TherapeuticsMD(TXMD) - 2019 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements The financial statements detail the company's financial position and performance, showing increased liabilities, a shift to stockholders' deficit, and higher revenue despite widening net losses from commercialization Consolidated Balance Sheets Total assets increased to $250.0 million, while liabilities surged to $271.2 million from new debt, shifting to a $21.2 million stockholders' deficit Consolidated Balance Sheet Highlights (Unaudited) | Account | Sep 30, 2019 ($) | Dec 31, 2018 ($) | | :--- | :--- | :--- | | Total Assets | 249,961,911 | 211,983,924 | | Cash | 155,330,050 | 161,613,077 | | Inventory | 10,532,844 | 3,267,670 | | License rights, net | 39,984,002 | 20,000,000 | | Total Liabilities | 271,190,840 | 114,459,803 | | Long-term debt | 194,361,169 | 73,381,014 | | Total Stockholders' (Deficit) Equity | (21,228,929) | 97,524,121 | Consolidated Statements of Operations Q3 2019 net revenue surged to $23.7 million, narrowing operating loss, while nine-month net revenue grew to $33.7 million, but net loss widened to $126.7 million Q3 2019 vs Q3 2018 Statement of Operations (Unaudited) | Metric | Q3 2019 ($) | Q3 2018 ($) | | :--- | :--- | :--- | | Total revenue, net | 23,719,741 | 3,473,535 | | Gross profit | 22,275,433 | 2,774,417 | | Operating loss | (27,071,250) | (34,361,247) | | Net loss | (31,966,593) | (35,605,302) | | Net loss per share | (0.13) | (0.16) | Nine Months 2019 vs 2018 Statement of Operations (Unaudited) | Metric | Nine Months 2019 ($) | Nine Months 2018 ($) | | :--- | :--- | :--- | | Total revenue, net | 33,745,257 | 11,009,937 | | Gross profit | 30,289,262 | 9,223,035 | | Operating loss | (106,813,201) | (92,099,537) | | Net loss | (126,709,485) | (93,226,179) | | Net loss per share | (0.53) | (0.42) | Consolidated Statements of Stockholders' Equity Stockholders' equity shifted from a $97.5 million positive balance to a $21.2 million deficit, primarily due to a $126.7 million net loss - The company's accumulated deficit grew from $(519.3) million at the end of 2018 to $(646.0) million as of September 30, 2019, due to ongoing net losses[12] - Share-based compensation contributed approximately $8.0 million to additional paid-in capital during the first nine months of 2019[12] Consolidated Statements of Cash Flows Net cash used in operating activities increased to $114.9 million, offset by $111.8 million from financing, resulting in a $6.3 million net cash decrease and a $155.3 million period-end balance Cash Flow Summary (Nine Months Ended Sep 30) | Cash Flow Activity | 2019 ($) | 2018 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (114,900,319) | (78,666,841) | | Net cash used in investing activities | (3,178,375) | (20,826,686) | | Net cash provided by financing activities | 111,795,667 | 162,357,192 | | (Decrease) increase in cash | (6,283,027) | 62,863,665 | | Cash, end of period | 155,330,050 | 189,999,293 | - Financing activities in 2019 were driven by $200 million in proceeds from a new Financing Agreement, which was used in part to repay $81.7 million of a previous Credit Agreement[14] Notes to Unaudited Consolidated Financial Statements The notes detail the company's transition to a commercial entity, outlining key accounting policies, significant debt and license agreements, and a subsequent equity offering Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a commercial entity, highlighting increased revenue from product sales and a license fee, alongside rising operating expenses and new financing Overview The company has transitioned from R&D to commercialization, launching key products IMVEXXY, BIJUVA, and ANNOVERA, and securing international licensing agreements - The company has transitioned from being predominately focused on R&D to one focused on commercializing its drugs following FDA approvals in 2018[128] - Key commercial products are IMVEXXY, BIJUVA, and the licensed product ANNOVERA, with a full launch of ANNOVERA expected in Q1 2020[128] - The company entered an exclusive license agreement with Theramex to commercialize BIJUVA and IMVEXXY outside of the U.S., Canada, and Israel[128] Product Commercialization Status The company is actively commercializing IMVEXXY, BIJUVA, and ANNOVERA, achieving broad payer coverage and patient reach, with ANNOVERA's full launch planned for Q1 2020 - IMVEXXY achieved unrestricted coverage with 8 of the top 10 commercial payers and had approximately 95,300 patients with at least one paid prescription by September 30, 2019[134][135] - BIJUVA, launched in April 2019, achieved coverage with 5 of the top 10 commercial payers and had approximately 9,100 patients with at least one paid prescription by September 30, 2019[142][143] - ANNOVERA began a 'test and learn' market introduction in Q3 2019 with a full launch expected in Q1 2020, pursuing distribution opportunities with direct-to-consumer platforms[149][150] Research and Development Expenses R&D expenses decreased by 39% to $4.1 million in Q3 2019 and by 25% to $15.4 million for the nine-month period, reflecting a shift to commercial focus R&D Expense by Project (in thousands) | Project | Q3 2019 ($) | Q3 2018 ($) | Nine Months 2019 ($) | Nine Months 2018 ($) | | :--- | :--- | :--- | :--- | :--- | | TX 001-HR (BIJUVA) | 454 | 3,017 | 2,869 | 8,432 | | TX 004-HR(IMVEXXY) | 527 | 764 | 1,869 | 3,922 | | ANNOVERA | 396 | — | 2,109 | — | | Other R&D | 2,701 | 2,927 | 8,513 | 8,192 | | Total | 4,078 | 6,708 | 15,360 | 20,546 | - Total R&D costs incurred since project inception are approximately $130.1 million for BIJUVA and $47.6 million for IMVEXXY[174] Results of Operations Q3 2019 revenues surged to $23.7 million, narrowing operating loss, while nine-month revenues grew to $33.7 million, but operating loss widened to $106.8 million due to increased expenses Q3 2019 vs Q3 2018 Results (in thousands) | Metric | Q3 2019 ($) | Q3 2018 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Product revenue, net | 8,213 | 3,474 | 4,739 | | License revenue | 15,506 | — | 15,506 | | Operating loss | (27,072) | (34,361) | (7,289) | | Net loss | (31,967) | (35,605) | (3,638) | Nine Months 2019 vs 2018 Results (in thousands) | Metric | Nine Months 2019 ($) | Nine Months 2018 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Product revenue, net | 18,239 | 11,010 | 7,229 | | License revenue | 15,506 | — | 15,506 | | Operating loss | (106,813) | (92,100) | (14,713) | | Net loss | (126,709) | (93,226) | (33,483) | - The increase in Q3 2019 revenue was primarily driven by a one-time license fee of $15.5 million from Theramex and a $4.6 million increase in IMVEXXY sales[159] - Operating expenses for the nine months ended Sep 30, 2019 increased by $35.8 million (35%) year-over-year, mainly due to higher sales & marketing ($16.8M) and human resources ($13.9M) costs to support product commercialization[180] Liquidity and Capital Resources The company held $155.3 million in cash, funded operations via a new $300 million debt facility, and subsequently raised $77.0 million from an equity offering, ensuring sufficient liquidity - The company had cash and cash equivalents of approximately $155.3 million as of September 30, 2019[191] - In April 2019, the company entered a new $300 million secured term loan facility, drawing an initial $200 million[195] - Subsequent to the quarter end, on October 29, 2019, the company closed a public offering of common stock, raising net proceeds of approximately $77.0 million[194] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate sensitivity on its $200 million variable-rate debt, with a 1.0% change impacting pre-tax income by $2.0 million annually - The company is exposed to interest rate risk from its $200 million outstanding balance on the Financing Agreement[208] - A 1.0% change in interest rates is estimated to impact pre-tax income by approximately $2.0 million per year[208] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the reporting period[210] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[213] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company settled with the SEC for Regulation FD violations, paying a $200,000 penalty, and is not involved in other material legal proceedings - In August 2019, the company settled with the SEC for violations of Regulation FD, agreeing to pay a $200,000 penalty without admitting or denying the findings[214] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes to risk factors were reported for the period[216] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including supply and lease agreements, CEO/CFO certifications, and XBRL data files - Exhibits filed include a Commercial Supply Agreement with QPharma AB, a lease agreement, CEO/CFO certifications, and XBRL data files[218]