TherapeuticsMD Inc (TXMD) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen, and thank you for joining us for the TherapeuticsMD's Second Quarter 2017 Financial Results Conference Call. Following prepared remarks from the company, we will open the call for questions.

I would now like to turn the call over to the TherapeuticsMD's Director of Investor Relations, David DeLucia. David?

Good afternoon, everyone. Thank you for joining today to discuss our second quarter 2017 financial and business results. This afternoon, TherapeuticsMD issued a press release announcing second quarter 2017 financial results. The press release is available on the company's website, therapeuticsmd.com, in the Investors & Media section. On today's call from TherapeuticsMD are Chief Executive Officer, Robert Finizio; Chief Financial Officer, Daniel Cartwright; Chief Clinical Officer, Dr. Brian Bernick; and Chief Medical Officer, Dr. Sebastian Mirkin.

I would like to remind everyone that certain statements made during this conference call may be forward-looking statements. Such forward-looking statements are based upon current expectations, and there could be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks; some of which are identified in our press release and our annual, quarterly, and other reports filed with the SEC. These forward-looking statements are based on information available to TherapeuticsMD today, and the company assumes no obligation to update statements as circumstances change.

An audio recording and webcast replay for today's conference call will also be available online in the Investors & Media section of the company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 3, 2017.

With that, I'll turn the call over to TherapeuticsMD CEO, Rob Finizio.

Thanks, Dave. Good afternoon, everyone. On today's call, we'll review the following developments in our prepared remarks and then open up for questions-and-answers. Dan will start with a review of our financial results, then I'll provide a regulatory update for TX-004HR. And lastly Dr. Mirkin and Dr. Bernick will provide an update for TX-001HR.

Now, let me turn the call over to Dan.

Thanks, Rob. Second quarter 2017 financial results are included in the press release issued today. Let me summarize a few key points. Net revenue from the company's prescription prenatal vitamin business was approximately $4.3 million for the second quarter 2017 compared with approximately $4.4 million for the second quarter of 2016.

Total operating expenses for the second quarter of 2017 decreased compared to the second quarter of 2016. These changes primarily reflect a decline in clinical trial cost as we completed our Phase 3 trials. R&D expenses during the second quarter of 2017 were approximately $8.7 million compared to approximately $13.8 million during the prior year's quarter. This change is a direct result of the completion of the REPLENISH trial for TX-001HR.

SG&A expenses for the second quarter of 2017 were approximately $14.6 million compared with approximately $10.6 million for the prior year's quarter. This is primarily due to an increase in sales, marketing, regulatory expenditures, and personnel costs to support future commercialization.

Turning to the bottom line, our net loss for the second quarter of 2017 was approximately $19.7 million or $0.10 per basic and diluted share, compared with approximately $21.1 million or $0.11 per basic and diluted share for the second quarter of 2016.

Finally, we finished the second quarter of 2017 with approximately $96.5 million in cash compared with approximately $131.5 million at December 31, 2016. As a reminder, our cash balance at the end of the first quarter of 2017 was approximately $113.5 million, which equates to a cash utilization of approximately $17 million in the second quarter. We believe our strong financial position will allow us to continue to advance both of our late-stage product candidates towards commercialization.

Let me turn the call over to Rob for a regulatory update for TX-004HR.

Thanks, Dan. On June 14, we participated in a Type A meeting with the Division of Bone, Reproductive and Urologic products to discuss the only approvability concern raised in the complete response letter regarding our new drug application for TX-004HR, and that is a lack of long-term safety data.

In this meeting, the FDA acknowledged that, "Through an unintentional oversight, we were not told by the agency during the entirety of our product development to conduct a one-year trial to support the safety of TX-004HR." Furthermore, the FDA acknowledged that they have not seen a safety signal in the data of currently marketed VVA products or in our Phase 3 REJOICE Trial data. Also, we presented additional information that we believe could address this long-term safety concern raised by the FDA and positively affect the status of our NDA.

This information was formally submitted to the agency on July 5, which included the following: Number one, information on what is known as a uterine first pass effect, where currently marketed estrogen products, when placed in the upper third of the vagina, can pass to the endometrium. This is in contrast to our product, which was specifically designed to be placed in the lower third of the vagina where the uterine first pass effect has not been demonstrated to occur, decreasing the likelihood of stimulating the endometrial tissue.

Number two, safety data from a very large observational study of long-term and real-world users of vaginal estrogens. This data is anticipated to be published in a peer-reviewed journal in the near-term.

Number three, a draft protocol for a 12-month post-marketing safety study of TX-004HR. We've recently been informed by the FDA that we will be receiving an Advice Letter within the next week. We expect this letter will acknowledge if the additional data submitted is material enough to reconsider our NDA along with a timeline for that review. If the decision or timeline is unacceptable to us, we reserve the right to pursue the FDA's formal dispute resolution process as an alternative path. We look forward to updating all investors in the very near future.

In conclusion, we believe that the scientific evidence, our clinical trial results, and our unique product design, in conjunction with our compromise to conduct a 12-month post-marketing safety study, will help address the FDA's long-term safety concerns.

I'll now turn the call over to Sebastian to give a clinical update for our second late-stage product candidate, TX-001HR.

Thanks, Rob. In April 2007, we presented positive top-line results for our REPLENISH trial for TX-001HR at the Endocrine Society Annual Meeting. The REPLENISH trial established for the first time that distinct doses of estradiol, in combination with progesterone, demonstrated both endometrial protection as well as statistically and clinically meaningful reduction in the frequency and severity of hot flashes. Both the estradiol 1 milligram progesterone conduit and estradiol 0.5 milligram/progesterone 100 milligram demonstrate a statistically significant and clinically meaningful results across the four core primary efficacy endpoints evaluated.

In addition, endometrial safety was established in a year one study, with an incidence rate of endometrial hyperplasia of 0% across all doses. During this meeting, we also presented secondary endpoints data that show statistical significant improvement in the total and vasomotor domain scores of the MENQOL questionnaire at week 12, and that efficacy was maintained throughout the whole duration of the study. These data will publish in peer-reviewed journals in the very near future.

Furthermore, five abstracts with key data on additional secondary endpoints included in the REPLENISH trial were accepted for oral presentations at the Annual Meeting of the North American Menopause Society in October of this year. This data will include additional MENQOL scores, uterine bleeding rates, quality of life, split outcomes, as well as the effect on metabolic parameters of TX-001HR.

Now, let me turn the call to Dr. Bernick for additional details on 001HR.

Thank you, Dr. Mirkin. We are excited to move forward with our TX-001HR clinical program and look forward to presenting the full REPLENISH clinical trial data at the Annual Meeting of the North American Menopause Society later this year. We currently have our pre-NDA meeting scheduled with the FDA at the end of August and plan to have our NDA filed in the fourth quarter of this year. Should TX-001HR be approved, it would be the first and only FDA approved bio-identical combination of estradiol and progesterone.

We continue to cultivate our relationship with the compounding pharmacy community and, to date, our BIO-IGNITE program has been a resounding success. We continue to develop our relationship with PVPCN to construct appropriate infrastructure for distribution channel into the compounding pharmacy market for our products, if approved. This network is one of the country's largest and most esteemed compounding pharmacy networks, representing over 300 pharmacies and approximately 1.5 million annual prescriptions of compounded estrogen and progesterone that are directly substitutable to TX-001HR. We have also received prescription data from over 400 additional pharmacies representing over 500,000 annual prescriptions of compounded bio-identical estrogen and progesterone that are also directly substitutable to TX-001HR.

And in conclusion, we recognize that women and physicians continue to choose unapproved compounded bio-identical hormones that are not covered by insurance and are cash pay instead of the FDA-approved synthetic hormones that are covered by insurance today. Our company's goal is to give women what they are already demanding for the management of their menopausal symptoms as an FDA approved bio-identical combination product that is covered by insurance. It gives me great pleasure to see our product candidate one step closer to meeting this demand.

We will now open the call for Q&A. Operator?

(Operator Instructions) And our first question comes from the line of Esther Rajavelu from Deutsche Bank.

I have a couple. First, for 01, can you explain what pushed the filing to 4Q versus 3Q? And then I have two more.

Sure. Esther, this is Rob. So, first off, we spend a lot more time post-PDUFA date on 04, which is completely unexpected. And furthermore, we have a pre-NDA meeting with the agency at the end of August. And to make sure we don't have another unintentional oversight, we want to be absolutely positive that -- because the agency, just to be clear, is being very accommodating with 04, spending a lot of time and a lot of routines on this, which we're very happy with. So we want to make sure that we go through everything with them before we filed 01 and don't have any unintentional oversights. So it's a combination of those two.

Got it. And then on the BIO-IGNITE program, can you -- it sounds like you guys are making a lot of good progress there. Can you maybe explain some of the terms of the agreements with the compounders that's not confidential?

Yes, so it really doesn't matter whether it's a normal mom-and-pop retail pharmacy, which most compounders are or a large chain. The discount off of WAC is the same for every pharmacy. The thing we're doing is we're going in and letting these smaller mom-and-pop pharmacies that on this business today know that we're not going to do a lot of the mistakes that previous companies have done and not let them have access to it. I don't know if you saw Makena rollout, horrible; compared to AndroGel, very well done, right?

So we want them to know we're here. We want them to know that this would be FDA approved, proven safe and effective, and since they've lost reimbursement on compounded products, probably more profitable for them. And they are very, very receptive. Everybody wins. Patient wins, physician wins, and the pharmacy wins. So we think it's a real good value proposition.

Okay. And then my last question for 04. I just wanted to clarify what you said, Rob, that in the Advice Letter that you're expecting over the next week, you do expect to know if the new data is material enough to warrant a full FDA review.

Absolutely. So that that is something that is a major catalyst coming here we expect in the next week. So they have taken the time -- the agency has taken the time on our behalf, which we really appreciate, to look at this new data. If they find it material enough to formally review for our application, they will give us a path and timeline forward. If they do not feel that way, they probably will not. And once they review that information, they would allow us to re-file or not re-file, depending on the outcome. So this is a major milestone for this program. We expect in the next week or so, and we really appreciate the agency doing the work for us.

All right. Thank you very much.

And our next question comes from the line of Annabel Samimy with Stifel.

Just on that last point with regard to your discussions with FDA and whether they're going to review the new data or not, did you confirm with them whether this review of this new data was going to be a full review? I mean this is new data that you presented, so is that another six months that they're just going to say, well, we've got new data now, and therefore we have to add another six months? Or can you just confirm that you discussed what the potential timelines of the different outcomes would be?

Annabel, we don't know, and that's what the Advice Letter will give us. So they realize the lack of clarity that they've given the company and the unintentional oversight previously. So what they're trying to do is give us something in writing that we can hang our hat on, which we really, really appreciate. So we will get the go/no-go, whether or not this information, which they're looking at over the past month, is impactful and needs further evaluation here in the next week. If that's the case, we would expect the timeline with it, and then we can certainly answer your question. Right now, if I were to answer, I'd just be guessing.

Okay, so it's not what you thought before, which is like a technical review in possibly two months, and (multiple speakers) --

It could be. No, it could be, Annabel. So let's look at it this way. They're going to need more time because this is a very large study, to review the study information. The first pass I don't think is that significant amount of data, and we expect a timeline for that. At the conclusion of that, my guess is, if they're very comfortable, they would tell us to re-file; and if they're not comfortable, they would tell us not to re-file. And that timeline for the deeper dive into that very large 20-year observational study, as well as some other coordination that they're doing internally, is what we're expecting the go/no-go on and if it's a go with the timeline, okay?

Okay, all right.

So then, once you re-file, Annabel, which is the next step, after they tell you, you're moving forward, once you re-file and they've done their work, then you get what you're saying, class one or class two review. If it's a class one, its two months; if its class two, its six months. And only they can tell you what that will be, all right?

Okay. All right. Then on TX-001, I know that you're trying to be really careful with that one not -- making sure that you're not falling into the same trap with 004. But is there anything that you're doing specifically with that filing that's similar to what you had in VVA? Or is VVA just unique and mutually exclusive, and this should be considered a completely different program altogether?

So the good news is we did a one-year endometrial protection study and there was 0% hyperplasia, as Sebastian just told you, across all the arms. So we used the same sites, which we told you we had no 483s in the previous program 04; same pathologist, same statistician, same CRO, and so on. So we believe the clean review of 04 is a very positive indication for 01. And in addition to that, we did do the one-year endometrial study.

But to your point, we don't want any more unintentional oversights. It's a shock to us, very painful. We know we're going to get through it, and we're very bullish on that, but we just want to be absolutely sure with the agency that, that's not going to be the case again. So when it's filed, it is solid. And we'll get there, absolutely.

Okay, great. And if I can ask one last question on BIO-IGNITE.

Sure.

So you've been talking a lot about the compounding pharmacies that you sort of reached an agreement with already. I think it was -- they covered that 1.5 million, then you identified additional pharmacies that cover about 500,000 prescriptions. Have you reached any agreement with any other compounding pharmacies recently, given that obviously you're in pretty late stages of all your regulatory reviews and all your programs? So where are you in that BIO-IGNITE program? And do you have any kind of targets that you can give us?

Well, so there's a couple things to say. We just -- actually, Joseph Auci was just at a very large compounding meeting, and we do have a number of other leads. It's just we have a good chunk of the pharmacies that are out there. It's not a high priority right now for us. Once 01 is filed and we're ramping up for launch, it will be a much higher priority. And I don't want to over-set the Street's expectations. So we think, for where we are right now in the filing development and what we've announced, it far exceeds the value of our market cap, and I think it's just plenty for now. But I'll tell you, we will be on that like white on rice. We'll get it done, okay?

Okay, great. Thank you.

And our next question comes from the line of Jay Olson with Oppenheimer.

With regards to the large observational study, recognizing that, that was provided to that -- that data was submitted to the FDA independently and you have not seen it, is there anything you can tell us about when we should expect that data to be published?

Yes, thank you for your question. Yes, the observational study is going to be published soon. It's going be published soon. That as much as we can say today.

Okay. And then --

Yes, you can go on the NIH's website, I believe, and look it up and get the same information we have. I think there's more detail there. We just don't want to say that because it gives the impression -- some people might think we've seen the data or know more than they know, and we just don't. We just don't.

Okay, I understand.

All right.

And then, you did mention the possibility of still pursuing the dispute resolution pathway. Is there anything you can tell us about how the timeline for that might look?

Absolutely, Jay.

And also -- and sorry, and also the circumstances under which you might pursue that, sorry.

Yes, I really like the question. So if we don't, let's say, like the timeline in the Advice Letter, we feel we have a very strong case in formal dispute. We really, really do. So if we entered formal dispute -- which we're ready to go, if need be. And we hope that's not the case, but if it is and it's a faster way to get there, we'll do it -- we would file. It takes a week to get accepted. And once it's accepted by the agency, it would start at, what they call, ODE3, which is Office of Drug Evaluation III, and that is where Dr. Beitz is the head of that division.

And she would have a review. She has 30 days. There's a hard stop 30 days, where she would make her decision. From there, if she did not agree with us to do a Phase 4, it will go to the next level up, which is the Office of New Drugs. And that was previously held by Dr. [Jenkins], who recently left, and Dr. Woodcock is the acting director there. And we do not know her personally, but we do know that she is very familiar with estrogens from being the WHI and the primary generics, and the controversy around those milestones. And if she did not agree, it will go to Dr. Gottlieb, and we -- although I have never met him and the company doesn't know him, we have been watching closely his effort to eliminate duplicative studies and what he recently did with Amicus, which we believe is a much, much weaker Phase 3 safety story than ours.

And the question they ask when you go through this process is what is the potential public harm in a Phase 4 study for a lower dose, first non-systemic, only product that is placed in the vagina with no first pass product [doing] Phase 4 where the top seller is 75 times higher. So either this product is not safe to even do a trial, right, or it's very safe to do the trial. It can't be both. It has to be one or the other. And that's the grounds for formal dispute. And we are confident if we go into it, we would come out pretty well. And to answer your question how long, all the way to Dr. Gottlieb would be a 90-day total start to finish, with three stops, 30 days each process, unless we call for a Type A meeting going along. That adds 30 days to it. So we're confident.

Great. Thank you. That's very helpful.

Thank you. Again, if that's needed, Jay.

(Operator Instructions) And our next question comes from the line of Bill Tanner from Cantor Fitzgerald.

Rob, just as it relates to the Advice Letter that you anticipate getting, so the outcomes could be that the FDA is saying we will review the data to see if there's a need for -- or there's an ability to do a Phase 4 study, or we're not going to review the data and we're not going to give you the opportunity to do a Phase 4. I mean, what are -- Phase 4 pre-approval.

Yes.

So if that's it, if they say, let's say they don't say we're not going to review it, you have to do it, let's say they're going to say they will review and they come back with a timeline, why do you not just skip over that and go straight to dispute resolution, or obviously you've got another filing coming before the end of the year? Is there something that you really would not want to expend political capital going that way?

Yes to all of those. But to be clear on the process here, Bill, I'm glad you brought it up because I want this to be really clear for everybody. So the agency had this data submitted on the 5th, and they've reviewed preliminarily, and they know whether or not this would potentially change their view and if they want to evaluate it because it's attractive. Statistically, very few people come out of a Type A meeting and get to resubmit new data. So this Advice Letter will let us know if they believe its material enough to impact and potentially change the course of 04 for approval.

And as you know, statistically, when you resubmit new data and they review it and then want to do a deep dive, which would be the case here, statistically the odds are very, very good for the company. If the timeline comes back because this is not under PDUFA, and it would not be a priority until we re-file and we don't like the timeline, I believe that would be grounds for us to move to dispute. I don't feel we need the new data given what's going on out there today with much higher doses as I've explained; so both are possible outcomes. And I'm glad you brought that question up so I could clarify for everyone.

And then, Rob, why is it that the [AERS] database carry no weight or they wouldn't appear to carry weight? I mean one would think that you've got massive numbers of observations or massive numbers of treatments that presumably have not yielded any observations or many observations. So why would they not feel comfortable relying somewhat on their own data?

Well, we actually asked about that in the meeting, and the agency, as we stated in the script, said that they do not see any public data with the currently marketed products. I think what the agency is looking for is real-world usage over a long period of time. I think what also was new to them is that the lower third of the vagina does not have a first pass effect, and we're uniquely positioned there as the only product that's attribute, as Brian designed it.

So if that answers your question, I think the AERS database is what you're saying it is. It is not to have a safety signal in the data, and I think that's just another supportive reason for us if we have to go to dispute.

And my last question then is, has it come up as there is a theoretical concern that even though 004 is intended for the lower third of the vagina, could be inadvertently placed in the upper third and then perhaps expose a woman something pharmacology or PK that's going to be different than if used appropriately?

No, that wouldn't be the case. In fact, if you look at the products put in the upper third of the vagina, like Vagifem, that did a one-year study, they didn't have any incidence of endometrial hyperplasia or -- enough to pull it off the market. The labeling is appropriate. It warns the use of a progestin and it might be needed. And I think that that's the actual case and point. If these higher dose products are being placed there and we don't have a safety signal on those products, why would a lower dose product that's not placed there, that's non-systemic and is 1/75 or 1/25 of the dose what's out there need this actual data, especially under 505(b)(2).

Got it. Okay. (Multiple speakers) --

It's a real strong case, we believe, we believe.

Yes, all right. Thank you.

And our final question come from the line of Matthew Andrews from Jefferies.

Rob, first one for me. In reviewing the minutes of the June 14th meeting with the agency, are you in agreement with the written contents of those minutes? Is there any discrepancy or disagreement with what the agency reflected to you in writing?

No, not really, not that I'm aware of, none. I got to (multiple speakers) -- I mean I just got to tell you, the agency has been supportive given our situation. They've been really good. They just have. They're working hard to get us what we need. They realize the lack of communication and the oversight. Administration is involved, and we're hoping this thing just moves forward at a timetable with a process that's amicable for both. And I've got to tell you, it's not adversarial at all. It actually feels really good. And if anything, we're building a great relationship for 01, so it just feels good. I'll just be honest with you. They don't have to give an Advice Letter, nor do they for 99.9% of products. So [lucky].

Yes. So on that point, sorry to ask the obvious, but I'm not familiar with that, what an Advice Letter is. I've never heard that term. So if you could perhaps describe it, if there's some sort of guidance document we can look at. And then, second, working with your ex-FDA consultants, is there any precedent case you can point to where a drug's gone through this process, they've gotten an Advice Letter, and it's been approved?

I'm sure we can find some. So it is a formal communication letter, and I don't have much off the top of my head. I believe to this division, there have been some products through dispute that have been approved. I'd also believe there's also been in the agency as of recent, and we'll dig a couple up for you, where new relevant information has come up and it's been filed. And when they take new information into consideration, it's most times very good for the company and the outcome of the company or the sponsor.

But to answer your question, what is a formal Advice Letter, it is a communication letter to kind of fill in the gaps and give you something on record where appropriate. In this case, since there has been a breakdown in the communication with the agency, I think one of their ways to fix it is to give us something in writing with a timeline. And we're hoping that's what we get, and we're going to get it, we believe, we've been told, in the next week, which is a very near-term catalyst. And we will certainly get on the phone and update people as soon as we can.

Great. Thank you.

And no further questions at this time. I would like to turn the call back to Robert Finizio, Chief Executive Officer, for further remarks.

So thank you everyone for joining the call. We look forward to providing a more specific, broader regulatory update in the very near future for TX-004. Until that time, thank you for joining.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. And, everyone, have a great day.