Pinned straw:
This is just a start in re-understanding BOT…
I am starting with understanding GTN both % and $. I think we can learn something useful from yesterdays presentation about this, unlike the other important disappointment regarding patient and prescription numbers which has a lot of fog to lift.
So what is the Gross Sales per script.
Matt had indicated that the Gross sale price was between US$500 and US$1,000 but closer to US$1,000. So US$750 to US$1,000
Based on the presentation the Gross Sales per customer is US$975, this is an average but one with very little variability – suspicious? maybe, or just a fact from initial launch and single distribution channel (welcome input on how these prices are agreed with insurers from anyone who knows, or there is something wrong with my calc).
So what is the GTN% profile and likely Net.
Initially Investors were told to expect approximately US$450 per prescription as net revenue. This was talked back recently to US$400, but analyst EUROZ still had the US$450 per prescription back in May.
Assuming they knew the gross price of US$975 at the time (which is reasonable given insurer negotiations were mostly done), that would be an average GTN% of 46.2% at US$450 net sales. They would have taken into account some element of deductibles would eat into a fully reimbursed margin, so we can probably assume that Fully Reimbursed GTN% is over 46.2%.
The subsequent talk down to US$400 (41.0% GTN), was probably in response to early indication on higher deductible impact and the sales approach effect of Non-Reimbursed sales or sales prior to authorisation ending up not being authorised.
The presentation sets out the types of reimbursement status that impact GTN. It also shows the weight but not what the GTN% of each group was. So here is my attempt to unravel the confusion on what each group represents in terms of GTN:
Full Reimbursed Units: These are full margin, highest GTN% sales which should only be offset by patient rebates (co-pay coverage), which on slide 10 is 50%. I am assuming the “Managed Care Rebates” of 21% are not included or any wholesale costs due to cutting that out. So may be 50% GTN% for these sales.
High-Deductible Units: BOT will cover the deductible for patients, which added to the other out of pocket coverage is the total price. Hence, I expect these are all 0% GTN%
PA Pending Units: This is messy, BOT would get nothing until they receive authorization, which they say 70% get approved, so 30% they get nothing ever and presumably stop (or become non-reimbursed). The rest may start to be reimbursable later, I assume those issued prior to authorisation don’t get reimbursed later. So at best they get 70% of the Full Reimbursed, but with a delayed – so I don’t think we see revenue until later and at a lower average GTN%.
Non-Reimbursed Units: They should just call these “Free Samples”…
So let’s assume a 50% GTN% for only Fully Reimbursed and zero for everything else and see how it lines up with the reported GTN%. Below you will see it starts on the money but a gap opens up to be 3-4% low by June.
So I played around with the % for Prior Authorisation Pending and delayed the impact by a few months and got a good fit at 2 months delay and average GTN% of 20%.
While not conclusive, it indicates to me that the GTN% for Fully Reimbursed sales is likely around 50% (from both this calc and the inference from the US$450 expected net on extrapolated gross US$975).
Given it is very early days, I think we can expect the weight of PA Pending and Non-Reimbursed to drop steadily as a total %, also the High deductible will be seasonal. So GTN% should improve, but how quickly and to what steady state I am unsure. To get to a US$400 net per script, they would need to get to an average of just over 80% of scripts being Fully Reimbursed as an example.
Conclusion
1. I am comfortable that GTN% will improve steadily, the rate of growth in patients will impact this significantly. Faster growth will hold GTN% back given the low base, but as the patient base matures we will see much higher Fully Reimbursed % and so higher GTN%
2. A 50% GTN% for Fully Reimbursed scrips seems to be reasonable given the current distribution model. Hence this is a cap, but a high cap, so we may see 30-40% GTN% in the next year, but over 40% will be a way off and challenging.
3. It is also clear that as much as we as investors are struggling to understand the economics of the business, those in the company are also challenged…
Disc: I own RL+SM
For me the concern / risk with BOT was always in the performance / expectations around digital / DTC.
My background / experience is in digital having run marketing / digital agencies for the past 15+ years. I have also been involved with businesses that operate on a similar model in the mens health space (ED, hair loss, weight management etc) so I have a rough grasp of expected funnel conversion rates when path to purchase involve telehealth.
From the change in messaging I suspect that they had very high expectations on the DTC channel and were hoping this would provide a high percentage of the patient acquisition. This in turn would prove out the "platform", keep reps (and commissions) to a minimum, and make greater margins. This would also enable them in theory to plug in similar underperforming products to the platform and "supercharge" their returns.
I think they were sold the dream from their agency and significantly underestimated digital CAC. They gave it a few months and are now having to pivot to a much more traditional sales model based on boots on the ground. Matt mentioned DTC was low and CAC was high in his Strawman interview a couple of months ago and the presentation this week left it out completely.
Whilst it has been mentioned here that the creative hasn't been great (which I agree with), the main issue is going to be ability to target their audience effectively. Outside of the very high quality (but low size) audience they get through the International Hyperhidrosis Society they are going to have very few digital segments to go after. A sufferer of HH is very unlikely to list this as an interest on social and search volumes for HH related terms are very very low. The slide they showed at launch around targeting was complete marketing BS, its just not the way audience segmentation works in reality, its spin by their agency.
With DTC they are not just aiming at "active switchers" as there aren't really enough of them they are looking to educate an entire segment both on the product and also on the platform to prescription. This is a long and expensive play with very low conversion rates and very very high CAC.
If this is the case it might explain the slow start and may also suggest that performance to date is not indicative of future performance its just that they backed the wrong channels at launch. If so it does however blow a bit of a hole in the platform and its potential to "turn around" additional products moving forward.
The site going down this week may indicate that they have fired or have changed the scope with their agency. If the agency are still managing the site then they should be bloody fired, there is no excuse for a site to be down for that long and if the site was indexed during that time it would have undone any organic gains since launch. We would expect to be sued if a site under our control was down for more that a few minutes let alone hours / days. They will have uptime guarantees (usually 99.9%) in any of their agreements.
I still hold (a lot) of shares in BOT. My hope is that they hire as many sales reps as possible, in as many regions as possible, as quickly as possible and focus on "what they know" i.e. how to sell a pharma product through traditional channels to really give Sofdra success a chance. I don't think we have any idea of potential performance moving forward however I think we can guess their marketing / launch strategy to date has been a bit of a train wreck.
@Tom73 Yes I was waiting for a post mortem to start, I have fully digested the shit sandwhich I choked down yesturday and have been attempting to square many circles and snapped about 12 biro's.
When you look at the HDC going to zero and you would have to think the freebies stop after 12 months? 35 % GTN seems achievable and it is trending that way.
I have been processing the mish mash of data..
Based on the new data this is a bust if they can't:
- Add net 1000 total users per month (you would think doable considering a doubling of the sales force) fk knows what the digital is doing.
- move up to 35% GTN.
GTN must hit 30-35%, if it is more towards 30, really need more than net 1000 users added per month
On the current growth path, cash available doesn't appear to be a massive issue with more revenue hopefully flowing by end of year. We will see.
as noted in the presentation, they should get good ROI on additional reps.
*COGS - 50USD / unit
*Bodor Royalty , 5% net sales
look to potentially be cashflow positive Q4 next year provided above is true.
TLDR - not a rocket ship but cashflow positive still looks possible off what appear to be achievable targets.
GTN table - They are all trends where in italics so don't tally perfect to 100% but the takeaway here is if it doesnt trend to 35% its a big issue. Assuming a bit of a dip on the CY reset, but hopefully offset by a drop in the free units...
With all the murkiness around the users my new target will be a minimum of 1200 added to the active base each month (if it continues downward and the june low wasn't a one off that is a major issue.
*edited to put script gross price in AUD, all in AUD now.
cashflow -
added in additional reps at 225k USD per rep broken down to quarterly costs, added in 2 x tranches.
COH, was 28m end of April + the raise + the debt facility for total of 111m, less op costs Q2 COH end of Q2 94m ( I am counting the undrawn debt as COH)
**COGS isn't factored into the cashflow costs, it is taken out of the income line, they had a boat load made up already so shouldn't need to build an excess of inventory, only replace what is used..
Other outcomes,
If GTN peaks at 30%, still cashflow positive, but barely in Q3 CY26
Here is the key snippet from the Euroz update on recutting their forecasts. Target halved from $0.80/sh to $0.40/sh as a result. This is the recalibration to digest I mentioned before which seems to be what the investor here are doing with the good work above from @Tom73 and @Schwerms
In this instance, GTN alone is half the recalibration with the result being a more modest patient/prescription growth trajectory.
@Schwerms, thanks for sharing all the workings and analysis – very helpful. Many aspects I will be borrowing as I work further, cheers.
@conrad , I don’t think they have attributed any revenue (gross or net) to areas they haven’t got it, the % for each group is units/scripts. What I am guessing at is the gross and net revenue for each of those groups based on how they describe what they include.
I don’t think they are getting any revenue from “Non-Reimbursed” or “High-Deductible” and would expect that once a patients deductibles run out that they switch to being fully reimbursed – which looks feasible if you turn those % into #:
What happens to the “Prior Auth Pending” once they are authorised is a bit of a mystery… I would have thought they would move to “Full Reimbursed” or “High-Deductible” if they are approved and continue, or drop out if not approved. However it seems like they just sit in this category – unless a very high portion of new patients start in this category before being switched (which may be the case - get the product to them is BOT priority, paperwork comes later).
@BkrDzn , thanks for sharing the Euroz update.
It has as Gross Sales of ~US$967, which supports the US$975 I took from the financials. The Net Revenue estimate for FY26 is also very close to what @Schwerms has. The GTN% expected range of 30-40% as a long-term average is a reasonable expectation and in line with @Schwerms projection and my thoughts at this point.
I have had a play with this, assuming:
Each item is listed as full revenue, matches with the report even if it is non-reimbursed, goes to the revenue line for the full whack but no reimbursement.
One interesting take away here, 70% of PA end up being fully reimbursed, in the month listed as PA they go down as full revenue, but detract from the gross to net as no reimbursement.
Similar to yours working I get below for June,
The PA is the big one here though, assuming (as told, not sure if truth from management) 70% of these are fully reimbursed meaning the others are free.
Again as it gets paid later, full gross revenue recognised in the month as they seem to be listing all scripts as revenue even the free ones (Am I reading that write as it sounds incorrect as I write it)
(Table is all USD but irrelevant as this is looking at % GTN)
When you distribute the PA into 70% FR and 30% charity its more like a GTN of 32% give or take.
Just a theory at the moment but they may actually reveal some extra net revenue in the quarterly. Depends how you treat the PA to FR conversion a month later which would then be paid net 30 days after that.
to look one step further,
once the charity units dry up and distributing the PA into FR and free you can start to get a GTN a bit higher.
trying to wrap my head around the revenue side still for the charity units,
give away a script but record as full whack of revenue, are we paying the insurance a copay of 975 to receive 975, it would have to have a cashflow to it to be recorded as revenue?
food for thought as we ponder nightmare on hyperhidrosis street.. thanks for the title @mikebrisy