Rockwell Medical, Inc.
Q4 2020 Earnings Call Transcript

Published: 31 Mar 2021

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the Rockwell Medical Fourth Quarter and Full Year 2020 Results Call. At this time all participant lines are in listen-only mode. After the presentation there will be a question-and-answer session. As a reminder, this conference call is being recorded. At this time, I would like to introduce Claudia Styslinger, Investor Relations. Please go ahead.

[Claudia Styslinger:]

Good afternoon. This is Claudia Styslinger of Argo Partners, the Investor Relations representative for Rockwell Medical. Joining me from Rockwell Medical on today's call are Dr. Russell Ellison, President and Chief Executive Officer; Russell Skibsted, Executive Vice President, Chief Financial Officer and Chief Business Officer; Dr. Marc Hoffman, Chief Medical Officer, and Tim Chole, Senior Vice President of Sales and Marketing.

[Russell Ellison:]

Good afternoon. Thank you for joining us. 2020 was an important year for us. Like most companies around the world, we faced challenges during the COVID-19 pandemic. And I'm proud of how our team stepped up. Our people created and followed strict protocols. And we met our customers demand without interruption. We have to, lives depended on it. The patients we serve do not have the option of sheltering in place. 2020 also marked a significant shift in the trajectory of our company. We are not the same company that we were even one year ago. The purpose of my remarks today is to address our dedicated shareholders with whom I want to share my enthusiasm for Rockwell's future. I also want to share our expectations for the near-term, and lay out in clear terms the practical plan of action that we are following to evolve Rockwell Medical into a higher margin and more broadly diversified company. I was first brought to Rockwell Medical by the Board in mid-2019 as a consultant to take a hard look at the company. The Board believed there was unrealized value. Let me walk you through the process. We had two key foundational assets. One was our next generation parenteral iron technology platform, ferric pyrophosphate citrate, or FPC as we call it, that I believe can positively impact a broad range of patients, not only in dialysis, but well beyond. The other was an asset that has been largely ignored over the past decade, except by the 125,000 or so people whose lives depend on it, our concentrate business.

[Tim Chole:]

Thanks, Russell. First, I would like to provide an update on the performance of the dialysis concentrates business. Rockwell Medical was built on the dialysis concentrates we manufacture and sell in the U.S. and around the world. We've grown to be one of the two major suppliers of dialysis concentrates in the U.S., and we have established a reputation as one of the most reliable suppliers in the business, with best-in-class customer service. We were proud to maintain the highest level of customer service, with no supply interruptions through the worst months of the COVID-19 pandemic and the Texas winter storm crisis. In 2021, our focus will be on maintaining our strong presence in the market, serving our customers with excellence and implementing strategies that will create efficiencies and improve our profitability. Our primary commercial focus in the dialysis space continues to be on growing the adoption of Triferic. As Russell mentioned, we sell Trifericin the U.S. into a dialysis market under a capitated reimbursement model with extreme price pressure. Nevertheless, Triferic is a novel product with distinct advantages for patients and clinics. And we have seen steady growth and adoption among independent dialysis providers. During the fourth quarter, we made good incremental progress with Triferic Dialysate. We entered into new purchase agreements for Triferic with 12 additional clinics, bringing the total number of clinics on contract to 65. This means the number of contracted patients increased to approximately 4,800. The overall results for the quarter lagged somewhat behind expectations, in part due to the continued impact of the pandemic. The surge of COVID cases in the fourth quarter proved again to be a burden for many dialysis clinics, particularly those in urban areas, which in some cases caused them to delay decisions about making any significant changes, such as adopting new products or changing treatment protocols.

[Marc Hoffman:]

Thank you, Tim. First, I'd like to touch upon the anticipated introduction of an entirely new class of anemia management agents, the hypoxia-inducible factor prolyl hydroxylase inhibitor, or HIF-PHI, which are expected to change the management of anemia in end stage renal disease in haemodialysis. We plan to strategically position Triferic alongside the HIF-PHI to provide a consistent and physiologic treatment of anemia in haemodialysis patients. Although the approval of roxadustat, the first of the HIF-PHI agents expected to become available in the U.S. has been delayed by the FDA, pending an advisory committee meeting. The publicly available clinical evidence from the roxadustat Phase 3 trials, indicates that there may be a reduced iron replacement requirement for dialysis patients treated with roxadustat. If we extrapolate these data to a real world scenario, this requirement appears to be well within the range that can be achieved with Triferic alone, administered at each dialysis session, such that Triferic could be a sufficient source of iron in patients treated with the HIF-PHI. We are working with KOLs and members of our Medical Advisory Board to develop a clinical trial protocol to demonstrate these synergies. The start of any such study would be contingent upon the commercial availability of roxadustat. In turn, this could represent a significant new market opportunity for our product, as nephrologist we think how they manage anemia. We look forward to providing further updates on our strategy related to HIF-PHI in the coming months. Turning to our foundational work in the area of home infusion therapy. We conducted a clinical feasibility study to assess treatment and practice patterns and attitudes towards the management of iron deficiency anemia, often referred to as IDA in-home infusion population. The purpose of this study was to inform the design for future clinical protocols and the overall development program, for a novel approach to iron replacement in the home infusion population. Many patients with chronic disease requiring long-term home infusion therapy are at risk for iron deficiency anemia. Iron deficiency anemia falls into the category of a condition that is relatively simple to identify, with challenging to treat with current IV formulations. For example, IDA is estimated to occur in 40% to 55% of all patients on long-term parenteral nutrition. The American Society for parenteral and enteral nutrition or ASPEN, recommends that patients receiving home parenteral nutrition be screened regularly for anemia and treated with parenteral iron when iron is recommended by the physician. These patients, it is important to note are unlikely to respond to oral supplementation. While IV supplementation is more effective than oral formulations, often home infusion clinicians are reluctant to recommend IV iron treatment at home due to the formulation options that are available today. Home infusion of traditional IV iron is limited due to the risk of hypersensitivity, and concerns about incompatibility with other infused drugs that the patient may be receiving. As a result, patients may be referred to the physician for an IV iron infusion, which is costly, inconvenient and may not be available from that physicians particular practice model. Limitations with the current approach can lead to a vicious cycle of late diagnosis and inconsistent treatment. Understanding that there are several key stakeholders in the treatment and management of IDA and home infusion patients, we surveyed U.S. physicians and pharmacists who are actively engaged with patients receiving home parenteral nutrition. These survey participants were identified in conjunction with the Oley Foundation. Outreach was conducted in cooperation with key opinion leaders in gastroenterology and home parenteral nutrition. The study was conducted in November and December of 2020, a total of 26 physician responses and 39 pharmacist responses were recorded and analyzed. Key insights include the following; with an 85% of the physicians and pharmacists recommend IV iron for home parenteral nutrition patients. Oral iron remains a first line therapy in approximately 50% of the respondents in both groups. The standard iron panel, which is iron total iron binding capacity, protein and transparent saturation are employed in the home infusion settings for the assessment of iron status. Our outreach validates literature reports that approximately 50% of home clinical nutrition patients suffer from IDA. However, there was no clear consensus on treatment or practice patterns, no clear consensus for hemoglobin target to initiate therapy, and no clear consensus from outreach for hemoglobin target for goal directed therapy. And existing treatment plans are indicative of the current therapeutic options available. The study results validated our initial assumptions that management of iron deficiency anemia in the home infusion population is suboptimal and remains an unmet clinical need. This is not surprising, considering the absence of any well controlled clinical trials with parenteral iron therapy in this patient population. Further, for the safe, effective and convenient parenteral iron therapy suited for home infusion, supported by randomized clinical trials could have a dramatic impact on patient care and quality of life. For the first time, a well-controlled randomized clinical trial will evaluate the safety and efficacy of a parental iron treatment, in this case, FPC delivered at home. The proposed study design incorporates the considerable knowledge and data that already exists for the FPC molecule, including an extensive safety database of more than 1.3 million administrations in a very frail haemodialysis patient population, and well-established genetics which provide a strong rationale for the doses and dose schedules that have been developed for this setting. FPC is a true second generation parenteral iron. It was developed to replace iron loss in patients with anemia in an entirely different way. FPC donates iron directly to circulating transferring, bypassing any potential hepcidin blockades from inflammation, which makes it immediately bioavailable for critical body processes. It is this unique property and the safety profile of the FPC that we believe make this proposed new indication and population for FPC clinically feasible and commercially attractive. We are confident that we approach the study with many of the typical questions that exist in a Phase 2 study already answered, which we expect to significantly derisk the study. As you heard from Dr. Ellison, the FDA has accepted our proposed development strategy to pursue an approval by the 505(b)(1) pathway as a novel NDA for FPC for treatment of IDA in adult patients. This will create the opportunity for a unique NDC code to be assigned, and will allow us to apply for unique J-codes from CMS. The agency further agreed with our approach to cross-reference non-clinical pharmacology and toxicology from our prior INDs, and does not foresee the need for additional studies in these areas. The FDA has provided us with valuable feedback on our proposed clinical development plans, which we intend to incorporate into the next iteration of clinical protocols and FDA correspondence and dialogue. We plan to take advantage of the early consultation opportunities provided by the FDA in a pre-IND meeting, to further clarify study design, patient selection and study endpoints for our Phase 2 study of FPC for treatment of IDA in adult patients receiving home infusion therapies. As a next step, we plan to have a pre-IND meeting with the FDA, where we will get feedback on the protocol and development plan. Following the successful meeting, we will initiate the clinical trial in the second-half of this year. For our pipeline indication acute heart failure, we intend to meet with FDA to seek clarity on our proposed development strategy for FPC, as a therapeutic to improve cardiac energetics in hospitalized acute heart failure patients with iron deficiency. Specifically, we want to confirm for FPC, FDAs published guidance that drugs for short-term treatment for heart failure that is less than 10-days do not require a mortality endpoint for approval. If confirmed, this would make the clinical development program feasible for Rockwell. Following a successful dialogue, we would pursue the filing of an IND for a Phase 2 mechanistic proof-of-concept study. We plan to submit this meeting request during the second-half of this year. Next, I'll turn the call for Russell Skibsted for a financial overview. Russell?

[Russell Skibsted:]

Thanks Marc. Our net sales in 2020 were approximately $62.2 million, which was about $900,000 more than 2019. Net sales of haemodialysis concentrates were approximately $61.1 million for the year, which was roughly flat compared to 2019. Net sales to Triferic were approximately $1.1 million for the year, compared to $0.5 million in 2019. For each year, 2020 and 2019, Triferic sales included approximately $200,000 of deferred revenue related to our international partnerships. It also included approximately $2 million each year in deferred revenue related to our agreement with Baxter. We ended the year with cash, cash equivalents and investments of approximately $58.7 million, which we believe puts us in a good position to focus on the strategic initiatives that Russell, Tim, Marc previously described. Russell mentioned earlier that we began a process of a ground up review of our concentrate business. After visiting each of the manufacturing facilities, I became increasingly convinced there were opportunities to make both our manufacturing and transportation operations more efficient. I also believe there are opportunities to grow this business. We have launched projects to identify ways to improve the overall profitability of these core operations, which I hope to update you on later this year. I'll now turn the call back to Russell Ellison, for his closing remarks. Russell?

[Russell Ellison:]

Thanks, Russell. Our company has multiple near-term commercial and development milestones coming up in 2021, and 2022. These milestones include expected progress in the global expansion of Triferic, as well as the anticipated clinical development activities that we outlined on our call today for our FPC platform. 2020 was a year of reimagining our company and reinvigorating our business. Our new strategy to become a scientifically and clinically driven company is now in execution mode, and progress has been made toward our key growth drivers. I expect continued strong progress for the remainder of this year and next year, as we execute against our plan to drive growth and increase value. Now, I'll turn the line over to the operator for questions.

[Operator:]

Our first question comes from line up Brandon Folkes with Cantor Fitzgerald.

[Brandon Folkes:]

Hi. Thanks for taking my questions and congratulations on the progress in the quarter. Maybe just three from me. Could you just elaborate a little bit on sort of what levers you have to pull on the concentrates business margin, obviously you good amount of revenue there. And, it can be quite meaningful if you're able to pull that off. Secondly, maybe just since the publication of the NYU hospital data, one, I guess any feedback you've had so far. And then, you expect this data to stand alone to drive uptake? Or should we think of this as maybe the first of many pieces that you think together will drive uptake? And then lastly on roxadustat, can you just elaborate obviously, a lot of questions around that at the agency right now. What can you say just in terms of do you expect that roxadustat approval in study being key to uptake for certain segments of the market? Or do you think you can infiltrate those segments of the market with this sort of data you're generating out of NYU? Thank you.

[Russell Ellison:]

Well, you have three questions there. So, thank you very much for that. On the concentrates issue, I'll turn this over to Russell. And then maybe we can take off your other two questions. Thanks. Russell?

[Russell Skibsted:]

Sure. Thanks for the question, Brandon. As I just mentioned, since joining I visited each of the facilities. And what struck me was, I think there is definitely some both bottom line and top line things we can do to help the margins. So what we're doing is we're embarking upon this really a ground up analysis, where we're trying to optimize the supply chain, materials handling, logistics, really the entire process to see where we can increase margins and lower costs. I think it's too early to say right now, but I just have a really good feeling that, we're going to be able to find some efficiencies there. But we will have to wait until we've completed the assessment to be able to give a little more guidance on that. And then the other side of it is working through -- we're looking at different ways to potentially bring in addition to making it more efficient, looking at ways that we can increase the top-line. So, we have available bandwidth within our manufacturing facilities and within our logistics. So we're looking at other ways in which we can actually make other make other products that we can manufacture through there that we can generate some top-line on. Again, what, if any, that turns out to be we'll have to wait until we've gone through the assessment, but I feel pretty optimistic about it.

[Russell Ellison:]

Thanks, Russell. And Marc, do you want to address the data question?

[Marc Hoffman:]

Sure, I’d be happy too. Brandon, could I just ask you to repeat the question, so I can answer in this .

[Brandon Folkes:]

So, on the NYU data, it looks pretty impressive on the surface. Maybe just, one, any feedback you've received to-date. And do you think this data will standalone to drive uptake? Or should we think of this as one of many pieces of data, some of the pieces of data that we should expect to see over the coming year that collectively will drive that uptake? And then secondly, maybe lumped into this on roxadustat do you think that hospital data will drive uptake within certain segments of the market or do you think that those segments of the market really are waiting for get roxa approval in study that you're going to run? Thank you.

[Marc Hoffman:]

Okay, great. Thank you for the question. So, with regard to the NYU data, I think it's probably the latter of the options that you articulated, which is that we look at this as the next series of long-term real world data with real world evidence that we've been collecting. One of the things that was particularly appealing about this data, is that this data was published independently by NYU in the Journal without any input from Rockwell, as we have had the opportunity to share this from a peer review journal. It has been very welcome by clinics as we've shared this with the nephrology community. I think it's fair to say that with each increasing body of evidence the story grows, and it makes our story more powerful and makes the uptake more appealing. But, I think we will continue to take advantage of the adoption of Triferic and the generation of new real world evidence. Russell, do you want me to take a stab at the roxadustat question?

[Russell Ellison:]

Do you want to repeat the question about roxa?

[Brandon Folkes:]

Sure. Maybe just sort of, should we think of certain segments of the market almost being beholden to the roxa approval and running a study with your drug in that ? Or do you think some of this data generation on this sort of cost savings, maybe you may be able to generate significant amounts to drive those segments of the market towards your product should roxa have a few challenges with the FDA?

[Russell Ellison:]

Well, let's take the scenario where they have an advisory committee and its fine, and they get approval. Between now and then, clinics are evaluating, the clinics are not yet using Triferic or evaluating whether they should want to adopt it, and we're utilizing the data that we have with respect to this in the context of the ESA. We haven't yet seen any hesitation about adopting this, because clinics are waiting for roxadustat, if that was part of your question. I think with respect to running a study with roxa, we wouldn't wait for the results to recommend to clinics that they use Triferic to maintain hemoglobin and replace the iron that's been lost in dialysis, that concept still applies. And, whether you're using an ESA or you're using roxadustat, the rationale for Triferic is to replace the iron that's lost in haemodialysis. And it's very straightforward way of doing that and very reliable in that respect, exactly how much iron they're getting. So, we're continuing -- we'll continue to keep on, while we're running that study, assuming that roxa is approved then we can get the drug to put in a clinical trial. Meanwhile, Marc and his team are working out the protocols such that they're ready to initiate this trial and roxadustat available. I hope that answers your question.

[Brandon Folkes:]

It does. That was very helpful. Thank you very much.

[Russell Ellison:]

Thanks, Brandon.

[Operator:]

That concludes today's question-and-answer session. Now I'll turn the line back to Dr. Ellison for closing remarks.

[Russell Ellison:]

Well, thank you all for joining us this afternoon. We really look forward to following up with many of you in the coming days and weeks. Have a great evening.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.