What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 71 added, 63 removed, 227 unchanged (37% of the section changed)

31 unchanged sentences

Pursuant to the Mayne License Agreement Amendment, Mayne Pharma agreed to pay us approximately $1.0 million in prepaid royalties on the Closing Date.

The prepaid royalties will reduce the first four quarterly payments that would have otherwise been received pursuant to the Mayne License Agreement by an amount equal to $257,250 per quarterly royalty payment plus interest calculated at 19% per annum accruing from the Closing Date until the date such quarterly royalty payment is paid to TherapeuticsMD.

In addition, the parties agreed that Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to us by $1.5 million in consideration of Mayne Pharma assuming our obligations under a long-term services agreement, including our minimum payment obligations thereunder.

This action represented a shift in our business and therefore, the related assets and liabilities associated with commercial operations are classified as discontinued operations on our condensed consolidated balance sheets and the results of operations have been presented as discontinued operations within our condensed consolidated statements of operations for all periods presented.

The prepaid royalties will reduce the first four quarterly payments that would have otherwise been received pursuant to the Mayne License Agreement by an amount equal to $257 thousand per quarterly royalty payment plus interest calculated at 19% per annum accruing from the Closing Date until the date such quarterly royalty payment is paid to TherapeuticsMD.

In addition, under the Mayne License Agreement Amendment, we owed Mayne Pharma $1.5 million payable from one royalty payment.

During the second quarter of 2023, Mayne Pharma held back our royalty payment and we funded an additional $0.9 million in August 2023 to settle the original $1.5 million payable.

See Note 2 - Discontinued Operations to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for further details.

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(“Knight”) pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel.

In June 2019, we entered into an exclusive license and supply agreement (the “Theramex License Agreement”) with Theramex HQ UK Limited (“Theramex”) to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel.

In September 2019, we entered into an exclusive license and supply agreement (the “Theramex License Agreement”) with Theramex HQ UK Limited (“Theramex”) to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel.

In 2021, Theramex secured regulatory approval for BIJUVA in certain European countries and began commercialization efforts in those countries.

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Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023 and severance obligations for terminated executive officers will be paid in accordance with their employment agreements and separation agreements as previously disclosed.

As of December 31, 2022 and June 30, 2023, we employed one full-time employee primarily engaged in an executive position.

As of December 31, 2022 and September 30, 2023, we employed one full-time employee primarily engaged in an executive position.

We have engaged external consultants, including certain former members of our management team, who support our relationship with current partners and assist with certain financial, legal and regulatory matters and the continued wind-down of our historical business operations.

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Our commitments under a long-term services agreement related to vitaCare were transferred to Mayne Pharma as part of the Mayne Transaction.

In addition, under the Mayne License Agreement Amendment, Mayne Pharma will reduce one quarterly royalty payment (other than the first quarterly royalty payment) otherwise payable to us by $1.5 million in consideration of Mayne Pharma assuming our obligations under the long-term services agreement related to vitaCare.

In addition, under the Mayne License Agreement Amendment, we owed Mayne Pharma $1.5 million payable from one royalty payment.

During the second quarter of 2023, Mayne Pharma held back our royalty payment and we funded an additional $0.9 million in August 2023 to settle the original $1.5 million payable.

The pre-divesture operations of vitaCare were reclassified to discontinued operations in December 2022 when we transitioned to becoming a royalty company and licensed our products to Mayne Pharma.

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Our ability to sell equity securities may be limited by market conditions, including the market price of our common stock and our available authorized shares.

To the extent that we raise additional capital through the sale of such securities, 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 are not successful in obtaining additional 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.

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The Common Stock issued pursuant to the Subscription Agreement was sold and issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as transactions not involving a public offering and Rule 5-06 of Regulation D promulgated under the Securities Act as sales to accredited investors, and in reliance on similar exemptions under applicable state laws.

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 with future financings or if the continued impact of the COVID-19 pandemic on us or the third parties we rely on is worse than we anticipate, our existing cash reserves may be insufficient to satisfy our liquidity requirements.

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 our current estimates if we are unsuccessful with future financings or if the continued impact of the COVID-19 pandemic on us or the third parties we rely on is worse than we anticipate, our existing cash reserves may be insufficient to satisfy our liquidity requirements.

The potential impact of these factors in conjunction with the uncertainty of the capital markets raises substantial doubt about our ability to continue as a going concern for the next twelve months from the issuance of these financial statements.

The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Portfolio of our licensed products

Portfolio of our royalty-bearing products

In December 2022, we changed our business to become a pharmaceutical royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories.

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We entered into the Theramex License Agreement with Theramex HQ UK Limited (“Theramex”) pursuant to which we granted Theramex an exclusive license to commercialize IMVEXXY for human use outside of the U.S., except for Canada and Israel.

As of June 30, 2023, no IMVEXXY sales had been made through the Theramex and Knight licensing agreements.

As of September 30, 2023, no IMVEXXY sales had been made through the Theramex and Knight licensing agreements.

The FDA has also asked the sponsors of other vaginal estrogen products to participate in the observational study.

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Results of operations

Three months ended June 30, 2023 compared with three months ended June 30, 2022

Three months ended September 30, 2023 compared with three months ended September 30, 2022

In December 2022, we granted an exclusive license to commercialize our IMVEXXY, BIJUVA, and prescription prenatal vitamin products and assigned our exclusive license to commercialize ANNOVERA to Mayne Pharma, which resulted in a business shift that had a major effect on our operations and financial results.

1 unchanged sentence

Assets and liabilities associated with the commercial business are classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets.

Additional disclosures regarding discontinued operations are provided in Note 2 to the financial statements included in this Quarterly Report.

Additional disclosures regarding discontinued operations are provided in Note 2 to the condensed consolidated financial statements included in this Quarterly Report.

The discussion below, and the revenues and expenses discussed below, are based on and relate to our continuing operations.

Three months ended June 30,

The following table sets forth the results of our operations (in thousands):

Three months ended September 30,

License and service revenue

5 unchanged sentences

Loss from operations

Other (expense) income:

Other income (expense):

Interest expense and other financing costs

Miscellaneous income (expense)

Total other income, net

Total other income (expense), net

Loss from continuing operations before income taxes

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Net loss from continuing operations

Income from discontinued operations, net of income taxes

Net income (loss)

Loss from discontinued operations, net of income taxes

As part of our transformation and the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued operations in the condensed consolidated financial statements for all periods presented.

License and service revenue.

We recorded $0.4 million in license revenue for the second quarter of 2023, primarily from the Mayne License Agreement, compared to $0.3 million in sales to another licensee for the second quarter of 2022.

This increase was a result of our transformation and transition from a manufacturing and commercialization business to a royalty-based business with revenue from the Mayne License Agreement.

We recorded $(0.1) million in license revenue for the third quarter of 2023, primarily from the Mayne License Agreement, offset by adjustments described below in the third quarter of 2023, compared to $0.4 million in sales to another licensee for the third quarter of 2022.

We report royalty revenue in excess of the contractual minimums each quarter totaling approximately $0.1 million in the third quarter of 2023.

Royalties reported as license revenue for intellectual property licensed by us totaled approximately $(0.1) million and royalties reported as other income for intellectual property we sold totaled approximately $0.1 million in the third quarter of 2023.

We are reporting license revenue of ($0.1) million in the third quarter of 2023 due to product sales adjustments reported by our licensed partners amounting to ($0.2) million.

Additionally, a portion of this adjustment is due to reallocations of license revenue to other income (expense).

On a quarterly basis, we reallocate royalty revenue proportionately between operating revenue for the amounts related to our licensed intellectual property and other income for royalties related to intellectual property we sold.

Operating expenses.

Total operating expenses for the second quarter of 2023 were $2.9 million, a decrease of $11.9 million, or 80.4%, compared to the second quarter of 2022.

Total operating expenses for the third quarter of 2023 were $1.7 million, a decrease of $12.8 million, or 88.2%, compared to the third quarter of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business with limited infrastructure.

Selling, general and administrative.

Selling, general and administrative expenses were $2.8 million for the second quarter of 2023, a decrease of $11.8 million, or 80.9%, compared to the second quarter of 2022.

Selling, general and administrative expenses were $1.6 million for the third quarter of 2023, a decrease of $12.7 million, or 88.8%, compared to the third quarter of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Depreciation & amortization.

Depreciation and amortization expense was $0.1 million for the second quarter of 2023, a decrease of $0.2 million, or 54.6%, compared to the second quarter of 2022.

Depreciation and amortization expense was $0.1 million for the third quarter of 2023, a decrease of $0.1 million, or 52.4%, compared to the third quarter of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Loss from operations.

In the second quarter of 2023, we had a loss from operations of $2.4 million, as compared to a loss from operations of $14.9 million for the second quarter of 2022.

In the third quarter of 2023, we had a loss from operations of $1.8 million, as compared to a loss from operations of $14.5 million for the third quarter of 2022.

This change was primarily due to the transition of our business from a manufacturing and commercialization business to a royalty-based business and the associated decrease in expenses.

Other income (expense), net.

During the second quarter of 2023, we had other income of $0.1 million compared to other expense of $0.0 million in the second quarter of 2022.

During the third quarter of 2023, we had other income of $0.3 million compared to other expense of $0.1 million in the third quarter of 2022.

This change was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Other income of $0.1 million represents interest income for the present value of the minimum royalty receivables recorded compared to actual minimum royalties received.

Royalties reported as other income for intellectual property we sold totaled approximately $0.1 million in the third quarter of 2023.

Provision for income taxes .

During the second quarter of 2023 and 2022, we recorded no provision for income taxes for continuing operations.

During the third quarter of 2023 and 2022, we recorded no provision for income taxes for continuing operations.

Net loss from continuing operations .

For the second quarter of 2023, we had a net loss of $2.4 million, or $0.24 per basic and diluted common share, compared to a loss of $14.9 million, or $1.70 per basic and diluted common share, for the second quarter of 2022.

Discontinued Operations – Revenues from discontinued operations were $0.0 million for the second quarter of 2023, a decrease of $28.2 million as compared to the second quarter of 2022.

Operating expenses from discontinued operations were $0.0 million in the second quarter of 2023, a decrease of $27.8 million, as compared to the second quarter of 2022.

Net income (loss) from discontinued operations for the second quarter of 2023 was $0.0 million, a decrease of $127.2 million as compared to the second quarter of 2022.

For the third quarter of 2023, we had a net loss of $1.4 million, or $0.13 per basic and diluted common share, compared to a loss of $14.6 million, or $1.58 per basic and diluted common share, for the third quarter of 2022.

Discontinued Operations - Revenues from discontinued operations were $(0.8) million for the third quarter of 2023, a decrease of $21.4 million as compared to the third quarter of 2022.

Operating expenses from discontinued operations were $0.0 million in the third quarter of 2023, a decrease of $23.4 million, as compared to the third quarter of 2022.

Net income (loss) from discontinued operations for the third quarter of 2023 was $1.9 million, a decrease of $12.4 million as compared to the third quarter of 2022.

For additional information, see Note 2 - Discontinued Operations, in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

Results of operations

Six months ended June 30, 2023 compared with six months ended June 30, 2022

Nine months ended September 30, 2023 compared with nine months ended September 30, 2022

1 unchanged sentence

Assets and liabilities associated with the commercial business are classified as assets and liabilities of discontinued operations in our condensed consolidated balance sheets.

Additional disclosures regarding discontinued operations are provided in Note 2 to the financial statements included in this Quarterly Report.

Additional disclosures regarding discontinued operations are provided in Note 2 to the condensed consolidated financial statements included in this Quarterly Report.

The discussion below, and the revenues and expenses discussed below, are based on and relate to our continuing operations.

Six months ended June 30,

The following table sets forth the results of our operations (in thousands):

Nine months ended September 30,

License and service revenue

5 unchanged sentences

Loss from operations

Other (expense) income:

Other income (expense):

Interest expense and other financing costs

8 unchanged sentences

License and service revenue.

We recorded $0.9 million in license revenue for the first six months of 2023, primarily from the Mayne License Agreement, and $1.0 million in sales to another licensee during the first six months of 2022.

This decrease was due to a decrease in sales to licensees as a result of our transformation and transition from a manufacturing and commercialization business to a royalty-based business, partially offset by the license revenue recognized during the first quarter from the Mayne License Agreement.

We recorded $0.8 million in license revenue for the first nine months of 2023, primarily from the Mayne License Agreement partially offset by adjustments described below, compared to $1.4 million in sales to another licensee during the first nine months of 2022.

We report royalty revenue in excess of the contractual minimums each quarter totaling approximately $1.0 million year-to-date.

Royalties reported as license revenue for intellectual property licensed by us totaled approximately $0.5 million and royalties reported as other income for intellectual property we sold totaled approximately $0.5 million year-to-date.

Operating expenses.

Total operating expenses for the first six months of 2023 were $6.0 million, a decrease of $26.7 million, or 81.7%, compared to the first six months of 2022.

Total operating expenses for the first nine months of 2023 were $7.7 million, a decrease of $39.5 million, or 83.7%, compared to the first nine months of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business with limited infrastructure.

Selling, general and administrative.

Selling, general and administrative expenses were $5.8 million for the first six months of 2023, a decrease of $26.3 million, or 81.8%, compared to the first six months of 2022.

Selling, general and administrative expenses were $7.4 million for the first nine months of 2023, a decrease of $38.9 million, or 84.0%, compared to the first nine months of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Depreciation & amortization.

Depreciation and amortization expenses were $0.2 million for the first six months of 2023, a decrease of $0.4 million, or 74.6%, compared to the first six months of 2022.

Depreciation and amortization expenses were $0.3 million for the first nine months of 2023, a decrease of $0.6 million, or 67.8%, compared to the first nine months of 2022.

This decrease was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Loss from operations.

For the first six months of 2023, we had a loss from operations of $5.1 million, as compared to a loss from operations of $32.7 million for the first six months of 2022.

For the first nine months of 2023, we had a loss from operations of $6.9 million, as compared to a loss from operations of $47.3 million, for the first nine months of 2022.

This change was primarily due to the transition of our business from a manufacturing and commercialization business to a royalty-based business and the associated decrease in expenses.

Other income (expense), net.

During the first six months of 2023, we had other income of $0.4 million compared to other expense of $0.0 million in the first six months of 2022.

This change was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Other income of $0.1 million represents interest income for the present value of the minimum royalty receivables recorded compared to actual minimum royalties received and $0.3 million of a net working capital adjustment from the vitaCare Divestiture.

During the first nine months of 2023 we had other income of $0.8 million as compared to a other expense of $0.1 million during the first nine months of 2022.

This increase was due to the transition of our business from a manufacturing and commercialization business to a royalty-based business.

Other income represents interest income from banks accounts as well the present value of the minimum royalty receivables recorded compared to actual minimum royalties received and other miscellaneous items.

Provision for income taxes .

During the first six months of 2023 and 2022, we recorded no provision for income taxes for continuing operations.

During the first nine months of 2023 and 2022, we recorded no provision for income taxes for continuing operations.

Net loss from continuing operations .

For the first six months of 2023, we had a net loss of $4.7 million, or $0.47 per basic and diluted common share, compared to a loss of $32.7 million, or $3.77 per basic and diluted common share, for the first six months of 2022.

Discontinued Operations – Revenues from discontinued operations were $0.0 million for the first six months of 2023, a decrease of $46.9 million as compared to the first six months of 2022.

Operating expenses from discontinued operations were $0.3 million for the first six months of 2023, a decrease of $50.3 million, as compared to the first six months of 2022.

Net loss from discontinued operations for the first six months of 2023 was $1.3 million, a decrease of $97.3 million as compared to the first six months of 2022.

For the first nine months of 2023, we had a net loss of $6.2 million, or $0.60 per basic and diluted common share, compared to a loss of $47.4 million, or $5.34 per basic and diluted common share, for the first nine months of 2022.

Discontinued Operations - Revenues from discontinued operations were $(0.8) million for the first nine months of 2023, a decrease of $68.2 million as compared to the first nine months of 2022.

Operating expenses from discontinued operations were $0.3 million for the first nine months of 2023, a decrease of $73.7 million, as compared to the first nine months of 2022.

Net loss from discontinued operations for the first nine months of 2023 was $3.2 million, a decrease of $84.9 million as compared to the first nine months of 2022.

For additional information, see Note 2 - Discontinued Operations, in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report.

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We have funded our operations primarily through public offerings of our common stock and private placements of equity and debt securities, the divestiture of our former subsidiary vitaCare, and the transactions with Mayne Pharma.

As of June 30, 2023, we had cash totaling $13.7 million.

As of September 30, 2023, we had cash and cash equivalents totaling $10.2 million.

We maintain cash at financial institutions that at times may exceed the Federal Deposit Insurance Corporation insured limits of $0.25 million per bank.

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Upon the expiry of the 20-year royalty term, the licenses granted to Mayne Pharma under the Mayne License Agreement will become a fully paid-up and royalty free license for the Licensed Products.

During the three months ended September 30, 2023, we revised certain estimates pertaining to contracts we were a party to when we were an operating company.

These included an incremental accrual of approximately $2 million for net working capital adjustments related to the Transaction Agreement.

Subscription Agreement with Rubric Capital Management LP

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The following table reflects the major categories of cash flows for each of the periods (in thousands).

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

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Operating Activities from continuing operations.

For the first six months of 2023, net cash used in operating activities was $12.1 million, compared to net cash used in operating activities of $38.6 million for the first six months of 2022.

This decrease of $26.5 million or 68.7%, was primarily due to a $28.0 million decrease in our net loss from continuing operations following our transition from a manufacturing and commercialization business to a royalty-based business, combined with a $2.3 million decrease in cash usage related to changes in operating assets and liabilities in 2023, partially offset by a $3.4 million decrease in share-based compensation as compared to 2022.

For the first nine months of 2023, net cash used in operating activities was $18.1 million, compared to net cash used in operating activities of $20.9 million for the first nine months of 2022.

This decrease of $2.8 million or 13.2%, was primarily due to a $41.2 million decrease in our net loss from continuing operations following our transition from a manufacturing and commercialization business to a royalty-based business, offset by a $38.5 million decrease in non-cash expenses as compared to the first nine months of 2022.

Investing Activities from continuing operations.

Net cash used in investing activities for the first six months of 2023 was $0.0 million, compared to net cash used in investing activities of $0.3 million for the first six months of 2022.

Net cash used in investing activities for the first nine months of 2023 was $0.0 million, compared to net cash used in investing activities of $0.3 million for the first nine months of 2022.

This change was due our transition from a manufacturing and commercialization business to a royalty-based business.

Financing Activities from continuing operations.

For the first six months of 2023, net cash received from financing activities was $1.2 million, compared to net cash used by financing activities of $125.0 million for the first six months of 2022, reflecting the sale of common stock during the first six months of 2023 and the payments of outstanding long-term debt during the first six months of 2022.

For the first nine months of 2023, net cash received from financing activities was $1.2 million, compared to net cash used by financing activities of $123.3 million for the first nine months of 2022, reflecting the sale of common stock during the first nine months of 2023 and the payments of outstanding long-term debt during the first nine months of 2022.

Net cash used in discontinued operations.

Net cash used in operating activities from discontinued operations for the first six months of 2023 was $25.8 million as compared to net cash provided by operating activities of $124.9 million for first six months of 2022.

This increase relates primarily to expenses incurred and the payment of current liabilities associated with our transition from a manufacturing and commercialization business to a royalty-based business.

Net cash provided by investing activities from discontinued operations was $0.0 million for the first six months of 2023, compared to net cash provided of $0.2 million for the first six months of 2022.

This decrease was due to our transition from a manufacturing and commercialization business to a royalty-based business.

Net cash provided by financing activities from discontinued operations was $1.1 million for the first six months of 2023, compared to net cash provided of $0.0 million for the first six months of 2022.

Net cash used in operating activities from discontinued operations for the first nine months of 2023 was $22.2 million as compared to net cash provided by operating activities of $117.6 million for first nine months of 2022.

This change relates primarily to expenses incurred and the payment of current liabilities associated with our transition from a manufacturing and commercialization business to a royalty-based business.

Net cash provided by investing activities from discontinued operations was $0.0 million for the first nine months of 2023 and $0.1 million for the first nine months of 2022.

Net cash provided by financing activities from discontinued operations was $0.0 million for the first nine months of 2023 and 2022.

For additional details, see the condensed consolidated statements of cash flows in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report.

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On December 30, 2022, Mayne Pharma acquired our accounts receivable balance of approximately $29.3 million which is subject to certain working capital adjustments.

As of June 30, 2023, we had a royalty receivable of $0.8 million relating to the short-term portion of receivable from Mayne Pharma and $19.8 million relating to the long-term portion of royalty

receivable which includes royalties recognized from the Minimum Annual Royalty.

As of September 30, 2023, we had a royalty receivable of $2.7 million relating to the short-term portion of receivable from Mayne Pharma and $19.1 million relating to the long-term portion of royalty receivable which includes royalties recognized from the Minimum Annual Royalty.

See Note 1 Business, basis of presentation, new accounting standards and summary of significant accounting policies (Revenue Recognition) to the condensed consolidated financial statements included in this Quarterly Report.

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As a result, the estimated fair value of liabilities relating to these provisions is minimal.

Accordingly, we had no liabilities recorded for these provisions as of June 30, 2023 and December 31, 2022.

Accordingly, we had no liabilities recorded for these provisions as of September 30, 2023 and December 31, 2022.

In the normal course of business, we may be confronted with issues or events that may result in contingent liability.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis