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spk03: Good afternoon, and thank you for joining Cumberland Pharmaceuticals' first quarter 2022 financial report and company update. This call is being recorded at the company's request and will be archived on Cumberland's website for one week from today's date. I would now like to introduce Molly Agus, Account Supervisor at the Dalton Agency, who handles Cumberland's communications. Molly, please go ahead.
spk01: Hi, everyone, and good afternoon. Earlier today, Cumberland issued a press release containing a company update and financial results for the first quarter of 2022. The release, which includes related financial tables, can be found on Cumberland's website at www.cumberlandpharma.com. Company management will share an overview of these results during today's call. With us today are A.J. Kazemi, Cumberland's Chief Executive Officer, Todd Anthony, Vice President, and John Hamm, Chief Financial Officer. Please keep in mind that today's discussion may include forward-looking statements as defined in the Private Securities Reform Act of 1995. These statements reflect the company's current views and expectations concerning future events. It may involve risks and uncertainties. Additionally, there are many factors that could affect Cumberland's future results, including natural disasters, economic downturns, public health epidemics, international conflicts, and others that are beyond the company's control. Those issues are described under the caption risk factors in Cumberland's Form 10-K and any additional updates filed with SEC. Any forward-looking statements made during today's call are qualified by those risk factors. Despite the company's best efforts, actual results may differ materially from expectations, so information shared on this call should be considered current as of today only. please remember that the company isn't responsible for updating any forward-looking statements, whether as a result of new information or due to future developments. During today's call, there will be references to several of Cumberland's marketed brands. Full prescribing and safety information for each brand is included on the individual product websites, and the links to those sites can be found on the corporate website at www.cumberlandpharma.com. Today, the company will also provide some non-GAAP financial measures with respect to performance. An explanation and reconciliation to GAAP measures can be found on the financial tables in the earnings release that was issued earlier this afternoon. If you have any questions, please hold them until the end of the call, at which point we'll be happy to answer them. And with that overview, I'll turn the call over to Cumberland's Chief Executive Officer, A.J. Kazemi, to begin the discussion.
spk02: Thank you, Molly. And good afternoon, everyone. We appreciate you joining us. As you heard, today we'll provide a company update as well as a review of our financial results for the first quarter 2022. As the first quarter progressed, we saw the headwinds from the pandemic begin to subside, and we're excited to see patient procedure volumes returning to a more normal customary level and our sales representatives gaining more access to face-to-face meetings. The pandemic proved to be a difficult time to introduce our new Caldor presentation and to launch our ReadyTREX brand. It also impacted our ability to advance our clinical trials as patient enrollment was significantly hampered by various restrictions. Fortunately, we're now seeing a light at the end of the tunnel, and if the return towards a more normal environment continues, we anticipate a meaningful, positive impact on our business. What the pandemic didn't change was our ability to further diversify our product portfolio. We started the year with an exciting and significant announcement, our acquisition of Sancuso from the U.S. affiliate of Japan-based Kiwakira. Sancuso is the first and only FDA-approved prescription patch available for the prevention of nausea and vomiting in cancer patients receiving certain types of chemotherapy. We closed that transaction in early January and then assumed full commercial responsibility for the brand in the U.S., including its marketing, promotion, distribution, manufacturing, and medical support activities. To support this transaction, we extended our bank line of credit for a new three-year term, and we expanded the facility to provide up to $20 million in capital, and that line was utilized to fund the Sancuso acquisition. Furthermore, ahead of today's call, we also announced that we've entered into a co-promotion agreement with Verity Pharmaceuticals for Sancuso. Verity is a specialty pharma company with an established presence in the U.S., and they'll be supporting Sancuso through their oncology commercial organization and customer network across the country. We believe Sancuso has the potential to be a valuable product, and we're honored to be able to bring it to patients throughout the United States. Fueled by the addition of initial Sancuso sales, our product portfolio of FDA-approved brands continues delivered combined revenues of $11.2 million during the first quarter of 2022, a 6% increase over the prior year period. Adjusted earnings for the quarter were $.5 million, or three cents a share. We ended the first quarter with $97 million in total assets, $56 million in liabilities, and $41 million of shareholders' equity. Next, we're going to discuss recent updates for several of our brands. But before we do so, it's with great sadness that I share with you that Marty Cornell, our Chief Commercial Officer, passed away in March. Marty enjoyed a successful 50-year career in healthcare, which included 20 years here at Cumberland. And he played a key role in our initial public offering, our business development initiatives, and all our product launches. Marty was an outstanding leader, a valued contact, and a dear friend to many. He'll be greatly missed. Fortunately, we have a strong marketing and sales leadership group who have stepped up following Marty's passing. Providing today's update regarding our commercial activities is Todd Anthony, our vice president, organizational development. He joined us on our last call, and he's been with Cumberland now for 12 years. Todd has a total of 25 years of experience in the pharmaceutical industry, including a variety of positions with growing responsibilities at Bayer Healthcare Pharmaceuticals, before coming over to Cumberland originally as our Director of Sales Training. Todd's now responsible for all our HR, office administration, and organizational development activities. Among his accomplishments is the establishment of the Cumberland Way, which provides consistent direction, procedures, and training for our sales professionals who have joined us with experience and backgrounds from many other biopharmaceutical companies. So, Todd, I'll turn it over to you.
spk05: Thank you very much, AJ. As you've heard today, we've expanded our portfolio of FDA-approved medicines with the recent acquisition of Sancuso, an oncology support drug, and we're excited about its potential. The active drug in Sankuso, Grinicetron, slowly dissolves in a thin layer of adhesive that sticks to the patient's skin and is released into their bloodstream over seven days, working continuously to prevent chemotherapy-induced nausea and vomiting. It's applied 24 to 48 hours before receiving chemotherapy and and can then prevent the nausea and vomiting for up to five consecutive days. Alternative oral treatments must be taken several times a day to deliver the same therapeutic doses and can be difficult for some patients who are experiencing nausea to swallow. We formed a new sales division to support the brand called Cumberland Oncology, which is initially comprised of a couple of former Kiowa Karen employees, as well as a group of their contracted inside sales individuals. Our commercial integration of the product is nearing completion, including the transition of key managed care and group purchasing contracts over to Cumberland. Through the co-promotion partnership that AJ mentioned, Verity Pharmaceuticals will deploy their national oncology sales organization cover a majority of the United States in support of the brand. Verity and Cumberland will share in the incremental contribution margin resulting from Verity's efforts. Turning now to Caldolor, I'd like to remind you that late last year, we received FDA approval for its use just prior to surgery, which results in patients waking up from their procedures in significantly less pain and requiring significantly fewer opioids. Recent market research predicts a significant increase in elective surgeries with a decrease in active COVID cases. So we are anticipating growth in the ready-to-use Caldolor product. We have also secured pediatric approval for Caldolor and will continue to seek expanded labeling and additional patient populations for the brand. I would now like to turn to Vibative. our potent FDA-approved injectable antibiotic product, which is designed to treat certain serious bacterial infections, including hospital-acquired or ventilator-associated pneumonia, as well as complicated skin infections. We continue to support the product in the outpatient marketplace, driven by our national accounts team. And our hospital sales force continues to focus their efforts on Vibativ's use in the acute care setting. To help patients in both settings, we supported two very well attended national symposiums with recognized infectious disease experts to provide medical guidance and education in the treatment of difficult infections. I'd next like to discuss Crystallose, which continues to be our largest selling product. It's a prescription strength laxative that's packaged in a convenient pre-measured powder dose, which dissolves quickly in just four ounces of water. It's clear, taste-free, and grit-free. Crystalose continues to benefit from the support of our co-promotion partners, who feature the brand with physicians and facilities that Cumberland doesn't cover. The award-winning marketing campaign is also being refreshed for 2022 with to support increased engagement with our customers. Next, I'd like to share an update on our Readytrex product line, which we launched nationally late last year. Recall that Readytrex is FDA approved to treat patients with acute rheumatoid arthritis, juvenile idiopathic arthritis, or severe psoriatic arthritis, who have difficulty tolerating or responding to orally delivered methotrexate. The pre-filled syringes assure accurate and safe dosing and have an automatic retractable extra thin 29 gauge needle, which reduces pain and the risk of needle sticks. As AJ mentioned, launching the product during the pandemic was difficult, especially as we were working to establish relationships with a new group of rheumatologists. Additionally, analysis and coverage by managed care plans for the product has progressed slowly, but is growing with continued coverage by new insurance plans. The product is now covered by plans managed by Cigna, Anthem, and United. While ReadyTrek sales during 2021 and the first quarter of 2022 have been limited, we are encouraged by the positive feedback we've received about the product's innovative delivery system. Regarding the supply of our Omeklamox pack product, we're still awaiting the packager's facility to resume operations after having encountered difficulties that forced them to suspend operations during the pandemic. The facility is now under new ownership and management, and we await their reopening. Meanwhile, we have transferred manufacturing of our Vaprosol product to a new facility and are awaiting the FDA's approval of that plant before resuming shipments. As a reminder, our Vaprosol product is the only intravenously administered Vaptan treatment available in the United States, and it has a proven day one response to help normalize serum sodium levels in hyponatremic patients so that they can be moved out of the ICU. An international study of over 4,000 patients found that hospitalized patients with COVID-19 were at high risk of developing hyponatremia, thereby increasing their mortality risk as well. Vaprosol provides clinicians with an effective treatment for these patients with hyponatremia. We support our portfolio of FDA approved medicines through three national sales divisions, including Cumberland Oncology, which was formed to feature our newly acquired Sancuso product. Our hospital sales division calls on key institutional accounts across the country, while our field sales division covers select office-based physicians. Lastly, we announced in the fourth quarter of 2021 We're moving our corporate headquarters to the new Broad West campus later this year. The new location will keep us close to the internationally recognized Vanderbilt Medical Center with whom we regularly collaborate. As the largest independent biopharmaceutical company founded and headquartered in this part of the country, we were pleased to receive grant awards from both the state of Tennessee and the Tennessee Valley Authority, totaling $250,000 to help support the build-out and relocation of this new space. And that completes my updates for today, AJ, so I'll turn the call back over to you.
spk02: Thank you, Todd. Next, we're excited and encouraged to see continued improvement regarding enrollment in our clinical programs following interruption during the pandemic. As a reminder, we have three Phase II clinical studies underway to evaluate our ifitroban candidate in patients with a series of unmet medical needs. These studies involve Duchenne muscular dystrophy, a genetic neuromuscular disease, systemic sclerosis, a debilitating autoimmune disorder, and aspirin-exacerbated respiratory disease, or AERD, a severe form of asthma. We're also designing a fourth Phase II program to evaluate the use of ifitroban in treating patients with progressive fibrosing interstitial lung diseases, and we're currently preparing the application for the FDA to support this new program. In addition to our company-sponsored studies, Harvard clinical investigators have led a Phase II trial in patients with AERD, the severe form of asthma that I mentioned, And their study has been designed to understand the mechanism of ifitriban in those patients, and therefore complements the work that we have underway. They've been supported by a $5 million grant from the NIH, and patient enrollment is now closed, and their data analysis is underway. We look forward to sharing the results of the study once we receive the study report from them in the coming months. We also look forward to sharing the results from each of our other Phase II studies, what's their complete. At that point, we'll then decide on the best development path for the registration of ifitroban, which we believe has the potential to help many patients. Now, today I'd also like to provide an overview of a few of the international activities underway for our Vibative product. Remember, Vibative is a potent antibiotic used to treat patients with pneumonia and serious skin infections. While Cumberland remains focused on promoting Vibative in the United States, we've been building a network of other established companies to bring the product to patients in their countries. In March 2022, we announced the launch of Vibative in Puerto Rico, again through a partnership with Verity Pharmaceuticals, who has a particular strength. and expertise in the Puerto Rican market. We also announced a new partnership with Saudi Arabia-based Tabook Pharmaceuticals to introduce Vibative into the Middle East. That arrangement provides Tabook with the exclusive rights to distribute Vibative into Saudi Arabia and Jordan with an option to expand into other countries in that region. Tabook's a fully-owned subsidiary of the Astra Industrial Group, a leading and publicly traded industrial conglomerate in Saudi Arabia. Tabuk is a well-respected pharmaceutical company with a strong distribution network across the Middle East, and they have the resources and experience to ensure that Vibative reaches as many patients as possible throughout that territory, and we do look forward to a successful partnership. Meanwhile, our Vibative partner in the Chinese market, Skyclone Pharmaceuticals, had their submission application in China accepted for review in September of 2021. Skyclone informed us then that the review period would be about 12 months. They've also advised that Vibative has significant potential in their market, the Chinese market, and they expect to share updates on the approval process later this year. So with that, I'd now like to turn it over to John Hamm, Cumberland's Chief Financial Officer, to present a review of the first quarter financial results. John?
spk04: Thank you, AJ. For the first three months ended March 31, 2022, net revenues from continuing operations were $11.2 million, a 6% increase over the $10.5 million in revenue recorded during the prior year period. Net revenues by product for the first quarter of 2022 included $3.9 million for Crystalos, $3.4 million for Sancuso, $2.5 million for Vybata, and nearly $1 million for Caldolor. Total operating expenses for the first quarter were $12.5 million, compared to $10.9 million for the prior year period. The primary driver of this increase were the addition of San Cuso expenses, including those associated with the product's amortization and marketing. The net loss for the quarter was $1.4 million, or 9 cents per share. When non-cash expenses are added back, the resulting adjusted earnings for the first quarter were $0.5 million, or 3 cents per share. Also, please note that those adjusted earnings do not include the additional benefit of the $900,000 of Vibatav and Sancuso cost of goods during the quarter. Those goods were received as part of each product's acquisition. Recall that our financial statements have been significantly impacted by the Vibatav and Sancuso acquisitions. The financial terms for the Vibatav transaction included a $20 million payment upon closing, and a subsequent $5 million milestone payment. We're also providing royalties based on product sales. I'm pleased to report that since the product's launch in late 2018, it has delivered a total cash contribution of approximately $29 million to our business, and therefore has now begun generating a return on our $25 million investment. We accounted for the Vibatab acquisition as a business combination, A total of $34 million in new assets were added as a result of the acquisition, including approximately $21 million in inventory, $12 million of intangible assets, and $1 million of goodwill. Due to the amortization of intangibles and the sale of inventory, the value of these assets totaled $16 million at the end of the first quarter. The financial terms of the San Cuso acquisition included a $13.5 million payment upon closing, up to $3.5 million in milestone payments, and tiered royalties of up to 10% on net product sales. That product is off to a fine start, delivering $2.6 million in cash contribution during the first quarter. Previously, we renewed our line of credit for a new three-year term. During the first quarter of 2022, we expanded our use of the facility to provide $20 million in capital. This new line of credit allowed us to acquire the U.S. rights to San Cuso. We accounted for the San Cuso acquisition as a business combination. We are developing the final valuation of the San Cuso transaction, but on a preliminary basis, we estimate a total of $19 million in new assets added as a result of the acquisition, including approximately $5 million in inventory, $12 million of intangible assets, and $1 million of goodwill. As of March 31, 2022, we had $96.7 million in total assets, including $17.3 million in cash and equivalents. Liabilities totaled $55.9 million, including $20 million on our credit facility. Total shareholders' equity was $41 million at the end of the first quarter. During the quarter, we continued our corporate share repurchase program and repurchased a total of 174,000 shares. These repurchases included those on the open market as well as those needed to fund the taxes associated with employee-vested restricted shares. There is also a share repurchase initiative underway for members of our board. who wish to increase their holdings in the company. Several of our board members are participating through share purchase plans initiated in April. Lastly, I'd like to note that Cumberland continues to hold over $57 million in tax net operating loss carry forwards, primarily resulting from the prior exercise of stock options. And that completes our financial report for the first quarter of 2022. Okay, John, thank you.
spk02: We recently held our annual shareholder meeting where three of our board members were reelected. So overall, our first quarter of 2022 was successful, and we do remain focused on our mission of advancing patient care to the delivery of high-quality medicines. We're particularly encouraged by our acquisition of Sancuso and our related new national co-promotion partnership with Verity. With the contributions from the new product, We do expect to deliver double-digit revenue growth this year while continuing to generate positive cash flow from operations. We look forward to sharing updates with you throughout the year, and now let's open the call to anyone who has a question. Operator, please proceed.
spk03: Thank you, sir. Ladies and gentlemen, that concludes the company's presentation, and we will now open the call for any questions. If you'd like to ask a question... please press the star key followed by the digit 1 on your phone.
spk02: Well, thanks, everyone, for joining the call today. And we do understand that many of you prefer a private discussion with management. And if so, please just reach out to us, and we're happy to get one scheduled and have such a discussion. As always, we very much appreciate your time and interest in Cumberland. and we look forward to providing a mid-year update in a few months.
spk03: Thank you, sir. Ladies and gentlemen, that concludes today's call. If you would like to listen to a replay of the discussion, please dial 855-859-2056 using the access code 757-4078. Alternatively, a replay of the webcast will be available on Cumberland's website. I would like to thank you for your participation. You may now disconnect
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