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

Good afternoon, and thank you for standing by. Welcome to Kane Biotech's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, August 29, 2024. I would now like to turn the conference over to Ray Dupuis Kane Biotech's Chief Financial Officer. Please go ahead.

Thank you, operator. Good afternoon, and welcome, everyone, to Kane Biotech's Second Quarter 2024 Earnings Conference Call. We are delighted to have you join us today. This call will cover Kane's, financial and operating results, along with a discussion of some of our recent highlights and goals for the remainder of 2024 and beyond. Following our prepared remarks, we will open the conference call to a question-and-answer session. 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 it's 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. For the second quarter 2024 financial results, all the numbers that I will mention have been rounded and are therefore approximate. The following figures are all in Canadian dollars. The second quarter 2024 financial results reflect the closing of the sale of Kane Biotech's 67% interest in its STEM Animal Health subsidiary, which took place on April 12, 2024. The company recorded a gain of $10.4 million on this transaction, which is offset by income tax loss carryforwards for income tax purposes. The following second quarter income statement results include the results of STEM Animal Health up to April 11, 2024. License and royalty income for the 3 months ended June 30, 2024, was $300,000, an increase of 74% compared to $173,000 in the 3 months ended June 30, 2023. The increase is due mainly to the company recognizing as license revenue the outstanding balance in contract liabilities related to the exclusive license and distribution agreement with Dechra Veterinary Products. There are no further obligations to Dechra under this agreement upon the sale of STEM. Product and services revenue for the 3 months ended June 30, 2024, was $510,000, an increase of 5% compared to $484,000 in the 3 months ended June 30, 2023. The increase is due mainly to incremental contract manufacturing revenue from Dechra subsequent to the sale of STEM, offset by the discontinuance of animal health product sales upon the sale of STEM. Total revenue for the 3 months ended June 30, 2024, was $810,000, an increase of 23% compared to $657,000 in the 3 months ended June 30, 2023. Gross profit for the second quarter of 2024 was $464,000, an increase of 41% compared to $330,000 for the second quarter of 2023. Total operating expenses for the 3 months ended June 30, 2024, were $1,520,000, an increase of 76% compared to $866,000 for the 3 months ended June 30, 2023. The increase, which is one-time and mostly non-cash, is primarily due to the combined effect totaling approximately $700,000 of an adjustment to accrued salaries and short-term compensation expense in the comparative period and expenditures related to the manufacturing scale up of the company's revyve Antimicrobial Wound Gel in the current period. Net income for the second quarter of 2024 was $9.2 million compared to a net loss of $968,000 for the quarter ended June 30, 2024. Net income in the current quarter reflects the gain on the sale of STEM Animal Health. Cash from continuing operations as of June 30, 2024, was $1,010,000 in connection with the completion of the sale of Kane 67% equity in STEM Animal Health, a portion of the net sales proceeds was used to repay the loan from Pivot Financial of $6.7 million. With that, I will now turn the call over to Marc.

Thank you, Ray and thank you, everyone, for being on today's call. I have to say it really feels like this flywheel we've been building and pushing on is finally starting to gain some momentum. And that everything we've been putting in place is coming to fruition. That certainly started at the beginning of the quarter with the sale of STEM to Dechra Veterinary pharmaceutical that allowed us to clean up our balance sheet, pay off all our interest-bearing debts and refocus the company on biofilm mitigated topical infections with a strong emphasis on chronic non human wounds. A quick side note here. I want to say thank you again to the team at Pivot Financial. They were real partners and really helped us out over these -- these last few difficult years, and they were great partners and thank you once again. Now with regards to revyve, there has been a lot of activity starting at the end of the quarter. When we completed the scale-up manufacturing process with our manufacturing partner, Halo. Now for a variety of reasons, the order did not officially get released until the following Tuesday, which was the first business day of the third quarter. So today's numbers do not reflect that shipment of our revyve Antimicrobial Wound Gel to ProgenaCare. shortly after that, we announced that we had obtained our ISO 1345 (sic) [ ISO 13485 ] Medical Device Single Audit Program, or MDSAP certification. Which has now allowed us to file for regulatory approval in Canada. To be clear, the file has been submitted, but we needed to make some administrative adjustments to the file, and it is now -- moving forward. With the U.S. FDA 510(k) clearance, it's an accelerated process with Health Canada, so we're still hopeful to get the approval this quarter. More great news followed when the FDA agreed to remove the dosage limitation on our revyve Antimicrobial Wound Gel. This provides a clear pathway for our revyve Antimicrobial Wound Gel Spray. We believe the spray will be a key product in the burn market and will have strong military appeal. Also with regards to our usage limitation, SaludPharma, our partner in Colombia, Panama and Costa Rica had been waiting for that to remove that limitation removal to file a regulatory approval. The dossier has now been submitted and we're hopeful sales will start early next year. Finally, we signed 2 new distribution agreements with distributors in the United Arab Emirates and Qatar with more deals to come before year-end. Now I do read some of the discussion forums and want to take a minute to address why we chose to build a network of local distributors rather than sign a worldwide distribution agreement with a larger player. There's a number of reasons. But in a nutshell, we've chosen partners that are more dedicated to their brand, have a greater influence on -- we have a greater influence on their success, and it also eliminates the risk of a global partner taking on the product and not giving it the full energy that it deserves. Also, as we grow our portfolio, we can quickly add these new products to that network. So a lot of exciting things going on with revyve, more distribution and line extensions to come this year. Now with regards to our DispersinB and in particular, the trials, in acne, we're making very good progress at University of Miami. We're still hopeful to start the acne proof-of-concept trial this year. We're finalizing the schedule at the university and we'll update investors on our progress shortly. We'll also be providing a more detailed update on acne and the scientific rationale explaining why we believe DispersinB will be a game changer. Dr. Jeffrey Kaplan has been doing a lot of research on this front. And the results are very compelling. A good example of that is a publication we announced this morning. And this -- with regards to DispersinB and Wound Care, we're addressing all of the FDA's feedback and still believe we have a clear path forward to initiate the trial in the first half of next year. I also want to highlight a few other successes we've had since my Q1 remarks. So we signed licensing agreements with I-MED Pharma for DispersinB, I met a great little company -- a great company in Montreal, I wouldn't call them -- little as well as Omni Bioceuticals for our DermaKB line. Finally, we announced $200,000 of funding from an NRC IRAP to expand our revived portfolio. So once again, it's exciting to see our flywheel that we're building gaining some real momentum. So with that, I'll turn it over to you, Victor, if there are any questions.

[Operator Instructions] And at this time, I'm not showing any questions. I would now like to turn it back to Marc Edwards, our CEO, for closing remarks.

Thank you, Victor. Thank you, everyone, for tuning in today. If investors do have any questions, please feel free to reach out. In closing, I just want to say I've been working very closely with our Executive Chairman, these past few weeks doing a little -- non-deal roadshow with investors and wanted to salute Dr. Robert Huizinga. It's been a real pleasure, and his tremendous contribution to the team and really a big part of our successes. It's not just good timing on his part there. He's really helping us push this up the hill. So thank you very much for everyone. And yes, thanks for tuning in.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.