Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Executives

Kerry Gray - Chairman, President, CEO

Analysts

Jason Napodano - Zacks Investment Research

ULURU Inc. (OTCQB:ULUR) Q1 2014 Earnings Conference Call May 16, 2014 9:00 AM ET

Operator

Good morning and welcome to the ULURU First Quarter Earnings Call. All lines will be muted during the presentation portions of the call with an opportunity for questions and answers at the end.

At this time, I would like to introduce your host, Mr. Kerry P. Gray, President and CEO. Mr. Gray, please proceed.

Kerry Gray

Thank you. Good morning and thank you for joining the earning call. Let me start by reading the Safe Harbor language. This conference call will contain certain statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 as amended, included but not limited to statements made relating to the future and financial performance of ULURU, expected business development, projections of product sales, plans and strategic relationships, and our commercialization of Altrazeal.

When used in the conference call, the words may, targets, goal, could, should, would, believe, feel, expect, confident, anticipate, estimate, intend, plan, potential and other similar expressions maybe indicative of forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the company's control.

The company cautions that various factors, industry trends and the Food and Drug Administration and other regulatory agencies could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements of the company.

Any forward-looking statements speak only as of the date on which such statements are made and the company undertakes no obligation to update any forward-looking statement or statements. These statements are subject to numerous risks and uncertainties, including but not limited to the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2013 and other reports filed by us with the Securities and Exchange Commission.

Let me start by giving you a brief introduction. As it is only been 45 days since our last call, this call will be somewhat briefer than the previous call. With each passing week, I continue to become even more convinced of the clinical and economic significance of Altrazeal.

During the past 45 days, I have been made aware of 5 to 10 clinical cases both in the United States and internationally. That demonstrates not only the clinical benefit, but also the quantum of improvement in the quality of life of patients that have used Altrazeal. As shareholders this is rewarding to be associated with the company that is having such a positive impact on patients.

At the moment, we certainly have abundance of ongoing activities to support our worldwide initiatives including registration documentation, ISO compliance, production and clinical activities.

I would now like to update you on our most recent progress. Financials, I will now briefly address our financial results. As stated in our press release, we currently have significant back orders which is planned substantially eliminate over the next 45 days with shipments being made to in excess of 10 markets. The production timeline together with initial start-up, regulatory requirements and equipment installation issues have delayed these shipments. I will further discuss production later in the call.

Our plan had called for us to be in a total of 24 countries by the end of June. We will marginally fall short of this objective and Altrazeal will be available in 20 markets. We have been able to accelerate the introduction in the number of markets and others due to delays by our partner in regulatory requirements have resulted in a delay in some launches. In other incidences, additional time has been taken to ensure that the correct market and the distribution partner have been selected. Ultimately, this will be to our benefit. I believe that achieving 20 markets by the end of June has been great progress for the company.

With the exception of revenue, the remaining results were in line with our projections with the exception of the legal expense associated with our licensing dispute and Investor Relations fees. 2013 was positively impacted by the recovery of a warrant due to the termination of an IR firm. 2014 has been impacted by the recognition of expense associated with the appointment of a new IR company.

Importantly, cash expenses were contained to $550,000 for the quarter despite the increased legal expense.

I would now like to briefly comment on the improvement we have made to the balance sheet in the quarter. As stockholders equity increased approximately $1.3 million, total liabilities have been reduced by $1,270,000 and our cash position has improved $1 million. The improvement in our balance sheet is an important for numerous reasons; it increases the investor audience due to the improved financial stability; it positions us for a possible uplifting to an exchange due to our improved shareholder equity position; it provides us with the resources to implement our business strategy, and it eliminates one uncertainly that can deter potential investors.

I would now like to move on to discuss business progress. Let me first start by discussing some U.S. initiatives. As we expand not only our international presence, but also get additional clinical exposure in the United States, we are being presented with additional opportunities to clinically utilize Altrazeal.

In the past 45 days, I have been approached by numerous clinicians in three areas - two areas where there have been outstanding clinical results. One, major dermatological [ulcerative] [ph] conditions, and two, use in conjunction with negative pressure wound therapy. While major dermatological [ulcerative] [ph] conditions may globally be a relatively small population, these patients have chronic and maybe relatively easy to access for marketing purposes.

The opportunity for the use of Altrazeal in conjunction with negative pressure wound therapy could be very significant as it could eliminate one of the negative features of negative pressure wound therapy that is the involvement of the [firm] [ph] in the wound bed. This could be very synergistic and a major improvement in wound care.

We continue to advance discussions on the initiatives I outlined on the previous call including the Accountable Care Organization and looking to change reimbursement practices. We have been presented with an outstanding opportunity. A physician with extensive clinical experience in the United States with Altrazeal will be helping the company with our U.S. and international initiatives including physician education and assisting with – targeting the Accountable Care Organization and assisting us access and present to important commercial groups. I see this as an extremely important addition to the company’s resources.

Let me now briefly touch on clinical studies. We’ve conducted additional discussions on the implementation of our clinical plans particularly as it relates to expanding our activities in Europe. This is a very attractive alternative due to the cost structure and the desire [to publish] [ph] fundamental research in wound care. We are advancing on all fronts previously discussed and we will be looking at the potential to conduct additional smaller multi-center case studies to support our activities.

With the increasing activities in Europe, I anticipate an important publication in clinical results to be presented. Clinician experimentation with Altrazeal is leading to the identification with additional opportunities that we need to support by additional clinical data. One such opportunity is the use with negative pressure wound therapy. Now, that it is used in difficult to heal areas such as the skin on skull where sutures are not possible.

In early April, we announced preliminary information on our pharmacoeconomic data. I'm very excited for this to be completed and published. The initial data is very encouraging and confirms what had been observed and reported.

The ability to reduce dressing changes, reduce the time for a dressing change and the potential to accelerate healing presents us with a clearly differentiated opportunity relative to the competition in a marketplace needing improved treatment options.

Let me now address the European Wound Management Association meeting. This week the major European wound meeting was held in Madrid, Spain. Next week we will be providing details of our participation in this important meeting. In addition to a number of poster presentations and a booth at the convention hall there was also an extensive symposium conducted on Altrazeal.

Importantly this served as a launch meeting for Altrazeal in Spain. In addition, key opinion leaders gave presentations to a large audience including our strategic partners and potential strategic partners for in excess – from an excess of 10 markets. Meetings such as this give Altrazeal the important visibility.

I would now like to briefly update you on publications and certain things we are looking at in the scientific area. Since the last call, we have been in contact with a number of academic institutions that have expressed interest in assisting the company determine the scientific basis behind a number of the observed benefits of Altrazeal. We are constantly asked by not only our physicians, but also our strategic partners and potential partners as to why patients experience almost immediate pain relief, healing is accelerated and there seems improvement in wound exudate and its control.

To-date we have only been able to offer hypotheses on these subjects, while it is not crucial to the commercial success of Altrazeal, it would certainly add further credibility to Altrazeal if we had scientific data supporting a mechanism of action. We intend to engage an academic institution to analyze wound fluids pre and post application of Altrazeal to determine the presence of certain biological markers to assist in the understanding of the science behind Altrazeal. Scientific publication on the basic science will not only add additional credibility, but will also provide further marketing support.

I would now like to address production. As previously stated, we are working to eliminate our current backlogs. On the past call as stated the production issues have been the most challenging and time consuming items we have to address. It is not uncommon with the new process that you are confronted with unanticipated issues. This is certainly been the case. I believe that we have resolved the majority of the issues and have plans in place to optimize the production process. It is anticipated by the fourth quarter, the process will be optimized, the only remaining outstanding issue will be to realize the cost savings associated with increased volume of powder production.

We have already reduced cost of our powder production by 33% and anticipate a further reduction by another 33% commencing as early as – the first quarter of 2015. On the production front currently ongoing, we have realized savings in excess of 50% on all of our packaging components.

Let me now address Investor Relations. Unfortunately due to the time constraint, I have not been able to devote as much as time as I would have liked during the past 90 days to this important activity. This situation would be immediately corrected. I have had discussed since with numerous groups including investment bankers and investor advisors to believe now is a time for us to make an aggressive push to get our story out to institutional investors. Hopefully, before the end of June, we will start this initiative. It has been very pleasing to get the feedback from these groups collectively it is their opinion that not only will smaller institutions will be interested in our investment proposition but also now is the time to introduce a story to larger health specific institutions.

I'm now evaluating a number of very interesting opportunities to access this much large investor banks. Our significantly improved financial position is of great importance to access this market segment. As we move forward and expansion, this has consumed less of amount of time; I intend to devote more time to this important activity.

Let me now move on and address some investor questions, I have been presented with. Obviously, the question I most often hear is why has been a decline in our stock price? I believe that there are basically five reasons for this.

One, there has been a pull back in small cap stocks and the Russell 2000 has retreated significantly from the highs. Two, there has been a significant pull back in biotech and small emerging pharmaceutical stocks. Now, three, understandably after the significant appreciation there has been profit taking by some of the largest shareholders that we have. Four, there has been a significant reduction in our average volume. And also as I mentioned, I haven't devoted so much time to Investor Relations as I had planned.

There is no fundamental reason why the stocks have retreated in price, well, in the short-term. This is a disappointment. It is something that I believe can quickly be corrected by additional exposure. And looking at our evaluation relative to the peers within the industry clearly indicates there is a major disparity in our valuation.

Another question, I'm asked before we move more regularly issued press releases. As you may noticed we tend to accumulate commercial progress and make an announcement that contains numerous activities. I believe there is greater impact announcing a larger advancement then constantly announcing smaller transactions and achievements. Because we are not making announcements doesn't mean we are not making progress.

An additional item that the peers somewhat unclear and is a little confusing to some investors is our ownership position in Altrazeal trading which impacted two separate entities and our OraDisc AG. ULURU has a non-dilutive 25% ownership in all three entities. These entities are the vehicle through which sales to our global partners are made consequently a significant margin is captured in these entities. Of major importance, ULURU has the right to buyback the 75% ownership that currently we do not own at pre-determined fixed formula.

It is our plan to exercise how option as a point this will be accretive to our earnings plus the 25% ownership in the purchase right, two very significant assets that are not on our balance sheet.

Lastly, I'm asked about guidance and providing additional financial details. At this point there are too many uncertainties outside of our control which makes it not only difficult but could be misleading to give such predictions. I fully understand the need and as soon as I'm comfortable that this is truly meaningful and is accurate, we will definitely do this.

From my view point, what is most important at this stage of our development is that Altrazeal continues to demonstrate outstanding clinical benefits, improved patient quality of life and provides an economic benefit to the healthcare system.

Additionally, global expansion in both the established and the marketing distribution partners and subsequent product launches are the critical success factors for the company. I can assure you that on all these fronts we are progressing outstandingly well.

I would like to point out that they may have been one confusing issue in the press release issued this morning. In the bullet points up front, it had stated that we would – we are looking to be on the market in 50 countries by the end of 2015 and then in my statement, it says 2014. The correct date is 2014 and not 2015.

In summary, although we have been confronted with a number of challenges over the past 60, 90 days including a delay in the shipping of orders, production optimization and a decline in our market capitalization, I can confidently say that the positive developments have far way outweighed any negative. We are substantially stronger company today than we were entering this year. Our financial strength, balance sheet, capital structure, clinical support, marketing and distribution networks are all passed the period than they were just four months ago.

The company has a very clear direction and defined objectives. I'm confident that we will successfully implement our plans to benefit all stakeholders. I repeat what I have previously said wound care is a very generic market Altrazeal is clearly innate, and as the desired features and benefits to favorably compete in this ever changing cost constrained market environment.

I will now open up the lines for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question comes from the lines of [Louis Kinckerbocker] (ph). Please proceed.

Unidentified Analyst

Good morning, Kerry.

Kerry Gray

Good morning.

Unidentified Analyst

You say there is a launch of 20 countries by June, how many of those countries have not been reflected in the reported revenues as of March 31st?

Kerry Gary

11.

Unidentified Analyst

Thanks.

Operator

Thank you. Our next question comes from the line of Jason Napodano [Zacks Investment Research]. Please proceed.

Jason Napodano - Zacks Investment Research

Hey, Kerry, how you are doing?

Kerry Gary

Fine, Jason. Thank you.

Jason Napodano - Zacks Investment Research

So was just trying to get a sense of the Q1 numbers. There was a shipment that I believe in the last call you talked about a shipment that was stranded at the facility in late December from weather, wondering if that shipment is representative of these Q1 numbers?

Kerry Gray

That's correct.

Jason Napodano - Zacks Investment Research

Okay. And so then there were several other shipments, I think a new distribution agreements that you were signing I think – had signed and expected to ship in the first quarter, if – am I understanding correctly in that these did not ship due to production facility?

Kerry Gray

That's correct. We had started production in the first quarter and our timelines slipped a little. And also we did have some start-up issues. So that production did slip into the second quarter and now we are – as I have mentioned in the press release, we are looking to make shipments to in excess of 10 markets by the end of June.

Jason Napodano - Zacks Investment Research

Would you – since obviously you know what those markets are, would you provide any guidance to the street on the magnitude of those shipments?

Kerry Gray

Oh, yes. Our shipments with – said this previously, it’s public information. For markets, the majority of markets our minimum orders $40,000 to $80,000. And in some cases with smaller markets now we have taken some of the smaller markets down to $20,000. So major markets we also – where possible in the agreements that are signed, we try and get the minimal order quantities up as high as possible obviously for economic reasons. But we made significant – we are not shipping 1000 blisters or whatever. To the major markets we ship 20,000, 40,000 blisters.

Jason Napodano - Zacks Investment Research

So and this revenue is recognized all when it's shipped or are you – is there deferred revenue portion?

Kerry Gray

No. All when it's shipped.

Jason Napodano - Zacks Investment Research

Okay. So, let me – I'm going to keep digging into this because I think this is interesting, so you got 10 markets, I mean, how would you classify those 10 markets that these shipments are going to, would you say that there are – the majority of them are major markets or they – some of them fall into the smaller category?

Kerry Gray

The smaller, mid and major, all three.

Jason Napodano - Zacks Investment Research

Okay. So just so that I think –

Kerry Gray

I don't have it. Just to be clear, I don't have any of the super majors, which is another level which we haven't shipped…

Jason Napodano - Zacks Investment Research

Right. Okay. I believe that was more like a 160 I think you said.

Kerry Gray

Right.

Jason Napodano - Zacks Investment Research

Okay. So just to get a sense of what we could be looking at here in the second quarter, if this shipment does take place in June I mean you had $87,000 in product revenues in the Q1, but if we are talking about 10 markets or 10 potential shipments here in the Q2 ranging between 20 to 80, we are looking at a fairly large number for the Q2 – at least sequentially, a fairly large uptick for Q2 revenues.

Kerry Gray

That's correct.

Jason Napodano - Zacks Investment Research

And then another – so 24 markets by the end of June, 50 by the – and so then there is another 26 markets that will come online in the Q3 and Q4?

Kerry Gray

That's our plan. Yes. We said 24. We will get 20 and up to 24.

Jason Napodano - Zacks Investment Research

Okay. Okay. Yes. You did say that. Okay. All right, but you are still – you are sticking by that 50 by the end of the year, so that means potentially 30 markets coming online between now and till the end of the year?

Kerry Gray

That's correct.

Jason Napodano - Zacks Investment Research

Okay. Well, that certainly, I'm like, we could be looking at a significant ramp in, in revenues, would you, I will put on the line here since I'm asking questions. Would you take a stab at when you think we will see a positive number and the bottom line, I'm impressed with the fact that you guys only look like you burned about 100 – I will give a math real quick about $160,000 in cash only in the Q1. So I mean the burn just really looks like it continues to come down. And that $160,000 in burn is on the face of what I would consider to be a pretty low revenue number, is it possible that we are looking at a positive cash flow number by the end of the year?

Kerry Gray

I would certainly – that's our objective and as you know we have got the business structured in such a way that we don't have to deliver massive revenue numbers to get to that point. And we certainly are very focused on that.

Jason Napodano - Zacks Investment Research

Yes. That's very interesting. So I've got a one last question, then I will jump out.

Kerry Gary

Right.

Jason Napodano - Zacks Investment Research

So I attended the SAWC meeting in April, unfortunately didn't get over to Spain for their European Wound conference meeting. But, the one thing that struck me as I was walking around the floor at SAWC was, how fragmented the wound care market is and how – for lack of a better word, generic, some of these products are – I mean the dry bandages – the wet to dry bandages, I mean they are - a lot of them are essentially just the same product with a different name on it. They really look like they have no differentiation. But, everybody had a table, everybody had a booth and it struck me that data and is so important to try to drive sales in this. You got a product, if you believe that product is differentiated which clearly we do with Altrazeal.

Do you have any thoughts on how to go out and tackle such a fragmented market? I don't know if the market is the same in Europe, where you are seeing the majority of your revenues. But in the U.S., it really does seem like there is so much generic bandages, and it really seems like data and education is the key to driving that. I'm very interested to see this pharmacoeconomic data that you guys are compiling right now.

Did you have any kind of thoughts on Europe and just how to drive market share in this type of environment?

Kerry Gray

Jason, your comments mirror my comments. It is a very generic market and in fact only skin substitute products have been coming on the market in the United States. I question if anyone could differentiate one of this from the other. So I mean, I see the U.S. market as a very, very generic market.

The only difference you have in Europe, there are not as many products on the market, and the main area where products are on the market is in the skin substitute area. There are very, very few and far between. And but, the whole thing revolves - and the way we have seen our success discussing Altrazeal with potential partners and the like, they get it. They say wow! Although this is a high priced basic bandage, it is a very low cost in total. And that is the whole selling proposition.

We are bringing science to wound care which - there is not a lot of science in wound care – in bandages. We are bringing it at a price point that enables everyone to get involved with this product basically because of the reduced dressing changes and the time to make the dressing change.

I mean, I'm very impressed with the number of physicians in the United States recently that I have spoken to where they are becoming very aggressive in the use of Altrazeal. Initially when we first put the product to the market people were so accustomed to looking at a wound every two or three or whatever days. But I have been aware lately of people who’ve put it on and left it on 7 to 10 days right up front. And that is where we get the benefit relative to all of these other generic type dressings. And a lot of them got no support whatsoever behind them.

Jason Napodano - Zacks Investment Research

It certainly seems that way. Thanks for taking the questions Kerry.

Kerry Gray

It's my pleasure.

Operator

Thank you. There are currently no additional questions waiting from the phone lines.

Kerry Gray

Well, thank you very much. We are extremely excited here. We are extremely busy, if you had the opportunity to look at the front page of the annual report that pretty much sums up our life right now putting Altrazeal in many, many different languages. And the challenges in one instance of putting four languages on one little lid on a blister and that. We are overcoming all of those and we look forward to updating you in 90 days on the progress we have made. Thank you very much.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: ULURU's (ULUR) CEO Kerry Gray on Q1 2014 Results - Earnings Call Transcript
This Transcript
All Transcripts