Agile Therapeutics, Inc. (AGRX) on Q1 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Agile Therapeutics' First Quarter 2021 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.
Matthew Riley: Hello, everyone, and welcome to today's conference call to discuss our first quarter 2021 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 for the future, management's expectations for our future financial and operational performance, our business strategy, our assessment of the combined hormonal contraceptive market, and the potential market share for Twirla among other statements regarding our plans, prospects and expectations.
Alfred Altomari: Thank you very much, Matt. Good afternoon, and welcome everyone to our first quarter 2021 conference call. To kick off the call, I'd like to highlight what we believe are the four most significant takeaways from today's update. Number one, I want to remind everybody we began our initial commercial shipments of Twirla to the wholesalers in late December 2020. As the wholesalers worked down their inventory, we anticipate product revenue will more closely reflect script demand growth at the retail level. Number two, our sales force received their samples also in late December and commence distributing samples to healthcare providers or HCPs in the first quarter of 2021. While samples are not reflected in the total prescriptions or the TRx data, we believe samples often lead to HCPs writing future prescriptions. Number three, we will continue to invest in growing Twirla and expect our operating expenses in the second quarter 2021 to be higher, reflecting increased spending on brand marketing and product sampling. Number four, we are excited about the recent growth in the number of HCP writers and the resulting TRx growth, and we believe the brand is laying the foundation for revenue growth into 2021. To that end, I want to spend our time today walking through Twirla's progress to date, and why we are so encouraged. I will also discuss updates on our marketing efforts to increase awareness of Twirla. Finally, we will provide an update on our financial performance. We're using slides this quarter to guide and supplement today's conversation, and you'll hear me refer to these as we progress through the updates. You can find this presentation on our website.
Dennis Reilly: Thank you, Al, and everyone joining us today. As Al commented, we are excited about the growth potential of our business, and I'd like to provide you with more clarity around the phasing of our growth for this year particularly what we experienced in the first quarter from a financial perspective, a bit more detail on how Twirla's performance has been trending year-to-date, and some general parameters on how to think about our results for the full year. If you're following along in the deck. I'm referring to Slide 8. As Al mentioned we closed out December 2020 with the initial stocking of Twirla. This represented shipments of approximately 6,500 units of Twirla into our wholesalers and resulted in nearly $750,000 in net product sales revenue in the fourth quarter of 2020. Wholesalers needed to work down these inventory levels and as a result, we realized $116,000 in net product sales revenue for the first quarter of 2021. The rate of inventory depletion came broadly in line with our expectation. And we expect that wholesaler restocking will likely be reflected in our second quarter 2021 results. We are encouraged by the progress of the sell-through of inventory for wholesalers into the market, and as Al said, and the momentum we are seeing in prescription growth. We believe now that our wholesalers have less than 30 days inventory on hand based on our current estimated demand levels. Therefore beginning later in the second quarter 2021 and throughout the second half of the year, we anticipate our product sales revenue will track closely to the increasing script demand and wholesaler restocking should more closely reflect retail sales. This aligns with our initial full year expectations for Twirla, which was based on the assumptions that sales growth would increase in 2021 as products samples are worked through, our prescriber base expands, patient awareness of Twirla increases, refills begin to occur and overall, we gain traction in the CHC market.
Operator: . Our first question is from Dan Busby from RBC Capital Markets.
Unidentified Analyst: Great. Hey, guys, this is Steve on for Dan. I've got two, and I'll ask them both upfront, but the first one, I was wondering if you can provide us a little more color on how the launch is progressing and in more particular, what are you hearing from physicians or in patients on the product, any particular push backs you're hearing? But I also think it might be pretty interesting to hear any feedback from maybe older physicians who've had experience with prior contraceptive patches and how they're viewing Twirla here today? So that's the first question, and then the second question is related to, obviously it's early in the launch, but any type of trends you're seeing with patients with regard to age or maybe different types of BMI and along with that you guys recently released some post ad hoc data from the SECURE trial and wondering how that data may help physicians potentially prescribed patients with a BMI between 25 to 35 and then maybe any other type of dynamics we should be thinking about here going forward?
Alfred Altomari: Hey, Steve, this is Al. You packed a big punch in two questions, so let me tell them in the order you asked. To have launch one, so what are we hearing from physicians and patients. So it's interesting. I think the group on the phone knows that we -- so we're hearing great things from physicians and also patients, and equally as important we're not hearing any problems. So I'll just give you an example. We had a patch replacement program set up that made -- if anybody had a problem with one of our patches, they can just call, we'd replace it. I believe as of yesterday we had three phone calls after multiple, multiple thousands of prescriptions and samples. So medical affairs we don't hear many complaints or any other than questions from doctors. So we hear day in and day out rave reviews of our products from both patients and physicians, which is really wonderful. And I think the reason I can point to that quite frankly is what we're seeing is high refill rates. We're seeing our brands getting refills, which is to me surrogate of patients liking the product and staying on the product. So the more we see refills growth, Steve, the more we feel good that we have got and that describes a very healthy brand and then it describes that and I was trying to say that also. So every indicators says that when a patient goes on our drug they like it, and so we hear nothing. Your question about older physicians is a very good one. We do get a lot of questions from older physicians about what makes us different than the other patch either the Ortho Evra patch or sort of current generics of Ortho Evra. So that always comes up, if not our reps proactively bring it up. It's interesting some of the younger physicians don't even that patches are available. So we're re-teaching physicians and all that was really born out in our market research. We expected both those phenomenon, so market satisfaction, patient feedback, physician feedback, everything is green, Steve. So trends, you mentioned ACOG. We're very proud of that paper that we -- was published at ACOG. So what we were able to do was use our SECURE trial to look at that cohort of patients between 25 and 30 BMI to say that we see anything more in there and can we just give more granularity. And I think you could see in the paper, we were quite satisfied with the authors that Twirla is an effective use. We don't get a lot of questions honestly in the field with the limitation of use of 25 to 30. And when we present that the actual upper bound being you can prescribe over 30 as off-label most physicians say thank you. Thank you for telling me the appropriate patients. They really give the company a lot of credit for its trial and then they say look, I'd probably know that other products have that. And I think the group on the phone knows that after we got the product approved the other patches were relabeled also with the weight restriction through 30. So -- and I think as we -- the company stated before, we see more and more products are going to really run into this issue. So from a trending perspective, I think the most important piece of information I can share with the group is that 56% of our prescriptions are coming from new patients that have never been on therapy the best we can see. So that's fantastic. About 25% of the patients have come off birth-control pills. So about 81% of the patients are either new to therapy or to come off the pill and that's exactly in line what we thought about 15% from another patch and the rest is coming from other methods. So the market's responded pretty much the way we've seen everything. We're getting news to our patients, we're getting folks that are tired and frustrated with pills and the market is talking to us that it likes our product. So that's a long answer, Steve, but you gave a complicated question.
Operator: Your next question is from Oren Livnat from HC Wainwright.
Oren Livnat: Can you hear me?
Alfred Altomari: Yes. I can, Oren.
Oren Livnat: Great. Great Okay. It's obviously very early and clearly, we don't have a real representation of underlying demand given samples, but I've been really encouraged to see the last several weeks prescription trends in IQVIA, I mean it might be modest but it looks like the early stage of a parabolic-looking curve, I'm no geometry major, so could you help us understand what sort of coverage are these scripts coming through? Are these -- these represent the Medicaid coverage or they represent your relatively limited commercial coverage at this point or are you perhaps already pushing through or getting some docs to push through prior auths such that this volume, as it increases, should maybe drag other managed care payers to the table to cover you?
Alfred Altomari: Yes. Terrific question, Oren. So we are also very encouraged the last couple of weeks. So I'm not a geometry major either but I like when things point north, that's all I know. So, no, I think that -- I think what I would say in the last couple of weeks what we believe is happening in the data is that we continue to grow, number one, our prescriber base. Number one. Number two, we're getting new prescriptions. New prescriptions are the lifeblood of us in any chronic meds, but any meds in general but also is our refills. Our refills are starting to become very meaningful to our weekly data. I don't want to say it's the floor, but it's nice to know that you're going to -- before even the week starts you're getting some refills from the prior weeks of acquired work. So I think it's an accumulation born of those three things that is generating the momentum and hopefully it's a harbinger of things to come. Hopefully, it's what we tell our team that look, the more docs we get, the more they write, the more new prescriptions we're getting. If they're happy, as Steve just asked me, on the medication they keep going back for more as the business starts moving. And then as we try to educate everybody in the first quarter, we knew, Oren, all along that look, the first 4 to 6 weeks we were just laying down samples. As you could see in the data we put out on Slide 4, there just wasn't much action in refills, and the new prescriptions were just really slow because there was sampling phenomenon. So I think we need to work past that. I can tell you that your last question, I can say without the data perfectly in my head, very little Medicaid business. We -- most of the Medicaid wins we just got happened in April, so we're just starting to get a taste of Medicaid. So it's overwhelmingly commercial payers at least in the first quarter results. The Medicaid businesses is pretty good for us. I mean it's an important part in the category. 1/3 of all patch business roughly or I think you said 25%, I'll say 25% right over my skis of the business was sitting in Medicaid. We couldn't touch it. It just -- we were locked out. So whereas it's nice to see those 20 states open up and Texas coming right behind. These are big markets for us. So we also think that will play into the future uptake, if you will. And to your last question. Look, we're seeing physicians and the plans we have good access to obviously, it's easy but we are seeing physicians step up and you're going to prior off, but they're allowed under the Affordable Care Act to ask for our brand, and they're speaking into it. So we're seeing that and that's where the Sterling organization helps us out, Oren, fight through some of those prior offs, if you will. So we are seeing physicians say, hey, this brand's working. I'm going for it. So now, we'd like to get more coverage and like to pick up more accounts in both the commercial side and Medicaid side but it's nice to start the second quarter of the line pointing North, Oren, in the Medicaid business and the commercial business still clicking along. So I think it's I think it's the series of little things. I wish I could point to one event. And then last thing I would say, like we haven't spent much money in the first quarter unbranded. I think you can tell that in my script. We throttled back. We said let's wait when the market is ready. So all the consumer insights I was mentioning and the extra spending that's imminent in the second quarter, you've not seen the benefit of that yet. So hopefully that will continue our momentum, if you will. I just don't think the market was ready. So we held back on some of our bigger spending on HCPs and branded stuff until the market was a better condition. I wanted to see a bigger beachhead of doctors, so we're ready now.
Oren Livnat: And if I could ask a quick follow-up because obviously you want to -- even though this doesn't translate to revenue yet as you work through inventory and samples, but when we try to think of the run rate that we keep track of as your prescriptions continue to climb, we need to plug in some sort of normalized value per script or net value per script number. So I know it's early but given where you see the scripts are coming from and the contracting that you've put in place in Medicaid, ballpark can you give us any kind of guesstimate what's a normalized run rate?
Alfred Altomari: Yes. I can help you a little bit. I think, Dennis I'll take a shot then you could clarify. What we -- we got some revenue in the first quarter, right so the channel is beginning to working down. I know it's very symbolic, the amount of money we put on the table but it's indicative of towards the end of first quarter the channel was kind of getting more normalized. We would expect by the end of this quarter that we're really on sort of one-for-one basis. So as we sell units, they stock the units, give or take now. So we're very hopeful. So I think the second quarter cleans up the normalization, Oren, if you will. I think the one thing we'd like to point out that I think it's worth and again, I'll go on Slide 4, the cycles. Every time we get a script, we get about 1.3 cycles. So we get more than 1 cycle. So if you think of the value of a script, it's not 159, 75 WAC, it's about 210 or 215, whatever. So the value of a script started becoming important to us. So we'd like to see that cycle dispense number to continue to grow. So I think, Oren -- I think the channel before normalizing second quarter, and I think in third quarter onward, I think that's what Dennis was saying. I don't know Dennis, did I get that right?
Dennis Reilly: Yes, you got it right. I mean it's normalizing now really, I'd say by the end of May. We're shipping pretty close to demand levels. They should all be equaling out.
Operator: Your next question is from Leland Gershell from Oppenheimer.
Leland Gershell: Al and Dennis, thanks very much for the update. Congrats on the progress. Two questions from me. First, on the reimbursement side, it sounds like your progress so far has been good at least as good, if not even though better than what you had, I believe you had kind of given us some soft indications around where you expected to be on reimbursement progress over the initial kind of near 1 to 2 years of the launch period. Have there been any areas where you've had pushback or is it just simply the nature of the process that you've been going through the states and that we could actually be kind of at the majority of covered lives by the end of '21, which I think would be a little bit ahead of prior, and then I have a follow up. Thanks.
Alfred Altomari: Yes, Leland, really good question. I think at this point we think we're chipping away at this. The wins we've got in Medicaid certainly add up a nice bucket of lives. So I think we're being very scrappy and I think looking for every opportunity to make Twirla available for women. Look, the option is still at the PBM level, that's the game changer. We've got one PBM, we've got -- we're in a great position with the two other ones, they're okay. But until we get on a national coverage with those, it's hard to pick up a huge win. But even though the PBMs kind of ruled the roost, Leland, at the high level it's not the individual plans under them. So even though we're not on contract at the national level or the PBM, we're seeing a lot of coverage and availability. And then just to remind everybody on sort of what Oren was asking me under the Affordable Care Act even if we were like all formulary or excluded from formulary, if a physician wants the product, he writes what is called a letter of medical necessity and it's on our website, on our twirla.com website. You could say it is a relatively simple form that says, look I want this patient to get this product. And by the way the Affordable Care Act is designed, the physician is supposed to get their wishes. So this is where kind of hand-to-hand level we're getting these scripts to go through and that's where Sterling will be able to help. They get patients and providers really great service, both of these letters of medical necessity, Oren -- I mean, Leland, and also give the patient some extra handholding if they need them where they also -- and then if the patient wants drugs shipped to them at their home, we'll get to them and ship it anywhere in the country for them. So they get a lot of -- that's a very big value add service. So I think for it -- so we can get the brands to the point that we can get on the national coverage. We're going to keep chipping away at these local wins, if you will. And the GPO agreement last quarter we mentioned to you all, that was another example. So we're swinging the big ones, and we're taking the signals too. But I think we're -- I think what you can expect from us is we're still at it and we can -- we would expect to continue to grow.
Leland Gershell: Thanks. And I know it's still relatively early days, but I'm sure you're learning a lot as you go out with all the different avenues by which you can reach the consumer these days online and in other advertising, just wondering if you could comment at all on kind of where you're seeing the effectiveness of your different campaigns in terms of how much you need to put in terms of the spend and how much you think you're getting out, and how that may affect kind of your decisions for marketing strategy as we get through the rest of the year and beyond?
Alfred Altomari: Yes. Good question. I mean, I think that everybody on the call knows we're big fans of activating consumers. I think we made two strategic decisions that are, I think -- in hindsight I think were the right ones. Number one, we decided to use samples instead of vouchers. So we said let's just get the doctor to write -- use a sample. It slows down the flow of the patients at the pharmacy, if you will, but once they get there we get paid for everything. So I like that. Even though at times sometimes we were considering using like pharmacy vouchers, so we thought it was the right thing to do. So I think that was -- I'm really glad we did that. But then, look, I think for us to spend -- big spend on TV or even radio while it feels good, you get your TV ads. And I was watching TV last night and ad came across for a contraceptive product. I'm like, I'm not the right target. So we just aren't big believers that most of these young women don't even own TVs. So we think the streaming platforms like Spotify, TikTok and all those ones where we could target the branded advertising even is a better spend of the money. We have a higher degree of confidence that's a better target and -- so for us, that's what's exciting and we're seeing some early signs that our early work there is really paying off. I mean, ultimately it's great to say, hey, the consumer saw your ad, we want to see if we're getting patients into the door. And we're starting to hear with our ears and we're starting to do some work on this. The doctors are starting to see patients come in asking for Twirla by name, so they saw the ad and our Twirla website starting to line up with people coming in. So relatively early days, but I think the decisions we made saying, let's spend our money more smartly in digital where we think arrivals are and then we have a much higher chance of activating or either come to our website or even better yet go to a doctor. So I hope the next quarter I'll be able to tell you a little more, but we're full bore now in the second quarter with our -- if you are DT social spending. I don't really know what it's called anymore, but we're going pretty heavy. And also with the physicians, we've held back on some spending in the first quarter and that's why we're signaling the second quarter is getting a little stronger from a spending perspective. Same drill with the healthcare providers. We are, right now, only deploying some of our more aggressive campaigns even to them. We just wanted to give our reps that beachhead to get out there in the first quarter. So we want to see the brand get us lagged on there and then we do, and that's why we're turning it all now. So we like what we see.
Operator: Your next question is from Tim Lugo from William Blair.
Timothy Lugo: And I believe Q4 the 749,000 was mostly stocking, can you just confirm if that's around how much stocking we should expect in Q2 as well, and then looking at the number of HCPs you ended the quarter 850 but I think in your prepared comments, you said you're now about 1,200, 350 in April, so, kind of where do you expect that number to trend throughout the next couple of quarters?
Alfred Altomari: Yes, bigger, Tim, is the number, right? I mean...
Timothy Lugo: Understood.
Alfred Altomari: No, and you're my math guy. Keep me honest. We're picking up about 100 new doctors a week, give or take. Some weeks 90, some weeks 110, but let's say about 100 doctors. That's awesome. That's awesome. They're new writers, hopefully they've been putting samples, and now they're writing scripts. So I think I mentioned it before and the group before and that's an important metric for me. I mean, that's how we grow this business, getting doctors that will get done with the samples and will start writing scripts. So I think that is an important one. Yes, I mean, in the fourth quarter -- Dennis, I'll say it, everything was stocking. I think we had like 10 scripts. I mean it's stocking. So that net sales reported was us filling the wholesaler's shelves, if you will, and you could see that they've worked down it in the first quarter, a lot of it. And they're actually re-buying inventory from us. We posted a small quarter, but it's still good to say in the end of the first quarter that we're saying okay, we worked down the shelves and the product is making its way in the pharmacy and the consumers hand. So, as Dennis mentioned, we're not quite done yet, so we think it will be fully normalized in May, and then from that point on, Tim, it sounds like a one-for-one. Every script you see we should get a sale, give or take. But that's the way it should work and I think we are optimistic that work down the bulk of that and then we should be able to just look at script volume and say, okay that should be, give or take, and less -- and there's some channel that we don't -- that don't report. As you know our GPO agreement doesn't report, but other than that, that should be directionally what you should be seeing later in the second quarter and particularly into the third.
Timothy Lugo: Okay. And looking at the cash burn. I think over $14 million in the quarter with the direct-to-social kind of ramping up, I assume that's going to ramp as well, but I don't quite understand how efficient this is and obviously, a direct-to-social is different than Super Bowl ads.
Alfred Altomari: Yes. So I just want you to walk, Tim, through what you're guiding for the second quarter because the first quarter was light, Tim. So I mean -- because we didn't had a -- we had to buy samples, a few of those from Corium, and then as I mentioned, we didn't do too much in the way of consumer spending. So Dennis, why don't you walk Tim through what -- the reason why we're signaling the second quarter being up?
Dennis Reilly: Yes. I mean, as Tim said, we burned about a little over $14 million net in Q1, the OpEx was $15 million, a little bit right around there. We're going to buy some more samples, we're going to do some more sampling and we're going to also kick up the branded marketing in Q2 as Al said. So we anticipate it could be $18 million to $20 million. Now the offset there is all roads lead to revenue, right. If we continue to start to see the revenue cranking, we should see cash flowing in. It's how fast does the revenue growth is kind of our whole challenge going forward there.
Alfred Altomari: So we think in the third quarter, Tim, that's our goal. I mean our third quarter our revenue line, as Dennis was saying, our margin line should need to work for us right. So that's what we're expecting, so the first quarter we didn't draw up any margin but then it's just insignificant. And second quarter onward, the revenue line's going to work for us. So but we're seeing on the rise, I should say, the sampling costs. I don't know that's where we use a complicated term called lumpy, so some quarters we need to buy more samples, some we don't. So this year...
Dennis Reilly: Yes, we will pay for that.
Timothy Lugo: Understood. Lumpy is a technical term, so I get it.
Operator: Your next question is from Naz Rahman from Maxim Group.
Nazibur Rahman: I want to talk a lot about your pipeline. At this point have you guys decided which asset you guys plan on advancing next and what's the next asset or what's the timeline for potentially moving the asset into the pipeline -- I'm sorry to the clinic.
Alfred Altomari: Yes. I mean we -- On our website we're saying hey, everything's on hold for a while. That it really isn't terribly bad. We are doing work on our pipeline, Naz. We are spending some money. We've activated and we're doing some formulation work and some PK work but we're not spending big clinical dollars. So as far as I'm concerned we have activated our pipeline, but we're just -- we haven't selected our final clinical candidate yet. So our intention is the next couple of quarters to spend a little bit of money, develop them along. We'd like to get some feedback from both. We've done some market research, also I should say with consumers and physicians. So the good news is all of our pipeline seems to be high interest, both from physicians and consumers and Dr. Kroner, our Chief Medical Officer has done great work and has a development plan for each one of them. So I think before we announced our clinical candidate I think we'd like to have a conversation with the FDA, so we understand the read because I can't see us going into the clinic. Even if I do a Phase II possibly at the end of this year or into next year, but we're going to continue. You should see us spending a few bucks sort developing. Paul and his team are activated. They've done more work in the last 3 months than we might have done in 3 years. I mean honestly, I mean they've done some really good work but we still haven't pulled the trigger on uniting the ones to the clinic until we get some PK work under our belt and get a little bit more regulatory feedback.
Nazibur Rahman: You guys don't have a file like another IND right with Twirla approved.
Alfred Altomari: It depends for -- it depends on what one we would do. So like the one, the extended regimen would be a follow on, if you will, for the Twirla NDA. So the progestin-only is a little bit different depending on the way we go with progestin-only, we may have to file another IND. So it really depends on what candidate. But in general, they are generally thought to be line extension but the progestin-only may require a new IND. It's really that different. So that's the work we're still doing right now. But if it's the other two, more than likely they are under the same IND. I mean I'm not a regulatory guy because I would like to take that with a grain of salt, but I think I'm right.
Operator: There are no questions over the phone. Presenters, back to you for closing remarks.
Alfred Altomari: Great. Thank you, operator. So I'd like to close today by saying that we think we have the building blocks in place right now for continued growth, and we believe we're on track near to achieve our near-term goal. We wanted Twirla to be a real serious player in the multi-billion dollar U.S. hormonal contraceptive product. We continue to implement our commercial plan, as you heard in the call. We're going to continue to work on expanding coverage and reimbursement and access for our brands in the United States, and working through all the channels, both on the HCP side and the consumer side and as well as the supply chain to make sure Twirla is available for as many women and many prescribers as we can in United States. So I'd like to thank everybody for joining us on the call. Be well, and we're looking forward to giving you more updates, and maybe down the road, we'll actually see each other some time. So for the meantime be safe and thanks again for dialing in. Thank you.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
