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Edited Transcript of RMTI earnings conference call or presentation 14-Aug-18 9:00pm GMT

Q2 2018 Rockwell Medical Inc Earnings Call

WIXOM Oct 3, 2018 (Thomson StreetEvents) -- Edited Transcript of Rockwell Medical Inc earnings conference call or presentation Tuesday, August 14, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Benjamin Wolin

Rockwell Medical, Inc. - Chairman

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Conference Call Participants

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* David Michael Bouchey

IFS Securities, Inc., Research Division - Head of Healthcare Research

* James Terwilliger

Paulson Investment Company, LLC - Senior MD

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Rockwell Medical Second Quarter 2018 Business Update Conference Call.

Before we begin, I wanted to note that certain matters we will discuss may be forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified as such because the context of the statement will include words such as we believe, anticipate, expect or words of similar import. Similarly, statements that describe our future plans, objectives, strategies or goals are also forward-looking statements.

These forward-looking statements are subject to certain risks and uncertainties that may materially adversely affect our anticipated results. Risks and uncertainties included, but are not limited to, the factors described in our Form 10-K for fiscal 2017 as updated in our periodic reports. Copies of our Form 10-K are available on the SEC's website, which is 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 as we disclaim any obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. This conference call is being recorded for audio rebroadcast on Rockwell's website at www.rockwellmed.com. The call will be followed by a brief question-and-answer session.

At this time, I would like to turn the conference call over to Benjamin Wolin, Chairman of the Board and Interim Principal Executive Officer. Ben, please go ahead.

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [2]

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Thank you, operator. Good afternoon, and thank you all for joining me on this call. Apologies for getting out today's press release so close to the start of the call. Today, I plan to focus on several important changes and business developments underway at Rockwell Medical. For an overview of our financial performance from the second quarter 2018, I will refer you to the press release and Form 10-Q for the second quarter that the company issued and filed, respectively, just before this call.

Turning to our business updates. As you've heard me say before, we recognize that change is needed at Rockwell Medical. There is much work to be done to strengthen the business and maximize value for our shareholders. We are not standing still and remain as focused as ever on realizing the potential of our innovative renal drug therapies to enhance the lives of dialysis patients and drive value for our shareholders. The board is acting in a diligent and purposeful fashion and has taken necessary steps over the past months to better position Rockwell Medical for the future.

This starts with the recent appointment of Stuart Paul as our next CEO and Class 1 Director to the Rockwell Medical Board of Directors. I'm extremely excited that we are welcoming a leader of Stuart's caliber to Rockwell Medical during this pivotal time for the company. Stuart is a seasoned veteran in the health care industry with 25 years of experience, serving in a number of senior leadership roles at Abbott Laboratories, Quest Diagnostics, Gambro AB and Baxter. Stuart brings significant operating and commercialization expertise across domestic and international markets and is deeply familiar with the clinical development process.

At Gambro AB, a $2 billion global dialysis products company, Stuart was a key member of the senior leadership team and was responsible for running a variety of businesses, including its $150 million Asia Pacific and $400 million Americas businesses, which he brought to new levels of revenue and profitability. Stuart also played an integral role in the $4 billion sale of Gambro AB to Baxter International in 2013 and led the integration of the combined $650 million Baxter-Gambro renal businesses in Latin America, driving significant synergies, revenue and profit growth.

Stuart is eager to hit the ground running when he joins us on September 4 and will play an integral role in continuing to build out the leadership team, including selecting our new Chief Financial Officer. Until he officially joins the company, I will be serving as Interim Principal Executive Officer. As we stabilize the business and transition into our next phase of growth, we will look to leverage his successful experience executing on commercialization strategies and driving growth and profitability.

We have also engaged a new independent registered public accounting firm, Marcum LLP, as our auditor. Marcum is one of the largest independent public accounting and advisory services firms in the nation, and we are pleased to be working with them.

And finally, as we announced on August 7, we have resolved the dispute with the former management team. We are pleased to have these matters firmly behind us so we can focus solely on operating the business.

To that end, with regard to our renal therapies, we continue to focus on maximizing the opportunity with Triferic. The company remains focused on its commercial planning to launch the product in the U.S. while still continuing to pursue separate reimbursement. We know that with the right resources and focus, we can create significant savings for clinics and the health care system and improve clinical outcomes for our patients.

Before we open up the call for Q&A, I want to take a moment to thank those who have helped us get to where we are today. First, to our shareholders. As I said at our annual meeting, I recognize that the last few months have been filled with a lot of extra noise, and we appreciate your support and candid feedback during this period. Second, to my fellow board members. Your focus and leadership have been critical to the progress that the company has made over the last few months as we have started a new chapter for Rockwell Medical. I'd also like to thank our customers for their support and shared vision of helping our patients live healthier lives. And most importantly, to our employees. Thank you for your continued dedication and commitment to improving clinical outcomes for our patients.

I'll now turn the call over to the operator to open the call for Q&A. I want to reiterate that the focus of today's call is the change underway at Rockwell Medical. When Stuart settles in to his new position as CEO, he will provide more detailed observations on his financial and strategic priorities for the company in the coming periods.

With that, let's open up the call for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of [John Crowley].

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Unidentified Analyst, [2]

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My question is, what is Rockwell's current business relationship with Baxter International in terms of selling its dialysate products? Are the companies working together still to get that product out to customers? Or have they gone separate ways?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [3]

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Thanks for your question, [John]. The company continues to work with Baxter. And as I've said in my prepared remarks, we're excited to have Stuart on board, and he's going to review all of the opportunities across the business. And I think he can do a great job of maximizing those opportunities for us.

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Operator [4]

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(Operator Instructions) Your next question comes from the line of James Terwilliger with Paulson Investment.

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James Terwilliger, Paulson Investment Company, LLC - Senior MD [5]

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I'm new to the story, a new shareholder. Just quickly, as I'm starting to do additional work on the company, the gross margin seemed to have trended down a little bit this quarter. Is there any additional color you can provide on the -- what drove the increase in the cost of goods sold?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [6]

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In terms of any real detailed questions on the financials, I obviously kind of wait for Stuart to get in and talk about trends in the business. The material changes that you saw were really related to write-downs for inventory as well as the settlement that occurred. The core business as you see it today remains pretty steady, and we look for that to be steady in the upcoming quarters.

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James Terwilliger, Paulson Investment Company, LLC - Senior MD [7]

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Okay. So just a general rule -- that makes sense. And as I'm looking at this, there's a lot of onetime items and noise in this particular quarter. Is that fair?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [8]

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Yes. You can see the write-down of over $5.4 million -- or $5.4 million due to the inventory and the onetime $1 million settlement. So if you back out those, you should see a business, at least on a quarter-over-quarter basis, that looks pretty steady.

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Operator [9]

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Your next question comes from the line of David Bouchey with IFS Securities.

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David Michael Bouchey, IFS Securities, Inc., Research Division - Head of Healthcare Research [10]

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Was hoping that I would kind of be near the tail end of the questions. I thought it would be a good idea to let the individual investors finally get their first crack at asking questions. But since I'm in the queue, I will go ahead. I do want to say that according to my calculations, if you back out the $5.4 million charge for Triferic inventory from the cost of goods sold from this quarter, I come up with actually a bit better than what my estimate for the quarter was. So I'm pleased with how that has been going. I do want to ask 2 quick questions. The first is about China. There's been a lot of news in the -- well, in the news about the Chinese government doing a lot of work to get drugs that are already approved in the United States and Europe to market faster in China. And have you any update for us on whether or not that would apply to Triferic and Calcitriol in the Chinese market?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [11]

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Thanks, David. Good to hear from you again as always. I don't have a specific update on progress with China other than to tell you that the company remains very excited about the opportunities. It's obviously a very large market. We think our products are well positioned to succeed in that market. And again, I would reiterate my excitement around Stuart here. He obviously has experience both in the renal market as well as in the international market. I think that all of the companies that he's recently been at -- he's had international experience in Latin America as well as Asia. And so that was one of the reasons that we brought him on, and we think that he can really accelerate our progress on that front, on the business development front, as well as on the clinical development front.

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David Michael Bouchey, IFS Securities, Inc., Research Division - Head of Healthcare Research [12]

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Excellent. And the last question I want to ask is about the IV version of Triferic. Can you give us an update on when we might expect to see an announcement of a new drug application filing with the U.S. FDA?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [13]

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No -- I don't have a specific time line to share on today's call. But the team is hard at work on that front. And again, we think that's a great opportunity for the company to expand our offering here in the U.S. as well as abroad.

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David Michael Bouchey, IFS Securities, Inc., Research Division - Head of Healthcare Research [14]

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And just to be sure I have this right, this is an actual NDA filing. So the FDA is looking at IV Triferic basically as a new drug?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [15]

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Yes.

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David Michael Bouchey, IFS Securities, Inc., Research Division - Head of Healthcare Research [16]

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Okay. And is it possible to use an IV formulation even in the U.S. where they have centralized mixing? Can you still -- well, there are a lot of IV drugs that are used. Can you market IV in the U.S. as well as abroad?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [17]

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Yes. I believe so that some of the clinics would be using that as their preferred methodology with Triferic.

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Operator [18]

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Your next question comes from the line of [Randy Heron], private investor.

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Unidentified Participant, [19]

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Could you give us some color -- we've heard about -- I mean, I wouldn't say miracle drug, but it's just drug has a huge potential to improve the lives of dialysis patients. Can you talk about and maybe provide us, the investor community, some color on uptake from the customers such as U.S. Renal, American Renal, DaVita, Fresenius, and maybe speak to when you might start seeing some traction on that front?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [20]

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Yes. Thanks for the question. I think, right now, there is no uptake to report. The product is not in the market. There is a free sample program that has been in place for several years now. So we see very positive results in the free sample program, both anecdotal feedback from clinics and patients as well as the data that we receive from them. But no commercial sales. I think when Stuart gets on board, that's obviously going to be top of the list from a priority standpoint as we look to bring Triferic to market as well as continue to pursue transitional pricing in Washington. So stay tuned on that front. We're very bullish on the opportunity with the drug. But at the end of the day, the proof is in the numbers, and we'll be eager to share those with you when we can start generating some real results.

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Unidentified Participant, [21]

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Well, and I would ask the same question on Calcitriol. I mean, when are we going to start seeing traction on that front? Or what would you anticipate?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [22]

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Again, until Stuart gets on board, I wouldn't anticipate immediate traction on that front. The team and Stuart will really evaluate the opportunity with Calcitriol and the best way to maximize that opportunity. So as soon as he gets on the ground, feet stabilized, he'll be able to articulate the plan and the progress that we expect to be able to make on that front.

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Operator [23]

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Your next question comes from the line of [Jim Blarsa], private investor.

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Unidentified Participant, [24]

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My question is similar to Dave's. I was already in the queue when David asked this question. I was curious, like, what's the time line to enter China and India? And like, where are we at in the regulatory process there? And then I have one more after that.

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [25]

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Yes. Again, I don't have a specific time line to share today. I mean, again, we expect Stuart to come on, and I'm excited about his deep international experience both on a commercial front and on the clinical development. China represents a large opportunity as does India, although I prioritize China above that. But until he gets in here and really can wrap his hands around the opportunity and can start to prioritize those opportunities, there won't be much to share until that happens. But rest assured that he and everybody else will be very focused on taking advantage of those opportunities.

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Unidentified Participant, [26]

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Look, Ben, do you know how long it takes to get approved in China and where we're at in that process?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [27]

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Again, nothing to share on this call in terms of where we are in the process. We obviously do have a partner there. But again, as soon as we have details to share of where we are, we'll definitely share them.

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Unidentified Participant, [28]

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All right. That's fair. That's fair enough. I was curious, too, like you said, there's not going to be any significant revenues with Calcitriol or Triferic by the end of the year. Could there be a little bit, like $1 million or more and that's -- in your mind, that's significant?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [29]

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Again, I don't have a number to give you. We're going to make as much progress as we can as quickly as we can. And whether it's Q4 or Q1, what you should hear from me is that we're going to be heads down and we're going to make the best of it and build a real business here. So no forecast to give or prediction on the revenue front, but we have good products, and I think we're going to be able to make something of it.

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Unidentified Participant, [30]

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All right. That's fair. So significant to you could be 0 or could be $1 million?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [31]

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Yes. Again, I don't have a specific number to give you on today's call, but we're going to make the best of it.

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Operator [32]

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Your next question comes the line of [Joe Imas], a private investor.

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Unidentified Participant, [33]

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I've emailed you a couple of times, appreciate the feedback. I've got a couple of skeletons in the closet that I'm interested in. A lot of the capital reserve that was in the Rockwell account from last year was attributed to Baxter investing in a Western plant. They were also investing in the company, and then I think there were some private money that they invested. So it amounted, in my estimate, to about $40 million. You're down to roughly $25 million. What part of that is Baxter's commitment?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [34]

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In terms of the cash on hand, that's -- all the company's cash on hand. And Baxter -- we had a commitment from Baxter that we publicly disclosed. There's been nothing more on that front than what was made available in our filings.

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Unidentified Participant, [35]

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All right. So right now, there is no commitment to -- financial commitment to repay anything to Baxter at the current time.

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [36]

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No, I don't have any more details to share on the Baxter agreement right now.

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Operator [37]

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(Operator Instructions) Your next question comes from the line of [Joseph Tisch].

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Unidentified Shareholder, [38]

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Before I ask my question, I wanted to thank you for all the steps that you have done -- you have taken during the past several months and especially for the transparency that you have provided to the investors. And as a long-term shareholder, I really appreciate that. My question is, as we all know, we don't have much coverage in the investment community with our stock. And have you planned or are you planning any steps that will result in more coverage?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [39]

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Yes. So thank you for the question, and thank you for the support. Yes. So I think as the company -- now that the company is on a path towards more stability and starting to bring its products to market and can be generating real results and driving the business forward, I would expect that you should also see us develop our business relationships, both with partners as well as with investors and with banks. And hopefully, that will result in some more coverage from analysts. We've been very grateful for the support that IFS has given us, but would also be interested in expanding the coverage that we can get. So again, nothing to report on today's call, but that is something that we will be focused on and should start to happen in the coming quarters.

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Operator [40]

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(Operator Instructions) Your next question comes from the line of [Wyle Smith].

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Unidentified Shareholder, [41]

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I have some common sense questions. Seems to me a lot of U.S. dialysis patients could use Triferic now. And ignoring government payments for Triferic, tell me if there are some dialysis clinics right now where they can walk in under the guidance of their physician, of course, and say, I want the treatment now, I'll pay cash or by check. And then the second question is if there are clinics that will allow that and have that adequate inventory and so on, then what's the retail price on the high end right now for just a single patient that thinks they really need it and can use it and is willing to pay?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [42]

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Yes. Thank you for the question. I think maybe before answering that specific question, the -- I would say, at the highest level, we agree. We want to get Triferic in the hands of patients, not just to drive revenue and profit but to improve their lives. And we are very focused on that. I think we made that clear as a board when we announced that we would no longer wait just for transitional pricing, that we would go down a parallel path in which we still would pursue that but also wanted to pursue a direct commercial strategy, selling within the bundle. So we're of the same mind in terms of getting the product in the hands of patients. Right now, the product is only available through the sample program. There is no retail sales right now where a patient can just go and purchase with a price point. It's certainly one of the things that we can consider along our -- with our commercial strategy. But right now, the only patients that have access to the products are in the free sample program.

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Unidentified Shareholder, [43]

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Well, my only comment would be, again, common sense. The free sample program, except in extremely limited circumstances, I'm a shareholder, is going to have to go away soon and quickly. And it's a needed therapy on the part of the patients, and it seems silly that they just can't pay out of their pocketbook right now.

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [44]

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Yes. Listen, I think you've probably seen from the actions that the board has taken in terms of the changes that we've made and our desire to get into market, the desire to bring on a new management team, we want to get this product in the hands of patients as well. So we're aligned. We obviously want to do it in the right way and make sure we're very thoughtful about the price that we set for the product. But we absolutely want to get the product in the hands of patients.

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Operator [45]

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Your next question comes from the line of [Mark Aboratman]. Your next question comes from the line of [Gary Choi] with Acumen. Your next question comes from the line of [Thomas Hammond] with Rockwell Medical.

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Unidentified Participant, [46]

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I've been a private investor for about 10 years, turning gray. Do we have any backlog orders on the vitamin D?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [47]

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So first of all, I appreciate your support and your patience with the company. It's definitely noted. And right now, the company was just approved on the -- with Calcitriol. We're bringing Triferic to market. So I think we're going to be able to make progress on that front. We don't have specific plans to share or more details than what I gave in the prepared remarks. But I think what you've seen is this is a board that's committed to action and committed to driving the company forward and that you should start to see results in the future.

All right. With that, I'm going to leave it for one last question. Operator, make this the final question, please?

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Operator [48]

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And your final question will come from [Tom Estens] with [LO Thomas].

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Unidentified Analyst, [49]

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In terms of the clinical data, on the free sample program, is there any information that you can disseminate through the investment community, showing the results of what patients have been experiencing for the last years on this free sample program?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [50]

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[Tom], thanks for your question and your patience. There isn't specific data that I can share. It's a great question and it's something that we're obviously focused on. The free sample program really is the best repository of data in terms of how patients are succeeding and really should drive the company's thinking around price and how to enter the market. We don't have anything that is packaged up that we can share with the public right now. But when we do, we definitely will. I mean, I think as you can tell, the company is very committed to transparency, whether the news is good or bad. And the free sample program would be a logical place to look for data. So when we have that data in a format that we can share, we definitely will.

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Unidentified Analyst, [51]

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Great. And one quick question about transitional add-on. It's kind of a gray area as to what exactly the law is. Are all new drugs coming online effective January 2019, are they going to be part of transitional add-on? Or where does that proposal/law stand?

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Benjamin Wolin, Rockwell Medical, Inc. - Chairman [52]

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Nothing is formalized on that front. We're -- we haven't even entered a comment period. Certainly, that was what you asserted in terms of all new drugs post 2019 would be available for that. But nothing has been finalized yet on that front. So we will definitely keep you posted. We definitely are paying attention there. But at the same time, we're not resting on our laurels and are pretty focused on our own commercial planning regardless of what happens with CMMI or CMS.

Okay. Thank you. And with that, folks, we're going to wrap it up. I really appreciate the time and all of the questions and your continued support of the company. We look forward to chatting with you again in the coming days and weeks.

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Operator [53]

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