Agile Therapeutics, Inc. (NASDAQ:AGRX) Q2 2023 Earnings Call Transcript

Agile Therapeutics, Inc. (NASDAQ:AGRX) Q2 2023 Earnings Call Transcript August 9, 2023

Agile Therapeutics, Inc. beats earnings expectations. Reported EPS is $-3.1, expectations were $-3.48.

Operator: Good morning, and welcome to the Agile Therapeutics Second Quarter of 2023 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: Hello, everyone, and welcome to today’s conference call to discuss our second quarter 2023 financial results and corporate update. Before we start, let me remind you that today’s call will include forward-looking statements based on our current expectations, including statements concerning our financial outlook and financing prospects for the future, our outlook for the second half of 2023, management’s expectations for our future financial and operational performance, including our expectations regarding the market growth of Twirla, and our operating expenses. Our business strategy, our partnerships with Afaxys and Syneos and their ability to promote growth, our relationship with Nurx and its ability to make Twirla broadly available to patients 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 forward-looking statements. Further, during today’s call, we will refer to certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our press release issued today, which can be found on the Investor Relations section of our website. For more information concerning risk factors that may affect the company, please refer to our filings with the SEC, which are available through the Investor Relations section of our website. 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 is Al Altomari, Agile Therapeutics’ Chairperson and Chief Executive Officer; and Amy Welsh, Chief Commercial Officer. Following our prepared remarks, we’ll open the call to your questions from our covering analysts. I will now turn the call over to Al.

Al Altomari: Thanks, Matt, and thank you for everyone joining us this morning. I’m personally very excited to share our quarterly results with you and that is in part of the reason why this is our first quarter we’re holding our call in the pre-market. We think a 44% growth in our net revenues of $5.5 million for the second quarter combined with our double digit growth in demand made this a significant quarter for both Agile and Twirla. We believe this affirms our confidence in our business plans, our progress towards the goal of generating positive cash flow and achieving 2023 net revenue in the range of $25 million to $30 million. I’m going to kick things off by reviewing the performance metrics from the second quarter 2023 that have us all excited.

Amy will then discuss why we are confident in our belief we can sustain momentum into future quarters. Twirla demand for the second quarter was 55,687 total cycles, a 24% increase from the first quarter of 2023 and another single quarter record. Retail demand, as reported by Symphony, was 35,682 total cycles in the second quarter of 2023, a 17% increase from the first quarter 2023. The retail channel is our most profitable channel, and the retail demand accounted for 64% of the second quarter 2023 demand. Non-retail demand for the second quarter of 2023 was 20,005 total cycles, an increase of 38% from the first quarter 2023. Our non-retail demand is comprised of data from Symphony as well as our wholesalers. Second quarter 2023 net revenue was $5.5 million, which represents a 44% increase from the $3.8 million reported for the first quarter in 2023 and the 159% increase from the $2.1 million reported for the comparable period in 2022.

Factory sales for the second quarter 2023, as reported by our wholesalers, were 61,770 total cycles compared to the 43,446 total cycles reported for the first quarter 2023, a 42% increase. As discussed last quarter, on a year-to-date basis, we think channel inventory has now normalized. We expect to see both net revenue and factory sales continue to grow in the second half of 2023, driven by our growth in demand and the execution of our business plan that Amy will describe. Gross margin. Along with the growth in our net sales and demand, we continue to make progress in generating gross profit. In the second quarter of 2023, we generated a gross profit of approximately $3.2 million or a margin of 58% compared to $1.8 million or gross margin of 47% in the first quarter of 2023.

We think gross margin is becoming a meaningful part of our progress, and we believe we will continue to see improvement in the second half of 2023. Operating expenses, or OpEx, for the second quarter 2023 were $8.3 million, a 2% decrease from $8.5 million reported in the first quarter of 2023. Before Amy takes over, I’d like to comment on a few other of our financial results, which we believe also demonstrates continued progress of our business. Cost of goods sold, or COGS, which represents direct and indirect costs related to the manufacturing of Twirla sold was $2.3 million or 42% for the second quarter of 2023 compared to $2 million or 53% for the first quarter of 2023. We ended the second quarter of 2023 with cash on hand of $2.8 million.

In addition to our aftermarket or ATM arrangement, we will continue to evaluate all available options to finance the company. Our GAAP net loss for the second quarter of 2023 was $3.8 million or $2.15 per share for the second quarter of 2023 compared to a GAAP net loss of $5.4 million or $5.91 for the first quarter of 2023 and a GAAP net loss of $5.2 million or $57.29 per share for a comparable period in 2022, respectively. Non-GAAP loss was $5.5 million or $3.10 a share for the second quarter of 2023 compared to a non-GAAP loss of $7.1 million or $7.76 per share for the first quarter of 2023 and $12.2 million or $135.46 per share for the comparable period in 2022. The non-GAAP results reflect the exclusion of fair market remeasurement of warrant liabilities, which resulted in other income of $1.7 million in the second quarter of 2023, $1.7 million in the first quarter of 2023, and $7.1 million in the second quarter of 2022.

Albina Glisic/Shutterstock.com

We set a single quarter record highs in demand, net revenue, factory sales, all by reporting another quarterly decrease in operating expenses. We are beyond pleased with the second quarter results, but the job is not done. We continue to ask ourselves how we can accelerate our growth. I will now hand over the call to Amy to answer that question by explaining the business model, which we have built and is designed to deliver future growth across the board.

Amy Welsh: Thanks, Al, and hello, everyone. Our whole organization is energized by our results in the second quarter of 2023. I would like to take a few minutes to explain why we are excited and answer the question, can we reach our 2023 net revenue guidance of 25 million to 30 million by sustaining our current momentum, driving increased growth in future quarters and holding our operating expenses at current levels? We think the answer to this question is yes, because of the structure of our commercial business model and the continued receptivity towards Twirla, which is now approaching 15,000 cumulative prescribers since launch. We are pursuing a business plan that is built on a commercial platform that we believe is scalable without adding a lot of fixed costs.

Let me explain further. First, our business plan focuses on driving Twirla in the five states that are estimated to reach over 45% of the U.S. women ages 18 to 24 and have strong reimbursement profiles. This targeted geographical strategy maximizes our sales force spend in the areas we believe have the greatest opportunity and potential for growth. And second, our commercial platform is based on collaborations with Syneos and Afaxys that have been structured to minimize fixed costs and allow us to scale up or down, as needed, as well as align our key partners’ interests with ours so that our partner succeeds when Agile and Twirla succeed. We have pursued this by converting what we would typically be considered fixed costs for a company like Agile into variable costs.

For example, through our partnership with Afaxys, second quarter 2023 non-retail demand grew 38% from our first quarter of 2023. Rather than allocating the time, resources and dollars to build and maintain our own non-retail sales force, we partnered with Afaxys to drive non-retail growth, because we identified them as experts in that area. The fact this is compensation is a combination of a fixed fee, along with performance-based incentives, which helps us keep quarterly operating expenses at a stable rate without sacrificing growth potential. We have taken the same approach with Syneos, which provides our retail sales force. We believe we can now build out this commercial platform and drive additional Twirla growth by expanding our distribution channels, which we expect will increase access to Twirla without incurring additional significant operating costs.

So this is why we remain confident that we can achieve net revenue in the range of 25 million to 30 million while holding our operating expenses relatively steady. Now I would like to take a few more minutes to provide some additional details on our plan to build out our distribution channel. In the first quarter of 2023, you saw us announce new relationships designed to further expand our commercial reach and drive Twirla growth. In the retail channel, we focused on collaborations to grow Twirla through telemedicine platforms, which we will expect to contribute to second half 2023 net revenue and retail channel growth. Advancing Twirla’s availability through Nurx, Twentyeight Health and Pandia are all part of our strategy to sustain future growth in the retail channel.

We also focused on growing the non-retail channel. Twirla’s availability through our relationship with FPA Women’s Health and MMCAP are planned to augment Afaxys’ efforts and contribute to further second half 2023 non-retail growth. Their expected contributions are a large part of why we are confident in sustained growth across the board and the second half of 2023. Strong focused external relationships are an integral part of our business plan, and we expect to continue to explore collaborations that can positively impact our business, allow us to expand without incurring significant costs and promote a growing, sustainable fiscally responsible business. We now like to give our covering analysts the opportunity to ask questions. Operator, you may now open the line for Q&A.

Operator: Thank you. [Operator Instructions].

Al Altomari: Operator, while we’re doing that, I want to introduce somebody else in the room. We also are joined in the room by Scott Coiante, our incoming new CFO. I think most of you know that Scott was a big part of the company when we took the company public. So we’re thrilled to have him back. So I just want to let you know he’s also in the room and he’ll be transitioning to the job in the next week or so.

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Q&A Session

Operator: All right. Thank you. So our first question comes from the line of Oren Livnat from H.C. Wainwright. Your line is now open.

Oren Livnat: Thanks. I have a bunch of questions. Congrats on a nice upside this quarter and reiterating that guidance. I guess first, you just mentioned Scott’s on the call. Welcome back, Scott. I’m curious what you found compelling about this opportunity to return to Agile. Then I’ll ask about the fundamentals.

Scott Coiante: Thanks, Oren. Good to connect with you. Look, as you know, I was part of some really good productive years here at Agile. And look, it’s a great team. There’s a great group of people here. The opportunity presented itself for me to come back. And I’m happy to be here and continue to build on that progress that the company has been doing.

Oren Livnat: Obviously, it’s a pivotal time. Sorry, I heard some feedback on the end. Can you hear me?

Al Altomari: Yes, you’re good, Oren. Go ahead.

Oren Livnat: Okay, good. Well, let’s talk about Twirla. I think we’re five weeks into Q3. And I know you don’t give quarter-by-quarter guidance. But since you reiterated the top line guidance, can you just talk about what sort of trends you’re seeing I guess quarter-to-date sequentially in growth? I think we’ve seen over 20% total cycle demand for a couple quarters in a row. And I’m just wondering, can that trend continue or do you expect some lumpiness as we get into summer?

Al Altomari: So, Oren, you’re stealing our thunder from my closing comments. There’s nothing we’re seeing — that’s okay, and I will answer. There’s nothing we’re seeing in July that doesn’t get us any concern. In fact, we’re ecstatic with July. The momentum we’ve seen in the second quarter continues to accelerate into the third quarter. So far, as you said about five weeks in it, we’re thrilled. So fingers crossed for the rest of the quarter like this one, but we’re not surprised. We would expect that. The model that Amy built has walked you through. We would expect to continue to see momentum and that’s why we reaffirm guidance and that’s why we’re bullish on the year.

Oren Livnat: All right. And one of the big things you talked about in the past is how this success in the non-retail channel, particularly Planned Parenthood, spills over into the retail channel, which is obviously the most profitable as you highlighted. You’ve seen nice sequential demand as well, near 20% in the retail as well, I think. Are you seeing that spillover or is this just traditional boots on the ground driving retail demand, or the new telemedicine channels?

Al Altomari: I’ll turn it over to Amy, the expert, Oren. She will have a better answer.

Amy Welsh: Hi, Oren. Thank you for the question. Yes, we are. We saw that spillover as early as third quarter last year. And every time that we add another account on, we do some analytics in that state and we’re confident when we see — a few months after looking into it that we see the spillover continue. It’s the model that we had talked about a few times, Oren, where these physicians that are in Planned Parenthood more than likely also have a private or a group practice. So the confidence that they start to gain on Twirla within the Planned Parenthood structure, they’re bringing over. So yes, we continue to see the spillover. So again, when we get a new account, again, we’re confident that the non-retail growth will go into the retail growth.

Oren Livnat: All right. And I guess one of the new things you announced this quarter was the non-340B non-retail accounts with FPA, and I think there was another one in there that I might have missed the name of. You said that’s an important contributor for second half. Big picture, how big a channel is that as an opportunity? How many more accounts are there like that? And remind us where do they fall sort of on the profitability spectrum of your multiple channels?