TherapeuticsMD, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; unaudited. The company develops and markets women’s healthcare products, including prenatal vitamins and OTC products, and is pursuing FDA approval of hormone-therapy drugs.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| Revenue | $1.54 million | $0.72 million |
| Gross profit | $1.16 million | $0.39 million |
| Gross margin | 75% | 53% |
| Operating expenses | $6.10 million | $3.25 million |
| Operating loss | $4.94 million | $2.87 million |
| Net loss | $6.38 million | $13.29 million |
| Net loss per share, basic and diluted | $0.06 | $0.16 |
| Cash used in operations | $3.51 million | $2.45 million |
Revenue grew approximately 113%, attributed to expanded sales territories and personnel and products launched during 2012. Cost of goods sold rose 13%, slower than revenue growth; management attributed the increase mainly to product mix. Operating expenses increased 87%, including higher product-development, staffing, compensation, and sales and marketing costs. The lower year-over-year net loss chiefly reflects the absence of the prior-year $10.31 million debt-extinguishment loss; operating loss increased.
At March 31, cash was $38.78 million, versus $1.55 million at December 31, 2012; current assets were $42.90 million and current liabilities $4.25 million. Stockholders’ equity was $39.94 million, compared with a $1.43 million deficit at year-end. The quarter’s cash increase largely reflected the March public offering, which generated approximately $45.4 million net. The company reported $100,000 outstanding on its bank line and $21,595 of accrued interest at quarter-end; the larger secured notes were repaid in March. The bank line was repaid and expired in April/May. April’s offering over-allotment added approximately $3.1 million net, after quarter-end.
Management said cash, including offering proceeds, was expected to fund operations and hormone-product clinical development for the next 12 months, and stated that the offering mitigated substantial doubt about the company’s ability to continue as a going concern. The company continued to expect substantial losses and cash needs; profitability depends on successful commercialization. No formal numerical revenue or earnings guidance is provided.
Strategy, risks, and notable items
- Management intended to begin Phase 3 trials for estradiol/progesterone combination and progesterone-only candidates; it also said it might file an IND later in 2013 for an estradiol product for vulvar and vaginal atrophy. These are plans, not assured milestones or approvals.
- Clinical development and commercialization require substantial capital. If additional financing is unavailable on acceptable terms, the company may delay, reduce, discontinue, partner, or license development; equity financing could dilute shareholders.
- Supplier and customer concentration are significant: approximately 100% of Q1 purchases came from one supplier, and two customers generated 66.19% of recognized revenue.
- Two intellectual-property-related lawsuits—Aceto over Quatrefolic and Avion over the Prena1 name—were ongoing. The company considered them without merit and did not expect a material adverse effect, but outcomes were uncertain.
- The March offering increased shares outstanding; 13.44 million warrants and 13.91 million options were outstanding at quarter-end. Potential shares were excluded from diluted EPS as anti-dilutive.
- Management identified no material change in risk factors from its 2012 Form 10-K. Disclosure controls were assessed as effective; no significant internal-control changes were reported.
Important facts for investors to verify
- Whether clinical-trial starts, IND filings, enrollment, and regulatory milestones occur as planned, and the associated costs.
- Cash burn and runway against management’s 12-month estimate, including post-quarter offering proceeds and any further financing needs.
- Revenue durability, gross-margin trends, and dependence on the largest supplier and two major customers.
- Developments and potential financial or operating effects of the Aceto and Avion litigation.
- Share dilution from outstanding options and warrants, and the terms and actual availability of the $10 million Plato credit facility.