Agile Therapeutics Inc (AGRX) 2020 Q3 法說會逐字稿

Good afternoon, and welcome to the Agile Therapeutics' Third Quarter 2020 Financial Results Conference Call.

Please note, today's event is being recorded.

(Operator Instructions) 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 2020 financial results.

Before we start, let me remind you that today's call will include forward-looking statements based on current expectations, including statements concerning our outlook for the fourth quarter and full year 2020.

Management's expectations for our future financial and operational performance, our business strategy and commercialization time line, our assessment of the combined hormonal contraceptive market and the potential market share for Twirla, among other statements 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.

Let me now turn the call over to Al.

Thank you, Matt.

Good afternoon, and welcome, everyone, for our third quarter 2020 conference Call.

We're pleased to report that we remain on track to launch Twirla, our first FDA-approved product, which is a once-a-week hormonal contraceptive patch.

During the third quarter of 2020, we delivered on several key stated objectives according to our planned time line that brings us closer to this exciting moment in Agile's history.

We trained and deployed our sales force, executed on our manufacturing plan and progressed on our managed care opportunities, all while controlling our spending prudently.

We've said all along that the launch of Twirla would happen in the fourth quarter of 2020.

And today, we're excited to report that we remain on track.

Thanks to the hard work and dedication of our talented leadership team and partners, we expect to launch Twirla by the end of this year.

We look forward to this important milestone and to providing women with new contraceptive choice that fit their lifestyles.

For our whole team achieving this launch of Twirla, while working from home since March will be a remarkable accomplishment that cannot be understated.

Now on to a review of the third quarter in greater detail, starting with manufacturing.

After completing production of the pre validation batch of Twirla, we initiated and remain on track to finalize the 3 foundation batches that we expect will produce product to support our commercial launch.

All 3 of these batches are expected to be released for commercial use by the end of this year.

We are pleased with the progress we've made on the manufacturing front and appreciate the continued support of our partner, Corium.

As announced at our Investors Day in September, we continue to build our distribution network by contracting with 1/3 of the 3 major U.S. wholesalers as well as a number of the regional wholesalers.

We believe we're installing a supply chain infrastructure that can efficiently support the commercialization of Twirla.

Turning to an update on our management team and our sales force.

We expanded the depth of our leadership team with the appointment of Dr. Paul Korner as our Chief Medical Officer.

Dr. Korner is a Board-certified OB/GYN with 20 years of experience in the biotech and pharmaceutical space, including significant experience with women's health care.

We are excited to bring his wealth of knowledge and experience to the team in supporting the commercial launch of Twirla.

Dr. Korner will also support our efforts in evaluating our existing pipeline, prioritizing our product candidates while considering the development costs and the pad life and to help us explore possible expansion through business development activities.

Our strong contract sales force is now out in the field, educating health care providers or ACPs and raising awareness in the marketplace.

The team of 8 regional sales specialists and 65 reps completed an 8-week training program.

Our sales reps been in the field since about mid-October, conditioning the market, and we're expected to make over 10,000-plus calls before we launch Twirla.

We're using insights from our data-driven approach to target the highest volume practices.

This proactive outreach from what we consider to be a best-in-class sales force for women's health, helps us to ensure that prescribers will have heightened awareness of Twirla at the time we actually launched the product.

We continue to make significant progress engaging with third-party payers regarding coverage and reimbursement for Twirla during the third quarter.

We are committed to have -- to working to minimize access barriers for patients and provide providers with the goal of obtaining rapid formulary positions at 0 co-pay for their patients.

We are currently negotiating with all key pharmacy benefit managers, or PBMs, and their representative health plans to secure rapid formulary reviews.

At our Investor Analyst Day, we indicated that we were targeting approximately 40% to 50% formulary access at the time of launch.

I'm now pleased to say that we've already achieved 40% to date.

This includes 1 of the major 3 PBMs with several of the smaller plans.

We continue to target 85% formulary access by the end of 2021 and along with the goal of gaining formulary access at 0 co-pays for individuals to use Twirla.

Beginning at launch, we will have a full month sample package for eligible prescribers to provide to appropriate patients.

The availability of samples will give HCPs a way to immediately start patients on Twirla until they can fill their first prescription at retail.

In terms of our customer engagement strategy, we are adapting to this unique environment presented to by COVID-19 to meet the needs of our customers.

As Amy Welsh, our VP of Marketing highlighted at the Analyst Day, our prelaunch strategy is aimed at building awareness of the contraceptive landscape and tapping into patient demand for new contraceptive choices.

In just over 2 months since the launch, we're slightly more than half enabled in the campaign of the -- in our website, BirthControlDoneMyWay.com is already outperforming our engagement goals.

Nearly 80% of the site traffic is engaging with the content centering on women discovering more about their birth control options.

This aligns them with -- this aligns with what we learned in market research that patients want to be engaged and to take an active part of their contraceptive decision-making process.

Our unbranded ad campaign is intended to heighten pent-up demand with patients primed to rethink their birth control options, we are approaching the HCPs with this objective of augmenting from the physician side, the decision-making process that happens in the office with patients, OB/GYNs and their nurses.

We will continue to broaden our marketing by leveraging this momentum of the unbranded campaign.

We're supporting the lifestyles of women and making it easy from the access afford and stay on Twirla.

Most importantly, in the event a customer loses a patch, our patch relation program is our commitment to women to serve their active and busy lifestyles.

We are pleased to announce that this program is fully ready and prepared to be operational at the time of launch.

I will now turn the call over to Dennis Reilly, who'll provide you with an overview of our financial results for the third quarter of 2020 and an update on guidance.

Thank you, Al, and thank you to everyone listening today.

Before I summarize our third quarter 2020 financial results, I'd like to echo Al's earlier comments about the great work our team has done as we get closer in bringing Twirla to market.

Now on to the results for the quarter.

For the third quarter of 2020, our R&D expenses were approximately $3.7 million compared to $2.4 million in the same quarter a year ago.

The increase in R&D was primarily attributable to the cost to conduct validation work for the commercial manufacturing of Twirla by Corium, our contract manufacturer.

As a reminder, all pre validation and validation batch costs were expensed through R&D.

G&A expenses totaled $11 million in the third quarter of 2020 compared to $2 million -- $2.1 million in the same period a year ago.

This increase in G&A was due to primarily pre-commercialization activities for Twirla, such as brand building, advocacy and market research.

G&A expenses also increased due to activities related to building out our commercial organization, which included an increase in headcount, professional fees and stock compensation expense.

We anticipate that our G&A will increase in the future with the commercialization of Twirla as we continue to grow our business.

These expenses will likely include increased selling and marketing costs, including payroll and operating costs related to the commercial launch of Twirla, legal and accounting services and other costs as we -- as expected as we grow the business.

Net loss in the third quarter of 2020 was $15.5 million or $0.18 per share compared to $4.4 million or $0.08 per share in the third quarter of 2019.

We ended September 30, 2020, with cash, cash equivalents and marketable securities of $71.9 million compared to $34.5 million of cash and cash equivalents as of December 31, 2019.

Turning now to our financial guidance for the fourth quarter and full year 2020.

Gross revenue in the fourth quarter, reflecting this initial stocking of Twirla by the wholesalers is expected to be approximately $1 million.

We continue to manage our costs well and have lowered the high end of our operating guidance range for the full year by $2 million.

We're now expecting expenses to be in the range of $52 million to $54 million for the year, with G&A, again, accounting for about 70% of this spending as we build out our commercial infrastructure.

We are making a slight revision to the bottom end of our noncash stock compensation expense guidance, which is included in G&A expense now in the range of $2.7 million to $3 million.

Based on our current business plan and our ability to launch Twirla, we believe that our current cash, cash equivalents and marketable securities as of September 30 will be sufficient to meet our projected operating requirements through the end of 2021.

With that, we are happy to take your questions.

Operator, you may now open up the line for Q&A.

(Operator Instructions) Our first question comes from Randall Stanicky with RBC Capital Markets.

Great.

Al, a couple of questions for you.

First, how do you think about launching with another new recent launch in the marketplace?

And is there anything that you've seen or heard thus far from that launch that gives you any learnings that you can apply to your launch?

So that's the first question.

And then secondly, as you continue to look at the marketplace, continue to do market research, where do you think that Twirla is going to pull from?

I think we can all look at Xulane and look at that as an obvious opportunity.

But when you think about the other share grab or share opportunity, which areas are you thinking is going to be most likely in the early part of the launch?

Right.

Thanks, Randall.

I just want to let the listeners know while Dr. Korner is also with us if there's any questions.

So Randall, your 2 questions.

Number 1, the launch dynamics of another contraceptive in where we're going to get share from.

So let me take the first one.

Yes.

I mean we have good intelligence now, Randall.

We have reps in the field.

We have 73 people in the field.

We have eyes and ears out there.

And I think, first and foremost, that I think doctors are pretty excited right now, OB/GYNs, for the first time in a number of years, have new contraceptive options being presented to them.

There's been really 3 or 4 of them in the last couple of years and hopefully, including ourselves.

So I think there's a heightened excitement, I would say, by the prescribers.

I think that's helpful to us.

They're excited that there's new options.

Those excited that companies are really stepping forward and doing research for them.

So we think it's net positive for the category.

We compete the most recent launch is in a different category than us.

It's in the nonhormonal side.

So we see our segment as being the hormonal side.

I think that's really important for us that we position the product in that segment, if you will.

Lessons learned from what I've seen so far.

Yes.

I mean, that's an interesting one.

I would say, number one, is there's still confusion about the Affordable Care Act.

There's a lot of misinterpretations of what the act is.

So I think that presents an opportunity for us.

I think doctors aren't as aware in some states where there's state mandates, that's available to them.

So I think that, again, is an opportunity for us.

There's a lot of -- I think the other thing we've learned, at least for us so far, we had planned on a lot of our face-to-face calls to be around the national average, if you will.

We thought nationally when we look at data, approximately 60%, Randall, are face-to-face right now depending on where COVID's at, we're well over 80% for the first a number of weeks, we've been out there since mid-October.

So that's -- I would say that's a pleasant surprise for us.

The other thing is that women are engaged.

I think we see that in the other launches, the consumers.

We see it in our activity on our website, there's a level of engagement that -- which seems to indicate the market is excited about this even on the patient side.

So that's what we can glean out so far, still relatively early days.

Where we're going to get share from?

So that's -- I'll put it in 2 buckets.

I think it was a new patient come in naive to therapy, more than likely, she was heading for a pill.

We believe that patient statistically was heading to be on a birth control pill.

So if we're fortunate enough to get a shot at that patient, we're taking share away from a pill.

That's still the bleeding method in our space.

If it's an existing user, I mean, you're right, we would expect some share to come from the other patch, but we would expect to take share from the pills there again.

A woman who's chosen -- our market research would say a woman who's chosen to be on an IUD, for instance, is not our patient.

So the bulk of the business, if we're successful, is going to come in patients that either are on a pill or were or were heading to be on a pill.

And that's what we're hearing right now from doctors.

We hear that in our market research.

So if we're going to be successful, it's going to be a pill user, either de novo or somebody that's already on a pill.

Al, can I ask a follow-up.

As you look at the launch, I mean, the point you made, it's correct.

We haven't seen very many women's health launches in the last several years and we're in a pandemic right now.

So as you look at your 65 reps and you look at your commercial plan, are you expecting to get greater provider touches given the tele-detailing aspect of this than you would normally get from a kind of an in-person non-COVID environment?

Yes.

And that's already planned out, Randall.

And we have 65 office-based reps that's our footprint that are trained to pivot either from a face-to-face call or telemarketing and the 8 other reps we've mentioned are -- they're really specialists that are in effect tele-detail reps, our telemarketing reps work for our individual sales managers.

So what we're finding is that on a tele-detail, we can cover a lot of space pretty quickly.

So meaning that they could be really productive.

So when you sprinkle in telemarketing or tele-detail capabilities along with our face-to-face, it's pretty remarkable.

You're right.

I mean the -- I guess, if there is a shining lining in this, we -- on a rep -- per capita rep basis, we can be more productive.

And since we're targeting group practices, Randall, we're even more productive.

So a rep going in either on a face-to-face, a lunch or a tele-detail, can handle a lot of bases versus chasing individual doctors on the map.

So our strategy of chasing group practices with our enhanced tele-detail capability and the willingness of doctors to let us in their office, we're well over 80%.

Now remarkably more productive on a rep basis, Randall, than I would expect even non-COVID times.

So we're off to a great start.

I'm really proud of the sales group.

I mean they're hitting the floor running and doctors want to see us, and we're very productive.

I hope knock on wood that it keeps up, but I'm really pleased with the traction we're getting out of the gates.

And you're right, that is the shining lining.

On a rep basis, we're getting more mileage out of a rep than we traditionally would if they were just chasing doctors around the landscape.

(Operator Instructions) Our next question comes from Tim Lugo with William Blair.

Apologies.

Our next question is actually from Oren Livnat with H.C. Wainwright.

Can you hear me?

Yes.

Muting myself all day, so I didn't mess up this time.

So a couple of questions.

I guess just to follow-up on COVID-related matters.

It sounds like you guys are getting pretty good face-to-face.

But what do you think about any impact, especially as we're surging again here on new patient visits or any patient visits for that matter?

Do you think that -- have you had to moderate your internal expectations with regards to therapies getting switched in this environment or maybe people putting off starting a little bit longer than they would have otherwise?

No.

Thanks, Oren.

I mean no, we haven't seen in the data yet.

I mean, I think we're fortunate versus some of the other specialists.

I mean our customers running an obstetrics practice also.

So that moves on.

They're given access to their patients and so forth.

And from what we could see in the category the number of prescriptions in the category hasn't fluctuated very much.

It's a little off, but not like we've seen in pediatrics and some of the other areas that you follow.

So not the one they're now, not yet.

I mean, we don't expect it, by the way.

When we look at regions that are really impacted by COVID and you say, how's that bad the prescribing and a very impacted region going down, the answer is no.

And we think a part of that is because they are actively getting more engaged with telemedicine and the scripts are phoned through telemedicine, we think.

So I think the physicians are being quite resourceful.

So with the obstetrics and their offices being open, having to give access, even the worst states they refer to telemedicine.

It hasn't dampened the category or their prescribing behavior.

And we monitor that pretty closely.

So now, we don't see it.

So we're relatively optimistic that the pie is intact, if you will, maybe a few percentage points down.

And the margins, not very impacted just yet.

And hopefully, not at all.

Hopefully, we are through obviously the worst of it.

All right.

And since I'm a nervous nelly, can you just put our minds at ease with regards to this manufacturing validation.

Is everything on schedule?

I noticed you tweaked down the fourth quarter revenue guidance again.

And I know that was or is all stocking.

I'm wondering, has there been any change in the expected timing of the launch?

And can you put our minds at ease that everything is within spec as far as you know, on the manufacturing side?

Oren, thanks for always worrying about me.

I appreciate it.

No, no, no.

We're certainly on track.

I mean I think if you think back to where we started on this journey in February with 9 or 10 employees, our plant was mothballed, no money functioning in the company.

And you say, okay, we have to reactivate a plant, build staff at both our company and Corium.

This is our time line.

That's why we've always had it out there.

Now truth be known, I would have loved to move this forward, but we weren't able to do that.

I mean it just was time and not money related.

Trust me, if I could move it with money, we would have done that.

But this is the time line that we put out as a team, and it's just never moved.

So now when the revenue guidance is really directly related to the time of year we're coming out and the wholesalers just don't want to carry much inventory of brand, any brand out of deschutes, you have to earn that inventory.

So we think that's an achievable number, and it's just based on the dialogue we've had.

Look, the next step for us.

So to give you more confidence, Oren, look, I own a sales force.

I've got them calling on doctors.

I'm spending a lot of time and money against the consumers.

We've built an internal organization.

We're probably approaching 30 people in the home office now.

So like we are of full confidence in bringing this product forward.

But the fair balance that I always try to be with you, like we just couldn't move it forward despite our best efforts.

With that said, this is the time line our team told us.

And so we'll get there.

I have full confidence we'll get there.

And I guess, when is the last spec check, so things can start going out the door?

Yes.

I mean, right now, the batches are made.

So let's just kind of put this behind it.

The batches are made, they're sitting there.

So what functionally needs to be done at this point is all the analytics have to be done on these batches.

It's not a typical, like in a typical production or it's pass fail.

If the batch is passed or they fail, ship them out the door.

But in this pre validation phase, we're working under a protocol that we designed with the FDA, where we actually go in and do a lot of statistical testing and things like that.

So we're in the analytics part of it now.

So that's what we're doing now as we speak.

And then we have to believe it or not, write up a report for our files.

It's a self out of station.

We don't have to file with the FDA.

So we have to put it on file.

And satisfy that we've done everything we could.

So we're in the football terms, we're in the red zone.

On the big running back, it's trying to reach into the goal line at this point.

But we're not quite there yet because it's just a series of activity.

Now with that said, in the next near term, we'll start talking to wholesalers.

And we'll start trying to firm up orders.

And so we're just going to keep progressing along.

So we're in that phase.

And that's why we mentioned we're also talking to managed care.

So the other thing that I'm thrilled with, so I'm happy with, is we're over 40% of this country when I get our product for 0 co-pay and growing.

That's just extraordinary.

We put our necks on the line.

So we also feel good about that, Oren.

So I think our managed care discussions are going great.

I think I own the best sales force I've got a privilege of working around.

And the doctors are excited on I got product coming.

So that's -- I hope that relieves some of your anxiety.

If that's possible, you did.

Our next question comes from Tim Lugo with William Blair.

And I feel a little anxious.

I apologize, but could you talk about this validation analytics phase a bit more for the final lots of product.

Does any of this require in-person site inspections or in-person interaction with the agency, which may be impacted by travel policies around COVID at the agency?

Let me try to talk to you off the ledge now.

So Oren was first, now you're second.

No, no, Tim.

So with the way it functionally happens is that we submit a protocol to the FDA saying, hey, this is how we're going to validate our final specs and our manufacturing process.

So it's a lot of statistics and a lot of testing and that's where we are right now.

Now there's nothing that needs to be submitted.

This is self-attestation.

If everything goes well, which is it appears that it has and will, we put in the files.

That's it.

We're done.

No, if not, it doesn't go anywhere.

So the batches just came with the line recently, and we're doing all the testing and writing up the reports, and that's right now where we are.

So we're as close as close it can be.

In a normal situation, Tim, we wouldn't need to do any of this.

We would say that the batch pass our specs, yes, no, it's black white, if it does, you ship it.

So these batches are peculiar because we -- they're really technically development batch.

So that's why Dennis is expensing them through R&D.

They really are.

And then if we pass everything which we expect to do, we ship it out the back door and we use it in manufacture.

We flip it into a commercial batch.

So now that's it.

That's it.

Nothing -- and it's not subject to any kind of inspection.

All your files are theoretically subject to inspection at any time by the FDA.

But we don't have to show with anybody, nothing.

It just stays on file, both in the company and Corium, and it's always subject to a question by the FDA, but they don't have to come in and check it.

It's all self-reporting.

Validation, Tim, because most people to be truthful with ourselves, most people take this off the scoreboard even before they submit their NDAs.

They just get this done.

Well, obviously, we didn't have the financial resources to do that.

That's why you're hearing more about validation than you typically would.

This would never even hit your ears generally in our industry.

So we just started late and it's become the gating item.

So that's why we're spending so much time talking about it.

That's fine.

I understand.

I guess can you talk maybe a bit on the marketing side now?

I know Xulane made some contracting gains before you were even in the market.

And that led to some of that growth we saw from them over the past few years.

Can you talk maybe -- are you able to break into those kind of relationships?

And how are you going to approach contracting in 2021?

Yes.

We don't believe, Tim, that they have per se contracts that we're aware we haven't bought up against them.

What they have is a monopoly.

You close the Affordable Care Act that they really get on the formulary for not -- for no reason.

I mean, they just get the place.

There's 18 forms of contraception.

They're in a monopoly.

They get it.

So to the best of our knowledge, there's not as link contracts we're up against.

Now with that said, they often on Mylan appears to have put some promotional noise against it.

They had some -- a smaller sales force at one point detailing the product.

So they've kind of picked up some volume there.

We think they pick up some business now and then in Planned Parenthood accounts.

So there's some contracting at kind of the Planned Parenthood level, but not in the PBM level, the commercial plans, the way you think of them.

So we think that's really a kind of a residual of the ever patch days and a little bit of selective promotion, but it's not a contracting.

So to answer your question, that's not an issue.

And I think that's why we're in a formulary position we are already.

I mean it's -- but we think we're -- we hope by the time we ship product and have reps the rest of this year, we hope we hit closer to 50%.

So we're half the country is going to be not only enabled.

That doesn't mean the other half won't have access to our drug.

There may be a co-pay.

So the 50% -- 40% we quoted is 0. We've got it.

Then we're inching our way up to closer to 50%.

And with the other 50%, we think we can activate through co-pays.

And then we have a co-pay card to help if we need to.

But we continue to be in negotiations with the other PBMs to hopefully improve that.

So hopefully, as we go into next year, you'll hear that's getting closer to that 85%.

We have our next several line for.

Okay.

That's good to hear.

And maybe lastly, can you talk about some of the quantitative metrics around the engagement to the campaign to the unbranded campaign, which you launched?

Yes.

There's a couple of different pieces of it.

I think the big sound by, Tim, is we only probably have 50% deployed.

So we -- while we deployed it, there's still a lot more to come.

So we turn on the lights.

It has different elements, right?

So you see us on like LinkedIn or a Facebook and that's a piece of the puzzle.

But really, the action, right?

We want to bring them into our website, right?

That's where we think the action is.

So we're getting a lot of volume.

I don't have the numbers in front of me.

But what we really want is like anybody can tag a base on a website.

But we want to see them go deeper, right?

You want to go deep, pass the homepage into the analytics, right, that they're actually doing something.

We're well ahead of our metrics.

I believe I said in the script, over 80% of the touches are doing stuff.

So we're really engaged at a level.

So that's exciting.

So we have internal on the whistles and bells jet.

We'll turn on more spending as we get closer and drive more traffic there.

But what we like is that we're well ahead of any metrics we would have expected at this point with the level of engagement, Tim, which tells us that they're finding our site relevant.

So hopefully, more to come.

But that's the metric I'm looking at, Tim.

I could care less how many hits I get.

I want to know how much if they're doing something.

So I look at layer deeper in the onion and saying are women engaged and it appears yes.

So we are -- the 2 metrics that excite me so far -- three, the 40% co-pay, right, 0 co-pay, the 80% plus face-to-face details and 80% engagement in the consumer.

Everything we're doing is we're hitting our major metrics and exceeding them.

We haven't activated the field.

We haven't activated the product yet.

So I think we've done a great job priming the prompt on our 3 elements managed care, HCP and consumer.

So I just can't wait to let it lose now.

I'm just -- I'm a wild man, Tim, what can I tell you?

I just can't wait.

Our next question comes from Leland Gershell with Oppenheimer & Co.

As we head into the Twirla launch and with the rise of telemedicine channels, probably accelerated a bit by the COVID condition.

I wanted to ask with your intel, what you could tell us about what the utilization of telemedicine versus women either seeing or perhaps calling or zooming in with their providers as they seek out their birth control option, whether it's new patients coming online, whether it's existing patients who are just looking to kind of streamline the process and getting prescriptions that way.

I wanted to know if you could share with us your understanding there and also how they may relate to your efforts with regard to the Twirla launch on that part of the market?

Yes.

Thanks, Leland.

Yes.

I mean I would characterize it as a really small but growing very quickly part of the OB/GYN's practice.

I personally believe in the studies we've done, a lot of this has to do with reimbursement.

Because right now, in the COVID environment, CMS is giving some pretty liberal reimbursement to docs for telemedicine visits.

That's -- so it's worth their while, including OB/GYNs to engage their patients through telemedicine.

There's a school of thought that if that goes back less.

I think order of magnitude is difference between like $29 and approximately $75-ish.

So that's my understanding of the reimbursement.

If it boomerangs back to $25 to $30, we're going to see it go down again.

So really, it's a function of, we believe, the reimbursement for their time.

With that said, it's growing quickly and somewhat regionally, Leland.

So we are watching it.

I believe our company has to be involved in that channel, either for now or in the future.

So we're watching telemedicine.

We think it's real.

We think it's going to grow.

We think it's a function that growth is going to be a function of reimbursement.

We think tele prescribing is going to continue to grow.

But we haven't seen it that big in contraception yet.

So the data is not there yet because, as you know, a lot of this market is refills.

It's just repeat business.

So we have -- that's a bolus that's not has impacted because, quite frankly, a doctor can just get -- take a phone call and handle that.

So we're watching the new starts, and they don't seem to be that influenced just yet, but it's early days, and I'm not 100% convinced we have great tools yet to monitor that.

So it's something we're keeping an eye on, but I think the real metric for all of us is saying, what's reimbursement going to be?

I hate to be that craft, but I think that really is a direct relationship between reimbursement and telemedicine both in OB/GYN but across the country.

So we'll have to see where that lands post COVID.

So is it worth of doctor's time to do it.

So the answer is yes.

Now, I don't know for that $29, I don't know if that is.

It's probably better to open your practice and have less patients flowing through.

So that's what metric we're watching just yet.

So it's a small but emerging channel.

I believe we should put a bet there.

And so we want to put a player in that space.

So we're going to probably do that down the road.

We're looking at potentially alliances but we're still studying just yet.

So we're not sure it's a day 1 need to do just yet.

So -- but something that's high on our radar screen that we should get on to pronto.

We don't think it has a direct impact on Twirla either way right now.

But down the road, it might.

What we see.

So watch reimbursement.

That's what's the reimbursement from CMS.

And then if it goes down, we'll see if the visits stay up.

So there's a direct correlation between that, at least what we've seen in the data.

Yes.

No, we'll watch that.

That's helpful.

And then a question maybe for Dennis.

Just in terms of the cost of goods with those 3 batches expensed through R&D, and then you're going to have in commercial inventory, just how we should think about normalization of COGS as we get into '21?

Would we see that kind of hit 2Q or midyear?

Or I guess it depends on the size of the batches and your sales uptick?

Yes, get beyond the first 2 quarters, it will get more normalized.

And there will be some fixed cost in there, too, of our staffing and some depreciation, which is in cash.

But there'll be some fixed cost we'll have to overcome just by absorption over time.

But I would think on a net sales basis, we'd still be 15% to 20% longer range as a COGS of net revenue, somewhere in that range.

So if it's kind of -- that just should be right in the ballpark.

Yes.

We think there's allocations that are above, Leland, also besides the direct cost from Corium, if you we pay a piece price in Corium, as you know.

But we have some internal costs that are dedicated.

So we have some fixed costs that we're going to start restating to COGS in effect.

Right.

You're going to have a supply chain organization, very small, but some bodies that basically going to manage Corium for us and we'll have to be allocating some of their costs over to that area.

So with very little volume early on, it's not going to be absorbed, but it will become insignificant over time to the COGS.

Our next question comes from Paul Biedlingmaier with Edward Jones.

Just a quick question.

Could you possibly broach the issue with the pricing of the product in comparison to existing products there that are all on the market?

Yes.

So Paul, nice meeting you, I don't believe we've had the privilege.

But yes, so just I'll frame kind of the football field for you.

The most relevant, we compare ourselves more to the branded products, if you will.

The other patch goes out the back door at $122 a month there -- what we call wholesale acquisition or we'll call it WAC.

Some of the birth control pills that are branded could be as high as $210.

I just flipped some are even over $200.

So if you want to use that as your kind of goalpost, the median in the category is probably $165, $170, if you know the median.

We chose a price of $159.75.

That's what really sell to wholesalers for.

So we're closer to the low end of the median, if you will.

But we're not as low as the other patch because the payers who ultimately pay for this product said, look, you have -- what they believe is a better product, in our case, a better patch.

That will give us some premium pricing.

But at the same time, we can't go up to $200.

So because -- so we've chosen to put the ball closer to the pin pall that's more relevant.

So when we get in front of managed care, we're not starting at these big differences because when ends up happen, we have to roll back that price anyhow, more than likely.

So we said, why we're playing that game?

Let's just start a rational price but slightly less than the average of order of the median, if you will.

And when we tell that the customers are like.

And then the other part of our value proposition, you heard me mention a couple of times the patch replacement program.

Because if a patch falls off, women have trouble with pills.

Women lose pills, they lose patches.

So we set as a manufacturer, look, you can call us, and we'll give it to it for free.

So in the other patch, the payer, the managed care group is paying that.

So they're not paying $122.

They're paying slightly more than that, if you know what I mean, for the replacements.

So when we say, hey, look, here's our price.

Here's where it's at.

We're eating the cost of these replacements.

You're only paying for 3 patches.

That's why I think the payers are starting off saying, "Hey, we'll cover this product." So I don't know, we started a more rational place, Paul, and it seems to be working for us.

I hope that makes some sense.

It's not -- you just have to off of price back from any.

It just seems like a silly game to me.

There are no further questions at this time.

I'd like to turn the floor back over to Al Altomari for any closing remarks.

Well, thank you, everyone.

Thanks for the questions.

As always, they're really great.

So appreciate it.

Hopefully, you can see in the third quarter of 2020, we like we've delivered against the manufacturing plan, the managed care plan, the customer engagements, our financial objectives, and we're on track launching Twirla in this quarter.

Leading up to this important milestone, we remain committing to minimizing access barriers for women and by extending the coverage and reimbursement for Twirla.

We're allocating a substantial amount of our resources to completing the validation process, not the batches, the process, and we'll continue to use our sales force out there to build awareness and engage in these customers in a really important and a robust dialogue.

And we're really pleased with the progress we've made and confident that, that strategy is going to pay off for us.

To get the market-ready for the product seems to be the right thing to do.

Looking ahead to our next call.

I look forward to talking to you about an update on all our launch activities and all our metrics.

I'm discussing, we'll discuss with you.

We hope to discuss with the feedback we're hearing both from patients and the physicians.

We believe the future for Agile is really bright.

So we're excited.

We look forward to talking about real data with you next quarter -- next time we talk.

And we look forward to becoming and continue to becoming a leader in this space.

So we want to thank you for dialing in, your interest in our company and thank you for your support, and we look forward to the next, hopefully, not-too-distant future, you'll hear the product is shipped.

So thank you.

Ladies and gentlemen, this concludes today's webcast.

You may now disconnect your lines at this time.

Thank you for your participation, and have a great day.