TherapeuticsMD, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. The company develops and commercializes women’s healthcare products, including IMVEXXY and BIJUVA for menopause-related conditions, ANNOVERA for contraception, and prescription prenatal vitamins.
Financial performance
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Net revenue | $6.08 million | $3.76 million | $10.03 million | $7.54 million |
| Gross profit | $4.83 million | $3.31 million | $8.01 million | $6.45 million |
| Gross margin | 79% | 88% | 80% | 86% |
| Operating expenses | $46.47 million | $36.33 million | $87.76 million | $64.19 million |
| Operating loss | $(41.64) million | $(33.02) million | $(79.74) million | $(57.74) million |
| Net loss | $(55.24) million | $(33.22) million | $(94.74) million | $(57.62) million |
| Net loss per share, diluted | $(0.23) | $(0.15) | $(0.39) | $(0.27) |
Q2 revenue included $3.12 million from IMVEXXY and $0.13 million from BIJUVA; prenatal vitamin revenue fell about $0.94 million year over year. For the first half, IMVEXXY contributed $5.13 million and BIJUVA $0.13 million, while prenatal vitamin revenue declined about $2.78 million.
At June 30, cash was $182.85 million, accounts receivable $18.38 million, and inventory $7.49 million. Current assets totaled $216.46 million against current liabilities of $41.88 million. Long-term debt was $194.10 million net of debt discount and financing fees; stockholders’ equity was $8.09 million. Six-month cash used in operating activities was $88.68 million, cash used in investing activities was $1.88 million, and financing activities provided $111.79 million.
Material changes versus prior periods
- Revenue grew 62% in Q2 and 33% in the first half, mainly as sales from recently launched IMVEXXY and BIJUVA supplemented declining prenatal vitamin sales. Gross margin fell by 9 percentage points in Q2 and 6 points in the first half, reflecting product mix and higher costs for newer products.
- Operating expenses rose 28% in Q2 and 37% in the first half, driven chiefly by commercialization-related sales, marketing, and personnel costs. R&D expense declined as certain programs and personnel shifted toward commercial operations and the BIJUVA REPLENISH trial was completed.
- Net loss widened by $22.02 million in Q2 and $37.12 million in the first half. Higher operating costs contributed, as did financing costs; first-half results included a $10.06 million debt-extinguishment loss.
- Cash increased from $161.61 million at year-end 2018 to $182.85 million, primarily reflecting new borrowing. The company’s first-half operating cash use nearly doubled from the prior-year period.
Outlook, financing, and risks
- Management expected operating losses to continue in the near term while the company commercializes IMVEXXY, BIJUVA, and ANNOVERA. It anticipated improving IMVEXXY and BIJUVA revenue as payer coverage and prescription adjudication increased, while noting that launch success was not assured.
- ANNOVERA pre-launch activities were planned for the second half of 2019, with full-scale launch targeted for Q1 2020; commercial availability was also described as potentially beginning as early as Q3 2019.
- In April 2019, the company replaced its prior credit facility with a $300 million first-lien secured term-loan facility. It drew $200 million; two additional $50 million tranches depend on specified FDA/product and revenue milestones. The loan carries interest at LIBOR plus 7.75% or prime plus 6.75%, subject to floors, and includes a $50 million minimum unrestricted-cash covenant, rising to $60 million if either additional tranche is drawn, as well as future revenue covenants. The reported effective interest rate was approximately 11%.
- Management said existing cash and facility availability were expected to fund operations for at least 12 months from the filing date, but cautioned that delays, inability to access facility funds, or faster-than-expected cash use could impair liquidity. A 1 percentage-point interest-rate change was estimated to affect annual pretax income by about $2 million.
- The June 2019 Theramex license covers BIJUVA and IMVEXXY outside the U.S., Canada, and Israel. Theramex paid a €14 million upfront fee on August 5, 2019, after quarter-end; recognition was contingent on satisfying performance obligations. The company may also receive regulatory and sales milestones and royalties.
- FDA-required post-approval studies include an ANNOVERA observational study measuring venous thromboembolism risk; its protocol was due in August 2019. The company also disclosed an SEC staff formal investigation concerning whether certain 2017 communications about TX-004HR may have violated Regulation FD; the company was cooperating, and the outcome was uncertain.
- Three customers represented approximately 60% of first-half revenue, indicating customer concentration. The filing reported no material change to previously disclosed risk factors and no legal proceeding other than the SEC investigation that management believed would materially affect the company.
Important facts for investors to verify
- Subsequent progress in payer coverage, prescriptions, net pricing, and sales for IMVEXXY and BIJUVA, including the impact of patient co-pay programs and returns or rebate estimates.
- ANNOVERA launch timing, FDA designation milestone status, commercial uptake, and the costs and obligations of required post-approval studies.
- Compliance with the loan’s liquidity and revenue covenants, availability of the conditional $50 million tranches, interest expense, and the company’s cash runway.
- Whether Theramex’s upfront payment is recognized after performance obligations are met, and whether international approvals, milestones, and royalties are achieved.
- Outcome of the SEC investigation and any resulting penalties or other remedies.