TherapeuticsMD, Inc. — Q3 2017 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2017. Financial statements are unaudited. TherapeuticsMD develops women’s health products, including hormone-therapy candidates, and sells prescription prenatal vitamins and limited OTC products. It ceased most OTC product manufacturing and distribution beginning January 1, 2017.
Financial results and position
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Net revenue | $4.42 million | $5.54 million | $12.65 million | $14.87 million |
| Gross profit | $3.72 million | $4.30 million | $10.61 million | $11.39 million |
| Gross margin | 84% | 78% | 84% | 77% |
| Operating expenses | $18.55 million | $29.43 million | $66.56 million | $78.71 million |
| Operating loss | $(14.83) million | $(25.13) million | $(55.95) million | $(67.31) million |
| Net loss | $(14.66) million | $(25.02) million | $(55.50) million | $(67.04) million |
| Basic and diluted loss per share | $(0.07) | $(0.13) | $(0.27) | $(0.34) |
For the nine months, operating cash use was $55.35 million, investing cash use was $0.48 million, and financing provided $72.58 million. Cash increased by $16.76 million to $148.29 million at September 30. The company reported $156.98 million of current assets and $10.88 million of current liabilities; total liabilities were $10.88 million, with no debt balance reported. Stockholders’ equity was $149.48 million.
Changes and key drivers
- Revenue declined 20% in Q3 and 15% for the nine-month period. Management attributed the decreases primarily to lower average net revenue per unit; for the nine months, higher estimated discounts and returns were a principal factor, partly offset by slightly higher unit sales.
- Gross margin improved, which management attributed largely to lower packaging, preparation, and delivery costs following distribution-channel centralization.
- Operating expenses fell 37% in Q3 and 15% for the nine months. Research and development expense declined 56% and 48%, respectively, primarily following completion of the TX-001HR REPLENISH trial.
- Nine-month sales and marketing expense rose 113% to $16.59 million, reflecting commercialization preparation, including outsourced sales personnel; management said this spending was curtailed in Q3 because of TX-004HR’s regulatory status.
- The September public offering of 12.4 million shares at $5.55 per share generated approximately $68.57 million net. Shares outstanding were 216,429,642 at October 30, 2017, versus 196,688,222 at December 31, 2016.
Outlook, risks, and other material items
- Management expected to submit an NDA for TX-001HR in Q4 2017. It estimated potential FDA approval as soon as Q4 2018, assuming timely filing acceptance and a ten-month review; these are expectations, not assurances.
- TX-004HR received an FDA Complete Response Letter in May 2017, citing lack of long-term safety data beyond the 12-week REJOICE trial. The company submitted additional endometrial-safety information in September. A November 3, 2017 FDA meeting, after the quarter, supported resubmission for the 4 mcg and 10 mcg doses without an additional pre-approval study, with a post-approval observational study commitment. Management anticipated resubmission within weeks and possible approval two to six months afterward, depending on review classification.
- The company stated that existing cash should fund its operating plan for at least 12 months from the filing date, but delayed commercialization could make cash insufficient. It planned to use most offering proceeds for TX-004HR and TX-001HR pre-commercialization and commercialization and was discussing debt financing; no commitment was reported. Management anticipated continued operating losses until product approvals and launches, which are uncertain.
- Key risks include FDA requirements and approval timing, clinical and safety uncertainty, commercialization and reimbursement outcomes, reliance on third-party manufacturers and clinical providers, and potential need for additional financing. Four customers represented about 60% of revenue in both nine-month comparison periods; one supplier provided approximately 100% of purchases in 2017.
- Three shareholder lawsuits related to TX-004HR disclosures were voluntarily dismissed without prejudice during 2017. The filing reported no material change to previously disclosed risk factors. Disclosure controls were assessed as effective, and no material internal-control changes were reported.
Most important facts for investors to verify
- Whether and when TX-004HR and TX-001HR NDAs are resubmitted, accepted, and decided by the FDA, and any additional safety or post-approval obligations.
- Cash burn, remaining runway, and the availability and terms of any proposed debt financing if approvals or launches are delayed.
- Commercial revenue trends, pricing, discounts and returns, receivable collection timing, and continued customer and supplier concentration.
- Potential dilution from equity financing and outstanding options and warrants; the filing lists 23.38 million options and 3.12 million warrants outstanding at September 30, 2017.