Kane Biotech Inc Ord

Good day, and thank you for standing by. Welcome to Kean Biotech Q2 2022 Financial Results Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicole Sende, Investor Relations and Public Relations for Kean Biotech.

Thank you, Operator. Good afternoon and welcome everyone to Kean Biotech's quarterly earnings conference call. We are grateful to have you join us today. This call will cover Kean's financial and operating results for the second quarter of 2022, along with a discussion of some of our recent highlights and goals for 2022 and beyond. Following our prepared remarks, Our call today will be led by Cane's Chief Executive Officer, Mark Edwards. Before we begin our formal remarks, I would like to remind everyone that some of the statements on this conference call contain certain forward-looking information and statements within the meaning of securities law, which may not be based on historical fact, including without limitation, statements containing the words, believes, should, may, plan, will, estimate, predict, continue, anticipate, potential, intends, expects, or other similar expressions. Such forward looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, events, or developments to be materially different from any future results, events, or developments expressed or implied by such forward-looking statements. Such factors include, among others, the company's stage of development, lack of product revenues, additional capital requirements, risks associated with the completion of clinical trials and obtaining regulatory approval to market the company's products, the ability to protect its intellectual property and dependence upon collaborative partners. These factors should be considered carefully, and readers are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements are made as of the date hereof, and the company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events, or developments. I will now hand over the call to Chief Financial Officer Ray DuFour. Please go ahead, Ray.

Thank you, Nicole. Before I turn the call over to Mark for an update on our commercial activities, I would like to provide a brief update on our second quarter 2022 financial results. To streamline things, all the numbers that I will mention have been rounded and are therefore approximate. The following figures are all in Canadian dollars. For the three months ended June 30th, 2022, the company recorded total revenues of $840,000, an increase of 201% compared to $279,000 for the same period in 2021. License revenue in the three months ended June 30th, 2022 was $500,000, an increase of 1295% compared to $36,000 in the three months ended June 30th, 2021. This substantial increase is due to the company's subsidiary, STEM Animal Health, achieving a key milestone in April 2022, namely the Veterinary Oral Health Council VOHC seal of acceptance, which triggered approximately $1.3 million in milestone payments from STEM's licensing partners pursuant to its license and distribution agreements. In the three months into June 30th, 2022, royalty revenue increased by 77% to $52,000 compared to $29,000 in the three months ended June 30th, 2021. This increase is due primarily to VOHC certification achieved in the current period, immediately triggering minimum royalties as per the company's license agreements, as well as the underlying product sales in the veterinary channel being less impacted by the COVID-19 pandemic in the current period than the comparative period. Revenue from product and services for the three months ended June 30th, 2022 was $288,000, an increase of 35% from $214,000 in the three months ended June 30th, 2021. The increase is due mainly to the reclassification of certain sales discounts to cost of sales and sales expenses and higher DERMA KB sales in the current period. Gross profit for the second quarter 2022 was $639,000, an increase of 665% compared to $84,000 for the three months ended June 30th, 2021. Second quarter 2022 operating expenses were just under $1.4 million, an increase of 25% compared to just under $1.1 million for the same quarter in 2021. This increase is due mainly to lower government assistance and higher non-funded research expenditures related to the company's Core Active Plus antimicrobial hydrogel and dispersant B hydrogel programs in the current period. The company recorded a second quarter 2022 loss of $795,000, a decrease of 26% compared to $989,000 for the same quarter and at June 30, 2021. Cash at June 30, 2022 was $2.5 million. During the quarter, the company received $500,000 U.S. from one of its licensing partners related to the achievement of the VOHC milestone, closed its non-brokered private placement offering, raising gross proceeds of $1 million, and further amended its credit agreement with its lender, resulting in approximately $1.8 million in new capital being provided. With that, I will now turn the call over to Mark.

Thank you, Ray. Thank you, Nicole. If you follow us on media platforms such as LinkedIn, I'm sure you've noticed we've been very active in sharing lots of great content on biofilms and how CAEN aims to solve biofilm-related problems. Nicole's been doing a great job with that and really helping us get our message out there. So thank you in particular for that, Nicole. Q2 2022 was a particularly solid quarter in which a number of key milestones were achieved. In animal health, Stem's water additive products obtained the long-anticipated VOHC seal of acceptance, which not only provided, again, long-awaited milestone payments and minimum royalties in the veterinary space, but also bodes well for our U.S. retail penetration. Also, the very positive results we got from our two clinical trials in order to obtain further validate the efficacy of Cane's CoActive Plus anti-biofilm technologies. Also, building on VOHC, Animal Care, which is our OUS partner for our animal health products, launched their Plactive Water Additive, which they claim is the first European product of its type to earn the VOHC seal. In wound care, we had a very constructive pre-submission meeting with the FDA regarding our CoActive Plus wound gel, where they recommended a number of additional testing, which we've completed just last week, in fact. Once we've received the final reports from the University of Miami, which are expected in a few weeks, We should be ready to submit our 510K application to the FDA, and we're confident we have a clear path forward. In terms of our dispersant B wound gel, we had a very positive update call with the U.S. Army, and I believe they shared our enthusiasm for the preclinical results we obtained. We expect clinical trials on the dispersant B hydrogel to begin in the coming months. Furthermore, and this applies to the entire business and not just wound care, but Dr. Greg Schultz's appointment as CAEN's chief scientific officer will provide tremendous supports in the development of our wound care business, not only from a scientific perspective by aiding the development and commercialization of our dispersant B and coactive plus technologies, but also from a business perspective as the company advances towards securing a strategic wound care partner. Greg has a fantastic network and extremely well respected in the industry. So he's certainly helping us out a lot there. In the second quarter of 2022, Kane also obtained the ISO 1345 certification for its quality management system. specific to its ongoing efforts to design and develop novel medical devices and manufacturing processes for the wound care market. Quality and continuous improvement are core values of Kane and of paramount importance to our company's growth. I want to congratulate the entire team on that, but in particular, Laurie Christophoulos, who is our VP of Quality. She was instrumental in getting that certification. We continue to see good online sales of our Derma KB line of scalp care products, due largely to increased product sales on Amazon, but being a small company with limited resources and unlimited opportunities, we haven't yet committed the time and effort to Derma KB that it deserves. We continue to receive very compelling testimonials on a regular basis, and I'm looking forward to deploying a more robust commercialization strategy shortly. With regards to funding the business, I want to recognize Pivot Financial's continued support of Kane's product development and commercialization efforts, demonstrated by the recent access to additional working capital they have provided, as discussions with potential wound care partners and other opportunities continue to advance. I will now pass the call over to the operator to begin the question and answer session. Thank you very much.

And thank you. As a reminder, to ask a question, you'll need to press star 1-1 on your telephone. Please stand by. We compiled the Q&A roster. And once again, that is star 1-1 if you have a question. One moment for questions.

And I am showing one question. One moment, please.

One moment for our next question. One second, please.

And our first question, one second. And our first question comes from Steve Simon, individual investor.

Your line is now open.

I was wondering, you said that you'll soon have your FDA pre-submission completed, and then you said you'll be able to submit And that's a gigantic undertaking to put together all the paper to submit to them. Has that all been done or will that take like half a month or half a year or something like that to put together?

no uh steve so we we it's really a compilation of all the tests that we've done so as when we report when we receive the the reports which should um happen by mid-september where our plan is to uh have everything um be be finalized there for for the submission and and simply add the report to the submission when it comes in and submit a few days later if all goes according to plan. I'm pushing the team very hard to get this done this quarter.

Sounds good. Got a question about your shampoo. I think you touched on it. You said you've got limited resources. You have limited resources to market it, and so are you possibly looking for somebody major to market these, like the human shampoo? Because you've done all the upfront, the studies and things that come out pre-Rosie.

Yeah, so we did a consumer trial, which we had 1,500 people complete two questionnaires, essentially before and after there, 50 medical questionnaires. And the results are extremely compelling there. Like I said, we haven't committed a lot of energy to the marketing of the product. But the plan is to, we're evaluating a number of different opportunities. I participate in a big salon and health spa conference called Cosmoprof in Las Vegas. We were there in July with Wendy, who's leading that initiative for us. And looking at, we met a number of potential distributors that are interested in commercializing in that space. and also we've been having different conversations with potential licensing partners. The one gap that we have is that although we have probably one of the largest consumer trials out there that's ever been done for a product like ours. It isn't quite the same as a clinical trial, which would allow for more robust claims, if you like. So that's something that we're working with the potential partners to figure out what the best way of doing that is. But we're making good progress on everything within wound care. And as soon as we've buttoned up a few of the key items there, we'll be putting a lot more effort into dermatology.

Okay, the last question I have is you've got a huge amount of milestone payments from these vets, marketers, and stuff like that. Compared to the amount of sales they're getting out of this, they must have much higher hopes in what they've been selling. And the other question is, how long are you tied up with them? Suppose you keep meeting your milestones, They just have very tiny sales. Is there a possibility of canceling, or am I way off on the wrong track?

So, Steve, that's a good point. So animal care, we did the deal with animal care for, I said OUS earlier, but it was outside of the Americas. We have a partnership with DECRA for all of the Americas and animal care for the rest of the world in the vet space. Now, Animal Care just launched that product in Q2 under the Plactive brand. And I think it was well received, although I think it was well received. Or I know it was well received. Now, in the Americas, that's licensed to DECRA. And although DECRA have been doing fairly well with this, considering we didn't have VOHC yet. So, as we achieve VOHC, there's minimum royalties, but we fully expect them to do a lot better than the minimum. This product has tremendous potential. and should really start getting some good traction with this shortly. VOHC is really critical in the vet space. Vets are very, very reluctant, especially in the U.S., to look at products that aren't VOHC approved. they've been waiting a long time for us to get that approval and and I think we'll start seeing some step growth there from both from from Decra and obviously animal care just launched so so those will start coming in in a big way okay when did you get the VOHC approval We did our second clinical trial in 2021 that met the clinical outcome expected, and we announced the VOHC, I believe, In this core in second quarter, so I think it's April so so it's just the question of They've got to update their label and the deckraft update their label and the marketing materials and so on so forth to to to to to get everything out there, so that'll start seeing some growth and and I mean they like the deck or like the product a loss and and really have high hopes for the product is what I is what they're telling us. So we're confident that it's going to do well.

So maybe a couple more quarters and we'll start to see some big activity.

Hopefully. Hopefully the royalties will start ramping up in a big way. Okay.

Thanks.

Thank you very much, Steve. Really appreciate it.

And thank you. And I'm showing no further questions. I would now like to turn the call back over to Mark Edwards, CEO, for closing remarks.

So I just want to thank everybody for joining. This was one of our busier calls and we had a good quarter. I was very, very happy with everything we did in Q2. I continue to be very excited about all three of our businesses that we're developing and look forward to coming back to you with with some good news, particularly in wound care, shortly. So thank you very much for joining, and have a great day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.