TherapeuticsMD, Inc. (TXMD) Q1 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for joining us for TherapeuticsMD First Quarter 2021 Financial Results Conference Call. Following prepared remarks from the company, we will open the call for questions. I would now like to turn the call over to TherapeuticsMD's Vice President of Investor Relations, Nichol Ochsner. Nichol?

Good morning, everyone. Thank you for joining today to discuss our first quarter financial results and business update. This morning, TherapeuticsMD issued a press release announcing our first quarter financial results. The press release is available on the Company's website, therapeuticsmd.com in the Investors and Media section. On today's call from TherapeuticsMD are Chief Executive Officer, Rob Finizio; Chief Financial Officer, James D'Arecca; Chief Commercial Officer, Dawn Halkuff; and Chief Strategy & Performance Officer, Mitchell Krassan. I would like to remind everyone that certain statements made during this conference call may be forward-looking statements. Such forward-looking statements are based upon current expectations, and there can be no assurance that the results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks some of which are identified in our press release and our annual, quarterly and other reports filed with the SEC. These forward-looking statements are based on information available to TherapeuticsMD today, and the company assumes no obligation to update statements as circumstances change. An audio recording and webcast replay for today's conference call will also be available online in the Investors and Media section of the Company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 6, 2021. With that, I'll turn the call over to TherapeuticsMD's CEO, Rob Finizio.

Good morning and thank you for attending our Q1 call. This quarter we had strong execution across the organization while investing in our most important assets to create shareholder value through revenue growth and continued protection of our assets. Let's begin on Slide 3. With the progress made on ANNOVERA, we have strong year-over-year growth in [indiscernible] our new strategies to overcome challenges that COVID-19 has created commercializing products. In addition, the patent state for ANNOVERA has doubled strengthening its durability and extending our exclusivity to June of 2039. With regard to our menopause franchise, we achieved record net revenue per units for both in IMVEXXY and BIJUVA. I'm also happy to announce that we won our appeal for approval with the FDA for the new lower dose 0.5/100 BIJUVA and have a meeting set in May to discuss next steps. The company continues to vitaCare divesture process to unlock shareholder value. We are creating significant revenue opportunity with two new live customers a third scheduled to launch in the fourth quarter and a pipeline with approximately 20 potential new deals. With this progress vitaCare continues to build on its foundation to become a freestanding, rapidly growing entity in a new sector with no established leader. Most importantly, Q1 year-over-year financial improvement was significant with increasing revenue growth while lowering operational expenses all in the midst of a pandemic. I will now turn the call over to James to discuss more details. James?

Thanks, Rob and good morning, everyone. Turning to Slide 5. Our net product revenue for the first quarter was $19.6 million which satisfied our first quarter revenue covenant. This was a 60% increase in product net revenue from the first quarter of 2020. That was primarily driven by ANNOVERA, which had only just been launched. ANNOVERA net revenue per unit decreased to $1,071 because of increased rebates owed resulting from a new payer contract becoming effective during the first quarter. We expect net revenue per unit of ANNOVERA to approximate $1,100 per unit for 2021 although it will likely fluctuate over the next three quarters as the mix of payer reimbursement changes. Additionally, as you can see on the chart, the vaccine net revenue grew to $7 million or 9.7% as compared to the first quarter of 2020. The average net revenue per unit increased to $61, the highest level for IMVEXXY. Since its launch, it was driven by the increase to $75 in our cash co-pay program along with our new preferred payer contract. BIJUVA net revenues for the quarter increased to $2.4 million. And as of March 31, 2021, inventory levels in the wholesaler and pharmacy channel for our products were within normal levels. Moving on to Slide 6, let's review some key financial statement items. Our product gross margin of 76% for the first quarter was adversely affected by production related write-offs through ANNOVERA of $900,000. We continue to maintain our focus on strict cost discipline, which allowed us to reduce operating expenses to $44.5 million for the first quarter a decrease of $16 million as compared to the first quarter of 2020. While we plan to maintain an efficient cost base that can be leveraged as revenue grows, we expect to make investments this year to improve our supply chain, enhance marketing, and strengthen digital capabilities related to commercial initiatives. With these investments, we expect our highest spending occurring in the second quarter. Net cash used in operating activities was $38.4 million for the first quarter of 2021. Our debt balance decreased to $183.9 million resulting from a $50 million principal repayment made during the first quarter. Overall, I continue to be pleased with our financial performance and believe we are well positioned to execute on our commercial plans to drive our growth in 2021. I'd now like to turn the call over to Dawn to discuss our commercial progress. Dawn?

Thank you, James. Let me start with ANNOVERA. Slide 8 shows the continued growth of ANNOVERA this past year, even in the face of the [indiscernible] constraints brought about by the pandemic. Year-over-year growth was 164% and sequential TRx growth was 5%. The quarter-over -quarter growth is meaningful given that historically first quarter volume and net revenue per unit are lower than the fourth quarter levels as a result of high deductible plans, and co-pay resets at the beginning of this New Year. Net revenue per unit came in at approximately $1,100 as expected. In addition to volume and net revenue growth, we saw a 17% increase in prescribers in the first quarter of ‘21 versus the fourth quarter of 2020 another continued positive trend. Moving to Slide 9, I am pleased to show you that ANNOVERA is gaining market share from across the spectrum of birth control product methods, more than half of ANNOVERA patients are new to rings. As you can see, with the growth from Q4 to Q1 the percentage of ANNOVERA patients who have switched from IUDs or implants is now at 18%. We believe this data is compelling, as it suggests an unmet need for a long acting procedure free contraceptive which ANNOVERA is now filling. Moving to the environment on Slide 10. We continue to successfully grow ANNOVERA in the face of headwinds from both payers as well as COVID limiting access to prescribers. Recently, EFI announced that it has replaced branded contraceptive with generic on formulary and most branded product on the drug exclusion list, which led to ANNOVERA’s commercial coverage at 57%. Despite this change, we have confirmed that patients continue to receive ANNOVERA when their providers submit letters of medical necessity through the protection of the Affordable Care Act. Moving to Slide 11, the most significant headwind we are experiencing is the lack of access to prescribers. Current industry prescriber access is shown on the left, which is about one-third of the pre-COVID level. This is reflective of our first quarter data with 40% access to our targets. Now the good news is that access is expected to double over the next year, allowing our salesforce to increase their productivity. That said many prescribers believe that in person visits will remain below pre-COVID levels permanently leaving a significant gap versus pre-COVID access. We intend to continue to address this issue with innovative solutions to complement and supplement the traditional salesforce model to drive continued uptick of the brand. Moving to Slide 12, the prescriber restrictions due to COVID are well documented across industry. The data in this chart shows many of the mass market pharma launches in the past 18 months. The reason I am highlighting is that it shows the impact of the COVID restrictions on the launch brand shown including birth control products with the growth rates in 2021 year-to-date being only in the single-digit. Typical launch brand trajectories were much higher in the pre-COVID world, but now are challenged to grow when using traditional approaches only. Turning to Slide 13. Although the various constraints imposed by the pandemic have been challenging, they have also created an opportunity to focus more heavily on the consumer as the catalyst to drive demand. As a company we continue to adapt, accelerating our use of digital platforms such as social media, virtual public relations events and telehealth to convert consumer interest in ANNOVERA to fill prescriptions in a virtual world. On Slide 14, the funnel on the left shows the path from the initial interest we generate from our consumer campaigns to the eventual number of patients who fill a prescription through online or telemedicine channels. The main takeaways here is that interest is high, but we have considerable opportunity to increase access to patients who want ANNOVERA every piece of the funnel. Let's look at each piece of the funnel and how we plan to accomplish. Starting at the top of the funnel on Slide 15, ANNOVERA messaging is impactful and relevant to consumers. We know this because we have achieved metrics that are above industry benchmark for click throughs to the website. Most recently, we supported Vaginal Appreciation Day, which resulted in a 380% increase in those searching for ANNOVERA online and boosted our daily website visits by 35%. Bottom line, we understand how to drive interest and plan to continue to do so throughout the year. Turning to Slide 16. Now comes the opportunity to help women better access ANNOVERA. We know that of those who visit annovera.com only about 2% start the process to access ANNOVERA online to move the needle on helping more women who want ANNOVERA receive it. We have launched additional options to increase access for patients who may not be able to visit their prescriber in person. Moving to Slide 17, the next step as shown in the funnel is helping women who want ANNOVERA to receive a prescription. Right now about 20% complete the process to receive a prescription for ANNOVERA. We believe that improving this percentage is about improving the process flow for women to make it easier to connect with a health care provider who can write the ANNOVERA prescription. Finally on Slide 18. Once the ANNOVERA prescription is written, we are actively working to increase access to help get the prescription filled. Our data shows that only 45% of women are able to successfully fill their prescription at this stage. We aim to help more women accomplish this step by utilizing patient assistance tools through vitaCare. Just last month, we launched an initiative to accelerate this effort for ANNOVERA. Moving to Slide 19, which is a visual once again of the complete funnel. We believe the small changes that I have described that we are making at each part of the funnel will drive significant increases in women's access to ANNOVERA throughout the year and the growth of the ANNOVERA brand. Turning to Slide 20. As Rob mentioned in the first quarter of 2021, three new ANNOVERA patents were issued and were now Orange Book listed. We now have a total of six Orange Book listed patents for ANNOVERA strengthening the durability of the patent state and extending the IP protection to June 2039. Turning now to IMVEXXY on Slide 22. We implemented our cash pay program change on January 1, causing an expected TRx decline. I am happy to say we had a record net revenue per unit this quarter at $61 due to this change and delivered approximately six pills per patient annually which continues to be above category averages. Moving to Slide 23, as you can see IMVEXXY is back to growth increasing month-over-month throughout the quarter. Turning to Slide 24, as stated we were able to increase the net price per unit IMVEXXY. Year-over-year there was a 39% improvement in net price. On a sequential quarter basis IMVEXXY saw a 13% improvement in net price. Now that we have raised our net price per unit, I wanted to share that we launched a new consumer campaign for IMVEXXY called Long May She Reign, shown on Slide 25. The campaign is compelling and in its first week show significant increases in traffic to the website. We believe this campaign will significantly raise the interest level for IMVEXXY. And the brand will have the same programs in places ANNOVERA to keep access to patients high. We now turn to BIJUVA the second product in our menopausal franchise. Sequential quarter TRx terms were impacted by the same change in the cash program as IMVEXXY. BIJUVA experienced year-over-year growth as shown on Slide 27, despite minimal investment in the brand throughout the year. Turning to Slide 28. We have made significant progress with our new lower 0.5/100 BIJUVA dose. We recently won an appeal with the FDA for this new lower dose and we have a meeting set with the FDA for May to discuss next steps. I would now like to turn the call over to Rob for closing remarks.

Thanks, Dawn. To close, let me highlight the following on Slide 29. In Q1, we improved our cash position lowered our debt had strong revenue growth while lowering expenses and set record net revenue per unit for our menopausal franchise. In addition, vitaCare continues to divesture process and is increased in value through acquisition of new customers and a significant pipeline in the works. Results this quarter are in line with our 2021 operating plan and we believe keep us on track for achieving EBITDA breakeven on a quarterly basis in the first half of 2022. I’d now like to open up the call for questions.

[Operator Instructions] Your first question comes from the line of Dana Flanders with Guggenheim Partners.

Hi, this is Devin on for Dana. Congrats on the net price improvements. I’ve got a couple questions. First, what do you -- what are you seeing as far as underlying trends for IMVEXXY at price that led you to increase the top end of guidance? I believe it was previously 70? Is it more attributed to the relative customer mix meaning like cash pay versus non-cash pay? And I guess more favorable profitability across this mix?

Hey Devin, it's Rob. Good question. So when you say we raised guidance for IMVEXXY, can you give me a little more clarity on that?

I thought previously that the net price was the top end of the range for net price was 70 and it looks like 65 to 75 now?

No, it's still 65 to 70. We have not changed that. But to your point, so we did see -- so we raised the cash pay price to $75. We had a really -- we expected two months of downward trends. We have about a month and it turned around in February. And now we're seeing meaningful growth and much higher nets. So we expect the blended average for the year 65 to 70. So you're going to see it continue to appreciate throughout this year. So that that average of 65 to 70 will stay. But to your point, since we came in at 61 you should see an upward trend a strong upward trend from here. So we had great movement there and it worked and the large PBM contract is helping as well. And we're working on others in that arena other large PBM contracts for preferred position. So we're feeling good about IMVEXXY its net revenue per unit and its volume going forward.

Okay. And then on ANNOVERA what percent of total covered lives does ESI represent for ANNOVERA and then additionally, as far as the patents go are they composition of [indiscernible] patents method of use to try to get a sense of what's contained and what claims are in the patents?

Yeah. So I'll take the patent one, and then I will turn it over to Dawn for the ESI portion, which by the way, they're approximately 15%. So the IP growth that we've had is significant. And it's strategic and its durability are really where we were hoped to get them and are really, really proud of our team that's gotten that done. And the extra five months are nice to have through 2039, but really it's strategic value of the types of IP we have in the placement of it, given the regulatory pathway that's there to protect our assets. Dawn, you want to comment on ESI?

Sure. And thanks, Devin for the question. So again, as Rob mentioned, it's about 15%. But I just wanted to remind on a couple of things with ESI. The first is, is that the decision was made at a class level, not a brand level, and it's actually happening in multiple classes. So what we're really lucky with is that in the birth control class, we have the protection of the ACA and ANNOVERA has been very successful with that given the uniqueness of the product, which has allowed doctors to continue to provide ANNOVERA for those patients that want it, through the letter of medical necessity. So we haven't seen an impact.

Yeah, we've note no impact from the ESI change at all, because of letters of medical necessity. That's great.

Okay, great. And one last one for me. Can you just remind me, have you given guidance on where you expect net price for BIJUVA to end for the year going forward?

No, we haven't in this, I think this quarter, it got a -- it's little bit of an anomaly got a little ahead of itself, I think it's comfortable to say it'd be in the 60s somewhere, it could be low 60s could be high we're not -- it's not a focus. So we haven't been putting a lot of color there. But it should trend somewhat similarly to IMVEXXY in our opinion. And that's about as far as you go on. Does that all?

Yes. Thank you very much.

You got it. Thanks.

Your next question is from Louise Chen with Cantor Fitzgerald.

Hi, this is [Jen] for Louise, thanks so much for taking our questions and congrats on the quarter.

Thank you.

I have two questions here. I guess just the start for the low dose BIJUVA. Can you go more into detail on what you're looking to get out of the May meeting? And maybe what's the base case timeline for next steps? And then my next question is, I know during the -- your remarks, you mentioned that the highest spending due to investments is expected to occur in the second quarter. I just first want to confirm that you're talking about SG&A there and or is it just SG&A that you're talking about? And how expensive is that increase expected to be? And related to that? Is it fair to say that, at least for the third quarter and fourth quarter, then the first -- like what we saw in the first quarter is sort of a good example of what spend could look like? Thanks.

Sure, I'll take the BIJUVA expectations. And what we plan to get. Maybe Dawn, you might want to add something you're closer to it than I am. So we thought BIJUVA low dose should have been approved when we originally submitted it. And it wasn't, so we filed an appeal. And that appeal was granted by the FDA very recently. We're going to go meet with them in May to look at the next steps there. And there's a very challenging division here at times and we don't know whether they're going to want to move it forward really quick or it's going to move forward slowly. So I don't want to set any expectations at all for that right now. But the good news is, is that they the office level thought it should have been approved originally. And they made that pretty clear and the summary and it's in good shape.

Hey Jen, it’s Dawn. I think the only thing to add is, as Rob said the FDA agree that the data originally submitted supported approval as far as timing, I think you asked on a base case, we won't know that until we have the meeting in May and when we have something to update we will.

And hi Jen, it’s James -- answer the questions on spending. So the spending that I'm talking about is our OpEx so our total OpEx line excluding non-cash items. That's the same thing we've been given guidance on and consistent in the past. So last call, we indicated that we expected the average per quarter of our OpEx to be between $45 million and $48 million. We're going to be sticking to that for this year. In terms of the trend as you know with launch products there is a lot of seasonality. And your point about using last year as a comparison, I think is a good one. I think last year you saw our expenses kind of peak towards the middle of the year and then ease out towards the end of the year and we would expect a similar phenomenon this year.

Okay, great. If I could squeeze in one more question. I think previously you mentioned that for ANNOVERA, your goal was to increase annual CRS per writer to 15. I'm just wondering, Is that still the case?

For a certain type of writer? Yes, absolutely. So if we have loyalist [indiscernible] different types. So if you go back to our strategic operating plan for 2021 that we shared a JPM, this quarter was exactly in line but lower -- a little bit lower on the spend than what we put out there are a bit lower on the spends. So we're going to continue that plan will deliver. And I think some of the new things that we found and Dawn has talked about here, we think should really accelerate some growth in areas where we've had great growth. So far in pilot stage. We're implementing it the full core in Q2 and Q3. And we're really excited about that related to ANNOVERA. So yes, the answer to your question for that type of provider 15 years ago.

Okay, great. That's super helpful. Thanks, everyone. And congrats again.

Thank you.

[Operator Instructions] Your next question comes from Douglas Tsao with H.C. Wainwright.

Could be interested the ESI change and I know, it's been fairly recent. But just curious how long is it taking to get the letters of medical necessity approved? And sort of, should we think of this release or just that group of patients just sort of pushing out the curve? And do you have the sense of sort of the success rate from wanting -- physician wanting to initially describe that to getting the LMN done? What's the sort of pull through rate that you've seen so far?

So the pull through rate is constant to what it was before. If anything is better for us, [obviously] Doug. So it's so far, it's been excellent. I don't know if you've seen we've been growing. Since this has happened. And the pull through rate or the approval percentage that we have, it's been identical to what it was before. So we feel really good, but give yourself credit for following the letter of the law, right. And they're doing a good job. And ANNOVERA uniquely not all birth control has this unique form. So when a letter of medical necessity goes through, it gets approved, unless there's certain like religious exclusions and things like that. So there's been zero impacts and we're growing.

And are you -- sort of have you implemented any operational changes to support physicians just to ensure that that continues to sort of the time that [indiscernible]?

Yeah, yeah. Yes we have.

Sorry, I got cut you off there?

Yeah, we have. We obviously are driving some education around this whole process related to elements and it's pretty well understood out there already.

Okay.

And Dough what I was mentioning with the vitaCare how we are supporting an initiative to support patients to make sure expectations are set with the LMN process and really doesn't take that long, but just making sure that all the paperwork is complete, that the doctor submits, and again, setting those expectations with patients and that really helps with the pull through as well.

Okay, great. Thank you so much.

You got it Doug. Thank you. All right. Is that's the last question.

Yeah, there are no additional questions at this time. I'd like to turn it back over to Rob for closing.

Thank you very much. Thank you very much for joining our Q1 call and we look forward to seeing you next quarter. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.