Evofem Biosciences Inc (EVFM) 2018 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Evofem Biosciences Conference Call. (Operator Instructions)

I would now like to introduce your host for today's conference, Amy Raskopf. Please begin.

Thank you, Norma. Good morning, everyone. And thanks for joining the Evofem Biosciences Fourth Quarter and Year-End 2018 Financial Results. This is Amy Raskopf, Investor Relations for Evofem.

If you have not already received it, please access the financial results press release issued earlier this morning on our website, evofem.com under Investors. A webcast of today's call is available there as well.

Various statements we make during this call about Evofem's business, strategy and plans are considered forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change overtime. Further information on the factors and risks that could affect our business, financial conditions and results of operations including those mentioned in the forward-looking statements are noted in today's press release as well as Evofem's Annual Report on Form 10-K filed with the SEC, which are available at www.sec.gov.

These forward-looking statements are based on information available to Evofem today, and we assume no obligation to update statements as circumstances change except as required by law.

An audio recording and webcast of today's conference call will be available online from the Investor section of our website. For the benefit of those who maybe listening to the replay or archived webcast, this call was held and recorded on March 1, 2019.

With that, I'll turn the call over to Saundra Pelletier, Evofem's Chief Executive Officer.

Thank you, Amy, and hello, everyone. 2018 was a transformational year for Evofem. We became a public company and we successfully completed a public offering that netted $36 million. We also added long term established institutional investors to our shareholder base as well as analyst coverage from five healthcare equity analysts.

Most importantly, we rapidly advanced Amphora, our hormone free first-in-class multipurpose vaginal pH regulator for birth control and the prevention of certain sexually transmitted infections.

We completed enrollment in the Phase 3 AMPOWER trial of Amphora for prevention of pregnancy ahead of schedule with a final cohort of approximately 1,400 women. We were excited to see that the efficacy result met the pre-specified primary endpoint of this trial and that no serious treatment related adverse events were reported.

Based on these positive topline outcomes, we're confident that Amphora will be an improvable asset. We are working toward a Q2 NDA resubmission and we've initiated pre-commercialization activities to enable a successful product launch in early 2020.

The time is right for Amphora. Many women are dissatisfied with currently available birth control options. In the United States today, there are 16.5 million women who are not using contraceptive methods, but do not want to get pregnant including women who cannot or will not use hormonal therapy.

Additionally, we expect Amphora will appeal to women who are currently using hormonal contraception but are concerned about the side-effects or the long-term impact of hormones and they would welcome a hormone free method.

We're also working to expand the Amphora value proposition beyond the estimated $1.2 billion U.S. market opportunity. With IQVIA, who is the merged company of IMS and Quintiles as our representative in these transactions, we recently committed and completed an ex-U.S. market assessment. This identified very attractive opportunities in multiple regions including the EU and Russia and the Asia Pacific region. These markets are valued at $1.1 billion and $1.4 billion respectively and they represent important non-dilutive funding opportunities for Evofem.

Currently, we're in discussions with potential marketing partners in Asia Pacific. We intend to initiate the process for the EU in the second quarter with both processes expected to be completed in the second half of 2019.

I also want to bring your attention to a new report from GlobalData, which is an independent third-party research firm. It projects the global female contraceptive market will grow from $6.3 billion in 2017 to $8.2 billion in 2027 with the majority of the sales coming from the United States. The report highlights Amphora, the only hormone free new product entry that was included in the report as a critical growth driver in the market. It also discusses the serious side effects of currently marketed products, which is a key reason that women discontinue using birth control.

The author opine that Amphora will fill an important unmet need and shape the contraceptive space, and that our MVP-R candidate and its dual method quote, make Amphora a very desirable form of contraception.

Additionally, findings from a recent survey conducted amongst 1,024 U.S. healthcare providers revealed that Amphora if approved would be their second most commonly prescribed birth control just behind The Pill. This further validates the significant unmet need that currently exists in the market for women who are simply ready to say no to hormones.

We also continue to make very good progress with AMPREVENCE, the Phase 2b trial evaluating Amphora with the prevention of chlamydia and gonorrhea in women. Enrollment is more than 90% complete and we continue to expect top-line study data at the end of this year. Assuming positive results, we will conduct a single Phase 3 study and submit an sNDA to expand the Amphora label to include the prevention of chlamydia.

So, with that, I will now turn the call over to our CFO, Jay File.

Thank you, Saundra, and good morning, everyone. For the three months ended December 31, 2018, Research and Development costs were $9.8 million versus $11.2 million in the prior year quarter. The $1.4 million decrease was driven mainly by lower clinical trial costs reflecting completion of the Phase 3 AMPOWER study in early November 2018. This was partly offset by a $200,000 increase in non-cash stock-based compensation associated with stock-based grant awards granted earlier in 2018.

General and administrative costs were $5.2 million in the fourth quarter of 2018 versus $4.1 million in the prior year quarter. The increase was mainly due to a $1.3 million increase in non-cash-based compensation associated with stock-based awards granted earlier in 2018, a $600,000 increase in costs related to public company operations as well as various pre-commercialization activities in early prep for our planned launch of Amphora in early 2020. And a $500,000 increase in salaries and bonus expense from headcount growth since Q4 of 2017. These increases were partially offset by a $1.1 million decrease in professional fees related to legal, audit and taxes.

Total other expense was not significant for the fourth quarter of 2018, which compares to $4.1 million in the prior year quarter which included non-cash losses associated with our Series D preferred stock that converted to common stock at the close of our reverse merger in January 2018.

As a result, net loss attributable to common stockholders was $15 million or a loss of $0.58 per share for the three months ended December 31, 2018 compared to a net loss of $20.7 million or $10.55 per share for the prior year quarter. Unrestricted cash was $1.3 million at December 31, 2018 versus $12.1 million at September 30, 2018.

Since year-end, we added an additional $6.3 million to our balance sheet from the exercise of approximately $2.4 million warrants by institutional holders. As part of this transaction, we issued these warrant holders approximately $1.2 million of reload warrants at the strike price of $5.20. We expect our quarterly use of cash will increase an average between $15 million and $17 million per quarter during 2019.

In the first half of the year, operating expense will be more heavily weighted in research and development as we complete and resubmit the Amphora NDA for prevention of pregnancy and complete the Phase 2b AMPREVENCE study evaluating Amphora for prevention of chlamydia and gonorrhea.

In the second half of the year, expenses will be weighted more heavily toward marketing and pre-commercialization activities to ensure the successful launch of Amphora in early 2020 assuming timely approval. As a result, we will need to raise additional capital to execute on our current business plan.

We continue to evaluate opportunities to further strengthen our balance sheet including several non-dilutive options. These include a potential royalty financing on anticipated future U.S. sales on Amphora and commercialization opportunities for Amphora in ex-U.S. markets as Saundra previously discussed.

With that, I'll turn the call back to Saundra.

Great. Thank you, Jay. We believe 2019 will be one of the most important years in our history and we have great momentum. Again, the time for Amphora is now. Amphora will be the next significant innovation in on-demand women's birth control. It's prime to meet the needs of more than 16.5 million women who are currently not using birth control but they are seeking new options. This presents a company with a very strong commercial opportunity that we expect to address in early 2020.

So with that, I'd like to open the call to questions.

(Operator Instructions) Our first question comes from Randall Stanicky of RBC Capital Markets. Your line is open.

Great. Thanks, guys. Given that marketing is really going to be critical here and effectively building a category and driving awareness, can you maybe talk about the plan to rollout commercially and when do we start to see that ramp and the onboarding of folks? That's number one. Second, when do we get to see any data on sexual satisfaction? And then finally, Sandra, I think I heard you correctly but with respect to partner in the OUS, were you indicating that you expect to announce deals for Asia and the EU in the back half of this year? Thanks.

Perfect. Thank you, Randall. So, Russ, will you start with the commercial question and then I'll jump in at the end.

Sure, I would love to. So from a commercial perspective, our intention would be to start ramping up with the hiring, first of all, of our sales managers that will happen summer months so that we're prepared when we come into the fall to start the process of hiring our sales force.

The sales force we put into place in order to be able to adequately bring them up to speed on the training necessary to sell to a non-hormonal category, which as Saundra already mentioned, will be new to the marketplace. So that will be in place in time to start training in the mid-months of November through December with an anticipated commercial launch early in 2020.

We then will, Randall, move to a place where we recognize how important direct-to-consumer advertising is within this category. I think I read a statistic at one point that somewhere in the neighborhood of 90% of the time when a woman requests a certain contraception that she does in fact receive that one.

So we will move to direct-to-consumer advertising six to nine months post launch recognizing that the HCP audience needs to first be adequately prepared to receive those women who we drive into their offices to request Amphora by assuring that they know both the counseling, how to use the product appropriately, and how to determine which women are appropriate for an on-demand method.

So that would begin either in the months of June, somewhere between June and say September depending on where we feel like we're out at that juncture time in terms preparing the marketplace.

We will put in to place the managed care consultants that will start calling on managed care early in the second quarter as well as are our MSL or our medical scientific liaisons, who will also begin to speak with KOLs and with medical director pharmacy benefit managers. So that in a broad spectrum is the timeline and that series of hirings that will take place to support the commercial launch.

And then Russ sits here in Asia now really focusing on our ex-U.S. partnership, do you want to address Randall's question about the timing of announcing partnerships?

Yes, I would love to. So as Saundra said, I am actually in Asia. I've been meeting with some of those partners or those potential partners that we have narrowed it down to with our partner IQVIA here in Asia and we would anticipate that we'll be in a position to get to some binding bids by those companies that are left in the process sometime by the end of the month of March and then that will allow the process to begin to unfold around accepting one of those binding bids and moving towards the contract negotiation necessary and so our anticipation is where we're trying to have that completed by the month of June, recognizing it takes a few months typically in terms of the legal negotiations to go back and forth.

Likewise, we will kick off in the -- in March or the first part of April the European as is referred to by our partners IQVIA, the beauty contests, in other words those companies who have indicated their interest in being a part of that process, have to submit their letter of interest and then we will kick off that process of interviewing and talking to them to narrow it down to those who we will put into the mix. And as I said, that will begin in earnest at the end of this month or the first part of April with our intention to be in a place whereby midsummer we have actually put that that contract into place and make an agreement on that.

So those would be the first two pieces that we actually already have our timeline defined for. And then for Latin America, where we're going to kick off that timeline soon. We don't have the details specifically at this point to give, but we would anticipate that we'll have that done as well by the end of the year.

And Russ, these would be presumably upfront payment and royalty type arrangements? And are you seeing good early demand as you have some of these conversations?

Yes, that's a correct assumption. We are, we are actually seeing some fairly aggressive bidding, if you will. I mean they don't know as individual partners who is in and who is out, but we're seeing those that are really expressing the interest being willing to put what in today's terms I think would be considered a reasonably nice up front with some pretty substantial milestones and then royalties that are attached to that through the length of the contract out 10 to 15 years as is being discussed right now.

So no, we feel pretty confident that those players that are still on the table that want to be a piece of this are going to give us upfront that represents the value that it's worth. And then along with that the milestones.

And then the other thing, just to be keep in mind as we look at what the value of that opportunity is, is they've also can you know understand that there are a few regions that will require some additional studies to be done in those regions and their commitment is to conduct those studies as well, so that in essence is additional payment that is being made on their part towards the commercialization of the brand.

And then, finally to Randall's question, Kelly, will you address sexual satisfaction and where we are in the data?

Yes. So unfortunately, we're not in a position to disclose any detailed results additionally from the trial other than what we've really thus far from top-line data at this time. But we do look forward to sharing that in due course. We are in the process of putting together abstracts and publications for this year and we will be presenting in peer-reviewed settings in the third quarter of this year.

Thank you. The next question comes from Leland Gershell of Oppenheimer. Your line is open.

Thanks. Good morning. Thanks for taking my question. Wanted to ask a couple of questions. First, if you could discuss what the regulatory status of Amphora would be in ex-U.S. regions, at least in some of the major regions that you're contemplating. Also, if you could if you could discuss the -- you mentioned that the survey that you had quoted 1,024 providers, was that done by -- was that published or was it a proprietary survey? I want to know when the response was that they would use -- the second most commonly use product would be Amphora in a birth control category. And you said just behind The Pill, is the pill meaning oral forms of hormone containing contraceptives or is it all hormone containing? I just want to sort of understand the specificity of that language. Thanks very much.

Thanks, Leland. Let me jump in first. As I've been working -- I'm sorry. Yes, Saundra, I'm sorry. I was just going to say that since I have been working most closely with our potential partners outside the United States, what we've heard pretty much across the board are, there are several jurisdictions or countries that would be willing to typically accept an FDA approval or an EMU approval -- EMA approval. So we anticipate that some of those like Australia, et cetera, would perhaps not require additional studies. At the same time, the recognition on most people's parts are that countries such as China and Japan would most likely require an additional study to be done in those countries to have regulatory approval.

When we've talked to the potential partners in the EU because our first study that was completed had 20% of the subjects that were in Russia and we've already had that scientific advice from some of the boards and the European theater, they've acknowledged that that's probably sufficient for them to have a population that is based upon their population and it would be acceptable from that point of view to likely avoid having to do additional clinical work.

When we've talked to some of the potential partners in the Latin America region that's still again to be decided, the big one there of course is Brazil. And it seems as though some of the progress that's been made over the last three years would indicate that with two pretty strong studies in our favor that we may not have to do any additional work there.

So, I think the overall assessment of the regulatory outlook outside United States is that most places with FDA approval are going to go for us fairly quickly but recognizing that one of the big pieces outside United States, China will undoubtedly require a clinical study to be done there.

Thank you. And also just a question on the survey. If The Pill you meant simply oral forms or all forms of hormone-containing contraceptives, I just wasn't sure what that language really meant.

Yes. So the surveys that we conducted was actually conducted, we commissioned it through a third party called KJT Group and they have done this type of segmentation work probably more than any other market research firm in women's healthcare in the space. So when they looked at across the board in terms of the hormonal aspect, they looked at all forms. So it was not just oral contraception, but it was also the IUDs that are hormonal. It was the ring, the patches, et cetera, as well as those non-hormonal methods like the IUD that's copper, diaphragms and those other methods. So they covered the whole gamut across the board not just your oral contraception.

Thank you. Our next question comes from Yasmeen Rahimi of ROTH Capital Partners. Your line is open.

Good morning, guys. This is Katie An on for Yasmeen today. Thanks for taking my questions. First with your NDA filing in the second quarter, what are the remaining items on your to-do list regarding the submission that you have to complete. And can you speak a little bit more on your post-NDA submission commercialization plans specifically in relation to your current cash position. And I have a follow-up. Thanks.

So I can start with the remaining -- this is Kelly, Chief Medical Officer, and I can start with the remaining items on the submission timeline. So we are recompiling basically -- we are recompiling our submission for the NDA as we speak, putting together all of the modules and so there is a lot of medical writing going on and review processes. And so really it's a matter of compiling all of the documents, having them reviewed, getting the medical writing done and then preparing for publication and submitting to the FDA.

So that time period takes several months. And so that's why we're looking at a Q2 submission now that we have all of the available information that we needed from our confirmatory Phase 3 trial.

And Katie, this is Russ. Can I get you just to clarify for me the last part of that question just to make sure I'm answering it the way that you were asking?

Yes, I just wanted to know a little bit more about your commercialization plans in relation to your current cash position.

Yes. And so from that perspective, I probably would throw it over to Jay just to give you that answer in that regard. We've been -- I think we've got pretty well down to the point where we're almost at a point where I can say we've counted our nickels and dimes, we know exactly what we need to make sure we're successful in terms of a good commercial launch.

And then I'll toss it over to Jay, our Chief Financial Officer, to kind of talk about that from a cash position.

Sure, no problem, Russ. Thanks for that. Yes. So just building on that slightly, obviously, as I mentioned in the call that key to us right now is raising the sufficient capital to fully execute on the pre-commercialization plan. So as Russ mentioned, we are doing targeted spend currently to initiate some pre-commercialization activities, identifying agent of record and things like that. And then upon close of an equity round or alternative financing, we're really going to go full force with moving forward on developing the new marketing plan, payer work, HCP programs and strategies and then obviously later in the year is where Russ have previously mentioned, we'll be bringing on the sales and sales support team so that we are fully ready to go upon NDA approval by the end of the year.

Okay. Thank you. That's very helpful. And my final question is -- regards to the AMPREVENCE study. What would be a clinically meaningful result in -- you're your primary endpoint proportion of patients with at least one infection during the treatment period? I guess in other words, what are the rates of reinfection with the current standard of care?

Right. So the current risk for reinfection, so we purposely for this trial have enrolled women who are at high risk for reinfection because they have had a previous infection the prior 16 weeks, that risk for reinfection is between 25% and 30% during the subsequent six months. And so by enrolling these women at high risk, what we're looking to see is a reduction in that infection rate to 13% compared to placebo. So that's what we've powered the study to look at. So, essentially, a 40% risk reduction in infection.

Thank you. Our next question comes from Ram Selvaraju of H.C. Wainwright. Your line is open.

Hi. Thanks very much for taking my questions. A couple on the sales and marketing first. Maybe you could comment a little bit on the composition of what you project to be the Amphora sales force in terms of the ideal profile of the sales reps you're going to be bringing onboard at that juncture and their background experience and so on and how easy you expect it to be to find such people. And also I was curious about whether you could provide us with some additional color at this time regarding the nature and composition of the direct to consumer advertising campaign. And then I have a couple additional follow ups.

Thanks, Ram. Let me jump in and give you our -- what were our anticipated look like [it] is for the sales force. So right now, we're anticipating 90 reps. We are planning on half of those being employees and the other half being contract sales consultants. And one of the reasons why we made that decision to be quite candid with you is as you bring a new modality into a marketplace, we think that there will be some shifting that goes on over time. Often, as is the case with this type of thing, it could be that West Coast to East Coast has a little stronger and an upfront need for additional sales consultants and then as time goes, it will even itself out across the country into what would be more of a typical footprint that we'd expect. So that that will be sort of, if you will, the makeup.

Also just as a note, I've been doing this for about 25 years and always in women's health care and I've brought with me a team of people who have also been doing this. So, we've had an incredible number of people from the sales side that have already contact us at some point, that have worked with us in the past, that are experienced in women's health that have said when this opportunity comes along, they'd like to be a part of it.

So we really anticipated that while sometimes the contract sales force has less experience, that we will be able to supplement it nicely with our own employees that will be quite experienced in women's health. So there'll be a nice balance across each district and across each geographical area and, as well, we anticipate that we're going to be able to hire nearly 100% of our sales managers that have deep experience in women's healthcare. So with that being the case, we anticipate that our sales force, when we launch, will not be a novice sales force, but it will actually demonstrate a pretty strong strength in this specific category of women's health care.

When we look at the DTC campaign, it is as you suggested, Ram, just a little bit early for us to know exactly where we're going to be. What we do know is this, is that the one thing that is the unique selling proposition or the hook that really brings women to the table and was acknowledged in the market research we did with the 1,024 healthcare providers is that non-hormonal is the missing piece for that 16.5 million women and for the physicians that either are or have in the past been trying to help them find the right solution for themselves.

Every market research we have done has always brought us back to that point. So this will be one of those very clear messages that for a woman who is seeking to have a non-hormonal birth control option, there's finally one available for her to be able to choose that will -- and at that point because we do have a 510(k) clearance as a lubricant. While we may not be in a position where we're yet able to speak to the sexual satisfaction based on the fact that it will only be one study at that point and we may have to have additional studies that that validate it, we will be able to speak to the fact that lubricated properties will add to the benefit and pleasure that's associated with their sexual experience.

So, we're still a ways away from being able to put into testing some of those concepts, but actually [Tim] and the team will be meeting with the vendors next week to start that process of putting that into place and getting a timeline put together for that.

Okay. Thanks, very helpful. And just a couple of small housekeeping items. The reload warrants, could you give me a sense as to what the expiration date of those warrants is and if any of those are a cashless exercise, please?

Yes. Sure, on that. So, they do have -- they carry forward the same terms as the original grant date and those did allow for a cashless exercise and they were a 10-year warrants originally.

Thank you. (Operator Instructions) Our next question comes from [Carl Burns] of [Northern Securities]. Your line is open.

Great. Congratulations on your progress. You provided some visibility with respect to publication of the AMPOWER data and peer-reviewed journals in the third quarter. Can you provide us with any visibility on presentations in upcoming major medical conferences? Thanks.

Yes. And in fact, I what I intended to say was that the major medical conferences that where we would be presenting are in the third quarter. We are also preparing manuscripts for publication, which that timing of when they would actually be published is sort of dependent on the journals themselves. But our key scientific conferences for this year happen in the third quarter and they include the North American Forum on Family Planning and the American Society for Reproductive Medicine. We will also be presenting data at the 2020 American College of OB-GYN? Meeting.

Thank you. Our next question comes from Matthew Lillis of Cantor Fitzgerald. Your line is open.

Thanks for taking questions. I'm curious if you could provide any further color on the ex-U.S. market assessment. Did you find the attraction of the product in those markets similar to what you find in the U.S.? And secondly, given the discussion the early partnership discussions, do you have a feel for when ex-U.S. sales may come to fruition, how far after your U.S. launch could we start to see an impact from that? Thank you.

Thanks, Matt. Appreciate that question. So we did a fair amount of research that we were trying to assess if that 16.5 million women that we saw in the United States were also going to be reproduced outside of the United States and what we can say today is that there are roughly 337 million women, who we call hormone avoiders, that was found with the research that was done in rest of world and then adding that 16.5 million from the United States and that research was done by IQVIA. Of course, we know they own all the secondary data through their -- being IMS, but now the new one as well as the primary market research that they conducted to support that, that data point. So that's a that's really good news for us to be able to learn.

Additionally, what they were able to discover is this that in -- while direct to consumer is not allowed anywhere else in the Asia Pacific region with the exception of New Zealand, which has a very similar process as ours, however the population base is relatively small. What they did find was that social media especially in the APAC, Asia Pacific region, is huge and critically important for decisions that have to do with contraception and health care.

So we do anticipate that while we are not able to see our partners use direct to consumer as we would, they will be able to leverage the social media aspect and talking to one of them that is again a multinational name that is almost a household name, if you will, they were able to say to us how they've effectively been able to drive some of the other products in their portfolio through social media, which gives us a good feel for that.

In terms of how quickly we'll start seeing any revenue start coming in, as I said earlier, there are going to be a -- it'll be a cascade, if you will, of events. Some jurisdictions will allow you to file and be put into the process of approval based on the FDA approval. And so those typically tend to be in the neighborhood of one-year approval processes.

It has been determined in all regions that we're better to wait for the FDA approval rather than putting the filing in now as typically they say you're one step behind. In other words, if we were at a Phase 3, they would put it into Phase 2; for a Phase 4, they'll put us in the Phase 3. So as a result, we think in -- with our partners that will be most effective to wait for the additional time till the end of the year, file, and then roughly about one year later, we will start seeing some of those countries come on.

Those that require clinical trials or have a longer regulatory process as in the event of China could take several years to do, but we -- again, with our partners will begin that process to preparing the dossier as soon as we've got our dossier together for the FDA.

Thank you. And this concludes Q&A portion. I'd like to turn the call back over to Saundra Pelletier for closing comments.

So I'd like to thank all of you for your [various astute] questions and for your ongoing support of Evofem and our mission to develop and provide innovative healthcare solutions that will really empower women to take control of their sexual and reproductive health.

We look forward to seeing many of you at the upcoming equity conferences including the Oppenheimer Healthcare Conference in New York and the ROTH Conference in Laguna. We are participating in the novel contraception and women's health panel in addition to our fireside chat. So, with that, I hope you have a great rest of your day. Thank you again so much.

Ladies and gentlemen, thank you for your participation in today's conference. You may disconnect. Everyone, have a wonderful day.