TherapeuticsMD, Inc. (TXMD) Q4 2018 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. Thank you for joining us for the TherapeuticsMD's Fourth Quarter and Full Year 2018 Financial Results Conference Call. Following prepared remarks from the company, we will open the call for questions. As a reminder, today’s call is being recorded. I would now like to turn the call over to Therapeutics’ Vice President of Investor Relations, Nichol Ochsner. Nichol?

Thank you. Good afternoon, everyone. Thank you for joining today to discuss our 2018 financial results and business update. This afternoon, TherapeuticsMD issued a press release announcing our fourth quarter and full year financial results. The press release is available on the company's website, therapeuticsmd.com, in the Investors & Media section. On today's call from TherapeuticsMD are Chief Executive Officer, Robert Finizio; Chief Financial Officer, Daniel Cartwright; Co-Founder and Director, Dr. Brian Bernick; and Chief Commercial Officer, Dawn Halkuff. I would like to remind everyone that certain statements made during this conference call maybe forward-looking statements. Such forward-looking statements are based upon current expectations, and there can be no assurances 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 the information available to TherapeuticsMD today, and the company assumes no obligation to update statements as circumstances may change. An audio recording and webcast replay for today's conference call will also be available online in the Investors & Media section of the company's website. For the benefit of those, who may be listening to the replay or archived webcast, this call was held and recorded on February 21, 2019. With that, I'll turn the call over to TherapeuticsMD's CEO, Rob Finizio.

Thanks, Nicole. Thank you for joining us on the call this afternoon. I will begin with an overview of highlights from 2018, including our successful launch of IMVEXXY and our key events planned for 2019 that we believe will continue to drive our growth. In 2018, TherapeuticsMD completed it’s most successful and transformative year to date and has positioned itself as a leading women's healthcare company. We obtained FDA approval for three products: IMVEXXY, BIJUVA and ANNOVERA. These products provide women with unique and highly differentiated treatment options to address the unmet needs in large patient populations of women's health. The approvals are crucial to our long-term growth and we're excited that 2019 brings opportunities to unlock their market potential. In 2019, we are focused on continuing to execute on our commercialization strategies. And I'd now like to turn the call over to our Chief Commercial Officer, Dawn Halkuff, to provide a review of IMVEXXY's performance.

Thank you, Rob. Let's begin with IMVEXXY on slide 4. We are very encouraged by the initial commercial performance of our first approved product IMVEXXY. As judged by prescription trends and patient refills, we believe IMVEXXY is viewed as an important new option for treating moderate to severe dyspareunia, a symptom of VVA, by addressing the unmet physical and clinical needs in the estrogen VVA category. Looking at our IMVEXXY prescription data from launch in July 2018 through January 31, 2019 approximately 86,000 prescriptions were dispensed to approximately 30,100 patients and approximately 8,100 prescribers have written a prescription. This data still puts us on track with the Vagifem launch. IMVEXXY prescriptions growth continues into 2019. We had a record month in January and average weekly prescription volume for the first two weeks of February increase to approximately 5,800 as compared to our record average weekly volume of approximately 5,300 in January. Regarding user adherence and compliance as shown on Slide 5, our most recent data demonstrates that the average number of refills tracks well with the maximum number of refills possible. For patients who received their first prescription in August 2018, the average number of fills was approximately 4.9 out of a maximum of six. Average refills for all patients through January 31st 2019 were 2.85. Adherence with other VVA treatments is estimated to be on the order of only two fills a year. We believe the strong adherence and compliance rates are a result of both the clinical and physical advantages that IMVEXXY have over existing therapies as well as our co-pay and patient education program. Going forward, we plan to provide monthly prescription refill updates on or around the 10th day of each month. I am often asked to explain why the launch of IMVEXXY has been so successful. As you can see on Slide 6, IMVEXXY exactly at four and 10 micrograms is the lowest approved dose of estrogen VVA therapy on the market. We believe this resonates well with both clinicians and payers as the medical guidelines recommend starting with the lowest effective dose of estrogen which is IMVEXXY. IMVEXXY is also clearly differentiated from other treatment options with improvement seen in some women as early as two weeks PK data where systemic hormone levels remain within a normal postmenopausal range, ease of use, ability to be used any time of day with an applicator-free, and mess-free administration among other important attributes. Turning to our commercial payer update on Slide 7, in the fourth quarter, we had two additional major payers begin to adjudicate prescriptions for IMVEXXY. This was a large contributor to our IMVEXXY net revenue growth over the third quarter in addition to the over 300% rise in script volume. We see these trends continuing in Q1 as more commercial payers begin to adjudicate prescriptions for IMVEXXY. I would like to congratulate the commercial team on securing contracts with seven of the top 10 commercial payers in the VVA market. In the majority of planned designs, we currently have unrestricted access with no step edits or prior authorizations with these seven commercial payers. This brings our covered lives to 33% of the commercial market. And looking forward, with United coming on Board effective March 1st, we will add another approximately 8% of the commercial life covered in the VVA market. The last commercial plans left are only Caremark, Aetna, and Kaiser and we are currently in negotiations with these payers. Looking at Medicare Part D, on Slide 8, which represents approximately 25% of the VVA market, we initially anticipate a coverage to start October 1st 2019. Due to IMVEXXY new lowest effective dose and the early interest of the Part D plans, we are happy to announce that we have already secured approximately 25% of the Medicare Part D market with both UnitedHealthcare the largest Part D payer, representing approximately 21.1% of life and Kaiser representing 3.7% of lives. United Healthcare began adjudication for both the starter and maintenance packs on February 1 and Kaiser is currently adjudicating the maintenance pact. We remain positive that we can further expand our Medicare coverage in the next two quarters. To step back, our payer contracting process is well ahead of our expectations on both the commercial side as well as the Medicare side and is starting to contribute to investing that revenue. We are aggressively working to finalize coverage with the remaining major commercial plans over the next two quarters. Our rollout of IMVEXXY has followed a specific plan that unlocks commercial levers in a cadence fashion. Looking at slide 9 at launch in late July 2018, we focus on the fundamentals of HCP Education and Patient Affordability delivered through a motivated and talented sales team. In a short time, we have driven awareness and acceptance of IMVEXXY with over 8,100 of our called on targets having written at least one prescription. We believe that fast uptake is not only driven by a product profile, but also the patient affordability programs that have been in place since day one. We will continue to focus on the sales organization as a primary driver with the expansion from 150 sales representatives to approximately 200 in March. This will expand our reach to 25% more target providing expanded opportunities for IMVEXXY. The second lever is growing payer access. As I just discussed, the majority of top commercial plans are already covering IMVEXXY and Medicare Part D coverage is starting to grow. Our sales force expansion that I just mentioned is timed with the increase in coverage at the end of the first quarter. The third lever is focused on expanding our prescriber base to medical education of IMVEXXY. To that end, we have rolled out several initiatives. The first is a promotional campaign such as email and direct mail that reinforces the sales representative message delivered in office. In addition, we launched our medical education program across the country. We have 70 speaker programs anticipated to roll out in Q1 with key opinion leaders providing disease awareness and medical education on IMVEXXY which results in increased understanding and familiarity with IMVEXXY which we believe will result in new prescribers and patients. We are very encouraged by the interest in these programs and attendance, which has been six times higher than the industry average. We have on average 14 healthcare providers per program, compared to the industry average of only 2.3. Programs are delivered in person and virtually. We plan to continue to grow these programs throughout the year. The last lever is unlocking the consumer opportunity. This will happen in the second half of 2019. At that time, IMVEXXY should be recognized broadly by our prescriber base across the country. This enables us to begin our direct to consumer marketing campaign for IMVEXXY designed to accelerate adoption and activate new postmenopausal women to take action to discuss IMVEXXY with their clinicians. This is a proven cost effective approach that is designed to increase awareness about the condition and encourage women to take action by having a discussion with their health care providers. With only 7% of symptomatic menopausal women being treated with prescription VVA therapy, we believe we have a significant opportunity to expand the market. Before I turn the call back to Rob, I want to end with this. From my time at Pfizer when I worked on the Premarin franchise, including Premarin Vaginal Cream, I knew the VVA market was promotionally sensitive market. The advantage that we have here at TherapeuticsMD is that IMVEXXY in my opinion is a best in class in the VVA estrogen category and the growth that we are seeing in Phase 1 launch with only the initial levers. Imagine the opportunity we will have when we unlock the full force of all the promotional levers. And the last lever, we have not discussed is how the launch of by BIJUVA will further enhance IMVEXXY growth when it reaches the market with more targets to call on and more reach and depth in the offices we already target. I will now turn the call over to Rob to discuss the BIJUVA opportunity.

Thanks, Dawn. As you know BIJUVA was approved on October 28 of 2018 and a great way to end the year. Turning to slide 10, let's set the stage for BIJUVA. Typically hot flashes are one of the first indicators that a woman is going through menopause. Average age of onset is 51 and these symptoms may last longer than 10 years. Menopausal women can also experience VVA symptoms like dyspareunia. The cause for both of these conditions is reduction of estrogen that occurs during menopause. We see the common cause of these conditions as an opportunity for TherapeuticsMD to become the leader in menopause by offering two best-in-class therapies that satisfy a growing and underserved market. BIJUVA also give us an opportunity to connect with menopausal women early in the treatment paradigm that may allow for the transition from BIJUVA to IMVEXXY based on their symptoms. So why is BIJUVA a large opportunity? As you can see from slide 11 in the year 2000 which is before the Women's Health Initiative or WHI combination synthetic hormones were the standard of care. Post-WHI women and health care providers have demanded bio-identical hormones and refused synthetic options like Prempro that can be seen on the slide. Prior to the availability of BIJUVA, bio-identical demand has been satisfied by the two pill off-label separate prescriptions of estradiol and progesterone filled annually in the United States that are not FDA approved to be used in combination in addition to the large compound in hormones segment. Turning to slide 12, you can see both of these segments are typically prescribed by health care practitioners that have patients who demand bio-identical products and refuse to take FDA approved synthetic therapies. According to Symphony Health, as of December 31, the off-label two pill regimen alone is approximately $850 million market opportunity for BIJUVA. The two pill off-label regimen has not been evaluated in large, adequate and well controlled studies and is not FDA approved to be used in combination. Instead these products are being used off -label to provide patients with FDA approved bio-identical but their combined use lacks both efficacy and safety data including evaluation of risks for endometrial hyperplasia or cancer. We believe that there is no reason why health care providers and patients will continue to use this off-label workarounds once BIJUVA is available. In addition, the compounding market which represents approximately 12 million to 18 million prescriptions annually of unapproved compounded bio-identical estrogen and progesterone have also not been proven safe and effective and are generally not covered by insurance. BIJUVA offers a modernized bio-identical solution that is supported by strong efficacy data and safety data including evaluation of risks for endometrial hyperplasia or cancer. Let's move on to the other reasons. BIJUVA is a compelling replacement for an unapproved solution. The scientific data shown on the next few slides is one of the most exciting features of BIJUVA and is how our technology, innovation, the solubilization of estradiol and progesterone has led to significant improvements in a number of secondary endpoints. As shown on slide 13, BIJUVA demonstrates the desired favorable lipid parameters. On slide 14 you can see there are no significant changes seen in coagulation parameters. And as illustrated on Slide 15 there were no significant changes in metabolic profiles as well as improvement in both quality of life measures and sleep parameters. This data is unique to BIJUVA. And it's not been documented for compounded products. BIJUVA will give women and prescribers exactly what they're looking for. A well studied scientifically compelling combination Bio-Identical solution and a single daily capsule. Now moving on to Slide 16. The introduction of BIJUVA is coming at just the right time. A few years ago this category of company Bio-Identical hormones was reimbursed and compounding pharmacies can make a profit. That's changed and most payers consider compounded hormones unapproved drugs and for the most part do not reimburse for hormones. Compounding pharmacies will now have an FDA approved and Bio-Identical option with BIJUVA that will be reimbursed. Let's move on to commercialization on slide 17. BIJUVA will file a similar commercialization path to IMVEXXY that focuses on first building healthcare professional education and patient affordability, while simultaneously building payer coverage before embarking on BIO-IGNITE and consumer expansion we're on track for launch in the second quarter and upon launch intend to draw our second $75 million debt tranche. Phase I of our launch of BIJUVA will focus on the traditional prescribers and the off label two pill regimen, since there is little to no promotion in the FDA approved top class category, TherapeuticsMD with BIJUVA will be one of the only voices presenting an opportunity to reshape this category and reinvigorate this therapeutic area. Now moving to slide 18. Phase II, once our payer coverage is established, we'll focus on maximizing the compounding channel known as BIO-IGNITE. BIO-IGNITE is an innovative program that allows us to engage compounding pharmacies. I am very happy to announce that we have already launched IMVEXXY and the BIO-IGNITE network, now that we have payer reimbursement to pay the ways for BIJUVA. Now turning to slide 19, as you can see our first wave of compounded pharmacies are live and BIO-IGNITE approximately 22 to women's health compounding pharmacies dispensing IMVEXXY today. We anticipate another 25 compounded pharmacies will be live in dispensing IMVEXXY in the next 30 to 60 days with the anticipation of dispensing BIJUVA once it gains reimbursement. In addition on slide 19, we recently partner partnered with the second largest group of compounded pharmacies that has over 100 locations in the United States. What's clear is that the value of distributing IMVEXXY and BIJUVA is resonating with the compounding pharmacies. Our goal is to have at least 150 compounding pharmacies live by the time BIJUVA obtains commercial reimbursement. Our compounding strategy is working, supporting IMVEXXY’s growth, while setting the groundwork for a fast uptake of BIJUVA. I'd like to point out a very important fact, out of approximately 700 plus of the top compounding pharmacies that represents over 50% of the bio-identical compounded volume of 12 million to 18 million prescriptions. I'll now turn over the call to the Co-Founder and Director, Dr. Brian Bernick to provide an overview of ANNOVERA.

Thank you, Rob. Starting with slide 20, let's talk about ANNOVERA that was approved in August 2018 which we view as an emerging opportunity that may not be fully appreciated by our shareholders. ANNOVERA is the first and only product approved in the new class of contraceptives designated as the vaginal system that is a patient-controlled, procedure-free, long-acting reversible prescription birth control product that provides a full year of protection from pregnancy. Like IMVEXXY and BIJUVA, ANNOVERA is a highly differentiated opportunity and large market representing the high-growth segment of the prescription contraceptive market and it's complementary to our women's health portfolio. Most women's health providers prescribe contraception which we believe will expand our reach and depth in the offices we call on as we promote IMVEXXY and BIJUVA. The reversible birth control market encompasses approximately 29 million women of child-bearing age. As seen on the slide, reversible contraception is made up of multiple methods including oral contraceptive products, rings patches, injections and long-acting reversible contraception such as IUDs and implants. The long-acting segment of the market is growing in response to the medical societies' and CDC recommendations that long-acting reversible contraception is the most effective reversible contraception option for most women. Moving to slide 21. As a reminder, ANNOVERA is a small, soft, flexible vaginal system in the form of a ring that prevents ovulation for an entire year and can be inserted and removed by a woman at her discretion in repeated 4-week cycles. ANNOVERA offers lower doses of contraceptive hormones and with its controlled-release delivery via the vaginal route, it avoids daily fluctuation in hormone levels with excellent cycle control and with the unique progestin-segesterone acetate it is highly effective in preventing pregnancy and lacks the androgenic estrogenic or glucocorticoid side effects that are often associated with other contraceptive products. Slide 22 shows some of ANNOVERA's unique physical characteristics. In the Phase three study ANNOVERA had an overall satisfaction rate of 89%. The study also demonstrated high rates of adherence and continuation. Looking at slide 23. As things exist today, there's a large well-established contraceptive ring market that is represented by Merck's monthly NuvaRing that was responsible for approximately $1 billion in gross revenue last year. We believe ANNOVERA has a competitive advantage over NuvaRing and will target prescribers and women that have already embraced this form of contraception. ANNOVERA is a softer and more pliable ring option and with segesterone acetate that provides contraceptive benefits for an entire year versus just one month it doesn't require refrigeration and will be priced more favorably on an annual basis. Additionally, we believe ANNOVERA will take market share from oral contraceptives. ANNOVERA represents an easier way to be compliant given that it is a ring that lasts an entire year and ideal for those women who forget doses due to breaks in their routines, travel or for those who may be burdened by monthly trips to the pharmacy like those that are away at college or in the military. We also plan to target patients and providers who desire long-acting contraceptives where IUDs and implants are not a good fit including those healthcare providers who do not want to do procedures or purchase and manage inventory as is usually required for IUDs and implants. In addition, IUD and implant use is limited by the number of health care providers that perform those procedures. As most health care providers are not proficient in those procedures, ANNOVERA now enables all prescribers, regardless of specialty or training, including the primary care providers to finally be able to provide long acting reversible contraception. We have committed to pricing ANNOVERA responsibly, ensuring a competitive price point between $1,800 to $2,000 for a one year vaginal system. This pricing is at a discount to other birth control products on an annual basis. However, given no other contraceptive vaginal system offers protection for an entire year, we believe there is a significant chance the FDA will determine ANNOVERA constitutes a 19th class of birth control that under the Affordable Care Act or ACA would require private health plans to cover with no out-of-pocket costs. We plan to have a limited launch of ANNOVERA as early as the third quarter of 2019. The launch will be limited as we ramp up inventory to meet the demand for ANNOVERA trigger the FDA decision on ACA and allow us to start conversations with payers. We believe this should bring adjudication for ANNOVERA, approximately six months after launch. Moving to slide 24 for a medical update. We have a busy year ahead of us in 2019 with numerous upcoming publications as well as presentations at both national and international medical meetings, including the International Society for the Study of Women's Sexual Health held in March, where we will present data related to BIJUVA and ANNOVERA. We will present secondary endpoints from the replenished trial that demonstrates the BIJUVA has a positive effect on vaginal health. Additionally we will present data on sexual outcomes and acceptability in ANNOVERA users. Later in March at an Endocrine Society meeting, we will present three publications, highlighting the key attributes of ANNOVERA, including its high efficacy, excellent bleeding profile, and lack of androgenic side effects. Also at the Endocrine Society meeting, we will present for the first time, BIJUVA reduction on hot flashes and night sweats resulting in sleeping improvements. In May at the American College of Obstetricians and Gynaecologists meeting, we will present novel data across all three products. And likewise, we will be presenting additional data at the European Menopause Society meeting later in May. I will now turn the call over to Dan Cartwright, our CFO to discuss fourth quarter and year-end financial results. Dan? Daniel Cartwright Thanks, Brian. Fourth quarter and full year 2018 financial results are included in the press release issued today. Let me summarize a few key points. Net revenue from the company's prescription, prenatal vitamins business was approximately $4.2 million for the fourth quarter and $15 million for the full year 2018, compared with approximately $4.1 million for the fourth quarter and $16.8 million for the full year 2017. For the years, the decreased was mainly attributable to a lower number of prenatal vitamin units sold and higher utilization of prenatal vitamins coupons in 2018. As shown on slide 25 for the fourth quarter, approximately 47,500 units of IMVEXXY were dispensed by pharmacies and paid for by 22,200 patients, compared with approximately 14,900 during our launch in the third quarter, which is a threefold increase. The average WAC sales price was approximately $219 for the fourth quarter. As insurance companies start covering IMVEXXY, we expect our co-pay assistance to decrease and our net revenue to increase proportionally. As such in line with our expectations, net revenue for IMVEXXY was approximately $0.9 million for the quarter which is a fourfold increase from our net revenue during our launch in the third quarter. Again, this quarter revenue was significantly impacted by our co-pay assistance program, driven by our maximum out-of-pocket cost to the patients of $35 per prescription. We expect co-pay assistance for IMVEXXY to decrease substantially over the few -- the next few quarters. In 2018, we completed the contracting process with a majority of the large payers in the VVA commercial space. We believe this change will translate into higher revenue as insurance companies begin to pay for IMVEXXY through the adjudication process thereby reducing our co-pay assistance. We expect that you will see this change improve our net revenues through 2019. Keep in mind Q1 net revenues also are impacted by the resetting of high deductible insurance plans. Total operating expenses for the fourth quarter and full year 2018 increased compared to the fourth quarter and full year 2017. These changes primarily reflected increase in commercialization expenses for the launch of IMVEXXY during the period. SG&A expenses for the fourth quarter and full year 2018 were approximately $35.4 million and $116 million respectively, compared with approximately $14.2 million and $57.7 million for the prior year's quarter and full year. This was primarily due to higher sales, marketing, personnel cost to support the launch and commercialization of IMVEXXY in the fourth quarter. R&D expenses for the fourth quarter and full year 2018 were approximately $6.8 million and $27.3 million respectively, compared to approximately $11 million and $33.9 million during the prior year's quarter and full year. Turning to the bottom line. Our net loss for the full -- excuse me -- for the fourth quarter and full year 2018 were approximately $39.4 million or $0.17 per basic and diluted share and approximately $132.6 million or $0.59 per basic and diluted share respectively, compared with approximately $21.4 million or $0.10 per basic and diluted share and approximately $76.9 million or $0.37 per basic and diluted share for the fourth quarter and full year 2017. Our cash position remains strong. We finished 2018 with approximately $161.6 million in cash compared to the approximately $127.1 million at December 31, 2017. For the fourth quarter of 2018, our cash utilization for operations was $30.7 million. As of December 31, 2018, we had approximately $75 million in debt from our non-dilutive term loan financing with MidCap Financial with an overall effective rate of approximately 11%. Following our planned launch of BIJUVA before the end of May 2019, we have the option to draw down an additional $75 million as part of the second tranche of our term loan with MidCap. We are currently working on a similar vehicle for the ANNOVERA launch. Now back to Rob for his closing comments.

Thanks, Dan. To summarize today's call, IMVEXXY’s prescriptions and refills are in line and we expect this growth will continue. Seven of the top 10 payers will all be adjudicating IMVEXXY on March 1st in line with expectations. Part D is ahead of schedule with United and Kaiser adjudicating now. We expect the remaining three large commercial payers and Part D payers to move forward. We do not see any significant outstanding issues. BIJUVA is on track and set to launch in Q2. ANNOVERA is lining up to launch in Q3 and this can add significant upside potential revenue with the existing sales force and little needed new infrastructure and expense. And most importantly, this will start to payer clock earlier than expected. As Dan said, we're also currently evaluating a debt vehicle for ANNOVERA. And I also want to take this opportunity to let you know that we'll be holding our annual Analyst or Investor Day in New York in the second quarter of this year or the summer. We're planning a day that will be informative and include speakers from the senior management team, compounding pharmacies, leading physicians in women's health and others. We will provide you with additional insight and details into our launch strategy for BIJUVA and further frame the market opportunity for ANNOVERA and why we are confident in the significant opportunities and promising outlook at TherapeuticsMD. I'd like to thank you for your time today. And we will now take questions.

[Operator Instructions] Our first question comes from Ken Cacciatore with Cowen and Company. Your line is open.

Hey, guys. Congratulations on all the progress. Everything sounds great. Just a couple of quick questions around the pricing. Do you still feel as you're going through all the negotiations that IMVEXXY is going to kind of normalize at around $100 per script? And then similar question for BIJUVA, can you give us where you think the per-script value is going to eventually normalize? And I guess starting with IMVEXXY, when do you think we'll start seeing that normalization? Would it be closer to Q1 of next year or exiting Q4 of this year that we should start thinking about that? And then also on the BIO-IGNITE, which is already doing better than you expected just the profitability mechanism. Is a prescription through BIO-IGNITE the same to you all as it is kind of through normal distribution? Thank you.

Ken that's a lot. I'm going to try to answer them all and if I miss anything please let me know. So yes, I think for the maintenance pack I think you're certainly in line. The starter pack has a $405 WAC price and you can certainly get more revenue there and it's -- since we're doing a lot of market take from current women that are stable on a competitive product, they're switching them right to maintenance pack and there's less starter packs. We expect or hope that will improve in the future. So as far as the BIO-IGNITE question goes, it's roughly the same. So that's a different class of trade that has to qualify for. So as we talked about just signing the second largest -- as everyone knows, we have -- we've had the largest kind of signed up in a partnership for a while, but now that we have the second largest, they go through a vetting process where actually make sure their licensure is in good standing, make sure they qualify for the class of trade. It could be a little bit more expensive on the distribution, because you go two smaller distributors there, but it's not that significant. We just want to make sure everything – remember, they're in a cash-pay environment today. They don't need any more cash-pay products. They need reimbursed products where they can get a discount off of WAC and sell it appropriately. I hope that answers your questions.

It does yes. And then if I could speak on one last one as we think about ANNOVERA and the potential size just -- it seems that utilization might be for women who want to have a continuous use and can actually not remove it often. Can you just talk about that segment of the market? And maybe give us a stab of how large this product do you think could be in some kind of context? We understand the advantages, but can you frame your expectations on how large this product could eventually be? Thank you.

Sure. So I'm going to take a stab at it first and then turn it over to Dr. Bernick. This is really his baby. So the numbers are significant and people -- we really haven't put the data out on ANNOVERA for people to go out and do their own surveys and build their own models yet. And that's going to come on our Investor Day. And we're starting to put more data out as you can see now that we'll get more and more out. But in that sense the market is very large. As we said, it's -- if you just got 5% of the market, it's a multibillion-dollar opportunity. The key here is, is what does ANNOVERA do? ANNOVERA is really a new tool for OB-GYNs. There's a lot --as you know the oral contraceptives kind of the dominant, short-acting product line that's oral is decreasing about 5% or 4.5% over the last seven years while the long-acting IUDs or implants are increasing at about a CAGR of about 14% over the last seven years. The issue here is when I use an IUD and I'm a female I give up control. I give up control of my fertility my menses I give up everything and I need a surgical procedure to put it in and take it out. What ANNOVERA does is it gives back to the doctor the control to give a long-acting product to a woman and not have to be a specialist in that procedure and it gives the woman the control to control her fertility over an entire year. So I can't tell you how many OB-GYNs do not implant IUDs or implants or PCPs that are never tried to do it and really, really want this flexibility. But maybe even more importantly on the woman's side is the short-acting products they don't -- they give all the control, but they don't offer long-term benefits. So having a 1-year ring and all the upside but keeping the control with the woman is really the cross-section across these different product lines that we're going to identify. So it's just really, really attractive. I think we can do very well, a lot better than people think we can do. And the key here is, we can get this out in Q3. We start the six-month payer clock. So as we go in to 2020 early on, we could have reimbursement adjudication in place for all three of our drugs. And I remember ANNOVERA adds so much upside, because now – with IMVEXXY they can use it throughout the year and you get a monthly payment throughout the year, ANNOVERA, you get it all up front. So as you know, it costs in the $50 range and we told you how we're going to price it. So the potential cash flow upfront is significant. And that is just so attractive. So the sooner we can get it out to start that payer clock and get reimbursement is what we're going to do. And it's on track and in line to get out in Q3. Brian, anything to add?

Yeah. So back to your question about the potential to use the product continuously, so just to be clear, that's not how the product was studied and it's off label. Of course, that's how we use most of our birth control products -- pills, as a clinician I have encouraged my patients for many years to use their birth control pills continuously, but that requires them getting multiple refills of their product. And here you have a product that empowers women to be in control of their cycle and have the flexibility to individualize their menstruation. And so some women will want to use the product and have a period once a month, others maybe every three months, some twice a year and some just continuously to keep it in to avoid a period. For similar reasons and again off-label, there's a lot of interest in this product for both endometriosis and fibroids, given its long-acting controlled release instead of using a birth control pill that is the frontline therapy in those conditions. So a lot of potential and a lot of interest in this product. Thank you.

Thank you.

Our next question comes from Louise Chen with Cantor Fitzgerald. Your line is open.

Hi. Thanks for taking my questions. I had a few. My first question is…

Sure.

Thank you. What is the net price trend that you expect over 2019 for IMVEXXY? And then what percent of Rx's are written to people that have insurance that's currently covering IMVEXXY? And the last question I had is, how many Rx's are written as 90-day prescriptions? Thank you.

I'll do my best to answer those, Louise. So the trend will be dictated solely by the payers and how fast we can get them on. So if you think about it we are -- and I'm really happy with my team. We really didn't see any Part D coming on till -- starting to pay until October 1. Somehow we got United in the door and Kaiser and they're already paying, as of very recently. Those other large payers will drastically impact that trend. You guys know what our WAC price is, you know what our goal is. On the commercial side for net margins, we don't have a clear picture on net margins for the Part D side. We know it is typically lower. And then, on the other side, next quarter we'll have a very good assumption on the commercial front, because we have seven of the top 10. As of March 1, we'll have great coverage there. But we don't see any delays that will stop us from contracting with, in essence -- we call it three, but it's really two. Aetna and Caremark are now one for the most part and then you have Kaiser. And we are deep in discussions with both. And I don't see any reason why both won't get done. So if we could answer that trend, it would completely dictate when that payer comes on and what that net percentages are in those contracts and I just don't have those yet. What was your next question? Sorry. I went long there.

No. That's okay. Thank you. How many prescriptions are written as 90-day prescriptions?

I don't know that question. Do you know, Dawn?

I don't believe that any of our prescriptions right now are 90. I believe most of them are 30.

Yes. So Dawn doesn't believe we're having any 90-days, but I can check on that and get back to you. I'm not sure.

Yes. Okay. Thank you.

You’re welcome.

Thank you. Our next question comes from Annabel Samimy with Stifel. Your line is open.

Hi, guys. Thanks for taking my questions. I have a variation of the same questions, but maybe you can indulge me.

All right.

So, I guess, there was some beginning of adjudication in the fourth quarter; it doesn't seem like the net price changed that much. So what should we really expect for the first quarter in terms of net price? Should we assume more normalization given that you're going to have about six or seven out of 10 of these payers adjudicating and presumably paying? Or is it still going to be a significantly slow-stage rollup of this net price into the end of the year when there's full coverage? So that's the first question. The second is around BIO-IGNITE. So now you have two of the major -- of two networks that were contracted. Are those networks signing up right now of those two networks? Are you holding back on any of them? And are you specifically holding back until BIJUVA is available and adjudicated? And with the BIJUVA approval has the interest in signing up accelerated? And then finally on ANNOVERA, when might we have a decision from the FDA that this is actually a vaginal system and if it's its own class, in fact, its own class. Did I hear correctly that there'll still be a six-month lag until adjudication? Thanks.

All right. I tried to take notes Annabel. I'll -- if I don't have it can you help?

I took notes. I can repeat them.

All right. Thank you. So, coverage. So in Q4 as you saw we had one payer come on and at the very end of the quarter we had another one come on so we really only had -- I don't know if it's two. But in Q1 at the -- and we even put the dates out there for you. You have coming on throughout the quarter different payers starting to adjudicate. So for -- it's very hard for me to tell you what to expect based on the mix and when they come on and what that mix is. I think at the end of Q1, we still believe you're going to have a very strong and solid step-up even though there are kind of the low to -- high-deductible resets, I still think you're going to see great progress. And I think it will be much easier for you to draw some conclusions because we will -- we should have set the additional large commercial payers on board, and hopefully, I expect more progress on the Part D side as well, which is way ahead of schedule. So I wish I could give you a lot more, but that's all we have now. Because realize when you sign those contracts, you know what your rebate percentage is, you know when they start to pay, and you can figure out what your net's going to be. And we're just not there with everybody yet, but as you see during this quarter we've got lots coming on. Does that help answer your question on that one?

I guess, so yes. In a vague sense.

All right. So the two large networks, so for BIO-IGNITE. So what we do is we in essence while they're in the vetting stage partner -- we have a partnership with them. The contractual agreement as they're vetted will actually go between the distributors and the pharmacies. And what the current plan is as you can see is we just launched IMVEXXY into these networks. 22 pharmacies are now promoting IMVEXXY and adjudicating IMVEXXY as opposed to compounding their own VVA product. That is getting new women into this space based on the technological advantages of IMVEXXY. We have another 30 in vetting and then the next one that will start vetting -- the next cycle will be this next second largest network of 100. We expect they will all carry IMVEXXY now and as we saw possibly in the slides, we've identified a couple hundred thousand scripts just right there, okay, so that's for VVA. So, it's pretty significant. Now, if we give them BIJUVA now, there's no reimbursement and we're just getting a co-pay cards -- co-pays of $35. That won't change once reimbursement comes on. So, that actually puts them at a disadvantage because they're in cash pay environment now. So, this IMVEXXY groundwork should have at least 150 compounding pharmacies that are high decile prescribers and kind of be thought leaders within the compounding pharmacy world, dispensing IMVEXXY, so once BIJUVA does get payer coverage, it's ready for us to launch right into it. And remember the top 700 pharmacies have approximately 50% or more of the 12 million to 18 million bioidentical hot-flash scripts. So, that 150 is significant and we don't see any reason we can't significantly grow that over the next two years. And our goal in the first two years is to get all 700 of those pharmacies. That is our goal. Okay?

Okay. And then the last question regarding ANNOVERA? The decision by the FDA or the class?

Yes sure. So, ANNOVERA, we priced strategically between $1,800 and $2,000. We did that so -- for two reasons. Number one, it's priced at parity or a discount to competitive products to ours. The reason we did that is that we no matter where we're slotted have a shot at having no co-pay. As it stands today, under ACA, there are 18 classes of birth control. Payers are mandated by law under ACA to pick one -- each class, they have to pick at least one product and have no out-of-pocket expense associated with that product, okay? So you would think birth control pills say one's a package of 90 and one's a package of 30, you would think they'd be in the same class; they're not, those are actually separate classes. So, given our design of being the only one-year reversible patient-controlled product, we don't see it fitting into any of the existing classes. We've also gone out to third-party research and almost everyone we interviewed agreed with that. And given the FDA guidelines out there, we think there's a good chance, it's not for sure, but we think there's a good chance that we will become the 19th class. And we do have the vaginal system designation in our label and we are currently the only product with vaginal system in the label. It's mentioned about 52 times. So, when do you know? The FDA triggers when you launch it. They can see it in the channel. And our goal is as early in Q3 as possible to do that. They typically make a decision within 30 days. There is no specific regulation though that requires them to do it. They typically have done it in the past in 30 days, okay?

Okay. And then the adjudication when does that start? Is there -- if you're the only one in that class, they have to pay for it?

There's still a six-month block. They do have to pay for it in this class of therapy. So, there is a six-month block, but after that the adjudication should come on Board very quickly is our expectation today. But there still is the process in place, right? You still have to -- during that six months as you've seen what we've done with IMVEXXY, we will go through that contracting process. Just we will be on a much stronger position with ANNOVERA than we are with BIJUVA or IMVEXXY and I think both of those are pretty good.

Okay, great. Thank you.

Thank you.

Our next question comes from Jay Olson with Oppenheimer.

Hey guys, congrats on the progress and impressive script growth for IMVEXXY. Can you maybe talk about what percent of your target physician prescriber audience, your sales organization has reached and how that reach may grow over the course of 2019 as you increase coverage, grow your sales organization and launch additional products?

Sure Jay. Hi it's Dawn. So on average we reach every month over 50% of our targets. So over the course of months, we've reached virtually all the targets that we have out there today. In terms of how our reach will increase, it's really not about reach at this point; it's about the frequency and sort of building that momentum to get people that are writing two a month to three a month and so on and so forth, so that we can build that more loyal prescribing base. So we've kind of gotten through the first number of months where all that reach needed to happen and then again we're going to build that frequency so that we can build the loyal prescribing base. And as I mentioned before when we expand the sales force then we're going to get to about 25% more targets, so we'll start that reach game again as we're building frequency with the existing targets.

To give you a rule of thumb each rep has approximately 100 doctors in their territory. So that would be about 20,000 doctors that 200 reps will be reaching out to. The key is getting the top-decile prescribers to shift from what they've been doing and make you their go-to or standard.

Okay great. That's super helpful. Thank you. And then congrats also on the refill rate for IMVEXXY. Only having been on the market for a few months already averaging more refills than other products on the -- in the category. How high can that go? Where do you think the refill rate will max out?

I'm not sure to answer your question. I think the best way -- so what we have to do is we're going to go to like a monthly cadence on scripts. So at the end of February, we will compile all of our data as it comes in say by February 27 and then give us a couple days two or three days to get it out to you guys. So we'll go to a monthly cadence here. And we will give updated compliance numbers here in early March for February. And expect that going forward as the new cadence as a side note. But to answer your question, look, I personally think we can still do better than we're doing today. I don't know that to be fact, but if you look at it, we've almost doubled the industry average. So if you look at -- if we continue to grow that, continue our reach with 25% more physicians, increase our frequency with more writing, and then start to implement Dawn's plans, because remember we're literally pulling our first lever. We just have the most low cost showing up in the doctors' offices and asking for a business model. Now this doesn't count BIO-IGNITE activating new women DTC, larger sales force. We have a number of new levers to pull this year, and I expect growth to continue throughout the year, and I'm hoping the refills will continue to improve. Because we're getting so many switches and women are staying on drug. That's a really good sign. All of the signs you look at, the refill rate, the growth trajectory. We're still right on spot with Vagifem. And you look at how little money we've spent and how basic the program is. It's telling you as we get more advanced our upside is -- could be significant. And that is you put the additional products out into these same offices with these same reps that don't cost you any additional money, our upside is going to be significant guys. And if we can ANNOVERA out in Q3, look out here we come. Because that will be reimbursed with a big price point. It's going to be great. Dawn do you have anything to add?

Yes and Jay just to add, so I agree with Rob that obviously we're going to watch the refill rates, but I feel incredibly encouraged by seeing what we're seeing month-on-month. And if you remember so the average for the category is two, but there are products and I'll just compare us to Vagifem for a second that we're achieving 3.5. I believe that we are -- have advantages over Vagifem. So the fact that we're at 2.85 right now, I think there's no doubt that as we gain more experience and seeing the trends that we can at least reach that. But again can't predict but that's really where we're headed.

Okay, great. Thanks. Appreciate.

Sure.

Thank you. [Operator Instructions] Our next question comes from Chris Schott with JPMorgan. Your line is open.

Great. Thanks very much for the questions. Just a couple here. I guess first on IMVEXXY; can you just remind us where you see the balance between the maintenance versus starter packs shaking out over time as we think about how to -- how we should be thinking about net pricing per script? And I've got a couple of follow-ups here.

Sure. So our guess is 30/70. As we continue to take market share through switches that is challenging right now. It's more along the lines of 80/20. But we expect as we activate new patients into the segment and we think we can do that effectively with Dawn's DTC we think it could be 70-30 or better 30 being the starter pack. So that would be our goal and as we refine our techniques the label does say even if you start from another therapy to start with a starter pack so we -- but we have not been pushing that and that's certainly another lever and some detail we didn't want to get into on this call that we could pull. So I think we can do a lot better than we're doing today to answer your question. Christopher Schott Okay great. And then the second question was just how are you thinking about balancing sales resources and prioritization for the BIJUVA launch and ANNOVERA now that they're fairly close timelines? It sounds like ANNOVERA might be more limited this year so it might be more BIJUVA, IMVEXXY and then switching it over to ANNOVERA next year. But can you just give us a little more color of how you're thinking about those coming in pretty close succession? Robert Finizio Yes. I'm going to turn it over to Dawn but just want to be clear. ANNOVERA would be a very -- with what inventory we have a launch this year where really in 2020 is when you're going to see this thing come on in a big way and be covered. So -- but BIJUVA and IMVEXXY should do well this year. Dawn do you want to turn that over? Dawn Halkuff Sure. Chris, thanks for the question. So I think the first thing I want to say is that I'm fully confident in our sales force that they can effectively detail two products at once and the reason that I'm confident is not only the success of IMVEXXY that we've seen but because we are calling on the same prescribers and the same offices with BIJUVA that we've done with IMVEXXY. So our -- in working with our VP of sales we've talked a lot about keeping the focus on IMVEXXY where we're seeing the momentum, but bringing in BIJUVA to those top E+P prescribers to get that same momentum with BIJUVA. So as far as sort of the traditional what's in the first position what's in the second position we don't look at it that way. We've got a lot of great data that allows us to make sure that we put the product that's going to be most effective first and that we always have time for the second. And so that's how we're setting it up for the launch of BIJUVA.

And the great news is they're both menopause, right? It's very unique. You don't see this too often.

Yes. And the final one just coming back to that capacity on ANNOVERA, just any more color in terms of how much actual capacity you have at launch? And then when we think about capacity ramping, I guess, as we think about 2020, is capacity a rate-limiter at all or will you be in a position that that's not going to be an issue for the company?

No. I don't see that being an issue at all. So we inherited from the Population Council, a very basic, basic non-commercial-oriented -- they're a non-profit and as it should be right? They did a good job -- process there where literally it's a manual injection into the molding of hormones and curing and things of that nature. We've invested a few million dollars as you've seen in our R&D line here to get that process duplicated and sped up and a little bit automated. And we think the initial stuff that lands will be limited, but as you get into Q4 this year capacity will not be an issue whatsoever. In essence, our investments start to pay off and things stand. So we're just trying to get it there going as soon as possible because it starts that payer clock and it's such a big-ticket item for us and it really extends our reach of the menopausal products as well. So come Q4 capacity will not be an issue. We're very confident in that.

Great. Thanks so much.

Thank you.

Thank you. And our last question comes from Dana Flanders with Goldman Sachs. Your line is open.

Hey, guys. This is Michael on for Dana. Just two questions here. The first one is given what we know now about IMVEXXY, how has like the go-to-market strategy changed at all for BIJUVA in terms of mimicking its launch? And then secondly, as you see the adjudication flowing through, how should we expect the volume data per IMS to trend going forward? A – Robert Finizio: So the basics -- so I'll leave it to Dawn on how our IMVEXXY experience is going to impact BIJUVA. But in essence, remember BIJUVA is an environment of two second-best workaround solutions, right? So as we showed you with the data as the WHI came out women just refused synthetics. We saw the fate of paroxetine; came out a non-hormonal approach and it didn't make it. Sebastian developed Duavee at Pfizer spent over $1 billion; another non neural approach synthetic approach. They just don't sell right? So what we want to do is we want to go in and limit the doctors' liability with an off-label solution right? Make sure the effective copay or cost-containment strategy is in place and offer something that has great data. We think that $850-million 2-pill low-hanging fruit is where we're going to start until we have commercial reimbursement and then take it out into the compounding market. I just want to be clear on that before I turn it over to Dawn. That market of -- is almost exclusively that 2-pill market OB-GYNs and it's almost directly overlaps with where our sales force is today. Dawn? A – Dawn Halkuff Sure. And Michael, I guess the only thing to add here is what we've learned about the launch of IMVEXXY is actually the strategy and sort of those rollout of levers is working. And so I would do and we are planning to do exactly the same thing which is call on those high-writing prescribers, make sure we have a focus with the sales organization who's done a brilliant job and again do that same thing where the levers that we would unlock later follow that same pattern. And I believe because we're not doing everything at once it allows us to get it right. Get adherence right which you're seeing in IMVEXXY. Get the momentum with the prescribing and then once that's done, you unlock the other levers and then they become that much more productive. And so, again, I would roll it out exactly the same way.

And if you look out at the VVA space you still have a little bit of Premarin out there being promoted, not much but sampled everywhere. You have INTRAROSA who's out there doing a pretty good job; you have Osphena out there as well promoting. When you get to the hot-flash space, there's nobody. It is literally crickets. We will be the only voice. And that's another very attractive thing. We can shape the narrative and reinvigorate this segment without any distractions or counter-selling going on which we really, really like. And that's another even -- I'd say more attractive part of this segment than the VVA segment. Did you have another question Michael, adjudication?

Yes just.

I didn't hear that part.

No problem.

Could you repeat it please?

Sure. So, as we see the adjudication flowing through, how should we expect the volume data on IMS, the trend going forward?

Excellent question. So, Symphony and IMS we've been working with directly on this. And -- so if you take a look at the Symphony progress that we've had. Symphony -- some of the large retail pharmacies and if you go back a year, I know, Walgreens as well as Walmart, in essence, blinds their data. So some of the pharmacies want to sell their data and they don't want to share it with Symphony unless they want to buy it. So what we've done is, we've directly connected some of these retailers that are not sharing data with Symphony today, directly with Symphony. We think in the next month to 60 days that it will be 70% to 80% accurate within Symphony. We're working on the same thing with IQVIA, it's just a little further behind. But it's just a matter of some of these larger retailers 3PLs and folks like that, sharing their data directly with Symphony and we're literally holding the hands. So you have a third-party giving data on a regular basis. And we think in the next 30 to 60 days it'll be 70% to 80% accurate.

Thank you.

Thank you.

Thank you. And this concludes today's question-and-answer session. I would now like to turn the call back over to Robert Finizio for any closing remarks.

Just want to thank everybody for showing up on the conference call today and we appreciate your support and look forward to connecting with you next quarter. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program and you may all disconnect. Everyone have a wonderful day.