TherapeuticsMD(US:TXMD)2022-05-16 21:03markdown Part I – Financial Information [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20statements) This section presents TherapeuticsMD's unaudited consolidated financial statements for Q1 2022, detailing balance sheets, operations, equity, and cash flows, along with explanatory notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $133.38 million, liabilities increased, and stockholders' deficit worsened to $140.58 million by March 31, 2022 Key Balance Sheet Metrics | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Total Assets | $133,381 | $169,472 | $(36,091) | | Total Liabilities | $273,961 | $263,093 | $10,868 | | Total Stockholders' Deficit | $(140,580) | $(93,621) | $(46,959) | | Cash | $30,384 | $65,122 | $(34,738) | | Current Maturities of Debt | $202,857 | $188,269 | $14,588 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2022 net loss increased to $49.02 million due to higher other expenses, despite slightly lower revenue and reduced operating expenses Key Operations Metrics | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------------- | | Total Revenue, net | $19,333 | $19,866 | $(533) | -2.7% | | Total Gross Profit | $14,473 | $15,179 | $(706) | -4.7% | | Total Operating Expenses | $40,702 | $44,457 | $(3,755) | -8.4% | | Loss from Operations | $(26,229) | $(29,278) | $3,049 | -10.4% | | Total Other Expense, net | $(22,792) | $(10,105) | $(12,687) | 125.6% | | Net Loss | $(49,021) | $(39,383) | $(9,638) | 24.5% | | Loss per Common Share, basic and diluted | $(5.69) | $(5.67) | $(0.02) | 0.4% | [Consolidated Statements of Stockholders' Deficit](index=5&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Deficit) Accumulated deficit increased to $1,100.38 million, and total stockholders' deficit worsened to $140.58 million by March 31, 2022, driven by net loss Key Stockholders' Deficit Metrics | Metric | January 1, 2022 (in thousands) | March 31, 2022 (in thousands) | | :------------------------ | :---------------------------- | :--------------------------- | | Common Stock | $9 | $9 | | Additional Paid-in Capital | $957,730 | $959,792 | | Accumulated Deficit | $(1,051,360) | $(1,100,381) | | Total Stockholders' Deficit | $(93,621) | $(140,580) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased to $29.53 million, but financing activities shifted to a $5.0 million outflow, resulting in a $34.74 million net cash decrease Key Cash Flow Metrics | Cash Flow Category | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------------- | | Net Cash Used in Operating Activities | $(29,526) | $(38,380) | $8,854 | -23.1% | | Net Cash Used in Investing Activities | $(212) | $(438) | $226 | -51.6% | | Net Cash (Used in) Provided by Financing Activities | $(5,000) | $95,949 | $(100,949) | -105.2% | | Net (Decrease) Increase in Cash | $(34,738) | $57,131 | $(91,869) | -160.8% | | Cash, End of Period | $30,384 | $137,617 | $(107,233) | -77.9% | [Notes to Unaudited Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the unaudited consolidated financial statements, covering business operations, significant accounting policies, recent divestitures, the impact of COVID-19, and the company's going concern status [Note 1. Business, Basis of Presentation, New Accounting Standards and Summary of Significant Accounting Policies](index=7&type=section&id=Note%201.%20Business%2C%20basis%20of%20presentation%2C%20new%20accounting%20standards%20and%20summary%20of%20significant%20accounting%20policies) This note outlines TherapeuticsMD's business, accounting policies, recent divestitures, and going concern status, including a reverse stock split - TherapeuticsMD is a women's healthcare company focused on products from pregnancy prevention through menopause, including contraceptive and hormone therapy products, and prenatal vitamins[20](index=20&type=chunk) - Completed the divestiture of vitaCare Prescription Services, Inc. on April 14, 2022, for a cash payment of **$150.0 million**, with potential for an additional **$7.0 million** in earn-out consideration contingent on financial performance through 2023[21](index=21&type=chunk) - The company incurred a net loss of **$49.0 million** for the three months ended March 31, 2022, and its current liabilities exceeded current assets by **$180.4 million**, raising substantial doubt about its ability to continue as a going concern for the next twelve months[28](index=28&type=chunk) - The company completed a **50-for-1** reverse stock split of its common stock on May 6, 2022, which also reduced the number of authorized shares from **600 million** to **12 million**[31](index=31&type=chunk) [Note 2. Accounts Receivable](index=10&type=section&id=Note%202.%20Accounts%20receivable) Allowance for credit losses remained stable at $1.334 million as of March 31, 2022, with charges offset by write-offs during the quarter Accounts Receivable Summary | Metric | Amount (in thousands) | | :---------------------------- | :-------------------- | | Balance as of January 1, 2022 | $1,334 | | Charges to provision for credit losses | $274 | | Write-off of uncollectible receivables | $(274) | | Balance as of March 31, 2022 | $1,334 | [Note 3. Inventory](index=10&type=section&id=Note%203.%20Inventory) Total inventory increased to $8.97 million by March 31, 2022, driven by raw materials, while ANNOVERA faces manufacturing challenges and awaits FDA response Inventory Breakdown | Inventory Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------- | :---------------------------- | :------------------------------ | | Raw materials | $4,394 | $3,042 | | Work in process | $1,231 | $1,642 | | Finished products | $3,342 | $2,938 | | Total Inventory | $8,967 | $7,622 | - A third-party contract manufacturer for ANNOVERA has experienced increased manufacturing difficulties, resulting in intermittent supply interruptions and challenges to meet projected demand[44](index=44&type=chunk) - The company filed a supplemental NDA in August 2021 to modify ANNOVERA testing specifications to increase supply consistency, responded to an FDA Complete Response Letter in January 2022, and expects a response by the end of Q2 2022[44](index=44&type=chunk) [Note 4. Prepaid and Other Current Assets](index=11&type=section&id=Note%204.%20Prepaid%20and%20other%20current%20assets) Prepaid and other current assets decreased to $9.66 million by March 31, 2022, mainly due to reduced insurance prepayments Prepaid and Other Current Assets Summary | Asset Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :---------------------------- | :---------------------------- | :------------------------------ | | Insurance | $1,644 | $2,731 | | Paragraph IV legal proceeding costs | $2,304 | $2,304 | | Other | $5,712 | $5,513 | | Total Prepaid and other current assets | $9,660 | $10,548 | [Note 5. Fixed Assets](index=11&type=section&id=Note%205.%20Fixed%20assets) Net fixed assets decreased to $1.08 million by March 31, 2022, primarily due to accumulated depreciation and amortization Fixed Assets Summary | Asset Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------ | | Fixed assets, gross | $3,759 | $3,717 | | Less: accumulated depreciation and amortization | $2,677 | $2,518 | | Fixed assets, net | $1,082 | $1,199 | - Depreciation expense was **$0.2 million** for both the three months ended March 31, 2022, and 2021[48](index=48&type=chunk) [Note 6. Licensed Rights and Other Intangible Assets](index=11&type=section&id=Note%206.%20Licensed%20rights%20and%20other%20intangible%20assets) Net licensed rights and other intangible assets decreased to $39.55 million by March 31, 2022, due to amortization of license rights and patents Licensed Rights and Intangible Assets Summary | Asset Category | March 31, 2022 (Net, in thousands) | December 31, 2021 (Net, in thousands) | | :-------------------------------- | :-------------------------------- | :--------------------------------- | | Licensed rights | $32,420 | $33,174 | | Hormone therapy drug patents | $4,888 | $4,792 | | Hormone therapy drug patents applied and pending approval | $1,907 | $2,020 | | Trademarks/trade name rights | $332 | $332 | | Total Licensed rights and other intangible assets, net | $39,547 | $40,318 | - Amortization expense for exclusive license rights was **$0.8 million** for both Q1 2022 and Q1 2021, while patent amortization was **$0.2 million** in Q1 2022, up from **$0.1 million** in Q1 2021[49](index=49&type=chunk) [Note 7. Accrued Expenses and Other Current Liabilities](index=12&type=section&id=Note%207.%20Accrued%20expenses%20and%20other%20current%20liabilities) Accrued expenses and other current liabilities decreased to $41.23 million by March 31, 2022, driven by lower payroll, rebates, and sales returns Accrued Expenses and Other Current Liabilities Summary | Liability Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------ | | Payroll and related costs | $10,845 | $13,764 | | Rebates | $9,810 | $11,010 | | Sales returns and coupons | $1,252 | $2,422 | | Wholesale distributor fees | $6,352 | $3,614 | | Total Accrued expenses and other current liabilities | $41,225 | $44,304 | - Advertising costs decreased significantly to **$1.9 million** for Q1 2022 from **$6.2 million** for Q1 2021[50](index=50&type=chunk) [Note 8. Debt](index=12&type=section&id=Note%208.%20Debt) Net debt increased to $202.86 million by March 31, 2022, due to Amendment No. 9, which added a $30.0 million PIK fee and amended the maturity to June 1, 2022 Debt Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------- | :---------------------------- | :------------------------------ | | Financing Agreement | $225,000 | $200,000 | | Less: deferred financing fees | $22,143 | $11,731 | | Debt, net | $202,857 | $188,269 | - Amendment No. 9 to the Financing Agreement, entered in March 2022, waived prior breaches, reduced minimum cash covenants, and added a **$30.0 million** paid-in-kind (PIK) amendment fee to the principal, with **$16.0 million** waivable under certain conditions[52](index=52&type=chunk) The maturity date was amended to June 1, 2022[52](index=52&type=chunk) - A **$8.4 million** loss on extinguishment of debt was recorded in March 2022 due to Amendment No. 9, and **$120.0 million** of vitaCare divestiture proceeds were used to prepay debt on April 14, 2022, resulting in a **$16.0 million** waiver of the PIK financing fee[53](index=53&type=chunk)[54](index=54&type=chunk) Interest and Financing Costs | Interest and Financing Costs | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Interest expense | $5,364 | $6,455 | | Interest prepayment fees | $0 | $2,500 | | Financing fees amortization | $9,048 | $1,272 | | Total Interest expense and other financing costs | $14,412 | $10,227 | [Note 9. Commitments and Contingencies](index=13&type=section&id=Note%209.%20Commitments%20and%20contingencies) The company has minimum purchase commitments for key products and is involved in a patent infringement lawsuit against Teva for IMVEXXY, with $2.3 million in capitalized legal costs [Minimum Purchase Commitments](index=13&type=section&id=Minimum%20purchase%20commitments) TherapeuticsMD has minimum purchase commitments for BIJUVA, IMVEXXY, and ANNOVERA, which were met in 2021 and are not expected to materially impact financial position - The company has manufacturing and supply agreements requiring minimum unit purchases for BIJUVA, IMVEXXY, and ANNOVERA, with contract years ending in April, July, and August, respectively[58](index=58&type=chunk)[59](index=59&type=chunk) - For the three annual contract years ending in **2021**, the company met its minimum purchase commitments in all material respects[60](index=60&type=chunk) [Legal Proceedings](index=13&type=section&id=Legal%20proceedings) The company is engaged in a patent infringement lawsuit against Teva for IMVEXXY, with proceedings stayed and $2.3 million in capitalized legal costs - In February 2020, TherapeuticsMD received a Paragraph IV certification notice from Teva Pharmaceuticals USA, Inc. regarding a generic version of IMVEXXY, alleging invalidity or non-infringement of IMVEXXY patents (expiring **2032** or **2033**)[61](index=61&type=chunk) - A patent infringement complaint was filed against Teva in April 2020, and proceedings were temporarily stayed in July 2021, extending the statutory stay preventing FDA approval of Teva's ANDA[61](index=61&type=chunk) - As of March 31, 2022, **$2.3 million** in legal costs for the IMVEXXY Paragraph IV legal proceeding have been capitalized, to be reclassified to patents upon successful conclusion or expensed if unsuccessful[62](index=62&type=chunk) [Note 10. Stockholders' Equity (Deficit)](index=14&type=section&id=Note%2010.%20Stockholders%27%20equity%20(deficit)) As of March 31, 2022, the company had 103 thousand warrants, 316 thousand options, 339 thousand RSUs, and 176 thousand PSUs outstanding, with $2.1 million in Q1 share-based compensation [Warrants](index=14&type=section&id=Warrants) As of March 31, 2022, 103 thousand warrants were outstanding with a weighted average exercise price of $76.19 and 8.1 years remaining contractual life Warrants Summary | Metric | As of March 31, 2022 | As of January 1, 2022 | | :-------------------------------- | :------------------- | :-------------------- | | Outstanding Warrants (in thousands) | 103 | 103 | | Weighted Average Exercise Price | $76.19 | $76.19 | | Weighted Average Remaining Contractual Life (in Years) | 8.1 | 8.3 | [Share-Based Compensation Payment Plans](index=14&type=section&id=Share-based%20compensation%20payment%20plans) As of March 31, 2022, 831 thousand shares were subject to outstanding awards, with 316 thousand options, 339 thousand RSUs, and 176 thousand PSUs outstanding - As of March 31, 2022, **831,066** shares of common stock were subject to outstanding awards (options, RSUs, PSUs) based on base PSU vesting, with **83,880** shares available for future grants[65](index=65&type=chunk) Share-Based Compensation Plans Summary | Metric | As of March 31, 2022 (in thousands) | As of January 1, 2022 (in thousands) | | :-------------------------------- | :--------------------------------- | :-------------------------------- | | Outstanding Options | 316 | 353 | | Weighted Average Exercise Price (Options) | $231.87 | $225.97 | | Outstanding RSUs | 339 | 272 | | Weighted Average Grant Date Fair Value (RSUs) | $43.11 | $58.17 | | Outstanding PSUs | 176 | 164 | | Weighted Average Grant Date Fair Value (PSUs) | $37.85 | $51.50 | [Share-Based Payment Compensation Cost](index=15&type=section&id=Share-based%20payment%20compensation%20cost) Q1 2022 share-based compensation costs were $2.1 million, with $17.8 million of unrecognized cost remaining, to be recognized over 2.2 years Share-Based Compensation Cost Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | | Share-based payment compensation costs | $2,062 | $2,957 | - As of March 31, 2022, **$17.8 million** of unrecognized share-based payment award compensation cost related to unvested options, RSUs, and PSUs is expected to be recognized over a weighted average period of **2.2 years**[69](index=69&type=chunk) [Note 11. Revenue](index=16&type=section&id=Note%2011.%20Revenue) Q1 2022 total net revenue decreased by 2.7% to $19.33 million, driven by declines in ANNOVERA and prescription vitamin sales, partially offset by BIJUVA international sales Revenue Breakdown | Revenue Category | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | YoY Change (%) | | :-------------------- | :------------------------------------------ | :------------------------------------------ | :------------- | | ANNOVERA | $8,510 | $8,750 | -2.7% | | IMVEXXY | $6,969 | $7,012 | -0.6% | | BIJUVA | $2,560 | $2,445 | 4.7% | | Prescription vitamin | $875 | $1,425 | -38.6% | | Product revenue, net | $18,914 | $19,632 | -3.7% | | License and service | $419 | $234 | 78.2% | | Total revenue, net | $19,333 | $19,866 | -2.7% | - BIJUVA sales for Q1 2022 included **$0.7 million** from the Theramex License Agreement, which started in Q3 2021[71](index=71&type=chunk) No IMVEXXY sales have been made through licensing agreements as of March 31, 2022[71](index=71&type=chunk) [Note 12. Income Taxes](index=16&type=section&id=Note%2012.%20Income%20taxes) No income tax provision was recorded for Q1 2022 due to net losses and NOL carryforwards, with a full valuation allowance maintained for deferred tax assets - No significant federal or state income taxes are expected due to recorded losses and net operating loss carryforwards[72](index=72&type=chunk) - A full valuation allowance is maintained for all deferred tax assets as of March 31, 2022, and December 31, 2021[73](index=73&type=chunk) [Note 13. Loss Per Common Share](index=16&type=section&id=Note%2013.%20Loss%20per%20common%20share) Basic and diluted loss per common share for Q1 2022 was $(5.69), with potentially dilutive securities deemed anti-dilutive due to net losses Loss Per Common Share Summary | Metric | Three Months Ended March 31, 2022 (in thousands, except per share) | Three Months Ended March 31, 2021 (in thousands, except per share) | | :-------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Net loss | $(49,021) | $(39,383) | | Weighted average common shares, basic and diluted | 8,614 | 6,945 | | Loss per common share, basic and diluted | $(5.69) | $(5.67) | - Potentially dilutive securities (stock options, RSUs, PSUs, warrants) were deemed anti-dilutive due to the net loss, thus not impacting diluted EPS calculation[74](index=74&type=chunk) [Note 14. Related Parties](index=17&type=section&id=Note%2014.%20Related%20parties) Catalent and AIG ceased to be related parties in December 2021 and May 2021, respectively, following changes in board and executive roles - Catalent, Inc. ceased to be a related party in December 2021 following the resignation of J. Martin Carroll from the company's Board[76](index=76&type=chunk) - American International Group, Inc. (AIG) ceased to be a related party in May 2021 after Karen L. Ling's executive role at AIG ended[77](index=77&type=chunk) [Note 15. Business Concentrations](index=17&type=section&id=Note%2015.%20Business%20concentrations) Product revenue, accounts receivable, and product purchases show significant concentration among a few key customers and vendors in Q1 2022 Business Concentration Metrics | Customer | Q1 2022 Product Revenue (%) | Q1 2021 Product Revenue (%) | | :--------- | :-------------------------- | :-------------------------- | | Customer A | 11% | 13% | | Customer B | 18% | 18% | | Customer C | 17% | 22% | | Customer F | 14% | <10% | Business Concentration Metrics | Customer | March 31, 2022 Accounts Receivable (%) | December 31, 2021 Accounts Receivable (%) | | :--------- | :------------------------------------- | :---------------------------------------- | | Customer B | 21% | 21% | | Customer C | 34% | 35% | | Customer D | <10% | 11% | | Customer F | 16% | <10% | Business Concentration Metrics | Vendor | Q1 2022 Product Purchases (%) | Q1 2021 Product Purchases (%) | | :------- | :-------------------------- | :-------------------------- | | Catalent | 28% | 29% | | Vendor A | 39% | 33% | | Vendor B | 27% | 32% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20discussion%20and%20analysis%20of%20financial%20condition%20and%20results%20of%20operations) Management discusses Q1 2022 financial performance, condition, and liquidity, highlighting the vitaCare divestiture, COVID-19 impact, and going concern status [Forward-Looking Statements](index=18&type=section&id=Forward-looking%20statements) This section contains forward-looking statements regarding operations and financial position, subject to substantial risks and uncertainties, and actual results may differ materially - The report contains forward-looking statements about operations, financial position, debt, liquidity, business strategy, and product development, identified by words like 'intend,' 'anticipate,' 'believe,' 'expect,' etc[81](index=81&type=chunk) - These statements are based on current expectations but are subject to known and unknown risks and uncertainties, including liquidity requirements, supply chain issues, and market factors, and actual results may differ materially[82](index=82&type=chunk)[83](index=83&type=chunk) [Business Overview](index=18&type=section&id=Business%20overview) TherapeuticsMD is a women's healthcare company focused on developing and commercializing innovative products for women's health, including hormone therapy and prenatal vitamins - TherapeuticsMD is a women's healthcare company focused on creating and commercializing innovative products for women's lifespan, from pregnancy prevention through menopause[84](index=84&type=chunk) - The product portfolio includes a patient-controlled contraceptive, advanced hormone therapy pharmaceutical products (IMVEXXY, BIJUVA, ANNOVERA), and branded/generic prescription prenatal vitamins (vitaMedMD, BocaGreenMD)[84](index=84&type=chunk)[96](index=96&type=chunk) [vitaCare Divestiture](index=19&type=section&id=vitaCare%20Divestiture) TherapeuticsMD completed the vitaCare divestiture on April 14, 2022, receiving $150.0 million cash and entering into long-term service agreements - The divestiture of vitaCare Prescription Services, Inc. was completed on April 14, 2022, yielding a **$150.0 million** cash payment and potential for up to **$7.0 million** in earn-out consideration through 2023[85](index=85&type=chunk) - Post-divestiture, TherapeuticsMD entered into a long-term services agreement to continue using the vitaCare platform for its products and a transition services agreement for up to **12 months**[86](index=86&type=chunk) [COVID-19](index=19&type=section&id=COVID-19) The COVID-19 pandemic continues to pose significant uncertainties and risks, leading TherapeuticsMD to implement virtual options and cost-saving measures, with uncertain future impacts - The COVID-19 pandemic continues to pose highly uncertain and difficult-to-predict risks to the business, financial condition, liquidity, and results of operations[87](index=87&type=chunk)[90](index=90&type=chunk) - The company has adopted virtual business continuity options, partnered with online pharmacies and telemedicine providers, and implemented cost-saving measures such as reduced marketing expenses, hiring restrictions, and delayed IT projects[88](index=88&type=chunk)[89](index=89&type=chunk) - Future impacts depend on pandemic duration, social distancing orders, sales force access to healthcare providers, unemployment rates affecting insurance coverage, and global supply chain disruptions[91](index=91&type=chunk) [Going Concern](index=19&type=section&id=Going%20concern) A Q1 2022 net loss of $49.0 million and $180.4 million current liability deficit raise substantial doubt about going concern, prompting pursuit of financing alternatives - Incurred a net loss of **$49.0 million** in Q1 2022, with current liabilities exceeding current assets by **$180.4 million**, and total liabilities exceeding total assets by **$140.6 million**, indicating substantial doubt about the company's ability to continue as a going concern[92](index=92&type=chunk) - The company needs to raise additional capital to repay the Financing Agreement, which matures on June 1, 2022, and to fund losses until operations become cash flow positive[92](index=92&type=chunk) - Financing alternatives include private placements of equity/equity-linked instruments or public offerings, but these may dilute existing stockholders and are subject to market conditions and authorized share limits[93](index=93&type=chunk) [Product Portfolio](index=20&type=section&id=Product%20portfolio) TherapeuticsMD commercializes IMVEXXY, BIJUVA, ANNOVERA, and prenatal vitamins, with ANNOVERA facing manufacturing challenges and BIJUVA seeing international sales [ANNOVERA (segesterone acetate ("SA") and ethinyl estradiol ("EE") vaginal system)](index=20&type=section&id=ANNOVERA%20(segesterone%20acetate%20(%22SA%22)%20and%20ethinyl%20estradiol%20(%22EE%22)%20vaginal%20system)) ANNOVERA, a one-year contraceptive, faces manufacturing difficulties and supply interruptions, with the company seeking FDA approval for modified testing specifications by Q2 2022 - ANNOVERA is the first and only patient-controlled, one-year contraceptive vaginal system, commercially sold in the U.S. under the Population Council License Agreement[97](index=97&type=chunk) - The company is experiencing manufacturing difficulties and intermittent supply interruptions for ANNOVERA, leading to a supplemental NDA filing in August 2021 to modify testing specifications[98](index=98&type=chunk) A response from the FDA is expected by the end of Q2 2022[98](index=98&type=chunk) - Measures to mitigate challenges include ramping up manufacturing, adding resources, increasing yield per batch, and automating processes, but supply shortfalls could adversely affect business[98](index=98&type=chunk) [IMVEXXY (estradiol vaginal inserts), 4-μg and 10-μg](index=21&type=section&id=IMVEXXY%20(estradiol%20vaginal%20inserts)%2C%204-%CE%BCg%20and%2010-%CE%BCg) IMVEXXY treats menopausal dyspareunia, is marketed in the U.S. and licensed internationally, with a post-approval study on endometrial cancer risk underway - IMVEXXY is a pharmaceutical product for treating moderate-to-severe dyspareunia (vaginal pain) due to menopause[99](index=99&type=chunk) - The company is conducting a post-approval observational study to assess the risk of endometrial cancer in post-menopausal women using low-dose vaginal estrogen unopposed by progestogen[99](index=99&type=chunk) - IMVEXXY is marketed in the U.S. and licensed to Knight Therapeutics (Canada and Israel) and Theramex HQ UK Limited (outside U.S., except Canada and Israel), but no IMVEXXY sales have been made through these licensing agreements as of March 31, 2022[100](index=100&type=chunk) [BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg](index=21&type=section&id=BIJUVA%20(estradiol%20and%20progesterone)%20capsules%2C%201%20mg%2F100%20mg) BIJUVA, an FDA-approved bioidentical hormone therapy, is marketed in the U.S. and licensed internationally, with $0.7 million in Q1 2022 international sales - BIJUVA is the first and only FDA-approved bioidentical hormone therapy combining estradiol and progesterone in a single oral capsule for moderate-to-severe vasomotor symptoms in menopausal women with a uterus[101](index=101&type=chunk) - BIJUVA is marketed in the U.S. and licensed to Knight Therapeutics (Canada and Israel) and Theramex HQ UK Limited (outside U.S., except Canada and Israel)[101](index=101&type=chunk) Sales through the Theramex License Agreement started in Q1 2022, contributing **$0.7 million**[101](index=101&type=chunk) [Prenatal Vitamin Products](index=21&type=section&id=Prenatal%20vitamin%20products) The company manufactures and distributes prescription prenatal vitamin product lines under the vitaMedMD and BocaGreenMD Prena1 brands - The company manufactures and distributes prescription prenatal vitamin product lines under the vitaMedMD brand and authorized generic formulations under BocaGreenMD Prena1[102](index=102&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20operations) Q1 2022 saw a 2.7% revenue decrease to $19.3 million, a 4.7% gross profit decrease, and an 8.4% operating expense reduction, but a $49.0 million net loss due to higher other expenses [Three Months Ended March 31, 2022 Compared with Three Months Ended March 31, 2021](index=21&type=section&id=Three%20months%20ended%20March%2031%2C%202022%20compared%20with%20three%20months%20ended%20March%2031%2C%202021) This section compares Q1 2022 and Q1 2021 financial performance, highlighting revenue decline, reduced operating expenses, increased non-operating expenses, and a larger net loss [Revenue](index=21&type=section&id=Revenue) Q1 2022 total net revenue decreased by 2.7% to $19.3 million, driven by declines in ANNOVERA and prescription vitamin sales, partially offset by BIJUVA international sales Revenue Performance | Product Revenue | Q1 2022 (in thousands) | Q1 2021 (in thousands) | YoY Change (%) | | :-------------------- | :--------------------- | :--------------------- | :------------- | | ANNOVERA | $8,510 | $8,750 | -2.7% | | IMVEXXY | $6,969 | $7,012 | -0.6% | | BIJUVA | $2,560 | $2,445 | 4.7% | | Prescription vitamin | $875 | $1,425 | -38.6% | | Product revenue, net | $18,914 | $19,632 | -3.7% | | License and service revenue | $419 | $234 | 78.2% | | Total Revenue, net | $19,333 | $19,866 | -2.7% | - ANNOVERA sales decreased by **2.7%** due to a **1.5%** decrease in sales volume and a **1.3%** decrease in average sale price[103](index=103&type=chunk) - BIJUVA sales increased **4.7%** overall, but excluding **$0.7 million** from the Theramex License Agreement, domestic BIJUVA sales decreased by **23.7%** due to a **19.4%** decrease in sales volume and a **5.3%** decrease in average sale price[105](index=105&type=chunk)[106](index=106&type=chunk) - Prescription vitamin sales decreased by **38.6%** due to a **35.1%** decrease in sales volume and a **5.4%** decrease in average sale price[108](index=108&type=chunk) [Gross Profit](index=22&type=section&id=Gross%20profit) Q1 2022 total gross profit decreased by 4.7% to $14.5 million, with product gross margin at 74.3%, impacted by BIJUVA export sales at cost Gross Profit Performance | Gross Profit Category | Q1 2022 (in thousands) | Q1 2021 (in thousands) | YoY Change (%) | | :-------------------- | :--------------------- | :--------------------- | :------------- | | Product | $14,054 | $14,945 | -5.9% | | License and service | $419 | $234 | 78.2% | | Total Gross Profit | $14,473 | $15,179 | -4.7% | - Product gross margin decreased by **1.8%** to **74.3%** in Q1 2022[110](index=110&type=chunk) Excluding **$0.7 million** of BIJUVA export sales (sold at cost), product gross margins would have increased by **1.0%** to **77.1%**[110](index=110&type=chunk) [Operating Expenses](index=22&type=section&id=Operating%20expenses) Q1 2022 total operating expenses decreased by 8.4% to $40.7 million, driven by lower selling and marketing, partially offset by higher G&A, with R&D also decreasing Operating Expenses Breakdown | Operating Expense Category | Q1 2022 (in thousands) | Q1 2021 (in thousands) | YoY Change (%) | | :------------------------- | :--------------------- | :--------------------- | :------------- | | Selling and marketing | $18,895 | $24,024 | -21.3% | | General and administrative | $20,407 | $18,383 | 11.0% | | Research and development | $1,400 | $2,050 | -31.7% | | Total Operating Expenses | $40,702 | $44,457 | -8.4% | - Selling and marketing costs decreased by **$5.1 million**, primarily due to **$6.1 million** in lower advertising and marketing costs, partially offset by **$1.0 million** in higher costs for a national sales and marketing event[111](index=111&type=chunk) - General and administrative costs increased by **$2.0 million**, mainly due to **$1.2 million** in higher compensation and employee benefits (including executive retention bonuses) and **$1.9 million** in higher professional fees, partially offset by **$1.0 million** in lower IT expenditures[112](index=112&type=chunk) - R&D costs decreased by **$0.7 million**, primarily from **$0.4 million** in lower compensation and employee benefits and **$0.2 million** in lower lab research costs, reflecting a refocus on commercialization[113](index=113&type=chunk) [Loss from Operations](index=23&type=section&id=Loss%20from%20operations) Q1 2022 loss from operations decreased by 10.4% to $26.2 million due to lower operating expenses, with continued operating losses anticipated Loss from Operations Summary | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | YoY Change (%) | | :----------------- | :--------------------- | :--------------------- | :------------- | | Loss from operations | $(26,229) | $(29,278) | -10.4% | - The decrease in loss from operations was attributable to **$3.8 million** in lower operating expenses, partially offset by **$0.7 million** in lower gross profit[115](index=115&type=chunk) [Other Expense, Net](index=23&type=section&id=Other%20expense%2C%20net) Q1 2022 non-operating expenses increased by 125.6% to $22.8 million, primarily due to an $8.4 million debt extinguishment loss and higher financing costs Other Expense Summary | Metric | Q1 2022 (in thousands) | Q1 2021 (in thousands) | YoY Change (%) | | :-------------------- | :--------------------- | :--------------------- | :------------- | | Total other expense, net | $(22,792) | $(10,105) | 125.6% | - The increase was primarily due to an **$8.4 million** loss on extinguishment of debt and **$7.8 million** in higher amortization of deferred financing costs related to Amendment No. 9 to the Financing Agreement[116](index=116&type=chunk) - Partially offset by **$2.5 million** in lower interest prepayment fees due to the elimination of prepayment fees with Amendment No. 9[116](index=116&type=chunk) [Net Loss](index=23&type=section&id=Net%20Loss) Q1 2022 net loss increased to $49.0 million, or $(5.69) per share, reflecting higher other expenses despite reduced operating losses Net Loss Summary | Metric | Q1 2022 (in thousands, except per share) | Q1 2021 (in thousands, except per share) | YoY Change (%) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------- | | Net Loss | $(49,021) | $(39,383) | 24.5% | | Loss per common share, basic and diluted | $(5.69) | $(5.67) | 0.4% | [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20capital%20resources) As of March 31, 2022, cash was $30.4 million; vitaCare divestiture proceeds were used for debt, but going concern issues persist, requiring additional financing [Cash Flows](index=23&type=section&id=Cash%20flows) Q1 2022 net cash used in operating activities decreased to $29.5 million, but financing activities shifted to a $5.0 million outflow, resulting in a net cash decrease Cash Flow Performance | Cash Flow Category | Q1 2022 (in thousands) | Q1 2021 (in thousands) | YoY Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :------------- | | Net cash used in operating activities | $(29,526) | $(38,380) | -23.1% | | Net cash used in investing activities | $(212) | $(438) | -51.6% | | Net cash (used in) provided by financing activities | $(5,000) | $95,949 | -105.2% | | Net (decrease) increase in cash | $(34,738) | $57,131 | -160.8% | - The decrease in net cash used in operating activities was primarily due to a **$14.7 million** increase in non-cash expenditure adjustments and a **$3.8 million** increase in cash from changes in operating assets and liabilities, partially offset by a **$9.6 million** increase in net loss[122](index=122&type=chunk) - The shift in financing activities was primarily related to the absence of **$150.9 million** in net proceeds from common stock sales in 2021, partially offset by a **$45.0 million** decrease in debt repayment and a **$5.0 million** payment of debt financing fees in 2021[124](index=124&type=chunk) [Other Liquidity Measures](index=24&type=section&id=Other%20liquidity%20measures) Net DSO increased to 151 days by March 31, 2022, reflecting longer payment terms, with $225.0 million in term loans outstanding under the Financing Agreement Other Liquidity Metrics | Metric | March 31, 2022 | December 31, 2021 | March 31, 2021 | | :---------- | :------------- | :---------------- | :------------- | | Net DSO | 151 days | 148 days | 141 days | | Gross DSO | 73 days | 72 days | 62 days | - DSOs fluctuate due to factors including longer payment terms for ANNOVERA, IMVEXXY, and BIJUVA commercialization, and changes in the healthcare industry[126](index=126&type=chunk) - Term loans outstanding under the Financing Agreement were **$225.0 million** as of March 31, 2022, up from **$200.0 million** at December 31, 2021[128](index=128&type=chunk) [Contractual Obligations, Off-Balance Sheet Arrangements and Purchase Commitments and Employment Agreements](index=24&type=section&id=Contractual%20obligations%2C%20off-balance%20sheet%20arrangements%20and%20purchase%20commitments%20and%20employment%20agreements) No material changes to contractual obligations, off-balance sheet arrangements, and purchase commitments occurred, except for Amendment No. 9 to the Financing Agreement - No material changes to contractual obligations, off-balance sheet arrangements, and purchase commitments from December 31, 2021, to March 31, 2022, other than Amendment No. 9 to the Financing Agreement[129](index=129&type=chunk) [Critical Accounting Policies and Estimates](index=24&type=section&id=Critical%20accounting%20policies%20and%20estimates) Financial statements adhere to U.S. GAAP, requiring management estimates, with critical accounting policies consistent with the 2021 10-K Report - The consolidated financial statements are prepared in accordance with U.S. GAAP, requiring estimates and assumptions that affect reported amounts[130](index=130&type=chunk) - Critical accounting policies and estimates remain consistent with those disclosed in the 2021 10-K Report[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20qualitative%20disclosures%20about%20market%20risk) As a 'smaller reporting company,' TherapeuticsMD is not required to provide quantitative and qualitative disclosures about market risk - As a 'smaller reporting company,' TherapeuticsMD is not required to provide quantitative and qualitative disclosures about market risk[131](index=131&type=chunk) [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal controls over financial reporting during the quarter [Management's Evaluation of Disclosure Controls and Procedures](index=24&type=section&id=Management%27s%20evaluation%20of%20disclosure%20controls%20and%20procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2022, providing reasonable assurance for timely and accurate reporting, despite inherent limitations - Disclosure controls and procedures are designed to ensure information required by the Exchange Act is recorded, processed, summarized, and reported timely and accurately[132](index=132&type=chunk) - Management, including the CEO and Interim CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022, providing reasonable assurance[133](index=133&type=chunk) - A control system provides only reasonable, not absolute, assurance, and may not prevent all error and fraud due to inherent limitations and resource constraints[134](index=134&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=25&type=section&id=Changes%20in%20internal%20controls%20over%20financing%20reporting) No material changes in internal control over financial reporting occurred during the three months ended March 31, 2022 - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2022[135](index=135&type=chunk) Part II – Other Information [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20proceedings) The company is involved in routine litigation, with no material effect on business or financial condition beyond Note 9 disclosures - The company is involved in ordinary course litigation, but no legal proceedings are expected to have a material effect on its business or financial condition, beyond those disclosed in Note 9[136](index=136&type=chunk) [Item 1A. Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20factors) The company's business, financial condition, and operating results are subject to various risk factors, with no material changes since the 2021 10-K Report, except as noted - The company's business, financial condition, and operating results are subject to various known and unknown factors, as described in Part I, Item 1A of the 2021 10-K Report[137](index=137&type=chunk) - No material changes to the company's risk factors have occurred since the 2021 10-K Report, except as explicitly set forth in this 10-Q[137](index=137&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=Item%202.%20Unregistered%20sales%20of%20equity%20securities%20and%20use%20of%20proceeds) No unregistered sales of equity securities or use of proceeds to report for the period - None[138](index=138&type=chunk) [Item 3. Defaults Upon Senior Securities](index=25&type=section&id=Item%203.%20Defaults%20upon%20senior%20securities) No defaults upon senior securities to report for the period - None[138](index=138&type=chunk) [Item 4. Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20safety%20disclosures) No mine safety disclosures to report for the period - None[138](index=138&type=chunk) [Item 5. Other Information](index=25&type=section&id=Item%205.%20Other%20information) No other information to report for the period - None[139](index=139&type=chunk) [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the 10-Q report, including the vitaCare Stock Purchase Agreement, Financing Agreement amendments, and CEO/CFO certifications - Key exhibits include the Stock Purchase Agreement for vitaCare (Exhibit **2.1**), Amendment No. **9** to the Financing Agreement (Exhibit **10.2**), and certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits **31.1**, **31.2**, **32.1**, **32.2**)[140](index=140&type=chunk)[141](index=141&type=chunk) [Signatures](index=27&type=section&id=Signatures) The report was signed by Hugh O'Dowd, CEO, and Michael C. Donegan, Interim CFO and Chief Accounting Officer, on May 16, 2022 - The report was signed by Hugh O'Dowd, Chief Executive Officer, and Michael C. Donegan, Interim Chief Financial Officer, Chief Accounting Officer and Vice President Finance, on May 16, 2022[144](index=144&type=chunk)