TherapeuticsMD(TXMD) - 2022 Q4 - Annual Report

Part I Business The company transitioned to a pharmaceutical royalty model in December 2022, generating revenue from licensed products like IMVEXXY and BIJUVA through partners such as Mayne Pharma after divesting its vitaCare business and downsizing operations - In December 2022, the company shifted its business model to a pharmaceutical royalty company, primarily collecting royalties from licensees and ceasing research, development, and commercial operations[15] - A significant transaction with Mayne Pharma granted them exclusive U.S. commercialization rights for IMVEXXY, BIJUVA, and prenatal vitamins, and assigned the ANNOVERA license[15] Mayne Pharma Royalty and Milestone Terms | Royalty/Milestone | Terms | | :--- | :--- | | Royalties | 8.0% on the first $80 million in annual net sales, 7.5% on sales above $80 million. Rate decreases to 2.0% upon patent expiration or generic launch | | Minimum Annual Royalty | $3.0 million per year for 12 years, adjusted for inflation | | Sales Milestones | Up to $30 million in one-time payments: $5 million at $100 million annual net sales, $10 million at $200 million, and $15 million at $300 million | | Upfront Consideration | $140.0 million cash at closing, plus ~$12.1 million for net working capital and ~$1.0 million in prepaid royalties | - On April 14, 2022, the company divested vitaCare Prescription Services, Inc., receiving $142.6 million in net proceeds and recognizing a $143.4 million gain, with a potential additional earn-out of up to $7.0 million[24] - Post-transformation, the company terminated all employees except the CEO, operating as a virtual entity with one full-time employee and external consultants[23][109] - The company holds 54 issued domestic and 47 issued foreign patents, with key BIJUVA and IMVEXXY patents expiring between 2032 and 2034[82] Risk Factors The company faces significant risks from its royalty-based model, including dependence on licensee sales, going concern doubts, reliance on third-party manufacturers, market acceptance, pricing pressures, and intellectual property challenges - The company's revenue is entirely royalty-based, making it vulnerable to licensees' sales performance[115] - Substantial doubt exists regarding the company's ability to continue as a going concern, as noted by its independent auditor, due to liquidity and potential capital needs[119] - Dependence on third-party CMOs like Catalent and Sever Pharma Solutions for product supply poses risks of manufacturing or compliance disruptions[122][123] - A Paragraph IV notice from Teva Pharmaceuticals challenging IMVEXXY patents could lead to generic competition and reduced royalty revenue if litigation is adverse[98][206][207] - Future legislation, including the Inflation Reduction Act of 2022, may adversely affect reimbursement and pricing for licensed products, potentially reducing royalty income[158] - Nasdaq issued a deficiency notice for failing to hold a 2022 annual stockholder meeting, with potential delisting if compliance is not met by June 29, 2023[213][214] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None Properties The company's Boca Raton headquarters, leased for approximately 62,748 square feet, is being subleased following the business model shift to a royalty company and employee terminations - The company leases 62,748 square feet for its headquarters in Boca Raton, Florida[253][254] - As a pharmaceutical royalty company, the company is in the process of subleasing its headquarters[254] Legal Proceedings The company is involved in patent infringement litigation against Teva Pharmaceuticals over IMVEXXY, with management responsibility transferred to Mayne Pharma, while previous litigation with Amneal over BIJUVA was settled - In February 2020, Teva Pharmaceuticals submitted an ANDA to the FDA for a generic IMVEXXY version, alleging patent invalidity or non-infringement[255] - The company filed a patent infringement lawsuit against Teva in April 2020, which is currently stayed, extending the 30-month statutory stay on FDA approval of Teva's ANDA[255] - As of December 30, 2022, responsibility for patent enforcement, including the Teva litigation, transferred to Mayne Pharma[255] Mine Safety Disclosures This item is not applicable to the company - Not applicable[257] Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Select Market under symbol "TXMD", with no history or future plans for cash dividends, as earnings are retained for operations - The company's common stock trades on the Nasdaq Global Select Market under the symbol "TXMD"[259] - The company has never paid dividends and does not plan to in the foreseeable future, intending to retain earnings for operations[261] Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2022 financial results reflect its royalty-based transformation, with continuing operations showing a $1.1 million net income driven by $70.0 million in license revenue, and discontinued operations generating $110.9 million net income from divestitures, despite ongoing going concern doubts Results of Operations from Continuing Operations (2022 vs 2021) | (In thousands) | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | Total revenue, net | $69,963 | $2,573 | | Gross profit | $68,566 | $1,171 | | Total operating expenses | $67,375 | $80,748 | | Income (loss) from operations | $1,191 | $(79,577) | | Net income (loss) from continuing operations | $1,074 | $(79,305) | - The significant increase in 2022 revenue from continuing operations is due to recognizing $70.0 million in license revenue from the Mayne License Agreement[294] - Discontinued operations generated $110.9 million in income in 2022, primarily from a $143.4 million gain on vitaCare's sale and a $62.0 million gain on ANNOVERA assets to Mayne Pharma[301] - The company's cash position was $38.1 million as of December 31, 2022, with all Financing Agreement obligations repaid and terminated[302][315] - Management concluded substantial doubt exists about the Company's ability to continue as a going concern for the next twelve months, citing potential licensee sales delays, working capital adjustments, and future financing needs[322] - Critical accounting policies include allocating Mayne transaction proceeds between ANNOVERA asset sale (ASC 610-20) and other product licenses (ASC 606), recognizing minimum guaranteed royalty payments as fixed consideration at present value[334][335] Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," the company is not required to provide this information - The company is not required to provide this information as it qualifies as a "smaller reporting company"[346] Financial Statements and Supplementary Data This section incorporates by reference the company's audited consolidated financial statements, accompanying notes, and the independent auditor's report, commencing on page F-1 - Refers to the financial statements, notes, and auditor's report commencing on page F-1[347] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None Controls and Procedures Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes in the most recent fiscal quarter, and no auditor attestation report is included due to filing status - Management concluded the company's disclosure controls and procedures were effective as of December 31, 2022[349] - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2022[354] - No material changes were made to the internal control over financial reporting during the most recent fiscal quarter[350] Other Information The company reports no other information for this item - None Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[359] Executive Compensation Executive compensation information is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[360] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership and related stockholder matters information is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[361] Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[362] Principal Accountant Fees and Services Principal accountant fees and services information is incorporated by reference from the 2023 Annual Meeting of Stockholders Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders[363] Part IV Exhibits and Financial Statement Schedules This section lists financial statements and exhibits filed with the Form 10-K, including material contracts and certifications, with financial statements commencing on page F-1 and no separate schedules included - This section lists all exhibits filed with the 10-K report, including material contracts like the License and Transaction Agreements with Mayne Pharma[365] - The financial statements are listed in the Index to Financial Statements on page F-1[366] Form 10-K Summary The company reports no Form 10-K summary - None