TherapeuticsMD(TXMD) - 2022 Q3 - Quarterly Report

Part I – Financial Information Item 1. Financial Statements The financial statements reveal a net income driven by a one-time business sale, which masks ongoing operating losses and significant 'going concern' risks Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash | $27,080 | $65,122 | | Total current assets | $87,478 | $119,468 | | Total assets | $133,907 | $169,472 | | Liabilities & Stockholders' Deficit | | | | Debt, net | $93,602 | $188,269 | | Total current liabilities | $174,071 | $252,891 | | Total liabilities | $182,178 | $263,093 | | Total stockholders' deficit | $(48,271) | $(93,621) | Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue, net | $20,917 | $25,406 | $68,811 | $68,273 | | Loss from operations | $(20,747) | $(39,921) | $(65,817) | $(104,378) | | Gain on sale of business | — | — | $143,384 | — | | Net (loss) income | $(28,965) | $(47,420) | $34,295 | $(129,455) | | (Loss) earnings per share, basic | $(3.13) | $(5.62) | $3.86 | $(16.68) | Consolidated Statement of Cash Flows Highlights (Nine Months Ended Sep 30, in thousands) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(63,850) | $(103,135) | | Net cash provided by (used in) investing activities | $142,316 | $(709) | | Net cash (used in) provided by financing activities | $(105,258) | $128,199 | | Net (decrease) increase in cash and restricted cash | $(26,792) | $24,355 | - The company completed a 50-for-1 reverse stock split of its Common Stock on May 6, 2022, with all historical share and per-share data adjusted accordingly[34][35] Note 1. Business and Going Concern The company divested its vitaCare business while facing substantial doubt about its ability to continue as a going concern due to operating losses - On April 14, 2022, the company completed the divestiture of vitaCare Prescription Services, receiving net proceeds of $142.6 million and recognizing a gain on sale of $143.4 million[18] - The company's financial condition raises substantial doubt about its ability to continue as a going concern, having incurred a loss from operations of $65.8 million for the nine months ended Sep 30, 2022[25][32] - To address capital needs, the company is pursuing various strategic alternatives, including the possibility of filing for Chapter 11 protection if these alternatives fail[31] Note 8. Debt Debt was significantly reduced using proceeds from a divestiture, though the maturity date required multiple extensions Debt Balance (in thousands) | | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Financing Agreement | $94,432 | $200,000 | | Less: deferred financing fees | $830 | $11,731 | | Debt, net | $93,602 | $188,269 | - In April 2022, the company used $120.0 million of net proceeds from the vitaCare Divestiture to make a prepayment on its loans[55] - The maturity date of the Financing Agreement was extended multiple times, with the date as of September 30, 2022, being October 31, 2022, and subsequently extended to November 30, 2022[59][60][61] Note 9. Commitments and Contingencies The company has minimum purchase commitments, is involved in patent litigation, and recorded significant executive severance expenses - The company has minimum purchase commitments with third-party manufacturers for its products ANNOVERA, IMVEXXY, and BIJUVA[67] - The company is involved in a patent infringement lawsuit against Teva Pharmaceuticals concerning a generic version of IMVEXXY[70] - Following the separation of the former CEO in September 2022, the company recorded executive severance expenses of $4.8 million[72] Note 10. Mandatory Redeemable Preferred Stock and Stockholders' Deficit The company raised capital through private placements of Mandatory Redeemable Preferred Stock, which is classified as a current liability - In July and September 2022, the company raised capital through private placements with Rubric Capital Management LP, issuing Mandatory Redeemable Preferred Stock and Common Stock[73][74] - The company received aggregate gross proceeds of $15.0 million in July and $7.0 million in September, with the Preferred Stock classified as a current liability due to its mandatory redemption date[73][74][75] Note 11. Revenue Net product revenue decreased in the third quarter but remained stable for the nine-month period, led by sales of ANNOVERA Disaggregated Revenue by Product (in thousands) | Product | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | ANNOVERA | $10,415 | $11,807 | $37,196 | $30,112 | | IMVEXXY | $6,947 | $8,016 | $20,583 | $24,866 | | BIJUVA | $2,663 | $3,298 | $7,877 | $7,899 | | Prescription vitamin | $892 | $1,335 | $2,671 | $4,162 | | Product revenue, net | $20,917 | $24,456 | $68,327 | $67,039 | Note 16. Subsequent Events Following the quarter's end, the company raised additional capital and further extended its debt maturity date - On October 28, 2022, the company sold an additional 7,000 shares of Preferred Stock for gross proceeds of $7.0 million[94] - In connection with the October financing, the company issued additional Lender Warrants and extended the maturity date of its Financing Agreement to November 30, 2022[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management's discussion highlights the critical 'going concern' risk from impending debt maturity, decreased quarterly revenue, and the urgent need for new capital Going Concern Management acknowledges substantial doubt about the company's ability to continue as a going concern due to its debt obligations - Management states that operational losses and upcoming debt maturity raise substantial doubt about its ability to continue as a going concern for the next twelve months[109][118] - The company is actively pursuing strategic alternatives but warns that a Chapter 11 filing is a possibility if these efforts fail before the debt matures[117] Results of Operations Quarterly revenue declined due to lower product sales, though operating expenses were significantly reduced, and nine-month net income was solely due to a one-time gain Revenue Comparison (in thousands) | Period | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended Sep 30 | $20,917 | $25,406 | -17.7% | | Nine Months Ended Sep 30 | $68,811 | $68,273 | +0.8% | - The 17.7% decrease in Q3 2022 revenue was primarily driven by lower sales of ANNOVERA (-11.8%) and IMVEXXY (-13.3%)[127][128] - Total operating expenses decreased by 36.9% in Q3 2022 and 23.5% in the first nine months of 2022, reflecting cost reduction efforts and the vitaCare divestiture[134][148] - For the first nine months of 2022, the company reported net income of $34.3 million, which was entirely due to the non-recurring gain of $143.0 million from the vitaCare divestiture[154] Liquidity and Capital Resources The company's liquidity is strained with low cash reserves, though cash used in operations improved year-over-year - As of September 30, 2022, the company had cash totaling $27.1 million[155] - Net cash used in operating activities for the first nine months of 2022 was $63.9 million, a 38.1% improvement from the $103.1 million used in the same period of 2021[159] - Net cash used in financing activities was $105.3 million, primarily due to a $125.0 million repayment of debt[14][161] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing market risk disclosures as it qualifies as a "smaller reporting company" - The company is exempt from providing quantitative and qualitative disclosures about market risk because it qualifies as a "smaller reporting company"[169] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation, the company's Chief Executive Officers and Interim Chief Financial Officer concluded that disclosure controls and procedures were effective[171] - No material changes in internal control over financial reporting occurred during the third quarter of 2022[173] Part II – Other Information Item 1. Legal Proceedings The company's primary legal matter is an ongoing patent infringement lawsuit related to its product IMVEXXY - The company's primary legal proceeding is the patent infringement case against Teva concerning a generic version of IMVEXXY, as detailed in Note 9 of the financial statements[174][70] Item 1A. Risk Factors The company's substantial indebtedness and impending debt maturity create a significant 'going concern' risk that may impede its ability to raise capital - The company's level of indebtedness, with $94.4 million outstanding maturing in November 2022, raises substantial doubt about its ability to continue as a going concern[176] - Current cash on hand is not sufficient to pay the amounts due under the Financing Agreement upon maturity, requiring the company to raise additional capital[180] - The 'going concern' opinion from the independent auditor could materially limit the company's ability to raise additional funds[180] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None reported for the period[182] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including financing amendments and officer certifications