Good day, ladies and gentlemen, and welcome to the Rockwell Medical 2018 Q4 and Year End Results Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Judy DiClemente from In-Site Communications. Ma'am, please begin.

Thank you, Mark. Welcome to Rockwell Medical's Fourth Quarter 2018 Earnings Results Call. This is Judy DiClemente of In-Site Communications, the Investor Relations firm for Rockwell Medical. With me on today's call are Stuart Paul, President and Chief Executive Officer; and Angus Smith, Chief Financial Officer of Rockwell Medical. Before we begin, I wanted to note that certain matters we discuss may constitute forward-looking statements within the meaning of the federal securities laws. Words such as may, might, will, should, believe, expect, anticipate, estimate, continue, could, potential, predict, forecast, project, plan, intend or similar expression or statements regarding intent, belief or current expectations are forward-looking statements. While Rockwell believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to us on the date of this call and which are subject to inherent uncertainty. These forward-looking statements are based upon current estimates and assumptions, and are subject to various risks and uncertainties, including without limitation, those set forth in Rockwell's SEC filings, many of which are beyond our control and subject to change. Actual results could be materially different. Risks and uncertainties include: statements about the timing and success of our planned NDA submission for IV Triferic; the potential market opportunity for IV Triferic and other Rockwell products; pricing and reimbursement status for IV Triferic, Dialysate Triferic and other Rockwell products, including eligibility for add-on reimbursement under TDAPA; liquidity and capital resources; expected duration of Rockwell's existing working capital plans; and plans and timing relating to the planned commercialization of Triferic; and the timing and success of our efforts to renegotiate economic terms of our concentrates business. Forward-looking statements are subject to numerous factors that could cause actual results to differ from our anticipated results. These include the factors described in our Form 10-K and are updated in our periodic reports, including our most recent quarterly report on Form 10-Q, which is available on the SEC's website at www.sec.gov and through a link on our website located at www.rockwellmed.com. The forward-looking statements made on this call are made as of the date of this call, and we disclaim any intent to publicly update these forward-looking statements to reflect subsequent events or circumstances. This conference call can be accessed on Rockwell Medical Investor Relation's webpage. This call is being recorded on March 14, 2019 for audio rebroadcast and can also be accessed on the same webpage. The call will be followed by a question-and-answer session. At this time, I would like to turn the conference call over to Rockwell's CEO, Stuart Paul. Stuart?

Thank you, Judy, and good morning, everyone. Thank you for joining our call today. This is a very exciting time for Rockwell Medical. In a very short time, we've accomplished a great deal toward advancing our clinical and commercial goals. We see a global opportunity for our product portfolio that addresses a large unmet medical need among dialysis patients. Let me start with some of the key accomplishments for the fourth quarter of 2018. We assembled a top-notch management team with renal sector, global marketing, and pharmaceutical launch experience to support our commercialization efforts. With this team now assembled, we have developed a long-term strategic plan to guide the execution of our first launch for the Triferic franchise. We completed a $22 million financing to support our general business operations and strengthen our balance sheet. We in-licensed additional intellectual property rights for IV Triferic, and we received our first international approval for Triferic in the country of Peru in January of this year. For 2019, our milestones include: launching the first formulation in our Triferic portfolio, Dialysate Triferic in the U.S., in the second quarter of 2019; filing of 505(b)1 NDA with the FDA for the second formulation IV Triferic, also in the second quarter of 2019; continuing global development of Triferic through existing partners and identifying new partners for key geographies, including Europe and Japan; and growing and improving the profitability of our concentrates business. Let me start with Triferic and why we're so excited about its potential to improve anemia management in hemodialysis patients. Triferic is the first and only FDA-approved iron replacement therapy indicated to maintain hemoglobin in hemodialysis patients. Dialysis patients become iron-deficient for various reasons, including loss of blood during dialysis treatments and sequestration of iron in the reticuloendothelial system due to inflammation. This leads…

Thank you, Stuart. Let me start by reviewing our financial results for the fourth quarter of 2018. Sales for the fourth quarter of 2018 were $16.9 million compared to sales of $14.8 million for the fourth quarter of 2017. The increase of $2 million was primarily due to an increase in sales for international use and increased revenue from distribution and management fees billed to Baxter as well as increase to product sales to both Baxter and DaVita. Gross profit for the fourth quarter of 2018 was $1.2 million compared to a gross loss of $1.2 million in the fourth quarter of 2017. Gross profit was negatively impacted by inventory reserves related to Triferic of $300,000 in the fourth quarter of 2018 compared to $2.7 million in the fourth quarter of 2017. The year-over-year improvement in gross profit was due primarily to this lower inventory reserve and an increase in sales volume, partially offset by higher distribution costs and higher variable costs due to the increase in sales volume. Selling, general and administrative expenses were $7.9 million for the fourth quarter of 2018 compared with $5.9 million for the fourth quarter of 2017. The $2 million increase was primarily due to increases in stock-based compensation and higher consulting expenses, recruiting fees, bonus and insurance expenses, offset by lower legal and annual reporting expenses. Research and product development expenses were $1.6 million for the fourth quarter of 2018 compared with $2.1 million for the fourth quarter of 2017. The decrease in fourth quarter -- in the fourth quarter of 2018 was largely related to lower clinical trials and product testing expense for Triferic, partially offset by higher labor costs. Research and product development expenses for the fourth quarter of 2018 also included a $700,000 inventory write-down for Calcitriol. Research and development expenses licensed to the acquired were $1.1 million in the fourth quarter of 2018 compared to zero in the fourth quarter of 2017. The expenses in this category relate to the master services and IT agreement and related agreement entered into with Charak LLC and Dr. Ajay Gupta in October 2018. Net loss for the fourth quarter of 2018 was $9.4 million or $0.17 per basic and diluted share compared to a net loss of $9 million or $0.18 per basic and diluted share in 2017. Cash used in operating activities was $5.8 million for the fourth quarter of 2018. And as of December 31st, 2018, the company had total liquidity of $33.5 million, consisting of cash and cash equivalents of $22.7 million and available for sale investments of $10.8 million. Working capital as of December 31st, 2018, was $33.6 million. With that, I will now turn the call back to Stuart.

Thank you, Angus. Let me reiterate that Rockwell today has a management team, Board of Directors and a scientific advisory board that is capable and ready to take Triferic forward and address the unmet medical needs of hemodialysis patients around the world. We have worked tirelessly to prepare a go-forward, long-term business plan for the commercialization of Triferic, which we believe has the potential to shift the paradigm on therapeutic care in the hemodialysis space and to add value for our shareholders. We will now open the call to questions. Operator?

[Operator Instructions] And our first question comes from the line of David Bouchey of IFS Securities. Your line is now open.

Thank you. Good morning, guys. I'll try and keep my -- I got a lot of questions, but I'll try to keep them to a minimum so that other people get a chance to ask. The first thing I want to do is just kind of get a clarification from you in terms of the Calcitriol decision. And I know that in previous management had estimated that there might be $40 million to $50 million worth of peak sales for Calcitriol in the U.S. It was being marketed as a lowest cost, lowest dose active vitamin D. And part of the advantages that the company had talked about were the fact that its margins were going to be in the range of 40% or more. So, I'm not looking for a comparison between the two management styles, but can you tell me what has changed in those numbers so that you don't want to launch Calcitriol anymore?

Yes, David. Hi, it's Angus. Thank you for the question. And good morning. It's a great question. What I'll say is we've done a deep dive from a financial perspective. We've had conversations with customers. We've assessed our manufacturing capabilities. And what we've concluded based on the feedback that we've received is that the prevailing market prices for a product like Calcitriol are, in many cases, lower than our manufacturing costs. And obviously, from a business standpoint, it doesn't make a whole lot of sense to launch into a market like that. So we've done a lot of work comparing the dose equivalency of Calcitriol to similar products that are on the market and an adjusted price for that as well. And again, it just doesn't get us to where we think we need to be from a margin standpoint. So, with that in mind, at this point, we're deciding not to launch it in the U.S. As Stuart mentioned, we'll continue to evaluate the market for Calcitriol in the U.S., and we're also continuing dialogue with our partner in China, Wanbang, about the potential market for Calcitriol there.

Okay. And a little clarification on the Chinese partnership. I believe, Stuart, did you just say that the next available milestone would be for approval for Triferic in China?

Correct.

Okay.

It's Stuart. So great to speak with you. We're moving forward with our partner, Wanbang Pharmaceuticals. So it is imminent that we'll complete the clinical studies in the coming months. And based upon the next discussion with CFDA, we think there is a good potential to be in position to file -- Wanbang would file in China later in the year. So on a conservative basis, we're looking toward late 2020, hopefully, to see a potential approval in China. Those would be the relevant milestone dates.

Okay. And my next question is about the study that you have to do in the European Union in order to get approval for IV Triferic, and the primary endpoint is going to be ESA-sparing. So, do you anticipate this trial to be similar in size and scope to the PRIME trial, which was a randomized comparative trial with a little more than 100 patients?

Yes, David, thanks for the question. It's Angus. I think we are still -- we've had discussions with EMA about what the endpoint needs to look like in Europe and it's around the ESA dose. We haven't gotten to the stage yet, where we've drafted formal protocols and things of that nature. I think that will all become more clear as we advance our partnership discussions. And I think whoever we choose as a partner in the EU will have a say in how those studies ultimately get designed. So I think at this stage, it would be premature to comment exactly on kind of how those trials will be designed and the scope and size.

Well, what I'm kind of getting at is do you have an estimate for how much that trial might cost?

Yes. Again, probably ballpark, we haven't given guidance out obviously, at this stage. And as I said before, it's probably preliminary to comment on exactly what the cost of that study would be, which we saw there's a fair bit work to do with partners to help draft that protocol and get a sense for what that trial could look like.

All right. And there's been some speculation that there might be a contractual change in your dialysate supplies, in particular to DaVita that there might be more of a switch to -- from GranuFlo to CitraPure. Can you comment upon what you might expect to see in the coming year in terms of your sales to DaVita?

Well, we're not going to give specific guidance on the actual sales levels at this stage, but I will say that we're in discussions with DaVita around the entire concentrate portfolio going forward. We think we have opportunities to address pricing and margin as well as logistics improvements. We think CitraPure is a great product for DaVita and other dialysis providers in the United States market, so we're going to continue to look at expanding our focus with CitraPure. We think CitraPure works beautifully with Triferic as well and sets the table for a very nice potential for paradigm shift and become part of the standard of care. So, that's the vector that we're on. And those discussions with DaVita, I think, are going very well, and would just say with the team that we've assembled, we have much experience from prior company environments and in terms of working with DaVita and setting up a successful win-win type of a scenario around future product protocols.

Excellent. And lastly, let me address some concerns about the Triferic launch. Do you anticipate continuing to sell the powder version of Triferic as well as the liquid version after you launch the IV version of Triferic? Are there any concerns about potential cannibalization? Or how would you address that?

Dave, I would just say that we're not going to rule anything out at this point, but we think that we will find certain accounts that have a desire for use of the liquid presentation with certain patients and certainly, those that gravitate more with the central loop model for the powder packet. We think there's a place for all three. It might turn out that one of the products ends up to be a little bit more niche than the other, going forward. But we work actively around market and account segmentation and account preferences. And certainly, as we -- even on a prelaunch basis, have quite a bit of interaction with our target accounts, there are very interesting and different perspectives as to which version they would prefer. And so with the IV model is great for those that really want to have the least interference with workflow and economics in the center because you can administer right at the patient bedside. And there's going to be a place, we think, for all three. I think down the road, IV Triferic though, is really going to be the dominant part of our mix.

Okay. So that's something that's going to evolve over time then?

Yes, I would say. And I think just -- I don't underestimate the challenge of just educating KOLs and nephrologists in general, there's a lot of work we have in front us here to do to make that happen. The good news is that as they come under the tent and begin to really understand the mechanistic action and the differences between the current standard of care, there's a lot of excitement. So we really need to build that base. And this is not something that happens overnight, right? It is going to take a year to change standard of care in an industry setting that has been somewhat fixed on a current standard of care that's been in place for quite some time. So it will take time, and -- but we're very focused on this, and think we'll see continuous uptake and improvement for the portfolio.

Okay. Now, I have had some investors call me with concerns that the dialysate version of Triferic could impact the IV version of Triferic in terms of whether you get separate J-codes or not. Can you offer some assurances on the call to investors? What are your beliefs that, that won't happen?

Okay. So I know that's a big question of a lot of the investors out there. So let me just start by saying, look, there's no guarantees, right? There are no guarantees. However, however, we have met with CMS several times. We've reviewed our reimbursement plans for IV Triferic. We reviewed our entire reimbursement portfolio for the ampoule, the powder packet and IV going forward with CMS. We've also reviewed with top tier legal firms and expert consultants, who are deeply experienced and with a practice in the health care regulatory compliance and reimbursement arenas, and they've helped us align and present our IV Triferic reimbursement strategy to CMS. More specifically, I would say that TDAPA applies to -- obviously, as I said earlier, it applies to new pharmaceuticals approved under the FDA 505 regulatory designation for new therapeutics approved post 1/1 of 2020. You need to have a newly approved drug, must be commercially available, you have to apply for -- get a HCPCS for the -- submitted for separate J-code. And we believe we meet all the key criteria as laid out by CMS. We've discussed this with CMS. So, we're also aware of other therapeutics that had similar molecular entities and are -- and have had success in establishing separate J-codes. And so when you look at the entire picture, we're doing everything we can to affect the separate J-code, okay? There are no guarantees in this world, but we have a lot of experience on the team and with our extended group of advisory people, and we feel pretty good about the backdrop right now on that basis.

Okay. Can you say who specifically in CMS you've been dealing with?

Well, I'd rather -- really rather not get into specific names of individuals.

Okay. Well this is the last question, I promise, and I want to just ask you, do you have a timeline in mind for when you might begin to access the oncology support of care market with the IV version of Triferic?

All right. Well, great question. I think, obviously, we believe there are opportunities outside of hemodialysis. But right now, we're focusing all near-term efforts on dialysate and IV Triferic in hemodialysis and as well as improving our concentrate business, right? We're going to continue to evaluate investments and expanding the Triferic franchise into new indications, such as peritoneal dialysis; TPN, total parenteral nutrition; and/or oncology. But for now, those things -- those investments are all in the back burner, I would say.

All right. Thank you. And I'll get out of the queue now. Thanks.

Great to talk with you, Dave. Thanks so much.

And our next question comes from the line of Robert McNamara, a private investor. Your line is now open.

Hi, gentlemen. I want to just follow up on some of David's questions, if I could. When you're looking at the risk reward scenario, since you just said there's no guarantee on the separate J-code and also there was comments about what's potentially having multiple products in the market at the same time, how do you sort of come to ascertain the risk reward? And how are you looking at the pricing difference? And if you could give us some ballpark estimates in terms of the pricing for both the powder pack formulation as well as the IV.

Thanks, Robert. It's Angus. I'll start and Stuart can chime in. I think the most important thing here is that the Triferic needs to get on the market. This is a therapeutic that has the potential as Stuart said; to shift the paradigm in a way that anemia is managed in this population. And we really think it -- patients and clinical benefit from the availability of this therapeutic. So at the end of the day, that's the primary motive here. From a pricing standpoint as Stuart mentioned, we are continuing to conduct our pricing research, both for the dialysate formulation as well as the IV formulation. And once that's complete, we'll be able to give a little more color on what the pricing is going to look like for those therapeutics.

I would just -- Angus, good comments. I would just add that we don't underestimate the amount of work to really drive medical education in 2019. That's really one of our primary focus points for the year, is to really begin to get the idea of what this is, the mechanism, the entire modality in terms of the treatment and the potential for shifting the paradigm out there to KOLs and I -- and to providers in general, in the dialysis space. So, we actually have a lot of work to do. I don't underestimate the amount of work. This is a product that's been on the shelf for a number of years already. It's time to get it out there, and it's time to get it, as Angus said, into the hands of patients and clinicians who needed the most. And that's our perspective. Working with significant experts in reimbursement, we've really torn into this, and we all come out on the same page, we literally do, that it's best to move forward with the dialysate version in market and start to build now and then shift and get into gears with IV once approved, if approved, and really continue to align all the components of the TDAPA model and the requirements of the TDAPA model with CMS. I mean, we are in active discussions with CMS, and so they are quite up to speed with where we want to go and the strategy here for all of our portfolio. So that's what I would say.

And so as a follow-up to that, as you said with Calcitriol and concentrate, you've talked to customers, you've been in discussions, when you're launching the powder pack version initially, what are your expectations in terms of DaVita presenting as the larger corporations taking on the product in the powder form versus the IV? How are you looking at the market as you move forward with the initial launch? And also, if you could give us a little better timing in terms of when in the second quarter you would anticipate the launch occurring?

Yes. No, great question. So what I would tell you is again, we have a franchise of Triferic products here, some approved and others about to file. I would say that with respect to larger sophisticated dialysis organizations like the DaVitas of the world and so forth, and I would say the very large ones, let's just say, there is a significant premium on in-center workflow, in-center protocols, not disturbing those protocols, and basically outlining and launching therapeutics that can complement those protocols in a very non-disruptive way. And so with that in mind, the way we think about the market is let's get Dialysate Triferic out into the medium and into the single size dialysis player segments and really start to work with our KOLs around the broader discussions with partners like DaVita. DaVita is a great partner for Rockwell, obviously. And as I said, myself, my team and I have known DaVita from other environment that -- Baxter, Gambro, my past. I think we have a very open, good discussion. DaVita is a very committed partner to Rockwell, and I think that we can all view DaVita as a very strategic partner, based on the fact that we're at the table continuously with them on the concentrate side of the house. So, I think going forward, the segmentation of the market will allow for us to map our products into the right segments and ensure that we pair the products with the right parts of the marketplace, do it accordingly. So we've got a lot of marketing research that's been done and focus on our marketing team to ensure that we really hit this correctly.

So, is it fair to say that the initial powder launch, considering there are very different protocols for applying that product into practice with the mixing and so forth, that your initial target for 2019 at least in the powder launch would be more focused on maybe 15% to 20% of the market at best, since Fresenius and DaVita account for 30% and then you have U.S. renal, ARA and a few others that are larger practices as well? Is that a fair estimate that you'd be looking at that also, considering in addition to protocols clearly, the commercial dialysis clinics are very motivated or focused on their own profitability?

Yes. No, I would say 25% of the market essentially, when you look at the medium-sized chain players and you look at the single independent space, looking at about 25% of the market there. So, yes, I would say that our target -- those are our target segments on launch with dialysate as we build experience, get our field teams, which consist of sales as well as medical science liaisons, who will continue to spend time scientifically, medically, clinically on the paradigms around anemia management to give them time to build up capabilities and strength and speed in the field and experience, in terms of helping to roll out Triferic. Dialysate is the tip of the iceberg. You look at this from a classic marketing point of view, this is a golden opportunity to get out in market and really start to see the market well with potentially, a paradigm-shifting therapy, right? So our view is you want to do that sooner than later. So those target segments are very important to us. We also think that they're not insignificant, 25% of the market is certainly a great place to put our toe in the water and begin to launch. And then of course, all of the -- as I mentioned earlier, all of the sites that have been involved in this on the trial program initially, will be in that first year of the launch as well in terms of segmentation targeting.

Okay. I have two quick follow-up questions. I appreciate the time. One, very briefly, are you able to provide the patent numbers or tell us which patents were actually licensed or part of the Gupta agreement? Because it appears that when one goes into the U.S. PTO website, it's difficult to find any valid patents that are still out there. And then my other follow-up is on the last conference call, Stuart, you had guided to having data from the sample program beginning of this year, end of last year, what's the update on having that data as you talk about generating all the pharmacoeconomic data to go out and market powder? And then I'll get back in queue.

All right. Yes. Thank you for the question. It's Angus. On the question of the patent numbers and the Charak license, we're actually going to be filing that agreement as an exhibit to our 10-K, and so all that will be in the exhibit list. It's a mix of issued patents and pending patents around the world. And the way the agreement is structured is there's a higher royalty rate, so long as there is a -- for a period of time and then so long as there are valid and issued patents and a lower royalty rate, if we would ship here, where there -- if there are no valid and issued patents. And again, all that will be disclosed in the exhibit to our 10-K. And the second question. Well, can you repeat the second question?

The second question was related to the sample program data that Stuart had mentioned we should have had probably by now.

Yes. No, fair question. We're still in the process of going through it and calling out the data. And we are basically getting our -- we're still in the process frankly, of getting our arms around it. And our plan is to take it forward in certain publication venues and potentially, conference, congress presentations as we move forward. So more to come on that still, but we just kind of clocked that program when I came in the door, and we've been still getting our arms around the data. And so more to come there.

And I'm sorry, but real quick. So the sample program, you're still -- is there a timing on that as to when we can have that data?

I would say that certain elements of the data might start to come, the midpart of the year. We're in the final stages of pulling together what we have there. And again, as I said, getting it into publication strategy is our prime objective right now. So, we might not see some of those publications until the beginning part of next year, but that would be timely from the standpoint of our anticipated IV Triferic approval. So that's the way we're looking at it.

And ladies and gentlemen, that's all the time we have for questions today. I'll now turn the call back to the Rockwell Medical team for closing remarks.

Okay. Thank you all for joining us today. We're very happy that you were able to be with us and wish you all well. And we'll be in touch with you on the next call. Thanks again.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.