TherapeuticsMD(TXMD) - 2023 Q4 - Annual Report

Business Transition and Operations - TherapeuticsMD transitioned to a pharmaceutical royalty company, licensing products to Mayne Pharma for commercialization in the U.S. and receiving a cash payment of $140 million at closing[21][25]. - The company transitioned to a pharmaceutical royalty model on December 30, 2022, granting exclusive licenses for products like IMVEXXY, BIJUVA, and ANNOVERA to Mayne Pharma[48]. - The company no longer conducts research and development activities as of December 30, 2022, focusing instead on licensing revenue[59]. - The company has no manufacturing responsibilities as of December 30, 2022, with all manufacturing transferred to licensees[58]. - Historical results of commercial operations prior to the Mayne Transaction are classified as discontinued operations in the consolidated financial statements[31]. Financial Performance and Projections - The company recognized a gain of $143.4 million from the divestiture of vitaCare, with net proceeds of $142.6 million after transaction costs[36]. - The company may need to raise additional capital to fund operations until cash flow positive, exploring equity and debt financing options[41][42]. - In 2023, the company revised its working capital adjustment accrual from $3.5 million to $5.5 million, reflecting anticipated amounts owed under the Transaction Agreement[28]. - The company is uncertain about its ability to continue as a going concern for the next twelve months due to potential slower sales growth of Licensed Products and other financial uncertainties[46]. Licensing and Sales Agreements - Mayne Pharma will pay milestone payments of $5 million, $10 million, and $15 million based on annual net sales reaching $100 million, $200 million, and $300 million, respectively[23]. - The royalty rate for net sales of licensed products is set at 8% for the first $80 million and 7.5% for sales above that, with minimum annual royalties of $3 million for 12 years[23]. - The company has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S.[33]. - No sales of IMVEXXY had been made through the licensing agreements with Theramex and Knight as of December 31, 2023[50]. - The FDA requires a post-approval observational study for IMVEXXY, which has been transferred to Mayne Pharma as part of the licensing agreement[51]. Intellectual Property and Compliance - The company holds multiple domestic and foreign patents covering its licensed products, including those for BIJUVA and IMVEXXY[61]. - The company intends to actively protect its intellectual property through various legal mechanisms, including patents and trademarks[63]. - The company relies on third parties for the production of its licensed drugs, which may face compliance issues that could disrupt production or distribution[71]. - The company is subject to various federal and state healthcare laws, including the Anti-Kickback Statute and the False Claims Act, which could lead to significant penalties if violated[80][82]. - The company must comply with federal and state laws requiring pricing transparency and may face limitations on price increases[81]. Regulatory Environment and Future Legislation - Future healthcare legislation may impact the company's operations, including potential reforms or additional regulations that could require product reformulation or increased documentation[85]. - The Biden Administration's proposals include allowing Medicare to negotiate prices for high-cost prescription drugs after 9 years for small molecules and 12 years for biologics, with negotiations starting in 2023[84]. - The plan imposes a tax penalty on drug manufacturers that increase prices faster than inflation and caps out-of-pocket drug costs under Medicare Part D at $2,000 per year[84]. Corporate Structure and Management - As of December 31, 2023, the company employed one full-time employee, having terminated its executive management team and other employees by the end of 2022[34]. - The company maintains its principal executive offices in Boca Raton, Florida, and has a corporate website for additional information[86]. - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[316].