TherapeuticsMD's (TXMD) CEO Robert Finizio on Q2 2014 Results - Earnings Call Transcript

Aug. 8.14 | About: TherapeuticsMD (TXMD)

Call Start: 16:30

Call End: 17:19

TherapeuticsMD Inc (NYSEMKT:TXMD)

Q2 2014 Results Conference Call

August 6, 2014 – 6:30 AM E.T.

Executives

Robert Finizio – CEO

Daniel Cartright – CFO

Sebastian Mirkin – Chief Medical Officer

Julia Amadio – Chief Product Officer

Analysts

Annabel Samimy – Stifel Nicolaus

Bill Tanner – FBR Capital Markets & Co.

Boris Peaker – Cowen and Company

Oren Livnat – JMP Securities

Ryan Martin – Jefferies & Company

Operator

Thank you for joining the TherapeuticsMD's second quarter 2014 results call. Following remarks from the company, we’ll be opening the call for Q&A.

I'd now like to turn the conference over to [Amy Kinetler] from [Spark Biocom], who's representing Investor Relations for the company. [Amy], please go ahead.

Unidentified Speaker

Thank you, Karen, and welcome this afternoon to TherapeuticsMD’s Second Quarter Earning's Call. Please note that a copy of the company's second quarter financial results press release was issued today after the close of market. It is available on the company's website, ThepeuticsMD.com, in the Investor section.

On today's call from the company are Chief Executive Officer, Robert Finizio; Chief Financial Officer, Daniel A. Cartright; Chief Medical Officer, Dr. Sebastian Mirkin; and Chief Product Officer, Julia M. Amadio.

Before turning over the call to the company, we would like to remind everyone that any forward-looking statements made during the call are protected under the Safe Harbor of the Private Securities Litigation Reform Act. Such forward-looking 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 risks and factors, 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 on 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 investor section of the company's website. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 6, 2014.

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

Rob Finizio

Thanks, [Amy]. Good afternoon, everyone. I'm pleased to update you on our progress in the second quarter and review why we think the business opportunity for TherapeuticsMD is unique in the women's health space. I'd like to start with an update on our Phase III trials.

We continue to advance recruitment in the ongoing REPLENISH Phase III study for TX01-HR, which is a bioidentical combination of hormone therapy product in development for treatment of vasomotor symptoms in post-menopausal women. Our recruitment is currently on track, and we expect to have our last patient enrolled in Q4 of this year.

Moving on to VVA. We're also on track to initiate this Phase III study this quarter for TX04-HR, also known as the VagiCap, for vulvovaginal atrophy or also known as VVA. I'm very happy to announce our clinical research organization is hired and currently performing start-up activities related to the VVA trial.

Moving next to our progesterone Phase III study, our progesterone-only study. We have had a positive dialog with the FDA regarding changes to the TX02-HR progesterone-only Phase III protocol. Later in the call, Dr. Sebastian Mirkin will discuss all three Phase III trials in more detail.

As you know, our pipeline features highly differentiated investigational product candidates that are designed to address significant needs in growing and underserved markets. These candidates are in development for indications affecting millions of women and could offer new treatment options in areas where dosing flexibility and safety are the utmost importance. The competitive landscape in changing regulatory or legislative atmosphere related to hormone therapy presents us with a compelling business opportunity.

On the legislative front, we're also pleased to see that the FDA has published its final guidance in July on pharmacy compounding related to the Drug, Quality, and Security Act. As compounded drugs are increasingly considered experimental by payors, many of whom have started blocking coverage for active ingredients that were formally covered. A clear example comes from Express Scripts, which has blocked coverage for approximately a thousand active ingredients. In addition to Express Scripts, OptumRx, UnitedHealth Group, Harvard Pilgrim, CVS Caremark, and others have also started placing restrictions on coverage of compounded medications.

Moving on to IP, our intellectual property portfolio also continues to strengthen. In July, we received notification of allowance for 2 new patents. One is a formulation patent, and the other is a method patent. The method patent in particular is a significant achievement and forms a new pillar in our patent strategy. We've also seen advancement from our early stage pipeline programs, which leverage our SYMBODA technology. SYMBODA, as most of you know, is our patent in solubilized lipid-based hormonal platform. We're very excited to share new transdermal PK data with our bioidentical natural estradiol and progesterone combination today. Julia will address these data along with our new patent allowances and more detail later in the call.

Looking ahead, we have a number of milestones in our development programs during the next several quarters. We have the resources and the team needed to execute. On the other side of our business, our prenatal sales force continues to perform very well, providing a scalable infrastructure targeting women's health providers throughout the US. I'd also like to thank all of our current and new shareholders for the support in the close of our $46 million equity financing this week. We appreciate your ongoing investment in our company.

And with that, let me hand the call over to Dan for some comments in our financials. Dan?

Daniel Cartwright

Thanks, Rob. Good afternoon, everybody. I'll provide a brief review of the company's financial results, and then turn the call over to Sebastian Mirkin for a clinical update.

For the second quarter ended June 30th, 2014, net revenue was $3.8 million, compared with $2.1 million for the second quarter of 2013. The increase was largely driven by the launch of the company's prescription prenatal vitamins, vitaPearl and Prena1 Pearl. Cost of goods sold also increased by approximately $400,000 for the 2014 quarter, compared to the prior year's quarter.

Operating expenses for the quarter totaled $13.8 million. The increase over the prior-year's quarter was primarily due to higher R&D expenses related to the late-stage clinical trials for our hormone therapy drug candidates.

During the quarter, SG&A expenses were relatively flat as compared to the prior-year period. The company's operating loss was $10.9 million for the second quarter of 2014, compared with $5.6 million for the second quarter of 2013.

Non-operating income during the second quarter of 2014 included a modest amount of miscellaneous and interest income, compared with expense from financing cost incurred in the prior-year's quarter. As a result, the net loss for the second quarter of 2014 was $10.9 million or $0.07 per basic and diluted share, compared with a net loss of $6 million or $0.05 per basic and diluted share for the second quarter of 2013.

Cash and cash equivalents were $35.6 million at June 30th, 2014, compared with $54.2 million at December 31st, 2013. Please note that as a result of our recent equity financing, our cash position has increased significantly by approximately $43 million. Our current shares outstanding are approximately $156 million.

We are very pleased with our recent progress, including advancements in our pipeline, growth of our current women's health business, and the recent equity financing that significantly strengthened our cash position and available resources.

With that, I'll turn the call over to Sebastian to summarize our clinical progress.

Sebastian Mirkin

Thanks, Dan. I would like to summarize the most current developments related to our Phase III clinical pipeline. Let me start with our ongoing Phase III REPLENISH trial for the TX001-HR or our natural estrogen, natural progesterone combination drug, which is under investigation for the treatment of vasomotor symptoms associated with menopause.

As you will recall, these studies started to enroll 1750 subjects at approximately 62 to 80 south in the US. We remained on track to complete enrollment in the 4th quarter of this year. In order to ensure our goals, we launched a nation national advertisement campaign to support enrollment, and I’m pleased to announce that we’ve seen extremely positive results from these initiatives.

As Rob mentioned, we also proceeded to the phase 3 study for the TX004-HR or VagiCap for the treatment of vulvar vaginal atrophy. We have selected the CRO that has experience on the execution of Phase III VVA trials and a personal reward with this company in the past. We are performing start-up activities, and we plan to initiate the trial by the end of September of this year.

We recently received feedback from the FDA on the protocol and incorporated the input into the trial design. We anticipate enrollment of approximately 800 subjects in this study at 60 to 80 sites in North America. The study's silent power are robust enough to support the evaluation of potential benefits of the 3 planned doses – 4, 10 and 25 micrograms of vaginal estradiols over placebo. We continue to estimate approximately 9th month for enrollment and will expect to have initial result in the third quarter of 2015.

Let me now move on to TX002-HR, our investigational natural progesterone product. As you know, this product candidate is being studied in a Phase III clinical trial for the treatment of secondary amenorrhea.

The product has faced significant recruitment challenges. However, we recently addressed this challenge with the FDA, and given those feedback, we intend to make some changes to win inclusion criteria and study some. We have temporarily suspended enrollment of the study until we’re in the protocol. We expect to work through a beta design this fall, and would provide more specific timelines once we review the protocol again with the FDA.

In terms of communications with the scientific community, earlier during this quarter, I presented [Boster] which highlight the design of the REPLENISH trial at the World Congress of Menopause. The presentation generated a lot of enthusiasm and engagement of key opinions leader worldwide.

I'm also pleased to announce that we have received notification that our VagiCap [fast track] that includes Phase II [indiscernible] data for the VagiCap product has been accepted as an odd presentation at upcoming North American Menopause Society meeting this October. This meeting will provide important visibility for our VagiCap development program within the medical community and raise awareness of the Phase III clinical trial that we are starting this September.

Finally, I would like to echo the excitement of the company and the potential of our Phase III product candidates. You will recall that I joined TherapeuticsMD last year having been the global head of women health clinical research and development at Pfizer.

In that role, I led development of Pfizer recently approved hormone combination product Duavee and previously led the execution of 3 different VVA clinical trials. At TXMD where development is strong being with experiencing the sign and execution of clinical trials for hormone theraphies. I've got hired – some of my former colleagues from Pfizer, including the clinical [person lead] for Duavee.

In addition to that, I recently hired a former [indiscernible], clinical team leader for Osphina. I believe that TXMD is apply and industry best practices and we have a strong prospect of success.

Now, I would like to turn the presentation over to Julia, who will review our early-stage pipeline and IP development.

Julia Amadio

Thank you, Sebastian, and good afternoon. Since the women's health initiative results were announced more than 13 years ago, hormonal research efforts in the women's health space have been extremely limited. TherapeuticsMD is working to fill this for you with exciting new opportunities that our SYMBODA technology can enable.

As Rob mentioned, we were quite excited by the recent patent allowances. The first is significant as it covers the method of treating menopausal symptoms using our combination natural progesterone and estradiol formulation. As we've been saying the idea in need for an FDA-approved natural bio identical combination has been wanted for decades but the ability to successfully combine these 2 hormones and demonstrate threshold levels of activity has not been done before. Our SYMBODA technology has enabled this combination to become a reality and is protected by these new patents. We believe these patents will provide an important competitive advantage.

Moving on to our new transdermal PK data, we have new data from our transdermal program, which you can see under the Investor Section of our website. Actually, it show the pharmacokinetic result of our new topical formulation of a combined estradiol and progesterone. These data demonstrate an 8-hour sustained 3 to 4 fold increase from baseline in progesterone concentration in lymphatic and capillary compartments.

Estradiol concentrations show a similar pattern. What we found most interesting was that while prolonged increases in lymphatic and capillary systems were obvious, the blood serum levels were negligible or undetectable. These data are exciting from a number of standpoints.

Number one, the lack of blood serum levels could create potential clinical advantages and significant generic barriers.

Number two, new dosage forms may be possible with sustained lymphatic and capillary increased levels.

And number three, a potential opportunity exist for a new layer in our IT strategy for progesterone.

We may, in the future, engage with a partner to advance our transdermal patch projects. Subsequent preclinical studies that are ongoing will further enhance these programs and direction with additional scientific and IP support.

Now, let me turn the call over to the Operator for our Q&A session.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Annabel Samimy from Stifel.

Annabel Samimy – Stifel Nicolaus

Hi. Thanks for taking my questions. Congratulations on your progress. I had a question about the VVA trial and the design that you've agreed to – or you've discussed with the FDA. I think I was reading that in order to have one trial, you had to achieve a statistical significance at the 0.01 level is the fact that you've increased the trial size to 800 because they're holding you to that 0.01 level? Or is because of the addition of the 4 microgram arm? And how confident do you feel about hitting those P values? And I'll have some follow ups. Thanks.

Sebastian Mirkin

Thank you. This is a great question. Certainly, the samples of the trial is related to the P value that we would like to achieve.

So, therefore the sample size was calculated given the statistical power that we would like to observe or placebo and to allow the lower dose of 4 micrograms to show a statistical difference over placebo.

Given the Phase II clinical data that we have in our hands, in which 10 micrograms behaves much more potently than other VVA products, I am very confident that the 4 micrograms will show a separation over placebo in a clinical and meaningful way.

Annabel Samimy – Stifel Nicolaus

Okay. Great. And then if I can move on to the progesteron trial the – I think you – if I understand correctly you have a path forward now. You're experimenting inclusion criteria. Can you just give us a little bit more detail on the doses that you're going to be looking at what you need to do before you can reinitiate that trial?

Robert Finizio

Sure. Hey, Annabel. This is Rob. Thanks for the question. So, just to be clear here so we've had a really, really positive or we feel is a very positive dialogue with the FDA.

And the path forwards is promising. We do have a considerable amount of dialogue in writing but we do want to finalize our protocol and put it forward before we make any clear commitments to the Street.

That last piece has not been done yet. The second it's done, we'll give everyone clarity on it within three business days.

So, I'm very positive on it and I'll turn it over to Dr. Mirkin but I cannot say to you this is exactly what is going to be and I feel like that's what's you're looking for from a dosage standpoint.

We do see potentially the ability to have smaller arms and we do see the ability to remove most of our inclusion barriers that we currently at trial today.

So, I'm promising but until it's finalized I really can't give you anything to hang your hat on.

Annabel Samimy – Stifel Nicolaus

Okay, great.

Robert Finizio

Does that your answer your question?

Annabel Samimy – Stifel Nicolaus

Yes, that's great. I don't know if Dr. Merkin had something else to add but I had one more question.

Sebastian Mirkin

[Indiscernible] as Rob was mentioning is to a trial of the shorter duration with lower amount of substrates in the trial.

Annabel Samimy – Stifel Nicolaus

Okay. All right. If I can drag one more question to maybe – Julia, with regard to the compounding legislation have any – I mean I understand that the PBM is just trying to block certain coverages or certain compounded drugs. At what does the FDA put these drugs on a Do Not Compound list? Is it only after approval? Or does it start right away?

Robert Finizio

You want me to address it?

Julia Amadio

Go ahead.

Robert Finizio

It's more in my area.

Annabel Samimy – Stifel Nicolaus

Okay.

Robert Finizio

Than Julia's, Annabel. So...

Annabel Samimy – Stifel Nicolaus

Sorry. I didn't mean to ignore you.

Robert Finizio

Sorry, I'll apologize as best as I can. Thank you. Great, great – CEO. I'll just keep going, right?

Annabel Samimy – Stifel Nicolaus

So, anyway the – so the Do Not Compound list, so the – this fall – in fact, we expect in the next 4 to 6 weeks, the advisory committee – we expect to be announced by the FDA, okay? That advisory committee will be responsible for both [VVAIIIa] and [VVVIIIb] so sterile and non-sterile do-not-compounding list, okay?

Now, remember this coverage by the PBMs in some direct payors is not related to that. That's related to the fact that these are considered now categorically experimental drugs in what I've been told. And in that situation, it changes the premise in which doctor prescribe it and the pharmacy spill it for a number of different venues, okay?

So, typically just like PBMs and insurance companies will not reimburse for our clinical trial subjects, it's is very similar. These are experimental medications, thus they don't have to cover them.

So, in the event that we are able to achieve estradiol and progesterone in combination approval, that would make the next piece of this legislation kick in, which is the piece that we feel is the strongest. Regardless of the Do Not Compound list, it would be a violation of the Food, Drug and Cosmetic Act to compound estradiol and progesterone. All right?

So, with that being said, there will be a Do Not Compound list that will be put in place. We expect it this fall. The [ADCOM] committee should be announced in, I would say, the next 4 to 6 weeks, and we'll see how that shakes out, all right?

But I just want to make it clear that that is not pivotal to our structure. It is pivotal though that we execute on our trial and get approval and everything else will fall into place.

And the last piece is the only reason we highlighted to payors and PBMs is we do not expect that to happen, we do not expect it to happen this fast and it's all pivoting on. And, again – and in our opinions and our professional advisor's opinions on the change and the classification of compounded drug.

Annabel Samimy – Stifel Nicolaus

Okay, great. Thank you very much.

Operator

Thank you. Our next question comes from the line of Bill Tanner from FDR Capital Markets.

Bill Tanner – FBR Capital Markets & Co.

Thanks for taking the questions. Rob, I had maybe a couple for you and then I had for Julia.

As it relates to IP, you obviously touchtone – you got a couple more patents, notice of allowance and I know you had more applications filed and I'm just curious if you could speak to maybe the pace of other anticipated pace of other notices of allowances and then how they would either broaden or support what is already out there in terms of the adds that you have issued or allowed?

Robert Finizio

Absolutely. So, as a CEO – and I'll talk a little bit about this on closing. You know we're executing. Or I don't know if you guys can hear our enthusiasm but we're – it's so seldom you have a quarter when all 6 departments are challenged with milestones that are critical to execution and we're able to execute simultaneously on all fronts so really excited. And a lot of these are intertwining and it's what I'm hitting here.

So, So, if you look at our trends dermal progresterone data, given the fact that the blood serum levels are low, yet you have a prolonged 300% to 500% increase in lymphatic and capillary systems, it's suggesting a lot of new here in the research and a tremendous amount of white space on the IP side. That IP white space would be potentially an umbrella that would extend to anything that we have progesterone in.

With that being said is our patent in chemist department and the clinical folks as well create these new IP fillings and I believe we currently have 47 patents filed for 30 in the US – or sorry – 33 in the US and 17 international – I'm sorry 14 international to be a total of 47.

The key here though is that we are – one of our head scientists is over 65 years old. And since he is, you are giving an accelerated review with the patent office.

So, we expect the bulk of those that are under examination today to be reviewed in the next 18 months but say half to be fair. And, of course, there's a dialogue related.

So, to answer your time table question, I would expect in the next 18 months to have a dialogue in at least 20 to 30 of the 47 patents that have been filed.

Bill Tanner – FBR Capital Markets & Co.

Dialogue it in – you had anticipated there being some initial office action? Or...

Robert Finizio

I would expect that a number of those would issue and we got allowances on it.

Bill Tanner – FBR Capital Markets & Co.

Okay.

Robert Finizio

I would expect a number of those will prosecute and we'll have to produce more documentation and I don't anticipate any rejections.

It could happen certainly. But given our dialogue there and the strength of the team here and the fact that we have the method in formulation patents and the platform patents under our belt, I think we'll just add more layers to those three pillars.

Bill Tanner – FBR Capital Markets & Co.

Got it. And then as the same question would be as it relates to medical meetings, going forward, ones were TXMD would be participating in some fashion how would you participate but sort of what are the important ones for us to pay attention to as you maybe raise the awareness of what it is that the company is doing and, I guess, you know, I don't...

Robert Finizio

That's a great, great question because we – it's one of the few things I want to bring up at the end.

We do expect between October 15th and 18th in Washington D.C., this year, the North American Menopause Society is hosting their annual meeting.

Not only will Dr. Merkin be presenting a lot of our scientific findings from VVA in Phase 1 and Phase 2, we also expect to host a small event there as well.

We would encourage any and all shareholders to attend. This is the intersection of practicing physicians thought leaders in industry. We will have a number of thought leaders on hand to talk to the buy side analysts or any shareholders that like more information on our products, our sector, and the overall practice of hormonal therapy for the myriad of indications it could be.

So, we hope to see you there, Bill, and anybody else and, again, we will certainly set something up where we'll have some time where folks can speak to the experts.

Julia Amadio

You know I know we're also planning – Bill, this is Julia – that we're also planning a submission for ACOG for next year and for the other major OBGYN meetings next year as well.

Bill Tanner – FBR Capital Markets & Co.

Okay.

Julia Amadio

So, we will continually updating with both published manuscripts there in works as well as abstracts and posters.

Bill Tanner – FBR Capital Markets & Co.

Okay, perfect. And while – have you on – Julia, just curious if you looked in the TV ads, it seems like there is an [increment to speed] that I'm more observant now covering your stock but it seems like there's been an uptick in DTC advertising for VVA by the – obviously the companies with the existing products. And I'm wondering what your read on that is if it has really changed or it was just a new observation for me or it has increased the impetus behind the increase?

Julia Amadio

Yes. You're absolutely right. It has increased. It's a nice thing to see the hormones being advertised again, both of Osphena and Premarin vaginal cream are doing some major direct consumer advertising.

And I think part of that is obviously the Osphena launch and competition but also the fact that NAMS and others have really started to focus on the recognition that VVA has been underrepresented, underdiagnosed. And with more and more women – baby boomers coming of age is recognizing it as problem vocalizing it and bringing it more to the force is something that they do want treatment force.

So, you definitely are seeing more activity, which is great and the market continues to grow and address some of the needs. And we have some - we believe our products will potentially meet some of the unmet need once approved.

Bill Tanner – FBR Capital Markets & Co.

Got it. OK. Thanks very much.

Julia Amadio

Thanks, Bill.

Operator

Thank you. And our next question comes from the line of Boris Peaker from Cowen and Company. Sir, your line is open.

Boris Peaker – Cowen and Company

Good afternoon, and thanks for taking my question. I'm just curious, in your discussion with the FDA, specifically in the context of bioidentical estrogen and progesterone, have they mentioned or do you have any sense of whether it would be specifically identified as such in the label? Or if they would just listed as simply estrogen and progesterone? Or what would it take to actually highlight the distinction between your hormones and some of the other hormones available in the market?

Robert Finizio

Boris, welcome. This is Rob Finizio. I know we haven't spoken before. So, a number of points here. I'll let Dr. Mirkin talk about the FDA correspondence or in his experience, it's very significant. But at the end of the day, we all get a black box on anything that has systemic exposure in estrogen, right?

So, we are not claiming that our product is better, safer. You're never going to get that in the label without another WHI 125,000 person 10-year study. But what we are claiming is that with the compounding legislation and last a very, very large underserved bioidentical need for an FDA-approved highly-available, reimbursed consistent, content-uniform safe and effective drug, which is what you would get if you achieve approval, you will be able to take that compounding market significant portion or all of it, right? So, that's number one. And that, at our price point is in the billions on the opportunity side.

On the other side of that, we are trying to achieve new lower effective doses. 2 of our doses are lower effective doses in anything on the market in the trial today. That black box warning now becomes a sales aid where it starts off with "Start with the lowest effective dose" is the advisory on the black box warning. So, they have a lower effective dose or 2 for a woman to titrate down to or to start on and move up with, whichever way a doctor prescribes is a huge sales advantage.

But as far as the term bioidentical goes, currently, the FDA on their website does not recognize the term, and the FDA has a lot of skepticism for compounded bioidenticals because no one has gotten FDA-approved combination in a single pill for that. So, what we do know is that these are hormones that are endogenous to the body, and that means your body produces them naturally, and these are exact molecular copies of that, right?

So, with that being said, I'll turn it over to Dr. Mirkin. I just want to separate the business issues from the FDA or medical issues here because we will have a black box warning, but we feel to a very large on top market.

Boris Peaker – Cowen and Company

Thanks. And I appreciate the detailed explanation as well.

Sebastian Mirkin

Thank you, Rob. So, certainly, we didn't have any newer label discussion yet with the FDA. But importantly, the doctor will tell, right? And we would expect if this compound is approved, something that have the description of the 2 components, which are the natural estrogen, the natural progesterone, and also graphically, it's going to be a description of what they are. So, one way or the other is going be covered within the label. And again, it's a little premature to discuss to the doctor. But doctor will tell and we may have some surprises, particularly on the lower doses that Rob was referring to.

Boris Peaker – Cowen and Company

Interesting. And my next question is just from a competitor landscape. Obviously, there's a lot of the legislature kind of closing down on compounding and given how big the hormone of – the female hormone space is, are there any competitors that you see are in kind of major developments that we should just be aware of?

Robert Finizio

We do not – this is Rob speaking, Boris. We do not – we are not aware of any other vasomotor Phase III trial going on in the US with any compound that's estrogenic. In addition to that, we are not aware of anyone with estradiol and progesterone working on treatment for vasomotor symptoms anywhere in the world, in any phase of development. So, that's where it is today.

I'm sure, as the laws change and the market size is publicized, I know another – a number of data analytics firms are working on numbers, medical societies, as well, and they’re forthcoming, I think there will be a lot of copycats try to come after us. But just to be honest with you, the scientific hurdles here to get these 2 to work together are significant. And this is a first mover advantage game.

If someone were to jump in the game today that somehow get around our IP and get things to work, we've got a good 5 to 7-year jump on them. And since you shut – you really have a first-mover game here because of the new law. I think we're in a great, great position to execute, given we can get to trials on successfully on time and yield a good data.

Boris Peaker – Cowen and Company

Well, great. Thanks for taking my questions. And I look forward to connecting offline at some point.

Robert Finizio

Thank you.

Operator

Thank you. And our next question comes from the line of Oren Livnat from JMP Securities.

Oren Livnat – JMP Securities

Thank you. You're making me dig deep here for some more questions.

Julia Amadio

We knew you could do it, Oren.

Oren Livnat – JMP Securities

I'll try. Let's talk about the PBMs then I guess you had that the surprise news that they're really going after or kind of cut of reimbursement. In the near term, it seems for compounded products – just maybe it's a tough question – but help me understand if that happens well before you guys come to market with your approval and if that hits the hormone, do you envision that that could push between now and then in a couple of years a lot of people out of compounding and into what are just currently generic alternatives that are FDA approved, which are bioidentical but that's all that's available, in which case some of those people come out of compounding sort of fall off of your low-hanging fruit or the windfall that you're hoping to reap and just get lost in the sea of generic drugs and go on with their treatments – never to be seen again by you.

Robert Finizio

So, it's North America again and disappear. So, it's a great question and if you look at it from a couple of different ways, I think you can get a good sense of what probably will happen.

So, if you look at the price point for a lot of these hormones and you look at the prescribers. So, you have 2 types of prescribers. You have the – well, we, in our research as well as in thoughts simply in health. Their research says – as well as to mothers that are coming out here shortly that I've seen – they all see that the anti-aging or wellness physicians that are treating menopausal symptoms are probably 66% to 75% of the market. That type of physician in all the research we have is they are indoctrinated with bioidenticals and I don't they will prescribe a progestin if their life dependent on it.

On the other side, the OBGYN might be more mallable to prescribing Premarin or progestins or trying the new Duavee but, you know, they aren't – are compensated to change a woman's mind when they walk in and they've done a research on the Internet and they believe that the bioidenticals are a better option for them.

So, could some of the markets if it gets really tight and they can't get bioidenticals at a reasonable price point moving into the other direction – sure. Do I think of the significant amount enough to impact our valuation? Absolutely not. I think we're talking single-digit percentages potentially.

And then the other side of it is our research, which is about 350 pharmacies that we personally called in shop price points, the average price point is about 70 – $47.98. And if you look at in thoughts research – I know it's a little bit higher but it's only about $50.

So, I don't believe the price point for cash out of pocket is going to stop the vast majority of people taking these drugs. But we'll see how it goes. We'll see how it goes.

And remember, this law the pivotal [crocks] is when there's an FDA-approved version, compounders are not supposed to make illegal copies, unless medically necessary with an exception in a case-by-case situation. You can't mass compound them.

So, once we have approval that would really be the trigger. If you read the UHS – I'm sorry UHC, as well as the expressed scripts in their memonrandums they just sent out – they're on the website. They both mentioned bioidenticals. But they also say they would stop reimbursing if there's an approved version, right? That's the main [crush] of this stuff.

So, with that being said, it's a lot of data points. You know if you take a look at it, you'll be interested to see what you think offline.

Oren Livnat – JMP Securities

All right. And if I could just follow up on the advisory committee panels today. It sounds like pretty near term. We're filling and they get a look at. Do your Washington consultants give you a good sense of what will actually be maybe the [crocks] of the content? I mean those early meetings – do you think we're going to be having a vetting publicly by these guys over what's on the first initial Do Not Compound list. Is that list going to be done by the first meeting? Or are we just maybe having big picture, "Welcome. This is the kind of stuff we're going to be dealing with over the next several years and let's just sort of shake each other's hands and not really have anything substantive?"

Robert Finizio

I expect since the OIG is holding the FDA accountable – and again this would be personally meeting. I expect it to be real committee. I expect it to be put together bigger. And I expect there that – I expect the FDA will hold this advisory panel to their timelines or just miss them. That's what I would expect as this public citizen and – in the industry.

Or if you look at the progress here, there's no way they can have their first meeting, in my opinion, and just put up a list. I think the FDA will prioritize – and, again, this is Rob speaking. They'll prioritize steriles first because that's what started the New England meningitis outbreak. I think once they were through the Do Not Compound list for steriles, they will move on to non-steriles.

My guess is it will take a couple of meetings to get through that at least. I believe they'll be having 6 meetings a year. I'm recalling not from memory not from notes.

So, you – my guess is it will take a full year to work through the non-steriles. So, probably this time next year, they'll be starting to look – I'm sorry they'll work through the steriles first over the next year and then the subsequent year look through the non-steriles. We'll see how it played out.

Oren Livnat – JMP Securities

Okay, thanks.

Robert Vinizio

Thank you. Great questions.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Ryan Martin from Jefferies & Company.

Ryan Martin – Jefferies & Company

Hi. Thanks for taking the questions. I just want to bring the discussion back to the VVA trial that you're planning to initiate soon.

So, just want to clarify here. So, if you don't hit the 0.01 statistical level on all 4 primary endpoints, I mean is that what the FDA is wanting you to that you have to hit 0.01 on each primary endpoints for the doses you're planning?

Sebastian Mirkin

So, the trial is powered to take a difference providing us to show a P value 0.01. Knowing the relations or there are no presence that we need to have that P value in order to get an approval. This is a discussion that we're going to have with FDA with that occurrence and with a really much easier discussion to have.

In other words, if one of the doses will be statistically different than placebo, I don't foresee any issues in order for us to get an approval.

Ryan Martin – Jefferies & Company

Okay. So, you mean if it's more than 0.01, you still feel confident you're getting approved.

Sebastian Mirkin

Right.

Ryan Martin – Jefferies & Company

Okay.

Sebastian Mirkin

Up to what is – considering safety significance which is 0.05.

Ryan Martin – Jefferies & Company

Okay. And then in terms of your safety data, obviously you won't have that when you file the 12-month endometrial biopsy. How many patients do you need to get a biopsy from out of the total 800 in order to meet the FDA's requirement versus a number of biopsies. And what's your confidence in being able to get that number of patients.

Sebastian Mirkin

Right. Let me tell you 5 of these important point that you're raising. We are not conducting – and in the endometry safety study of 12-month duration per [year] advice. We're conducting an efficacy study of 12 weeks of duration only.

We are obtaining the endometrial biopsies after three months of treatment and every participants with uterus will provide a safety data to endometry safety perform.

Ryan Martin – Jefferies & Company

So, you will have a biopsy at 3 months not at 12 months.

Sebastian Mirkin

That's correct. And we agreed that with FDA.

Ryan Martin – Jefferies & Company

Okay. And what proportion of [the issuance] do you need to get a biopsy from?

Sebastian Mirkin

Still mandated. This is a vaginal product so normal you wouldn't expect to – need to do – and in endometrial safety study for these particular products.

I mean [nautically], I can tell you that most of the compounds have proved they kept something around 100 to 150 patients exposed to different products, which obtained endometrial safety data.

Ryan Martin – Jefferies & Company

Okay. And I was asking mostly because that's all that [indiscernible] did a separate 12-month endometrial safety open label study. That's were...

Sebastian Mirkin

That's correct.

Ryan Martin – Jefferies & Company

I guess...

Sebastian Mirkin

That's correct.

Ryan Martin – Jefferies & Company

And do you know why they did a 12-month study?

Sebastian Mirkin

I cannot speak with the why [and novel], you know, conducted the 12-month study.

Ryan Martin – Jefferies & Company

Okay, okay. And then in terms of the dyspareunia implant, you – I guess I haven't looked at that in the Phase I/II studies that you've done because it was obviously on 2 weak end point but what gives you the confidence especially on the low-dose, the 4 microgram that you'd be able to hit that particular end point?

Sebastian Mirkin

So, that's a great question. And let me try to explain why we're using dyspareunia as one of the co-premise efficacy end points.

So, the major reason is that when the FDA issued the draft guidelines in 2003, they installed the concept of the most [bios sim], symptom right? After the years, while doing several clinical trials on VVA, we learned that the most [bio sim] symptom were post-menopausal women suffering in VVA is dyspareunia. Therefore, what we're doing now in this trial is we're using all lessons learned from previous trial and we are targeting the end point to only patients that will present dyspareunia. Therefore, it's an easier end point to heed with estrogen in compounds.

So, I'm expecting that our – three different docile will show efficacy for the end point of dyspareunia.

Ryan Martin – Jefferies & Company

And then in terms of R&D, just wondering what do – you'll expect in terms of R&D for the second half of the year, given, yes, you're going to obviously initiate the VVA trial just in terms of expectations [indiscernible]. Is the 2Q runrate something we should look well off of? Or it – may be expect to increase from that.

Robert Finizio

Ryan, this is Rob. You should know I'll never forecast a burn. I mean I can't, right? The faster we burn, it means the faster when enrolling patients and you know our milestones.

I love to forecast for EBITDA. It doesn't do anybody do any good. So, we've got plenty of money to get over the finish line. I think we're in great shape and we're hitting on all fronts here.

So, I hope that helps. I'd love to give you more but I can't.

Ryan Martin – Jefferies & Company

Okay, thank you.

Robert Finizio

Thank you.

Operator

Thank you. And that concludes our question-and-answer session. At this time, I would like to turn the conference over to our host for any closing comments.

Robert Finizio

All right. Thank you. Thank you, everyone, for joining the call today. We just had a fantastic quarter.

As CEO, you're always testing your company's internal ability with strategic execution. I think to see all 6 of our departments from the Phase III clinical, early-stage clinical, IP departments, sales, regulatory, as well as a few others, hit simultaneously and execute on key goals simultaneously is a real challenge in showing some maturity here and [gelling] of the team internally here, and I'm just really proud of everyone.

I hope you can feel our excitement. We feel very strong. We had a great quarter, and I hope we have other quarters like this when a lot of things come together. We made a very positive result.

I want to thank you all for taking the time in joining us today. If anybody has any questions for us, you know how to contact us. Thank you

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone, have a great day.

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