Management cares about only one thing. Paperwork. They will forgive almost anything else - cost overruns, gross incompetence, criminal indictments - as long as the paperwork's filled out properly. And in on time.”― Connie Willis, Bellwether
Today, we take a look at a small biopharma concern just up the road from me here in Miami. The company had three products approved by the FDA in 2018 and is in the early stages of commercialization. We dive into this interesting small-cap concern and 'Busted IPO' in the paragraphs below.
Company Overview:
TherapeuticsMD (NASDAQ:TXMD) is a Boca Raton based women’s healthcare company with three recently approved products as well as a line of branded and generic prescription prenatal vitamins. The company was founded in 2008 as VitaMed. Through a series of reverse mergers and divestitures, it was eventually folded into what is today TherapeuticsMD, renamed so in 2011. The stock currently trades around $2.35 per share and commands a market cap of ~$630 million.
Products:
IMVEXXY. All three of TherapeuticsMD’s non-vitamin offerings were approved by the FDA in 2018. The first one to launch was IMVEXXY, an estradiol vaginal insert for the treatment of moderate-to-severe dyspareunia, a symptom of vulvar and vaginal atrophy (VVA), due to menopause. The U.S. market for VVA treatments was ~$2 billion in 2018, with three therapies (Premarin cream from Pfizer (PFE); Estrace creams from Allergan (AGN) and Mylan (MYL) and mostly generic forms of Vagifem) accounting for ~$1.7 billion of sales.
Since launching in July 2018, IMVEXXY has captured ~10% of the VVA market, significantly outperforming two other newcomers (Duschesnay’s Osphena and AMAG’s (AMAG) Intrarosa). Approximately 106,000 scripts were dispensed and paid for by patients during 2Q19, up 41% sequentially over 1Q19. In the third quarter, scripts rose another 26% to 134,000. 
Also impressive is patient adherence: women who started a year ago have filled their prescriptions on an average 7.8 times versus 1.5 times for vaginal creams and 3.5 times for tablets.
IMVEXXY generated sales of just under $10 million in the first three quarters of 2019. Overall, its first 16 months since launch mimics that of Vagifem, which accounted for sales of ~$450 million in 2018.
BIJUVA. In addition to IMVEXXY, TherapeuticsMD launched BIJUVA, a 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 (hot flashes) symptoms due to menopause in April 2019. In other words, instead of getting a prescription for estrogen and another for progesterone, a patient can now take both in one capsule.
The target U.S. market for BIJUVA consists of two categories. The first is the market of FDA-approved separate bio-identical hormone products, such as Estrace and AbbVie’s (ABBV) Prometrium, which accounted for ~3.9 million prescription in 2018. The second consists of off-label prescriptions of the separate bio-identical regimen, which before the advent of BIJUVA required two separate copays, not to mention compliance issues associated with the use of two separate products. TherapeuticsMD puts this opportunity at 12 million annual prescriptions.
In its six-plus months of commercialization ending September 30th, 2019, ~20,000 total paid scripts were dispensed to patients. Sales reps have been instructed to focus on IMVEXXY while the company onboards commercial payers for BIJUVA. The company recently filed a sNDA with the FDA for a lower dose of BIJUVA.
ANNOVERA. The company’s third recently-approved product is ANNOVERA, a first and only patient-controlled, procedure-free, reversible prescription contraceptive designed to prevent unintended pregnancy for one year. It is a vaginal ring that contains segesterone acetate and ethinyl estradiol. It was approved by the FDA in August 2018.
However, TherapeuticsMD is also awaiting a decision from the FDA per the Affordable Care Act (ACA) as to whether ANNOVERA qualifies as the 19th method of contraception – its own unique designation separate from Merck’s (MRK) NuvaRing. Unlike ANNOVERA, NuvaRing is monthly, requires refrigeration before prescription, and is constructed of harder material. If it is determined by the FDA that ANNOVERA is the 19th method of contraception, private payers, who must provide no-cost coverage for one product in each class, will be compelled to provide no-cost coverage for ANNOVERA as it will be the only product in its class. Merck’s birth control asset has generated revenue north of $500 million in each of its last four years.
A full-scale launch is scheduled for this quarter.
Prenatal Vitamins. In addition to its three recently-approved products, the company has a legacy prenatal prescription vitamin business that generated revenue of $15.0 million in 2018.
Collaborations:
TherapeuticsMD entered into a commercial license with Theramex, a global specialty pharma company to market BIJUVA and IMVEXXY outside the U.S. except for Canada and Israel. In return, TherapeuticsMD received $15.4 million upfront in August 2019 and is eligible to receive an additional 29.5 million euros of regulatory and commercial milestones in addition to royalties.
Israel and Canada are the domain of Knight Therapeutics (OTC:KHTRF), for which it purchased $20 million of TherapeuticsMD stock at $5.10 in August 2018. TherapeuticsMD is also eligible for milestones and royalties in these territories.
Balance Sheet & Analyst Commentary:
The company improved its cash flexibility over the summer. This was accomplished through a $200 million floating-rate term loan due 2023-2024, of which $81.7 million was used to pay down existing debt. 
Since August, six analyst firms have chimed in TXMD. All have either reiterated or initiated Buy ratings. Price targets proffered have ranged from $5 to $16 a share.
In addition, over the same time span, several insiders have purchased new holdings in TXMD. The aggregate purchases are slightly above $1 million. There have been no insider sales over that time frame.
Verdict:
There are plenty of catalysts for the company going forward, including decisions from the remaining top ten commercial payers for IMVEXXY and BIJUVA, an FDA decision on ANNOVERA being the 19th form of contraception, and 4Q19 sales results for the three drugs that could trigger availability of non-dilutive capital.
Management sees multiple paths to attaining $1 billion of peak sales from its three recently approved assets. With IMVEXXY attaining ~10% market share in its first 13 months and tracking a therapy that recorded sales of $450 million in 2018; BIJUVA eliminating the need for two separate prescriptions (re: two copays); and ANNOVERA’s superiority to Merck’s NuvaRing in terms of convenience and price, TherapeuticsMD has an excellent chance of achieving that top-line goal.
The company should report Q4 results shortly which should give investors a good reading on how sales are ramping, and hopefully management will provide an update on ANNOVERA's designation progress as well. With three new drugs in the early stages of commercialization, the stock is likely to continue to be volatile. However, given peak sales potential is significantly more than the current market cap of the shares; the risk/reward profile seems attractive on a long-term basis.
In a hierarchy, every employee tends to rise to his level of incompetence.”― Laurence J. Peter, The Peter Principle
Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum.
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