Good morning, and welcome to Rockwell Medical's Third Quarter 2022 Results Conference Call and Webcast. Please note, this event is being recorded. At this time, I would like to turn the conference call over to Heather Hunter, Senior Vice President, Chief Affairs Officer at Rockwell Medical. Heather please go ahead.

Good morning, and thank you for joining us for this update on Rockwell Medical. Joining me on today's conference call are Dr. Mark Strobeck, Rockwell's President and Chief Executive Officer; and Paul McGarry, Rockwell Medical's Senior Vice President, Finance and Chief Accounting Officer. During today's call, Mark will discuss changes we are making to Rockwell Medical's corporate strategy along with the recent company update and then review highlights from the third quarter. Then Paul will go through Rockwell's financial results. After that, we will open the lines to take your questions. Before we begin, I would like to remind everyone that this conference call will contain forward-looking statements about Rockwell Medical within the meaning of the federal securities laws including, but not limited to, the types of statements identified as forward-looking in our annual report on Form 10-K and our subsequent periodic reports filed with the SEC which are all available on our Web site under the Investors section. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions and expectations only as of today. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed in or implied by such forward-looking statements are discussed in greater detail in our periodic reports filed with the SEC. Rockwell Medical's quarterly report on Form 10-Q for the quarterly period ended September 30, 2022 will provide a full analysis of the company's business strategy as well as the company's third quarter 2022 results. The Form 10-Q for the third quarter of 2022 will be filed at the conclusion of this call. Additionally, a recording of this conference call will be available on Rockwell Medical's Web site under the Investors section. At this time, I would like to turn the conference call over to Rockwell Medical's President and CEO, Dr. Mark Strobeck.

Thank you, Heather. Good morning, everyone, and thank you for joining us today for Rockwell Medical's third quarter 2022 results conference call and webcast. Before we discuss our third quarter results, I would like to begin by walking you through the important changes here at Rockwell and our rationale for those changes. After I joined the company in July of this year, I, together with Rockwell's management team and Board of Directors underwent an extensive evaluation and assessment of our business, our value proposition and differentiation, our addressable market opportunities and the ever-changing macroeconomic environment, including rising interest rates, inflation and the constricting capital markets. We employed this approach in an effort to identify the right path forward for Rockwell, which leverages what has been built over the company's 25-year history and maximizes value going forward for Rockwell's stockholders. After evaluating and reassessing our business, we are taking a different approach and are restructuring the business in a way that we believe can reduce the use of cash, create a profitable business, drive near- and long-term value and position us to pursue longer-term opportunities once profitable. We have determined that the optimal path forward is to focus our commercial and operational efforts primarily on Rockwell's hemodialysis concentrates business, which has been a consistent revenue generator for Rockwell and is well-positioned for growth. When we look closer at this business fundamentals, we see that the concentrates market in the United States alone is currently valued at approximately $380 million and is projected to grow to approximately $500 million by 2026. This is a large market and its growth is a byproduct of the increasing number of patients who are suffering from end-stage kidney disease. Today, Rockwell is the second largest supplier of life-sustaining hemodialysis concentrates products to dialysis clinics in the…

Thank you, Mark. Our cash and cash equivalents as of September 30, 2022, was $27.6 million. This compares to $30.8 million at June 30, 2022. Subsequent to the third quarter, we reduced our long-term debt to $10 million following a prepayment of $5 million, which allows us to reduce our interest expense over the next year by agreeing to a 10-month interest-only period starting December 1, 2022. With this $5 million debt prepayment, Rockwell's cash position would have been approximately $22.6 million as of September 30, 2022. This is compared to March 31, 2022, when Rockwell's outstanding debt was $19.5 million and the cash balance was $9.9 million. Revenue for the 3 months ended September 30, 2022, was $18.7 million. While slightly ahead when compared to the second quarter of 2022, this represents a 16.9% increase year-over-year compared to $16 million for the same quarter in 2021. Revenue for the 9 months ended September 30, 2022 was $53.5 million, which represented a 14.8% increase year-over-year compared to $46.6 million for the 9 months ended September 30, 2021. Cash used in operating activities for the 3 months ended September 30, 2022, was $1.1 million compared with $5.8 million for the 3 months ended June 30, 2022, representing an 81% decrease quarter-over-quarter. We remain focused on managing our cash to position us for future growth, derisk the business and support our goal to be profitable in 2024. I will now turn the call back over to Mark.

Thank you, Paul. Operator, please open the phone lines for any questions.

[Operator Instructions] And your first question comes from the line of Brandon Folkes from Cantor Fitzgerald. Your line is open.

Hi. Thanks for taking my questions and congratulations on the progress. So only 2024 profitability target, can you just help us think about how much of that is driven by revenue growth versus sort of cost cutting and maybe just gross margin improvement? And then maybe along the same lines, how much additional investment is required to expand the business, whether it be West or just sort of in other regions now that you have got past the Baxter agreement?

Yes. Thanks, Brandon. So to -- you've asked a number of pieces, so let me try to address those. So for us to achieve profitability in 2024, it will come from both a combination of growing our business, as I mentioned, and that will occur through a couple of different ways, one of which is continuing to expand our customer base, both in the U.S. and abroad. Secondly, we will be to find a way to access the Western portion of the United States, which is a market today that is now going to be accessible to us. And then third to that is going to be to add additional products to our portfolio. The second piece to our ability to achieve profitability in 2024 will come from continual improvements to our overall manufacturing and distribution processes. As I mentioned, we recognize that both in all three of our manufacturing facilities, we need to continue to automate our ability to manufacture our process -- our products. Those facilities are and our processes are right for that. So we will continue to do that, which will obviously reduce our expenses and enhance our profitability, which will, obviously, lead to enhanced gross margin and overall profitability for the business. As far as the remainder of the organization, we will need to add some additional small number of folks in support of taking over this Baxter business, but that won't significantly increase our expenses. And the combination of which will allow us to get to profitability in 2024.

Thanks. And sorry, just one follow-up. The $65 million to $70 million, was that for total revenue for 2022? Apologies, if I didn't get it correct.

Yes, that would be total revenue for 2022.

Okay. And then maybe do you mind if I just one more on the pipeline, just the microbiology and short-term stability results on FPC. How should we think about maybe some of the challenges around the Acute Heart Failure product as a stage? Obviously, Home Infusion it's very different for a number of reasons. So just any color in terms of how you're thinking about this meeting with the FDA.

Yes. So I think where we've landed on the formulation development is that we need to move to an aseptically prepared formulation for this product, which we think will move us around any potential issues that way we may find in other presentations related to microbiological growth. And so that will -- that aseptically prepared formulation will need to be developed for both the Home Infusion and the Acute Heart Failure program.

Great. Thank you very much and congratulations on all the steps during the quarter.

Thanks, Brandon.

And your next question comes from the line of Ram Selvaraju from HC Wainwright. Your line is open.

Thanks very much for taking my questions. Firstly, Mark, I was wondering if you could give us a bit of a flavor of the differences between the U.S. environment and the ex U.S. territories to which you were alluding previously, as those pertain to the economic outlook for a product like Triferic? And in particular, if you could maybe highlight the differences between, say, the Chinese market and the West market.

Yes. So the different -- I mean, obviously, there are different regulatory and development requirements to get a product approved in each of those different territories. And then additionally, commercially, it's a different competitive landscape. And so it's really a combination of those that I think provide each of our different partners an opportunity to develop and successfully commercialize these products in a different environment than we found here in the United States.

And then with respect to the longer term financial outlook, can you clarify just two items here. Firstly, if you expect to be cash flow breakeven or profitable on a full year basis in 2024? Or if you expect to reach cash flow breakeven before the end of 2024? And also, if you could clarify what you expect the total annualized revenue to be like in 2024. If you can provide a range that would be in and of itself would be very helpful.

Yes. So we intend to be -- we intend to achieve cash flow breakeven within 2024. So as of right now, our model is showing that we are able to do that. And we are going to continue to work aggressively to move that forward. But as of right now, based on our forecasting and our estimates and as I mentioned, the growth initiatives that we've outlined, we anticipate that we will cross that line within 2024. We are not prepared at the moment to provide guidance for 2024. But as you've seen in this announcement, we are now moving to a format where we will provide annual guidance for the company going forward.

And then lastly, just some clarifications on restructuring. Can you just indicate whether you expect any further workforce reductions over the course of the next couple of quarters? And if so, what their magnitude might be? And secondly, if you have already seen the bulk of the restructuring related expenses, let's say, addressed as of the end of the current quarter or if you expect there to be a few more to be recognized in the early part of 2023?

Yes. So we expect that the majority of the restructuring expense will be taken within the third and the fourth quarter. So we don't anticipate there being much beyond that. And as far as additional reduction in force, we don't see any significant reductions in force going forward. Right now, for us, it's about improving our processes, making what we do more efficiently and making sure that we do it within a very disciplined cost framework.

Thank you.

Thanks, Ram.

And there are no further questions. I will now turn the call back over to Dr. Strobeck.

Thank you, operator, and thank you, everyone for joining us on today's call. It was a pleasure to provide you with an overview of the restructuring of our business and the rationale for the decisions we've made, our third quarter achievements, the progress we've made since then and the opportunities that lie ahead for Rockwell. Our singular focus is to drive our overall business to profitability, improve our financial position, maximize revenue and unlock the value of our manufacturing and distribution capabilities. We are putting Rockwell Medical in a better position to drive growth and further improve its performance so we can serve more patients, clinics and major medical centers around the world. We are in the business to make products that impact patients' lives. This is our passion, and we take this responsibility very seriously. We are inspired by the challenges and opportunities that lie ahead and look forward to sharing our progress on future calls.

This concludes today's conference call. You may now disconnect.