TherapeuticsMD, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; filed May 8, 2019. TherapeuticsMD is a women’s healthcare company shifting from research and development toward commercialization. Its products include prescription prenatal vitamins and the hormone therapies IMVEXXY and BIJUVA, plus the contraceptive ANNOVERA.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 | Change or context |
|---|---|---|---|
| Net revenue | $3.95 million | $3.77 million | Up 4.6%; IMVEXXY contributed $2.01 million, partly offset by a $1.84 million decline in prenatal vitamin revenue. |
| Gross profit / margin | $3.18 million / 81% | $3.14 million / 83% | Margin declined two percentage points. |
| Operating expenses | $41.29 million | $27.86 million | Up 48.2%, primarily from commercialization, sales and marketing, and personnel costs. |
| Operating loss | $38.11 million | $24.72 million | Loss widened. |
| Net loss | $39.51 million | $24.40 million | Loss widened; basic and diluted loss per share was $0.16 versus $0.11. |
| Operating cash flow | $(38.16) million | $(19.65) million | Cash use increased, reflecting higher losses and working-capital changes. |
| Cash and current assets | $122.88 million; $152.63 million | — | Cash was $161.61 million at year-end 2018; current liabilities were $44.97 million. |
| Debt at March 31 | $75.0 million principal; $73.50 million carrying value | — | MidCap term loan; effective interest rate approximately 11%. |
Total liabilities were $121.20 million and stockholders’ equity was $60.69 million at March 31. Net DSO rose to 341 days from 200 days at December 31, 2018; management attributed this to launch-related payment terms, coupons and discounts, and the timing of receipts. Gross DSO was 74 days, down from 77 days.
Material changes and business developments
- IMVEXXY revenue was $2.01 million in its first reported full quarter of sales; prenatal vitamin revenue fell to $1.94 million from $3.77 million. Management cited lower vitamin unit sales following a Q1 price increase and increased coupon use.
- Sales and marketing expense rose 62.1% to $17.01 million; human-resource costs rose 73.1% to $11.11 million. R&D declined 10.2% to $6.32 million, partly because the BIJUVA REPLENISH trial was completed and products received FDA approval.
- BIJUVA launched in April 2019. ANNOVERA was approved in August 2018; the company estimated availability as early as Q3 2019 and a full launch by Q1 2020.
- In April 2019, the company entered a new first-lien secured loan facility of up to $300 million. It drew $200 million initially and used approximately $81.7 million to repay the MidCap facility, including fees. Two additional $50 million tranches depend on specified ANNOVERA and revenue milestones.
Outlook, risks and unusual items
- Management expected operating losses to continue in the near term and sales and marketing expense to rise as it launched BIJUVA and prepared for ANNOVERA. It stated that cash and facility availability were expected to fund the operating plan for at least 12 months from the filing date, subject to access to funds and successful commercialization.
- The new loan carries floating-rate interest and requires minimum unrestricted cash of $50 million, rising to $60 million if either additional tranche is drawn, plus minimum product-revenue covenants beginning with the quarter ending December 31, 2020. The loan is secured by substantially all company and subsidiary assets and includes substantial early-prepayment fees.
- Commercialization risks include payer coverage and reimbursement, patient and prescriber adoption, competition, manufacturing and third-party dependence, product safety, and the company’s ability to meet financing covenants. IMVEXXY revenue estimates depend on variable rebates, returns, discounts and copay assistance.
- The SEC staff was conducting a formal investigation into whether certain 2017 communications about TX-004HR may have violated Regulation FD. The company was cooperating; the outcome and any penalties were uncertain.
- The company adopted lease accounting on January 1, 2019, recording a $3.8 million right-of-use asset and approximately $4.1 million in lease liabilities. It reported no impairment of intangible or long-lived assets during the quarter.
Important facts for investors to verify
- Whether IMVEXXY and BIJUVA prescriptions, payer coverage and net realized revenue improve, and whether coupon and rebate costs remain material.
- Whether ANNOVERA becomes commercially available on the estimated schedule and whether the additional loan tranches’ milestones are achieved.
- Cash burn, receivables and net DSO trends, together with compliance with the new facility’s cash and revenue covenants.
- The full economic cost of refinancing, including interest, fees, prepayment terms and any future borrowing requirements.
- Developments in the SEC investigation and required post-approval studies, including ANNOVERA’s venous thromboembolism study.