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After Robert Finizio sold his medical technology company, Care Fusion, to Cardinal Health in 2006, his plan was to put all the money into bonds and leave it there to grow. For his next job, he figured he'd find a nice, safe product category or a business that was mostly sales focused. The one thing he definitely did not want to do was start another R&D-heavy company that would require a huge personal investment, recalls Finizio. "I really didn't want that pressure again." Then a new neighbor bought a house down the street from Finizio's in their Boca Raton development, and all of that changed. Brian Bernick, an obstetrician-gynecologist who had served women for a quarter century shared Finizio's entrepreneurial mindset. "Most OB-GYNs aren't interested in that type of thing, so that was surprising," says Finizio. The two hit it off and were soon exchanging ideas about the large, unmet need in women's health and how they might meet it if they put their heads together. Before long, they had founded TherapeuticsMD with the goal of offering pharmaceutical products designed for the full lifecycle of women's reproductive health—from contraceptives to prenatal vitamins to menopause. "Basically I put all the money I made on Care Fusion back into this company and did the exact opposite of what I thought I would do," says Finizio. But the effort and investment has paid off, he says. In 2018, after more than 10 years of clinical development, TherapeuticsMD became the first company to get three new drugs—Annovera, Bijuva and Imvexxy—approved by the FDA in one year in a single specialty. And in just the past year, Imvexxy has taken 10% of the market in a product class that has been around for more than 50 years and is well genericized, says Bernick. Chief Executive sat down with Finizio and Bernick to talk about the opportunity they found in a once crowded space and why, despite a Street that hasn't quite recognized their progress, they see much growth ahead. [caption id="attachment_73339" align="alignright" width="280"] TherapeuticsMD Co-Founder and CEO Robert Finizio[/caption]
What was it like entering this field as a startup competing with established pharmaceuticals?Finizio: In the last five or six years, the larger pharmaceutical companies, even the midcaps, have really left this space. In pharmaceuticals, supply chain will take about half of the drug's cost—it's gotten so exorbitant, the large pharma companies have left most of these areas, especially women's health, and moved on to rare diseases, oncology, areas where the price points are very high, so that even though the patient population is low, they can have a much more profitable run. The high-volume, low-cost areas, even though it's a bigger population, have seen a real lack of innovation across the board, women's health being most deficient. And then if you look at the generic industry, they have price-fixing going on, they have issues with taking products that are difficult to get and upcharging them 3000%, 5000%—so there has been a lot of abuse in the system. Our company has taken the price-at-parity approach to all our products and we haven't charged these exorbitant premiums that a lot of people have done.
What made you focus specifically on this space?[caption id="attachment_73340" align="alignright" width="280"] TherapeuticsMD Co-Founder and Director Brian Bernick[/caption]
Bernick: We had identified these chronic conditions that women spend a long period of their life with. When you look at reproductive health, contraception and family planning, a woman's going to spend the better part of 30 years in that state.They could go on a contraceptive product for literally up to 30 years or they could be trying to get pregnant and need to be on a pregnancy related medicine, like our prenatal vitamins—and then there's menopause, where women will spend well over 30 years in that state and will want to use our products. So it's an opportunity to capture women in these conditions and keep them on product for a long time, which is really rare. Most medicines, as you know, treat a disease state and then it goes away. These are disease states that stay with women for a very long time. So we took my experience for 25 years, my patients' experience, my colleagues' experience and we went out and we designed products that offer comfort, convenience and really fit well with the modern day woman, how she lives her everyday life, and we did so with a big commitment to being affordable.What kind of response are you getting from providers and patients? Bernick: From both the medical community and the women themselves, what we're hearing is almost like a thank you—thank you for being committed to women's health, where everyone else has abandoned women's health for these more attractive, high-dollar products. They're also saying, what took so long for companies to bring these products [to market]?
The time to market in pharmaceuticals is obviously much more protracted than, say, technology, so you can't quickly innovate to avoid disruption. How do you deal with that?Finizio: So your barriers become your strengths and your weaknesses become your strengths when compared to a technology company. CareFusion was largely focused on medication safety technology, so I know the software world very, very well. When you're in a heavily regulated environment like we are now, for someone to compete with you, they have to go through the same regulatory process unless they're generic. When someone wants to compete on a branded basis, they have to go through a 10- to 15-year development time cycle and the average drug development cost is $1.2 billion. So someone has to be really, really sure and have a lot of time to come after us. Whereas the software, you can turn on a dime, you can make a new hardware device, you can make a new software application and if you have enough developers you can move things very quickly. Here, there is a long process of each phase and each phase has to be met with statistical significance, safety and efficacy at a certain population amount. it's a long, slow process with this much regulation, so although it's very difficult and expensive to get there, it provides a lot of barriers to entry that don't exist in normal product areas.
Do you feel frustrated that your share price doesn't seem represent your recent successes?Finizio: We think it will definitely work itself out. What's happened is that specialty pharma launches, from an investor standpoint is, have gone from most doing very well to most not doing very well. What you're seeing a lot of success with is biotech oriented, products that are not looking at day to day life satisfaction and comfort, but at disease states that are threatening like cancer or rare disease with a small population and very high dollar, or that are wildly scientific like genetics, genetic therapies, those are stocks that are still doing very well. You go back to 2015, '16 even part of '17, spec pharma stocks like us and dermatology and neurological companies, were doing well. So the exodus as been very clear away from spec pharma and into biotech. Now that that's happened, companies that can get out, take rapid market share and turn a good profit, those companies will be the new set of winners since these changes have happened. And I believe these changes in market perception are due to payer rebates, or the amount of money you have to give back to an insurance company to cover your product, and due to supply distribution costs being 10% to 12% for a small company. So it's taking so much of the apple, there's not much left for the company. Our strategy takes all of those factors into account and our only goal is to become profitable and not be dependent on the market for capital. We're very unique in an area where there's a huge unmet need, not a lot of innovation and very little promotion going on with current products. I don't have to spend a lot on marketing to get the attention of doctors. We can leverage one single sales force [for all three products], so the efficiency here is significant and the ROI we believe will be pretty strong. These markets are also growing and underserved, so there's room to grow all of these markets, significant room, because no one has been there for a while, right? I think we're a victim of a macro pharmaceutical trend that's going on. Given all of the things we talked about, uh, that are negative headwinds, like the politicking—[saying] "Medicare for all," "everybody will be priced like a generic," "we're gonna take all the pharmaceutical money away"— the mutual fund generalists have left this space. The only spaces they're in now are the high-tech genetic spaces, or high-tech cancer spaces. So that leaves only the pharmaceutical specific funds and indexes, which leaves less people to buy your stock. I think assuming we continue to do what we've done, which is clearly execute and get market share with these three products, our ability and our focus on becoming profitable will definitely turn that share price around—assuming we're successful, which is our only intention.
How much time do you spend talking to investors vs. on talent strategy?Finizio: I manage all of the investor relations here and I spend probably four weeks a quarter out with investors; the other eight or nine weeks per quarter I spend focused on internal initiatives. Brian has less of a role with investors and more of a role with customers. But the only way we're going to be really successful and it's very, very clear in every business I've been in or that I've observed is, you have to get the best people around you that you can. My goal is not to be the smartest guy in the room. My goal is to have the people around me that have done what we need to get done before, and they're good at it. So, in essence, the adage of the company is to take a 12th grader and put them back in third grade to do it again—it just might be a little bit different this time. So we've tried to take that trend, whether it's on sales, marketing, clinical development, accounting, you name it, and get them to help re-establish these products in their capacity with women, re-establish these products with OB/GYNs and reestablish the connections in markets and in the media—and I think so far we've been doing a great job.
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