Earnings Call Transcript - CPIX Q4 2024

Operator, Operator

Good afternoon, and welcome to Cumberland Pharmaceuticals Fourth 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 go ahead.

Molly Aggas, Account Supervisor

Hello, everyone and thank you for joining us today. This afternoon, Cumberland issued a press release announcing its fourth quarter and annual financial results with the year ending December 31, 2024. The release also provided an operational update including key recent developments. 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. There are many factors that could affect Cumberland’s future results, including natural disasters, economic downturns, public health epidemics, international conflicts, trade restrictions, 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. Also 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 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 which was issued earlier this afternoon. If you have any questions, please hold them until the end of the call, at which point we will be happy to answer them. Management is also prepared to hold a follow-up conversation after the call, if you prefer. So with that introduction, I’ll turn the call over to Cumberland’s Chief Executive Officer, A.J. Kazimi.

A.J. Kazimi, CEO

Thank you, Molly, and good afternoon everyone. We do appreciate your joining us today as we share financial results and provide an update on our progress here at Cumberland. As Molly mentioned during the call, we’ll review both fourth quarter and full year 2024 financial performance and we’ll also share a company update, which will include some highlights from a successful 2024 as well as some key recent developments. So let’s begin. For those that have been following Cumberland over the years, recall our business strategy has been to acquire and commercialize a portfolio of branded pharmaceuticals that we can grow through our dedicated sales organization domestically and through our partners internationally. We’ve also built an internal development capability, which enables us to develop and register new medicines, establishing a long-term pipeline for our business. And that pipeline is enhanced through our Cumberland Emerging Technologies, or CET division, which is a joint initiative mainly with Vanderbilt University and their prominent academic research center. While despite various headwinds over the past several years, we have not deviated from these strategies; in fact, we continue to move forward by acquiring new brands, expanding our sales organization, advancing our development pipeline, securing a series of FDA approvals, and broadening our reach through a series of international partnerships. And as you’ll see in our comments today, that steadfast approach is gaining traction and it’s now being recognized by the investment community for the dramatic growth in our share valuation. We recently reported significant progress on several fronts. We announced positive Phase 2 study data evaluating our ifetroban product candidate in patients with Duchenne muscular dystrophy. That breakthrough had a dramatic impact on our share price and trading volumes, and I believe it’s the first time we’re seeing investors beginning to recognize the value of our development capabilities and pipeline. And we learned that our potent antibiotic, Vibativ, received approval by the regulatory authorities in China, the world’s second largest pharmaceutical market. And that milestone adds to our growing international business as we also began shipping Vibativ to Saudi Arabia and completed the needed product training to launch the product there. Before discussing these achievements in more detail, I’d like to take a few minutes and share a number of key developments during 2024 that enabled us to make significant progress in advancing our newly refined mission of working together to provide unique products that improve the quality of patient care. During 2024, we announced the publication of new real-world outcomes research involving 150,000 patients, which compared our ibuprofen injection product, Caldolor, to its key competitor Ketorolac. The results provided compelling evidence that Caldolor is associated with a significantly reduced incidence of adverse drug reactions and can also help provide cost savings through improved healthcare system utilization. Meanwhile, we reported the FDA approval of a supplemental new drug application for Acetadote, our IV treatment for preventing or lessening the liver injury that occurs after ingestion of potentially toxic quantities of acetaminophen. The new streamlined approach reduces the frequency of medication errors and potentially serious non-allergic anaphylactoid reactions without compromising the effectiveness of Acetadote. By simplifying the product’s dosing regimen, healthcare providers can administer this lifesaving treatment more efficiently, potentially improving patient outcomes. And thirdly, we received both orphan drug designation and rare pediatric disease designation from the FDA for the use of our ifetroban product in treating Duchenne muscular dystrophy heart disease, reflecting its potential significance and helping with this devastating condition. Turning to the Q4 financial results, I’m pleased to report our portfolio of FDA approved brands delivered strong net revenues of $10.4 million, which represented an 11.6% increase over the prior year period. So with that overview, I’d now like to turn it over to Todd Anthony, Cumberland’s Vice President, Organizational Development, to further discuss both our brands and our organization. Todd?

Todd Anthony, Vice President, Organizational Development

Thank you, A.J. I’ll begin with an update on our major brands. Vibativ is our powerful intravenous antibiotic aimed at difficult-to-treat infections like hospital-acquired pneumonia, ventilator-associated pneumonia, and complex skin infections caused by certain drug-resistant gram-positive bacteria. A report from the World Health Organization in 2024 highlighted that antimicrobial resistance is an urgent crisis affecting global health and the economy. It also warned that the rising rates of antibiotic resistance threaten the effectiveness of many common antibiotics against prevalent bacterial infections, estimating that global deaths from antimicrobial resistance could reach nearly 2 million by 2050. Unlike many antibiotics losing their effectiveness, Vibativ’s unique dual action was specifically designed to combat drug-resistant bacteria. We believe it has lifesaving potential for patients facing this growing crisis, especially given the fragile state of new antibiotic developments. To support this message, we are holding a series of discussions with infectious disease experts and sharing their insights nationwide. These video presentations illustrate how Vibativ can be a viable solution for certain patients where other treatments have failed. In 2024, a study within the field of antimicrobial agents in chemotherapy evaluated Vibativ as a possible new option for anthrax infections, particularly given concerns about existing antibiotics becoming ineffective against anthrax bacteria. Researchers found that Vibativ could emerge as an effective treatment for anthrax, especially if resistance develops against current antibiotics. Moving on to Kristalose, our prescription-strength laxative that comes in a convenient premeasured powder format, dissolving quickly in just 4 ounces of water for a clear, tasteless solution. We've observed that the brand performs best in states with Medicaid coverage like Texas, New York, and Wisconsin. In 2024, we reported Kristalose receiving coverage in specific Medicaid plans in Virginia, Louisiana, and Maine. We are implementing initiatives to boost our presence in these regions, believing this new coverage is aiding product growth. Additionally, we launched a campaign highlighting the American Gastroenterological Association’s guidelines that recognize Kristalose as a first-line treatment for opioid-induced constipation, which we expect will enhance its use among patients suffering from opioid-related side effects. Next, let’s discuss Caldolor, our intravenous ibuprofen product. In March, a special report on Caldolor was published in various medical news outlets, showcasing the growing evidence for its use as a standard pain and fever treatment. The findings indicated that Caldolor is both a safe and effective option for treating pain and fever across all age groups. As A.J. mentioned, we also shared new real-world outcomes research demonstrating Caldolor's safety and healthcare resource benefits compared to its main competitor, Ketorolac, in both adult and pediatric patients. This study, published in Frontiers of Pain Research, presents strong evidence that Caldolor significantly reduces adverse drug reactions and enhances healthcare utilization compared to Ketorolac. With the FDA’s approval of its new pediatric labeling, we have expanded its application to patients of nearly all ages. Caldolor is now the only non-opioid injectable product approved for pain management in infants. We are promoting Caldolor through targeted sales and marketing efforts, leading to increased usage in children's hospitals. Now, regarding Sancuso, the only FDA-approved transdermal patch for managing chemotherapy-induced nausea, we successfully transferred manufacturing to a new FDA-approved facility. We have also introduced our newly packaged product and expanded our oncology sales division, which has positively influenced our business. Additionally, we launched a new sampling program to increase patient access to Sancuso, enabling more patients to experience its benefits. We have also implemented new hub services to provide better patient support throughout their treatment journey. Currently, we have 50 representatives nationwide engaging with the medical community to support our FDA-approved products across three national sales divisions. Our hospital sales division targets key institutional accounts for Caldolor and Vibativ, while our field sales division focuses on select physicians for Kristalose and promotes Caldolor to outpatient surgery centers. Lastly, our expanded Cumberland Oncology division works with cancer clinics to promote Sancuso. That wraps up my updates for today, and I’ll now turn it back to you, A.J.

A.J. Kazimi, CEO

Thanks, Todd. Now I’d like to provide an update on our product development activities. We continue to progress our pipeline of innovative products designed to improve patient care and their quality of life. Our ifetroban product candidate, a potent and selective thromboxane receptor antagonist, is being evaluated in Phase 2 clinical trials for patients with a series of unmet medical needs. It’s now been dosed in nearly 1,400 subjects and has been found to be safe and well tolerated in those individuals, resulting in an outstanding safety database. We recently completed a Phase 2 study in patients with cardiomyopathy associated with Duchenne muscular dystrophy, or DMD, a rare fatal genetic neuromuscular disease which results in the deterioration of the skeletal, lung, and heart muscles. This marks a breakthrough for these patients as it’s the first successful Phase 2 study that specifically targeted the cardiac complications of their condition. Recall a previous study conducted at Vanderbilt University Medical Center demonstrated that ifetroban is protective against cardiomyopathy in several preclinical models of muscular dystrophy and those results were published in the Journal of the American Heart Association. And based on those promising findings, we became the first recipient of an FDA Office of Orphan Products clinical trial grant for DMD, which provided us with over $1 million in funding for our Phase 2 clinical study. The trial enrolled 41 DMD patients who received either a low dose of ifetroban 150 milligrams a day, a high dose of ifetroban at 300 milligrams a day, or placebo. The study’s primary endpoint was improvement in the heart’s left ventricular ejection fraction or LVEF. Key findings from the trial include that compared to the placebo group, high dose ifetroban treatment resulted in an overall 3.3% improvement in LVEF. That difference resulted from the high dose ifetroban group showing a 1.8% increase or improvement in LVEF, while the placebo group showed the expected decline which was 1.5%, again a difference of 3.3%. Compared with propensity matched natural history controls, the difference was even more pronounced with high dose treatment providing a significant 5.4% overall improvement in LVEF. As the natural history control patients experienced a larger 3.6% decline and both doses were well tolerated with no serious drug-related events. Recall late last year ifetroban received both Orphan Drug Designation and Rare Pediatric Disease Designation from the FDA, highlighting its potential significance in treating this devastating condition. Other products for DMD patients typically target their neuroskeletal impact of the disease; importantly, our ifetroban program is designed to address the patient’s cardiomyopathy, which is a thickening of the muscle that weakens the heart. Therefore, our product is applicable to all DMD patients targeting a cardiovascular condition that often leads to their death. Next steps for this program include completion of the full data analysis and the study report in preparation for a meeting with the FDA to determine the remaining path for the product’s development and commercialization. Meanwhile, our two other company-sponsored Phase 2 clinical programs are also well underway. The first, now nearing completion, involves patients with systemic sclerosis or scleroderma, a debilitating autoimmune disorder characterized by diffuse fibrosis of the skin and internal organs. And we’re also developing ifetroban to treat idiopathic pulmonary fibrosis, the most common form of progressive fibrosic interstitial lung disease. Recent studies have shown that ifetroban can both prevent and enhance resolution of lung fibrosis in several preclinical models. In addition to these sponsor studies I’ve covered, there are also other preclinical and pilot patient studies of ifetroban underway, including several investigator-initiated trials. You see, we believe ifetroban, our first new chemical entity, has the potential to benefit many patients. We look forward to sharing our further progress with the DMD program as well as results from our other company-sponsored studies as they emerge. Meanwhile, through our work at Cumberland Emerging Technologies or CET, we’re continuing to build a long-term pipeline of innovative new biopharmaceutical products. Last year we announced two developments among the programs that CET is supporting. We announced favorable top-line results from an investigator-led Phase 2 study evaluating our new treatment for delirium in critically ill patients. CET also entered into a development agreement with a corporate partner to fund the development of a new product designed to locate the site of internal bleeding in the digestive tract. We believe this innovation can lead to faster diagnosis, reduced costs, and less trauma to the patient. 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 2024 financial results.

John Hamm, CFO

Thank you, A.J. For the three months ending December 31, 2024, net revenue from continuing operations were $10.4 million, which represented a $1.1 million or 11.6% increase over the prior year period. Net revenue by product for the fourth quarter of 2024 included $4.4 million for Kristalose, $2.4 million for Sancuso, $2.1 million for Vibativ, and $1.4 million for Caldolor. As a reminder, due to quarterly fluctuation in our customers' purchases, we believe our performance should be assessed based on annual sales results. With that in mind, I’m pleased to report that net revenue for the full year 2024 were $38 million. Full year product revenue totaled $15.3 million for Kristalose, $9 million for Sancuso, $6.9 million for Vibativ, and $5 million for Caldolor. Turning to our expenditures, total operating expenses for the fourth quarter were $12.3 million compared to $15.5 million for the prior year period. Total operating expenses for 2024 were $44.3 million, a $5 million improvement down from $49.1 million during the prior year. The net loss was approximately $1.9 million for the fourth quarter and $6.5 million for the full year. However, when non-cash expenses are added back, the resulting adjusted loss for the year is reduced to $1.5 million or $0.11 a share. Also, please note that the adjusted earnings calculations do not include the additional benefit of the $0.3 million of Vibativ and Sancuso cost of goods during the fourth quarter. That benefit was $1.3 million for the full year of 2024. Those goods were received as part of each product’s acquisition. As a reminder, we’re pleased to see that the additions of Vibativ and Sancuso to our product portfolio continue to positively impact our financial performance. As a result of the Vibativ acquisition, a total of $34 million in new assets were added, including approximately $21 million in inventory, $12 million of intangible assets, and $1 million of goodwill. The estimated value of those assets was $12.2 million at the end of 2024. The financial terms for the Vibativ transaction included a $20 million payment upon closing and a subsequent $5 million milestone payment. We also continue to provide royalties tied to product sales. Sancuso added a total of $19 million in new assets, including approximately $4 million in inventory and $14 million of intangibles. The estimated value of those assets was $11 million at the end of 2024. We provided $13.5 million at the closing for the Sancuso acquisition, and we paid $1.5 million in milestone payments. There are also royalties we can pay based on the brand sales. Turning to our balance sheet, as of December 31, 2024 we had $76 million in total assets, including $18 million in cash and cash equivalents. Liabilities totaled $53 million including $15.3 million on our credit facility. Total shareholders’ equity was $23 million at the end of 2024. 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 terms so far and is subject to one financial covenant determined on a quarterly basis. During 2024, we continued our corporate share repurchase program and through the end of December, we repurchased a total of 339,000 shares. Those repurchases include those on the open market as well as those needed to fund the taxes associated with employee vested restricted shares. We also continue the process of implementing new trading plans for our Board members who purchased Cumberland shares throughout 2024 to increase their holdings in the company. Lastly, I’d like to note that Cumberland continues to hold $53 million in tax net operating loss carryforwards, primarily resulting from the prior exercise of stock options. And that completes our financial report for the final quarter and year-end of 2024. Back to you, A.J.

A.J. Kazimi, CEO

Thank you, John. Well, overall 2024 was a successful year as we continue to add key components to our foundation that can drive further value creation. We’re encouraged by the progress of our clinical studies evaluating ifetroban in patients with unmet medical needs and we believe the product has the potential to benefit many patients. Given the large market those clinical programs are addressing, success in just one can potentially transform our company. It’s also been encouraging to see the literature featuring the benefits of our Caldolor product as well as the favorable international developments, which can result in a significant expansion of our Vibativ business. We continue to see the positive impact of our sales and marketing initiatives that are now supporting the growth of Sancuso and it’s been good to see the growing number of states adding Kristalose to their Medicaid formularies. Further, I’d like to remind you we have an active acquisition initiative underway as we continue to seek additional FDA approved brands that complement our portfolio and can be bolted onto our infrastructure. And finally, we expect our momentum to continue as we are still in the early stages of capitalizing on the numerous opportunities available to us. We’d often point out in previous updates is that while many of the positive developments announced didn’t impact those quarters revenues, they could become important contributors to future shareholder value creation, and those predictions are now coming to fruition just as we anticipated. Our ongoing success can be driven by continued momentum from our improved brands, increased contributions from international partnerships, ongoing advancement of our clinical development programs, and the potential addition of select acquisitions. Importantly, Cumberland remains in a solid financial position which provides us with the ability to execute on our strategy and our objectives. We expect to deliver double-digit revenue growth this year as well as positive cash flow from operations. We’re entering an exciting time for our company and with that report, we’ll now open the call to any questions. Operator, please proceed.

Operator, Operator

Thank you, everyone. That wraps up our presentation and we are now ready to take any questions.

A.J. Kazimi, CEO

Well, if there’s no questions, that’s fine. Just want to thank everybody for joining us for today’s call. We do understand many of our shareholders prefer a private discussion with management, and if so, please reach out and we’ll be happy to get such a call scheduled with you and hold such a discussion. As always, we appreciate your time and interest in Cumberland, and we look forward to providing another update in the coming months.

Operator, Operator

Thank you, sir. Ladies and gentlemen, that concludes today’s call. If you would 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.