TherapeuticsMD, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2020. The company commercializes women’s health products, including IMVEXXY, BIJUVA, ANNOVERA and prescription prenatal vitamins. Financial statements are unaudited.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Net product revenue | $10.7 million | $6.1 million | $23.0 million | $10.0 million |
| Gross profit | $6.3 million | $4.8 million | $15.8 million | $8.0 million |
| Operating loss | $(45.0) million | $(41.6) million | $(96.0) million | $(79.7) million |
| Net loss | $(52.0) million | $(55.2) million | $(108.8) million | $(94.7) million |
| Net loss per share, basic and diluted | $(0.19) | $(0.23) | $(0.40) | $(0.39) |
- Q2 revenue increased 76% year over year; six-month revenue increased 129%. Growth reflected higher IMVEXXY and BIJUVA sales and ANNOVERA revenue, partly offset by COVID-19 effects. Q2 product revenue included $5.1 million from IMVEXXY, $1.4 million from BIJUVA, $1.8 million from ANNOVERA and $2.4 million from vitamins.
- Prescription-product gross margin was approximately 59% in Q2 and 69% for the six-month period, versus 79% and 80%, respectively, in 2019. The company cited product mix, ANNOVERA license amortization and inventory obsolescence, primarily BIJUVA. The six-month statements include a $6.0 million inventory obsolescence reserve adjustment; management’s discussion separately identifies $2.1 million of inventory obsolescence expense in cost of goods sold and product-sample write-downs in sales and marketing.
- Operating expenses rose 10% in Q2 and 27% for the six-month period, mainly from commercialization costs, personnel and product-sample write-downs. Six-month R&D expense declined 47% to $6.0 million as resources shifted toward commercialization.
- Cash was $113.8 million at June 30, down from $160.8 million at year-end 2019. Operating cash use was $95.1 million for the first half; investing cash use was $0.8 million and financing provided $48.9 million. Management reported net DSO of 156 days, up from 141 days at December 31, 2019.
- Long-term debt carrying value was $243.8 million, representing $250 million borrowed under a first-lien facility, net of discounts and fees. The facility bears interest at LIBOR plus 7.75% (2.70% floor) or prime plus 6.75% (5.20% floor); its effective rate was approximately 11%. Principal installments are scheduled to begin June 2023, with maturity March 2024. The facility requires at least $60 million of unrestricted cash and minimum product-revenue covenants.
- Total current assets were $148.9 million against current liabilities of $46.5 million. Total liabilities of $299.6 million exceeded assets of $205.5 million, leaving a stockholders’ deficit of $94.1 million.
Material changes and developments
- The company drew an additional $50 million under its term loan in February 2020. It is not proceeding with the remaining discretionary $50 million tranche, originally tied to ANNOVERA’s full launch; future financing discussions are at the lender’s discretion.
- COVID-19 disrupted prescriber access and patient visits, reduced demand and led to a pause in ANNOVERA’s planned full launch. The company resumed the launch July 1, 2020. It also reduced spending, restricted hiring, cut vendor and travel costs, and reduced staffing.
- On August 5, 2020, lenders amended the product-revenue covenant to reflect COVID-19 impacts. In place of a cash amendment fee, the company issued warrants for approximately 4.75 million shares at $1.58 per share, expiring in 2030.
- Cash-flow financing included $50 million from the term loan. The company received and voluntarily returned a $6.5 million Paycheck Protection Program loan in May 2020.
Outlook, risks and unusual items
- Management expected operating losses to continue in the near term and stated there was no assurance commercialization would succeed. It believed cash, anticipated operating cash flows and potential financing would cover ordinary-course needs for the next 12 months from the report date, but warned liquidity could be inadequate if commercialization is delayed or COVID-19 has a worse-than-expected impact.
- Management planned further operating-expense reductions in the second half of 2020. It intended to prioritize ANNOVERA, followed by IMVEXXY and BIJUVA, and planned an initial IMVEXXY consumer marketing campaign for August 2020. No quantified revenue or earnings guidance was provided.
- COVID-19 risks include weaker demand, restricted sales-force access, insurance loss from unemployment, slower collections, supply-chain disruption and further spending or liquidity pressure. The company reported finished-product inventory sufficient for anticipated demand through at least the fourth quarter of 2020 and no expected supply interruption at filing.
- Generic challenges are pending: Teva filed an ANDA challenging IMVEXXY patents, and Amneal filed an ANDA challenging BIJUVA patents. The company sued both parties; trial dates had not been set. Outcomes could affect future product sales and patent protection.
- Other items include a $10.1 million debt-extinguishment loss in the prior-year period, no income-tax provision in either current period, and no legal proceedings identified by management as expected to materially affect financial condition, results or cash flows.
Important facts for investors to verify
- Progress of ANNOVERA’s resumed launch, and whether IMVEXXY and BIJUVA growth and payer coverage can offset pandemic-related effects.
- Cash burn, receivable collection trends and liquidity relative to the $60 million minimum-cash covenant and management’s 12-month assessment.
- Compliance with amended revenue covenants, availability and terms of any future financing, and the effect of lender warrants and potential dilution.
- Inventory valuation and further obsolescence or sample write-downs, particularly for BIJUVA.
- Developments in the Teva and Amneal patent cases and the FDA’s November 16, 2020 target action date for the BIJUVA lower-dose supplement.