Agile Therapeutics, Inc. (AGRX) on Q1 2022 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Agile Therapeutics’ First Quarter 2022 Financial Results Conference Call. Please note, today's event is being recorded. I would now like to turn the conference over to Matt Riley, Head of Investors Relations.
Matt Riley: Hello, everyone. And welcome to today’s conference call to discuss our first quarter 2022 financial results and corporate update. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations, including statements concerning our financial outlook and financial prospects for the future. Our outlook for the second quarter of 2022, management’s expectations for our future financial and operational performance, including our expectation regarding the growth as well. Our business strategy, and our assessment of the combined hormonal contraceptive market, 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 our filings with the SEC, which are available through the Investor Relations section of our website for information concerning risk factors that may affect the company. We undertake no obligation to update forward-looking statements except as required by law. The information on today’s call is not intended for promotional purposes and not sufficient for prescribing decisions. Joining me on today’s call are Al Altomari, Agile Therapeutics’ Chairman and Chief Executive Officer; and Dennis Reilly, Chief Financial Officer. Following our prepared remarks, we will open the call to your questions. I will now turn the call over to Dennis.
Dennis Reilly: Thank you, Matt. And thank you all for joining us on our call this afternoon. I will review the key areas of our financial performance for first quarter '22 and then provide an update on our cash position and plans to finance the company. I will then hand the call over to Al for an update on our 2022 business plan. In the first quarter of '22 we realized net product sales revenue of 1.8 million, which is near the middle range of our guidance. Our cost of product revenues totaled $1.5 million, which consists of direct and indirect costs related to the manufacturing Twirla sold during the first quarter. We had no charges for obsolescence during the first quarter of '22 and we remain focused on managing our inventory levels to meet the demands of our customers, while avoiding oversupply. Accordingly, we are working closely with Corium, our contract manufacturer and supplier of Twirla to revise the structure and application of the contract minimums for the years 2022 and beyond, under our supply agreement. Our operating expenses were 15.8 million in Q1 2022. Within our guidance of $15.5 million to $16.5 million. We communicated in April 22 and down from the $18.2 million of operating expense from the fourth quarter of 2021. We continue to focus on discipline spending approach to making the right investments to encourage strategic growth. While implementing what we believe to be impactful partnerships and agreements. We plan to continue to optimize our spending by engaged in targeting focus spending in support of growing Twirla, while seeking reductions in other areas of our operations. Based on this plan, we anticipate future 2022 quarterly operating expenses to be lower than those experienced in the first quarter of 2022. For example, our management team has decided to voluntarily forego the annual bonuses for 2021 performance that were awarded in January of 2022, which is estimated to be a result in a savings of approximately $700,000 and that will be used for general corporate purposes. We're examining other areas with our operations that can be reduced in a sensible way that will not compromise our plan to grow Twirla. We closed out the first quarter of 2022 with a net loss of $11.8 million or $3.78 per share, compared to a net loss of $17.1 million or $8 per share for the comparable period in 2021. As of March 31, 2022, we had cash and cash equivalents of $3.7 million compared to $19.1 million of cash and cash equivalents as of December 31, 2021. The decrease in cash on hand in Q1 '22 reflects our working capital burn during the quarter and a $5 million pay down of our debt with Perceptive Advisors in January. Offset by proceeds from a 4.85 million registered direct offering of preferred stock with a single healthcare focused institutional investor. In April of 2022, we added cash of $4.7 million from the sale of our New Jersey net operating cost, for which a receivable was recorded in the first quarter. Financing update, we continue to explore financing options to support the growth of Twirla. As we discussed on last quarter's call our plan to finance the company is focused on three parts. Part one, worked down our debt facility with Perceptive Advisors in exchange for relief on financial coverage. We currently have no plans to further leverage the company and therefore will not add additional funds under our debt facility with Perceptive. In January '22, we paid back $5 million to Perceptive, reducing our debt to $15 million. In the second quarter 2022 we plan to make another payment of 5 million in principle to Perceptive in exchange for further relief. This payment is tied to our ability to raise additional capital. Part 2, regain compliance with NASDAQ. As we have previously reported, we were notified by NASDAQ that we are out of compliance with their minimum bid price requirements. To that purpose, we believe we have taken the necessary steps to regain compliance with the NASDAQ stock market and in which in turn will put us in a better position to finance the company. Part 3, raise additional capital. We've been transparent that we will require additional capital to achieve our goal of being cash flow positive. We acknowledge that the capital markets recently have been unpredictable in general and especially in our sector. Our plan is to remain flexible and continue to evaluate all options available to us to finance the company, including the ATM we recently established, further equity offerings, and various business development and partnership opportunities to accelerate our path profitability. We remain committed to our plan to grow revenue while reducing burn with a goal to shorten the time to become cash flow positive. Al will now provide an update on the business plan designed to help do exactly that. Al, over to you.
Al Altomari: Thank you, Dennis, and thank you everyone for joining us today and continue to follow our story. On the fourth quarter 2021 earnings call, we referenced our belief that in 2021, we began to build momentum for Twirla and we believe we saw that momentum carry into the first quarter of 2022. As we announced on April 14, 2022, our first quarter 2022 prescription data for Twirla, demonstrating strong double-digit growth in all key performance areas. This was the third consecutive quarter where we saw consistent and meaningful growth and we expect to see this trend continue throughout 2022. Additionally, we're encouraged with the growth and momentum we're now seeing in the second quarter 2022. Beginning in the third quarter of 2021, we started to see steady demand growth and we believe that three part business plan we introduced on the fourth quarter call of 2021 is contributing to the continued momentum in the early stages of 2022. I'd like to provide you a brief update on each of these three key initiatives. First, our partnership with Afaxys. As a reminder in January of 2022, we launched our co-promotion partnership with Afaxys through their group purchasing organization, which primarily provide services to non-retail channel. In Afaxys Pharma which has a potential access to over 25,000 accounts, including college and university student health centers and the Planned Parenthood network. During the first quarter of 2022, we focused on initiating and mobilizing the Afaxys partnership, and we believe we're beginning to see the positive results into April and May of 2022. The graph you see here provides insight into the impact that the non-retail channel is starting to have on our business. And we believe Afaxys to drive non retail growth as contributions from this channel continues to ramp throughout 2022. The second component of our plan is to continue to focus on the state of California. As previously highlighted, California has the largest U.S. market for contraceptives, as well as the largest Medicaid program in the United States, with roughly one-third of the existing contraceptive patch market coming from Medicaid. For these reasons, beginning in the first quarter of 2022, we began prioritizing adoption and awareness in the state of California. Thus far, we are pleasantly surprised with the results we're seeing for two reasons. First, we're seeing an uptick in Twirla market share in California, and also an uptick in a Twirla prescribers in California. We believe these results are attributable to our existing sales team amplified by both general and targeted digital media spending. Last initiative in the Twirla direct to consumer commercial on Connected TV, also known as CTV. On the fourth quarter call in 2021, we announced our new patch and play CTV commercial with the objective of prompting patients after doctors that Twirla. At the end of March 2022, we deploy into commercial with a highly targeted, efficient focus on women in our target market of 18 to 24 years old, in the states that have the large market for contraceptive and potentially strong commercial coverage for Twirla. While the commercials only been in the market for a little over one month, the first month data suggests that our targeted consumers are efficiently being exposed to the ad at a frequency of approximately twice per week and that a significant majority of the viewers are not skipping through the ad. For those who are interested in viewing the ad to target demographics, it is available on Twirla's YouTube channel We continue to execute in our plan for 2022 and focus on building upon the momentum we established through 2021 and now into the first quarter of 2022. As a reminder, each of these three truly became activated in the first quarter of 2022 with a CTV commercial launching at the very end of the quarter and we expect each to continue to contribute to our demand throughout 2022. So now let me briefly talk about ACOG. Before we open up the call for Q&A, I want to touch on our recent presentation of Twirla's first year post marketing pharmacovigilance at the 2022 annual clinic and scientific meeting of ACOG that was held in San Diego. For the first year of Twirla launch, we received no reports of venous thromboembolism or VTE, and two reports of serious adverse events or SAEs, which is consistent with the safety profiles that were reported in the secure clinical trial. This was the first ACOG meeting that was live since the pandemic started and we welcome the opportunity to present these data and interact with the contraceptive thought leaders and prescribers in general. I was personally thrilled to be in California, our nation's biggest market for Twirla and I saw firsthand the physicians excited about our product. As a reminder, our cumulative prescriber count grew approximately 26% from the end of the fourth quarter in 2021 to the end of the first quarter in 2022 and we consistently gain roughly 100 new prescribers each week during that period. We believe having the opportunity to present the post marketing data and speak to physicians face to face with prescribers from all around the country will have a positive impact on our prescription growth. In summary, we had another solid first quarter of 2022 evidenced by our growing quarterly prescription data and that we have a good base on which to continue to build a healthy growing brand. Based on the prescription data trends we are now seeing so far in quarter two and the advancement of our Twirla business plan, we currently expect to report a fourth quarter of consecutive growth and strong demand growth for the second quarter of 2022 and provide further proof points that our business plan is now delivering. We also believe that an important part of our plan moving forward to explore all of our strategic options to grow or transform our business. We'd like now to give our covering analysts the opportunity to ask any questions. Operator, you may open the line for Q&A,
Operator: Your first question comes from Oren Livnat at H.C. Wainwright.
Oren Livnat: I have a few. Thanks for that graph on effects, as I'm not sure if that's the first time you show that or not. That's really interesting, you can see that. What it looks like, growing, albeit small school trend to non-retail volume there. And so I have a couple questions. First of all, what kind of economics do you see on that business is substantially different or not from your retail business? And going forward, does that seem like it'll be a consistent business for you, on a week to week or month to month basis? Or should we expect or hope for sort of huge bolus orders like we saw last year early in the launch from ? I'm just curious now we have more formalized relationship with Afaxys if that will be lumpy or steady, a steady grower and then have a couple of follow ups.
Al Altomari: It’s Al. Yes, this is the first time we're putting in public. So I think its next hopefully a couple of dots. First of all, 2nd May of last year when you see that big water, we alluded to that on a call. But if you remember way back when we were talking about it, the prescription data and this is what caused the algorithms and the prescription data and get a little crazy. So we got a big order as you can see in May and that was a kind of a wakeup call for us, it came from a single state, not a Planned Parenthood, it came for state and county organization and bought a lot of products in one day, without Afaxys by the way. That was just call it in, we were delighted to take the order Oren and then you see on an ongoing basis, hopefully you start getting an appreciation that we get a smidgen of it. So we know every month or so without much activity put against it. So we weren't marketing in that channel. We're going to 1D and 2D, we make our products available to state and county organizations, we're going to roughly 340B pricing, so the Medicaid pricing. So some hospitals buy some little businesses buy. And then in January, we announced our relationship, we started going after in earnest with Afaxys. And you see a little bit of a smidgen of a bump, hopefully in March, that we started getting in some orders. A couple Planned Parenthood, but are nothing to your question about how to think about this business is almost like a hospital business. We start saying how many accounts that we have. So these are a couple Planned Parenthood accounts, a couple of state organizations. And I mentioned in my script that we're seeing a lot more on the volume going forward. So I think on this graph, I really want to emphasize that our retail channel, look at the past, look at March, march was a super month for us. And the retail channel, we got to a preview on kind of what this non retail channel -- I will tell you, going forward that April meaningful data exists on both channels were lining up. So we're bullish on our growth going forward. And those channels, you'll see in this channel, the non-retail channel, from pretty big that bought that little deep purple is going to grow substantially in April. So we're just starting to see Afaxys stick in on that to your question about having a data ahead around this. I wish, I could tell you that we see it every week, this is lumpy, it's lumpy, even for us. That sounds come in, they place big orders, some place small orders, we just don't have a steady flow of business yet. So it's even for us, it’s -- we're going to leave and think of as lumpy. So I think the best way we can communicate that to you is this show you kind of the business like we're doing, show you both channels. I think Dennis and Jason's in the room. And we might have to start reporting this separately. So -- but we're not quite there yet. But the economics was great, we make money in this channel, these are profitable description for us. If it comes from a non-GPO customer, they basically get the product that 340B pricing, which is really pretty good. It's about, it's substantial, it's not that big of a discount. So a true facts as GPO customer gets a bigger discount, that we haven't revealed yet. So, but it's pretty substantial, but profitable, I want to emphasize but profitable. We are not in the business of putting on profitable business out there, it's got to have a margin to throw off cash and so we're pretty excited. And as you could see, we start bending that curve on cycles, based on what we're doing. I mean, we get paid for cycles. We talk a lot about TRX and we get paid for cycles. So nice to see cycles is jumping and their nucleus going forward. I mean, it's starting to light up, we had -- we came out of sheets in January, February kind of a little bit slow as all of us did. The market was a little soft and we popped in March, April looks great. And May for I'm seeing is going to be still going. So we think going forward, we were going to grow both these channels, so it's lumpy, we're trying to get our heads around it. When I could figure it out, I'll communicate it to you. But right now we'll face a business.
Oren Livnat: Okay. And focus on California. I'm not sure if I totally understand. Are you, with the concurrent sort of cost consciousness or require cost consciousness you have at the moment, are you exclusively focused on California or just being prioritizing California? Not necessarily other territory.
Al Altomari: Now, our sales -- we're looking at cost across the whole company. I mean, we've been out this for a while, I think we really understand what drives the business from kind of what's important to spend to make an incentive for losing his park, kind of what are the right spend to make. So look we're looking at our Salesforce and saying, we've been added a while, territories aren't productive, meaning they're not making money. They've got to be put on hold. So we're looking at our sales footprint, in general, we're looking at our G&A spend, but in California, California, we have a decent sales footprint. And then is in the room with me right now, double down and e-commerce, we're putting our consumer spend that CTV spent only in five states. We mentioned before California, Texas, Florida, New York, and Illinois. So that's, we're double downing those states so we're not spending our money consumer across the nation for double down. So we're -- California, getting hit with a Salesforce, pretty good footprint, and double down its consumer spend. So we're not exclusive, but we're having an opportunity to have the -- not exclusive.
Oren Livnat: And then just lastly, I’m sorry for taking so much time. Upfront, you clearly are hiding from the resource constraints that you're facing at the moment. And you mentioned that BD or partnership opportunities are clearly something you're looking at, certainly given the current market conditions. So I'm just curious, just philosophically, is everything on the table in terms of buying, selling, merging or is there something specific that you're thinking about, as far as, I mean, as far as specific targets, but just a type of transaction? That would make sense for a company like yours and your current situation?
Al Altomari: Sure. The answer to your first question . So I mean I think the state of the sector and the broader take, would anybody not saying all the tables is probably not been true themselves. So it's all on the table. I mean, clearly, what we're looking to do is to accelerate our revenue and or take down our burn significantly. So when we're ACOG, the room the thing, we talked about, the ways that co-promote with other people. We've got one product sales force, is there an efficient way to do can we lighten the load, so taking down some of the costs and even doesn't have G&A areas, and then also potentially in the marketing areas. So reducing our burn is, and or growing our revenue was mission critical. If there's a strategic move that can happen. We're not afraid of that either. So everything's on the same Oren but we're laser focused on the top line and/or reducing our cost structure ultimately, lighten the requirements of burning money, if you will. So it's all in the table.
Operator: There are no further questions at this time. I would like to turn the call back to Al -- I do apologize – Al Altomari for closing remarks.
Al Altomari: I know we did not too long ago, with our year-end. So -- and we tried to be very descriptive in our press statement. So I like thank everybody for joining us today and we have a little bit of good news that we were able to disclose on our press statement, but we couldn't get in our scripts that's not. We did receive a letter from NASDAQ. Letting us know that we're back again in compliance on the minimum bid price requirement. And that's really important to us. And we also -- that's off the table, as Dennis described in his comments, that was a big part of our plan. So we move forward. So that's a step in the right direction, I would say. Beyond that news, I wanted to reiterate a couple things in today’s call. We currently expect to report a fourth consecutive quarter of demand growth. So we're signaling to you right now that we think the second quarter is strong. We've seen about roughly half for the second quarter. So we'd get obviously the demand data a little bit earlier. So we're really confident that we can deliver to you another strong quarter of growth, which are put up with a year of growth, and our fourth quarter, I think about it as a year of solid growth. And so we're really excited about that, which tells us the good work that Amy and her team doing is really kicking in. So we expect, also Dennis talked about on 2022 quarterly OpEx, we're going to be burning less money and we burned in the first quarter. So we're trying to set the company up that our top-line is growing, and in our OpEx burn and going the other direction. So we think that's a good position to be in. We're proud of that and we're at it. Then the partnership that Oren’s question to me, I think was the right question, the non-retail channel, we are bullish, we're starting to see it wake up. And we're starting to see that it's becoming we think an important part of our business. But we don't want to lose sight of the retail business. The retail business is our core. That's the most profitable business. That's the business we've got to deliver. We think of the Afaxys partnership augmenting, not replacing retail volume. And then we expect data that are larger footprint, there's Oren’s question again, it asked me about the state of California, we think it's a big idea. I mean, it's singularly the biggest market we've got, winning there is important to us, winning in the other big five states that we've identified also is very important to us. So we want to win in those states, it's approximately 550% of the volume those 5% states bring in. And we think, we can leverage the business smartly like that. And we can guide our marketing and our efforts to a very targeted area, that's the beauty of CTV, we could put it where we want it. So based on what we see and what we can control, we believe our strategies work and the Twirla brand is healthy as we described and growing, we're determined on executing our plans that we have in place to keep the brand growing. And that Dennis is -- good hands with Dennis and financing the company. We look forward to giving you future updates on our progress. But we're excited, we feel great coming out of his sheets in '22. Like the first quarter a lot seems like I'm going to like the second quarter even a lot more. And if we can continue to work on our expense structure at the same time, I think we're setting the company up nicely for the following year and where we want to take this company which ultimately is to cash flow positive, as Dennis mentioned his comments. So thanks again. I know these polls are on top of each other, I appreciate you keeping track of our business and good night to everybody.
Operator: This concludes today's call. You may now disconnect.
