TherapeuticsMD, Inc.
Q2 2019 Earnings Call Transcript

Published: 6 Aug 2019

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for joining us for the TherapeuticsMD Second Quarter 2019 Financial Results Conference Call. Following prepared remarks from the company, we will open the call for questions. I would now like to turn the call over to TherapeuticsMD's Vice President of Investor Relations, Nichol Ochsner. Nichol?

[Nichol Ochsner:]

Good afternoon everyone. Thank you for joining today's call to discuss our second quarter financial results and business update. This afternoon 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 & Media section.

[Robert Finizio:]

Thanks Nichol. Good afternoon everyone, and thank you for joining today's call. We are pleased to report a solid quarter. As you can see on slide 3, total net revenue for the second quarter of this year came in at approximately $6.1 million above our guidance range of $4.5 million to $5.5 million. Net revenue for IMVEXXY came in at approximately $3.12 million above our financial guidance range of $2.5 million to $3 million. IMVEXXY net revenue was up 55% in the second quarter, as compared to the previous quarter of this year. We launched BIJUVA on April 17 and recorded approximately $134,000 in BIJUVA net revenue for the partial quarter. Combined our FDA approved drugs came in at approximately $3.25 million in net revenue for the quarter. Moving to prenatal vitamins, net revenue came in at approximately $2.8 million for the second quarter above our financial guidance in the range of $2 million to $2.5 million. Dan will review the financial results in more detail later in the presentation. I would now like to turn the call over to Dawn Halkuff, our Chief Commercial Officer to discuss performance in more detail. Dawn?

[Dawn Halkuff:]

Thank you, Rob. Let's start with our progress on IMVEXXY on slide 4. IMVEXXY growth continues with approximately 289,500 total prescriptions dispensed since launch through July 31 of 2019. Total prescriptions for the month of July were approximately 45,500, which is an increase of 21% or 8,000 units over the month of June. This is a good start to the quarter given summer months are historically slower months for pharmaceuticals. We also continue to gain strength with average weekly volume crossing over 10,000 for the month of July.

[Daniel Cartwright:]

Thanks Dawn. Second quarter 2019 financial results are included in the press release issued today. Let me summarize a few key points. Please turn to slide 27. As Rob mentioned, net revenue from IMVEXXY was approximately $3.1 million for the quarter. The average WAC sales price of approximately $213.30 for the second quarter. The difference between WAC and net revenue is mostly driven by the cost of our co-pay assistance program. Once we have completed our payer contracting we believe our IMVEXXY scripts will generate higher revenues per unit and drive significant net revenue acceleration. We launched BIJUVA during the second quarter of this year. During our first partial quarter of commercialization BIJUVA net revenue was approximately $134,000. Our total FDA-approved product revenue for the second quarter was approximately $3.25 million coming in above our second quarter 2019 financial guidance of $2.5 million to $3.0 million. Net revenue from the company's prescription prenatal vitamin business was approximately $2.8 million for the second quarter of 2019, coming in above our second quarter 2019 guidance of $2.0 million to $2.5 million. Total revenues for the second quarter of 2019 were approximately $6.1 million, coming in above our second quarter 2019 financial guidance of $4.5 million to $5.5 million. Total operating expenses for the second quarter of 2019 increased compared to second quarter of 2018. These changes primarily reflect a commercialization -- an increase in commercialization expenses for the launch of IMVEXXY and BIJUVA. This is reflected in SG&A expenses for the second quarter of 2019, which were approximately $41.4 million, compared with approximately $29.5 million for the prior year's quarter. This is primarily due to higher sales, marketing and personnel costs to support commercialization including the expansion of our women's health sales force to support the launch of BIJUVA. In the second quarter, non-operating expenses included a one-time charge for extinguishment of debt of approximately $10.1 million as we refinanced our previous term loan into a more favorable facility with TPG Sixth Street Partners. Turning to the bottom line, our net loss for the second quarter of 2019 was approximately $55.2 million or $0.20 per basic and diluted share. Excluding the one-time charge for extinguishment of debt, the net loss for the second quarter was approximately $45 million or $0.19 per basic and diluted share, compared with approximately $33.2 million or $0.15 per basic and diluted share for the second quarter of 2018. As we move to slide 28, we finished the second quarter of 2019 with approximately $183 million in cash compared with approximately $161.6 million at December 31, 2018. Our company has taken significant steps this year to raise additional non-dilutive capital to support the commercialization of our three FDA-approved products. In April, we closed on an upsized $300 million non-dilutive term loan facility with TPG Sixth Street Partners. The initial funding was $200 million with additional funding available of $50 million upon the designation of ANNOVERA as a new category of contraception by the FDA on or prior to December 31, 2019, as well as another $50 million upon achieving $11 million in net revenue from IMVEXXY, ANNOVERA and BIJUVA for the fourth quarter of 2019. I would like to clarify, a common question that these are draw triggers and not covenants. Our loan facility provides us with a favorable amortization profile with no repayment of principal scheduled until June 30, 2023. In July, we closed our ex-U.S. license deal with Theramex and yesterday, we received the upfront payment of $15.5 million. We are also eligible to receive additional regulatory and sales milestone payments as well as a royalty on net sales. Combining these two debt tranches and the upfront payment received from Theramex, TherapeuticsMD will have the potential to access over $115 million of non-dilutive capital over the coming eight months. Please turn to slide 29 for our revised quarterly guidance. We are pleased with our net revenues results for the quarter. And as Rob stated, we have reiterated our quarterly guidance for our FDA-approved products and raised our third quarter guidance for the vitamin business to a range of $2.25 million to $2.5 million. Our guidance for total TXMD net revenue for the third quarter will increase to $6.75 million to $9.0 million range. For the fourth quarter of 2019, we reiterated our previous stated financial guidance for our FDA-approved products and raised our guidance for the vitamins business to a range of $1.75 million to $2.25 million. Our guidance for total TXMD revenue for the fourth quarter will move to $2.75 million to $15.25 million. Slide 30 outlines the impact on full year 2019 guidance. Given our second quarter beat, we revised our year end financial guidance for FDA-approved products to a range of $20.75 million to $24.75 million. Moving to full year guidance for our prenatal vitamin business we are increasing our range to $8.75 million to $9.45 million. Our guidance for total TXMD net revenue for the full year will move to $29.45 million to $34.2 million. This represents a net revenue increase of $1.7 million based on the revised guidance midpoint versus our previous guidance for the full year. I would like to now turn the call back over to Rob for closing remarks.

[Robert Finizio:]

Thanks, Dan. On slide 31 in closing, we're pleased with our quarterly results. This progress confirms our menopausal strategy is clearly working and execution has produced a solid market share adoption. At this point, we are confident that the payer contracting process will come to a positive completion for both menopausal products in Q3 and Q4 of 2019. ANNOVERA is on time and will contribute revenue in Q4 positioning us with three revenue-producing products to meet our guidance and allow us to access another $50 million. This will also give us the time needed to discuss the 19th category with the FDA. And in turning to slide 32 for an illustration of the overall opportunity the value of this company is based on three FDA-approved products. As you can see when you look at the sum of the parts there are multiple paths to get to a potential $1 billion of peak sales. In the next 60 days, TXMD will have transformed to a three product company and be well on its way to being the new leader in women's health care. With that, I'd like to turn the call back over to the operator for Q&A.

[Operator:]

Thank you. Our first question comes from the line of Louise Chen with Cantor Fitzgerald. Your line is now open.

[Louise Chen:]

Hi. Congratulations on the quarter and thanks for taking my questions here. So my first question is regarding the designation for ANNOVERA. When do you expect to hear regarding this? And then second question is, are you covered by CVS for IMVEXXY on the commercial side? And then last question some people ask us is on the potential launch of generic NuvaRing and if that will impact your launch of ANNOVERA in any way? Thank you.

[Robert Finizio:]

So, Louise, it's Rob. I'm going to tie together one and three, and Dawn if you have anything to add please jump-in. With the 19th category, the process is as follows. We already have started the dialogue with the FDA. There is currently 18 methods of contraception, and they are separated by various reasons to be different methods. Let me give an example. A 30-day supply of birth control pills is one method, oral contraceptives. A 90-day supply of birth control pills that may even have the same progestin is considered a different method of contraception. So we believe that given ANNOVERA is a 13-cycle long-acting ring versus the only other ring out in the market which is a three-week ring, NuvaRing it clearly under the precedent and number of different ways constitutes a separate category. And so we think, the process that we are undertaking should be very positive and the process is as follows. The Office of Women's Health runs this at the FDA. Once they make a determination assuming they designate it the 19th category all they have to do is literally change it on their website, and all the payers naturally would have to follow it. As you know, 19 states will have to cover this product. And as you can see payers for the first time, we just listed it and they're covering it in a number of states. We had a number of the big guys reach out to us as well. So we're very bullish on this product. We do not see the NuvaRing generic since it is a different – not only different progestin, it's a different cycle. This is a long-acting birth control product. NuvaRing is a short-acting product. It's a different ingredient in it. And as you know, the market is going long-acting. We don't see the NuvaRing generic having any impact on this product whatsoever. It certainly would not ever be generic equivalent. As far as CVS goes – and Dawn I'll ask you if you have any other comments on that – as far as CVS goes, we expect to hear from them this quarter. We're very bullish on it. I can't guarantee that we'll get it, but CVS and Aetna are one. But we're very positive on it and we hope for the best.

[Dawn Halkuff:]

Nothing to add.

[Robert Finizio:]

Okay. Did that answer your questions?

[Louise Chen:]

Yeah. Thank you very much.

[Robert Finizio:]

Thanks, Louise.

[Operator:]

Thank you. Our next question comes from the line of Annabel Samimy with Stifel. Your line is now open.

[Annabel Samimy:]

Hi. Thanks for taking my question. And great progress there. Just on IMVEXXY. Regardless of CVS do you expect to see some pretty meaningful step-ups in the adjudication given that I think we're at a point now that we're past some of these 6-month blocks and these payers should start processing the claims already. Then separately affecting I guess the net price have you seen any change in the mix of starter versus maintenance packs? Are you seeing more new starts? Are you seeing switches? Then separately on BIJUVA where are you seeing most prescriptions coming from at this point? Are you still seeing are you seeing it from off-label use of the separate E+P or from compounded or synthetic products? And then on ANNOVERA, I just want to understand the process here. I guess aside from your classification, I think you mentioned that you had a number of states that would have to cover it regardless. And I just want to -- I guess I didn't quickly count how many we're covering there, but is this an automatic pickup by a number of these states and these plans? And if you can just help us understand the process there.

[Robert Finizio:]

Absolutely. So Annabel, I'm going to…

[Annabel Samimy:]

[Robert Finizio:]

No, no worries. I'm going to turn it over to Dawn for ANNOVERA. I'll take IMVEXXY/BIJUVA. So yes, we do expect continued step-up of adjudication in Q3 this quarter and next quarter. So we are -- we have three basic payers left on the commercial side. So CVS and Aetna count them as one or two we expect to hear from them. We're bullish on it. We can't guarantee it. They could say no, but we're positive on it this quarter. We just opened dialogues with Kaiser. As you know Kaiser is a closed system without access. Even though they cover it on Part D they don't cover it commercially and we've had some good progress there. On the Part D side, we actually expect a couple decisions here in Q3. The rest will be in Q4. And again we're bullish. We think we'll get most. We might not get every single one, but I think we'll get most. And I think you guys can hang your hat on that. We have enough color there. In addition to that as far as BIJUVA goes with the payers, we will be done with all of the commercial payers. As you can see there's almost no Part D impact here as you can see by our adjudication stats in early Q4. So we will have a number of BIJUVA commercial decisions. We just got Optum and United, which is huge. And we'll get in Q3 another three or so and I believe the last two or three will come in October. And we will be done with the payer process in Q4 for BIJUVA and off to the races with full reimbursement. Again, I think we'll get most. I don't know if we'll get all. But I think our shareholders will be proud is what I expect for the commercial and Part D coverage for both of these drugs. As far as where the prescriptions come from for BIJUVA, we've only gone after the two pill market and we've only allowed our sales reps up to Q3 to only call on 10 doctors per territory, okay. There's a reason there. The reason is that we only have until we got United and Optum very recently the first of this month we only had 17% coverage in that market. So to go into the BIO-IGNITE channel and have the additional distribution expense will eat up all of your revenue and even into your IMVEXXY revenue. So we're holding off on that until Q4 until we have solid coverage. But with that being said they're only going after 10 doctors per territory and only after the two pill FDA-approved market. And in fact if you look at our adjudication for BIJUVA, it's actually 34% even though we only had 17% coverage. So, it's just the situation where you happen to have more of the population that you're covered with getting these prescriptions coincidentally. So, obviously both IMVEXXY and BIJUVA will even out of that 70%-plus in both Part D and commercial and again the next five months that will be completed.

[Dawn Halkuff:]

Okay. And just maybe one more point on BIJUVA that I think important is that 82% of the prescriptions are from writers -- or sorry 83% of the writers are also IMVEXXY writers. And so, so much of the overlap is playing out for us and where we're getting that volume. So the last question you had was on ANNOVERA and how to…

[Robert Finizio:]

Starter versus maintenance.

[Dawn Halkuff:]

Can you repeat the question on starter versus maintenance?

[Annabel Samimy:]

Yeah. There was -- I did have a question regarding whether you're seeing more starter patients or new patients rather than just the switches that would proceed to the maintenance pack and how that might affect the net price over time.

[Dawn Halkuff:]

Yeah. So Annabel, because our refills are so strong, we obviously see a lot more of the maintenance than we see of the starter. I think we continue to see some market share that we are getting some switches from some of the creams and others, and I think we showed some of that data on the market share at Investor Day. But again, the majority of our mix will be the maintenance pack given the amount of refills that we have.

[Robert Finizio:]

And as the payers finish their cycle, the label says to start with a starter pack even if you're coming from another product. We'll have the reps really push that and hopefully up that amount of starters. And it's just the normal cycle until you get coverage. The discount you give to the channel is a raw percentage. So, you're giving -- in essence losing money on a starter pack, whereas if there's no coverage, you're making a little bit of money, and if there is coverage, you're making good money. Okay?

[Annabel Samimy:]

Got it. Got it. Okay.

[Robert Finizio:]

So that'll transition as we go forward here in Q3, Q4.

[Dawn Halkuff:]

So moving on to your question on ANNOVERA, how the process works for the 19 states in the automatic. I think what you're seeing thus far is there have been some automatic adds on some of the payers that we showed putting us on formulary immediately. The way it works though is that there is at the state level, there's regulation that they do have to cover us some states with a copay, some states without a copay automatically. But that doesn't mean that we will get it automatically at approval. We still have to have the conversation with the big national payers, and then once we get through those clinical reviews over the course of a few months, they would make the decision whether to put ANNOVERA on nationally or cover just those lives in those states. But the regulation says they do have to cover it. So we just have to get through a process, but that process is just much shorter than BIJUVA and IMVEXXY. And the birth control category just holds a whole lot of leverage that gets us to the table.

[Robert Finizio:]

And from a population standpoint, you asked how many states. So it is 19 states that is mandated coverage without a generic equivalent, which obviously there is none here. I believe the copay-free population is 42 million women. And I believe the rest of the states outside of that is another 25 million women, which is approximately 45% to 47% of the women of this age in the country. So it's not quite half. Let's just say 40%, 45%. So it's great way to start really fast. And the good thing is the national plans, all play -- and these are big states, California, Washington, Maryland, Illinois. So you just get a lot of leverage with the payers walking in especially with the 19th category for the other states looming over their heads, because those 19 states this designation of the 19th method or category really will have no impact, but the other 31 states it would. So it really pushes the payers to a table to get something done quickly, and so we feel really bullish on it.

[Annabel Samimy:]

Great. Thank you so much.

[Robert Finizio:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Jay Olson with Oppenheimer. Your line is now open.

[Jay Olson:]

Hi. Thanks for taking the question. I just wanted to follow-up on comments you made regarding CVS and Aetna. On your July 9 update you indicated that they were not covering the majority of their plan designs and that you were in negotiations for opportunities to increase access. And now here we are less than a month later, it seems like you may have made some significant progress there. So I was wondering if there was any comments or any color you could add to what's going on with CVS and Aetna and your indication that there may be a commercial coverage decision coming this quarter.

[Robert Finizio:]

Yeah, absolutely. It's just taking longer there and we're trying to get to a situation where it's acceptable for both sides. They've been actually pretty good and we like them. It's just taking a little bit longer than we thought. There's a lot going on over there with the mergers and stuff. They did their preferreds. We didn't want preferred in the commercial side. We do want preferred on Part D. And we on the commercial side are the next group to go for non-preferred access. We do think we're in good shape there. I cannot guarantee we'll get it. I've had situations where we thought we were in great shape and once before our phone rang and they decided not to go with us out of all of our payers. So it's not guaranteed, but we feel good about it. And we do believe that that decision will be made this quarter.

[Jay Olson:]

Great. Thank you for that color. And then also I just wanted…

[Robert Finizio:]

Thank you, Jay.

[Jay Olson:]

I wanted to if I could just follow up on ANNOVERA. Merck reported second quarter sales of $240 million, which were significantly higher than expected for NuvaRing. And I was wondering if the resilience that NuvaRing showed in the second quarter changes your view of the opportunity for ANNOVERA.

[Robert Finizio:]

Jay it's -- the beauty of that is vaginal rings are being accepted and significantly growing with women. Kind of the yuck factor that was there 10 years ago is really gone. If a woman's not using it herself, she has a friend that uses it, right. So now, we're not for every vaginal ring user. Like, we're not going to replace every IUD and every oral contraceptive. But we are for a cross section of those women that have to have a long-acting option. And want control over 13 cycles or a full year of their fertility and their menses. And with that being said, I think, we are positioned very well with NuvaRing's progress, kind of blazing the trail for us. And getting this vaginal category accepted for birth control. And we hope, the differentiator product, the differentiation of our product versus NuvaRing will attract a lot of those women over, but certainly not all of them. It's not for everybody. But as you can see with the numbers we put up, if you just got 1.5%, this is anywhere from a $400 million to a $700 million, product per annum. And I tell you, that's not very -- that's not that big of a piece of that category, anything to add, Dawn?

[Dawn Halkuff:]

Yeah. Hi, Jay and the only thing I would add is, it doesn't necessarily change our outlook. But there are two places that I like to see, and gives me confidence in the ANNOVERA opportunity. One is the acceptance of the ring category, which so I feel confident, that they're continuing to see strong sales. And the second is the growth of the long-acting market, and we continue to see that as well. And as Rob just mentioned, we sit right in the middle of that. So, for me, it doesn't change the outlook. It just increases my confidence.

[Jay Olson:]

Great, thanks again for taking my questions.

[Dawn Halkuff:]

Thank you.

[Robert Finizio:]

Thanks, Jay.

[Operator:]

Thank you. This concludes today's question-and-answer session. I would now like to turn the call back to, Rob Finizio for closing remarks.

[Robert Finizio:]

Thank you all for joining our Q2 call. And we look forward to following up with you next quarter. Thank you.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.