Q2 2023 Agile Therapeutics Inc Earnings Call
Okay.
Good morning, and welcome to the agile Therapeutics second quarter 2023.
Natural T cells conference call.
Please note today's event is being recorded.
I would now like to turn the conference O'brien.
Head of Investor Relations.
Hello, everyone and welcome to today's conference call to discuss our second quarter 2023 financial results and corporate update.
We start let me remind you that today's call will include forward looking statements based on our current expectations.
<unk> statements concerning our financial outlook and financing prospects for the future our outlook for the second half of 2020 for management's expectations for our future financial and operational performance, including our expectations regarding the market growth of <unk> and our operating expenses, our business strategy, our partnerships with them.
Faxes and seniors and their ability to promote growth.
Our relationship with <unk> and its ability to make 12 are broadly available to patients and our assessment of the combined hormonal contraceptive market among other statements regarding our plans prospects and expectations.
Such statements represent our judgment as of today are not promises or guarantees and may involve risks and uncertainties that may cause actual results to differ from the results discussed in forward looking statements.
Further during 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 issued today, which can be found on the Investor Relations section of our website.
For more information concerning risk factors that may affect the company. Please refer to our filings with the FTC, which are available through the Investor Relations section of our website.
We undertake no obligation to update forward looking statements, except as required by law.
The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions.
Joining me on today's call is our Kumari agile therapeutics chairperson and Chief Executive Officer, and Amy Welsh Chief Commercial officer. Following our prepared remarks, we'll open the call to questions from our covering analysts.
Now I'll turn the call over to al.
Thanks, Matt and thank you for everyone joining us this morning.
Personally very excited to share our quarterly results with you and that is in part of the reason why this is our first quarter, we're holding our call in the free market.
We think 44% growth in our net revenue to $5 $5 million.
In the second quarter combined with our double digit growth in demand, mainly its a significant quarter for both agile and squalor.
We believe this affirms our confidence in our business plan.
Our progress towards the goal of generating positive cash flow and achieving.
2023, net revenue in the range of $25 million to $30 million.
I'm going to kick things off.
Reviewing the performance metrics from the second quarter 2023 that habits all excited.
Amy will then discuss why we are confident in our belief, we can sustain momentum into future quarters.
Overall demand for the second quarter was 55687 total cycles, a 24% increase from the first quarter 2023, and another single quarter record.
Retail demand as reported by Symphony was 35682 total cycles in the second quarter of 2023 seven.
A 17% increase from the first quarter 2023.
The retail channel is our most profitable channel and the retail demand accounted for 64% of the second quarter 2023 demand.
Non retail demand for the second quarter of 2023 with 25.
Five total cycles and increase of 38% from the first quarter 2023.
Our non retail demand is comprised of data from symphony as well as our wholesalers.
Second quarter 2023, net revenue was $5 5 million, which represents a 44% increase from the $3 8 million reported for the first quarter of 2023 and 159% increase.
From the $2 1 million reported for the comparable period in 2022.
Factory sales for the second quarter 2023, Agra reported by our wholesalers.
61770, <unk> total cycles compared to the 43446 total cycles reported for the first quarter 2023 up 42% increase.
As discussed last quarter on a year to date basis.
I think channel inventory has now normalized.
We expect to see both net revenue and factory sales continue to grow in the second half of 2023, driven by our growth in demand and the execution.
Our business plan that Amy will describe.
Gross margin along with the growth in our net sales and demand.
We continue to make progress in generating gross profit.
In the second quarter of 2023, we generated a gross profit of approximately $3 2 million or margin of 58% compared.
Compared to the $1 8 million or gross margin of 47% in the first quarter of 2023.
We think gross margin is becoming meaningful part of our progress and we believe we will continue to see improvement in the second half of 2023.
Operating expenses or Opex for the second quarter 2023 were eight.
$8 3 million.
A 2% decrease from the $8 5 million reported in the first quarter of 2023.
Before Amy takes over I would like to comment on a few other of our financial results.
We believe also demonstrate continued progress of our business.
Cost of goods sold or Cogs, which represents direct and indirect costs related to the manufacturer of <unk> sold was $2 3 million or 42%.
Second quarter of 2023.
<unk> to $2 million or 53%.
The first quarter of 2023.
We ended the second quarter of 2023 with cash on hand of $2 $8 million.
In addition to our aftermarket or ATM arrangement will continue to evaluate all available options to finance the company.
Our GAAP net loss for the second quarter of 2023 was $3 $8 million for $2 15 per share for the second quarter of 2023.
Compared to a GAAP net loss of $5 4 million or $5 91 for.
For the first quarter of 2023, and a GAAP net loss of $5 2 million.
For $57 29 per share for a comparable period in 2022, respectively.
non-GAAP loss was $5 5 million.
Our $3.10 a share for the second quarter of 2023.
Compared to a non-GAAP loss of $7 $1 million.
Or $7 76 per share for the first quarter of 2023 at $12 $2 million or $135 46.
<unk> per share for the comparable period in 2022.
non-GAAP results reflect the exclusion of fair market Remeasurement of warrant liabilities, which resulted in an other income of $1 $7 million in the second quarter of 2020 $317 million in the first quarter of 2023 and $7 1 million.
In the second quarter of 2022.
We set a single quarter record highs and demand net revenue.
Factory sales all by reporting another quarterly decrease in operating expenses.
We are beyond pleased with our second quarter results.
Job is not done we continue to ask ourselves, how we can accelerate our growth.
I will now hand over to call to Amy to answer that question by explaining the business model. We have built and are designed to deliver future growth across the board.
Thanks, Joe and Hello, everyone.
Our whole organization is energized by our results from the second quarter of 2023 I.
I would like to take a few minutes to explain why we are excited and answered. The question can we reach our 2023 net revenue guidance of $25 million to $30 million by sustaining our current momentum.
<unk> increased growth in future quarters.
And holding our operating expenses at current levels.
We think the answer to this question is yes, because of the structure of our commercial business model and the continued receptivity towards trailer.
Which is now approaching 15000 cumulative prescribers since launch.
We are pursuing a business plan that is built on a commercial platform that we believe is scalable without adding a lot of fixed costs let.
Let me explain further.
First our business plan focuses on driving trailer in the five states that are estimated to reach over 45% of the U S women.
18 to 24 and have strong reimbursement profiles.
This targeted geographical strategy maximizes, our salesforce spend and the areas, we believe have the greatest opportunity and potential for growth.
And second our commercial platform is based on collaborations with Daniels and impactful that had been structured.
To minimize fixed cost and allow us to scale up or down as needed.
As well as the line are key partners interest with ours, so that our partners succeed when agile <unk> succeed.
We have pursued by converting what we would typically be considered fixed cost for a company like agile and to variable cost.
For example through our partnership with the fact that second quarter 2023, non retail demand grew 38% from our first quarter of 2023.
Rather than allocating the time resources and dollars to build and maintain our own non retail sales force, we partnered with the facts as to drive non retail growth.
We identified them as experts in that area.
The fact this is compensation is a combination of a fixed fee along with performance based incentives, which helped us keep quarterly operating expenses at a stable rate without sacrificing growth potential.
We have taken the same approach with video which provides our retail sales force.
We believe we can now build out this commercial platform and drive additional taller growth by expanding our distribution channels, which we expect will increase access to twilla without incurring additional significant operating costs.
So this is why we remain confident that we can achieve net revenue in the range of $25 million to $30 million, while holding our operating expenses relatively steady.
Now I would like to take a few more minutes to provide some additional details on our plan to build out our distribution channel.
In the first quarter of 2023, you saw us announce new relationships designed to further expand our commercial reach and drive trial of groups.
And the retail channel, we focused on collaborations to grow trailer through telemedicine platforms.
We will expect to contribute to second half 2023, net revenue and retail channel growth.
Advancing <unk> availability through <unk>.
<unk> health and <unk> are all part of our strategy to sustain future growth in the retail channel.
We are also focused on growing the non retail channel.
Pros availability through our relationship with FCA Women's health and end cap are planned to augment abaxis efforts and contribute to further second half 2023 non hotel growth.
Their expected contributions are a large part of why we are confident and sustained growth across the board in the second half of 2023.
Strong focused external relationships arent integral part of our business plan and we expect to continue to explore collaborations that can positively impact our business allow us to expand without incurring significant cost and promote a growing sustainable fiscally.
<unk> business.
We would now like to give our covering analysts the opportunity to ask questions.
Operator, you May now open the line for Q&A.
Thank you.
A reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Okay. So operator, while were doing that I want to introduce somebody else in the room. We also are joined in the room by Scott.
Incoming CFO .
CFO I think most of you know that Scott was a big part of the company. When we took the company public. So we're thrilled to have them back. So I just want a Laredo is also in the room and we'll be transitioning that a job in the next week or so.
Alright, Thank you alright.
Alright.
Question comes from the lineup Oren <unk> from H C. Wainwright. Your line is now open.
Thanks, I have a <unk>.
Bunch of questions Congrats on.
Nice upside this quarter.
And reiterating that guidance.
I guess first you just mentioned Scott on the call welcome back Scott.
I'm curious what you found compelling about this opportunity to return to add Jeff and I'll ask about the fundamentals.
Thanks, Lauren good to connect with you.
Okay. As you know I was part of some really good productive years here at agile and.
Look it's a great team there is a great group of people here the opportunity presented itself for me to <unk>.
Back and I'm happy to be here and continue to.
I'll build on that progress that the company has been doing.
Obviously, it's a pivotal time.
Alright.
Thank you good afternoon.
Can you hear me.
Yes.
Ed.
Okay.
Let's talk about <unk>.
We're five weeks into Q3, and I know you don't give quarter by quarter guidance, but since you reiterated.
The top line guidance can you just talk about what sort of trends, you're seeing I guess quarter to date sequentially.
And gross I mean, I think we've seen over 20% total cycle demand.
Couple of quarters in a row and I'm just wondering can that trend continue.
Or do you expect some lumpiness.
Okay.
But so are you stealing your thunder for my closing comments.
There is nothing we are seeing.
Okay that will answer Rob there's nothing we're seeing in July that doesn't get us any.
Any concern in fact, we're ecstatic with July the momentum we've seen in the second quarter continues to accelerate into the third quarter. So far with the as you said about five weeks since then.
So.
Yes.
So fingers.
Fingers crossed the rest of the quarter concerns like this one but we're not surprised I mean, we would expect that the model that Naomi Bill walked you through.
We would expect to continue to see momentum and that's why we reaffirmed guidance and Thats why we are bullish on the year.
Alright.
Yeah.
One of the Big things you talked about in the past is how this success in the non retail channel, particularly.
Planned Parenthood spills over.
The retail channel, which is obviously the most profitable as you highlighted.
<unk> seen nice sequential demand as well near 20% in the retail as well I think.
Are you seeing that spill over or is this just traditional boots on the ground driving retail demand or that any telemedicine channels.
I'll turn it over to Amy to expert Orange, you'll have a better answer.
Hi.
Thank you for the question, Yes, we are we.
We saw that spillover as early as third quarter last year and every time that we add another account or we do some analytics in that state and we're confident when we see a few months after looking into it that we see the fellow or continue it's the model that we had talked about a few times arent aware. These physicians that are planned.
<unk> has more than likely also have a.
Private or in a group practice.
The confidence that they start to gain on <unk> within the planned parenthood structure. They are bringing over so yes, we continue to see the spillover. So again when we get a new account again, we're confident that the non retail growth will go into the retail growth.
Alright.
Yes.
I guess one of the new things you announced this quarter is the non 340 b non retail accounts with SBA and I think there was another one in there then I might've missed the name.
Yes, you said Thats an important contributor for a second half Big picture, how big a channel is that.
As an opportunity how many more accounts out there like that and remind us where do they fall sort of on the profitability of spectrum of your multiple channels.
Yes, so I'll do profitability, then maybe I'll just give you kind of an overview and Amy can talk you through FBA and specifically, but.
Profitability, if we look at kind of our profitability yield commercial commercial.
Cycles are still clearly our best.
Next in the pecking order would be <unk>.
Then we would put our Medicaid business and then the faxes business Thats, the GPO business kind of that's our Cascade. So <unk>, it's closer to commercial which is a really great thing for our satellite.
I mentioned this to our team I said when you look at California, California is.
The bigger bigger than the country of Germany, where GDP perspective, so we landed not only the biggest private account in California, a claim that.
The biggest the country itself.
We want to take you there.
And I think I'll take the part on how.
How much potential is there with that one and the other reporting the account.
<unk> is a phenomenally sort of all count.
A great Driftwood LNG land, we just start at the partnership so.
There are no way.
States are just beginning to normalize so there's lots of growth with that single account, but strategically other non 340 billion talent other sort of hybrid count that sit in between the commercials for our cost structure and a planned Parenthood 340 <unk> cost structure.
That's part of our new back half of the year our strategy. So some more to come on that but we are very lucky to start within the Catholic SBA.
It's meaningful inflation wine and meaningful financially for us maybe explain how <unk> fits into that strategy, because the importance of <unk> and <unk>.
The GPL for Abaxis and enables that.
Their sales folks to sell.
And then deeper into colleges and universities and some government health services that are faxes may or may not have accounts with so M cap, we signed on and it's basically again, a volume opener like I was saying earlier in the call. We're looking for partnerships that can help us have access for Carla So Ed.
Cap serves for us in those two channels again that is colleges and universities nationwide as well as government health and human services statewide.
Okay.
I guess since we're talking about profitability and mix can you.
Talk about these are overall value.
Cycle trends.
I guess from last quarter this quarter and then going forward.
Obviously, both channels, they're all channels are growing so it's hard for us to really.
Hey guess what direction. This is going on but can you give us a big picture, how we should think about that.
Yes, I'll take a shot and then ill, let Amy comment, but just when you look at the second quarter versus the first quarter our mix.
Retail was stronger in the second quarter. So that's a good thing. So if you do like you like calculating the yield per script, our yield per cycle. So what did we yield per cycle at one off in the second quarter and that was primarily due to a more I call. It a favorable mix.
Yes, a quarter, that's more balanced on retail and non retail and then.
Just to put a footnote on FPA one of the things. We are realizing is that when we say non retail that's got some shades of gray in there to now because theres a lot of differences in pricing on there. So one of the things we're concerned with.
Scott what he came here call it a hybrid but thats, what we think of as FTE.
Somewhere in the middle So the mix is better the pricing is stronger which is great and then as you saw on our comments with gross profit we've outgrown some of the.
Fix allocations in Cogs, so the margins improving so all boats. So we have a better yield per script Oren, we would expect to see that continue if we can continue to deliver on the retail mix.
And then we would expect our Cogs, but continuing to improve as we just become more variable if you will in Cogs.
Outgrown those things so it was nice that as I commented in my talk to see we're throwing off a margin now.
<unk>.
Get it.
Pretty significant and Thats why we continue to see us zooming in on throwing off cash in this business.
So thats a nice thing so as our revenue grows our costs become more efficient and then we are continuing partnering model that Amy built hopefully that the opex state space relative to the ZIP code. We're in and that's why we can close the gap, but that's why we took the top line and also of our abilities.
Bart generating cash office business.
Yes.
Sure.
Every every every metric is looking better more and everything is kicking in nicely.
We actually anticipated my next question, which is just.
Can you just remind us sort of how.
Your fixed cost base on the Cogs side, the magnitude of that such that regardless of your weighted and even if you had a flat.
Value per cycle.
<unk> gross margin can grow just with sales as they increase.
What's your quarterly underlying fixed I guess coram commitment adversity or Bernie.
Yes.
To layer on to that alright.
And FX as you mentioned, yes.
Performance based incentives I'm, just wondering is that non retail channel grows.
Does that did.
Did they get a bigger piece of the gross to net.
Yes.
So let's to Cogs first.
Amy mentioned, we've reduced our clear if you look at one of the most impressive things I think on our P&L as if you look at our Opex spending six months ago. The first six months of last year versus the first six months this year.
I think its eye opening how much opex, we've taken off the board right. So that's the model Amy described but also our and we've been able to reduce our fixed cost internally that we were allocating in the Cogs, what we're allocating in the Cogs is people cost here that help run the business. So look we've been able to.
To reduce that too so the effort to reduce opex hit not only the SG&A lines, but it also hit Cogs. So the good news is theres not much allocations going forward and gone in the Cogs anymore. So.
There is a little bit but for the most part it's going to be variable. That's why we're signaling that that's going to continue to improve.
The reductions or the incentives Amy described in our relationships with people like of faxes.
Our offsets of sales so they run through the net sales line.
So that's.
Thats, where youll see that so.
The cheaper ones or the GTO business on <unk> relationship.
That's becoming less of a big portion of our mix as Amy brings on people like at Ada and growth of the retail so that's what I'm, referring to was mix. So that's all all those incentives are running through as a reduction of sales and so even with those with been able to increase our yield per cycle.
That makes sense.
So the models, becoming efficient org.
Leave you with that just becoming especially it's just everything we're doing now.
Even more efficient as we can at this model really takes shape.
Our partners as Amy mentioned are incentivized to grow our business or they don't get paid it's just that simple.
For the most part for the most part and so their incentives are aligned with ours.
In the meantime, we can keep our fixed costs in general across the whole of female leaner.
You keep.
Adding to my next question looks like Youre looking at my page here.
Speaking of the intense incentives of your partners too.
Do a good job how are the telemedicine channels working out so far.
<unk> and others.
<unk> has been on board for a while in terms of partnership, but I think maybe last quarter, you talked about sort of it just being turned on are being fully trained up and ready to go how are how are they doing in terms of I guess you could call it promoting the products.
Not per se, but when women go into the <unk> channel how are they doing.
With regards to offering.
<unk> as an option for appropriate patients and are they hitting the targets that they.
Or are you exit.
Arrangement.
Yes, I'll jump in and thank you all of our telemedicine partners.
You have a great partners <unk> Youre right, we find them at the end of last year and they officially.
Now offer through their distribution channels, our patch as there are only patch.
And Allison is that fair Glenn May theyre growing month over month over month.
It was a bit of a slow start because of some of the structural changes that were happening.
On their end, but they have now a solid team.
And I'm pleased when I look at their growth week over week again, we're very lucky to have them as a partner we just signed on.
2008 health so early days, there, but again, we always see growth I think the best thing about our telemedicine partners is a channel that is meaningful to the women. Our age group 18 to 24 year olds that was always going to be available for them.
And branded products.
Okay.
Stealing a bit and been one of the first branded products offered on these channels.
The negative about that is we help them set up a process deposit about stand alone.
Does take takes a while sometimes but we see growth.
I am more than confident in the back half of the year.
We're going to make any type of slowness in Canada.
Training is.
Process changes that happened in the first part of the year.
The other side a lot of gaps I think retail will be due to telemedicine.
Alright, and bigger picture.
Yes.
Washington.
Activities have been interesting we've seen.
Maybe a third executive order to come out of this administration related to win.
Women's health.
Specifically coverage or lack of coverage.
Contraceptives.
Al you down there a bunch I think.
What's going on there in terms of.
Words versus potential enforcement actions that they've been hinting at for a while and do you expect anything to change, especially as we're heading into an election cycle or women's health as well as health care, such as an important part of the narrative.
The answer is yes.
Clear.
Was it.
Surprise to us the symbolism of that executive order being on the <unk> anniversary.
The bite and administration clearly is signaling.
The women's health in the broadest sense is important to them. The <unk> way are the abortion discussion on ports is a very complicated discussions so they see contraception, we believe they see contraception.
An important win for women.
Yes.
So that executive order as you saw.
Including us, but it also including things like <unk>, which is the military medical Medicare.
I am sorry about Medicaid.
So it was it had a five point plan, so contraception needed a lot of work so.
Based on my discussions we believe that the right thing to do.
To clarify.
Watson for all.
Products like us that were approved that don't have generic equivalents needed to get access to this country. So we believe that thats coming I can't tell you when.
I don't know when I Shouldnt say I would tell you by phone.
On it because it's a <unk>.
Different pace in Washington than I have.
We have but what I think we've tried to communicate here.
That is an upside to our investors.
What we created is a sustainable growing model thats growing in every channel that <unk> put a stake in.
So our and so we still believe that's upside.
To us we believe it's coming.
Thank orin personally I don't believe the enforcement is the answer because while there's three PBF insect control.
The majority of lives in this country, it's up to every plan under them. So administered as things so it's on building.
You could say, if pbms and Thats true, but the implementation of the Affordable Care Act has really been the downstream plan. So we think the enforcement is a bit.
Tracing of the tail we think.
<unk> regulations out clearly, stating what I just said I think its ultimate answer and then we would expect there is going to be a lot of oversight from the administration and also that the agencies to monitor this.
Things that will be enforcement will be on the back end of those new rigs. If you will so I think it's a comment on R&M probably have high degree of confidence.
I don't want to guide to something I don't I don't have.
Joel over.
But I think it's coming but in the meantime should outwards blow it out in the third quarter and that will put more wind in our sails.
Alright, Thanks Thats. It from me I appreciate your patience with all the questions.
I'm looking I'm looking to go ahead.
Okay.
Alright.
As of the moment I do not see any other questions. At this point I would like to turn the conference back to Alex Murray for closing remarks.
Alright, thank you.
Oren, Thank you for the thoughtful questions.
It looks like you preempted a couple of the call and so this is great.
I guess my final thought is there.
Statement I would say the proof is in our progress.
We're not.
Saying this is going to happen, we're saying this is happening.
The first six months.
This year versus the first six months of 2022, you saw in our data that net revenue is up 140% opex to be up.
On the other hand is down nearly 38%.
And as Lauren asked me.
Based on what I've seen of the third quarter, so far I feel great.
About that the momentum is still continuing.
We say that time in time out or come in and have.
Record quarters, and every metric that's important to us and the momentum that we're seeing isn't in any one channel.
All of the channels retail continues to grow non retail continues to grow as Amy mentioned in her question oriented asked about.
Tom Madison the momentum there is growth. So we're just layering on in all of our channels continued growth.
Because we are on a quest.
Once and for all first of all hit our guidance. We've given you for the year. So hopefully to see why we are confident in that based on this quarter's results.
The ultimate prices that start throwing off cash office business. So thank you for your attention and thank you for following our story and we appreciate your.
You're staying close to us thank you everybody.
This concludes today's conference call. Thank you for participating you may now disconnect.
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