Mayne Pharma Group Limited (MYX) Earnings Call Transcript & Summary

Good morning, everybody. Welcome to the 42nd Annual J.P. Morgan Healthcare Conference. My name is Dan Delfico. I'm one of the associates on the banking team here. This morning, it's my pleasure to introduce to you, Mayne Pharma. With us today, we have CEO, Shawn O'Brien; CFO, Aaron Gray; and EVP Commercial, Daniel Moore. Just a reminder that at the end of the presentation, there will be a Q&A session. We'll have a mic being passed around. And with that, I'll turn it over to Shawn.

Thank you, Dan, and JPMorgan team for this opportunity to share the main transformation story. We're moving this company from a high capital intense business to a high-growth, high-margin business. And as I said, Aaron Gray, our CFO; and Daniel Moore are here to join me for the Q&A period. On our disclaimer slide, I'd just like to bring to your attention that these results are unaudited that I'm sharing with you today of October year-to-date, 4 months. Our fiscal year is June 30. And so, we report on Australian IFRS basis and a GAAP basis. All the numbers reported here today are either Australian dollars, and I'll highlight if they are in U.S. dollars. The historical numbers represent the go-forward businesses as we go forward. So looking at the agenda today, I'm going to share where we were 18 months ago, highlight the progress we have made against our goals and provide some insights on how the dermatology and women's health represent our growth drivers in the United States. 18 months ago, Mayne was nearly bankrupt with a capital intense business to drive its growth. While our CDMO and Generics business represented almost 60% of our revenue, both of these sectors were not succeeding due to various factors. Our CDMO represent 21%, we required a significant amount of capital to keep that moving, and we really didn't have scale in the U.S. generic space. Our dermatology business was subject to significant pricing pressures and our women's health business was based on one product, NEXTSTELLIS, which was actually not launched effectively initially. Coupled with a large debt of over $300 million, this business needed significant changes, and I'll highlight what we've done to make that happen. In a very short period of time, 2023 was a really busy year. First, we set out to reduce the complexity of the business, refocusing on our core segments, and to this end, we completed the sale of Metrics Contract Services and subsequently sold our U.S. generics business for a combined total of USD 565 million. And we expanded position in the U.S. women's health by acquiring exclusive commercialization rights for a portfolio of 3 branded contraceptive and menopausal products and a portfolio of prenatal vitamins. Secondly, we said about delivering successful commercialization of our flagship product, it's a oral contraceptive NEXTSTELLIS, we refreshed our marketing strategy and relaunched the product in the second half of fiscal year '23 to strong results. For the full year, NEXTSTELLIS revenue was up 276% compared to fiscal '22. The momentum is continuing to build, and the unit sales are increasing at 40% from the second half for prior to the first half of fiscal year '23. The strength of NEXTSTELLIS' relaunch, combined with the successful integration of the products we acquired from TXMD in January of 2023, resulted in transformation of our U.S. women's health business. Third, we have addressed the challenges of the dermatology business due to commercial practices, co-pay charges and pricing pressures we are seeing, which we first articulated last November when we actually showed negative net sales for our business at the AGM. I'm pleased to report that we saw a significant rebound in the second half of fiscal year '23 with a 314% increase in our dermatology revenue in that period, that half over the -- and returned the business back to positive contribution. And finally, we made changes to our international division. Our Australian-based specialty CDMO and specialty based pharmaceutical business to improve on manufacturing performance and our margin and commercial execution in the marketplace. We have adopted a conservative stance to our financial capital management as we transform the business with the large impact of these transactions and worked through a significant number of legacy issues with our final objective set Mayne on a path towards generating positive operating cash and returning the business to significant profitable growth. We achieved positive operating cash flow of AUD 14 million in the second half of fiscal year '23. And following our various asset sales, we ended up the year with a net cash position in June 30 of AUD 173 million. And then compared this to a year prior of a net debt position of $317 million. We also commenced an on-market buyback of up to 10%, and we recently increased that last November up to 15%. So, significant changes in the last 18 months and really pleased with the results as shown with the numbers here that I'm sharing with you. This looks at a 4-month running period from July 1st through October 30 and shows the net sales of $125 million. And we want to remind you that we reported roughly $186 million for full year fiscal year '23. So looking at a run rate of $375 million for fiscal year '24, if you look at these numbers. So, the sequential increase that we saw on the prior 4-month period is 30%. Our gross margin was up 50% to $2 million roughly, and the underlying EBITDA was $1 million. We've achieved 4 of our goals that we set out for fiscal year '24, and that's making all 3 business units contribution positive and EBITDA positive for the whole entire business. Our 2 primary segments showed strong results, and we're particularly pleased with the turnaround of dermatology business after a lot of work by the team to get the business back on track. Sales were up 55% sequentially and the margin is recovering, thanks to better performance of the core portfolio and recent new product launches. Women's Health, which is roughly 96% of our branded product portfolio had net sales were up 45% sequentially with growth in NEXTSTELLIS in the licensed portfolio of products of IMVEXXY, ANNOVERA and BIJUVA. For NEXTSTELLIS, it's worth noting that after a drop in net selling price in fiscal year '23, largely due one-off effects, our net selling price has fully recovered to prior levels, and we see opportunity for that to expand. The license portfolio is improving, and we remain conservative in our approach to gross to net accounting as we finalize the integration of these assets into our company. As I mentioned, all 3 operating segments delivered positive contribution margin during the 4-month period. In addition to driving sales growth, we initiated cost and efficiency program to reduce costs in absolute terms wherever possible and ensure that the ROI needed from the sales and marketing investments are there. As mentioned earlier, we're adopting conservative approach to our capital management as we worked through last year's transactions. And with that overview, I'll go in each segment with a little more information. First, dermatology, which is a significant turnaround. So looking at our business, in the dermatology business, we have 6 proprietary brands and over 20 generic and authorized generic dermatologics that we provide to our customers. Our newest product is RHOFADE, an FDA-approved topical cream used to treat rosacea. As of today, the main pharma dermatology portfolio actually can satisfy 1/3 of the medical prescriptions written in the U.S. for dermatological products. So I mentioned earlier, the teams undertake significant work to restructure and introduce new commercial disciplines in this business, and we're seeing the results now, but there's still a way to go. We're on track to deliver sustainable potential of our dermatology franchise as we continue to build on our market position with a strong profitable pipeline of products and meet broader product patient needs while leveraging our unique platform, which I'll highlight, which we call disintermediation. We have expected between October of '23 and June of '24 to launch 10 products in this segment. Financially, looking at our year-to-date results, and this is in U.S. figures. Our performance is really strong in the turnaround. We started late in the fall of '23. In October, year-to-date FY, we compared to the prior period, we saw a 55.5% net sales increase and a 174% increase in the margin. We're seeing improved gross to net in our channel strategy and individual economic decisioning that's driving much more sustainable and better results. We've introduced co-pay monitoring, which will drive improvements in the gross to net. And most of our business is driven on a cash basis in this market, which has been subject to significant payer -- negative payer actions in this area. As I mentioned, we've launched several new products in target, and we're seeing solid performance. Our disintermediation strategy is active, and our goal is to generate positive contribution and cash contribution from this business on a yearly basis, and we're already achieving that in the first 4 months. So looking at our disintermediation, Mayne has an ability -- let me talk about what we're trying to solve here. A lot of people going into dermatology because they didn't want to be on call. It's a lifestyle practice, and the payers put them on call. Over the years, the payers have done a significant job of making their work a lot tougher, and we're trying to solve that problem for the -- both the physicians and the patients. Patients don't like the sticker shock, they get at the pharmacy. And so we have incorporated working with GoodRx platform, and Ris Rx to be able to tell the patients within a very short period of time, less in a minute what it's going to cost them out of pocket. And 70% of our business today is cash driven through this model. So we have our own mail owner pharmacy, Adelaide Apothecary, it's licensed in every state in the nation, and we have over 400 pharmacies that we contract and distribute our products in the marketplace. We're working with significant partners like Sandoz and Galderma that bring their products in through our channel and make sure that these patients can get what they need when the physician writes that product. So we're really excited about our business model that we have here, and it's working well. And let me demonstrate that in script growth. The top line here shows that we've now become the #1 market share with Durex in that market share segment. It's the top blue line here you look at the continued growth. The middle blue line here is our ratio performance, and it continues to grow and driving #1 market share. And then recently, we picked up the global rights for RHOFADE and launched that in October. And you can see we took it from a small position as Novan had taken it off the market and drove it back to the prescription levels that it saw prior to the launch. We paid $8 million for this product upfront, plus obviously, working capital get in there. In the first 2 months of the market, we did $5.2 million net sales. So we're really excited about what we're achieving in the turnaround in dermatology. And we're going to continue to use this disintermediation strategy right across the business and in women's health. Women's health, which is 96% of our branded product portfolio division is really the significant driver of the business for the next 15 years. So if you look at a quick snapshot here, we have reproductive health and menopause management and prenatal vitamins right across the board. During 2023, we made several key moves to strengthen this portfolio. And while we're already recognized and established name with some of the patients and providers, we built on it by acquiring these products from TXMD. And as I mentioned prior, we really had a launch misstep. Our launch for NEXTSTELLIS had incongruent marketing strategy and sales strategy. We went after Loa loa and really got pegged in on one significant profile of a product where we have less bleeding. And really, we're starting -- we really picked up patients who had endometriosis or fibroid issues associated with bleeding and that really didn't work. And we'll give you some more highlights on the specifics of NEXTSTELLIS. In addition, we have a strong patent portfolio here, and we enhanced our patent portfolio. We announced on November 6 that we have secured an Orange Book listed patent to 2036 for NEXTSTELLIS to improving our ability to market this in a longer period of time. So financially, what we're seeing here is a significant up growth. If you look at the prior similar period, we're up sixfold from $5 million to $30 million and up roughly 50% on a sequential basis for our women's health division. And we've delivered $5.2 million in net contribution in that 4-month period. So as I mentioned, our NEXTSTELLIS retargeting strategy is working. We have restored our net selling price, and we continue to refine and streamlining our marketing strategy. In fact, we limited $8 million in direct-to-consumer expenses because we weren't seeing the ROI from that investment. And we've seen some other companies in the women's health area actually spent a significant amount of monies and create financial stress for the company and trying to achieve that. We'll continue to look at ROI in all our marketing investments and across women's health, but throughout the rest of fiscal year '24, we expect to complete the integration of the expansion products and deliver continued growth across all 4 brands. And now we're pursuing a growth strategy with the launch of BIJUVA half strength or low strength. And in addition, we're looking at making sure that we enforce wherever possible, the ACA law ensuring that patients do not have to take out-of-pocket expenses to get birth control. We've recently seen the state of Vermont, they enact a lawsuit against not only commercial payers, but the federal government on this front, and we hope to see more action across the country on that. So looking at NEXTSTELLIS, there's a lot of information on your left-hand side of the slide, that tells really this is a naturally occurring estrogen. It's the first estrogen come to the market in 60 years. It is the estrogen everybody experienced when they were fetus in their mother. It's called E4, and it has unique selective properties. And I'm not going to go in all one, but it results in less breast candidness, less acne, less effect on liver, less effect on cholesterol. So, what we have here is we have the same progesterone as risperidone is the and really effectively, we're positioning this product in the marketplace as Yaz-plus. You have all the benefits you've seen and enjoyed with Yaz and you have a better estrogen backing the product. So as I said, we refreshed the strategy. We've also actually hired 8 [ MSLs ] to educate the market on the benefits of E4, which we didn't launch before I came on board. And then we continue to look on the ROI and make sure that we're driving this women's health business and NEXTSTELLIS forward in a profitable way. And I'm really pleased that we've achieved one milestone that we set out for this product, and it's to get a run rate breakeven, i.e., the volume and value that we're getting on the next selling price of a product on a cycle basis equals what we're investing in that moment. From this moment on, NEXTSTELLIS is a profitable product. So we're excited about that we achieved that goal that we set out for the business and appreciate Daniel's good work to make that happen. So briefly looking at the license portfolio, we're really pleased. We have patent protection from 2032 to 2039 for ANNOVERA, IMVEXXY and BIJUVA. BIJUVA is the first and only FDA-approved combination by identical estradiol and progesterone product for VMS. As you see, NEXTSTELLIS is quite active in the marketplace, selling their -- and communicating the benefits of treating VMS in post-menopausal women, and we're going to see a lift. And so just this week, we launched the half strength dose of BIJUVA and to create more access for patients to the market for this important therapy. ANNOVERA is self-inserted vaginal ring for contraceptive and the patients can get a full clinical effect for up to a 1-year period. And so there's a good lifetime value when we get generative prescription for that business. So if I look at the outlook of the business in dermatology, as I mentioned, we have 10 launches of note, Soolantra it was launched last week. And generic Accutane is being launched this month. And Dapsone 5% will be launched towards the next quarter. And in women's health, we just launched BIJUVA this week. Working with GoodRx, it's been a good experience. The NPS score for GoodRx in the 90s. So both consumers and physicians really like this tool and then having the backbone assist Rx to ensure that we actually know all the data behind the patients out costs out of pocket and what it's going to cost, we are able to transact and create that commitment and create that adherence to our products. We'll continue to work with the policy people on the ACA enforcement for contraceptive and look forward for that tipping point for that to come through, which would improve our gross to nets, obviously. And then we can continue to ensure that we can deliver our products in innovative ways and then make sure that we have the right products for our patients, both in dermatology and women's health. And then financially looking at the -- what are the drivers for the business here? Completing the integration for the women's health, continue the growth there that we've seen for NEXTSTELLIS, ANNOVERA, BIJUVA, with that new launch and act on the ACA wherever possible. We expect and have delivered contribution margin from all 3 business segments and continue to see that happen for the rest of the year. We expect to be cash flow positive by the end of the year. From an operating standpoint, on a go-forward basis, we've had positive operating cash flow as we communicated for the first 4 months of the business. The negative cash burn has all been on residual effects of the prior businesses that we have sold. The international business, we haven't spent much time on that, but we're really investing to ensure that when we bring the capacity up to the speed, procurement and supply chain and improve the productivity of that facility as well as penetrating what we can with NEXTSTELLIS in Australia. And then dermatology with 10 launches in a very short period of time, and this meeting has been very productive for others to see what we can do for their products in dermatology. We expect to bring more products into the marketplace through our model. So I'm open to questions that you have on the business and sit down and Aaron, myself and Daniel answer any questions you have at this point. Thank you for the opportunity.

Thank you again for the great presentation, Shawn. I'll start us off. Maybe going with the derm portfolio in particular, can you touch on how your strategy allows you to be profitable in that segment? And what you're doing differently versus others?

Sure. Daniel, do you want to take that?

Sure, I'll take that. I think what we've seen in dermatology, really over the last 10 years is payer coverage has eroded considerably through plan design changes or exclusion list, whatever it may be. So we've set ourselves on a mission that's really been ongoing for some time to be profitable at cash. So we want to make sure that patients can access our products in a way that they're willing to pay the out-of-pocket costs. And that's kind of culminating in our partnership with -- GoodRx prescription services and our wholly owned pharmacy, where we're developing real relationships with patients and prescribers and meeting them where their needs are because the underlying conditions didn't change, their access to medications did. So we want to make sure that we're able to provide them, again, the products that their prescriber wants to have at an affordable and reasonable cost.

Maybe turning to the women's health portfolio. Can you just touch on your level of IP protection in that area?

Do you want to cover that, Dan?

Sure. So really excited about what we recently announced on NEXTSTELLIS with patent coverage through 2036. And a big driver of the in-licensing of the assets that we completed a little over a year ago and ANNOVERA, BIJUVA, and IMVEXXY was the fact that not only did the products serve meaningful needs of women, but also we had patent protection for a long period of time from 2032 to 2039, which gives us time to integrate the products and market them effectively and really generate a great return for our shareholders.

In addition to that, the hurdles for a product like ANNOVERA for a generic company to reproduce that is significant, north of $50 million. So there's a patent to 2039, but will somebody actually have the ability and the economics to come to the market. So that could be a product that we don't see an LOE possibly.

And maybe can you just touch on how you're planning to continue to drive profitable growth in women's health segment?