TherapeuticsMD, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2013. Interim financial statements are unaudited. The company develops and commercializes women’s healthcare products, including prenatal vitamins and OTC products, while advancing hormone-therapy drug candidates.
Financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $2.295 million | $1.036 million | $5.913 million | $2.577 million |
| Gross profit | $1.646 million | $0.730 million | $4.420 million | $1.562 million |
| Gross margin | 71.7% | 70.4% | 74.8% | 60.6% |
| Operating expenses | $8.883 million | $4.640 million | $22.217 million | $12.315 million |
| Operating loss | $(7.237) million | $(3.911) million | $(17.797) million | $(10.753) million |
| Net loss | $(7.673) million | $(4.253) million | $(20.040) million | $(29.393) million |
| Basic and diluted loss per share | $(0.06) | $(0.04) | $(0.16) | $(0.33) |
- Revenue increased 121% in Q3 and 129% for the nine-month period. Management attributed growth to more prescribing physicians, improved sales-force productivity, higher average net selling prices, and products launched in 2012. Product mix accounted for about 69% of Q3 growth and 80% of nine-month growth.
- Cost of goods sold was 28% of revenue in Q3 versus 30% a year earlier, and 25% for nine months versus 39%. Gross margin improved accordingly.
- Operating costs rose substantially, driven principally by clinical development, personnel and share-based compensation, and sales and marketing. R&D expense was $4.099 million in Q3 and $7.711 million for nine months, compared with $1.702 million and $3.131 million, respectively.
- Nine-month net loss improved year over year largely because 2012 included $10.505 million of debt-extinguishment loss and $6.717 million related to a beneficial conversion feature. Operating loss increased in both comparative periods.
- Operating cash use was $15.893 million for the first nine months, versus $8.731 million in 2012; investing cash use was $0.388 million. Financing provided $74.299 million, primarily from stock offerings. Cash at September 30 was $59.572 million, compared with $1.553 million at year-end 2012.
- Total assets were $68.477 million; current assets were $65.933 million against current liabilities of $6.390 million. Stockholders’ equity was $62.087 million, versus a deficit of $1.433 million at December 31, 2012.
- No notes payable or accrued interest remained on the balance sheet at September 30. The Plato revolving facility permitted borrowings up to $10 million at 6%, secured by substantially all assets; it had no outstanding balance at period-end and was due February 24, 2014.
Material changes and business developments
- The company raised approximately $78.9 million net through 2013 public offerings, including a September offering that generated approximately $30.4 million net. Shares outstanding increased to 144,962,706 at September 30 from 99,784,982 at December 31, 2012; 144,968,007 were reported outstanding on November 4.
- In March 2013, the company repaid the remaining principal and interest on its 2012 secured notes; the bank line was repaid in April and expired in May.
- The REPLENISH Phase 3 trial of TX 12-001-HR began enrolling and dosing its first patient in September. The company reported Phase 1 pilot results for TX 12-004-HR in October, stating that treatment showed statistically significant changes in vaginal maturation index and pH versus placebo.
- Supplier and customer concentration increased: one vendor supplied approximately 98% of purchases for the nine months, and three wholesale customers accounted for 63% of recognized revenue.
Outlook, risks and contingencies
- Management believed cash and the available Plato facility would fund operations, including clinical development, for the next 12 months, while cautioning that spending could exceed expectations. The filing provides no formal revenue or earnings guidance.
- Management expected significant and increasing R&D spending. It intended to begin Phase 3 trials for TX 12-002-HR at the end of 2013 and TX 12-004-HR in Q2 2014, subject to regulatory input. No current clinical-trial plans were stated for TX 12-003-HR.
- Key risks include clinical-trial results and timing, FDA approval, the need for additional capital if circumstances change, concentrated suppliers and customers, and potential competition. The company stated that it might delay, scale back, discontinue, or seek partners for development if it could not raise capital on acceptable terms.
- Aceto litigation had a tentative settlement awaiting approval by Gnosis S.p.A.; the company said it believed the case lacked merit. Avion Pharmaceuticals’ lawsuit over the Prena1 name was in discovery; management likewise believed it lacked merit.
- A financial advisor filed suit on October 22, 2013, alleging breach of an engagement letter relating to the September equity offering and seeking at least $2.3 million plus costs. The company intended to defend the claim, but said litigation could have a material adverse effect.
- The company entered a 63-month office lease beginning July 1, 2013, with stated future minimum payments of $1.899 million. It reported no off-balance-sheet arrangements.
Investor verification priorities
- Confirm subsequent cash burn, clinical-trial costs and progress against the stated 12-month funding estimate.
- Review Phase 3 timelines, regulatory milestones and the full Phase 1 results for TX 12-004-HR.
- Assess whether revenue growth and margin gains persist, given the contribution of product mix and concentration in three customers and one supplier.
- Verify dilution from offerings, outstanding options and warrants, and the potential impact of future equity financing.
- Monitor the financial advisor lawsuit, Aceto settlement status, and Avion litigation for any change in exposure.