Kane Biotech Inc Ord

Good afternoon, and thank you for standing by. Welcome to Kean Biotech's fourth quarter and full year 2023 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference call will be open to questions. If you have a question, please press star 1-1 on your touchtone phone. If you'd like to withdraw your question, please press star 1-1 again. This conference is being recorded today, March 26, 2024. I would like to turn the conference call over to Ray Dupuy, Kean Biotech's Chief Financial Officer. Please go ahead.

Thank you, Operator. Good afternoon and welcome, everyone, to Kean Biotech's fourth quarter and full year 2023 earnings conference call. We are delighted to have you join us today. This call will cover Kean's financial and operating results, along with a discussion of some of our recent highlights and goals for 2024 and beyond. Following our prepared remarks, we will open the conference call to a question and answer session. Our call today will be led by King'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 date hereof, and the company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events, or developments. For the financial results, all the numbers that I will mention have been rounded and are therefore approximate. The following figures are all in Canadian dollars. Starting with the fourth quarter 2023 financial highlights, license and royalty income for the three months ended December 31st, 2023 was $251,000, an increase of 66% compared to $151,000 in the three months ended December 31st, 2022. The increase is due mainly to incremental license and royalty income associated with Scouts Owners' launch of its oral care product line, as well as increased royalty revenue from animal care in the current period. Product revenue for the three months ended December 31, 2023, was $491,000, an increase of 9% compared to $450,000 in the three months ended December 31, 2022. The increase is due mainly to higher online sales of Bluestem products in the current period. Total revenue for the three months ended December 31st, 2023 was 765,000, an increase of 11% compared to 692,000 in the three months ended December 31st, 2022. Gross profit for the fourth quarter of 2023 was 398,000, an increase of 24% compared to 321,000 for the fourth quarter ended December 31st, 2022. Total operating expenses for the three months ended December 31st, 2023 were $1,735,000, an increase of 96% compared to $884,000 for the three months ended December 31st, 2022. The increase is primarily due to short-term compensation expense adjustments in the comparative period, as well as higher non-cash long-term incentive expense and higher contract research expenditures related to the company's corrective plus antimicrobial wound gel product development in the current period. Lost for the fourth quarter of 2023 was $1,612,000, an increase of 92% compared to $838,000 for the quarter ended December 31st, 2022. Moving on to the full year 2023 financial highlights. License of royalty income for the 12 months ended December 31st, 2023 was $731,000, a decrease of 22% compared to $933,000 in the 12 months ended December 31st, 2022. Excluding the one-time revenue recognition in the prior period associated with contractual veterinary oral health care council milestone payments received from licensing partners, license and royalty income increased by 46% in the current period over the comparative period. The increase is due mainly to incremental license and royalty income associated with Scouts Honors launch of its oral care product line, as well as increased royalty revenue from Decra and Animal Care's in the current period. Product revenue for the 12 months ended December 31st, 2023 was $1,872,000, an increase of 25% compared to $1,497,000 in the 12 months ended December 31st, 2022. The increase is due mainly to higher online and pet retail sales of Bluestem products in the current period. Total revenue for the 12 months ended December 31st, 2023 was $2,818,000, an increase of 6% compared to $2,668,000 in the 12 months ended December 31st, 2022. Gross profit for the 12 months ended December 31st, 2023 was $1,389,000, a decrease of 2% compared to $1,413,000 for the 12 months ended December 31st, 2022. Total offering expenses for the 12 months ended December 31, 2023 were $5,475,000, an increase of 15% compared to $4,777,000 for the 12 months ended December 31, 2022. The increase is primarily due to higher long-term compensation expense. and employee separation costs incurred in the current period, as well as higher government assistance received in the comparative period, partially offset by lower contract research expenditures incurred in the current period. Loss for the year into December 31, 2023, was $5,270,000, an increase of 38%, compared to $3,824,000 for the year into December 31, 2022. Contributing to the higher loss for higher finances finances expenses in the current period and higher non-cash fair value adjustments on government loan advances in the comparative period. Cash from continuing operations as of December 31st, 2023 was $749,000. With that, I will now turn the call over to Mark.

Thank you, Ray. Dear fellow shareholders, I'm very proud of everything that my team has accomplished in 2023 and and look forward to 2024 with great anticipation and excitement. We started the year with multiple licensing and distribution agreements, starting with Progenicare Global, who promises to be a fantastic partner in the U.S. wound care market. We have developed a close collaboration and shared vision for a Revive antimicrobial wound gel. We've slowly started introducing Revive to a number of partners as we ramp up manufacturing, and the response has been overwhelmingly positive. Salud Pharma have built an impressive network in Colombia, Panama, and Costa Rica. They have a solid track record of success with complementary wound care products, and we're confident they will do very well with Revive once they obtain the regulatory approval in their jurisdiction, which is expected later this year. Scouts Honor licensed and launched our pet oral care line in the North American pet specialty market, establishing our first animal health licensing agreement outside of the veterinary channel. They have done a remarkable job of building a strong network of retailers, which will allow them to ramp up sales in this channel. Now, the achievement I'm most proud of is obviously our U.S. FDA 510K clearance for our Revive antimicrobial wound gel for the management of ulcers, including diabetic foot and leg ulcers and pressure ulcers, first and second degree burns, partial and full thickness wounds, large surface area wounds, and surgical incisions for for adult populations. Revive is a triple threat combination of efficacy, thanks to our patented CoActive Plus technology. Ease of use due to the thermogeling properties that easily, that make it easy to apply and stays on the wound and is easy to remove. And last but not least, accessibility, as Kane intends to, offers gel at a price point that fits within Medicare and private payer allowables. So far, it has been extremely well received by practitioners as it checks all the boxes. In November, we strengthened our board of directors with the addition of Dr. John Coleman, who brings a wealth of scientific and business expertise to the board. We've already started to reap the benefits of Dr. Coleman's knowledge and experience. Finally, we closed 2023 with the signing of a non-binding offer for the sale of our interest in STEM, animal health, In 2018, when I joined as CEO, Cain made the strategic decision to continue to build Cain's animal health portfolio while expanding into advanced wound care. Since that time, we have created STEM in partnership with Animal Care, received VOHC seal of acceptance for our pet oral care water additive, and signed licensing deals, licensing and distribution agreements with Animal Care and Scouts on our pet supply company. These achievements have created real value within Stem, which we believe is reflected in the offer we received. The sale of Stem will allow us to strengthen our balance sheet and provide capital to grow the company, and it will certainly focus Kane. We believe that most persistent topical infections in both wound care and not abraded skin, such as acne or atopic dermatitis, are particularly hard to treat due to the existence of biofilms. We have both the right technologies and the right team to win in this rapidly growing market. Now, 2024 is off to a fantastic start. The appointment of Dr. Robert Huizinga as executive chair of the company. Dr. Huizinga will devote his time to the development and implementation of strategic initiatives, strengthening the company's partnerships with existing clients, and fostering key relationships that will lead to new business, including strategic acquisitions. The announcement of the Revive antimicrobial wound gel spray, a follow-on product to our FDA 510K cleared Revive antimicrobial wound gel, which we have now loaded into a new patent-pending delivery, creating a highly differentiated product ideal for burns and other sensitive wounds. I was also very proud and honored that Kane was named the Bioscience Association of Manitoba Company of the Year. Once again, I'm extremely proud of everything we've accomplished and look forward to a big 2024 for Kane. Robert Huizinga, our new executive chairman, was not able to join us today, but I do have a recorded message from him, which I will share immediately.

Hello, everyone. wound and skin care. I've worked in nephrology for much of my career, and I've seen the devastating impact of biofilm on both chronic wounds and long-term catheters, and I was really fortunate to work with the Kane team on their successful 510K clearance, a co-active plus antimicrobial wound gel from the U.S. FDA, and I look forward to continuing to work with the team. Once again, thank you for this opportunity, and thank you for your trust in me.

So with that, I will now pass the call over to the operator to begin the question and answer session. Thank you.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Kemp with ITG.

How are you, David? How are you? I'm doing well. Good to hear you. Congratulations on all the accomplishments you've done over the past while. It's very gratifying to see. I wanted to just touch base briefly on an independent lab called ValueSure who recently did a very in-depth study on all the current acne medications. And it was found that virtually all of them have a multiple of the levels allowed for benzene, which is a cancer-causing agent. And I would think at some point these things will have to either be reformulated or pulled off the shelf. And that seems to play into your hand quite well. What are your thoughts in that regard?

Yeah, I think the products in question were excellent. creams that contain benzoyl peroxide, if I remember correctly there. And yes, it was quite alarming to see the levels of benzene. I think that really that's the beauty of cane, is that as people become aware of biofilms and how they impact bacteria and make bacteria hard to treat, We have 20 years of research and technology development in that market. So we really believe that we're very, very well positioned for the topical infection market that includes acne. and that potentially our technologies could really be game changers and be the missing link in a variety of topical infections. So it is a big concern. And the beauty of using our technology is also, David, is that by first breaking up the biofilm, you can significantly reduce the amount of antibacterials and antibiotics that you need to use to treat a topical infection. So that's really, I think, key to us and key to where the future lies in dermatology for us.

Just to say a couple of the products, just to mention names, they were the top selling acne medications on the market, which are Clearasil and Clinique. And anyways, they've got to find a solution. So I hope you guys reach out to the aforementioned companies and make them aware of what your products offer.

We're always looking to talk to the big players, David. I appreciate that. I really do appreciate the comment there. And as you know, we really believe that acne, for one there, I think this is specifically what you're referring to, is really a biofilm problem where What's happening is that staph epidermidis biofilm, which is found on our skin pretty commonly, is creating an anaerobic, is plugging up the hair follicles, creating the anaerobic environment that C. acnes needs to thrive and become an acne lesion. Now, if you read the research papers, it's commonly known, but I don't think they're People are reading a lot of research papers on the weekend, but staph epidermidis is actually our positive control for dispersant B. So our intent this year with the University of Miami is to run a proof of concept clinical trial on acne patients to test that hypothesis there. That by using dispersant B, we could remove that plug and eliminate that anaerobic environment and prevent C. acnes from creating that acne lesion. So it would be a very, very effective skin cleanser.

May I ask, Mark, when that trial gets underway? Okay.

We're very much looking forward to getting it going. We've been trying to save all our money as best we could, and once the sale of STEM gets concluded, we should be good to start. We'll have a better idea of when we can get going with that.

Thanks very much for your time, Mark.

Thank you, David.

As a reminder, that is star 1-1 to ask a question. I'm showing no further questions in queue at this time. I'd like to turn the call back to Mark Edwards for closing remarks.

Thank you very much. Thank you, everybody, for tuning in. We announced last week the extension of the exclusivity period with our buyer for STEM to the end of this month. and believe we should be able to get quite close to that date. So as I'm sure you all are, we're very much looking forward to wrapping up that transaction and to providing further details as to what that transaction looks like. Thank you very much.

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