TherapeuticsMD, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; filed May 5, 2016. The company develops women’s health products, including hormone-therapy drug candidates in clinical development, and sells prescription prenatal vitamins and OTC products. Results are unaudited.
Financial performance and position
| Metric | Q1 2016 | Q1 2015 / comparator |
|---|---|---|
| Revenue | $4.93 million | $4.48 million; up 10% |
| Gross profit / margin | $3.82 million / approximately 77.5% | $3.43 million / approximately 76.7% |
| Operating expenses | $24.80 million | $24.35 million |
| Operating loss | $20.97 million | $20.92 million |
| Net loss | $20.93 million | $20.89 million |
| Net loss per share, basic and diluted | $0.11 | $0.13 |
| Cash used in operating activities | $19.40 million | $19.15 million |
| Cash and cash equivalents at period end | $182.10 million | $64.71 million at December 31, 2015 |
At March 31, 2016, total assets were $192.97 million, current liabilities and total liabilities were $9.60 million, and stockholders’ equity was $183.37 million. The balance sheet reports no debt. Cash rose primarily from a January public stock offering: net proceeds were approximately $134.9 million. Financing cash flow was $136.96 million; investing cash use was $0.17 million.
Material changes versus the prior-year quarter
- Revenue increased $455,000, primarily from higher unit sales; management attributed about 84% of the increase to units sold and 16% to product mix and average net pricing, partly offset by insurance-plan changes.
- Cost of goods sold increased 6%, slower than revenue growth, and fell from approximately 23% to 22% of revenue; management cited favorable product mix.
- Research and development expense fell 17% to $15.10 million, mainly following completion of enrollment in the TX-001HR REPLENISH trial. TX-001HR spending was $9.03 million; TX-004HR spending was $2.44 million.
- Sales, general and administrative expense rose to $9.68 million from $6.16 million. Management cited higher human-resource costs, including increased stock-based compensation, as well as higher professional fees, marketing costs, other expenses and bad-debt allowance. Share-based compensation was $4.38 million, versus $0.84 million.
- Net loss was broadly unchanged, while loss per share narrowed as weighted-average shares increased to 194.9 million from 163.4 million.
Outlook, clinical programs and risks
- Management said existing cash was expected to fund its operating plan for at least the next 12 months, while warning that spending could exceed expectations. It anticipated continuing operating losses until hormone-therapy products receive approval and reach the market; approval and commercial success are not assured.
- TX-004HR: Following positive top-line Phase 3 REJOICE results announced in December 2015, the company intended to submit an NDA for three doses by the end of June 2016 and projected possible FDA approval as soon as Q1 2017, assuming a ten-month review. The 4 mcg dose’s dyspareunia result was significant at p=0.0149; the filing notes FDA had indicated a single-trial NDA would require p≤0.01 for each endpoint. The company also reported low systemic hormone absorption and no drug-related serious adverse events in the trial.
- TX-001HR: The Phase 3 REPLENISH trial had completed enrollment. Results were anticipated late in Q4 2016; subject to successful results, management anticipated an NDA as soon as the first half of 2017 and possible approval in Q4 2017 or Q1 2018. As of May 3, approximately 1,500 patients had exited the trial, with reported endometrial hyperplasia incidence below 1% among them.
- TX-002HR: The Phase 3 SPRY trial remained temporarily stopped while the company considered protocol changes following enrollment challenges and FDA discussions. There was no assurance the FDA would accept a revised protocol. The company had no current plans for TX-003HR clinical trials.
- Key stated risks include clinical-trial duration, cost and outcomes; safety findings; regulatory approval; dependence on third parties for trials, research and manufacturing; product reimbursement; product-liability litigation; and extensive regulation. The company relied on one supplier for approximately 95% of purchases. Three customers represented approximately 61% of Q1 2016 revenue.
- The company reported no material legal proceeding believed likely to adversely affect its business or financial condition, and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
- After quarter-end, an April 26 lease amendment added office space and extended the lease term to October 31, 2021. Future minimum rent under the lease as of March 31, before that amendment, was $1.31 million.
Important facts for investors to verify
- Whether TX-004HR NDA submission occurred as planned and the FDA’s position on the trial evidence, particularly the 4 mcg dyspareunia endpoint.
- Final TX-001HR REPLENISH results, including full endometrial safety data, and whether they support the projected NDA timeline.
- Cash burn and clinical-trial spending relative to the stated minimum 12-month runway; future financing could dilute shareholders or impose restrictive terms.
- Revenue durability and exposure to concentrated customers, a highly concentrated supplier base, and changes in insurance coverage or reimbursement.
- Potential dilution: the January offering issued 17.42 million shares; 20.57 million options and 12.28 million warrants were outstanding at March 31, 2016.