TherapeuticsMD, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. The filing was dated August 15, 2022. TherapeuticsMD is a women’s healthcare company selling ANNOVERA, IMVEXXY, BIJUVA and prescription prenatal vitamins. Amounts below are in U.S. dollars; financial statement amounts have been converted from thousands to millions where appropriate.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $28.6m | $23.0m | $47.9m | $42.9m |
| Gross profit / margin | $23.8m / 83.4% product margin | $18.9m | $38.3m / 79.8% product margin | $34.0m |
| Operating expenses | $42.7m | $54.0m | $83.4m | $98.5m |
| Operating loss | $(18.8)m | $(35.2)m | $(45.1)m | $(64.5)m |
| Net income (loss) | $112.3m | $(42.7)m | $63.3m | $(82.0)m |
| Operating cash flow | Not separately reported for the quarter | Not separately reported for the quarter | $(44.9)m | $(64.9)m |
Q2 and first-half net income included a $143.4m gain on the vitaCare sale. Excluding the sale gain, the company reported a Q2 net loss of $30.6m versus $42.7m in Q2 2021, and a first-half net loss of $79.6m versus $82.0m. The reported profit is therefore not representative of ongoing operating performance.
- Q2 product revenue rose 24.2%. ANNOVERA revenue increased 91.2% to $18.3m; IMVEXXY fell 32.2% to $6.7m; BIJUVA increased 23.1% to $2.7m. Prescription vitamin revenue declined 35.5% to $0.9m.
- At June 30, cash was $26.3m and restricted cash was $11.3m. Total cash and restricted cash was $37.6m. Current assets were $98.6m versus current liabilities of $164.0m, a $65.4m working-capital deficit.
- Debt was $90.8m at June 30, down from $200.0m at December 31, 2021, following a $120.0m debt prepayment from vitaCare sale proceeds. Interest expense and other financing costs were $26.1m for the first half, including $17.0m of financing-fee amortization.
- Total assets were $146.2m, total liabilities $172.3m, and stockholders’ deficit $26.1m at June 30. First-half investing cash inflow of $142.3m largely reflected the vitaCare sale; financing cash outflow was $125.0m, mainly debt repayment.
- Net days sales outstanding rose to 159 days from 146 at year-end 2021; gross DSO was 77 days versus 72. Accounts receivable was $45.8m.
Material changes and significant events
- On April 14, 2022, TherapeuticsMD sold vitaCare for net proceeds of $142.6m, including $11.3m held in escrow until expected release in April 2023, subject to claims. The company may receive up to an additional $7.0m in contingent earn-out consideration. It remains committed to minimum vitaCare service fees, including $10.7m for 2023.
- Operating expenses declined 21.1% in Q2 and 15.4% in the first half year over year, reflecting cost reductions and the vitaCare divestiture. Selling and marketing expenses were notably lower.
- A 50-for-1 reverse stock split took effect May 6, 2022; historical per-share figures in the filing are adjusted for the split.
- The proposed $10-per-share acquisition by an EW Healthcare Partners affiliate failed to obtain the required majority of shares. The offer expired and the merger agreement was terminated July 13, 2022.
Outlook, risks and contingencies
- Going concern: Management concluded that substantial doubt existed about the company’s ability to continue as a going concern for the next 12 months. It needed additional capital to repay debt and fund operations; the financial statements contain no adjustments for a possible inability to continue as a going concern. Management cited possible Chapter 11 protection if financing or other strategic alternatives failed.
- Subsequent financing and debt extensions: On July 29, the company raised $15.0m gross through a private placement: $12.3m of Series A preferred stock and $2.7m of common stock. The preferred shares have a $1,333-per-share liquidation preference, mature December 31, 2022, and have redemption provisions. The same date, the debt maturity was extended to September 30, 2022, with options to extend to October 31 and November 30 if each extension condition is met, including at least $7.0m in qualifying equity proceeds. The company also issued lenders warrants for 185,000 common shares at a $0.01 exercise price. These developments occurred after June 30 and do not eliminate the disclosed financing risk.
- Management expected operating losses to continue in the near future and gave no quantified revenue or earnings guidance. Future performance depends on commercializing its products and obtaining financing; success is not assured.
- ANNOVERA supply had experienced intermittent manufacturing interruptions and raw-material specification issues. The FDA approved a supplemental application in May 2022 to revise testing specifications, which the company expected to improve supply, but third-party manufacturing and supply risks remain.
- Other risks include declining IMVEXXY sales and pricing, customer concentration, collection delays, COVID-19 and supply-chain uncertainty, and minimum purchase commitments. A Teva challenge to IMVEXXY patents is pending; the company capitalized $2.3m of related legal costs, which could be expensed if it does not prevail.
- The filing states that disclosure controls and procedures were effective at quarter-end and that there were no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Current debt balance, covenant compliance, and whether the September 30 maturity was repaid, refinanced, or extended; confirm any required equity proceeds for extensions.
- Cash available for operations, including the status and accessibility of the $11.3m escrow and any earn-out proceeds.
- Preferred-stock redemption and maturity obligations, and the potential dilution from common stock and lender warrants.
- Whether ANNOVERA supply improved after the FDA’s May approval, and whether revenue growth and margins can offset continuing operating losses and cash burn.
- Progress and outcomes in the Teva patent litigation and any claims against the vitaCare sale escrow.