Agile Therapeutics Inc. Q1 2023 Earnings Call

Speaker 1: You

Speaker 2: Good day, and thank you for standing by. Welcome to the Agile Therapeutics first quarter 2023 financial results conference call. At this time, all participants are in a listen-only mode. For the end of the speaker presentation, there will be a question and answer session.

Speaker 2: To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Riley, head of investor relations.

Speaker 3: Hello, everyone, and welcome to today's conference call to discuss our first quarter 2023 financial results and corporate updates.

Speaker 3: Before we start, let me remind you that today's call will include forward-looking statements based on current expectations, including statements concerning our financial outlook and financing prospects for the future, our outlook for the first half and full year of 2023, management's expectations for our future financial and operational performance.

Speaker 3: including our expectations regarding the market growth of TWERLA and our operating expenses.

Speaker 3: Our business strategy, our partnership with the FACTS system and its ability to promote growth, our product supply agreement with Nurex and its ability to make Torella broadly available to patients, and our assessment of the combined hormonal contraceptive market generally, among other statements regarding our plans, prospects, and expectations.

Speaker 3: Such statements represent our judgments as of today, are not promises or guarantees, and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forelooking statements.

Speaker 3: Further, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issue today, which can be found on the investor relations section of our website.

Speaker 3: For more information concerning risk factors that may affect the company, please refer to our filings of the SEC, which are available through the Investor Relations section of our website. We undertake no obligation to update for the spoken statements except is required by law. The information on the case is not intended for promotional purposes and not sufficient for prescribing decisions.

Speaker 3: Chairperson and Chief Executive Officer.

Speaker 3: Following our prepared remarks, we'll open the call to your question. I will now turn the call over to Al.

Speaker 3: continue to grow at double digit rates, have us on the path to achieving our 2023 financial goal of net revenue in the range of $25 to $30 million.

Speaker 3: I want to begin by reviewing Turalis First Quarter 2023 Performance and providing some commentary on our outlook in these areas.

Speaker 3: First, twirl of demand. We are excited about the growth in twirl of demand that we're seeing across all our channels.

Speaker 3: We think this demonstrates that we're making good progress penetrating our markets and that patients are continuing to choose twirl up.

Speaker 3: For all of total demand for the first quarter, as reported by Symphony, was 45,036 total cycles, a 20% increase from the fourth quarter of 2022, a single quarter record.

Speaker 4: Retail demand.

Speaker 4: which is our most profitable channel, was 30,576 total cycles in the first quarter of 2023, of 20% increase from the fourth quarter of 2022.

Speaker 4: Non-retell the man.

Speaker 4: The first quarter of 2023 was 14,460 total cycles.

Speaker 4: also an increase of 20% from the fourth quarter of 2022. Throughout March and April , we've consistently seen new weekly highs for 12 demand as reported by Symphony, and we expect...

Speaker 4: also an increase of 20% from the fourth quarter of 2022. Throughout March and April , we've consistently seen new weekly highs for 12 demand as reported by Symphony, and we expect our telemedicine partnerships.

Speaker 4: Further advance the retail channel, the man beginning in the second half of 2023, as Trolla becomes the only path to be offered by Norex, Artner Pharmacy.

Speaker 4: the retail channel, the man beginning in the second half of 2023, as TOROLA becomes the only pass to be offered by NIRAC's partner pharmacy. Our vision and ambition

Speaker 4: Is that our retail partnerships can potentially accelerate the growth in the retail channel like the fact that it's accelerated the growth in our non-retail channel?

Speaker 4: Now turning to net revenue and factory sales.

Speaker 4: First quarter 2023, NetRavenew was $3.8 million, which was approximate as same as the NetRavenew reported in the fourth quarter 2022 and then lying with our expectations.

Speaker 4: Next, revenue results.

Speaker 4: for the first quarter, 2023, reflect that factory sales quarter on quarter due to wholesaler work down of inventory levels, which rose at the end of 2022 and are slightly higher and the slightly higher mix on our non-retail sales, which represent higher growth to net reduction.

Speaker 4: Back restails for the first quarter of 2023 as reported by our wholesalers for 43,446 cycles.

Speaker 4: compared to 43,340 total cycles for the fourth quarter of 2022.

Speaker 4: Oldslayer inventory decreased in the first quarter by 24%, but the whole solar-larve purchasing port patterns realized in April 2023.

Speaker 4: Slingling, we believe that channel inventory levels have now normalized. We would expect to see both net revenue and factory sales to grow at higher rates moving forward. Now gross margin. Another encouraging sign for Agile is that we continue to make progress in generating gross profit.

Speaker 4: In the first quarter of 2023, we generated gross profit of about $1.8 million or a gross margin of 47%. Compared to only $234,000 or a gross margin of 13% in the first quarter of 2022.

Speaker 4: We believe that we have the ability to increase this growth over the rest of 2023. Now on to operating expenses. Non-GAP operating expenses or OPEX for the first quarter of 2023 were $8.5 million, and 8% decrease from the $9.2 million reported for both the third and fourth quarters of 2022.

Speaker 4: We are proud of our ability to grow Toronto, or to grow up, while effectively managing our OPEX levels. Our goal is to continue to manage OPEX, be in line with the first quarter of 2023 results, which would lead...

Speaker 4: to a significant reduction in our full year 2023 op-X compared to the 45.5 million reported for the full year of 2022. Looking ahead to the second quarter of 2023, we expect to see meaningful quarter of recorded growth in net revenue, faculty sales, and demand while continuing to manage our op-X levels.

Speaker 4: This is the formula that is driving our confidence and our ability to achieve the 2023 net revenue in the range of $25 to $30 million.

Speaker 4: We believe we will continue to produce results by delivering on our business plan that is designed to allow agile to thrive, not just survive by first focusing primarily on our five key states.

Speaker 4: Second, growing non-retail prescriptions to our partnership with the FACTS to FACTS.

Speaker 4: and focusing on the Planned Parenthood.

Speaker 4: Number three, growing our retail prescriptions for our telemedicine partnership while also increasing the effectiveness of our sales force. In the past, you've heard me allude to our business plan and its emphasis on leveraging external partnerships that allows us to keep our internal infrastructure lean and efficient.

Speaker 4: While this plan has demonstrated the ability to grow twirla while keeping our op-X manage, we believe it is also the demonstrated our credibility as a true commercial partner. We believe our ability to launch and consistently grow twirla makes us an effective potential partner.

Speaker 4: We ended the first quarter of 2023 with $4.4 million cash on hand. In addition to our ATM or at the market arrangement, we will continue to evaluate all available options to finance the company and continue to explore opportunities that could potentially accelerate our timeline to generate positive cash flow, including exploring business development opportunities. We closed out our first quarter 2023 with a gap net loss of $5.4 million or $5.91 per share compared to a net loss of $10.4 million.

Speaker 4: Non-GAP net loss was $7.1 million or $7.76 per share for the first quarter of 2023 compared to non-GAP net loss of $11.8 million for $188.91 per share for the comparable period in 2022. The non-GAP results reflect the excuse of $1.7 million in other income for the first quarter of 2023 and $1.4 million in other income.

Speaker 4: for the first quarter of 2022, resulting from the fair market value remeasurement on our warrant liability. We acknowledge that we're operating in very challenging times in the capital market. The first quarter of 2022, resulting from the fair market value remeasurement on our warrant liability.

Speaker 4: We feel fortunate to be a growing revenue generating company and believe that puts Agile in a more advantageous position to execute on our business plans. We believe that our results for this quarter demonstrates that our business plan is working and that we're making good progress in achieving our goals and establishing Agile.

Speaker 4: in the contraceptive marketplace by growing twerla and moving towards positive as flow generation.

Speaker 2: We now let's give our covering analyst a chance to ask us any questions. Operator, you can open the lines. Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone.

Speaker 2: and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster.

Speaker 5: I have several questions. What obviously jumps off the page is this growth of revenue and demand and scripts that we see despite reduced OPEX quarter over quarter and certainly much lower year over year. I think you said in your comments you hope to keep that approximately flat going forward through the year despite pretty ambitious revenue growth. Did I hear that right?

Speaker 4: You know, we think we've got our arms around our, you know, the model that we want to execute on there. I mean, you see we're, you know, generating significant growth, you know. Now I think, I believe, five quarters in a row, so it's not a fluke. And we think we figure out the way the model should work and what should be on our books versus our partner's books. So yeah, that's what we want to do. We want to kind of try to hold steady here, you know, so that in…

Speaker 4: I think we could do it. I think we could do it. We're pleased to put up an 8% decrease from the first quarter, I'm sorry, from your end in the first quarter. So we wanna try to hold it from here.

Speaker 5: So, it sounds like these outsourced, if you want to call it, or partnerships models, clearly there's some margin in it for them, but I'm trying to think about just the actual work of helping grow demand. You have your Salesforce out there and the traditional retail channel, but when you think about telemedicine...

Speaker 5: and NERKS, NERKS, how, you know, what's the flow of demand there? Are those patients coming in looking for anything and some algorithm or active engagement from the NERKS side potentially pushes them towards your product and also in that channel? Can you remind us what is your relative?

Speaker 4: specialty pharmacy. You know, I think we mentioned before to you and everybody on the call that we have our strategy. A lot of times pharma companies said we're going to have a hub or a specialty farm that's our favorite. And a lot of times the local doctors want to use their local specialty farm. So Amy is building that work.

Speaker 4: First of all, national players like Sterling and a number of regional players. So we, rather than putting all our eggs in one basket, so that's especially warm. We're doctors right to script. They want to make sure the paper's filled out right. If they're lighter than medical, the staff need to be done.

Speaker 4: And then the doctor, at that point, you know, for a NuStart patient, you know, more than likely they're going to count for them on all the methods, all right, so including now a patch. So we are their preferred patch, you know, so if they're going to offer a patch, it's going to be the Agile patch Twirla. So you know, we are, you know, unique relationship with them that with its partners, a true partnership. So the doctor, let's say, writes the script for Twirla, they have a pharmacy, no different than an online pharmacy, so the patient gets a choice, if you will, they could have it sent to their home through their online pharmacy.

Speaker 4: or they can have the script around the CVS. So back to your question, the way those scripts flow through, these doctors are going to be more than likely capturing symptoms like a retail doctor. So in this case, you're going to have optics and visibility. And our reps, if they have relationships with doctors, we know who they are. We try to serve with them.

Speaker 4: You know, but these doctors generally don't have offices the way we think of offices. They sit in a unique situation online, you know, and just counsel to patients like that. So they don't really have an office the way we think, an exam room and things like that. They're really doing online services. So that's the way the patients flow. So beginning, you know, beginning in the second quarter, May 1st was our kind of go live date.

Speaker 4: Toral's the only customer offering. And we're expecting that that business kicks off in this quarter and we expect that really augments our growth and the second half of years I mentioned.

Speaker 5: like you are a traditional office-based position.

Speaker 5: I guess what is the model for them being educated is that done? Are they ready to go and are they? How are they determining what sort of patient is best for for for for for our church ally mast

Speaker 4: Yeah, great question. We do train them. So like Amy, Amy, you know, first and foremost trains.

Speaker 4: You know, they're pharmacists and they're marketing people. We do joint marketing. So Amy, you know, in the home office people called, you know, or has already trained them up. You know, for partner, Kimberly Wellen, you know, who's our reimbursement and our advocacy specialist talk about, you know, talking through how to handle these letters of medical necessity.

I'm a private seminar with Dr. Corner and Amy and Kimberly. And then from time to time we'll check in with them. Any questions? What are you hearing? So it's a lot more home office driven if you will.

So that's kind of the way that the organization rolled it out and you know, they're excited I believe I believe and this is the first time they've had a formal relationship with a brand and also I think this is a really important turning point for that their model, you know clearly interest a better margin, so it's they're excited. They're excited. We're

We're excited, they're excited, so this is a win-win for both companies.

Oh sure, oh sure. I mean, this is I mean, I've been involved with her CEO . He's he's a super I believe we this is a top to top. It's important to both organizations. I mean, we want to prove principle here. And you know, I just want to clarify, but that's the my knowledge that the the only brand they've ever was well there certainly in contraception. They do other vertical, you know, but I believe this is the first one ever and it's a little bit more complicated. Why do you think they're dispensed in our you know, so they, you know, but that's why you know, film out these forms and all that stuff that you know, was important for them to understand it, but also understanding clinically. What's different about our patch versus the other patches out there. Sure.

And I'm sorry, and should we not think that there's a, is this gonna take a few months to sort of ramp up, especially with the adjudication of letters and articles, the smart second half thing than a second quarter? Yeah, that's why we're guiding. I think we wanna kind of walk before we run.

You know, the other thing that I think is exciting for us, that 1 last thing I maybe tell dimension since they have a pharmacy that they actually, you know. Despense out of they buy product from us in this case. It doesn't go through the wholesalers. So, you know, which is, you know, nothing wrong with the wholesale is we make a better margin. People buy directly up. So.

a hotel organization comes directly from the manufacturer. So we pick up, we pick up margin right there, even though they do get a margin. So, you know, so I'm clear they do get kind of a, you know, a whole margin, but it's, you know, it's a lot more efficient, you know, kind of just going directly to them. So we pick up some margin. So it's the same rank in order or in commercial is always first, you know, Medicaid. In this case, the effect of the business won't flow through there. So it's just kind of, you know, gives a couple of little extra points on the margin.

Oh, yeah, I think this is just a little bit of a speed bump. We, you know, the reason is, it's directly at our sales and our volume. And as I mentioned in there at the mix, proportionally the effects of business, you know, kind of, you know, was more of a piece of our business in the first quarter. So we kind of took a haircut on the gross and that begins in a business. And then it's close to tomorrow's a little bit. That set is not in there. It's a little, we make some allocations. And, you know, I think the good news is we broke through and we're generating margin. So that's that new graph we're showing is my now my favorite graph. I mean, hopefully you and everybody else see that we're closing in, we're closing in. If you look at the gap between those two, the red line and the green line.

That's the loss, if you will. So you look at where we started and where we are now, and hopefully you can see. My job is to make those lines cross-orange. So I need the green line to get bigger, and I need the red line to get smaller. So that's the goal. That's why we're so confident that this company's zooming in on cash flow, to generate cash flow. So that's what we're doing.

So, margins are important clearly in op-ex matches, but the best way to grow margins is your top line, right? So, I can't worry about the allocations. If I could shift to the non-retail channel, which you haven't spoken about as much on this call as in the past,

Can you just remind us, I can see in the data it's still going strong, but are we expecting any steps up or acceleration also in that business through this year as well? Are you expecting any new...

Planned Parenthood material wins to kick in this year? Yes, we're getting them already. So yeah, we've got it, getting them. Every Planned Parenthood that we mentioned at last where it has a different philosophy of how to bring on a new product. The first couple we got were what Amy was calling a complete conversion. They're like, all right, you're in, we're not gonna use any other product, any other patch. So it's kind of a, it was a winner take all situation.

Other ones tend to work down their inventory a little bit of competitive products. So we landed some big accounts that are more in a work down. So what that looks like, Warren, is what you're seeing in the Senate. You get IQ via, but more of a steady state. So.

So the answer is we keep picking up big accounts. They come online, sort of what I said before, you understand one player in a node, you understand one, so they all have a different philosophy of transitioning. So these newer ones tend to be more of a kind of a work down of their inventory versus kind of just one day you wake up and you got it all. You know.

I like the latter one, by the way, better. But once they work through that, let me interrupt, I'm sorry. Once they work through that inventory, though, are these, do they tend to be exclusive, that they're just doing tour-related? Yeah, oh, yeah. All roads lead to exclusivity. Yeah, they convert. They convert. But rather than convert, you know, like, so the hard part about the first model is you have to wait for that first purchase order. Like when are they going to get through that inventory, right? So Amy and I pace in the offices and, you know. But on the other one, you start seeing inventory being purchased as you go.

where we talk to everybody about, once Planned Parenthood come online, the local zip codes around them start writing more. So the patients flow into the community, the docs go in the community. So our market share in the retail segments are growing in the epicenters around these clinics, which is really exciting because clearly that's what the business brought.

So everything's working. Everything, Amy, your team deserves a lot of credit. All right. Well, that was my last question that you beat me to it on the spillover. So I think that does it for me. I appreciate all the patience. No, my pleasure, Mark. Thank you.

Everything that Amy received deserves a lot of credit. All right, well that was my last question that you beat me to it on the spillover. So I think that does it for me. I appreciate all the patience. No, my pleasure, thank you. All right, thanks.

Thank you. I would now like to turn it back to Matt Riley for closing remarks. Yeah I've heard it say I'll but I'll close it out so thank you. I think Oren takes everybody's questions and we lose people out of the queue so thank you Oren. Just kidding, great questions. Now I hope your takeaway from this call is that how excited we are about our consistent growth.

and our confidence that, you know, we've said it a number of times, this isn't a one and done quarter. We've showed you multiple, multiple quarters of consistent growth and consistent OpEx management, which gives us a lot of confidence that I can say that we feel we're going to have a strong quarter two.

know, our ultimate prize is the graph that Aron and I were just talking about, again, those lines are crossed. You know, the bigger we get our top line and the better we do at OpEx Management, we can deliver, you know, the ultimate prize for us, which is to generate positive cash flow at its business on the backs of one brand.

line folks and I really appreciate everybody's support, the support of our partners that we've mentioned, but some we don't mention enough. Corium and Cineos, for instance, are just been bad with business partners to us. So we have established a business model. We have a lot of confidence in so you should expect growth in the second quarter and expect that this will keep them.

This does conclude the program. You may now disconnect.