TherapeuticsMD, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. The filing also reports fourth-quarter 2015 results. TherapeuticsMD is a women’s health company whose revenue came primarily from prenatal vitamins; it is investing heavily in hormone-therapy candidates that were not yet approved for sale.
Financial performance and position
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $20.1 million | $15.0 million |
| Gross profit / margin | $15.6 million / approximately 78% | $11.4 million / approximately 76% |
| Operating expenses | $100.8 million | $65.4 million |
| Operating loss | $85.2 million | $54.0 million |
| Net loss | $85.1 million; $0.49 per share | $54.2 million; $0.36 per share |
| Cash used in operating activities | $79.0 million | $45.5 million |
| Cash at year-end | $64.7 million | $51.4 million |
- Revenue rose 34%, driven approximately equally by higher average selling prices and increased unit sales. Prenatal vitamin products generated approximately 99.5% of 2015 revenue.
- R&D expense increased 67% to $72.0 million, principally reflecting Phase 3 trial and manufacturing scale-up costs for TX-001HR and TX-004HR. Management attributed the larger net loss mainly to increased R&D spending.
- Fourth-quarter 2015 revenue was $5.63 million, gross profit $4.40 million, and net loss $17.48 million, compared with fourth-quarter 2014 revenue of $4.26 million and net loss of $16.30 million.
- Year-end total assets were $73.7 million, liabilities $10.7 million, and stockholders’ equity $63.1 million. Working capital was $60.0 million. The balance sheet lists no debt outstanding; the company had repaid its prior notes and credit line in 2013.
- 2015 financing provided $93.0 million, mainly from common-stock offerings. After year-end, the company raised approximately $134.9 million net from a January 2016 offering. Management said available cash was expected to fund the operating plan for at least 12 months.
Material changes and business developments
- TX-004HR completed the REJOICE Phase 3 trial in 2015. The 25 mcg and 10 mcg doses met all four co-primary endpoints at p<0.0001; the 4 mcg dose met three at p<0.0001, while dyspareunia severity was significant at p=0.0149.
- The FDA had indicated that a single-trial approval would require p≤0.01 for each endpoint. The filing therefore identifies uncertainty about whether the 4 mcg result supports an NDA based on this trial alone. The company planned to seek approval for all three doses, targeting an NDA submission as early as the first half of 2016.
- TX-001HR Phase 3 enrollment was completed in October 2015. Results were expected late in Q4 2016; subject to successful results, management anticipated an NDA in the first half of 2017 and possible approval in late 2017 or early 2018.
- TX-002HR’s Phase 3 trial was stopped in 2014 for protocol changes following FDA discussions; TX-003HR had no further clinical development planned. The company intended to pursue early-stage work on topical candidates TX-005HR and TX-006HR.
- Revenue concentration remained significant: two customers accounted for approximately 67% of 2015 revenue. One supplier provided approximately 60% of purchases (down from 82% in 2014); Lang supplied approximately 99% of the vitaMedMD and BocaGreen product lines.
Outlook, risks and contingencies
- Management expected continued operating losses as clinical development and commercialization preparations continued. The company had a history of substantial losses: $85.1 million in 2015 and an accumulated deficit of approximately $219.8 million at year-end.
- Key uncertainties include clinical and regulatory outcomes, possible requests for additional studies, manufacturing validation and FDA inspections, commercialization and reimbursement, competition, and the ability to fund development. Further equity financing may dilute shareholders; debt or partnering could impose restrictions or require surrendering rights.
- The company reported no legal proceedings believed to be material and no material off-balance-sheet arrangements. Operating lease commitments totaled approximately $1.39 million, mostly due within three years. Contractual indemnification obligations could be unlimited, though no related liability was recorded.
- Two 2015 customers represented 67% of revenue, and reliance on third-party manufacturing creates supply and quality risks. The filing also cites hormone-therapy safety perceptions, product liability exposure, intellectual-property challenges, and possible limits on insurance coverage and reimbursement.
- Management and the auditor reported effective disclosure controls and internal control over financial reporting as of December 31, 2015; the auditor gave an unqualified opinion on the financial statements.
Important facts for investors to verify
- Full REJOICE safety and efficacy analyses, the 4 mcg dyspareunia endpoint’s significance relative to the FDA’s stated threshold, and whether the FDA accepts the proposed NDA and dose set.
- REPLENISH trial results, timing and completeness of the planned TX-001HR NDA, and any additional FDA or manufacturing requirements.
- Cash burn and runway after the January 2016 offering, including how planned development spending compares with the reported liquidity outlook.
- Customer and supplier concentration, supply continuity, and changes in prenatal-product sales or margins.
- Share dilution from the January offering and outstanding options and warrants; the filing reported 196.2 million common shares outstanding as of February 22, 2016.