ChromaDex Second Quarter 2020 Earnings Conference Call

Overview

On August 5, 2020, ChromaDex Corporation (NASDAQ: CDXC) hosted its second quarter 2020 earnings conference call. The session featured CEO Chris P. Day, CFO Darren B. Smith, and senior scientific advisors who discussed the company's financial performance, operational highlights, and strategic outlook amid the challenging environment created by the COVID19 pandemic.

Financial Highlights

• Revenue: $8.0million, a 12% decline versus Q22019, reflecting reduced licensing activity and delayed shipments.
• Gross margin: 78%, slightly lower than the prior years 80% due to higher cost of goods on a smaller volume base.
• Operating expenses: $9.2million, up 8% yearoveryear, driven primarily by increased R&D investment and remotework related costs.
• Net loss: $2.1million, or $0.12 per share, compared with a net loss of $1.3million in Q22019.
• Cash position: $30.5million of cash, cash equivalents, and shortterm investments at quarterend.

Operational Highlights

Despite the pandemics impact on supply chains, ChromaDex achieved several key milestones:

• Completion of the Tru Niagen PhaseIII clinical trial, confirming the products ability to raise NAD levels in a diverse adult population.
• Launch of the NMN (nicotinamide mononucleotide) licensing program, with two new partners signed in Q22020.
• Expansion of the Phytoceram manufacturing facility, increasing capacity by 25% to meet growing demand for skinhealth ingredients.
• Introduction of a newly validated analytical method for quantifying nicotinamide riboside (NR) in complex matrices, enhancing product quality control.

Strategic Initiatives

The leadership team emphasized three strategic pillars for the remainder of 2020 and beyond:

1. Scientific Innovation: Accelerate the development of nextgeneration NAD precursors and explore synergistic combinations with existing product lines.
2. Global Expansion: Target new markets in Europe and Asia through strategic licensing and comarketing agreements.
3. Operational Excellence: Implement costoptimization programs, invest in automation, and enhance supplychain resiliency.

Q&A Highlights

Question Analyst: How does the company plan to offset the revenue decline from a slower Tru Niagen rollout?

Answer CEO Chris Day: We are diversifying our revenue streams by expanding the NMN licensing program, which is already showing early traction. In addition, we are increasing our focus on the Phytoceram portfolio and exploring new applications in beauty and nutritional supplements.

Question Analyst: Can you comment on the cash burn outlook given the increased R&D spend?

Answer CFO Darren Smith: Our cash burn for the full year 2020 is projected at approximately $30million, which aligns with our current cash position. The additional R&D spend is targeted at highpotential product candidates that we expect to generate meaningful licensing revenue within the next two to three years.

Question Analyst: What is the timeline for the next major clinical trial?

Answer CEO Chris Day: We anticipate initiating a PhaseII trial of NMN for metabolic health in Q42020, with enrollment expected to be completed by mid2021.

Outlook for Q32020

The company guided to total revenue of $7.5million to $8.5million for the third quarter, reflecting a modest rebound as supplychain constraints ease and new licensing agreements come online. Gross margin is expected to improve to approximately 80% as volume increases. Operating expenses are projected to remain flat, with continued emphasis on targeted R&D initiatives.

The leadership reaffirmed its fullyear 2020 guidance of $30million to $33million in revenue, a gross margin of 78%80%, and a net loss of $4million to $5million.

Conclusion

The Q22020 earnings call highlighted ChromaDexs resilience in a turbulent market and its commitment to scientific leadership in the NAD space. While revenue pressures persisted, the company made significant headway on product development, licensing expansion, and operational improvements. Investors and stakeholders were reassured of a clear strategic roadmap and a solid cash position to navigate the remainder of the year.