TherapeuticsMD, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; filed March 3, 2021. The filing also reports unaudited fourth-quarter results. TherapeuticsMD is a women’s healthcare company commercializing ANNOVERA, IMVEXXY and BIJUVA, alongside prescription prenatal vitamins.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Product revenue, net | $62.9 million | $34.1 million |
| License revenue | $2.0 million | $15.5 million |
| Gross profit | $48.9 million | $43.3 million |
| Operating loss | $(155.5) million | $(151.2) million |
| Net loss | $(183.5) million | $(176.1) million |
| Net loss per share | $(0.67) | $(0.72) |
| Cash used in operating activities | $(159.5) million | $(165.7) million |
- Fourth-quarter revenue was $22.6 million versus $15.9 million in Q4 2019; quarterly net loss was $42.1 million versus $49.4 million.
- Product revenue rose 84%, led by ANNOVERA (+$13.4 million), IMVEXXY (+$10.9 million) and BIJUVA (+$4.5 million). Prenatal vitamin revenue declined slightly to $9.8 million for the year.
- Gross margin on prescription products was approximately 75%, down from 81%. Cost of goods sold included a $7.2 million inventory charge, primarily related to BIJUVA, and higher ANNOVERA license amortization and royalties.
- SG&A was $193.0 million, up from $174.1 million; R&D fell to $10.4 million from $19.8 million. Management attributed the R&D decline to prioritizing commercialization.
- Cash was $80.5 million at year-end, down from $160.8 million. Working capital was $69.2 million; total assets were $181.6 million. Current liabilities were $59.2 million.
- Debt principal was $250.0 million at year-end; reported long-term debt, net of discounts and financing fees, was $237.7 million. Total liabilities were $305.6 million and stockholders’ deficit was $124.0 million. Interest expense was $28.6 million; the stated effective debt interest rate was approximately 12.5%.
- Three customers accounted for approximately 63% of 2020 product revenue. The company reported an accumulated deficit of $878.9 million and federal NOL carryforwards of approximately $761.7 million, subject to limitations.
Changes, outlook and material risks
- COVID-19 disrupted sales-force access and delayed ANNOVERA’s full launch; the launch resumed in July 2020. Product revenue nevertheless increased, while management recorded the inventory charge and cut or deferred certain costs. The duration and financial effects of the pandemic remained uncertain.
- The company reported continuing operating losses and expected losses in the near term; it did not provide a conventional sales or earnings forecast. It said year-end cash, together with subsequent financing, was expected to support ordinary-course needs and covenant compliance for 12 months from issuance of the financial statements, subject to commercialization and pandemic risks.
- Debt covenants require at least $60 million of unrestricted cash, subject to specified adjustments, and minimum quarterly product revenue. In Amendment No. 8, dated March 1, 2021, the lender revised revenue thresholds and required $50 million of principal repayment by March 31, 2021, with a 5% prepayment fee, followed by scheduled repayments. Failure to meet covenants could accelerate debt repayment.
- Subsequent to year-end, the company raised approximately $47.3 million net through an at-the-market offering and approximately $97.1 million net through a February 2021 public offering. These issuances materially increased the share count and diluted existing holders. The filing reported 387.8 million shares outstanding as of March 1, 2021, versus 299.8 million at year-end.
- Management had begun a process to divest VitaCare Prescription Services; completion and benefits were uncertain. The lender consented to a framework for a potential disposition.
- Generic applicants Teva and Amneal challenged patents covering IMVEXXY and BIJUVA; litigation was ongoing. BIJUVA proceedings were temporarily stayed in February 2021. Outcomes could affect exclusivity and product revenue.
- Other notable risks include dependence on third-party manufacturers and distributors, concentrated customer revenue, payer coverage and reimbursement, regulatory and post-marketing study obligations, and potential further financing needs. ANNOVERA and IMVEXXY have required post-approval observational studies; preclinical programs were largely on hold.
- The auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control attestation.
Most important facts for investors to verify
- Whether product growth and gross margins can support the lender’s escalating quarterly revenue covenants and debt-service requirements.
- Current unrestricted cash, debt principal and repayment terms after the March 2021 amendments, including applicable prepayment fees and covenant calculations.
- Actual commercial performance by product, payer access, channel inventory and the assumptions behind rebates, returns and other variable-revenue estimates.
- Progress and outcomes in the Teva and Amneal patent cases, and any effect on product exclusivity or generic entry.
- Subsequent share count, dilution from equity financing and any further capital needs; also verify whether the proposed VitaCare divestiture was completed and on what terms.