TherapeuticsMD, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. This is an annual filing; it also provides unaudited fourth-quarter results. The company develops women’s health products, including prescription and OTC supplements and cosmetics, while advancing hormone-therapy drug candidates. Its hormone candidates had not received FDA marketing approval.
Financial performance and position
| Metric | FY2013 | FY2012 |
|---|---|---|
| Net revenue | $8.78 million | $3.82 million |
| Gross profit / margin | $6.82 million / 78% | $2.47 million / 65% |
| Operating expenses | $32.62 million | $18.62 million |
| Operating loss | $(25.81) million | $(16.15) million |
| Net loss | $(28.42) million | $(35.12) million |
| Basic and diluted loss per share | $(0.22) | $(0.38) |
| Cash used in operating activities | $(20.77) million | $(12.74) million |
| Cash and cash equivalents, year-end | $54.19 million | $1.55 million |
| Total liabilities, year-end | $7.32 million | $7.36 million |
| Working capital, year-end | $52.09 million | $1.02 million |
Revenue grew 130%, attributed by management to more products, higher average selling prices, broader physician prescribing, sales-force productivity, and products launched in 2012. Gross margin improved primarily due to pricing and product mix. R&D expense rose to $13.55 million from $4.49 million, principally as Phase 3 work began or was prepared. SG&A increased to $19.01 million from $14.07 million. The smaller net loss versus 2012 largely reflects the absence of that year’s substantial debt-extinguishment and beneficial-conversion charges, partly offset by higher operating losses and 2013 financing costs.
Financing activities provided $73.99 million in 2013, mainly from two public stock offerings; the company repaid approximately $4.69 million of notes. No notes payable or accrued interest remained on the year-end balance sheet. The company reported no material off-balance-sheet arrangements. Contractual operating-lease payments totaled approximately $1.77 million before sublease income.
Fourth-quarter 2013 revenue was $2.86 million, gross profit $2.40 million, net loss $8.36 million, and loss per share $0.06. Quarterly figures are unaudited.
Changes, outlook, and material risks
- Management expected year-end cash to fund its operating plan for at least the next 12 months, but said additional financing could be needed if cash proved insufficient. The company warned that further losses were expected and that it might need to raise capital, delay or scale back development, or pursue collaborations or licensing.
- The REPLENISH Phase 3 trial of TX 12-001HR, an oral estradiol/progesterone combination, began enrollment in September 2013. Recruitment for the TX 12-002HR progesterone Phase 3 trial began in January 2014. TX 12-004HR, vaginal estradiol, entered a Phase 1 trial in August 2013. The company had no current plans to further develop TX 12-003HR, oral estradiol.
- The company planned to introduce the vitaPearl prenatal product in the first quarter of 2014 and aimed to expand sales coverage. These are plans, not reported results.
- Liquidity improved substantially following equity offerings, but operating cash use increased to $20.77 million. FY2013 financing included approximately $78.65 million net proceeds from common-stock sales; dilution is a material consideration.
- Risks include clinical-trial failure or delay, FDA approval uncertainty, ongoing financing needs, intense competition, reimbursement and market-acceptance uncertainty, intellectual-property challenges, and dependence on third parties. Approximately 98% of vitaMedMD products were sourced from one supplier; three major wholesalers accounted for a substantial share of sales. The filing gives differing 2013 customer-concentration percentages in separate disclosures, so the precise figure is unclear from the text.
- The company stated that it had incurred recurring losses and had an accumulated deficit of approximately $80.5 million. It noted that the auditor’s reports for 2012 and 2011 included substantial-doubt language; the 2013 audit opinion was unqualified and the auditor separately gave an unqualified opinion on internal control effectiveness as of year-end.
- The $10 million revolving credit facility was secured by substantially all assets, but had no balance at December 31, 2013 and expired February 24, 2014. The filing reports no material legal proceedings and no material contingencies recorded for indemnification provisions.
Important facts for investors to verify
- Cash runway against actual trial costs, operating burn, and management’s stated minimum 12-month funding expectation.
- Enrollment, timing, safety and efficacy outcomes, and expected costs for the REPLENISH, SPRY, and TX 12-004HR studies, plus the regulatory path and data needed for any NDA.
- Revenue quality and concentration: reconcile the filing’s different 2013 customer-concentration percentages, and assess dependence on the three large wholesalers and primary supplier.
- Commercial momentum and gross-margin sustainability, including the effects of product mix, pricing, returns, rebates, and deferred prescription-product revenue recognition.
- Potential dilution and capital needs, including outstanding options and warrants and the company’s ability to obtain financing on acceptable terms.
- Execution of announced 2014 product and sales-expansion plans, and whether any hormone-therapy candidates ultimately receive FDA approval and achieve market acceptance.