Rockwell Medical, Inc.

Good morning, and welcome to Rockwell Medical's fourth quarter and full year 2022 results conference call and webcast. Please note this event is being recorded. At this time, I would like to turn the conference call over to Heather Hunter, Senior Vice President, Chief Corporate Affairs Officer at Rockwell Medical. Heather, please go ahead.

Good morning, and thank you for joining us for this update on Rockwell Medical. Joining me on today's conference call are Dr. Mark Strobeck, Rockwell Medical's President and Chief Executive Officer, Tim Cole, Rockwell Medical's Senior Vice President, Sales and Marketing, and Paul McGarry, Rockwell Medical's Senior Vice President, Finance and Chief Accounting Officer. Before we begin, I would like to remind you that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our annual report on Form 10-K, and our subsequent periodic reports filed with the SEC, which are all available on our website under the Investors section. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC. Rockwell Medical's annual report on Forum 10K for the year ended December 31st, 2022 was filed prior to this call and provides a full analysis of the company's business strategy as well as the company's fourth quarter and full year 2022 results. It can be found on Rockwell Medical's website under the Investors section along with today's press release and a recording of this webcast. Now, I would like to turn the conference call over to Rockwell Medical's President and CEO, Dr. Mark Strobeck.

Thank you, Heather. Good morning, everyone. And thank you for joining us today for Rockwell Medical's fourth quarter and full year 2022 results conference call and webcast. We have a number of exciting accomplishments that we want to review with you this morning. So let's get started. For those of you who are new to Rockwell Medical, and for those of you who have been following us for some time, I'd like to take a few minutes to remind everyone of our updated business model and strategy. Rockwell Medical is a revenue generating healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers worldwide. Rockwell's mission is to provide dialysis clinics and the patients they serve with the highest quality products supported by the best customer service in the industry. Rockwell is the second largest supplier of life-sustaining hemodialysis concentrates products To dialysis clinics in the United States and is one of only two suppliers that has the manufacturing scalability and transportation infrastructure to service the over 7200 dialysis clinics in the United States, along with select international markets. This positions rockwell as an indispensable player in a large and expanding market. which in the United States alone is currently valued at approximately $380 million and is projected to grow to approximately $500 million in 2026. Our vision is to become the leading global supplier of hemodialysis concentrates to dialysis providers worldwide. After joining Rockwell Medical in July of last year, I, together with Rockwell's management team and board of directors, underwent an extensive evaluation and assessment of our businesses and determined that for Rockwell to be successful, we need to focus our efforts on enhancing our revenue generating businesses, pause our capital intensive businesses, and focus on improving our financial condition, delivering this company, and drive us to profitability in 2024. We believe that the results we reported for the second, and third quarter, and now for the fourth quarter and full year 2022 demonstrate that we are making significant progress towards these goals and objectives. Revenue is growing, gross profit is increasing, and operating expenses are declining. The key takeaway here is that our focused and revised business model is working. Now let's turn our attention to Rockwell's fourth quarter and full year 2022 operational results. In the fourth quarter of 2022, we made a number of operational improvements to our business. First, we reacquired our distribution rights to our hemodialysis concentrates products from Baxter and terminated the exclusive distribution agreement that Rockwell originally entered into back in 2014. This transaction marked a critical inflection point for Rockwell. Removing our sales from the Baxter agreement lifted a number of restrictive elements that made it impossible for us to grow our business and to establish long-term supply agreements with preferred economics. Reacquisition of this business allows us for the first time to control our own destiny. Our commercial team is actively transitioning the Baxter business to Rockwell, onboarding new and existing customers in the United States and abroad, and establishing long-term multi-million dollar product purchase supply and distribution agreements. Tim will provide you with more details on the progress we are making with the transition and the commercial opportunities that lie ahead for Rockwell. Additionally, in the fourth quarter, we continued to improve our top-line revenue, reduced our cash burn, and streamlined our operations. We reduced headcount related to non-core areas of our business and reduced our overall G&A expense. We eliminated expenses associated with Triferic in the U.S. as we made the strategic decision to move away from this product and put development activities associated with the FPC platform on hold. Rockwell has several international partnerships with companies looking to develop and commercialize Triferic in their respective countries. In 2022, Triferic and Triferic Avenue were approved in South Korea, and our partner Geo Pharmaceutical launched Triferic in South Korea during the third quarter. We are actively keeping track of Trifaric's market adoption and have already begun to realize revenue associated with Jiel's license and supply agreements. In addition, our partner in China, a subsidiary of Fosun Pharma, completed its pivotal Phase III study in the fourth quarter of 2022, and we expect results from this study in mid-2023. As a reminder, these international partnerships require no capital expenditure and very little operational resources from Rockwell. While they have the potential to generate near and long-term revenue for the company, we have not factored this into our revenue forecasts. As it relates to FPC for home infusion, we announced during the fourth quarter of 2022 that we put development work for this program on hold because it required significant capital expenditures and Rockwell would not realize value from this program for many years to come. As for the FPC for acute heart failure, we conducted a successful pre-IND meeting with the FDA at the end of 2022, which provided useful insight as we consider future development activities for this program. As we have discussed previously, this program is currently on hold and is available for us to reconsider once Rockwell achieves sustainable profitability. Before we get into our financial results, I wanted to take a moment to address the new way in which we presented our financials in this morning's press release. We believe that this evolved format clearly communicates our results in a more transparent, straightforward manner and illustrates the progress we are making against our objectives and the direct impact on our earnings per share. This type of financial measurement is customary and successful. revenue generating businesses, and we felt it was time to transition to this updated format of presenting our financials. I am pleased to report that for the fourth quarter 2022, we reported $19.3 million in revenue, which represented our third consecutive quarter achieving record revenue in the company's history. For the full year 2022, Rockwell generated $72.8 million in revenue, exceeding our guidance which represents a 17.6% increase when compared to the comparable period in 2021 and the highest full-year revenue to date for the company. During the fourth quarter of 2022, we entered into an amendment of our loan agreement, accelerating the pay down of our debt with a $5 million prepayment of our existing loan, leaving Rockwell Medical with $10 million of long-term debt as of December 31st, 2022. This offers Rockwell the opportunity to reduce its interest expense by agreeing to a 10-month interest-only period starting December 1, 2022, and ending with our last payment on September 1, 2023. As we look to 2023, our corporate objectives are very clear. We plan to focus on commercially growing our business by expanding it to new geographies, optimizing agreements with existing customers, adding new customers with long-term supply agreements with preferred economics. We expect to continue to focus on reducing our expenses and operating our business more efficiently. We plan to continue to find ways to enhance our financial condition and seek ways to further reduce our debt. Based on these goals and forecasted demand for our hemodialysis concentrates products in 2023, we expect to generate $78 to $82 million in revenue in 2023. At the top of that range, this represents a 13% increase in revenue over 2022. In addition, we are expecting to generate gross profit between $7 million and $9 million in 2023. The decisions we have made and continue to make are consistent with our strategy going forward to drive our business to achieve profitability in 2024 and put the company in a stronger, more stable financial position. We are well on our way and anticipate that revenue for the first quarter of 2023 will be in line with revenue of the fourth quarter of 2022, reflecting the timing of the Baxter transition in contract renewals. Now I would like to introduce you to Tim Cole, our Senior Vice President of Sales and Marketing, who leads our commercial organization here at Rockwell. Tim has more than 20 years of experience in sales and marketing, at some of the largest renal care companies in the world and has successfully built renal care portfolios and significantly grown their sales. I will now turn the call over to Tim to provide you with a commercial update related to our hemodialysis concentrates business.