TherapeuticsMD, Inc. (TXMD) is a pharmaceutical company that has undergone a significant transformation in recent years, shifting its focus from being a commercial-stage women's healthcare company to a royalty-based business model. This strategic pivot has positioned the company to capitalize on its intellectual property and product portfolio through licensing agreements with pharmaceutical partners, rather than directly manufacturing and commercializing its own products.
Business Overview and History
TherapeuticsMD was founded in 1997 with a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause. The company initially focused on developing and commercializing novel pharmaceutical products exclusively for women. Over the years, TherapeuticsMD faced various challenges in its pharmaceutical development and commercialization efforts, including significant research and development costs and delays in the regulatory approval process for some of its products. Additionally, the company struggled with building a successful commercial infrastructure and achieving profitability from its product sales.
In July 2018, the company granted Knight Therapeutics Inc. an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel. In September 2019, TherapeuticsMD entered into an exclusive license and supply agreement with Theramex HQ UK Limited to commercialize IMVEXXY and BIJUVA outside the U.S., excluding Canada and Israel.
In December 2022, TherapeuticsMD underwent a transformative change, granting Mayne Pharma an exclusive license to commercialize its IMVEXXY, BIJUVA, and prenatal vitamin products in the United States and its territories. Additionally, the company assigned its exclusive license for ANNOVERA, a one-year contraceptive vaginal system, to Mayne Pharma. This transaction marked the company's transition from a commercial pharmaceutical company to a royalty-based business model.
Under the terms of the Mayne License Agreement, TherapeuticsMD will receive milestone payments and ongoing royalties on net sales of the licensed products in the United States. Mayne Pharma will pay TherapeuticsMD one-time milestone payments of $5 million, $10 million, and $15 million if aggregate net sales of all products reach $100 million, $200 million, and $300 million, respectively, in a calendar year. Additionally, Mayne Pharma will pay TherapeuticsMD royalties on net sales of all products in the United States at a rate of 8% on the first $80 million in annual net sales and 7.5% on annual net sales above $80 million, subject to certain adjustments.
As of September 30, 2024, the company employed one full-time employee, primarily engaged in an executive position. TherapeuticsMD has engaged external consultants to support its relationship with current partners and assist with certain financial, legal, and regulatory matters, as well as the continued wind-down of its historical business operations.
Product Segments and Products
IMVEXXY (estradiol vaginal inserts): IMVEXXY is a pharmaceutical product for the treatment of moderate-to-severe dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and vaginal atrophy due to menopause. On December 30, 2022, TherapeuticsMD granted an exclusive license to commercialize IMVEXXY in the United States and its possessions and territories to Mayne Pharma. TherapeuticsMD also has licensing agreements with third parties, such as Knight Therapeutics Inc. and Theramex HQ UK Limited, to market and sell IMVEXXY outside the U.S.
BIJUVA (estradiol and progesterone capsules): BIJUVA is the first and only FDA-approved bioidentical hormone therapy combination of estradiol and progesterone in a single, oral capsule for the treatment of moderate-to-severe vasomotor symptoms (hot flashes or flushes) due to menopause in women with a uterus. Similar to IMVEXXY, TherapeuticsMD granted an exclusive license to commercialize BIJUVA in the United States and its possessions and territories to Mayne Pharma, and it has licensing agreements with Knight Therapeutics Inc. and Theramex HQ UK Limited for commercialization outside the U.S.
ANNOVERA (segesterone acetate and ethinyl estradiol vaginal system): ANNOVERA is a one-year, patient-controlled, procedure-free, reversible prescription contraceptive vaginal system. On December 30, 2022, TherapeuticsMD assigned its exclusive license to commercialize ANNOVERA to Mayne Pharma.
Prenatal Vitamin Products: TherapeuticsMD granted an exclusive license to Mayne Pharma to commercialize its prescription prenatal vitamin product lines under the vitaMedMD brand name and authorized generic formulations of some of its prescription prenatal vitamin products under the BocaGreenMD Prenatal name in the United States and its possessions and territories.
Financials
As of the company's latest 10-Q filing on November 12, 2024, TherapeuticsMD reported the following financial highlights:
- Net loss from continuing operations for the first nine months of 2024 was $2.43 million, or $0.21 per basic and diluted common share, compared to a net loss from continuing operations of $6.16 million, or $0.60 per basic and diluted common share, for the same period in 2023. - License revenue, primarily from the Mayne License Agreement, totaled $1.09 million for the first nine months of 2024, an increase of $294,000, or 36.8%, compared to $800,000 in the first nine months of 2023.
For the three months ended September 30, 2024: - License and service revenue was $547,000, an increase from $53,000 reported in the same period of 2023. - Total operating expenses were $1.41 million, a decrease of $314,000, or 18.3%, compared to the third quarter of 2023. - Net loss was $609,000, a decrease of $863,000 compared to Q3 2023.
For the nine months ended September 30, 2024: - Total operating expenses were $5.54 million, a decrease of $2.18 million, or 28.2%, compared to the first nine months of 2023.
The company does not provide a breakdown of revenue by geographic markets, as it is a small-cap company that primarily operates in the US.
Liquidity
As of September 30, 2024, the company had cash and cash equivalents of $5.05 million. The company's current ratio and quick ratio are both 2.03.
Challenges and Risks
TherapeuticsMD's transition to a royalty-based business model has not been without its challenges. The company has faced uncertainty regarding the net working capital settlement with Mayne Pharma, as the parties have disagreed on the allowance for payer rebates, wholesale distributor fees, and returns. This has led to ongoing negotiations and potential disputes, which could impact the company's future cash flows.
Additionally, the success of TherapeuticsMD's royalty-based strategy is heavily dependent on the sales performance of its licensed products by its partners, Mayne Pharma, Knight Therapeutics, and Theramex. Any underperformance or delays in the commercialization efforts of these partners could adversely affect the company's revenue and profitability.
The company also faces the challenge of maintaining a lean operational structure and managing its cash resources effectively to support its transformation. The termination of its executive management team and the majority of its employees, with the exception of its Chief Executive Officer, has introduced operational risks that the company must navigate.
Outlook and Guidance
TherapeuticsMD has not provided explicit financial guidance for the full year 2024 or beyond. However, the company has highlighted its focus on managing its cash resources and exploring strategic alternatives to maximize value for shareholders.
In the company's most recent earnings report, Marlan D. Walker, Chief Executive Officer of TherapeuticsMD, stated, "We continue to explore a variety of strategic alternatives with the goal of maximizing value for our shareholders."
Short Reports and Controversies
In February 2020, TherapeuticsMD received a Paragraph IV certification notice letter from Teva Pharmaceuticals USA, Inc. regarding an Abbreviated New Drug Application (ANDA) seeking approval to commercially manufacture, use, or sell a generic version of the 4 mcg and 10 mcg doses of IMVEXXY. The company filed a complaint for patent infringement against Teva in the United States District Court for the District of New Jersey, and the litigation is currently stayed.
In June 2024, Mayne Pharma received a Paragraph IV certification notice letter from Sun Pharma Inc. regarding an ANDA seeking approval to commercially manufacture, use, or sell a generic version of the 4 mcg and 10 mcg doses of IMVEXXY. TherapeuticsMD and Mayne Pharma subsequently filed a complaint for patent infringement against Sun Pharma in the United States District Court for the District of New Jersey.
Conclusion
TherapeuticsMD's transition to a royalty-based business model represents a significant shift in the company's strategic direction. While the move holds the potential for more stable and predictable revenue streams, the company faces ongoing challenges related to the net working capital settlement with Mayne Pharma and the sales performance of its licensed products by its partners. As TherapeuticsMD continues to navigate this transformation, investors will closely monitor the company's ability to effectively manage its cash resources, resolve outstanding disputes, and explore strategic alternatives to maximize shareholder value. The company's streamlined operations, with only one full-time employee and reliance on external consultants, reflect its new focus as a pharmaceutical royalty company. The success of this model will largely depend on the performance of its licensed products in the market and the company's ability to manage its financial resources efficiently.