TherapeuticsMD, Inc. — FY2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. The filing also reports fourth-quarter results. TherapeuticsMD is a women’s health company whose commercial revenue came primarily from prescription prenatal vitamins; its main strategic focus was developing hormone-therapy drug candidates.
Financial performance and liquidity
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue | $19.36 million | $20.14 million |
| Gross profit / margin | $15.17 million / 78% | $15.64 million / 78% |
| Operating expenses | $105.42 million | $100.83 million |
| Operating loss | $90.25 million | $85.19 million |
| Net loss | $89.88 million | $85.08 million |
| Net loss per share | $0.46 | $0.49 |
| Cash used in operating activities | $69.14 million | $79.04 million |
| Cash at year-end | $131.53 million | $64.71 million |
| Working capital | $124.43 million | $60.01 million |
FY2016 revenue fell 4%, mainly because of lower average net revenue per unit, including higher estimated discounts and returns, partly offset by more units sold. Gross margin held at 78%. R&D expense declined 25% to $53.94 million as phase 3 trial costs eased; SG&A rose substantially, including higher staffing and commercialization spending and a $2.2 million receivables write-off. Net loss increased 6%. Revenue remained highly concentrated in prenatal vitamins, which generated approximately 99.8% of consolidated revenue.
Q4 comparison: FY2016 fourth-quarter revenue was $4.49 million versus $5.63 million in Q4 2015; net loss was $22.84 million versus $17.48 million. The filing provides quarterly gross profit of $3.78 million for Q4 2016 and $4.40 million for Q4 2015.
Cash provided by financing was $137.23 million, principally from a January 2016 public equity offering that generated approximately $134.86 million net. Stockholders’ equity was $127.49 million and total liabilities were $14.98 million at year-end. The balance sheet lists current liabilities but no borrowings; the filing does not identify debt as a material funding source. Management said existing cash was expected to fund operations for at least 12 months from the filing date, while warning that delays to commercialization could make cash insufficient. Operating cash burn was substantial despite the year-over-year reduction.
Business developments and changes
- In December 2016, the company reported positive top-line phase 3 REPLENISH results for TX-001HR, an oral estradiol/progesterone combination for menopausal hot flashes. Two higher-dose regimens met all co-primary efficacy endpoints and the primary endometrial-safety endpoint; reported endometrial hyperplasia or malignancy incidence was 0% across doses.
- The TX-004HR vaginal estradiol softgel NDA, covering three doses, was accepted for FDA review. Its target action date was May 7, 2017. In the REJOICE trial, the 4-mcg dose’s dyspareunia endpoint had p=0.0149, above the FDA’s previously stated p≤0.01 benchmark for approval based on a single trial; the company identified possible need for another trial or removal of that dose.
- An IND for topical combination candidate TX-006HR was submitted in Q4 2016; phase 1 trials were planned for 2017. Development of TX-002HR was suspended and TX-003HR had no planned clinical development.
- Effective January 1, 2017, the company stopped manufacturing and distributing most OTC product lines and stopped direct-to-consumer website sales, prioritizing prescription vitamins.
- Distribution was centralized in September 2016. Days sales outstanding increased to 92 from 50 in 2015, reflecting longer payment terms. Three customers accounted for about 41% of FY2016 revenue, and one supplier represented about 98% of purchases.
Outlook, risks and unusual items
Management anticipated submitting the TX-001HR NDA in Q3 2017 and, subject to FDA review and approval, estimated approval could occur as early as the first half of 2018. The company planned to launch TX-004HR in Q4 2017 if approved. These are forward-looking expectations, not assured outcomes. Management expected continued operating losses until hormone products were approved and commercialized, with no assurance of approval, launch success, or profitability.
- Regulatory uncertainty includes the FDA’s review of TX-004HR, the statistical-significance issue for its lowest dose, manufacturing inspections and validation, product stability, labeling and potential additional studies.
- The company had never obtained FDA approval for or commercialized a drug. It relied on third parties for manufacturing and clinical trials; Catalent was contracted for commercial supply, while the clinical-trial manufacturer had received FDA Form 483 observations. The filing describes remediation and regulatory review as potential timing risks.
- Funding remains a key risk: management reported no committed external funding source and warned that financing may be needed if development or commercialization is delayed. Future equity financing could dilute shareholders.
- FY2016 included a $2.2 million write-off of receivables from two retail pharmacy distributors. Higher DSO, customer concentration, supplier concentration, competition, reimbursement pressure, hormone-therapy safety perceptions and potential product-liability claims are additional risks.
- The company reported a $310 million accumulated deficit and approximately $268.2 million of federal net operating loss carryforwards, whose future use may be limited by ownership-change rules. No material litigation or material off-balance-sheet arrangements were reported.
Important facts for investors to verify
- FDA milestones and outcomes: TX-004HR review, including the 4-mcg dose, and the timing and contents of the TX-001HR NDA.
- Cash runway against continuing losses, operating cash burn, planned commercialization costs and any subsequent financing or dilution.
- Receivables collection and DSO trends after the distribution-channel change, including customer concentration and the effects of the $2.2 million write-off.
- Manufacturing inspection status, product stability, commercial-supply readiness and any FDA-requested additional studies or labeling changes.
- Revenue and margins after the OTC exit, and whether the prescription prenatal-vitamin business can sustain revenue while drug candidates remain unapproved.