Q3 2021 TherapeuticsMD Inc Earnings Call

Good morning, ladies and gentlemen, thank you for joining us for the therapeutics empty third quarter 2021 financial results conference call.

Following prepared remarks from the company, we will open the call for questions I would now like to turn the call over to Lisa Wilson Investor Relations for Therapeutics M D. Lisa.

Thank you operator.

Good morning, everyone and thank you for joining today to discuss our third quarter financial results and business update.

This morning, <unk> Therapeutics M. B issued a press release announcing our third quarter financial results. The press release and accompanying presentation are available on the company's website therapeutics MD dot com in the investors and media section.

On today's call from Therapeutics M D, Our Chief Executive Officer, Rob Kinesio.

President Hugh O'dowd.

Chief Financial Officer, James <unk>.

And Chief commercial officer, Mark Glickman.

I would like to remind everyone that certain statements made during this conference call may be forward looking statements.

Such forward looking statements are based upon current expectations and there can be no assurance that the results contemplated in these statements will be realized.

Actual results may differ materially from such statements due to a number of factors and risks some.

All of which are identified in our press release, and our annual quarterly and other reports filed with the SEC.

These forward looking statements are based on information available to therapeutics M. D. Today, and the company assumes no obligation to update these statements except as circumstances change.

An audio recording and webcast replay for today's conference call will also be available online in the investors and media section of the company's website.

For the benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on November 11th 2021 and with that I'll turn the call over to Therapeutics M. B C E O Rob Kinesio.

Good morning, everyone.

Thank you for joining our third quarter call. We look forward to updating you on the steady growth of our topline sales, but before going into further detail.

An important announcement to make.

More than a year ago I started a search for a company president who had the necessary financial and commercial expertise.

The right personality and the right strategic vision of someone who would eventually be my successor as the new CEO of Therapeutics M D.

Back in August after a comprehensive and exhaustive search process, we hired fueled out to fill the role as our president.

He was a first class professionals with proven leadership and entrepreneurial skills and deep industry knowledge, having held leadership positions at both large.

And small pharmaceutical companies.

The board of directors and I have worked closely with you since August to ensure he developed an in depth understanding of therapeutics M D.

Now I'm happy to announce that the board of directors have unanimously.

Elected Hugh O'dowd, as Chief Executive Officer, and member of the board of directors.

On or before December 31 of 2021.

After being at the helm of Therapeutics M D. Since its inception 13 years ago I will now transition to vice chairman of the board of Directors and will now focus on board level strategic direction of the company.

I'm confident in Usabilities to achieve our next milestone of EBITDA breakeven in the back half of 'twenty, two and building therapeutic sandy into the premiere Women's health company in the United States with that being said I'd like to congratulate you and ask you to take over the call here.

Thank you Rob and good morning, everyone first I wish to express my thanks, and appreciation to Robin Israel and our board of Directors, Rob. This organization wants to thank you for your leadership in founding the company and launching a portfolio of three innovative and well differentiated therapies.

Therapeutics and D would not be where it is without your dedication vision and leadership.

See enormous opportunity for the company and we will invest all my energy and realizing our goal to become the Premier Women's Health care company by Curbing our mission in PAH.

Women of all ages through better health care Bye.

By way of background I was most recently CEO of neon therapeutics for four years.

The clinical stage immuno oncology company that was sold to be Ontic SC last year.

Part of this I enjoyed a 20 year career in a variety of ascending senior leadership roles at Novartis, which included country President region head and Chief commercial officer of the oncology Hematology business unit and then the second largest oncology business in the world.

I am deeply committed to our mission and serving women and ambition, which has its roots reaching back three decades to my first launch as a marketer in the metastatic breast cancer setting.

My philosophy was shaped by these initial series of launch experiences where great science must focus on clearly defined.

<unk> patient population in need of innovation.

I look forward to sharpening this focused exclusively on women of all ages as we seek to improve their overall health.

While serving our patients and health care professional communities remains my priority.

It's also important that we deliver results to our shareholders starting with achieving.

Positive EBITDA in the second half of 2022.

We will accomplish this by embracing financial discipline, which is why we are announcing today a significant cost savings initiatives that will reduce our annual cost in 2022 by at least $40 million.

This figure does not include savings from or the cost associated with a potential divestiture of itacare estimated at approximately $20 million.

In addition, we've already streamlined our senior leadership structure by eliminating three executive roles.

Last month, we announced the appointment of Mark Glickman, who will now be serving as our chief commercial officer.

Under Mark's organization, we now have a new head of sales a new head of marketing and a new head of market access.

As you'll see in a few moments. This team has already produced results and they're executing plans with a renewed focus on health care professionals.

And finally, we are also actively working to address our capital structure to allow for more financial flexibility and ease the restrictive revenue and cash covenants that are currently in place.

In summary, I'm thrilled to be joining and leading therapeutics M D.

My immediate priorities are drive topline growth and overall operating performance.

The elimination of at least $60 million of annual costs, including the successful divestiture of vital care, which we believe will then enable us to achieve EBITDA breakeven in the second half of 2022.

And finally to address our capital structure to ease the restrictive revenue and cash covenants.

Currently in place.

To maintain accountability, we will provide full year guidance starting in the first quarter of 2022.

I look forward to taking your questions at the end of the call and now I'll turn it over to our Chief Financial Officer, James Director to discuss our financial results in greater detail James.

Thanks, Hugh and good morning, everyone.

Slide six shows a snapshot of our quarterly net product revenue trends, which continue to increase as we emerge from the COVID-19 pandemic.

Our net product revenue for the third quarter was 24, and a half million dollars of which $23 1 million was applicable toward our third quarter revenue Covenant, which was successfully achieved.

As compared to the third quarter of 2020, our net product revenue increased by 41%.

<unk> net revenue increased by 84% as compared to the third quarter of 2022 $11.8 million.

This increase was driven by strong volume growth, partially offset by a slight decrease in net price as compared to the third quarter of 2020.

Net price per unit about avera remained stable as compared to the second quarter of 2021.

The volume increases for out of ore this quarter reflected additional stocking in our wholesaler and pharmacy channels in advance of expected increased patient demand due to new insurance coverage beginning in the fourth quarter and our recently assigned J code, which brings significant additional patient.

Access and the public health sector.

And vaccine net revenue increased by 17% as compared to the third quarter of 2000 $20 million to $8 million. This increase was mainly attributable to higher net pricing, partially offset by a moderate decrease in sales volumes shipped to customers.

Let me share some highlights from our financial statements on slide seven.

Our gross profit margin was 79% in the third quarter of 'twenty to 'twenty one.

Most profit margins were negatively impacted by approximately $700000 of Baidu about export sales, which were recorded in the third quarter and were sold at cost.

Total operating expenses of $60 million for the third quarter of 2021 included approximately seven $2 million of severance related expenses attributable to the exit of four executives.

Absent these severance related expenses, our total operating expenses were in line with our expectations as we continued to invest behind out of era and in vaccines.

We expect our operating expenses to decrease in the fourth quarter to below $50 million, excluding the impact of any one time costs related to our 2022 cost savings initiatives.

Next year as you mentioned a moment ago, we expect to reduce our annual operating expenses by at least $60 million, assuming a divestiture of body care.

Net cash used in operating activities was $38 $2 million for the third quarter and as of September 30th 2021 we had $104 $8 million in cash.

I'll now turn the call over to our new Chief Commercial officer, Mark Glickman to provide more detail around our commercial progress.

Mark.

Thanks, James and good morning, everyone I'm excited to be on this call.

Before we delve into the company's commercial activities I wanted to give you all a quick summary of my background.

This is my 31st year in the health care industry I started my career with large pharmaceutical companies before transitioning into the smaller more entrepreneurial around as.

As an executive at COSE pharmaceutical I help the company grow from minimal revenue over $1 billion in sales.

And that Auxilium, we increased our market cap from 900 million to a $3 billion sale to endo in just three years.

Most recently, our chief commercial officer at Asbury, and Therapeutics, where we introduced a novel cholesterol product directly into the global pandemic.

See more details about my background on slide nine.

Stepping into my role of Chief Commercial Officer, I contemplated the overall vision of Therapeutics M. D and saw a three key factors that I believe will drive long term success.

First and foremost our focus must remain on the patients and physicians.

Second an environment of accountability is crucial and this is something we've already implemented. This organization is focused on meeting the needs of our patients physicians and our shareholders.

Third we've begun creating a format based organization to execute with excellence on our overall objectives.

These moves are designed to help us achieve our ultimate goal to become the Premier Womens health care organization.

Therapeutics and D. We have three differentiated therapeutic options for women.

Since joining and looking back I saw an opportunity to address our overall commercial focus.

Our approach while appropriate during the pandemic has been adjusted and we are now well on our way to transitioning to a health care practitioner prioritize effort.

After some internal changes I believe we have the right people and the team is fully committed to the success of the company.

With this refreshed commercial team in place we have removed several barriers to launch and importantly has seen significant wins of managed care, which we'll talk about in a few slides.

Based on the assessment I conducted I determined we could improve sales by re directing marketing programs. These programs were overweighted to the consumer and have now shifted to the health care provider. We also simplified the data orientation for the sales organization, which is designed to improve our ability to effectively execute.

Finally, while we continue to have good managed care reach we are re directing our immediate focus to the opportunities where we believe we have the greatest impact as soon as possible.

Physician targeting became my first priority as we redistributed our activity, it's the highest decile prescribers.

This effort given the size of the rollout continues to progress in stages, while the evaluation of call in field activity is ongoing.

My second priority, we needed to refocus our sales representatives on solution selling the key to this sales tactic is to make the salesperson to center of the solution process.

Most branded pharmaceutical products, despite great coverage present, some level of complexity regarding patient access we have many great solutions to assist patients and physicians I've asked our sales representatives to proactively discuss potential issues and align the appropriate solution ensuring patients receive our products at affordable.

Prices.

Finally, we refined our focus to provide direction and tools that are designed to result in sustainable consistent growth.

I'm excited for the opportunities for success and recognize there is still much to do.

I'm confident that with this refined focus and re emphasis on accountability will be able to recognize the opportunities.

So what was the result, so far during my tenure.

First the culture of accountability and close evaluation of performance resulted in an immediate increase in cost per day to targeted physicians specifically those in the highest decile overall.

Overall cost per day have moved up from the low <unk> to the low nines. This is a critical gauge of effort.

The next slide shows that the extra calls which are the correct targets.

In September 53% of our effort was through the top four decile physicians, who represent 40% of the market. This is the first time, we've broken and 50% and it was a 10% increase over August which is great progress in only one month.

In addition pack prescriptions.

On slide 17, you'll see total monthly prescriptions for Ana there, our long lasting reversible contraceptive for women.

To the left and purple or several quarters of relatively flat activity.

In the June July timeframe, we implemented our changes in earnest, which accounts for the improvement beginning in August and really taking off in September.

Timber we exceeded 3000 monthly total prescriptions of <unk> for the first time.

On a quarterly basis, we saw an increase of over 1000 prescriptions of <unk> quarter over quarter or 14%, Chuck driven almost entirely by the success in September.

Slide 19 shows another indicator of our productivity and our cumulative prescribers increased over 8100 for the quarter plus 1300, new prescribers, most of which were in that higher decile area.

This overall uptick as a result of the changes in our focus and our sales organization.

Turning now to vaccines, which is an estrogen hormone therapy for post menopausal patients suffering from Veeva. We are very pleased with the indexing results because this quarter, while we prioritize and Vera with the aforementioned HCP and targeting initiatives, we did not lose it actually traction currently with <unk>.

Forming a full targeting mixed assessment, which should be completed by the end of the fourth quarter and fully implemented early next year.

This will give us some of the insights we were able to achieve with anniversary as we move into 2022, we expect in vaccines to return to being a growth product for the company.

I want to stress that while we did transition most of our resources to a health care practitioner focus we still enjoyed a very successful consumer campaign, the comedian and actress Whitney coming continues to be an outstanding spokesperson for us at her advocacy as an anniversary user is influencing the right target audience. We.

Also continue to see consumer appreciation and activities around the various infection campaigns.

We are encouraged by the benefits the changes I discussed have already produced looking forward. We believe there are additional accelerators not reflected in the slide I. Just showed we have had significant managed care wins that will take place predominantly in the fourth quarter and a J code was recently assigned which gives and their access to a.

Piece of the public health sector.

We also filled the 'twenty two vacancies in our field force with high quality Representatives, who hit the field the first week in October.

We're entering into an exciting new phase of the company I'm highly optimistic about therapeutics and these future and I look forward to speaking with you next quarter and now operator, please open up the call for questions.

Thank you.

To ask a question you will need to press Star then one on your telephone to lift.

Your question. Please press the pound key again that is star then one if you would like to ask a question. Please standby, while we compile the Q&A roster.

Yeah.

Our first question comes from the line of Louise Chen with Cantor Fitzgerald. Your line is now open.

Hi, Thank you for taking my questions here. So I feel that are coming in for me and I wanted to ask you. So first question is you know why the CEO change now I know you've been looking for a while is there any sort of inflection points that are driving your decision here and then secondly, what are you going to do differently from.

What Rob did you have a new strategic vision for the company and then just some housekeeping items in terms of the SG&A progression next year did you say that you'd be at less than $50 million of spend by the fourth quarter 'twenty, one and it will ramp down from there and should we assume that you'll sell vital care next year and take out that $20 million as well or just kind of stick.

Now with a $40 million decrease in SG&A. Thank you very much.

So Louise Thank you it's great to meet you, let's unpack that because theres three good segments and questions, we'll start with Rob in a moment because I think thats helpful for context of why now and the considered process then I'll pick up and offer comment as it relates to the priorities and then we'll finish up I think what changed was it.

<unk> to the vital care piece in particular, but Rob.

Luis.

Thanks for the question so as far as my.

My role so I remain fully committed to <unk> I'm not going anywhere I've changed my role device Chairman and Sue takes over all operational accountability for <unk> I'm going to focus on strategic board level.

Our focus is and I have no plans currently to sell any of my stock of shares I'm still probably one of the largest if not the largest shareholder so rushed confidently that I am still fully committed here and still see a fantastic opportunity here. We did we did start this process over a year ago.

Right.

And I've met you a full a full year ago, and we were looking for somebody with the right commercial background, the right financial discipline and really the right operating history, which we all found in here and we hired him as the president to ensure that he was as good as <unk>.

<unk> and that he could come in and operate the way we thought he could and I'll tell you. He has met all of those criterion and the board has unanimously voted him in and I'm really excited for my next chapter here and I'm really excited for you and I think we've got a winner.

Hope that answers your question I will turn it back to here.

Thank you Rob.

The way is very kind of you Louise.

It really took the opportunity to emphasize what are the company's immediate priorities and why.

Really took an effort to emphasize the four key points.

Number one we've got three tremendous well differentiated assets and driving top line performance and growth is job one and the operating performance surrounding that is where really our focus lies.

It was important to align.

Cost structure with that top line evolution.

And it was reasonable for us to consider how we should eliminate $60 million in full 22 cost structure inclusive of the divestiture of <unk> and I think James could.

Offer some additional comment there, but doing so really does secure our pathway to EBITDA breakeven in the second half of 2022 that is a clear mission for this company its clear mission with our board of directors and I will speak to it that we deliver.

And then finally, how do we frankly do address our capital structure and E&ps restrictive covenants that are in place.

These four things are top priorities and Rmi focus and beyond that as I shared in the call. In Q1, we will issue full year guidance and I look forward to elucidate further beyond that period, but let me turn it over to James to your third query Louise as it related to providing care.

Thank you Luis.

Luis you had it right.

Your initial question, we are expecting the SG&A to come down.

Quarter to below $50 million and then when you think forward to 2022, you can take out.

At least the $40 million, which is the <unk> portion.

And then depending on the <unk> sale of its timing.

The additional.

$20 million, so that would that would get you to a 2022.

Estimated SG&A spend.

With regard to the body care, we do intend to divest it.

That's our planning scenario right now and as Hugh mentioned, we will be back in the first quarter with guidance, but recognize that we're agile here and thinking about all the different scenarios that are in front of us.

Thank you.

Our next question comes from the line of Annabel Sammy with Stifel. Your line is now open.

Hi, all thanks.

Thanks for taking my question a lot of change here. So congratulations on this mix shift.

I have several here on.

I guess my my Big question.

Prime Merrily NCR. Your first priority is driving top line performance. These products have now.

Been in the marketplace for.

A couple of years specifically in fact he also.

Last quarter, you went from I guess going from a consumer so okay now you're focusing again on HCP, but I guess my question here being that they've been around for some time.

What does the HCP not know at this point about this product, but what are the chances for.

Our inflection because it seems like the managed care coverage for its pretty.

Solid has been solid for a while.

And so what is the physician community not getting about these products yet.

A second question on cost savings, what exactly is being sacrifice from a cost savings perspective, what.

What should we expect is it.

You know DTC is it you know something else if he can help us sort of frame that please and then on capital structure alleviate the capital structure. What options you have available to essentially adjust your balance sheet to give yourself some breathing room here. Thanks.

Alright, Thank you for those those queries annabel excellent questions.

We're going to have Mark Glickman, our chief commercial officer answer the first piece, but one of the things I took note and I enjoyed his presentation of a few moments ago is that performance in the early shoots that we saw that frankly revealed growth.

Really driven by the inputs and changes that he's already erected.

<unk> in the absence of new items that are coming online now in the fourth quarter and I think when we rebalance in a more open world post Covid, we foresee a real opportunity to take advantage of those catalysts Mark would you care to elaborate.

Nice to talk to you again, and it's been a while so.

Regarding <unk> in the health care practitioner focus.

While your statement is correct.

Hcp's know about them is actually quite a bit. However, there is a lot of options out there for women and reminders and consistent communication and education about certain patient types. The reminder of the consistent reminder, to the physician as to who is the proper convexity patient.

Physicians tend to forget and especially throughout Covid.

Don't tend to go towards generic product they'll tend to go towards products that that they use many years ago and eventually being fairly on the new side, we do need to continue that awareness in fact awareness is the number one driver.

Prescribing of branded products in the industry. So it's not necessarily education, what are they going to learn new it's about the patient type it's about the continuing awareness and also making sure. The entire office is aware how to prescribe and factually what questions. They may receive from the patients. So unlike <unk>, where there is more online.

Interest for the post menopausal women that are BVA suffers they do rely on their health care practitioner and we need to be there we need to give them awareness education.

Samples for the women all these things are critical so I do think this is the most critical.

Attention, we can give right now <unk> and we're rolling through new targeting initiatives to ensure that we're being as efficient and productive as possible. These new targets I do anticipate to see this go back into a growth phase in Q1.

Thank you Mark now, let's turn to your second quarter is the nature and composition of these cost savings so.

We've articulated from a 22 full year perspective savings of at least $60 million now 20 million of that is coming at least from the vital care divestiture. So let's park that off to the side. So that means on what I'll call. The <unk> and the pharma side of the business. There is $40 million coming from there. This is an exercise that is really.

Driven by the shift that Mark has just elucidated. So we're really talking about rebalancing, our focus and lessened our intensity from the DTC media AD buy component of that we believe while still leveraging that as Mark noted in his opening remarks.

Racing the impact empower focus and execution of a greater health care professional focus we acquire synergies and I think with that financial discipline. We can drive topline growth, we can drive EBITDA positivity and breakeven in the back end of next year and I think that is just value creation that we can offer.

Now as it relates to your third question I will turn to James to further growing yes. So that was the that was the one on the cap structure I believe I think the first Domino that has to fall there is <unk>.

Might occur and we'd like to see.

What what kind of proceeds are available in that regard and then once we have that information then I think.

It really kind of opens things up in terms of where we had next.

Yeah.

You heard Hugh mentioned, we want to address the revenue and cash covenants that we have in our current facility.

We're certainly be looking at at refinancing there.

So, but one thing at a time, let's let's take the first step get get to get to the body care answer first and then we'll take it from there.

That's great. Thank you.

Yeah.

Thank you.

As a reminder to ask a question you would need to press Star then one on your telephone.

Our next question comes from the line of Douglas Tsao with H C. Wainwright. Your line is now open.

Hi, Good morning, Thanks for taking my question, just maybe could you just walk through a little bit.

The manufacturing change in manufacturing disruptions for Ana thereof.

And how.

How you are for supply into <unk> and <unk>.

Doug Thank you for the question.

Really the current problem stems primarily from an extremely narrow FDA approved release specification that requires us to reject batches at fall upside the release criteria for one.

<unk> test method, we have submitted an NDA supplement with FDA with a <unk> date of December 12, 2021. So that really provides data we believe justify a revision of that specific portion of the specification for that one test method now if the FAA.

Proves the NDA supplement in December we believe we'll be able to release batches that were outside the previously approved specification to be clear this submission and potential approval by the FDA would have no impact on our product quality.

We foresee a Q4 pathway.

Would permit satisfying increasing patient demand, but this is the first time that our ability to adequately and a very demand isn't question due to the recent increase in bad failures.

Okay, and then just as a second question.

Mark mentioned accountability a lot I was just wondering if you could just provide a little bit more of a sense of what he means by that thank you.

So mark would you care to elaborate.

Certainly I mean.

Accountability, when we think about the sales organization to me, it's having a clear plan, a well thought out plan going into quarter or into the year and executing against that plan.

As we since I've been here and with my team the.

The new internal team working together, we're much more about.

Giving direction, where the representatives could be where the right targets are and our expectation accountability is to follow call.

So messaging and follow overall.

Accountability with.

With solution selling and these are all really items that were not negotiable.

I don't want to comment about how things were before but in my in my environment everyone's accountable for them to execute against the plan as it's rolled out and we're already seeing that so it's about it's about activity metrics. It's about performance metrics and it's about providing solutions as directed on a consistent basis.

Additionally, internally, it's about having programs and planned our ROI positive and being able to demonstrate that our spend is actually worthwhile and that our spend is actually going to benefit the overall organization patient and physician.

Doug I, just want to say I can't tell you.

How pleased I am with the early work done by Mark with our new head of sales a new head of marketing a new head of market access it's a new day and there is a vibrant energy associated with March leadership, and I look forward to seeing continued results performing.

Okay.

That's really helpful. And then just one quick follow up just Hum.

In terms of the calls that are being made today what percent are actually in person calls versus ones that are virtual details.

Thanks for a great question the statistics I put on the screen today are all in person calls so we're actually right now only counting in person calls as a call.

Officers have opened up.

And we're out there so the numbers I provided our all in person office calls.

Great. Thank you so much that's good to hear.

Yes.

Yes.

Thank you Darren.

There are no further questions I will now turn the call back to Hugh Odowd for closing remarks.

Thank you everyone for a wonderful morning, we look forward to taking further follow up we wish you all a very good day take care and be well and happy veterans day.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

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