Business Overview
TherapeuticsMD, Inc. (NASDAQ:TXMD) is a pharmaceutical company that has recently transitioned its business model from a commercial women's healthcare company to a pharmaceutical royalty company. This strategic shift has positioned the company to capitalize on its intellectual property and generate recurring revenue streams through licensing agreements.Formerly a women's healthcare company, TherapeuticsMD has now transformed into a pharmaceutical royalty company. In December 2022, the company completed a transaction with Mayne Pharma LLC, granting the latter an exclusive license to commercialize IMVEXXY, BIJUVA, and the company's prescription prenatal vitamin products in the United States and its possessions and territories. Additionally, TherapeuticsMD assigned its exclusive license to commercialize ANNOVERA to Mayne Pharma.
Under the terms of the Mayne License Agreement, Mayne Pharma will pay TherapeuticsMD one-time milestone payments upon reaching certain net sales thresholds for the licensed products in the United States. Furthermore, Mayne Pharma will pay TherapeuticsMD royalties on the net sales of these products, with the royalty rate ranging from 8.0% on the first $80 million in annual net sales to 7.5% on annual net sales above $80 million, subject to certain adjustments. The royalty rate will decrease to 2.0% on a product-by-product basis upon the earlier of the expiration or revocation of the last patent covering a product or the launch of a generic version in the United States.
In addition to the Mayne License Agreement, TherapeuticsMD has also entered into licensing agreements with other strategic partners to commercialize IMVEXXY and BIJUVA outside of the United States. In July 2018, the company granted an exclusive license to Knight Therapeutics Inc. to commercialize these products in Canada and Israel. Additionally, in September 2019, TherapeuticsMD entered into an exclusive license and supply agreement with Theramex HQ UK Limited to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel.
Financials
For the full year 2023, TherapeuticsMD reported annual net income of -$10,278,000, annual revenue of $1,302,000, annual operating cash flow of -$48,141,000, and annual free cash flow of -$48,141,000.The company's total operating expenses for the first quarter of 2023 were $1,455 thousand, a significant decrease of 52.8% compared to the first quarter of 2022. This reduction in expenses is a direct result of the company's transition to a royalty-based business model, which has allowed for increased efficiencies and a streamlining of operations.
TherapeuticsMD reported a net loss from continuing operations of $809 thousand for the first quarter of 2023, compared to a net loss of $2,310 thousand in the same period of the prior year. The improvement in net loss is primarily due to the decreased operating expenses, as mentioned earlier.
Liquidity
As of March 31, 2023, TherapeuticsMD had cash and cash equivalents totaling $4,338 thousand. The company's primary source of revenue is now from royalties on products licensed to pharmaceutical organizations with commercial capabilities in the relevant territories.To address its capital needs, TherapeuticsMD may pursue various equity and debt financing alternatives, including the private placement of equity, equity-linked, or other similar instruments or obligations with investors, lenders, or other institutional counterparties, or an underwritten public equity or equity-linked securities offering. The company's ability to sell equity securities may be limited by market conditions, including the market price of its common stock and the availability of authorized shares.
On May 1, 2023, TherapeuticsMD entered into a Subscription Agreement with Rubric Capital Management LP, pursuant to which the company agreed to sell up to 5,000,000 shares of its common stock in separate draw-downs at its election. The company has already completed two draw-downs under this agreement, raising a total of $3.15 million in gross proceeds.
Risks and Challenges
As TherapeuticsMD transitions to a pharmaceutical royalty company, it faces several risks and challenges. The company's future revenue and profitability are heavily dependent on the sales performance of the licensed products by its partners, Mayne Pharma, Knight, and Theramex. Any slowdown or decline in the sales of these products could have a significant impact on TherapeuticsMD's financial results.Additionally, the company's liquidity position remains a concern, as its existing cash reserves may be insufficient to satisfy its liquidity requirements if Mayne Pharma's sales of the licensed products grow more slowly than expected, the net working capital settlement with Mayne Pharma is greater than the company's current estimates, or the company is unsuccessful in securing future financing. The potential impact of these factors, combined with the uncertainty of the capital markets, raises substantial doubt about TherapeuticsMD's ability to continue as a going concern for the next twelve months.