This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Good afternoon, and welcome to the Agile Therapeutics fourth quarter and full year 2022 financial results conference call. Please note, today's event is being recorded. I want to turn the conference over to Matt Riley, head of investor relations.
spk03: Hello, everyone, and welcome to today's conference call to discuss our fourth quarter and full year 2022 financial results and corporate updates. Before we start, let me remind you that today's call will include forward-looking statements based on our current expectations, including statements concerning our financial outlook and financing prospects for the future, our outlook for the first half and full year of 2023, management's expectations for our future financial and operational performance, including our expectations regarding the market growth of TWRLA and our operating expenses. our business strategy, our partnership with Afaxys and its ability to promote growth, our product supply agreement with Nurex and its ability to make Twirla broadly available to patients, our digital advertising campaign and its ability to promote growth, and our assessment of the combined hormonal contraceptive market generally, among other statements concerning our plans, prospects, and expectations. Such statements represent our judgments as of today, are not promises or guarantees, and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Further, during the course of today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issue today, which can be found on the investor relations section of our website. Please refer to our filings of the SEC, which are available through the investor relations section of our website. for information concerning risk factors that may affect the company. We undertake no obligation to update forward of these statements, except as required by law. The information on today's call is not intended for promotional purposes and is not sufficient for prescribing decisions. Joining me on today's call is Al Altamari, Agile Therapeutics Chairman and Chief Executive Officer. Following our prepared remarks, we'll open the call to your questions. I will now turn the call over to Al.
spk04: Great. Thank you, Matt. Thank you all for joining us. on our call this afternoon. 2022 was a turning point for Agile as we continue to advance revenue growth for TWRLA and transform and streamline our operating model to reduce expenses, which we believe sets Agile up for a strong year of continued revenue growth in 2023. We think the third quarter of 2022 was a breakout quarter for Agile and Twirla because we saw meaningful growth in net revenue, Twirla demand, and Twirla factory sales. Following the third quarter, many of you have been asking an important question. How do we know that the performance is sustainable and not just an anomaly? Today, I believe we can answer that question with our fourth quarter 2022 performance, which we saw continued double-digit quarter-over-quarter revenue growth combined with discipline spending and provides insight into why we are encouraged by what we're seeing so far in 2023. Earlier today, we issued a press release with our detailed fourth quarter and full year 2022 results. I want to walk you through a few of those results now. Net revenue for the fourth quarter was $4 million. which represented a 33% increase from the $3 million we reported in the third quarter of 2022. The 33% increase comes after we reported a 43% quarter over quarter from the second quarter to the third quarter of 2022. We think this is notable because we finished the second half of 2022 with momentum that contributed to full year 2022 net revenue of $10.9 million, a 165% increase over 2021 net revenue of $4.1 million. Our fourth quarter net revenue reflects improvements in the following key areas. Swirl of demand for the fourth quarter, as reported by Symphony, was 37,452 total cycles. a 25% increase from the third quarter of 2022. Full year 2022, total twirl demand was 105,667 total cycles, a 213% increase from 2021. Twirl of factory sales for the fourth quarter of 2022, as reported by our wholesalers, were 43,230 total cycles. a 30% increase from the third quarter of 2022. For the full year 2022, Twirla factory sales were 114,546. This total exceeded the 113,600 total cycles which we previously guided for the year and represents a 235% increase from full year 2021. As a reminder, the difference between the demand and the factory sales cycle is that not all the prescription demand in the non-retail channel is reported into third parties like Symphony or IQVIA. The demand numbers we receive from our wholesalers do include the sales to non-retail channel. And therefore, we believe that the factory sales more closely represents the total demand for TWRLF across all our channels. Net revenue, demand, and factory sales are all key components of our overall growth plan. But growth in these areas is only meaningful if we can simultaneously manage our operating expenses. As you can see from our results, we were disciplined in managing our spending in the fourth quarter and total year of 2022. Non-GAAP operating expenses for the fourth quarter of 2022 were $9.2 million, which is identical to the $9.2 million reported for the third quarter of 2022. Full year 2022 non-GAAP operating expenses were $45.5 million, a 29% decrease from the $64.4 million reported for the full year of 2021. Before I move on to the outlook for 2023, I want to take a moment to put 2022's year-over-year performance into perspective. From the end of the fourth quarter, 2021, to the end of the fourth quarter, 2022, factory sales increased 205% while OpEx decreased from 18.2 million to 9.2 million. So in the past year, we were able to grow our sales over 200% while decreasing our spending by 49%. We plan to maintain spending discipline and therefore expect to see our total operating expenses for 2023 to be lower than 2022. Our outlook for all these measures is primarily attributable to the reengineering of our business plan as a commercial company that focuses on leveraging external partnerships while keeping our internal infrastructure lean and efficient. We are confident in our ability to execute on our business plan, and we believe that our lean commercial platform can continue to produce strong results in 2023. To that end, in January of 2023, we reported that we expect 2023 net revenue to be in the range of $25 to $30 million. which would represent a year-over-year growth of 129% to 175%. We recognize this goal may sound ambitious, so let me explain why we think it's attainable. Our initial review of January 2023 demand saw a single-month record high for twirl demand and a single-month record high for retail cycle demand, which is important because the retail side of our business is our most profitable. As we continue through the first quarter of 2023, we expect to see factory sales reflect wholesaler workdown of inventory levels, which rose slightly at the end of 2022, but are encouraged by these initial trends. From what we can tell in 2023 thus far, February demand numbers appear to be on par with January and February factory sales appear to be slightly higher than that of January. The preliminary reports for the first two months of 2023 give us confidence that we can continue to grow Twirla and meet our 2023 goal of achieving net revenue of $25 to $30 million and our greater financial goal of generating positive cash flow. Our commercial plan is designed to create growth by focusing on the five states that have the highest level of reimbursement potential for TWRLA and are estimated to allow to reach 45% of U.S. women between the ages of 18 and 24. We believe there's still a lot of room for growth in this segment of the contraceptive market by going deeper into these five states. We believe our lean commercial platform can continue to deliver the growth needed to meet our goals and in part because of our continued focus on collaborations with our telemedicine providers, which we hope to celebrate in the second half of 2023, and our relationship with AFACTSIS, which allows us to grow the non-retail channel through the Planned Parenthood Centers and public health clinics. I'd like to take a moment to comment on a few of our other financial results. which we believe also demonstrate a year of progress in 2022. Cost of goods sold, or COGS, which consists of direct and indirect costs related to manufacturing twirl of sold, were 1.7 million for the fourth quarter and 6.8 million for the full year of 2022, compared to 5.7 million and 10.7 for the same periods of time in 2021. We closed out the fourth quarter and the full year of 2022 with a net loss of 3.9 million, or 10 cents a share, and 25.4 million, or $1.18 per share, respectively, compared to a net loss of 19.5 million, or $6.63 per share, and 71.1 million, or $29.28 per share. for the comparable period in 2021. These reflect the reclassification of certain warrants which were issued in conjunction with the financing in 2021 and 2022. The reclassification of these warrants as liabilities resulted in 3.8 million in other income for 2021 and 25.5 million in other income for 2022. Moving forward, we expect to see fluctuations in our net income or loss, depending on the valuation of these warrants, which we will need to perform on a quarterly basis and are expected to result in non-cash accounting adjustments. We do not expect these adjustments to have any effect on the company's previously reported revenue, operating expenses, cash flows, or cash. After deducting the other income attributed to the valuation of these warrants and the one-time only non-cash charge associated with the transfer of our equipment to Corium in the third quarter of 2022, the non-GAAP loss was approximately $39.8 million for the year ending December 31st, 2022, or $1.84 per share. We believe excluding these items represents a more useful comparison of the results from our operations in the periods we're discussing. We ended 2022 with $5.2 million of cash on hand. In addition to the $75 million at the market or ATM arrangement, we will continue to evaluate all available options to finance the company and continue to explore opportunities that can potentially accelerate our timelines of generating positive cash flow, including exploring business development opportunities. Before we open the Q&A, I want to emphasize that the entire organization remains focused on achieving our goals of growing TWRLA, attaining the 2023 net revenue target of $25 to $30 million, and ultimately generating cash flow positive. We remain confident we can accomplish these goals by, first, focusing on the five states that have the highest level of reimbursement potential for TWRLA and are estimated to allow us to reach 45% percent of U.S. women between the ages of 18 and 24. Second, continuing to cultivate the non-retail channel at the reach of the EFACSIS customer network, which includes Planned Parenthood and student health centers. Third, increasing our footprint in telemedicine through our collaboration with Nurex, which has provided contraceptive options to more than 1 million patients. Our vision and ambition is that NREX can accelerate the retail channel growth similar to the way a fax system has helped us accelerate the non-retail channel growth. Now we'd like to give an opportunity for our covering analyst to ask any questions. Operator, you can now open the line for Q&A.
spk05: Thank you. Please stand by while we have our first question. One moment. Our first question comes from the line of Oren Levnat from HC Wainwright. Your line is open.
spk06: Thanks for taking my question. Can you hear me? Yeah, Oren. Okay, great, great, great. Thank you. So I was hoping first to just talk about this $25 to $30 million guidance that you've reiterated. I mean, that would be pretty remarkable growth year over year, and I'm hoping we can dig a little bit into, I guess, the contributors to that and visibility on that. First, I guess, can you characterize... what contribution you expect, I guess, year over year from the retail and non-retail channels to that number? I mean, currently, I think volume-wise, retail or non-retail is already at or above 40%. Do you expect like a major change than mix for 2023?
spk04: Yes, Warren, it's Sal. Besides Matt and I in the room, Amy, our Welsh, our Chief Commercial Officer, and Jason Butch, our Chief Accounting Officer, are joining me. So I'll turn it over to Amy, but at a high level, we expect all boats to rise. I mean, we expect significant contributions both from the retail, which, as I mentioned in the script, we had an all-time high in January. So retail seems to be performing well. That's our most profitable book. you know, a non-retail, but maybe you can go into a little more detail.
spk01: Yeah. Thank you for the question, Warren. I expect the growth to be the same as you saw in Q4. From a non-retail perspective, that growth came from one large account and a couple of handful of moderate to smaller accounts. We look at 2023 and, you know, we see here we'll have one large account each quarter. So we should be able to see that type of growth. And what we're learning from the growth of a large account or the addition of a large account is when they come on board, that's where ALDIs always say it looks a little lumpy. They'll maybe buy a lot in the beginning and then they'll normalize and then they'll buy consistently. So I think that that mix should look the same. Retail is where our bread and butter is. So we're ensuring that we have a field that's optimized and growing and augmented by partners like NREX. But I think that we're going to stay consistent to the type of mix you're seeing and the same type of growth rate.
spk04: Yes. So, Lauren, like just to answer your question, I mean, like, you know, mathematically, the fourth quarter we did $4 million on a run rate basis. you know, we're a $16 million plus business. So, you know, if you apply the same growth as Amy was saying, you know, that we've seen, you know, particularly in the fourth quarter, and said if we could stay on that curve, you know, you start seeing the numbers we see. So there's no reason to believe we can't keep growing this business the way we've been. At the same time, we'll keep our hand on the rudder of the OpEx, you know, and that's the one-two combination that gets us across the goal line and starts generating cash. All right, if I could dig in.
spk06: Well, sure, I'm going to keep digging in there until you tell me to stop. So you kind of anticipated my next question, which is this non-retail channel growth. So it's pretty amazing how big an impact one large, I guess in California, Planned Parenthood network win can add to the total volume picture here. And you mentioned... expecting one large account win each quarter. What sort of visibility do you have on that? Are you already through the process with, I guess, the P&T equivalent there and highly confident in these new wins? Do you know or have a good grasp on what kind of volume each one of those can produce?
spk04: And I have more where I came from.
spk06: Yeah.
spk04: I'm going to give you kind of a 30,000 view, and then Amy will take you through. You know, it's really interesting, Orrin. I think you more than anybody will appreciate this. The governor, Gavin Newsom, as you probably saw with one of the big chain accounts, kicked him off the Medi-Cal formulary to defend women in the state. So in his press statement, he said that the California economy on a GDP basis would be the fourth largest economy in the world, which just – I know that just stunned me. And so it talks about the five-state strategy we're on. When we look at our five states, they represent, we talk about 45% of the market. They're 41% of the GDP in this country. So I'll turn it over to Amy on the visibility. So California's a good state for us, Lauren. So I'll let Amy tell you her visibility.
spk01: Yeah. I think your question was, where are we with the process? Because I think the last couple of times we've explained that the effects of sales process a little bit longer. Yeah, we, from a clinical perspective, it's clear to the next handful of large accounts that Pearl is a meaningful option for their patients. So we're past the clinical phase with all of those larger accounts. And what we're doing is we're trying to work with them from a financial perspective, but when it makes sense to partner with Terrola and bring them on. So it's sort of the last phase for most of those larger accounts, which is why in my guesstimate, we'll see that happening sort of like quarterly, quarter over quarter throughout the year.
spk04: So we won the battle clinically, Oren, so now it tends to be when's the right system, when they buy and the purchasing people work with us. So we have optics, all this, so we have the wind, so we expect to see volume now.
spk06: So there are additional large accounts. This is also in California, theoretically?
spk01: Yeah, believe it or not, yes. Most of these large accounts are right there on the West Coast, specific to the state of California.
spk04: What makes California peculiar, Oren, is just a little bit of a A Planned Parenthood can be a single clinic like we've talked before or in a blind group. In California, so many affiliates tend to be in one buying group. So one purchasing person or one P&T represents a number of individual affiliates. So in a lot of ways, Amy has one-stop shopping. So I think they just aggregate their volume, and, look, they use that as a negotiating tool. So California seems to be, I don't know, Amy, the most organized, for lack of better words. That's a good way of putting it. But when we win, we win big or enough.
spk06: Right. And so, obviously, as we see volume accelerate, you know, it's been pretty remarkable how it can ramp in that non-retail channel already, you know, in the last quarter or two. As we see that to continue to grow, you know, before we get carried away with, you know, how that might translate to revenue on our end before you report, I guess an important factor is that economic side. And I know it's less profitable, of course, than retail. But, you know, do you feel pretty confident that – I guess the gross to net or the net pricing per cycle going forward will be consistent with what you've managed to achieve so far in the Planned Parenthood or other non-retail?
spk01: Yes. Contractually, we don't expect any changes there from our pricing, 340B pricing that should be locked. We shouldn't see any surprises. And one thing that when you were asking the question, Oren, that made me think about that I wanted to share is we're also seeing a positive effect on the retail market. through these gains in California. I think that Alan on a couple of these calls have explained that these physicians who work in a Planned Parenthood very often work in the community as well. So we're starting to see a very positive effect on the non-retail account wins in California coming over into the retail side too. So, but yes, to answer your question, no, we're going to be consistent on the pricing.
spk04: Well, I'll give a big picture answer, but maybe Jason can comment if I get it wrong. The mix in our third and fourth quarter hasn't changed much. So the bar is all those rows. So our average yield per cycle is pretty consistent, right, quarter over quarter?
spk02: Yeah, that's exactly right. Like Al mentioned, Q3, Q4 is consistent. And from a forecasting perspective, looking into 23, I'm seeing a point or two maybe increase in the discounting across the board. So the mix does remain relatively consistent in and throughout 23. So, Warren?
spk04: Our growth in that is maybe – I think it's stabilizing. I don't know, for lack of a better word, Jason anticipates it going up a little, but I think we had the big shift in the third quarter. Fourth quarter was about the same. We're saying going forward it looks pretty steady. Now, if Amy is wildly successful in retail, which we hope, that might change into the good. If the mix changes more into the other side, we'll take a little bit of a haircut. But volume is good to us. We like volume.
spk06: Yep. So speaking of retail, that's growing pretty nicely. I mean, I have IQVIA and that's in the, you know, 50, 60% year over year growth. I think Symphony is even better. You know, how much effect of NERCs are we already seeing in the current volume or is that really almost all upside in terms of, you know, inflection or trajectory in 2023?
spk01: Yeah, it's going to be, we have not seen much at all. What we've been doing with our partner and our ex over the last quarter has been really just making sure that all of our tools will work with them, everything from our copay card to websites and co-promotion and just getting everyone up to speed to make sure that when they're ready to go full bore and completely convert to Twirla that they are set up systematically and the patients will be able to get it seamlessly. I think you're going to see impact of Nurex in the back half of the year, hopefully as early as Q2, but confidently in Q3. Okay.
spk06: And can you just remind us, you're going to be their exclusive patch, right? So are they just going to, I guess, similar to Planned Parenthoods that have adopted your product, are they just going to exhaust whatever, I guess, Zulane or generic supply they have and then go whole... wholly into Torla prescribing?
spk04: Yeah, think of that as a formulary. We're in a preferred position on their formulary. You know, it's going to be up to them how to manage the patient. Amy's been really sensitive to patients. Like, if a woman's on Zulane and she's happy, you know, she should stay. You know, she should stay. Yeah. We really, that's been some of the behind-the-scenes things we've been talking about. You know, now we hope a new patient comes in, we get that patient. So, but, you know, we're in a preferred position, you know, which is great. We're a good partner with them. Amy works hand-in-hand with them. But we say, look, you know, do what's right for the patient. You know, in the long run we'll benefit. So that's kind of been our philosophy.
spk01: Exactly right.
spk04: So it's not going to be black and white like some of the planned paranoia or we're going to go on and off. You know, so that's a little different situation. This will be kind of, as Amy was saying, we'll grow into it.
spk06: And I guess just one last one on retail long term. Has there been any noticeable tailwind or change in payer coverage or payer compliance with coverage mandates with regards to Torla or any other contraceptives that you've seen since the White House election? you know, started to bring some real heat onto payers?
spk04: The answer is yes. I mean, Amy and I review that data a lot. I mean, what we see is all boats are rising. In the early days, kind of the headwinds would require doctors doing this letters of prior loss. We talked you through, Oren, or, you know, or letters of medical necessity. And they were even being stopped, which is what we thought was wrong. We're seeing them go through. So there's less friction, if you will, you know, on this script. The scripts have a better chance of getting filled. You know, another reason we like Nurex and Specialty Pharm is that they can talk the patient through it, saying, hey, it might take us a week or two to, you know, get this paperwork in, but in the meantime, here's a sample. So, you know, the answer is yes. And we see it across all brands, which is great. When you're questioning a formulary, no, we haven't seen much movement in formulary. You know, so doctors, we still think the big win for us, imagine a day we get the formulary wins, Oren. You know, the wins, what we're doing right now is remarkable. I believe in retail. But formulary is, I think, a whole different game if we can unlock the formularies.
spk06: Sure. So if there is some improvement on the compliance with the letters of medical necessity or whatever, the waiver, so to speak, for ACA, is it an opportunity for you to go back? I imagine early on some people wrote, especially when you had a broader footprint with sales, some people wrote prescriptions and were probably inappropriately rejected by payers. And I can only imagine that's a tough first impression for a doctor to have with any product launch. Do you have the opportunity to go back and revisit as this landscape has improved a little bit to some of these doctors and say, hey, I know you tried and failed before, but try again?
spk04: Yeah, two things. One, it's better now. Then it was, but it's still not perfect. So we're routinely answering questions by Congress and the Senate about, is it fixed yet? Your question, and the answer is no. We believe we shouldn't even have to do a lot of this work. So not all of them go through at 100%. So it's very plan-specific. Some plans or PBMs do better than others. So while it's improved, it's not perfect. So we're routinely being advised to answer Congress and answer the Senate on this. They still have an active eye on this. So I think while it's getting better, it's not perfect. You know, and then we do tell doctors. We do tell doctors it's getting better. But rather than just sending the script down the street to the local CVS, give us a script. You know, once it's in our hands, our hit rate is a lot higher. Amy can, I mean, it's as close as, you know, we can handhold that script across the goal line. But if she goes to the CVS and they say your card doesn't work, That's a bad customer day for them. So that's why we think specialty farm and health medicine is so important to us. I mean, that's the strategy. The more volume we get there, our hit rate will even go up.
spk06: Okay. And just lastly, I appreciate the patience. OpEx, you mentioned it being down year over year. I guess, can you talk about that? Is that expected to be sort of flat-ish or up a little bit from the current level? as you sort of have these new programs rolling out and are starting to get a lot more traction. And I guess on your guidance of $25 to $30 million, you have an ambition of actually potentially cash flow break even at some point before the year end, which would be pretty remarkable. And I'm just trying to figure out, at what OpEx level do you feel like you can maintain sustainable growth? Like you've obviously reorganized a lot and you've got a lot of momentum on the sales side. How much growth long-term do you think you can sustain beyond even 2023 and just reaching break-even with this footprint? Do you think you're right-sized for substantial growth beyond 2023, or would you have to start investing more again?
spk04: To answer your last question first, I believe we're right-sized. and we can sustain growth, you know, the growth we're on. But it's based on one word, Amy's ability to partner. We can't do it alone. So I think as long as we have these great partnerships, Oren, you know, maintain a strong presence in the field and a good – leader like Amy that can really keep everybody working on all the oars in the water at the same time, I think we can continue to sustain this growth. And, like, down the road, we'd love to invest in the business again, I'll be honest. But we're not there yet, you know, but I'm not going to cry poor mouth either. I mean, I think we have a good investment to work off of, and I'm happy and I'm pleased with the level. To your next question about the range, Jason, I think it's in a range. So I think before we said nine to ten and a half, something like that. Because it gets a little lumpy at times. You know, when we buy samples, for instance, we have to buy the batch and expense it in that quarter. So I think we're in kind of a range of, you know, I'll call it 9.5 to 10.5, I think was what we said before. The 9.2 we're proud of. That was a great day. That's a lot of belt tightening. But we didn't cut corners. Amy got the investment she needed to grow this business. So she wasn't complaining. She'd always want more, but she's not complaining. And then I just want to clarify the profitability, I mean the cash flow sustainability. you know we're not going to be sustainable this year we're not going to throw off the year there's not going to be i i know you know this but what we see the fourth quarter or maybe the last couple of months of the year that will break through there so um and then hopefully we don't go back and then you know we go into 24 that way so we're shooting for the fourth quarter-ish you know that's where the lines cross and if we can keep the opex in roughly the same zone of like nine to ten We probably, Jason, need a $12 million net on the top line. And then we have to cost of goods sold. That's the math. So it really is just arithmetic. So you say, what level of sales do we need to cover the effects? It's probably $12 million net. And that number doesn't look scary to us. All right.
spk06: I look forward to future results and keep up the good work. Appreciate it.
spk04: We're losing questions, Oren. I think you got everybody's questions. We're losing questions out of the queue, but thank you. All right.
spk05: Thank you. And I'd like to turn the conference back to Al for closing remarks. Great.
spk04: Thank you. Thank you very much, Operator. You know, I'd like to take a couple minutes, you know, to comment on the, you know, the recent special meeting we had with our shareholders and You know, to continue to execute on our business plan and achieve our objective for 2023 and beyond, it was really important that we regain our compliance with our NASDAQ listing. And so to put us in a position to raise capital across a broader base of sources. While we believe, you know, the notable growth in 2022, it just wasn't enough, you know, to regain our compliance with NASDAQ. listing standards in our first compliance period. We've been granted a second compliance period with NASDAQ, but we need to obtain authorization by our shareholders to implement a reverse stock split if and when the board believes it's the right time. We explored all the available options available to us before concluding that our ability to implement a reverse stock split puts the company in potentially the best best position to regain the NASDAQ listing requirements and to appeal to a broader base of investors and to improve the perception, you know, of our common stock overall in the investment and, you know, with the investment community and the scrutiny by the investment community. So we would take a minute to thank our shareholders for your understanding of this issue. You know, it was a challenging issue for us to think through, you know, that we we we really appreciate your support and your understanding and you know and that your support of this important resolution so we just want to say thanks and um we're just also a great start in 23 we're proud of 2022 uh we're also a great start in 23 and You know, we're not going to sleep until, you know, we hit the commitments we've given you. We take pride in that. And the ultimate prize is to draw a sustainable business that generates its own cash. So thank you to the shareholders, and thank you for those that are following us. We really do appreciate it. So thank you.
spk05: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.
Disclaimer