Agile Therapeutics, Inc. (AGRX) on Q3 2021 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to the Agile Therapeutics’ Third Quarter 2021 Financial Results Conference Call. Please note today’s event is being recorded. I would now like to hand the conference over to Matt Riley, Head of Investors Relations.
Matthew Riley: Hello, everyone. And welcome to today’s conference call to discuss our third 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. Such statements represent our judgment as of today are not promises or guarantees and may involve risks and uncertainties that may cause our 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 questions. I will now turn the call over to Al.
Alfred Altomari: Thank you very much Matt. And thank you all for joining us this afternoon. In our third quarter 2021, we once again saw growth in all key performance areas for Twirla. From the end of quarter two to 2021, end the quarter three 2021 we saw the following. Total cycle to spend grew 61%, total prescriptions for TRxs grew 47%, new prescriptions or anorexics grew 45% and refill grew 86%. We are encouraged by this double-digit growth in our prescription demand, but we are not content. Our goal is to accelerate growth and Twirla brands and reduce our time to profitability. We believe we have the awareness and act of programs in place to execute on our plans and intend to make meaningful investments in marketing help increase demand. I will delve into these initiatives later on this call. First, let me discuss what we believe are the key takeaways on these performance metrics. First, refill growth at 86% is a great sign. Our Head of Marketing, Amy Welsh always reminds us that we believe that the sign to healthy brands, because it tells us women are on Twirla, like Twirla and are stay on the product in turn just gives us the confidence and the longevity of the brand because new patient starts are translating to repeat customers. Second, we want to increase the rate of new prescription growth. When we consider the rate of Twirla prescriptions are being refilled. We believe more new patient starts can lead to more refills and greater overall brand growth. Part of the new prescription equation is also the prescriber count, the prescriber counts grew 63% in the quarter to 3,394 total prescribers and we continue to simply pick up approximately 100 new prescribers in each week. Third, from quarter three, we said Twirla cycles, or retail units are expected to grow between 50% and 56% higher than the retail unit sold in quarter two 2021. We saw retail units actually grow at 61% this quarter. And again, we are pleased to see this growth but are not content, we want more. I would like also to address the guidance provided during quarter three. During the third quarter, we said we expect a quarter three 2021 net sales to be in the range of 1.4 million to 1.6 million. We came in slightly under our guidance as wholesalers reduce their channel inventory by approximating 18. The double-digit growth in prescription demands leads us to believe we have the underlying demand to support the business long-term and we expect to see the wholesale activity reflected in the near future. Dennis will provide some additional commentary on revenues and inventory reserves for the quarter when I hand over the call for him. We need to sell our e-prescription growth, which accelerates the revenue grant and that is our singular focus. We are executed on initiatives that we believe can help accomplish this goal. For this call, I would like to discuss three of these initiatives, telehealth, Medi-Cal and DTC in our influencer program. First telehealth. In the third quarter of 2021, we announced the partnership with Pandia Health a telehealth service provider which is now active. Pandia offers an additional point of access for Twirla in the fast growing channel and represents the first telehealth alliance for our company and our products. We are excited to enter telehealth, as its use and contraceptive care has grown over the past several years, and has come into the spotlight during the COVID-19 pandemic. We always believe telehealth was a priority channel for our target consumer prior to the pandemic and we believe it is even more so now. To that end, we continue to explore additional telehealth partnerships to maximize our footprint in this channel. Because Twirla became available at the very end of the third quarter, we expect to start seeing its contributions to our TRx, as we progress through the fourth quarter of 2021 and into 2022. Second, Medi-Cal as we previously announce to California and Medicaid programs placed Twirla on the preferred drug formulary list effective October 1, 2021. This secured a preferred position for Twirla on the formulary for Medi-Cal and its related programs, which provided significant for Twirla, because Medi-Cal is the largest Medicaid program in the U.S. and we believe roughly one-third of the existing contraceptive patch market comes from Medicaid. Again, this is just one in full effect at the beginning of the fourth quarter 2021 and we expect to start thing its contribution for business as we progress through quarter four of 2021 and into 2022. Thirds DTC and our influencer program. We believe that our DTC advertising programs can perhaps have the biggest impact on NRx growth. We recently activated branded influencer programs to increase awareness of Twirla as birth control options, we encouraged women that are target markets to engage in open conversations about the product. We are focused on leveraging influencers via Instagram and ensuring this program focused towards Twirla through clinic storytelling, which further supported by our paid social amplification to reach even a broader audience. Our influencers include individuals of varying tears from micro to macro, which we believe will allow us to optimize the unique benefits each level influencer offers. We will get our first way of activity in early October and are seeing the type of engagement we envision, not just like an impressions, but also in the comments and conversation. We are pleased to the first wave of influencers and posts. We continue to focus here to reach our target market. We previously the stop our plans for DT advertising, and I’m pleased to announce that Twirla is the first prescription birth control brands to launch branded podcasts on Spotify. Twirla is also the first birth control brands to run branded content across BuzzFeed. leveraging their social handles across Facebook, Instagram and Snapchat. Finally, and importantly, we are partnering with U.S. soccer star Carli Lloyd as a corporate spokesperson. At corporate spokesperson we believe she will help amplify the message of our commitment to women’s health. The partnership really kick starts letters here and throughout 2022. You can expect to see Carli Lloyd promoting Agile’s mission on Instagram and Facebook, where she has a combined two million followers. These are important initiatives which we believe build our business. At the top of the call, I reported we saw growth on all our key brands performance metrics. This is without the contributions of any of the programs, I just mentioned. As we continue to implement these programs, we believe, they will contribute significantly to increased product awareness, uptake and growth acceleration, as we finish 2021 and enter 2022. I also want to review two other announcements for the third quarter that we anticipate having positive impact on our overall business. First, the appointment of Josephine Torrente to our Board of Directors. Josephine is highly experienced regulatory experts, who we believe can contribute to growth of our company through her strategic and on the FDA regulatory process and our experienced evaluating business development opportunities. We believe this will be useful as we evaluate our own pipeline, explore other ways to expand our business. Second, the patient protection, Affordable Care Act, or ACA established an important standard for coverage of contraceptives. Nearly all the commercial and Medicaid coverages are required to cover the full range of female control contraceptives without cost sharing, such as co-insurance, co-payments or deductibles. Despite the ACA protection and the government’s guidance on implementation, women around the country are not getting the contraceptive they need or are prescribed or entitled at no cost. Recently health community leaders, the National Women’s Law Center and the Family Planning Council all urged the Biden Administration to clarify any forced regulations to ensure consumers act to the full range of FDA approved contraceptives. We believe this issue has been an impediment to prescribing any uptake of all new innovative contraceptive products, including Twirla that has been approved by the FDA, since the ACA passes. Kimberly Whaley leads our policy and advocacy and market access for Agile and is closely following the developments for us. We hope to see the Biden Administration address this important issue and ensure all women have access to contraception that has been decided as medically appropriate between the patient and their provider. We believe that we have been able to grow despite this access barrier, and we applaud the congressional chairs for urging enforcement. I will now turn over the call it the Dennis to provide you more clarity about the third quarter from a finance perspective. Dennis, take it over.
Dennis Reilly: Thank you, Al. My goal here is to highlight key financial areas related to our financial performance and our cash position then move over to Q&A so we can answer your questions. In the third quarter of 2021, we have realized net product revenue of 1.3 million on sales. As Al stated, this came in slightly under our guidance as our wholesalers reduced their channel inventory by approximately eight days the equivalent of $115,000 to $160,000 in net sales. In addition, we made some increases on our gross to net revenue allowances. Our cost of product revenue for Q3 2021 was 2.7 million and included a 1.4 million inventory obsolescence charge. This reflects our initial reserve for inventory that is not expected to be sold prior to its shelf life date, which is 12-months prior to expiring. Our operating expenses were 14.4 million in Q3 2021 versus 14.7 million in the same period a year ago. We remain focused on maintaining our discipline spending approach and making the right investments to encourage strategic growth and maximize shareholder value. While implementing what we believe to be impactful partnerships and agreements. We anticipate our quarterly spending for the fourth quarter 2021 to be in the range of $15 million to $18 million with increases reflecting commercial spending on products sample batches, and branded markets. We close out the third quarter of 2021 with a net loss of $16.8 million, or $0.18 per share, compared to net loss of $15.5 million or $0.18 a share for the comparable period in 2020. As of September 30, 2021, we had cash and cash equivalents of $14.7 million compared to $31.1 million of cash and cash equivalents at the end of the second quarter 2021. Most recently, we raised an additional 21.1 million of net proceeds in a public offering. We will require additional capital to achieve our goal profitability. We anticipate that as we accelerate sales growth, our options on revenue will become clearer and allow us to better define the path and timelines profitability. We continue to evaluate all options available to us to finance the Company. We were thrilled to see perceptive advisors once again support our Company in our most recent rates, as well as several other high profile institutions. We currently have no plans to further leverage the Company with debt and pull down additional funds under the perceptive facility. We will continue to explore various business development and partnership opportunities in our quest to accelerate our path to profitability. We are happy to expound on any of these areas discussed during today’s call. And Operator, you can now open up for questions.
Operator: Thank you. Your first question comes from the line of Leland Gershell from Oppenheimer. Please proceed with your question.
Leland Gershell: Hi, good afternoon. thanks for taking my question. Congratulations on the progress, very encouraging to see the 86% rate of refills. A couple of questions for me. Wanted to ask first in terms of the inventory of wholesalers. Dennis, you had mentioned that eight days scaling down just wondering if there is any expectations for any further shifts in inventory in general that should be stable from now on. I also want to ask the respect to the recent initiatives by the BMW, LA and Congress those letters with respect to the ACA coverage, one if you can provide us with any even just qualitative feedback on to what extent Twirla may have had challenges getting covered because of non-compliance on the part of payers, under the ACA guidelines. And also on any outlook on when we may see action being taken, following those letters. Thanks very much.
Alfred Altomari: Thanks Leland. Dennis, do you want to take the first one, and I will take the ACA.
Dennis Reilly: Yes. I mean, we anticipate we are there on the wholesalers. We don’t have control over them in any sense. But we do believe they are running pretty lean now. And so we expect our scripts and ultimately, our cycle sales, which is a month supply to start to match up very closely in Q4, and going forward with actually wholesaler sales. So I would say they are in stage going forward.
Alfred Altomari: Clearly, thank you for your questions. My only comment is, we bought their status. We took a balance in other eight days, which bit surprised us, but it wasn’t Twirla all only and was really they are just contracting. I mean, we have seen it across all the books of business. So I think we are steady state where we thought that before, but we will continue to monitor it. But at this point, I don’t know how much more lower they can go. It is so much just designed in inventory at this point, Dennis, and I would think. So I will take the Affordable Care Act your second comment. So how has it impacted Twirla? So just to re-kind of laid this out for the listeners, there is two parts of the ACA when we talk about compliance. I think everybody knows now that there is 18 forms of contraceptives, famous chart they site, and the plans are required to copy one of every product, including a patch. So that is part A Leland. So I think Part B is the one that we think it is not as well discussed, but what, for doctor, once a woman’s on Twirla. There is a form, as you will see in our websites twirla.com called letter of medical necessity. By law, it is not a prior off. By law, if a doctor says I want this woman on Twirla, the plan to not say no. The decision is up to the doctor, it is not a prior off. It is not like anything else we have seen, it is a very unique aspect. We have seen a lot of denials for Twirla. And a lot of the new brands. So it is just not us. So the insurance companies are basically saying and their PBMs are saying, no, we will just deny it and doctors go away. So that is why we saw sterling drug and people like that and say, no, no, no, that is not how it works. So it just creates a bit of a kind of a headwind, but the doctors mind, that this drug is hard to get across the goal line. Now it is improving a lot. But it is certainly held us back. And the interesting part, if any of you have read these documentations, which I would encourage you, this is not just in the commercial plans. Unfortunately, it is in Medicaid, and also in the government’s own plans, their own books of business and their own employees aren’t getting the access they deserve. So, like I said, we really applaud free organizations for stepping up, and it is the voice of Congress, it is the voice of Women’s Law Center, who has been the person in the courts fighting a lot of these cases over the years about the ACA, and it is the women’s group. So, each one of them spoke with a pretty loud voice as we are that this wasn’t the way the law was intended. So, we need to clarify this again. Again It has been clarified before, and we encourage it necessary to be enforcement, something has got to change. Despite that we are proud to grow. I mean, put up the growth we have done. As you might imagine, very proud of the organization. So when does it get fixed and that is the question, Mr. Reilly asked me all the time. We just don’t know. There was a short turnaround on the congressional letter that was probably too short. So we are aware of some conversations that are going on, at the highest levels. But we expect action. Now the action what it will mean most likely, hopefully they’ll re-clarify all this for the industry, and if necessary take enforcement action. But, we still think we have better days ahead of us on this. It just makes the writing our drugs a lot easier. Ideally, we would love to be on all one of the letters, actually, one, as far as saying, all the brands should be available, every FDA product should be available. Why are we dealing with this chart, why don’t make everybody available for no co-pay, because that really wasn’t the intent of the act. So, that is the home run. So if we can’t get the home run, just to be able to get prescriptions and the doctor’s wishes would certainly be a win for us. I have thank you for your comment about refills. I’m thrilled. It is just speaks to this brand and the stickiness of this brand and women just liking this product. It just makes us feel great. And just give us a beachhead of a volume every week to build off. So it is a nice day.
Leland Gershell: Terrific. Thanks so much, Al and Dennis.
Dennis Reilly: Thank you.
Alfred Altomari: Thanks Leland.
Operator: Thank you. The next question comes from the line of Oren Livnat from H.C. Wainwright. Please proceed with your question.
Oren Livnat: Thanks. I have a few, if you will indulge me. Just quickly on the ACA situation. How relevant is there that, there Agile engineer out there now? I mean, we know that, they are not even living up to their promise probably even covering one of every form under ACA, but even if they were to meet that low bar, do you think, you would still have some challenges getting coverage in that regime, given - and family having grounds that are out there? And then I have a follow-up.
Alfred Altomari: Yes, Oren. Great question. So there is kind of like Part A and Part B. So, the best we can see, people are supposed to make, let’s be specific about a patch either us or Xulane or generic available on the plans, so that someone can save it appears they have done that. So, that is the Part A. So, I think from a compliance perspective and following Act, I think they seem to be in compliant there. The Part B of the act is let’s use a situation that we are not on formulary, Xulane is on the formulary in the zero co-pay. So, we could be on formulary on a non-zero co-pay. We could be, let’s say, $40, $50 co-pay. We are not using the zero or the preferred. So in that case, we can deploy our - that is easy for us to handle. We can deploy some couponing and handle that. But let’s say we are locked out. So, we are off formulary, in that situation, you go to our website, get pulled down that form, the doctor fills it out, and that is - they are suppose to walk, not only the first time, but every time she goes into fill. She is on it, she has got in the system, that is where we are seeing, a lot of the resistance to comply with that part of the Affordable Care Act. So, it's -- that's just again, doctors goes in trouble, fills us out for a woman, she gets not again and they more than likely just want to go back to Xulane. That's the battles we're fighting. But now with that said, contextualized COVID for what we've been through with COVID and this resistance we're getting in some of the plans and just try to put our growth in perspective on that. So I do believe that if these -- nothing else that these letters of medical necessity just go through the system as intended, that they should go through in a very short amount of time. And then the patient by the time she gets the pharmacy should have that drug and then she should be freed up. So that's the way in the simplest form it works.
Oren Livnat: Okay, and then if I can just follow-up on that. You did mention in the quarter gross to nets were up. I see that in sequentially over 2Q, is that simply a reflection of just having to have increased patient assistance utilization in light of the challenges you have just covered, or that also potentially have an actual contracting from some economics that you have worked out to get coverage on the payer side? And in the meantime, when you don’t have coverage, you don’t have ACA compliance, how are you making sure that doctors don’t get frustrated and give up so that they can continue to keep writing it. And patients keep getting in one way or another profitably or otherwise so that down the road you can convert all that into sustainable revenue?
Alfred Altomari: Yes. I will do the second part and Dennis will comment, and you can correct me if I’m wrong on that. The last part of the last question is this simplest way our reps do this, is they just tell about this, just give us a script, transmit the script to Sterling. Sterling are experts at processing those claims. We are seeing a lot more of our business runs through Sterling. So that we just basically call the doc saying, Hey, Doc, like, just send us we will judicate it, we will do the insurance claims. And we will do this letters of medical necessity if we need to. And then the patient has the choice, let’s say everything goes swimmingly and we get the patient across the goal line. What happened or and we could say to the patient or the docs, and we can transition ship the drug for our house or we could ship it through a local CVS. So it is a concierge service in effect to make the doctor’s life easier. So our best reps are the ones that just say hey, Doc, why work with this, just give it to us. Now we know we are on a plan, like an a big area that we have got a lot of great coverage, we shouldn’t have to do that. There are major books of business that we get to say lock in Connecticut Medicaid, it goes through, and Medic-Cal it is going to go through, you don’t need to need to do these gymnastics. So if we could point to big plans, or it is a lot easier just to do it that way. And then I will comment on the gross to net and Dennis correct me if I’m over my skis. We are seeing more of our business running through Medicaid as we would expect us to signal that is an important part of our business. Remember, in the first and second quarter, we didn’t have much Medicaid coverage. So we are seeing Medicaid becoming more part that is a little bite of the apple and then I think the other one is co-pay cards to generally you know are the more risk. We are dealing with co-pays, co-pay utilization has crept up. I think there is a lot of little benefit, I think, I think two headlines that I should remember.
Dennis Reilly: Yes, those are it and the co-pay being the one that kind of came up. We both came up a bit with co-pay even a little bit more this quarter.
Oren Livnat: Can you tell us what the gross to nets are sort of all-in?
Dennis Reilly: We are still in like the low 30s including that 12% from the wholesalers.
Oren Livnat: Okay. Well thanks.
Alfred Altomari: Thanks Oren.
Operator: For the next question, we have now the line of Tim Lugo from William Blair. Please proceed with your question.
Unidentified Analyst: Hi, team. This is John on for Tim. Thanks so much for taking our questions. Just two from us. So first one to say congrats on the new marketing efforts and I was wondering if you could give an update on your previously announced campaigns, such as your efforts on the dating apps. Do you have any updates on how those campaigns are progressing, and you have the insight as to how they have been translating into scripts? And second, on previous calls, you have noted that about half of your patients have been brand new to contraception, about a quarter switches from pills, and the remainder omit. Are those still the trends that you’re seeing? Or is there any indication that next is changing?
Alfred Altomari: No. Thank you for the questions. I mean, no, the mix, basically we have come up with the data hasn’t changed so directionally what you just quoted is still there, about half our business comes from what we believe is a new start. And she could have been on drug before maybe had a baby and be entered, but she looks like a new patient to us and about 25% from the pill. So that is our major source of us. Dating apps just in general, the marketing campaigns were encouraged by what we are seeing, I mean, when we just started having off our spends, I think we mentioned in the second quarter was pretty light spending the DTC in a relative basis. Third quarter is the first time we won at it, for the most part, full bore, at the levels, we thought we should and we still are, first of all, our website light up, which is very encouraging. We are seeing like a 10 fold increase in our store twirla.com. But equally as important or more important, we are seeing prescriptions, one of the things we look at. As we look at where our prescriptions are coming from and we are starting to see prescriptions starting to show up in parts of the country, and that we don’t have reps. So I would love to get my sales. Today, I think it works in harmony, perfect world. If I were starting to see a fair number of business coming from sure pure whitespace, that we have not been in front of before, which is to me an indicator that it is working. So it works better, if we have a rep there. And then the dating app, specifically, every metric that we have seen or we would have expected, because we were buying media. So we are saying we are buying eyeballs. So we are going to buy in through the dating apps. We are off the charts in the execution. So we are just getting more visits more continuity on these apps. That seems to be our highest performing media, on the dating apps, which I know is obvious. But we actually rank and we say it is like buying advertising, when you say I bought advertising and magazines in the old days and what’s one work better. We are actually able to tell, which ones are getting the most traffic and the most pool for the most eyeballs. And that is top list of things to answer if Amy was here, she would say, she’s thrilled with that that idea comes unique. It is perfectly targeted and it is actually outperformed all our metrics. But still early days, I mean, we are still got to see our campaign run a little bit longer. It is only been kind of a few months running at full bore, so outside of that, leave it out there a little longer and see we will see what’s happening and keep it fresh.
Unidentified Analyst: Alright thanks for the update and congrats on the progress.
Alfred Altomari: Thank you.
Operator: Thank you There are no further questions in queue. I will now turn the call back to Al Altomari. Please proceed.
Alfred Altomari: Well, thank you operator. Thanks to Matt and Dennis also for your help on the call. So hopefully you had a couple takeaways tonight. Number one, first and foremost, we need to remind ourselves, we have an approved product that is growing in a very large multi-billion dollar market. We discussed tonight some of the challenges we faced that we pushed through, in particularly with some of the larger challenges that face our company and our brand. But I’m ecstatic with the brand’s performance and the potential of this brand. We have the cash to support our business and we anticipate that as sales grow our optics on revenue, become more and more clearer. So, it will be much easier for us to define our path to profitability, because that is our singular quest in the company to become profitable and sustainable. We believe that these initiatives have been effective, that helps expand Twirla’s access in particular DTC programs that we think are aimed at accelerating our growth. We will continue to explore and implement additional partnerships and keep you updated on those. We continue to look for other opportunities to expand the brand and to expand expense it is reach. There is a lot more of the market that we still think we can get at. So, I’m pleased with the progress. You should expect more progress from us and we will keep you updated on future calls. But, thanks everybody for joining the call tonight and keeping track of us and keeping updated on what is we to hope starting to be a real exciting story. So, thank you all, and everybody have a good night.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
