TherapeuticsMD, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Although the request refers to 2022 Q4, this filing reports annual results; standalone fourth-quarter financial figures are not clearly provided in the filing text.
Business context and major changes
TherapeuticsMD shifted from operating a women’s healthcare business to a royalty-focused company. On December 30, 2022, it licensed U.S. commercialization of IMVEXXY, BIJUVA and prescription prenatal vitamins to Mayne Pharma, and assigned Mayne its ANNOVERA commercialization license. The company ended research, development, manufacturing and commercial operations, and reduced its workforce to one full-time employee, supported by consultants. Historical commercial and vitaCare results are presented as discontinued operations.
Mayne paid $140.0 million at closing for transferred assets and license rights, approximately $12.1 million for net working capital and approximately $1.0 million in prepaid royalties. The company also became eligible for U.S. royalties, minimum annual royalties and sales-based milestone payments. Separately, the April 2022 vitaCare sale generated $142.6 million in net proceeds and a $143.4 million gain; $11.3 million of sale proceeds held in escrow was released in March 2023.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Continuing-operations revenue | $70.0 million | $2.6 million |
| Gross profit | $68.6 million | $1.2 million |
| Operating income (loss) | $1.2 million | $(79.6) million |
| Continuing-operations net income (loss) | $1.1 million | $(79.3) million |
| Discontinued-operations net income (loss) | $110.9 million | $(93.1) million |
| Consolidated net income (loss) | $112.0 million | $(172.4) million |
| Cash from continuing operating activities | $9.4 million | $(55.1) million |
The continuing-operations revenue and profit improvement primarily reflects recognition of Mayne-related license consideration and minimum royalties, rather than a full year of recurring royalty operations. Consolidated FY2022 income also included gains of $143.4 million on vitaCare and $62.0 million on ANNOVERA, partly offset by financing costs and other items. Continuing-operations gross margin was approximately 98%; operating margin was approximately 1.7%.
At December 31, 2022, cash was $38.1 million and restricted cash was $11.3 million. Total assets were $90.5 million, total liabilities $55.3 million and stockholders’ equity $35.1 million. Debt was zero after repayment and termination of the financing agreement on December 30. Operating lease liabilities totaled $8.8 million, with $11.9 million of undiscounted lease payments remaining. The company reported $20.3 million of long-term royalty receivable and $1.5 million of short-term royalty receivable.
Material changes, outlook and risks
- Continuing revenue rose to $70.0 million from $2.6 million, substantially due to the Mayne transaction. General and administrative expense fell 28.3% to $57.9 million; restructuring costs were $9.5 million in continuing operations and $6.2 million in discontinued operations.
- Mayne royalties are generally 8.0% on the first $80 million of annual U.S. net sales and 7.5% above that level, subject to adjustments, with a 2.0% rate applying product-by-product after specified patent-expiration or generic-entry events. Minimum annual royalties begin at $3.0 million in 2023 and increase 3% annually through 2034, subject to adjustments. Sales milestones total up to $30 million.
- Management and the auditor reported substantial doubt about the company’s ability to continue as a going concern for the following 12 months. Management said it may need additional financing and is considering financing and expense-reduction alternatives. The auditor’s report includes a going-concern explanatory paragraph; the financial statements contain no adjustments for a potential failure to continue as a going concern.
- Liquidity is exposed to Mayne product sales and royalty receipts, working-capital adjustments, potential financing availability and supply interruptions at third-party manufacturers. Revenue is highly concentrated: Mayne accounted for 98% of continuing license revenue in 2022.
- The final net-working-capital settlement with Mayne was disputed: the company said Mayne’s March 2023 calculation differed significantly from its estimate, and the outcome was uncertain. No additional liability was accrued because the company could not reasonably estimate a loss range.
- Teva’s challenge to IMVEXXY patents remained in litigation; Mayne assumed responsibility for enforcement after the transaction. The FDA had previously found an ANNOVERA post-marketing study unsatisfactory and delayed reports on other studies; the company said Mayne and the Population Council were working to complete them.
- Nasdaq notified the company of noncompliance with its annual-meeting rule. Nasdaq granted an extension through June 29, 2023 to regain compliance. Management stated its intent to hold an annual meeting by then.
Most important facts for investors to verify
- Whether royalty receipts and Mayne’s product sales support operating cash needs, and whether additional capital is required.
- The resolution and cash impact of the Mayne working-capital adjustment dispute, including any other contractual offsets to royalties.
- Mayne’s performance against the minimum annual royalty terms and sales milestones, and the terms affecting royalty reductions.
- Progress and regulatory consequences relating to ANNOVERA post-marketing studies, and the status and potential impact of the Teva IMVEXXY patent litigation.
- Whether the company regained Nasdaq listing compliance and how it will manage its remaining lease obligations and wind-down costs.