Cv Sciences Inc

Good afternoon and welcome to CVSciences' fourth quarter and full year 2020 earnings conference call. All participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. Please note, today's event is being recorded. I would now like to turn this conference over to Ms. Alyssa Dunn. Please go ahead, Ms. Dunn. You may begin.

Thank you and good afternoon, everyone. With us today with prepared remarks are CVSciences Chief Executive Officer Joseph Dowling and Jorg Grosser, Chief Financial Officer. I would like to remind you that during this call, management's prepared remarks may contain forward-looking statements and management may make additional forward-looking statements during the Q&A session. These forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those anticipated by CVSciences at this time. When used in this call, the words anticipate, could, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to CV Sciences are as such a forward-looking statement. Finally, please note that on today's call, management will refer to non-GAAP financial measures in which CV Sciences excludes certain expenses from its GAAP financial results. Please refer to CVScience's press release from earlier today for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures. This afternoon, March 18th, the company issued a press release announcing its financial results. Participants on this call who may not have already done so may wish to look at the press release as the company provides a summary of the results on this call. The press release may be found at www.cvsciences.com. Following the prepared remarks, we will open up for a Q&A from the analyst community. I would like to now turn the call over to CVSciences Chief Executive Officer, Mr. Joseph Dowling.

Joe? Thank you, Alyssa. Good afternoon, and thank you for joining us for today's conference call. We hope that you and your families are staying safe and healthy in these challenging times. 2020 proved to be a very challenging year for the company and our industry, predominantly due to the impact of COVID-19. The year-long COVID-19 pandemic created significant headwinds for our retail customers, intensified competitive pressures, and extended the regulatory uncertainty we have discussed on previous earnings calls. I am proud of how our company responded under such difficult circumstances, adapting quickly and continuing to provide uninterrupted service to our customers. We are privileged to have a committed and dedicated team of employees to deliver daily upon our corporate mission and strategy. Innovation and quality remain our primary areas of focus. underscoring the competitive advantages of CV Sciences and creating a strong platform for long-term sustainable growth. We introduced several new products during the past year, including our first two immunity products, CV Acute and CV Defense, in the third quarter. Consumer demand for immunity products surged in 2020 due to COVID-19, reflecting heightened awareness of the long-term value that these products will provide for daily health and wellness. We are encouraged by strong science behind our products and believe we are in a good position to drive future growth in the immunity market, which in North America alone is estimated at over 4 billion annually and growing at double-digit rates. In the fourth quarter, we introduced PlusCBD Pet, a full line of hemp extracts formulated exclusively for dogs and cats. The opportunity in the pet market is also very compelling for CV Sciences. This market grew an estimated 75% in 2020 and is projected to increase at approximately 25% per year through 2025. reaching 1.7 billion annually as pet owners increasingly turned to natural alternatives to address a wide range of ailments for these much loved family members. In the last 90 days, we launched ProCBD, a full product line of clinical strength CBD products available exclusively through health practitioners. This science-based product line enables us to target the rapidly growing interest by consumers and practitioners in natural plant-based alternative medicines. ProCBD is the only high-strength CBD product line on the market that is supported by published investigations, randomized controlled clinical studies, and post-marketing safety review. New products and refreshed packaging helped us significantly expand the breadth of our distribution in 2020. We ended the year with over 7,300 retail stores carrying our products. Importantly, a significant portion of the net store additions came in the fourth quarter. A sharp acceleration from Q3, strengthening our position as we entered 2021. Consistent with our strategy, the FDM channel continued to account for the majority of our store growth during 2020. And we continue to make progress on our expansion into the convenience store channel with the third quarter introduction of our value product line, Happy Lane. We anticipate announcements soon on distribution expansion in the C-Store channel. Our direct-to-consumer channel remains a core element of our continued growth strategy, including our investments during 2020 and going forward. We have been building out our digital capabilities to strengthen our competitive position while also mitigating the impact of external pressures, including low barrier to entry by thousands of new competitors in a very underdefined regulatory environment. Our 2020 investments in SEO and development of our affiliate and auto ship programs have resulted in stronger website traffic while effectively managing customer acquisition costs. The net result is a DTC channel that is well positioned for continued profitable growth while having a closer relationship with our customers, understanding what triggers purchase behavior, and gaining valuable insight for new product development. Sales in our DTC channel accounted for 35% of total revenue during the fourth quarter, up from 24% in the fourth quarter of 2019. For the full year 2020, DTC channel sales represented nearly 32% of total sales compared to under 19% in 2019. To summarize our product development and marketing efforts during 2020, We refresh the packaging on our flagship plus CBD branded products and we have received great market feedback from distribution partners and customers. And we launched three new brands and 50 plus new or brand refresh SKUs across multiple sales channels. We believe these efforts effectively position us to be at the front of this developing product category and industry. On the regulatory front, we continue to work with a diverse group of Washington, D.C. stakeholders that are advocating for CBD regulation, oversight, and enforcement. For example, CV Sciences staff have been working with the National Institute of Standards and Technologies on the Cannabis Quality Assurance Program to improve the accuracy and capability of cannabis product testing in laboratories. Having robust laboratory methods and standards supports industry transparency and protects consumers. In addition, we have successfully reintroduced the Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2021, HR 841, which has energized the CBD regulatory conversation in D.C. This month, the United States Department of Agriculture published the U.S. Domestic Hemp Production Program Final Rule, which provides the regulatory framework for U.S. hemp farmers. This rule goes into effect this Monday, which is a good reminder of how young the U.S. hemp industry is and that we have yet to see what a mature and regulated hemp industry will look like. To support the expected surge in hemp farming and consumer demand for CBD, Congress has made it clear that the FDA must act quickly to provide legal clarity and to establish a regulatory framework to open economic opportunities for farmers and businesses in a way that protects consumers by eliminating the availability of unregulated CBD products. We remain confident that FDA enforcement of CBD dietary supplements will occur and be a significant growth catalyst across all sales channels, allowing only the most credible and trustworthy companies like CV Sciences to compete effectively. Now I will move on to our drug development program. As discussed on previous earnings calls, we received formal notice of issuance from the USPTO for our drug patent on May 19, 2020. Also, in December 2020, we received notification from the Japanese Patent Office that our patent was granted in the Japanese market. We are continuing our patent prosecution in major world markets and our success as evidenced by the U.S. and Japan patent grants, provide strong validation for our program. We have completed our pharmacological and toxicological studies in support of our planned Phase I clinical study. We continue to work through global operations and logistics impacted by COVID-19, and as a result, we do not have a guidance date for commencing a Phase I clinical trial yet. However, we are starting to see improvement in global drug development operations that impacted our program due to COVID-19 as we continue to move this program forward. We believe strongly in the potential success of developing an effective therapeutic for the treatment of smokeless tobacco addiction. We know this is a big worldwide market. Conservative estimates start at $2 billion. There are very few treatment options that are effective, and we are looking at all options to move this program forward, including partnering. Before I turn it over to Yord, I want to reiterate our confidence in the continued development, expansion, and regulatory environment of the CBD and the cannabis industry generally. We believe the current administration and Congress have a big opportunity to responsibly advance our industry, and we will continue to work on that goal with members of Congress and with our industry partners and colleagues. We are confident that the current headwinds, including the COVID-19 pandemic, the competitive environment and regulatory uncertainty will resolve. a more normalized and sustainable competitive environment will evolve, and the most trusted and respected companies like CV Sciences will thrive and be at the forefront of this growing market. Now let me turn it over to Jord to run through our financials.