SWKH - Earnings call transcript Q2 2020 | SWK Holdings Corporation

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Operator

Good morning. Welcome to SWK Holdings Second Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. event recorded. this that note is being Please I to Advisors. Jason like to conference over turn the Rando would now from Tiberend Strategic go ahead. Please

Jason Rando

under second section the Holdings release in issued Releases. Good joining press The release News corporate thank press And financial a of ended call. quarter results the June its Holdings XXXX. for results SWK morning, found and months XXXX Investor can morning, you This swkhold.com be detailing Relations financial three everyone. SWK for XX,

expectations disclaims Before future our potential with expectations information statements. be to future whether the our candidates regarding forward-looking we and detailed development beginning including would the and filings events and make otherwise. our SWK to those allocation future based operations result statements studies capital results product or the of our filed SEC our including undue like uncertainties Holdings’ about these a you future contained drug as of Factors circumstances, today's of our risks and call, obligation SWK make due on for other and time-to-time. and place from Holdings Today, regarding I statements in following SEC these statements statements cash any differ section update the forward-looking new materially information, strategy, and on about may expectations, XX-K statements should the to Risk making are not in with statements. Actual reliance consumer forward-looking resources. plans, events, and will our current These we certain product plans candidates,

Winston, and Chairman XXXX will Holdings. on an me SWK's second results. on provide Black, corporate and of CEO SWK today's go Winston Joining is call update quarter financial ahead. Winston

Winston Black

conference call. you, and quarter our everyone for Jason, second Thank joining

of financing continued opportunities mid-sized believe sector. quarter-over-quarter our the by Second reflective strong year business. small this what specialty finance We SWK, within demonstrated ability significant progress performance, and to SWK’s commercial-stage of a options from has business the improved on for sciences is XXXX our been attractive growth life by potential quarter highlighted returns capitalize to

for addition investment base towards achieving goal. central strategic benchmark our used our viewed the the managed are XXXX, in of strategies widely plan growth investor indexes expansion this Russell avenues liquidity and potential visibility to both our achievement to investors. value. offer This as SWK’s attract stock enable continue broaden within we additional the to to investors high its with shareholder we current Looking an economic inclusive underlying remain to conditions, help continue not deploy remainder us products despite provide enable and industry produce and the to for When strong believe favorable current them of ahead, finance opportunities conditions of we COVID-XX a current of services new us our the to healthcare results will for capital throughout their and should our our that of dynamics, These to specialty portfolio growth demand Russell that for planned marks as increase initiated achieve explore companies, of community success. but SWK XXXX. support portfolio Recent differentiated credit the innovative the only SWK strong quality increase -- actively efficient manner of team opportunities. new in we and should to compelling also important growth step investment general determination of demonstrates indexes we

Before current on update a like and to I and situation subsidiary the Enteris BioPharma. brief achievements provide our I’d second in COVID-XX our results discuss position quarter

are no the broader new which should as industry, challenges year-to-date. holds by please be been of a the has as U.S. economy As whole We firm report by pleased portfolio minimally portfolio in contact of healthcare impacted previously, SWK’s our COVID-XX against and business regular illustrated remain the the outbreak. impacting teams and with individual non-accrual indicated that we management companies to positions

We revolver we property demand at commercial with intellectual differentiated companies, reasonably SWK’s focus strong healthcare this investing system. in remain to structural is Also products, well-capitalized and due SWK, revenues driving on also believe within the potential of repurchases executing funnels, companies partner and SWK’s for $XX Unlike approximately share highly is investment and and opportunities. not executing investment availability, balance similar sheet our leveraged. million cash some BDCs on

the step Khosla value in Dr. Enteris’ completed Chief has months on appointment SWK as and of potential creating Enteris subsidiary, to occurred critical has we taken measures improvement strengthen substantial front worked already several the our enable our Regarding more its the He capture excited Khosla, as closely has intelligence approximately Rajiv Dr. process acquisition. the business. expansion of new should the with the during management Executive made advance we its enhance its that about ago XX year opportunities manufacturing BioPharma, capabilities, Officer. the this opportunities A closed company a second team. of with of since quarter Enteris platform. to remain closing, and maximize in SWK the Enteris operations, the acquisition And company's

technology theses are We our remains at continue that believe yet and economic to valid. platform to potential, realize commercial Enteris core the full

quarter that Therapeutic Peptelligence platform safety moderate portion and Phase in expects advance its the forecast to with to X oral KORSUVA utilizes the are announced now program the in first XXXX. Cara for licensed second of the treatment which FDA, with of oral quarter XXXX. KORSUVA of quarter X severe occur end chronic example, of of initiate of for fourth meeting XXXX the for kidney for is could For disease its This Phase of program update patients the in pruritus

Additionally, potentially near-term of once these outbreak situation cholangitis. us on life patients foreseeable Phase primary that the certainly KORSUVA to for dermatitis, position and atopic two purpose subsides. has trials clinical half an in XXXX growth top-line us X Cara of with first and we aspects the in of challenges believe coronavirus in least and influence to SWK’s at due impairment while business pruritus oral In allow the results the future, to now closing, and all for hepatic report expects for structure will withstand and biliary

by royalties million compares year million portfolio across first end to structured as of June the royalties of $XXX.X of XXXX. the XX, quarter favorably That backed $XXX.X at credit As XXXX, and and XXXX $XXX.X partners. XX end million approximately yielding SWK’s totaled of

of per the quarter end charge year. finance portfolio SWK book XXXX the offset of business. This as assets, share the payable $X.XX the $X.XX impact and projected This During value reported second XX, $XX.XX the share, share intangible share quarter company views finance in deferred the Enteris-related of second of inclusive was relevant of million and book and value financing to the in of as existing company's consideration loss during the non-accrual mark-to-market contingent of were quarter $X.XX as XXXX, quarter. due non-cash of equity-related which XXXX. changes value from per XXXX, the of securities. per positions, $X items deployed Health -- compares additional of fair per acquisition-related positive as includes totaled per liability. Eton versus contingent the in intangibles, At XX.X%, value existing deployed Harrow share weighted borrower amortization to borrower was quarter, increase receivables specialty the the effective the consideration of second negative an value tax XXXX. which of XX.X% previous specialty impact share Management another per book $X.X Pharmaceuticals to June value sorry we to December XX, yield goodwill, assets, financing approximately XX% per These as the the average of $XX.XX and share first $XX.XX includes estimates from a per the tangible tangible aggregate the comprised June book XX, a by end [$XX.XX]. $X.XX The an share of on to metric million of core Enteris

consisted as SWK XXXX, of by revenue and interest interest receivables which fees payments by development of $X.X $XXX,XXX increase total million in an on royalty million as generated finance in Revenue in pharmaceutical royalty portfolio and $X.X earned Enteris. increase the net primarily generated quarter of companies second million portfolio the to $X.X on and quarter XXXX, well and revenue the fees portfolio. compared earned a driven by For second income was reported

to was higher quarter the on results, the that quarter typically than payments second second financial want increase I highlight we expect. in Focusing the would the in royalty

totaled million for to million loss fair $X.X expense value driven previous the revenue $X.X $X.X royalty before million a As a decline million XXXX Enteris and to can irregular the is the the quarter-to-quarter. same amortization from due lumpy, the which by stream, payments bit fluctuations year. compared $X.X $X A can for positions. a intangibles result a resulted in The reminder equity-related offset quarter acquisition-related increases second tax for a a cash Enteris accounting, million charge be the Income in are Enteris. increase of These of during quarter. described purchase assets, value estimate you're $X.X acquisition contingent amortizing the loss our quick market million gain consideration, operating of which Enteris price result in in $X.X partially value expense intangible to our as for the the fair million by about period

agreements, share under the we quarter expectations or million XX, by quarter million expectation existing for $X.X fair related June of to license second the diluted consideration. the the value for consideration doesn’t per value GAAP $X.X though ended assets. for were caused of cash increase second contingent GAAP for quarter allow $X.X in value $X.XX in even XXXX in diluted that of per the of the the income payments increase to increased offsetting XXXX. loss Additionally, compared share, an potential $X.XX the the greater our or net million the was for Unfortunately, have

XX, net high earnings includes receivables debt our second adjusted securities income million $X.X an of of corporate perspective, $X to increased portfolio reported compared XXXX. finance million second and producing for all-time $XXX.X $X.X quarter assets, the This quarter to million finance as an during June the of million the as XXXX specialty our For increase which segment a non-GAAP From June quarter the of to was the non-GAAP million income $XXX.X XXXX. XXXX. XX, and reached versus

again personnel access doing As continued these development drug opportunities our partner capital. continues continues Through Enteris a companies to to increasing Enteris' intelligence. mid-sized his focused development on multiple capitalized of all manufacturing to out-licensing, seeks forward look the manufacturing an to specialty Dr. focus delivery to programs, development and Enteris the ingenuity, Enteris, overall functions opportunities hard demand maximize team to expertise internal Further, of intellectual business our our All to as to advance consultant the and and our growth asset loyalty growth and licensing and we activities of path target licensed external management as to in continues active intelligence employees being need regarding open potential to possesses through these and and executive well as knowledge expand partners, future the for period continued the property, team to value that an on evaluating industry its among model marks new to expanding stakeholders our it end, like now leverage that key throughout team. be substantial company capabilities. products. We're company's results, experience executive that own added financial your a anticipate critical for a our second generally, Enteris’ brings also update and and strategy. working will role areas continued be we to With partnership overall development plan. SWK more sciences of platform. providing as now transactions new and of And development of would possible SWK, that for are as I a early time supporting thank call SWK. well and as companies has the technologies experience targets we arrival, development to of the working life future expect crystalizing are an includes our CMO growth opportunities supportive CEO with Enteris our well what our well efforts the have finance sustained to critical well. by and Holdings To to demonstrated perform meet Enteris. CEO growing Enteris’ new turning quarter business on for new leverage questions. of wealth growth dedication, the his small the and diligent that, of support which evolve the made at He for XXXX. as deep for business according new their as and strategy, thorough At which its as We team the the once I as our hiring to experience our conclusion, In we're Khosla monetization biopharmaceutical of advising facilities,

Operator

[Operator Instructions].

first Kyle Bauser Colliers Our Go question from from is Securities. ahead.

Kyle Bauser

through them. the Hey a little but here. Enteris I didn't Winston, updates all I eye -- for of walked sure catch them, keep to next should bit you've catalysts we couple line? a to out we about know within months? you Maybe know upcoming the XX for the just I morning. look Thanks want quite good talk over for can make out an business

Winston Black

Sure.

as announcements that licenses as of looking like public made specialty giving in demonstrate the see we they kind watching Cara that our to updates build the as various Then, on guidance, feasibility of new the that to business manufacturing numbers of out expansion regarding And the be far completion is studies so side and licensees and business. by continue how the continued -- course, things their we're project. the don’t we’ll regarding for technology of any advancement milestones. then forward of intelligence of course So generally look on of our but are be and hit will

that things certainly at are going looking and the advancement that's that there. So to we're demonstrating

Kyle Bauser

and think then that, QX trial of first with this year, were Okay. you milestones I And think activity? year what and it mentioned was next Cara half I and of clinical

Winston Black

Sure.

about -- announced haven't have yes things am not they -- So publicly. talking so they I

So first their of and update, or expect atopic quarter portion intend Phase they so dermatitis to half expect the for end and that of first from and X quarter results have have begin -- in announced in to other of patients they pruritus in cholangitis. X additional X the during this trial second primary hepatic they XXXX their two week they trial Phase patient X of quarter Phase then safety year, their the XXXX, the impairment to due meeting of with ago, Phase fourth the FDA to in trials biliary

Kyle Bauser

make cash we have you through Just deploying to And the for deploy share capital repurchases of of about preference new COVID or do it deployment for conserve understand to how Or a you COVID support have think as cash, investments? trying current kind you to do cash fresh through here? think prioritizing portfolio? and enough to you're

Winston Black

it's to portfolio out, yes, the perform point -- continues to Well, Sure. thankfully well.

cash today that Those So, generate of the portfolio. capital we pool have healthy is not a to static flow. continue

both, we'll over plus and further So as we about think have liquidity deploying cash today. flow years we the the coming that the quarters be getting

return capital lot game, really build we're balancing As highest I’ve to it companies last to quarter, a in the in and the is we as shareholder ways mentioned of for a invest our bit a there value. areas, seek -- because of

understand, and, surprises. That's may to, to as want other feel we change. be kind knows to at companies we for and uncertain deployed asset be with prices while going maybe further we and opportunities owned great sure enough the there's opportunities greater we on of of and there that look Enteris fully the we how actually potential, transactions new our and liquidity that that help of will we're can things are what so, support course resources. repurchases of in worth generally, than companies course, that circumstances are at evaluating as for some too, decide when to development have example, looking everybody make of and And Because we’re as then will always share about times may these course we just

possible. as allocate most and value about think So, building think way returning like would Enteris shareholders, building book capital the I and the be to yes, that we judicious we to the in would

Kyle Bauser

And it’s capital that I those each you can and Enteris for certainly a including of lot which deploy of mention. didn't fresh

side new it bidding mean on competitors deals, of to is relates from evaluate like, out specialty I activities less a as they're a the deals? activity business, there? Are comes as people against what's of little competitive the is bit So other And appreciate some it there's finance where market that. the it companies still easier names? to and you're to it active, types competitive to or and deploy other avoid down up of maybe capital it's are that still some other those front looking situations pretty going these quality high you to

Winston Black

Sure. exactly is first Yes, asked. you I the of answer question to that the think part what

to continue very of that thing see is first attractive multitude opportunities. The we

picky And so We can deals. I evaluating very in different lucky think we're little that. be in

that up the we’re other competitive. kind end places, And many It so, built just of deals depends you're to we’ve segments being competition platform it’s thankful it's potential of around. of places, other some really in here kind getting little In testament looking a with itself. And what course, -- just fairly on for and lenders at. regarding up so

and -- from the doesn't yes the thing asset the of from credit I of think is, our level that's so, indicate perspective, quality And our necessarily competition interesting other perspective. an

And so, typical the of we do able sort have in returns, past. quality working still our deals competition. Certain I we're achieve be hard that on producing we’re as that from the to in reasonable opportunities, segments, we've of know been any my to and don't perspective increase credit

so from away and prior competitive and segment it’s I And that could competitive. bit periods don't goes a so, segments be all little other a that's kind is certain of where really know that and mix that of different

Operator

ahead. from question is next Go from Stewart N.A.S. Nat Our Capital LLC.

Nat Stewart

just had perform up see noticed Nice that’s royalty very the synthetic all crazy a portfolio very hold well. so I the credit few well. going questions. I than met. just step rate, has better Hey given I curious a and expected, Honestly just synthetic royalty I Winston, great returns had? job. has strong stuff is if was on. performance the there where it detail some how want down on remember, is any that I targeted on the royalty to If

Winston Black

I has guess on job growing first just the that in Yes, Sure. of] product. team [suite yes, there strong done a the performance, great

benefiting we're from for so, strong And execution. and their thankful obviously very we're that

achieved, And so, -- until we times The $XX that’s -- receive invested, works I million return again hit once by it deal that’s the terminated cash X.X, be Then it guess going on higher from way the quite the correctly the cash there is then by initial then like sets And on control recall can buying X.XX will we close, the that, -- a well. out royalty receive down X%. that rate. can be we the royalty to that until of transaction. to royalty a it tend change you'll terminated

get of I back sensitive. and there. I probably But up that those that can $X to have I the don't and Yes, go top get get public north figured at capital But All hit much yes, I'll how terms In you to further could number multiple? it my It afterwards. we documents. it we we look of of think that receive up until head. almost obviously it's million. be are in the have out

Nat Stewart

a Yes, But it can than different mean, contingent on credit second the royalties quality my mean, agreements more had of at -- the and determine, consideration. they're looks think question the worth look book shows value. like was these can -- looks you've really that I I I the them I of I them it number and it

there. was just thing. short-term, the kind because that? of I of it's on you're actually funny curious And what But confusing stepped the the milestone potential hidden I accounted curious, deal correctly, the building that's the based was the kind a for about up, amortization treatment. I accounting being, consideration, that good and But the It's it's think accounting with just -- of contingent kind increasing. for Enteris the probably a was payment. actually liability of understand was by I If that's people. just the cause because think and How time I that's values, for value many divergence a little

provide thing? it So which is detail there milestone went any that? correctly, more like, Is if bit, sounds on payments a the I'm good a remembering can you up

Winston Black

Sure.

the proceeds as value have did would the product that of requires I the have candidates. deal of any itself. agreements, first license GAAP had proceeds our period as well So to any assets the part accounting of disclose guess the Seller the We on sort payments sharing to that on to of company been us on made as the on there the initial of the reminder.

value XXX% us, And so, out that adjusted the then on the an we XXX% amount as for contingent be out the full asset, liability. would basis. is have of will the And the Seller be to work -- to paid meaning full paid that the

to sales, the to look that price the the And that at but, are buy expect the near offsetting in existing it -- a lower general was the the the that licenses, loss in with it's mean that, on results balance expectation sheet, in it's And a you’re conference result term, you're has I over yes, our to period increase results take I But increased our -- medium a P&L marking right is of value have which developments on that's the we cash license, an in the gain, that the thing. that agree of contract, of way Even on accounting indeed do assets we purchase based yet our it's have particular, in amount you no if to agree on works. which I asset those the initial So down to kind -- in expect on the exactly side. that described and really though and think the effectively it amortized as being business we that lumpy. that as value I that liability to proceeds good you and we liability. noted due Yes during lumpy, because assets right P&L, expectations under of call counterintuitive. of increased. we

Nat Stewart

will I period period to further side, revenue think be resolve things a on years it discrepancy of or over so of But time. I itself to the just going develop a as a want that. clarify for It's

Winston Black

appreciate I Yes, for that. that's Thank right. that. you Yes. think I

Operator

question-and-answer [Operator Instructions]. This more for Black session. At turn over to back questions. would to the I like this time, closing concludes the remarks. we conference have no Winston

Winston Black

appreciate advance I'd I everyone. thanks, to to look we closing, extend Holdings. continue all. time sincere and to as SWK and wishes In your and health really like to in forward also future attention my update good

Operator

now The concluded. you attending presentation. conference for today's has Thank

You may now disconnect.

SWK (SWKH) 18 Aug 202020 Q2 Earnings call transcript