Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) Q4 2022 Earnings Call Transcript

Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) Q4 2022 Earnings Call Transcript March 17, 2023

Operator: Greetings, and welcome to the Adamis Pharmaceuticals Full Year 2022 Financial Results Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Uhl, ICR Westwicke. Thank you, Robert. You may begin.

Robert Uhl: Thank you, operator. Welcome to the Adamis Pharmaceuticals’ Full Year 2022 Financial Results and Corporate Update Conference Call. Joining me on the call today are members of the Adamis executive team, including Chief Executive Officer, David J. Marguglio; and Chief Financial Officer, David Benedicto. In addition, DMK Pharmaceuticals CEO, Dr. Eboo Versi, will also join the call to provide an introduction to DMK in the context of the proposed merger with Adamis. Our format for this call will consist of prepared remarks from Adamis Management and Dr. Versi, followed by a Q&A session. This call is being webcast and will be available for replay in the Investors section of our website at adamispharmaceuticals.com. In today’s call, we will make certain forward-looking statements regarding our business based on current information and expectations.

Those statements speak only as of today, and except as required by law, we do not assume any duty to update in the future any forward-looking statements made today. Of course, any forward-looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated by any forward-looking statements that we make today. Additional information concerning factors that could affect our business and financial results is included in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission and in other subsequent filings that we make with the SEC. These are available on the SEC’s website. Today’s call may also include certain forward-looking statements related to DMK, its technologies, product candidates and their market potential.

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All of these forward-looking statements are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from such forward-looking statements. Further, nothing in today’s presentation should be considered an offering of securities or a solicitation of a proxy vote. The information discussed today is qualified in its entirety by the current report on Form 8-K that was filed by Adamis on February 27, 2023, which may be accessed on the SEC’s website. In the coming weeks, we intend to file and mail to stockholders a record of proxy statement that will provide details on the proposed merger transaction with DMK. We urge all Adamis stockholders to read the proxy statement after it is filed with the SEC, and all current and future SEC filings which describe the proposed transaction, carefully because they will contain important information about DMK, the proposed transaction and specific risks and uncertainties, particularly those described in the Risk Factors sections.

Once available, these documents can be obtained free of charge from the SEC at sec.gov or on Adamis’ website. Now let me hand the call over to David Marguglio, CEO of Adamis.

David Marguglio: Thank you, Robert, and thank you to everybody for joining on our call this afternoon. Today, we will be discussing our full year 2022 operational and financial results. As you know, since October, the company has been engaged in a process to explore strategic and financing alternatives. That process concluded last month with the announcement of the execution of the merger agreement with DMK Pharmaceuticals. In the forthcoming proxy statement, we will describe and provide stockholders with more detail about the process, the terms of the merger agreement and why management and our Board of Directors believe this transaction to be the best path forward to producing long-term value for the stockholders. While engaged in this process, we have also undertaken efforts to reduce the company’s operating expenses, which included winding down all R&D activities and a significant reduction in head count that should impact 2023 financials.

There have also been some positive developments since the start of the year. At the end of December and early January, we sold off certain of USC’s remaining assets, netting just over $1 million. We are now attempting to liquidate the remaining USC assets, which have an approximate book value of $2.9 million, but there can be no certainty regarding the timing or the net proceeds from those sales. Also, in January, we received a tax refund, which had been previously requested from the IRS under the Employee Retention Credit program under the CARES Act. On February 23, we announced that NASDAQ had granted our request to extend the period for the company to regain compliance with the $1 minimum share price requirement, subject to the company evidencing compliance with all applicable criteria for continued listing by no later than a final extension date of June 26, 2023.

The company’s continued listing is subject to the timely satisfaction of certain interim milestones and the undertaking of certain corporate actions during the compliance period, including executing the merger agreement with DMK and effecting a reverse stock split of the common stock and achieving a minimum closing bid price of at least $1 per share for a minimum of 10 consecutive business days prior to the expiration of the compliance period. Within days of the NASDAQ’s decision, the Boards of both companies authorized and executed the merger agreement between Adamis and DMK. On Tuesday of this week, we announced a raise of $3 million in gross proceeds from a single health care-focused fund. This equity financing was intended to enable the company to operate through a period during which we can complete the merger with DMK.

Now before introducing Dr. Versi to discuss DMK’s neurology-focused platform and clinical programs, David Benedicto will describe our year-end 2022 financials. David?

David Benedicto: Thank you, David. This afternoon, we filed our Form 10-K for the year ending December 31, 2022. I will highlight a few items from our financials, but I encourage you to review the 10-K for additional details and disclosures. Despite the manufacturing hold and recall of SYMJEPI in 2022, revenues for the 12 months ending December 31, 2022 and 2021 were approximately $4.8 million and $2.2 million, respectively. The increase in revenues was primarily due to product sales of ZIMHI to US WorldMeds, less an offset of approximately $310,000 in costs for the completion of the SYMJEPI. Selling, general and administrative expenses for the 12 months ending December 31, 2022 and 2021 were approximately $13.2 million and $16.1 million, respectively.

The decrease was primarily a result of reductions in legal and compensation expenses, which included the elimination of the bonus accrual and the lower stock-based compensation expenses. Research and development expenses were lower for 2022 at approximately $10.4 million compared to $11.3 million in 2021. The decrease was also primarily related to the elimination of bonus accrual and the lower stock-based compensation expense. Net loss for the combined continued and discontinued operations for the years ended December 31, 2022 and 2021 was approximately $26.5 million and $45.8 million, respectively. The decreased loss was primarily attributable to the cessation of U.S. Compounding’s operations and reductions in legal and compensation expenses, as mentioned earlier.

Cash and cash equivalents at December 31, 2022, totaled $1.1 million. Additional cash infusions during the first quarter of 2023 included proceeds of approximately $832,000 from the sale of certain equipment of our discontinued U.S. Compounding operations, proceeds of $875,000 from Employee Retention Credit program of the government and $3 million gross proceeds from the sale of equity. Before turning it back to David Marguglio, I would like to encourage you to review our recently filed annual report on Form 10-K for additional details and disclosures. David?

David Marguglio: Thank you, David. Now I’d like to introduce Eboo Versi. Dr. Versi earned a Bachelor’s degree and PhD at Oxford University and his medical degree from Cambridge University. He then trained and worked for many years as a surgeon in academic hospitals in London before being recruited to Harvard to establish the first urogynecology program at Brigham and Women’s Hospital. After Harvard, Dr. Versi held a variety of senior leadership roles in both large and small pharmaceutical companies, including Pfizer and Astellas. And now it gives me great pleasure to introduce to you the Founder and CEO of DMK Pharmaceuticals, Dr. Eboo Versi.

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Q&A Session

Dr. Eboo Versi: Thank you for the kind introduction, David, and thank you for recognizing the potential value and synergy of the combination of Adamis and DMK. As Adamis announced in February at the close of the merger, I will be assuming the roles of both CEO and Chairman of the Board of the combined company. David Marguglio will simultaneously be stepping down as CEO and Board member, but I’m pleased that he will continue as part of the management team to help me manage the transition and integration of the 2 companies. DMK Pharmaceuticals is a privately held clinical-stage neurobiotechnology company focused on developing novel therapies for central nervous system disorders. In addition to the lead asset to address the opioid use disorder crisis, DMK is developing new assets with novel mechanisms of action to treat other neuro-based conditions where patients are underserved and where current therapies are decades old.

I believe our current pipeline of product candidates holds great promise for patients and investors alike. DMK’s technology is at the forefront of endorphin-inspired drug design. We are developing mono, bi and trifunctional small molecules that modulate critical networks in the nervous system with the goal of creating novel treatments that are efficacious, safe and tolerable. DMK has a library of high-value, first-in-class compounds and a differentiated pipeline that could address several unmet medical needs by taking the novel approach to integrate with the body’s own efforts to regain balance of disruptive physiology. By designing small molecule analogues of neuropeptides, one or multiple receptors can be targeted by a single molecule to support the transition back to a balanced neurophysiological state.

Our proprietary technologies are based on a wealth of basic science research and the result of significant research and developmental efforts. We have a unique library of more than 750 first-in-class small molecules, each with novel properties that I believe have the potential to be developed into innovative treatment for some of the worst neurological conditions that plague humanity. Each of our lead compounds, if successfully developed, could transform patients’ lives and a blockbuster potential as treatments for opioid disorder, acute and chronic pain, bladder control and Parkinson’s disease. I believe that this diverse array of indications represents a significant potential competitive advantage for the company. I believe that by offering multiple shots on goal, the risk of the overall pipeline is reduced, and the portfolio, therefore, presents a transformative opportunity for the combined company and its investors.

Our lead clinical-stage compound, DPI-125, is a small molecule that is currently being developed for the rapid stabilization of patients with opioid use disorder who are actively using prescription or street opioids, including deadly fentanyl and its analogues. In addition, data from studies conducted to date suggest that DPI-125 provides potent pain relief but is less likely to cause respiratory depression and addiction than currently marketed opioids. Most marketed opioids are pure mu agonists, which means they bind to and have that effect only through the mu receptor. While they do provide the desired pain relief, they are addictive and can lead to death due to respiratory depression. In contrast, DPI-125 binds to all 3 receptors, namely delta, mu and kappa, hence the DMK name.

Interacting with all 3 receptors results in a more natural, balanced approach, mimicking the body’s own endorphins, potentially resulting in potent pain relief with reduced respiratory depression and abuse liability. To date, DPI-125 has completed the dose escalation first-in-human Phase I study which showed that the drug was well tolerated with no serious adverse events or study dropouts. The planned human studies will attempt to confirm what has been demonstrated in preclinical studies in terms of reduced respiratory depression and impact on addiction. Once these key enhancing characteristics have been demonstrated, we intend to develop DPI-125 as a treatment for opioid disorder and eventually as a treatment for acute and chronic pain. The second clinical-stage compound, DPI-221, is a small molecule that is currently being developed as a unique alternative to surgery for benign prostatic hyperplasia, or BPH, by reestablishing bladder control.