TherapeuticsMD(US:TXMD)2020-08-06 22:38PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for the quarterly period ended June 30, 2020, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on accounting policies, operations, debt, and contingencies Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific points in time, detailing assets, liabilities, and equity Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash | $113,839 | $160,830 | | Total current assets | $148,944 | $208,416 | | Total assets | $205,539 | $265,986 | | Liabilities & Equity | | | | Total current liabilities | $46,484 | $53,005 | | Long-term debt | $243,802 | $194,635 | | Total liabilities | $299,628 | $256,785 | | Total stockholders' (deficit) equity | ($94,089) | $9,201 | Consolidated Statements of Operations This section outlines the company's revenues, expenses, and net loss over specific periods, reflecting its operational performance Statement of Operations Summary (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $10,701 | $6,079 | $22,952 | $10,026 | | Gross profit | $6,301 | $4,830 | $15,836 | $8,014 | | Operating loss | ($45,039) | ($41,637) | ($95,961) | ($79,742) | | Net loss | ($51,977) | ($55,237) | ($108,825) | ($94,743) | | Net loss per share, basic and diluted | ($0.19) | ($0.23) | ($0.40) | ($0.39) | Consolidated Statements of Cash Flows This section details the inflows and outflows of cash from operating, investing, and financing activities, illustrating changes in the company's liquidity Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($95,100) | ($88,678) | | Net cash used in investing activities | ($806) | ($1,876) | | Net cash provided by financing activities | $48,916 | $111,787 | | Net (decrease) increase in cash | ($46,990) | $21,233 | | Cash, end of period | $113,839 | $182,846 | Notes to Unaudited Consolidated Financial Statements This section provides additional context and detailed information regarding the accounting policies, business operations, debt, and contingencies presented in the financial statements - The company is a women's healthcare firm focused on commercializing its FDA-approved products: IMVEXXY (launched July 2018), BIJUVA (launched April 2019), and ANNOVERA (test launch Oct 2019) The full commercial launch of ANNOVERA was paused due to COVID-19 and resumed on July 1, 202018 - The COVID-19 pandemic reduced Q2 2020 product revenues The company implemented cost-saving measures, including reduced marketing expenses, a hiring freeze, and eliminating travel The future financial impact remains uncertain2324 Net Revenue by Product (in thousands) | Product | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | IMVEXXY | $5,085 | $11,478 | | BIJUVA | $1,352 | $2,464 | | ANNOVERA | $1,835 | $4,108 | | Prescription vitamins | $2,428 | $4,902 | | Total Net Revenue | $10,701 | $22,952 | - As of June 30, 2020, the company had $250 million in borrowings outstanding under its Financing Agreement The company also received and subsequently returned a $6.5 million PPP loan in Q2 20206970 - The company has manufacturing and supply agreements with Catalent, which require minimum purchase commitments As of June 30, 2020, these commitments have been met95107 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a commercial-stage entity, focusing on its women's health products IMVEXXY, BIJUVA, and ANNOVERA, detailing the significant impact of the COVID-19 pandemic, and assessing liquidity risks tied to commercial success and the pandemic's ongoing effects Impact of COVID-19 This section details the adverse effects of the COVID-19 pandemic on the company's product sales, commercialization efforts, and the implementation of cost-saving measures - The COVID-19 pandemic impacted all products during Q2 2020, primarily due to limited sales force access to healthcare professionals and patients deferring office visits122 - The full commercial launch of ANNOVERA was paused in March 2020 and resumed on July 1, 2020121122 - The company implemented a COVID-19 contingency plan that included cost-cutting measures such as negotiating lower vendor fees, a hiring freeze, eliminating travel, and reducing the sales force size123126 Product Portfolio and Commercialization Strategy This section outlines the company's key product offerings and its strategic approach to commercializing them, including regulatory submissions, market access, and international licensing agreements - The company is commercializing three key products: IMVEXXY for VVA, BIJUVA for VMS, and ANNOVERA, a one-year contraceptive An NDA efficacy supplement for a lower dose of BIJUVA has been submitted to the FDA with a target action date of November 16, 2020133136138141 - The commercialization model focuses on HCP education, payer access, patient affordability programs, and direct-to-consumer communication As of June 30, 2020, the company had achieved broad commercial payer coverage for its products149151152 - The company has license agreements to commercialize IMVEXXY and BIJUVA outside the U.S with Knight Therapeutics (Canada and Israel) and Theramex (other ex-U.S territories)119163164 Results of Operations Analysis This section provides a detailed comparison of the company's financial performance across different periods, highlighting key revenue and expense trends and their drivers Financial Performance Comparison (Q2 2020 vs Q2 2019) | Metric | Q2 2020 | Q2 2019 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $10.7M | $6.1M | +76% | | Operating Loss | ($45.0M) | ($41.6M) | +8% | | Net Loss | ($52.0M) | ($55.2M) | -6% | Financial Performance Comparison (H1 2020 vs H1 2019) | Metric | H1 2020 | H1 2019 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $23.0M | $10.0M | +129% | | Operating Loss | ($96.0M) | ($79.7M) | +20% | | Net Loss | ($108.8M) | ($94.7M) | +15% | - The increase in operating loss was driven by higher sales and marketing costs to support product launches, including a $5.1 million write-down of product samples, and an inventory obsolescence charge of approximately $2.1 million for BIJUVA in H1 2020193195 Liquidity and Capital Resources This section assesses the company's current cash position, debt obligations, and management's outlook on its ability to meet future financial obligations - As of June 30, 2020, the company had cash and cash equivalents of $113.8 million205 - The company has drawn $250 million from its Financing Agreement and is not moving forward with the final $50 million tranche due to the paused ANNOVERA launch209 - Management believes existing cash reserves are sufficient to meet cash needs for the next twelve months, but acknowledges risks if commercialization is delayed or the COVID-19 impact is worse than anticipated210 Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is to interest rate fluctuations affecting its variable-rate debt, where a 1% change in interest rates would result in a $2.5 million annual impact on pre-tax loss - The company's main market risk is interest rate sensitivity from its Financing Agreement, which has a variable interest rate tied to LIBOR or the prime rate, subject to floors219220 - A 1.0% change in interest rates would impact the loss before income taxes by $2.5 million per year on the $250 million outstanding debt220 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the quarter, with no material changes to internal controls over financial reporting during the period - Based on an evaluation by management, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2020222 - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls224 PART II - OTHER INFORMATION Legal Proceedings The company is engaged in patent litigation to defend its products, having filed lawsuits against Teva Pharmaceuticals and Amneal Pharmaceuticals following their submissions of Abbreviated New Drug Applications for generic versions of IMVEXXY and BIJUVA - Received a Paragraph IV notice letter from Teva Pharmaceuticals for a generic version of IMVEXXY and subsequently filed a patent infringement lawsuit against Teva on April 1, 2020226 - Received a Paragraph IV notice letter from Amneal Pharmaceuticals for a generic version of BIJUVA and subsequently filed a patent infringement lawsuit against Amneal on April 29, 2020227 Risk Factors This section updates the company's risk factors, emphasizing the material adverse effects of the COVID-19 pandemic, including continued negative impacts on product sales, potential reductions in patient insurance coverage, and possible disruptions to the supply chain and billing cycles - The ongoing COVID-19 pandemic is highlighted as a material risk factor that has already adversely affected all products in Q2 2020 and is expected to continue impacting the business229 - Specific risks include the sales force's limited access to healthcare providers, patients deferring non-emergent visits, and potential loss of patient insurance coverage due to rising unemployment230 - Future operations and liquidity could be affected by extended billing cycles, payment delays, supply chain disruptions, and uncertain demand231232 Other Information This section details key events occurring after the quarter's end, including an amendment to the Financing Agreement, the issuance of warrants to lenders, and the appointment of a new Chief Accounting Officer - On August 5, 2020, the company entered into Amendment No 5 to its Financing Agreement, which modified the minimum consolidated net revenue covenants235 - In connection with the amendment, the company issued warrants to lenders to purchase an aggregate of approximately 4,750,000 shares of common stock at an exercise price of $1.58 per share236 - On August 4, 2020, Michael Donegan was appointed as the company's Chief Accounting Officer and Principal Accounting Officer237 Exhibits This section provides a list of all exhibits filed with the Quarterly Report on Form 10-Q. Key documents include amendments to the Financing Agreement, the form of warrant issued to lenders, an employment agreement, and certifications from the CEO and CFO - Lists exhibits filed with the report, including multiple amendments to the Financing Agreement, the form of Warrant to Purchase Common Stock, and officer certifications240