TherapeuticsMD, Inc. — Q1 2015 Form 10-Q
Business context and reporting period. The unaudited quarter ended March 31, 2015. TherapeuticsMD develops women’s health products, including hormone-therapy drug candidates in clinical trials, and sells prescription prenatal vitamins and OTC vitamins. The reported financial statements cover the company and its subsidiaries; product sales were in the United States.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| Net revenue | $4.48 million | $2.83 million; up 58% |
| Gross profit / margin | $3.43 million / 76.7% | $2.00 million / 70.7% |
| Operating expenses | $24.35 million | $10.95 million; up 122% |
| Operating loss | $(20.92) million | $(8.95) million |
| Net loss / loss per share | $(20.89) million / $(0.13) | $(9.18) million / $(0.06) |
| Operating cash flow | $(19.15) million | $(8.71) million |
| Cash at period end | $91.66 million | $45.40 million at March 31, 2014 |
Gross margin improved primarily due to favorable product mix. Research and development expense rose 208% to $18.18 million, chiefly reflecting clinical development costs. Revenue growth reflected higher unit sales (about 68% of the increase) and product mix and higher average net selling prices (about 32%).
Cash increased $40.30 million during the quarter, principally because of $59.12 million net proceeds from a February common-stock offering, plus warrant and option exercises. Investing cash use was $0.04 million. At March 31, current assets were $96.71 million and current liabilities $11.11 million, a current ratio of about 8.7. The balance sheet presents no borrowings; liabilities were primarily payables, accruals and other current liabilities. Common shares outstanding increased to 172.65 million from 156.10 million at year-end 2014.
Material developments, outlook and risks
- Pipeline: Phase 3 trials were underway for TX-001HR and TX-004HR. Management expected TX-004HR enrollment to finish in Q2 2015, results in Q4 2015, and a possible NDA filing as early as Q4 2015; it anticipated potential FDA approval as early as Q4 2016, contingent on successful results and regulatory review. For TX-001HR, management expected enrollment completion in the second half of 2015, results in the second half of 2016, and a possible NDA filing then, with potential approval during 2017.
- Trial uncertainty: TX-002HR enrollment had been suspended and the trial stopped while the company sought to revise its protocol after FDA discussions. FDA acceptance of the proposed changes was not assured. The company had no current plans for TX-003HR trials.
- Operating outlook: Management expected significant R&D spending and operating losses to continue for the near future while candidates were developed; approval and commercial success were uncertain. Management stated existing cash was expected to fund its operating plan for at least the next 12 months, but said spending could exceed expectations and additional financing might be needed. Future equity financing could dilute shareholders.
- Concentration and execution risks: One supplier accounted for about 95% of Q1 purchases. Four customers generated about 70.4% of revenue. Clinical development depends on trial enrollment, CROs and other third parties; safety, efficacy, regulatory, reimbursement, product-liability and manufacturing risks could affect outcomes.
- Other items: The company added office space under a lease amendment effective April 1, 2015, with stated future minimum payments of $393,429. It reported no legal proceeding believed likely to have a material adverse effect, no material change to previously disclosed risk factors, and effective disclosure controls. No impairment charge was recorded.
Important facts for investors to verify
- Actual trial enrollment, results and regulatory milestones versus management’s conditional timelines, particularly for TX-004HR and TX-001HR.
- Cash burn and whether the stated minimum 12-month funding runway remains adequate as clinical-trial spending evolves.
- Revenue sustainability, gross-margin trends, customer concentration and reliance on the principal supplier.
- Share dilution and potential future financing needs; the filing reports 30.59 million potentially dilutive options, warrants and restricted stock units excluded from diluted loss per share as antidilutive.
- Accrual estimates for clinical-trial costs and the financial effects of the additional lease commitment.