Atossa Therapeutics, Inc.
Q3 2015 Earnings Call Transcript

Published: 13 Nov 2015

[Operator:]

Good afternoon. And welcome to the Atossa Genetics Earnings Conference Call for the Third Quarter Ended September 30, 2015. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Scott Gordon, President of CorProminence. Please go ahead, sir.

[Scott Gordon:]

Thank you, Kacia [ph]. And thank you all for joining today’s conference call to discuss Atossa Genetics’ corporate developments and financial results for the third quarter ended September 30, 2015. With us today are Dr. Steven Quay, Chairman, CEO and President; and Mr. Kyle Guse, CFO and General Counsel. At 4

[Steven Quay:]

Thank you and good afternoon. Atossa is a healthcare company focused on the development of locally administered pharmaceuticals to treat breast health conditions and to prevent breast cancer. Our leading pharmaceutical product is Afimoxifene Gel, which is in Phase II clinical development. We are also developing intraductal delivery and pharmaceuticals for local delivery and to avoid systemic exposure. Our first program is Fulvestrant. Fulvestrant is commercially available in the U.S. as a monthly intramuscular injection. We’ve also developed proprietary lab test and medical devices. Before I provide an update, Kyle will summarize our third quarter ended September 30, 2015 financial results.

[Kyle Guse:]

Thank you, Steve. Good afternoon, everyone. Total revenues for the three months and nine months ended September 30, 2015 were $772,000 and $5.3 million respectively, consisting of pharmacogenomics testing, compared to virtually no revenue in the same periods in 2014. We saw a decrease in revenue from Q2 to Q3 2015 caused directly and indirectly by changes in Medicare rates that we cautioned investors about in May. The Medicare change has reduced the number of tests we performed, reduced the amount we received from Medicare and we believe has caused some private carriers to also reduce and/or decline coverage for our PGX test. Gross profit for the three months and nine months ended September 30, 2015 $459,000 and $2.2 million respectively which is attributable to the pharmacogenomics testing compared to virtually no gross margin in 2014 Total operating expenses for the three months ended September 30, 2015 were $4.8 million representing an increase of $1.6 million or 49% from $3.2 million in the same period in 2014. Operating expenses for the nine months ended September 30, 2015 were $12.8 million. Operating expenses increased $3.9 million or 44% from $8.9 million for the same period in 2014. Finally, our cash and cash equivalents as of September 30, 2015 were approximately $7.8 million. That concludes my comments. I’d like to turn the call back over to Steve.

[Steven Quay:]

Thank you, Kyle. I want to spend the majority of the call today providing you with details on the progress we’ve made with our therapeutic program and developing pharmaceuticals to treat breast health conditions and to prevent breast cancer. This is where we are now focusing our financial and human resources and will continue to do so for the foreseeable future. Before I do that, let me briefly update you on our laboratory business and medical devices. The laboratory services business has opportunities to grow. Based on September 30, 2015 year-to-date results, the lab is near breakeven for its direct cost and doesn’t require much additional equity capital. Because of this, we are looking at leveraging the equipment, lab and sales personnel to grow the business by expanding the PGX test portfolio and we’re evaluating potential new offerings. This is the direction of the lab business as we end the year and look into 2016. During the third quarter, the lab received the coveted ISO 15189

[Operator:]

[Operator Instructions]. The first question comes from David Null [ph] of Atossa. Please go ahead.

[Unidentified Analyst:]

Hi, it’s David Null here, an investor in your product. When do you anticipate, I have few questions. When do you anticipate the Afimoxifene Gel IND application being submitted to the FDA?

[Steven Quay:]

Yes, so, great question. The process is two-step. In the first quarter we will meet with the FDA around the details of the clinical program. And as any Phase II trial, as you know, any Phase II trials can have a lot of nitty-gritty details and each one of them is important to get agreement with the FDA. And then, once that protocol is agreed upon and baked, then we would be submitting for the IND of that at that point in time.

[Unidentified Analyst:]

Okay.

[Steven Quay:]

I’m sorry, before - this drug is already been studied in 16 clinical trials with existing IND. So we expect the FDA has seen this drug before in an IND format. So we don’t expect that to be a difficult or challenging situation.

[Unidentified Analyst:]

Okay. And then, the other question is, recently we fell out of compliance with the NASDAQ listing with stock price for overall 10 consecutive base closing above the dollar. What is management doing to address that and how do they plan on maintaining the NASDAQ listing?

[Steven Quay:]

Yes, thanks David. I’m going to have Kyle address that if he would?

[Kyle Guse:]

Yes, thanks for that good question. Our plan really is to execute on our business and to continue to put out good news at the appropriate time. We think the fundamental development of the business will enhance shareholder value and drive the stock price back up over $1. That’s really our strategy is to focus on the business and let the stock price take care of itself and catch up with the value of the business that we’re creating here. We do have until approximately the end of March to regain compliance and then typically companies get a 6-month extension. So we have quite a bit of time before we would need to address in a different fashion.

[Operator:]

[Operator Instructions]. As there are no further questions at this time, this concludes our question-and-answer session. I would now like to turn the conference back over to Dr. Quay for any closing remarks.

[Steven Quay:]

Well, thank you for your attention this afternoon and for your questions. I hope you also detected that management is palpably excited about these pharmaceutical programs. We think we have an incredible opportunity to change the paradigm in breast cancer and we just can’t wait to get to the next step here. So, thank you for your patience. Thank you for your attention. And that ends the call.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.