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

Good afternoon, and thank you for standing by. Welcome to Kane Biotech's First Quarter 2023 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, May 25, 2023. I would now like to turn the conference call over to Nicole, Kane Biotech's Investor Relations Adviser. Please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to Kane Biotech's quarterly earnings conference call. We are delighted to have you join us today. This call will cover Kane's financial and operating results for the first quarter of 2023, along with a discussion of some of our recent highlights and goals for 2023 and beyond. Following our prepared remarks, we will open the conference call to a question-and-answer period. 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, risks 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 summary and update on our first quarter 2023 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 March 31, 2023, was $678,000, an increase of 20% compared to of $565,000 in the 3 months ended March 31, 2022. License and royalty revenue for the 3 months ended March 31, 2023, was $138,000 and an increase of 66% compared to $83,000 in the 3 months ended March 31, 2022. This increase is due primarily to VOHC certification received in the second quarter of 2022 which has had a favorable impact on both license and royalty revenues recognized in subsequent periods. Revenue from products and services sales for the 3 months ended March 31, 2023, was $539,000 an increase of 12% from $482,000 in the 3 months ended March 31, 2022. The increase is due primarily to higher demand for contract manufacturing services during the current period. Gross profit for the first quarter of 2023 was $345,000, an increase of 88% compared to $184,000 for the quarter ended March 31, 2022. This increase is due primarily to higher license and royalty revenue recognized as well as higher profit margins realized on product sales in the current period. Total operating expenses for the 3 months ended March 31, 2023, were $1.361, million, a decrease of 4% compared to $1.42 million for the 3 months ended March 31, 2022. Contributing to this decrease were salary-related cost reductions that affected the current period. Loss for the first quarter of 2022 and was $1.245 million, an increase of 8% compared to $1.152 billion for the quarter ended March 31, 2022. This increase is primarily attributable to higher financing costs in the current period as well as a higher noncash fair value adjustment on government loan advances received in the comparative period. Cash at March 31, 2023, was $991,000 compared to $1.105 million at December 31, 2022. With that, I will now turn the call over to Marc.

Thank you, Ray. Thank you, Nicole. We're having a good day today there. I hope everybody saw our 510(k) clearance announcement this morning, and I will definitely get into that a little bit later in my remarks, but I think all in all, 2023 so far has been a really, really good year for Kane with regards to its commercialization. We -- if I start with our Animal Health business, there, we announced recently the licensing of our pet dental care line to Skout's’ Honor pet supply or Skout's’ Honor. And I really truly believe this is going to greatly accelerate the expansion into the U.S. of our -- into the U.S. pet retail markets. Skout's’ Honor, I was in San Diego on Monday and met with the team there, and they have really built an enviable business, and they've got a clear plan for our dental line and I mean -- I'm confident that as soon as there is product available, their dental line based on our technology is going to be available in thousands of retailers, retail stores, including some of the very, very big names in Animal Health. I was joined -- in San Diego I was joined with -- by [indiscernible], sorry, I apologize for that Dena and who is now leading our animal health business, previously our Director of Marketing. And we're very excited and really think Dena and the Skout's’ Honor team are going to do very, very well at bringing our technology to market through those -- through that effort. I just got back from my meeting at MTEC, and there was an army ranger there with his dog. MTEC is a military technology enterprise consortium. It's through them that we got our DispersinB funding. But -- so I was at this MTEC meeting and there was an army ranger there with his dog and asking about his pet's teeth and there were 4 other gentlemen at the table that I didn't know. And they all wanted to know about this product that could really quickly fix their dogs halitosis or bad breath. So it always surprises me that nobody really knows that this product is available. And when they do find out that it is available, it's something that they really want and feel that they need. So that's very, very exciting. The other big news, of course, before getting to the clearance is our distribution agreement for our coactiv+ antimicrobial wound gel with ProgenaCare Global, Bert, Howard, Chase, the whole team there at ProgenaCare have a fantastic team. They have a clear vision. We're aligned. We're going to work together and very confident that we're going to be able to ramp sales up there quickly. And working with them to really disrupt this USD 200 million U.S. wound gel market there. We've got a differentiated products that fits within Medicare reimbursement, which really is the big, big driver in the U.S. there, so it's a $200 million market. We're -- the agreement provides for some good margins, and we're excited about that and expect the USD 0.5 million payment there before the end of this month. So that will be great. The other thing also with this 510(k) clearance, we've got Salud Pharma that can now move forward and get regulatory approval for our product in Colombia, Panama and Costa Rica. The more I talk to these gentleman at Salud Pharma, the more I am confident that they can move a lot of product. I've seen them do it with other companies. They're doing very, very well and expect them to do the same with our product. So should be a high-margin, high-volume product for us through our distribution partners and investors should expect to see a number of additional licensing -- distribution agreements globally. And then finally, it's our 510(k) clearance that we announced this morning. We got the news late last night and very, very exciting. This 510(k) clearance was a long fought journey, and we're very excited. As I mentioned, there are a number of countries and geographies that depend either on the U.S. FDA 510(k) clearance or the CE mark in Europe. And this really opens up the door to commercialize our gel globally. So that's obviously very, very exciting. And the -- if I may, I want to take a minute to reiterate I don't know if everybody has had a chance to go see our coactiv+.com website, but a really great triple spread combination of -- when we look at -- compare our gel to other gels in vitro in terms of efficacy we're second to none. The ease of use of the gel is definitely very -- makes it very compelling. A number of things. First of all, it's a clear gel. So once you apply it, you can still see the wound underneath. And secondly, it's the poloxamer in there has got thermoreversible property so as you -- as it heats up or goes from room temperature to body temperature, it gels even more. If you cool it down below 16 degrees Celsius or 60 degrees Fahrenheit, it will liquefy. So it's not so much to liquefy, but when you apply it, it will stay on and not run, and that's obviously a big deal. But if you've got a sensitive wound and you want to remove the gel, you can do so with cold water, which makes it very, very easy to use. And in particular, very practical for patients suffering from first to second degree burns. So before I wrap it up, I apologize, I've got a long list but I can't go without thanking the team there. The Kane team have worked extremely hard at -- to get us across the finish line here, both getting the licensing agreements and getting this 510(k) clearance. So I have to thank Vijay [indiscernible], Gabriel Suresh, Patricia, [indiscernible] Wendy, Greg Schultz, our CSO. Great to hear him talk at conferences like SAWC. Nanda, who's really been the heart and soul of this company for the past 20 years. Gordy, who we're still very, very close to, Ray Dupuis, Nicole, Sue, [indiscernible], all fantastic. [indiscernible] even put in some long hours to get this all done. And then last but not least, from the Kane team, I have to mention Lori Christofalos. Lori was instrumental both from a quality perspective and regulatory perspective and getting us across the finish line. Fielded hundreds of calls for me, and I really appreciate her patience a lot. And then really, the people that are very, very close to us, [indiscernible] our regulatory consultant, [indiscernible], our Scientific Advisory Board, Robert Rivka and then my Board, George and Philip. So I want to thank everybody there. And then finally, as I mentioned, I was at MTEC this week. We were presenting a poster on our DispersinB wound gel. We -- our funding is through MIDRP there in the U.S. Army. And it was great to be able to meet a lot of the people that we've been engaged with for a while now in person and very interesting to see that there's some really good potential for coactiv+ gel within the U.S. Department of Defense. So that's also very, very exciting. So with that, it concludes my remarks, and I'm going to open it up for questions. Jonathan?