TherapeuticsMD, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014; the filing also reports unaudited fourth-quarter results. The company develops women’s health products, with revenue primarily from prenatal vitamins, while investing heavily in hormone-therapy drug candidates. Financial statements are audited; the auditor reported effective internal control over financial reporting.
Financial performance and liquidity
| Metric | 2014 | 2013 |
|---|---|---|
| Revenue | $15.0 million | $8.8 million |
| Gross profit / margin | $11.4 million / approximately 76% | $6.8 million / approximately 78% |
| Operating expenses | $65.4 million | $32.6 million |
| Operating loss | $(54.0) million | $(25.8) million |
| Net loss / loss per share | $(54.2) million / $(0.36) | $(28.4) million / $(0.22) |
| Cash from operating activities | $(45.5) million | $(20.8) million |
Revenue grew 71%, reflecting approximately $4.25 million from products introduced during 2014 and approximately $2.00 million from higher average selling prices. Prenatal vitamin products generated approximately 98% of revenue. Gross margin declined primarily because of higher distribution costs. Research and development expense rose 219% to $43.2 million, largely due to phase 3 development programs.
Fourth-quarter 2014 revenue was $4.257 million, gross profit was $3.377 million, net loss was $16.303 million, and basic and diluted loss per share was $0.10.
At year-end, cash was $51.4 million, down from $54.2 million; current assets were $56.2 million and current liabilities $10.7 million, yielding reported working capital of $45.5 million. Total liabilities were $10.7 million and the balance sheet reported no debt outstanding. Management said existing cash was expected to fund its operating plan for at least 12 months, while warning that spending could exceed expectations. Operating cash use increased substantially year over year. The company raised $42.8 million net through an August 2014 stock offering.
Material changes and business developments
- TX-001HR, an oral estradiol/progesterone combination, and TX-004HR, vaginal estradiol, were in phase 3 trials. TX-002HR enrollment was suspended in July 2014 and the trial stopped in October to revise its protocol following FDA discussions. The company had no current plans to develop TX-003HR.
- Management expected TX-004HR trial enrollment to finish in Q2 2015, results in Q3 2015, and a potential NDA filing in Q4 2015; it projected possible FDA approval in Q4 2016, subject to successful results and regulatory review.
- For TX-001HR, management expected enrollment completion in the first half of 2015, results in the first half of 2016, a potential NDA filing in the first half of 2016, and possible approval in the first half of 2017. These were forward-looking estimates, not assured outcomes.
- Management planned to revise the TX-002HR phase 3 protocol, including narrowing the target population, but FDA acceptance was uncertain. It also intended to seek INDs for two preclinical candidates in the second half of 2015.
Outlook, risks, and unusual items
The company expected continued operating losses and significant R&D spending until drug candidates could be approved and commercialized; approval and commercial success were uncertain. No specific revenue or earnings guidance was provided. Management stated that additional financing might be needed if cash proved insufficient; equity financing could dilute shareholders, while debt or partnerships could impose restrictions or require giving up valuable rights.
- Clinical, regulatory, and enrollment risks are substantial, including the possibility of trial delays, additional studies, failure to meet FDA standards, or rejection of an NDA. The FDA had indicated that TX-004HR, if supported by a single pivotal trial, would need statistical significance at the 0.01 level.
- Revenue and supply are concentrated: four customers represented approximately 75% of recognized 2014 revenue, and one supplier accounted for approximately 82% of purchases. Lang supplied approximately 97% of the company’s branded and generic products.
- Competition, reimbursement and pricing pressure, product safety or liability claims, changing regulation, and intellectual-property disputes could adversely affect results. The company also disclosed potential 505(b)(2) patent-certification and litigation timing risks.
- After year-end, the company completed a February 2015 public offering that generated approximately $59.1 million net. This subsequent financing is not included in 2014 year-end cash. Common shares outstanding were 156.1 million at December 31, 2014 and 171.7 million as of March 6, 2015.
- The company reported no material legal proceedings or material off-balance-sheet arrangements. Contractual operating lease payments totaled approximately $1.45 million at year-end.
Important facts for investors to verify
- Current cash runway and operating cash use relative to the company’s stated 12-month funding expectation, including the effect of the February 2015 offering.
- Latest enrollment, trial results, FDA feedback, and revised timelines for TX-001HR, TX-004HR, and TX-002HR.
- Customer and supplier concentration, product demand, gross-margin trends, and the ability to maintain or replace key manufacturing and distribution relationships.
- Potential dilution from subsequent share issuance, options, and warrants; the filing reports 30.7 million potentially dilutive options and warrants at December 31, 2014, excluded from diluted loss per share as anti-dilutive.
- Whether intellectual-property, regulatory, reimbursement, or product-liability developments alter the expected commercialization prospects of the pipeline.