Agile Therapeutics Inc (AGRX) 2020 Q1 法說會逐字稿

Greetings, and welcome to the Agile Therapeutics First Quarter 2020 Financial Results Conference Call.

(Operator Instructions) As a reminder, this conference is being recorded.

It's now my pleasure to turn the call over to Matt Riley, Investor Relations for the company.

Please go ahead, sir.

Hello, everyone, and welcome to today's conference call to discuss our first quarter financial results for 2020.

Before we start, let me remind you that today's call will include forward-looking statements based on our 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 size and value 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 judgment 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 the filings with the SEC, which are available through the SEC's website at www.sec.gov as well as on our website for the 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 will open up the call to your questions.

Now let me turn the call over to Al.

Thank you, Matt.

Good afternoon, everyone, and thank you for joining us.

I want to welcome you to our first quarterly earnings call for Agile Therapeutics.

Before we begin, I want to reflect on the times we find ourselves in.

During this crisis, we are reminded on why we chose to be part of the health care industry, namely to help patients.

For us at Agile, we think about women and their health care providers.

It is the young woman looking to consider contraception who must have that important conversation on a telemedicine platform.

It is the obstetrics patient who is going to have a checkup alone while her partner or loved one is waiting outside the office in the parking lot.

We think about the 2,000-plus women who participate in the SECURE trial.

We think about the 100 investigators and their teams that executed the SECURE trial.

We have even a greater respect for the health care workers on the frontline, keeping us safe and caring for our sick.

But for a business like ours, now trying to build a company from our home offices, we owe an additional debt of gratitude to the other frontline, unsung heroes.

It is our partner, Corium, that continues to execute on our manufacturing preparation.

It is the computer techs, the postal carriers and the delivery drivers who make the sacrifices so we can go forward with Agile without missing a beat.

I want to thank the Agile team for taking on this challenge.

Finally, importantly, we recognize that we could not have done it without the investor base who has given us the financial support to carry on our business plan.

We will always try to be good stewards of your capital.

Thank you for your support.

We hope you and your families are safe.

Now let's begin our business update.

I'd like to first address COVID-19 pandemic and its impact specifically on the Agile business before discussing our first quarter highlights and commercialization plans for Twirla.

At the emergence of the COVID-19 pandemic, we took proactive steps by moving all employees to work-from-home settings.

Our employees are the backbone of our organization, and we prioritize their health and safety above all else.

To ensure business continuity during this pivotal time in Agile's history, all employees remain connected virtually and thus far have only had minimal disruptions to our day-to-day operations.

We thank all our employees for their flexibility and commitment to Agile under these extraordinary circumstances.

The pandemic did not have a material impact on our Q1 financial results and has not delayed the anticipated launch of Twirla nor has it impacted our pre-commercialization time line.

Our guidance today is the same as it was on February 14 when Twirla received FDA approval.

We believe we're still on track to ship Twirla to the trade in Q4 2020.

Now turning to a review of our first quarter 2020 results in more detail.

It was an important quarter for Agile as we secured the FDA's approval of Twirla and obtained the funding necessary to support our commercialization plan.

The FDA's approval of Twirla was a game-changing moment in the history of Agile that now allows us to take more control of our direction going forward.

Having an FDA-approved product enables us to begin delivering on our short-term goal of establishing Agile in the contraceptive prescription marketplace, and it's our first step towards our longer mission to build a meaningful portfolio of women health care assets that address unmet needs.

Achieving our regulatory and clinical goals was not easy, taking hard work and dedication from our outstanding team at Agile.

In addition, I would personally like to thank all those who made it possible for us to achieve this major corporate milestone, including our clinical trial patients, researchers, health care providers, advocates, and of course, our investors.

In our view, the contraceptive marketplace is not as well served as believed.

The approval of Twirla brings a new contraceptive option to the market for women that should be welcomed.

Nearly half of the pregnancies in the U.S. are unintended, and we believe this is partially attributable to inconsistent and/or improper use of the contraceptive method.

Our market research tells us that women's individual preferences for contraceptive methods vary and change across their lifetimes as their needs change.

Giving women more choices is thought to be critical in reducing unwanted pregnancies.

Twirla is a once-a-week patch that provides a lower estrogen dose in line with label doses of many commonly prescribed oral contraceptives.

High estrogen doses in birth control products can be problematic as they may contribute to an increased likelihood of blood clots.

Twirla is designed to reduce the burden associated with taking a daily birth control pill and is designed to be a less invasive method of birth control compared to injections, implants, rings or IUDs.

We believe this is where Twirla has an opportunity to potentially take share of the $4.1 billion estimated addressable market in the combined hormonal contraceptive, or CHC, segment.

Based on our market research, we believe that at its peak, Twirla may be able to obtain between a 5% to 8% share of total prescriptions.

Let me put in perspective what the value of a single share point could potentially be to a branded manufacturer like Agile Therapeutics.

In 2019, there were approximately 69.5 million total prescriptions reported in the CHC category.

On average, the pharmacist dispenses approximately 1.7 units per month of contraceptive for each of these CHC prescriptions, for a total of approximately 118 million monthly units or cycles in the CHC segment.

For branded CHC products, WAC prices range from approximately $122 to $220, depending on many factors, including whether there's generic competition.

For purposes of illustrating potential value of a market share point, I will use the current average WAC price for the top 16 CHC products, which is approximately $169 per unit or month of contraceptive.

We were not providing guidance on our price at this time because we are still evaluating our pricing strategy as we conduct discussions with managed care entities, so you should not assign any meaningful -- any meaning to my using the average WAC price here.

So based on these assumptions, we estimate the value of a single share point to be potentially as high as $200 million.

For a company of Agile's size, in our view, the market share is achievable.

We believe we have the product and the people to execute on the plan.

We will continue to analyze the contraceptive market and update our market research to evaluate the commercial opportunity for Twirla.

With the approval of Twirla, Agile has accelerated its commercial activities, and we are well capitalized to do just that.

In February 2020, we signed a $35 million debt facility with Perceptive Advisors, a recognized leader in growth capital financing.

To date, $20 million has been made available to Agile via the first of 2 of 3 separate tranches, and the additional $15 million will be available upon the achievement of certain revenue milestones in 2021.

Later in February 2020, Agile raised approximately $48 million in net proceeds from a public offering of our common stock.

We were fortunate to get this done -- we were fortunate to get this accomplished prior to the COVID 2019 pandemic.

Combined with our strong cash position as of the end of 2019, we expect that our financial position gives us the runway to launch Twirla in the fourth quarter of 2020 and execute our business plan through at least the end of 2021.

As Dennis will describe in more detail, we had approximately $94 million in cash and cash equivalents on our balance sheet at the end of first quarter 2020.

Another important part of our business execution plan is the addition of strategic new hires, and I'm pleased to report on the progress on this front.

We recently added 3 new vice presidents to strengthen our team.

These include Amy Welsh, Vice President of Marketing; [Keith Froemmel], Vice President of Supply Chain; and Tristen Herrstrom, VP of HR and Administration.

Each of these hires are critical to our growth as an organization.

These hires now round out our senior commercial leadership team.

The next phase of our capabilities growth will be our sales force, and we are pleased to announce we are partnering with Syneos Selling Solutions.

In total, we expect to hire 70 to 100 people in a phased manner rather than all at once.

We expect to begin with the hiring of the sales managers in second quarter 2020 and sales representatives to be added in the third quarter of 2020.

We are fortunate not to be locked into a large sales force right now, and we'll use this opportunity to build a nontraditional selling model to handle the challenges of a post COVID-19 world.

This will involve the emphasis on adding digital or virtual-savvy sales talent, capable of executing both tele-representative and traditional office-based sales tactics.

Additionally, this approach will not require a nationwide configuration in order to reach our targets.

Agile will be building potentially a new model that is adaptable to any business interruptions.

While most companies are likely trying to rethink their sales forces nationally, we can build a sales force to engage with physicians virtually and their remote settings if necessary.

Once in place, the focus of our sales force will be to target high-volume OB/GYN and women's health nurse practitioners or physician assistants.

In parallel, we're excited to announce the nomination of Sharon Barbari and the anticipated for appointment of Dr. Sandra Carson to our Board of Directors.

These 2 new Board members bring unique backgrounds and extensive experience in their respective fields that will provide invaluable support as we advance towards the launch of Twirla and evaluate our plans for our pipeline and future products.

Sharon brings 40 years of pharmaceutical and biotech experience in leading financial operations through periods of growth in various senior roles throughout her career.

Dr. Carson brings significant clinical and research expertise in women's health, coupled with established clinical experience as an OB/GYN physician and regulatory experience through membership on the FDA's advisory panels.

Both Sharon and Sandra will join our Board in June, and we look forward to their insights and contributions.

I would also like to take this opportunity to acknowledge the contributions of Abhijeet Lele and Bill McKee and to thank them for their service to the Board.

Abhijeet is our longest-serving independent director and has been the lead independent director since 2016.

Bill joined the Board just before IPO and has served as the Chair of the Board's Audit Committee since that time.

We wish them both well.

In the first quarter of 2020, Agile initiated work with managed care and patient payers as part of our plan to gain market access for Twirla.

Based on the current contraceptive mandate in the Affordable Care Act, all women get contraceptive for free with no copays.

There are 18 forms of contraceptions called out in the mandate, and patches are one of the 18 forms.

Our objective is simple, we want to build a value proposition minimizing or eliminating barriers so that women can have access to Twirla with no copays.

In addition to the federal contraceptive mandate, there are a number of individual state mandates that can be leveraged as part of our overall access plan.

The success of our managed care strategy will inform our sales force rollout.

It is our intention to only deploy representatives in markets that are enabled or have access, which ties back to our strategy to activate the sales force in phases.

We're also building a patch replacement program.

The guiding principle of this program is that if a woman loses a patch or otherwise needs one, we are working on an innovative program to get her a replacement patch on behalf of Agile.

We do not believe that she should have to go back to her doctor for a new prescription and believe that this offering will be both compelling and convenient for patients, prescribers and their payers.

Turning to manufacturing.

We've been able to stay on schedule, thanks to Corium, an experienced contract patch manufacturer.

We have completed the production of our pre-validation batches.

And subject to the final QA control testing, we expect to be complete -- that to be completed soon.

We will then transition into the final validation phase.

In that phase, we will manufacture 3 validation batches of Twirla.

We expect that these batches will be commercially usable product.

As previously guided, we plan to complete these batches in time to support a fourth quarter 2020 ship date.

As part of Twirla's approval, the FDA is requiring Agile to conduct a long-term prospective observational post-marketing study comparing the risk of VTE in arterial thromboembolism in new users of Twirla to new users of other combined hormonal contraceptives.

The FDA's requirement for Twirla is similar to a post-marketing study requirement for another recently approved combined hormonal contraceptive.

The final study report for the Twirla study is scheduled to be submitted to the FDA in November 2032, with an interim safety data due in November of 2026.

The company plans to begin designing the post-approval studies and evaluating the related costs throughout the second half of 2020.

To recap, it's been a transformational quarter for Agile, notwithstanding the COVID 2019 pandemic.

By getting the FDA approval for Twirla and achieving our capital raise goals, we believe we're in a good position to launch Twirla in the fourth quarter of 2020, in line with our prior expectations.

In anticipation of this launch, we will continue to build out our sales force, manufacturing operations and market access plan.

I will now turn over the call to Dennis Reilly who'll provide an overview of our financial results for the first quarter 2020.

Thank you, Al.

And thank you to everyone listening today.

First, I'll review our first quarter financial results.

Then I will cover our financial guidance before opening up the call to Q&A.

For the first quarter of 2020, our R&D expenses were approximately $3.2 million compared to $2.9 million in the same quarter a year ago.

The increase in R&D was primarily attributed to our increased manufacturing expenses in preparation for commercialization.

They were partially offset by lower expenses related to clinical development of Twirla.

G&A expenses totaled $4.5 million (sic) [$4.4 million] in the first quarter of 2020 compared to $1.8 million in the same period a year ago.

We anticipate our G&A expenses will increase in the future with the commercialization of Twirla.

These expenses will likely include increased selling and marketing costs, including related payroll and operating costs, among other costs related to this commercial launch of Twirla.

Net loss in the first quarter was $7.9 million or $0.10 per share compared to $4.7 million or $0.13 per share in the first quarter of 2019.

During the first quarter of 2020, we were able to strengthen our balance sheet as evidenced by our strong cash position and current mix of debt and equity financing.

We ended March 31, 2020, with cash and cash equivalents of $93.9 million.

As Al mentioned earlier, this includes our successful first quarter 2020 debt and equity financing totaling combined proceeds of $68.4 million.

Moving forward, we plan to continue to monitor our spending.

We expect operating expenses for the full year 2020 to be in the range of $52 million to $56 million.

And G&A will account for about 70% of that spending as we build out our commercial infrastructure.

Net revenue in the fourth quarter of 2020, reflecting the initial launch of Twirla, is expected to be between $4 million and $6 million.

Based on our current business plan, which includes getting Twirla launched in the fourth quarter, we believe our current cash at March 31, 2020, will be able to fund our operations through the end of 2021.

If the COVID-19 outbreak or other factors impact this business plan and our ability to generate revenue, we can revise our plans accordingly, including curtailing some sales and marketing spending to continue to fund our operations.

I also want to mention on this call that later this year, as we near the launch of Twirla, we invite members of the financial community to our scheduled Investor Analyst Day on September 21, 2020, in New York.

This will be an opportunity for members of the financial community to get an in-depth review of our commercialization plan, interact with management and discuss the progress we have made by that date as well as our future plans.

We'll continue to provide updates to this event as we draw closer.

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 today is coming from Randall Stanicky from RBC Capital Markets.

This is Dan Busby on for Randall.

To start off, I just have a few questions on your selling model.

First, how much capacity will you have to conduct face-to-face interactions with prescribers should the world return to normal sooner than people expect?

Second, does your phase launch mean that you could potentially have fewer than 70 reps hired by the time you launch?

And third, what are you prioritizing in terms of sales rep experience?

Are you looking for people who have been in the women's health space already?

Or are you looking more for digital talent?

Dan, it's Al.

So thank you for your questions.

I'll try to do them in order if it's okay.

Your first question, about capacity, so -- all over the world.

I mean I think what we're trying to communicate, Dan, is that we want to build the capacity to call on doctors face-to-face if we need to, right?

So that's the plan.

There might be some doctors we identify in the call plan that might be more remote, that might always get tele-detailing, if you will.

So we want to kind of assume the best and plan for the worst, right, so -- when we're planning the capacity.

So that's an important part.

I think what we're trying to communicate is we want to be flexible, right?

So the goal is that we want to be in the high-prescribing offices.

So we want to get in front of the offices' centers, the epicenters where the most business is.

So what we're finding is that a lot of the OB/GYNs are in group practices.

So we want to deploy activity against them.

But if their doors are shut, we don't want to wait.

We want to be able to activate them and get them in front of them.

So that's a really -- so think of us being able to pivot, Dan.

That's the most important thing there because we don't want to find ourselves short.

So which directly goes on -- go to your third question, which you asked me about what we're looking to hire.

We're looking to hire -- experience might not matter in the new world as much because we're looking for people with savvy skills because it's great to have a relationship with an office-based rep where they can walk in, they have the experience with the office.

And we'll look for that.

But it's equally important that they have the skills we need, that they can get on a Zoom call.

They can execute.

Like really have the smarts, if you will, to really get in front of doctors.

What we're seeing is that's where a lot of the pharmas are stumbling.

You hire these reps that have great relationships, that are used to office-based call, and they can't have a conversation on a call with a doctor or don't have the skill set.

So we're looking for both.

But equally important to experience is savviness.

So like if you're one of our reps, we might say in your call plan, you have 125 doctors we want you to get in front of.

But we might say you've got 25 or 30 other doctors that we want you to always communicate with them on a tele-detail.

So if the world changes or there's a business interruption in your territory, we want you to be able to pivot and go to all tele-details.

So we want a nimble, smart, flexible sales force.

Your second question was -- can you repeat the second question?

Just wondering the phased rollout, could you have potentially less than 70 reps at launch?

Yes.

The answer is we possibly.

They're possibly.

So we're finalizing the analytics right now, Dan.

We think, in total, if everything goes well, 100 is the max we see.

But we really see this as part of the managed care strategy.

So like if a market -- like, you're in New York, if New York isn't open or we don't have managed care, we're not putting a rep there.

We're just not doing it.

We don't believe reps can open doors in managed care.

It's not like the old days.

So when we sign our final contracts, we're going to sit back and say, okay, where is the map open, where do we still need work?

If the number ends up being 100, so be it.

If the number ends up being 40, so be it.

We will chase business that it's enabled.

So I think we'll have more than 1 deployment.

Right now, we see at least 2 waves.

But we see the bulk of them coming onboard early, but we haven't done the final Ts and dotting of the Is.

So we hope to tell you more about that in September when you will see, if not sooner.

Good questions, Dan.

Okay.

Great.

And then just one follow-up.

On the managed care angle, can you just give us an update on how those discussions are going?

And do you have a target in mind in terms of specific coverage level by the end of the year by the time you launch?

It's a great question, Dan.

The conversations are going well.

I mean, as you know, this is a pretty dense number of payers.

You don't need 50 relationships.

You need less than 10 to get the business done.

The conversations are going well.

We're deployed in front of these customers right now.

We think our goal selfishly is to have every -- to have access to every patient in the country, if we could.

But we know that might not be realistic, but that's where our goal is.

So we want to open up areas of the country.

So we want to get the big plans knocked, buttoned up early.

So far, so good.

It's a little bit early to sign contracts because we're still a few months from launching our product.

So as we get closer to launch, you could expect us to announce some of these relationships.

But for right now, the conversations are going well.

We're generally happy with them, but I will keep you updated.

Our next question today is coming from Tim Lugo from William Blair.

Congratulations on all the progress of the company over the past year.

I think we all kind of finally remember back when AdComs and Phase III data were kind of the most worrisome things keeping us up at night.

I just am looking at the Q4 guidance.

Can you just describe a little bit more in detail the $4 million to $6 million?

Is this coming from what's expected to be loading at the distributor level?

Is this something that we should kind of build off of or kind of quarter-to-quarter estimates beyond Q4?

I know there's obviously a lot of sampling in this, the one with [South Arena].

So just trying to get my arms around what Q4 and this $4 million to $6 million really represents.

Well, thanks, Tim.

And I agree with you that some of the events we've been through as a company -- I guess, what doesn't -- made us stronger, I guess.

But you're right, with some of the events we've been through now, we're now facing this.

But I'll ask Dennis to comment to your question, okay, and give you a little bit more detail on the guidance.

Yes.

Tim, it is not script-based at that point.

We'll be loading the channel to make sure we have product available, and the goal is to do that early in Q4, and we'll be recognizing revenue accordingly.

But the scripts will follow.

And as you said, we will be doing a fair amount of sampling, we believe, in Q4.

Yes.

So we don't expect, Tim, as we -- we don't expect to see a lot of prescriptions right out of the chute.

We load the channel.

We get the doctors comfortable with the drug and get them to initiate therapy, which more oftentimes involve the samples.

So we'd expect later on to get a better view of demand, if you will.

So -- but I wouldn't straight-line off of that.

I think it's just a load.

Fair enough.

And can you give -- maybe, Al, can you give us some idea about what's occurring in the contraception market outside of the oral dose forms?

I know it seems like the generic patch on the market has gained some market share over other alternative dosage forms in the past, let's call it, a year or so.

Can you just maybe explain some of the underlying market dynamics which may be occurring and which you'll launch into?

Sure.

The pill business is still the most prevalent business.

But you do see the nonoral segment which, for us, is the one we directly compete against is the other patch, and the ring kind of nipping away at some share, Tim.

So they -- it's not a big revolution.

It's an evolution.

They take a little bit of share here and then because they're promoted, so they're getting some business.

I think the ACA, in my own opinion, gives them -- everything is free, right?

So a woman, she's getting a copy of 0. So there's a little bit of, we think, a consumer pull there, saying why not ask for a brand in those cases.

IUDs continue to be a method that's emerging.

However, we've heard a little bit, based on the COVID situation, that women are having difficult time getting in front of doctors to have IUDs, the insertion.

So that's something we got to watch with the new COVID world.

So I -- we see a little bit of share coming, Tim.

But I don't think it's that big.

I think the market still -- our market research still says that us coming out with a low dose or a lower dose patch is still very relevant, that more than likely, we're going to take share from probably everybody.

But most likely, if we're going to achieve the 5% to 8% share, we're not going to get it off those other products.

It's more than likely going to come off women that were [heading themselves] to the pill.

So it's evolved a little bit since the -- probably since the last time we dove in.

A little bit stronger price share, a little bit of evolution of share.

But there seems to be a trend away from dailies.

I think that's something that we see across all the products.

So that's why we're excited to be bringing on our product.

That makes perfect sense.

And maybe, Al, can you just describe kind of the remaining risk around manufacturing after this pre-validation batch is produced and behind us?

Yes, Tim.

I mean you've been through a lot.

I guess a number of you have.

I mean, you're right.

You go through a CRL and AdComs.

And if things were out of the woods, and your plant is sitting in Michigan, and you're watching TV at night, watching the state under a lot of tension right now.

So Corium, as we know, I think everybody remembers, is in Grand Rapids.

So the Corium organization was able to continue to deploy people.

So they got people in their plant making our product.

I mean we made that pre-validation batch the middle -- with COVID going on.

So we didn't miss a beat.

We've missed maybe a couple of days in our plan.

But -- so we've successfully completed the batch, meaning we made it, which is the first thing.

It's the first time we made an end product with all the serialization and everything on the line.

So that's exciting for us.

We've made batches before, but never from soup to nuts, including in the defaulting cards.

This is a trade product, if you will, by any other standards.

But it's a big experiment.

So it gives us the confidence to keep going forward and make the final validation.

So we expect to get the final QA results.

We don't expect any surprises.

We think we understand this manufacturing.

So the interim results, we test along the way.

We call it work in process.

It looks good.

So it gives us the confidence to roll the dice and make the 3 big batches.

And those batches, as we communicated, we'll be able to sell them or use them as samples.

So we're moving forward, Tim, in the middle of it all.

But it's a little bit nerve-racking at night watching that your plant is sitting in Michigan as if I had nothing else to worry about.

We're getting there though, Tim.

we're getting there.

Our next question today is coming from Leland Gershell from Oppenheimer.

Al, a couple of questions from me.

First, just want to ask as we think about modeling expenses through the remainder of the year, as you hire your sales organization kind of through 2Q with sales managers and then the reps in 3Q.

Can you kind of just give us maybe just a rough breakdown of what those different fractions of people look like in terms of numbers?

And also, I have a question about, with the ACA guidelines to have at least one product in the category, well, at no cost, yet, of course, it's another patch.

Yet, there are advantages to your patch versus what is a much older patch.

I wanted to drill into maybe what the arguments that you could make to payers for preferential reimbursement of Twirla over the other one.

And also, if you could maybe help us understand, on a state-by-state basis, across the country, what sort of the proportion of the country you see is a lower-hanging fruit in terms of state mandates versus those that may be more difficult to get reimbursement for?

Yes.

So let me -- I'll do the second 2 and I'll let Dennis help me with the first one.

So I'll take the second 2. And with the first one, generally, we see sales managers roughly having like a 10:1 ratio.

So if we hire 50 reps, we need 5 sales managers.

Something in that range.

We're not done, but directionally, that's what we're looking at.

And Dennis will guide you through the expenses in a little bit more detail.

So with the -- let's go to question 2, which is the differentiation in the way the Act works.

The plan is required to have 1 -- our knowledge of the plan or our interpretation of the federal mandate is they require to have 1 dosage form or 1 product, I'll call it, for every 1 of those 18 forms.

So in the case of the patches, they require to have at least 1. So in our -- when we come out specifically, they can leave the Mylan product on formulary, add us side-by-side, which we believe is -- we'll take that because we believe we have a good product, and we're going to support it.

So we could be parity.

They could leave that on there and leave us off, or they could do the reverse, put us on and leave them off.

Our philosophy is we feel like we just want to be on equal ground.

So we want to be on there so a woman gets a 0 copay.

If we have to co-habitate on that rung with them, we're fine with that.

So that's what we're in the discussions with.

So -- but again, they're required to have 1, they could have 2. So either -- 2 out of 3 outcomes is fine by me.

So in the individual state mandates, we're still digging in and understanding them.

There's some overlays that sit on top of this, and California is the one we look at a lot that says, hey, in brand -- all branded products, our interpretation are supposed to have no copay.

So it's a bit of an overlay on the federal system.

And we're trying to see does that really work with -- when we talk to the plans, when you read the plan guidelines.

Some of them say, well, hey, we just let all brands on nationally.

So all indicators seem to say to us that we should get pretty decent reimbursement at that.

But the work is being done right now.

But so far, so good.

But we think we have a compelling value proposition, meaning value, the clinical differentiations, product, the support we're going to give.

We have a patch replacement program and other ancillary support that this is -- and we believe our technology, this interesting technology, brings something to the table.

So we're willing to put all that to bear and put together a good value proposition, both clinically and for -- especially for the plans.

Dennis, do you want to walk him through the guidance of how to think about the expenses?

Like maybe just frame out the total expenses and...

Yes.

Well, as we said, we believe our total OpEx will be in the $52 million to $56 million range for the year.

And obviously, Q4 will be the heavy quarter from an OpEx standpoint.

I would think something in the $15 million to $18 million in that time frame.

And then coming back, it will be just rescaling up, let's say, as we go quarter-to-quarter.

So we're not -- we don't have reps now.

We won't have them probably until August, September.

So it won't -- we won't get the big expenses until we get later in the year and maybe even a little later than that depending on timing.

I mean you see our first [Q3] results, Leland.

I mean we had a good quarter.

We think we've made the right investments.

But if you look at what Dennis is saying he's going to spend for the year, you can see there's a pretty big growth coming through the second, third, and particularly, the fourth.

I think the whole annualization of it is in the fourth, like Dennis is guiding.

Right.

But I think I would expect in the third quarter, you're going to see a pretty significant bump, but it's all going to kind of, if you will, the biggest part of the spend will come in the fourth quarter in line with when we're deploying.

Our next question today is coming from Oren Livnat from H.C. Wainwright.

I think there's some left.

I guess we haven't really had the conversation regarding managed care with regard -- I guess regarding your differentiation from Xulane.

You said in the last question that you want to be at least at parity with them.

So do you think in your conversations with managed care that they are going to see differentiation with your product in Xulane?

I mean obviously, you're a lower dose.

But how is that conversation resonating with them?

And does the BMI restriction factor to that conversation at all?

And I do have a follow-up.

No, Oren, good question.

I mean I think what we fall back on is there are still scientists, there are still physicians, there are still pharmacists that make up the P&T committees of these organizations.

When we test our value proposition, our differentiation with physicians and the doctors we talk to, they see the difference, right?

They see the meaningful difference.

So we would expect that to carry the day also there.

I mean it's -- our Skinfusion, the design of our product is relevant.

Our support of the product is relevant.

Our clinical differentiation, the lower dose of estrogen is relevant as compared to them.

So we think we have a good story.

And so far, it's tracking really well.

But to answer your question, yes, we would expect it.

We would expect to do that.

We have pretty high aspirations of this product.

We think we deserve at least parity, if not better, but parity is okay.

Functionally, the woman gets the cost of the product for free.

So we will take our game to physicians and talk to them about this differentiation and eventually consumers.

So -- but we want to be mindful of the consumer.

We don't want her to pay more than 0 if we could.

But so far, so good.

Okay.

And I guess that does beg the question of pricing and/or copay support, I guess you have to work tradeoffs there.

I mean are you willing to buy consumers all down to 0 on the copay end rather than the reimbursement side?

Or do you think it's important to pay upfront to get the proper tiering to be as frictionless as possible with managed care?

Tough questions.

I mean it's going to come down to the math, Oren.

So we prefer 0 copays.

That's still obvious.

I mean are we willing to work with managed care to do that?

Sure, we would.

But if we can't get that, would we use a copay card?

Yes.

Will we buy it down to 0?

That's a tough one for me right now.

Don't know yet.

But we -- but it's going to be a sticker shock for the consumer, right?

You're trying to compete with 0 versus, say, $50 or $75.

I mean that's what they could be looking at.

That's a big buy down.

So we don't -- we'd have to understand what the coinsurance or the co-traveling copay would be to make that decision.

And we don't -- we're not deep enough along to buying that.

But in general, we would say we're willing to use copay cards if we need to, but not preferred.

That's not a win in our minds.

But if we're in good discussions with the plan and we're trending to getting on formulary, could a copay card be a bridge to get you to formulary?

Sure.

Then I'm -- but if it's a permanent loss, then we've got to think hard about that.

It's all in the math.

Okay.

If I could move on to just the actual commercial side.

On the commercial side, you did mention this patch replacement program, which is something that has been talking about for years.

The world has changed, I guess, since we first started these conversations.

And I'm curious if when -- you're talking about avoiding or not needing another prescription from their doctor.

Is it safe to assume we're thinking some sort of like bespoke telemedicine solution that patients can use?

And if that is possible under the regulatory framework today, is there anything stopping you from using that platform to generate, I guess, originate scripts, à la a Nurx or Hims model?

So the second part of your question is, yes, we're looking at it.

So we've been fascinated with some of the emerging channels.

They're still emerging right now.

There's not a lot of volume going through.

There's a lot of noise, but not a lot of volume, at least that's our first cut.

But this might be the world -- where the world is heading, so it behooves us to continue to have these dialogues.

The first one is the solution we see with the patch replacement.

I mean, right now, if the current patch falls off, their -- the patch replacements, go get another script and managed care pays for it.

That's the solution.

So a lot of times, a woman's got to go back to get a new script or dial in.

We think that's not right.

So what we want to do is offer her a better solution where she calls a number possibly and we service her.

We say, okay, we'll get you a patch.

And we could do that through a specialty pharma organization that's authorized to be a pharmacist in effect.

So we think she wakes up the next day and then there's a patch from us on there.

And we don't have to get a script for that.

We have to verify -- don't get me wrong, we have to verify her, but we can do that through a phone call to her doctor.

We don't need to have her chase down a script.

We can just have the doctor vouch for it.

So -- and then we -- and that's a service that we'll provide the providers and the consumers that really should differentiate us, too.

So we think it's the right thing to do, first and foremost.

It's pretty not that big of a cost for us from a goodwill perspective.

And I think it helps our differentiation against this and other products, and particularly these older products that we'll be competing with.

It just feels like the right thing to do, Oren, especially in what's going on right now in the world.

We even feel stronger about it.

Just if I may, on the, I guess, support side.

Sampling is obviously a big thing.

Are you thinking that it's a more-the-merrier situation with sampling beyond Q4, through all of 2021?

And you just -- at the expense of paid prescriptions, perhaps it's worth it to get the product into people's hands?

Or is that a real fine balancing act you need to strike between revenue and sampling?

I thought I had a good answer for that until COVID because I thought samples were more mainstream.

But in the COVID world, our commercial group talks to me a lot about -- our first issue was, can we even get in front of the doctor?

Right?

We talked about that with Dan's question earlier.

The second question is, will a doctor see patient?

We don't know that.

And will a doctor be able to hand out a sample?

And will the patient take it, a box touched by a doctor?

So I think the sample ratio that we were once thinking is under question.

So we feel that samples are important to launch the product.

But if the samples are a fallback of the old days, Oren, when there was like $25 and $50 copays where the doctor was trying to help the patient out.

They were getting 2 and 3 months.

And yes, well, if the -- what we're hearing from the doctors, if the number's 0, if we're successful at a 0 copay, we want to get her enough drug to get her to pharmacist or to get into the system.

So we're -- I think our guts are telling us our sampling may be a little bit lighter than we originally thought in this category for a lot of reasons.

So again, we're getting our arms around this.

We think sampling -- don't misinterpret that as sampling doesn't play a role.

It does.

But I don't think it's the old-style launch of dumping a bunch of samples and wishing for the best.

I think it's more guided and more targeted than that and more smarter than that.

So I think post-COVID is teaching us that.

And then the question about Nurx.

No sampling comes into that, right?

They just dial in, you get the drug, right?

There's no sample there.

So if you go on a telemedicine platform, I don't -- that's really a tele-pharmacy platform and telemedicine, there's no sampling.

I don't think that's the way it works.

So you just get the drug.

So I think that final mix that we're putting together is going to dictate the number of samples.

So I think samples will play a role, maybe not like they did in the past.

They're a bit necessary, but maybe not as necessary in the quantity perspective as we once thought.

Our next question is coming from Esther Hong from Janney.

So wondering about how to think about Twirla's launch in the event that COVID-19 precautions, restrictions to ebb -- in the event they ebb and flow over the next several quarters.

So how should we think about that?

And then any lessons or tactics learned from companies who launched second quarter of this year or even just to launch in third quarter?

Yes.

Thanks, Esther.

Good questions.

The first one, I mean we have to be always mindful of the risk, right?

I mean we still have a plant manufacturing our drug in Michigan.

So our first risk profile is to say, can we get the drug manufactured?

We believe we're in good shape.

We believe we -- in Michigan, that's viewed as an essential employer.

So we think we're okay.

But I want to alert you to that risk.

That's the first thing on my mind, Esther.

Let's assume the nation's locked down again as it is now.

We want to build a sales force that could adapt, right?

That's what I've learned.

These pharma companies and my peers that didn't anticipate this have reps with no tools, no skills and no tools of having telemarketing KOL meetings, ad boards, tele-detailing.

So they're scrambling right now to get vendors and people like that.

So if we need to go all tele, we're going to be ready.

You should hear that.

We will be ready to launch a national sales force -- or not a national, a sales force that if it needs to be 100% tele, we can do that.

And so we're buying the tools, the training and everything that we'll need.

So that's what I've learned, Esther, that when I talk to my peers that didn't anticipate this, I think it's really important that we build that into our culture.

Now we hope we don't need that.

We hope it's at least partially open or if not regionally open.

So we want to be able to adapt and move.

So what I've learned is if you didn't have these tools and training and the right skills, it's hard to retrofit sales organizations.

So we're going to build into our mindset right out of the chute.

So that's what I've learned.

I spent a long time with other CEOs and commercial leaders.

And the commercial leader we just launched -- we just announced Amy Welsh, came from an organization that built this in ahead of COVID luckily.

So we're really fortunate to have Amy's knowledge of how to do this, that can actually build into our culture from a marketing perspective.

And then Kimberly with the sales side.

So we're looking to learn from this situation because there could be a business interruption down the road for some other reason, right?

It could be a snowstorm.

It could be a power outage.

We want to never be caught with the [bill] of not be able to talk to a doctor, and we don't need to knock on their door to do it.

So that's what I've learned.

So on the telemed, are you able to -- are you going to switch potentially your sales strategy on which doctors respond better to virtual conversations?

Or will you target those doctors first?

Are they more willing to have those conversations?

I guess I'm just trying to understand the sales strategy and if there's anything there.

Yes.

The quick read on the market is, in a business interruption situation like we're going on, I think what we see as all boats rising.

We're hearing and we're seeing doctors more receptive to these tactics than ever because they have time in their day, right?

They're not running from office to office.

So I think it's hard to isolate.

And I'm sure there's people that like it more or like it less.

We want the ability to get to them all if we needed to that way.

And the way we're going to target, Esther, is -- it's interesting.

Our analytics team presented me some data the other day that was striking.

We looked at a practice right near us in New Jersey that had 10 doctors in there, literally.

And the lowest decile doctor, we wouldn't have called on the traditional way because there's an [ad,] there's not much business with that doctor had we targeted the doctor.

When we re-decile that practice, it's one of the biggest practices in New Jersey, and that person that we would have blown off happens to run the practice, right?

So we got to work smarter.

We've got to say, hey, it's our job to call on that practice and all the doctors in there, and we got to know who influences this.

So we're -- I think what we've done is we're going to be a lot smarter at targeting groups or high-volume practices and the doctors in there and be able to use all the tools that we have at our disposal.

Some -- we said let's give the reps the right tools, give them the right hardware, let's give them the right sign-ons, let's give them the right training and let's hire the right profile of rep that can pivot.

We also want them to be able to make an office-based call, like, let's not go too much.

I mean we do see a day that office-based calls will be the predominant part of our call plan.

So they still need to be able to get eyeball-to-eyeball, too, Esther.

So we don't know the world we're going to enter in the fourth quarter.

But we're ready for either world.

We're ready for a complete lockdown or complete opening for some partial patchwork in between.

But we don't see enough in the data.

I'm sure we can figure that out.

There are some doctors that might be more receptive.

We can't see it early on.

It seems like all boats are rising temporarily.

Our final question today is coming from Jack Fernandes from Cambrian Biopharma.

I appreciate the work you're doing.

I had a quick question, and it might be something you don't want to touch upon.

But I know a lot of the shareholder base is really concerned about this overarching strategy to go about this yourselves.

I mean I know you announced the 2 partnerships.

One of them is long term.

It was in the 8-K today.

Particularly curious if you've considered partnering with a larger commercial partner and how you're going to essentially approach future discussions about acquisition.

Sure.

Thanks, Jack.

This is Al again.

We come to work to do what's best for all shareholders.

So I think you'll -- if you get to know us, you'll see that we're open to anything that drives shareholder value.

It's always within our bones.

At this point, we think the way we're doing it is very judicious with the cash.

Are partnering, we are partnering, as you pointed out.

We're not trying to build a massive infrastructure.

We're leveraging on the people's infrastructures to make this efficient as possible.

We're open to partnering.

So that's the world.

I mean -- but right now, we believe the strategy we're executing on is the best approach to build shareholder value.

With that said, we're always glad to listen.

We pride ourselves in being very flexible.

I really believe that what we're doing in the U.S. is the best way we can gain shareholder value.

I don't believe that in Europe, like -- so we would be open to discuss anything anytime in Europe or Latin America.

We want to kind of use the U.S. as our beachhead because that's where the best economics are, but we're delighted to partner in the U.S. We're delighted to sign up with somebody else to give us additional reach and additional coverage.

So we have those discussions, and we continue to have those discussions.

But the path forward, I believe, is the best path is to create shareholder value.

But it's not locked in stone either, Jack.

So it's a situation by situation basis.

We'll -- if some interesting comes along, we'll listen to it.

But we're here to do what's right for you and the shareholders.

And we think we're on the right path, and we're not looking to build an empire of cost, and we're trying to do this efficiently.

Thank you.

We've reached the allotted time for questions.

I'd like to turn the floor back over to management for any further or closing comments.

Great.

Well, thank you, everybody, for dialing in, and thank you, operator.

Let me close the call by reiterating that we're pleased with the company's cash position.

I think you've heard that on the call.

We're pleased with our continued strong execution as we really march forward to launching Twirla in the fourth quarter of this year.

While the COVID pandemic brings us really unprecedented challenges, we remain on pace to achieve this milestone of getting this product in the marketplace.

Having our employees work remotely to ensure their health and safety has not caused any business interruptions, and I hope you've heard that tonight on our call.

We're on a hiring process.

We continue to hire great people in this company.

Our next steps, as you've heard, is to hire and onboard sales managers in this quarter we're in, the calendar quarter of Q2, and bring on the sales force in quarter 3. Additionally, we're ramping up our manufacture with the qualification of our equipment.

There are large-scale commercial equipment there.

It's in the final stages, and we plan on continuing with them in the validation stage.

I'd also like to emphasize that all these activities support -- are supported by a solid balance sheet.

And I reflect back on how important it was to do that pre-COVID.

I must say we caught a little bit of a break there, getting our balance sheet built ahead of the situation.

Having an approved product gives us control of our destiny, so we like that, for the first time.

We're really excited by that opportunity.

As Dennis mentioned, and just to remind you, we'll be hosting an Analyst Day, and we'll be able to get deeper into some of the questions you've asked us in New York on September 21.

We hope to see many of you there.

If you can, personally.

If not, we'll see you virtually.

So we'll be ready there in that situation too to pivot to a live meeting or a virtual meeting.

But in closing, I'd like to thank everyone for joining us on the call today.

And I hope everybody listening is safe and healthy.

I look forward to updating you.

And thanks for listening to our first call, and we're looking forward to keeping you updated.

But thank you, everybody.

And be safe and be well.

Thank you.

Thank you.

That does conclude today's teleconference.

You may disconnect your lines at this time, and have a wonderful day.

We thank you for your participation today.