TherapeuticsMD, Inc. — 2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. The filing also reports unaudited quarterly results, including fourth-quarter 2018. TherapeuticsMD is a women’s healthcare company transitioning from research and development toward commercialization of prescription products.
Business context and key developments
- FDA approvals in 2018 included IMVEXXY, launched in July; ANNOVERA, licensed from the Population Council and approved in August; and BIJUVA, approved in October.
- At year-end, revenue was still predominantly from prescription prenatal vitamins: approximately 93% of consolidated revenue for 2018. IMVEXXY generated $1.06 million in 2018 sales.
- The company licensed IMVEXXY and BIJUVA commercialization rights in Canada and Israel to Knight Therapeutics. It also raised equity capital and entered a secured term-loan facility.
Financial performance and liquidity
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Net revenue | $16.10 million | $16.78 million |
| Gross profit / gross margin | $13.36 million / 83% | $14.14 million / 84% |
| Operating expenses | $143.58 million | $91.77 million |
| Operating loss | $(130.22) million | $(77.63) million |
| Net loss | $(132.62) million | $(76.93) million |
| Basic and diluted loss per share | $(0.59) | $(0.37) |
| Cash used in operating activities | $(106.81) million | $(76.16) million |
- Revenue declined 4%, mainly due to a $1.74 million reduction in prenatal-vitamin sales, partly offset by IMVEXXY sales. Increased coupons and launch co-pay support weighed on net revenue and gross margin.
- Operating expenses rose 56%. Sales and marketing increased $42.23 million to $61.85 million to support commercialization; R&D declined 19% to $27.30 million as major trials concluded and products received approval.
- Fourth-quarter 2018 revenue was $5.09 million, gross profit $4.14 million, net loss $(39.39) million, and loss per share $(0.17). Fourth-quarter 2017 revenue was $4.13 million and net loss $(21.43) million.
- At December 31, 2018, cash was $161.61 million, working capital $145.70 million, total assets $211.98 million, total liabilities $114.46 million, and stockholders’ equity $97.52 million.
- Debt included $75 million principal under the term loan (carrying value $73.38 million after financing costs). Interest is one-month LIBOR, subject to a 1.50% floor, plus 7.75%; the reported effective rate was approximately 11%. Principal installments begin May 2020, with maturity in May 2023.
- Financing provided $162.79 million net cash in 2018, including $75 million of term debt and approximately $89.91 million from common-stock issuance and option exercises. Shares outstanding rose to 240.46 million at year-end from 216.43 million a year earlier.
- Management stated cash and available term-loan capacity were expected to fund the operating plan for at least 12 months from the filing date, subject to commercialization progress and access to additional loan tranches. The facility requires at least $50 million cash and compliance with revenue covenants.
Outlook, risks, and unusual items
- Management expected operating losses to continue in the near term and anticipated higher sales and marketing expense as it launched BIJUVA and prepared ANNOVERA. No specific revenue or profitability guidance was provided.
- BIJUVA was planned for launch early in the second quarter of 2019. ANNOVERA was expected to become commercially available as early as the third quarter of 2019, with a full launch planned by the first quarter of 2020.
- Access to the remaining $125 million of the term facility was conditional: the second tranche required BIJUVA approval and first U.S. commercial sale by May 31, 2019; the third required the second tranche and at least $75 million of specified trailing-twelve-month sales by December 31, 2019. The filing’s liquidity outlook therefore depends in part on milestones and commercial performance.
- ANNOVERA obligations include a further $20 million payment after release of the first commercial batch, sales-based milestones, and royalties of 5%–15% under stated annual-sales tiers. The company is responsible for a post-approval study on venous thromboembolism risk; protocol submission was due August 2019. IMVEXXY also requires an observational post-approval study on endometrial cancer risk.
- Key risks include substantial recurring losses, cash burn and financing needs; uncertain uptake and payer coverage; price and reimbursement pressure; competition; reliance on contract manufacturers and concentrated customers; and regulatory, product-safety, clinical, intellectual-property, and commercialization risks. Four customers accounted for approximately 76% of 2018 revenue.
- The SEC staff was conducting a formal investigation into whether certain 2017 communications about TX-004HR may have violated Regulation FD. The company was cooperating; the outcome was uncertain.
- The company reported no material ordinary-course legal proceedings. The independent auditor issued an unqualified opinion on the financial statements and internal controls; management and the auditor concluded internal control over financial reporting was effective at year-end.
Important facts for investors to verify
- Quarterly and subsequent-period product sales, prescription trends, payer coverage, coupon utilization, and net revenue realization for IMVEXXY, BIJUVA, and ANNOVERA.
- Cash runway and operating cash burn, covenant compliance, and whether the conditions for additional term-loan tranches are achieved.
- Actual timing and costs of BIJUVA and ANNOVERA launches, including the ANNOVERA commercial-batch milestone payment and royalty obligations.
- Customer and supplier concentration, accounts-receivable collection trends, and the sharp increase in net days sales outstanding to 200 days from 97 days year over year.
- Progress and findings from required post-approval safety studies, the SEC investigation, and any material manufacturing or regulatory developments.
- The filing’s operating-lease commitments, including the new office lease, and the expected 2019 balance-sheet recognition of approximately $4 million–$5 million in lease assets and liabilities.