Q3 2021 Evofem Biosciences Inc Earnings Call
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Thank you for standing by and welcome to the F O Fab Biosciences third quarter 2021 financial results Conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Reminder, today's program is being recorded and now I'd like to introduce your host for today's program can be Roscoe Vice President of Investor Relations. Please go ahead.
Thank you and good afternoon, everyone and welcome to the Elephant in Biosciences results call for the third quarter of 'twenty 'twenty. One if you haven't done so already I encourage you to access the press release, we issued earlier today and the presentation that accompanies this call both of which alright, although some dot com under the investors tab before we begin I would like to remind you that remarks on this call will contain.
Forward looking statements, which are made only as of today November 15, 2021 for a more detailed description of important risk factors that could cause our actual results to differ materially. Please refer to our annual report on Form 10-K, and most recently filed 10-Q with that I'll turn the call over to <unk> CEO Saundra Pelletier. Thank you Amy.
And thank you everyone for joining us today.
Our focus on driving awareness and uptake for vaccines for hormone free birth control enabled us to reach new heights for the fourth consecutive quarter. The substantial growth in Q3 and Q4 to date is being elevated by the House rules DTC campaign, starring Emmy Award, winning actress Eddie Murphy, which we launched in September.
Night as well as the ongoing work of our sales force with the obgyn nurse practitioners and midwives.
More than 19000 prescriptions were filled in Q3, which is a 48% increase from Q2.
Q4 is off to a strong start with a spectacular October.
Monthly total prescription, which jumped to over 7800 and September grew 27% to a new record high in October.
Other metrics and ongoing initiatives in greater detail after our CFO Jay file reviews, the financial results Jay.
Thank you saundra today I'm going to focus on the third quarter of 2021 relative to Q2 since we believe sequential growth is more meaningful at this stage of our corporate development.
Solid growth in ex factory sales effectively drove a 29% increase in gross revenues in Q3.
This was offset by gross to net adjustments most of which were from programs that we put in place to better ensure that cost and coverage are not barriers to getting vaccines are those women, whose plans are not yet covering facts the zero copay. Despite the intent of the affordable Care Act.
Primarily as a result of these G. T N adjustments, we saw a slight decrease in net product sales to $1 7 million for Q3.
Research and development costs were $8 7 million.
194000 from Q2, reflecting higher enrollment in our pivotal phase three trial Abo guard.
Positive outcomes should enable us to expand effects. The label to include two new indications the prevention of chlamydia and gonorrhea in women.
As a reminder, trial costs, where even though 100 are covered through the end of the year by restricted cash in adjuvant and investments last fall.
Selling and marketing costs were $30 5 million up 12% from Q2, due primarily to higher media expenses related to the house rules DTC marketing campaign.
General and administrative costs were $5 million down 23% from Q2, primarily due to reductions in payroll related expenses, including stock based compensation.
As a result total operating expenses were $45 1 million up 5% compared to Q2 and our loss from operations was $43 4 million.
We currently expect fourth quarter operating expenses will be lower than Q3 by several million dollars, primarily driven by a shift in our DTC strategy away from broad awareness factors like TV to digital channels, such as streaming and other social media based approaches.
As we look forward to 2022, we expect to reduce total operating expenses by approximately $50 million.
The key driver will be marketing expenses, which we anticipate will be approximately 50% lower than 2021 levels R&D.
R&D expenses are likely to remain at 2021 levels due to the ongoing Abo guard trial and preparations for the NDA filing.
And we expect G&A will also remained flat.
We plan to provide more guidance for 2022 during our year end 2021 call in March.
At the close of Q3, we had $14 9 million in cash and cash equivalents as well as $9 million in restricted cash from the adjuvant notes available for use this totaled $23 9 million for use in ongoing operations as of September 32021.
In October we raised $10 million in gross proceeds from the sale and issuance of shares of our series B preferred stock to an institutional investor.
We believe our existing capital resources will be sufficient to sustain our planned operations into the first quarter of 2022.
Finally, I wanted to address the notice we received in late August from NASDAQ, but Alessandra noncompliance with Nasdaq's listing standard because we do not currently meet the minimum bid price requirement.
We have until February 21, 2022 to regain compliance and at that time, if the stock is still trading below a dollar we anticipate being able to apply for an additional six month Grace period we.
We have an approved asset that is growing faster than any other recently launched contraceptive brand as well as several near term catalysts that we believe position <unk> for success with <unk>.
Currently expect that we will regain compliance with the listing standard within the allowed time.
And with that I'll turn it back to Sandra Thank you Jay.
Today, Youre going to hear details and tactical information about vaccine both successes and challenges that we are working to overcome I'm going to shed light on some tax issues to help you better understand our strategy and wildly stand undaunted and highly positive about the future of that with them and vaccines.
As Jay mentioned this strong top line growth. We are driving is not currently reflected in our net revenue.
As we discussed on prior calls this is primarily because of a co pay assistance program. We implemented at launch to ensure that cost and coverage are not barriers for any eligible commercial patients to get taxi.
Our co pay programs allows affects the savings card can be seamlessly apply to patient out of pocket costs.
In the absence of these programs not having coverage from insurers will cause a prescription to be denied at the pharmacy, which will result in a call to the prescriber to make another choice. This will result in the loss of not only that prescription and future refills about prescription, but it may also cause the prescriber to refrain from prescribing vaccine in the future.
Because the pharmacy calls take time from both the prescriber and their staff.
It is for these reasons that we implemented co pay assistant programs that ensure we then are able to fill their taxi prescription when they based coverage denials or step edits if.
If we were not using these programs to build our base of users. We believe that our net revenue would be well in line with current analyst consensus.
The reality of the situation is it due to the innovative nature of sexy. There is still work to be done to gain inclusion in the office of women's health birth control Guy until that time, which we believe is soon we are prevented from effectively building, our prescriber base, while optimizing revenue.
What does that mean exactly.
It means that if the opposite women's health maintained a medically accurate birth control guide, we wouldn't have had to make that difficult choice to prioritize building the base of prescribers in fact to users because vaccine would be covered like the affordable care Act mandate since.
It is the only vaginal ph modulator.
The truth is that coverage denials and step at it should not happen under the affordable Care Act.
And in the spirit of the HVA health insurance companies should cover at least one product in each category of contraception at zero co pay.
It's all health insurance companies acted as they should.
Use of our savings program to be dramatically lower and we would stop supporting the prior authorization process with both our time and our money.
Our net revenue and margins would dramatically improve.
But clearly some health insurance companies are acting in their own interest not in the interest of patients.
It will take a bigger power to force them to change. This is why our strategy is of critical importance and I'll come back to this in a few minutes.
The other factor to keep in mind is the health care provider. It takes a great deal of outreach in effort to educate obgyn nurse practitioners and midwives and even more to get them to change their attitudes behaviors and contraceptive prescribing habits sexy.
He is both a clinical and a behavioral cell.
Our sales representatives are working to overcome a deeply ingrained habit. The gold standard mentality. If you will following the norm, meaning the standard practice of prescribing oral contraceptives that are systemic delivery hormones everyday when the reality is women do not have sex every day.
Our reps are doing a fantastic job more than 10000 health care prescribers have written a prescription since launch just over a year ago, and we continue to grow the provider base as well as to work to increase the prescription volume per provider.
The challenge is that the coverage denials step edits and prior authorization letters for P. Eight required by some health insurance company could easily result in prescriber fatigue testing.
This in turn can result in them reverting back to old habits of writing hormonal contraception, because it's easy which puts us back at square one.
Despite how easy the process is some prescriptions are never filled because of the need for a prior authorization letter or P. A to combat that our reps check frequently to asking Tas are getting done and while 60% of the ppas that are submitted get approved by the health insurance company, let me be obvious.
80% of women are being denied access to their contraceptive of choice Sn.
Essentially our reps have to call approach they felt sexy and they explain the simplicity of P. Eight warm when they are needed.
We have observed real demand for <unk> across the United States women everywhere are beyond hormones.
Yes, we can.
Could sacrifice prescription growth, which would improve our gross to net and our net revenue. We did exactly that in Q2, we changed our savings card for six weeks. During this period, many prescriptions not covered on formulary, including those that required a ta were lost.
With that we lost some prescribers and a number of patients who were not able to get back seat the hormone free birth control of their choice.
Halting our programs improve gross to net in Q2, but if we had not started them up again, the negative impact on prescribers and consumers alike would have translated to a business with little chance of long term success. The near term game was not worth it.
So we prioritize access to <unk> and the bottom line with the expectation of improvement following governmental action on the ACI.
We are successfully building a strong base of healthcare providers, writing the product and dramatically growing the number of women using sexy more than 19000 prescriptions were filled in Q3 alone and we exceeded 10000 Trs is for the month of October.
Our sales force efforts are dovetailing with rising consumer brand awareness, which climbed to 14% in September after just three weeks at the house real campaign, which we launched on September nine with our celebrity Ambassador the Fabulous Andy Murphy.
When I say she is fabulous, it's not just because he's statements. It is because of our testimonial really speaks to the fact that she felt that her hormonal side effects.
Leisure feels like there was something wrong with her.
So many women have resonated with that message because it is not just old bird side effects. It's the covert side effects, but also make becsey an excellent choice for these women.
Brand awareness continues to rise we had 19% in October which is approaching the level of the most successful women's healthcare brands brand launched.
Greater awareness is leading to more and more women requesting taxi prescriptions and to more health care providers, recognizing the unmet need for sexy.
This in turn is driving new highs in prescription and unit sales week after week and month after month.
Comparing the six weeks before and after the household launch more than 10000, new <unk> prescriptions were written in just six weeks a 94% increase in total prescriptions grew 81% to more than 13000.
Defense units, which are boxes of 12, three films Becsey applicators were up 82% with more than 15000 Becsey box of dispense in the six weeks. After the house rules campaign launched this number is higher than the number of total prescriptions, because some women's specialty prescription or for more than one box affect fee.
2700 health care providers wrote a new sexy prescription in September at 34% increase over August.
Women are asking for vaccine and health care providers are increasingly prescribing it for them.
We believe that the early results of the house rules campaign, clearly demonstrates the high unmet need.
As sexy awareness continues to grow we are confident so too will brand consideration health care provider discussions and ultimately conversion to vaccine.
Turning back to HCA.
We are committed to ensuring that all women have access to <unk> as their choice and contraception. There are two parallel strategies in play here and either one should be a win for taxi for women nationwide for <unk> and for our shareholders.
Path one is for the office of women's health to update the birth control guide when it was developed this guide listed all available birth control methods that were FDA approved at that time method not products or brands.
It was developed as an educational tool and it served its purpose purpose.
The HCA, which was passed in March of 2010 specifies that at least one product in each category will be covered as a covered benefit gyro out of pocket pay to women well that was 12 years ago. The chart has not been updated since then it is sorely outdated and it does not include <unk>.
Sequent advances in contraception, using new delivery methods, including fact fee a vaginal ph modulator, which is in our label given to us by the FDA.
We are working to get the opposite women's health to update the chart to include a new vaginal ph modulator category.
<unk> is the only FDA approved product in this category and under the current rules and regulation it will be a covered benefit.
We believe this is the simplest and most straightforward path.
As part of our strategy, we are collaborating with the coalition for hormone free contraceptive coverage to raise awareness and support this issue we launched a petition on September 17th and in just six weeks our petition garnered over 12000 signatures.
I encourage you listening today to sign and share our petition to help us reach 20000 signatures by Thanksgiving you can access it through the QR code and our presentation or at contraceptive coverage Dot com.
Two weeks ago I spent a full week in Washington D. C to educate key policymakers on the need to update the birth control Guy I met with more than a dozen key legislatures legislators in both houses of Congress, including Senator Susan Collins, Patty Murray, Alex the DFS and Congress person Scott.
Peters, Eric Smiled, well, Jackie sphere, gaiam to get and Sarah Jacobs.
I also gained audiences with top staff at the Federal Health resources and services administration as well as the most senior domestic policy adviser and the Vice President's office and wildly Eddie Amo, the Deputy Secretary of the Treasury.
Along with our team that has worked tirelessly on this issue I presented our case to them as well as our petition.
As demonstration of consumer demand for hormone free birth control with a very compelling to these policymakers.
The second path is for the federal Health resources, and services administration or <unk> to issue updated guidance to insurers in the United States to prevent the chart from being a limiting factor.
Wired that these insurers cover new and unique contraceptive methods such as sexy.
Currently some of these insurers or using this as a loophole to prevent women from getting coverage.
In October for House Committee chairs wrote a letter to the U S Secretary of HHS Treasury and labor, calling for action to ensure coverage for the full range of contraceptives under the ACA.
The letter mentioned that certain health insurance providers are blocking access to products that is clearly outside of the spirit and outside of the intent of the letter called for action to stop these practices now we see this as a very positive development and believe it is well timed given the ongoing <unk> review of its guidance.
Regarding contraceptive coverage.
We are optimistic that the department to review will culminate in a favorable update to the current guidance that said we are developing contingency plans, while we continue to push hard in DC.
Under the spirit of HCA, we believe <unk> should be a covered benefit at zero co pay we're not asking them to send us to the moon visited this is just an administrative update so we are pushing hard because thats, what what is right for women. It's what's intended under HCA, It's what's right for Abo fan, it's what's right for our shareholder.
<unk>.
Turning to R&D.
We continue to advance the development of <unk> hundred for the prevention of Chlamydia and gonorrhea with the goal of expanding the <unk> label to include these potential new indications.
According to the CDC every sexually active person is at risk of catching these common infection.
There are no FDA approved prescription preventative measures right now the choices are condoms are absent.
And based on the continuing rise in reported Sci rates clearly this is not enough.
In October 2020, we initiated our pivotal phase III trial with the goal of enrolling just over 1700 women's by year end.
Enrollment has been a little slower than predicted due to COVID-19 related issues, including labor shortages affecting our study sites, our CRO and testing laboratories, we are constantly evaluating every available strategy and implementing new tactics to help overcome these hurdles.
Based on the challenges in the macro environment and where we are today, we now expect enrolment of our last patient in Q1.
We will still report topline results in 2022, and assuming positive results, we will file our <unk> with the FDA in Q1 of 2023.
Looking outside the U S disc.
Discussions are ongoing with potential global and regional partners for commercialization of <unk> in key international markets. We're very pleased that the opportunity for sexy and hormone free contraception as well as the potential opportunity in the prevention of Chlamydia and gonorrhea is resonating with many strong potential partners I.
I can't go into more details of these delicate these conversations are quite delicate, but I will tell you that the initial.
Opportunities will probably be in Asia Pacific or in the Latin America region.
We expect this structure will include an upfront payment commensurate with the size of the license market or markets as well as milestone payments and royalties on future product sales.
Meanwhile, we recently submitted our first regulatory registration outside of the U S and Mexico under the trademark evidence. This is the first of several strategic regulatory submissions plan under our 2020 Global health agreement with adjuvant capital.
The goal is to ensure that safe effective high quality contraceptive and STI prevention products are made available to women and health care providers in low and middle income countries on terms that are commercially viable for <unk>.
Assuming approval by the Mexican regulatory agency, we expect <unk> will be available in Mexico in early 2023.
We look forward to the day when all women, regardless of income or geography has access to hormone free birth control that they can use on their terms only when they need it.
And with that operator, please open the call for questions.
Certainly ladies and gentlemen, if you have a question. Please press Star then one if your question has been answered and you'd like to remove yourself from the queue. Please press the pound key our first question comes from the line of Ram <unk> from H C. Wainwright Your question. Please.
Hi, Thanks, very much for taking my questions.
Firstly I was wondering if you could comment on.
The overall Mexican market situation as this pertains to female contraception.
How given the unique nature of that specific target market.
He might be particularly attractive additional endpoint.
Yes. So thank you for the question wrong, a couple of things I would say.
Almost 50% of our enrollment and empower where women that were of Latin American descent, and some of the feedback. We received is that based on their religion, mostly predominantly Catholicism. They loved the fact that not only did this products have no hormones, but thats because it was hormone free it did not.
<unk> there are natural cycles, and the way their body work and they felt that that gave them a more natural way to manage their fertility and they thought that that was incredibly positive. So we do believe that and the other thing frankly is that and feedback that we got in market research.
They had no issues whatsoever with something that was vaginally administered so we feel very good that talking about the positive benefits of the product. The attributes are going to be received and the uptake is actually going to be quite rapid frankly, so we feel good about that and as we mentioned on the call. It will be a different brand name and so then we will be able to.
To understand and focus on how we build that separate from the <unk> brand in the U S.
Great Secondly.
I was wondering if you could comment on.
The previously mentioned.
Our strategy for <unk>.
Recommending sexy use specifically in women, who are undergoing hormonal based treatment for cancer, because obviously for those women hormonal contraception would not be an appropriate choice and.
What new developments there may have been on that front and what you are expecting to pursue if any.
You know that new activities aimed specifically at that target population over the course of the coming months or quarters.
Yeah.
So here's what I would say to you is that so we have partnered and continue to partner with the group and coda. They did a PQ why a positive quality intervention and this positive quality intervention talks about you need to treat the total patient don't just treat her cancer treated totaled.
And that when these women get done treatment and they want to go back to their lives and had intimate relations with their partner.
The last thing they want to get pregnant to your point, Ron because it will grow their estrogen cancers and so.
They are recommending sexy ads the ideal product of choice not of course, because it's non hormonal, but a lot of these women have to pick anti estrogen for five years or 10 years every single day, which creates a lot of vaginal dryness a lot of pain with intercourse. So <unk> is actually growing amongst the oncology community at the.
Other thing why Im glad you asked this question is that when I was in D C.
I can tell you. This if people want to try to close their ears, and they want to try to not listen to me because they don't want to do any hard work when I call out the fact that they're vulnerable constituents 800000 women get cancer every year and how about the women last year in the year before and how those are daughters, and how about their sisters and do they want to be part of.
A movement that denies these vulnerable women coverage or do they want to be part of the movement that provides access for all women, but in particular these vulnerable women and I will tell you that the cancer patient was the way that.
They could get behind it now you would hope that they would care about the 23 million women that are also beyond hormones, but in some cases when they thought that was a bridge too far helping a bad pharma companies just didnt seem to meet their standards no one could deny that that population was deserving and.
Boehner mall and that the one company, who has actually innovating actually innovating not coming out with more hormones and a different delivery system that in actual innovator should not be denied access and the final thing I will say is that you know I actually agitated to the point, where I said look.
Who is going to be motivated as a pharma company.
In women's health when a company like ours has provided a copay card to allow access and which were not what youre going to be able to continue to do because you know we have to stop that at some point and we're not going to be available anymore. Because we might go out of business because the office of women's health is denying it.
<unk> in the category.
So we have been very fierce about that message and and I'm glad that you asked because I really want our shareholders to hear that we're not being polite and going and having a cucumber tea party, we're going there, saying listen you better wake up because we're not being polite because youre not doing the right thing in the office of women's health is not doing the right thing and insurers are using it as a loophole.
<unk>.
Sorry wrong I went on a little soapbox crazy, there, but sorry about that but.
Thanks for the question.
That's very helpful. And lastly, just wanted to get some additional details regarding some commercial aspects. Firstly I was wondering if on the marketing front you feel that given the critical mass of awareness that has been built around sexy with.
The house rules campaign and other initiatives from a DTC perspective, whether you believe that at this juncture.
The appropriate point to transition into.
Different kind of marketing approach different kind of marketing strategy that isn't quite as capital intensive and this in fact would not really sacrifice.
Ongoing commercial growth because as I mentioned the critical mass of awareness has been built and then secondly, just very quickly on pricing I understand that you folks took a price increase relatively recently you anticipate pricing to remain stable on an ongoing basis from here on in regardless of what happens with the copay card.
Yeah. So I'll take the first one and then I'll, let Jay jump in so to your point, we were very very strategic about how long we ran the Andy Murphy House rules campaign, knowing that we needed to build a solid base. So that once we leaned off the most expensive piece.
As TV, then we would be able to maintain that base and continue to grow and I would tell you that getting to 19%.
It was very very significant so I would say that I would say that we feel very confident that the basis built they're going to these other social media outlets are going to be a way to not just maintained by continue to grow the business. So yes, we needed the broad awareness.
And we needed to be appropriately provocative so that we would be memorable and people would want more so that when we go to these other social media channels, they're going to be interested in looking theyre going to know that it's not going to be on TV necessarily but it is going to be and other social media outlets that are obviously going to be more cost effective for US also I want you to know that Andy Murphy and has agreed to be our.
Ambassador for a full year, so that wasn't just the one and only she is going to continue to do other things and other social media outlets.
I have never met a more passionate advocate for our brands I really mean it. She is in love with vaccine, which is which is wonderful. So so yes, we feel that the base is built we don't feel that there is going to be a downturn, we feel very good about that and we also have been very smart about ship.
Sting and dialing back a little bit on social media Influencers, we now have enough data, Ron and <unk> metrics to note what is working exactly what are the social media channels. We should continue to invest in what are the ones that didn't actually deliver as much as we hoped and we are stopping those so it's actually a very specific menu.
What we're going to continue what we're going to stop but we feel very very good that we're going to continue to grow the base now as far as the price increase you are right. We did take a price increase and we did that frankly based on looking at a proxy of the market dynamics what were other contraceptive products doing across the board and so Jay I don't know if you want to.
To that yes, so youre correct. We did do an annual price increase that was effective October October one.
Part of the natural process with the pharmaceutical we assess that on an annual basis, we do not anticipate doing any other adjustments until approximately the same time next year. So were stable at $2 94.
Any other business changes that might come with our co pay programs and Ron just to add to that only because when I have interacted with you I don't want to pretend I know, how you think about I know that you.
You do full circle and here's what I mean by that is that.
When I got back from DC.
Although I really do believe that we were memorable our voice is heard and people know that we are serious and we are going to keep pounding the pavement and until we get success.
I came back and met with the team and said we need to.
We need to be realistic and what needs to happen is that we need to.
Really look at the copay card, we need to not rip off the band-aid completely but we need to significantly dial that back so that women aren't going to zero like they would when we get our own category, but they have to give some additional pay now a lot of these women are already using the product they love the product and they are.
<unk> seen the benefits and the attributes so we feel confident that we can continue to maintain them as users affect fee, but you will see in Q1 and improvement in our gross to net and you will see over the year and improvement in our revenues as a result of that.
Which which is important we built our base we did a strategically we did if I design and now our sales force is going to have to really continue to pull through.
Thank you.
Thank you. Our next question comes from line of David <unk> from Piper Sandler Your question. Please.
Thanks, So just have a couple.
Firstly.
I understand those sort of palpable frustration with <unk>.
Policymakers.
Yes.
To date, but I guess looking forward.
What happens is you just can't get where you need to be in terms of.
Coverage under the ACA mandate.
Do you think about potentially looking.
Looking to evaluate strategic alternatives does it get to a point where.
Potentially it makes more sense for the asset to be.
Part of a larger.
Portfolio.
Maybe the other way of asking it is is without.
The it's all without its own category.
In fact, he get to critical mass.
With people from being a Standalone company.
Thanks, David So here is the answer that right now as we've said before we have 55% coverage and with prior offs that is basically bringing it up to about 70% of the prior offs that are going through but here's what I want you to hear that we have made a decision as an organization.
Based on the demand that plans has seen so for example, the plans that are denying us and are saying Oh, well. If you don't have your own if youre not a method under this chart and the one thing I want to make sure everybody understands is that this chart by the office of women's health the opposite women's health Central US listen this is only supposed to be an educational tool why do you keep bothering us this is not.
Supposed to be a proxy for health care plans to make decisions and we say well we understand that we know what your intention is but the reality is health care plans or using it as a loophole and theyre, telling us that if we don't give them, a 60 or greater percent discount they will not let women get coverage and Moreover, they're seeing to some women they have.
To fail on each other contraceptive products now this is not the majority it's the minority, but here's what's been happening lately as we've reached out to those same plants. Those same plants have said, okay. Fine we have seen all the prior offs come through we have seen that you are creating a groundswell for this product.
We're going to negotiate with you on better terms, so instead of asking you for a 60% discount.
Let's start playing ball. So the short answer is yes. This organization can be viable, which sexy for non hormonal contraception and the forthcoming label expansion for chlamydia and gonorrhea, because we will contract. Some people. Unfortunately have had to contract at $50 to 60% and those are three year contracts, we thank goodness.
Decided not to do that we've built our base of users and now the contracts will be somewhere between 20% to 30%.
Do I wish it was lower yes, but we will contract to get the kind of coverage that we need for our flexi patience until we get our own category. So that is the plan frankly is that we'll do that and when I say that we've already started these conversations to say until we get our own category, we need to know contract.
With you, but the great thing is that now those percentages are going to be much lower because we built demand.
Okay. That's helpful and then with <unk>.
To the extent that you get.
STI prevention.
Added.
Can you talk to the extent to which that gives you more leverage with payers and maybe another way of asking it is if we're talking about a contract in game.
Is having STI prevention in the label.
Something that ultimately we will give you better terms.
No question.
Having sci and the label will give us better terms across the board frankly, even with the groups that we have great terms with yes because.
I think the big thing that a lot of these planned fee is that.
The recurrent fit is happening and so having something for the prevention of both chlamydia and gonorrhea, Dave actually proactively indicated to us that it will give us better terms. So we think that those expanded indications are going to give us leverage across the board, they're going to give us leverage with payers and contracts and they are also going to give us leverage with continuing to identify.
<unk> partners outside of the U S with it.
To do arrangements with license deals. So yes, we think it is going to be a very very significant value add to the brand.
Okay. And then last question is looks again assume that you don't get to where you want to go with.
The office of women's health.
But you do have STI prevention.
In the label so looking longer term what is your view on what the steady state gross to net ultimately will be.
In that scenario.
Dave do you want to opine on that yes, I mean spirit.
A great hypothetical.
In general it really what it will come down to ultimately is any sort of outsize negotiations and ultimately contracting that we would need to do that saundra was just referring to that we believe ultimately could get back down to 20% to 30% versus their request.
And around 60.
The interesting part with STI and we've done some additional payer research is that we do see that they would give.
Without issue.
We'll have those effects plus with an STI indication.
Our scripts to those women that are requesting you that are on other forms of birth control. So we do think we have some additional leverage in that capacity and that even if it's not used for contraception. There is still additional used for prevention of community to gonorrhea.
I think ultimately to answer your question Youll see its definitely come down because of that contracting.
The basis points ultimately will determine on the basis of those final negotiations rehab with films.
Pbms will also too just to add David is that we're looking at very serious ways to lower our cost of goods and what I mean by that is our manufacturing team is very very savvy. So we are looking at everything from packaging configurations to amount of product in packages.
Is to literally looking at tech transferring to sites that can really give us more operational efficiencies. So in the next 18 months by the time, we are on the market with our expanded label we.
Definitely feel that our cost of goods will be much much lower which will also help the overall brand equity.
Okay. Thank you.
Thank you. Our next question comes from the line of Annabel <unk> from Stifel. Your question. Please.
Hi, Thanks for taking my question.
This is obviously a challenging time for you.
So just going back to the.
Plans that have seen enough prior authorization such that they are willing to.
To come to the table and start negotiating a rebate that is more reasonable to you.
I guess, what timeframe should we be thinking about that in terms of getting these plants on board.
And what percent of those plants that are quaint what percent of covered lives could this potentially represent to you.
If you actually are successful at finding these claims.
Okay. So here's what I would tell you is that.
I would say that.
It.
We're starting the conversations now the contracting will go into place in Q1, and we won't see an impact until Q2, I think that is a realistic.
It's about 30 million additional lives and.
Oh.
If we get the contract negotiations completed Q1.
Not if we've already started so I give you Q1 being conservative they will implement in Q2 30 million additional lives.
We feel like that is a very realistic assumption and timeline and <unk>.
And to give you an idea I mean look there are some plans that are.
Please Lee female patient focused right. They are just doing the right thing because they know it's a mandate and it's the right thing to daily and the handful of plans that are.
Places like Cvs and United and so those are the places where.
We are having positive conversations based on the demand that they have seen but yes 30 million lives is what we expect we'll be able to impact.
Okay, Great and then when you think about.
I guess the.
The rebates that you've been offering so I know that you had to pull back on some of the co pay assistance not the rebates I'm sorry, the copay assistance that you've been offering I know that you've had to pull back on that.
To a certain degree, but then I guess this quarter because.
It was impacting the fulfillment you brought them back.
I guess you are providing that assistance again, I guess, where is the right balance that we should.
Think about going forward.
As far as the level of co pay assistance youre going to provide.
Is there some kind of.
Whether you can quantify it for us a little bit just so how would you frame the modeling.
And then.
Follow up question to that also unbalanced, obviously youre in a very promotion sensitive market.
We're still going to be.
Providing some kind of.
Social media presence, but again.
Whereas the balance there.
You've got about.
What the $10 million at about $24 million.
And cash left and practically speaking that's not going to last at the level of spend that you have right now even with the reduction so I guess I'm trying to understand all those pieces and maybe I asked two questions in one but I want to make sure I got the malls.
No it's okay got.
We're gonna try to remember them all okay. So the first one is okay. So so where we are now as far as okay. So let me just say that from June from June of this year until the end of this year. The copay assistance program is going to remain the same in May we turned it off and that's what we saw.
A major decline in our prescriptions in May and based on that decline Here's what we said to ourselves we're launching Andy Murphy September 9th it is insane to launch any Murphy after the investments that we've made and the big push that we are going to have and have all of these women and drove us to go to get vaccine and have them be denied.
We're going to lose these patients forever that is not a smart strategy. So that's what's to be candid. We wanted to see what would happen we wanted to see.
We really wanted to see how reliant women are on this ACA and what's going on with these 18 categories. So that's why we set it off in May.
So then we turned it back on in June and it's been the same from June until the end of this year at the end of this year. That's when we're going to make adjustments. So we're gonna make co pay adjustments and they will be it's going to be a step approach, meaning for example, right now we're buying winding down to zero.
So quite literally our whole team is here this week looking at.
Looking at the different plans in the different regions. So for example in some places we will take it to 50%. Other places will take it will have to pay 50% other times they'll have to pay 75%. So we are looking to try to figure out how to slice that up but at a minimum it is going to be at 50.
Percent.
Approach, so that will increase our gross to net that will not go into place until Q1.
You should see shifts in Q1, what we saw is just happen right away I mean right away. So so that's why so June to the end of the year you should continue your same modeling, but the modeling should shifts for Q1 of 2022, let me just pause there Jay are you in agreement with all of that absolutely okay.
Then.
Mark.
Oh marketing, okay sensitive market yeah, yeah, so listen it is a promotion sensitive market. So here's the things that I want you to hear so some of the things that we're doing might sound a little grass roots interestingly, it's working very well so now with a lot of colleges opening up we're doing a very serious college campus push where our reps are educating healthcare providers on campus.
We literally have a push through a whole variety of sororities.
They are doing healthcare days, where we're talking about sexy on all of the college campuses. We are doing a huge push through the pads and association through all the.
Sessional cheerleading teams they have a ground swell.
Women when they love something I know this is an obvious statement, but they tell other women and we have identified these groups of women as a very big social media pushers so to speak so.
We are continuing our regular social media channels outside of TV, but we are also looking at different outreach through campuses and through these associations that we think are actually going to be very very very important all of these young women we have found.
Are saying to us in all of the feedback.
Any way to call. It to your mother made the gone birth control because he was so worried they're going to get pregnant and all of a sudden they started crying for no reason that all of attending the stars have anxiety multifamily thought when they were just nervous because they were in school. So they can put on anti anxiety product or they get put on an anti depressant and then finally they realize.
Two semesters leader.
Perhaps it was their hormonal birth control that was making them not feel like themselves. So a lot of these young women are very empowered and theyre very vitriolic and they've themselves. We did not poisonous they call themselves. The <unk> and they are creating this groundswell, where they really feel that they are doing yoga and they're eating healthy and they care about their fertility.
And they care about getting pregnant when they want to and so we're doing a lot more of those kinds of efforts now that COVID-19 has dissipated on college campuses, but we're still.
Still very committed to the social media channels outside of television so youre still going to see vaccine. We are definitely not going away. It's just the TV ads are the things that are going to dissipate.
Okay, and then finally practically speaking where are we in terms of.
To manage all of this with the cash position at year end.
And lastly, you told the first quarter, so kind of running out of time here.
On either another non dilutive source of financing or dealmaking, So what options do you have.
And I actually have another follow up question.
Sure ill do I didn't take that interval CSO stated on the call obviously that we've got runway into the first quarter and Youre exactly right.
We've got the potential for non dilutive sources continuing to work towards several of these potential licensing agreements that we think are good opportunities to get outside the U S. And then we continually assess additional alternatives that could be.
Good sources of external capital into the company to pushes further into 2022.
With the most effective cost of capital.
We've got some great fantastic momentum since the DTC campaign with house rules, we see that continuing to build and anticipate it to continue to grow through the end of the year. We think we're in a strong position to really leverage that.
As we near the end of the year.
Okay, and then one last final question.
The Oregon and Washington.
And the off the women's health was it outright rejection or just.
Sort of like you know.
Yeah, sneaking platitudes and that kind of essential central off packing, Michael what actually is the dynamic there.
Yes.
Here's what I would tell you I would tell you that.
I would tell you that the team that I went with from <unk> Fab would give you a slightly slightly different narrative and I gave you. They would tell you that they've got the meetings were very positive that they are very optimistic and they were pleasantly surprised at how much <unk>.
Movement, we saw now.
I believe that that story book of the turtle and the hair is a fairytale for a reason the hair always wins and so I am very impatient and frustrated by nature and I just can't believe it because it's called the office of women's Health I mean Hello.
So you know I imagine stated, but I would say this to you is that no one incentive package it quite seriously no one didn't get it so everybody got it everybody understood that we innovated in the category everybody understood that this was unlike anything else and a vaginal ph modulator.
It makes sense it makes sense to everybody honestly.
Men women advocacy groups, everyone that we met with and and I do mean that all of them I'll give you an example, and several of them.
Wrote letters and emails that they showed me the secretary of this era and a coffee copied the office of women's health sent letters, we gave them a template they edited it and those letter said it is time for you to update the chart. We recognize that it's intended as an educational tool and even if that's the intent it still not accurate because if it's an educational tool.
Should have a new innovation or vaginal ph modulators so I.
I would real action was taken and we got people and I'm not kidding. When they said, okay. We will contact the office of women's Health I said, well can you do it now I have a template and if you could send it right now.
I can help you started.
Okay, what we will call them could you call them now why do we do it now how about if you call them can I call you at the end of the day to see how the call. When we were persistent to a point of.
A little bit annoying, which we needed to be so I would say to you that there was not one bad meeting I mean that sincerely everyone responded in a very positive appropriate way my frustration with that.
[laughter] Secretary of the <unk> is really the key lever to make the office of women's health debate. That's what we know we also known as Weitzen Obgyn Interestingly. So we know our onto our next series of follow ups.
And in a lot of them say I will give you. Another example, somebody said to me you know what maybe we should get you to testify at.
Even had senators Susan Collins contacted the office of women's Health and said you need to give this woman in audience you need to let her appeal to you directly because you need to update the chart. So the final thing I would say is that the excuse that we were given is they are going to update the chart. They are going to make an accurate but they have.
So many other things to worry about like ROE versus Wade in Covid and this is just <unk>.
And educational chart.
And they are going to get to it.
I do believe theyre going to get to it and I do believe we're going to get a vaginal ph modulator category extension I want it now.
And so that was my frustration is the lack of sense of urgency, but no. One said we disagree no. One said you shouldnt have your own category No. One said this doesn't make sense.
None of that happened.
Okay, great. Thank you.
Thank you. Our next question comes from the line of Jeff Hung from Morgan Stanley. Your question. Please.
Hi, This is molina Sandro on for Jeff Thanks for taking our questions.
Touched on this but can you just give a little bit more color on the net sales for this court quarter and going forward.
Do you kind of expect this disconnect with scripts and sales to continue.
Until you adjust the copay assistance program its direct share or is this when you secure the additional category with ECA or get the guidance updated with th RSA.
And I have a follow up.
Sure I'll go ahead and take that yes, so to reiterate there was a 29% increase in gross sales and really what it comes down to ultimately is the mix that happens during that time period as far as the women that are gaining access to your tax rate and we are not what levers of our co pay programs are true.
<unk> from that.
We continue to see rate increases in the ex factory sales as its ongoing we've even given a little bit more guidance here in the call. We do anticipate that we will see that continuing trend upwards.
But I wouldn't be so bold as to give you specific guidance on two as to the nature of Youll see Q3 repeated in Q4, because it ultimately comes down to the mix of those women that are getting prescriptions filled and their underlying coverage. What I can say is that we do know through the end of the year, we are going to be committed to ensuring that access for those.
Women that want the product to get experience using it are going to have that ability and that is our number one key through the end of the year than as Sandra mentioned, we're going to go ahead and evaluate what options we have at our disposal to adjust the prophage program starting the beginning of the year. We do anticipate that we will have a impact rather.
We even starting in January as to <unk> improvement and then ongoing and then that separate approach that she mentioned will continue to be analyzed as we move forward in the beginning of the year ultimately.
It gets kicked on we can then even make further adjustments are even more positive less to <unk>.
Okay great.
And then maybe just one more.
Can you share with us any update on what you're seeing with the refill rate and how you expect that to trend into next year. Thanks.
Yes.
Actually two.
<unk> is here with US do you want to talk about the repo rate because the inland that recently.
To come closer and won't give you I can hear you.
Yes, just really quickly so we've looked at refills and we continue to monitor.
Closely.
One of the things that's been really exciting is we actually hit some of the highest refill rate percentages on a weekly basis, when we were coming into the launch of our celebrity campaign.
Then after the celebrity campaign, we continued to see a large number of a growing number and the volume of refills weekly, but that percentage, obviously went down which is a good thing and we're all excited about because honestly the number of new Rx is coming in it is it is just.
Is really throwing that percentage off so the good news is we're seeing a lot more women refill.
And the percentages are probably arent the best way to tell the story right now because.
It's just it's a different number as we're approaching new highs monthly.
Yeah.
Got it thank you.
Thank you. This does conclude the question and answer session of today's program I'd like to hand, the program back to Cedric Pelletier for any further remarks.
Great. Thanks, so much.
We know that many of you have been shareholders in <unk> for many years and.
And we know.
It has been a little rough.
We never expected to be launching taxi and the type of environment that exists today.
And why do we assure you that everyone at <unk> is fighting to make this company a success, we know what needs to be done and we execute on it every single day, we've discussed our key initiatives throughout this call, but I want to summarize them here for Ya one cost reduction we are committed to reducing costs by 50 million.
In 2022 predominantly in marketing.
To.
Increased access to taxi by spring an update to the office of Women's Health birth control chart, our guidance from the Federal Health Resources services administration to insurers that will prevent the chart for being used to limit contraceptive choices for women.
I also want to make a comment.
When I was in DC.
One of the things that you want to say to people. When you wanted to say to politicians is that you don't want their name associated with the company that was punished for innovating.
This company is going to succeed.
Aye.
<unk> with them to say do you want to be in the administration when a company is no longer existed.
That is a suggestion to activate people I believe that this company is going to be the.
The most successful leader in women's Health Ed.
Believe me if you're on the inside looking out to see all the positive things that are happening. There is no chance you would not agree with me.
Number three.
Drive the STI prevention program forward by completing the ABA Guard trial filing for an NDA for <unk> for the prevention of Chlamydia and gonorrhea.
Number four enter into licensing agreements to get sexy into international markets, and bringing non dilutive capital to ebb of them and number five.
Tim you to increase <unk> demand in the U S.
We worked tirelessly on these initiatives to make this company a success and increased contraceptive access for women. We remained determined we remain proactive and we remained highly focused our efforts are not gentle nor are they timmins they are professional but we escalate.
<unk> intensity and even fierce when it is required because succeeding in women's health is not a walk in the park, but.
But we will succeed and we will succeed for the shareholders that got us here and for the women who deserve better. So we want to thank you for your ongoing support and I Hope you have a great rest of your day. Thank you very much.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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