Business Overview and History
TherapeuticsMD, Inc. (TXMD) is a pharmaceutical royalty company that has undergone a significant transformation in recent years. Formerly a women’s healthcare company, TherapeuticsMD is now focused on collecting royalties from its licensed products, marking a strategic shift in its business model.
TherapeuticsMD was founded in 1907 and was previously headquartered in Boca Raton, Florida. The company’s mission was to create and commercialize innovative products to support women’s health throughout their lifespan, from pregnancy prevention to menopause. Over the years, TherapeuticsMD developed and commercialized several pharmaceutical products targeting women’s healthcare needs. Key products included IMVEXXY, a treatment for moderate-to-severe dyspareunia (vaginal pain during sexual activity) due to menopause, and BIJUVA, 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) due to menopause.
In 2018, TherapeuticsMD expanded its global reach by entering into licensing agreements with Knight Therapeutics and Theramex to commercialize IMVEXXY and BIJUVA outside of the United States. However, the company faced significant challenges in the following years. In 2020, TherapeuticsMD reported a net loss of $183.5 million due to high operating expenses, particularly in research and development and selling, general, and administrative costs. The company also struggled with the impact of the COVID-19 pandemic on its business operations and product sales.
To address these challenges, TherapeuticsMD underwent a strategic transformation. On December 30, 2022, the company completed a transformative transaction with Mayne Pharma LLC, granting them an exclusive license to commercialize IMVEXXY, BIJUVA, and its prescription prenatal vitamin products in the United States and its possessions and territories.
As part of this transaction, TherapeuticsMD also assigned its exclusive license to commercialize ANNOVERA, a one-year ring-shaped contraceptive vaginal system, to Mayne Pharma. In exchange, Mayne Pharma paid TherapeuticsMD a cash payment of $140 million at closing, along with additional cash payments for the acquisition of net working capital and prepaid royalties. Importantly, the transaction also grants TherapeuticsMD the right to receive contingent consideration in the form of milestone payments and ongoing royalties from Mayne Pharma’s sales of the licensed products.
This strategic shift has transformed TherapeuticsMD from a commercial pharmaceutical company into a licensing-focused, royalty-based business. The company’s primary source of revenue is now the royalties it collects from Mayne Pharma, as well as its other licensing agreements with partners like Knight Therapeutics and Theramex for the commercialization of IMVEXXY and BIJUVA outside the United States.
In connection with the business transformation, TherapeuticsMD terminated its executive management team and all other employees, except for the former General Counsel who is now the Chief Executive Officer. As of September 30, 2024, the company employed one full-time employee.
Financial Performance and Ratios
In the first nine months of 2024, TherapeuticsMD reported license and service revenue of $1.09 million, an increase of 36.8% compared to the same period in 2023. This revenue growth can be attributed to changes in sales of the licensed products by Mayne Pharma and the company’s other licensing partners.
TherapeuticsMD’s total operating expenses for the first nine months of 2024 were $5.54 million, a decrease of 28.2% compared to the same period in 2023. This reduction in expenses reflects the increased efficiencies realized following the company’s transition to a royalty-based business model and the streamlining of its operations.
The company’s 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 of $6.16 million, or $0.60 per basic and diluted common share, in the same period of 2023. This improvement in net loss can be attributed to the increased revenue and decreased expenses associated with the company’s new business model.
For the most recent fiscal year (2023), TherapeuticsMD reported revenue of $69.96 million, net income of $1.07 million, operating cash flow of $9.36 million, and free cash flow of $9.00 million.
In the most recent quarter (Q3 2024), the company reported revenue of $547,000, a net loss of $567,000, and negative operating cash flow and free cash flow of $71,000. The year-over-year revenue growth for Q3 2024 was 1,033% compared to Q3 2023, which had reported negative license revenue of $53,000 due to product sales adjustments reported by the company’s licensees.
Liquidity
As of September 30, 2024, TherapeuticsMD had cash and cash equivalents of $5.05 million and a royalty receivable of $19.93 million, including both the short-term and long-term portions. The company’s current ratio, a measure of liquidity, stood at 2.03, indicating a strong ability to meet its short-term obligations. The quick ratio was also 2.03, further supporting the company’s liquidity position.
The company’s debt-to-equity ratio was 0 as of Q3 2024, indicating that TherapeuticsMD has no outstanding debt. However, the company may need to raise additional capital to provide liquidity to fund operations until it becomes cash flow positive. There is substantial doubt about the company’s ability to continue as a going concern for the next twelve months.
Risks and Challenges
While TherapeuticsMD’s transition to a pharmaceutical royalty company has provided a more stable revenue stream, the company faces several risks and challenges. One significant risk is the potential for Mayne Pharma’s sales of the licensed products to grow more slowly than expected or to decline, which could impact the royalties received by TherapeuticsMD.
Additionally, the ongoing net working capital settlement with Mayne Pharma under the transaction agreement could result in a greater-than-expected payout, which could strain the company’s liquidity. TherapeuticsMD is also exposed to supply chain risks related to the third-party contract manufacturers of the licensed products.
Product Portfolio
TherapeuticsMD’s current portfolio of royalty-bearing products includes:
BIJUVA (estradiol and progesterone capsules): The first FDA-approved bioidentical hormone therapy combination for treating moderate-to-severe vasomotor symptoms due to menopause. Like IMVEXXY, it is licensed to Mayne Pharma in the U.S. and to Knight Therapeutics and Theramex outside the U.S.
ANNOVERA (segesterone acetate and ethinyl estradiol vaginal system): A one-year, patient-controlled, procedure-free, reversible prescription contraceptive vaginal system. TherapeuticsMD assigned its exclusive license to commercialize ANNOVERA to Mayne Pharma.
Guidance and Outlook
TherapeuticsMD has not provided formal financial guidance for the full year 2024. The company’s current focus is on managing its transition to a royalty-based business model and the continued wind-down of its historical commercial operations. This suggests a cautious outlook as it navigates the changing industry landscape.
Conclusion
TherapeuticsMD’s transformation from a women’s healthcare company to a pharmaceutical royalty company represents a significant strategic shift for the business. While the company now benefits from a more stable revenue stream and improved profitability, it faces a unique set of risks and challenges as it navigates the changing industry landscape. The substantial year-over-year revenue growth in Q3 2024 demonstrates the potential of the royalty-based model, but the company’s ability to sustain this growth and achieve consistent profitability remains to be seen.
Investors should closely monitor the company’s progress in managing its transition, the performance of its licensed products in the market, and the ongoing net working capital settlement with Mayne Pharma. Additionally, the company’s liquidity position and potential need for additional capital raise concerns about its long-term viability. These factors will be critical to TherapeuticsMD’s future success and its ability to overcome the substantial doubt about its ability to continue as a going concern.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.