Business context and reporting period
TherapeuticsMD, Inc. filed this unaudited Form 10-Q for the quarter ended September 30, 2016. The women’s health company sells prescription prenatal vitamins and OTC vitamins while developing bioidentical hormone-therapy candidates. The filing was signed November 4, 2016.
Financial performance and position
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $5.54 million | $5.19 million | $14.87 million | $14.51 million |
| Gross profit / margin | $4.30 million / 78% | $4.00 million / 77% | $11.39 million / 77% | $11.24 million / 77% |
| Operating expenses | $29.43 million | $23.50 million | $78.71 million | $78.92 million |
| Operating loss | $(25.13) million | $(19.50) million | $(67.31) million | $(67.68) million |
| Net loss | $(25.02) million | $(19.47) million | $(67.04) million | $(67.59) million |
| Basic and diluted loss per share | $(0.13) | $(0.11) | $(0.34) | $(0.39) |
For the nine months, operating cash use was $53.52 million, investing cash use was $0.86 million, and financing provided $137.22 million. Cash at September 30 was $147.53 million, versus $64.71 million at December 31, 2015. Current assets were $156.10 million and current liabilities $12.47 million. Total liabilities were $12.47 million; the filing reports no debt balance. The January 2016 stock offering generated approximately $134.9 million net and increased shares outstanding to 196.58 million at quarter-end.
Material changes versus comparable periods
- Q3 revenue rose 7%, mainly on higher unit sales, partly offset by lower average net selling prices. Nine-month revenue rose 2%; nine-month gross margin was unchanged.
- Q3 operating expenses increased 25%, led by higher personnel and sales and marketing costs, stock compensation, and a customer receivables write-off. Q3 net loss increased 28%.
- Nine-month R&D expense declined 26% to $43.60 million, primarily following completion of enrollment in the TX-001HR REPLENISH trial; commercialization preparation and scale-up costs partly offset the decline. Higher personnel, sales and marketing, and other expenses largely offset R&D savings.
- Operating cash use improved by approximately $8.91 million year over year. The increase in cash chiefly reflected equity financing.
Outlook, risks, and unusual items
- Management said existing cash was expected to fund the operating plan through at least the next 12 months, while cautioning that spending could exceed expectations. Continued operating losses were anticipated until hormone candidates gain approval and reach the market; approval and commercial success are not assured.
- TX-004HR’s NDA was accepted for FDA review; the target action date was May 7, 2017. The filing describes positive Phase 3 REJOICE results, but also notes FDA concerns about the evidentiary threshold for approval based on a single trial.
- For TX-001HR, management expected REPLENISH results late in Q4 2016 and, if successful, anticipated an NDA submission as soon as the first half of 2017. As of November 3, virtually all participants had exited and consensus endometrial hyperplasia incidence among those patients was below 1%; complete trial results remained pending.
- TX-002HR’s Phase 3 trial remained stopped while the company considered protocol changes; TX-003HR had no current clinical-trial plans. Clinical timelines, FDA decisions, safety, third-party trial/manufacturing reliance, reimbursement, and future financing are key risks.
- The company wrote off approximately $2.2 million of receivables from two former customers for inability to collect. Four customers each represented more than 10% of nine-month revenue, together accounting for approximately 60%; one supplier provided approximately 97% of purchases. These concentrations create collection and supply risks.
- Minimum future lease payments were $3.76 million as of September 30; additional office space was leased effective November 1. Long-term supply agreements require minimum purchases after commercial sales begin, subject to stated conditions. Management reported no legal proceeding believed likely to have a material adverse effect and no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether the FDA approves TX-004HR by its May 7, 2017 target date, and the resulting label, dose availability, and launch requirements.
- Full REPLENISH results, the timing and content of any TX-001HR NDA, and the status of TX-002HR protocol discussions.
- Cash consumption against management’s stated minimum 12-month funding horizon, including development and pre-commercialization spending.
- Receivable collectability and subsequent customer concentration, alongside dependence on the principal supplier.
- Potential dilution from equity financing and outstanding options and warrants; the filing lists 20.71 million options and 12.06 million warrants at September 30, 2016.