TherapeuticsMD, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. Financial statements are unaudited. The company develops women’s hormone-therapy drug candidates and sells prescription prenatal vitamins and OTC vitamins.
Financial performance and position
| Metric | Q3 2015 | Q3 2014 | Nine months 2015 | Nine months 2014 |
|---|---|---|---|---|
| Net revenue | $5.19 million | $4.19 million | $14.51 million | $10.77 million |
| Gross profit | $4.00 million | $3.12 million | $11.24 million | $7.98 million |
| Gross margin | 77% | 74% | 77% | 74% |
| Operating expenses | $23.50 million | $20.97 million | $78.92 million | $45.70 million |
| Operating loss | $19.50 million | $17.85 million | $67.68 million | $37.73 million |
| Net loss | $19.47 million | $17.83 million | $67.59 million | $37.91 million |
| Loss per share, basic and diluted | $0.11 | $0.12 | $0.39 | $0.26 |
- Nine-month research and development expense was $58.79 million, up 102%; the principal increases related to TX-001HR, TX-004HR, clinical trials, and manufacturing scale-up.
- Cash and cash equivalents were $81.12 million at September 30, 2015, compared with $51.36 million at December 31, 2014. Current assets were $87.78 million and current liabilities $11.69 million.
- Operating cash use for the first nine months was $62.43 million, versus $30.24 million in 2014. Investing cash use was $0.13 million; financing provided $92.33 million, primarily from stock offerings.
- Total liabilities were $12.90 million. The balance sheet reports no debt balance; liabilities primarily comprise payables, accrued expenses, and other current liabilities.
- Net proceeds from common-stock offerings during the first nine months were approximately $91.4 million. Shares issued and outstanding rose from 156.1 million at year-end 2014 to 177.8 million at September 30, 2015.
Changes versus the prior comparable period
- Revenue rose 24% in Q3 and 35% for the nine months. Management attributed the increases mainly to higher unit sales, with additional contribution from product mix and average net selling prices.
- Cost of goods sold grew more slowly than revenue; it was 23% of revenue in both 2015 periods, versus 26% in 2014, which management attributed mainly to favorable product mix.
- Nine-month operating expenses rose 73%, driven chiefly by the 102% increase in R&D. Nine-month net loss widened to $67.59 million from $37.91 million.
- Q3 loss per share improved to $0.11 from $0.12, while nine-month loss per share increased to $0.39 from $0.26.
Outlook, risks, and notable items
- Management said existing cash was expected to fund the operating plan for at least the next 12 months, while cautioning that spending could exceed expectations and additional financing might be needed. Further equity financing could dilute shareholders; debt or collaboration financing could impose restrictions or require concessions.
- Management expected operating losses to continue in the near term while hormone-therapy candidates are developed; approval and successful commercialization are uncertain.
- TX-004HR’s REJOICE Phase 3 trial had completed its last patient visit; topline results were anticipated in Q4 2015. Subject to successful results, management anticipated an NDA as early as the first half of 2016 and possible FDA approval as early as Q1 2017.
- Enrollment in the TX-001HR REPLENISH Phase 3 trial was completed in October 2015, after quarter-end. Results were anticipated in Q4 2016 or Q1 2017; potential NDA submission and approval timing was conditional on trial results and FDA review.
- TX-002HR’s Phase 3 trial remained stopped while the company planned protocol changes following FDA discussions; FDA acceptance of a revised protocol was not assured. The company had no current plans for TX-003HR clinical trials.
- Revenue concentration remained significant: four customers represented approximately 90% of nine-month revenue, and one supplier represented approximately 54% of purchases. The filing also disclosed $3.53 million of accrued clinical-trial costs, including $1.21 million classified as long-term accrued expenses.
- The company reported no legal proceeding believed likely to have a material adverse effect, no material change to previously disclosed risk factors, and effective disclosure controls. It identified clinical-trial cost, duration and outcomes; FDA approval; safety; reliance on third parties; reimbursement; product liability; and financing needs among key risks.
Important facts for investors to verify
- Whether REJOICE results support the anticipated TX-004HR NDA timetable and whether regulatory milestones remain achievable.
- REPLENISH results, associated timing, and the implications for TX-001HR development and financing needs.
- Cash consumption relative to the stated 12-month funding outlook, particularly as R&D spending and clinical-trial commitments continue.
- Revenue durability and exposure to major customers and the concentrated supplier base.
- Potential dilution from equity compensation, outstanding options and warrants, and any future capital raises.