TherapeuticsMD, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unless stated otherwise, financial amounts below are in U.S. dollars and millions. The company has shifted from commercializing women’s health products to operating as a pharmaceutical royalty company; prior commercial operations are presented as discontinued operations.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Continuing revenue | $0.437 | $0.348 | $0.853 | $1.043 |
| Operating expenses | $2.909 | $14.857 | $5.992 | $32.732 |
| Operating loss | $(2.472) | $(14.857) | $(5.139) | $(32.732) |
| Net income (loss), including discontinued operations | $(2.414) | $112.281 | $(6.017) | $63.260 |
| Basic and diluted EPS | $(0.24) | $12.83 | $(0.60) | $7.29 |
- Q2 license and service revenue was primarily from Mayne Pharma. Continuing gross profit was $0.437 million in Q2 and $0.853 million for the half year; comparative-period cost of revenue equaled revenue.
- Operating expenses fell substantially year over year following the transition to a royalty model and reduced infrastructure. Q2 continuing net loss narrowed to $2.4 million from $14.9 million; the six-month loss narrowed to $4.7 million from $32.7 million.
- Comparative net income is not indicative of recurring performance: 2022 results included significant discontinued-operations income, including the vitaCare divestiture gain. Discontinued operations generated a $1.3 million loss in the first half of 2023, versus $96.0 million of income in the first half of 2022.
- At June 30, cash was $13.7 million, with no restricted cash; current assets were $19.6 million and current liabilities $14.4 million. Total assets were $53.7 million, total liabilities $22.5 million, and stockholders’ equity $31.2 million. The filing reports no outstanding borrowings under the former financing agreement, which was repaid and terminated in December 2022; operating lease liabilities were $6.9 million.
- Continuing operating cash use was $12.1 million for the half year, compared with $38.6 million in 2022. Discontinued operations used a further $24.6 million net; total cash declined $35.6 million from beginning cash and restricted cash of $49.3 million to $13.7 million.
Material changes, outlook and risks
- Mayne Pharma received U.S. commercialization rights to IMVEXXY, BIJUVA, prenatal vitamins and ANNOVERA. The company earns royalties, generally 8% on the first $80 million of annual U.S. product sales and 7.5% above that threshold, subject to adjustments; the rate can fall to 2% for a product after specified patent or generic-entry events. The agreement also provides minimum annual royalties of $3 million for 12 years, adjusted for inflation, and sales-based milestones. Q2 and six-month Mayne royalty revenue was $0.4 million and $0.9 million, respectively.
- Royalty receivables were $0.8 million current and $19.8 million long term. Revenue concentration is high: all first-half 2023 license revenue came from Mayne and Theramex. The company has one full-time employee and relies on external consultants.
- Management states that additional capital may be needed before the company becomes cash-flow positive and that substantial doubt exists about its ability to continue as a going concern for the next 12 months. Potential equity or debt financing is uncertain and may dilute shareholders. Under a May 2023 Rubric agreement, the company may sell up to 5 million shares, for aggregate proceeds of up to $5 million; the June drawdown raised $1.15 million gross through 312,525 shares.
- The final working-capital settlement with Mayne is disputed: Mayne’s March 2023 calculation differed significantly from the company’s estimate. The outcome is uncertain, and the company says it cannot reasonably estimate a loss range. A potential vitaCare earn-out of up to $7 million is not expected by management to be realized.
- Key risks include licensee product sales and royalty timing, the Mayne working-capital settlement, access to financing, and potential effects of COVID-19 or supply-chain disruption. Teva’s challenge to IMVEXXY patents remains relevant; Mayne is responsible for patent enforcement under the license agreement. No specific financial guidance was provided.
Investor facts to verify
- Cash runway, expected cash use, and whether further financing will be required; review the going-concern disclosure.
- Mayne product sales, royalty receipts, minimum-royalty receivable assumptions, and any subsequent working-capital settlement.
- Terms and remaining capacity of the Rubric financing, including dilution and any related-party considerations.
- Developments in the Teva patent litigation and any effect on royalty rates or product commercialization.
- How continuing results and cash flows evolve as the company operates solely as a royalty business.