TherapeuticsMD, Inc.

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Good morning, ladies and gentlemen. Thank you for joining us for TherapeuticsMD first quarter 2020 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, Nicole Oshner. Nicole?

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, our Chief Executive Officer, Robert Fenizio, Chief Financial Officer, James Durecka, Chief Commercial Officer, Don Howcuff, and Chief Strategy and Performance Officer, Mitchell Crafton. 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 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 are annual, quarterly, and other reports filed with the SEC. These forward-looking statements are based on information available to Therapeutics MD 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 May 6, 2021. With that, I'll turn the call over to Therapeutics MD's CEO, Rob Fenizio.

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 three. With the progress made on Innovera, we have strong year-over-year growth and Dommel share new strategies to overcome challenges that COVID-19 has created commercializing products. In addition, the patent estate for Innovera has doubled strengthening its durability and extending our exclusivity to June of 2039. Moving on to our menopause franchise, we achieved record net revenue per unit for both Invexi and Byjuva. I'm also happy to announce that we won our appeal for approval with the FDA for the new lower dose 0.5100 of Byjuva and have a meeting set in May to discuss next steps. The company continues the Vitacare divestment process to unlock shareholder value. We are creating significant revenue opportunity with two new live customers, a third schedule 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 2021 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 five. Our net product revenue for the first quarter was $19.6 million, which satisfied our first quarter revenue covenant. This was a 60 percent increase in product net revenue from the first quarter of 2020 that was primarily driven by Anavera, which had only just been launched. Anavera 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 Anavera 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, Invexi 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 Invexi since its launch. It was driven by the increase to $75 in our cash copay program, along with our new preferred payer contract. Byjuva net revenues for the quarter increased to $2.4 million. And as of March 31st, 2021, inventory levels in the wholesaler and pharmacy channel for our products were within normal levels. Moving on to slide six, 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 for Anavera 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 Anavera. Slide 8 shows the continued growth of Anavera this past year, even in the face of the constraints brought about by the pandemic. Year-over-year growth was 164 percent, and sequential TRX growth was 5 percent. 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 each 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 percent increase in prescribers in the first quarter of 21 versus the fourth quarter of 2020, another continued positive trend. Moving to slide nine. I am pleased to show you that Anavera is gaining market share from across the spectrum of birth control methods. More than half of Anavera patients are new to rings. As you can see, with the growth from Q4 to Q1, the percentage of Anavera 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 Anavera is now filling. Moving to the environment on slide 10. We continue to successfully grow Anavera in the face of headwinds from both payers as well as COVID limiting access to prescribers. Recently, ESI announced that it has replaced branded contraceptives with generics on formulary and placed branded products on the drug exclusion list, which led to Anavera's commercial coverage at 57%. Despite this change, we have confirmed that patients continue to receive Anavera 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 sales force 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 uptake 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 digits. 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 Anavera to filled 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 takeaway here is that interest is high, but we have considerable opportunity to increase access to patients who want Anavera at 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, Anavera messaging is impactful and relevant to consumers We know this because we have achieved metrics that are above industry benchmarks for click-throughs to the website. Most recently, we supported Vagina Appreciation Day, which resulted in a 380% increase in those searching for Anavera 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 Anavera. We know that of those who visit Anavera.com, only about 2% start the process to access Anavera online. To move the needle on helping more women who want Anavera 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 Anavera to receive a prescription. Right now, about 20 percent complete the process to receive a prescription for Anavera. We believe that improving this percentage is about improving the process flow for women to make it easier to connect with a healthcare provider who can write the Anavera prescription. Finally, on slide 18, once the Anavera 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 Anavera. 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 Anavera throughout the year and the growth of the Anavera brand. Turning to slide 20. As Rob mentioned, in the first quarter of 2021, three new Anavera patents were issued and are now Orange Book listed. We now have a total of six Orange Book listed patents for Anavera, strengthening the durability of the patent estate and extending the IP protection to June 2039. Turning now to INVEXIE on slide 22. We implemented our cash pay program change on January 1st, 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 fills per patient annually, which continues to be above category averages. Moving to slide 23, as you can see, Invexi 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 for Invexi. Year over year, there was a 39% improvement in net price, On a sequential quarter basis, Invexi saw a 13 percent 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 Invexi called Long May She Rain, shown on slide 25. The campaign is compelling and in its first week drove significant increases in traffic to the website. We believe this campaign will significantly raise the interest level for Invexi, and the brand will have the same programs in place as Anavera to keep access to patients high. We now turn to Byjuva, the second product in our menopausal franchise. Sequential quarter TRX trends were impacted by the same change in the cash program as Invexi. Byjuva 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 0.5100 by Juva 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 menopause franchise. In addition, VitaCare continues the divestment process and has 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 even a breakeven on a quarterly basis in the first half of 2022. I'd now like to open up the call for questions.

At this time, if you would like to ask a question, please press star, then the number one on your telephone keypad. Again, that's star, then the number one to ask your question. 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 improvement. I just had a couple questions. First, what are you seeing as far as underlying trends for investing 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 from VEXI, 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 it's 75 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 trend. We had about a month, and it turned around in February. And now we're seeing meaningful growth and much higher NAPs. So we expect the blended average for the year of 65 to 70. So you're going to see it continue to appreciate throughout this year. So that average of 65 to 70 will stay. But to your point, since we came in at 61, you should see upward trend, a strong upward trend from here. So, yep, 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 Invexi. It's net revenue per unit and it's volume going forward. Okay.

And then on Anavera, what percent of total covered lives does ESI represent for Anavera? And then additionally, as far as the patents go, are they composition of matter patents, method of use, just trying 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, uh, turn over to Don for the, uh, ESI, uh, portion, uh, by the way, they're approximately 15%. Uh, so the, the, the IP growth that we've had is significant, uh, and it's strategic and it's durability are, are, are really where we were hoped to get them, uh, and are really, really proud of our team that's gotten that done. And, um, The extra five months are nice to have through 2039, but really it's the strategic value of the types of IP we have and the placement of it given the regulatory pathway that's there to protect our assets. Dawn, you want to comment on ESI?

Sure. Thanks, Devin, for the question. So, again, as Rob mentioned, it's about 15%, but I just wanted to remind on a couple things with ESI. The first is that the decision was made at a class level and 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 Anavera has been very successful with that, given the uniqueness of the product, which has allowed doctors to continue to provide Anavera for those patients that want it, you know, through the letter of medical necessity. So we haven't seen an impact.

Yeah, we have no impact from the ESI change at all because of letters of medical necessity. So it's great.

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

No, we haven't. I think this quarter is a little bit of an anomaly. I think it's got a little ahead of itself. I think it's comfortable, say, to be in the 60s somewhere. It could be low 60s. It could be high. It's not a focus, so we haven't been putting a lot of color there. But it should trend somewhat similarly to Invexi, in our opinion, and that's about as far as we've gone. Does that help? 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 to start, For the low-dose by JUVA, 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 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, or is it just SG&A that you're talking about? And how extensive 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, 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 Baijuva expectations and what we plan to get. Maybe, Don, you might want to add something. You're closer to it than I am. So, you know, we thought – Biduva 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, you know, 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 to that right now. But the good news is that the office level thought it should have been approved originally, and they made that pretty clear in the summary, and it's in good shape.

Janet Stone, I think the only thing to add is, you know, as Rob said, you know, the FDA agreed that the data originally submitted should have 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, you know, when we have something to update, we will.

And hi, Jen. It's James Durek to answer the questions on spending. So the spending that I'm talking about is our OPEX, our total OPEX line, excluding non-cash items. That's the same thing we've been giving 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 and 48 million. We're 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've mentioned that for Anavera, your goal was to increase annual TRX per rider to 15. I'm just wondering, is that still the case?

For a certain type of rider, yes, absolutely. So we have loyalists, champions, dabblers, different types. So if you go back to our strategic operating plan, for 2021 that we shared at JPM. This quarter was exactly in line, but a little bit lower on the spend than what we had put out there, or a good bit lower on the spend. So we're going to continue that plan. We'll deliver. And I think some of the new things that we found that Don has talked about here we think should really accelerate some growth in areas where we've had great growth so far in the pilot stage. We're implementing into full bore in Q2 and Q3. And we're really excited about that related to Anavera. So, yes, to answer your question, for that type of provider, 15 is the goal.

Okay, great. That's super helpful. Thanks, everyone, and congrats again. Thank you.

Again, if you would like to ask a question, please press star, then the number 1 on your telephone keypad. That's star 1. Your next question comes from Douglas So with H.C. Wainwright.

Just really quickly, in terms of the ESI change, and I know it's been fairly recent, but just curious, you know, how long is it taking to get the letters of medical necessity approved? And sort of should we think of this, at least for just that group of patients, just sort of pushing out the curve? And do you have a sense of, you know, sort of the success rate from, you know, when a physician wanted to initially prescribe that to, getting the LMN, you know, 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, it's better for us, to be honest with you, Doug. So, it's so far, it's been excellent. I don't know if you've seen what we've been growing since this has happened. And the pull-through rate or the approval percentage that we have has been identical to what it was before. So, we feel really good. Look, give ESI credit. They're following the letter of the law, right? And they're doing a good job. And Anabara uniquely, not all birth control has this unique form. So when the 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 impact and we're grown.

And are you sort of, have you implemented any operational changes to support physicians just to ensure that that continues? Yes, we have.

Sorry, Doug, I cut you off there. Yeah, we have. We obviously are driving some education around this whole process related to LMNs, and it's pretty well understood out there already.

And, Doug, what I was mentioning with VitaCare, how we are supporting an initiative for you know, to support patients to make sure expectations are set with the LMN process. And, you know, it really doesn't take that long, but just making sure that all the paperwork's 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. I think that's the last question. There are no additional questions at this time. I'd like to turn it back over to Rob for closing.

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

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