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spk01: Good morning and welcome to the Agile Therapeutics second quarter of 2023 financial results conference call. Please note today's event is being recorded. I would now like to turn the conference over to Matt Riley, Head of Investor Relations.
spk07: Hello everyone and welcome to today's conference call to discuss our second quarter 2023 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 second half 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 partnerships with Afaxas and Cineos and their ability to promote growth, our relationship with Nurex and its ability to make Twirla broadly available to patients, and our assessment of the combined hormonal contraceptive market, 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 forward-looking statements. Further, during today's call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued today, which can be found on the investor relations section of our website. For more information concerning risk factors that may affect the company, please refer to our filings with the STC, which are available through the investor relations section of our website. We undertake no obligation to update forward-looking statements except as required by law. The 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, and Amy Welsh, Chief Commercial Officer. Following our prepared remarks, we'll open the call to questions from our covering analysts. I will now turn the call over to Al.
spk08: Thanks, Matt, and thank you for everyone joining us this morning. I'm personally very excited to share our quarterly results with you, and that is in part of the reason why this is our first quarter we're holding our call in the pre-market. We think a 44% growth in our net revenue to $5.5 million for the second quarter, combined with our double-digit growth in demand, made this a significant quarter for both Agile and Twirla. We believe This affirms our confidence in our business plan, our progress towards the goal of generating positive cash flow, and achieving 2023 net revenue in the range of $25 to $30 million. I'm going to kick things off by reviewing the performance metrics from the second quarter of 2023 that have us all excited. Amy will then discuss why we are confident in our belief we can sustain momentum into future quarters. Total demand for the second quarter was 55,687 total cycles, a 24% increase from the first quarter 2023 and another single quarter record. Retail demand as reported by Symphony, was 35,682 total cycles in the second quarter of 2023, a 17% increase from the first quarter 2023. The retail channel is our most profitable channel, and the retail demand accounted for 64% of the second quarter 2023 demand. Non-retail demand for the second quarter of 2023 was 20,005 total cycles, an increase of 38% from the first quarter 2023. Our non-retail demand is comprised of data from Symphony as well as our wholesalers. Second quarter 2023 net revenue was $5.5 million, which represents a 44% increase from the 3.8 million reported for the first quarter in 2023 and the 159% increase from the 2.1 million reported for the comparable period in 2022. Factory sales for the second quarter 2023 as reported by our wholesalers were 61,770 total cycles compared to the 43,446 total cycles reported for the first quarter 2023 a 42% increase. As discussed last quarter, on a year-to-date basis, we think channel inventory has now normalized. We expect to see both net revenue and factory sales continue to grow in the second half of 2023, driven by our growth in demand and the execution or business plan that Amy will describe. Growth margin. Along with the growth in our net sales and demand, we continue to make progress in generating gross profit. In the second quarter of 2023, we generated a gross profit of approximately $3.2 million, or a margin of 58%. compared to the $1.8 million or gross margin of 47% in the first quarter of 2023. We think gross margin is becoming a meaningful part of our progress, and we believe we will continue to see improvement in the second half of 2023. Operating expenses, or OPEX, for the second quarter of 2023 were $8.3 million, a 2% decrease from the $8.5 million reported in the first quarter of 2023. Before Amy takes over, I'd like to comment on a few other of our financial results, which we believe also demonstrate continued progress of our business. Cost of goods sold, or CODS, which represents direct and indirect costs related to the manufacture of the twirl is sold, was $2.3 million or 42% for the second quarter of 2023 compared to $2 million or 53% for the first quarter of 2023. We ended the second quarter of 2023 with cash on hand of $2.8 million. In addition to our at-the-market or ATM arrangement, we'll continue to evaluate all available options to finance the company. Our gap net loss for the second quarter of 2023 was $3.8 million, or $0.2015 per share, for the second quarter of 2023, compared to a gap net loss of $5.4 million, or $5.91, for the first quarter of 2023, and a GAAP net loss of $5.2 million, or $57.29 per share, for a comparable period in 2022, respectively. Non-GAAP loss was $5.5 million, or $3.10 a share, for the second quarter of 2023, compared to a non-GAAP loss of $7.1 million, or $7.76 per share, for the first quarter of 2023 at $12.2 million or $135.46 per share for the comparable period in 2022. The non-GAAP results reflect the exclusion of fair market remeasurement of warrant liabilities, which resulted in an other income of $1.7 million in the second quarter of 2023 $1.7 million in the first quarter of 2023, and $7.1 million in the second quarter of 2022. We set a single quarter record highs in demand, net revenue, factory sales, all by reporting another quarterly decrease in operating expenses. We are beyond pleased with the second quarter results, but the job is not done. we continue to ask ourselves how we can accelerate our growth. I will now hand over the call to Amy to answer that question by explaining the business model which we have built and is designed to deliver future growth across the board.
spk02: Thanks Sal and hello everyone. Our whole organization is energized by our results in the second quarter of 2023. I would like to take a few minutes to explain why we are excited and answer the question Can we reach our 2023 net revenue guidance of $25 to $30 million by sustaining our current momentum, driving increased growth in future quarters, and holding our operating expenses at current levels? We think the answer to this question is yes, because of the structure of our commercial business model and the continued receptivity towards Torolla. which is now approaching 15,000 cumulative prescribers since launch. We are pursuing a business plan that is built on a commercial platform that we believe is scalable without adding a lot of fixed costs. Let me explain further. First, our business plan focuses on driving TROLA in the five states that are estimated to reach over 45% of the U.S. women ages 18 to 24 and have strong reimbursement profiles. This targeted geographical strategy maximizes our Salesforce spend in the areas we believe have the greatest opportunity and potential for growth. And second, our commercial platform is based on collaborations with Cineos and Apexis that have been structured to minimize fixed cost and allow us to scale up or down as needed. as well as align our key partners' interests with ours so that our partners succeed when Agile and Trolla succeed. We have pursued this by converting what we would typically be considered fixed cost for a company like Agile into variable cost. For example, through our partnership with the SACSIS, second quarter 2023 non-retail demand grew 38% from our first quarter 2023. Rather than allocating the time, resources, and dollars to build and maintain our own non-retail sales force, we partnered with the FACSIS to drive non-retail growth because we identified them as experts in that area. The FACSIS's compensation is a combination of a fixed fee along with performance-based incentives, which helps us keep quarterly operating expenses at a stable rate without sacrificing growth potential. We have taken the same approach with Cineo, which provides our retail sales force. We believe we can now build out this commercial platform and drive additional Torolla growth by expanding our distribution channels, which we expect will increase access to Torolla without incurring additional significant operating costs. So this is why we remain confident that we can achieve net revenue in the range of 25 to 30 million while holding our operating expenses relatively steady. Now I would like to take a few more minutes to provide some additional details on our plan to build out our distribution channel. In the first quarter of 2023, USOS announced new relationships designed to further expand our commercial reach and drive TROLA growth. And the retail channel refocused on collaborations to grow TROLA through telemedicine platforms. which we will expect to contribute to second half 2023 net revenue and retail channel growth. Advancing Parola's availability through NREX, 28 Health, and PANDIA are all part of our strategy to sustain future growth in the retail channel.
spk03: We also focused on growing the non-retail channel.
spk02: Parola's availability through our relationship with SPA Women's Health and NCAP are planned to augment AFACTSIS's efforts and contribute to further second half 2023 non-retail growth. Their expected contributions are a large part of why we are confident in sustained growth across the board in the second half of 2023. Strong, focused external relationships are an integral part of our business plan and we expect to continue to explore collaborations that can positively impact our business, allow us to expand without incurring significant cost, and promote a growing, sustainable, fiscally responsible business.
spk03: We'd now like to give our covering analysts the opportunity to ask questions. Operator, you may now open the line for Q&A.
spk01: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
spk08: So, Operator, while we're doing that, I want to introduce somebody else in the room. We also are joined in the room by Scott Gante, our incoming moderator. new CFO. I think most of you know that Scott, you know, was a big part of the company when we took the company public. So we're thrilled to have him back. So I just want to let everyone know he's also in the room and he'll be transitioning to the job in the next week or so.
spk01: All right. Thank you. All right. So our first question comes from the line of Oren Livnat from H.T. Wainwright. Your line is now open.
spk05: Thanks. I have a bunch of questions. Congrats on a Nice upside this quarter. And reiterating that guidance. I guess first, you just mentioned Scott's on the call. Welcome back, Scott. I'm curious what you found compelling about this opportunity to return to Agile. And I'll ask about some fundamentals.
spk06: Thanks, Oren. Good to connect with you. Look, as you know, I was part of some really good, productive years here at Agile. Look, it's a great team. There's a great group of people here. The opportunity presented itself for me to come back, and I'm happy to be here and continue to, you know, build on that progress that the company's been doing.
spk04: Obviously, it's a pivotal time. Sorry. I just heard some feedback on the end. Can you hear me?
spk08: Yeah, you're good. You're good, Oren. Go ahead.
spk05: Okay, good, good. Well, let's talk about Trolla. I think we're five weeks into Q3 and I know you don't give quarter by quarter guidance, but since you reiterated, you know, the top line guides, can you just talk about what sort of trends you're seeing, I guess, quarter to date sequentially in growth? I mean, I think we've seen over 20% total cycle demand a couple of quarters in a row. And I'm just wondering, can that trend continue or do you expect, you know, some lumpiness as they get into summer?
spk08: So, Lauren, you're stealing our thunder from my closing comments. There's nothing we're seeing. That's okay. Now we'll answer. There's nothing we're seeing in July that doesn't get us any concern. In fact, we're ecstatic with July. The momentum we've seen in the second quarter continues to accelerate into the third quarter. So far, as you said, about five weeks into it. So, I don't know. We're thrilled. That's exactly right. Fingers crossed the rest of the quarter goes like this. But we're not surprised. I mean, we would expect that. The model that Amy built has walked it through. We would expect to continue to see momentum, and that's why we reaffirm guidance, and that's why we're bullish on the year.
spk05: All right. And one of the big things you talked about in the past is how this success in the non-retail channel, particularly, you know, Planned Parenthood spills over into the retail channel, which is obviously the most profitable, as you've highlighted. You've seen, you know, nice sequential demand as well, near 20% in the retail as well, I think. You know, are you seeing that spillover, or is this just traditional boots on the ground driving retail demand or the new telemedicine channels?
spk08: I'll turn it over to Amy, the expert, and she'll have a better answer.
spk02: That's okay. Hi, Oren. Thank you for the question. Yes, we are. We saw that spillover as early as third quarter last year, and every time that we add another account on, we do some analytics in that state, and we're confident when we see, you know, a few months after looking into it that we see the spillover continue. It's the model that we had talked about a few times, Oren, where these physicians that are in Planned Parenthood more than likely also have a private or in a group practice. So the confidence that they start to gain on Twirla within the Planned Parenthood structure, they're bringing over. So, yes, we continue to see the spillover. So, again, when we get a new account, you know, again, we're confident that the non-retail growth will go into the retail growth.
spk04: All right.
spk05: And I guess one of the new things you announced this quarter was the non-340B non-retail accounts like the FPA. And I think there was another one in there that I might have missed the name of. You know, you said that's an important contributor for second half. Big picture, how big a channel is that, you know, as an opportunity? How many more accounts are there like that? And remind us, where do they fall sort of on the profitability spectrum of your multiple channels?
spk08: Yeah, so I'll do profitability, then maybe I'll just give you kind of an overview. Then Amy can talk you through FBA specifically. But Profitability, if we look at kind of our profitability yield, commercial cycles are still clearly our best. Next in the pecking order would be FP&A. Then we would put our Medicaid business, and then the AFAXIS business that's a GPO business. Kind of that's our cascade. So FP&A is closer to commercial, which is a really great thing for us. I don't know. I mentioned this to our team. I said, you know, when you look at California, California is bigger than the country of Germany from a GDP perspective. So we landed not only the biggest private account in California, they claim to be the biggest in the country. So why don't you take it from there?
spk02: I think I'll take the part on, you know, How much potential is there with that one and other non-340B accounts? FPA is a phenomenal account led by a great group of OBGYNs. We just started the partnership, so we're in no way at a steady state. You know, we're just beginning to normalize now, so there's Lots of growth with that single account. But strategically, other non-340B accounts, other sort of hybrid-like accounts that sit in between the commercial sort of cost structure and a Planned Parenthood 340B, if you will, cost structure, that's part of our new back half of the year strategy. So some more to come on that. But we were very lucky to start with an account like FPA. It's meaningful nationwide and meaningful financially for us.
spk08: Maybe explain how MCAP fits into that strategy, maybe just the importance of MCAP.
spk02: Yeah, MCAP serves as a GPO for FACSIS and enables their sales folks to sell deeper into colleges and universities and some government health services that a FACSIS may or may not have accounts with. So MCAP, we signed on, and it's basically, again, a volume opener, like I was saying earlier in the call. We're looking for partnerships that can help us have access for TRLA. So MCAT serves for us in those two channels again, that is colleges and universities nationwide, as well as government health and human services statewide.
spk05: Okay. I guess since we're talking about profitability and, you know, mix, can you talk about these sort of overall value per cycle trends? I guess from last quarter to this quarter and then going forward, you know, obviously both channels or all channels are growing. So it's hard for us to really to guess what direction this is going. But can you give us a big picture how we should think about that?
spk08: Yeah, I'll take a shot and let Amy comment. But just when you look at the second quarter versus the first quarter, our mix. you know, of retail was stronger in the second quarter. So that's a good thing. So if you do like you're, you like calculating the yield per script or yield per cycle. So what did we yield per cycle? It went up in the second quarter. And that was primarily due to a more, I call it a favorable mix, you know, so, you know, a quarter that's more balanced on retail and non-retail And then, you know, just to put a footnote on FBA, like one of the things we're realizing is that when we say non-retail, that's got some shades of gray in there too now because there's a lot of differences in pricing on there. So one of the things we're considering, you know, Scott, when he came here, he called it a hybrid. So that's what we think of as FBA because it's kind of somewhere in the middle. So the mix is better. The pricing is stronger, which is great. And then as you saw in our comments with gross profit, we've outgrown some of the you know, fixed allocations and COGS. So the margins are improving. So we have a better yield per script orange. We would expect to see that continue if we can continue to deliver on the retail mix. um and then we would expect our cogs to continue to improve as we just become more variable if you will and cogs you know we've outgrown those things it was nice as i commented in my talk to see we're throwing off a margin now you know that's starting to you know you know get you know pretty significant and that's why we continue to see us zooming in on you know throwing off cash for this business You know, so that's a nice thing. So as our revenue grows, our cost becomes more efficient, and then we are a continued partnering model that Amy built. You know, hopefully that, you know, the OpEx stays in reference to the zip code we're in, and that's why we can close the gap. So that's why we took the top line and also our ability to, you know, start generating cash off this business.
spk00: Okay, my next question.
spk08: Every metric is looking better more, and everything is kicking in nicely.
spk05: You actually anticipated my next question, which is just, can you just remind us sort of how your fixed cost base on the cog side, you know, the magnitude of that, such that, you know, regardless of your weighted, you know, even if you had a flat net value per cycle, you know, how fast your gross margin can grow just with sales as they increase? You know, how... What's your quarterly underlying fixed, I guess, quorium commitment versus your variable cost? And just to layer onto that, sorry, just to interrupt, but in FX, as you mentioned, performance-based incentives, I'm just wondering, as that non-retail channel grows, does that, you know, do they get a bigger piece of the growth to net?
spk08: Yeah, so let's do cons first. You know, as Amy mentioned, we've reduced our – if you look at one of the most impressive things, I think, on our P&L is if you look at our OPEX spending six months ago, the first six months of last year versus the first six months this year, it's – I think it's eye-opening how much OPEX we've taken off the board, right? So that's the model Amy described. But also, Oren, we've been able to reduce our fixed costs internally that we were allocating in the COGS. What we're allocating in the COGS is people cost here to help run the business. So, look, we've been able to reduce that, too. So the effort to reduce OPEX hit not only the SG&A lines, but it also hit COGS. So the good news is there's not much allocations going forward going in the COGS anymore. So there's a little bit, but for the most part, it's going to be variable. That's why we're signaling that that's going to continue to improve. The reductions in the incentives Amy describes in our relationships with people like a faxist are offsets of sales. So they run through the net sales line. So that's where you'll see that. You know, the cheaper ones are, you know, the GPO business on the effects relationship. That's becoming less of a big portion of our mix as Amy brings on people like FP and Angra as the retail. So that's what I'm referring to as mix. So that's all those incentives are running through is a reduction of sales. And so even with those, we're enabling three-star yield per cycle, if that makes sense. So the model is becoming efficient, Oren. I'll leave you with just becoming efficient. You know, it's just everything we're doing now gets, you know, even more efficient as this model really takes shape. You know, our partners, as Amy mentioned, are incentivized to grow our business so they don't get paid. It's just that simple for the most part, for the most part. And so their incentives are aligned with ours. And in the meantime, we can keep our fixed costs in general across the whole, you know, leaner.
spk05: You keep segueing to my next question like you're looking at my page here. Speaking of the incentives of your partners to do a good job, how are the telemedicine channels working out so far? I mean, there are Nurex and others. I think Nurex has been on board for a while in terms of partnership, but I think maybe last quarter you talked about sort of it just being turned on or being fully trained up and ready to go. How are they doing in terms of, I guess you could call it promoting the product, maybe not per se, but when women go into the Nurex channel, how are they doing with regards to offering products twirl as an option for appropriate patients, and are they hitting the targets that they or you had set in the arrangement?
spk02: Yeah, I'll jump in, Oren. Thank you. All of our telemedicine partners, we're lucky to have their great partners, Nurex. You're right. We signed them at the end of last year, and they officially now offer through their distribution channels our patch as their only patch that they send out, and that's for them in May. They're growing month over month over month. It was a bit of a slow start because of some of the structural changes that were happening on their end, but they have now a solid team. And I'm pleased when I look at their growth week over week. Again, we're very lucky to have them as a partner. We just signed on 28 Health, so early days there, but again, we always see growth. I think the best thing about our telemedicine partners is it's a channel that is meaningful to the women our age group, 18 to 24-year-olds, so it's always going to be available for them, and branded products. Tarola has kind of broken the ceiling a bit and been one of the first branded products offered on these channels. So the negative about that is, you know, we help them set up a process. The positive about that is we stand it alone. But it does take a while sometimes. But we see growth, and I'm more than confident in the back half of the year. We're going to make up any type of slowness because of some of the training and the process changes that happen in the first part of the year. The upside, a lot of the upside in retail will be due to telemedicine.
spk05: All right. Bigger picture. Bigger picture. Washington activities have been interesting. We've seen maybe a third executive order to come out of this administration related to women's health and specifically coverage or lack of coverage of contraceptives. Al, you're down there a bunch, I think. What's going on there in terms of you know, words versus potential enforcement actions that they've been hinting at for a while. And do you expect anything to change, especially heading into an election cycle where women's health is, women's health care is such an important part of this narrative?
spk08: The answer is yes. I mean, clearly, you know, I don't think it was a surprise to us, the symbolism of that executive order being on the Roe v. Wade anniversary. I mean, The Biden administration clearly is signaling that women's health in the broadest sense is important to them. The Roe v. Wade or the abortion discussion on boards is a very complicated discussion. So they see contraception. We believe they see contraception as an important win for women. So that executive order, as you saw, including us, but also including things like TRICARE, which is the military, Medicare, I'm sorry, Medicaid. So we had a five-point plan. So contraception needed a lot of work. So based on my discussions, we believe that the right thing to do is to clarify once and for all you know, that products like us that were approved that don't have generic equivalents need to get access to this country. So we believe that that's coming. I can't tell you when. I don't know when. I shouldn't say. I would tell you if I thought I had a handle on it because it's a different pace in Washington than I have. But what I think we've tried to communicate here is that that is an upside to our investors. I mean, What we've created is a sustainable, growing model that's growing in every channel that Amy's put a stake in. So, you know, Oren, so we still believe that's upside to us. You know, we believe it's coming. We don't think, Oren, personally, I don't believe enforcement's the answer, because while there's three PBMs that control, you know, vast majority of lives in this country, it's up to every plan under them to administer this thing. So it's unwielding You know, you could say it's PBMs, and that's true, you know, but the implementation of the Affordable Care Act has really been the downstream plan. So we think the enforcement's a bit chasing of the tail. We think, you know, to get regulations out, clearly stating what I just said, I think is the ultimate answer. And then we would expect there's going to be a lot of oversight from the administration and also that the agencies that monitor this. I think the enforcement will be on the back end of those new regs, if you will. So I think it's coming over. I have a high degree of confidence. I don't want to guide to something I don't have control over. But I think it's coming. But in the meantime, you should know we're just blowing out the third quarter, and that'll put more wind in our sails.
spk04: All right. Well, I think that's it for me. I appreciate your patience with all the questions. I'm looking. Go ahead.
spk01: All right. As of the moment, I do not see any other questions at this point. I would like to turn the conference back to Al Altamari for closing remarks.
spk08: Great. Thank you. So, Oren, thank you for the thoughtful questions. You look like you preempted a couple of the callers, so this is great. You know, I guess my final thought is that in a statement, I would say the proof is in our progress. You know, we are not saying this is going to happen. We're saying this is happening. You know, for the first six months, you know, of this year versus the first six months of 2022, you saw in our data that net revenue is up 140%. OpEx, on the other hand, is down nearly 38%. And as Oren asked me, you know, based on what I've seen of the third quarter so far, Amy and I feel great you know, about that the momentum is still continuing. You know, we say that time in and time out, but come in and have record quarters and every metric, you know, that's important to us. And the momentum that we're seeing isn't in any one channel. It's in all the channels. Retail continues to grow. Non-retail continues to grow. As Amy mentioned in the question or the answer about, you know, telemedicine, the momentum there is growing. So we're just layering on in all our channels, continued growth, because we're on a quest to once and for all, first of all, hit our guidance we've given you for the year. So hopefully you see why we're confident in that based on this quarter's results. And the ultimate prize is this barter on cash off this business. So thank you for your attention. Thank you for following our story. And we appreciate you staying close to us. Thank you, everybody.
spk01: This concludes today's conference call. Thank you for participating. You may now disconnect.
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