Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) Q3 2022 Earnings Call Transcript

Adamis Pharmaceuticals Corporation (NASDAQ:ADMP) Q3 2022 Earnings Call Transcript November 14, 2022

Operator: Good afternoon, ladies and gentlemen, and welcome to the Adamis Pharmaceuticals’ Third Quarter 2020 Financial Results Conference Call. . This call is being recorded on Monday, November 14, 2022. I would now like to turn the conference over to Robert Uhl with ICR Westwicke. Please, go ahead.

Robert Uhl: Thank you, operator. Welcome to the Adamis Pharmaceuticals’ Third Quarter 2022 Financial Results and Corporate Update Conference Call. Thank you for joining us today for the update. Joining me on the call will be members of the Adamis executive team, including Chief Executive Officer, David Marguglio; and Chief Financial Officer, David Benedicto. They will share with us their various Adamis updates. Our format for this call will consist of prepared remarks from management. And following that, we will have a Q&A session. This call is being webcast and will be available for replay in the Investors section of our website, adamispharmaceuticals.com. In today’s call, we will make certain forward-looking statements regarding our business based on current expectations and current information.

These 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 statement 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. Now please let me hand the call over to David Marguglio, CEO of Adamis.

David Marguglio: Thank you, Robert. I appreciate all of you for tuning in today for our third quarter update. After our clinical trial examining the effects of Tempol and COVID-19 treatment failed to achieve its primary end point. We paused and now have halted further development of Tempol beginning at the end of September. In early October, we announced we had initiated a process to explore strategic and financing alternatives for the company. Those alternatives include partnering or outright sale of one or both of our commercial products, SYMJEPI and ZIMHI or the sale, merger or reverse merger of the company. All of these options would have the objective of maximizing shareholder value. The company hired our long-time investment bank Raymond James as strategic adviser to assist and evaluate potential alternatives.

We are presently actively involved in communications with third parties regarding, which — regarding this process, which could result in one or more possible transactions. While engaged in the process, we have implemented significant and successful expense reduction measures including stopping all development programs and reducing employee headcount to just those individuals directly involved in either the manufacturing of our commercial products, maintaining regulatory compliance or supporting the strategic process. These measures were necessary to preserve the company’s limited cash while determining our path forward. Over the last few months, we’ve weathered a near perfect storm of both micro and macro events, which have severely limited the company’s ability to operate.

However, I’m confident that this process we began in October will conclude with one or more good options that will enable us to reset our strategy and place the company on a path to increasing shareholder value. While there can be no assurance that this process will result in a transaction, and we have not established a schedule for completion of the review process, I expect that in the coming weeks, we will have a better sense of where this process is likely to head. But until the company enters into a definitive agreement or otherwise determines that our disclosure is necessary or appropriate, we will not expect to disclose or provide updates concerning developments related to the process or the company is engaged in the process. I’d now like to turn it over to our CFO, David Benedicto, to provide a brief update on our recently filed third quarter financial results.

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David Benedicto: Thank you. This afternoon, we filed our Form 10-Q for the quarter ending September 30, 2022. I will discuss a few items relating to our financials, and I encourage you to review the 10-Q for additional details and disclosures. Despite still being negatively impacted by the SYMJEPI recall, total net revenue for the quarter ending September 30, 2022 was $1.5 million compared to $760,000 for the same quarter in 2021. This 98% increase was primarily due to sales of ZIMHI, the absence of sales for SYMJEPI resulting from the 2022 product recall and the recognition of deferred revenue under the US WorldMeds agreement, offset by the cost of the SYMJEPI recall. Selling, general and administrative expenses were approximately $2.5 million for the quarter ending September 30, 2022, versus $4.8 million in the quarter ending September 30, 2021.

The 48% decrease was primarily a result of reductions in legal and advisory fees and a reversal of accrued bonus expenses. Research and development expenses were lower for the third quarter of 2022 at approximately $2 million compared to $4.6 million in 2021. The 57% decrease was primarily related to lower development spending for Tempol and ZIMHI. Net loss for the combined discontinued and continued operations for the quarter ended September 30, 2022, was approximately $4.4 million compared to $12.4 million for September 30, 2021, a 64% decrease. Cash and cash equivalents at September 30, 2022, totaled $2.4 million. We expect to receive additional proceeds between now at the end of the first quarter of 2023, which could range from approximately $3 million to $4 million from the disposition of the remaining U.S. compounding assets.

While there are no guarantees, we are endeavoring to implement further reduction measures to cut operating expenses to manage the company’s limited cash to both continue critical operations and provide the time required to conclude one or more potential strategic transactions. Once again, I encourage you to review our recently filed Form 10-Q for additional details and disclosures. I will now turn it back to David Marguglio.

David Marguglio: Thanks, David. I’d now like to provide you with a brief update on our commercial products for both SYMJEPI and ZIMHI. As you know, in March, we announced a voluntary recall of certain batches of SYMJEPI due to quality issues at one of our manufacturers. I am pleased to announce today that following corrective actions, Catalent has now resumed operations at their Belgium facility, and they have scheduled a new batch of SYMJEPI to be manufactured in November. Without any further delays, we would expect SYMJEPI to be back in the market before the end of Q1 ’23. Prior to that recall, it seemed likely that 2022 would be the year that SYMJEPI reached breakeven and begin producing positive cash flow for Adamis. We expect that US WorldMeds can regain their prior momentum, and we are hopeful that 2023 will be that banner year that we expected for 2022.

Shifting to ZIMHI. On our last call, I provided a substantial summary of how US WorldMeds is approaching the commercial launch of ZIMHI, including their areas of focus within the retail and nonretail markets. I also attempted to establish the expectation that the heavy lift in the first few quarters of any drug launch is laying the necessary foundation through a tedious process of adding the drug to the formularies of both insurers and prescription benefit managers contracting with — directly with customers, et cetera. You may have noticed an uptick in media coverage of ZIMHI over the last couple of months. In fact, there have been 470 distinct media mentions of ZIMHI since August 31, with at least 8 of those stories highlighting individual lives that have been saved by ZIMHI.

It’s exciting to track this increased media exposure as the market becomes more and more aware of ZIMHI. Additionally, US WorldMeds continues to grow the size of its commercial team focused on ZIMHI. Last month, they added a new Director of Medical Affairs to focus on better positioning ZIMHI in the market. Their team is also actively engaged with opioid task forces in more than a dozen states and multiple federal agencies. All of this foundational work is just now starting to convert into increase in sales. Our third-party sales prescription — sales and prescription data shows that unit sales of ZIMHI increased 90% in the third quarter of 2022, nearly doubling the second quarter. Now there’s still a long way to go to reach total unit sales at a level that’s meaningful in establishing cash flow for Adamis, but it’s certainly directionally positive.

So to summarize the commercial update, we expect SYMJEPI to reenter the market in the first quarter of ’23. The commercial launch of ZIMHI is proceeding as planned, and we look forward to stronger sales in Q4 and look ahead to more meaningful revenue for both products in 2023. That concludes our initial remarks. Before I open it up to questions, I’ll share that following our second quarter call, we received positive feedback regarding the format that we had used for Q&A. So we’re going to continue that format today, having Robert consolidate the most frequently asked questions from investors. Robert?

Q&A Session

A – Robert Uhl: Thank you, David. Let’s kick it off with this one. And this one has to do with your cash balance of $2.4 million at the end of September. So this investor is asking, will you be out of cash by the end of the year if no additional proceeds come from the U.S. compounding liquidation? And what is your confidence level in receiving the $3 million to $4 million of additional proceeds that you discussed in your remarks?

David Benedicto: No — this is David Benedito. No. We have a plan to manage expenditures to coincide with the receipt of the additional proceeds. We are confident on the receipt, but we remain uncertain where actual proceeds will fall within the estimated range.

Robert Uhl: Okay. Great. Now shifting over to the SYMJEPI and getting that back on the market. When does the newly manufactured SYMJEPI from Catalent get shipped to your fill and finish contract manufacturer? And when should we expect product to be available to patients and on the shelves of the pharmacy? Just help us understand the steps and where there might be some additional delays or unanticipated bumps in the road, if any?

David Marguglio: Yes, certainly. So the process starts for SYMJEPI at Catalent in Belgium. And at that site, they formulate epinephrine and fill it into syringes and insert rubber stoppers. Before that has been evaluated for release, it goes through all its release testing and eventually shipped to Phillips-Medisize for what their part of the supply chain entails, and — which is — they manufacture all of the plastic components for the device and assemble the device around the syringes, add all of the labeling and package inserts and secondary packaging. And then that product is shipped from Phillips to US WorldMeds for distribution. So as far as the timing — as it relates to the restart, as I mentioned, we are currently on schedule with Catalent to manufacture a batch of SYMJEPI in November.

And assuming that there are no further delays, the product should be released sometime towards the end of January, shipped to Phillips. And then as Phillips begins their assembly process, they will send that product out as it’s completed to US WorldMeds. So we’re saying by the end of the first quarter, but we are certainly working towards accelerating that time line.

Robert Uhl: Okay. Great. Let’s jump over to one that comes in fairly often. Just can you remind us where you are in the NASDAQ delisting process? Is there a scenario where you might have to go to an OTC listing before the strategic process has been completed?

David Marguglio: Well, just to refresh everybody — to recall here, we received a notice earlier this year from NASDAQ regarding our out of compliance share price. And they gave us, at that time, until December 27 to regain price compliance. And we’re quite aware of the delisting process. And we are communicating with NASDAQ, and we’ll — intend to communicate further with NASDAQ as this strategic process becomes clear at which time we expect to either file an appeal or some other form of request of additional time to regain that compliance. It is certainly our expectation that we will maintain a listing on NASDAQ, at least for a period of time to get through this process that we’re currently in. But — and have no reason to believe otherwise. So that’s currently where our confidence is.

Robert Uhl: Okay. Great. Let’s talk about — switching over to ZIMHI a little bit. Generic Narcan is available, and I think it’s been quite readily accepted by the marketplace. Is the availability of the generic Narcan having any kind of a negative impact on the ZIMHI launch and its acceptance?