Agile Therapeutics Inc (AGRX) 2021 Q3 法說會逐字稿

Good afternoon, and welcome to the Agile Therapeutics Third Quarter 2021 Financial Results Conference Call.

Please note, today's event is being recorded.

I would now like to turn the conference over to Matt Riley, Head of Investor Relations.

Hello, everyone, and welcome to today's conference call to discuss our third quarter 2021 financial results and corporate update.

Before we start, I remind you that today's call will include forward-looking statements based on current expectations, including statements concerning our financial outlook for the future, management's expectations for our future financial and operational performance, our business strategy and our assessment of the combined hormonal contraceptive market and the potential market share for Twirla, among other regarding our plans, prospects and expectations.

Such statements represent our judgments as of today, are not promises or guarantees and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements.

Please refer to our filings with the SEC, which are available through the Investor Relations section of our website for information concerning risk factors that may affect the company.

We undertake no obligation to update forward-looking statements, except as required by law.

The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions.

Joining me on today's call are Al Altomari, Agile Therapeutics Chairman and Chief Executive Officer; and Dennis Reilly, Chief Financial Officer.

Following our prepared remarks, we'll open the call to your questions.

I will now turn the call over to Al.

Thank you very much, Matt, and thank you all for joining us this afternoon.

In our third quarter 2021, we once again saw growth in all key performance areas for Twirla.

From the end of quarter 2 2021 to the end of quarter 3 2021, we saw the following; total cycle dispensed grew 61%, total prescriptions for TRxs grew 47%, new prescriptions or NRxs grew 25%, and refill grew 86%.

We're encouraged by the double-digit growth in our prescription demand, but we are not content.

Our goal is to accelerate the growth of Twirla brand and reduce our time to profitability.

We believe we have the awareness and access programs in place to execute on our plans and intend to make meaningful investments in marketing to help increase demand.

I'll delve into these initiatives later on this call.

First, let me discuss what we believe are the key takeaways on these performance metrics.

First, refill growth at 86% is a great sign.

Our Head of Marketing, Amy Welsh, always reminds us that we believe this is a sign of a healthy brand because it tells us women, how on Twirla, like Twirla and are staying on the product.

In turn, this gives us the confidence in the longevity of the brand because new patient starts are translating to repeat customers.

Second, we want to increase the rate of new prescription growth.

When we consider the rate at which Twirla prescriptions are being refilled, we believe more new patient starts can lead to more refills and greater overall brand growth.

Part of the new prescription equation is also the prescriber count.

The prescriber count grew 63% in the quarter to 3,394 total prescribers, and we continue to consistently pick up approximately 100 new prescribers each week.

Third, during quarter 3, we said Twirla Cycles or retail units are expected to grow between 50% and 56% higher than the retail units sold in quarter 2 2021.

We sold retail units actually grow at 61% this quarter.

And again, we are pleased to see this growth but are not content.

We want more.

I'd like also to address the guidance provided during quarter 3. During the third quarter, we said we expected quarter 3 2021 net sales to be in the range of $1.4 million to $1.6 million.

We came in slightly under our guidance as wholesalers reduced their channel inventory by approximately 8 days.

The double-digit growth in prescription demand leads us to believe we have the underlying demand to support the business long term, and we expect to see the wholesale activity reflect this in the near future.

Dennis will provide some additional commentary on revenues and inventory reserves for the quarter when I hand over the call to him.

We need to accelerate prescription growth, which accelerates the revenue grant and that is our singular focus.

We are executing on initiatives that we believe can help accomplish this goal.

For this call, I'd like to discuss 3 of these initiatives telehealth, Medi-Cal and DTC in our influencer program.

First, telehealth, In the third quarter of 2021, we announced a partnership with Pandia Health, a telehealth service provider, which is now active.

Pandia offers an additional point of access for Twirla in a fast-growing channel and represents the first telehealth alliance for our company and our products.

We are excited to enter telehealth as its use in the contraceptive care has grown over the past several years and has come into the spotlight during the COVID-19 pandemic.

We always believe telehealth was a priority channel for our target consumer prior to the pandemic, and we believe it's even more so now.

To that end, we continue to explore additional telehealth partnerships to maximize our footprint in this channel.

Because Twirla became available at the very end of the third quarter, we expect to start seeing its contribution to our TRxs as we progress through the fourth quarter of 2021 and into 2022.

Second, Medi-Cal.

As we previously announced, the California Medicaid program placed Twirla on the preferred drug formulary list effective October 1, 2021.

This secured a preferred position for Twirla on the formulary for Medi-Cal and its related program, which provides health care to approximately 15 million beneficiaries.

This is significant for Twirla because Medi-Cal is the largest Medicaid program in the U.S., and we believe roughly 1/3 of the existing contraceptive patch market comes from Medicaid.

Again, this just one into effect at the beginning of the fourth quarter of 2021 and we expect to start seeing this contribution to our business as we progress through quarter 4 of 2021 and into 2022.

Third, DTC and our influencer program.

We believe that our DTC advertising program can perhaps have the biggest impact on NRx growth.

We recently activated branded influencer program to increase awareness of Twirla as birth control options and encourage women in our target markets to engage in open conversations about the product.

We are focused on leveraging influencers via Instagram and ensuring this program focused Twirla through clinic storytelling, which further supported by our paid social amplification to reach even a broader audience.

Our influencers include individuals of varying tiers from micro to macro, which we believe will allow us to optimize unique benefits each level of influencer offers.

We rolled out our first wave of activity in early October and are seeing the type of engagement we envision, not just like the impression, but also in the comments and conversations.

We are pleased with the first wave of influencers and post.

We continue to focus here to reach our target market.

We previously discussed our plans for DT advertising and are pleased to announce that Twirla is the first prescription birth control brand to launch branded podcast on Spotify.

Twirla is also the first birth control brand to run branded content across BuzzFeed, leveraging their social handles across Facebook, Instagram and Snapchat.

Finally and importantly, we are partnering with U.S. soccer star, Carli Lloyd, as our corporate spokesperson.

As corporate spokesperson, we believe she will help amplify the message of our commitment to women's health.

As the partnership really kicks later this year and throughout 2022, you can expect to see Carli Lloyd promoting Agile and its mission on Instagram and Facebook, where she has a combined 2 million followers.

These are important initiatives which we believe build our business.

At the top of the call, I reported we saw growth on all our key brand performance metrics.

This is without the contributions of any of the programs I just mentioned.

As we continued to implement these programs, we believe they will contribute significantly to increase product awareness, uptake and growth acceleration as we finish 2021 and enter 2022.

I also want to review 2 other announcements in the third quarter that we anticipate having positive impact on our overall business.

First, with the appointment of Josephine Torrente to our Board of Directors.

Josephine is a highly experienced regulatory expert that we believe can contribute to our growth of our company through her strategic insights on the FDA regulatory process and our experience evaluating business development opportunities.

We believe this will be useful as we evaluate our own pipeline to explore other ways to expand our business.

Second, the patient protection Affordable Care Act, or ACA, established an important standard for coverage of contraceptives.

Nearly all of the commercial and Medicaid coverages are required to cover the full range of female-controlled contraceptive without cost sharing, such as coinsurance, co-payment or deductible.

Despite the ACA protection and the government's guidance on implementation, women around the country are not getting the contraceptive they need or are prescribed or entitled to at no call.

Recently, health committee leaders, the National Women's Law Center as a family planning Council all urged the Biden Administration to clarify and enforce the regulation to ensure consumers access to a full range of FDA-approved contraceptives.

We believe this issue has been an impediment to prescribing and the uptake of all new innovative contraceptive products, including Twirla, that has been approved by the FDA since the ACA's passage.

Kimberly Whelan leads our Policy and Advocacy and Market Access for Agile and is closely following this development for us.

We hope to see the Biden Administration address this important issue and ensure all women have access to contraception that has been decided as medically appropriate between the patient and their providers.

We believe that we've been able to grow despite this access barrier and we applaud the congressional chairs for urging enforcement.

I'll now turn over the call to Dennis to provide you more clarity about the third quarter from a financial perspective.

Dan, let's take it over.

Thank you, Al.

My goal here is to highlight key financial areas related to our financial performance and our cash position, then move over to Q&A so we can answer your questions.

In the third quarter of 2021, we realized net product revenue of $1.3 million on sales.

As Al stated, this came in slightly under our guidance as our wholesalers reduced their channel inventory by approximately 8 days, the equivalent of $150,000 to $160,000 in net sales.

In addition, we made some increases on our gross to net revenue allowances.

Our cost of product revenue for Q3 2021 was $2.7 million and included a $1.4 million inventory obsolescence charge.

This reflects our initial reserve for inventory that is not expected to be sold prior to its shelf-life state, which is 12 months prior to expiry.

Our operating expenses were $14.4 million in Q3 2021 versus $14.7 million in the same period a year ago.

We remain focused on maintaining our disciplined spending approach and making the right investments to encourage strategic growth and maximize shareholder value, while implementing what we believe to be impact our partnerships and agreements.

We anticipate our quarterly spending for the fourth quarter 2021 to be in the range of $15 million to $18 million, with increases reflecting commercial spending on product sample batches and branded marketing.

We closed out the third quarter of 2021 with a net loss of $16.8 million or $0.18 per share compared to net loss of $15.5 million or $0.18 a share for the comparable period in 2020.

As of September 30, 2021, we had cash and cash equivalents of $14.7 million compared to $31.1 million of cash and cash equivalents at the end of the second quarter 2021.

Most recently, we raised an additional $21.1 million of net proceeds in a public offering.

We will require additional capital to achieve our goal of profitability.

We anticipate that as we accelerate sales growth, our optics on revenue will become clearer and allow us to better define the path and time line to profitability.

We continue to evaluate all options available to us to finance the company.

We were thrilled to see Perceptive Advisors once again support our company in our most recent rate as well as several other high-profile institutions.

We currently have no plans to further leverage the company with debt and pull down additional funds under the Perceptive facility.

We'll continue to explore various business development and partnership opportunities in our quest to accelerate our path to profitability.

We're happy to expound on any of these areas discussed during today's call.

And operator, you can now open up for questions.

(Operator Instructions) Your first question comes from the line of Leland Gershell from Oppenheimer.

Congratulations on the progress.

Very encouraging to see the 86% rate of refills.

A couple of questions from me.

I wanted to ask first in terms of the inventory and wholesalers, Dennis, you mentioned the 8 days scaling down.

Just wondering if there's any expectations for any further shifts in inventory in the channel or if that should be stable from now on.

I also wanted to ask with respect to the recent initiatives by the BNWLA and Congress those letters with respect to the ACA coverage.

I want to note, one, if you can provide us with any -- even if just qualitative feedback on to what extent Twirla may have had challenges getting covered because of noncompliance on the part of payers under the ACA guidelines and also on any outlook on when we may see action being taken following those letters.

Dennis, you want to take the first one, and I'll take the ACA.

I mean, we anticipate we're there on the wholesalers.

We don't have control over them in any sense, but we do believe they're running pretty lean now.

And so we expect our scripts and ultimately our cycle sales, which is a month supply, to start to match up very closely in Q4 and going forward with actually wholesaler sales.

So I would say they're in sake going forward.

My only comment is like we thought they were at status.

We took us down another 8 days, which is a bit surprised us, but it wasn't Twirla only and really they're just contracting.

I mean, we've seen it across all the books of business.

So we think we're at steady state, but we thought that before, but we'll continue to monitor it.

But at this point, I don't know how much more lower they can go.

It's almost just in time inventory at this point, Dennis, that I would think.

So about the Affordable Care Act, your second comment, Leland.

Yes, so covenant impacted Twirla.

So just to kind of lay this out for the listeners there's 2 parts of the ACA when we talk about compliance.

I think everybody knows now that there's 18 forms of contraceptive.

There's a famous chart that they site.

And the plans are required to carry one of every product, including a patch.

So that's part A, Leland.

So I think part B is the one that we think it's not as well discussed and -- but if a doctor wants a woman to be on Twirla, there's a form that you'll see on our website, twirla.com called the letter of medical necessity, by law, it's not a prior auth.

By law, if a doctor says, I want this woman on Twirla, the plan cannot say no.

The decision is up to the doctor.

It's not a prior auth.

It's not like anything else we've seen.

It's a very unique aspect.

We have seen a lot of denials for Twirla and a lot of the new brands.

So it's just not us.

So the insurance companies are basically saying and their PBMs are saying, now we're just going to deny it and doctors go away.

So that's why we set up sterling drug and people like that that say, no, no, no, that's not how it works.

So it just creates a bit of a kind of a headwind with the doctor's mind, but this drug is hard to get across the goal line.

Now, it's improving a lot, but it certainly held us back.

And the interesting part of any you've read the documentations, which I would encourage you, this is not just in the commercial plans.

Unfortunately, it's in Medicaid and it's also in the government's own plans.

Their own books of business and their own employees aren't getting the access they deserve.

So like I said, we've really applaud all 3 organizations for stepping up and it's the voice of Congress, it's the voice of the women's law center, who's been the person in the courts fighting a lot of these cases over the years about the ACA and it's the women's group.

So each one of them spoke with a pretty loud voice as we are that this wasn't the way the law was intended.

So we need to clarify this again.

Again, it's been clarified before.

And we've encouraged it necessary to be enforcement.

Something got to change.

Despite that, we're proud to grow.

I mean, to put up the growth we've done as you might imagine, I'm very proud of the organization.

So when we can fix, Leland, that's the question, Mr. Reilly asked me all the time.

We just don't know.

There was a short turnaround time on the congressional letter that was probably too short.

So we are aware of some conversations that are going on at the highest levels.

But we expect action.

Now the action, what it will mean most likely, hopefully, they'll reclarify all this for the industry and if necessary take enforcement action.

But we think -- we still think we are better days ahead of us on this.

It just makes writing our drug a lot easier.

And ideally, we'd love to be on all.

One of the letters actually went as far as saying all the brands should be available -- every FDA products should be available.

Why are we dealing with this chart, why don't make everybody available for no co-pay because that really was the intent of the act.

So that's the home run.

So if we can't get the home run, just to be able to get the prescriptions and the doctors wishes would certainly be a win for us and thank you for your comment about refills.

I'm thrilled.

It just speaks to this brand and the stickiness of this brand and women just liking this product.

It just makes us feel great and just give us a beachhead of volume every week to build off of Leland.

So it's a nice day.

The next question comes from the line of Oren Livnat from H.C. Wainright.

I have a few if you indulge for me.

Just quickly on the ACA situation.

How relevant is there that there is a Xulane generic out there now?

I mean we know that they're not even living up to their promise probably of even covering one of every form under ACA.

But even if they were to meet that low bar, do you think you would still have some challenges getting coverage in that regime, given Xulane and generic or have you bounced that are out there?

And then I have a couple of follow-ups.

So there's kind of like part A and part B. So the best we can see, people are supposed to make wise specific about a patch, either us or Xulane or generic available on the plans.

The best we could say it appears they've done that.

So that's the part A. So I think from a compliance perspective and following it will act or they seem to be in compliance there.

The Part B of the act is let's use a situation that we're not on formulary, Xulane is on formulary in the zero co-pay.

So we could be on formulary on a non-zero co-pay.

We could be, let's say, $40, $50 co-pay.

We're not getting to zero or the preferred.

So in that case, we can deploy our -- that's easy for us to handle.

We can deploy some couponing and handle that.

But let's say we're locked out.

So we're off formulary.

In that situation, you go to our website, you pull down that form, the doctor fills it out and that scripts supposed to walk, not only the first family, Oren, but every time she goes in the fill, she's on it, she's got to in the system.

That's where we're seeing a lot of the resistance to comply with that part of the Affordable Care Act.

So it's -- that's just again, doctors goes in trouble, fills us out for a woman, she gets not again and they more than likely just want to go back to Xulane.

That's the battles we're fighting.

But now with that said, contextualized COVID for what we've been through with COVID and this resistance we're getting in some of the plans and just try to put our growth in perspective on that.

So I do believe that if these -- nothing else that these letters of medical necessity just go through the system as intended, that they should go through in a very short amount of time.

And then the patient by the time she gets the pharmacy should have that drug and then she should be freed up.

So that's the way in the simplest form it works.

And then if I just follow up on that.

You did mention in the quarter the gross to nets were up, I assume that means sequentially over 2Q.

Is that simply a reflection of just having to have increased patient assistance utilization in light of the challenges you've just covered or is that also potentially reflects an actual contracting some economics that you worked out to get coverage on the payer side?

And in the meantime, where you don't have coverage, you don't have ACA compliance, how are you making sure that doctors don't get frustrated and give up so that they can continue to keep writing it and patients keep getting it one way or another profitably or otherwise, so that down the road, you can convert all that into sustainable revenue?

I'll do the second part, then Dennis, I'll comment, and you can correct me if I'm wrong, on the gross net.

So the last part of your last question, the simplest way our reps do this is they just teledoc, just give us a script, transmit the scripted to Sterling.

Sterling are experts at processing these claims.

We are seeing a lot more of our business run through Sterling.

So we just basically sell the doc say, hey, doc, just send us, we'll adjudicate it, we'll do the insurance claims and we'll do this letter of medical necessity if we need to.

And then the patient gets the choice, let's say, everything goes through swimmingly and we get the patient across the goal line, what happens or and we could say to the patient or the doc saying we can ship the drug to our house or we could ship it to a local CVS.

So it's a concierge service in effect that makes the doctor's life easier.

So our best reps are the ones that just say, hey, doc why work with this, just given us.

Now, if we know we're on a plan like on a big area that we've got a lot of great coverage, we shouldn't have to do that.

There are major books of business that we could just say, look, in Connecticut and Medicaid, it goes through.

And Medi-Cal is going to go through, you don't even need to do these gymnastics.

So if we can point to big plans it's a lot easier just to do it that way.

And then I'll comment on the gross to net in that and then Dennis could correct me if I'm over my skis.

But look we're seeing more of our business running through Medicaid, as we would expect as we've signaled that's an important part of our business.

Remember, in the first and second quarter, we didn't have much Medicaid coverage.

So we're seeing Medicaid becoming more parts and that's a little bit of the apple.

And Dennis I think the other one is co-pay cards generally the more we're dealing with co-pays, co-pay utilization creep up.

But I think there's a lot of little about us, but are they the 2 headlines that I should remember.

Yes, those are it.

And the co-pay being the one that kind of came up -- both came up a bit with co-pay even a little bit more this quarter.

Can you tell us what the gross to nets are sort of all in?

We're still in like the low-30s on discounts including the 12% from the wholesalers.

(Operator Instructions) For the next question, we have now the line of Tim Lugo from William Blair.

This is John on for Tim.

Just 2 from us.

So first, I want to say congrats on the new marketing efforts.

And I was wondering if you could give an update on your previously announced campaign such as your efforts on the dating app.

Do you have any updates on how those campaigns are progressing?

And do you have any insight into how they've been translating into scripts?

And second, on previous calls, you've noted that about half of your patients have been brand new to contraception, about quarter switches from pill and the remainder of mix.

Are those still the trends that you're seeing or is there any indication that mix is changing?

No.

I mean, no, the mix, based on the last time I looked at the data hasn't changed.

So directionally, what you just quoted is still there.

About half of our business comes from what we believe is a new start.

She could have been on drug before and maybe had a baby and reentered, but she looks like a new patient to us and about 25% from a pill.

So that is our major source of.

We have a dating apps, and just in general the marketing campaigns, we're encouraged by what we're seeing.

I mean, our -- when we just started having up our spend, I think we mentioned in the second quarter was pretty light spending in DTC on a relative basis.

Third quarter is the first time we went at it, for the most part, full bore at the levels we thought we should.

And we sold our, first of all, our website light up, which is very encouraging.

So we're seeing like a tenfold increase in our hits to our twirla.com.

But equally as important or more important, we're seeing prescriptions.

One of the things we look at is we look at where our prescriptions are coming from.

And we're starting to see prescriptions starting to show up and hit in parts of the country that we don't have reps in.

So I'd love to get my sales.

I do think it works in harmony in a perfect world.

But we're starting to see a fair number of business coming from pure, pure white space that we have not been in front of before, which is, to me, an indicator that it's working.

So it works better if we have a rep there.

And then the dating app specifically, every metric that we've seen or we would have expected because basically, we're buying media.

So we're saying we're buying eyeballs, right?

So in that case, we're buying through the dating apps.

We're off the charts in the execution.

So we're just getting more visits, more continuity on these apps.

That seems to be our highest performing media on the dating apps, which I know is obvious.

But we actually rank and we say it's like buying advertising.

You said advertising in 10 magazines in the old days and which one were better.

We're actually able to tell which ones are getting most traffic and the most pull-through and the most eyeballs.

And it's -- that's top of list.

I think the answer, if Amy was here, she would say she's thrilled with that idea because it's unique.

It's perfectly targeted and it's actually outperformed our metrics.

But it still early days.

I mean, we still got to see our campaign run a little bit longer.

It's only been kind of a few months running at full bore.

So we're excited to leave it out there a little bit longer and see what's happening and keep it fresh.

(Operator Instructions) There are no further questions on queue.

I will now turn the call back to Al Altomari.

First, well, thank you, operator.

Thanks to Matt and Dennis also for your help on the call.

So hopefully, you had a couple of takeaways tonight.

#1, first and foremost, we need to remind ourselves, we have an approved product that's growing in a very large multi-billion dollar market.

We discussed tonight some of the challenges we faced, but we pushed through, and particularly with some of the larger challenges that face our company and our brand.

But I'm ecstatic with the brand's performance and the potential of this brand.

We have the cash to support our business and that -- and anticipate that as sales grow or optics on revenue become more and more clearer.

So we -- it will be much easier for us to define our path to profitability, because that's our singular quest in the company to become profitable and sustainable.

We believe that these initiatives have been effective that have helped expand Twirla's access in particularly our DTC programs that we think are aimed at accelerating our growth.

We'll continue to explore and implement additional partnerships and keep you updated on those.

We continue to look for other opportunities to expand the brand and expand to reach.

There's a lot more of the market that we still think we can get at.

So I'm pleased with the progress, you should expect more progress from us and we'll keep you updated on future calls.

But thank you everybody for joining the call tonight and keeping track of us and keeping update on what's starting out to be a really exciting story.

So thank you all, and everybody have a good night.

This concludes today's conference call.

Thank you for participating.

You may now disconnect.