TherapeuticsMD, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing does not provide standalone fourth-quarter results. TherapeuticsMD (Nasdaq: TXMD) is now a pharmaceutical royalty company following its December 2022 transition from direct product commercialization.
Business context
The company licenses women’s health products to commercial partners. Mayne Pharma holds U.S. commercialization rights for IMVEXXY, BIJUVA, ANNOVERA and specified prenatal vitamin products; international licensing partners include Theramex and Knight. TherapeuticsMD has one full-time employee and relies on consultants. Its revenue is highly dependent on licensees’ product sales and performance.
The Mayne agreement provides royalties generally at 8% on the first $80 million of annual net sales and 7.5% above that level, subject to adjustments. Rates may fall to 2% for a product after patent expiration or generic launch. Minimum annual royalties start at $3 million, increase by 3% annually, and continue through 2034. Sales milestones could provide additional payments, but no guidance on the likelihood or timing of milestones is provided.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $1.3 million | $70.0 million |
| Gross profit | $1.3 million | $68.6 million |
| Operating expenses | $9.8 million | $67.4 million |
| Operating income (loss) | $(8.5) million | $1.2 million |
| Net income (loss) | $(10.3) million | $112.0 million |
| Cash from continuing operating activities | $(23.1) million | $9.4 million |
Revenue fell by $68.7 million, largely because 2022 included recognition of consideration associated with the Mayne transaction; it is not a like-for-like comparison of ongoing royalty operations. The 2022 net income also reflected substantial gains from the vitaCare and ANNOVERA sales. In 2023, continuing-operations net loss was $7.7 million, while discontinued operations recorded a $2.6 million loss. FY2023 cost of revenue was zero; the reported gross profit therefore should not be viewed as an indication of operating profitability.
At December 31, 2023, cash and cash equivalents were $4.3 million, total assets $43.3 million, total liabilities $14.0 million, and stockholders’ equity $29.3 million. The company reported no borrowings outstanding after repaying and terminating its Sixth Street financing agreement in December 2022. Operating lease liabilities were $8.0 million. Current assets were $11.8 million and current liabilities $6.9 million, including balances classified as discontinued operations.
Cash declined by $45.0 million during 2023, including $23.1 million of cash used in continuing operations and $25.1 million used in discontinued operations. The company reported $21.6 million of royalty receivables/contract assets, including a substantial long-term component tied to minimum royalties. These recognized amounts should be distinguished from cash collected. The filing reports $3.2 million of gross proceeds from 2023 stock sales to Rubric Capital.
Material changes, outlook and risks
- Going concern: Management and the auditor identify substantial doubt about the company’s ability to continue as a going concern for the 12 months following issuance of the financial statements. The auditor’s report includes an explanatory paragraph. The statements contain no adjustments for a possible failure to continue as a going concern.
- Financing and cash needs: Management may seek debt or equity financing and plans to manage expenses. Additional equity could dilute shareholders; the filing provides no assurance that financing will be available on acceptable terms.
- Mayne working-capital dispute: The company paid Mayne $5.5 million in December 2023 for certain working-capital adjustments. In February 2024, Mayne’s calculations for payer rebates and distributor fees differed significantly from the company’s estimates. The company disputes the claims, has not accrued an additional liability because it cannot reasonably estimate the loss range, and says the outcome could be material.
- Product and partner dependence: Slower or declining sales, reimbursement or pricing pressure, competition and supply interruptions could reduce royalties. ANNOVERA has had raw-material and supply issues; the company also describes prior FDA manufacturing observations at third-party facilities.
- Legal and regulatory matters: Teva’s challenge to IMVEXXY patents remains in litigation, with proceedings stayed; Mayne is responsible for patent enforcement under the license. A former contractor filed a breach-of-contract lawsuit in September 2023, which the company contests. ANNOVERA post-marketing study obligations remain relevant; the filing describes prior FDA concerns about study submissions.
- Other items: The company sublet 41,418 square feet of its Boca Raton headquarters and was seeking to sublet the remaining 21,330 square feet. No specific forward revenue, earnings or cash-flow guidance is provided.
Most important facts for investors to verify
- Current cash runway, expected cash burn, and whether additional financing is required or secured.
- Mayne’s product sales, royalty calculations and cash remittances, including the timing and collectability of the minimum-royalty receivable.
- The final outcome and potential financial impact of the Mayne working-capital dispute, particularly rebates and distributor fees.
- Developments in the Teva IMVEXXY patent litigation, generic competition, and ANNOVERA post-marketing and supply matters.
- Progress in subleasing the remaining office space and any effect on lease costs and liquidity.