TherapeuticsMD, Inc. — Q1 2014 Form 10-Q
Reporting period: Three months ended March 31, 2014; financial statements are unaudited. TherapeuticsMD develops women’s health products, including investigational hormone therapies, and sells prescription prenatal vitamins and OTC products.
Financial performance and liquidity
| Metric | Q1 2014 | Q1 2013 |
|---|---|---|
| Revenue | $2.83 million | $1.54 million |
| Gross profit / gross margin | $2.00 million / 70.7% | $1.16 million / 75.3% |
| Operating expenses | $10.95 million | $6.10 million |
| Operating loss | $8.95 million | $4.94 million |
| Net loss | $9.18 million | $6.38 million |
| Basic and diluted loss per share | $0.06 | $0.06 |
| Cash used in operating activities | $8.71 million | $3.51 million |
- Revenue grew 84%; management attributed the increase to more physicians prescribing, improved sales-force productivity, and higher average net sales prices. It said approximately 33% of the increase reflected unit growth and 67% product mix.
- Research and development expense rose to $5.91 million from $1.57 million, primarily reflecting development and clinical trials. Selling, general and administrative expense was $5.03 million versus $4.53 million.
- Cost of goods sold grew 118%, faster than revenue; it was 29% of revenue versus 25% a year earlier.
- Cash was $45.40 million at March 31, down from $54.19 million at December 31, 2013. Current assets were $50.97 million and current liabilities $6.82 million (current ratio approximately 7.5). Total liabilities were $6.82 million; the balance sheet reported no debt outstanding.
- Financing cash flow was $0.04 million in Q1 2014, mainly option exercises, compared with $40.84 million in Q1 2013, largely reflecting the prior-year stock offering. The company reported 145.07 million common shares outstanding at quarter-end and 145.44 million as of May 2, 2014.
Changes, outlook, and risks
- Net loss increased by $2.81 million year over year as higher R&D and operating costs more than offset revenue growth. The reported per-share loss remained $0.06, alongside a substantial increase in weighted-average shares.
- Management believed existing cash would fund operations for at least 12 months, while cautioning that spending could exceed expectations. It expected R&D spending to remain significant and increase as trials and pipeline development continued; no specific financial guidance was provided.
- TX-001HR and TX-002HR were in Phase 3 trials. The company intended to begin a TX-004HR Phase 3 trial in Q3 2014. TX-002HR’s SPRY trial faced enrollment challenges related to protocol and FDA eligibility criteria. The company said it had no current plans for TX-003HR trials.
- Key business risks include clinical-trial execution, regulatory approval, funding needs and potential dilution or unfavorable financing terms. Four customers accounted for 97.42% of Q1 2014 revenue, and one supplier accounted for approximately 84% of purchases, creating significant concentration exposure.
- The company disclosed $1.70 million of future minimum lease payments as of March 31, 2014, no material off-balance-sheet arrangements, and no impairment of long-lived assets in the quarter. Management reported effective disclosure controls and no significant change in internal controls.
Important facts for investors to verify
- Progress, enrollment, timing, and results for the TX-001HR, TX-002HR, and planned TX-004HR trials, including the cause and impact of SPRY enrollment difficulties.
- Cash burn, projected runway, and whether trial costs or operating needs require additional financing.
- Revenue durability and exposure to the four major customers and concentrated supplier base.
- Potential dilution from outstanding options and warrants; the filing listed approximately 30.85 million potentially dilutive securities, excluded from diluted loss per share as antidilutive.
- The terms and fulfillment of the $1.70 million lease commitment and other commitments or contingencies.