Therapeuticsmd, Inc. current report, Q3 FY2018

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Business Context and Reporting Period

Company: TherapeuticsMD, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: July 30, 2018 (Events reported through August 2, 2018)
Context: The filing details the entry into material definitive agreements regarding the licensing of contraceptive and menopause products, an amendment to a credit agreement, and the execution of equity financing transactions.

Key Financial Metrics and Agreements

Equity Financing:

  • Public Offering: Underwritten public offering of 12,745,098 shares of Common Stock, with the underwriters exercising their option to purchase an additional 1,911,764 shares.
  • Expected Net Proceeds: Approximately $70.0 million from the public offering.
  • Registered Direct Offering: Knight Therapeutics Inc. agreed to purchase $20 million of Common Stock.

License Agreement Obligations (Population Council):

  • Milestone Payments: $20 million upon FDA approval of the one-year vaginal contraceptive system; $20 million upon release of the first commercial batch.
  • Sales Milestones: $40 million payable upon cumulative net sales reaching $200 million, $400 million, and $1 billion.
  • Royalties: Step-based royalties ranging from 5% to 15% of annual net sales in the U.S., subject to reductions upon generic entry.

Credit Agreement Amendment:

  • Condition Precedent: The Company must receive aggregate net cash proceeds of at least $75 million from equity issuance within 30 days of the license agreement to avoid an automatic event of default.

Material Changes and Strategic Developments

Population Council License (Item 1.01):

  • Entered an exclusive license agreement to commercialize the segesterone acetate/ethinyl estradiol one-year vaginal system in the U.S.
  • The New Drug Application (NDA) is under FDA review with a PDUFA target action date of August 17, 2018.
  • Includes rights to negotiate co-development and marketing for two additional investigational vaginal contraceptive systems.

Knight Therapeutics License (Item 8.01):

  • Granted Knight Therapeutics an exclusive license to commercialize Imvexxy (estradiol vaginal inserts) and investigational TX-001HR in Canada and Israel.
  • Compensation includes milestone fees upon regulatory approval, sales milestones, and royalties.
  • Knight's $20 million equity investment is contingent on the closing of the Company's underwritten public offering.

Outlook, Risks, and Contingencies

Regulatory Risks:

  • The Population Council license may be terminated if the FDA issues a complete response letter, requires a continuance greater than 90 days, or approves the product with post-marketing requirements exceeding $1 million (beyond standard studies).
  • Termination rights exist if the product is approved with a shelf life of less than 18 months or is not granted "new chemical entity" status.

Financial Contingencies:

  • Default Risk: Failure to raise at least $75 million in net equity proceeds within 30 days of the license agreement constitutes an automatic event of default under the Credit Agreement.
  • Investment Contingency: Knight Therapeutics' $20 million investment is tied to the successful closing of the public offering; otherwise, an upfront license fee is payable.

Post-Approval Costs:

  • The Company is responsible for a post-approval study on venous thromboembolism risk. Costs exceeding $20 million will be offset against royalties or other payments owed to the Population Council.

Investor Verification Checklist

  • Equity Proceeds: Verify the actual closing date and net proceeds of the public offering and Knight Therapeutics' direct offering to ensure the $75 million credit agreement threshold is met.
  • FDA Decision: Monitor the FDA's action on the NDA for the one-year vaginal contraceptive system by the August 17, 2018 PDUFA date.
  • License Terms: Confirm whether the FDA approval includes any post-marketing requirements or shelf-life limitations that could trigger termination rights under the Population Council agreement.
  • Capital Structure: Assess the dilution impact of the issuance of approximately 14.66 million shares in the public offering plus the shares issued to Knight Therapeutics.