Kane Biotech Inc. (KNE) Earnings Call Transcript & Summary

Okay, and thank you for standing by, and welcome to Kane Biotech Quarter 1 2021 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Mr. Ray Dupuis, Kane's Chief Financial Officer. Sir, please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to Kane Biotech's quarterly conference call to discuss the company's financial results for Q1 2021. We are delighted to have you join us today. This call will cover Kane Biotech's financial and operating results for the first quarter ended March 31, 2021. Kane Biotech's CEO, Marc Edwards, will begin by providing an overview of the quarter. I will then elaborate on the financial performance of the company in the quarter. Following our prepared remarks, we will open the conference call to a question-and-answer session. But before we begin the presentation, let me caution you that our comments and discussions will include forward-looking information within the meaning of applicable securities legislation. Forward-looking information will include, among other things, forecasts and projections, which involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from such forecasts and projections. Therefore, although we believe that anticipated future results, performance or achievements expressed or implied by the forward-looking information are based on reasonable assumptions and expectations, you should not place undue reliance on such forward-looking information. Thank you. And I will now hand the call over to Marc Edwards, CEO of Kane Biotech.

Thank you, Ray, and welcome, everyone, to everyone listening in on today's call. Kane has 2 proprietary technologies, coactiv+ and DispersinB that both prevent and disperse microbial biofilms, which are a big problem in multiple markets. What is a biofilm? Put simply biofilm is a community of microorganisms irreversibly attached to a surface. Think dental plaque, for example. Kane has identified 3 multibillion-dollar markets where biofilms are causing big problems and where we feel our technologies provide Kane, the ability to win and grow. Throughout Q1, we continued to successfully execute our commercialization plan and made significant progress in all 3 verticals. With that, I'll hand it over to Ray Dupuis, our CFO, to over the high level financials, and I'll be back to share more exciting news about this progress.

Thanks, Marc. To streaming things, all the numbers I will mention are around it and are, therefore, approximate the following figures are all in Canadian dollars. Revenue from product sales in the 3 months ended March 31, 2021, was $254,000, a decrease of 4% compared to $264,000 in the 3 months ended March 31, 2020. This decrease is due mainly to the permanent COVID-related store shutdowns across the U.S. at one of the company's major pet retail customers. Partially offsetting this, the company grew its product sales revenue by approximately 27% from other pet retail customers in both Canada and the United States. Revenue from product and services sales grew by 58% in the 3 months ended March 31, 2021, when compared to the 3 months ended December 31, 2020, due mainly to growth in pet retail channel demand and increased product availability as well as increased demand for contract manufacturing services from Dechra. Gross profit for the first quarter of 2021 and was $166,000, a decrease of 7% compared to $179,000 for the quarter ended March 31, 2020. Total operating expenses for the 3 months ended March 31, 2021, were $1,150,000, an improvement of 29% compared to $1,624,000 for the quarter ended March 31, 2020. This decrease is due mainly to lower marketing, business development, legal and research expenditures in the current period in combination with funding received in the current period related to the company's U.S. Department of Defense Research funding grant. Loss for the first quarter of 2021 was $1,011,000, an improvement of 26% compared to $1,364,000 for the quarter ended March 31, 2020. Cash used in operating activities for the 3 months ended March 31, 2021, and was $447,000, a decrease of 71% compared to $1,475,000 for the 3 months ended March 31, 2020. This decrease reflects both reduced operating spending during the current period as well as the company's increased use of government grants and subsidies. Cash at March 31, 2021, was $633,000 compared to $1,008,000 as of December 31, 2020. I will now hand it back over to Marc.

Thank you, Ray. Firstly, I'd like to thank our shareholders for their continued support. Our stock has done well these past few months. And because of this, we saw shareholders exercise 4.2 million warrants. Including 1 million warrants from our Vice Chair of Philip Renaud, and 100,000 warrants from our CFO, Ray Dupuis. During the quarter, which is a sign of continued support and optimism for Kane, both from insiders and non insiders. The main highlight for me of the quarter was a confirmation that are patented that coactiv+ technology is a platform technology that has been proven, highly effective. We did this in 2 ways: First, we announced that our pet oral care water additive clinical trial had met its clinical endpoints, which should enable us to obtain a veterinary efficacy certification. This certification will trigger milestone payments from both Dechra, our licensing partner for the veterinary markets in the Americas; and Animal Care, our strategic partner, who has the right to commercialize their technology in the veterinary markets in Europe and Asia. It will also trigger minimum royalty payments from Dechra, and we expect it to help Dechra drive increased sales. I love our STEM Animal Health business. Pet Oral care is a surprisingly big market. Our product is proven effective. We have 2 great partners who are commercializing our technology in the veterinary market and we have an industry veteran CEO, Kevin Cole, who is putting all the right piece in place for substantial growth in the pet specialty market. The second way, we demonstrated that our coactiv+ technology is highly effective in the quarter is with our DermaKB shampoo line consumer trial. We received overwhelmingly positive results on our DermaKB shampoo consumer trial. We published the results, but the key elements for me that we signed up over 4,000 people, none of which were compensated, 82% of trial participants saw an improvement in their scale related issues, and on average, participants saw a 33% improvement from a single 3-ounce bottle of shampoo. The consumer trial also demonstrated their DermaKB shampoo can go head-to-head or shoulder-to-shoulder, if you know what I mean, with the biggest brands in the markets and come out ahead. Gordy, our CSO, who spent 25 years at P&G as a research fellow was very impressed by this particular metric, and things that will help us go a long way. Congrats OTC team for all their hard work in bringing those products to markets. We are leveraging these numbers to put sales and distribution agreements in place as well as talking to partners about potential licensing opportunities for our DermaKB shampoo line as well as other products we have in our pipeline. As for our Wound Care business, we continue to talk with potential partners and review opportunities. We are confident we'll be putting an agreement in place by the end of the year. Our products are world-class, and we want to ensure that we have the right partner. We're making great progress with development and regulatory approval of both our wound care products. Finally, I would like to welcome Dr. Allan Mandelzys, who was appointed to our Board at our recent AGM, which I was actually yesterday, and we look forward to the support and advice that Allan brings. Thank you for your support and interest in Kane Biotech, and we look forward to our continued success. We'll open up the line for questions. Operator, we're ready for questions.

[Operator Instructions] Our first question comes from the line of Jonathan Lichter from Diamond Bridge Capital.

Just wanted to confirm you may have just mentioned this, the award of grants from the U.S. Department of Defense-related to the Wound Care business. You're still receiving that, right?

Yes. So we were awarded that last year at around this time. And yes, we are still receiving that. And we're still delivering on that research project for which we've received the funding.