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

Good day, and thank you for standing by. Welcome to the Kane Biotech Fourth Quarter and Full Year 2022 Financial Results and Company Update. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nicole Sendey, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to Kane Biotech's quarterly earnings conference call. We're delighted to have you join us today. This call will cover Kane's financial and operating results for the fourth quarter and year ended December 31, 2022, along with a discussion of some of our recent highlights and goals for 2023 and beyond. Our call today will be led by Kane's Chief Executive Officer, Marc Edwards. Before we begin our formal remarks, I would like to remind everyone that some of the statements on this conference call contain certain forward-looking information and statements within the meaning of securities law, which may not be based on historical fact, including, without limitation, statements containing the words believes, should, may, plan, will, estimate, predict, continue, anticipate, potential, intends, expects or other similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the company's stage of development, lack of product revenues, additional capital requirements, risk associated with the completion of clinical trials and obtaining regulatory approval to market the company's products, the ability to protect its intellectual property and dependence upon collaborative partners. These factors should be considered carefully. And readers are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements are made as of the date hereof. And the company disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. I will now hand the call over to Chief Financial Officer, Ray Dupuis. Please go ahead, Ray.

Thank you, Nicole. Before I turn the call over to Marc for an update on our commercial activities, I would like to provide a brief update on our fourth quarter and full year 2022 financial results. To streamline things, all the numbers that I will mention have been rounded and are therefore approximate. The following figures are all in Canadian dollars. Total revenue for the 3 months ended December 31, 2022, was $692,000, an increase of 68% compared to $412,000 for the 3 months ended December 31, 2021. This increase is primarily attributable to increased pet retail sales, licensing revenues and royalties. Gross profit for the fourth quarter of 2022 was $321,000, an increase of 71% compared to $187,000 for the quarter ended December 31, 2021, due largely to increased license and royalty income. Total operating expenses for the 3 months ended December 31, 2022, were $874,000, a decrease of 41% compared to $1.491 million for the quarter ended December 31, 2021. The decrease is due mainly to lower short-term and long-term incentive expense as well as lower contract research expenditures related to the company's DispersinB Hydrogel program in the current period. Loss for the fourth quarter of 2022 was $838,000, a decrease of 33% compared to $1.257 million for the quarter ended December 31, 2021. Moving to the full year results. Total revenue for the year ended December 31, 2022, was $2.668 million, an increase of 66% compared to $1.608 million for the year ended December 31, 2021. This increase is primarily attributable to increased pet royalty -- sorry, pet retail and royalty revenues as well as the recognition of license revenue associated with VOHC certification achieved in April 2022. Gross profit for the year ended December 31, 2022, was $1.413 million, an increase of 149% compared to $568,000 for the year ended December 31, 2021, due largely to increased license and royalty income. Total operating expenses for the year ended December 31, 2022, was $4.777 million, a decrease of 12% compared to $5.432 million for the year ended December 31, 2021. The decrease is due mainly to lower short-term and long-term incentive expense as well as lower contract research expenditures related to the company's DispersinB Hydrogel program in the current period. Loss for the year ended December 31, 2022, was $3.824 million, a decrease of 21% compared to $4.850 million for the year ended December 31, 2021. Cash at December 31, 2022, was $1.105 million compared to $1.153 million as of December 31, 2021. On March 2, 2023, the company announced that it had entered into an amending agreement with its primary lender, Pivot Financial, which increased the amount of the non-revolving loan under the credit facility by $1 million and extended the maturity date of the credit facility from February 28, 2023, until August 31, 2023. With that, I will now turn the call over to Marc.

Thank you, Ray. Thank you, Nicole. Before we get underway with my comments, I want to apologize to the shareholders. Unfortunately, I'm traveling today, and I got caught on a plane. And when I realized I wouldn't be able to be on the call, I recorded these notes in advance. I won't be able to answer your questions but would invite you to e-mail me any questions or comments you have, and I'll get back to you promptly. So 2022 has been a transformational year for Kane. And we're well positioned for growth in 2023 with new partnerships, new products, new regulatory approvals and important clinical trials. We've increased revenues over '21, decreased costs and advanced our clinical position. As you know, we're operating in three verticals: Animal Health, Wound Care & Surgical as well as Dermatology. In Animal Health, we received VOHC acceptance for our pet oral care water additive last April, which not only validates Kane's antibiofilm technology but provides milestone payments and will go a long way towards growing our royalties. With VOHC, Animalcare launched their Plaqtiv veterinary oral care product range. They're working on doing that globally outside of the Americas. And Dechra, who commercializes in the Americas, saw some good growth from their Vetradent line. We also announced on Tuesday, a new licensing deal with Skout's Honor. Pete and his team are fantastic. We're very, very excited to see what they can do with our technology and really believe that, that will significantly accelerate the deployment of our technology in the pet specialty markets and especially in the big players. We also announced the departure of Kevin Cole as we shift our strategy from a retail play to a product development and to developing and licensing some great products. I'll be assuming the role of STEM's CEO for now. And we will continue to commercialize our bluestem product line throughout North America and are seeing some good growth and some good opportunity there as well. So exciting times for Animal Health business. On the Wound Care & Surgical side, we submitted our coactiv+ antimicrobial hydrogel as an FDA 510(k) last October. We strongly believe it can be a potential best-in-class treatment option for millions of patients suffering from chronic wounds and burns. And we're in advanced discussions with the FDA and believe we're close to obtaining clearance. So fingers crossed, and thank you to the Kane team for all your hard work on that. The team has been working extremely hard to answer all of the FDA's questions. And we've been making some really good progress. So kudos, in particular, Lori, Milo and Vije. And then I was very excited this morning to announce our partnership with ProgenaCare Global. Howard Walthall and Bert Jones at ProgenaCare have a great team. And we're really going to work with them to make this highly disruptive product a huge success. There's a real market opportunity. I truly believe that the wound care market is one that people aren't paying attention to and the hydrogel market is the one that people aren't paying attention to, and that we can really gain some market share quite rapidly. Also, in Wound Care & Surgical, we're making good progress towards getting our DispersinB wound care clinical trial underway and hope to get that going this summer. Now an exciting addition to what we're doing with DispersinB is, given all the safety and biocompatibility work that we've done, we plan on testing our wound gel as a skin cleanser on acne patients. So we're working with the University of Miami. And we're going to be doing a small proof-of-concept clinical trial to test out our DispersinB as an enzyme as a -- to make the existing treatments for acne much, much better, much, much stronger. So very, very exciting times for Kane on a number of fronts. Again, apologize for not being present, and invite you to write to me to answer any -- to ask any questions or share your comments. Thank you very much.

For any questions you may have, please direct them to Marc's e-mail at medwards@kanebiotech.com, or you can reach them via phone or text at (514) 910-6991. This concludes today's conference call. Thanks for participating. You may now disconnect. Everyone, have a great day.