Rockwell Medical, Inc.
Q4 2019 Earnings Call Transcript

Published: 13 Mar 2020

[Operator:]

Good afternoon, ladies and gentlemen and welcome to the Rockwell Medical 2019 Q4 Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Ms. Judy DiClemente. Ma’am.

[Judy DiClemente:]

Thank you, May. Welcome to Rockwell Medical’s fourth quarter 2019 earnings results call. This is Judy DiClemente of In-Site Communications, the Investor Relations representative for Rockwell Medical. With me on today’s call are Stuart Paul, Chief Executive Officer of Rockwell Medical and Angus Smith, Chief Financial Officer of Rockwell Medical.Before we begin, I wanted to note that certain matters we will discuss may constitute forward-looking statements within the meaning of the federal securities laws. Words such as may, might, will, should, believe, expect, anticipate, estimate, continue, could, potential, predict, forecast, project, plan, intend or similar expressions or statements regarding intent, belief or current expectations are forward-looking statements. While Rockwell believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements which are based on information available to us on the date of this release and which are subject to inherent uncertainty. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including without limitation those set forth in Rockwell’s SEC filings, many of which are beyond our control and subject to change. Actual results could be materially different. Risks and uncertainties include statements about the unique J-code for the Triferic Powder Packet; timing and the success of our NDA submission for IV Triferic; timing and regulatory approval process for Dialysate Triferic in China; the potential market opportunity and commercialization of Dialysate Triferic in China upon regulatory approval; the timing and regulatory process for our NDA filing for IV Triferic as filed with the FDA; the potential market opportunity for IV Triferic and other Rockwell products; pricing and reimbursement status for IV Triferic, Dialysate Triferic and other Rockwell products; CMS’s announced final rule relating to the eligibility criteria for TDAPA; liquidity and capital resources; expected duration of Rockwell’s existing liquidity and working capital; success of our commercialization plans for Dialysate Triferic; and the success of our efforts to maintain, grow and improve the profit margin of our concentrates business and the impact of our general, economic, industrial, healthcare and political conditions in the United States and internationally as well as those risks more fully discussed in the company’s SEC filings.Accordingly, you should not place undue reliance on these forward-looking statements. Rockwell expressly disclaims any obligation to update or alter any statements whether as a result of new information, future events or otherwise except as required by law. This conference call can be accessed on Rockwell Medical’s Investor Relations webpage. This call is being recorded on March 12, 2020 for audio rebroadcast and can also be accessed on the same webpage.At this time, I would like to turn the conference call over to Rockwell’s Chief Executive Officer, Stuart Paul. Stuart?

[Stuart Paul:]

Thank you, Judy. Good afternoon, everyone and thank you for your time today. As we shared in our recent business update and our press release this afternoon, we are providing key updates today in our progress on numerous fronts, including first

[Angus Smith:]

Thank you. Thank you, Stuart. Turning now to our fourth quarter results, net sales for the fourth quarter of 2019 were $15.5 million compared to sales of $16.9 million during the three months ended December 31, 2018. Net sales of hemodialysis concentrates to dialysis providers and distributors in the U.S. and abroad were $15.3 million for the three months ended December 31, 2019 compared to $16.8 million for the three months ended December 31, 2018. The decrease in net sales was due to a decrease in international concentrate sales of $1.1 million and a decrease related to true-ups under the Baxter agreement for cost of sales and transportation costs partially offset by increased concentrate sales to DaVita and an increase in Triferic sales.Net sales of Triferic were approximately $2280,000 for the three months ended December 31, 2019 compared to $68,000 for the three months ended December 31, 2018. For each of the three months ended December 31, 2019 and 2018, Triferic net sales included approximately $68,000 of deferred revenue recognized under the company’s license and Peoples’ Republic of China with Wanbang Biopharmaceutical. Triferic net sales for the three months ended December 31, 2019 also included approximately $160,000 of Triferic product sales to U.S. customers.Cost of sales during the fourth quarter of 2019 was $14.4 million compared to the cost of sales of $15.7 million during the fourth quarter of 2018. The decrease was due primarily to a decrease in distribution costs for our concentrates products due to reduced rates for third-party shipping and reduced costs for materials and overhead tied to the reduction in concentrate sales volume. Gross profit for the fourth quarter of 2019 was $1.1 million compared to gross profit of $1.2 million during the fourth quarter of 2018. The decrease in gross profit was primarily due to reduction in concentrate sales compared to the fourth quarter of 2018 partially offset by an increase in Triferic sales.Operating loss for the fourth quarter of 2019 was $7.4 million compared to $9.4 million in the fourth quarter of 2018. The improvement in operating loss was due to a decrease in G&A expenditures and expenditures related to licenses acquired partially by an increase in R&D and selling and marketing expenses. Selling and marketing expenses were $1.9 million during the fourth quarter of 2019, an increase of $1.6 million compared to the fourth quarter of 2018. The increase in sales and marketing expense reflects the investments we are making in developing a commercial platform to support the launch of Triferic.General and administrative expenses were $4.7 million during the three months ended December 31, 2019 compared with $7.6 million during the three months ended December 31, 2018. The decrease of $2.9 million was primarily driven by reductions in compensation, legal, consulting and recruiting expenses partially offset by an increase in insurance and facility related expenses.Research and product development expenses were $2 million for the fourth quarter of 2019 compared to $1.6 million during the fourth quarter of 2018. The increase was due primarily to an increase in clinical trial and consulting expenses partially offset by a reduction due to our write-off of Calcitriol inventory that occurred in the fourth quarter of 2018. We expects our research and product development expenses will increase in the future due to additional clinical development of Dialysate and IV Triferic, including the pediatric clinical trial for Triferic, expenses associated with real-world data collection and analysis for Triferic, an increase in headcount to support medical education efforts for Triferic and potential investments in developing Triferic for new clinical indications.Net loss for the fourth quarter of 2019 was $7.3 million or $0.11 per basic and diluted share compared to a net loss of $9.4 million or $0.17 per basic and diluted share in the fourth quarter of 2018. As of December 31, 2019, the company had approximately $26 million of cash, cash equivalents and investments available for sale. Net cash used in operating activities for the fourth quarter of 2019 was approximately $5.3 million. In February 2020, we completed the public offering of common stock for gross proceeds of $8.1 million. This was the first step in our broader financing strategy for 2020. As we look forward, we continue to believe that our valuable assets provide us with the financial flexibility, including non-dilutive financing alternatives.Finally, as many of you are aware, we received correspondence from Medical Resource Acquisition Group, or MRAG recently regarding potential director nominations for our upcoming annual meeting. Our Board has determined that the director nominations failed to comply with our bylaws and therefore MRAG’s directors will stand for elections at our annual meeting. We will not be taking any further questions on this matter today so that we can focus on our business update and quarterly earnings results.I will now turn the call back to Stuart.

[Stuart Paul:]

Thank you, Angus. We have a lot to look forward to in the next weeks and months. We will continue to work to bring this innovative and much needed therapeutic to the hemodialysis patients who can benefit today as well as to address anemia in a wider variety of disease states in the future. And our goal remains to establish a new standard of care for anemia management over the course of the next 3 to 5 years. We are proud of our two very valuable assets our Triferic platform and our concentrates business that we believe offer multiple opportunities to drive the long-term value of Rockwell Medical. We will now open the call to questions. Operator?

[Operator:]

[Operator Instructions] We have our first question from the line of Raghuram Selvaraju. Your line is now open.

[Edward Marks:]

Good afternoon, guys. This is Edward Marks on for Ram. I appreciate you guys taking the questions two questions on the MDO’s for those that having the purchasing agreement how many of the 160 clinics do you anticipate using Triferic by the end of this year and how many more might sign for agreements over this year versus how many are you currently targeting?

[Stuart Paul:]

Great to talk with you. Thanks for the question. So I am not going to give specific numbers of clinics but I can tell you we got access to 160 where we have an evaluation program in place for most of the types of singular independent accounts that we pick up which were more of like an one by one basis in an MDO setting you have the ability to go after bigger chunks of clinics at a time and not necessarily with the need for the evaluation program so there is a bit of a process to work through together to drive these forward successfully we are in dialog with this MDO as well as MDOs and large regional clusters of clinics regarding evaluation programs as well and if you move into these chunkier types of accounts things have a tendency to pick up faster so our expectation is that we will be able to significantly accelerate the pace that you are seeing today but that’s all I will say on that.

[Edward Marks:]

Okay understood. And if you could provide a little more detail on the timeline for conversion of these LDO’s and just wondering if there are any are likely to come online this year or is that more of a capture that you are expecting to take place next year?

[Stuart Paul:]

What I can tell you is no we are obviously engaged with the LDO’s in discussions and when we have more to report there we will let you know.

[Edward Marks:]

Alright sounds good. Three more quick ones in here. Just wondering if there are any recent requests from FDA regarding MDA for IV Triferic?

[Stuart Paul:]

I would just say we are very excited about the process and being so close to the PDUFA, we have had the normal correspondence you would expect ahead of the PDUFA date with the FDA over the last several weeks and we are looking forward to their decision later this month.

[Edward Marks:]

So and then there is two final questions just if you could provide any timeline updates for regulatory approvals in Chile and just wondering whether the matter regarding the webpage warning letter from the FDA has been addressed and officially closed?

[Stuart Paul:]

Yes. Angus, you want to take these ones?

[Angus Smith:]

Sure. Yes, so as it ever relates to Chile, we are originally expecting to get approval in Chile last year. There were some civil unrest down here that has delayed it. I think we are back on track there and expecting to have approval later this year. So we are pleased with that. And then as it relates to the FDA untitled letter in the website, we have removed certain references on the website and then had a dialogue with the FDA about some of their comments. So from our perspective, we have resolved some of them and we look forward to continuing the dialogue with them as they go forward.

[Edward Marks:]

Excellent. I appreciate all the detail. Thank you, guys.

[Stuart Paul:]

Thank you.

[Operator:]

[Operator Instructions] At this time, I would like to turn it back to the speakers for any further comments.

[Stuart Paul:]

Well, thank you again for joining us for this fourth quarter earnings call and we look forward to staying in touch with you at future business updates and earnings call in the near future. Thanks so much.

[Operator:]

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation and have a wonderful day.