Thank you for standing by, and welcome to the Evofem Biosciences Third Quarter 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one on your telephone. As a reminder, today's program is being recorded. Now I'd like to introduce your host for today's program, Amy Raskopf, Vice President of Investor Relations. Please go ahead.
Thank you. Good afternoon, everyone, and welcome to the Evofem Biosciences results call for the third quarter of 2021. If you haven't done so already, I encourage you to access the press release we issued earlier today and the presentation that accompanies this call, both of which are at evofem.com under the Investors tab. Before we begin, I would like to remind you that remarks on this call will contain forward-looking statements which are made only as of today, November 15, 2021. For a more detailed description of important risk factors that could cause our actual results to differ materially, please refer to our annual report on Form 10-K and our most recently filed Form 10-Q. With that, I'll turn the call over to Evofem's CEO, Saundra Pelletier.
Thank you, Amy. Thank you everyone for joining us today. Our focus on driving awareness and uptake for Phexxi for hormone-free birth control enabled us to reach new heights for the fourth consecutive quarter. The substantial Phexxi growth in Q3 and Q4 to date is being elevated by the House Rules DTC campaign starring Emmy Award-winning actress Annie Murphy, which we launched on September ninth, as well as the ongoing work of our sales force with OB-GYNs, nurse practitioners, and midwives. More than 19,000 prescriptions were filled in Q3, which is a 48% increase from Q2. Q4 is off to a strong start with a spectacular October. Monthly total prescriptions, which jumped to over 7,800 in September, grew 27% to a new record high in October.
I'll discuss other metrics and ongoing initiatives in greater detail after our CFO, Jay File, reviews the financial results. Jay?
Thank you, Saundra. Today I'm going to focus on the third quarter of 2021 relative to Q2, since we believe sequential growth is more meaningful at this stage of our corporate development. Solid growth in ex-factory sales of Phexxi drove a 29% increase in gross revenues in Q3. This was offset by gross to net adjustments, most of which were for programs that we put in place to better ensure that cost and coverage are not barriers to getting Phexxi to those women whose plans are not yet covering Phexxi at zero copay, despite the intent of the Affordable Care Act. Primarily as a result of these GTN adjustments, we saw a slight decrease in net product sales to $1.7 million for Q3.
Research and development costs were $8.7 million, up $194,000 from Q2, reflecting higher enrollment in our pivotal phase III trial, EVOGUARD. Positive outcomes should enable us to expand the Phexxi label to include two new indications, the prevention of chlamydia and gonorrhea in women. As a reminder, trial costs for EVO100 are covered through the end of the year by restricted cash from the Adjuvant investment last fall. Selling and marketing costs were $30.5 million, up 12% from Q2, due primarily to higher media expenses related to the House Rules DTC marketing campaign. General and administrative costs were $5 million, down 23% from Q2, primarily due to reductions in payroll-related expenses, including stock-based compensation.
As a result, total operating expenses were $45.1 million, up 5% compared to Q2, and our loss from operations was $43.4 million. We currently expect fourth quarter operating expenses will be lower than Q3 by several million dollars, primarily driven by a shift in our DTC strategy away from broad awareness tactics like television to digital channels such as streaming and other social media-based approaches. As we look forward to 2022, we expect to reduce total operating expenses by approximately $50 million. The key driver will be marketing expenses, which we anticipate will be approximately 50% lower than 2021 levels. R&D expenses are likely to remain at 2021 levels due to the ongoing EVOGUARD trial and preparations for the sNDA filing. We expect G&A will also remain flat.
We plan to provide more guidance for 2022 during our year-end 2021 call in March. At the close of Q3, we had $14.9 million in cash and cash equivalents, as well as $9 million in restricted cash from the Adjuvant notes available for use. This totals $23.9 million for use in ongoing operations as of September 30, 2021. In October, we raised $10 million in gross proceeds from the sale and issuance of shares of our Series B preferred stock to an institutional investor. We believe our existing capital resources will be sufficient to sustain our planned operations into the first quarter of 2022. Finally, I want to address the notice we received in late August from Nasdaq about Evofem's noncompliance with Nasdaq's listing standard because we do not currently meet the minimum bid price requirement.
We have until February 21, 2022 to regain compliance, and at that time, if the stock is still trading below $1, we anticipate being able to apply for an additional six-month grace period. We have an approved asset that is growing faster than any other recently launched contraceptive brand, as well as several near-term catalysts that we believe position Evofem for success. We currently expect that we will regain compliance with the listing standard within the allowed timeframe. With that, I'll turn it back to Saundra.
Thank you, Jay. Today, you're going to hear detailed and tactical information about Phexxi, both successes and challenges that we are working to overcome. I'm going to shed light on some tough issues to help you better understand our strategy and why we stand undaunted and highly positive about the future of Evofem and Phexxi. As Jay mentioned, the strong top-line growth we are driving is not currently reflected in our net revenue. As we discussed on prior calls, this is primarily because of a co-pay assistance program we implemented at launch to ensure that costs and coverage are not barriers for any eligible commercial patient to get Phexxi. Our co-pay programs allow the Phexxi savings card to be seamlessly applied to patients' out-of-pocket costs.
In the absence of these programs, not having coverage from insurers will cause a prescription to be denied at the pharmacy, which will result in a call to the prescriber to make another choice. This will result in the loss of not only that prescription and future refills of that prescription, but it may also cause the prescriber to refrain from prescribing Phexxi in the future because pharmacy calls take time from both the prescriber and their staff. It is for these reasons that we implemented co-pay assistance programs that ensure women are able to fill their Phexxi prescriptions when they face coverage denials or step edits. If we were not using these programs to build our base of users, we believe that our net revenue would be well in line with current analyst consensus.
The reality of the situation is that due to the innovative nature of Phexxi, there is still work to be done to gain inclusion in the Office on Women's Health Birth Control Guide. Until that time, which we believe is soon, we are prevented from effectively building our prescriber base while optimizing revenue. What does that mean exactly? It means that if the Office on Women's Health maintained a medically accurate birth control guide, we wouldn't have had to make that difficult choice to prioritize building the base of prescribers and Phexxi users because Phexxi would be covered like the Affordable Care Act mandates since it is the only vaginal pH modulator. The truth is that coverage denials and step edits should not happen under the Affordable Care Act.
Under the spirit of the ACA, health insurance companies should cover at least one product in each category of contraception at 0 co-pay. If all health insurance companies acted as they should, use of our savings programs would be dramatically lower, and we would stop supporting the prior authorization process with both our time and our money. Our net revenue and margins would dramatically improve. Clearly, some health insurance companies are acting in their own interests, not in the interests of patients. It will take a bigger power to force them to change. This is why our ACA strategy is of critical importance, and I'll come back to this in a few minutes. The other factor to keep in mind is the healthcare provider.
It takes a great deal of outreach and effort to educate OB-GYNs, nurse practitioners, and midwives, and even more to get them to change their attitudes, behaviors, and contraceptive prescribing habits. Phexxi is both a clinical and a behavioral sell. Our sales representatives are working to overcome the deeply ingrained habit, the gold standard mentality, if you will, following the norm, meaning the standard practice of prescribing oral contraceptives that are systemic, delivering hormones every day when the reality is women do not have sex every day. Our reps are doing a fantastic job. More than 10,000 healthcare prescribers have written a Phexxi prescription since launch just over a year ago, and we continue to grow the provider base as well as to work to increase the prescription volume per provider.
The challenge is that the coverage denials, step edits, and prior authorization letters, or PAs, required by some health insurance companies can easily result in prescriber fatigue. This, in turn, can result in them reverting back to old habits of writing hormonal contraception because it's easy, which puts us back at square one. Despite how easy the process is, some prescriptions are never filled because of the need for a prior authorization letter or PA. To combat this, our reps check frequently to ask if PAs are getting done. While 60% of the PAs that are submitted get approved by the health insurance company, let me be obvious, 40% of women are being denied access to their contraceptive of choice. Essentially, our reps have a two-call approach. They sell Phexxi, and they explain the simplicity of PA forms when they're needed.
We have observed real demand for Phexxi across the United States. Women everywhere are beyond hormones. Yes, we could sacrifice prescription growth, which would improve our gross to net and our net revenue. We did exactly that in Q2. We changed our savings card for six weeks. During this period, many prescriptions not covered on formulary, including those that required a PA, were lost. With that, we lost some prescribers and a number of patients who were not able to get Phexxi, the hormone-free birth control of their choice. Halting our programs improved gross to net in Q2. If we had not started them up again, the negative impact on prescribers and consumers alike would have translated to a business with little chance of long-term success. The near-term gain was not worth it.
We prioritize access to Phexxi over GTN and the bottom line with the expectation of improvements following governmental action on the ACA. We are successfully building a strong base of healthcare providers, writing the product, and dramatically growing the number of women using Phexxi. More than 19,000 prescriptions were filled in Q3 alone, and we exceeded 10,000 TRx for the month of October. Our sales force efforts are dovetailing with rising consumer brand awareness, which climbed to 14% in September after just three weeks of the House Rules campaign, which we launched on September ninth with our celebrity ambassador, the fabulous Annie Murphy. When I say she's fabulous, it's not just because she's famous. It is because her testimonial really speaks to the fact that she felt that her hormonal side effects made her feel like there was something wrong with her.
Many women have resonated with that message because it is not just overt side effects, it's the covert side effects that also make Phexxi an excellent choice for these women. Brand awareness continues to rise. We hit 19% in October, which is approaching the level of the most successful women's healthcare brands launched. Greater awareness is leading to more and more women requesting Phexxi prescriptions and to more healthcare providers recognizing the unmet need for Phexxi. This, in turn, is driving new highs in prescriptions and unit sales week after week and month after month. Comparing the six weeks before and after the House Rules launch, more than 10,000 new Phexxi prescriptions were written in just six weeks, a 94% increase, and total prescriptions grew 81% to more than 13,000.
Dispense units, which are boxes of twelve prefilled Phexxi applicators, were up 82% with more than 15,000 Phexxi boxes dispensed in the six weeks after the House Rules campaign launched. This number is higher than the number of total prescriptions because some women's Phexxi prescriptions are for more than one box of Phexxi. 2,700 healthcare providers wrote a new Phexxi prescription in September, a 34% increase over August. Women are asking for Phexxi, and healthcare providers are increasingly prescribing it for them. We believe that the early results of the House Rules campaign clearly demonstrates the high unmet need. As Phexxi awareness continues to grow, we are confident so too will brand consideration, healthcare provider discussions, and ultimately conversion to Phexxi. Turning back to ACA, we are committed to assuring that all women have access to Phexxi as their choice in contraception.
There are two parallel strategies in play here, and either one should be a win for Phexxi, for women nationwide, for Evofem, and for our shareholders. Path one is for the Office on Women's Health to update the birth control guide. When it was developed, this guide listed all available birth control methods that were FDA approved at that time. Methods, not products or brands. It was developed as an educational tool, and it served its purpose. The ACA, which was passed in March 2010, specifies that at least one product in each category will be covered as a covered benefit at zero out-of-pocket pay to women. Well, that was 12 years ago. The chart has not been updated since then.
It is sorely outdated, and it does not include subsequent advances in contraception using new delivery methods, including Phexxi, a vaginal pH modulator, which is in our label given to us by the FDA. We are working to get the Office on Women's Health to update the chart to include a new vaginal pH modulator category. Phexxi is the only FDA-approved product in this category, and under the current rules and regulations, it will be a covered benefit. We believe this is the simplest and most straightforward path. As part of our strategy, we are collaborating with the Coalition for Hormone Free Contraceptive Coverage to raise awareness and support this issue. We launched a petition on September 17, and in just six weeks, our petition garnered over 12,000 signatures. I encourage you listening today to sign and share our petition to help us reach 20,000 signatures by Thanksgiving.
You can access it through the QR code in our presentation or at contraceptivecoverage.com. Two weeks ago, I spent a full week in Washington, D.C., to educate key policymakers on the need to update the birth control guide. I met with more than a dozen key legislators in both Houses of Congress, including Senators Susan Collins, Patty Murray, Alex Padilla, and Congresspersons Scott Peters, Eric Swalwell, Jackie Speier, Diana DeGette, and Sara Jacobs. I also gained audiences with top staff at the Health Resources and Services Administration, as well as the most senior domestic policy advisor in the Vice President's office, and Wally Adeyemo, the Deputy Secretary of the Treasury. Along with our team that has worked tirelessly on this issue, I presented our case to them as well as our petition. This demonstration of consumer demand for hormone-free birth control was very compelling to these policymakers.
The second path is for the Health Resources and Services Administration, or HRSA, to issue updated guidance to insurers in the United States to prevent the chart from being a limiting factor and require that these insurers cover new and unique contraceptive methods such as Phexxi. Currently, some of these insurers are using this as a loophole to prevent women from getting coverage. In October, four House committee chairs wrote a letter to the U.S. Secretaries of HHS, Treasury, and Labor calling for action to ensure coverage for the full range of contraceptives under the ACA. The letter mentions that certain health insurance providers are blocking access to products that is clearly outside of the spirit and outside of the intent of ACA. The letter called for action to stop these practices now.
We see this as a very positive development and believe it is well timed given the ongoing HRSA review of its guidance regarding contraceptive coverage. We are optimistic that the department's review will culminate in a favorable update to the current guidance. That said, we are developing contingency plans while we continue to push hard in D.C. Under the spirit of ACA, we believe Phexxi should be a covered benefit at zero copay. We are not asking them to send us to the moon. This is just an administrative update. We are pushing hard because it's what is right for women. It's what's intended under ACA. It's what's right for Evofem. It's what's right for our shareholders. Turning to R&D.
We continue to advance the development of EVO100 for the prevention of chlamydia and gonorrhea, with the goal of expanding the Phexxi label to include these potential new indications. According to the CDC, every sexually active person is at risk of catching these common infections. There are no FDA-approved prescription preventative measures. Right now, the choices are condoms or abstinence, and based on the continuing rise in reported STI rates, clearly this is not enough. In October 2020, we initiated our pivotal phase III trial with the goal of enrolling just over 1,700 women by year-end. Enrollment has been a little slower than predicted due to COVID-related issues, including labor shortages affecting our study sites, our CRO, and testing laboratories. We are constantly evaluating every available strategy and implementing new tactics to help overcome these hurdles.
Based on the challenges in the macro environment and where we are today, we now expect enrollment of our last patient in Q1. We will still report top-line results in 2022 and assuming positive results, we will file our sNDA with the FDA in Q1 of 2023. Looking outside the U.S. Discussions are ongoing with potential global and regional partners for commercialization of Phexxi in key international markets. We're very pleased that the opportunity for Phexxi and hormone-free contraception, as well as the potential opportunity in the prevention of chlamydia and gonorrhea, is resonating with many strong potential partners. I can't go into more detail since these conversations are quite delicate, but I will tell you this. The initial opportunities will probably be in Asia Pacific or in the Latin America region.
We expect the structure will include an upfront payment, commensurate with the size of the licensed market or markets, as well as milestone payments and royalties on future product sales. Meanwhile, we recently submitted our first regulatory registration outside of the U.S. to Mexico under the trademark Femidence. This is the first of several strategic regulatory submissions planned under our 2020 Global Health Agreement with Adjuvant Capital. The goal is to ensure that safe, effective, high-quality contraceptive and STI prevention products are made available to women and healthcare providers in low- and middle-income countries on terms that are commercially viable for Evofem. Assuming approval by the Mexican regulatory agency, we expect Femidence will be available in Mexico in early 2023.
We look forward to the day when all women, regardless of income or geography, have access to hormone-free birth control that they can use on their terms, only when they need it. With that, operator, please open the call for questions.
Certainly. Ladies and gentlemen, if you have a question, please press star then one. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. Our first question comes from the line of Ram Selvaraju from H.C. Wainwright. Your question, please.
Hi. Thanks very much for taking my questions. Firstly, I was wondering if you could comment on the overall Mexican market situation as this pertains to female contraception and how, given the unique nature of that specific target market, Phexxi might be a particularly attractive additional entrant.
Yes. Thank you for the question, Ram. A couple of things I would say. Almost 50% of our enrollment in AMPOWER were women that were of Latin American descent. Some of the feedback we received is that based on their religion, mostly predominantly Catholicism, that they loved the fact that not only did this product have no hormones, but that because it was hormone-free, it did not impact their natural cycles and the way their body worked. They felt that that gave them a more natural way to manage their fertility, and they thought that that was incredibly positive. We do believe that. The other thing, frankly, is that in feedback that we got in market research, they had no issues whatsoever with something that was vaginally administered.
We feel very good that talking about the positive benefits of the product, the attributes are going to be received and the uptake is actually going to be quite rapid, frankly. We feel good about that. As we mentioned on the call, it will be a different brand name. We will be able to, you know, understand and focus on how we build that separate from the Phexxi brand in the U.S.
Great. Secondly, I was wondering if you could comment on, you know, the previously mentioned, strategy for, recommending Phexxi use specifically in women who are undergoing hormonally based treatment for cancer, because obviously for those women, hormonal contraception, would not be an appropriate choice. You know, what new developments there may have been on that front and what you are expecting to pursue, if any, you know, the new activities aimed specifically at that target population over the course of the coming months and quarters?
Yes. Well, here's what I would say to you is that we have partnered and continue to partner with the group, NCODA. They did a PQI, a positive quality intervention. This positive quality intervention talks about you need to treat the total patient. Don't just treat her cancer, treat the total woman. That when these women get done treatment and they wanna go back to their lives and have intimate relations with their partner, that the last thing they want is to get pregnant, to your point, Ram, 'cause it will grow their estrogen cancers. They're recommending Phexxi as the ideal product of choice, not of course, because it's not hormonal, but a lot of these women have to take anti-estrogen for five years or 10 years every single day, which re-creates a lot of vaginal dryness, a lot of pain with intercourse.
Phexxi is actually growing among the oncology community. The other thing why I'm glad you asked this question is that when I was in D.C., I can tell you this, if people wanna try to close their ears and they wanna try to not listen to me because they don't wanna do any hard work, when I call out the fact that their vulnerable constituents, 800,000 women get cancer every year, and how about the women last year and the year before? How about their daughters, and how about their sisters? Do they wanna be part of a movement that denies these vulnerable women coverage, or do they wanna be part of a movement that provides access for all women, but in particular, these vulnerable women?
I will tell you that the cancer patient was a way that they could get behind it. Now, you would hope that they would care about the 23 million women that are also beyond hormones, but in some cases, when they thought that was a bridge too far, helping a, you know, bad pharma company just didn't seem to meet their standards. No one could deny that population was deserving and vulnerable, and that the one company who's actually innovating, not coming out with more hormones in a different delivery system, that an actual innovator should not be denied access.
The final thing I will say is that, you know, I actually agitated to the point where I said, "Look, who is gonna be motivated as a pharma company to innovate in women's health when a company like ours has provided a co-pay card to allow access, and which we're no longer gonna be able to continue to do because, you know, we have to stop that at some point. We're not gonna be available anymore because we might go out of business because the Office on Women's Health is denying innovation in the category. So, you know, we have been very fierce about that message. I'm glad that you asked 'cause I really want our shareholders to hear that. We're not being polite and going and having a cucumber tea party.
We're going there saying, "Listen, you better wake up because we're done being polite 'cause you're not doing the right thing, and the Office on Women's Health is not doing the right thing, and insurers are using it as a loophole." Sorry, Ram, I went on a little soapbox crazy there, but sorry about that. Thanks for the question.
No, that's very helpful. Lastly, just wanted to get some additional details regarding some commercial aspects. Firstly, I was wondering if on the marketing front, you feel that given the critical mass of awareness that has been built around Phexxi with the House Rules campaign and other initiatives from a DTC perspective, whether you believe that at this juncture it's the appropriate point to transition into a different kind of marketing approach, a different kind of marketing strategy that isn't quite as capital-intensive, and that this, in fact, would not really sacrifice the ongoing commercial growth because, as I mentioned, you know, the critical mass of awareness has been built. Secondly, just very quickly on pricing. I understand that you folks took a price increase relatively recently.
Do you anticipate pricing for Phexxi to remain stable on an ongoing basis from here on in, regardless of what happens with the co-pay card?
Yeah. I'll take the first one, and then I'll let Jay jump in. To your point, we were very, very strategic about how long we ran the Annie Murphy House Rules campaign, knowing that we needed to build a solid base so that once we weaned off the most expensive piece, which is television, then we would be able to maintain that base and continue to grow. I would tell you that getting to 19%, it was very, very significant. I would say this, I would say that we feel very confident that the base is built, that going to these other social media outlets are going to be a way to not just maintain, but continue to grow the business.
Yes, we needed the broad awareness, and we needed to be appropriately provocative so that we would be memorable and people would want more so that when we go to these other social media channels, they're gonna be interested in looking. You know, they're gonna know that it's not gonna be on television necessarily, but it's going to be in other social media outlets that are obviously gonna be more cost-effective for us. Also, I want you to know that Annie Murphy has agreed to be our ambassador for a full year. That wasn't just a one and only. She's gonna continue to do other things in other social media outlets because I have never met a more passionate advocate for a brand. I really mean it. She is in love with Phexxi, which is wonderful.
Yes, we feel that the base is built. We don't feel that there is gonna be a downturn. We feel very good about that. We also have been very smart about shifting and dialing back a little bit on social media influencers. We now have enough data, Ram, and enough metrics to know what is working exactly, what are the social media channels we should continue to invest in, what are the ones that didn't actually deliver as much as we hoped, and we are stopping those. It's actually a very specific menu of what we're gonna continue, what we're gonna stop, but we feel very, very good that we're gonna continue to grow the base. Now, as far as the price increase, you're right.
We did take a price increase, and we did that frankly, based on looking at a proxy of the market dynamics. What were other contraceptive products doing, you know, across the board? Jay, I don't know if you wanna speak to that.
Yeah. No, you're correct. We did do an annual price increase that was effective October first. Part of the natural process with the pharmaceutical, we assess that on an annual basis. We do not anticipate doing any other adjustments until approximately the same time next year. We're at stable at $294 in light of any other business changes that might come with our co-pay programs.
Ram, just to add to that, only because, you know, when I've interacted with you, I don't wanna pretend I know how you think, but I know that you know, you do full circle, and here's what I mean by that, is that when I got back from D.C., although I really do believe that we were memorable, our voice was heard, and people know that we are serious, and we are going to keep pounding the pavement until we get success. I came back and met with the team and said, "We need to be realistic, and what needs to happen is that we need to really look at the co-pay card.
We need to not rip off the Band-Aid completely, but we need to significantly dial that back so that women aren't going to zero like they would when we get our own category, but they have to give some additional pay. Now, a lot of these women are already using the product. They love the product, and they've seen the benefits and the attributes, so we feel confident that we can continue to maintain them as users of Phexxi. You will see in Q1 an improvement in our gross net, and you will see over the year an improvement in our revenues as a result of that, which is important. You know, we built our base. We did it strategically. We did it by design. Now, you know, our sales force is going to have to really continue to pull through.
Thank you.
Thank you. Our next question comes the line of David Amsellem from Piper Sandler. Your question, please.
Thanks. Just have a couple. You know, first, I understand the sort of palpable frustration with policymakers to date, but I guess looking forward, what happens if you just can't get where you need to be in terms of coverage under the ACA mandate? Do you think about potentially looking to evaluate strategic alternatives? Does it get to a point where potentially it makes more sense for the asset to be part of a larger portfolio? Maybe the other way of asking it is, without its own category, can Phexxi get to critical mass with Evofem being a standalone company? Thanks.
Thanks, David. Here is the answer, that right now, as we've said before, we have 55% coverage, and with prior auths, that is basically bringing it up to about 70% of the prior auths that are going through. But here's what I want you to hear, that we have made a decision as an organization based on the demand that plans have seen. For example, the plans that are denying us and are saying, "Oh, well, if you're not a method under this chart." The one thing I wanna make sure everybody understands is that this chart by the Office on Women's Health, the Office on Women's Health said to us, "Listen, this is only supposed to be an educational tool. Why do you keep bothering us?
This is not supposed to be a proxy for healthcare plans to make decisions." We say, "Well, we understand that. We know what your intention is, but the reality is healthcare plans are using it as a loophole. They're telling us that if we don't give them a 60% or greater discount, they will not let women get coverage. Moreover, they're saying to some women they have to fail on eight other contraceptive products." Now, this is not the majority, it's the minority, but here's what's been happening lately, is we've reached out to those same plans. Those same plans have said, "Okay, fine. We have seen all the prior auths come through. We have seen that you are creating a groundswell for this product, and we're gonna negotiate with you on better terms.
Instead of asking you for a 60% discount, let's start playing ball. The short answer is, yes, this organization can be viable with Phexxi for non-hormonal contraception and the forthcoming label expansion for chlamydia and gonorrhea because we will contract. Some people, unfortunately, have had to contract at 50% and 60%, and those are three-year contracts. We, thank goodness, decided not to do that. We've built our base of users, and now the contracts will be somewhere between 20%-30%. Do I wish it was lower? Yes. We will contract to get the kind of coverage that we need for our Phexxi patients until we get our own category. That is the plan, frankly, is that we'll do the
When I say that, we've already started these conversations to say until we get our own category, we need to now contract with you. The great thing is that now those percentages are gonna be much lower because we've built demand.
Okay, that's helpful. Secondly, to the extent that you get STI prevention added, can you talk to the extent to which that gives you more leverage with payers? Or maybe another way of asking it is if we're talking about a contracting game, is having STI prevention in the label something that ultimately will give you better terms?
No question. Having STI in the label will give us better terms across the board, frankly, even with the groups that we have great terms with. Yes. Because, you know, I think the big thing that a lot of these plans see is that the recurrence that is happening. Having something for the prevention of both chlamydia and gonorrhea, they've actually proactively indicated to us that it will give us better terms. We think that those expanded indications are gonna give us leverage across the board. They're gonna give us leverage with payers and contracts, and they're also gonna give us leverage with continuing to identify partners outside of the U.S. with, you know, to do arrangements with license deals. Yeah, we think it's gonna be a very, very significant value add to the brand.
Okay, last question is, let's again assume that you don't get to where you wanna go with the Office on Women's Health, but you do have STI prevention in the label. Looking longer term, what is your view on what the steady-state gross to net ultimately will be in that scenario?
Jay, do you wanna opine on that?
Yeah. I mean, David, that's a great hypothetical. You know, in general, really what it will come down to ultimately is any sort of outside negotiations and ultimate contracting that we would need to do that Saundra was just referring to that we believe ultimately could get that down to 20%-30% versus their request of being around 60%. You know, the interesting part with STI, and we've done some initial payer research, is that we do see that they would give without issue we'll call it the Phexxi plus with an STI indication of scripts to those women that are requesting it that are on other forms of birth control.
We do think we have some additional leverage in that capacity that even if it's not used for contraception, there is still that additional use for prevention of chlamydia and gonorrhea. I think ultimately, to answer your question, you'll see it definitely come down because of that contracting. You know, the basis points ultimately will determine on the basis of those final negotiations we have with those PBMs.
Well, also too, just to add, David, is that we are looking at very serious ways to lower our cost of goods. What I mean by that is our manufacturing team is very, very savvy. We are looking at everything from packaging configurations, to amount of product in packages, to literally looking at tech transferring to sites that can really give us more operational efficiencies. In the next 18 months, by the time we are on the market with our expanded label, we definitely feel that our cost of goods will be much, much lower, which will also help the overall brand equity.
Okay. Thank you.
Thank you. Our next question comes from the line of Annabel Samimy from Stifel. Your question please.
Hi. Thanks for taking my question. This is obviously a challenging time for you. Just going back to the plans that have seen enough prior authorizations such that they're willing to come to the table and start negotiating a rebate that is more reasonable to you. You know, I guess what timeframe should we be thinking about that in terms of getting these plans on board? And what % of covered lives could this potentially represent to you, if you actually are successful at signing these plans?
Okay, here's what I would tell you is that I would say that we're starting the conversations now. The contracting will go into place in Q1, and we won't see an impact until Q2. I think that is a realistic. It's about 30 million additional lives. You know, if we get the contract negotiations completed Q1. Not if, we've already started. I give you Q1 being conservative. They'll implement it Q2, 30 million additional lives. We feel like that is a very realistic assumption and timeline. Look, to give you an idea, I mean, look, there are some plans that are completely female patient-focused, right? They're just doing the right thing because they know it's a mandate, and it's the right thing to do. The handful of plans that aren't, you know, are places like CVS and United.
Those are the places where, you know, we are having positive conversations based on the demand that they've seen. Yes, 30 million lives is what we expect we'll be able to impact.
Okay, great. You know, when you think about, I guess, the rebates that you've been offering. I know that you had to pull back on some of the copay assistance that you've been offering. I know that you've had to pull back on that to a certain degree. I guess this quarter because it was impacting the fulfillment, you brought them back. I guess you're providing that assistance again. I guess where is the right balance that we should think about going forward as far as the level of co-pay assistance you're gonna provide. Is there some kind of way you can quantify it for us a little bit just so we can frame the modeling?
Then a follow-up question to that, also on balance, obviously, you're in a very promotion-sensitive market, and you're still gonna be providing some kind of social media presence. Again, where's the balance there? You've got about, you know, with the $10 million, you've got about $24 million in cash left, and practically speaking, that's not gonna last at the level of spend that you have right now, even with the reduction. I guess I'm trying to understand all those pieces, and maybe I asked too many questions in one, but I wanted to make sure I got them all in.
No, it's okay. I'm gonna try to remember them all. The first one is where we are now as far as. Let me just say this. From June of this year until the end of this year, the co-pay assistance program is going to remain the same. In May, we turned it off, and that's when we saw a major decline in our prescriptions in May. Based on that decline, here's what we said to ourselves: We're launching Annie Murphy September ninth. It is insane to launch Annie Murphy after the investment that we made and the big push that we are gonna have and have all of these women in droves go to get Phexxi and have them be denied. We're gonna lose these patients forever. That is not a smart strategy.
To be candid, we wanted to see what would happen. We really wanted to see how reliant women are on this ACA and what's going on with these 18 categories, so that's why we shut it off in May. Then we turned it back on in June, and it's been the same from June till the end of this year. At the end of this year, that's when we are going to make adjustments. We're gonna make co-pay adjustments, and they will be a stepped approach. Meaning, for example, right now, if we're buying women down to zero, quite literally, our whole team is here this week looking at the different plans in the different regions. For example, in some places, we will take it to 50%, other places we'll take it...
The women will have to pay 50%. Other times, they'll have to pay 75%. We are looking to try to figure out how to slice that up, but at a minimum, it's going to be a 50% approach. That will increase our gross net. That will not go into place until Q1, but you should see shifts in Q1. What we saw is shifts happen right away. I mean, right away. That's why. June to the end of the year, you should continue your same modeling, but the modeling should shift for Q1 of 2022. Let me just pause there. Jay, are you in agreement with all that?
Absolutely.
Okay.
Marketing.
The-
Oh, marketing. Okay.
Promotion-sensitive market, yeah.
Yeah. Listen, it is a promotion-sensitive market. Here's the things that I want you to hear. Some of the things that we're doing might sound a little grassroots. Interestingly, it's working very well. Now with a lot of colleges opening up, we're doing a very serious college campus push, where our reps are educating the healthcare providers on campus. We literally have a push through a whole variety of sororities. They are doing healthcare days where we are talking about Phexxi on all the college campuses. We are doing a huge push through the pageant association, through all the professional cheerleading teams. They have a ground swell. Women, when they love something, I know this is an obvious statement, but they tell other women. We have identified these groups of women as very big social media pushers, so to speak.
We are continuing our regular social media channels outside of television, but we are also looking at different outreach, you know, through campuses and through these associations that we think are actually gonna be very important. All of these young women we have found are saying to us in all of the feedback, when they went away to college, their mother made them go on birth control because she was so worried they were gonna get pregnant. All of a sudden, they started crying for no reason. All of a sudden, they started to have anxiety. Well, their family thought, well, they were just nervous because they were in school, so they got put on an anti-anxiety product, or they got put on an antidepressant.
Finally, they realized two semesters later that perhaps it was their hormonal birth control that was making them not feel like themselves. A lot of these young women are very empowered, and they're very vitriolic. They themselves, we did not coin this, they call themselves the Phexxi babes, and they're creating this groundswell where they really feel that they are doing yoga and they're eating healthy and they care about their fertility and they care about getting pregnant when they want to. We're doing a lot more of those kinds of efforts now that COVID has dissipated on college campuses, but we're still, you know, very committed to the social media channels outside of TV. You're still gonna see Phexxi. We're definitely not going away. It's just the television ads are the things that are gonna, you know, dissipate.
Okay. Finally, practically speaking, where are we in terms of being able to manage all this with the cash position that you're in? It lasts you till the first quarter, so kind of running out of time here on either another non-dilutive source of financing or, you know, deal-making. What options really do you have? I actually have another follow-up question.
Sure. I'll go ahead and take that, Annabele. So yeah, as stated on the call, obviously that we've got runway into the first quarter. You're exactly right. You know, we've got the potential for non-dilutive sources, continuing to work towards several of these potential licensing agreements that we think are good opportunities to get Phexxi outside the U.S. We continually assess additional alternatives that could be, you know, good sources of external capital into the company to push us further into 2022, with, you know, the most effective cost of capital. You know, we've got some great, fantastic momentum since the DTC campaign with House Rules. We see that continuing to build and anticipate it to continue to grow through the end of the year.
We think we're in a strong position to really leverage that, as we near the end of the year.
Okay. One last final question on the work in Washington in the Office on Women's Health. Was it outright rejection or just, you know, sort of like, you know, you know, speaking platitudes, and they kinda sends you off packing? Like, what actually is the dynamic there?
Here's what I would tell you. I would tell you that the team that I went with from Evofem would give you a slightly different narrative than I gave you. They would tell you that they thought the meetings were very positive, that they are very optimistic, and they were pleasantly surprised at how much movement we saw. Now, I believe that that storybook of the turtle and the hare is a fairy tale for a reason. The hare always wins. I am very impatient and frustrated by nature, and I just can't believe it 'cause it's called the Office on Women's Health. I mean, hello? You know, I'm agitated, but I would say this to you, is that no one sent us packing. Quite seriously, no one didn't get it, so everybody got it.
Everybody understood that we innovated in the category. Everybody understood that this was unlike anything else and that a vaginal pH modulator, it makes sense. It made sense to everybody, honestly. Men, women, advocacy groups, everyone that we met with and I do mean this, all of them. I'll give you an example. Several of them wrote letters and emails that they showed me to Secretary Becerra, and they copied the Office of Women's Health. Sent letters. We gave them a template. They edited it, and those letters said, "It is time for you to update the chart. We recognize that it's intended as an educational tool, and even if that's the intent, it's still not accurate because if it's an educational tool, it should have a new innovation, a vaginal pH modulator." Real action was taken.
We got people, and I'm not kidding, when they said, "Okay, well, we'll contact the Office on Women's Health." I said, "Well, can you do it now? I have a template, and if you could send it right now, I could help you start it." "Okay, well, we will call them." "Could you call them now? Why don't we do it now? How about if you call them? Can I call you at the end of the day to see how the call went?" We were persistent to a point of, you know, a little bit annoying, which we needed to be. I would say to you that there was not one bad meeting. I mean that sincerely. Everyone responded in a very positive, appropriate way. My frustration was that Secretary Becerra is really the key lever to make the Office on Women's Health activate.
That's what we know. We also know his wife's an OBGYN, interestingly. We now are on to our next series of follow-ups, and a lot of them said. I'll give you another example. Somebody said to me, "You know what? Maybe we should get you to testify." I even had Senator Susan Collins contact the Office on Women's Health and said, "You need to give this woman an audience. You need to let her appeal to you directly because you need to update the chart." The final thing I would say is that the excuse that we were given is they are going to update the chart, they are going to make it accurate, but they have so many other things to worry about, like Roe v. Wade and COVID, and this is just an educational chart, and they are gonna get to it.
Now, I do believe they're gonna get to it, and I do believe we're going to get a vaginal pH modulator category. It's that I want it now. That was my frustration, is the lack of sense of urgency. No one said we disagree. No one said you shouldn't have your own category. No one said this doesn't make sense. None of that happened.
Okay, great. Thank you.
Thank you. Our next question comes from the line of Jeffrey Hung from Morgan Stanley. Your question, please.
Hi, this is Melina Santoro on for Jeff. Thanks for taking our questions. You touched on this, but can you just give a little bit more color on the net sales for this quarter and going forward? Do you kind of expect this disconnect with scripts and sales to continue until you adjust the co-pay assistance program at the start of next year? Or is this when you secure the additional category with ACA or get the guidance updated with the HRSA? I also have a follow-up.
Sure. I'll go ahead and take that. To reiterate, there was a 29% increase in gross sales. Really what it comes down ultimately is the mix that happens during that time period as far as the women that are gaining access to Phexxi and whether or not what levers of our co-pay programs are triggered from that. We continue to see great increases in the ex-factory sales as it's ongoing. We've even given a little bit more guidance here in the call. We do anticipate that we will see that continuing trend upwards.
I wouldn't be so bold as to give you specific guidance as to whether you'll see Q3 repeated in Q4 because it ultimately comes down to the mix of those women that are getting prescriptions filled and their underlying coverage. What I can say is that we do know through the end of the year, we are going to be committed to ensuring that access for those women that want the product and get experience using it are going to have that ability. That is our number one key through the end of the year. As Saundra mentioned, we're gonna go ahead and evaluate what options we have at our disposal to adjust the copay program.
Starting at the beginning of the year, we do anticipate that will have an impact rather quickly, even starting in January as to GTN improvement and then ongoing, and then that step approach that she mentioned will continue to be analyzed as we move forward in the beginning of the year. Ultimately, ACA gets kicked in. We can then even make further adjustments or even more positive lift to GTN as the year goes on.
Okay, great. Maybe just one more. Can you share with us any update on what you're seeing with the refill rate and how you expect that to trend into next year? Thanks.
Yes. Actually, Tim Gordon is here with us. Do you wanna talk about the refill rate 'cause you analyzed it recently?
Yeah.
You might have to come closer. I'm not sure they can hear you.
Yeah. Just really quickly. We've looked at refills, and we continue to monitor refills closely. You know, one of the things that's been really exciting is we actually hit some of the highest refill rate percentages on a weekly basis when we were coming into the launch of our celebrity campaign. Then after the celebrity campaign, we continued to see a large number of a growing number in the volume of refills weekly. That percentage obviously went down, which was a good thing, and we're all excited about because honestly, the number of new RXs coming in is really throwing that percentage off. The good news is we're seeing a lot more women refill, and the percentages probably aren't the best way to tell the story right now because you know, it's just a.
It's a different number as we're approaching new highs monthly.
Got it. Thank you.
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Saundra Pelletier for any further remarks.
Great. Thanks so much. We know that many of you have been shareholders in Evofem for many years, and we know that it has been a little rough. We never expected to be launching Phexxi in the type of environment that exists today. I want to assure you that everyone at Evofem is fighting to make this company a success. We know what needs to be done, and we execute on it every single day. We've discussed our key initiatives throughout this call, but I wanna summarize them here for you. One, cost reduction. We are committed to reducing costs by $50 million in 2022, predominantly in marketing.
two, increase access to Phexxi by spurring an update to the Office on Women's Health birth control chart or guidance from the Health Resources and Services Administration to insurers that will prevent the chart from being used to limit contraceptive choices for women. I also wanna make a comment. When I was in D.C., look, one of the things that you wanna say to people and you wanna say to politicians is that you don't want their name associated with a company that was punished for innovating. This company is going to succeed. I've jousted with them to say, "Do you wanna be in the administration when a company is no longer in existence?" That is a suggestion to activate people. I believe that this company is going to be the most successful leader in women's health.
Believe me, if you are on the inside looking out to see all the positive things that are happening, there is no chance you would not agree with me. Number three, drive the STI prevention program forward by completing the EVOGUARD trial, filing for an sNDA for Phexxi for the prevention of chlamydia and gonorrhea. Number four, enter into licensing agreements to get Phexxi into international markets and bring non-dilutive capital to Evofem. Number five, continue to increase Phexxi demand in the U.S. We work tirelessly on these initiatives to make this company a success and increase contraceptive access for women. We remain determined, we remain proactive, and we remain highly focused. Our efforts are not gentle, nor are they timid. They are professional, but we escalate to intensity and even fierce when it is required because succeeding in women's health is not a walk in the park.
We will succeed, and we will succeed for the shareholders that got us here and for the women who deserve better. We wanna thank you for your ongoing support, and I hope you have a great rest of your day. Thank you very much.
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.