Company History and Diversified Portfolio
Petros Pharmaceuticals, Inc. (PTPI) is a biopharmaceutical company leading the charge in expanding consumer access to prescription medications through its innovative over-the-counter (OTC) drug development programs. The company's unwavering focus on harnessing technology to facilitate the Rx-to-OTC switch has positioned it as a trailblazer in the rapidly growing self-care market, which is valued at over $38 billion annually.
Petros Pharmaceuticals was incorporated in Delaware on May 14, 2020, with the purpose of acquiring Metuchen Pharmaceuticals LLC, Neurotrope, Inc., Timm Medical Technologies, Inc., and Pos-T-Vac, LLC. The company's primary focus has been on the commercialization and development of Stendra, an FDA-approved PDE-5 inhibitor prescription medication for the treatment of erectile dysfunction (ED).
In September 2016, Petros entered into a License and Commercialization Agreement with Vivus, Inc., purchasing the license for Stendra for a one-time fee of $70 million. This agreement granted Petros the exclusive rights to sell Stendra in the U.S. and its territories, as well as Canada, South America, and India. Vivus had originally obtained the license from Mitsubishi Tanabe Pharma Corporation in December 2000, with FDA approval for Stendra coming in April 2012.
In addition to Stendra, Petros' portfolio includes a line of external penile rigidity devices, namely Vacuum Erection Devices (VEDs) and related accessories, which are sold both domestically and internationally through its subsidiaries, Timm Medical and PTV. This diversified offering caters to the broader male sexual health market, positioning Petros as a comprehensive solution provider.
In January 2022, Petros and Vivus entered into a Settlement Agreement related to minimum purchase requirements under a previous supply agreement. As part of this agreement, Petros executed an interest-bearing promissory note in favor of Vivus for $10.2 million and granted Vivus a right of first refusal for certain types of debt and convertible equity financing until the note is paid in full.
Throughout its history, Petros has faced several challenges. In April 2020, Health Canada issued a Notice of Deficiency against the New Drug Submission for Stendra, halting the company's efforts to expand into the Canadian market. Additionally, Petros has struggled with net losses and negative cash flows from operations since its inception, leading to doubts about its ability to continue as a going concern. The company has had to explore various financing strategies, including private placements of equity securities, to fund its operations.
Pivotal Shift in Corporate Strategy: Focus on Proprietary Technology Platform
In December 2024, Petros announced a strategic shift in its primary business focus, moving away from a traditional pharmaceutical model and instead concentrating on the development of its proprietary technology platform. This platform is designed to serve as a prospective Rx-to-OTC switch solution across a multitude of conditions and existing Rx-only therapies.
The company's proprietary technology, which integrates artificial intelligence (AI) and quantum computing, aims to revolutionize the Rx-to-OTC transition process. By leveraging advanced data analytics and personalized consumer engagement, Petros' platform is poised to address the FDA's key concerns regarding the safe and effective use of PDE-5 inhibitors in an OTC setting, particularly for patients using nitrates.
Pivotal Studies Demonstrate Promising Results
Petros has made significant progress in its pursuit of OTC status for Stendra, its flagship prescription ED medication. The company has conducted a series of pivotal studies that have yielded encouraging results.
In July 2024, Petros announced the results of a pivotal self-selection study, which showed that consumers who used the company's proprietary Web App Technology had a statistically significant (p<.001) higher instance of correct self-selection for receiving the drug compared to those using the Drug Facts Label (DFL) alone. This study paved the way for Petros' technology-centered approach to the Rx-to-OTC switch.
Building on this success, Petros announced the completion of a Formative Human Factors study in May 2024, which demonstrated positive consumer interaction with its AI-integrated Web App designed for the Stendra OTC switch. This milestone further solidified the company's innovative strategy and its potential to become a trailblazer in the Rx-to-OTC transition landscape.
Financials
Promising Quarterly and Annual Financial Performance
Petros has reported consistent quarterly and annual financial performance, showcasing the strength of its diversified product portfolio and the company's strategic focus.
For the fiscal year ended December 31, 2023, Petros reported total revenue of $5.82 million, a 2.9% increase from the previous year. The company's net loss for the year was $8.16 million, which included $13.71 million in one-time gains related to the Vivus Settlement Agreement. The annual operating cash flow and free cash flow were both negative $7.63 million.
In the most recent quarter ended September 30, 2024, Petros reported net sales of $1.58 million, a decrease of 6% or $98,290 compared to the same period in 2023. This decline was primarily driven by decreased wholesaler sales of Stendra due to decreased demand and reduced promotional activities. The company's net loss for the quarter was $2.22 million.
Petros' gross profit margin remained strong at 78.0% for the nine months ended September 30, 2024, compared to 76.0% in the same period of the previous year. This improvement was driven by a shift in product mix and increased operational efficiencies.
Liquidity
The company's cash position as of September 30, 2024, stood at $3.89 million, a decrease from $13.34 million as of December 31, 2023. This decline was primarily due to ongoing investments in the company's Rx-to-OTC transition efforts and the repayment of debt obligations.
Petros' debt-to-equity ratio is 2.325, indicating a relatively high level of leverage. The company's current ratio of 0.854 and quick ratio of 0.742 suggest potential liquidity challenges in meeting short-term obligations. The company has not disclosed any available credit lines.
Nasdaq Listing Challenges and Mitigating Strategies
In May 2024, Petros received a notice from the Nasdaq Stock Market indicating that the company's common stock did not meet the minimum bid price requirement of $1.00 per share for continued listing. The company was provided with a compliance period until November 11, 2024, to regain compliance.
On November 12, 2024, Petros announced that it had received a 180-day extension from Nasdaq to regain compliance with the minimum bid price requirement, with the new deadline set for May 12, 2025. The company is actively exploring strategies to address this challenge, such as potential reverse stock splits, capital raises, or other initiatives to ensure its continued listing on the Nasdaq Capital Market.
Collaborative Efforts and Partnerships
Petros has forged strategic partnerships to expand the reach and accessibility of its products. In April 2024, the company announced a collaboration with Lemonaid Health, a leading telemedicine provider and a subsidiary of 23andMe Holding Co. (Nasdaq: ME), to offer Stendra through Lemonaid Health's telehealth platform. This partnership allows Lemonaid Health customers to access Petros' prescription ED medication at improved pricing.
Furthermore, in March 2024, Petros announced the successful launch of its AI tool, developed in collaboration with a multi-billion-dollar software provider. This AI-integrated technology is being integrated into the company's Web App, which is currently being tested in a Human Factors study as part of its Stendra OTC switch efforts.
Business Overview A Storied Brand with a Refocused Strategy
Petros Pharmaceuticals operates through two main product segments: Prescription Medications and Medical Devices. The Prescription Medications segment, primarily consisting of Stendra sales, generated $2.09 million in net sales for the nine months ended September 30, 2024, accounting for approximately 48% of the company's total net sales. The gross profit for this segment was $1.89 million, representing a gross margin of 90%.
The Medical Devices segment, which includes the sale of vacuum erection devices (VEDs) and related accessories, generated $2.30 million in net sales for the same period, accounting for approximately 52% of total net sales. The gross profit for this segment was $1.55 million, with a gross margin of 67%.
Petros' flagship product, Stendra, is the only patent-protected PDE-5 inhibitor on the market in the US. Under the agreement with Vivus, Petros pays a royalty of 5% on the first $500 million of Stendra net sales and 6% thereafter. The company is also responsible for a pro-rata portion of a $6 million milestone payment once $250 million in Stendra sales has been reached.
The company's primary focus has shifted towards expanding consumer access to medication through over-the-counter (OTC) drug development programs. Petros is currently conducting non-clinical consumer studies in pursuit of potential FDA approval for Stendra for Non-Prescription OTC use in treating erectile dysfunction. This strategy aligns with the company's vision of becoming a platform for transitioning other prescription therapeutics to OTC access.
Petros operates primarily in the United States, with no individual country other than the US accounting for 10% of total sales for the three and nine months ended September 30, 2024, and 2023.
Navigating Challenges and Capitalizing on Opportunities
Petros Pharmaceuticals has faced its share of challenges, including the recent Nasdaq listing concerns and the ongoing pursuit of OTC status for Stendra. However, the company's unwavering focus on its proprietary technology platform and its strategic partnerships have positioned it as a leader in the rapidly evolving Rx-to-OTC transition landscape.
As Petros continues to navigate the regulatory landscape and execute its technology-driven strategy, the company's ability to successfully bring Stendra and potentially other prescription medications to the OTC market could unlock significant value for shareholders. The self-care market's projected growth, coupled with Petros' innovative approach, presents a compelling opportunity for the company to cement its position as a trailblazer in the industry.
Conclusion
Petros Pharmaceuticals' transformative shift towards a technology-centric business model has positioned the company at the forefront of the Rx-to-OTC transition. The promising results from its pivotal studies, strategic partnerships, and relentless pursuit of innovation underscore Petros' potential to revolutionize consumer access to prescription medications. As the company navigates the regulatory landscape and addresses its Nasdaq listing challenges, its ability to unlock the vast potential of the self-care market will be a key determinant of its long-term success.