Kane Biotech Inc (KNBIF) Q2 2024 Earnings Call Transcript Highlights: Record Gains and Strategic Shifts

Strong financial performance driven by the sale of STEM Animal Health and increased license income, despite rising operating expenses.

Summary
  • Gain on Sale of Subsidiary: $10.4 million from the sale of 67% interest in STEM Animal Health.
  • License and Royalty Income: $300,000, up 74% from $173,000 in Q2 2023.
  • Product and Services Revenue: $510,000, up 5% from $484,000 in Q2 2023.
  • Total Revenue: $810,000, up 23% from $657,000 in Q2 2023.
  • Gross Profit: $464,000, up 41% from $330,000 in Q2 2023.
  • Total Operating Expenses: $1,520,000, up 76% from $866,000 in Q2 2023.
  • Net Income: $9.2 million, compared to a net loss of $968,000 in Q2 2023.
  • Cash from Continuing Operations: $1,010,000 as of June 30, 2024.
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Release Date: August 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Kane Biotech Inc (KNBIF, Financial) recorded a gain of $10.4 million from the sale of its 67% interest in STEM Animal Health.
  • License and royalty income increased by 74% to $300,000 compared to the same period last year.
  • Total revenue for the second quarter of 2024 increased by 23% to $810,000 compared to the same period in 2023.
  • Gross profit for the second quarter of 2024 increased by 41% to $464,000 compared to the same period in 2023.
  • The company obtained ISO 1345 medical device Single Audit Program certification, allowing for regulatory approval filings in Canada.

Negative Points

  • Total operating expenses for the second quarter of 2024 increased by 76% to $1,520,000 compared to the same period in 2023.
  • The increase in operating expenses was primarily due to noncash adjustments and expenditures related to manufacturing scale-up.
  • Product and services revenue saw only a modest increase of 5% compared to the same period last year.
  • The company is still awaiting regulatory approval for its revyve Antimicrobial Wound Gel in Canada.
  • There is uncertainty regarding the timeline for the start of the acne proof-of-concept trial at the University of Miami.

Q & A Highlights

Q: Can you provide more details on the financial impact of the sale of STEM Animal Health?
A: Raymond Dupuis, Chief Financial Officer: The sale of Kane Biotech's 67% interest in STEM Animal Health resulted in a gain of $10.4 million, which significantly improved our financial position. This transaction allowed us to clean up our balance sheet and pay off all interest-bearing debt.

Q: What were the main drivers behind the increase in license and royalty income?
A: Raymond Dupuis, Chief Financial Officer: The increase in license and royalty income, which rose by 74% to $300,000, was primarily due to recognizing the outstanding balance and contract liabilities related to the exclusive license and distribution agreement with Dechra Veterinary Products.

Q: How did the sale of STEM Animal Health affect product and services revenue?
A: Raymond Dupuis, Chief Financial Officer: Product and services revenue increased by 5% to $510,000, mainly due to incremental contract manufacturing revenue from Dechra following the sale of STEM, although this was partially offset by the discontinuation of animal health product sales.

Q: Can you elaborate on the recent regulatory milestones achieved for revyve Antimicrobial Wound Gel?
A: Marc Edwards, Chief Executive Officer: We completed the scale-up manufacturing process and obtained ISO 13485 MDSAP certification, which allowed us to file for regulatory approval in Canada. Additionally, the FDA removed the dosage limitation on our revyve Antimicrobial Wound Gel, paving the way for a spray version that we believe will be significant in the burn market and for military use.

Q: What is the strategy behind choosing local distributors over a global partner for revyve Antimicrobial Wound Gel?
A: Marc Edwards, Chief Executive Officer: We opted for local distributors because they are more dedicated to the brand and we have greater influence over their success. This approach also mitigates the risk of a global partner not fully committing to the product and allows us to quickly add new products to the network as we grow our portfolio.

Q: What progress has been made in the development of DispersinB for acne treatment?
A: Marc Edwards, Chief Executive Officer: We are making good progress with the University of Miami and are hopeful to start the acne proof-of-concept trial this year. Dr. Jeffrey Catlin's research has been very compelling, and we will provide more detailed updates on the scientific rationale and progress shortly.

Q: Can you provide an update on the financial support received for expanding the revyve portfolio?
A: Marc Edwards, Chief Executive Officer: We received $200,000 in funding from NRC IRAP to expand our revyve portfolio, which is a significant boost to our efforts in developing new products and expanding our market reach.

Q: What are the future plans for Kane Biotech following the sale of STEM Animal Health?
A: Marc Edwards, Chief Executive Officer: Post-sale, we are refocusing on biofilm-mitigated topical infections, particularly chronic non-healing wounds. We are also expanding our distribution network and product lines, with more deals expected before year-end.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.