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TherapeuticsMD: Hanging On A Thread

May 01, 2020 11:33 AM ETTherapeuticsMD, Inc. (TXMD)55 Comments
Zheng Feng Chee profile picture
Zheng Feng Chee


  • My worst fear was realized with the poor sales trajectory, challenging payor coverage and a total shift in business strategy.
  • COVID-19 situation has further exacerbated the problem resulting in the suspension of "conservative" guidance.
  • Even under an optimistic scenario, the company will be facing stretched cash balance.
  • The company will have to dilute and renegotiate with TPG to avoid a default.
  • TXMD is no longer the company I have initially invested in. I recommend existing investors to sell the news and potential investors to stay away.

"Know what you own, and know why you own it." - Peter Lynch

TherapeuticsMD (Nasdaq: TXMD) has been a company I had covered since 2017 when it popped into my radar when it received a complete response letter ("CRL") for Imvexxy. I did my research and realized the letter was issued inappropriately and the company will be able to get Imvexxy without another trial. On that front, I was spot on and the stock price did reverse substantially.

I continued to hold on and even added to my share count basis on 3 main thesis: 1) huge unmet need in the market, 2) ability to gain comprehensive coverage and 3) sensible go-to-market strategy. However, in recent months, I've been seeing cracks in my thesis and have subsequently sold out at a substantial loss.

Overblown market potential sizing

Chart 1: Imvexxy and Bijuva monthly script trend since launch

Source: TXMD's monthly presentations

Imvexxy has done decently in terms of script count, gaining ~9% market share within 1.5 years. However, this was only achievable on the back of aggressive couponing strategy, which the company has pivoted from (elaborated further latter).

If one looks at the total market for VVA script of ~5.8 million at a net price of $100, achieving 25% market share will lead to net revenue of $144 million. This is a far cry from the $230 million estimate from management which requires total VVA script to grow by 60%. Not saying it's impossible, but it's very rare and unlikely to see such growth rates in a matured market.

Bijuva, the purported star product of the company, had an underwhelming launch. Despite the highly touted partnership with compounding pharmacies and a market of 16 million scripts (>2.5x bigger than Imvexxy total script), Bijuva script remained lacklustre (significantly lower than Imvexxy as seen in Chart 1). Management

This article was written by

Zheng Feng Chee profile picture
Contrarian investor favouring companies with an unbalanced risk-reward ratio like (i) distressed companies with strong cash flow and attractive valuation, (ii) companies in beaten-down sectors with a strong balance sheet and solid business model and (iii) attractive merger-arbitrage situations.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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