Agile Therapeutics, Inc.

Good day and thank you for standing by. Welcome to the Agile Therapeutics first quarter 2023 financial results conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Riley, Head of Investor Relations.

Hello, everyone, and welcome to today's conference call to discuss our first quarter of 2023 financial results and corporate updates. Before we start, let me remind you that today's call will include forward-looking statements based on 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 Twirla and our operating expenses, our business strategy, our partnership with the FAC system's ability to promote growth, our product supply agreement with Nurex and its ability to make Twirla broadly available to patients, and our assessment of the combined hormonal contraceptive market generally, among other statements regarding 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. For more information concerning risk factors that may affect the company, please refer to our filings with the SEC, which are available through the investor relations section of our website. We undertake no obligation to update forwarded booking statements except as required by law. The information on today's call is not intended for promotional purposes and not sufficient for prescribing decisions. Joining me on today's call is Al Altamari, Agile Therapeutics Chairperson 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. Thank you, Matt, and good afternoon, everyone. I'm pleased to report another successful quarter for TWRLA. We believe our TWRLA net revenue level to date along with the demand continuing to grow at double-digit rates, have us on the path to achieving our 2023 financial goal of net revenue in the range of $25 to $30 million. I want to begin by reviewing TWRLA's first quarter 2023 performance and providing some commentary on our outlook in these areas. First, TWRLA demand. We are excited about the growth in Twirla demand that we're seeing across all our channels. We think this demonstrates that we're making good progress penetrating our markets and that patients are continuing to choose Twirla. Twirla total demand for the first quarter, as reported by Symphony, was 45,036 total cycles, a 20% increase from the fourth quarter of 2022, a single quarter record. Retail demand, which is our most profitable channel, was 30,576 total cycles in the first quarter of 2023, a 20% increase from the fourth quarter of 2022. Non-retail demand, the first quarter of 2023 was 14,460 total cycles, also an increase of 20% from the fourth quarter of 2022. Throughout March and April, we've consistently seen new weekly highs for Twirla demand as reported by Symphony, and we expect our telemedicine partnerships to further advance the retail channel demand beginning in the second half of 2023 as Twirla becomes the only patch to be offered by Nurex Partner Pharmacy. Our vision and ambition is that our retail partnerships can potentially accelerate the growth in the retail channel, like the fact this accelerated the growth in our non-retail channel. Now turning to net revenue and factory sales. First quarter 2023, net revenue was $3.8 million, which was approximately the same as the net revenue reported in the fourth quarter of 2022 and in line with our expectations. Net revenue results for the first quarter 2023 reflect flat factory sales quarter on quarter due to wholesaler work down of inventories levels, which rose at the end of 2022 and are slightly higher and a slightly higher mix on our non-retail sales, which represent higher gross to net reduction. Factory sales for the first quarter of 2023, as reported by our wholesalers, for 43,446 cycles compared to 43,340 total cycles for the fourth quarter of 2022. Wholesaler inventory decreased in the first quarter by 24%, but the wholesaler purchasing patterns realized in April 2023, signaling we believe the channel inventory levels have now normalized. We would expect to see both net revenue and factory sales to grow at higher rates moving forward. Now, gross margin. Another encouraging sign for Agile is that we continue to make progress in generating gross profit. In the first quarter of 2023, we generated gross profit of about $1.8 million, or a gross margin of 47%, compared to only $234,000 for a gross margin of 13% in the first quarter of 2022. We believe that we have the ability to increase this growth over the rest of 2023. Now on to operating expenses. Non-GAAP operating expenses, or OPEX, for the first quarter of 2023 were $8.5 million, an 8% decrease from the $9.2 million reported for both the third and fourth quarters of 2022. We are proud of our ability to grow Toralex while effectively managing our OPEX levels. Our goal is to continue to manage OPEX, be in line with the first quarter of 2023 results, which would lead to a significant reduction in our full year 2023 OPEX compared to the $45.5 million reported for the full year of 2022. Looking ahead to the second quarter of 2023, we expect to see meaningful quarter-over-quarter growth in net revenue, factory sales, and demand while continuing to manage our OPEX levels. This is the formula that is driving our confidence and our ability to achieve the 2023 net revenue in the range of $25 to $30 million. We believe we will continue to produce results by delivering on our business plan that is designed to allow Agile to thrive, not just survive, by first, focusing primarily on our five key states. Second, growing non-retail prescriptions through our partnership with AFACTSIS and focusing on the Planned Parenthood. Number three, growing our retail prescriptions for our telemedicine partnership, while also increasing the effectiveness of our sales force. In the past, you've heard me allude to our business plan and its emphasis on leveraging external partnerships that allows us to keep our internal infrastructure lean and efficient. While this plan has demonstrated its ability to grow Twirla while keeping our OpEx managed, we believe it has also demonstrated our credibility as a true commercial partner. We believe our ability to launch and consistently grow Twirla makes us an effective potential partner as we continue exploration of business development and product licensing opportunities. While we believe we can achieve our 2023 net goal with Twirla alone, adding a second commercial product to the company could potentially allow us to accelerate the timeline to generating positive cash flow. Before we open the line for Q&A, I'd like to comment on a few other of our financial results, which we believe demonstrate our continued progress on our business. Cost of goods sold, which consists of direct and indirect costs related to the manufacturing twirl of sold, were $2 million for the first quarter of 2023, compared to $1.7 million for the fourth quarter of 2022. We ended the first quarter of 2023 with $4.4 million cash on hand. In addition to our ATM, or at the market arrangement, we will continue to evaluate all available options to finance the company and continue to explore opportunities that could potentially accelerate our timeline to generate positive cash flow, including exploring business development opportunities. We closed out our first quarter of 2023 with a GAAP net loss of $5.4 million or $5.91 per share compared to a net loss of $10.4 million or $166.68 per share with a comparable period in 2022. Non-GAAP net loss was $7.1 million or $7.76 per share for the first quarter of 2023 compared to non-GAAP net loss of $11.8 million for $188.91 per share for the comparable period in 2022. The non-GAAP results reflect the exclusion of $1.7 million in other income for the first quarter of 2023 and $1.4 million in other income for the first quarter of 2022. resulting from the fair market value remeasurement on our warrant liabilities. We acknowledge that we are operating in very challenging times in the capital markets. We feel fortunate to be a growing revenue generating company and believe that puts Agile in a more advantageous position to execute on our business plan. We believe that our results for this quarter demonstrate that our business plan is working and that we're making good progress in achieving our goals and establishing agile in the contraceptive marketplace by growing Twirla and moving towards positive cash flow generation. We now like to give our covering analysts a chance to ask us any questions. Operator, you can open the lines.