Cumberland Pharmaceuticals Inc.
Q3 2013 Earnings Call Transcript

Published: 8 Nov 2013

[Operator:]

Good afternoon, ladies and gentlemen and welcome to Cumberland Pharmaceuticals Third Quarter 2013 Earnings Conference Call. During the company’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. This call is being recorded and a replay will be available for one week, shortly following the conclusion. (Operator Instructions) At this time, I would like to turn the call over to Elizabeth Davis, who handles Corporate Relations for Cumberland Pharmaceuticals. Please go ahead.

[Elizabeth Davis:]

Good afternoon, everyone. And before we begin, we'd like to advise you that this call will include forward-looking statements, which reflect our current views about future events. Such forward-looking statements are subject to the risks outlined in the Safe Harbor section of today's press release and are detailed in our 10-K and 10-Q reports on file with the SEC. Despite our best efforts, actual results could differ materially from our expectations. Information shared on the call today should be considered current as of today only, and please remember that the company assumes no duty to update it. Today, we issued a press release featuring our third quarter 2013 financial results and company update. If you have not seen our press release issued today, you can access it on our website at www.cumberlandpharma.com. We also post and maintain the current version of our corporate presentation as well as other press releases and company updates on the Investors portion of our website. Additionally, please note that this conference call is being webcast through our website and will be available there. I'll now turn the call over to our Chief Executive Officer, A.J. Kazimi.

[A. J. Kazimi:]

Thanks, Elizabeth. Good afternoon, everyone, and thank you for joining us as we review our third quarter results for 2013. With me on today's call are Cumberland's Chief Commercial Officer, Martin Cearnal; and, our Chief Financial Officer, Rick Greene. We will start by reviewing key recent developments, and then provide an update on our products, followed by a discussion of our financial performance and comments on our strategy before opening the call to any questions. So let's begin. We were very pleased to announce last week the addition of a fourth commercial product to our portfolio. As a reminder, we’ve entered into an agreement with Pernix Therapeutics for the promotion and distribution of Omeclamox-Pak for the United States market. As we previously communicated, Cumberland has been actively evaluating several very interesting product opportunities that would complement our medical focus. That process is ongoing and we believe there are opportunities for additional attractive assets that would fit well with our organization. The new agreement with Pernix reflects those criteria and our commitment to expanding our product portfolio and our commitment to expanding our product portfolio. Under the terms of the Omeclamox agreement, Cumberland will promote the product to gastroenterologists across the United States to our field sales force which also promotes our Kristalose brand. So as you may know, many stomach ulcers are caused by an infection from the bacteria Helicobacter pylori or H. pylori, which colonize in the stomach and duodenal. When present, this bacterial infection has been proven to be the cause of over 90% of duodenal ulcers. These ulcers commonly cause abdominal pain and can lead to serious bleeding. In fact, the U.S. prevalence of H. pylori is approximately 30% to 40% in adults and its eradication has been shown to reduce the risk of duodenal ulcer reoccurrence. Omeclamox-Pak is a brand, it’s a prescription product that combines three key ingredients, omeprazole, amoxicillin and clarithromycin for the treatment of H. pylori infection and related ulcer disease. It’s the newest FDA approved brand for H. pylori and the first to contain omeprazole as the protein pump inhibitor. Furthermore, it’s prescribed over a short in treatment period of just ten days. Published studies show that a single ten day regimen of twice-daily triple therapy with this combination of omeprazole, amoxicillin, clarithromycin, can eradicate 80% to 90% of H. pylori infections. We’ve been very selective in the brands we bring into our portfolio and we’ve been searching for an FDA approved gastroenterology product for sometime. With over half of this prescription is written by gastroenterologists, we believe Omeclamox is an excellent strategic fit for our organization. On the Caldolor front, I am pleased to report two recent poster presentations at the Annual Meeting of the American Society of anesthesiology in San Francisco. One of the posters featured results from our Phase IV studies evaluating a shortened infusion time for Caldolor and the other covered results from the pilot Knee Arthroscopy Study comparing Caldolor to ketorolac. Those posters were presented by Dr. Alberto Uribe from the Department of Anesthesiology at the Ohio State University’s Wexner Medical Center. Turning to our financial performance, total revenue for the third quarter 2013 was $6.5 million with a net loss of $800,000 for the period. Total assets as of the end of September 2013 were $92 million, including just over $65 million in cash and marketable securities. I’d like to ask Martin Cearnal to provide an update on our marketed products. Marty?

[Martin Cearnal:]

Thank you, A.J. Let’s begin with Acetadote. In early 2013, Acetadote encountered generic competition. Therefore we approved the launch of an authorized generic product distributed by Perrigo. Both Acetadote and our authorized generic feature our new formulation, which is free of EDTA and any other chelating or preservative agents. Our goal has been to maintain a majority share of this market in 2013 through the combined sales of our Acetadote brand and our authorized generic. Through the third quarter of 2013, we have enabled to just that. We have continued to provide active Acetadote sales support for the key medical facilities and poison control centers across the country through our hospital sales division. These targeted promotional efforts support our new formulation and consistently contain the EDTA-free message, including the product enhanced stability compared to the old formulation. We believe the differences between our new EDTA-free product and the old EDTA-containing version are meaningful, and we will continue to feature that message to the medical community. Kristalose sales remain steady through the third quarter of 2013 and we continue to promote it through our field sales organization. We have expanded our promotion to a larger audience through a telemarketing campaign covering all high potential users of the product. We have also implemented a pilot couponing program and e-prescribing feature launched earlier in 2013. This coupon enhanced with the e-prescribing component that’s allowing us to enhance patient access to Kristalose. It’s particularly helpful when a physician feels that this is the best product for a patient who has a high insurance co-payment. We find that these coupons can reduce the burden of such high co-pays instituted by some third-party payers, thus making Kristalose more affordable. Turning to Caldolor. Both our sales divisions continue to implement our pull-through strategy. They have been sharply focusing their efforts on high priority accounts where Caldolor is already stocked in order to drive pull-through sales and help more patients in those institutions. The shift in sales force time towards our priority-targets is paying off, as we continue to see steady growth in our shipments of the product compared to prior year periods. Meanwhile, more new hospitals are adding Caldolor each month and we are now nearing our 2013 goal of 1,000 medical institutions across the U.S. stocking the product. With that, I'll turn the call back over to you, A.J.

[A. J. Kazimi:]

Thank you, Marty. I would now like to share a further update on our Caldolor clinical studies. We previously announced results from a pilot study favorably comparing Caldolor to Ketorolac and based on those encouraging findings, we’ve initiated a larger multi-center study to further evaluate Caldolor compared to Ketorolac in treating pain following knee arthroscopy procedures. Enrollment is now well underway in its 100 patient study. As I mentioned earlier, two posters featuring Caldolor clinical study results were presented at the Annual Meeting of the American Society of Anesthesiology San Francisco in October. A poster entitled, multi-center open-label surveillance trials to evaluate the safety and efficacy of a shortened infusion time of intravenous Ibuprofen was presented and two registry studies make up that presentation. In the fist of the registry studies, eligible patients were enrolled to receive one of twos dose strengths either, 400 milligrams for the treatment of fever or 800 milligrams for the treatment of pain of intravenous Ibuprofen for up to a 24 hour dosing period. 150 patients from 13 clinical sites were enrolled in that study. The data indicated that intravenous Ibuprofen reduced fever and pain and the shortened infusion time was well tolerated. The second registry study featured in this poster was a Phase IV Multi-Center Open-Label Surveillance Study to assess Ibuprofen administered over five to ten minutes to hospitalized patients undergoing surgical procedures. Eligible patients were enrolled to receive 800 milligrams of intravenous Ibuprofen, administered at the induction of anesthesia and could continue therapy for up to 24 hours. 300 patients from 21 clinical sites were enrolled in this study, and again the shortened infusion time was well tolerated. The results from these two studies support the safety of s shortened infusion time for our intravenous Ibuprofen which provides for flexibility and convenience in its dosing. Now the second poster presentation was entitled A Pilot Study to Determine the Efficacy of Intravenous Ibuprofen for Pain Control Following Arthroscopic Knee Surgery. That study was conducted at the Ohio State University Medical Center and it enrolled 51 patients with results indicating that patients compared to patients receiving ketorolac, patients receiving intravenous Ibuprofen experienced less post-operative pain prior to their discharge. And needed fewer narcotics and were less likely to require narcotics prior to their discharge. This data supports the benefits of using Caldolor in a preemptive model of multimodal analgesia. We continue to be encouraged that the data from study-after-study demonstrates the safety and efficacy of our Caldolor product. And we are confident it’s only being a matter of time before this line of thinking is shared by an even broader audience of care providers. So now on to Hepatoren, our candidate for hepatorenal syndrome, a life-threatening condition with a high mortality rate and no approved treatment in this country. We launched the 64 patient study to evaluate the safety, the efficacy and the pharmacokinetics of Hepatoren for this unmet medical need. The study is designed to evaluate escalating dose levels of Hepatoren and progression to higher dose levels is reviewed and approved by an independent safety data monitoring committee. Enrollment in this study is well underway at major medical centers across the United States. And recently, several top-tier research institutions have been added to the study as we continually evaluate enrollment rates at all the sites. We remain enthusiastic about this product and its potential to help these patients and we look forward to sharing the compound results once all 64 patients have completed the protocol for this study. Moving to international front, we’ve entered this year into a series of new agreements and have new partners now for China, India, Indonesia, The Pacific Rim, The Arabian Peninsula and South America. And that’s an addition to our previous agreements for Australia, Canada, and South Korea. These agreements typically provide each of partners who respond both the product registration followed by product commercialization in their respective countries. And under these licensing agreements, we typically received an upfront payment, milestone payments and then participate in our product success through a share of product sales. Our international network includes a growing group of distinguished partners who are at various stages of product registration. And over time, we do expect our international business to become an important source of revenue for the company as we work to bring our products to patients outside the United States. So now, I’ll turn to Rick Greene Cumberland’s Chief Financial Officer for a review of our third quarter financial results. Rick?

[Richard Greene:]

Thanks you, A.J. For the thee months ended September 30, 2013, net revenues were $6.5 million, compared to $12.5 million for the prior year. Net revenues by product were $3.8 million for Acetadote, which includes $1.9 million from our share of the authorized generic sales; $2.2 million for Kristalose; and $500,000 for Caldolor. For the nine months ended September 30, 2013 net revenues were $23.9 million, compared to $35.2 million for the same period in 2012. Total operating expenses for the three months ended September 30, 2013, were $8 million, down from $9.6 million in 2012. This decrease was primarily driven by lower sales and marketing expenses, as we work to manage those costs in line with our change in revenues. Total operating expenses for the first nine months of 2013, were $25.2 million, down from $29.6 million in 2012. For the three months ended September 30, 2013, we had a net loss of $800,000 compared to net income of $1.9 million for the prior year period. Net loss for the nine months ended September 30, 2013 was $600,000 compared to net income of $4 million in 2012. The diluted loss per share for the third quarter was $0.04 compared to net earnings per share of $0.10 in the third quarter of 2012. Diluted loss per share for the nine months ended September 30, 2013 was $0.03, compared to EPS of $0.20 for the same prior year period. As of September 30, 2013, we had just over $65 million in cash and securities with approximately $46 million in cash and equivalents and $19.2 million in marketable securities. Total assets at the end of the third quarter were $92 million. With that, A.J., I'll turn the call back over to you.

[A. J. Kazimi:]

Okay. Thanks, Rick. I’d like to take a brief moment to outline our strategic focus as we manage the company in a way that will maximize the next phase of Cumberland’s growth. You see our strategy is to garner the full potential of our commercial brands, while continuing to add new products and cultivate that into important top-line contributors for the company. We are very optimistic about the opportunity that Omeclamox-Pak will offer Cumberland and our sales force is enthusiastic about promoting the product. We continue to pursue additional products in order to further expand our portfolio and meanwhile our clinical team is actively developing new product candidates, while also generating additional data to support our approved products. Further, we will remain vigilant in controlling expenses and improving returns. And the last point I’d like to make and perhaps the most important is that our balance sheet remains strong which provides us with the ability to execute on this strategy. Thank you everyone for joining us on today’s call. We appreciate your time and interest in Cumberland and we look forward to providing you with another update following the completion of the fourth quarter. Again, thank you and good-bye.

[Operator:]

Thank you. Ladies and gentlemen, that concludes our conference for today. If you would like to listen to a phone replay of today's conference, please dial 85-859-2056, using the access code 91716682, through November 12. Alternatively, a replay of the webcast will be available on the company's Investor Relations website. I would like to thank you for your participation. You may now disconnect. [No Q&A session for this event]