Key Quotes from Chromadex's Q2 2018 Earnings Call $CDXC

Chromadex (ticker: CDXC) recently reported Q2 2018 earnings results and hosted an earnings call. Here are some key quotes from CEO Rob Fried:"

TRU NIAGEN -- "game-changing":

"We see this growing body of scientific literature on the benefits of NR and its relationship to NAD as a validation of our belief that NR is a game-changing human wellness product. 

...What is apparent after much research by dozens of institutions, looking at a wide range of health conditions, is that NAD is essential to human health and that NIAGEN is effective in the production of NAD.

TRU NIAGEN is our growth engine."

Human Studies:

"During the second quarter, the number of human studies on NIAGEN posted on clinicaltrials.gov has grown to a total of 22. The additional human studies investigating NIAGEN's role in some very exciting new areas of human health. 

As the foundation of science continues to build the pipeline of peer-reviewed publication should yield media attention and greater consumer awareness."

Recent Study Results -- The University of Copenhagen:

"The University of Copenhagen published the results of the clinical trial that once again confirms NIAGEN safely increases NAD levels at the highest dose thus far published. This is the fourth published clinical study of NR, and the results of this study collaborate previous findings that not only does NR effectively raise NAD levels in humans without adverse effects, but more importantly, it showed that potential for improvement in liver health."

Partnership with Watsons Drug Stores in Asia:

"Watsons has committed to significantly grow sales on an annual basis over the next 3 years. 

As a result, we expect to see more consistent shipments with Watsons beginning in the fourth quarter of 2018. 

Based on the successful launch of TRU NIAGEN in Hong Kong and in Macau, Watsons is interested in extending the distribution of TRU NIAGEN to other international markets. 

A.S. Watson group has over 14,100 stores in 24 markets worldwide. 

...Watsons, as you know, has done an excellent job of promoting TRU NIAGEN in Hong Kong and their sales have been extremely successful. It -- their campaign has been a combination of promotional campaigns, there's been a lot of outdoor advertising, there's been press. There's been a fair amount of online campaigns and a lot of in-store promotional campaigns. They also did a tie-in with one local celebrity endorser. 

And we are aware of many plans that they are developing over the next month to continue to promote the sales of TRU NIAGEN."

International Expansion:

"...we are working very hard to get approval of nicotinamide ribosome (NR) to be sold as a supplement in many countries presently. 

And we are also working to get approval of marketing materials, health claims that could be made in those countries. 

And until you get both, you can't sell directly into the country, certainly not in stores. 

In some cases, you can sell across border, internet sales into those countries, and we are exploring those opportunities as we speak."

International Expansion -- Singapore, Taiwan:

"Singapore, it's mostly marketing materials-related and that's more of a waiting game. 

In Taiwan, it is -- the regulatory thresholds in Taiwan are slightly unique, and we think we're okay, and we think we should be getting that approval relatively soon. But it's further away in the process than is Singapore. We still need, in Taiwan, to get nicotinamide riboside approved as a supplement. 

In Singapore, we're at the marketing-material stage."

International Expansion -- Turkey:

"...we believed that Turkey would be easier to get regulatory approvals. 

So second is that Watsons was -- had stores in Turkey and wanted to expand into Turkey.  

So even though Turkey itself may not be as larger market as some others, relative ease of entry and Watsons interest in exploiting that territory were the reasons why we went there next. 

There are a number of countries that we are pursuing right now. It's hard to know on any given day, which one's going to notify us and say you're good. 

We got that phone call from Turkey a little earlier than others."

International Expansion -- New Zealand:

"The launch of TRU NIAGEN in New Zealand is expected in mid-September 2018. 

...We thought New Zealand was interesting for a number of reasons. 

One is again, like Turkey, we were able to get regulatory approval there. And be able to sell-in and we happen to have a relationship with this company, which is an excellent company in New Zealand and one that we thought would be good to do business in. 

But third, we see New Zealand as an excellent opportunity to learn. 

It is the neighboring country to Australia year, which is a very, very important country. 

90% of the Australian population purchases some sort of a vitamin, consumer vitamin every day. 

We thought New Zealand would be an interesting place for us to learn and test that market and see how it goes from there."

International Online Expansion -- UK, Germany, Asia:

"During the second quarter, we began offering TRU NIAGEN for sale through Amazon in the U.K., and we expect to add Amazon Germany in the second half of the year and may add certain Asian countries as well."

Marketing Strategy:

"the vast majority of the marketing that we have done has been internet, digital-based marketing. And generally speaking, when you do that, you begin a campaign or a series of campaigns by prospecting large swaths, reaching out to large groups of people in order to get interest at the very top of the funnel. And then what you do is you work to convert those prospected potential customers. 

So we have done that and there is a large number of people who are interested and who are visiting our site and learning more about TRU NIAGEN, and what we have been doing lately is converting them, and we have been very successful. 

All of the underlying metrics have improved, things like conversion rate and acquisition cost, et cetera."

Gross Margins:

"Gross margins remained relatively flat at 49.3% for the second quarter compared to 50% for the prior period."

Higher Quarterly Losses:

"The higher losses in the second quarter were the result of the strategic decision to invest in marketing and overhead ahead of growth, higher legal spending and higher stock-based compensation expense, partially offset by higher sales volume and gross profits. 

...we expect our overall net losses and cash outflows to moderate in the second half of the year"

Cash Balance:

"We ended the second quarter of 2018 with a solid balance sheet with cash of $33.4 million. 

...Based upon our current outlook, we have plenty of cash to fund operations in 2018 and beyond to get to the point of generating positive cash flow."

2019 Guidance:

"As we look to 2019 and beyond, we see tremendous opportunity for growth. We have multiple efforts underway to open new markets and increase sales in existing markets. Factors that will influence how fast we grow include the pace of regulatory approvals, the completion of new strategic partnerships, expansion into additional markets and increased awareness of TRU NIAGEN domestically. 

...the company expects the revenue growth to be driven by our U.S. e-commerce business and Watsons' international business as well as the launch of TRU NIAGEN in certain new international markets."

Cost Cutting Initiatives:

"...we're implementing cost-cutting programs across the company to reduce our overall spending."

Litigation:

"There's a decision scheduled to come out of New York but we don't -- we've been waiting for that for months, it could come at any time. There's motions that we're waiting from there. But we don't have anything right now that we're certain is going to come out in the next few months."

Full transcript HERE.

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Disclosure: Long CDXC

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