Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
The
following discussion and analysis provides information that we believe to be relevant to an assessment and understanding of our
results of operations and financial condition for the periods described. This discussion should be read together with our unaudited
consolidated financial statements and the notes to the financial statements, which are included in this Quarterly Report on Form
10-Q. This information should also be read in conjunction with the information contained in our Annual Report on Form 10-K for
the year ended December 31, 2019 filed with the Securities and Exchange Commission, or the SEC, on February 24, 2020, or our Annual
Report, including the audited financial statements and notes included therein. The reported results will not necessarily reflect
future results of operations or financial condition.
In
addition, this Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties.
Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies as
well as statements, other than historical facts, that address activities, events or developments that we intend, expect, project,
believe or anticipate will or may occur in the future. These statements are often characterized by terminology such as “believes,”
“hopes,” “may,” “anticipates,” “should,” “intends,” “plans,”
“will,” “expects,” “estimates,” “projects,” “positioned,” “strategy”
and similar expressions and are based on assumptions and assessments made in light of management’s experience and perception
of historical trends, current conditions, expected future developments and other factors believed to be appropriate. Forward-looking
statements are made as of the date of this Quarterly Report on Form 10-Q and we undertake no duty to update or revise any such
statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and
regulations of the SEC. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties,
many of which are outside of our control. Important factors that could cause actual results, developments and business decisions
to differ materially from forward-looking statements are described in the sections titled “Risk Factors” in our Annual
Report, and include the following: the effects of the COVID-19 pandemic; our ability to maintain or increase sales of our approved
products; our ability to successfully commercialize IMVEXXY®, BIJUVA®, and ANNOVERA® and obtain additional financing
necessary therefor; our commercialization, marketing and manufacturing capabilities and strategy for our approved products; the
size of markets and the potential market opportunity for which our products are approved and our ability to penetrate such markets;
the rate and degree of market acceptance of our products; the willingness of healthcare providers to prescribe and patients to
use our products; our ability to obtain additional financing when needed; our competitive position and the success of competing
products that are or become available for the indications that we are pursuing; our intellectual property position; whether we
will be able to comply with the covenants and conditions under our term loan facility, the length, cost and uncertain results
of our clinical trials, the potential of adverse side effects or other safety risks that could adversely affect the commercialization
of our current or future approved products or preclude the approval of our future drug candidates; whether the U.S. Food and Drug
Administration (FDA) will approve the efficacy supplement for the lower dose of BIJUVA; our ability to protect our intellectual
property, including with respect to the Paragraph IV notice letters we received regarding IMVEXXY and BIJUVA; the length, cost
and uncertain results of future clinical trials; our reliance on third parties to conduct our manufacturing, research and development
and clinical trials; the ability of our licensees to commercialize and distribute our products; the ability of our marketing contractors
to market ANNOVERA; the availability of reimbursement from government authorities and health insurance companies for our products;
the impact of product liability lawsuits; the influence of extensive and costly government regulation; the volatility of the trading
price of our common stock; and the concentration of power in our stock ownership.
Throughout
this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “TherapeuticsMD,”
or “our company” refer to TherapeuticsMD, Inc., a Nevada corporation, and unless specified otherwise, include our
wholly owned subsidiaries, vitaMedMD, LLC, a Delaware limited liability company, or VitaMed; BocaGreenMD, Inc., a Nevada corporation,
or BocaGreen; and VitaCare Prescription Services, Inc., a Florida corporation, or VitaCare.
This
Quarterly Report on Form 10-Q includes our trademarks, trade names and service marks, such as vitaMedMD®, BocaGreenMD®,
IMVEXXY®, BIJUVA® and ANNOVERA® which are protected under applicable intellectual property laws and are the property
of, or licensed to, our company. Solely for convenience, trademarks, trade names and service marks referred to in this Quarterly
Report on Form 10-Q may appear without the ®, ™ or SM symbols, but such references are not intended to indicate, in
any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor
to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade
names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement
or sponsorship of us by, these other parties.
Overview
TherapeuticsMD
is a women’s healthcare company with a mission of creating and commercializing innovative products to support the lifespan
of women from pregnancy prevention through menopause. At TherapeuticsMD, we combine entrepreneurial spirit, clinical expertise,
and business leadership to develop and commercialize health solutions that enable new standards of care for women. Our solutions
range from a patient-controlled, long-lasting contraceptive to advanced hormone therapy pharmaceutical products. We also have
a portfolio of branded and generic prescription prenatal vitamins under the vitaMedMD and BocaGreenMD brands that furthers our
women’s healthcare focus.
Our
portfolio of products focused on women’s health allows us to efficiently leverage our sales and marketing plans to grow
our recently approved products. During 2018, the U.S. Food and Drug Administration, or FDA, approval of our pharmaceutical products
has transitioned our company from predominately focused on conducting research and development to one focused on commercializing
our pharmaceutical products.
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In
July 2018, we launched our FDA-approved product, IMVEXXY (estradiol vaginal inserts)
for the treatment of moderate-to-severe dyspareunia (vaginal pain associated with sexual
activity), a symptom of vulvar and vaginal atrophy, or VVA, due to menopause, which was
approved by the FDA in May 2018.
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In
April 2019, we launched our FDA-approved product, BIJUVA (estradiol and progesterone)
capsules, our hormone therapy combination of bio-identical 17ß-estradiol and bio-identical
progesterone in a single, oral softgel capsule, for the treatment of moderate-to-severe
vasomotor symptoms, or VMS, due to menopause in women with a uterus, which was approved
by the FDA in October 2018.
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In
October 2019, we began a “test and learn” market introduction for our FDA-approved
product ANNOVERA (segesterone acetate and ethinyl estradiol vaginal system), the first
and only patient-controlled, procedure-free, reversible prescription contraceptive option
for women, which was approved by the FDA in August 2018 and which we have licensed
for commercialization in the U.S. pursuant to an exclusive license agreement, or
the Population Council License Agreement, with the Population Council, Inc., or the Population
Council. We paused the planned full commercial launch of ANNOVERA in March 2020 due to
the impact of the COVID-19 pandemic and resumed this initiative on July 1, 2020.
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We
have also entered into license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S.
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In
July 2018, we entered into a license and supply agreement with Knight Therapeutics Inc.,
or Knight, pursuant to which we granted Knight an exclusive license to commercialize
IMVEXXY and BIJUVA in Canada and Israel.
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In
June 2019, we entered into an exclusive license and supply agreement, or the Theramex
License Agreement, with Theramex HQ UK Limited, or Theramex, a leading, global specialty
pharmaceutical company dedicated to women’s health, to commercialize BIJUVA and
IMVEXXY outside of the U.S., excluding Canada and Israel.
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Our
common stock, par value $0.001 per share, or the Common Stock, is traded on the Nasdaq Global Select Market of The Nasdaq Stock
Market LLC, or the Nasdaq, under the symbol “TXMD.” We maintain websites at www.therapeuticsmd.com as well
as various product websites. The information contained on our websites or that can be accessed through our websites does not constitute
part of this Quarterly Report on Form 10-Q.
Impact
of COVID-19 on our Business
Our
business has been, and we anticipate that it will continue to be, impacted by the coronavirus (COVID-19) pandemic. During the
second quarter of 2020, all of our products were affected by the COVID-19 pandemic, primarily due to our sales force having limited
access to healthcare professionals and our patients deferring visits to healthcare professionals. In particular, we paused the
full commercial launch of ANNOVERA in March 2020 as we deferred sales and marketing initiatives. As live
interactions resumed toward the latter portion of the second quarter of 2020 when healthcare professional offices opened, we
resumed the full launch of ANNOVERA on July 1, 2020.
At
this time, the extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict. We
developed a comprehensive COVID-19 contingency plan designed to preserve the value of our investments in our sales and marketing
infrastructure, protect our balance sheet during this period of market disruption, and meet the needs of our patients and prescribers.
This contingency plan was designed to be implemented in stages as we continue to evaluate the length of time that COVID-19 may
impact our business, which is intended to allow us to conserve our financial resources during the COVID-19 pandemic and re-scale
our sales and marketing activity when conditions warrant.
Our
COVID-19 contingency plan is designed to support our strategy of driving revenues by prioritizing ANNOVERA as the lead product,
IMVEXXY in the second position and BIJUVA in the third position. As part of this plan, we reduced our marketing focus on BIJUVA
so that we can prioritize driving our revenue growth for ANNOVERA and IMVEXXY. Our COVID-19 contingency plan includes containing
costs and cutting spending, preparing for a potential longer-term impact throughout the year, leveraging vitaCare to continue
to meet the needs of our patients and prescribers, and ensuring continued availability of our products to patients.
Cost
Containment and Spending Cuts
The COVID-19 pandemic accelerated our focus on reducing our operating
expenses. During the second quarter of 2020, we deferred consumer and healthcare practitioner,
or HCP, marketing spend for ANNOVERA and IMVEXXY and initiated other measures to reduce our operating expenses. As live interactions resumed toward the latter portion of the second quarter of 2020
when healthcare professional offices opened, we resumed the full commercial launch of ANNOVERA on July 1, 2020 and currently intend to launch the initial consumer marketing campaign for IMVEXXY in August 2020.
We
plan to further reduce quarterly operating expenses for the third and fourth quarters of 2020. These
cost cuts and reductions included permanent cost savings that had been identified by management, as well as the interim cessation
of certain spending that may be restarted in future quarters. These cost cuts included:
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Negotiating
lower fees or suspending services from third party vendors;
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Implementing
certain hiring restrictions;
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Delaying
or cancelling non-critical information technology projects;
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Eliminating
travel, entertainment, meeting, and event expenses; and
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Reducing
the size of our sales force and eliminating certain staff positions.
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We
anticipate that these savings can be extended further throughout 2020 or expanded depending on the impact of the COVID-19 pandemic.
Employees
and Sales Force
Our
sales force continues to function utilizing digital engagement tools and tactics and virtual detailing to remain engaged with
prescribers and distribution channels and supplement live interactions, which began to pick up as the second quarter progressed
and physician offices opened.
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We
have enhanced the ability of our sales force to support healthcare providers remotely,
including the sales forces’ ability to continue to provide HCPs with access to
patient product samples, product marketing information, and information regarding patient
affordability programs and support services.
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Our
sales force is in regular interaction with healthcare providers, including conducting
“virtual” lunch and learn programs with providers.
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Our
sales force also continues product training, including sharing best practices, in advance
of our anticipated future sales and marketing ramp.
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Remote
Pharmacy and At-Home Delivery Options
As
of the date of this Quarterly Report on Form 10-Q, we are providing continued access to our products for patients.
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Our
products have broad distribution at all major retail pharmacy chains across the country.
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Our
vitaCare patient model assists patients in obtaining easy and convenient access to their
prescriptions for products at a retail pharmacy of their choice, including via home delivery
retail pharmacy options. We anticipate that home delivery pharmacy options will be attractive
to patients during the COVID-19 pandemic.
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We
anticipate that vitaCare will support continued patient access to our products during
the COVID-19 pandemic and will help sustain the strong refill trends for our products
given vitaCare’s broad use by our patients.
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We
have also engaged with independent community pharmacies and multiple third-party online
pharmacies and telemedicine providers that focus on contraception or menopause to help
ensure patients have real-time access to both diagnosis and treatment.
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Supply
of Products
As
of the date of this Quarterly Report on Form 10-Q, we do not anticipate a shortage of our products due to the COVID-19 pandemic.
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We
currently have sufficient inventory of finished product in our contracted warehouses
to meet anticipated demand through at least the fourth quarter of 2020.
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We
currently do not foresee any interruption in our contract manufacturers’ abilities
to continue to manufacture additional product to be used. Our contract manufacturers
have sufficient active pharmaceutical ingredients on hand for the continued manufacture
of our products and there is currently no interruption in the supply chain for the active
pharmaceutical ingredients for our products.
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We
currently have uninterrupted wholesale and retail distribution of our products and are
actively working to ensure that there continues to be an adequate supply of our products
at pharmacies for sales to patients.
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While
we currently believe that our COVID-19 contingency plan has the ability to mitigate the effect of the COVID-19 pandemic on our
business, the severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but
not limited to, the duration and severity of the pandemic, the duration of “stay at home,” quarantine or “social
distancing” orders, the ability of our sales force to access healthcare providers to promote our products, increases in
unemployment, which could reduce access to commercial health insurance for our patients, thus limiting payer coverage for our
products, and the impact of the pandemic on our global supply chain, all of which are uncertain and cannot be predicted. Our future
results of operations and liquidity could be materially adversely affected by delays in payments of outstanding receivable amounts
beyond normal payment terms, supply chain disruptions, uncertain demand, and the impact of any initiatives or programs that we
may undertake to address financial and operations challenges that we may face.
Our
business may also be affected by negative impacts of the COVID-19 pandemic on capital markets and economies worldwide, and it
is possible that the pandemic could cause a local and/or global economic recession. While policymakers globally have responded
with fiscal policy actions to support the healthcare industry and economy as a whole, the magnitude and overall effectiveness
of these actions remains uncertain.
Our
Products
IMVEXXY
In
May 2018, the FDA approved the 4-μg and 10-μg doses of IMVEXXY (estradiol vaginal inserts) for the treatment of moderate-to-severe
dyspareunia (vaginal pain associated with sexual activity), a symptom of VVA, due to menopause. The 4-μg formulation of IMVEXXY
represents the lowest FDA-approved dose of vaginal estradiol available. IMVEXXY 10-μg became available for commercial distribution
in July 2018 and both doses were commercially available in September 2018.
IMVEXXY
is a small, digitally inserted, softgel vaginal insert that dissolves completely. It is administered mess-free, without the need
for an applicator, and can be used any time of day. IMVEXXY provides a mechanism of action and dosing that are familiar and comfortable
for patients, with no patient education required for dose application or applicators. IMVEXXY demonstrated efficacy as early as
two weeks (secondary endpoint) and maintained efficacy through week 12 in clinical studies, with no increase in systemic hormone
levels beyond the normal postmenopausal range (the clinical relevance of systemic absorption rates for vaginal estrogen therapies
is not known).
As
part of the FDA’s approval of IMVEXXY, we have committed to conduct a post-approval observational study to evaluate the
risk of endometrial cancer in post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen.
The FDA has also asked the sponsors of other vaginal estrogen products to participate in the observational study. In connection
with the observational study, we will be required to provide progress reports to the FDA on an annual basis. The development of
this method is underway, and we do not believe that the costs will be material on an annual basis. In addition, the FDA asked
for post-approval information with respect to certain characteristics related to the product’s specifications, which we
submitted to the FDA.
BIJUVA
In
October 2018, the FDA approved BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg, 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 VMS
(commonly known as hot flashes or flushes), due to menopause in women with a uterus. The estrogen and progesterone in BIJUVA have
the same molecular structure as the hormones that are naturally produced in a woman’s body. We launched BIJUVA in April
2019.
BIJUVA
offers the convenience of a single-capsule combination of two hormones (estradiol and progesterone), which may improve a user’s
compliance. The estradiol and progesterone in BIJUVA are plant-based, not animal-sourced, and contain no peanut allergens. BIJUVA
provides a sustained steady state of estradiol which reduced the frequency and severity of hot flashes in clinical studies with
no demonstrated impact on a patient’s weight or blood pressure. Additionally, through clinical trials BIJUVA has demonstrated
endometrial safety and greater than 90% amenorrhea rates, while providing no clinically meaningful changes in mammograms.
We
submitted a New Drug Application, or NDA, efficacy supplement for the 0.5/100 mg dose of BIJUVA to the FDA in late January 2020
for review and potential approval. The NDA efficacy supplement uses existing data from our Phase 3 REPLENISH trial for BIJUVA,
for which we announced results in December 2016, together with additional information and analyses. The REPLENISH trial was the
first time that a combination of bio-identical estradiol and bio-identical progesterone used in a continuous combined daily fashion
demonstrated safety and efficacy data to support FDA-approval, when the 1/100 mg dose of BJIUVA was approved. We do not anticipate
that the FDA will require any new clinical trials in connection with our submission of the NDA efficacy supplement, however, there
is no assurance that will be the case. The NDA efficacy supplement has been accepted for review by the FDA and has a Prescription
Drug User Fee Act target action date for the completion of the FDA’s review of November 16, 2020. Despite the FDA’s
acceptance of the NDA efficacy supplement and previous approval of the 1/100 mg dose of BJIUVA, there can be no assurance that
the 0.5/100 mg dose of BIJUVA will be approved.
With
the approval of BIJUVA, the FDA required a post-approval commitment to further develop and validate our in-vitro dissolution method
to show how BIJUVA is released from the capsule in an in-vitro setting for quality control assessments. The development of this
method and validation were completed and submitted to the FDA as required in our approval.
Our
hormone therapy pharmaceutical products are characterized by safety and efficacy profiles that can be consistently manufactured
to target specifications. This provides an alternative to the non-FDA approved compounded bio-identical market. We believe that
our FDA-approved pharmaceutical products offer advantages in terms of demonstrated safety and efficacy, consistency in the hormone
dose, lower patient cost due to the increased likelihood of insurance coverage and improved access as a result of availability
from major retail pharmacy chains rather than custom order or formulation by individual compounders.
ANNOVERA
In
July 2018, we entered into an exclusive license agreement with the Population Council to commercialize in the U.S. ANNOVERA (segesterone
acetate and ethinyl estradiol vaginal system), the first and only patient-controlled, procedure-free, reversible prescription
contraceptive that can prevent pregnancy for up to a total of 13 cycles (one year), which was approved by the FDA in August 2018.
In October 2019, we began a “test and learn” market introduction phase of launch for ANNOVERA. We paused the planned
full commercial launch of ANNOVERA in March 2020 due to the impact of the COVID-19 pandemic and resumed this initiative on July
1, 2020.
ANNOVERA
was classified by the FDA as a “new chemical entity,” or NCE, and thus has five years of regulatory exclusivity under
the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the Hatch-Waxman Act. ANNOVERA is a one-year
ring-shaped contraceptive vaginal system, or CVS. ANNOVERA, which is made with a silicone elastomer, contains segesterone acetate,
a 19-nor progesterone derivative also known as Nestorone®, or SA, and ethinyl estradiol, or EE. EE is an approved active ingredient
in many marketed hormonal contraceptive products. Segesterone acetate, an NCE, is a potent progestin that, based on pharmacological
studies in animals and in vitro, does not bind to the androgen or estrogen receptors and has no glucocorticoid activity
at contraceptive doses. SA has been evaluated in 51 clinical studies across these delivery systems with more than 26,794 cycles
of exposure.
ANNOVERA
can be inserted and removed by the woman herself without the aid of a healthcare provider and, unlike oral contraceptives, ANNOVERA
does not require daily administration to obtain the contraceptive effect. After 21 days of use, the woman removes ANNOVERA for
seven days, thereby providing a regular bleeding pattern (i.e., withdrawal/scheduled bleeding). The same CVS is then re-inserted
for additional 21/7-days in/out, for up to a total of 13 cycles (one year). ANNOVERA releases daily vaginal doses of both active
ingredients (SA and EE). The claimed release rate of 150 μg/day SA and 13/day μg EE is supported by the calculated average
release rate from an ex vivo analysis of ANNOVERA used for 13 cycles and is also supported by data from 13 cycles of in vitro
release.
As
part of the approval of ANNOVERA, the FDA has required a post-approval observational study be performed to measure the risk of
venous thromboembolism. In accordance with the post-marketing requirements, the full protocol for the study was submitted to the
FDA in August 2019. We have agreed to perform and pay the costs and expenses associated with this post-approval study, provided
that if the costs and expenses associated with such post-approval study exceed $20 million, half of such excess will offset against
royalties or other payments owed by us to the Population Council under the Population Council License Agreement. Given the observational
nature of the study, we do not believe that the costs of the study will be material on an annual basis.
We
believe that ANNOVERA will compete across all the contraception options for women with focus on those women seeking a long-lasting
option without a procedure.
For
patients, ANNOVERA provides a single long-lasting reversible birth control product that does not require a procedure at the doctor’s
office for insertion or removal, empowering women to be in complete control of their fertility and menstruation with a 21/7 regimen.
We believe that ANNOVERA is a unique alternative for women who have previously chosen other forms of birth control. These include
nulliparous women (or women who have never given birth), women who are considering an IUD but would rather not have a procedure,
women who are between pregnancies but desire protection without a long-term commitment, and women who are not satisfied with oral
options due to the daily usage or potential side effects.
We
believe that the strong initial commercial net revenue per unit of ANNOVERA and commercial insurance adoption provide us with
an opportunity to deploy additional financial resources to maximize ANNOVERA’s consumer-focused commercialization strategy
and leverage the ability of doctor/patient choice of contraceptive to override insurance company formularies when necessary. As
part of this strategy, we are pursuing distribution opportunities for ANNOVERA to provide women with additional access to ANNOVERA,
particularly during the COVID-19 pandemic, with multiple direct-to-consumer contraceptive platforms that extend the reach of our
products. However, as a result of the COVID-19 pandemic, we have deferred a significant portion of our planned 2020 marketing
spend for ANNOVERA.
Commercialization
Model
We
are commercializing the products in our portfolio through a common model focused on the belief that providing good experiences
for both HCPs and patients will drive profitability for TherapeuticsMD. Given that our portfolio focus is exclusively in women’s
health, we believe that each new product launch will allow us to further leverage our existing infrastructure and build out our
reputation as the premier women’s health organization in the U.S. Below is more detail on our commercialization model:
HCP
Education - Initially, we focus on the high writing and high potential HCPs in each territory to gain a full
understanding of their prescribing behavior and practices. Our focus is on driving initial prescriptions of these writers for
each new product launch and utilizing the time to also pull through on our portfolio of existing products. Once regular
writing is established with the initial group of HCPs, we expand our reach to a larger set of HCPs writing in the category.
We educate HCPs on our products primarily with our field sales organization supplemented by non-personal promotion. Our sales
force currently targets approximately 130 territories, which includes the most significant part of the addressable markets
across our product portfolio. As of June 30, 2020, at least 18,500 HCPs had
written at least one prescription of IMVEXXY and at least 5,800 HCPs had written at least one prescription of BIJUVA, the
majority of which are also IMVEXXY writers demonstrating the value of portfolio and focus. In addition, as of June 30, 2020,
approximately 2,000 HCPs had written at least one prescription of ANNOVERA. In addition to our sales organization, we
leverage non-personal promotion (multi-channel advertising) to targets and non-targets that drive awareness, education, and
action. These efforts allow for pull through of the sales organization efforts and identification of new targets that have
interest in writing prescriptions for one or more of our products. We believe this will drive increased prescribing for our
products and lift the overall writing universe and our products top of mind in the HCP community.
BIO-IGNITE
- In addition to our sales organization calling on HCPs, we have a Key Account Management, or KAM, team to support our existing
BIO-IGNITE pharmacy partners and additional pharmacies that wish to enroll in the BIO-IGNITE program. Additionally, KAM’s
are focusing on supporting current prescribers of BIJUVA as well as high decile prescribers of hormone therapy for menopause.
Payer
Access - With the ever-changing payer environment, it is critical to maximize breadth of coverage as quickly as possible to
not inhibit patient access to product. We do this while working to negotiate the best possible contracts for us. Many commercial
payers employ “new-to-market blocks” for newly launched products until the payers have the opportunity to make a coverage
decision based upon their internal review of the product. When a product is not covered, the patient is responsible to pay the
full price for the medication, which can significantly limit utilization of the product. As we seek to increase the number of
lives covered by commercial payers, it is our objective to continue to seek unrestricted coverage. As of June 30, 2020, we have
obtained coverage for the majority of commercial payers for IMVEXXY and BIJUVA and continue to seek unrestricted coverage from
the remaining commercial insurance plans that we have not yet contracted with to provide affordable access for patients. For IMVEXXY,
we achieved unrestricted coverage with the top ten commercial payers of VVA products by commercial payer lives and we continue
to sign new agreements with other payers to cover IMVEXXY. In addition, as of June 30, 2020, four of the top eight Medicare Part
D payers of VVA products were adjudicating IMVEXXY, with additional decisions for other Medicare Part D payers expected during
the second half of 2020. For BIJUVA, through June 30, 2020, we have achieved unrestricted coverage with eight of the top ten commercial
payers of VMS products by commercial payer lives and we continue to sign new agreements with payers to cover BIJUVA. Although
Medicare is a small percentage of the VMS market, as of June 30, 2020, two of the top six Medicare Part D payers of VMS products
were adjudicating BIJUVA.
For
ANNOVERA, we believe that its unique characteristics will assist us in pursuing favorable commercial payer coverage, including
only one pharmacy fill fee per year and no office visit or procedure fees. We have made substantial progress in achieving unrestricted
access to ANNOVERA through commercial payers, including having achieved adjudication with five of the top ten commercial payers
by commercial payer lives as of June 30, 2020, and we continue to pursue discussions with several of the country’s largest
commercial insurers to further expand coverage. As of June 30, 2020, approximately 66% of the commercial payer market covered
ANNOVERA with unrestricted access under pharmacy benefits and approximately 78% covered ANNOVERA with step or prior authorization
access.
In
February 2020, we entered into an agreement with Afaxys Pharma, LLC, a pharmaceutical company focused on serving women in the
public health system, to market ANNOVERA in the U.S. public health sector. As part of the Population Council License Agreement,
we have agreed to provide significantly reduced pricing to federally designated Title X family planning clinics serving underrepresented
women. We also have agreements to market ANNOVERA to the U.S. Department of Defense, the U.S. Department of Veteran’s Affairs,
and in Puerto Rico.
Supply
- We want to ensure our products are available in all classes of trade and delivery systems. We offer our products through
traditional chain wholesalers (Cardinal, McKesson and AmerisourceBergen) and independent retail pharmacies, community compounding
pharmacies with our BIO-IGNITE program, and online pharmacies. We continue to develop unique opportunities to sell direct to pharmacies
to streamline distribution and better control costs.
Patient
Affordability Programs - We have affordability and adherence programs in place for patients so that we can support appropriate
use of our products by patients. Our co-pay assistance programs allow all patients to access our products at a reasonable cost.
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We continue to support our patient education and affordability program that allows all eligible patients who enroll to receive
IMVEXXY and BIJUVA at a reasonable cost. When a product is not covered by a patient’s commercial insurance, the patient
is responsible to pay the full price for the medication, which can significantly limit a patient’s ability to pay and subsequent
utilization of the product. For IMVEXXY and BIJUVA, enrolled patients pay as little as $35 for a prescription with commercial
insurance coverage and pay as little as $50 for a prescription without commercial insurance coverage. For ANNOVERA, for commercially
insured patients, we offer patients assistance for as low as $60 for an annual prescription. Many patients will not need a co-pay
assistance program for ANNOVERA given the requirements of the ACA at the federal level and similar laws at the state level.
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We continue to dialogue with the FDA regarding the potential inclusion of ANNOVERA as a new class of contraception for women in
the FDA’s Birth Control Guide, which would require private health plans to cover ANNOVERA with no patient out-of-pocket
costs as part of the ACA. There is no assurance that the FDA will make such a determination and it is possible that other FDA-approved
products could also be included in such a new class. The FDA may also find that ANNOVERA fits into the vaginal contraceptive ring
class, which it would share with NuvaRing and its generic equivalents, and potentially others. Eight states require insurance
coverage of prescription contraception with co-pay regardless of inclusion in the FDA’s Birth Control Guide and 11 states,
plus Washington D.C., require coverage of prescription contraception with no co-pay regardless of inclusion in the FDA’s
Birth Control Guide.
Patient
Adherence - Establishing compliance and adherence programs that make getting on a prescription medication and obtaining prescribed
refills easy and convenient for the patient and HCPs is a critical lever in our commercial model. Our focus is on minimizing complications
in patients filling their first prescription and engaging with them throughout the life of their treatment to ensure patients
stay on and use therapy for the appropriate length of time. We have delivered effective patient engagement programs for all of
our products.
Consumer
Communication - Another critical level in the commercial model is consumer outreach. Our initial focus is on those patients
who are already predisposed to seek treatment, such as those patients new to therapy, and those patients dissatisfied with their
current therapy. Next, we are focused on expanding the market by energizing patients who are experiencing bothersome symptoms
but who have not been motived to seek treatment. Methods of communication include online and offline media and span branded and
unbranded communication to ensure we drive action from awareness of symptoms to desire to speak to an HCP to acquire a prescription.
License
Agreements
License
Agreement with the Population Council
Under
the terms of the Population Council License Agreement, we paid the Population Council a milestone payment of $20 million within
30 days following approval by the FDA of the NDA for ANNOVERA. The first commercial batch of ANNOVERA was released during the
third quarter of 2019, and we paid the Population Council a second milestone payment of $20 million as a result of the commercial
batch release. The Population Council is eligible to receive additional milestone payments and royalties from commercial sales
of ANNOVERA, as detailed below. We assumed responsibility for marketing expenses related to the commercialization of ANNOVERA.
We are required to pay the Population Council additional milestone payments of $40 million upon cumulative net sales of ANNOVERA
in the U.S. by us and our affiliates and permitted sublicensees of each of $200 million, $400 million and $1.0 billion.
In
addition, we are required to pay the Population Council, on a quarterly basis, step-based royalty payments based on annual net
sales of ANNOVERA in the U.S. by us and our affiliates and permitted sublicensees as follows:
Annual Net Sales
|
|
Royalty
Rate
|
|
Less than or equal to $50.0 million
|
|
|
5
|
%
|
Greater than $50.0 million and less than or equal to $150.0 million
|
|
|
10
|
%
|
Greater than $150.0 million
|
|
|
15
|
%
|
The
annual royalty rate will be reduced to 50% of the initial rate during the six-month period beginning on the date of the first
arms-length commercial sale of a generic equivalent of ANNOVERA that is launched by a third party in the U.S., and thereafter
will be reduced to 20% of the initial rate.
The
Population Council has agreed to perform and pay the costs and expenses associated with two post-approval studies required by
the FDA for ANNOVERA and we have agreed to perform and pay the costs and expenses associated with a post-approval study required
by the FDA to measure risk for venous thromboembolism, provided that if the costs and expenses associated with such post-approval
study exceed $20 million, half of such excess will be offset against royalties or other payments owed by us to the Population
Council under the Population Council License Agreement. We and the Population Council formed a joint product committee responsible
for overseeing activities under the Population Council License Agreement. We are responsible for all aspects of promotion, product
positioning, pricing, education programs, publications, sales messages and any additional desired clinical studies for the one-year
vaginal contraceptive system, subject to oversight and decisions made by the joint product committee.
Unless
earlier terminated, the Population Council License Agreement will remain in effect until the later of the expiration of the last-to-expire
of the Population Council’s U.S. patents that are licensed to us, or the date following such expiration that follows a continuous
period of six months during which we and our affiliates have not made a commercial sale of ANNOVERA in the U.S. The Population
Council License Agreement may also be terminated for certain breach and bankruptcy-related events and by us on 180 days’
prior notice to the Population Council.
As
part of the Population Council License Agreement, we have the exclusive right to negotiate co-development and U.S. marketing rights
for two other investigational vaginal contraceptive systems in development by the Population Council.
License
Agreement with Knight
In
July 2018, we entered into a license and supply agreement, or the Knight License Agreement, with Knight pursuant to which we granted
Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel. Pursuant to the terms of the Knight License
Agreement, Knight will pay us a milestone fee upon the first regulatory approval in Canada of each of IMVEXXY and BIJUVA, sales
milestone fees based upon certain aggregate annual sales in Canada and Israel of each of IMVEXXY and BIJUVA and royalties based
on aggregate annual sales of each of IMVEXXY and BIJUVA in Canada and Israel. In October 2019 and November 2019, Knight’s
New Drug Submissions for IMVEXXY and BIJUVA, respectively, were accepted for review by Health Canada. Knight will be responsible
for all regulatory and commercial activities in Canada and Israel related to IMVEXXY and BIJUVA. We may terminate the Knight License
Agreement if Knight does not submit all regulatory applications, submissions and/or registrations required for regulatory approval
to use and commercialize IMVEXXY and BIJUVA in Canada within certain specified time periods. We also may terminate the Knight
License Agreement if Knight challenges our patents. Either party may terminate the Knight License Agreement for any material breach
by the other party that is not cured within certain specified time periods or if the other party files for bankruptcy or other
related matters. As part of the Knight License Agreement, Knight is prohibited from exporting IMVEXXY and BIJUVA to the United
States.
License
Agreement with Theramex
In
June 2019, we entered into a licensing and supply agreement, or the Theramex License Agreement, with Theramex pursuant to which
we granted Theramex an exclusive, perpetual license to commercialize BIJUVA and IMVEXXY for human use outside of the U.S., except
for Canada and Israel, or the Theramex Territory. Pursuant to the terms of the Theramex License Agreement, Theramex paid us an
upfront fee of EUR 14 million in cash. We are also eligible to receive up to an additional EUR 29.5 million in cash milestone
payments, comprised of (i) an aggregate of EUR 2 million in regulatory milestone payments based on regulatory approvals for each
of BIJUVA and IMVEXXY in certain specified markets and (ii) an aggregate of EUR 27.5 million in sales milestone payments to be
paid in escalating tranches based on Theramex first attaining certain aggregate annual net sales milestones in the Theramex Territory
ranging from EUR 25 million to EUR 100 million. We are also entitled to receive quarterly royalty payments based on net sales
of BIJUVA and IMVEXXY in the Theramex Territory. Theramex has agreed to submit all regulatory applications, submissions and/or
registrations required for regulatory approval to use and commercialize BIJUVA and IMVEXXY in certain specified markets within
certain specified time periods and we may terminate the Theramex License Agreement if Theramex does not submit certain of such
regulatory applications, submissions and/or registrations. We may also terminate the Theramex License Agreement if Theramex challenges
our patents. Either party may terminate the Theramex License Agreement for any material breach by the other party that is not
cured within certain specified time periods or if the other party files for bankruptcy or other related matters. Theramex may
sublicense its rights to commercialize BIJUVA and IMVEXXY in the Theramex Territory, except for certain specified markets. Pursuant
to the terms of the Theramex License Agreement, we agreed to supply, or cause to be supplied, BIJUVA and IMVEXXY to Theramex.
We and Theramex have agreed to form a joint product committee responsible for advising and overseeing activities under the Theramex
License Agreement.
Intellectual
Property
As
of June 30, 2020, we had 35 issued foreign patents and 35 issued domestic or, U.S., patents, which included 14 domestic utility
patents that relate to BIJUVA, three domestic patents that relate to estradiol and progesterone product candidates, ten domestic
patents that relate to IMVEXXY, which establish an important intellectual property foundation for IMVEXXY, one domestic utility
patent that relates to a pipeline transdermal patch technology, one domestic utility patent that relates to our topical-cream
candidates, two domestic patents that relate to formulations containing progesterone, one domestic utility patent that relates
to our OPERA® information technology platform that we wrote off in the second quarter of 2019, and three domestic utility
patents that relate to TX-009HR, our progesterone and estradiol drug candidate.
Research
and Development Expenses
A
significant portion of our historical operating expenses have been incurred in research and development activities. Research and
development expenses relate primarily to the development, support and maintenance of our drug candidates. Our research and development
expenses consist primarily of expenses incurred under agreements with contract research organizations, or CROs, and consultants
that conduct our clinical and preclinical studies; employee related expenses, which include salaries and benefits, and non-cash
share-based compensation; the cost of developing our chemistry, manufacturing, and controls capabilities, and costs associated
with other research activities and regulatory approvals. Other research and development costs listed below consist of costs incurred
with respect to drug candidates that have not received Investigational New Drug Application approval from the FDA.
The
following table indicates our research and development expense by project for the periods indicated:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
(000s)
|
|
|
|
(000s)
|
|
TX 001-HR (BIJUVA)
|
|
$
|
530
|
|
|
$
|
905
|
|
|
$
|
1,117
|
|
|
$
|
2,415
|
|
TX 004-HR(IMVEXXY)
|
|
|
376
|
|
|
|
577
|
|
|
|
757
|
|
|
|
1,342
|
|
ANNOVERA
|
|
|
493
|
|
|
|
840
|
|
|
|
868
|
|
|
|
1,714
|
|
Other research and development
|
|
|
1,343
|
|
|
|
2,642
|
|
|
|
3,269
|
|
|
|
5,811
|
|
Total
|
|
$
|
2,742
|
|
|
$
|
4,964
|
|
|
$
|
6,011
|
|
|
$
|
11,282
|
|
Research
and development expenditures have been reduced as we refocused our resources towards the commercialization of our approved pharmaceutical
products. We will continue to deploy limited resources as we develop our drug pipeline, continue stability testing and validation
on our pharmaceutical products, develop and validate secondary manufacturers, prepare regulatory submissions and work with regulatory
authorities on existing submissions.
The
costs of clinical trials may vary significantly over the life of a project owing to a variety of factors. We base our expenses
related to clinical trials on estimates that are based on our experience and estimates from CROs and other third parties. Research
and development expenditures for the drug candidates will continue after the trial completes for on-going stability and laboratory
testing, regulatory submission and response work. For a discussion of the nature of efforts, steps and costs necessary to complete
these projects, see “Item 1. Business — Research and Development” and “Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations — Research and Development Expenses” contained in our
Annual Report.
Results
of Operations
Three
months ended June 30, 2020 compared with three months ended June 30, 2019
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
|
(000s)
|
|
Revenue, net
|
|
$
|
10,701
|
|
|
$
|
6,079
|
|
|
$
|
4,622
|
|
Cost of goods sold
|
|
|
4,400
|
|
|
|
1,249
|
|
|
|
3,151
|
|
Operating expenses
|
|
|
51,339
|
|
|
|
46,467
|
|
|
|
4,872
|
|
Operating loss
|
|
|
(45,038
|
)
|
|
|
(41,637
|
)
|
|
|
(3,401
|
)
|
Other expense, net
|
|
|
(6,938
|
)
|
|
|
(13,600
|
)
|
|
|
6,662
|
|
Net loss
|
|
$
|
(51,976
|
)
|
|
$
|
(55,237
|
)
|
|
$
|
3,261
|
|
Revenues
and Cost of Goods Sold
Revenue
is recorded net of sales discounts, chargebacks, wholesaler fees, customer rebates, coupons and estimated returns. We
launched IMVEXXY in the third quarter of 2018 and BIJUVA in the second quarter of 2019. We started selling ANNOVERA in the
third quarter of 2019. We paused the planned full commercial launch of ANNOVERA in March 2020 due to the impact of the
COVID-19 pandemic, and resumed this initiative on July 1, 2020. Revenue for the three months ended June 30, 2020 increased
approximately $4,622,000, or 76%, to approximately $10,701,000, compared with approximately $6,079,000 for the three months
ended June 30, 2019. Revenue increased primarily due to continued ramping of sales of IMVEXXY and BIJUVA and pre-launch
sales of ANNOVERA during the three months ended June 30, 2020, as compared to the prior year period, partially offset by
impacts from the COVID-19 pandemic. Our revenue in the prior year period only consisted of sales of IMVEXXY, BIJUVA and our
prenatal vitamins.
Sales
of IMVEXXY increased approximately $1,963,000 as compared to the prior period, primarily due to a higher number of units sold
and increased net revenue per unit and sales of BIJUVA increased approximately $1,218,000 as compared to the prior period, primarily
due to a higher number of units sold and increased net revenue per unit. Revenue for the three months ended June 30, 2020 also
included sales of ANNOVERA of approximately $1,835,000. In addition, during
the three months ended June 30, 2020, our prenatal vitamin sales decreased approximately $394,000 due to decreased number of units
sold, partially offset by increased net revenue per unit as compared to the prior year period.
During
the launches of IMVEXXY and BIJUVA we introduced co-pay assistance programs which allow eligible enrolled patients to access the
products at a reasonable cost regardless of insurance coverage. We expect that our product revenue will improve in the long term
as commercial and Medicare payer coverage increases, and plans complete the process needed to adjudicate IMVEXXY, BIJUVA, and
ANNOVERA prescriptions at pharmacies.
Cost
of goods sold increased approximately $3,151,000, or 252%, to approximately $4,400,000 for the three months ended June 30, 2020,
as compared with approximately $1,249,000 for the three months ended June 30, 2019. This increase in cost of goods sold is attributable
to the 76% increase in revenue as compared to the prior period, royalty fees of approximately $92,000 and amortization of our
license fee of approximately $754,000 related to ANNOVERA, as well as approximately $1,944,000 of inventory obsolescence expense
primarily related to BIJUVA recorded during the three months ended June 30, 2020. Our gross margin related to prescription products
was approximately 59% and 79% for the three-month periods ended June 30, 2020 and 2019, respectively. The change in our gross
margin between the two periods is primarily related to the change in product mix and its related costs as well as inventory obsolescence
expense described above.
Operating
Expenses
Our
principal operating costs include the following items as a percentage of total operating expenses.
|
|
Three Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Sales and marketing costs, excluding human resources costs
|
|
|
45.5
|
%
|
|
|
45.1
|
%
|
Human resources related costs, including salaries, benefits and taxes
|
|
|
31.4
|
%
|
|
|
27.0
|
%
|
Product research and development costs
|
|
|
5.3
|
%
|
|
|
10.7
|
%
|
Professional fees and consulting costs
|
|
|
5.8
|
%
|
|
|
7.3
|
%
|
Other operating expenses
|
|
|
12.0
|
%
|
|
|
9.9
|
%
|
Our
operating costs have increased as we continue to support the launch of our new pharmaceutical products in the market. We
started selling ANNOVERA in the third quarter of 2019. We paused the planned full commercial launch of ANNOVERA in March 2020
due to the impact of the COVID-19 pandemic, and resumed this initiative on July 1, 2020. During the three months ended June
30, 2019, we were primarily focused on growing sales of IMVEXXY and our prenatal vitamins, as well as BIJUVA, which was
launched in the second quarter of 2019. Our principal operating costs include the following items as a percentage of total
operating expenses:
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
|
(000s)
|
|
Sales and marketing costs, excluding human resources costs
|
|
$
|
23,339
|
|
|
$
|
20,978
|
|
|
$
|
2,361
|
|
Human resources related costs
|
|
|
16,115
|
|
|
|
12,546
|
|
|
|
3,569
|
|
Product research and development costs
|
|
|
2,742
|
|
|
|
4,964
|
|
|
|
(2,222
|
)
|
Professional fees and consulting costs
|
|
|
2,991
|
|
|
|
3,391
|
|
|
|
(400
|
)
|
Other operating expenses
|
|
|
6,152
|
|
|
|
4,588
|
|
|
|
1,564
|
|
Total operating expenses
|
|
$
|
51,339
|
|
|
$
|
46,467
|
|
|
$
|
4,872
|
|
Sales
and marketing costs, excluding human resources costs, for the three months ended June 30, 2020 increased by approximately
$2,361,000, or 11%, to approximately $23,339,000, compared with approximately $20,978,000 for the three months ended June 30,
2019. The sales and marketing costs, excluding human resources costs, increased due to higher advertising expense, which was
partially offset by cost cutting initiatives put in place at the beginning of the COVID-19 pandemic, including reducing
consulting and agency fees. Sales and marketing costs, excluding human resources costs, during the three months ended
June 30, 2020 also reflect the write down of product samples of approximately $3,900,000, primarily related to BIJUVA,
partially offset by lower physician education and training expenses caused by restrictions on in-person speaker programs due
to the COVID-19 pandemic.
Human
resources costs, including salaries, benefits and taxes, for the three months ended June 30, 2020 increased by approximately $3,569,000,
or 28%, to approximately $16,115,000, compared with approximately $12,546,000 for the three months ended June 30, 2019, primarily
as a result of an increase of approximately $2,901,000 in personnel costs in sales, marketing and regulatory areas to support
the commercialization of our prescription products and an increase of approximately $668,000 in non-cash compensation expense
included in this category related to employee stock-based compensation during 2020 as compared to 2019.
Product
research and development costs for the three months ended June 30, 2020 decreased by approximately $2,222,000, or 45%, to approximately
$2,742,000, compared with approximately $4,964,000 for the three months ended June 30, 2019. Research and development costs include
costs related to manufacturing validation and early development trials, as well as salaries, wages, non-cash compensation, and
benefits of personnel involved in research and development activities. Research and development expenditures have been reduced
as we refocused our resources towards the commercialization of our approved pharmaceutical products. We continue to deploy limited
resources as we develop our drug pipeline, continue stability testing and validation on our pharmaceutical products, develop and
validate secondary manufacturers, prepare regulatory submissions and work with regulatory authorities on existing submissions.
|
●
|
Since
the project’s inception in February 2013, we have incurred approximately $132,152,000
in research and development costs with respect to BIJUVA.
|
|
●
|
Since
the project’s inception in August 2014, we have incurred approximately $49,018,000
in research and development costs with respect to IMVEXXY.
|
For
a discussion of the nature of efforts, steps and costs related to our research and development projects, see “Item 1. Business
— Research and Development” and “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Research and Development Expenses” contained in our Annual Report.
Professional
fees and consulting costs for the three months ended June 30, 2020 decreased by approximately $400,000, or 12%, to approximately
$2,991,000, compared with approximately $3,391,000 for the three months ended June 30, 2019, primarily as a result of decreased
recruiting and consulting fees.
All
other operating expenses for the three months ended June 30, 2020 increased by approximately $1,564,000, or 34%, to approximately
$6,152,000, compared with approximately $4,588,000 for the three months ended June 30, 2019, primarily as a result of increased
information technology, dues and subscriptions, rent, and insurance, partially offset by lower other office and travel expenses
due to travel restrictions caused by the COVID-19 pandemic.
Operating
Loss
As
a result of the foregoing, our operating loss increased approximately $3,401,000, or 8%, to approximately $45,038,000 for the
three months ended June 30, 2020, compared with approximately $41,637,000 for the three months ended June 30, 2019, primarily
as a result of an increase in total operating expenses to support commercialization and launch efforts related to our pharmaceutical
products, as well as write off of product samples and inventory due to the COVID-19 pandemic, partially offset by increased total
net revenue.
We
anticipate that we will continue to have operating losses for the near future until we successfully commercialize IMVEXXY, BIJUVA,
and ANNOVERA, although there is no assurance that any commercialization of IMVEXXY, BIJUVA and ANNOVERA will be successful.
Other
expense, net
Other
non-operating expenses, net decreased by approximately $6,662,000, or 49%, to an expense of approximately
$6,938,000 for the three months ended June 30, 2020, compared with an expense of approximately $13,600,000 for the three months
ended June 30, 2019, primarily as a result of the loss on extinguishment of debt of approximately $10,058,000 incurred during
the three months ended June 30, 2019, partially offset by increased interest expense related to our Financing Agreement. For more
information regarding our Financing Agreement, see “Liquidity and Capital Resources” below.
Net
Loss
Because
of the net effects of the foregoing, net loss decreased approximately $3,261,000, or 6%, to approximately $51,976,000 for the
three months ended June 30, 2020, compared with approximately $55,237,000 for the three months ended June 30, 2019. Net loss per
share of Common Stock, basic and diluted, was ($0.19) and ($0.23) for the three months ended June 30, 2020 and 2019, respectively.
Six
months ended June 30, 2020 compared with six months ended June 30, 2019
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
|
(000s)
|
|
Revenue, net
|
|
$
|
22,952
|
|
|
$
|
10,026
|
|
|
$
|
12,926
|
|
Cost of goods sold
|
|
|
7,116
|
|
|
|
2,012
|
|
|
|
5,104
|
|
Operating expenses
|
|
|
111,797
|
|
|
|
87,756
|
|
|
|
24,041
|
|
Operating loss
|
|
|
(95,961
|
)
|
|
|
(79,742
|
)
|
|
|
(16,219
|
)
|
Other expense, net
|
|
|
(12,865
|
)
|
|
|
(15,001
|
)
|
|
|
2,136
|
|
Net loss
|
|
$
|
(108,826
|
)
|
|
$
|
(94,743
|
)
|
|
$
|
(14,083
|
)
|
Revenues
and Cost of Goods Sold
Revenue
is recorded net of sales discounts, chargebacks, wholesaler fees, customer rebates, coupons and estimated returns. We launched
IMVEXXY in the third quarter of 2018 and BIJUVA in the second quarter of 2019. We started selling ANNOVERA in the third quarter
of 2019. We paused the planned full commercial launch of ANNOVERA in March 2020 due to the impact of the COVID-19 pandemic, and
resumed this initiative on July 1, 2020.
Revenue
for the six months ended June 30, 2020 increased approximately $12,926,000, or 129%, to approximately $22,952,000, compared with
approximately $10,026,000 for the six months ended June 30, 2019. Revenue increased primarily due to continued ramping of sales
of IMVEXXY and BIJUVA and pre-launch sales of ANNOVERA, partially offset by impacts from the COVID-19 pandemic. Our revenue in
the prior year period only consisted of sales of IMVEXXY, BIJUVA and our prenatal vitamins.
Sales
of IMVEXXY increased approximately $6,346,000 as compared to the prior period, which was primarily due to a higher number of units
sold and increased net revenue per unit, and sales of BIJUVA increased approximately $2,329,000 as compared to the prior period,
which was primarily due to a higher number of units sold and increased net revenue per unit. Revenue for the six months ended
June 30, 2020 also included sales of ANNOVERA of approximately $4,108,000.
In addition, during the six months ended June 30, 2020, our prenatal vitamin sales increased approximately $143,000 due to increased
net revenue per unit as compared to the prior year period, partially offset by a decreased number of units sold.
During
the launches of IMVEXXY and BIJUVA, we introduced co-pay assistance programs which allow eligible enrolled patients to access
the products at a reasonable cost regardless of insurance coverage. We expect that our product revenue will improve in the long
term as commercial and Medicare payer coverage increases, and plans complete the process needed to adjudicate IMVEXXY, BIJUVA,
and ANNOVERA prescriptions at pharmacies.
Cost
of goods sold increased approximately $5,104,000, or 254%, to approximately $7,116,000 for the six months ended June 30, 2020,
compared with approximately $2,012,000 for the six months ended June 30, 2019. This increase is attributable to a 129% increase
in revenue as compared to the prior period, royalty fees of approximately $205,000, and amortization of our license fee related
to ANNOVERA of approximately $1,500,000, as well as $2,080,000 inventory obsolescence expense, primarily related to BIJUVA, recorded
during the six months ended June 30, 2020. Our gross margin related to prescription products was approximately 69% and 80% for
the six-month periods ended June 30, 2020 and 2019, respectively. The change in our gross margin between the two periods is primarily
related to the change in product mix and its related costs, as well as inventory obsolescence expense described above.
Operating
Expenses
Our
principal operating costs include the following items as a percentage of total operating expenses.
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Sales and marketing costs, excluding human resources costs
|
|
|
49.0
|
%
|
|
|
43.3
|
%
|
Human resources related costs, including salaries, benefits and taxes
|
|
|
28.9
|
%
|
|
|
27.0
|
%
|
Product research and development costs
|
|
|
5.4
|
%
|
|
|
12.9
|
%
|
Professional fees and consulting costs
|
|
|
5.6
|
%
|
|
|
6.8
|
%
|
Other operating expenses
|
|
|
11.1
|
%
|
|
|
10.0
|
%
|
Our
operating costs have increased as we continue to support the launch of our new pharmaceutical products in the market. We
commercially launched ANNOVERA in early March 2020, which was subsequently paused due to the outbreak of the COVID-19
pandemic. During the six months ended June 30, 2019, we were primarily focused on growing sales of IMVEXXY and our prenatal
vitamins, as well as BIJUVA, which was launched in the second quarter of 2019. Our principal operating costs include the
following items as a percentage of total operating expenses:
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Change
|
|
|
|
(000s)
|
|
Sales and marketing costs, excluding human resources costs
|
|
$
|
54,869
|
|
|
$
|
37,991
|
|
|
$
|
16,878
|
|
Human resources related costs
|
|
|
32,345
|
|
|
|
23,655
|
|
|
|
8,690
|
|
Product research and development costs
|
|
|
6,011
|
|
|
|
11,282
|
|
|
|
(5,271
|
)
|
Professional fees and consulting costs
|
|
|
6,222
|
|
|
|
5,925
|
|
|
|
297
|
|
Other operating expenses
|
|
|
12,350
|
|
|
|
8,903
|
|
|
|
3,447
|
|
Total operating expenses
|
|
$
|
111,797
|
|
|
$
|
87,756
|
|
|
$
|
24,041
|
|
Sales
and marketing costs, excluding human resources costs, for the six months ended June 30, 2020 increased by approximately
$16,878,000, or 44%, to approximately $54,869,000, compared with approximately $37,991,000 for the six months ended June 30,
2019. This increase was primarily due to higher expenses associated with sales and marketing efforts to support the
significant initiatives related to the launch of ANNOVERA in March 2020, which was subsequently paused as a result of the
COVID-19 pandemic, as well as continuing to support the commercialization of BIJUVA and IMVEXXY, which was partially offset by
cost cutting initiatives put in place at the beginning of the COVID-19 pandemic, including reducing consulting and
agency fees. Sales and marketing costs, excluding human resources costs, during the six months ended June 30, 2020, also
reflect the write down of product samples of approximately $5,100,000, primarily related to BIJUVA, which was partially
offset by lower physician education and training expenses caused by restrictions on in-person speaker programs due to the
COVID-19 pandemic.
Human
resources costs, including salaries, benefits and taxes, for the six months ended June 30, 2020 increased by approximately $8,690,000,
or 37%, to approximately $32,345,000, compared with approximately $23,655,000 for the six months ended June 30, 2019, primarily
as a result of an increase of approximately $7,977,000 in personnel costs in sales, marketing and regulatory areas to support
commercialization of our prescription products and an increase of approximately $713,000 in non-cash compensation expense included
in this category related to employee stock-based compensation during 2020 as compared to 2019.
Product
research and development costs for the six months ended June 30, 2020 decreased by approximately $5,271,000, or 47%, to approximately
$6,011,000, compared with approximately $11,282,000 for the six months ended June 30, 2019. Research and development costs include
costs related to manufacturing validation and early development trials, as well as salaries, wages, non-cash compensation, and
benefits of personnel involved in research and development activities. Research and development expenditures have been reduced
as we refocused our resources towards the commercialization of our approved pharmaceutical products. We continue to deploy limited
resources as we develop our drug pipeline, continue stability testing and validation on our pharmaceutical products, develop and
validate secondary manufacturers, prepare regulatory submissions and work with regulatory authorities on existing submissions.
|
●
|
Since
the project’s inception in February 2013, we have incurred approximately $132,152,000
in research and development costs with respect to BIJUVA.
|
|
●
|
Since
the project’s inception in August 2014, we have incurred approximately $49,018,000
in research and development costs with respect to IMVEXXY.
|
For
a discussion of the nature of efforts, steps and costs related to our research and development projects, see “Item 1. Business
— Research and Development” and “Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations — Research and Development Expenses” contained in our Annual Report.
Professional
fees and consulting costs for the six months ended June 30, 2020 increased by approximately $297,000, or 5%, to approximately
$6,222,000, compared with approximately $5,925,000 for the six months ended June 30, 2019, primarily as a result of increased
legal, accounting and other professional fees, partially offset by reduced recruiting and consulting fees.
All
other operating expense for the six months ended June 30, 2020 increased by approximately $3,447,000, or 39%, to
approximately $12,350,000, compared with approximately $8,903,000 for the six months ended June 30, 2019, primarily as a
result of increased information technology, dues and subscriptions, rent, and insurance, partially offset by lower other
office and travel expenses due to travel restrictions caused by the COVID-19 pandemic.
Operating
Loss
As
a result of the foregoing, our operating loss increased approximately $16,219,000, or 20%, to approximately $95,961,000 for the
six months ended June 30, 2020, compared with approximately $79,742,000 for the six months ended June 30, 2019, primarily as a
result of an increase in total operating expenses to support commercialization and launch efforts related to our pharmaceutical
products, as well as write off of product samples and inventory due to the COVID-19 pandemic, as described above, partially offset
by increased total net revenue.
We
anticipate that we will continue to have operating losses for the near future until we successfully commercialize IMVEXXY, BIJUVA,
and ANNOVERA, although there is no assurance that any commercialization of IMVEXXY, BIJUVA, and ANNOVERA will be successful.
Other
expense, net
Other
non-operating expense, net decreased by approximately $2,136,000, or 14%, to an expense of approximately $12,865,000 for the six
months ended June 30, 2020, compared with an expense of approximately $15,001,000 for the six months ended June 30, 2019, primarily
as a result of the loss on extinguishment of debt of $10,058,000 incurred during the six months ended June 30, 2019, partially
offset by increased interest expense related to our Financing Agreement. For more information regarding our Financing Agreement,
see “Liquidity and Capital Resources” below.
Net
Loss
Because
of the net effects of the foregoing, net loss increased approximately $14,083,000, or 15%, to approximately $108,826,000 for the
six months ended June 30, 2020, compared with approximately $94,743,000 for the six months ended June 30, 2019. Net loss per share
of Common Stock, basic and diluted, was ($0.40) and ($0.39) for the six months ended June 30, 2020 and 2019, respectively.
Liquidity
and Capital Resources
We
have funded our operations primarily through public offerings of our Common Stock and private placements of equity and debt securities.
For the three-year period ended December 31, 2019, we received approximately $236,000,000 in net proceeds from the issuance of
shares of our Common Stock. As of June 30, 2020, we had cash and cash equivalents totaling approximately $113,839,000. However,
changing circumstances may cause us to consume funds significantly faster than we currently anticipate, and we may need to spend
more money than currently expected because of circumstances beyond our control.
Our
net days sales outstanding, or net DSO, is calculated by dividing gross accounts receivable less the reserve for doubtful
accounts, chargebacks and payment discounts by the average daily net product revenues during the quarter. We also disclose
gross DSO, which includes the calculation of gross accounts receivable divided by the average daily gross product revenues to
distributors during the quarter. For the three months ended June 30, 2020, our gross DSO was 55 days compared to 55 days for
the three months ended December 31, 2019 and our net DSO was 156 days for the three months ended June 30, 2020 compared to
141 days for the three months ended December 31, 2019. We anticipate that our DSO will fluctuate in the future based upon a
variety of factors, including longer payment terms associated with the launches of IMVEXXY, BIJUVA, and ANNOVERA and changes
in the healthcare industry. Our exposure to credit losses may increase if our customers are adversely affected by changes in
healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic
recessions, disruption associated with the COVID-19 pandemic, or other customer-specific factors. Although we have
historically not experienced significant credit losses, it is possible that there could be a material adverse impact from
potential adjustments of the carrying amount of trade receivables in the future.
On
April 24, 2019, we entered into a Financing Agreement, as amended, or the Financing Agreement, with TPG Specialty Lending, Inc.,
as administrative agent, or the Administrative Agent, various lenders from time to time party thereto, and certain of our subsidiaries
party thereto from time to time as guarantors, which provides us with up to a $300,000,000 first lien secured term loan credit
facility, or the Facility. The Facility provides for fund availability in multiple tranches: $200,000,000 was drawn upon entering
into the Financing Agreement while an additional $50,000,000 was drawn on February 18, 2020. An additional $50,000,000 was previously
available to us in the Administrative Agent’s sole and absolute discretion either contemporaneously with the delivery of
our financial statements for the quarter ended June 30, 2020 or at such earlier date as the Administrative Agent may have consented
to. We and the Administrative Agent are not moving forward with the undrawn $50,000,000 tranche under the Financing Agreement, which was designed to be drawn following the successful full commercial launch of ANNOVERA in the second quarter of 2020, due to the pause in the launch timing caused by the COVID-19 pandemic. However,
the Administrative Agent has agreed to continue to discuss with us the terms upon which additional financing could be made available
to us by the Administrative Agent in the future at our request and in its discretion.
Although there is uncertainty related to the anticipated impact of the COVID-19 pandemic on our future results, we believe
that our current cash reserves and the recent steps we have taken to reduce our operating expenses will help us manage our
business through the pandemic. We have reviewed numerous potential scenarios in connection with the impact of COVID-19 on
our business and, based on our analysis, we believe that our existing cash reserves, our currently anticipated operating cash
flows, and proceeds from potential future financings, if available to us, will be sufficient to meet our cash needs arising
in the ordinary course of business for the next twelve months from the date of this Quarterly Report on Form 10-Q. However,
if the successful commercialization of IMVEXXY, BIJUVA, or ANNOVERA is delayed, or the impact of the COVID-19 pandemic on
our business is worse than we anticipate, our existing cash reserves and proceeds from potential future financings, if available
to us, may be insufficient to satisfy our liquidity requirements until we are able to successfully commercialize IMVEXXY,
BIJUVA, and ANNOVERA. If our available cash is insufficient to satisfy our liquidity requirements, we may curtail our sales,
marketing, and other commercialization efforts and we may seek to sell additional equity or debt securities. Our ability to
sell equity securities will be limited by market conditions. Our ability to sell debt securities or obtain additional debt
financing is restricted pursuant to the Financing Agreement. To the extent that we raise additional capital through the sale
of equity or convertible debt securities, to the extent permitted under the Financing Agreement, the ownership interests of
our existing stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences
that adversely affect the rights of our existing stockholders. If we raise additional funds through collaborations, strategic
alliances, or licensing arrangements with third parties, certain of which are restricted under the Financing Agreement, we
may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or proposed products,
if permitted under the Financing Agreement. Additionally, we may have to grant licenses on terms that may not be favorable
to us.
We
need substantial amounts of cash to complete the launch and commercialization of our hormone therapy and contraceptive drugs.
The following table sets forth the primary sources and uses of cash for each of the periods set forth below:
Summary
of (Uses) and Sources of Cash
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(000s)
|
|
Net cash used in operating activities
|
|
$
|
(95,100
|
)
|
|
$
|
(88,678
|
)
|
Net cash used in investing activities
|
|
$
|
(806
|
)
|
|
$
|
(1,876
|
)
|
Net cash provided by financing activities
|
|
$
|
48,916
|
|
|
$
|
111,787
|
|
Operating
Activities
The
principal use of cash in operating activities for the six months ended June 30, 2020 was to fund our current expenses primarily
related to supporting commercialization activities for IMVEXXY, BIJUVA, and ANNOVERA, sales, marketing, scale-up and manufacturing
activities and clinical development, adjusted for non-cash items. The increase of approximately $6,422,000 in cash used in operating
activities for the six months ended June 30, 2020 compared with the prior year period was primarily due to an increase in our
net loss and changes in the components of working capital as well as decrease in non-cash items.
Investing
Activities
Investing
activities include costs related to patents and fixed assets. Investing activities for the six months ended June 30, 2020 decreased
by approximately $1,070,000 primarily due to lower costs related to the purchase of fixed assets during the six months ended June
30, 2020 compared with the prior year period.
Financing
Activities
Financing
activities currently represent the principal source of our cash flow. Our financing activities for the six months ended June
30, 2020 provided net cash of approximately $48,916,000 which consisted of the funding from our Financing Agreement of
$50,000,000 and the exercise of options to purchase Common Stock of approximately $166,000, partially offset by the payment
of deferred financing fees of $1,250,000. Our financing activities for the six months ended June 30, 2019 provided net cash
of approximately $111,787,000, which consisted of the net funding from our Facility of approximately $193,348,000 and the
exercise of options and warrants to purchase Common Stock of approximately $100,000, partially offset by the repayment of the
MidCap Agreement of approximately $81,661,000.
New
Accounting Pronouncements
In
August 2018, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, 2018-13 which
eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose
certain new information and modifies some disclosure requirements. The FASB developed the amendments to Accounting Standards Codification,
or ASC, 820 as part of its broader disclosure framework project, which aims to improve the effectiveness of disclosures in the
notes to financial statements by focusing on requirements that clearly communicate the most important information to users of
the financial statements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and
for interim periods within those fiscal years. An entity is permitted to early adopt either the entire standard or only the provisions
that eliminate or modify requirements. We adopted this standard on January 1, 2020, and the adoption did not have a material effect
on our disclosures.
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on
Financial Instruments. The amendments in this update require a financial asset (or a group of financial assets) measured at amortized
cost basis to be presented at the net amount expected to be collected based on historical experience, current conditions, and
reasonable supportable forecasts. The amendments in this update are effective for public business entities for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted no sooner than the
first quarter of 2019. A modified retrospective approach is required for all investments, except debt securities for which an
other-than-temporary impairment had been recognized prior to the effective date, which will require a prospective transition approach
and should be applied either prospectively or retrospectively depending on the nature of the disclosure. The adoption of ASU 2016-13
requires expanded quantitative and qualitative disclosures about the Company’s expected credit losses. Effective January
1, 2020, we adopted ASU 2016-13 under a modified retrospective approach for all financial assets measured at amortized cost. There
was no adjustment recorded for the cumulative effect of adopting ASU 2016-13. The adoption expanded disclosures about our credit
losses.
Other
recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified
Public Accountants and the SEC did not, and are not expected to, have a material effect on our results of operations or financial
position.