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Agile Therapeutics (AGRX) Q1 2021 Earnings Call Transcript




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Agile Therapeutics (AGRX) Q1 2021 Earnings Call Transcript



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© The Motley Fool
Logo of jester cap with thought bubble.

Agile Therapeutics (NASDAQ: AGRX)

Q1 2021 Earnings Call

May 04, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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Good afternoon and welcome to the Agile Therapeutics first-quarter 2021 financial results conference call. Please note today’s event is being recorded. I would like to turn the conference over to Matt Riley, head of investor relations.

Matt RileyHead of Investor Relations

Hello, everyone, and welcome to today’s conference call to discuss our first-quarter 2021 financial results and corporate update. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations, including statements concerning our financial outlook for the future, management’s expectations for our future financial and operational performance, our business strategy, our assessment of the combined hormonal contraceptive market, and the potential market share for Twirla, among other statements regarding our plans prospects and expectations. Such statements represent our judgment 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. Please refer to our filings with the SEC which are available through the Investor Relations section of our website for information concerning risk factors that may affect the company.

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 are Al Altomari, Agile Therapeutics’ chairman and chief executive officer; and Dennis Reilly, chief financial officer. Following our prepared remarks, we’ll open the call to questions.

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Let me now turn the call over to Al.

Al AltomariChairman and Chief Executive Officer

Thank you very much, Matt. Good afternoon and welcome everyone to our first quarter of 2021 conference call. To kick off the call, I’d like to highlight what we believe are the four most significant takeaways from today’s update. Number one, I want to remind everybody, we began our initial commercial shipments of Twirla to the wholesalers in late December 2020.

As the wholesalers work down their inventory, we anticipate product revenue will more closely reflect strip demand growth at the retail level. Number two, our sales force received their samples also in late December and commenced distributing samples to healthcare providers or HCPs in the first quarter of 2021. While samples are not reflected in the total prescriptions for the TRx data, we believe samples often lead to HCPs writing future prescriptions. Number three, we will continue to invest in growing Twirla and expect our operating expenses in the second quarter of 2021 to be higher, reflecting increased spending on brand marketing and product sampling.

Number four, we are excited about the recent growth in the number of HCP writers and the resulting TRx growth. And we believe the brand is laying the foundation for revenue growth into 2021. To that end, I want to spend our time today walking through Twirla’s progress to date and why we are so encouraged. I will also discuss updates on our marketing efforts to increase awareness of Twirla.

Finally, we’ll provide an update on our financial performance. We’re using slides this quarter to guide and supplement today’s conversation and you’ll hear me refer to these as we progress through the updates. You can find this presentation on our website. Now, let’s talk about Twirla’s performance.

First, I’d like to give an update on Twirla and our performance to date, our first full quarter of commercial launch. As I mentioned, we’ve been sampling in the first quarter and we believe our sampling efforts are important to driving HCP and patient awareness of Twirla. The first several weeks of quarter one included an intensive sampling. And in the weeks that followed, we’ve seen steady trends of increasing scripts, refills, and awareness of our product.

On Slide 4 of the deck which outlines a four-week rolling average of the first quarter, you’ll be able to see the trend quite clearly and we’re thrilled to see the growth on all these key performance metrics. We believe this is a sign of a healthy brand and have seen these trends continued into the early part of the second quarter. As we progressed through 2021, as we did so in our earnings press release, we expect to update you on a quarterly basis rather than providing such granular detail as shown on Slide 4. Although we thought this data would be useful for the purposes of providing our own initial insights into the first quarter of our launch.

Our growth in total prescriptions was driven by an increased number of prescribers and a growing refill rate. The graph on Slide 5 showcases our monthly Rx data. As you can see, increasing the number of TRx’s from January onwards and increasing refill trend as well. We expect this uptake will continue as we move into the second quarter and beyond.

We’re pleased with the progress to date on the growth of our prescriber base. When we last spoke, we told you that we would continue to focus on educating and expanding our prescriber base as we seek to grow our brand. I’m excited to update you on this progress of what we’re seeing. During the first quarter, the number of prescribers has increased dramatically.

As of March 31, we had more than 855 writers and the number has continued to increase into the second quarter to over 1,200 prescribers. You can see the prescriber growth on Slide 6. The growth in the number of prescribers writing TRX’s for Twirla has continued to steadily grow and increase in the momentum at the TRx level. Importantly, the number of TRx’s each prescriber is writing is also growing, and we’re seeing higher refill rates, and approximately 25% of our units dispersed at pharmacies are now refills.

Our sales team of 65 sales representatives and eight virtual sales specialists continued to engage with both in-person and virtual visits with prescribers. With vaccination rates continuing to increase, we anticipate having the ability to meet in-person with a growing number of practices, which we expect to enable us to make continued inroads in complement with our virtual sales efforts. I also want to comment on our efforts to expand our distribution network. On our last call, we’ve discussed a new arrangement with Sterling specialty pharmacy.

Today, we can report this relationship, while its early stage, has been a very productive one. We’re encouraged by the efforts to date and believe this collaboration will support our continued sales uptake of Twirla. While the agreement’s only been active for one month, we see a number of patients and prescribers continuing to grow. We also recognize the increasing role of telemedicine in facilitating access when we continue to evaluate this channel as we move forward with Twirla.

Now, in the managed care. We remain focused on increasing access to Twirla through a variety of efforts, including the focus on expanding access and reimbursement coverage for Twirla across managed care and government insurance plans. And particularly, we made a lot of progress in obtaining Medicaid coverage for Twirla. Currently, Twirla is covered with no prior authorizations in 20 states, and we’re expecting coverage in Texas in May of 2021.

The Medicaid market represents a large number of combined hormonal contraceptives or CHC users. Medicaid volume for oral contraception total prescriptions in 2020 was nearly 8 million. It’s worth noting that we believe roughly one-third of business of the other patches comes from Medicaid. We’re encouraged by this trend and view this as another source of ongoing market growth for Twirla.

We remain committed to maximizing access for Twirla for all women interested in using our product. Now, I’d like to turn to our marketing update. I want to spend some time on the work we’ve been doing to increase awareness of Twirla. If you’ve been following along with the deck, I’m now on Slide 7.

We focused on reaching HCPs and consumers alike through our branded and on branding marketing efforts. Let me walk through some of our efforts this quarter. For the I’m So Done unbranded campaign, our efforts continue. Last quarter, we told you we were the first unbranded contraceptive campaign to launch on TikTok.

This was very positive for us, driving increased visits on our unbranded website. We believe this is a strong indication of the interest and underlying need for birth control education. We’re also leveraging I’m So Done to drive awareness of the birth control category. And now, we’re focused on driving Twirla consideration and trial among consumers.

This leads us into our branded Twirla efforts. We believe that a robust brand marketing effort is important to drive awareness and trial of Twirla. Our strategy is focused on reaching women with a multi-channel creative campaign that positions Twirla as the first and only weekly contraceptive patch that delivers a low dose of estrogen and which meets women at key moments in their day to support engagement with our brands. With this in mind, we’re extending our digital reach by advertising on dating apps which include Tinder and OkCupid.

Over 29 million women leverage dating apps and the user base skews to millennials and Gen Z, both of which coincide for the Twirla market segment. Moreover, we expect to begin advertising on Spotify which has a monthly user base of approximately 22 million U.S. women between the ages of 18 and 34. The key takeaway here is that we’re strategically rolling out more and more branded consumer marketing communications and resources as we simultaneously increase HCP awareness.

We expect a stronger incremental branded consumer investment to continue over the quarter and into the quarters throughout 2021, and we look forward to providing you additional updates. Before handing over the microphone to Dennis, I’d like to reiterate our commitment of building a robust women’s healthcare business. We believe this — that the first step of achieving this is through the growth of Twirla. I’ll now turn over the call to Dennis Reilly, our chief financial officer, and he’ll provide an overview of our financial results and our business update.

Dennis?

Dennis ReillyChief Financial Officer

Thank you, Al, and everyone for joining us today. As Al commented, we are excited about the growth potential of our business and I’d like to provide you with more clarity around the phasing of our growth for this year, particularly what we experienced in the first quarter from a financial perspective, A bit more detail on how Twirla’s performance has been trending year to date and some general parameters on how to think about our results for the full year. If you’re following along in the deck, I’m referring to Slide 8. As Al mentioned, we closed out December 2020 with the initial stocking of Twirla.

This represented shipments of approximately 6,500 units of Twirla into our wholesalers and resulted in nearly $750,000 in net product sales revenue in the fourth quarter of 2020. Wholesalers needed to work down these inventory levels. And as a result, we realized $116,000 in net product sales revenue for the first quarter of 2021. The rate of inventory depletion came broadly in line with our expectation and we expect that wholesaler restocking will likely be reflected in our second-quarter 2021 results.

We’re encouraged by the progress of the sell-through of inventory for wholesalers into the market. And as Al said, in the momentum, we are seeing in prescription growth, we believe now that our wholesalers have less than 30 days of inventory on hand based on our current estimated demand levels. Therefore, beginning later in the second quarter of 2021 and throughout the second half of the year, we anticipate our product sales revenue will track closely to the increasing script demand, and wholesaler restocking should more closely reflect retail sales. This aligns with our initial full-year expectations for Twirla which was based on the assumptions that sales growth would increase in 2021 as product samples are worked through, our prescriber base expands, patient awareness of Twirla increases, refills begin to occur, and overall, we’ve gained traction in the CHC market.

Regarding our quarterly costs, our cost of product revenue for Q1 2021 was $1.2 million. This included expenses supporting our manufacturing and distribution efforts, as well as personnel costs and $500,000 of non-cash depreciation expense. We expect these relatively fixed costs will become less significant as a percentage of sales as volume increases. There’s no direct cost of product revenue during the three months ended March 31, as all of the product that we sold was validation inventory that was previously expensed as R&D in the fourth quarter of 2020.

We expect all this validation inventory to be utilized in 2021. Our operating expenses were $15.2 million in Q1 2021, versus $7.6 million in the same period a year ago. We anticipate our second-quarter operating expenses to be $3 million to $5 million higher, or approximately $18 million to $20 million, reflecting increased commercial costs from product samples and spending on branded marketing. Our R&D expenses were approximately $2.1 million in the first quarter of 2021, compared to $3.2 million in the same period a year ago.

The decrease was primarily attributable to the absence of 2020 pre-validation manufacturing cost for commercial manufacturing Twirla by Corium, our contract manufacturer, offset in part by higher clinical development and personnel-related expenses. Selling and marketing expenses were $9.2 million, compared to $1.7 million in the same period a year ago. This increase in period-over-period selling and marketing expenses was due to higher costs associated with the activities for Twirla, including brand building and advocacy, and the development of the company’s contract sales force. G&A expenses totaled $3.9 million, compared to $2.7 million in the same quarter a year ago, reflecting higher personnel costs and professional fees to support of the product launching commercial activities, as well as an increase in stock compensation expense.

We closed out the first quarter with a net loss of $17.1 million or $0.20 a share, compared to a net loss of $7.9 million or $0.10 per share for the comparable period in 2020. As of March 31, 2021, we had cash, cash equivalents, and marketable securities of $40.1 million, compared to $54.5 million of cash and cash equivalents as of year-end 2020. As a reminder, we have $25 million of capital potentially available through our loan facility with Perceptive Advisors, including a tranche of $15 million available in 2021 and another tranche of $10 million which will be available through June of ’22, both are contingent on achieving a predetermined revenue target. We will continue to monitor our spending closely and if we need to, we can modify our sales and marketing expense.

Additionally, we have the potential to access additional capital through our existing at-the-market arrangement under which we can sell up to an aggregate of $50 million in gross proceeds through the sale of shares of common stock. Our team continues to be excited for what lies ahead. We believe we have established and remain encouraged by the continued momentum for Twirla. We remain focused on maintaining our disciplined and nimble approach and are focused on making the right investments to encourage strategic growth and maximize shareholder value.

With that, we’re happy to take your questions. Operator, you may now open up the line for Q&A.

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] Our first question is from Dan Busby from RBC Capital Markets. Your line is open.

Unknown speakerRBC Capital Markets — Analyst

Great. Hey guys, this is Steve on for Dan. Thanks for taking our questions here. I’ve got two and I’ll ask them both upfront.

But the first one I was wondering if you can provide us a little more color on how the launch is progressing, and more particularly, you know, what — how — what are you hearing from physicians or in patients on the — on the product? Any particular pushbacks you’re hearing? But I also think it might be pretty interesting to hear, you know, any feedback for maybe older physicians who’ve had experience with prior contraceptive patches and how they’re viewing Twirla here today. So, that’s the first question. And then the second question is related to — obviously it’s early in the launch, but, you know, any type of trends you’re seeing with patients with regard to age or maybe different types of BMI? And along with that, you know, you guys were — recently released some — some post-ad hoc data from the SECURE trial and wondering how that data may help physicians potentially prescribe patients with a BMI between 25 to 35. And then may be any other type of dynamics we should be thinking about here going forward.

Thanks for taking the questions.

Al AltomariChairman and Chief Executive Officer

Thanks, Steve, this is Al. It packs a big punch in two questions. So, let me go in the order you asked. To how the launch has gone, so, what are we hearing from physicians and patients? So, it’s interesting.

I think that the group on the phone knows that we see — so, we’re hearing great things from physicians and also patients. And equally as important, we’re not hearing any problems. So, I’ll just give you an example. We had a patch replacement program set up, you know, that made — if anybody had a problem one of our patches, to take these calls, we’ve replaced it.

I believe as of yesterday, we have three phone calls after multiple, multiple thousands of prescriptions and samples. So, medical affairs, we don’t hear many, you know, complaints or any other thing, questions from doctors. So, we hear day in and day out rave reviews about our products from both patients and physicians which is really wonderful. And I think the reason I can point to that quite frankly is what we’re seeing is high refill rates.

We’re seeing our brand getting refills, which is to me a surrogate of patients liking the product and staying on the product. So, the more we see refills grow, Steve, the more we feel good that, you know, we have now, as Matt describes, a very healthy brand, and Dennis described that, you know, and I was trying to say that also. So, every — every indicator says that when a patient goes on our drug, they like it. And so, we hear nothing.

Your question about older physician’s a very good one. We do — we do get a lot of questions from older physicians about what makes this different than the other patch, either with whatever patch, is there a current generics or what they’re after. So, that always comes up, you know, and if not, our reps proactively bring it up. It’s interesting some of the younger physicians don’t even know that patches are available.

So, we’re reteaching physicians and all that was really born out in our market research. We expected both of those phenomenons. So, market satisfaction, patient feedback, physician feedback, you know, everything’s green, Steve. So, trends, you’ve mentioned ACOG.

You know, we’re very proud of that paper be that, you know, we was published at ACOG. So, what we were able to do was use our SECURE trial to look at that cohort of patients between 25 and 30 BMI, to say did we see anything more in there and can we just give more granularity. And I think you could see in the paper we were — we were quite satisfied with the authors that Twirla is an effective, you know, use. We don’t get a lot of questions honestly in the field with the limitation of use for the 25 to 30.

And when we present the actual upper bound being you can’t prescribe, you know, to over 30 just kind of off-label, you know, most physicians say thank you. Thank you for, you know, telling me to appropriate patients. They really give the company a lot of credit for its trial. And then they say, look, I probably know, you know, that other products have that.

And I think that the group on the phone knows that after we got the product approved, the other patches were relabeled also with the weight restriction to 30. So, — and I think as we — the company stated before, we see more and more products circulate, really run into this issue. So, from a trending perspective, I think the most important piece of information I can share with the group is that 56% of our prescriptions are coming from new patients that have never been on therapy, the best we can say. So, that’s fantastic.

About 25% of the patients have come off birth control pills. So, about 81% of the patients are either new to therapy or have come off the pill. And that’s exactly in line what we thought about 15% are from another patch and the rest is coming from other methods. So, the market’s responded pretty much in the way we’ve seen everything.

We’re getting new-start patients against folks that are tired and frustrated with pills, and the market’s talking to us and likes our product. So, that’s a long answer, Steve, but, you know, you gave a complicated question.

Unknown speakerRBC Capital Markets — Analyst

Great. Thanks, I really appreciate the color there.

Al AltomariChairman and Chief Executive Officer

No problem.

Operator

Your next question is from Oren Livnat from H.C. Wainwright. Your line is open.

Oren LivnatH.C. Wainwright — Analyst

Thanks. Can you hear me?

Al AltomariChairman and Chief Executive Officer

Yeah, I can, Oren.

Oren LivnatH.C. Wainwright — Analyst

Great. Great. OK, see it’s obviously very early and clearly, we don’t have a real representation of underlying demand given samples, but I’ve been really encouraged to see, you know, the last several weeks’ prescription trends IQVIA. I mean, it might be modest but it, you know, looks like the early stage of a, you know, parabolic-looking curve though I’m no geometry major.

So, can you help us understand, you know, what sort of coverage are these scripts coming through? Are these the, you know, these represent the Medicaid coverage or they represent your relatively, you know, limited commercial coverage at this point? Or, you know, are you perhaps already pushing through or getting some docs to push through prior off on such that this volume as it increases should maybe drag other managed care payers to the table to cover you?

Al AltomariChairman and Chief Executive Officer

Yeah. Terrific question. You know, so, we’re — we’re also we’re very encouraged the last couple of weeks. So, I’m not a geometry major either but I like when things point north, that’s all I know.

So, no, I think that — I think what I would tell you in the last couple of weeks, what we — we believe is happening in the data is that we continue to grow, you know, number one, our prescriber base, number one. Number two, got new — new prescriptions. New prescriptions are the lifeblood, you know, of us, you know, in any chronic meds, but any meds in general, but also to our refills. Our refills are starting to become very meaningful to our weekly data.

You know, I don’t want to say at the floor, but it’s nice to know that you’re going to — before even the week starts, you get some refills from the prior weeks of hard work. So, I think it’s an accumulation born of those three things that is generating the momentum. And hopefully, it’s a harbinger of things to come. You know, hopefully, it’s what we tell our team that, look, the more — more docs we get, the more they write, the more of new prescriptions we got and if they’re happy to do the testing, you know, on the medication, they keep going back for more, the business starts moving.

And then as we tried to educate everybody in the first quarter, you know, we knew, Oren, all along that, look, the first four to six weeks, we were just laying down samples. You know, we — as you could see in the data we put out on Slide 4, there just wasn’t much action in refills and, you know, and the new prescriptions were just — they’re really slow because of the sampling phenomenon. So I think we need to work past that. I can tell you that your last question that I can say without the data perfectly in my head it’s a very little Medicaid business.

We — most of the Medicaid, you know, wins we just got happened in April. So, we’re just starting to get a taste of Medicaid, you know. So, it’s overwhelmingly commercial payers at least in the first-quarter results. The Medicaid businesses is pretty good for us.

I mean, it’s an important part of the category and one-third of all patch business roughly are — or I think you said 25%, let’s say 25% — I go over my skis, of that business was sitting in Medicaid. We couldn’t touch it. It just — so, we were locked out. So, boy, it’s nice to see those 20 states open up in Texas coming right behind that.

These are big markets for us. So, we’re — we also think that will play into the, you know, the future uptake, if you will. And to your last question, look, we’re seeing physicians and the plans to give good access too. Obviously, it’s easy, but we’re seeing physicians step up and, you know, you’re calling the prior off but it’s — you’re allowed on the Affordable Care Act to ask for our brand, and there are — there — and they’re speaking into it, so we’re seeing that and that’s where specialty — the Sterling organization helps us out, Oren, you know, fight through some of those, you know, prior off if you will.

So, we’re seeing physicians say, hey, this brand is working, I’m one for it. So, well, we’d like to get more coverage and we’d like to pick up more accounts in both the commercial side and Medicaid side. But, boy it’s nice to start this — it’s nice to start the second quarter with the line pointing north, Oren, and, you know, that Medicaid business and the commercial business still clicking along. So, I think it’s a — I think it’s a theory little things.

I wish I could point to one I’d been. And then the last thing I would tell you like we haven’t spent much money in the first quarter on brand, I think you could tell that in my script. We throttle back, we said let’s wait ’til the market’s ready. So, all the consumer insights I was mentioning and the extra spending, it’s all coming in the second quarter.

You — you’ve not seen the benefit of that yet. So, hopefully, that’ll continue our momentum if you will. I just don’t think the market was ready. So, we held back on some of our, you know, bigger spending on HCPs and the branded stuff.

And so, the market was better conditioned. I wanted to see a bigger beachhead of doctors, so we’re ready now.

Oren LivnatH.C. Wainwright — Analyst

And if I could ask a quick follow-up, you know, because obviously, you want to, you know, even though this doesn’t translate to revenue yet as you walk through inventory and, you know, the samples but when we try to think of the run rate that we keep track of as your prescriptions continue to climb, you know, we need to plug in some sort of normalized value per script and net value per script number. So, you know, I know it’s early but given where you see these scripts are coming from and, you know, the contracting that, you know, you’ve put in place and Medicaid, ballpark, can you give us any kind of estimate, you know, what’s your normalized run rate?

Al AltomariChairman and Chief Executive Officer

Yeah. I can help you a little bit I think, Dennis, you know, I’ll take a shot, Dennis and you could clarify being what we — we — we got some revenue in the first quarter, right? So, with the channel — it’s beginning to working down, I know what it’s very symbolic of, you know, the amount of money we’ve put on the table. But it’s indicative of, you know, toward the end of the first quarter, that the channel was kind of, you know, getting more normalized. We would expect by the end of this quarter that we’re really almost on a — also on a one-for-one basis.

So, as we sell a unit, they should stock a unit, give or take. Now, you know, we’re — and so, we’re — we’re very hopeful. So, I think the second quarter cleans up, you know, the normalization is, Oren, if you will. I think the one thing we’d like to point out that I think is worse — and again, I’ll go on Slide 4 of the cycles — the cycles every time — every time we get a script, we get about 1.3, you know, cycles.

So, we get more than one cycle. So, if you think of the value of a script, it’s not $159.75 WAC, it’s about $210 or $215 whatever. So — so, the value of a script start to become important to us. So, we’d like to see that cycle, this bent number, to continue to grow.

So, I think, Oren, I think the channel gets more normalized in the second quarter, you know. And I think in the third quarter onward, I think that’s what Dennis was saying. I don’t know, Dennis, did I get that right? I mean —

Dennis ReillyChief Financial Officer

Yeah, you got it right. I mean, this — it’s normalizing now really I’d say by the end of May where we’re — we’re shipping pretty close to demand levels. They should all be equaling out.

Oren LivnatH.C. Wainwright — Analyst

Yeah. All right. All right. Thanks.

Appreciate it.

Al AltomariChairman and Chief Executive Officer

No, thanks, Oren.

Operator

Your next question is from Leland Gershell from Oppenheimer. Your line is open.

Leland GershellOppenheimer & Co. Inc. — Analyst

Hey, guys. Al and Dennis, thanks very much for the update. Congrats on the progress. Two questions for me.

First, on the reimbursement side, it sounds like your progress so far has been good, at least as good, if not the, you know, the better and what you had, I believe, you had kind of given us some soft indications around where you expected to be, you know, on reimbursement progress over the — the initial kind of near one to two years of the launch period. Have there been any areas where you’ve had pushback or is it just simply the nature of the process that you’ve been going through the state and that we could actually be kind of at the, you know, majority of covered lives by the end of 2021, which I think would be a little bit ahead of prior. And then, I have a follow-up. Thanks.

Al AltomariChairman and Chief Executive Officer

Yeah, Leland, a really good question. I think at this point, you know, we — you know, we think we’re chipping away at this, you know. Still the wins we’ve got in Medicaid certainly add up, you know, a nice bucket of lives. So, I think we’re being very scrappy, you know, and I think looking for every opportunity to make Twirla available for women.

You know, look, the actions still at the PBM level, that’s the game-changer. We’ve got one PBM, we’ve got really, you know, we’re in a great position with the two other ones, they’re OK. But until we get on a national coverage with those, it’s hard to pick up, you know, the huge, huge wins. But even though that PBMs kind of, you know, rule the roost, you know, Leland, at the high level, it’s up to the individual plans under them.

So, even though we’re not on contract at the national level with the PBM, we’re seeing a lot of coverage, you know, availability. And then just remind everybody on the sort of what Oren was asking me. You know, on the Affordable Care Act, even if we’re like off-formulary or excluded from formulary, if a physician, you know, wants the product, he writes what it’s called a letter of medical necessity and it’s on our website, it’s on our twirla.com website. You could say it is a relatively simple form and — that says, look, I want this patient to get this product.

And, you know, by the way, the Affordable Care Act is designed if the physician is supposed to get their wishes. So, this is where, you know, kind of hand-to-hand level, you know, we’re getting, you know, these scripts to go through and that’s where Sterling be of a help. Because they give patients and providers really great service both with these letters of medical necessity, or I mean, Leland, and then also, you know, give the patients some — some extra handholding if they need them or they also — and then if the patient wants drugs shipped to them — at their home, we’ll get it to home, we’ll ship it anywhere in the country for them. So, they get a lot of — very big value add service.

So, I think for it, and frankly, where I’m getting is so we can get the brand to the point that we can get it on the national coverage. You know, we’re going to keep chipping away at these local wins that if you will. And the GPO agreement last — last quarter we mentioned to you all, you know, that was another example. So, we’re swinging for the big ones and we’re taking the singles too, you know.

But I think we’re in the — I think what you can expect form us is we’re still at it and we can — we would expect to continue to grow.

Leland GershellOppenheimer & Co. Inc. — Analyst

Thanks and, you know, still relatively early days but I’m sure you’re learning a lot and you go out with all the different avenues, you know, by which you can reach the, you know, the consumers these days online and in other advertising. Just wondering if you could comment at all in kind of where you’re seeing the effectiveness of your different campaigns in terms of —

Al AltomariChairman and Chief Executive Officer

Yeah.

Leland GershellOppenheimer & Co. Inc. — Analyst

How much, you know, we need to put in in terms of the spend and how much you think you’re getting out, and how that may affect kind of your decisions for marketing strategy as we, you know, get through the rest of the year and beyond?

Al AltomariChairman and Chief Executive Officer

Yeah. Good question. I mean, you know, I think that everybody in the call knows we’re big fans of activating consumers. I think we made two strategic decisions that I think in on the hindsight, I think, were the right ones.

Number one, we — we decided to use samples instead of vouchers. So, we said let’s just get the doctor to write a — use a sample. It’ll slow down the flow of patients at the pharmacy if you will. But once they get there, we get paid for everything.

So, I like that. Even though at times sometimes if we were considering using Mypharmacy vouchers, though we thought it was the right thing to do. So, I think that was — I’m really glad we did that. But then, look, I think, you know, for us the spends — big spends on TV or even radio, you know, while it feels good, you know, you get your TV ads and — I was watching TV last night, an ad came across, we’re conscious of the product, I’m like, I’m not the right target.

So, you know, we just aren’t big believers that, you know, most of these young women don’t even own TVs and, you know. So, we think the streaming platforms like Spotify, you know, TikTok, and all those ones where we could target the branded advertising, Leland, is a better spend of the money. We have a higher degree of confidence at a better target and we, you know, so, for us, that’s what’s exciting. And, you know, we’re seeing some early signs that our early work there is really paying off.

I mean, ultimately, it’s great to say, hey, consumer saw your ad. We want to see if we’re getting patients in the door. And we’re starting to hear with our ears and we’re starting to do some — some — some work on this, that doctors are starting to see patients come in, you know, asking for Twirla by name. So, they saw the ad and our Twirla websites might start the light up, you know, with people coming in.

So, relatively early days but I think they’re the decisions, Leland, we made saying, let’s spend our money more — more smartly in digital where we think our rivals are and then we have a higher chance of, you know, activating card or either come to our website or — and better yet, go to a doctor. So, I hope that next, you know, quarter, I’ll be able to tell you a little more. But, you know, we’re full bore now in the second quarter of our, if you are DT social spending. I don’t only know what it’s called anymore.

But I — we’ll work on pretty, you know, heavy. And also with the physicians, we’ve held back on some spending in the first quarter that’s why we’re signaling the second quarter to be a little stronger from a spending perspective. Same throughout with the healthcare providers, you know. We are in right now only deploying some of our more aggressive campaigns even to them.

We just wanted to give our reps that beachhead to get out there in the first quarter. So, you know, we wanted to see the brand get its — get its leg on there, and then we do, and that’s why we’re turning it on now. So, we like what we see.

Leland GershellOppenheimer & Co. Inc. — Analyst

Got you. Thanks. Thanks so much, Al.

Al AltomariChairman and Chief Executive Officer

You’re welcome. Thank you.

Operator

Your next question is from Tim Lugo from William Blair. Your line is open.

Tim LugoWilliam Blair — Analyst

Thanks for taking the question. And I believe Q4, the $749,000 was mostly stocking. Can you just confirm if that’s around how much stocking we should expect in Q2 as well? And then looking at the number of HCPs, you entered the quarter 850, but I think in your prepared comments you said you’re now about 1,200. Well, that’s —

Al AltomariChairman and Chief Executive Officer

Yeah,

Tim LugoWilliam Blair — Analyst

350 in April. So, kind of where do you expect that number to trend throughout the next couple of quarters?

Al AltomariChairman and Chief Executive Officer

Yeah. Bigger — bigger, Tim, is the number, right? You know, well, you’re —

Tim LugoWilliam Blair — Analyst

Yeah. I guess, right?

Al AltomariChairman and Chief Executive Officer

No, no. You’re — you’re — you’re my math guy. Keep me on. It’s now — we’re — we’re picking up about 100 new doctors a week, give or take.

You know, some weeks, you know, some weeks 90, some weeks 110. But I’ll say about 100 doctors a week. That’s awesome. That’s awesome.

You know, they’re new — new writers. Hopefully, they’ve been through our samples and now they’re writing scripts. So, that — I think, I mentioned it to you before, you know, in the group before and that’s an important metric for me. I mean, that’s how we grow this business, you know, getting doctors that look, I’m done with the samples, let me start writing scripts.

So, I think that is an important one. Yeah, I mean in the fourth quarter, Dennis, I’ll say it, but everything was stocking. I think we had a, like, 10 scripts, I mean, at stocking. So, that net sales reported was — was, you know, us spilling the wholesalers’ shelves, if you will.

And you could see that they’ve worked it down in the first quarter. A lot of it, you know, and they — they’re actually rebuying inventory from us, meaning — you know, we posted a small quarter, but it’s still good to see in the end that our first quarter that we’re saying, OK, we work down the shelves and the products making its way in the pharmacy and consumers’ hands. So, as Dennis mentioned, you know, we’re not quite done yet. So, we think it’ll be fully normalized in May and then — and then from that point on, Tim, with some sort of one for one every script you see, we should get a sale for it, give or take.

Tim LugoWilliam Blair — Analyst

OK. That’s great to hear.

Al AltomariChairman and Chief Executive Officer

You know, that — but that’s the way it should work. And I think we’re optimistic that a work down the bulk of that. And then, you should be able to just look at script, the volume and say, OK, that should be, give or take, unless — and there’s some channels that we know — that don’t report, as we know, our GPO group, it doesn’t report. But other than that, that should be directionally what used to be seeing later in the second quarter and particularly in the third.

Tim LugoWilliam Blair — Analyst

OK. And, you know, looking at the cash burn, I think the over 14 million in the quarter with the direct to social kind of ramping up. I do not go into ramp as well, but I don’t quite understand, you know, how efficient this is and obviously direct to social is different than the Super Bowl ads. So —

Al AltomariChairman and Chief Executive Officer

Yeah. Dennis, why don’t you let, Tim, sort of — where you’re guiding through the second quarter? Because since the first quarter was light, Tim, you know, so — because we didn’t know how to — you know, we had to buy samples, if you will, just from our — from Corium, unless I mentioned we didn’t use too much in the way of consumer spending. So, Dennis, why don’t you walk Tim through what the — the reason why we’re [Inaudible] and the second quarter being up.

Dennis ReillyChief Financial Officer

Fair enough. Yeah, I mean, yeah, as Tim said, we burned about a little over $40 million net in — in Q1. You know, the opex was $15 million, a little bit right around there — we were going to buy some more samples. We’re going to do some more sampling and we’re going to also kick up the branded marketing in Q2, as Al said.

So, you know, there we — we anticipate it could be $18 million to $20 million. Now, the offset there is all roads lead to revenue, right. If we continue to start to see the revenue crank in, we should see cash flowing in. You know, it’s how fast does the revenue grow is — is kind of our, you know, our whole — our whole challenge going forward there.

Tim LugoWilliam Blair — Analyst

I understand. Thanks.

Al AltomariChairman and Chief Executive Officer

Yeah, so the — the way we think about third quarter, Tim, that’s our goal. I mean, our third quarter, our revenue line, as Dennis was saying, our margin lines should need to work for us, right. So, that’s — that’s what we’re expecting. So, the first quarter, we — you know, we didn’t draft a margin because that was just, you know, was insignificant.

And second quarter onward, the revenue lines got to work for us, you know. So — but we’re seeing on the rise, I should say, the sampling causes, I know that’s why its’s a complicated term called lumpy. So, some quarters we need to buy more samples, some we don’t. So, this is one we —

Dennis ReillyChief Financial Officer

Yeah, we taper it back.

Al AltomariChairman and Chief Executive Officer

We could replenish our sales.

Tim LugoWilliam Blair — Analyst

Great. So, secondly, with samples —

Dennis ReillyChief Financial Officer

Understood. Lumpy is a technical term. So, I get it.

Tim LugoWilliam Blair — Analyst

That’s right.

Dennis ReillyChief Financial Officer

Thank you for the clarity.

Operator

Your next question is from [Inaudible] from Axiom Group. Your line is open.

Unknown speakerRBC Capital Markets — Analyst

Hi, guys. Thanks for taking the question. I want to talk a little about your pipeline. At this point, have you guys cited which asset you guys plan on advancing next, and what’s the next asset or what’s the timeline for potentially moving an asset into the pipeline? And — I’m sorry, in physical asset.

Al AltomariChairman and Chief Executive Officer

Yeah. Yeah, I mean, we, you know, we — on our website, we say, you know, we — we’re saying, hey, everything’s on hold for a while. That really isn’t terribly bad. You know, we are doing work on our pipeline now.

You know, we are spending some money. We’ve activated and we’re doing some — some, you know, formulation work and some — some PK work, but we’re not spending big clinical dollars. So, as far as I’m concerned, we have activated our — our pipeline but we’re just — we haven’t selected our final clinical candidate yet. So, our intention is the next couple quarters to spend a little bit of money, you know, to develop them along.

We’d like to get some feedback from both. We’ve done some market research also, I should say, with consumers and physicians. So, the good news is all of our pipelines seems to be of high interest both from physicians and consumers. And Dr.

Korner, our chief medical officer has done great work and has a development plan for each one of them. So, I think before we announce our clinical candidate, you know, I think we — that we’d like to have a conversation with the FDA, so we understand, you know, the — a reprice. I can’t see us, you know, going into a clinic, you know, even if we’d do a phase 2 possibly to the end of this year or into next year. You know, but we’re going to continue.

You should see us spending a few bucks to new — to developing. Paul and his team have activated them? They’ve done more work in the last three months than we might have done in three years. You know, I mean honestly, I mean, they’ve done some really good work. But we still haven’t pulled the trigger on, you know, knighting the ones to the clinic until we get some of this PK work under our belt and just a little bit more regulatory feedback.

Unknown speakerRBC Capital Markets — Analyst

You guys don’t have to file like another IND, right, with Twirla approved?

Al AltomariChairman and Chief Executive Officer

It depends on — it depends, you know, for — it depends only what one we would do. So, like the one that’s the extended regimen would be, you know, a follow-on, and if you will to the Twirla — Twirla NDA. The progestin-only is a little bit different. Depending on the way — the way we go with the progesterone-only, we may have found another IND.

So, it really depends on what candidate. But in general, they’re generally thought to be line expansions, but the progestin-only may require new IND. It’s really that different. So, that’s the work we’re still doing right now.

But if it’s the other two, more than likely, they’ll run in the same IND. I’ll now —

Unknown speakerRBC Capital Markets — Analyst

Thanks for answering my questions.

Al AltomariChairman and Chief Executive Officer

I’m not of regulatory guy, so it’s like take that with a grain of salt. But I think I’m right. I think I’m right.

Unknown speakerRBC Capital Markets — Analyst

All right. Sure. Thanks.

Operator

And there are no more questions over the phone. Presenters, back to you for your closing remarks.

Al AltomariChairman and Chief Executive Officer

Great. Thank you, operator. So, I’d like to close, you know, today by saying, you know, that we’ve been — we think we have the building blocks in place right now, you know, to — for continued growth and we believe we’re on track near to — to visit — to achieve our near-term goal. We wanted to be — Twirla to be a real serious player in the multi-billion U.S.

hormonal contraceptive products. We’re — we continue to implement our — our commercial plan. As you heard in the call, you know, we, you know, where we continue to work on expanding coverage and reimbursement and access for our brands in the United States. And working through all of the channels, you know, both in the HCP side and the consumer side, and also on the supply chain to make sure Twirla is available, you know, for as many women and many prescribers as we can in the United States.

So, I’d like to thank everybody for joining us on the call. Be well and we’re looking forward to giving you more updates. And maybe down the road, we’ll actually see each other some — some time. So, in the meantime, be safe, and thanks again for dialing in.

Thank you.

Operator

[Operator signoff]

Duration: 47 minutes

Call participants:

Matt RileyHead of Investor Relations

Al AltomariChairman and Chief Executive Officer

Dennis ReillyChief Financial Officer

Unknown speakerRBC Capital Markets — Analyst

Oren LivnatH.C. Wainwright — Analyst

Leland GershellOppenheimer & Co. Inc. — Analyst

Tim LugoWilliam Blair — Analyst

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