Q3 2023 Agile Therapeutics Inc Earnings Call
Good morning, and welcome to the agile Therapeutics third quarter 2023 financial results Conference call. Please note today's event is being recorded.
I'd now like to turn the conference over to Matt Riley head of Investor Relations.
Thank you operator, and welcome to everyone joining us on today's call with me today or Tomorrow, <unk> Chair and Chief Executive Officer, and Scott <unk>, Chief Financial Officer, Our Chief Commercial Officer, Amy well well also be available for the Q&A portion of today's call.
Our prepared remarks today will include forward looking statements based on current expectations, including statements concerning our financial outlook and financing prospects for the future.
Outlook for the fourth quarter, 2023, and first quarter of 2020 for management's expectations for our future financial and operational performance, including our expectations regarding the market growth is 12, our operating expenses our business strategy, our partnership with Factset and its ability to promote growth.
Our relationship with telemedicine providers in their ability to make trailer broadly available to patients and our assessment of the combined hormonal contraceptive market generally.
Other statements regarding our plans prospects 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 the 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 SEC, 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.
The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions.
And with that I'll turn the call over to al.
Great. Thank you, Matt and thank you to everyone for taking the time to join our call. This morning.
Third quarter 2023, we once again achieved all time highs across several leading indicators, including net revenue.
Well the demand.
Factory sales and gross margin.
The combination of continued strength in execution and increasing momentum gives us confidence that we will achieve our 2023 net revenue goal of at least $25 million.
And.
Today, we're announcing that we expect to generate positive cash flow from operations with our single product <unk> and the <unk>.
First quarter of 2024.
It's been approximately one year since we recalibrated our business plan to emphasize partnerships that maximize our growth while simultaneously.
<unk>, managing our operating expenses or opex levels.
In the past year, we've seen consistent quarter over quarter improvements across all of our key performance areas and we believe there is room for additional growth both in the fourth quarter of 2023 as well into the first quarter of 2024.
I'll now get into some of the details of our third quarter 2023 performance.
Our ports our confidence in achieving our 2023 net revenue goal.
And generating positive cash flow from operations.
First quarter of 2024.
Net revenue.
Third quarter 2023, net revenue was <unk>.
$6 7 million, which represents a 21% increase from the second quarter of 2023.
The continued increase in net revenue was primarily driven by our ability to once again accelerates world demand across both the retail and non retail channels.
Global demand for the third quarter 2023, with 74325 total cycles up 33% increase from the second quarter of 2023.
A new single quarter record.
Retail demand as reported by Symphony was 40196 total cycles, a 13% increase.
From the second quarter of 2023 also a single quarter record.
Non retail demand was 34129 total cycles at 71% increase from the second quarter of 2023.
As a reminder, our non retail demand is comprised of data from both symphony as well as our wholesalers.
Factory sales for the third quarter 2023 as reported by our wholesalers with 74424 cycles, a 20% increase from the 61770 total cycles that were reported in the second quarter of 2023.
Gross margin.
Along with our growth in sales and demand we continue to make progress towards our goal of generating gross profit.
Which has become a more meaningful part of our story as we approach positive cash flow from our operations.
In the third quarter of 2023, we generated gross profit of $4 $2 million.
Gross margin of 63% compared to $3 2 million or a gross margin of 58% in the second quarter of 2023.
As our net revenue levels increase and our Opex level remained steady we are focused on increasing both gross margin and gross profit as we expect to see continued improvement moving forward.
Opex for the third quarter of 2023 or $8 2, Million% to 2% decrease from the $8 3 million reported for the second quarter of 2023.
Early in the call I alluded to the Recalibration Recalibrating, our business plan approximately one year ago.
The recalibration focused on the following.
Building, a scalable commercial platform without adding fixed costs by driving toilet.
Five key states.
That have strong reimbursement profiles and are estimated to reach approximately 45% of the women 18 to 24 years old.
And collaborating with our partners, who we believe can drive additional throw a great by expanding our distribution channels.
Compared to the first nine months of 2022 versus the first nine months of 2023, our Recalibrated business plan has delivered the following.
Net revenue growth of 132%.
Toilet demand growth of 156%.
Opex reduction of 31%.
The growth that our plan has delivered to date affirms our belief that our model is sustainable and we expect to see continued towards the growth in both the fourth quarter and into 2024.
We see additional growth and upside potential coming from the following areas.
First further penetration in the five key states.
We believe there is room for growth through increased penetration into our prescriber base and these states as well as focusing on converting current non writers of Toyota.
Second additional volume from the Abaxis customer network, while we grew non retail demand an impressive 71% from the second quarter of 2023.
To the third quarter 2023, we estimated that we are currently reaching less than 20% of the total of Factset customer network and plan to tap into additional non retail volume moving forward.
Third advancing orla telemedicine platforms, such as <unk> 48, health and Panda are all part of our strategy to sustain growth in the retail channel our most profitable channel.
Before we open the Q&A Scott will comment on a few other financial results, which we believe also demonstrate continued progress for our business and fiscal discipline.
Also encourage you to read the press statement and our Form 10-Q for a broader review of all of our financial results for the third quarter of 2023.
Turn it over to Scott.
Thanks Al.
Cost of goods sold which consists of direct and indirect costs related to the manufacturing of <unk> sold for $2 5 million, resulting in a gross margin of 63% for the third quarter of 2023.
<unk> to $2 3 million or a gross margin of 58% for the second quarter of 2023.
We ended the third quarter 2023, with cash of $2 9 million.
In addition to our existing at the market or ATM arrangement, we will continue to evaluate all available options to finance the company.
Our GAAP net loss was 0.8 million or <unk> 27 per share for the third quarter of 2023 compared to a GAAP net loss of $3 8 million or $2 15 per share for the second quarter 2023, and a GAAP net loss of $5 9 million or $8 <unk> per share.
Sure for the comparable period in 2022.
non-GAAP net loss was $4 3 million or $1 47 per share for the third quarter of 2023.
Third to our non-GAAP net loss of $5 5 million or $3 10 per share for the second quarter of 2023.
$19 7 million or $26 58 per share for the comparable period in 2022.
The company incurred a one time non cash operating expense charge of $11 1 million in the third quarter of 2022 related to the transfer of equipment ownership to Korea, which is reflected in the net loss for the third quarter of 2022.
The non-GAAP results reflect the exclusion of the fair market value re measurement of warrant liabilities, which resulted in other income of $3 5 million in the third quarter of 2020 317 million in the second quarter of 2023, and $13 7 million in the third quarter of 2020.
Sure.
We once again set single quarter record highs in demand net revenue and factory sales all robbery, while reporting another quarterly decrease in operating expenses.
This continues our quarterly momentum fragile, but we are now excited to articulate.
Where we believe our results are taking the company.
Achieving our 2023 net revenue goal.
Generating positive cash flow from operations in the first quarter of 2024 and delivering continued growth in 2024.
We believe our continued focus on revenue growth in fiscal discipline can lead to continued improvement in our gross margin, which can in turn help us to begin to generate positive cash flow from operations and put us in a position of having options about how to invest that future cash.
We'd now like to give our covering analysts the opportunity to ask questions. Operator, you may now open the line for Q&A.
Thank you and as a reminder to ask a question press Star one one on your telephone and wait for your name to be announced.
One moment for our first question.
Is from Oren <unk> with H C. Wainwright. Please proceed with your question.
Thanks, and congrats on the continued growth centrella.
I have a few.
I appreciate that refined outlook you gave us.
Highlighting the.
$25 million minimum sales this year and <unk>.
Q1 breakeven I'm just curious.
Our quarterly or annual sales run rate exit rate from 2023, do you project needing to get to breakeven I guess im asking is that where do you see your current.
Margin and Opex profile at that point going forward.
And that will follow ups.
Yes, so first of all thanks for thanks for joining us.
Yes, I think if you see two things right with this business Sprague continued growth momentum on the top line right and then we're hitting a point of leverage right.
We will seek we're seeing continued improvement on the margin both in real dollars right nominal dollars, but also as a percent. So we would expect as Scott mentioned in his comments that that would continue to improve so when we project out margin improvement if you will as a.
Percent and growth on the topline.
We think we're on a glide path in the first quarter. So in effect those lines will Pat Cross if you will.
So it's kind of a a little bit of a ying and Yang warn that growth on the top line is always your best friends, but also margin improvement because I think we've tried to educate the street for the last year or so some of the charges. We take the margin our fixed costs. So as we grow we just hit points of leverage so.
So basically when we look forward, saying, okay, what's the glide path, we're on and sales and demand.
And what's our ability to manage and affect the fixed expenses both in the Opex line, but also on the margin we see a crossing in the first quarter.
Scott.
That's fair Okay.
That makes sense.
I guess as we think about continued growth through the rest of this year and into next year.
Where do you think the biggest contributions are going to come from I mean, obviously, we've seen a fax is still a great job.
Retail has sort of been steady steady as she goes at least as far as the.
UBS scripts that I track.
Is there anything you can do in your view and the size state strategy to accelerate the retail business.
Should we think of that as sort of a hopefully a straight line grower and continuing to add on there are new lines of business.
Yeah.
Queue up Amy, but I think I think what gets me excited about the retailers are going to call. It the synergies were starting to seeing between the non retail and retail is spillover and Amy has got some more information she will share with you all about that so that's where.
The non retail business in effect that helps accelerate our retail business and the other thing that gets me excited also as the channels.
Specifically telemedicine.
Literally believe we're only scratching the surface there.
This is a channel that we rely on partners.
As you know <unk> was acquired by 30 Madison. So we went through an acquisition period of time. So we're just starting to hit our stride there. So when I look at the business forward.
Deeper in the five states more market share as we alluded to my comments, but the synergy of the non retail channel and especially farm and then look I mean, we try not to overdo. This arm, but we believe that the ACI will get fixed.
We believe we are on the go line about turning around and I think that just adds a layer of acceleration that both on our margin, but also on the top line. So that's what gets me excited.
I don't know if you want to comment you.
He made that when I talk to I would tell you that was very well said.
Ill, maybe add some more context to Al's point. The reason why I believe in the spillover is we added in our.
Another large account in the Q3 timeframe for non retail.
As a measure and we saw that that helped to grow in that area in one state alone about 60% right. So I think non retail continues to be the bridge that strategically we wanted it to be to improve retail.
Confidence mature offices, perhaps where there hasn't even been prescribing it.
As we continue to add more accounts that we are seeing true spillover and.
Our partners like <unk>, who have been doing good.
Good job. This year, we're looking forward to partnering even better maybe even having a bit of a.
A broader reach in 24 states.
<unk> stabilizing we have some good good systems in place moving forward, so and that's just the.
Couple of things that you know about we're constantly looking at other ways to improve so really for me. It's about optimizing the partners that we have we have just begun to do well with that so I know we can do better.
Thanks, Tim.
Okay.
If I may you mentioned that Youre on the goal line for HCA are really confident there.
Okay. It seems like a change in tone I think from past calls where you thought.
Washington is Washington.
We'll see what happens, but it's happening.
Based on your expectations on.
Is there a change of tone, there or something if something improved on that front.
Yes.
Yes.
How do I dance around this without being too political I mean look it's hard to ignore the last couple of days right in the country.
I think reproductive rights are on top of mind everywhere in this country right. So.
Washington.
I believe.
We do direct lobbying including myself with the folks that actually make these decisions are.
We are looking to put up a win for women in this country.
And brought in reproductive rights.
What's interesting in the state we live in.
Our work in I should say, New Jersey, just put a very like mandate in place that.
So we see the states stepping up.
But also.
There's a lot of people leaning into this and telling DC. This has got to happen.
Because one of the things that was really interesting and wanted to congressional reports has studied this is unfortunately, who gets hurt worse by denying women coverage of brands.
As disenfranchise women and women of color they get hit hardest in the country and it's time for that to stop so I think our our our drumbeat and as you know.
This is <unk>.
Unifying principle between all the competitors if you will in this space.
Leaning into this it's just but I'm proud to say the work. We've all done I think is on the goal line. So.
Our net.
So, yes, I'd feel more bullish.
But we made a commitment to you and art.
And the street that we would not use that as an excuse for not getting to the goal line, we will get to the goal line without it and this is only morning. After this just throws a little bit of gasoline on what we hope is a hot brand already.
Alright, thank you so much.
Thank you and as a reminder, if you do have a question press star one one to get into queue.
One moment for our next question please.
Comes from the line of <unk> Rama with Maxim Group. Please proceed.
Hi, everyone. Congrats on the progress and thanks for taking my questions I have a SKU.
So you touched on a point you just made.
Since President Biden issue that executive order over summer I believe the Tri departments responsible for issuing additional FTE Qs regarding contraceptive reimbursement do you have any updates on potentially the tri departments progress or any potential timelines on when we meet.
The additional epic cues on what they may look like.
Yeah. Thanks, Thanks, guys.
Second question I mean, just to reeducate everybody.
<unk>.
Leading to the Tri departments, it's really three departments in the government that regulate our insurance industry and or the affordable Care Act.
Human services Treasury and believe it or not labor, So probably goes back to our days in the unionized systems.
But if you think of them as the Tri agencies. The quarterback of Hal is helping human services. So it's been football season, I can use quarterback health and human services Thats. The primary responsibility of issuing the guidelines so unlike.
When we see what's going on in our country.
This doesn't have to go to the floor.
We're sort of set up to be debated. These are guidelines that need to be issued by health and human services to clarify and really put into guidance. If you will.
What <unk> said and as an executive order, but Biden said in his executive order that gets US excited is as you know on the.
The Affordable Care Act, if a physician if we werent on formulary drug wasn't on formulary physicians how to go through this onerous prior authorization.
<unk> is a medical necessity, which is in direct violation of affordable Care Act.
At least the spirit of what that actually it so to make the system work better guidance suggested NDA in Congress believes theyre right, saying, let's just make this easy if you have an approved drug.
For contraception.
That doesn't have a generic equivalent you get no cost sharing and the fact you're on formulary.
That just makes the poll system work better and then when you lose your exclusivity it's up to the plan to decide whether you're on formulary, though different than other formulary decisions. So that's what we're waiting for we are waiting to see what Congress and the oversight committees had recommended.
Get it adopted by health and human services and the reason I am bullish not it doesn't have to go to the floor of either house for debate.
Into the guidelines and then.
And to be fair balanced we've got to see the insurance companies and their pbms adopt these guidelines once and for all and we're hopeful that after this time the president getting involved in this.
We hope that they'll comply.
So that's that's the watchful waiting we're in right now so we believe helping services is getting a lot of inquiries about this.
A lot of attention the secretary Bucyrus certainly aware of this.
He was he as you know he was in California, where he put a lot of these laws in place.
And the interesting parties married to an obgyn, so hopefully you're getting a little help at home on this issue of whether or not but you want is going through.
Yeah.
Thanks for that color and on that point.
Just on your contacts and everyone <unk> been speaking to do you think there is a greater sense of urgency to get this John.
Let's call in the first half of 'twenty, just because we're entering an election cycle to look I guess the risk administration change.
Yes, now I will go into the world of what I believe yes.
Yes, I think I believe that personally.
And I believe our management team believes that from a practical point of view, it's a lot easier doing it ahead of the election cycle. This is something you don't want to leave on the table. So yes, there seems to be a sense of urgency.
Getting your house in order.
On the eve of an election, so yes, yes, I believe that I believe that plays into it again I want to be fair balance those two other issues that take a lot of mine space down PC.
Clearly abortion.
It takes a lot of reproductive health mind space. This issue and now we have an over the counter product for the first time, how does that get reimbursed.
It's a very complicated subject. So these are all issues that are being dealt with in parallel.
I believe a lot of what we've been held up by us because of what's happened with <unk>.
That took a lot of the mine spaced on DC and how to handle that.
Can the federal government do so.
We think we're out of that so we think we're rising to the top reproductive health in the contraceptive sectors coming on coming up with that and Thats evidenced by the by executive order.
Thanks for that and to dig a little deep on <unk> performance to date in this quarter I know you talked quite a bit about the script, but could you provide some commentary on prescriber growth from total like how much are prescribers, increasing and how much of the growth do you think is due to just scripture versus.
Growth at this point.
I'll, let amy handle it quite that out yes.
Great question now simply recently, we're looking at that.
We were coming near the end of the year and what we're starting to see.
Now understanding better in most of our growth is coming from the new prescribers and what that means is new patients, we're seeing about 50% 51% of our trollish scripts.
Week over week month, or a month are coming from naive or new patients.
From a retail perspective, the quarter I know you already went through that.
No.
The data on the slides at all but we see a little over 100, new prescribers each week some weeks you've seen more which is good but that's pretty much an average.
So let me know if I.
Yes.
And any additional color on what I've already said now.
Yes, those prescribers are new prescribers do you find them consistently writing new scripts.
We see them coming out of new yeah, they're finding a patient that they think is the toronto patient rather than switching from pads to a perl, that's how they're getting their first confidence Motorola and then we see them after that.
And then we see them starting to ticket is patchy and pill, but to me that's good.
Good because the P.
Patients that are coming in on the island on their annual basis may or may not be talking about wanting to switch. So what the but these physicians are doing is finding patients that wanted to get a new contraception and control the perfect form. So yes. These 100, new prescribers or several weeks are starting off typically putting trauma on with Eni.
E.
Female patient.
Got it. Thank you and my last question regarding this quarter. It seems like the growth in the retail channel and factory sales were.
The quarter over quarter growth it was slower than it was in <unk> do you have any idea or comments around why that is or is that just kind of an effect in <unk>.
No we don't know.
This is going to be a little complicated so bear with me I mean, Amy and I were talking this morning.
A lot of time, they tell them prescribing doctors don't get reported in our sympathy so we've.
We know we have a little bit more growth and youre seeing.
But for right now we just wanted to kind of leave that offset aside until it's got a bigger head of steam. So we know we're doing I'll call. It.
That said, we shouldn't be Ahmad.
Mike.
At all disappointed with putting up double digit growth.
Look if you look around the sector and just look around women's health or specialty pharma.
And consistently putting up double digit growth on a quarter by quarter basis is no small feat.
And particularly as our business gets bigger not look harder to be a bigger number right.
So we are all the leading indicators if you will make us feel like we're heading in the right direction when Amy was seen spillover.
We see little insights includes that would say we're not done yet.
But to your question you asked I mean, clearly as Amy mentioned, new writers are great existing.
Existing writers writing more is even better so we focus on getting our existing brighter base to write more.
So roughly we.
We have ample number of physicians to grow this brand.
Big level.
We just got to get them to write more and we think some of that resistance is related to their frustration with the affordable care Act and general brands frustrate them in this category. So we.
Amy build a network of specialty farms that helped.
But that that guidance will help more but in the meantime.
We're excited with the growth we're seeing.
And retail and then based on some of the analytics team is doing is more common.
Okay.
Okay.
Helpful. Thanks for taking my questions and congratulations on the progress.
No we appreciate it.
Thank you and this concludes the question and answer period, I will turn it back to Al Tomorrow for final remarks.
Well, thank you everybody.
This will be kind of.
Reflective of the year.
We first talked to you about our ambitious goals of putting up as much as $25 million. This year and we showed you the first quarter, which was three eight but truth be known a number of you called me and said Hey, how are you going to get there how are you going to get there and then concurrently we said we're ahead in the profitability.
That appeared to be a steep mountain we were having declined but this management team believes in this brand and the indicators. We're seeing so we had that led to was posting five five in the second quarter now six seven and we're still saying we think we can get to 25. So you can do the math.
We expect to see big growth in the fourth quarter and that should expect us to us moving forward into the first quarter. We continue to see growth. So we're just excited to be here at this moment and then looking forward.
The happy thought.
When we look at the business and saying, Okay, we could be a company throwing off cash next year and we expected it would be but we call. It that though are the days of having an interesting decision to make as a company is what do we do with that cash.
Do we let it accrue.
But I believe we have for opportunities to grow this business, even more and this is the debate. We're beginning to have on the eve of this hopefully happy thought number one our partners work so should we invest more in our partnerships.
Number two our sales force works and works well should we should we do more of the sales force Amy early Owens showed you a digital works what should we do there and but strategically we also say we need to have.
More of a broader offering we would need to have 101 product. So this is the debate we'd love to have with ourselves and eventually bring in but for right now we're not done our short term goals. We've got a post $25 million and then we've got to show you that we can get this business to throw off cash, but we have a high degree of confidence and then orange.
EMEA, Mike and losses of my confidence that the days for this business look better ahead with.
The environment with the ACI that just as gravy, but you have our commitment we will get there.
Without the help of DC now with that said, we loved secretary busier in D. C to help us and helped us category women.
Contraceptive that their physicians want them to have so thank you for your support.
Thank you for your challenges the team is saying can we get there we're almost there and then what will the rest up and do it again in 'twenty four but thank you for your support thank you for your tough questions.
He made us a better management team, but thank you.
And thank you all for joining our call and you may now disconnect.
Okay.
[music].
Okay.