Agile Therapeutics (AGRX) Q1 2022 Earnings Call Transcript

Agile Therapeutics (AGRX 8.19%)
Q1 2022 Earnings Call
May 12, 2022, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the Agile Therapeutics first quarter 2022 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.

Matt Riley -- Head of Investor Relations

Hello, everyone, and welcome to today's conference call to discuss our first quarter 2022 financial results and corporate update. 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 second quarter of 2022, management's expectations for our future financial and operational performance, including our expectations regarding the growth of Twirla; our business strategy 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 the forward-looking statements. Please refer to our filings with 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-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 are Al Altomari, Agile Therapeutics' chairman and chief executive officer; and Dennis Reilly, chief financial officer. Following our prepared remarks, we'll open the call to your questions.

I will now turn the call over to Dennis.

Dennis Reilly -- Chief Financial Officer

Thank you, Matt, and thank you all for joining us on the call this afternoon. I will review the key areas of our financial performance for the first quarter '22 and then provide an update on our cash position and plan to finance the company. I will then hand the call over to Al for an update on our 2022 business plan. In the first quarter of '22, we realized net product sales revenue of $1.8 million, which is near the middle range of our guidance.

Our cost of product revenues totaled $1.5 million, which consists of direct and indirect costs related to the manufacturing of Twirla sold during the first quarter. We had no charges for obsolescence during the first quarter of '22, and we remain focused on managing our inventory levels to meet the demands of our customers while avoiding oversupply. Accordingly, we are working closely with Corium, our contract manufacturing supplier of Twirla, to revise the structure and application of the contract minimums for the years 2022 and beyond under our supply agreement. Our operating expenses were $15.8 million in Q1 2022, within our guidance of $15.5 million to $16.5 million we communicated in April 22 and down from the $18.2 million of operating expense for the fourth quarter of 2021.

We continue to focus on disciplined spending approach and making the right investments to encourage strategic growth while implementing what we believe to be impactful partnerships and agreements. We plan to continue to optimize our spending by engaged in targeting focused spending in support of growing Twirla while seeking reductions in other areas of our operations. Based on this plan, we anticipate future 2022 quarterly operating expenses to be lower than those experienced in the first quarter of 2022. For example, our management team has decided to voluntarily forego the annual bonuses for 2021 performance that were awarded in January of 2022, which is estimated to be a result in savings of approximately $700,000, and that will be used for general corporate purposes.

We are examining other areas with our operations that can be reduced in a sensible way that will not compromise our plan to grow Twirla. We closed out the first quarter of 2022 with a net loss of $11.8 million, or $3.78 per share compared to a net loss of $17.1 million, or $8 per share for the comparable period in 2021. As of March 31, 2022, we had cash and cash equivalents of $3.7 million compared to $19.1 million of cash and cash equivalents as of December 31, 2021. The decrease in cash on hand in Q1 '22 reflects our working capital burned during the quarter and a $5 million paydown of our debt with Perceptive Advisors in January, offset by proceeds from a $4.85 million registered direct offering of preferred stock with a single healthcare-focused institutional investor.

In April of 2022, we added cash of $4.7 million from the sale of our New Jersey net operating loss for which a receivable was recorded in the first quarter. Financing update. We continue to explore financing options to support the growth of Twirla. As we discussed on last quarter's call, our plan to finance the company is focused on three parts: part one, work down our debt facility with Perceptive Advisors in exchange for relief on financial cover.

We currently have no plans to further leverage the company and, therefore, will not add additional funds under our debt facility with Perceptive. In January '22, we paid back $5 million to Perceptive, reducing our debt to $15 million. In the second quarter 2022, we plan to make another payment of $5 million in principle to Perceptive in exchange for further release. This payment is tied to our ability to raise additional capital.

Part two, regain compliance with NASDAQ. As we have previously reported, we were notified by NASDAQ that we are out of compliance with their minimum bid price requirement. To that purpose, we believe we have taken the necessary steps to regain compliance with the Nasdaq stock market and in which, in turn, will put us in a better position to finance the company. Part three, raise additional capital.

We've been transparent that we will require additional capital to achieve our goal of being cash flow-positive. We acknowledge that the capital markets recently have been unpredictable in general and especially in our sector. Our plan is to remain flexible and continue to evaluate all options available to us to finance the company, including the ATM we recently established, further equity offerings, and various business development and partnership opportunities to accelerate our path to profitability. We remain committed to our plan to grow revenue while reducing burn, with a goal to shorten the time to become cash flow-positive.

Al will now provide an update on the business plan designed to help do exactly that. Al, over to you.

Al Altomari -- Chairman and Chief Executive Officer

Thank you, Dennis, and thank you to everyone for joining us today and continuing to follow our story. On the fourth quarter 2021 earnings call, we referenced our belief that, in 2021, we began to build momentum for Twirla, and we believe we saw that momentum carry into the first quarter of 2022. As we announced on April 14, 2022, our first quarter 2022 prescription data for Twirla demonstrated strong double-digit growth in all key performance areas. This was the third consecutive quarter where we saw consistent and meaningful growth, and we expect to see this trend continue throughout 2022.

Additionally, we're encouraged with the growth and momentum we are now seeing in the second quarter of 2022. Beginning in the third quarter of 2021, we started to see steady demand growth, and we believe the three-part business plan we introduced on the fourth quarter call of 2021 is contributing to the continued momentum in the early stages of 2022. I'd like to provide you a brief update on each of these three key initiatives. First, our partnership with Afaxys.

As a reminder, in January of 2022, we launched our co-promotion partnership with Afaxys through their group purchasing organization, which primarily provides services to the non-retail channel, and Afaxys Pharma, which has a potential access to over 25,000 accounts, including college and university student health centers and the Planned Parenthood network. During the first quarter of 2022, we focused on initiating and mobilizing the Afaxys partnership, and we believe we're beginning to see the positive results into April and May of 2022. The graph you see here provides insight into the impact that the non-retail channel is starting to have on our business, and we believe Afaxys can drive non-retail growth as contribution from this channel continues to ramp throughout 2022. The second component of our plan is the continued focus on the state of California.

As previously highlighted, California is the largest U.S. market for contraceptives as well as the largest Medicaid program in the United States, with roughly one-third of the existing contraceptive patch market coming from Medicaid. For these reasons, beginning in the first quarter of 2022, we began prioritizing Twirla adoption and awareness in the state of California. Thus far, we are pleasantly surprised with the results we're seeing for two reasons.

First, we're seeing an uptick in Twirla market share in California and also an uptick in the Twirla prescribers in California. We believe these results are attributable to our existing sales team amplified by both general and targeted digital media spending. The last initiative is the Twirla direct-to-consumer commercial on Connected TV, also known as CTV. On the fourth quarter call in 2021, we announced our new patch-and-play CTV commercial with the objective of prompting patients to ask their doctors about Twirla.

At the end of March 2022, we deployed the commercial with a highly targeted, efficient focus on women in our target market of 18- to 24-years-old in the states that have the large market for contraceptive and potentially strong commercial coverage for Twirla. While the commercial's only been in the market for a little over 1 month, the first month data suggests that our target consumers are efficiently being exposed to ad at a frequency of approximately twice per week and that a significant majority of the viewers are not skipping through the ad. For those who are interested in viewing the ad, who aren't any target demographics, it is available in Twirla's YouTube channel. We continue to execute on our plan for 2022 and focus on building upon the momentum we established through 2021 and now into the first quarter of 2022.

As a reminder, each of these three priorities truly became activated in the first quarter of 2022 with the CTV commercial launching at the very end of the quarter, and we expect each to continue to contribute to our demand growth throughout 2022. So now let me briefly talk about ACOG. Before we open up the call for Q&A, I want to touch on our recent presentation at Twirla's first year post-marketing pharmacovigilance at the 2022 Annual Clinic and Scientific Meeting of ACOG that was held in San Diego. For the first year of Twirla's launch, we received no reports of Venous Thrombolic Events, or VTEs, and two reports of Serious Adverse Events, or SAEs, which is consistent with the safety profile that was reported in the secure clinical trial.

This was the first ACOG meeting that was live since the pandemic started, and we welcome the opportunity to present these data and interact with the contraceptive thought leaders and prescribers in general. I was personally thrilled to be in California, our nation's biggest market for Twirla, and I saw firsthand the physicians' excitement about our product. As a reminder, our cumulative prescriber count grew approximately 26% from the end of the fourth quarter in 2021 to the end of the first quarter in 2022, and we consistently gained roughly 100 new prescribers each week during that period. We believe having the opportunity to present the post-marketing data and to speak to physicians face-to-face with prescribers from all around the country will have a positive impact on our prescription growth.

In summary, we had another solid first quarter of 2022, evidenced by our growing quarterly prescription data and that we have a good base on which to continue to build a healthy, growing brand. Based on the prescription data trends we are now seeing so far in the Quarter 2 and the advancement of our Twirla business plan, we currently expect to report a fourth quarter of consecutive growth and strong demand growth for the second quarter of 2022 and provide further proof points that our business plan is now delivering. We also believe that an important part of our plan, moving forward, is to explore all of our strategic options to grow or transform our business. We'd like now to give our covering analysts the opportunity to ask any questions.

Operator, you may now open the line for Q&A.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from Oren Livnat at H.C. Wainwright.

Oren Livnat -- H.C. Wainwright -- Analyst

Thanks for that graph on Afaxys. I'm not sure if that's the first time you've shown that or not. That's really interesting. You can see that what looks like growing, albeit small, still trended non-retail volume there.

And so I have a couple of questions. First of all, what kind of economics do you see on that business? Is it substantially different or not from your retail business? And going forward, does that seem like it'll be a consistent business for you on a week-to-week or month-to-month basis? Or should we expect or hope for sort of huge bolus orders like we saw last year early in the launch from one center? I'm just curious, now that you have a more formalized relationship with Afaxys, if that will be lumpy or steady, a steady grower. And then I have a couple of follow-ups.

Al Altomari -- Chairman and Chief Executive Officer

This is Al. Yes, this is the first time we're putting it in public. So I think it connects hopefully a couple dots. First of all, back in May of last year when you see that big order, we alluded to that on a call.

But if you remember, way back when we were talking about it, the prescription data, this is what caused the algorithms and the prescription data to get a little crazy. So we got a big order, as you could see in May, and that was kind of a wake-up call for us. It came from a single state, not a Planned Parenthood. It came from a state and county organization that bought a lot of product in one day, without Afaxys, by the way.

That was just they called it in. We were delighted to take the order, Oren, and then you see on an ongoing basis, hopefully, you start getting an appreciation. We get a smidgen of it, so we know every month or so without much activity put against it. So we weren't marketing in that channel.

We're getting onesies and twosies. We make our product available to state and county organizations, Oren, at a 340B pricing, so the Medicaid pricing. So some hospitals buy. Some little businesses buy.

And then, in January, we announced our relationship, and we started going after it in earnest with Afaxys. And you see a little bit of a smidgen of a bump hopefully in March that we started getting in some orders, a couple Planned Parenthoods. Oren, I think to your question about how to think about this business, it's almost like a hospital business. We start saying how many accounts do we own.

So these are a couple Planned Parenthood accounts, a couple state organizations. And I mentioned in my script that we're seeing a lot more of the volume, going forward. So I think on this graph, I really want to emphasize that our retail channel, look at the [pot], look at March. March was a super month for us.

In the retail channel, we've got a preview of kind of what this non-retail channel can be. I will tell you, going forward, that April was awesome. The April data in both channels, we're lighting up. So we're bullish on our growth, going forward, in both channels.

You'll see in this channel, the non-retail channel, some pretty big -- that that little deep purple is going to grow substantially in April. And so we're just starting to see a factor kick in, Oren. Now to your question about how do you get your head around this, I wish I could tell you it's steady, we see it every week. This is lumpy.

It's lumpy even for us. Accounts come in, they place big orders, some place small orders. We just don't have a steady flow of business yet. So even for us, we even think of it as lumpy.

So I think the best way we can communicate that to you is to show you kind of the business like we're doing, show you both channels. I think Dennis and Jason's in the room, and we might have to start reporting this separately. But we're not quite there yet, but the economics look great. We make money in this channel.

These are profitable prescriptions for us. If it comes from a non-GPO customer, they basically get the product at 340B pricing, which is really pretty good. It's not that big of a discount. So a true Afaxys GPO customer gets a bigger discount that we haven't revealed yet, but it's pretty substantial, but profitable.

I want to emphasize but profitable. We are not in the business to putting unprofitable business out there. It's got to have a margin. It's got to throw off cash.

And so we're pretty excited. And look, as you could see, we start bending that curve on cycles based on what we're doing. I mean, we get paid for cycles. We talk a lot about TRX, and we get paid for cycles.

So boy, I'll tell you, nice to see the cycles just jump. And then you'll see us, going forward. I mean, it's starting to light up. We came out of chutes in January and February kind of a little bit slow, as all of us did.

The market was a little soft, then we popped in March. April looks great, and May from where I'm seeing, is going to be still going. So we think, going forward, we're going to grow both these channels. So it's lumpy, Oren.

We're trying to around it. When I can figure it out, I'll communicate it to you, but for right now, we'll take the business.

Oren Livnat -- H.C. Wainwright -- Analyst

And focus on California. I'm not sure if I totally understand. With the concurrent sort of cost consciousness, or required cost consciousness you have at the moment, are you exclusively focused on California, or just in prioritizing California, not necessarily at other territory?

Al Altomari -- Chairman and Chief Executive Officer

No. We're looking at costs across the whole company. I mean, we've been at this a while. I think we really understand what drives the business and kind of what's important to spend and make, and as Dennis alluded in his talk kind of what are the right spends to make.

So look, we're looking at our sales force and saying, we've been at it a while. Territories aren't productive, meaning they're not making money. They've just got to be put on hold. So we're looking at our sales footprint in general.

We're looking at our G&A spend. But in California, California we have a decent sales footprint, and then Amy, who's in the room with me right now, has double down on [Inaudible]. We're putting our consumer spend, the CTV spend, only in five states we mentioned before, California, Texas, Florida, New York and Illinois. So we're double-downing those states, Oren, so we're not spending our money in consumer across the nation.

We're doubled down. So California is getting benefit with the sales force, a pretty good footprint, and doubled down with Amy's consumer spend. So we're not exclusive, but we're heavying up. Think of it as a heavy upping, Oren, and not exclusive.

Oren Livnat -- H.C. Wainwright -- Analyst

And then just lastly, and sorry for taking so much time, upfront, you clearly aren't hiding from the resource constraints that you're facing at the moment. And you mentioned that BD or partnership opportunities are clearly something you're looking at, certainly given the current market conditions. So I'm just curious, just philosophically, is everything on the table in terms of buying, selling, merging, or is there something specific that you're thinking about as far as, I don't know, maybe sort of specific targets, but just a type of transaction that would make sense for a company like yours in your current situation?

Al Altomari -- Chairman and Chief Executive Officer

Sure. I mean, to answer your first question, everything's on the table. So I mean, I think the state of the sector and the broader take, anybody who's not saying it's all on the table is probably not being true to themselves. So it's all the table.

I mean, clearly, what we're looking to do is to accelerate our revenue and/or take down our burn significantly. So while we were at ACOG, Amy's in the room with me, we talked about the ways to co-promote with other people. We've got a one-product sales force. Is there an efficient way to do? Can we lighten the load and so taking down some of the costs? And it even goes into G&A areas, and then also potentially in the marketing areas.

So reducing our burn and/or growing our revenue is mission-critical. Plus, if there's a strategic move that can happen, we're not afraid of that, either. So everything's on the table, Oren, but we're laser-focused on the top line and/or reducing our cost structure, ultimately lighten the requirement to earning money, if you will. So it's all on the table.

Operator

[Operator instructions] There are no further questions at this time. I would like to turn the call back to Al. I do apologize, Al Altomari for closing remarks.

Al Altomari -- Chairman and Chief Executive Officer

So thank you. I know we just were in front of you not too long ago with our year-end, and we try to be very descriptive in our press statement. Plus, I'd like to thank everybody for joining us today. And we have a little bit of good news that we were able to disclose on our press statement, but we couldn't get it into our scripts fast enough.

We did receive a letter from NASDAQ letting us know that we're back again in compliance on the minimum bid price requirement. And that's really important to us, so that's off the table. As Dennis described in his comments, that was a big part of our plan. So we move forward.

So that's a step in the right direction, I would say. Beyond that news, I want to reiterate a couple things from today's calls. We currently expect to report a fourth consecutive quarter of demand growth. So we're signaling to you right now that we think the second quarter is strong.

We've seen about roughly half of the second quarter, so we've got obviously the demand data a little bit earlier. So we're really confident that we can deliver to you another strong quarter of growth, which will put up a year of growth in our fourth quarter or think of that as a year of solid growth. And so we're really excited about that, which tells us that the good work that Amy and her team doing is really kicking in. So we expect also, as Dennis talked about on the 2022 quarterly opex, we're going to be burning less money than we burned in the first quarter.

So we're trying to set the company up that our top line is growing and our opex burn is going the other direction. So we think that's a good position to be in. We're proud of that, and we're at it. Then, the partnership that Oren's question to me, I think it was the right question.

The non-retail channel, we are bullish. We're starting to see it wake up, and we're starting to see that it's becoming, we think, an important part of our business. But we don't want to lose sight of the retail business. The retail business is our core.

That's the most profitable business. That's the business we've got to deliver. We think of the Afaxys partnership augmenting, not replacing retail volume. And then, we expect that our larger footprint, as Oren's question again, had asked me about the state of California.

Look, we think it's a big idea. I mean, it's singly the biggest market we've got. Winning there is important to us. Winning in the other big five states that we've identified also is very important to us.

So we want to win in those states. It's approximately slightly under 50% of the volume those five states bring in. And we think we can leverage the business smartly like that. And we can guide our marketing efforts to a very targeted area.

That's the beauty of CTV. We could put it where we want it. So based on what we see and what we can control, we believe our strategy is working. The Twirla brand is healthy, as we described, and growing.

We're determined on executing our plans that we have in place to keep the brand growing, and we're in good hands with Dennis and financing the company. We look forward to giving you future updates on our progress, but we're excited. We feel great coming out of the chutes in '22. Like the first quarter a lot.

It seems like I'm going to like the second quarter even a lot more. And if we can continue to work on our expense structure at the same time, I think we're setting the company up nicely for the following year and where we want to take this company, which ultimately is to cash flow-positive, as Dennis mentioned in his comments. So thanks again. I know these calls were on top of each other.

I appreciate you keeping track of our business, and good night to everybody.

Operator

[Operator signoff]

Duration: 29 minutes

Call participants:

Matt Riley -- Head of Investor Relations

Dennis Reilly -- Chief Financial Officer

Al Altomari -- Chairman and Chief Executive Officer

Oren Livnat -- H.C. Wainwright -- Analyst

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