Daré Bioscience, Inc. (DARE) Earnings Call Transcript & Summary

Welcome to the conference call hosted by Daré Bioscience to review the company's recent announcement regarding its license agreement with Bayer and to provide general business update. This call is being recorded. My name is Jonathan, and I will be your operator today. With us today are Sabrina Martucci Johnson, Daré's President and Chief Executive Officer; John Fair, Chief Business Officer; and Lisa Walters-Hoffert, Chief Financial Officer. Ms. Johnson, please proceed.

Thank you. Welcome to the business update call for Daré Bioscience. It is an absolute pleasure to have the opportunity to discuss our recent announcement and highlight some of the other milestones we expect for our later-stage assets in 2020. Before I begin, I'd like to remind you that today's discussion will include forward-looking statements within the meaning of federal securities laws which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical facts should be considered forward-looking statements. Actual results or events could differ materially from those anticipated or implied by these statements due to known and unknown risks and uncertainties. You should not place undue reliance on forward-looking statements. Forward-looking statements are qualified in their entirety by the cautionary statements in the company's SEC filings, including our annual report on Form 10-K for the year ended December 31, 2018, and our quarterly report on Form 10-Q for the quarter ended September 30, 2019. I'd also like to point out that the content of this call includes time-sensitive information that is current only as of today, January 22, 2020. Daré undertakes no obligation to update any forward-looking statements to reflect new information or developments after this call, except as required by law. Daré is a biopharmaceutical company focused on improving the life and well-being of women, primarily in the areas of contraception, vaginal health, sexual health and fertility. We continue to deliver on our vision of becoming the premier accelerator of innovation in women's health by advancing our product candidates to meaningful value inflection points and delivering on key program milestones, and our announcement last week of our license agreement with Bayer is reflective of that. On today's call, we'll review the highlights of our exclusive licensing agreement with Bayer for the U.S. commercial rights to Ovaprene, our investigational, hormone-free, monthly contraceptive and our general partnering strategy across the portfolio. We will also provide an update on the clinical development progress of our other later-stage assets, DARE-BV1 and Sildenafil Cream, and the upcoming milestones you can expect in 2020. To start, I'd like to put our recent transaction in the context of our overall strategy for value creation. Those of you who have heard us present in the past know that partnering is key to this strategy. Daré is focused solely and squarely on women's health. We recognize that being disciplined in selecting and investing in the development of differentiated products that meet a strict profile and address persistent unmet needs would create opportunities to partner with some of the world's most successful companies since many of these companies are no longer investing in the development of products in women's health despite having a robust and successful commercial capability and capacity in women's health that they want to support and maintain. We believe the licensing agreement with Bayer is validation of our broader strategy and confirmation of Ovaprene's market potential as the first potential monthly nonhormonal contraceptive product. We also believe Bayer is the ideal partner to maximize Ovaprene's market opportunity, which has the potential to be a first-in-category product for women just as Bayer has done with other first-in-category products. Bayer is committed to bringing to market innovation in women's health and is the only company to have built a contraceptive brand family with sales in excess of $1 billion. We believe in the commercial opportunity for Ovaprene and that the terms of our license agreement with this dominant player in women's health will allow Daré and our shareholders to benefit from the commercial potential of Ovaprene. For investors that are new to the Daré story, the prescription contraceptive market is valued at more than $5 billion in the U.S. alone. So what that means for companies like ours that are actively innovating in this area is that a few market share points can deliver significant value. I'll now turn it over to our Chief Business Officer, John Fair, to provide a high-level review of the deal structure.

Thank you, Sabrina. We are thrilled with the terms of the agreement and be partnering with Bayer, an industry leader in women's health. Under the agreement, we received an upfront payment and access to Bayer's extensive clinical and market capabilities while retaining control over Ovaprene's clinical development and regulatory approval process. Following completion of the pivotal clinical trial we are undertaking, Bayer receives the right to exclusively commercialize Ovaprene in the U.S. Upon a $20 million payment to Bayer -- excuse me, upon a $20 million payment by Bayer to Daré, which is in Bayer's sole discretion to make, and if received, we intend to apply to clinical reimbursement trial costs, the exclusive license to commercialize Ovaprene in the U.S. becomes effective, and Bayer will be responsible for the commercial activities and expenses. Under the terms of the agreement, we are entitled to receive commercial milestone payments potentially totaling $310 million, with the first such double-digit payment due upon the first commercial sale of Ovaprene. In addition, under the terms of the agreement, we are entitled to double-digit tiered royalties on net sales. Given Bayer's track record in building successful brands in contraception specifically and in women's health more broadly, we are confident that they are the best positioned partner to maximize the value of Ovaprene in the U.S. market, which is the #1 market for branded contraceptive products.

Thank you, John. This agreement framework also provides Daré the opportunity to immediately benefit from Bayer's expertise in development, regulatory and commercialization, which we believe will help unlock the program's full value, similar to other important contraceptive brands. As John noted, under the agreement, we retain responsibility and control of our Ovaprene's development and regulatory activities, reflecting Bayer's confidence in Daré's ability to execute on these fronts. Bayer will support us through the development and regulatory process by providing up to 2 full-time equivalents or FTEs in an advisory capacity, which essentially gives us access to their internal global manufacturing, regulatory, medical and commercial expertise on an ongoing basis. Retaining control over the development process was something that we collectively felt was in the best interest of the brand and our shareholders and given our focus on clinical development in women's health and given our history with this product, in particular, and our knowledge of the regulatory pathway. We believe partnering now with Bayer is a means to commercially derisk the program and, importantly, to unlock the program's full value similar to other innovative contraceptive brands. Given what Bayer has demonstrated with the Mirena family of contraceptive products, we believe Bayer is best positioned to maximize the market opportunity for Ovaprene in the U.S. as the next first-in-category product for women. In terms of our broader partnering strategy for other assets in our portfolio, we continue to have productive conversations with potential strategic partners for our mid-stage and our late-stage assets, and we are encouraged by the number of companies that have indicated interest in one or more of our programs. We will continue to evaluate this collaboration opportunities and the timing of such partnerships in the context of what we believe will drive the greatest value for our shareholders. Importantly, we believe that the level of interest in our portfolio for potential strategic partners as well as nondilutive funders from our earlier-stage program to our mid- and late-stage assets positions us well to drive significant value in both the short and long term for investors and, importantly, for women. I'll now provide an update on the 2020 milestones. We hit all of the clinical and regulatory objectives we set for the company for 2019. Positive Ovaprene data readout, regulatory clarity on DARE-BV1 and Sildenafil Cream. And with those objectives achieved, we have had a great start to 2020. In addition to the partnership accomplishment we announced last week, there are a number of development and regulatory milestones we expect to achieve this year, including filing the investigational device exemption or IDE for Ovaprene and starting that pivotal study to support that premarket approval or PMA submission to the FDA; starting our DARE-BV1 single Phase III study to support the new drug application or NDA filing, which we're targeting for completion with top line data available by the end of 2020; and initiating the at-home dosing Sildenafil Cream Phase IIb study, which has the potential to be the first FDA-approved treatment option for female sexual arousal disorder. Before I open the lines for questions, I'd like to reiterate that we believe each candidate in our portfolio, those mentioned here today as well as those we did not discuss, has the potential to become either first-line therapy or a first-in-category solution or both and delivers on our mandate to address persistent unmet needs in women's health. We're thrilled to have the potential for value-driving events, like we discussed in 2020 for all 3 of our lead programs. I'll now turn it over to the operator, who will open the lines for Q&A.

[Operator Instructions] Our first question comes from the line of Yasmeen Rahimi from ROTH Capital Partners.

This is Rachel on for Yasmeen. Well, our question was, what was the most compelling data used in Ovaprene that sparked the deal with Bayer?

Yes, thanks for the question. So the question was, what's the, I guess, data at Ovaprene that kind of sparked the transaction? And we announced last year the results of the postcoital test study for Ovaprene, and I will say, not only did that spark interest from Bayer, there are a number of companies that found that data -- those data quite compelling and Ovaprene, frankly, quite compelling as this potential first-in-category opportunity. And to highlight this data for those that maybe missed that press release back in November, it was a surrogate market for contraceptive effectiveness. And bottom line, the data that we reported were highly significant and demonstrated that Ovaprene prevented almost all sperms from entering the cervical canal, which is a great surrogate marker for highly effective contraceptives, and that other contraceptives have demonstrated no motile sperm in the cervical mucus in their trials of similar size, went on to demonstrate typical use contraceptive effectiveness of 86% to 91% in pivotal studies evaluating pregnancy rates over 6 months period. And that's similar in range to typical use effectiveness rates for hormonal methods like pills or patches or vaginal ring, such as the very successful NuvaRing product. And so given that this study that we conducted, our study was actually the most robust of these types of clinical studies ever conducted in the field of contraception and how encouraging the findings were with regard to Ovaprene's potential as being this alternative to traditional hormone-based options. That really led to a lot of interest in Ovaprene, certainly from potential partners like Bayer who we've engaged in a partnership with and others. And really that what sparked that was that potential opportunity to provide this hormone-free method that also does not require any intervention at the time of intercourse. So it's a compelling product profile and having the benefit of such a robust study. To share with the potential partner universe for program like this was definitely one of the -- I would say, one of the most compelling kind of last pieces of the story that we were able to deliver that really led to this partnership. So thank you for that great question.

Yes. That was very helpful. And our second question for you is, are there any reasons that the milestone payment is after completion of the pivotal trial? And will Bayer have input into Ovaprene Phase III design?

Yes. Thanks you, and thanks for that follow-up. And I know we're trying to keep it to kind of 1 follow-up for question. So thank you for that, and I'll address that, and then we'll open the line for someone else. Great question. So as I mentioned, we really structured this transaction in a way that we felt would really optimize the commercial opportunity for Ovaprene and, therefore, to us and our shareholders around this transaction. And so the agreement framework is really structured to allow us to immediately benefit, of course, from that expertise that Bayer is going to bring us in development and regulatory and commercialization so that we can unlock that full program value while, at the same time, allowing us under the agreement to retain responsibility and control over the development and regulatory activities. As I mentioned, we, collectively with Bayer, really felt, one, there was confidence in our ability to execute; and two, that was a really great structure to help us move forward and unlock the value in the program in a really efficient way. And so the whole agreement is structured to allow for that, not just that timing of that $20 million payment and how that's structured, but the $310 million in potential commercial milestones, the double-digit tiered royalties. The whole agreement was really built around how can we execute on driving this product to market efficiently, effectively and really right from day 1, having the benefit of Bayer's expertise at the table so that we can truly unlock that program's full potential.

Our next question comes from the line of Jason Kolbert from Dawson James.

I understand Bayer is a great partner, and John, congratulations. I know how hard you worked, and believe me, we would all like to know every offer that you reviewed and what the other offers look like. And the reason why we want to -- let me explain, though, okay? The reason why we want to know what all the offers were is because something you said, Sabrina. You said, "We believe partnering now." I want to challenge you. You didn't partner this drug yet. You sold the right to partner it. It's not really partnered yet. So Bayer has opt in. And the challenge or the pushback when I talk to institutions is it's great, but you sold the option instead of the actual right, right? And I understand, believe me, I'm not being critical. But I think if I want to cut right to the heart of things, we would all like to see $30 million upfront right now. Now it is what it is. And you have to make a compromise because this is the #1 company in the world when it comes to marketing. And so one place that I'm going is, how do the 2 part-time people come into this, the FTEs? Because don't want to say conflicted. Because on the one hand, if they work really hard with you and they make this happen, then I guess they make the deal happen and they get paid. But if they -- there's no renegotiation. But I'm just kind of wondering -- and again, in your own words, right? But I'm sure, on some level, a lot of -- it must have been very tempting to take other offers that brought a lot of cash upfront that, of course, would -- it would be really nice to have.

Yes. No, thank you for the question. And I'll start, and obviously, John, jump in if I miss something in responding. And I appreciate the question. I frankly appreciate the great opportunity to highlight how we look at these partnering programs and how we look at what kind of structure makes sense and how we weigh that trade-off, right, which we -- absolutely, one has to weigh, particularly in a circumstance like Ovaprene as upfront consideration and magnitude of that versus what the party is going to bring to the table in terms of potential to build the brand and what you're going to get on the back-end. And I will reiterate something that I said upfront. In the end -- and I'm a shareholder, too. In the end, we look at what is really going to have the opportunity to maximize shareholder value. And with a product like Ovaprene that has this first-in-category potential, what you want behind a product like Ovaprene is a company that has proven their ability to build the first-in-category brand, absolutely proven that ability and has been the most successful of any company in the contraceptive category and doing that. And I'm very proud to say that, that is what we have in Bayer. So first and foremost, you look at who's got that potential to give this product what it deserves, and that's them. And then you look at all the other [indiscernible], right? So that's where you start. You start with now what is that commercial opportunity. And then you look at all the other numbers that go into a transaction like this and what they're bringing to the table and other things and what's important to Daré as a company and our shareholders as well. And so this whole, as I mentioned, upfront, this whole agreement was really structured from beginning to end. It is a license. So we have signed a license agreement with payments that come in later. But this whole agreement framework is structured to frankly optimize this commercial opportunity and optimize the return to us and our investors. And from everything from who's running clinical development to how Bayer steps in and to the experts they're providing now, and I will assure you, I would never ever take it upon myself to speak for Bayer. But I think I can safely say that they are very excited to be working with us in this capacity. They're very committed to bringing those 2 FTEs in because they see the potential in Ovaprene. That's why they're putting their name next to Daré's, frankly, and next to Ovaprene. And they're doing it today because they see the opportunity in this brand, and they want to help us be successful from day 1 in making it the kind of product that it has the potential to be a dispersed investigational, once a month, hormone-free contraceptive with the opportunity of effectiveness in the kind of range it has the opportunity for. So we're super excited about that.

Sabrina, yes, can I push a little bit more in a slightly different direction than that?

Sure.

John, I hope you can chime in. So as an analyst, right, I try to take the emotion out of it and look at things mathematically. And I look at what is the potential of the drug, what's the risk of the drug, how many years away, and then I discount that back to a net present value. Where I learned how to do that is working for Schering-Plough in business development, right? Those -- it's classic pharma math. John, can you walk us through a little bit of what the math was that kind of drove Bayer in their decision?

Yes, sure. And you're absolutely right. But let me start by saying this is all down for us to commercial execution, right? That's what this is all about. For us, we feel very comfortable developing a product. We feel very comfortable with the regulatory pathway. So from that standpoint, there wasn't risk on the table. Risk on the table for us is about commercial execution. This market, in particular, needs a player like Bayer to be able to go [indiscernible].

Yes. John, let me interrupt [indiscernible] risk number and [ its success ]. So I'm not talking about emotional risk. I'm talking about the mathematics.

Yes. So let me take it. And I do want to leave time for other questions in the queue. So I do want to be mindful of everyone's time and let other questions in, but I definitely want to answer your question, John and I together do, Jason. So math definitely came into the equation, a lot of math. I personally spent 9 years as a public company CFO. So I assure you, there's a lot of math that came into the equation of how we partner. And so again, the deal that we move forward with was absolutely the transaction, to John's point, with a partner that has that expertise to execute commercially in a way that this product deserves and that financially delivers to our shareholders in the most robust possible way. So that's all I can say on that. We can't give numbers on sales projections. We can't do any of that. But obviously, I think it goes without saying, if Bayer is at the table for a product like this, they clearly see the commercial opportunity. And I'll let John have a final comment and then we will go to the next question.

And Jason, the only thing I would say is -- back to the math question is that the other piece you have to layer on as a fully burdened commercial infrastructure and what that costs and how that impacts NPV. So if you look at the math on this deal, this is great math. It's a great deal.

Okay. I really appreciate it. And sorry, I don't mean to be abrasive, but I just want people to understand that the mathematics, if you actually do the work, is pretty compelling.

Absolutely, absolutely.

No, thank you, Jason, for that opportunity. And John raised a great point on the commercial piece of it, which hopefully was clear. They are funding all of that.

Our next question comes from the line of Nathan Weinstein of Aegis.

Congratulations on the deal.

Thank you.

Okay. So one of the interesting things about Daré, in my opinion, is the interesting assets that you put together in the portfolio that could help refresh product portfolios across women's health. And so when we think about the other products that are in development beyond Ovaprene, can we think of the Ovaprene deal perhaps as a precedent case of the types of partnerships that Daré is interested in?

Yes. So John and I will answer this one together. So I'll, at a high level, just from a strategic perspective, say, yes, every transaction is a little different because every asset is a little different in terms of what really is going to maximize that program and that program opportunity. And so likely, no every deal that we do is going to look exactly the same. But these kind of partnering opportunities are exactly what we're striving for, and we have a number of innovative programs in our portfolio that are interesting to people.

Yes. And that's really how we select product candidates to bring into the portfolio. They really have to meet our criteria where they can be. They can address a persistent unmet need that's not yet being addressed in women's health. They have the ability to be delivered in a more personalized way, so nonsystemic transdermal delivery, things like that. They have a package, a data package. So we have a proof-of-concept that we can lean on and see that the product works the way we think it's going to work. And then obviously, there's a partnerable opportunity downstream. So a big player like a Bayer, for example, would look at this product and say, "Yes, I'd like to add this to my portfolio."

And if I could just ask 1 follow-up. When we think about the organization overall and what some of the knock-on benefits could be of a partnership announcement like this? I mean, obviously, it raises the profile of your company, but what are some of the overall benefits of the organization?

Thanks for asking. That's a great question. And it really does have, I think, far-reaching implications than just this individual transaction. One, clearly, Bayer is a leader in women's health, not just in contraception, but they're certainly a leader in women's health commercialization. And so we're obviously excited to be working with them not only on Ovaprene, but it just allows us an opportunity to create. But we look forward to being an outstanding relationship with one of the commercial leaders in women's health. But further, an organization like Bayer and, frankly, all the other companies that diligence the Ovaprene asset, they're not just diligencing that asset, they're diligencing Daré. And us, our potential to pick programs that are compelling and interesting and have the opportunity to succeed clinically, that we have people and processes and systems in place to help ensure programs can move through development as efficiently and effectively that we can, that we've got accretive leadership. All of those things in that bottom line, we have an ability to execute. And particularly with this transaction and how it's structured after all the months of work that go into something like this, I think it's really reflective of not only Ovaprene individually as a program but, as importantly, Daré overall as a company. And our business model, validation of our business model, we have been saying from day 1, if we build it, they will come. I'm quoting John on that. And this is great validation of that. The bottom line is, if we as a team, as a company continue to pick programs that are compelling, that are first-in-category, that are addressing persistent unmet needs, to John's point, that are delivering drugs in a manner that is really personalized to her, so leveraging the unique biology of women to deliver drugs in a way that really can enhance convenience and potentially side effect profiles because you're eliminating first-pass metabolism often and delivering them in a way that enhances outcomes, that is compelling. And something that's unique also as well that is not associated with Ovaprene because of its design but with our other programs is often by doing that, you can leverage a 505(b)(2) regulatory pathway, which there are a lot of data out there to support that products that go that pathway have a higher probability of success. And because of the nature of how we're delivering them, they're first-in-category opportunities. So you're not giving up any of that market potential. So I think all of -- a transaction like this is certainly hugely validating for Ovaprene and Ovaprene as a product. But definitely, Nathan, to your point, I think it speaks more broadly about Daré, and we certainly hope the world sees it that way as validation of us as a company and our ability to execute, both on clinical development and on partnerships and basically on our whole business model.

Our next question comes from the line of Jason McCarthy from Maxim Group.

This is Joanne Lee on for Jason McCarthy. I just wanted to say congratulations on bringing on a major partner like Bayer. And as we know, Bayer is the only company to generate $1 billion contraceptive product in the space. So with that, could you provide some color on what kind of role Bayer will be playing in the upcoming pivotal trial and getting Ovaprene really to the finish line?

Yes. So maybe I'll comment a little bit on their role going forward and the role they'll be playing. And then maybe I'll let John talk a little bit more, too, and kind of round it up then on just Bayer as a partner, right, and some of the things that went into our calculus on selecting them for this program. So first of all, in terms of their contributions, we talked about this a little bit, but maybe I'll put a little more direct spin and color on it. So as I mentioned, we have access to their expertise in development and regulatory. And certainly, at this phase in the development, we'll leverage that. But maybe I can give you some examples, for instance, on commercialization even and why having them at the table now, going back to one of the earlier questions on why now, having them at the table now, how that can matter, right? So there's a lot of work that goes into preparing a marketplace for a new product like Ovaprene. So publication strategy, medical education strategy, things like that. And so having the ability to work with Bayer today, as we're thinking through some of those opportunities, right, of where do we present data, where do we publish data, who do we involve in our clinical development programs, right, whose name do we want associated with this product, those are all things we're collaborating today with Bayer, with their expertise in the category, with the connections that they have, with their thought leader relationships. Those are very tangible near-term things that are -- hopefully, that gives a little more color, apart from the very obvious of tapping into their regulatory people as we have regulatory interactions or tapping into their clinical development team as we're working through clinical strategy. And to your question on the pivotal program, exactly working with them now as we're getting ready to implement that pivotal program to make sure we're capturing all the data in that program that is going to help be compelling in the marketplace and give Ovaprene the position and the opportunity that it deserves. And so those are some very tangible benefits on both sides, on Bayer's side and on our side of working together now. And I'll let John add a few comments as well.

Yes. And just briefly, I mean, in terms of partnerships, they are very thoughtful and very methodical organization. They were really great to work with, and both teams really enjoyed the interaction that we are now moving into alliance management mode, where we are really going to think broadly about the product opportunity, as Sabrina mentioned, thinking about ways we can continue to extend the value of the opportunity even before it's ready for commercialization. And I think it just proved positive that Bayer is really investing in the category. They're looking to extend their leadership position in this category, and we believe Ovaprene will help them do that.

And just as a follow-up, in a broader aspect, I wanted to see if you guys could kind of help me frame this. Would it make more sense to view this partnership with Bayer as they shift in this space towards more nonhormonal options? Or do you think this is more a Bayer adding a nonhormonal option to their arsenal?

That's a great question. I do think there is an unmet need for nonhormonal options, particularly when you look at something that's monthly like Ovaprene. And so I think when they looked at the opportunity and looked at the need and they saw Ovaprene, it really matched very well with some of the innovations they're looking to add to their portfolio. So I think this particular instance, it made a lot of sense for them to move in this direction.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Sabrina for any further remarks.

Well, thank you for that. And I really want to thank everyone for taking the time this afternoon and taking the time to hear a little bit more about our partnership with Bayer on Ovaprene and what that means for the company, taking a little time to hear more about how we'll be working with Bayer on advancing the Ovaprene program and a brief update, as I said, on some of the other milestones we have in 2020. And so there's a lot going on this year, and we're certainly excited about the promise that the year holds. And we are very much looking forward to keeping you updated on our progress as the year continues on certainly our clinical and regulatory milestones and partnering activities as well. So thank you for your time, and look forward to keeping you updated as the year progresses.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.