Q4 2021 TherapeuticsMD Inc Earnings Call
Good morning, ladies and gentlemen, thank you for joining us for the Therapeutics M D fourth quarter of 2021 financial results Conference call.
In the prepared remarks from the company, we will open the call for questions.
I would now like turn the call over to Investor Relations for Therapeutics M D. Lisa Wilson Lisa.
Thank you operator, and good morning, everyone and thank you for joining today to discuss our fourth quarter financial results and business update.
This morning Therapeutics M D issued a press release announcing its fourth quarter 'twenty one.
<unk> financial results.
The press release and accompanying presentation are available on the company's website therapeutics M D Dot com in the investors and media section.
On today's call from Therapeutics M D.
Our Chief Executive Officer, Hugh O'dowd, Chief Financial Officer, James Director, and Chief Financial 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 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 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 March 10th 2022 .
With that I'll turn the call over to therapeutic M. D. C E O Hugh O'dowd. Thank you Lisa and thank you for everyone for joining our call today.
Last quarter, we outlined our immediate priorities and today I'd like to share our progress against those stated goals. As a reminder, that list included number one driving topline growth and overall operating performance too.
To addressing our capital structure to ease our restricted cash and revenue covenants currently in place.
Three eliminating $60 million from our annual cost base, including the successful divestiture of body care and finally, achieving EBITDA breakeven by Q4 of 'twenty two.
These are the actions we committed to let me first turn to our topline performance.
Our fourth quarter revenue performance was impacted by innovator of manufacturing and supply challenges that we've previously announced.
To be clear our immediate challenge here is not about demand generation, but instead, it's an issue of short term supply and scale. We believe that this is a temporary event, which will be resolved by the end of Q1.
Our underlying in a very demand according to symphony remains significantly higher than our ability to fulfill in this immediate period.
As we continue to manufacture and supply and a bureau, we have assembled a cross functional team to ensure that we're efficiently allocating every ring available across our distribution channels.
As a company we are at a pivotal moment that we believe will help transform us into a more focused women's health care company debt.
Dedicated to our mission of empowering women of all ages through better and affordable health care.
We are implementing changes both large and small that we believe will help us.
Hope enable us to maximize our three unique products and avera in vaccines and by June and thus create and grow value for our patients customers and shareholders. As an example, we've recently partnered with <unk> associates.
Implement an innovative targeting analytics approach designed to allow us to utilize the full productivity of our field force, calling on the highest decile and most productive health care providers as well as optimize our full portfolio of women's health products, Mark will have more to share on this in a few moments.
In regard to our second priority and in support of a new capitalization plan for the company, we have amended our credit agreement with fifth Street.
We believe this was the most prudent way to British through the close of the body care transaction and the refinancing of our sixth Street debt facility with another party.
In a few moments James will highlight the key details of this amendment.
Let me now turn to our third priority starting with our recently announced transaction to divest body care to good Iraq.
Obtaining maximum value for this business unit has been a top priority for us.
As announced earlier this week, we entered into a definitive agreement with good Rx for $150 million in cash plus additional earn out of up to $7 million. This reinforces our commitment to maximizing value to our shareholders.
We are pleased that we delivered on this important commitment this transaction enables us to accelerate the transformation of our company and importantly, it allows us to narrow our focus as a pharmaceutical business dedicated to empowering women of all ages through better and affordable health care gain.
James will offer color on the effect of the body care divestiture on our previously announced cost savings initiatives and finally with regard to achieving EBITDA breakeven. We will provide further details when we discussed earnings guidance in Q2.
Pending the closing of our divestiture of body care. We are now poised to address our capital structure removes fixed readers, our creditor and delever our balance sheet.
Easing our restricted cash and revenue covenants.
Now beyond our progress against our immediate priorities I wish to provide clarity and more details surrounding our efforts in regard to integrate our manufacturing.
In this impacted period, we have experienced supply disruptions due to a higher rate of batch rejections.
Primarily associated with the restricted specification for one test method last August we took action and submitted to the FDA the manufacturing supplement, which Scott amendment to our specification for that one test method.
Subsequently, we received a sheer all last December .
The tier all provided the rationale for the rejection of the revised specification, but also provided a pathway for resubmission.
We responded to the sea around January providing the requested information and we anticipate FDA response by the end of Q2. So what are we doing today beyond our FDA Resubmission first we've added resources at our CMO to significantly increase our production volumes and.
Second we have improved our production process to drive a double digit percentage increase in our yield per batch.
To be clear, our topline growth assumption does not assume FDA approval of the anniversary of manufacturing supplements.
Approval would accelerate our ability to achieve this goal, but it's not dependent on that outcome.
Based on these factors and the pending sale of Arctic here, we intend to provide earnings guidance in Q2, when we believe we will have more visibility and we can provide that guidance with greater certainty.
Since stepping into the role of CEO I Indian tier therapeutics and the leadership team have undertaken a number of highly effective steps toward achieving our immediate priorities start studying spend a pathway towards attaining a leadership position in women's health and now with the fight of care definitive agreement announced we are.
Vision to become a far more focused company and to capture the full value of our portfolio of products let.
Let me summarize this is a transformational moment for us. The path ahead is bright and with the sale of body care, we fulfilled our commitment to reduce our annual cost base by $60 million. We believe we are positioned to bring the company to profitability and restructure our capitalization, which we aim to complete.
In the second quarter.
We are on a pathway to successfully scale manufacture and supply our flagship product and avera and finally, our priority is to deliver results to our shareholders and provide a pathway to EBITDA breakeven.
Our company core values of high standards empowerment, and respect I mean, a lot to me it will be reflected in all the work, we do moving forward and with that I'll turn it over to our Chief Financial Officer, James Director to discuss our financial results in greater detail James.
Thank you and good morning, everyone.
Before we review our financials I would first like to review the terms of our amended debt agreement with fifth Street announced this morning.
We have agreement with fifth street to adjust for $60 million minimum cash covenant.
The fourth quarter covenant default and eliminate the first quarter 2022 revenue Covenant. We also agreed to pay the first $120 million of net proceeds of the vital care divestiture to sixth street to reduce the loan balance the company will keep up to $15 million of net proceeds from the divestiture.
The amended loan facility will now have a new maturity date of June 1st 2022.
This amendment will provide the company with the necessary financial flexibility to complete the announced sale of body care and refinance our remaining debt with another lender.
Now lets focus on our financial results in greater detail.
Slide eight shows a snapshot of our quarterly net product revenue trends, which were impacted by production issues as previously discussed.
Our net product revenue for the fourth quarter was $18 $7 million as compared to the fourth quarter of 2020, our net product revenue decreased by 15%.
<unk> net revenue increased by 14% as compared to the fourth quarter of 2000 $20 million to $7.8 million.
And various performance in the quarter was significantly affected by the production and supply issues previously discussed by you.
Despite the supply challenges the demand for out of ore at the patient level continues to grow and we closed the fourth quarter with significant unfilled orders, which it filled would have led to significant revenue growth for out of era, we look forward to bringing antevert back to its strong revenue growth trajectory for the remainder.
2022 and beyond.
And vaccine that revenue increased decreased by 24% as compared to the fourth quarter of 2020 to $6 $7 million. This decrease was mainly attributable to a decrease in sales volume shipped to customers as a result of a shift in managed care coverage and coupon copay assistance modestly.
Offset by more favorable pricing.
Let me now share some highlights from our financial statements on slide nine.
Our gross profit margin was 75% in the fourth quarter of 2021, and gross profit margins were negatively impacted by approximately $700000 of by Juba export sales, which were recorded in the fourth quarter and were sold at cost.
Total operating expenses of $49 $3 million for the for the fourth quarter of 2021, including approximately $4 $5 million of severance related expenses attributable to the exit of a former executive.
Absent these severance related expenses, our total operating expenses were in line with our expectations as we continued to invest in out of era and infection.
Now that we have announced our divestiture of buyer character Rx. We can provide some further details regarding our $60 million cost reduction initiative that we started last year.
Vital care accounted for approximately $20 million of operating expenses in 2021 that will no longer continue once it's divested completing our cost reduction initiatives.
As we move forward the variable cost of using vital care services under good Rx ownership will be included and managed together with our marketing and selling expenses. As you noted we intend to provide earnings guidance in Q2.
Net cash used in operating activities was $39 $6 billion for the fourth quarter and as of December 31st 2021, we had $65 $1 million in cash.
I'll now turn the call over to our Chief commercial officer, Mark Glickman to provide more detail around our commercial progress Mark.
Thank you James I'd like to Echo Hughs remarks, and reiterate the therapeutics M. D is transforming itself as a commercial organization. We are confident that with the changes we are implementing we can achieve the goals that you described we believe we are on the right track to capture the full value of our portfolio of products and ensure access to the.
Riders in patients who depend on them.
Turning now to our performance metrics and you can see.
On slide 11, despite the revenue shortfall total prescriptions for <unk> rose by 11% quarter four over quarter three in 2021 and saw a 57% increase from Q4 2020.
Absence of supply challenge the quarterly increase would have been greater.
Bottom line is that patients and providers want anniversary and we are confident that as we manage and address these challenges we will be able to fulfill the increased demand.
Moving to slide 12, you can see the steady growth in momentum since our launch we added 1300, new prescribers to our base in the fourth quarter. We are pleased that the initial changes we made last year with regard to prescriber targeting has had an impact and believe that the even more focused targeting plans. We are currently.
Implementing to drive these numbers, even higher I'll have more to say about these growth accelerators and how we are realigning our commercial efforts to capture more value in just a moment.
Moving to victory as shown on slide 13, we saw a slight decline in quarterly T Rx, which reflects the greater focus on advair. During the period on slide 14, you can see that the same is true for by Juba in terms of Q4, total prescriptions, which were flight flat slightly down.
As a company, we opted to shift our focus to add a barrel last quarter. So the fact that both inventory and buy Juba held their own for the most part despite the lack of support is meaningful it is.
Tells us that patients and providers are loyal and remain committed despite the pullback of investment in these two assets. It further gives us confidence that as we continue to make progress and focus on maximizing the value of all three products in our portfolio that we will begin to see accelerated growth across the product mix.
A key takeaway here is that we're still driving demand for our products and we believe we are positioning ourselves well to take full advantage as we work through the supply challenge.
Keep in mind there.
Never been an issue of quality with advair or supply in the marketplace. It is a high quality unique easy to use product with a low dropout rate and high patient satisfaction.
So let me now turn to our growth acceleration plan and the major overhaul of our prescriber targeting efforts that was just implemented as I described last quarter. There are three key factors that I believe will drive our long term success first we must continue to prioritize the patients and health care providers.
Our culture of Accountability is essential and third we must become a performance based organization with clearly delineated objective that ultimately lead us to achieve our goals of becoming the best in class Women's health care space to achieve this we are concentrating on targeting focus and alignment.
Since last quarter, we've made significant headway to transform the T X M D commercial effort from the inside.
We studied and map the decile of our target prescribers and assess various productivity measures.
This exercise provided critical information that now guide our commercial strategy.
This slide shows how we are overhauling the entire approach to sales targeting across our portfolio of change that we will we believe will lead to an expansion of our prescriber base. As you can see we are now singularly focused on the high decile market riders, meaning we are selectively targeting those health care providers with the highest potential.
This represents a shift from the past and one that we believe will help us accelerate growth among all three products for the first time.
Capturing this untapped potential of prescribers is our top priority from a commercial standpoint, our activities now better aimed at identifying those opportunities that will enhance our portfolio.
Slide 16 highlights this new focus we continue to support our culture of accountability and you can see the granular level of detail that we're bringing forward and retooling our strategic commercial plan. We performed an exhaustive audit of how we're approaching sales and how we may do this more effectively we look closely at the difference.
There is overlap in segments, among the prescribers of contraception versus menopause products. These metrics allow us to create a highly prescriber directly to pulp approach. We now know exactly where our season professional womens health specialists should be focusing their attention.
Our newly created commercial plans have been designed to our teams in the field can be more effective in optimizing efforts across the product portfolio.
By this I mean, we are still a young company and we're now working to put the full strength of our committed sales force behind each of our three products rather than see our portfolio in aggregate. This new focus is designed to allow us to distinguish our work in the metabolic space in a very new and weight and Reenergize the brand.
We are also ramping our coal plants with more aggressive benchmarks and realigning territories.
As shown on slide 17, we are ensuring that our sales specialists are in the right territories and in front of the right prescribers, what you'll see on this slide is that a vast majority of our territories are now in a proper alignment and in the right locations to maximize productivity, we have painstakingly gone through these exercises and.
We are confident that with this new commercial plan in place we are now positioned for success.
Turning now to our marketing strategy is swollen shown on slide 18, we have put a lot of effort into owning our marketing messaging and ensure that the differentiators of our three products are well understood by both healthcare providers and consumers.
And <unk> is positioned to play a significant role in the contraceptive market as the only long lasting procedure free patient controlled option for women, providing pregnancy prevention for an entire year.
Importantly, our market research now shows that total brand awareness amongst HCP has increased to 87% from just 67%.
We will continue our consumer focused celebrity partnership with Whitney Cummings content, featuring Whitney has performed well above the industry click through benchmarks with a focus on social media, including Instagram Snapchat Pitcock as well as online video such as Hulu and display.
We will focus our marketing initiatives on Hcp's menopause brands to increase their preference based on the unique product differentiators from vaccine, we emphasized that as the only ultra low dose vaginal insert that work as early as two weeks for the treatment of moderate to severe dyspareunia a symptom of veeva.
And for my Juba. It is the only FDA approved once daily combination bio identical hormone therapy to treat moderate to severe nasal motor symptoms.
As we work to execute our commercial strategy. We believe we can grow and bear our long lasting procedure free reversible contraceptive for women as well as our menopause products into category leaders.
One final note, we held our national sales meeting just last week when we rolled out these new plans and I truly believe at the Therapeutics MD team has embraced this new vision as a company and a fresher more focused roadmap for going forward.
We know we have great products that patients want and need we are working tirelessly to address the recent challenges and to provide ample supply to meet rising demand.
I'd like to thank you for all your time and listening operator, if you could please go ahead and open the call for questions.
Thank you.
You will need to press star one on your telephone.
Try your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Louise Chen with Cantor Your line is open.
Hi, Thanks for taking my questions and congratulations on all the progress this quarter. So I had a few questions. First question I had for you is how will the new management team do things differently than the prior one.
And then I wanted to ask you how we think about anniversary sales for the first quarter 2022 or if you can give us a little bit more Colorado, what they would've been demand sales would've been in fourth quarter of 'twenty. One. However, whatever you can say it would be helpful. And then the last question I had was just on the sixth Street loan it sounds like Youre going to.
Use of $120 million of the 150 to pay it down and then you're going to refinance the debt. So could you give us a little bit more color on exactly what the numbers look like and then how much cash you're going to have after June this year. Thank you.
So thank you Louise appreciate the opportunity for the question, let me take the first and then I'll have James gave you some thoughts as it relates to the second and third question I think there was a fourth snuck in there, but let us make sure we get to your question before I answer it.
So.
How is this management team different I think the first thing I want to say is we're not really looking to the past we're looking to the future here and everything is very forward looking I think the tone was established.
On the announcement last quarter of my new appointment and slide number one pulled everything you needed to know it really focused on four immediate priorities and this as a company frankly didn't needed for immediate priorities. So let me state that clearly and categorically. That's why methodically went back to them because it's the notion of accountability what am I.
And the management team accountable for standing up and delivering and I think the second concept. There is this is a management team that is devoted not to over promise and therefore under deliver so I think I'd like to point you to that set a philosophy first and I rest upon the immediate priorities as my my point of focus of what this management team is doing going.
Forward as it relates to the second and third question James.
Yes sharp here thanks.
So on the question of what Anabelle ourselves would have been in the fourth quarter. There was probably at least 6000 rings or so.
We could've probably delivered an additional demand may be even more its hard to hard to do total total what if but.
That that would've been a much better performing quarter for us and then as we move into first quarter 2022.
Is it in to really say much until we have a little bit more certainty on our supply situation, which is very fluid. We are selling every rig that we are that.
That we produce so well have a little bit more to say I think on that.
And on the full year and when we give guidance.
In Q2, and then to take your final question on the refinance it Yeah you have it you have it pretty right.
We are going to take the proceeds from the vital care divestiture and use that to refinance our sixth street debt and and size the amount of the refinancing to ensure that we have.
Enough cash for the foreseeable future beyond that but we have a bunch of different stages, we have to go through.
To get to that point and once we once we complete those transactions will give some more guidance on our cash flow forecast and runway.
Okay. Thank you.
As a reminder to ask a question at this time. Please press Star then one on you touched on the telephone.
Next question comes from Douglas Tsao with H C. Wainwright Your line is open.
Hi, good morning, Thanks for the question.
Just trying to walk through and understand the manufacturing issues with out of there. Obviously you had a little bit of a bottleneck as last quarter and you're you're committing additional resources I guess you know what's your confidence in terms of getting to its manufacturing stack resolved and if you're not would you be able.
To meet your anticipated sort of demand a year or two years down the road because obviously I think you have great ambition for the product and so is it just a matter and in that case, just committing a lot more resources towards making it in and it just might be a slightly lower gross margin product.
Yes.
Doug. Thank you for the question and I think this is a vital question. So I appreciate you putting it out there. So let me let me phrase the first part of your question. This way can we manufacture enough, particularly without FDA approval and let me frame. It. This way we've implemented a number of changes that we believe will allow us to manufacture sufficient.
To meeting demand starting around the second quarter, even without the approval of the FDA supplement our ability to meeting demand increases significantly if the FDA does improve the supplement but to be clear our topline twenty-two growth assumption does not assume FDA approval of the innovative manufacturing supplement.
Approval would only accelerate.
Our ability to achieve this goal now let me take an opportunity to highlight with you five actions that we've undertaken since Q4 'twenty one.
There are ongoing and I think will significantly reduce our battery objections, and therefore improved capacity.
Number one the resubmission to FDA, a revised request of the specification revision, we anticipate that response by the end of Q2.
Second we're implementing additional environmental controls a storage of certain intermediates.
Third we have significantly reduced human error is a contributing factor to batch rejection now down to low low single digits.
Fourth we significantly increased the manufacturing yield per batch by approximately 15% to 20% and then finally, we've added resources at our contract manufacturer to increase the number of batches made per month. So taken together. We believe we really are getting into a far stronger position from.
Q2 onwards.
Okay, Great. That's really helpful. And then just I guess, a second follow up question.
Obviously, you're engaged in pretty significant sort of repositioning of the commercial organization I guess, just you know.
Your commitment or sort of how much are you limited by their commitment to sort of get into EBITDA profitable rather than just doing a full reset and just not having that sort of.
Hangover your head and just being able to focus on growing the portfolio in the near term. Thank you.
Well, let me start first about the commitment and then I'll go to Mark as to why we might have confidence in our approach and you're correct. I think reset is a is a very appropriate word we are resetting practically every element of our entire commercial approach and I'm terribly proud of the leadership team that Mark has assembled.
Yeah.
His entire team is devoted to that purpose in Cogs.
As it relates to full.
Full year, Mark do you want to give a view on why we have confidence on that and I'll come back on EBITDA.
So all the work that we had taken place in transitioning really to be focused on the health care practitioners has been completed so all the work all the effort was rolled out just two weeks ago February the week of February 22nd.
We did a pilot in trials some of the ACP directed initiatives a fourth quarter and they were quite successful. So at this point, where we stand we're growing we've seen as James had mentioned at really a tremendous volume growth and patient growth for demand on Advair. We now know and believe we have an vac.
And by Juba focus on the right physicians and our sales representatives are now in the right place to execute on that on that strategy and implement this new strategy so from it.
[laughter] perspective, we actually have everything that we need and we're investing wisely in our initiatives. So Hugh I'll turn it back to you. Thanks for that so just getting back on it either we're I think we're willing our way with expense reduction as stated.
Friction demand remained strong as mark indicated here and we see a successful path with supply and look forward to a full update in Q2.
Okay, great. Thank you.
Thank you and I'm currently showing no questions I'd like to turn the call back over to him.
For closing remarks.
Well. Thank you everyone. We appreciate your time, we look forward to updating you as the year progresses, we remain quite enthusiastic with what we shared today and the progress I wish you all a very good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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