TherapeuticsMD, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The company commercializes women’s health products, including ANNOVERA, IMVEXXY and BIJUVA, as well as prescription prenatal vitamins. Financial amounts below are in U.S. dollars; statement amounts are in millions unless noted.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / prior date |
|---|---|---|
| Net revenue | $19.3 million | $19.9 million; down 2.7% |
| Gross profit | $14.5 million | $15.2 million; down 4.7% |
| Product gross margin | 74.3% | Down 1.8 percentage points; 77.1% excluding BIJUVA export sales sold at cost |
| Operating expenses | $40.7 million | $44.5 million; down 8.4% |
| Operating loss | $(26.2) million | $(29.3) million |
| Net loss | $(49.0) million; $(5.69) per share | $(39.4) million; $(5.67) per share |
| Operating cash flow | $(29.5) million | $(38.4) million |
| Cash | $30.4 million at March 31 | $65.1 million at December 31, 2021 |
| Debt | $225.0 million loan principal; $202.9 million net carrying value after deferred financing fees | $200.0 million principal at December 31, 2021 |
Current assets were $84.4 million versus current liabilities of $264.8 million, a $180.4 million working-capital deficit. Total liabilities exceeded assets by $140.6 million. Interest expense and other financing costs were $14.4 million, including $9.0 million of financing-fee amortization; the company also recorded an $8.4 million debt-extinguishment loss.
Material changes and subsequent events
- Revenue by product: ANNOVERA $8.5 million (down 2.7%); IMVEXXY $7.0 million (approximately flat); BIJUVA $2.6 million (up 4.7%, including $0.7 million of Theramex export sales); prescription vitamins $0.9 million (down 38.6%). Excluding Theramex sales, BIJUVA revenue fell 23.7%.
- Selling and marketing expense fell 21.3% to $18.9 million, mainly due to lower advertising costs. General and administrative expense rose 11.0% to $20.4 million, including higher compensation and professional fees. Research and development expense fell 31.7% to $1.4 million.
- In March, lenders waived specified covenant breaches, including the prior minimum-cash and Q4 2021 net-revenue covenant breaches, and amended the financing agreement. The loan maturity was extended to June 1, 2022; the agreement added a $30 million paid-in-kind fee, of which $16 million could be waived under specified conditions.
- On April 14, 2022, after quarter-end, the company sold vitaCare for $150 million in cash, subject to adjustments and customary holdbacks, with up to $7 million additional contingent earn-out consideration. It applied $120 million of net proceeds to debt and the $16 million fee was waived. The company also entered a long-term vitaCare services agreement with minimum service fees stated as $5.2 million for the remainder of 2022, $10.7 million in 2023, $13.4 million in 2024, $15.4 million in 2025, $16.2 million in 2026, and $5.5 million through April 14, 2027.
- A 50-for-1 reverse stock split took effect May 6, 2022. Historical share and per-share figures in the filing are adjusted for the split.
Outlook, risks and contingencies
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern for the twelve months following issuance. It said additional capital was needed to address the debt and fund operations until cash-flow positive; the statements include no adjustments for a possible inability to continue operations. Financing alternatives may dilute shareholders, and failure to secure financing could require curtailing operations, asset sales, or a strategic transaction.
- Product supply and FDA review: ANNOVERA manufacturing difficulties caused intermittent supply interruptions and may limit supply relative to demand or lead to product write-offs. The FDA had requested further information on a supplemental application to revise testing specifications; management expected a response by the end of Q2 2022. Product demand and revenue could be adversely affected if supply or approval issues persist.
- Debt and liquidity: The financing agreement’s June 1, 2022 maturity and cash covenant remain important liquidity risks. The company disclosed that it had stayed above the amended minimum-cash covenant from March 1 through May 16, 2022; thereafter the minimum was $10 million less specified payables. The filing does not provide a clear post-sale debt balance or a complete financing plan beyond the reported prepayment.
- Other risks: Third-party manufacturing and API dependence, COVID-19-related demand, access and supply-chain uncertainty, customer payment delays, and customer concentration may affect results. Three customers represented 18%, 17% and 14% of Q1 product revenue. Teva’s challenge to IMVEXXY patents remains pending; the filing reports $2.3 million of related legal costs capitalized as prepaid assets.
- Management expected operating losses to continue in the near term and described cost-saving measures, but provided no quantified revenue, earnings or cash-flow guidance.
Key facts investors should verify
- The debt principal, covenant compliance and available liquidity after the vitaCare sale and $120 million prepayment, including the outcome of the June 1, 2022 maturity.
- Actual net sale proceeds after adjustments and holdbacks, any earn-out earned, and the effect of ongoing vitaCare service fees on cash needs.
- Whether ANNOVERA manufacturing output and FDA review resolved supply constraints, and the resulting effect on sales and inventory write-offs.
- Whether core product revenue trends, payer coverage and operating-cost reductions can materially reduce cash burn.
- Developments in the Teva IMVEXXY patent litigation and any related expense or commercial impact.