Earnings Call Transcript - TXMD Q2 2021

Operator, Operator

Good morning, ladies and gentlemen. Thank you for joining us for the TherapeuticsMD Second Quarter 2021 Financial Results Conference Call. Following the prepared remarks from the company, we will open the call for questions. I would now like to turn the call over to Investor Relations for TherapeuticsMD, Lisa Wilson. Lisa?

Lisa Wilson, Investor Relations

Thank you, Christy. Good morning, everyone, and thank you for joining us today to discuss our second quarter financial results and business update. This morning, TherapeuticsMD issued a press release announcing our second 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 are Chief Executive Officer, Rob 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 the 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 August 4, 2021. With that, I’ll turn the call over to TherapeuticsMD’s CEO, Rob Finizio.

Rob Finizio, CEO

Good morning, and thank you for joining our Q2 call. We are pleased with our steady progress in line with our expectations. Our sales force is benefiting from improved access to providers, which were not back to pre-pandemic levels but have opened up. In addition, the efforts we have made during the quarter to create a more streamlined and improved online patient experience are gaining traction. With UpScript, our newest telemedicine relationship now live, we expect to see continued growth with or without COVID-19 through our online channels. Finally, we have strong coverage for all of our products in the marketplace, and we expect continued improvement in insurance coverage throughout Q3 and Q4. As shown on Slide 3, overall, our revenue increased by 17% in the second quarter of this year compared with the first quarter. Our overall volumes and revenues are healthy, and vitaCare Prescription Services is also experiencing growth. We recently signed our third vitaCare customer contract and have a strong pipeline of over 30 potential customers. In addition, we continue to evaluate the investment in vitaCare, including potentially selling a minority stake in vitaCare, which would provide a non-dilutive source of capital for our company. We’re building a solid foundation for vitaCare to become a freestanding entity in this high growth sector. Before I turn the call over to James, I’d like to welcome Hugh O’Dowd, who is stepping into the position of President of TherapeuticsMD, which John Milligan vacated to take the position of Chief Executive Officer of vitaCare Prescription Services earlier this year. He was previously the CEO and President of Neon Therapeutics. Hugh joined Neon from Novartis, where he spent more than 20 years in a variety of leadership roles, including Chief Commercial Officer and Head of Global Strategy. I’ll now turn the call over to James to discuss our financials in more detail. James?

James D’Arecca, CFO

Thanks, Rob, and good morning, everyone. Slide 5 shows a snapshot of our quarterly net revenue trends, which increased across the board. Our net product revenue for the second quarter was $23 million, which satisfied our second quarter covenant. On a quarter-over-quarter basis, our total net product revenue increased by 115%, and on a sequential quarter basis versus Q1 of 2021, net revenue increased by 17%. For ANNOVERA, net revenue increased by 9% on a sequential quarter basis. Average net revenue per unit calculated based on units sold to wholesalers and pharmacies for the quarter increased to $1,157 from $1,071 in the first quarter. We continue to expect that average net revenue per unit of ANNOVERA will approximate $1,100 for the year. IMVEXXY net revenue increased by 40% on a sequential quarter basis, and average net revenue per unit increased to $64 from $61 in the previous quarter. Net revenue per unit continues to benefit from IMVEXXY’s $75 cash copay program, along with the new preferred payer contract that became effective in the first quarter. Also importantly, with regard to IMVEXXY’s performance, second quarter prescriptions included a larger portion of 90-day scripts, over 20% of the total prescriptions filled. Turning to BIJUVA, net revenue decreased by 12% and average net revenue per unit was $68. As a reminder, we are minimally supporting BIJUVA at present. As of June 30, 2021, looking at all three products, inventory quantities in the wholesaler and pharmacy channel remain within normal levels. Let me share some highlights from our financial statements on Slide 6. Our gross profit margin rebounded to 82% in the second quarter, back in line with our expectations. Operating expenses increased in the second quarter as we had anticipated, reflecting our continued investment to enhance marketing and strengthen our digital capabilities related to commercial initiatives, which are promotionally sensitive. This is a critical stage in the lifecycle of our products and we are committed to supporting them and driving growth. Dawn will elaborate on these important activities and their impact in a moment. Due to a shift in timing of SG&A and R&D spending, we expect the expenses in the back half of the year to be moderately higher than the first half of the year. Total 2021 spending remains consistent with our initial expectations for the year. Net cash used in operating activities was $26.5 million for the second quarter. As of June 30, 2021, we had $111.4 million in cash. I’ll now turn the call over to Dawn to provide more detail around our commercial progress. Dawn?

Dawn Halkuff, CCO

Thank you, James. On the product side, let’s start with ANNOVERA. As you can see on Slide 8, ANNOVERA showed continued growth both on a sequential quarter basis and year-over-year. We are making good progress positioning ANNOVERA as the only long-lasting procedure-free product, and this is driving uptake. The sequential quarter growth of 17% illustrates this positive trend. Our net revenue per unit held steady at $1,157, and refill rates remain strong at about 50%. There are a couple of main drivers behind the sequential quarter growth trajectory. First, as the world begins to open up again, our sales representatives are slowly regaining access to providers, now able to reach over 50% of our primary targets with live calls. And the second trend is that all channels where we sell ANNOVERA are seeing increased growth, with telemedicine continuing to lead the pack as patients can access ANNOVERA, even if they are not going to their doctor for a live visit. Turning now to ANNOVERA writer trends on Slide 9, the bars represent the total number of ANNOVERA prescribers by quarter and show that the number was slightly up in Q2 over Q1. Importantly, the average number of prescriptions written per prescriber increased by 10% from two in the first quarter of this year to 2.2 in Q2, indicating that we are seeing an increase in the depth of prescribing. This prescriber uptake is coming from two places: improved sales force penetration to the primary targets and from successful marketing efforts. And while the impact of COVID on access to providers is waning, there are still challenges, making these gains all the more impressive. On Slide 10, importantly, ANNOVERA is benefiting as women switch their method of birth control, capturing market share from various contraceptive methods. Interestingly, the majority of ANNOVERA users have never used a vaginal ring before and are making the change from other methods, including implants or IUDs. ANNOVERA is creating a new segment within this market and increasingly is being recognized as a procedure-free, long-acting alternative, filling an unmet need. Turning now to Slide 11, as the ANNOVERA data points are moving in the right direction, we see potential broad near-term growth catalysts that support continued uptake of ANNOVERA. Let me touch on a few of them broadly. First, the environment around women’s health is supportive. The Affordable Care Act has been upheld and advocacy efforts around birth control choice and access for women have increased in support. Second, from the payer perspective, ANNOVERA continues to have strong unrestricted access at 57%, and the majority of patients continue to pay zero dollars for an annual prescription due to the ACA federal and state laws. Where we do not have coverage, we currently have a 64% prior authorization approval rate across all payers. Additionally, CMS recommended that ANNOVERA receive its own unique national J-Code that allows Title X facilities to be reimbursed for dispensing ANNOVERA. This could be live as early as the fourth quarter, and we believe it will drive increased uptake in the public health market for ANNOVERA. Third, as mentioned, access to providers is improving, and we continue to utilize marketing tools to communicate with a broader physician base, including primary care providers to expand the market opportunity for ANNOVERA. Lastly, on the consumer front, we believe telemedicine will continue to have a significant positive impact. We are leveraging that channel and our peer-to-peer influencer program to reach millions of women. Keep in mind, that more than 50% of women know what they want in terms of contraception before they go see their doctor, and their preferences are often shaped based on what they have learned from influencers and friends. Moving now onto our Menopause Products, Slide 13 shows the key metrics for IMVEXXY for the second quarter. IMVEXXY has faster TRx growth outpacing the VVA market, Q2 over Q1, achieving an 8% increase in TRx prescriptions, and net revenue per unit improved to $64, which I’ll discuss in more detail in a moment. We saw a 2% increase in the number of prescribers writing a prescription in the second quarter compared to the first quarter. IMVEXXY has a steady base of prescribers, which has enabled the product to withstand the impact of COVID. The loyalty of regular writers together with improved access for sales representatives supports this growth, and importantly, refill rates remain higher than average for this category, with approximately 6.5 total fills over the lifetime of the patients, with over 20% of patients filling a 90-day supply. Slide 14 shows the pattern of improvement in net revenue for IMVEXXY after the January 1, 2021 cash pay changed to $75. There was a 56% increase in net price for 2Q 2021 compared to 2Q 2020 and a 5% improvement in net price for the second quarter of this year compared to the first quarter. As a reminder, this is our new high for net revenue per unit, and the fourth quarter in a row we have seen improvement in net revenue per unit. As Slide 15 shows, there are strong potential near-term growth catalysts that support IMVEXXY going forward. IMVEXXY has strong unrestricted commercial coverage at 61%, including a Top 5 payer that has IMVEXXY as their only preferred branded product. For those patients not covered, we continue to support them with an affordable cash program through vitaCare. As noted for ANNOVERA, access to top providers is improving as the country opens up in virtual format, amplifying outreach. On the consumer side, we recently launched a new telemedicine relationship with UpScript that provides increased access to IMVEXXY for patients, and we believe will improve conversion to prescription in the online channel. Our recently launched direct-to-consumer campaign called Long May She Reign is already showing a positive impact in both interest and engagement. Turning finally to BIJUVA on Slide 17, total prescriptions for BIJUVA grew by 9.5% quarter-over-quarter. Notably, there was a 4% increase in prescribers writing the prescription for BIJUVA in Q2 21 compared to Q1 21, and net revenue per unit stayed steady at $68. In addition, in the second quarter, BIJUVA received approval in seven European countries. We have been minimally supporting BIJUVA, but recently resumed our sampling and merchandising efforts with the field force. We just received acceptance from the FDA for our filing for the BIJUVA low dose with the PDUFA date of March 21, 2022, both of which we believe will be important catalysts for growth going forward. I would now like to turn it over to Rob for closing remarks.

Rob Finizio, CEO

Thanks, Dawn. As you just heard, we delivered a great quarter for our products with 115% net revenue growth year-over-year and cash used in operating activities decreased to $26.5 million. Looking ahead to Q3 and Q4, we expect these prescription trends to accelerate due to improved healthcare provider access both online and in person. We also expect near-term growth in our commercial and government insurance coverage, which should accelerate prescription trends throughout Q3 and Q4. Additionally, we grew ANNOVERA in every channel, and for IMVEXXY, we achieved record net revenue per unit for the fourth quarter in a row. We had an accepted filing for BIJUVA low dose with a PDUFA date of March 22, 2022, and received multiple approvals across Europe for BIJUVA in the second quarter. Finally, vitaCare closed its third customer, grew its pipeline to over 30 potential customers, and we are working to secure a minority investor in vitaCare as a source of non-dilutive capital for the company. Operator, please open up the call for questions.

Operator, Operator

Your first question comes from the line of Louise Chen with Cantor.

Louise Chen, Analyst

Hi, congratulations on the quarter and thanks for taking my questions here. So first question I had for you is how are you thinking about valuation ranges for a minority stake in your vitaCare franchise? And then secondly, how much do you actually expect sales to improve when ANNOVERA receives that J-code? If you could put anything behind that, that’d be helpful. And then I know you addressed this in the call, but is the resurgence of COVID-19 going to impact your second half 2021 sales? Thank you.

Rob Finizio, CEO

Louise, thanks. Great questions. So for vitaCare, what I can say, and I have to be very careful because we’re working on this actively today. What we are looking at doing was retaining a minority stake below 20% or around 20% for an investment. The market has grown significantly, the value of the company, the vitaCare company has grown significantly, and the pipeline has exploded. So now we’re looking at hopefully selling off a minority and keeping the vast majority of the company and getting a solid investment that would make a difference to our shareholders from a non-dilutive standpoint. I wish I could be more specific than that, but I can’t because we are in active negotiations on that. As far as the commercial progress, I’m going to turn that over to Dawn because we’ve had a lot of good – great – we’ll have the best catalyst we’ve had in the commercial history of this company throughout Q3 and Q4 here. I’ll let Dawn talk about that.

Dawn Halkuff, CCO

Sure. Hi, Louise. Thanks for the question. So the first question you asked is what do we expect the J-code? How do we expect it to impact our trajectory? To explain a little bit about the J-code and why it’s an exciting catalyst for us, the J-code allows the Title X facilities. You can think about them as the Planned Parenthood facilities; there are about 5,000 of them to actually get reimbursed for dispensing ANNOVERA. The public health market is growing quickly for us with universities opening, and ANNOVERA will be the only procedure-free product, long-acting procedure-free product that the Planned Parenthood facilities will have. The analog suggests that this would provide a 20% bump up to the public health portion of our forecast, so a really exciting catalyst for us that we’re looking forward to getting implemented. As far as your second question around the resurgence of COVID and how it will impact second-half sales, Rob has mentioned that we have a tremendous amount of catalysts that are supporting our growth going forward. I mean, it really is such a unique moment for us. The reality is that with the Delta variant out there, we are already experiencing some of the COVID impact, and we are still growing across every channel. If you really think forward to what we are experiencing in terms of catalysts, we still see our ability to access providers growing, we’ve got incredible consumer programs in the online world. So with or without COVID, that doesn’t impact us, and we’re seeing the growth of that channel 26% quarter-over-quarter. With the payer catalyst that Rob mentioned, which we expect to grow across government and commercial, that alone is going to support our growth in the back half of the year. The reality is we’re really bullish about the growth and feel good about the path we have for the rest of the year.

Louise Chen, Analyst

Thank you.

Operator, Operator

Your next question will come from Annabel Samimy with Stifel.

Annabel Samimy, Analyst

Hi, thanks for taking my questions. So I had just a question regarding your online presence. Again, I apologize if I missed some of the earlier comments. I think you touched on it before. You’re seeing growth of 26% in the online channels. What percent penetration do you have in these online channels? Do you expect to use those online channels for both ANNOVERA and IMVEXXY, both? Or is it weighted more towards one product versus the other? And then separately for BIJUVA, you mentioned you were going to restart sampling. Can you just give us an idea of what you’re going to be doing there as far as supporting that product? Thank you. And not just supporting the product, but what’s going on with BIO-IGNITE? Thank you.

Rob Finizio, CEO

Sure. Annabel, thanks for joining. So from an online standpoint, telemedicine has been a strong area of growth for us, as you’ve heard with the numbers, but we think we are just starting. Now with UpScript live, and it just recently went live, we expect that growth to accelerate. Even though Delta is out there, our access has improved with our reps on the ground into the offices as well. If you put those two together, I think you’ll see the volume of scripts increase going into Q3 and Q4. We haven’t had any real payer wins this year, and we expect significant payer coverage improvements in both commercial and government across the portfolio in Q3 and Q4. More of the scripts written will be filled just with what we have today with the payer improvements, but we expect the volume of scripts to go up with the online improvements we’ve had. Working with some of these partnered companies, we’ve done a great job improving that as well. On top of that, we have our bulk. ANNOVERA, we just really launched last July because of COVID. The refill volumes that will come up are still at about 50% on refill volumes, which should kick in here in Q3 and Q4 on top of that. We expect a great back half of the year, and I’ll turn it over to Dawn for the rest of the questions.

Dawn Halkuff, CCO

Before I move on to BIJUVA, a couple of things I want to add on the telemedicine side because you asked about the penetration. If you look at the partners that are out there, we are with all the large ones in terms of ANNOVERA, and as Rob just mentioned, we just launched UpScript. So penetration from that perspective on partnerships is high, but certainly, there’s still a lot of places to grow, as Rob just mentioned, and those catalysts are going to support that growth. As far as the difference between ANNOVERA and IMVEXXY, the birth control telemedicine channel is much more evolved than the menopause telemedicine channel, so IMVEXXY is slightly smaller, but we are also launching UpScript with IMVEXXY and we’re leveraging the same programs across the portfolio. As far as BIJUVA, I mentioned that we are restarting sampling, and the entire field force has that, and they are ensuring that those providers, as we have a loyal set of them that need samples, are covered there as well as any BIJUVA education. The BIO-IGNITE program has no shift; we are still working with all the partners and have a team that continues to support them for when we start to reinvest in the product in the future.

Rob Finizio, CEO

That’s great.

Annabel Samimy, Analyst

If I could just follow up on something. Obviously, it's a different population than the birth control market. It is an older population, but given the vaccination rates among the elderly that are quite high, have you seen better entry or access to physician practices now? Has that normalized a bit? Are they learning how to operate in this environment or is it still pretty restricted?

Rob Finizio, CEO

It’s definitely much better than it was, but it’s not near where it was before COVID – probably 50% of where we were before COVID, and I think you can see that through our recent numbers growing for both IMVEXXY and ANNOVERA. We do expect that to potentially moderate, but given the access we do have, we see improvements in both online and coverage to continue to accelerate the growth. No questions asked in Q3 and Q4.

Dawn Halkuff, CCO

Here’s the best news: people are starting, the patients are starting to go back into the office, which is a real catalyst for us being able to get the product prescribed. We’re seeing patients returning for their annual visits, whether younger or older, and that’s going to help us out.

Rob Finizio, CEO

Yeah, they can only put those things off for so long, and it’s built up and it’s coming back. It’s good, but it’s not what it was; it’ll get back eventually.

Annabel Samimy, Analyst

Okay. Thank you.

Rob Finizio, CEO

Oh, sorry. Annabel, just one last thing: one of the things you’ll see in our numbers is that 20% of our IMVEXXY scripts were actually three-month supplies, so like three units, which is a phenomenon that’s growing. Per IQVIA, that’s supposed to stay, and I think part of that phenomenon is due to COVID and retail pharmacy strategies. So that also can be seen in our numbers as indicative of what you are asking.

Annabel Samimy, Analyst

Certainly helps on the revenue side, because that’s three units for every patient going in when they’re getting that TRx.

Rob Finizio, CEO

Yes.

Operator, Operator

Our next question comes from the line of Douglas Tsao of H.C. Wainwright.

Douglas Tsao, Analyst

Well, can you hear me? Sorry.

Rob Finizio, CEO

Sure. Can, Doug, thanks for joining.

Douglas Tsao, Analyst

Thank you. So just – I’m just curious just given the strength you’ve seen for IMVEXXY recently, which is great to see, thinking in terms of moving it up in terms of prioritization in terms of promotion. I know ANNOVERA had been the focus and it’s obviously doing well, but we’re seeing some very strong numbers from IMVEXXY right now. Thank you.

Rob Finizio, CEO

Doug, great question. I will tell you that we will keep it the way it is for now, and we can always reevaluate that. Let me tell you why: because of the growth that we see coming, we’ll have more scripts written for ANNOVERA, as well as how effective and evolved the telemedicine channel is for birth control. Combined with our refill effort and many of our retail strategies, including vitaCare, we think we will have strong growth in Q3 and Q4 for ANNOVERA. To your point, IMVEXXY, we expect to grow right there with it, and it’s been great lately, and we expect that to continue. Dawn, anything to add?

Dawn Halkuff, CCO

Just to add to that, if you think about what’s going to grow IMVEXXY, Rob is right; on the sales force side, we feel really confident in the split we have. IMVEXXY is an easy product to sell. We have leaned in in two places: one is the online telemedicine channels and really making sure that we expand there, and then overall in consumer. We didn’t talk a lot about it today, but the Long May She Reign campaign that we just launched is gaining a tremendous amount of traction as well as patient testimonials. Those are the places where we’re leaning in, which supports the sales force as they sell it into the office.

Douglas Tsao, Analyst

Okay, great. Thank you.

Rob Finizio, CEO

Thanks, Doug.

Operator, Operator

There are no further questions at this time. Do you have any closing remarks?

Rob Finizio, CEO

I want to thank everyone for joining the call today and we look forward to seeing you in the next quarter.

Operator, Operator

Ladies and gentlemen, thank you for participating in TherapeuticsMD’s 2021 earnings call. You may now disconnect.