compared to a negative $2.7 million in the fourth quarter of 2021. As I previously discussed, consumer health segment was negatively affected by the supply chain shortages during the fourth quarter of 2022. For fiscal year 2022, it was a negative $4.9 million compared to a negative $5.3 million in 2021. Again, full reconciliations are provided in the tables included in today's press release. Finally, on the balance sheet, cash and cash equivalents at the end of the fiscal year ended June 30, 2022 for $19.4 million. Subsequent to the end of the year, we raised $10 million in gross proceeds in a registered public offering. Full details of all these financings are included in our 10-K. With that, let me turn it back over to Josh.
Biopharma Fourth Quarter
Thank you, Mark. Let me just conclude with where I started. I'm extremely pleased with the traction we are achieving in our commercial operations as we achieved record fourth quarter and fiscal year net revenues, driven by strong growth in our prescription business, and high single-digit growth on the year in our consumer health segment. Through operational improvements, commercial execution, and positive market drivers, we have delivered positive adjusted EBITDA in the fourth quarter within our prescription segment. We believe this bodes well for us as we enter fiscal 23, particularly as we continue both our top-line growth and margin improvement through the tech transfer at Zenith to Potempla to further improve our bottom line. As we look to the future, I believe we are well positioned as we expect continued growth in our portfolio of prescription and consumer health products. This organic growth, when coupled with operational and manufacturing efficiencies, as well as portfolio prioritization, should drive us towards positive adjusted EBITDA for our commercial businesses. This solid base, coupled with the clinical advancement of ARR 101, and our phase three prevent clinical trial for the treatment of patients with beds. It provides us with the unique ability to have a solid fundamentally driven commercial business, coupled with a high value pipeline opportunity to create value for the future. We look forward to that future with tremendous optimism. I appreciate everyone's participation on the call today, and now we'll be happy to answer questions. Operator?
Operator
Thank you. Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please indicate so now by pressing star 1 on your touchtone phone. Pressing star 2 will remove you from the queue should your question be answered. And lastly, while posing your question, please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Once again, that's star 1 if you have a question or comment. The first question is coming from Vernon Bernardino with HC Wainwright. Your line is live.
Mark
Hi. Thanks for taking my question. Hi, Josh. Congrats on the strong results and the progress with Enzostarin. I was just wondering if you could talk a little bit about the discontinued products. You know, if you could either tell us what they are or perhaps characterize what decision process you made to deprioritize them, including perhaps some idea of the cost of sales of those versus the cost of sales of the other consumer health products.
Biopharma Fourth Quarter
Yeah, thanks, Vernon. Appreciate the call and the questions. And I'll have Mark fill in if there's anything I miss on. But generally speaking, the discontinued products were a drag on the company's bottom line. These were relatively small revenue players. and actually contribute an aggregate negative growth margin over the last year plus. And so these were not products that were going to be long-term growth drivers. As you likely recall, you know, before the pandemic, we acquired a product line from Seracor that we refer to as the pediatric product line. And really the centerpiece of that portfolio was what we've identified as the core pediatric brands today, polybifluor, tribifluor, and carbonyl. And we brought some additional products that, while they were revenue contributors, we did not expect them to be big growth drivers and, again, contributed largely negative gross margins. So relatively de minimis revenue that comes from that and a pickup in the context of us being able to to pick up, reverse some of that negative contribution margin. And then we did discontinue, I'll remind you, Natesto. We discontinued that along with TuZistro back in March of 2021. When we were on the precipice of closing the deal with NIOS, we entered into negotiations with two separate parties to return those assets back to their originators and did that. While Natesto did contribute some revenue, the TuZistro was de minimis. And so frankly, it was addition by subtraction when you look at all those products. And this is all to say is we're squarely focused on our core ADHD and pediatric brands. Obviously, it's NSXR, Cotempla XR is the lion's share of the revenue. But really, the pediatric products, polyviflor, triviflor, and carbonyl are really beginning to be meaningful growth drivers for the company. And this enables us to focus squarely in pediatrics and ADHD, remove the distractions of these non-core products that were a drag on the company's bottom line. So hopefully that gives you some perspective.
Mark
Terrific. It does. I have one follow-up question, but I'll get back into Q for now.
spk00
Okay.
spk02
Once again, if you have a question or a comment, please press star 1 on your touchtone phone.
Operator
Okay. We'll have a follow-up from Vernon. Vernon, your line is live.
Mark
Hi. Thanks for taking the follow-up. The heat light device has always been interesting to me. What are our current activities related to that? And perhaps, you know, you mentioned, you know, monetization opportunities, but what perhaps is in the current COVID environment is how one may perhaps advance the product into either clinical development or even just experimental further use.
Biopharma Fourth Quarter
Yeah, thank you, Vernon. So just to recap, where obviously HealLight started was the concept of potentially treating SARS-CoV-2, the COVID-19 virus. And while it did show early promise, we began to make a pivot when it really became clear that clearly the market has found ways to solve for COVID, at least in large part through vaccinations and some of the treatments that have since received authorizations. But what was clear from the beginning is that this was going to be a device that had far more potential than just SARS-CoV-2, inclusive of severe pneumonias and then specifically with respect to ventilator-associated pneumonia. And so that's where we find ourselves now in the throes of a preclinical study at the University Clinic de Barcelona under the supervision of Dr. Tony Torres. is to look in a very refined, sophisticated, ventilator-associated pneumonia pig model, which is really kind of the gold standard and one of the only places on the planet that employs such a model, to look and see can we either delay the time of onset of VAP, potentially prevent it altogether. And so where we stand is we are We are in the midst of a larger pig study after completing a relatively small one to demonstrate proof of concept that, in fact, the rates of pseudomonas and the ability to delay onset of pseudomonas-driven VAP was significant. And so we need to do a larger study now, and that will, in turn, inform our decision about where we take development. And, frankly, we're excited about what this could mean for us from a couple of perspectives. The ability to focus on our core business, which, as I mentioned, is our commercial business and advancing AR101 towards the first patient getting dosed in the PREVENT trial. But it also enables HealLight to potentially get into the hands of a larger company that may be more focused in respiratory illnesses, anti-infectives, and already has a presence in major European hospitals and so forth. And we think there could be a meaningful opportunity to get non-dilutive funding in through an out-licensing deal through a company that has more resources than we currently do. You know, you can't be all things to all people. What we've said over the last year plus following our transition into a pediatric and ADHD company is we'll consider all opportunities to bring in additional sources of funding, and we think HealLight could represent a really good source for that. So we've kicked off the process and more to follow as to what might come from that, but excited about the ability to get it into the hands of a company that could really resource it and drive something meaningful through a potential out-licensing deal.
Mark
when might we see results from those studies in the pig? And I guess that's it.
Biopharma Fourth Quarter
Yeah, so I don't want to give you specific guidance because this all depends on the workflows within a large hospital. And of course, that's anything but predictable these days. But I think it's realistic to think that late this year or early next, we'll have a read on the porcine model to understand what we do from there and whether we pursue more of a preventative type of approach, which would be a different protocol and a different sort of set of studies versus whether we go after a treatment. The bigger opportunity, frankly, is a preventative to go after. That's the bigger market where you can envision that Every hospital is employing this as part of their standard operating procedure for any high-risk patient that comes in with a respiratory illness and needs to be mechanically ventilated. So excited about what this could mean, and I don't want to signal necessarily that we fully expect to get a deal done. We are starting the process, and given what we perceive as a very exciting opportunity, there could be a meaningful deal that gets done with HealLife.
Mark
Terrific. Thank you. That's very helpful in perhaps defining the opportunity. Appreciate you taking my follow-ups. Thanks, Vernon.
Operator
Okay. The next question is coming from Sumat Kulkarni with Canaccord. Sumat, your line is live.
Canaccord
Good afternoon, Josh and Mark. Thanks for taking my question. Could you give us a sense of what the cost of the PREVENT study might be for endostatin and VEDS and how that might play out relative to the cash in hand right now?
Biopharma Fourth Quarter
Yeah, thanks, Jamon. Good to have you on the call. So what we've discussed in a general sense is that all in up to the interim analysis, which would be kind of a go-no-go, is about a $16 to $17 million spend. It's about an $8 million annual spend. So that's about a, you know, call that 24 months out. If we get a positive indication from either an efficacy perspective or it's a primarily being oriented as a safety read just to make sure that we Have the safety profile to enable us to add in some adolescent patients So at the very least it would be okay. Now it's safe to add in adolescents go back to the FDA It is powered and we have afforded ourselves alpha such that if there's a significant increase And a statistically significant response, there could be an unblinding to potentially enable filing for benefit at that point. So generally speaking, think of it as about an $8 million annual spend over two, but could be three years, assuming that we don't necessarily expect to get an interim read from an advocacy perspective. So there may be another year added on to that. So think of it about as an $8 or so million annualized spend all in.
Canaccord
Got it. Thanks a lot. And then now that you have gotten further along on the PREVENT trial, could you give us a sense of what the latest discussions have been with the FDA, if any?
Biopharma Fourth Quarter
You know, the FDA has been relatively quiet because we got to a good agreement on the protocol. We got really everything that we needed out of them in terms of a real clear endpoint, exactly what they're looking for. And so if anything, we've had more interactions with some of the European countries regulatory agencies getting ethics approval, getting the country-by-country CTAs approved, and we have that in four of the five countries at this point. So from an FDA perspective, we've been, shall I say, signed, sealed, and delivered for multiple months, really just wanting to synergize and make sure that we've got all of the runners at the starting line on both sides of the Atlantic, such that we can maximize the stats plan to make sure that we work accruing for the right number of events. And the more we can front-load that, the better. So FDA has been more or less in our camp. Everything's solid. Obviously got the fast track designation, which obviously allows for sort of much more frequent and ready access to the FDA. And so we're excited to have gotten agreement from them relatively swiftly and are now in a position to really just, again, get the runners to the starting line. Thanks for the detail. Thank you so much.
Operator
Okay, if there are any final questions, please press star 1 on your touchtone phone. Once again, that's star 1 if you have a question or a comment.
spk02
Okay, it looks like we have no further questions in queue.
Operator
I'd like to turn the floor back to management for any closing remarks.
Biopharma Fourth Quarter
Thank you, John, and thanks to everyone for attending today's call and for those that joined via the webcast online. I hope you can hear my enthusiasm. I hope you share the excitement of what we have accomplished here this past year. A significant transition has taken place, and we're really excited about the process. that's been made looking forward to the future on continuing to grow the commercial business we're obviously excited about the fact that we crossed over the EBITDA positive line on the RX side expect to continue to see improvements we expect to continue to advance towards the first patient getting dosed in the prevent trial so again thanks for the support thanks for your continuing interest in A2 for those of you that are shareholders and have not yet voted your shares, we would ask you to do that in consideration of certainly the importance of maintaining our NASDAQ listing. And so appreciate everyone that hasn't voted doing so. And again, thank you for your support and for your time on today's call. Everyone have a very good evening or afternoon, depending on where you may be. Thanks very much. Have a good day.
Operator
Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
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