Earnings Call Transcript - DARE Q1 2023

Operator, Operator

Welcome to the conference call hosted by Daré Bioscience to review the Company’s Financial Results for the Quarter Ended March 31, 2023, and to provide a General Business Update. This call is being recorded. My name is Mallory and I will be your operator today. With us today are Sabrina Martucci Johnson, Daré’s President and Chief Executive Officer; John Fair, Daré’s Chief Commercial Officer; and Lisa Walters-Hoffert, Daré’s Chief Financial Officer. Ms. Johnson, please proceed.

Sabrina Martucci Johnson, CEO

Thank you. Good afternoon and welcome to the financial results and business update call for the quarter ended March 31, 2023 for Daré Bioscience. Our plan today is to review our first quarter results, discuss developments since our recent call in March, and highlight some important objectives and milestones anticipated in 2023. Before we begin, I’d like to remind you that today’s discussion will include forward-looking statements within the meaning of the federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical facts should be considered forward-looking statements. Actual results or events could differ materially from those anticipated or implied by these statements due to known and unknown risks and uncertainties. You should not place undue reliance on forward-looking statements. Forward-looking statements are qualified in their entirety by the cautionary statements in the company’s SEC filings, including our Form 10-Q for the year ended March 31, 2023 which was filed today. I’d also like to point out that the content of this call includes time-sensitive information that is current only as of today, May 11, 2023. Daré undertakes no obligation to update any forward-looking statements to reflect new information or developments after this call, except as required by law. As a reminder, Daré’s diversified portfolio, which includes one FDA-approved product and 12 development stage candidates, three of which are in or nearing Phase 3 clinical development, is focused solely and squarely on women’s health and is built upon the following core principles. Each product candidate must address a meaningful market opportunity in the form of a persistent unmet need. Each product candidate must have the potential to be first line or first in category or both, because we seek to deliver a clear improvement over the standard of care. And ideally, each product candidate has demonstrated proof of concept and/or uses well-characterized active pharmaceutical ingredients which can mitigate development time, cost, and even risk. Our current innovation efforts are focused on contraception, vaginal health, reproductive health, menopause, sexual health, and fertility. On our recent 2022 financial results and update call, we discussed the key milestones anticipated for the year 2023. Phase 2b RESPOND study top line results for our investigational Sildenafil Cream for female sexual arousal disorder, the U.S. launch of XACIATO by Organon, the initiation of the Phase 3 clinical study of Ovaprene, our investigational potential first-in-category hormone-free monthly intravaginal contraceptive whose U.S. commercial rights are under a license agreement with Bayer, which we expect will be the single pivotal study to support Ovaprene’s pre-market application. IND-related activities for DARE-HRT1, which is our investigational 28-day intravaginal ring for hormone therapy for the vasomotor symptoms of menopause, and IND-related activities for DARE-VVA1, our investigational hormone-free intravaginally administered treatment for vulvar and vaginal atrophy, as well as our Phase 3 related clinical study plans for the candidate DARE-HRT1 and Phase 2 clinical study plans for DARE-VVA1. Additionally, DARE-PDM1, which is our investigational vaginal hydrogel formulation of diclofenac to treat primary dysmenorrhea, or menstrual cramps, the Phase 1 study conduct, and the top line data this year. On today’s call, Lisa will review our first quarter 2023 financial results shortly, but we will otherwise focus on our anticipated milestones for this quarter, this second quarter of 2023. Namely, we’ll spend our time today on the Sildenafil Cream 3.6%, Phase 2b RESPOND study top line results, and the commercial launch of XACIATO in the U.S. by Organon. We’ll start with the Sildenafil Cream update, and we will review both the exploratory Phase 2b RESPOND study objectives to provide context for the anticipated upcoming top line data readout. And as importantly, we’ll talk about the market dynamics for female sexual arousal disorder, which will highlight why we’re so excited to be conducting this Phase 2b study for this yet unserved indication that’s analogous to erectile dysfunction in men. I’ll then turn the call over to John, who will provide an update on Organon XACIATO launch activities.

John Fair, CFO

Thank you, Sabrina. As a reminder, XACIATO, clindamycin phosphate vaginal gel is a lincosamide antibacterial for single dose vaginal administration indicated for the treatment of bacterial vaginosis in female patients, 12 years of age and older in the United States. The XACIATO story is great validation of our portfolio candidate selection and development strategy. Bacterial vaginosis is the most common vaginal condition in women of reproductive age, estimated to affect approximately 23 million women in the U.S. alone. However, a large number of women with the condition are underserved by currently available products. We believe that we could deliver a novel option, understanding that differentiation drives value. We designed a Phase 3 study capable of generating the data necessary to support a compelling label. We believe that if we are successful in our clinical development planning, we would be able to create an opportunity for a commercialization collaboration that could drive value. In regard to securing a collaborator capable of maximizing value, we believe we have been very successful. We are thrilled that the women’s health company Organon is launching XACIATO and that they will leverage their established Nexplanon sales team to accelerate XACIATO uptake. With the manufacturing validation activities required to support the commercial launch completed, commercial launch activities are progressing. Given that the sales team for Nexplanon will be launching XACIATO, we expect that XACIATO will benefit from Organon’s track record of commercial success in the branded women’s health category. Organon believes there’s a roughly 90% overlap of healthcare providers or HCPs who prescribe Nexplanon and have the potential to be prescribers of XACIATO based on provider treatment patterns. Because of the strong relationships the sales team has with these HCPs in the women’s health space, we expect Organon to be well-positioned to inform these HCPs about XACIATO, ultimately providing benefits for their patients. As I mentioned on our last update call, Organon has what we believe to be a truly integrated go-to-market plan, targeting all of the key stakeholders, HCPs, payers, and patients in order to quickly drive interest and awareness in XACIATO. With a strong product label and a powerful commercial partner, we are excited about the launch of XACIATO expected this quarter. And Organon has been working on launch activities. They are taking a holistic approach to the products’ introduction, including ongoing work in the areas of non-sales force related promotional activities and utilization of key symposia and conference events. Organon had a very prominent presence at a recent payer-focused industry conference called AMCP, which stands for the Academy of Managed Care Pharmacy. This annual event is one of the key conferences where payers and manufacturers can interact and share key pharmacoeconomic insights and learnings across a broad range of products and therapeutic areas. Organon shared important insights into the pharmacoeconomic and socioeconomic impact of a bacterial vaginosis diagnosis. I attended this conference personally, and I really believe this information was very well received by many of the key stakeholders attending the conference as well. In addition to their presence at AMCP and their ongoing work with payers, Organon is planning activities in support of the physician community, including their branded exhibit at the Marquee Conference in Women’s Health, the American College of Obstetricians and Gynecologists, Annual Clinical & Scientific Meeting, commonly referred to in our field as the ACOG meeting. The upcoming ACOG meeting, which takes place later this month, provides unique opportunities to interact with key HCPs focused on women’s health, which is critical given the role that OB/GYN offices play in treating patients with bacterial vaginosis. Finally, I know that we touched on this earlier, but I feel it’s worth repeating, Organon will leverage its established Nexplanon sales team, which currently focuses on contraception, to maximize XACIATO uptake at launch. And because the vast majority of sufferers of bacterial vaginosis are also women of reproductive age, the Nexplanon sales force is well-positioned to leverage their existing relationships with HCPs in women’s health. In summary, we believe that XACIATO should be well positioned for commercial success given the knowledge and experience of Organon’s Nexplanon sales team, coupled with Organon’s payer outreach provider and patient-centered initiatives. We are working towards the first commercial sale before the end of the second quarter. And with that, I will now turn the call over to Lisa to provide a financial update.

Lisa Walters-Hoffert, CFO

Thank you, John, and thanks everyone for joining us today. I would now like to summarize Daré’s financial results for the quarter ended March 31, 2023, which I will refer to as the current quarter or first quarter. As you know, Daré’s business model is to assemble and advance a portfolio of differentiated product candidates that address meaningful unmet needs that we’ve identified in women’s health and then to monetize the value of our portfolio’s clinical and regulatory advances over both the near and long term. The investment required to build an advanced portfolio includes corporate overhead, portfolio acquisition and maintenance costs, and ongoing research and development (R&D) expenses. During the first quarter of 2023, our general and administrative expenses (G&A) were approximately $3.3 million. Our R&D expenses, which vary from period to period based on clinical, preclinical manufacturing, regulatory, and other activities across our entire portfolio, were approximately $5 million and primarily reflected the costs of two of our later-stage programs, including the ongoing Sildenafil Cream 3.6%, Phase 2b RESPOND clinical trial and manufacturing and regulatory affairs activities related to Ovaprene. Our comprehensive loss for the quarter was approximately $8 million. We ended the first quarter with approximately $19.8 million in cash and cash equivalents, and we had approximately 86.3 million shares of common stock outstanding as of May 10. In terms of upcoming milestones and future sources of cash under our license agreement with Organon to commercialize XACIATO, we are entitled to receive $2.5 million following the first commercial sale. Thereafter, we will be eligible to receive potential additional milestone payments of up to $180 million, as well as tiered double-digit royalties based on XACIATO’s net sales. We are continuing to explore a variety of options to fund our operations, advance our candidates, monetize the value of our assets, and build shareholder value. As a reminder, these alternatives include, but are not limited to, non-dilutive grants; equity sales, license agreements, structured financings, strategic collaborations, and alliances. As we’ve noted previously, we will endeavor to be creative, collaborative, and opportunistic in seeking the capital needed to meet our objectives and build shareholder value. We also encourage investors to review the more detailed discussion of our financials, our financial condition, liquidity, capital resources, and risk factors in our Form 10-Q for the quarter ended March 31, 2023, which we filed this afternoon, as well as our annual report on Form 10-K for the year ended December 31, 2022, which was filed on March 30, 2023. I would now like to turn the call back over to Mallory, the operator.

Operator, Operator

Thank you for attending the conference call at this time. Your first question comes from the line of Catherine Novack with Jones Research.

Catherine Novack, Analyst

Hi, good afternoon. Congrats on the quarter and thank you so much for taking my question. My first question is about Sildenafil Cream, just thinking about the RESPOND study, what kind of endpoints are important for an efficacy study that’s specifically directed at arousal? And to that point, how are arousal and desire differentiated from the FDA’s perspective? When you’re thinking about a product that’s directed specifically at FSAD versus hypoactive desire?

Sabrina Martucci Johnson, CEO

Great questions. Thank you for them. And it’s a good reminder of some of the things that maybe we should have also talked about in our prepared comments, because they’re great questions to kind of get everyone ready for the day to read out. So in terms of the kind of questions that one can ask about general sensations of arousal, they are concussive as the name implies, their questions about what someone might be feeling, literally a sensation, a physical sensation, as part of their sexual activity and part of that arousal response to activity. And you may remember that, and we’ve talked about this on past calls, that we utilize both a combination of already validated questionnaires about sexual functioning that have a lot of domains, questions about orgasm, questions about lubrication, questions about arousal sensation, questions about cognition, and questions about desire. So we use the kind of relevant parts of some validated questionnaires like that. And then we also included what we’re referring to is our exploratory endpoints. Those really came out of interviews with women who have the condition to understand what bothers them, what they are not feeling physically, what are the words they use to describe it and what would they like to see improved? Those are the types of things that we included in our study. To your question about the difference between those kinds of questions versus desire disorder, think about what Sildenafil does. Sildenafil increases blood flow. That is what it does through its mechanism. We are really focusing on questions about what Sildenafil does and what someone is likely going to feel as a result of that. That’s very different from desire, which is interest; it’s emotional. It’s whether they are interested in having sexual activity, do they have sexual fantasies. It’s more of that thought aspect of it. So we do ask questions about that in the trial because I think it’s important for us to understand our patients both in terms of the subjects in the study, both before we enroll them in the study, and to understand all the benefits that a product like Sildenafil could potentially have. But the focus is really on those genital sensations, those physical manifestations, as opposed to how interested they are or how much they fantasize.

Catherine Novack, Analyst

Right. That’s helpful. My understanding is the FDA does not have separate draft guidance for arousal and desire, that they’re kind of lumped together.

Sabrina Martucci Johnson, CEO

Yes. So what they did, it’s one guidance document, but it is very clear that the conditions are different. They have one guidance document that covers both, as discrete conditions, female sexual arousal disorder and hypoactive desire disorder. They are all part of one guidance document. Part of that came out of the fact that the desire products, there are two products, no FDA approved for desire disorder. They came before us in terms of approaching the FDA and talking about studies and talking about indications that really led to ultimately the FDA putting out that draft guidance document in 2016 to very clearly try to distinguish the two disorders. They are different and they certainly don’t want a product that demonstrates improvement in one aspect, like desire, to get labeling to imply that they improve arousal because those are two very different things. The guidance document was intended to spell out that they are both aspects of sexual dysfunction, but they’re different, and to give examples for sponsors on what the pathway to approval is. This gives a lot of leeway. That’s why we did all this work to align on our exploratory endpoints and align with the FDA that the Phase 2b really is the validation study for those exploratory endpoints. We have a great opportunity to take the best, most responsive questions forward into the Phase 3.

Catherine Novack, Analyst

Got it. No, that’s helpful. Thanks again and congrats on the quarter.

Sabrina Martucci Johnson, CEO

Thank you so much. And maybe one other point on that too that might be helpful to just again, help frame it for people that are going to be watching for the top line data. In any clinical trial, your primary outcome measures that you declare as primary have to be, if you’re using a patient-reported outcome, it has to be an already validated questionnaire. We were not able to use any of those very specific questions that women with the condition helped us develop as our primary or secondary endpoint. So those are all our exploratory endpoints. The primary endpoint really came out of an already validated questionnaire, a sexual function questionnaire of 28 questions, and then we use this particular arousal domain of it. We use one question out of that. That’s how we came up with the primary endpoints, using those already validated questionnaires and then the exploratory endpoints use all of the new questions and new ways of asking the questions and new descriptive words that came out of our patient interviews. Those are our exploratory endpoints and that’s why our top-line data readout will be a little traditional; a traditional top-line data readout usually just has the primary endpoint. These exploratory endpoints are just as interesting. We can’t do all of it for the top-line data readout because that would just be a little bit much to do quickly, which is why we made the comment that you’re going to have to look at the whole full database before we can decide what goes into Phase 3. But at least for the top line, we’ll be able to share a combination about the primary, secondary, and also some exploratory endpoints. The fun of being first.

Operator, Operator

Your next question comes from Kumar Raja with ROTH Capital.

Kumar Raja, Analyst

Thanks for taking my questions and congratulations on the progress. Continuing with the Sildenafil Cream, what is the expectation in terms of when you will have the full data set?

Sabrina Martucci Johnson, CEO

That’s a great question. We are trying to work as quickly as we can. The way the process works is you have the database lock, and then there’s a short order from that to have the top line data, which obviously we will announce very quickly upon getting those top line data. Typically, it does take more time before you actually get the full data set and really have an opportunity to go through all of it very carefully and ultimately compile your clinical study report. This can take weeks to months for that to happen. Obviously, we’re motivated to work very quickly. It’s something we pride ourselves on in terms of being a smaller company; you can work quickly. This is a very rich data set. I cannot stress that enough. We are asking these women who participated in this study a lot of different questions, in a lot of different ways, and collecting a lot of information about them. We don’t want to rush this analysis because we are going to blaze the path, hopefully for the Phase 3, and for what’s going to happen in Phase 3, and not just for us, but for potentially who comes after us in a program like this, if it’s successful as we hope it can be. We want to ensure that what we request from the FDA in Phase 3 is very favorable as well. That’s a long way of me saying it’s going to take some time. Know that the time is thoughtful and purposeful, spent with the shared objective of making sure we take something forward to the FDA as quickly as we can, but we are going to want to make sure we’re thoughtful about this.

Kumar Raja, Analyst

Okay. And regarding the thermography study, how many sites will you be conducting that study in, and how will it be kind of viewed in with this complete data before you present it to the FDA?

Sabrina Martucci Johnson, CEO

Yes, so great question. We’re working with one site for this first thermography study, and these studies are very specific in their conduct. There are really less than a handful of sites worldwide that can do these kinds of sexual health thermography studies because of the specific equipment and types of setups needed. We’ve partnered with one of those sites that has the capacity to do this for this particular study. They can provide valuable insights into the time to effect and what that time to effect curve looks like. Obviously, we did one of them purposely before the Phase 2b study, and that’s what determined our dosing regimen. In the Phase 2b, we gave a window of 10 to 20 minutes for women to dose the product in advance of sexual activity. We think it’s very powerful to have a more comprehensive data set, as we prepare for discussions with the FDA regarding the ultimate Phase 2 plan. What we’re really looking at is the placebo curve, vehicle curve, and active curve, and what that all looks like in terms of the maximum separation. We just want to ensure that we have all the relevant data planned for our go-forward program, especially before going into Phase 3.

Kumar Raja, Analyst

Great. And maybe finally in terms of Ovaprene, maybe just provide some highlights, like, is everything going as expected for the mid-2023 trial start?

Sabrina Martucci Johnson, CEO

Yes, we’re super excited. The NACHT has been fantastic to work with. They started doing work to prep the core sites we’re going to have in the study, which were part of their contraceptive clinical trials network. You may remember back in December, which was super helpful because they also provided great insights on the protocol in terms of operational conduct. Of course, manufacturing activities, as Lisa discussed regarding pivotal study supplies, all of that is important for the study. Things are shaping up nicely. Regulatory time is a part of it; you might remember the IND approval from the FDA came with comments we had to consider for the pivotal study to ensure it is the one pivotal study for registration. We’re feeling really good about where we are now, the site’s excitement, enthusiasm for the study, and the NIH’s enthusiasm for partnering with us on that. So we’re feeling like everything is in a good place and moving forward as planned.

Kumar Raja, Analyst

Okay. Great. Thanks so much.

Operator, Operator

Good afternoon. I’m going to ask about XACIATO and the context of the question.

Sabrina Martucci Johnson, CEO

We’re excited about XACIATO too.

Kemp Dolliver, Analyst

Yes. So excuse me. Your milestones dependent upon the first commercial sale, which is a pretty low bar in the grand scheme of things, and it does appear to be getting some formulary coverage. The concern in my question is, given all this talk about launch and the fact that you’re not saying you’ve had the first sale yet, it tells me there’s a question about the timing of when Organon is actually detailing it. Have they started detailing the product or are we a few weeks away?

Sabrina Martucci Johnson, CEO

Yes. Yes, that’s a great question for us to clarify. As John mentioned in his comments, and we’ve been discussing, there are activities that started last year, frankly, around launch activities. Obviously, there’s a marquee conference happening in May, and as we’ve mentioned, there were manufacturing validation activities that had to happen before you could place the product in the channel. With those manufacturing validation activities now completed, that allows us into the next phase of the commercial launch activities, achieving that low bar of that first commercial sale. We anticipate that with everything going on with the ACOG event being a significant branded showcase for this product, happening this month in May, we’re optimistic about that timing within the second quarter.

Kemp Dolliver, Analyst

Okay, super. And the product is in licensed and I think you have to share the economics with the licensor and/or licensee. Will this apply to the milestones and the royalties?

Sabrina Martucci Johnson, CEO

Yes. So, taking a step back in terms of just our strategy, I think it's important to understand. Our portfolio is built upon products in women’s health that we selected based on indications worth treating. We design our products to address significant unmet needs. By design, there are financial obligations we owe to third parties. We built our company knowing we would have to enter into commercialization partnerships. All our transactions are structured to reflect that we’re going to receive funds from a partner, and we will likely owe money to someone else. Every deal is different, depending on opportunity, potential downstream transactions, and the nature of the product. Specifically with this transaction, our deal includes milestones and royalties to the other party. As Lisa discussed, we have $180 million in milestones that we can receive from Organon, together with double-digit tiered royalties. Our licensor's milestones are much lower compared to that $180 million overall.

Lisa Walters-Hoffert, CFO

Yes, and thank you, Sabrina. Exactly what she was describing, each deal is different, but with our license to obtain product rights, our agreement with MilanaPharm states we will owe them one commercial milestone for $1 million when net sales exceed $50 million. Everything else is a low royalty based on net sales.

Kemp Dolliver, Analyst

Okay, so there’s a…

Sabrina Martucci Johnson, CEO

So we hope that’s helpful. Go ahead.

Kemp Dolliver, Analyst

Yes, the way to think about how the royalty works is in a way you’re keeping a, for lack of a better term, a spread between what you’re getting from or we’ll get from Organon and versus what you’ll pay out?

Sabrina Martucci Johnson, CEO

Yes, absolutely. There’s obviously a spread on just the royalty part, and then there’s a spread as we discussed specifically on the milestones, which are two different revenue streams for us.

Doug Tsao, Analyst

Hi, good afternoon. Thanks for taking my question. Just out of curiosity, with XACIATO, do you know, will this be available at pharmacies or will this be distributed through a specialty pharmacy?

Sabrina Martucci Johnson, CEO

Yes, at the pharmacy, and I don’t know John if you want to add any other comments on this?

John Fair, CFO

Yes, just like every broad women’s health product, it’s going to be available through the pharmacy. The retail outlet is where you’ll see the product show up.

Doug Tsao, Analyst

No, I was going to ask you there's a follow-up. Do we have a sense of the tech transfer and the timing for Organon taking on the manufacturing?

Sabrina Martucci Johnson, CEO

Yes, great question. Our agreement with Organon does have us overseeing the manufacturing activity and being the holder of the marketing authorization at this point. However, it does contemplate that at some time, Organon will take over those manufacturing responsibilities. We’ve been working on that process. Tech transfer takes time. Obviously, this is not just a simple switch. The timing requires the right equipment, processes, and regulatory considerations. Both parties are working hard on this, but setting expectations appropriately, a tech transfer like this takes time and effort from both parties.

Doug Tsao, Analyst

Okay, great. Thank you so much.

Sabrina Martucci Johnson, CEO

Yes, absolutely.

Operator, Operator

There are no further questions at this time.

Sabrina Martucci Johnson, CEO

Great. Well, thank you for the great questions. We really appreciated the opportunity to share our thoughts on some upcoming milestones this quarter and spending some time on that end this year. Thank you, everyone, for taking the time this afternoon to hear about the recent updates, and our ongoing commitment to drive value for all of Daré’s stakeholders. We’ve talked about the shareholders today, but obviously the women and healthcare providers. With our diverse portfolio, we seek to bring to market differentiated prescription therapies that prioritize women’s health and wellbeing, expanding treatment options where none exist, enhance outcomes where current standard of care has meaningful shortcomings, and improve ease of use for women. We look forward to keeping you updated on our progress on the milestones anticipated this year that I outlined earlier, which include the XACIATO product launch and first commercial sale, and milestones associated with our three candidates in or nearing Phase 3 clinical development. We have the Phase 2b RESPOND top line study results for Sildenafil Cream, study for female sexual arousal disorder targeted for this quarter. Similarly, this quarter, the U.S. first commercial sale of XACIATO by Organon. We expect to initiate the Phase 3 clinical study of Ovaprene and have discussed the IND-related activities for DARE-HRT1 for hormone therapy and DARE-VVA1, our investigational treatment for vulvar and vaginal atrophy. We are excited for the Phase 1 study completion for DARE-PDM1 this year. That’s all just for 2023. Thank you again for your time today, and we look forward to keeping you updated.

Operator, Operator

This concludes today’s conference call. You may now disconnect.