TherapeuticsMD(TXMD) - 2023 Q1 - Quarterly Report

Business Transition - TherapeuticsMD transitioned to a pharmaceutical royalty company in December 2022, ceasing research and development and commercial operations [108]. - The transition to a royalty-based business model has significantly reduced both revenue and operating expenses, impacting overall financial performance [141]. Financial Transactions - The company completed a transaction with Mayne Pharma, receiving total consideration of $140.0 million in cash at closing, plus additional payments based on sales milestones and royalties [113]. - The Mayne License Agreement included a cash payment of $140 million at closing and potential milestone payments totaling $30 million based on annual net sales reaching $100 million, $200 million, and $300 million [159]. - The company recognized a gain of $143.4 million from the divestiture of vitaCare Prescription Services, with net proceeds of $142.6 million after transaction costs [118]. - The company completed the vitaCare divestiture on April 14, 2022, utilizing $120 million of net proceeds for loan prepayment, with potential additional earn-out consideration of up to $7 million [156]. Royalty and Revenue - Mayne Pharma will pay royalties of 8.0% on the first $80 million in annual net sales and 7.5% on sales above that threshold for a period of 20 years [111]. - Minimum annual royalties of $3.0 million will be paid for 12 years, adjusted for inflation at an annual rate of 3% [111]. - License and service revenue for Q1 2023 was $0.4 million, a decrease of 42.9% from $0.7 million in Q1 2022, primarily due to the transition to a royalty-based business model [146]. - Discontinued operations reported no revenue for Q1 2023, a decrease of $18.6 million compared to Q1 2022, due to the transition to a royalty-based business [153]. Operating Expenses and Cash Flow - Total operating expenses for Q1 2023 were $3.1 million, a decrease of $14.8 million, or 82.8%, compared to $17.9 million in Q1 2022, reflecting the shift from a manufacturing and commercialization business [147]. - For the first three months of 2023, net cash used in operating activities was $8.7 million, a decrease of $9.2 million or 51% compared to $17.9 million in the same period of 2022 [164]. - Net cash used in investing activities was $0.0 million for the first three months of 2023, compared to $0.2 million in the first three months of 2022, reflecting the transition to a royalty-based business [166]. - Net cash used in financing activities was $0.0 million for the first three months of 2023, down from $5.0 million in the same period of 2022, due to payments of outstanding long-term debt [167]. - Net cash used in discontinued operations increased to $23.4 million in the first three months of 2023 from $11.7 million in the same period of 2022, primarily due to expenses related to the transition to a royalty-based business [168]. Liquidity and Going Concern - There is substantial doubt about the company's ability to continue as a going concern for the next twelve months due to potential liquidity issues [130]. - The company may need to raise additional capital to fund operations until cash flow positive, exploring various equity and debt financing options [126]. Strategic Partnerships - The company has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S. [116]. Assets and Obligations - Cash as of March 31, 2023, totaled $17.2 million, with no losses related to cash held at financial institutions exceeding insured limits [155]. - As of March 31, 2023, the company had a royalty receivable of $2.0 million for the short-term portion and $20.3 million for the long-term portion, totaling $22.3 million [170]. - The company’s inventory balance was approximately $8.4 million, acquired by Mayne Pharma, subject to working capital adjustments [171]. - Total contractual obligations amount to $11.5 million, with $1.1 million due in the first year and $4.3 million due beyond five years [173]. Management and Support - The company has engaged external consultants to support relationships with partners and assist with financial, legal, and regulatory matters following the termination of its executive management team [117].