TherapeuticsMD, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited consolidated results; filing dated May 6, 2020. TherapeuticsMD develops and commercializes women’s health products, including IMVEXXY, BIJUVA, ANNOVERA and prescription prenatal vitamins.
Financial results
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Net product revenue | $12.25 million | $3.95 million |
| Gross profit | $9.54 million | $3.18 million |
| Gross margin on prescription products | 78% | 81% |
| Operating expenses | $60.46 million | $41.29 million |
| Operating loss | $50.92 million | $38.11 million |
| Net loss | $56.85 million | $39.51 million |
| Basic and diluted loss per share | $0.21 | $0.16 |
| Net cash used in operating activities | $39.11 million | $38.16 million |
Revenue rose 210% year over year, reflecting continued IMVEXXY growth, BIJUVA sales following its 2019 launch, and ANNOVERA sales. Q1 revenue by product was IMVEXXY $6.39 million, ANNOVERA $2.27 million, prescription vitamins $2.47 million and BIJUVA $1.11 million. Operating expenses increased 46%, driven mainly by sales and marketing and personnel costs supporting product commercialization; research and development expense fell to $3.27 million from $6.32 million.
At March 31, cash was $170.10 million, current assets were $211.99 million and current liabilities were $61.64 million. Long-term debt had a carrying value of $243.43 million, against $250 million principal outstanding. Stockholders’ equity was a deficit of $45.21 million. Cash increased $9.27 million during the quarter, including $50 million of financing proceeds; investing activities used $0.44 million.
Changes, outlook and risks
- Interest expense increased to $6.26 million from $2.09 million, principally due to the financing agreement. The loan’s effective interest rate was approximately 11%; it matures March 31, 2024, with scheduled quarterly principal payments beginning June 30, 2023.
- The $300 million first-lien facility had $250 million drawn at quarter-end. The remaining $50 million tranche was subject to the lender’s discretion. Covenants include a minimum unrestricted cash balance of $60 million and minimum product-revenue requirements beginning in Q4 2020.
- COVID-19 led the company to pause ANNOVERA’s commercial launch and defer sales and marketing initiatives. Management suspended previously announced 2020 financial guidance. It deferred approximately $10 million of planned marketing spending and targeted approximately $20 million in other 2020 expense cuts. Management said it could restore marketing spending if conditions improve.
- Management stated that cash, anticipated operating cash flows and facility availability, if accessible, were expected to cover ordinary-course cash needs for the next 12 months. It cautioned that weaker commercialization, pandemic effects or inability to access facility funds could make liquidity insufficient. Finished-goods inventory was expected to meet anticipated demand through at least early Q3; management reported no then-anticipated supply interruption.
- On April 27, 2020, the company received a $6.48 million Paycheck Protection Program loan at 1% interest. Forgiveness was uncertain and subject to program conditions.
- Four customers represented approximately 70% of prescription revenue in Q1; four suppliers accounted for approximately 97% of purchases. The filing identifies risks from COVID-19, product adoption and commercialization, payer coverage, competition, intellectual property challenges, manufacturing reliance and debt covenants. The company reported no litigation it believed would materially affect its financial condition or operations.
Key facts for investors to verify
- Whether IMVEXXY and BIJUVA revenue growth and ANNOVERA commercialization recover after pandemic-related delays.
- Cash burn, debt service and compliance with the $60 million cash covenant and revenue covenants; whether the discretionary $50 million tranche becomes available.
- Whether the announced cost reductions are achieved and how they affect marketing, sales growth and operating losses.
- PPP loan forgiveness outcome and any subsequent liquidity or financing developments.
- Customer and supplier concentration, payer coverage trends, and developments affecting product patents or competing products.