Cumberland Pharmaceuticals Inc. (NASDAQ:CPIX) Q3 2024 Earnings Call Transcript

Cumberland Pharmaceuticals Inc. (NASDAQ:CPIX) Q3 2024 Earnings Call Transcript November 9, 2024

Operator: Good afternoon. And welcome to Cumberland Pharmaceuticals Third Quarter 2024 Financial Report and Company Update. This call is being recorded at the company’s request and will be archived on its website for one year, from today’s date. I would now like to turn it over to Molly Aggas, Account Supervisor at the Dalton Agency, who handles Cumberland’s communications. Molly, please proceed.

Molly Aggas: Hello, everyone and thank you for joining us today. Earlier this afternoon, Cumberland issued a press release, announcing the company’s financial results, for the third quarter of 2024 as well as an operational update. The release, which includes the related financial tables, can be found on the company’s website at www.cumberlandpharma.com. Management will share an overview of those financial results during today’s call. They’ll also provide an overall company update, including a discussion of Cumberland’s brands, pipeline and partners. Participating in today’s call are A.J. Kazimi, Cumberland’s Chief Executive Officer; Todd Anthony, Vice President, Organizational Development; and John Hamm, Chief Financial Officer.

Please keep in mind that their discussions may include some forward-looking statements as defined in the Private Securities Reform Act. Those statements reflect the company’s current views and expectations, concerning future events and may involve risks as well as uncertainties. d There are many factors that could affect Cumberlan’s future results, including natural disasters, economic downturns, public health epidemics, international conflicts and others that are beyond the company’s control. Those issues are described under the caption, Risk Factors, in Cumberland’s Form 10-K and any additional updates filed with the SEC. Any forward-looking statements made during today’s call are qualified by those risk factors. Despite the company’s best efforts, actual results may differ materially from expectations.

So information shared on this call should be considered current as of today only. Please remember that the company isn’t responsible for updating any forward-looking statements, whether as a result of new information or due to future developments. During today’s call, there will also be references to several of Cumberland’s marketed brands. Full prescribing and safety information for each brand, is included on the individual product websites and you can find links to those sites on the corporate website at www.cumberlandpharma.com. The company will also be providing some non-GAAP financial measures with respect to its performance. An explanation and reconciliation to GAAP measures can be found in the financial tables of the earnings release that was issued earlier this afternoon.

If you have any questions, please hold them until the end of the call, at which point we’ll be happy to answer them. Management is also prepared to hold a follow-up conversation after the call, if you prefer. With that introduction, I’ll turn the call over to Cumberland’s Chief Executive Officer, A.J. Kazimi.

Q&A Session

A.J. Kazimi: Thank you, Molly and good afternoon everyone. We do appreciate you joining us today as we share how the year is going. As Molly mentioned during this call, we’ll provide both the company update as well as a review of our financial results for the third quarter 2024. So let’s get started. There are a number of positive developments here at Cumberland which we’ll discuss today that bolster, our optimistic view about the company’s future outlook. During the quarter our line of FDA-approved brands provided $9.1 million in net revenue which included solid performance from Kristalose from Caldolor and Sancuso. But unfortunately, Vibativ was impacted by an inordinate amount of product returns and by shipment delays at the end of the third quarter all of which resulted from Hurricane Helene.

Furthermore, two manufacturing facilities that supply much of our country’s IV fluids were damaged by that storm. That created a fluid shortage and has impacted sales of Vibativ which is provided in lyophilized powder and needs to be reconstituted with an IV fluid before administration. Therefore, we continue to believe our brand performance is best measured on an annual basis. Our September ending balance sheet included $77 million in total assets $17.5 million in cash and investments total liabilities of $52 million and shareholders’ equity of $25 million. With that financial overview I’d like to next share several updates regarding our products including a number of growth opportunities. We continue to see that Kristalose, our prescription strength laxative performs best in states where we have Medicaid coverage.

Today I’m pleased to report that several more states have now added Kristalose to their Medicaid plans and we’ll work to increase awareness of that coverage. Regarding Sancuso, our oncology support medication, we introduced several new patient-oriented programs for the product during the summer and we also continue to see the favorable impact of our recently expanded oncology sales division. Turning next to Vibativ, our potent antibiotic, that features a unique dual mechanism of action specifically designed to address drug-resistant bacteria. We therefore believe that Vibativ has the potential to help many patients, amid the growing global resistance crisis that was recently highlighted in a report from the World Health Organization. Vibativ should also benefit from the initiatives underway to register and launch the product in new international markets.

And in fact, the product is now approved in Saudi Arabia with launch plans well underway for that country. We also continue to pursue new clinical data to expand the use of our products and the patients, who can benefit from them. For example, there are several such initiatives underway for Caldolor, our intravenous ibuprofen product approved for the treatment of pain and fever in adults, children and recently newborns. We just announced the publication of a new real-world outcomes research study comparing Caldolor to its key competitor, Ketorolac. This extensive analysis evaluated 17 million patient records and selected over 150,000 adult and pediatric patients who received either Caldolor or Ketorolac. The results provide compelling evidence that Caldolor is associated with a significantly reduced incidence of adverse drug reactions and also improved health care utilization — we believe these important new findings underscore Caldolor’s potential to improve patient care by reducing their treatment complications, while also deliver potential savings for health care systems through decreased hospital readmissions and shortened treatment times.

Caldolor is currently approved and being sold in Australia and South Korea and we believe there’s an opportunity to increase the international contribution to our business. Today, I’m pleased to announce that our newest partner in Mexico, PiSA Pharmaceutical, one of the largest established pharma companies in that country has completed the submission of the approval dossier to Mexico’s regulatory agency for the product registration in that country. So with that, financial update and operational overview, I’d now like to turn to Todd Anthony, Cumberland’s Vice President, Organizational Development, to further discuss both our brands and our team. Todd?

Todd Anthony: Thank you, A.J. I’d like to start with an overview of our customer-facing organization. We now have a total of 50 individuals across the country interacting with the medical community in support of our FDA-approved medicines. Our sales professionals are organized into three national divisions with the hospital sales group calling on key institutional accounts in support of Caldolor and Vibativ, our field sales division focusing on select office-based physicians featuring Kristalose and our recently expanded Cumberland Oncology division, which cover cancer clinics promoting our Sancuso product. These 3 sales divisions are augmented by our national accounts and our field-based medical teams. We also have two co-promotional partnerships that help bring Kristalose to additional physicians and their patients.

Next, I’d like to share some more insight regarding our brands Vibativ is our potent intravenous antibiotic designed for difficult-to-treat infections such as hospital-acquired and ventilator-associated pneumonia as well as complicated skin and skin structure infections caused by certain gram-positive bacteria. A new report from the World Health Organization, which A.J. mentioned, found that antimicrobial resistance is becoming an urgent global health and socioeconomic crisis. Further, they noted that the worldwide rise in antibiotic resistance poses a significant threat, diminishing the effectiveness of many common antibiotics used widespread against bacterial infections. And according to a recent article in Lancet, the global number of deaths from antimicrobial resistance is expected to reach nearly 2 million by 2050.

Unlike many antibiotics that are losing the battle to fight bacteria, Vibativ’s unique dual method of action was specifically designed to address drug-resistant bacteria. We therefore believe it has life-saving potential to help many patients amid the growing antibiotic resistance crisis. To reinforce this message, we are conducting a series of infectious insights discussions with infectious disease experts and disseminating the results across the country. These video vignettes share the opportunity to use Vibativ as a solution for select patient types where other products have failed. Additionally, in June, antimicrobial agents and chemotherapy published a study featuring Vibativ as an effective treatment for anthrax inhalation, the most dangerous form of those infections.

Researchers highlighted Vibativ’s potential as an alternative therapy if anthrax bacteria develop resistance to existing antibiotics. Meanwhile, recall that we launched a new smaller package for our Vibativ product this summer. This additional presentation is designed to overcome a barrier at smaller hospitals and infusion centers that use less of the product at one time, allowing them to better manage their costs and the workflow associated with the product. Now, turning to our prescription strength laxative Kristalose, which is provided in a convenient pre-measured powder dose that dissolves quickly in just four ounces of water, resulting in a clear taste-free and grit-free solution. We continue to see strong performance in states where we have Medicaid coverage such as, Texas and New York.

And we’re excited to share today that Kristalose is now also covered by certain Medicaid plans in Virginia, Louisiana and Maine. Also as a reminder, we recently launched a campaign featuring the American Gastroenterological Association’s guidelines that include Kristalose, as a first-line treatment option for opioid-induced constipation. We believe this important recommendation will support the use of Kristalose, in patients suffering from these side effects of opioid medications. Now let’s shift to Caldolor, our intravenous ibuprofen product. In April, we announced the publication of a special report compiling and evaluating the growing amount of data supporting the use of Caldolor, as a standard of care for the treatment of pain and fever in adults, children and infants.

Pain management has become one of the most common health care problems in the United States, and comprehensive multimodal pain regimens have become key in preventing pain and optimizing pain control, while reducing the need for opioids. A nonsteroidal, anti-inflammatory drug like Caldolor, can provide a cornerstone for many treatment protocols. We are encouraged by the substantial database emerging from our studies in patients of all ages, which was featured in this special report. With its new pediatric labeling cleared with the FDA last year, Caldolor is the only non-opioid product approved to treat pain in infants that’s delivered by injection. We’re very pleased to have further expanded the product’s labeling for use in patients, of nearly all ages.

We are featuring Caldolor through sales and marketing initiatives, highlighting this new indication, resulting in growing use of the product in our country’s children’s hospitals. We were disappointed to learn that CMS has issued guidance that did not include Caldolor as a non-opioid product, eligible for special Medicare reimbursement. In fact, it appears that they are not going to include any new products for such coverage. We believe that the CMS position is not consistent with the intent of the NOPAIN legislation, designed to address cost barriers for non-opioid products. Therefore, we will continue to advocate for Caldolor’s coverage and evaluate alternatives for our next course of action. Recall, it took several applications to obtain the FDA fee reimbursement, a couple of years ago before we were successful.

We’ll be persistent in pursuing this Caldolor designation as well. Turning next to Sancuso, which is the first and only FDA-approved prescription patch, for the prevention of nausea and vomiting in patients, reserving certain types of chemotherapy. During the third quarter, we launched a new sampling program that broadens access to the product, allowing more patients to try Sancuso and experience its benefits. We also introduced a new hub service capability to provide enhanced patient support, ensuring that they receive comprehensive assistance throughout their treatment journey. Meanwhile, our new manufacturing and distribution partner has successfully produced Vaprisol in their facility. Vaprisol is the first and only intravenously administered, vasopressin receptor antagonist.

It’s used to raise serum sodium levels in hospitalized patients with hyponatremia, which is the most common electrolyte disorder among these patients. We look forward to relaunching the brand, once the FDA clears our submission to manufacture it in this new facility. That completes my updates for today, and so I’ll turn it back to you A.J.

A.J. Kazimi: Thank you, Todd. I’d now like to take a few minutes, to provide an update on our new product development activities. Through our work at Cumberland Emerging Technologies or CET, we continue to build a long-term pipeline of innovative new biopharmaceutical products. And today, I’ll share two recent developments among the programs CET is supporting. First, CET is developing a new treatment for delirium, a growing neurological condition, seen in hospitalized critical care patients. I’m pleased to share that enrollment has concluded and top line results are now available for the MENDING trial, a Phase 2 pilot study evaluating the safety and efficacy of a new treatment for delirium in critically ill patients. The study was conducted in partnership with Vanderbilt University Medical Center and it was funded by the National Institutes of Health.

The primary endpoint was the safety of this new treatment, which was successfully met as it was well-tolerated in these patients. The study also demonstrated that the new treatment was associated with fewer days of delirium, reduced use of antipsychotics opioids and sedatives, and the decrease in patients experiencing comas. While these efficacy results were not statistically significant given the limited number of patients treated in this pilot study, the researchers concluded that the findings were indeed clinically meaningful and support continued product development. Delirium is the most common presentation of neurologic dysfunctions in critically ill patients and it affects a sizable percentage of patients admitted to our country’s intensive care units.

The progression of delirium is associated with several poor outcomes including increased length of hospital stays, long-term cognitive deficits, additional hospital costs, and impaired quality of life and even mortality. Despite the prevalence and impact of delirium, there are currently no FDA-approved products for the prevention or treatment of this problem, highlighting an unmet medical need for these patients. CET has developed a proprietary formulation of the compound tested in the study and the program’s next steps include a potential pivotal trial that will be discussed next with the FDA. Today, I’m also pleased to announce another CET product this one designed to locate sites of internal bleeding. The program is also in collaboration with researchers at Vanderbilt and was initially funded by a small business grant from NIH that was secured by CET.

Following the initial activities to design and successfully test this new product during the third quarter, CET entered into an agreement with a corporate partner to fund all the remaining development work and then commercialize this biologic. Most clinically significant internal bleeding occurs in the gastrointestinal tract. Current treatment for this GI hemorrhage typically involves a colonoscopy or a CT scan. However a colonoscopy’s effectiveness can be diminished if the bleeding isn’t active or if there’s too much blood blocking the view. And CT scans need a certain level of active bleeding to be accurate. This new technology represents a paradigm shift as it is able to identify blood clots that have already formed allowing for the potential to pinpoint GI bleed sites even after the bleeding is stopped.

By precisely identifying the source of bleeding this technology could reduce the need for more invasive or repeated diagnostic procedures. And that translates to faster diagnosis, reduce health care costs, and less physical strain on patients. The next steps in this program include scaling up product supplies, while conducting the remaining testing needed to file and obtain FDA clearance for an investigational new drug application paving the way for an initial patient study. Meanwhile development also continues to progress our ifetroban product candidate, a selective thromboxane receptor antagonist through a series of clinical programs. To-date ifetroban has been administered to nearly 1,400 subjects, demonstrating excellent tolerability and a strong safety profile.

We currently have three Phase 2 clinical studies underway assessing ifetroban in patients that address unmet medical needs. Our latest program, now rapidly enrolling patients at medical centers, focuses on idiopathic pulmonary fibrosis, the most common form of progressive fibrosing interstitial lung disease. This FIGHTING FIBROSIS study is designed to enroll a total of 128 patients and up to 20 medical centers of excellence throughout the United States. Meanwhile, enrollment is nearing completion in our two other company-sponsored Phase 2 clinical programs with ifetroban. The first targets patients with systemic sclerosis or scleroderma, a debilitating autoimmune disorder characterized by widespread fibrosis of the skin and internal organs.

And the second is evaluating ifetroban in patients with a cardiomyopathy linked to Duchenne Muscular Dystrophy or DMD, which is a rare a fatal genetic neuromuscular disease that leads to the weakening of the skeletal, heart and lung muscles. Recall, we’ve now received over $1 million in grant awards from the FDA to support this muscular dystrophy study. Enrollment in the younger patient cohort has been completed and we’re now working to address enrollment in the older patient group. Now recently, we applied for two FDA designations — special designations for this muscular dystrophy product candidate. The first is Orphan Drug Designation which is granted to products that address rare or orphan diseases. Today, I’m very pleased to announce that the FDA has granted this orphan drug request for our DMD program.

Such designation can result in reduced approval requirements, an expedited FDA review process waiver of FDA filing fees and an extended exclusivity after product approval. Now we’ve also applied for Rare Pediatric Disease Designation which is given to products that address diseases that primarily affect children. Upon FDA approval, this designation may result in a valuable priority review voucher from the FDA that can be used to accelerate approval of another product. And today, I’m also very pleased to announce that the FDA has indeed granted this rare pediatric disease request for our ifetroban DMD program. We expect to close these two ifetroban studies this year and we then look forward to sharing results from the studies before deciding on the best development path for ifetroban, our first new chemical entity, which we believe has the potential to benefit many patients.

So with that update on our new product development programs, I’d now like to turn it over to our Chief Financial Officer, John Hamm to review our third quarter financial results. John?

John Hamm: Thank you, A.J. For the three months ended September 30, 2024 net revenue from continuing operations were $9.1 million. Net revenue by product for the third quarter included $3.6 million for Kristalose, $2.6 million for Sancuso, $1.3 million for Caldolor, and $1 million for Vibativ. As mentioned sales during the quarter were impacted by a halt in shipments due to the hurricane and there were also an inordinate amount of product returns recorded in Q3, which we do not expect to continue. Total year-to-date net revenues were $27 million. Year-to-date product revenues totaled $10.9 million for Kristalose, $6.6 million for Sancuso, $5.1 million for Vibativ and $3.6 million for Caldolor. Given the fulfillment of late September orders in October, we continue to believe it’s important to evaluate our brand performance on an annual basis.

Our gross margin improved during the quarter to 85%. Turning to our expenditures. Total operating expenses for the third quarter were $10.8 million, a $1 million improvement over the prior year period reflecting our efforts to reduce costs as we strive for sustained profitability. Year-to-date expenses totaled $32 million, a $1.5 million savings from the prior year period. Net loss for the quarter was $1.5 million and when the non-cash expenses are added back, the resulting adjusted loss was $0.26 million or $0.02 a share. Also please note, that the adjusted earnings calculations do not include the additional benefit of the $0.1 million of Vibativ cost of goods during the third quarter. Those goods represent a non-cash item as they were received as part of the Products acquisition.

We’re pleased to see that the additions of Vibativ and Sancuso to our product portfolio continue to positively impact our financial performance. Cash contributions from each of these brands have now exceeded their acquisition costs, and therefore, going forward, all cash flow generated by each brand will represent a return on our investment. Turning to our balance sheet. As of September 30, 2024, we had $76.7 million in total assets, including $17.5 million in cash and cash equivalents. Liabilities totaled $52.3 million, including $16 million on our credit facility. Total shareholders’ equity was $24.8 million at the end of the quarter. We continue to hold a bank line of credit, which provides up to $20 million in capital and provides the ability for Cumberland to increase the amount to $25 million under certain conditions.

The interest rate is based on benchmark term SOFR and is subject to a financial covenant determined on a quarterly basis. Meanwhile, we continued our corporate share repurchase program, buying a total of 72,000 shares during the third quarter and repurchasing 275,000 shares year-to-date. These purchase included those on the open market and those needed to fund the taxes associated with employee vested restricted shares. We are also continuing the process of implementing new trading plans for our Board members, who will purchase Cumberland shares throughout the year to increase their holdings in the company. Lastly, I’d like to note that Cumberland continues to hold over $52 million in tax net operating loss carryforwards, primarily resulting from the prior exercise of stock options.

And that completes our financial report for the third quarter of 2024. Back to you, A.J.

A.J. Kazimi: Thank you, John. Well, overall, it’s been a successful year-to-date, and we’re encouraged by our progress. It’s particularly good to see the steady performance of our Kristalose business and the number of states adding the product to their Medicaid formularies. And we continue to see the positive impact of our sales and marketing initiatives that are now supporting the growth of Sancuso. We have more work to do with Vibativ, but note that the brand will be favorably impacted by new international shipments. And we also believe the recent publication of our new Caldolor clinical data can have a meaningful impact on the brand’s future growth. We’re also encouraged with the progress of our clinical studies evaluating patients with ifetroban to address unmet medical needs and believe it has the potential to benefit many patients.

And we’re pleased to share the two new programs emerging from CET, including the positive top line study results for a new delirium treatment as well as the corporate partnership for the development of a new GI imaging product. Lastly, I’d like to note that we have an active acquisition initiative underway as we seek select FDA-approved brands to add to our portfolio and bolt-on to our infrastructure. As we move into the remainder of the year, our dedicated team will continue in their efforts working together to provide unique products that improve the quality of patient care. Please note that shipments of our brands are typically strongest in the fourth quarter and we look forward to our next report, which will provide our full year performance.

With that report, let’s now open the call to any questions. Operator, please proceed.

Operator:

A.J. Kazimi: Well, if there’s no questions, I just want to thank everyone for joining today’s call. We do understand that many of you prefer a private discussion with management. If so, just reach out, and we’ll be happy to get calls scheduled with you and hold such a discussion. And as always, we appreciate your time and interest in our company and we then look forward to providing another update in the coming months.

Operator: Thank you, sir. Ladies and gentlemen, that concludes today’s call. If you’d like to listen to a replay of the discussion, please visit the Investor Relations section on Cumberland’s website. I would like to thank you for your participation. You may now disconnect.