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Edited Transcript of TXMD earnings conference call or presentation 20-Feb-20 1:30pm GMT

Q4 2019 TherapeuticsMD Inc Earnings Call

Beverly Hills Mar 11, 2020 (Thomson StreetEvents) -- Edited Transcript of TherapeuticsMD Inc earnings conference call or presentation Thursday, February 20, 2020 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Daniel Alan Cartwright

TherapeuticsMD, Inc. - CFO & Treasurer

* Dawn Halkuff

TherapeuticsMD, Inc. - Chief Commercial Officer

* Nichol L. Ochsner

TherapeuticsMD, Inc. - VP of IR

* Robert G. Finizio

TherapeuticsMD, Inc. - Co-Founder, CEO & Director

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Conference Call Participants

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* Ahu Demir

NOBLE Capital Markets, Inc., Research Division - Biotechnology Research Analyst

* Annabel Eva Samimy

Stifel, Nicolaus & Company, Incorporated, Research Division - MD

* Dana Carver Flanders

Guggenheim Securities, LLC, Research Division - Senior Analyst

* Douglas Dylan Tsao

H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst

* Kenneth Charles Cacciatore

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Lawrence Scott Solow

CJS Securities, Inc. - MD

* Louise Alesandra Chen

Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Thank you for joining us for the TherapeuticsMD Fourth 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?

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Nichol L. Ochsner, TherapeuticsMD, Inc. - VP of IR [2]

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Good morning, everyone. Thank you for joining today to discuss our fourth quarter financial results and business update. This morning, TherapeuticsMD issued a press release announcing our fourth quarter financial results. The press release is available on the company's website, therapeuticsmd.com, in the Investors & Media section.

On today's call from TherapeuticsMD are Chief Executive Officer, Robert Finizio; Chief Financial Officer, Dan Cartwright; and Chief Commercial Officer, Dawn Halkuff. I would like to remind everyone that certain statements made during this conference call may be forward-looking statements. Such 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 upon 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 those who may be listening to the replay or archived webcast, this call was held and recorded on February 20, 2020.

With that, I'll turn the call over to TherapeuticsMD CEO, Rob Finizio.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [3]

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Good morning, and thank you for joining today's call. Let me briefly review the agenda today on Slide 3. I will start with a review of 2019, and then we will provide an in-depth look at our strategy and plans for 2020. Dawn will provide a commercial overview and then turn the call to Dan to review our financial results. Then we will close with 2020 financial guidance.

In 2019, the focus of the entire organization was on building out the foundational elements that would allow us to accelerate revenue growth in 2020. As you can see on Slide 4, the areas of focus, we're launching our full portfolio of products, ensuring national payer access, expanding new lines of business such as public health and transforming our talent base from a clinical focused company, to a commercial focused organization.

Let me recap some of our achievements on Slide 5. First, we exceeded our fourth quarter guidance and met the high end of our full year guidance. We satisfied the milestone with TPG Sixth Street Partners to access the first additional $50 million loan tranche, which we received this week. And we completed an amendment to our financial agreement related to the second $50 million loan tranche in December.

Moving on to our payer accomplishments shown on Slide 6, starting with ANNOVERA, commercial coverage was gained quickly. Less than 4 months after the limited launch commenced, we achieved 75% commercial coverage, demonstrating stronger net revenue per unit and this, in turn, allowed us to enter into new markets for ANNOVERA, including Medicaid, Title X and the Department of Defense.

Moving on to IMVEXXY. We know that one of the most critical foundational items for 2020's success is payer access. We secured coverage from every one of the top 10 commercial payers and brought on other regional payers, resulting in 72% unrestricted commercial coverage. We did achieve 3 of the top 6 Medicare Part D payers, but the pace of attaining Medicare Part D coverage was slower than we expected. We believe TXMD remains well positioned to gain additional coverage when the 2020 Part D coverage decisions are finally made for this class of products.

We still believe 2 or 3 of the major payers will make a decision this quarter, and we are positioned well to gain most, but might not gain all. From a market share perspective, in December, we exited with a share of 10% of the total prescriptions in the VVA category. This is a great result from a sales force-driven effort with very limited marketing spend for IMVEXXY.

Moving on to BIJUVA. Payer access was a core focus, and we secured coverage from 7 of the top 10 commercial payers, achieving 56% unrestricted commercial coverage. We also built out the BIO-IGNITE operational infrastructure and key account management team with 163 live BIO-IGNITE pharmacies by year-end. As a reminder, BIJUVA was launched in a limited capacity in April and then expanded into BIO-IGNITE compounding channel in December as we crossed over the 50% commercial payer access threshold.

Our goal for 2020 is to create a revenue inflection point for our portfolio. We had substantial payer coverage, a very well-trained and focused sales force and providers now have an awareness of our company and products. Bottom line, we have the pieces in place today as we have pivoted from a clinical development company to a fully integrated commercial sales and marketing pharmaceutical company for 2020 and beyond.

Now I'd like to turn the call over to Dawn to take you through the 2020 strategy and priorities.

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [4]

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Thank you, Rob. I'm happy to be able to share our 2020 plans to grow the portfolio. Let me start with how we are prioritizing our spend and focus this year. We are in a unique situation. As shown on Slide 8, we have 3 products all in early launch mode. As you know, products in launch mode take a higher level of focus than those that have been on the market multiple years in our maintenance mode. This is a fantastic opportunity for us, but also requires a plan that allows each brand the spotlight so that growth can continue across the board.

To that end, based on our experience in 2019, we have modified the structure of our sales force to accomplish that, as shown on Slide 9. We will use the existing sales force size but split into 2 sleeves. The larger of the 2, around 150 sales representatives, will sell the entire portfolio with ANNOVERA, as the lead. The smaller of the 2, our menopause specialists, will be 30 to 40 sales representatives and have BIJUVA as the lead product. IMVEXXY will be promoted by all sales representatives. This structure will go into place on March 1 and will coincide with increased marketing spend for the brand.

Let me move to providing more detail on each of the brands. Let's start with ANNOVERA on Slide 10. As you know, ANNOVERA is a differentiated product in a large growing category that generates the highest net revenue per unit across our portfolio, and thus, we have prioritized it as a lead product in terms of spend and focus. The strategy for ANNOVERA is to position the product as the solution that provides the needed control and empowerment for women that has been missing in the birth control category.

Turning to Slide 11. Our approach to bringing this strategy to life is utilizing 3 levers. First, sales force focus. As mentioned, ANNOVERA will be the #1 focus for 150 sales representatives. They will educate health care providers that there's finally a long-lasting birth control option that is procedure free. This is relevant for providers who provide IUD and implant procedures for their patients and have a subsegment of patients that are not ready for a procedure. For those providers that do not do IUDs or implants, they finally have a long-lasting option to offer. You might not realize that most primary care physicians and a subset of OB/GYN do not conduct procedures today. Some key findings during our limited launch in Q4 was that the health care providers want to engage in understanding the uniqueness of ANNOVERA. They see the value of ANNOVERA when you bring to life the multiple patient types this is suited for and the ability to see and touch a demo version of the product is key to their prescribing.

On March 1, we will activate the full health care professional launch with a campaign called owned and operated by her, which resonated strongly with prescribers. Our second lever is consumer advertising, including public relations. Launching our consumer efforts early is important for ANNOVERA adoption. In fact, our research shows that 65% of birth control decisions are made by the women with a doctor serving in a supportive role. Our consumer campaign will be centered around control and empowerment and will be heavy in digital and social channels where our target population consumes media. We believe our consumer campaign called Unapologetically, ANNOVERA will cut through the clutter of other advertising on the market.

We are also engaging in several public relations efforts as we believe endorsement of ANNOVERA by brand, media and people that are relevant to our target population of women will increase the likelihood of consideration and adoption.

The third and final lever is expanding patient access to new channels. To that end, ANNOVERA is now available with several online consumer platforms, including PillPack, PlushCare and Pill Club. These platforms are providing ease and convenience for women in obtaining their birth control and are a perfect place for a modern birth control option like ANNOVERA.

Finally, we have entered into an arrangement to market to the Department of Defense and Veteran's Administration and recently announced our agreement with Afaxys to market ANNOVERA into the public health sector, including Medicaid. Entering these channels is important, so ANNOVERA can be available to all women. We believe, with this plan, we will be able to accelerate this product's traction in 2020.

Moving forward to IMVEXXY on Slide 12. Now that the commercial payer piece is complete, we believe it's the right time to invest marketing dollars for this brand. The investment in 2020 will mostly be spent in consumer marketing with continued focus by the sales force to increase market share. From the health care professional lever, where we have invested, we have seen broad adoption of IMVEXXY with nearly 20,000 prescribers writing at least one IMVEXXY prescription. Of that, we consider 4,200 health care providers, heavy IMVEXXY writers, which represents 20% of the high-volume VVA writers. Our goal is to expand the depth of writing among these prescribers and grow the overall breadth of regular prescribing among the 20,000 who have written at least one prescription for IMVEXXY.

From an IMVEXXY direct-to-consumer advertising standpoint, we just started in the fourth quarter and anticipate increased awareness in women trying the product during 2020. As a reminder, half of all menopausal women in the U.S. experienced VVA symptoms, but only 9% are treated with the prescription VVA therapy. Since many of these women have been on therapy before, we will also point out the unique patient-centric features of IMVEXXY that we believe will provide a better experience. Our goal is to surpass Premarin Vaginal Cream prescriptions on a monthly basis by year-end. Today, on average, Premarin totals 80,000 prescriptions a month.

Finally, moving forward to BIJUVA on Slide 13, we have a very targeted strategy that we believe supports what is needed to accelerate an important brand. We have seen that BIJUVA is of great interest to the health care professional and the independent community pharmacies that focus on compounding bioidentical hormone. This is why we are committing a menopause specialist sales force for focused promotion of BIJUVA in 2020. We will target existing BIJUVA writers, high writers in the VMS category as well as targeting that overlaps with our existing BIO-IGNITE locations. We believe this approach targets what is needed for BIJUVA to grow today is cost-effective as we are using existing sales resources to divide and conquer across the brand without compromising reach to our most important targets and sets us up for an accelerated growth and a full launch in 2021 after the potential approval of a second lower dose of BIJUVA at the end of 2020.

As a reminder, we previously announced the submission of the BIJUVA 0.5 100-milligram dose, NDA efficacy supplement to the FDA. We expect to be up for approval in November of this year, given the 10-month PDUFA time line. With our focused plan this year, our goal for BIJUVA to exit the year with a loyal base of prescribers, just like we have seen for IMVEXXY. Once that happens, and as we accelerate ANNOVERA and IMVEXXY in 2020, we believe we will be able to unlock additional spend and focus for BIJUVA at the right time in 2021.

As you can see, we have a lot planned for the brands this year with strategies and tactics that we believe will provide the greatest impact and return over 2020. This plan is supported by an incredible team shown on Slide 14 that we have hired over the past 1 to 2 years across marketing, sales, key account management, training and access. They are an incredible team of professionals with deep pharmaceutical experience across large and small companies with a passion for women's health and a strong desire to win. With the strategic plans in place and the talent to execute, we believe we are on the path for significant growth in 2020.

I will now turn the call over to Dan to summarize our financial results.

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Daniel Alan Cartwright, TherapeuticsMD, Inc. - CFO & Treasurer [5]

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Thanks, Dawn. On today's call, I am going to review our 2019 financial performance, which will focus on the trends for the fourth quarter of 2019 compared to the third quarter of 2019.

As a reminder, our fourth quarter and full year 2019 financial results are included in our press release issued today with the full results of our -- in our 2019 10-K to follow. Our fourth quarter 2019 total net revenue from product sales increased 94% to $15.9 million from $8.2 million for the third quarter.

As shown on Slide 16, this beats the upper end of our fourth quarter guidance by $650,000. The company has met or exceeded expectations for the last 3 quarters. Finally, the fourth quarter net revenue of $13.3 million from the sales of FDA-approved products exceeded the debt trigger of $11 million, allowing us to draw the additional $50 million in financing from TPG Sixth Street Partners. We continue to see net revenue increase quarter-over-quarter.

Move to Slide 17. IMVEXXY, net revenue grew 33% to $6.3 million for the fourth quarter over the third quarter. This change was driven by the increase in net revenue per unit. As you can see, IMVEXXY's calculated net revenue per unit increased to $51 per unit versus $35 per unit for the third quarter. The net revenue increase was somewhat offset by volume declines in the IMVEXXY for the quarter. Most of the decline in units occurred in the first half of the quarter, this was due to changes in our cash pay program, and we saw it trend back up in the second half of the quarter with a strong December.

Turn to Slide 18. BIJUVA net revenue was $1.2 million for the fourth quarter of 2019, for the growth of 147% over the third quarter. This was the result of an increase of 37% in the units sold to patients in the fourth quarter over the third quarter. At the same time, BIJUVA's calculated net revenue per unit increased to $56 per unit versus $31 per unit for the third quarter.

Move to Slide 19. ANNOVERA had net revenue of $5.8 million for the fourth quarter of 2019 from sales to wholesalers and pharmacies with an average net revenue per unit of approximately $1,350. Symphony reported unit sales to patients of approximately 1,100 units in the fourth quarter. Given the strong initial demand we experienced from our patients and physicians during our soft launch in conjunction with the full launch of ANNOVERA in the first quarter of 2020, our commercial customers ordered reasonable levels of inventory to ensure adequate supply to meet the anticipated patient demand. According to Symphony, between January 1 and February 7, approximately 1,100 prescriptions have been dispensed by pharmacists to patients.

Turn to Slide 20. As expected, the total operating expenses for the fourth quarter increased compared to the third quarter due to the increase in commercialization expenses for the launches of both IMVEXXY and BIJUVA, and the preparation for the national launch of ANNOVERA. SG&A expenses for the fourth quarter were $52.7 million compared to $45.1 million for the previous quarter.

Turning to the bottom line. Our net loss for the fourth quarter of 2019 was $49.4 million or $0.19 per basic and diluted share, while the net loss for the third quarter of 2019 was $32 million or $0.13 per basic and diluted share, which included license revenue of $15.5 million. Excluding the license revenue, our loss would have been $47.5 million.

On Slide 21, you can see that we ended the year with a cash balance of $160.8 million as of December 31, 2019. Operating cash burn for the fourth quarter was $51 million. This excludes the $20 million payment to the Population Council. Additionally, this week, we received the first $50 million tranche of additional borrowing under our term loan facility with TSSP.

For a look at our 2020 financial guidance, I will turn the call back over to Rob.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [6]

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Thank you, Dan. Turning to Slide 22. During our 2020 budget review, we focused on cutting nonrevenue-generating projects, flattening of the organization, eliminating multiple clinical development roles and pause pipeline development projects. The goal of these cost containment measures was to reinvest the savings into the 2020 marketing initiatives Dawn just discussed.

Turning to our financial guidance on Slide 23. Now that you've heard about our sales and marketing plans for 2020, I'd like to provide some color about how we see the year unfolding from a net revenue standpoint. We project our net revenue for 2020 to be between $90 million to $110 million. We expect net product revenue during the second half of the year will be significantly larger than the first half, with the majority coming from ANNOVERA and IMVEXXY. This year is shaping up to be a transformative year for TXMD, creating a significant revenue inflection point for our shareholders.

Further, we anticipate high deductible on annual co-pay resets to impact Q1 revenue for the menopause franchise and expect Q1 revenue to come in below Q4 revenue for 2019. This is a Q1 industry-wide headwind built into our 2020 annual financial guidance.

Looking forward for the rest of 2020, let's start with ANNOVERA on Slide 24. The full launch of ANNOVERA for TXMD's sales force will begin on March 1. In addition, we have secured new partnerships that allow us to enter into new markets that create additional revenue opportunity outside of our direct sales and marketing efforts. For IMVEXXY, our goal is to pass the VVA brand leader, Premarin Vaginal Cream, on a monthly prescription basis by the end of 2020.

Lastly, we believe BIJUVA menopause specialist sales force will provide the right focus to build the foundation and allow us to scale BIJUVA in the coming years. Our goal is to become EBITDA positive business in 2021. We believe the investments that we're making in 2020 will drive significant net revenue growth to get us one step closer to that goal as we build long-term shareholder value. In summary, we will focus on executing our plans to drive revenue growth. We see tremendous opportunity to extend our reach among prescribers and women through focused commercial execution and incremental investment in sales and marketing to maximize the potential of our products. We're well positioned to address the unique changes and challenges women experience throughout the various stages of their lives with a therapeutic focus in reproductive health and menopause management. We're committed to becoming a leader in women's health, and as we see so many unmet needs that we look forward to meeting in the future.

And lastly, I'd like to thank all of our employees and our shareholders for their continued commitment, dedication and support, last year as we execute on our goals in 2020.

I'd now like to turn the call over for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Louise Chen with Cantor.

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Louise Alesandra Chen, Cantor Fitzgerald & Co., Research Division - Senior Research Analyst & MD [2]

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Congratulations on the quarter. So my 2 questions for you are, first, on the ANNOVERA stocking, is there any way to quantify that and think about the drawdown? I know you gave some metrics in the call, but just any more color would be very helpful there. And then in terms of the $90 million to $110 million sales guidance for 2020, is there any way to break that out between the 3 or 4 products that you have?

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [3]

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Louise, it's Dawn. I'll take the first question. So our goal in -- was to sell 2,800 units for ANNOVERA, and so we actually ended up selling more because the demand from our customer, given the uniqueness of the product as well, launch mode was stronger. And really, which was warranted because what we're seeing in the first 5 weeks of 2020 is that we filled over 1,000 prescriptions. So we're seeing that ramp coming.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [4]

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And the full launch will be on March 1. And in Q4, we had about 18% of our sales force promoting with some managers in the BIO-IGNITE team of about 12. So looks good going forward. As far as the guidance of $90 million to $110 million, no, we did not break it out by product purposely. We did talk a little bit about weighting. ANNOVERA and IMVEXXY will be the heavily weighted -- more heavily weighted majority here. And then, obviously, it's heavily -- more heavily weighted to the back half of the year. But our goal this year is to put the revenue up, get that done. That's our only goal. And we'll get that done. And not to worry about where it's coming from, right? We also did, by the way, mention that prenatals, we expect to continue to decline. Just to be clear.

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Operator [5]

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Our next question comes from Dana Flanders with Guggenheim.

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Dana Carver Flanders, Guggenheim Securities, LLC, Research Division - Senior Analyst [6]

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My first one is just on how you expect net price to trend throughout 2020 for IMVEXXY and BIJUVA, maybe you could make some comments on that. I think you had previously had a, kind of, 3Q target for IMVEXXY. So just wondering if that still holds? And then my second one, just a bigger picture question on guidance. I know you've taken a conservative stance over the past couple of quarters. So can you just help us understand some of the bigger pushes and pulls to revenue next year? And how you've accounted for them in guidance? I know that you're still waiting for more Part D coverage on IMVEXXY. And how you expect BIO-IGNITE to ramp and how you factored in some of those things? And I know there are others that I'm missing, but maybe just some comments on that as well?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [7]

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Sure. So with gross to nets, Dana, so with IMVEXXY, I guess, the question you're really asking, I think, and if this is not the right answer certainly, tell me. Do we still think we can get to that $106, $107, a little bit above $100 number this year for IMVEXXY? So yes, we think it's absolutely attainable. The -- obviously, the more payers we get on, the faster we get there. And then it is optimizing or normalizing your net revenue for that product. And the 3 levers you have there is, one, co-pay optimization with co-pay cards. Number two, your distribution costs, getting that from 12% down. We believe we get down a couple of percent this year, 3% to 5% is our goal. And then the last piece is to start up versus maintenance mix, right? That brings the ASP up as a direct correlation to our nets there to stop direct to the bottom line of the net of the product. So yes, we still think that is our goal for the year depending on how we want to pace the scaling of the launch. Because when you pull those levers, it obviously has an effect in other areas. But we still think that's obtainable.

As far as BIJUVA goes, I know we came in $6, $10 above what we thought we would on the nets for the quarter. And I would extrapolate this to ANNOVERA as well. I mean I know the nets are higher there at 1,350. So look, IMVEXXY having an overweighted Part D population within our user base, prescribe base -- prescriber base and patient base. And the Part D long process with payers has been a drawn out sort of effect, right, with the pricing. And I hope you see with BIJUVA and ANNOVERA, the nets have been higher than we had planned faster. And there is a lot of noise, though, in the first couple of quarters of a launch for those two.

To give you a recap, BIJUVA has been on the market for 6, 7 months, still some noise for the next quarter, maybe 2, and then ANNOVERA, obviously, is in the fourth month of its -- if it's not even fully launched process yet, so there's some noise there.

A lot of new distributors, new partners, online partners that are taking this out to market. That will all clear up in the next quarter or two. And I think we'll get in in Q3, Q4 at the end of this year to a stride where we'll be able to give very clear guidance on that. But I would expect from today forward, the expectations we set with the street on all 3 of these drugs to hold. Does that answer your question?

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Dana Carver Flanders, Guggenheim Securities, LLC, Research Division - Senior Analyst [8]

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Yes, it does. And then just my second one on how you're viewing kind of the pushes and pulls to revenue guidance and how you've accounted for them in guidance this year?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [9]

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Yes, so I'll give a piece of that and then turn it over to Dawn. So the Part D piece of that, which I think you touched on, we calculated -- there's 3 or 4 large Part D payers that have not made a decision for the 2020 year. We planned on -- in the guidance of getting at least one of those. We do think we'll get 2 or 3 of those, as we said, going forward, once they do make a decision, that's most, not all. So it is calculated with only a single Part D payer in there. Dawn?

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [10]

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Sure. And since Rob covered the payer piece, what I'll cover is sort of the major shift that we have going on, which is the reorganization of the sales force, which we will complete on March 1. Once that's behind us, we would expect to see sort of the increase to start as we get focused on each of the brands for the sales force. In addition, what you're going to see in March is increased spend with IMVEXXY and ANNOVERA on consumer, which will also increase the trajectory of those brands.

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Operator [11]

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Our next question comes from Annabel Samimy with Stifel.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [12]

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I have several, actually. Just going back to ANNOVERA and, I guess, the buy-in from some of your partners, I guess, to what extent are these large contracts that could result in some wonky trends for the first quarter. Is the demand there -- sufficient there to allow that product to continue to grow on a steady trajectory every quarter this year as opposed to IMVEXXY where there might be some high deductible plan issues? And to what extent are these new sources of distribution that you have reported by third-party trackers like PillPack and Plush and those, like how can we get a sense of what the true demand is?

And then for IMVEXXY, I'm supposing that your guidance is based on you reaching the 80,000 prescriptions per month by the end of the year. I guess based on some of the Rx trends we saw, I guess, the first month or first weeks of the year, how do you get there, how do you feel confident that you're going to get there? And then finally, just as you talk about the expenses going forward, obviously, you're going into a full launch of ANNOVERA, you're going to have heavy marketing expenses for IMVEXXY. How much are we going to see an increase in OpEx? And how much of your declines in R&D in the clinical side, offset by those increases or vice versa?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [13]

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So Annabel, I'll take a couple and give a bunch of these to Dawn as well. So what we saw in the first 5 weeks of this year was more than we saw for ANNOVERA from a demand standpoint for the entire quarter of Q4. So there's definitely some good solid demand pulling through. And it's not even fully launched yet and not marketed really at all. It's just a limited sales force effort out there. So we expect that to continue to grow.

As far as the question of what to expect going into new markets we don't go into with the menopause franchise or working with partners online, which you can't really do with the menopause franchise either, like you talked about, we can't -- that certainly will be a synergistic, additional revenue center outside of our own direct efforts. But we -- it's early. It takes these online partners, which we currently have three, expect us to increase that as we go forward. And expect a quarter or 2 for them to get up to speed. So again, the Q3, Q4, I think we'll be able to lay down some clarity. There's a lot of noise in the system with a new product that's going out to new markets with new distributors. But look, we feel confident that the net margins and adjudication rate will stay really high. And that it's only going to grow. And our own efforts, we've seen more demand in the first 5 weeks of Q1 than we saw for ANNOVERA in all Q4. Dawn, anything you want to add?

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [14]

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No, except for the fact that we're also launching the full sales force with the new campaigns and consumer remarks so that demand should continue. I think the next question was on IMVEXXY and our confidence to why we feel confident on hitting the 80,000 month by year-end. So certainly, we did see that slowdown, right? That slowdown was due to the co-pay program change as well as some of this reorganization that we're talking about, which causes some disruption. But again, as of March 1, that is behind us. The marketing plans kick in, and we're also going to be focusing on those doctors that I explained that are already writing some IMVEXXY, and we're going to be able to have that heavier focus across both sales forces that should deliver that trajectory.

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Annabel Eva Samimy, Stifel, Nicolaus & Company, Incorporated, Research Division - MD [15]

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Okay. And then maybe...

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [16]

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So we see the growth coming right back. Yes, sure, sure. So we did, as we talked about, a good amount of cost containment, pipeline pauses, reorganizing the entire -- throughout all of '19, reorganizing this entire organization from a clinically focused place to a commercially centered pharmaceutical sales and marketing company. So we've been able to cut some costs there. We think that should leave us in very good shape with the cost containment measures to fund the marketing plans. So we'll continue to evaluate that going forward. But as of right now, we think we're in pretty good shape.

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Operator [17]

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Our next question comes from Larry Solow with CJS.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [18]

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Just a few follow-ups. Most of my questions were answered. On the operating expenses side, just a quick follow-up on that. So it sounds like SG&A will trend somewhat upward, but the S going higher, the G&A going lower, but I guess, S a little bit more than that. Is that fair to say?

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Daniel Alan Cartwright, TherapeuticsMD, Inc. - CFO & Treasurer [19]

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Yes, this is Dan. I think that's a fair assessment.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [20]

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Okay. And then a question for Rob, maybe just a little higher level. Clearly, it seems like to me a little bit more of a pivot towards ANNOVERA, a little more focus on that. Do you worry about -- do you run the risk of sales guys and gals having just more incentive to sell the larger product and maybe the IMVEXXY and later on BIJUVA sort of get lost in the shuffle there a little bit?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [21]

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Yes. That's a great point because there's not a lot of companies that do multiple launches at once. Right? And I'll let Dawn put a couple of cents in here as well because she's really the expert here. But if you look at the team we brought on specifically, Chris Gish, he is a master, very successful, if you look up his background there, at launching multiple drugs at once. And the way Dawn and team have set up incentive comp certainly, there's going to be first and second position. And that's the reason we can't have all of the reps, pushing all 3 drugs at once. We want organized, focused execution that's absolutely flawless, and we have the team to do it. So I -- as we said earlier, the menopause sales force will really be pushing BIJUVA and laying the foundation for when that second dose comes through, in a future year, when we do a full launch of that to have everything in place to get rapid uptake.

As far as the rest of the organization, the other 150 reps, it's ANNOVERA first, IMVEXXY second, and the beauty of that is when IMVEXXY does finally slow down, it's still a menopause message, you could swap BIJUVA right in and go naturally with it. Dawn?

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [22]

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Yes, just to add to that, Larry. So I think with the way we've designed the sales force, it's going to be incredibly effective. So you're right, people are going to be excited about selling ANNOVERA. We know that. It's a fun product to sell. Doctors are really interested. But the reality is every sales representative will be selling IMVEXXY and each sales representative out there already has a base of business for that product. So we're trying to do something different there, which is just get that regular prescribing going. And then BIJUVA, we needed to give it a focus in the right places. And for those folks, the 30 to 40, Rob just mentioned, they're going to have it in the first position. So I feel really good about the fact that every product, as I said at the beginning, is going to get its spotlight, and we've done it in a way that I think is also incredibly cost-effective.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [23]

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Okay. And then on the BIJUVA itself, it seems to me like a little bit pushout of expectations more into '21. Is there -- what are some of the challenges? Is it more of a missionary sale there? And will the lower dose be a big driver for growth in '21?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [24]

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It's really a focus on EBITDA breakeven, right? So ANNOVERA has by far the highest nets, and then from a scale standpoint and a presence, we're in a place where we have great brand recognition with IMVEXXY with just a sales effort, very little marketing spend there so far. So getting -- because, look, we don't want any more dilution, and we're not a cash flow positive company yet. So to get those two going, the marketing dollars will go way further with brand recognition with IMVEXXY than BIJUVA, and then, obviously, the nets are so much higher with lack of co-pay for most women with ANNOVERA. That's just the quickest way to profitability. It's only about that.

Now if those things change, we don't expect them to. But if they do, we instantly could swap out IMVEXXY for BIJUVA and get that menopause message down to hot flashes versus VVA. So it's really well aligned. The way Dawn and team did here is great.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [25]

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Okay. And just last question, just a confirmatory one. On the IMVEXXY on the Part D, so you're at just below 30% today. And you say 70% by year-end. Does that -- so by year-end '20, is that for coverage in '21? In other words, if you have several hang -- ones that haven't decided on yet, the bridge from 30% to 70%, is that all based on what you would hear from in the next few weeks? Or is that also including what you'll hear from at the end of the year for '21?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [26]

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Got you. So you mean the 30%. So within invested...

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Lawrence Scott Solow, CJS Securities, Inc. - MD [27]

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In other words, going from 30% to 70%. Right, right. What's that bridge? Because I assume most providers will make decisions for '20 within the next few weeks, right?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [28]

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Right. I just wanted to be clear that the 30% you're talking about is the Part D coverage.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [29]

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Correct, correct.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [30]

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Correct. Okay because commercial is 70% and then Part D is 30%. We have all of the top 10 for commercial, right? On the Part D side, to your point, we have 3 of the top 7 and 4 have not made decisions for this class. Yes, so let me walk you through those. So each one is pretty clear, right? You have Humana that's going through the process. They just have not completed their process yet. It's a good portion of that market. It's equal to United. It's about 20%. Then you go down to WellCare. WellCare is being acquired as part of the divestiture with the CVS acquisition. That's going to Centene. Due to that, it's frozen. From what I understand that's going to close late this month, early next month, and we think probably moving that forward quickly there. And then, ESI. ESI is also doing some PBM alignment with other PBMs and taking over contracts for other ones. And we believe their decision will be by 04,01, April 1, so it will be this quarter. And then CVS, we just don't know with CVS, right? I'll give you a lot of color and clarity on the other 3. CVS will make their mind up when they want.

So we expect decisions of at least 2 of those 3 here, all of which are very large, very large this quarter. Could one drag into April? Yes, but we don't expect it. And then CVS, we just don't have any time label on.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [31]

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Got it. So that target coverage, then the number of 70%. That includes you getting some of these larger ones, and then that's actually more like a midyear type of thing then, right, in theory?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [32]

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So if we got 3 of those 4, we would be well above 70%, I believe, 80%. I don't have the numbers in front of me, I'm going from memory, but I believe it would be about 80% of Part D. By the way, if we just got two, it would -- it actually would probably be the best covered or very close to the best covered product in the class.

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Lawrence Scott Solow, CJS Securities, Inc. - MD [33]

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Got you.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [34]

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With just that 2 out of 4. Got it?

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Lawrence Scott Solow, CJS Securities, Inc. - MD [35]

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Yes, appreciate that.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [36]

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Just to be clear, Larry, we're done on the commercial side. So we got the last two. Like we said, we have all 10 of the top 10, plus a number of regional players behind it.

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Operator [37]

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Our next question comes from Ken Cacciatore with Cowen and Company.

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [38]

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Congratulations on all the progress. A question on ANNOVERA first. Just wondering what percentage of patients do you think will eventually be using this product for continuous use. And you talked about it briefly, Dawn, but maybe expand on the patient and the clinician wanting to have a continuous use kind of an IUD substitution. And with that, now that you've had a little bit of experience as we try to do some out-year modeling, can you give us a sense of maybe where peak sales could go for this product and why? And then also let us know the IP situation.

Next question is on -- you've been asked a couple times on costs. Just wondering, and I'll ask more specifically, is Q4 a good run rate to use? Just want to drill down, so we can have our models right. And then lastly, on the covenants, just wondering if you could remind us the cash minimums you need to maintain and some of the maybe revenue covenants as well.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [39]

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Sure. Ken, I'm going to take a piece of this, then hand it to Dawn and then give it to Dan for the cash piece. So -- and the reason I'm taking it, just a sensitive area on the off-label use, right, obviously, we, as a company, will never promote off-label, continuous use is off-label for ANNOVERA, and we don't allow our employees or anyone associated with the company to ever promote off-label. The percent of patients using it continuously, I don't know for our products yet. But what I can tell you is for other birth control products there is a ton of off-label use. With ours, it's just way too early to know. And it's something, to be honest with you, we don't ask because we don't want to know. We don't want to go down that road, right? I wish I could give you more information there, but that's kind of the -- a lot of legalities right there. I'll turn it over to Dawn.

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [40]

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And Ken, maybe I'll bridge too. So we -- the language we use is long-lasting, right? Because the product does work in the patients control for a year, and that's really where the interest comes. So it's not necessarily on continuous use, right? That's up to the doctor and how they prescribe for their patients. What it is, is that it's the first long-lasting option that doesn't require a procedure. And there's a lot of interest in that because there are so many patient types that a doctor can see this suited for. And so what you hear from physicians that are, hey, there are a number of patients that I know want this type of long-lasting option because they travel, or they don't have a traditional schedule or the pill is not working for them anymore. And because of that, they know that this is an option that's great for them.

The other piece is that there are many people like that just are in situations like overseas with the military, and that's why we've gotten on formulary so quickly that this is good for as well. And so what we're seeing is a lot of interest based on that long-lasting option.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [41]

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So Ken, to peak, as you know, look, this product isn't for everybody, right? But the market is so big. NuvaRing has got 6% market share, with about 900,000 patients annually using it. IUDs, the growing segment significantly. And then simple things like orals for people that are in the military, that works really easy right now, ANNOVERA is such a better fit for young college kids, universities. So what we see is getting a cross-section of all of that. At 1,350 nets, if we just got 1% to 2% of the market, that'd be a half to $500 million to $1 billion in net revenue to the company. So it's exciting. It's large. Do I think this drug and this team could get to 1%? Absolutely. Do I think they can get to 2%? I think we got a good shot at it, right? So I think the potential here is significant, which kind of goes to your next question on IP.

So you know, the NCE status of this goes out for, I believe, another 3.5, 4 years. So we've got good protection in the near term. We do have a number of patents under development which we believe will extend that out a good amount of time and is a very high priority for our IP team. So we feel very confident there. But in addition to that, if you look at the generic pathway, and what it took to get a NuvaRing product approved that was off-patent for a long, long time, right? Just to get a 3-week PK profile done, it took a long, long time and a lot of resources. And as you know, there were 10 companies chasing it to maybe 2 or 3 might come to market.

So if you take that and put it into a 13 cycle or a 1-year trial, where you're getting into 1,000 patients on it, wash out and then 1,000 patients to go into a potential generic and try to match those 13 cycles of PK, I think that is a very large, very, very long and very expensive undertaking. So there's going to have to be a lot of revenue in place for someone to come after it, right?

Take NuvaRing's, basically, experience and multiply it times 13 cycles, right? 3 weeks to 52 weeks. So anyway, so that's the take there. We feel good, really good about our exclusivity position here and that we should be in great shape, given all the hurdles in place to try to get to a generic position on ANNOVERA.

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Daniel Alan Cartwright, TherapeuticsMD, Inc. - CFO & Treasurer [42]

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And Ken, this is Dan Cartwright. You had asked about fourth quarter expenses compared to our expenses going forward. As Rob discussed, we went through an extensive process this year, and we worked what we were going to put together for 2020 as far as expenses, and we were able to reallocate some resources from things like admin and move it over to March sales and marketing. And I think with that put in place we're going to go into '20, looking at expenses, maybe being a little higher than they were in the fourth quarter, but not significantly higher. Plus, we'll have the additional revenue run that we'll see from what we threw out there as our $90 million to $110 million goal for 2020 as far as revenue.

As far as your other question on cash requirement. Our cash requirement since we drew down the other $50 million from TSPP is now at $60 million for loan covenants. And then the last thing you asked about was -- you asked specifically about the loan covenant. Was there something else you're looking for, Ken?

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Kenneth Charles Cacciatore, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [43]

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Just on revenue covenants, if there's any.

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Daniel Alan Cartwright, TherapeuticsMD, Inc. - CFO & Treasurer [44]

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Yes, we do have revenue covenants. They're not disclosed out there. But when we put together our goals and our revenue for 2020, those were certainly considered when we came up with our $90 million to $110 million range. We thought we had those more than covered with that range in revenue.

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Operator [45]

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Our next question comes from Douglas Tsao with H.C. Wainwright.

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Douglas Dylan Tsao, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [46]

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Rob, just in terms of IMVEXXY and the Medicare Part D coverage decisions that seem to be taking a little longer than normal. I think you indicated -- or you've indicated that it's a sort of -- they're making decisions on the class. Do you have an understanding, a sense of what it is about the class and why it is so protracted?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [47]

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Yes. It's just a low spend, not a material impact on their P&L either way. So it's just not a high priority, unfortunately. It is for us, obviously. But realize, the guidance we put out there, we'll get there without any additional decisions, right? We put in one additional Part D player. I think we can get there without any. So I think we'll be in great shape either way. And as I said earlier, they will make decisions eventually. We are bullish that 2 or 3 will make a decision this quarter. We feel good about it. And we should do well, we should do well. But to answer your question, Doug, it's just a matter of the spend is not material on their P&Ls.

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Douglas Dylan Tsao, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [48]

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Okay. And then just in terms of the sales force realignment, was this really something done proactively? Or was this something that you sort of sensed from sort of how the salesforce was -- feedback from the sales force over the last several months promoting the portfolio?

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [49]

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Yes. No, thanks for the question, Doug. So it certainly was proactive, given that we were launching 3 drugs at once. We recognize that in order to give each of the brands what is needed that we needed to split in this way. And given we could figure out a solution that gave us the reach and depth that we needed, we've put it into place and we did it in line with the full launch of ANNOVERA. So we'll be at the right time.

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Operator [50]

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And our last question comes from Ahu Demir with NOBLE Capital.

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Ahu Demir, NOBLE Capital Markets, Inc., Research Division - Biotechnology Research Analyst [51]

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Congratulations. So a few questions on enterprise for ANNOVERA, based on early patient data, do you have any real-time data on what population uses, what age group uses the product and you can move more targeted for the full launch?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [52]

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For ANNOVERA?

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Ahu Demir, NOBLE Capital Markets, Inc., Research Division - Biotechnology Research Analyst [53]

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Yes.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [54]

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So I don't yet. Again, it's really, really early, but we have word of mouth, so to speak. And remember, the co-pay cards aren't used here. So for the most part, it has very, very low usage. So we don't get that real-time patient data when they opt in, like with the menopausal products. We could see the menopausal products who, what, where and when, right real-time, within 24 hours of a script being filled because there's practically no co-pay with this product. With a lot of -- say, most payers, we don't -- you see the co-pay cards being used. So we don't have that data yet. But what I can tell you is the Population Council did a full 908 women study, I believe, for a full year before they even did their Phase III clinical studies, that's peer reviewed and published that can give you a really good demographic slice at different age points and what they liked and didn't like about the product. It's a really well-done study, and most contraceptive products don't get the opportunity to come to market with that much robust data, which Dawn is leveraging.

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [55]

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Yes. And I think the only thing to add there is, and Rob is right, it would be qualitative at this point, not quantitative. We're just getting started. But don't necessarily think about it in terms of age demographic. Think about it in terms of life situation. And that's where the doctors grab on and that's what we know about women, if they're in a particular situation, they don't want a procedure. This is a perfect product for them.

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Ahu Demir, NOBLE Capital Markets, Inc., Research Division - Biotechnology Research Analyst [56]

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And I think...

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [57]

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To your point...

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Ahu Demir, NOBLE Capital Markets, Inc., Research Division - Biotechnology Research Analyst [58]

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Yes, Robert?

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [59]

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I was going to say, no, we weren't in the state that we want. So we'll -- more to come here, right?

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Ahu Demir, NOBLE Capital Markets, Inc., Research Division - Biotechnology Research Analyst [60]

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Okay. Sounds great. And for IMVEXXY and BIJUVA, for IMVEXXY we don't expect any additional coverage or market driver in addition to Part D. And when it comes to BIJUVA, what would be the expectations with the BIO-IGNITE program being active on the product? I know it's not the major revenue driver for this year.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [61]

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Yes. Well, for that sales team, it will be the main revenue driver and IMVEXXY will be #2. But if you look, there's a slide -- a payer slide, I don't have it in front of me. But what we did, to answer your question, is we do expect to get additional payer coverage for all of the products this year. I mean the idea is that, look, we're above 70% for our 2 main products. So we're ready to go. We have all we need to meet our numbers this year, right? But we do expect to continue to grow that coverage for all 3 products moving forward. The only one we don't expect to expand on the coverage side is prenatals.

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Dawn Halkuff, TherapeuticsMD, Inc. - Chief Commercial Officer [62]

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Yes. And I think to your other question, so for IMVEXXY, the other drivers would obviously be the demand we create in terms of consumer marketing that we're putting out there. As far as BIJUVA, we think that with the menopause specialist sales force that we're well positioned to grow this product appropriately. And BIO-IGNITE will also continue to grow. So that team is going to be working really closely together. We still see it to be a driver, but we're putting the resources in the appropriate places.

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Operator [63]

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And I would now like to turn the call back over to Rob Finizio, CEO, for any further remarks.

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Robert G. Finizio, TherapeuticsMD, Inc. - Co-Founder, CEO & Director [64]

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Great. I want to thank everybody for a great quarter and a great year-end and look forward to speaking with you next quarter. Thank you.

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Operator [65]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.