TherapeuticsMD, Inc. — Q2 2015 Form 10-Q
Reporting period: Three and six months ended June 30, 2015; filed August 7, 2015. TherapeuticsMD develops women’s health products, including hormone-therapy drug candidates, and sells branded and generic prenatal vitamins and OTC vitamins. The reported revenue came from product sales; the company was still conducting clinical trials for its hormone-therapy pipeline.
Financial performance
| Metric | Q2 2015 | Q2 2014 | Six months 2015 | Six months 2014 |
|---|---|---|---|---|
| Net revenue | $4.85 million | $3.75 million | $9.32 million | $6.58 million |
| Gross profit | $3.81 million | $2.86 million | $7.25 million | $4.86 million |
| Gross margin | 78.7% | 76.2% | 77.7% | 73.8% |
| Operating expenses | $31.07 million | $13.79 million | $55.42 million | $24.74 million |
| Operating loss | $(27.26) million | $(10.93) million | $(48.18) million | $(19.88) million |
| Net loss | $(27.23) million | $(10.90) million | $(48.12) million | $(20.08) million |
| Basic and diluted loss per share | $(0.16) | $(0.07) | $(0.29) | $(0.14) |
Q2 revenue increased 29% year over year, mainly from higher unit sales; six-month revenue rose 42%. Management attributed improved gross margin primarily to favorable product mix. Research and development expense rose to $24.19 million for Q2 and $42.37 million for the half year, driven by development and clinical trials, particularly TX-001HR and TX-004HR.
Cash, liquidity and capital
- Cash was $67.25 million at June 30, 2015, up from $51.36 million at December 31, 2014. Current assets were $72.96 million and current liabilities $11.71 million.
- Cash used in operations was $44.00 million in the first half, versus $18.78 million in the prior-year period; investing activities used $0.09 million.
- Financing activities provided $59.98 million, primarily from a February common-stock offering that generated approximately $59.1 million net. The offering increased shares outstanding.
- The balance sheet reports no separate borrowing or debt line; liabilities were $12.67 million, primarily accounts payable and accrued liabilities. Cash interest paid was zero.
- Management said June 30 cash was expected to fund the operating plan for at least 12 months. After quarter-end, a July offering closed with approximately $32.2 million net proceeds; the underwriters’ full option was exercised.
Material developments, outlook and risks
- As of August 6, the Phase 3 REPLENISH trial of TX-001HR was 93% enrolled. Management expected enrollment completion in the second half of 2015, results in Q4 2016 or Q1 2017, and—if results were successful—an NDA filing in Q4 2016 or Q1 2017.
- The last patient had enrolled in the Phase 3 REJOICE trial of TX-004HR in June 2015. Management expected topline results in Q4 2015 and, subject to successful results, an NDA filing as early as the first half of 2016.
- The TX-002HR Phase 3 trial remained temporarily stopped while the company sought to update its protocol following FDA discussions; FDA acceptance of the proposed changes was not assured. The company had no current plans for TX-003HR clinical trials.
- Management anticipated continued operating losses in the near term, pending potential FDA approvals and commercialization; approval and commercial success were uncertain. It also warned that trial costs and timing could vary and that further financing might be needed. Additional equity financing could dilute shareholders.
- Revenue and supply concentration are notable: four customers represented approximately 91% of first-half 2015 revenue, and one vendor supplied approximately 98% of purchases. The filing also identifies clinical-trial, regulatory, safety, reimbursement, product-liability and third-party-dependence risks.
- Subsequent to quarter-end, the company reported its first patent application allowance related to TX-004HR. It reported no material change to previously disclosed risk factors and no legal proceeding it believed would materially adversely affect the business or financial condition.
Important facts for investors to verify
- Whether REJOICE and REPLENISH meet their clinical endpoints, and whether trial timelines or NDA plans change.
- Cash burn relative to available cash and the post-quarter offering proceeds, including the resulting share dilution and expected runway.
- Revenue durability given customer concentration, and continuity of supply given reliance on a dominant vendor.
- Clinical-trial accruals and estimates: $3.05 million was included in current accrued liabilities and $0.97 million in long-term accrued expense at June 30.
- Potential dilution from outstanding options and warrants; the filing reported 17.53 million options and 13.03 million warrants outstanding at June 30.