ChromaDex Corporation

Ladies and gentlemen, thank you for standing by and welcome to Chromadex Corporation's fourth quarter 2021 earnings conference call. My name is Josh and I will be the conference operator today. At this time, all participants are in a listen only mode. And as a reminder, this conference call is being recorded. This afternoon, Chromadex issued a news release announcing the company's financial results for the fourth quarter of 2021. If you have not reviewed this information, Both are available within the investor relations section of Chromadex's website at www.chromadex.com. I would now like to turn the conference call over to Brianna Gerber, Vice President of Finance and Investor Relations. Please go ahead, Ms. Gerber.

Thank you. Good afternoon, and welcome to Chromadex Corporation's fourth quarter 2021 results investor call. With us today are Chromadex's Chief Executive Officer, Rob Freed, Chief Financial Officer, Kevin Farr, and Senior Vice President of Scientific and Regulatory Affairs, Dr. Andrew Hsiao. Today's conference call may include forward-looking statements, including statements related to Chromadex's research and development and clinical trial plans and the timing and results of such trials, the timing of future regulatory filings, the expansion of the sale of TruNiagen in new markets, business development opportunities, future financial results, cash needs, operating performance, investor interest, and business prospects and opportunities, as well as anticipated results of operations. Forward-looking statements represent only the company's estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors to cause Chromadex's actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These risk factors include those contained in Chromadex's quarterly report on Form 10-Q, most recently filed with the SEC, including the effect of the COVID-19 pandemic on our business, results of operations, financial condition, and cash flows. Please note that the company assumes no obligation to update any forward-looking statements after the date of this conference call to conform with the forward-looking statement's actual results or to changes in its expectations. In addition, certain of the financial information presented in this call references non-GAAP financial measures. The company's earnings presentation and earnings press release, which were issued this afternoon and are available on the company's website, present reconciliations to the appropriate GAAP measures. Finally, this conference call is being recorded via webcast. The webcast will be available at the investor relations section of our website at www.chromadex.com. With that, it's now my pleasure to turn the call over to our Chief Executive Officer, Rob Freed. Rob?

Thank you, Brianna. Good afternoon, everyone, and thank you for joining our fourth quarter 2021 investor call. In 2021, Chromadex achieved several important strategic milestones. We launched TrueNiagen in 3,800 Walmart stores, our first mass retail launch in the United States. We also partnered with Sinopharm Xinjia, a subsidiary of one of China's largest pharmaceutical companies, to help grow our TrueNiagen cross-border business and to collaborate in securing health food registration in China. We signed agreements with new strategic partners, H&H Group and Rowe, to help build the Niagen ingredient business with their unique customer base. And we announced results of a study on NR supplementation in children with ataxia, an orphan disease characterized by premature aging. We believe this is further evidence of Niagen's potential impact on age-related health declines. This strategic momentum has continued in early 2022. Our Chromedex External Research Program, or CERC, achieved its 100th published peer-reviewed study on Niagen and other ingredients. This milestone was followed by a first-of-its-kind study on Parkinson's disease patients, which was another data point supporting NR's positive impact on neurodegenerative diseases. A Phase II study is currently underway, which will explore these findings in a larger patient population. And finally, we were granted an important new U.S. continuation patent that significantly reinforces Chromadex's intellectual property portfolio. We now have over 40 patents on NR and other NAD precursors. This particular patent adds protection of the manufacturing process of NR and its various salt forms through 2037. While many of these achievements position the company for growth in 2022 and beyond, we also delivered solid financial performance in 2021. True year net sales were 67.4 million, a 14% increase year over year. True nitrogen net sales were 56.7 million, a 20% increase year over year. And our gross margins were 61.5%, a 200 basis point increase versus last year, despite a very challenging global supply chain environment. As I said last quarter, I believe we're at an inflection point for this company, with litigation largely behind us. We are already devoting more resources, both human and financial, to building our true nitrogen brand and developing our science and furthering our relationships with global partners. In the fourth quarter of 2021, total legal expense declined significantly to $1.6 million, which allowed for reinvestment in brand building, as well as improvements in profitability on a reported basis. Our total operating loss was 5.3 million in the fourth quarter of 2021 compared to 8.8 million in the third quarter. In the fourth quarter, we tested television advertising with our existing Shannon Sharp spot to help shape our plans for 2022. And I'm excited to announce that one of our new TV commercials begins airing nationally in March. While the Shannon Sharp ad was targeted at a primarily male and fitness-oriented audience, our new commercial is intended to educate a broader group of potential consumers about the benefits of taking TruNiogen. We'll share more as we scale this campaign and others to support our e-commerce business, as well as improve brand awareness at Walmart. As I said, the recent scientific developments on Niogen have been significant and continue to validate the tremendous market opportunity for this ingredient. Specifically, several studies have shown that tissues in complex organs such as the heart and brain are heavily dependent on NAD. Not a coincidence that these metabolically demanding tissues are the ones we're most concerned about as we age. We now have 20 completed and published clinical trials involving Niagen, and more than 40 additional studies underway. Our focus going forward is to translate this extensive and growing body of science into compelling marketing messages, including aging, heart health, muscle health, cellular health, and others. We're beginning to test benefit-specific messages in our marketing materials. encouraging results. For example, we designed an email and social media campaign highlighting the scientific research behind NR and heart health in February to align with American Heart Month. In addition, we're launching a new true nitrogen product this year to broaden our customer base by targeting another important benefit area. I'm excited to share more once it's in the market. And finally, I'd like to highlight our newest strategic partner, Designs for Health, and give a brief update on Sinopharm. Designs for Health sells premium dietary supplements to its extensive healthcare practitioner network in the U.S. They will offer specifically formulated products with Niagen exclusively to these eight CPs. Chromadex and Designs for Health share a similar philosophy. Both companies are rooted in science and sell research-driven, evidence-based products. The healthcare practitioner channel is strategic for Chromadex to build awareness of Niagen. These practitioners play a pivotal role in educating consumers on the importance of NAD, and providing science-backed health solutions. Designs for Health will complement our internal sales team and help us leverage the tremendous body of preclinical and clinical research on this amazing ingredient. Last quarter, I discussed the tremendous opportunity in China with our new partner, Steino. We've been very impressed with their deep knowledge of the local market. They share detailed marketing plans for TrueNiagen as well as insight into the large and growing NMN market in China, a far less efficient NAD precursor with much less science than nitrogen. We're finalizing the commercial plans and the supply agreement with Sinopharm for initial cross-border sales, as well as our approach to pursuing Blue Hat approval in parallel. All of our new partnerships are in various stages of product development, but we expect them to contribute to increased sales in 2022. In addition, for established relationships like Nestle, we're in discussions about how to make the partnerships more impactful over time. As I reflect on this quarter and on 2021 in general, I'm incredibly proud of our entire team's execution and more confident than ever about the market opportunity for TrueNight. I'd like to thank our loyal shareholders, partners, employees, and customers as we enter this next phase of growth. And now I'll pass the call to Andrew Hsiao, our Senior Vice President of Scientific and Regulatory Affairs, to share more about the strategic importance of our industry-leading CERC program as well as the growing body of exciting research on Niagen.