Emisphere Technologies, Inc (OTCPK:EMIS) Q2 2014 Earning Conference Call August 14, 2014 8:30 AM ET
Alan L. Rubino – President and Chief Executive Officer
Michael R. Garone – Chief Financial Officer
Good day ladies and gentlemen and welcome to the Emisphere Technologies Second Quarter 2014 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, today’s conference is being recorded.
I’d now like to introduce your host for today's conference call Mr. Alan Rubino, President and Chief Executive Officer. You may begin sir.
Alan L. Rubino
Thank you, Kevin very much. Good morning, ladies and gentlemen as mentioned, I am Alan Rubino and I would like to begin this call by welcoming each of you to the Emisphere’s earnings call for the second quarter of 2014. As always we certain value your time and attention to join this call. I just want to at the outset that myself and Mr. Garone at different locations, I don’t think that should affect any of the quality of the call it’s nice to have this technology is progress.
Anyway shortly I am going to ask our CFO Mr. Michael Garone, if you would summarize the financial results which will really be followed by updates on Eligen in terms of the commercial business development and financing activities and of course I would say over relate to our status towards implementing the company’s business plan that we have been discussing in recent call.
At this morning, the company issued a press release that covers all the financial results for the second quarter of 2014 and that also addresses the development business matters, this press release has been posted on the company’s website. In addition, this teleconference is being webcast live via the Internet with an audio replay which will be post to our website two hours after this call has ended and will remain there for approximately two weeks.
And now I would like to turn I think over to Michael Garone and Michael review the salient financial highlight.
Michael R. Garone
Thank you, Alan. Before we begin the business of the call, please note that the any forward-looking statements made by representatives of Emisphere relating to matters that are not historical facts including, without limitation, those regrading the sufficiency of our available capital resources to meet our funding needs; timing of the development and commercialization of our product candidates or potential products that may be developed using our Eligen Technology; planned or expected studies and trials of oral formulations that utilize our Eligen Technology.
The potential market size, advantages or therapeutic uses of our potential products; and variation in actual savings and operational improvements resulting from restructurings are forward-looking statements that involve risks and uncertainties, including, but not limited to, the likelihood that future research will prove successful, the likelihood that any products in the research pipeline will receive regulatory approval in the United States or abroad.
The ability of Emisphere and/or its partners to develop, manufacture and commercialize products using Emisphere's drug delivery technology, Emisphere's ability to fund such efforts with or without partners, and other risks and uncertainties detailed in Emisphere's filings with the Securities and Exchange Commission, including those factors discussed under the caption "Risk Factors" in Emisphere's identified in the documents Emisphere has filed, or will file, with the Securities and Exchange Commission.
Copies of Emisphere's filings with the SEC may be obtained on the Internet at the site http://www.sec.gov. Emisphere expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Emisphere's expectations with regard thereto or any change in events, conditions, or circumstances on which any such statements are based.
Okay. So we’ve got that out of the way. Now let me turn my attention to the summary of the financial results. I will begin by talking about the company’s financial results for the three-months ended June 30, 2014. For the period, the company reported a net loss of $8.1 million or $0.13 per basic and diluted share compared with the net loss of $14 million or $0.23 per basic and diluted share for the same period last year. The company reported an operating loss of $1.5 million for the quarter compared to an operating loss of $1.8 million for the same period in 2013.
Total operating expenses were $1.5 million for the quarter of $200,000 or 14% reduction compared to the same period in 2013. Total operating expenses include research and development costs of $300,000 that’s an increase of $200,000 or 111% compared to the same period in 2013, due primarily to a $200,000 investment in further developing the manufacturing processes for our Oral Eligen B12 Rx product during 2014.
In general and administrative expenses of $1.2 million that’s a $400,000 or 24% reduction compared to the same period in 2013 due primarily to a $300,000 reduction in professional services costs in connection with the preparation – with our preparations to launch Eligen – Oral Eligen B12 Rx and $100,000 reduction in human resources costs.
Other expense for the second quarter of 2014 was $6.5 million compared to other expense of $12.2 million for the first quarter 2013, that’s a decrease of $5.7 million due primarily to a decrease in the change in fair value of derivatives of $6 million, and a $300,000 increase in interest expense.
Year-to-date the company reported a net loss of $11.4 million, or $0.19 per basic and diluted share, for the six-months ended June 30, 2014, compared to a net loss of $16.4 million, or $0.27 per basic and diluted share, for the six-months ended June 30, 2013. An operating loss of $3.9 million for the first half of 2014 compared to a loss of $3.5 million for the same period last year.
Total operating expenses were $3.9 million, an increase of approximately $400,000 or 11% compared to $3.5 million for the same period last year. Total operating expenses included research and development costs of $700,000 and general and administrative expenses of $3.2 million, compared to $400,000 and $3.1 million respectively for the same period last year.
The company reported other non-operating expense of $9.2 million for the first half of 2014, compared to other non-operating expense of $12.9 million for the same period last year, that’s a $3.7 million reduction, it was due primarily to a $4.4 million decrease in the change in fair value of derivative instruments, offset partially by a $700,000 increase in interest and other expense.
A state income tax benefit for 2013 of approximately $1.7 million was received and recognized during the first quarter of 2014 from the proceeds from the sale of approximately $20.8 million of New Jersey net operating losses through the Technology Business Certificate Transfer Program, sponsored by the New Jersey Economic Development Authority. Our weighted average basic and diluted shares outstanding for the period ended June 30, 2014 and the same period of 2013 were at was 60,687,478.
Next I will report in the company’s liquidity. As of June 30, 2014, we had approximately $1 million in cash, a net decrease of $3 million from December 31, 2013, approximately $6.9 million in working capital deficiency, a stockholders' deficit of approximately $98.1 million and an accumulated deficit of approximately $500.2 million.
The company estimates that its cash balance is sufficient to allow it to continue to prepare for the market development and domestic launch of, and to explore global markets opportunities for Oral Eligen B12, and otherwise continue operations through approximately the end of the third quarter of 2014.
The company recognizes with the imperative of addressing its financing needs and is perusing several courses of action to addresses deficiency in capital resources including the global commercialization of B12, seeking new partnerships, leveraging existing partnerships, and capital markets financings. That completes the read out of the company’s financial results.
Now I’ll turn the call back to Alan Rubino, who will provide everyone with the concise and thorough update on the Emisphere’s business. Alan?
Alan L. Rubino
Mike, thank you. Thank you to all as Mike indicated I will provide an update and give you in Emisphere business overview. As Mike just mentioned and it is important to stress that we remain laser focused on financing and we are working or rather intensely to insure that the company is publicly funded to implement the plans that we have been outlaying on these calls. I would like to emphasis that all of our financing, commercial and development efforts are still on track and we continue to make excellent progress in each area.
Now I will cover some brief, but salient highlights this morning which will give you an effective snapshot in status and some key areas. First, just talk about the commercial highlights. Eligen B12 Oral U.S. product launch subject to securing the necessary financing or planning activities remain on schedule for the most part. But we have decided to push back introduction from Q4, 2014 to Q1 2015, the reason to straight forward the first is we being involved or anticipated timing and closing on the financing.
And the second for those of you are very familiar with pharmaceutical marketing launching the product in the November, December timeframe is not optimal and you are certainly going to in anyway impair a successful launch. So, we have made basically that decision.
An overview now on our carrier and delivery system highlights, we continue to advance relationships and also develop new initiatives with Novo Nordisk and Novartis as mentioned previously and we’re also now advancing with a Japanese global concerns we are into a agreement related to a carrier and an API match. As you’ve heard recently Novo is in is in Phase II clinical trial with their oral GLP-1 analog and that is with an Emisphere carried and that is continuing on schedule we remain very enthusiastic about that as well.
Updating you now onto the global business development activities in progress on that front, we are continuing to have multiple global partnership discussions, specifically regarding ex-U.S. license for the Eligen B12 product and we are encouraged by the status of these interactions as well as the level of engagement of these moving along in a time and speed that we are comfortable with.
And, something even more specifically we also had some key global and regional players have completed, their multi-marketed commercial and regulatory product due diligence, so therefore we anticipate progressing toward the deal stage very soon we would hope at some point to be able to discuss that a bit further.
Coming back to the important area of financing, I think it’s a note that as it was mentioned, the Eligen wants timeline hinges import on this adequate financing, but I would like everyone on this quarter be sure that management remains absolutely focused on job one. We are heavily engaged in pursuing non-dilutive sources and, I can show you that this management team is doing everything possible to secure the required financing as soon as possible.
Naturally, and has been the norm on these calls, I plan to keep you all posted in real-time on progress of our financing efforts in particular as well as any other areas related to product commercialization and business development. I would also like to reiterate a statement I made on the last call that Emisphere will continue as an entry and an operating company to make sustained progress and it’s operating very effectively in a well-organized way as it continues to transform itself from a single focused delivering system company to a broader company that has been carefully prepared to moving to the marketing of it’s own prescription therapeutic products.
Many of you out there run companies and have been involved in turnaround and you know that these things don’t happen overnight, but I think in each of the calls if you look back, there has been very organizing and disciplined progress each time and we've tried to communicate that effectively. And again, let me just say that our efforts to secure this financing will remain our primarily and immediate focus. I think it’s also important, I would like to express my appreciation on behalf of our team for your interest and attention to what is happening within Emisphere and how we are addressing both our opportunities and our challenges.
I would like you to know that we have very intent to deliver on initiatives, in progress to the point where we really earn back the trust of all of you our shareholders, management is secured however, it fully understand that translating progress against priorities into real and intangible results will be the ultimate signal and, the Emisphere is on the solid course for creating new value from an achievement of real and meaningful results.
So, now as is customary, I wish to open up the call to Q&A exchange and in advance while much is underway in the critical area of financing. I’ll speak to as much as I standard and I'm ready to share any important information on this topic. And, I would also personally want to avoid to engaging in any what I would consider to be speculative comments beyond what I have already shared on today’s call. So, I will be best I can to address anything, but I think you hopefully all understand and respect that I have to be very thoughtful about providing anymore details than I have on this call or we have.
So, with that Kevin, I would certainly open it up to questions and discussions.
(Operator Instructions) And, I’m not showing any questions at this time.
Alan L. Rubino
Okay, wait another few…
Actually we do actually have one question just queued up it’s from Brad Jose [ph] and he is a private investor.
Alan L. Rubino
Okay thank you. Hi, Brad. Good morning.
Good morning, Alan. Thanks for the update. Can you tell us what you expect to be able to accomplish or hope to accomplish in 2014 versus 2015 regarding the launch of the B12?
Alan L. Rubino
Oh, yes. As I mentioned on a couple of previous calls Brad. I think we have accomplished most of our market development and pre-launch activities as we’re critically gearing up for certain types of commercial – materials in commercial building at that campaign, also very important is our manufacturing, I think, Mike alluded to that as well, that is obviously a critical – I mean critical path of being ready to launch is having adequate supply and we’ve made excellent progress in this area.
We have a very good internal team, high expertise in manufacturing. So, I would say we are basically launch ready and the other steps we would obviously get towards the end of the fourth quarter a little over fourth quarter is really getting all the pieces all the other commercial pieces in place for that launch. We are for everything that we had on our agenda and also that we used our money prudently for where we are supposed to be right now.
Okay, excellent. And then, can you at this time provide any guidance on a range of target penetration, up teen either from your market surveys or the potential partner’s?
Alan L. Rubino
Penetration into the marketplace?
Yes, for the B12, if there is any guidance you can give there?
Alan L. Rubino
We have – lets put a guidance in well in planning. I think in the next call, I would like to be in a better place to explain exactly. We understand the market extremely well, you know exactly where all the IM injections are, we have also clear focus on what subset of the most highly productivity physicians that we are going to target with our resources and we are also thinking about some expanded opportunities as well. So, it’s just a tab premature Brad, but I think it’s a question that we certainly appreciate and we want to deliver with – and not specificity that as we go forward that maintained credibility with ourselves and as well as you and our shareholders. So, hope you appreciate that.
Okay. Thank you.
Alan L. Rubino
You’re welcome. Thanks for your question.
And, I’m not showing any further question at this time.
Alan L. Rubino
Okay. Then, Kevin, thank you and thanks to all that have been on this call. And I look forward to speaking to you soon and take good care.
Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.
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