Edited minutes of the ADMP conference call or presentation from November 12 to November 19, 10:00 p.m. (GMT)

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Del Mar Jan 4, 2020 (Thomson StreetEvents) – Edited transcript of the conference call or presentation on the outcome of Adamis Pharmaceuticals Corp. Tuesday, November 12, 2019, 10:00 p.m. GMT

* David J. Marguglio

Adamis Pharmaceuticals Corporation – Senior Vice President, Chief Business Officer & Director

* Dennis J. Carlo

* Robert O. Hopkins

* Ronald B. Moss

Hello and welcome to the Adamis Pharmaceuticals Corp. conference call for the third quarter of 2019. Today’s conference is being recorded. At this point I would like to send the conference to Dr. Dennis Carlo, President and CEO, handed over. Please go ahead, sir.

Dennis J. Carlo, Adamis Pharmaceuticals Corporation – President, CEO and Director [2]

Thank you very much. I am Dennis Carlo, President and CEO of Adamis. Thank you for joining us today for the update and welcome to our shareholders, analysts and all new Adamis customers. Our CFO Rob Hopkins joins me today; our chief medical officer, Dr. Ronald Moss; and our chief business officer, David Marguglio.

The format for this call again consists of a few comments from management followed by an opportunity for some questions. This request is broadcast on the Internet and can be repeated in the investor area on our website adamispharmaceuticals.com.

I would like to remind everyone that in today's call, we will make certain forward-looking statements about our business that are based on current expectations and information. These statements apply only to today. Unless required by law, we assume no obligation to update the forward-looking statements made in the future.

Of course, forward-looking statements involve risks and uncertainties, and our actual results may differ materially from those expected in today's forward-looking statements. For more information about factors that may affect our business and financial performance, please see our last Annual Report on Form 10-K with the Securities and Exchange Commission and other filings with the US Securities and Exchange Commission. These are available on the SEC's website.

I would now like to start a discussion about ZIMHI. I know that the topic is on everyone's lips and the regulatory status of our high-dose naloxone product ZIMHI. As we indicated in a November 4 press release, on October 31, the PDUFA date, the FDA delivered neither tricks nor treats. [I can honor for] Anything positive or negative, but instead believing that the agency is simply taking more time to review the file.

The company believes that a high-dose naloxone product is needed immediately and obviously, and we continue to strive to bring ZIMHI to the market. Discussions with potential trading partners for ZIMHI have been going on for several months, and I expect we can announce our trading plans in the near future either before or very soon after approval is received.

Contact SYMJEPI. At our investor call in the second quarter of August, I highlighted some of the initiatives Sandoz was taking to fully implement SYMJEPI. Sandoz has implemented several since July. However, your rollout was slower than expected. Visiting the best prescribing allergy sufferers is critical to maximizing SYMJEPI's success. We believe that the Sandoz team is now addressing allergists and general practitioners in their commercial endeavors.

In addition, the symjepi.com website went live earlier this month and now supports the needs of allergy sufferers with online resources such as administration instructions, product brochures, guidelines for doctor discussions and action plans for anaphylaxis. The website also links patients to the PillPack program, an Amazon company. In this way, the patient can have SYMJEPI conveniently delivered to their home.

We have also watched advertisements, including targeted electronic marketing and participation in the largest allergy and children's conferences. We expect the increased commercial activities to lead to an increase in sales at SYMJEPI. Adamis continues to trust the value of SYMJEPI. We are waiting for the activities recently launched by Sandoz to generate substantial sales.

At Adamis, we believe that briefing doctors, patients and caregivers in SYMJEPI is an important component for a successful start. As soon as they recognize the small size and ease of use and reliability of SYMJEPI, we believe that demand will follow.

Between ZIMHI and SYMJEPI, it seems like we're just waiting for others. But we continue to make progress on matters that we can control directly. In a few minutes I will be Dr. Ask Moss to describe how we continued to develop our pipeline while operating on a smaller R&D budget. Before that, our CFO Rob Hopkins will announce some highlights from our third quarter financials, including how we continue to increase sales and reduce costs.

Rob will also explain how some of our investments in the past year have enabled us to integrate new automation components into our device production lines, which are scheduled to go online in early 2020, and will more than double our potential production capacity and reduce costs for both SYMJEPI and ZIMHI.

We have also made progress in our out-licensing efforts for SYMJEPI outside the United States, where we signed an agreement with Emerge Health for Australia and New Zealand this quarter. Dave Marguglio will provide additional colors for this effort as well as for our ZIMHI sales process.

Before I hand it over to the other team members, I want to share my thoughts about the future. As I said on our last call, I firmly believe that Adamis is severely undervalued, and I still believe that Adamis is greatly undervalued. Once ZIMHI is approved, Adamis will have three FDA-approved products that can compete in large markets where we believe our products have competitive advantages and may save more lives.

I think all of this will lead to success and ultimately lead to a higher share price. The foundation on which sales can build has now been laid. The sale will exceed everything else. By the way, since I used the word Trump, I believe that President Trump has a legitimate interest in helping to eliminate the opioid crisis. More than 100 people die every day from the effects of the opioid problem, and I believe ZIMHI will have a positive impact on reducing this number.

I will now call our CFO Rob Hopkins to discuss the financial results.

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Robert O. Hopkins, Adamis Pharmaceuticals Corporation – Senior Vice President of Finance, CFO and Secretary [3]

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Thanks, Dennis. Before I go into the finance department, I would like to explain Dennis’s comment on manufacturing. We worked with our manufacturing partner to design and build a new line that included various forms of automation and other improvements over the current assembly line.

Now that we are finished, we will start converting SYMJEPI and finally ZIMHI to the new line. We believe that the profits and efficiency of the new product line will lead to a reduction in manufacturing costs, which we believe should pay for itself within 12 to 18 months, depending on the volume.

I would now like to highlight just a few points in this call and encourage everyone to review our Form 10-Q for further details and information.

First, sales increased 54% in the third quarter of 2018 to approximately $ 5.9 million and $ 3.8 million, respectively. Revenue increased approximately 52% from $ 10.9 million in the first nine months of 2018 to $ 16.6 million compared to the same period in 2019. This increase was due to growth in U.S. compounding and revenue-related expenses in Related to SYMJEPI.

Third quarter gross profit increased 25% from the third quarter of 2018 to approximately $ 1.9 million and $ 1.5 million, respectively. This increase was due to SYMJEPI and increasing margins in U.S. Compounding attributed.

Selling, general and administrative expenses decreased more than 24% in the third quarter compared to the second quarter of 2019, by $ 5.3 million and $ 7.0 million, respectively, and by 19% compared to the third quarter of 2018. The largest single contribution to the decline compared to the second quarter The equity compensation decreased until the third quarter.

Research and development costs decreased approximately 15.1% from $ 3.9 million in the third quarter of 2018 to $ 3.3 million compared to the same period in 2019. The decrease was mainly due to the reduction in the development costs of our product candidates. We assume that R&D expenses will continue to decrease in the fourth quarter of 2019.

Cash and cash equivalents were approximately $ 12.1 million at the end of the third quarter. The cash outflow from operating and investing activities decreased by almost 7% in the third quarter of 2019 compared to the second quarter of 2019. Our goal for the last quarter of 2019 is to keep the cash outflow from operating and investing activities in 2019 in the range of $ 3-4 million. If we meet our spending targets for the rest of 2019, this should mean a reduction in cash outflow from operating and investing activities of around 37% in 2018.

Assuming that we can achieve our goal of keeping net cash spending in the $ 3 million to $ 4 million range last quarter, we currently expect working capital to be around 9 to 12 months. Of course, there can be no guarantee that this will be possible. However, we believe that Adamis will have additional time to allow the operating business to generate sufficient cash flow to cover operating costs. Further details and information can be found in our Form 10-Q.

I hand it over to our Chief Medical Officer, Dr. Ron Moss, for an update on our regulatory and pipeline developments.

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Ronald B. Moss, Adamis Pharmaceuticals Corporation – Chief Physician [4]

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Thanks, Rob. I would like to provide an update to our high-dose naloxone injection product ZIMHI. Naloxone is an opioid antagonist and is considered to be an immediate administration treatment for the treatment of opioid overdoses.

Unintentional overdose of opioids continues to be a major public health concern in the United States, with stronger opioids such as fentanyl being a major driver of the current epidemic. For this reason, we believe that there is a public need for our higher dose ZIMHI product candidate.

As a reminder, we submitted an NDA for ZIMHI at the end of 2018 and the FDA has given us an action target for October 31, 2019. As Dennis just mentioned, we are still waiting for a decision on the agency's application.

We have completed two pharmacokinetic studies on ZIMHI that have been submitted to the FDA and we expect the results to be released soon. In the first study, we compared the intramuscular injection of 5 milligrams of ZIMHI with the intramuscular injection of 2 milligrams of EVZIO. The results showed significantly higher naloxone levels in the blood in the ZIMHI group than in the EVZIO group.

The second study, which was used as a comparison for the NDA, examined the pharmacokinetics of ZIMHI compared to a generic intramuscular dose of 2 milligrams. The results showed that ZIMHI had higher blood levels than the intramuscular dose of 2 mg. Most importantly, the naloxone levels in the ZIMHI group were significantly higher after just 2.5 minutes. This specific analysis was requested by the FDA.

We believe these are important results because the timing for a successful resuscitation after an opioid overdose is absolutely critical. Brain death occurs within minutes. The results of these studies suggest that ZIMHI is faster and more bioavailable compared to current intramuscular or intranasal doses of naloxone.

If our product is approved by the FDA, we believe that our high-dose candidate could be an important part (technical difficulties) of the dosage. As we discussed in our last quarterly call, we have slowed down the development of our other pipeline (technical difficulty).

In relation to our platform for dry powder inhalers, we are currently developing a fluticasone dry powder inhaler product candidate for the treatment of asthma. We plan to complete ongoing in vitro work by the end of the year to deliver the proof of concept. We believe that this proof-of-concept should support future efforts to out-license the product or find a partner who provides additional funding for further clinical development.

I would now like to introduce our Chief Business Officer, David Marguglio, to an update of the out-licensing efforts. David?

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David J. Marguglio, Adamis Pharmaceuticals Corporation – Senior Vice President, Chief Business Officer & Director [5]

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Good. Thank you very much, Ron. On October 1, we announced that we worked with Emerge Health to obtain regulatory approval and eventually commercialize SYMJEPI in Australia and New Zealand. We are also exploring other ways to market SYMJEPI outside of the United States. We are currently in discussions with multiple groups for areas outside the United States and will announce these partnerships as soon as they are completed.

We believe that, as Dennis suggested, we were late when we started finding a commercial partner for ZIMHI a few months ago. Unfortunately, I cannot – I cannot tell you the names of the companies in the process or the proposed business structures today.

If ZIMHI's approval is further delayed, this may delay the trade agreement. However, assuming that the FDA will make a positive decision in the coming weeks, I am confident that we will be able to announce a commercial distribution agreement shortly after approval.

Here too, our overarching goal remains to shorten the time from approval to commercial launch. Therefore, I believe that the timing of the announcement of the commercial agreement with respect to an approval is of less importance than the time from the approval to the commercial launch. With that, I'm going to open it up to a couple of questions.

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questions and answers

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operator [1]

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(Instruction manual) Our first question comes from Elliot Wilbur from Raymond James.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Department – Senior Research Analyst [2]

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A question for Dennis and the team. A company recently presented data on high-dose naloxone or ZIMHI at IVH [IHV] Conference, and apparently many key officials were present. Curious about how the general feedback, the level of susceptibility to the asset might have been.

And if you could explain the potential partnership for the asset in more detail, you should put the timing aside. Maybe just give us a color or description of what you're thinking about in terms of partnership characteristics, whether you're looking for a company with simply domestic skills from an international pharmaceutical company, a company more like a classic specialty pharmaceutical company, or a larger platform. I'm just curious what kind of interest you have and where it might lead you to in relation to the type of partner you choose.

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Dennis J. Carlo, Adamis Pharmaceuticals Corporation – President, CEO and Director [3]

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Thank you very much. This is dennis. The response to the presentation that Dr. Moss held at the Virology Conference was excellent. Ron did a great job and we let him talk about it. Ron, why don't you talk about what happened at the conference?

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Ronald B. Moss, Adamis Pharmaceuticals Corporation – Chief Physician [4]

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For sure. As everyone knows, at a conference, we introduced a number of health professionals from the CDC, the National Institute on Drug Abuse and the NIH, all of whom attended this very important conference. And the data was very well received.

We have presented various data sets. On the one hand, pharmacokinetic data were used, and on the other hand, a pharmacokinetic model was used, which suggests that at the higher doses of fentanyl that are currently observed in victims of overdoses, higher doses of naloxone are required to get the opioids from the receptors to remove.

So I think the data was very well received, and I think we have a good scientific basis for why the higher doses seen in ZIMHI should hopefully lead to more successful opioid overdose resuscitation.

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Dennis J. Carlo, Adamis Pharmaceuticals Corporation – President, CEO and Director [5]

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And Elliot, the PK data showed that ZIMHI has higher blood levels than any other product currently on the market. So the second was -.

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David J. Marguglio, Adamis Pharmaceuticals Corporation – Senior Vice President, Chief Business Officer & Director [6]

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Yes. This is david. I'll discuss the part of what we're looking for at a partner. The focus was initially on the US market. The overall goal is to maximize the value of ZIMHI in the US market.

We believe that one of the keys to this is to identify among these groups those who we believe have an existing commercial infrastructure that allows them to start very quickly, as I indicated earlier, but have also shown success in that particular niche within the market.

Therefore, we particularly consider companies with an existing product that we believe complements ZIMHI, and therefore offer them the opportunity to use this asset when launching our product.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Department – Senior Research Analyst [7]

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OK. I have a follow-up question about SYMJEPI. It looks like units purchased from pharmacies in September have reached the highest level since the product was launched, which is encouraging as this was not necessarily due to the seasonality. But what else can you say about the events behind the scenes? Obviously difficult to [get this here],

If you look around from the outside, you have a much clearer line of sight there and have 6 to 7 weeks after the end of the quarter for data. Just to give us an idea of ​​what might happen with regard to new initiatives that could further accelerate the momentum of September.

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Dennis J. Carlo, Adamis Pharmaceuticals Corporation – President, CEO and Director [8]

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Yes. Elliot, this is Dennis. As I said, I think progress was slower than expected. But I think Sandoz is now moving in the direction we all think will be fruitful and is actually talking to the major allergy sufferers. As you know, they need to be informed about SYMJEPI, learn how to use it, look at it and learn how to write recipes.

This is how allergy sufferers and pediatricians now see the product. There have been a number of conferences they have attended now, the major allergy conferences and the children's conferences. A telemarketing program is underway. There is also the program with Amazon that is currently running. So I think they're moving in the right direction, a little slower than we thought, but I think Sandoz has a good track record and I still believe that SYMJEPI will be a success in their hands.

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Elliot Henry Wilbur, Raymond James & Associates, Inc., Research Department – Senior Research Analyst [9]

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OK. Last question and I apologize if I missed this in your prepared comment. Just talk about the trends in US compounding, which have increased year over year, but have been relatively flat in recent quarters. Is there anything in the short term that could accelerate sales development there? And where are you operating towards a previous goal of reaching a cash flow breakeven point in this business?

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Robert O. Hopkins, Adamis Pharmaceuticals Corporation – Senior Vice President of Finance, CFO and Secretary [10]

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Yes. Elliot, it's Rob Hopkins. Yes. We already have a cash flow breakeven for this operation and have been since the end of the second quarter of this year. New initiatives are underway for the fourth quarter. We signed a few smaller group policy objects, group purchasing organizations. We – while you register, it takes a while for this recording to occur.

We have made some decent – really good improvements in our sales team. And we think, while it looks flat compared to the previous quarter, we expect some increase over the fourth quarter. And I would say – you ask about what we will see in 2020. I would say anything below a growth margin of 25% – or sales growth of 25% year on year between & # 39; 19 and 2020 would be disappointing.

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operator [11]

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Our next question comes from Jason McCarthy from Maxim Group.

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Jason Wesly McCarthy, Maxim Group LLC, Research Department – Senior MD [12]

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Can you talk a little bit about the compounding business? I know – at least more. I know that you have put tremendous effort into overhauling and rationalizing this business. And talk a little about the number of products that really spearhead sales growth from here. And where does it ultimately end up? This – is this an asset that, once profitable, could even be monetized through mergers and acquisitions?

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Robert O. Hopkins, Adamis Pharmaceuticals Corporation – Senior Vice President of Finance, CFO and Secretary [13]

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Well, of course, any asset on our books could be monetized depending on future growth. But yes, I think the great success in US compounding is actually simplified. We had – when we bought the asset over 3 years ago, we thought the number of products offered was really confusing to the market.

After some analysis, we expect the primary future growth of US compounding to be in the hospital or in our syringe business. This is where we make our biggest bet. And to give it – and I don't want to get too far into the weeds, but when a hospital makes these pre-filled syringes in-house, they only have a 72-hour date. Therefore, it is very difficult for a hospital to plan inventory control.

If you know as much as you can about the hospital business, the ups and downs of a surgical unit, you need to get to know each other a little better. We can offer a term of up to 6 months for our products, whereby sterility is guaranteed by external tests. We believe that the added value that we achieve for each hospital in-house definitely helps to grow the business.

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Jason Wesly McCarthy, Maxim Group LLC, Research Department – Senior MD [14]

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And then just go back to naloxon on ZIMHI. Just a general question. How has media attention to opioids and litigation, and everything that goes on there, impacted or even intensified discussions about a possible overdose of naloxone?

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David J. Marguglio, Adamis Pharmaceuticals Corporation – Senior Vice President, Chief Business Officer & Director [15]

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For sure. That's a good question. And I think from the start we saw this as a high quality product that we believe will pay a lot of attention to every potential partner.

We believe that, given the increasing media attention, this is just an even better opportunity for a potential partner to take advantage of the goodwill we feel imposed on anyone who markets this product beyond the financial benefits that it brings actually represents the product.

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Dennis J. Carlo, Adamis Pharmaceuticals Corporation – President, CEO and Director [16]

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Listen, thank you very much. We appreciate that and look forward to our next call in a few months.