COVID-19
With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our business continues to be highly uncertain and difficult to predict.
As of the date of the filing of this 10-Q Report, the future extent to which the COVID-19 pandemic may continue to materially impact our financial condition, liquidity, or results of operations remains uncertain and difficult to predict. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.
Going concern
On December 4, 2022, we entered into agreements with Mayne Pharma pursuant to which we (i) granted Mayne Pharma an exclusive license to commercialize IMVEXXY, BIJUVA, and prescription prenatal vitamin products (in the United States and its possessions and territories), (ii) assigned to Mayne Pharma our exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma.
The total consideration we received from Mayne Pharma for the purchase of the Transferred Assets and the grant of the licenses under the Mayne License Agreement consisted of (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net working capital subject to certain adjustments, (iii) a cash payment of approximately $1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended.
On the Closing Date, we repaid all obligations under the Financing Agreement, dated as of April 24, 2019, as amended, with Sixth Street Specialty Lending, Inc., as administrative agent, the various lenders from time-to-time party thereto, and certain of our subsidiaries party thereto from time to time as guarantors (the “Financing Agreement”) and the Financing Agreement was terminated.
Following the transaction with Mayne Pharma, we changed our business to become a royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories. We are a women’s health care company focused on creating and commercializing products targeted exclusively for women. Currently,may need to raise additional capital to provide additional liquidity to fund our operations until we become cash flow positive. To address our capital needs, we are focused on pursuing various equity and debt financing and other alternatives. The equity financing alternatives may include the regulatory approvals and pre-commercialization activities necessary for commercializationprivate placement of equity, equity-linked, or other similar instruments or obligations with one or more investors, lenders, or other institutional counterparties or an underwritten public equity or equity-linked securities offering.
Our ability to sell equity securities may be limited by market conditions, including the market price of our advanced hormone therapy pharmaceutical products. Our drug candidates that have completed clinical trials are designed to alleviate the symptoms of and reduce the health risks resulting from menopause-related hormone deficiencies, including hot flashes, osteoporosis and vaginal discomfort. We are developing these hormone therapy drug candidates, which contain estradiol and progesterone alone or in combination, with the aim of demonstrating clinical efficacy at lower doses, thereby enabling an enhanced side effect profile compared with competing products. With our SYMBODA™ technology, we are developing advanced hormone therapy pharmaceutical products to enable delivery of bio-identical hormones through a variety of dosage forms and administration routes. In addition, we manufacture and distribute branded and generic prescription prenatal vitamins, as well as over-the-counter, or OTC, iron supplements.
Our common stock par value $0.001 per share, orand the Common Stock, has been listed onpotential delisting of our common stock from the Nasdaq Global Select Market, of The Nasdaq Stock Market LLC since October 9, 2017. Our Common Stock was previously listed on the NYSE American, LLC. We maintain websites at www.therapeuticsmd.com, www.vitamedmd.com, www.vitamedmdrx.com, and www.bocagreenmd.com. 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.
Research and Development
We have obtained FDA acceptance of our Investigational New Drug, or IND, applications to conduct clinical trials for five of our proposed hormone therapy drug products: TX-001HR, our oral combination of progesterone and estradiol; TX-002HR, our oral progesterone alone; TX-003HR, our oral estradiol alone; and TX-004HR, our applicator-free vaginal estradiol softgel with estradiol alone and TX-006HR our combination estradiol and progesterone product in a topical cream form. Our IND applications for TX-002HR and TX-003HR are currently inactive.
In December 2016, we announced positive top-line results from the recently completed the REPLENISH Trial, our phase 3 clinical trial of TX-001HR, our bio-identical hormone therapy combination of 17ß- estradiol and progesterone in a single, oral softgel drug candidate, for the treatment of moderate to severe vasomotor symptoms, or VMS, due to menopause in post-menopausal women with an intact uterus. In December 2015, we completed the REJOICE Trial, our phase 3 clinical of TX-004HR, our applicator-free vaginal estradiol softgel drug candidate for the treatment of moderate to severe dyspareunia (vaginal pain during sexual intercourse), a symptom of vulvar and vaginal atrophy, or VVA, in post-menopausal women with vaginal linings that do not receive enough estrogen. In the fourth quarter of 2016 we submitted an IND application for TX-006HR, our combination estradiol and progesterone drug candidate in a topical cream form, and intend to commence phase 1 clinical trials of this drug candidate as early as 2018. In July 2014, we suspended enrollment in the SPRY Trial, our phase 3 clinical trial for TX-002HR, our oral progesterone alone drug candidate, and, in October 2014, we stopped the trial in order to update the phase 3 protocol based on discussions with the FDA. We have currently suspended further development of this drug candidate to prioritize our leading drug candidates. Our IND is currently in inactive status.We have no current plans to conduct clinical trials for TX-003HR, our oral estradiol alone drug candidate, and the IND application for this drug candidate is currently inactive.
TX-001HR
TX-001HR is our bio-identical hormone therapy combination of 17ß- estradiol and progesterone in a single, oral softgel drug candidate for the treatment of moderate to severe VMS due to menopause, including hot flashes, night sweats and sleep disturbances in post-menopausal women with an intact uterus. The hormone therapy drug candidate is bioidentical to – or having the same chemical and molecular structure as - the hormones that naturally occur in a woman’s body, namely estradiol and progesterone, and is being studied as a continuous-combined regimen, in which the combination of estrogen and progesterone are taken together in one product daily. If approved by the FDA, we believe this would represent the first time a combination product of estradiol and progesterone bioidentical to the estradiol and progesterone produced by the ovaries would be approved for use in a single combined product.
On September 5, 2013, we began enrollment in the REPLENISH Trial, a multicenter, double-blind, placebo-controlled, phase 3 clinical trial of TX-001HR in postmenopausal women with an intact uterus. The trial was designed to evaluate the efficacy of TX-001HR for the treatment of moderate to severe VMS due to menopause and the endometrial safety of TX-001HR. Patients were assigned to one of five arms, four active and one placebo, and received study medication for 12 months. The primary endpoint for the reduction of endometrial hyperplasia was an incidence of endometrial hyperplasia of less than 1% at 12 months, as determined by endometrial biopsy. The primary endpoint for the treatment of moderate to severe VMS was the mean change of frequency and severity of moderate to severe VMS at weeks four and 12 compared to placebo, as measured by the number and severity of hot flashes. Only subjects experiencing a minimum daily frequency of seven moderate to severe hot flashes at screening were included in the VMS analysis, while all subjects were included in the endometrial hyperplasia analysis. The secondary endpoints included reduction in sleep disturbances and improvement in quality of life measures, night sweats and vaginal dryness, measured at 12 weeks, six months and 12 months. The trial evaluated 1,835 patients between 40 and 65 years old at 111 sites. On December 5, 2016, we announced positive topline data for the REPLENISH Trial.
The REPLENISH Trial evaluated four doses of TX-001HR and placebo; the doses studied were:
| ● | 17ß-estradiol 1 mg/progesterone 100 mg (n = 416) |
| ● | 17ß-estradiol 0.5 mg/progesterone 100 mg (n = 423) |
| ● | 17ß-estradiol 0.5 mg/progesterone 50 mg (n = 421) |
| ● | 17ß-estradiol 0.25 mg/progesterone 50 mg (n = 424) |
The REPLENISH Trial results demonstrated:
● TX-001HR estradiol 1 mg/progesterone 100 mg and TX-001HR estradiol 0.5 mg/progesterone 100 mg both achieved all four of the co-primary efficacy endpoints and the primary safety endpoint.
● TX-001HR estradiol 1 mg/progesterone 100 mg and TX-001HR estradiol 0.5 mg/progesterone 100 mg both demonstrated a statistically significant and clinically meaningful reduction from baseline in both the frequency and severity of hot flashes compared to placebo.
● TX-001HR estradiol 0.5 mg/progesterone 50 mg and TX-001HR estradiol 0.25 mg/progesterone 50 mg were not statistically significant at all of the co-primary efficacy endpoints. The estradiol 0.25 mg/progesterone 50 mg dose was included in the clinical trial as a non-effective dose to meet the recommendation of the FDA guidance to identify the lowest effective dose.
● The incidence of consensus endometrial hyperplasia or malignancy was 0 percent across all four TX-001HR doses, meeting the recommendations established by the FDA’s draft guidance.
As outlined in the FDA guidance, the co-primary efficacy endpoints in the REPLENISH Trial were the change from baseline in the number and severity of hot flashes at weeks four and 12 as compared to placebo. The primary safety endpoint was the incidence of endometrial hyperplasia with up to 12 months of treatment. General safety was also evaluated.
The results of the REPLENISH Trial are summarized in the table below (p-values of < 0.05 meet FDA guidance and support evidence of efficacy):
| Replenish Trial Co-Primary Efficacy Endpoints: Mean Change in Frequency and Severity of Hot Flashes Per Week Versus Placebo at Weeks 4 and 12, VMS-MITT Population |
| | | | | | |
| | | | | | |
| Estradiol/Progesterone | 1 mg/100 mg | 0.5 mg/100 mg | 0.5 mg/50 mg | 0.25 mg/50 mg | Placebo |
| | (n = 141) | (n = 149) | (n = 147) | (n = 154) | (n = 135) |
| | | | | | |
| | | | | | |
| | | Frequency | | | |
| | | | | | |
| Week 4 P-value versus placebo | <0.001 | 0.013 | 0.141 | 0.001 | — |
| Week 12 P-value versus placebo | <0.001 | <0.001 | 0.002 | <0.001 | — |
| | | | | | |
| | | Severity | | | |
| | | | | | |
| Week 4 P-value versus placebo | 0.031 | 0.005 | 0.401 | 0.100 | — |
| Week 12 P-value versus placebo | <0.001 | <0.001 | 0.018 | 0.096 | — |
| | | | | | |
| Replenish Trial Primary Safety Endpoint: Incidence of Consensus Endometrial Hyperplasia or Malignancy up to 12 months, Endometrial Safety PopulationŦ |
| | | | | | |
| Endometrial Hyperplasia | 0% (0/280) | 0% (0/303) | 0% (0/306) | 0% (0/274) | 0% (0/92) |
MITT = Modified intent to treat
ŦPer FDA, consensus hyperplasia refers to the concurrence of two of the three pathologists be accepted as the final diagnosis.
We had a pre-NDA meeting for TX-001HR with the FDA on August 28, 2017. We anticipate that we will submit an NDA for TX-001HR to the FDA in the fourth quarter of 2017. Assuming that the NDA is accepted 60 days thereafter and an FDA review period of ten months from the receipt date to the Prescription Drug User Fee Act, or PDUFA, date for a non-new molecular entity, the NDA for TX-001HR could be approved by the FDA as soon as the fourth quarter of 2018.
TX-002HR
TX-002HR is a natural progesterone formulation for the treatment of secondary amenorrhea without the potentially allergenic component of peanut oil. The hormone therapy drug candidate is bioidentical to – or having the same chemical and molecular structure as - the hormones that naturally occur in a woman’s body. We believe it will be similarly effective to traditional treatments, but may demonstrate efficacy at lower dosages. In January 2014, we began recruitment of patients in the SPRY Trial, a phase 3 clinical trial designed to measure the safety and effectiveness of TX-002HR in the treatment of secondary amenorrhea. During the first two quarters of 2014, the SPRY Trial encountered enrollment challenges because of Institutional Review Board approved clinical trial protocols and FDA inclusion and exclusion criteria. In July 2014, we suspended enrollment and in October 2014 we stopped the SPRY Trial in order to update the phase 3 protocol based on discussions with the FDA. Our IND is currently in inactive status. We are considering updating the phase 3 protocol to, among other things, target only those women with secondary amenorrhea due to polycystic ovarian syndrome and to amend the primary endpoint of the trial. We believe that the updated phase 3 protocol, if proposed by us and approved by the FDA, would allow us to mitigate the enrollment challenges in, and shorten the duration of, the SPRY Trial. However, there can be no assurance that the FDA will approve the updated phase 3 protocol if we propose it. We have currently suspended further development of this drug candidate to prioritize our leading drug candidates.
TX-004HR
TX-004HR is our applicator free vaginal estradiol softgel drug candidate for the treatment of VVA in post-menopausal women with vaginal linings that do not receive enough estrogen. We believe that our drug candidate will be at least as effective as the traditional treatments for VVA because of an early onset of action with less systemic exposure, inferring a greater probability of dose administration to the target tissue, and it will have an added advantage of being a simple, easier to use dosage form versus traditional VVA treatments. TX-004HR features our SYMBODATM technology. This allows for the production of cohesive, stable formulations and provides content uniformity and accuracy of dosing strengths for TX-004HR. We initiated the REJOICE Trial, a randomized, multicenter, double-blind, placebo-controlled phase 3 clinical trial during the third quarter of 2014 to assess the safety and efficacy of three doses – 25 mcg, 10 mcg and 4 mcg (compared to placebo) – of TX-004HR for the treatment of moderate to severe dyspareunia, or painful intercourse, as a symptom of VVA due to menopause.
On December 7, 2015, we announced positive top-line results from the REJOICE Trial. The pre-specified four co-primary efficacy endpoints were the changes from baseline to week 12 versus placebo in the percentage of vaginal superficial cells, percentage of vaginal parabasal cells, vaginal pH and severity of participants’ self-reported moderate to severe dyspareunia as the most bothersome symptom of VVA. The trial enrolled 764 postmenopausal women (40 to 75 years old) experiencing moderate to severe dyspareunia at approximately 89 sites across the United States and Canada. Trial participants were randomized to receive either TX-004HR at 25 mcg (n=190), 10 mcg (n=191), or 4 mcg (n=191) doses or placebo (n=192) for a total of 12 weeks, all administered once daily for two weeks and then twice weekly (approximately three to four days apart) for ten weeks. The 25 mcg dose of TX-004HR demonstrated highly statistically significant results at the p < 0.0001 level compared to placebo across all four co-primary endpoints. The 10 mcg dose of TX-004HR demonstrated highly statistically significant results at the p < 0.0001 level compared to placebo across all four co-primary endpoints. The 4 mcg dose of TX-004HR also demonstrated highly statistically significant results at the p < 0.0001 level compared to placebo for the endpoints of vaginal superficial cells, vaginal parabasal cells, and vaginal pH; the change from baseline compared to placebo in the severity of dyspareunia was statistically significant at the p = 0.0149 level. The FDA has previously indicated to us that in order to approve the drug based on a single trial, the trial would need to show statistical significance at the 0.01 level or lower for each endpoint, and that a trial that is merely statistically significant at a higher level may not provide sufficient evidence to support an NDA filing or approval of a drug candidate where the NDA relies on a single clinical trial. Statistical improvement over placebo was also observed for all three doses at the first assessment at week two and sustained through week 12. Vaginal dryness was a pre-specified key secondary endpoint. The 25 mcg and 10 mcg doses of TX-004HR demonstrated highly statistically significant results at the p < 0.0001 level compared to placebo for the endpoint of vaginal dryness. The 4 mcg dose of TX-004HR demonstrated statistically significant results at the p = 0.0014 level compared to placebo. The pharmacokinetic data for all three doses demonstrated negligible to very low systemic absorption of 17 beta estradiol, estrone and estrone conjugated, supporting the previous phase 1 trial data. TX-004HR was well tolerated, and there were no clinically significant differences compared to placebo-treated participants with respect to adverse events. There were no drug-related serious adverse events reported.
We submitted the NDA for TX-004HR with the FDA on July 7, 2016. The FDA determined that the NDA was sufficiently complete to permit a substantive review and accepted the NDA for filing with the PDUFA target action date for the completion of the FDA’s review of May 7, 2017. The NDA submission was supported by the complete TX-004HR clinical program, including positive results of the phase 3 REJOICE Trial. The NDA submission included all three doses of TX-004HR (4 mcg, 10 mcg and 25 mcg) that were evaluated in the REJOICE Trial. If approved, the 4 mcg formulation would represent a lower effective dose than the currently available VVA therapies approved by the FDA.
On May 5, 2017, we received a Complete Response Letter, or CRL, from the FDA regarding the NDA for TX-004HR. In the CRL, the only approvability concern raised by the FDA was the lack of long-term safety data for TX-004HR beyond the 12-weeks studied in the phase 3 REJOICE Trial. The CRL did not identify any issues related to the efficacy of TX-004HR and did not identify any approvability issues related to chemistry, manufacturing and controls. We believe that the NDA was approvable as filed and have been engaged in discussions with the FDA to address the concerns raised by the FDA in the CRL.
On June 14, 2017, we participated in a Type A Post-Action Meeting with the Division of Bone, Reproductive, and Urologic Products (DBRUP) of the FDA to discuss the CRL. The meeting enabled us to present new information that we believe could address concerns raised by the FDA in the CRL and positively affect the status of the NDA for TX-004HR. We have received the minutes of the meeting and, per the FDA’s request, on July 5, 2017 formally submitted the new information for consideration related to the NDA for TX-004HR.
On August 3, 2017, we received a formal General Advice Letter from the FDA stating that an initial review of this information has been completed and requesting that we submit the additional endometrial safety information to the NDA for TX-004HR on or before September 18, 2017. On September 14, 2017, we submitted the additional endometrial safety information that was requested by the FDA in the General Advice Letter to the NDA for TX-004HR. The submission includes a comprehensive, systematic review of the medical literature on the use of vaginal estrogen products and the risk of endometrial hyperplasia or cancer, including the safety data from the recently published Women’s Health Initiative Observational Study, or WHI Study, of vaginal estrogen use in postmenopausal women and information on the relevance of the first uterine pass effect for low-dose vaginal estrogen products. The WHI Study demonstrated no significant difference in the risk of invasive breast cancer, stroke, colorectal cancer, endometrial cancer and venous thromboembolism in vaginal estrogen users versus non-users. The WHI Study also shows that, among women with an intact uterus, there was a decreased risk of cardiovascular disease, hip fracture and all-cause mortality in vaginal estrogen users versus non-users. The WHI Study evaluated over 4,000 women who used vaginal estrogens for a median duration of two to three years.
On November 3, 2017, we participated in an in-person meeting with DBRUP. At the meeting, DBRUP agreed to the resubmission of the NDA for the 4 mcg and 10 mcg doses of TX-004HR without the need for an additional pre-approval study. We will commit to conduct a post-approval observational study. We believe that we will be in a position to resubmit the NDA for TX-004HR within the coming weeks, with a potential approval of the NDA within two to six months after resubmission, depending on the classification of the review of the NDA.
As of September 30, 2017, we had 17 issued patents, which included 13 utility patents that relate to our combination progesterone and estradiol formulations, two utility patents that relate to TX-004HR, which establish an important intellectual property foundation for TX-004HR, one utility patent that relates to a pipeline transdermal patch technology, and one utility patent that relates to our OPERA® information technology platform.
Research and Development Expenses
A significant portion of our operating expenses to date have been incurred in research and development activities. Research and development expenses relate primarily to the discovery and development of our drug candidates. Our business model is dependent upon our company continuing to conduct a significant amount of research and development. Our research and development expenses consist primarily of expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants that conduct our clinical trials and a substantial portion of our 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 acquiring clinical trial materials; 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 IND application approval from the FDA.
We make payments to the CROs based on agreed upon terms that may include payments in advance of a study starting date. Nonrefundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Advance payments to be expensed in future research and development activities are capitalized, and were $0 at September 30, 2017 and $228,933 at December 31, 2016 which were included in other current assets on the accompanying consolidated balance sheets. CRO activity expenses include preclinical laboratory experiments and clinical trial studies.
The following table indicates our research and development expense by project/category for the periods indicated:
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | | | 2017 | | | 2016 | |
| | | (000s) | | | (000s) | |
| TX 001-HR | | $ | 3,066 | | | $ | 7,751 | | | $ | 11,971 | | | $ | 25,101 | |
| TX 002-HR | | | — | | | | — | | | | — | | | | — | |
| TX 004-HR | | | 1,580 | | | | 2,611 | | | | 6,292 | | | | 7,724 | |
| Other research and development | | | 1,791 | | | | 4,302 | | | | 4,615 | | | | 10,777 | |
| Total | | $ | 6,437 | | | $ | 14,664 | | | $ | 22,878 | | | $ | 43,602 | |
| | | | | | | | | | | | | | | | | |
Research and development expenditures will continue to be incurred as we continue development of our drug candidates and advance the development of our proprietary pipeline of novel drug candidates. We expect to incur ongoing research and development costs as we develop our drug pipeline, continue stability testing and validation on our drug candidates, 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 factors that include, but are not limited to, the following: per patient trial costs; the number of patients that participate in the trials; the number of sites included in the trials; the length of time each patient is enrolled in the trial; the number of doses that patients receive; the drop-out or discontinuation rates of patients; the amount of time required to recruit patients for the trial; the duration of patient follow-up; and the efficacy and safety profile of the drug candidate. 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.
Results of Operations
Three months ended September 30, 2017 compared with three months ended September 30, 2016
| | | Three Months Ended
September 30, | | | | |
| | | 2017 | | | 2016 | | | Change | |
| | | (000s) | |
| Revenues, net | | $ | 4,417 | | | $ | 5,536 | | | $ | (1,119 | ) |
| Cost of goods sold | | | 701 | | | | 1,237 | | | | (536 | ) |
| Operating expenses | | | 18,548 | | | | 29,427 | | | | (10,879 | ) |
| Operating loss | | | (14,832 | ) | | | (25,128 | ) | | | (10,296 | ) |
| Other income, net | | | 167 | | | | 113 | | | | 54 | |
| Net loss | | $ | (14,665 | ) | | $ | (25,015 | ) | | $ | (10,350 | ) |
Revenues and Cost of Goods Sold
Revenues for the three months ended September 30, 2017 decreased approximately $1,119,000, or 20%, to approximately $4,417,000, compared with approximately $5,536,000 for the three months ended September 30, 2016. This decrease was attributable to a decrease in the average net revenue per unit of our products and a slight decrease in the number of units sold. Cost of goods sold decreased approximately $536,000, or 43%, to approximately $701,000 for the three months ended September 30, 2017, compared with approximately $1,237,000 for the three months ended September 30, 2016. Our gross margin was approximately 84% and 78% for the three months ended September 30, 2017 and 2016, respectively. The increase in gross margin percentage was primarily attributable to the centralization of the distribution channel for both our retail pharmacy distributors and wholesale distributors, which, among other things, lowered the cost to package, prepare and deliver our products to customers.
Operating Expenses
Our principal operating costs include the following items as a percentage of total operating expenses.
| | | Three Months Ended
September 30, | |
| | | 2017 | | | 2016 | |
| Research and development costs | | | 34.7 | % | | | 49.8 | % |
| Human resource related costs including salaries, benefits and taxes | | | 32.2 | % | | | 20.3 | % |
| Sales and marketing costs, excluding human resource costs | | | 17.0 | % | | | 14.3 | % |
| Professional fees for legal, accounting and consulting | | | 6.9 | % | | | 4.9 | % |
| Other operating expenses | | | 9.2 | % | | | 10.7 | % |
Operating expenses decreased by approximately $10,879,000, or 37%, to approximately $18,548,000 for the three months ended September 30, 2017, from approximately $29,427,000 for the three months ended September 30, 2016 as a result of the following items:
| | | Three Months Ended
September 30, | | | | |
| | | 2017 | | | 2016 | | | Change | |
| | | (000s) | |
| Research and development costs | | $ | 6,437 | | | $ | 14,664 | | | $ | (8,227 | ) |
| Human resources related costs, including salaries, benefits and taxes | | | 5,966 | | | | 5,965 | | | | 1 | |
| Sales and marketing, excluding human resource costs | | | 3,163 | | | | 4,201 | | | | (1,038 | ) |
| Professional fees for legal, accounting and consulting | | | 1,271 | | | | 1,450 | | | | (179 | ) |
| Other operating expenses | | | 1,711 | | | | 3,147 | | | | (1,436 | ) |
| Total operating expenses | | $ | 18,548 | | | $ | 29,427 | | | $ | (10,879 | ) |
Research and development costs for the three months ended September 30, 2017 decreased by approximately $8,227,000, or 56%, to approximately $6,437,000, compared with $14,664,000 for the three months ended September 30, 2016. Research and development costs include costs related to clinical trials as well as salaries, wages, non-cash compensation and benefits of personnel involved in research and development activities. Research and development costs decreased as a direct result of the completion of the REPLENISH Trial for TX-001HR, our combination estradiol and progesterone drug candidate. Research and developments costs during the three months ended September 30, 2017 included the following research and development projects.
During the three months ended September 30, 2017 and the period from February 2013 (project inception) through September 30, 2017, we have incurred approximately $3,066,000 and $107,987,000, respectively, in research and development costs with respect to TX-001HR, our combination estradiol and progesterone drug candidate.
During the three months ended September 30, 2017 and the period April 2013 (project inception) through September 30, 2017, we have incurred approximately $0 and $2,525,000, respectively, in research and development costs with respect to TX-002HR, our progesterone only drug candidate.
During the three months ended September 30, 2017 and the period from August 2014 (project inception) through September 30, 2017, we have incurred approximately $1,580,000 and $39,098,000, respectively, in research and development costs with respect to TX-004HR, our applicator-free vaginal estradiol softgel drug candidate.
For a discussion of the nature of efforts and steps necessary to complete these projects, see “Item 1. Business — Pharmaceutical Regulation” in our Annual Report and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Research and Development” above. For a discussion of the risks and uncertainties associated with completing development of our products, see “Item 1A. Risk Factors — Risks Related to Our Business” in our Annual Report. For a discussion of the extent and nature of additional resources that we may need to obtain if our current liquidity is not expected to be sufficient to complete these projects, see “— Liquidity and Capital Resources” below. For a discussion as to whether a future milestone such as completion of a development phase, date of filing an NDA with a regulatory agency or approval from a regulatory agency can be reliably determined, see “Item 1. Business — Our Hormone Therapy Drug Candidates,” and “Item 1. Business — Pharmaceutical Regulation” in our Annual Report. Future milestones, including NDA submission dates and potential approval dates, are not easily determinable as such milestones are dependent on various factors related to our clinical trials, scale-up and manufacturing activities.
Human resource costs, including salaries, benefits and taxes, for the three months ended September 30, 2017 increased by approximately $1,000, or less than 1%, to approximately $5,966,000, compared with approximately $5,965,000 for the three months ended September 30, 2016, primarily as a result of a an increase of approximately $1,042,000 in personnel costs in sales, marketing and regulatory areas to support commercialization of our hormone therapy drug candidates partially offset by a decrease of approximately $1,041,000 in non-cash compensation expense included in this category related to employee stock option amortization.
Sales and marketing costs for the three months ended September 30, 2017 decreased by approximately $1,038,000, or 25%, to approximately $3,163,000, compared with approximately $4,201,000 for the three months ended September 30, 2016, primarily as a result reduced spending associated with sales and marketing efforts to support commercialization of our hormone therapy drug candidates, partially offset by higher costs related to outsourced sales personnel and their related expenses together with an increase in employee incentives.
Professional fees for the three months ended September 30, 2017 decreased by approximately $179,000, or 12%, to approximately $1,271,000, compared with approximately $1,450,000 for the three months ended September 30, 2016, primarily as a result of decreased consulting expenses partially offset by a slight increase in legal expenses.
Other operating expense for the three months ended September 30, 2017 decreased by approximately $1,436,000, or 46%, to approximately $1,711,000, compared with approximately $3,147,000 for the three months ended September 30, 2016, as a result of decrease in bad debt expense, partially offset by increased rent, information technology and other office expenses.
Operating Loss
As a result of the foregoing, our operating loss decreased approximately $10,296,000, or 41%, to approximately $14,832,000 for the three months ended September 30, 2017, compared with approximately $25,128,000 for the three months ended September 30, 2016, primarily as a result of decreased research and development costs and reduced spending associated with sales and marketing efforts to support commercialization of our hormone therapy drug candidates, partially offset by higher costs related to outsourced sales personnel and their related expenses, professional fees, and other operating expenses, as well a decrease in revenue.
As a result of the continued development of our hormone therapy drug candidates, we anticipate that we will continue to have operating losses for the near future until our hormone therapy drug candidates are approved by the FDA and brought to market, although there is no assurance that we will attain such approvals or that any marketing of our hormone therapy drug candidates, if approved, will be successful.
Other Income
Other non-operating income increased by approximately $54,000, or 48%, to approximately $167,000 for the three months ended September 30, 2017 compared with approximately $113,000 for the comparable period in 2016, primarily as a result of increased interest income.
Net Loss
As a result of the net effects of the foregoing, net loss decreased approximately $10,350,000, or 41%, to approximately $14,665,000 for the three months ended September 30, 2017, compared with approximately $25,015,000 for the three months ended September 30, 2016. Net loss per share of Common Stock, basic and diluted, was ($0.07) for the three months ended September 30, 2017, compared with ($0.13) for the three months ended September 30, 2016.
Nine months ended September 30, 2017 compared with nine months ended September 30, 2016
| | | Nine Months Ended September 30, | | | | |
| | | 2017 | | | 2016 | | | Change | |
| | | (000s) | |
| Revenues, net | | $ | 12,653 | | | $ | 14,869 | | | $ | (2,216 | ) |
| Cost of goods sold | | | 2,042 | | | | 3,476 | | | | (1,434 | ) |
| Operating expenses | | | 66,559 | | | | 78,706 | | | | (12,147 | ) |
| Operating loss | | | (55,948 | ) | | | (67,313 | ) | | | (11,365 | ) |
| Other income, net | | | 450 | | | | 274 | | | | 176 | |
| Net loss | | $ | (55,498 | ) | | $ | (67,039 | ) | | $ | (11,541 | ) |
Revenues and Cost of Goods Sold
Revenues for the nine months ended September 30, 2017 decreased approximately $2,216,000, or 15%, to approximately $12,653,000, compared with approximately $14,869,000 for the nine months ended September 30, 2016. This decrease was attributable to a decrease in the average net revenue per unit of our products, primarily related to higher estimates related to discounts and returns in 2017, partially offset by a slight increase in the number of units sold. Cost of goods sold decreased approximately $1,434,000, or 41%, to approximately $2,042,000 for the nine months ended September 30, 2017, compared with approximately $3,476,000 for the nine months ended September 30, 2016. Our gross margin was approximately 84% and 77% for the nine months ended September 30, 2017 and 2016, respectively. The increase in gross margin percentage was primarily attributable to the centralization of the distribution channel for both our retail pharmacy distributors and wholesale distributors which, among other things, lowered the cost to package, prepare and deliver our products to customers.
Operating Expenses
Our principal operating costs include the following items as a percentage of total operating expenses.
| | | Nine Months Ended
September 30, | |
| | | 2017 | | | 2016 | |
| Research and development costs | | | 34.4 | % | | | 55.4 | % |
| Human resource related costs, including salaries, benefits and taxes | | | 26.2 | % | | | 22.0 | % |
| Sales and marketing costs, excluding human resource costs | | | 24.9 | % | | | 9.9 | % |
| Professional fees for legal, accounting and consulting | | | 6.1 | % | | | 4.6 | % |
| Other operating expenses | | | 8.4 | % | | | 8.1 | % |
Operating expenses decreased by approximately $12,147,000, or 15%, to approximately $66,559,000 for the nine months ended September 30, 2017, from approximately $78,706,000 for the nine months ended September 30, 2016 as a result of the following items:
| | | Nine Months Ended September 30, | | | | |
| | | 2017 | | | 2016 | | | Change | |
| | | (000s) | |
| Research and development costs | | $ | 22,878 | | | $ | 43,602 | | | $ | (20,724 | ) |
| Human resources related costs, including salaries, benefits and taxes | | | 17,415 | | | | 17,309 | | | | 106 | |
| Sales and marketing costs, excluding human resource costs | | | 16,590 | | | | 7,796 | | | | 8,794 | |
| Professional fees for legal, accounting and consulting | | | 4,062 | | | | 3,615 | | | | 447 | |
| Other operating expenses | | | 5,614 | | | | 6,384 | | | | (770 | ) |
| Total operating expenses | | $ | 66,559 | | | $ | 78,706 | | | $ | (12,147 | ) |
Research and development costs for the nine months ended September 30, 2017 decreased by approximately $20,724,000, or 48%, to approximately $22,878,000, compared with $43,602,000 for the nine months ended September 30, 2016. Research and development costs include costs related to clinical trials as well as salaries, wages, non-cash compensation and benefits of personnel involved in research and development activities. Research and development costs decreased as a direct result of the completion of the REPLENISH Trial for TX-001HR, our combination estradiol and progesterone drug candidate. Research and developments costs during the nine months ended September 30, 2017 included the following research and development projects.
During the nine months ended September 30, 2017 and the period from February 2013 (project inception) through September 30, 2017, we have incurred approximately $11,971,000 and $107,987,000, respectively, in research and development costs with respect to TX-001HR, our combination estradiol and progesterone drug candidate.
During the nine months ended September 30, 2017 and the period April 2013 (project inception) through September 30, 2017, we have incurred approximately $0 and $2,525,000, respectively, in research and development costs with respect to TX-002HR, our progesterone only drug candidate.
During the nine months ended September 30, 2017 and the period from August 2014 (project inception) through September 30, 2017, we have incurred approximately $6,292,000 and $39,098,000, respectively, in research and development costs with respect to TX-004HR, our applicator-free vaginal estradiol softgel drug candidate.
For a discussion of the nature of efforts and steps necessary to complete these projects, see “Item 1. Business — Pharmaceutical Regulation” in our Annual Report and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Research and Development” above. For a discussion of the risks and uncertainties associated with completing development of our products, see “Item 1A. Risk Factors — Risks Related to Our Business” in our Annual Report. For a discussion of the extent and nature of additional resources that we may need to obtain if our current liquidity is not expected to be sufficient to complete these projects, see “— Liquidity and Capital Resources” below. For a discussion as to whether a future milestone such as completion of a development phase, date of filing an NDA with a regulatory agency or approval from a regulatory agency can be reliably determined, see “Item 1. Business — Our Hormone Therapy Drug Candidates,” and “Item 1. Business — Pharmaceutical Regulation” in our Annual Report. Future milestones, including NDA submission dates and potential approval dates, are not easily determinable as such milestones are dependent on various factors related to our clinical trials, scale-up and manufacturing activities.
Human resource costs, including salaries, benefits and taxes, for the nine months ended September 30, 2017 increased by approximately $106,000, or less than 1%, to approximately $17,415,000, compared with approximately $17,309,000 for the nine months ended September 30, 2016, primarily as a result of an increase of approximately $4,636,000 in personnel costs in sales, marketing and regulatory areas to support commercialization of our hormone therapy drug candidates partially offset by a decrease of approximately $4,530,000 in non-cash compensation expense included in this category related to employee stock option amortization.
Sales and marketing costs for the nine months ended September 30, 2017 increased by approximately $8,794,000, or 113%, to approximately $16,590,000, compared with approximately $7,796,000 for the nine months ended September 30, 2016, primarily as a result of increased expenses in the first half of 2017 associated with sales and marketing efforts to support commercialization of our hormone therapy drug candidates, which were curtailed in the third quarter of 2017 due to the status of the NDA for TX-004HR, higher costs related to outsourced sales personnel and their related expenses which started in the fourth quarter of 2016, together with an increase in employee incentives.
Professional fees for the nine months ended September 30, 2017 increased by approximately $447,000, or 12%, to approximately $4,062,000, compared with approximately $3,615,000 for the nine months ended September 30, 2016, primarily as a result of increased legal and other professional expenses, partially offset by a decrease in consulting expenses.
Other operating expense for the nine months ended September 30, 2017 decreased by approximately $770,000, or 12%, to approximately $5,614,000, compared with approximately $6,384,000 for the nine months ended September 30, 2016, as a result of a decrease in bad debt expense as well as decreased investor relations expenses, partially offset by increased rent, information technology and other office expenses.
Operating Loss
As a result of the foregoing, our operating loss decreased approximately $11,365,000, or 17%, to approximately $55,948,000 for the nine months ended September 30, 2017, compared with approximately $67,313,000 for the nine months ended September 30, 2016, primarily as a result of decreased research and development costs and other operating expenses, partially offset by increased personnel costs, sales and marketing expenses to support commercialization of our hormone therapy drug candidates, higher costs related to outsourced sales personnel and their related expenses and professional fees as well a decrease in revenue.
As a result of the continued development of our hormone therapy drug candidates, we anticipate that we will continue to have operating losses for the near future until our hormone therapy drug candidates are approved by the FDA and brought to market, although there is no assurance that we will attain such approvals or that any marketing of our hormone therapy drug candidates, if approved, will be successful.
Other Income
Other non-operating income increased by approximately $176,000, or 64%, to approximately $450,000 for the nine months ended September 30, 2017, compared with approximately $274,000 for the comparable period in 2016, primarily as a result of increased interest income.
Net Loss
As a result of the net effects of the foregoing, net loss decreased approximately $11,541,000, or 17%, to approximately $55,498,000 for the nine months ended September 30, 2017, compared with approximately $67,039,000 for the nine months ended September 30, 2016. Net loss per share of Common Stock, basic and diluted, was ($0.27) for the nine months ended September 30, 2017, compared with ($0.34) for the nine months ended September 30, 2016.
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. Since 2014, we received approximately $337,582,000 in net proceeds from the issuance of shares of Common Stock. As of September 30, 2017, we had cash and cash equivalents totaling approximately $148,293,000, 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.
On September 25, 2017, we entered into an underwriting agreement with J.P. Morgan Securities LLC relating to an underwritten public offering of 12,400,000 shares of our Common Stockat a price of $5.55 per share. The net proceeds to us from the offering were approximately $68,573,000, after deducting estimated offering expenses payable by us. The offering closed on September 28, 2017 and we issued 12,400,000 shares of our Common Stock. We intend to use a majority of the net proceeds from this offering to fund pre-commercialization and commercialization activities for our TX-004HR and TX-001HR drug candidates. We currently intend to fund the remainder of our pre-commercialization and commercialization expenses for our TX-004HR and TX-001HR drug candidates through debt financing and are currently engaged in discussions to secure debt financing commitments during the fourth quarter of 2017. If we are successful in obtaining these commitments, we currently anticipate we would begin to draw on them following approval of either TX-004HR or TX-001HR.
During the nine months ended September 30, 2017, certain individuals exercised warrants to purchase 2,476,666 shares of Common Stock for $3,798,999 in cash. During the nine months ended September 30, 2017, certain individuals exercised stock options to purchase 102,546 shares of Common Stock for $212,615 in cash.
As a result of developments in the pharmaceutical industry that negatively affected independent pharmacies, including such pharmacies’ reliance on third party payors, in 2016, we identified that payment periods for our retail pharmacy distributors were becoming longer than in prior years. As a result, during the third quarter of 2016, we centralized the distribution channel for both our retail pharmacy distributors and wholesale distributors, in order to facilitate sales to a broader population of retail pharmacies and minimize business risk exposure to any one retail pharmacy. During the third quarter of 2016, we entered into new distribution agreements with our retail pharmacy distributors to effectuate this centralization which were effective September 1, 2016.
For the three months ended September 30, 2017, our days sales outstanding, or DSO, was 91 days compared to 92 days for the year ended December 31, 2016. We anticipate that our DSO will fluctuate in the future based upon a variety of factors, including longer payment terms associated with the centralization of the distribution channel for both our retail pharmacy distributors and wholesale distributors in September 2016, as compared to the terms previously provided to our retail pharmacy distributors, changes in the healthcare industry and specific terms that may be extended in connection with the launch of our hormone therapy drug candidates, if approved.
We believe that our existing cash will allow us to fund our operating plan through at least the next 12 months from the date of this quarterly report. However, if the commercialization of our hormone therapy drug candidates is delayed, our existing cash may be insufficient to satisfy our liquidity requirements until we are able to commercialize our hormone therapy drug candidates. If our available cash is insufficient to satisfy our liquidity requirements, we may curtail our sales, marketing and other pre-commercialization efforts and we may seek to sell additional equity or debt securities or obtain a credit facility. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. authorized shares.
To the extent that we raise additional capital through the sale of equity or convertible debtsuch securities, the ownership interests of our existing shareholdersstockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders.stockholders. If we raiseare not successful in obtaining additional funds through collaborations, strategic alliances,financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge, consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us.
If Mayne Pharma’s sales of IMVEXXY, BIJUVA, or ANNOVERA are delayed, if the net working capital settlement with Mayne Pharma under the Transaction Agreement is greater than estimated, if we are unsuccessful
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