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TherapeuticsMD, Inc. (NASDAQ:TXMD)
Q1 2021 Earnings Call
May 06, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good morning, ladies and gentlemen. Thank you for joining us for TherapeuticsMD first-quarter 2020 financial results conference call. [Operator instructions] I would now like to turn the call over to TherapeuticsMD's vice president of investor relations, Nichol Ochsner. Nichol?

Nichol Ochsner -- Vice President, Investor Relations

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 and the Investors and Media section.

On today's call from TherapeuticsMD are Chief Executive Officer Robert Finizio, Chief Financial Officer James D'Arecca, Chief Commercial Officer Dawn Halkuff, and Chief Strategy and Performance Officer Mitchell Krassan. I would like to remind everyone that certain statements made during this conference call may be forward-looking statements. Such forward-looking statements are based upon current expectations, and there can be no assurance that results contemplated in these statements will be realized. Actual results may differ materially from such statements due to a number of factors and risks, some of which are identified in our press release and our annual, quarterly and other reports filed with the SEC.

These forward-looking statements are based on information available to TherapeuticsMD today, and the company assumes no obligation to update statements as circumstances change. An audio recording and webcast replay for today's conference call will also be available online in the Investors and Media section of the company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded May 6, 2021. With that, I'll turn the call over to TherapeuticsMD's CEO, Rob Finizio.

Rob Finizio -- Chief Executive Officer

Good morning, and thank you for attending our Q1 call. This quarter, we had strong execution across the organization while investing in our most important assets to create shareholder value through revenue growth and continued protection of our assets. Let's begin on Slide 3. With the progress made on ANNOVERA, we had strong year-over-year growth, and Dawn will share our new strategies to overcome challenges that COVID-19 has created commercializing products.

In addition, the patent estate for ANNOVERA 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 units for both IMVEXXY and BIJUVA. I'm also happy to announce that we won our appeal for approval with the FDA for the new lower dose 0.5/100 in BIJUVA, and I have a meeting set in May to discuss next steps.

The company continues the vitaCare divestiture process to unlock shareholder value. We are creating significant revenue opportunity with two new live customers, a third scheduled to launch in the fourth quarter and a pipeline with approximately 20 potential new deals. With this progress, vitaCare continues to build on its foundation to become a freestanding, rapidly growing entity in a new sector with no established leader. Most importantly, Q1 year-over-year financial improvement was significant with increasing revenue growth while lowering operational expenses, all in the midst of a pandemic.

I will now turn the call over to James to discuss more details. James?

James D'Arecca -- Chief Financial Officer

Thanks, Rob, and good morning, everyone. Turning to Slide 5. Our net product revenue for the first quarter was $19.6 million which satisfied our first-quarter revenue covenant. This was a 60% increase in product net revenue from the first quarter of 2020 that was primarily driven by ANNOVERA, which had only just been launched.

ANNOVERA net revenue per unit decreased $1,071 because of increased rebates owed, resulting from a new payer contract becoming effective during the first quarter. We expect net revenue per unit of ANNOVERA to approximate $1,100 per unit for 2021, although it will likely fluctuate over the next three quarters as the mix of payer reimbursement changes. Additionally, as you can see on the chart, IMVEXXY 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, a highest level for IMVEXXY since its launch.

It was driven by the increase to $75 and our cash co-pay program, along with our new preferred payer contract. BIJUVA net revenues for the quarter increased to $2.4 million. And as of March 31, 2021, inventory levels in the wholesaler and pharmacy channel for our products were within normal levels. Moving on to Slide 6, let's review some key financial statement items.

Our product gross margin of 76% for the first quarter was adversely affected by production-related write-offs for ANNOVERA of $900,000. We continue to maintain our focus on strict cost discipline, which allowed us to reduce operating expenses to $44.5 million for the first quarter, a decrease of $16 million as compared to the first quarter of 2020. While we plan to maintain an efficient cost base that can be leveraged as revenue grows, we expect to make investments this year to improve our supply chain, enhance marketing and strengthen digital capabilities related to commercial initiatives. With these investments, we expect our highest spending occurring in the second quarter.

Net cash used in operating activities was $38.4 million for the first quarter of 2021. Our debt balance decreased to $183.9 million, resulting from a $50 million principal repayment made during the first quarter. Overall, I continue to be pleased with our financial performance and believe we are well-positioned to execute on our commercial plans to drive our growth in 2021. I'd now like to turn the call over to Dawn to discuss our commercial progress.

Dawn?

Dawn Halkuff -- Chief Commercial Officer

Thank you, James. Let me start with ANNOVERA. Slide 8 shows the continued growth of ANNOVERA this past year, even in the face of strict constraints brought about by the pandemic. Year-over-year growth was 164%, and sequential TRx growth was 5%.

The quarter-over-quarter growth is meaningful, given that, historically, first-quarter volume and net revenue per unit are lower than the fourth-quarter levels as a result of high deductible plans and co-pay resets at the beginning of 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% increase in prescribers in the first quarter of '21 versus the fourth quarter of 2020, another continued positive trend. Moving to Slide 9.

I am pleased to show you that ANNOVERA is gaining market share from across the spectrum of birth control product -- methods. More than half of ANNOVERA patients are new to rings. As you can see with the growth from Q4 to Q1, the percentage of ANNOVERA patients who have switched from IUDs or implants is now at 18%. We believe this data is compelling as it suggests an unmet need for a long-acting, procedure-free contraceptive which ANNOVERA is now filling.

Moving to the environment on Slide 10. We continue to successfully grow ANNOVERA in the face of headwinds from both payers, as well as COVID-limiting access to prescribers. Recently ESI announced that it has replaced branded contraceptive with generics on formulary and placed branded products on the drug exclusion list, which led to ANNOVERA's commercial coverage at 57%. Despite this change, we have confirmed that patients continue to receive ANNOVERA when the 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 sales force model to drive continued uptake of the brand. Moving to Slide 12.

The prescriber's 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'm highlighting is that it shows the impact of the COVID restrictions on the launch brands shown, including birth control products, with the growth rate 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 has been challenging, they have also created an opportunity to focus more heavily on the consumer as the catalyst to drive demand. As a company, we continue to adapt, accelerating our use of digital platforms, such as social media, virtual public relations events and telehealth, to convert consumer interest in ANNOVERA to fill prescriptions in a virtual world. On Slide 14, the funnel on the left shows the path from the initial interest we generate from our consumer campaigns to the eventual number of patients who fill a prescription through online or telemedicine channels.

The main takeaway here is that interest is high, but we have considerable opportunity to increase access to patients who want ANNOVERA 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. ANNOVERA messaging is impactful and relevant to consumers.

We know this because we have achieved metrics that are above industry benchmark for click-throughs to the website. Most recently, we supported the Vagina Appreciation Day, which resulted in a 380% increase in those searching for ANNOVERA online and boosted our daily website visits by 35%. Bottom line, we understand how to drive interest and plan to continue to do so throughout the year. Turning to Slide 16.

Now comes the opportunity to help women better access ANNOVERA. We know that of those who visit annovera.com, only about 2% start the process to access ANNOVERA online. To move the needle on helping more women who want ANNOVERA receive it, we have launched additional options to increase access for patients who may not be able to visit their prescriber in person. Moving to Slide 17.

The next step, as shown in the funnel, is helping women who want ANNOVERA to receive a prescription. Right now, about 20% complete the process to receive a prescription for ANNOVERA. We believe that improving this percentage is about improving the process flow for women to make it easier to connect with a healthcare provider who can write the ANNOVERA prescription. Finally on Slide 18.

Once the ANNOVERA prescription is written, we are actively working to increase access to help get the prescription filled. Our data shows that only 45% of women are able to successfully fill their prescription at this stage. We aim to help more women accomplish this step by utilizing patient assistance tools through vitaCare. Just last month, we launched an initiative to accelerate this effort for ANNOVERA.

Moving to Slide 19, which is a visual once again of the complete funnel. We believe the small changes that I have described that we are making at each part of the funnel will drive significant increases in women's access to ANNOVERA throughout the year and the growth of the ANNOVERA brand. Turning to Slide 20. As Rob mentioned, in the first quarter of 2021, three new ANNOVERA patents were issued and now Orange Book listed.

We now have a total of six Orange Book-listed patent for ANNOVERA, strengthening the durability of the patent estate and extending the IP protection to June 2039. Turning now to IMVEXXY on Slide 22. We implemented our cash pay program change on January 1, causing an expected TRx decline. I am happy to say we had a record net revenue per unit this quarter at $61 due to this change and delivered approximately six fills per patient annually, which continues to be above category averages.

Moving to Slide 23. As you can see, IMVEXXY is back to growth, increasing month over month throughout the quarter. Turning to Slide 24. As stated, we were able to increase the net price per unit for IMVEXXY.

Year over year, there was a 39% improvement in net price. On a sequential-quarter basis, IMVEXXY saw a 13% improvement in net price. Now that we have raised our net price per unit, I wanted to share that we launched a new consumer campaign for IMVEXXY called Long May She Reign, shown on Slide 25. The campaign is compelling and in its first week drove significant increases in traffic to the website.

We believe this campaign will significantly raise the interest level for IMVEXXY and the brands will have the same programs in place as ANNOVERA to keep access to patients high. We now turn to BIJUVA, the second product in our menopausal franchise. Sequential quarter TRx trends were impacted by the same change in the cash program as IMVEXXY. BIJUVA experienced year-over-year growth, as shown on Slide 27, despite minimal investment in the brand throughout the year.

Turning to Slide 28. We have made significant progress with our new lower 0.5/100 BIJUVA dose. We recently won an appeal with the FDA for this new lower dose, and we have a meeting set with the FDA for May to discuss next steps. I would now like to turn the call over to Rob for closing remarks.

Rob Finizio -- Chief Executive Officer

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 divestiture process and is increasing 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 keeps us on track for achieving EBITDA breakeven on a quarterly basis in the first half of 2022. I'd now like to open up the call for questions.

Questions & Answers:


Operator

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

Devin Geiman -- Guggenheim Partners -- Analyst

Hi. This is Devin on for Dana. Congrats on the net price improvements. I just had a couple of questions.

First, what are you seeing as far as underlying trends for IMVEXXY net 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 cash pay versus non-cash pay and I guess more favorable profitability across this mix?

Rob Finizio -- Chief Executive Officer

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

Devin Geiman -- Guggenheim Partners -- Analyst

I saw previously that the net price was the top end of the range for net price was $70, and it looks like $65 to $75 now.

Rob Finizio -- Chief Executive Officer

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 of $75.

We had a really -- we expected two months of downward trend. We had about a month in the turnaround in February, and now we're seeing meaningful growth at much higher nets. 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 a great movement there, and it works. And the large PBM contract is helping as well, and we're working on others in that arena, other large PBM contracts for preferred position.

So we're feeling good about IMVEXXY, its net revenue per unit and its volume going forward.

Devin Geiman -- Guggenheim Partners -- Analyst

OK. And then ANNOVERA, what percent of total covered lives does ESI represent for ANNOVERA? And then additionally, as far as the patents go, are they composition of minor patents method of use? Just trying to get a sense of what's contained and what claims are in the patents.

Rob Finizio -- Chief Executive Officer

Yeah. So I'll take the patent one, and then I will turn it over to Dawn for the ESI portion, which, by the way, they're approximately 15%. So the IP growth that we've had is significant, and it's strategic, and its durability are really where we would hope to get them and are really, really proud of our team that's gotten that done. And the extra five months are nice to have through 2039.

But really, it's structured strategic value of the types of IP we have in the placement of it, given the regulatory pathway that's there to protect our assets. Dawn, you want to comment on ESI?

Dawn Halkuff -- Chief Commercial Officer

Sure. And thanks, Devin for the question. So again, as Rob mentioned, it's about 15%, but I just wanted to remind on a couple things with ESI. The first is that the decision was made at a class level, not a brand level.

And it's actually happening in multiple classes. So what we're really lucky with is that in the birth control class, we have the protection of the ACA. And ANNOVERA has been very successful with that, given the uniqueness of the product, which has allowed doctors to continue to provide ANNOVERA for those patients that want it through the Letters of Medical Necessity. So we haven't seen an impact.

Rob Finizio -- Chief Executive Officer

Yeah. We have no impact from the ESI change at all because of Letters of Medical Necessity.

Dawn Halkuff -- Chief Commercial Officer

Yeah.

Devin Geiman -- Guggenheim Partners -- Analyst

OK, great. And one last one for me. Could you just remind me, have you given guidance on where you expect the net price for BIJUVA and for the year going forward?

Rob Finizio -- Chief Executive Officer

No, we haven't. In this -- I think this quarter, it got a little bit of an anomaly. It could a excel a little ahead of itself. I think it's comfortable to say to be in the 60s somewhere, could be low 60s, could be high.

We're not -- it's not a focus, so we haven't been putting a lot of color there. But it's a trend somewhat similarly to IMVEXXY in our opinion, and that's about as far as we've gone. Does that help?

Devin Geiman -- Guggenheim Partners -- Analyst

Yes. Thank you very much.

Rob Finizio -- Chief Executive Officer

You got it. Thanks.

Operator

Your next question is from Louise Chen with Cantor Fitzgerald.

Jen Kim -- Cantor Fitzgerald -- Analyst

Hi. This is Jen for Louise. Congrats on the quarter.

Rob Finizio -- Chief Executive Officer

Thank you.

Jen Kim -- Cantor Fitzgerald -- Analyst

I have two questions here. I guess just to start, for the low-dose BIJUVA, can you go more into detail on what you're looking to get out of the May meeting and maybe what's the base case time line 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 and -- or is this 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 the first -- like what we saw in the first quarter is sort of a good example of what spend could look like?

Rob Finizio -- Chief Executive Officer

Sure. I'll take the BIJUVA expectations and what we plan to get. Maybe, Dawn, you might want to add something. You're closer to it than I am.

So we thought BIJUVA low dose should have been approved when we originally submitted it, and it wasn't. So we filed an appeal, and that appeal was granted by the FDA very recently. We're going to meet with them in May to look at the next steps there, and there is 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 they -- the office level of thought, it should have been approved originally. And they made that pretty clear in the summary, and it's in good shape.

Dawn Halkuff -- Chief Commercial Officer

Jen, it's Dawn. I think the only thing to add is, as Rob said, 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 when we have something to update, we will.

James D'Arecca -- Chief Financial Officer

And, Jen, it's James D'Arecca 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 million and $48 million.

We're going to -- we're sticking to that for this year. In terms of this trend, as you know, with launched 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 toward the middle of the year and then ease out toward the end of the year, and we would expect a similar phenomenon this year.

Jen Kim -- Cantor Fitzgerald -- Analyst

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

Rob Finizio -- Chief Executive Officer

For a certain type of writer, yes, absolutely. So we have loyalists, influenced 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 lower -- a little bit lower on the spend than what we've put out there or a good bit lower on the spends. So we're going to continue that plan.

We'll deliver. And I think some of the new things that we found that Dawn has talked about here, we think should really accelerate some growth in areas where we've had great growth. So far in pilot stage, we're implementing into full bore in Q2 and Q3, and we're really excited about that related to ANNOVERA. So, yes, to answer your question for that type of provider, 15% is the goal.

Jen Kim -- Cantor Fitzgerald -- Analyst

OK, great. That's super helpful. Thanks, everyone, and congrats again.

Rob Finizio -- Chief Executive Officer

Thank you.

Operator

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

Douglas Tsao -- H.C. Wainwright -- Analyst

Just really quickly in terms of the ESI change, and I know it's been fairly recent. But just curious how long is it taking to get the Letters of Medical Necessity approved? And sort of should we think of this for at least -- for just that group of patients you're sort of pushing out the curve and do you have a sense of sort of the success rate from when a physician wanted to initially describe that to getting that the LMN done, what's the sort of pull-through rate that you've seen so far?

Rob Finizio -- Chief Executive Officer

So the pull-through rate constant to what it was before, if anything, it's better for us actually, Doug. So it's -- so far it's been excellent. I don't know if you've seen that 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. Give ESI credit, they're following the letter of the law, right, and they're doing a good job.

And ANNOVERA, uniquely not all birth control has this unique form. So when 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 0 impacts, and we're growing.

Douglas Tsao -- H.C. Wainwright -- Analyst

And are you -- sort of have you implemented any operational changes to support physicians, just to ensure that that continues, just sort of to, it sounds like --

Rob Finizio -- Chief Executive Officer

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

Dawn Halkuff -- Chief Commercial Officer

And Doug, what I was mentioning with vitaCare, how we are supporting an initiative to support patients to make sure expectations are shared with the LMN process and 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 of patients and that really helps with the pull-through as well.

Douglas Tsao -- H.C. Wainwright -- Analyst

OK, great. Thank you so much.

Rob Finizio -- Chief Executive Officer

You got it, Doug. All right. Is that the last question?

Operator

Yeah. There are no additional questions at this time.

Rob Finizio -- Chief Executive Officer

Thank you very much.

Operator

I'd like to turn it back over to Rob for closing.

Rob Finizio -- Chief Executive Officer

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

Operator

[Operator signoff]

Duration: 29 minutes

Call participants:

Nichol Ochsner -- Vice President, Investor Relations

Rob Finizio -- Chief Executive Officer

James D'Arecca -- Chief Financial Officer

Dawn Halkuff -- Chief Commercial Officer

Devin Geiman -- Guggenheim Partners -- Analyst

Jen Kim -- Cantor Fitzgerald -- Analyst

Douglas Tsao -- H.C. Wainwright -- Analyst

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