Agile Therapeutics, Inc. (NASDAQ:AGRX) Q3 2023 Earnings Call Transcript

Agile Therapeutics, Inc. (NASDAQ:AGRX) Q3 2023 Earnings Call Transcript November 9, 2023

Agile Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.27, expectations were $-1.58.

Operator: Good morning, and welcome to the Agile Therapeutics Third Quarter 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: Thank you, operator, and welcome to everyone joining us on today’s call. With me today are Al Altomari, Chair and Chief Executive Officer; and Scott Coiante, Chief Financial Officer. Our Chief Commercial Officer, Amy Welsh, will also be available for the Q&A portion of today’s call. Our prepared remarks today will include forward-looking statements based on current expectations, including statements concerning our financial outlook and financing prospects for the future. Our outlook for the fourth quarter 2023 and first quarter 2024, management’s expectations for our future financial and operational performance including our expectations regarding the market growth of Twirla, our operating expenses, our business strategy, our partnership with Afaxys and its ability to promote growth, our relationship with telemedicine providers and their ability to make Twirla broadly available to patients and our assessment of the combined hormonal contraceptive market generally, among other statements regarding our plans, prospects, and expectations.

Such statements represent our judgments as of today, are not promises or guarantees and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. 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. And with that, I’ll turn the call over to, Al.

Alfred Altomari: Great. Thank you, Matt, and thank you to everyone for taking the time to join our call this morning. In the third quarter 2023, we once again achieved all-time highs across several leading indicators, including net revenue, Twirla demand, factory sales and gross margin. The combination of continued strength and execution and increasing momentum gives us confidence that we will achieve our 2023 net revenue goal of at least $25 million. And, today we’re announcing that we expect to generate positive cash flow from operations with our single product Twirla in the first quarter of 2024. It’s been approximately one year since we recalibrated our business plan to emphasize partnerships that maximize total growth, while simultaneously managing our operating expenses or OpEx levels.

In the past year, we’ve seen consistent quarter-over-quarter improvements across all of our key performance areas, and we believe there is room for additional growth both in the fourth quarter of 2023 as well as into the first quarter of 2024. I’ll now get into some of the details of our third quarter 2023 performance that supports our confidence in achieving our 2023 net revenue goal and generating positive cash flow from operations in the first quarter of 2024. Net revenue, third quarter 2023, net revenue was $6.7 million, which represents a 21% increase from the second quarter of 2023. The continued increase in net revenue was primarily driven by our ability to once again accelerate Twirla demand across both the retail and non-retail channels.

Twirla demand for the third quarter 2023 was 74,325 total cycles a 33% increase from the second quarter of 2023, a new single quarter record. Retail demand as reported by Symphony was 40,196 total cycles, a 13% increase from the second quarter of 2023, also a single quarter record. Non-retail demand was 34,129 total cycles, a 71% increase from the second quarter of 2023. As a reminder, our non-retail demand is comprised of data from both Symphony as well as our wholesalers. Factory sales for the third quarter 2023 as reported by our wholesalers with 74,424 cycles, a 20% increase from the 61,770 total cycles that were reported in the second quarter of 2023. Gross margin, along with our growth in sales and demand, we continue to make progress towards our goal of generating gross profit, which has become a more meaningful part of our story as we approach positive cash flow from our operation.

In the third quarter of 2023, we generated gross profit of $4.2 million or gross margin of 63% compared to $3.2 million or gross margin of 58% in the second quarter of 2023. As our net revenue levels increase and our OpEx level remains steady, we are focused on increasing both gross margin and gross profit as we expect to see continued improvement moving forward. OpEx for the third quarter of 2023 were $8.2 million, a 2% decrease from the $8.3 million reported for the second quarter of 2023. Early in the call, I alluded to recalibrating our business plan approximately one year ago. The recalibration focus on the following: building a scalable commercial platform without adding fixed costs by driving Twirla in the five key states that have strong reimbursement profiles and are estimated to reach approximately 45% of the women, 18 to 24 years old.

And collaborating with our partners who we believe can drive additional Twirla growth by expanding our distribution channels. Compared to the first nine months of 2022 versus the first nine months of 2023, our recalibrated business plan has delivered the following: Net revenue growth a 132%. Twirla demand growth, 156%. OpEx reduction of 31%. The growth that our plan has delivered to-date affirms our belief that our model is sustainable and we expect to see continued Twirla growth in both the fourth quarter and into 2024. We see additional growth and upside potential coming from the following areas: First, further penetration in the five key states, we believe there’s room for growth through increased penetration into our prescriber base in these states, as well as focusing on converting current non-writers of Twirla.

Second, additional volume from Afaxys customer network, while we grew non-retail demand, an impressive 71% from the second quarter of 2023, to the third quarter 2023, we estimated that we are currently reaching less than 20% of the total Afaxys customer network and plan to tap into additional non-retail volume moving forward. Third, advancing Twirla through telemedicine platforms such as Nurx, TwentyEight Health and Pandia are all part of our strategy to sustain growth in the retail channel, our most profitable channel. Before we open to Q&A, Scott will comment on a few other financial results, which we believe also demonstrate continued progress for our business and fiscal discipline. We’d also encourage you to read the press statement and our Form 10-Q for a broader review of all our financial results for the third quarter of 2023.

I’ll turn it over to, Scott.

Scott Coiante : Thanks, Al. Cost of goods sold, which consists of direct and indirect costs related to the manufacturing of Twirla sold were $2.5 million, resulting in a gross margin of 63% for the third quarter of 2023, compared to $2.3 million or a gross margin of 58% for the second quarter of 2023. We ended the third quarter of 2023 with cash of $2.9 million. In addition to our existing at-the-market or ATM arrangement, we will continue to evaluate all available options to finance the company. Our GAAP net loss was $0.8 million or $0.27 per share for the third quarter of 2023 compared to a GAAP net loss of $3.8 million or $2.15 per share for the second quarter 2023, and a GAAP net loss of $5.9 million or $8.01 per share, for the comparable period in 2022.

Non-GAAP net loss was $4.3 million or $1.47 per share for the third quarter of 2023 compared to a non-GAAP net loss of $5.5 million or $3.10 per share for the second quarter of 2023, and $19.7 million or $26.58 per share for the comparable period in 2022. The company incurred a one-time non-cash operating expense charge of $11.1 million, in the third quarter of 2022 related to the transfer of equipment ownership to Corium, which was reflected in the net loss for the third quarter of 2022. The non-GAAP results reflect the exclusion of the fair market value remeasurement of warrant liabilities, which resulted in other income of $3.5 million in the third quarter of 2023, $1.7 million in the second quarter of 2023, and $13.7 million in the third quarter of 2022.

We once again set single quarter record highs in demand, net revenue and factory sales, all while reporting another quarterly decrease in operating expenses. This continues our quarterly momentum for Agile, but we are now excited to articulate where we believe our results are taking the company, achieving our 2023 net revenue goal, generating positive cash flow from operations in the first quarter of 2024, and delivering continued growth in 2024. We believe our continued focus on revenue growth and fiscal discipline can lead to continued improvement in our gross margin, which can in turn help us to begin to generate positive cash flow from operations, and put us in the position of having options about how to invest that future cash. We’d now like to give our covering analysts the opportunity to ask questions.

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

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Q&A Session

Operator: Thank you. [Operator Instructions] One moment for our first question, is from Oren Livnat from H.C. Wainwright. Please proceed with your question.

Oren Livnat: Thanks and congrats on a continued growth in Twirla. I have a few, I appreciate the refined outlook you gave us, specifically highlighting the $25 million minimum sales this year and, Q1 breakeven. I’m just curious, at what quarterly or annual sales run rate or exit rate from 2023, do project needing to breakeven? I guess I’m asking is, where do you see your current the margin and OpEx profile at that point and going forward? And I have several follow-ups.

Alfred Altomari: Yes. Oren, it’s Al. First of all, thanks for joining us. Yes. I think you see two things, with this business, continued growth a momentum on the topline. And we’re hitting a point of leverage. We’re seeing continued improvement on the margin both in real dollars, nominal dollars, but also as a percent. So, we would expect, as Scott mentioned in his comments that would continue to improve. So, when we project out margin improvement, if you will, as a percent, and growth on the topline, we think we’re on that glide path in the first quarter, so that, in effect, those lines in path cross if you will. It’s kind of a little bit of a [yinyang] (ph) or in that grows on the topline as always your best friend, but also margin improvement.

Because I think we’ve tried to educate the street for the last year or so. Some of the charges we take to the margin are fixed costs. So, as we grow, we just hit points of leverage. So, basically when we look forward and saying, okay, what’s the glide path we’re on sales and demand? And what’s our ability to manage in effect the fixed expenses, both in the OpEx line, but also on the margin, we see it crossing in the first quarter. I’ll let Scott, is that —

Scott Coiante: That’s fair.

Alfred Altomari: Okay.

Oren Livnat: Yes, makes sense. As we think about continued growth through the rest of this year and into next year, where do you think the biggest contributions are going to come from? I mean, obviously, we’ve seen Afaxys do a great job. Retail has sort of been steady as she goes at least as far as the, IQVIA scripts that I track. Is there anything you can do in your view in the five states strategy to accelerate the retail business, or should we think of that as sort of a, hopefully, a straight line grower and continuing to add on other new lines of business?

Alfred Altomari: Yes. I’ll queue up, Amy, but I think what gets me excited about the retail is I’m going to call it the synergies. We’re starting to see in between the non-retail and retail to spill over. And Amy’s got some more information she’ll share with you all about that. So, that’s where, the non-retail business, if in effect, it helps accelerate our retail business. And the other thing that gets me excited also is the channels, specifically telemedicine, I literally believe we’re only scratching the surface there. This is a channel that we rely on partners and, as you know Nurx was acquired by Thirty Madison, so we went through an acquisition period of time. So, we’re just starting to hit our stride there. So, when I looked at the business forward, deeper in the five states, more market share, as we alluded in my comments, but the synergy of the non-retail channel and the specialty farm and then look, I mean, we try not to overdo this, Oren, but, we believe that the ACA will get fixed.

We believe we’re on the goal line of that turning around. And I think that just adds layer of acceleration that both on our margin, but also on the topline. So, that’s what gets me excited. I don’t know, Amy, if you want to comment.