TherapeuticsMD, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion should be read in conjunction with our 2020 Annual Report on Form 10-K (“2020 10-K Report”), and the consolidated financial statements and related notes in Item 1, Financial Statements, appearing elsewhere in this this Quarterly Report on Form 10-Q (“10-Q Report”) . The following discussion may contain forward-looking statements, and our actual results may differ materially from the results suggested by these forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A of our 2020 10-K Report under the heading “Risk Factors,” as updated and supplemented by Part II, Item 1A of this 10-Q Report. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. Certain amounts in the following discussion may not add due to rounding, and all percentages have been calculated using unrounded amounts. Forward-looking statements This 10-Q Report may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 . Forward-looking statements may include, but are not limited to, statements relating to our objectives, plans, and strategies as well as statements, other than historical facts, that address activities, events, or developments that we intend, expect, project, believe, or anticipate will or may occur in the future. These statements are often characterized by terminology such as “believes,” “hopes,” “may,” “anticipates,” “should,” “intends,” “plans,” “will,” “expects,” “estimates,” “projects,” “positioned,” “strategy,” and similar expressions and are based on assumptions and assessments made in light of management’s experience and perception of historical trends, current conditions, expected future developments, and other factors believed to be appropriate. Forward-looking statements are made as of the date of this 10-Q Report and we undertake no duty to update or revise any such statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many of which are outside of our control. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the sections titled “Risk Factors” in our 2020 10-K Report, as updated and supplemented by Part II, Item 1A of this 10-Q Report , and include the following: the effects of the COVID-19 pandemic; our ability to maintain or increase sales of our approved products; our ability to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA, and to develop and commercialize our hormone therapy drug candidates and obtain additional financing necessary therefor, including pursuant to our 2021 ATM Program; our ability to maintain the listing of our common stock on Nasdaq; our ability to continue as a going concern; our commercialization, marketing, and manufacturing capabilities and strategy for our approved products; the size of markets and the potential market opportunity for which our products are approved and our ability to penetrate such markets; the rate and degree of market acceptance of our products; the willingness of healthcare providers to prescribe and patients to use our products; our ability to obtain additional financing when needed and to service our debt; our competitive position and the success of competing products that are or become available for the indications that we are pursuing; our intellectual property position; whether we will be able to comply with the covenants and conditions under our term loan facility, including product net revenue requirements and liquidity requirements; the length, cost, and uncertain results of our clinical trials, the potential of adverse side effects or other safety risks that could adversely affect the commercialization of our current or future approved products or preclude the approval of our future drug candidates; whether the U.S. Food and Drug Administration (“FDA”) will approve the efficacy supplement for the lower dose of BIJUVA and the manufacturing supplement for ANNOVERA; our ability to protect our intellectual property, including with respect to the Paragraph IV notice letters we received regarding IMVEXXY and BIJUVA; the length, cost, and uncertain results of future clinical trials; our reliance on third parties to conduct our manufacturing, R&D and clinical trials; potential disruptions in our supply chains related to our third party contract manufacturers and their ability to provide the materials necessary to manufacture our products, to successfully manufacture our products, and to timely ship bulk and finished product to their intended destinations; the ability of our licensees to commercialize and distribute our products; the ability of our marketing contractors to market our products; the availability of reimbursement from government authorities and health insurance companies for our products; the impact of product liability lawsuits; and the influence of extensive and costly government regulation; the potential disposition of vitaCare ™ Prescription Services, Inc. (“vitaCare Prescription Services”), a Florida corporation, or any other divestitures we may pursue in the future; the volatility of the trading price of our common stock and the concentration of power in our stock ownership. Business overview We are a women’s healthcare company with a mission of creating and commercializing innovative products to support the lifespan of women from pregnancy prevention through menopause. At TherapeuticsMD, we combine entrepreneurial spirit, clinical expertise, and business leadership to develop and commercialize health solutions that enable new standards of care for women. Our solutions range from a patient-controlled, long-lasting contraceptive to advanced hormone therapy pharmaceutical products. We also have a portfolio of branded and generic prescription prenatal vitamins under the vitaMedMD and BocaGreenMD brands that furthers our women’s healthcare focus. 19 During the first nine months of 202 1, the recovery from the COVID-19 pandemic drove improved access to health care providers for our sales force and increased consumer demand for our products, which had a positive impact on our net product revenue relating to ANNOVERA, IMVEXXY, and BIJUVA . We believe the growth in our net product revenue will continue to be affected by the pace of recovery from the COVID-19 pandemic . Product portfolio Our portfolio of products focused on women’s health allows us to efficiently leverage our sales and marketing plans to grow our pharmaceutical products. We are focused on activities necessary for the continued commercialization of IMVEXXY, commercially launched in the third quarter of 2018; BIJUVA, commercially launched in the third quarter of 2019; and ANNOVERA, which we started selling in the third quarter of 2019 and commercially launched in March 2020, which was subsequently paused as a result of the COVID-19 pandemic and relaunched in July 2020. We continue to manufacture and distribute our prescription prenatal vitamin product lines, consisting of branded prenatal vitamins under vitaMedMD and authorized generic formulations of some of our prescription prenatal vitamin products under BocaGreenMD. IMVEXXY (estradiol vaginal inserts), 4-μg and 10-μg This pharmaceutical product is for the treatment of moderate-to-severe dyspareunia (vaginal pain associated with sexual activity), a symptom of vulvar and vaginal atrophy due to menopause. The 4-μg formulation of IMVEXXY represents the lowest FDA approved dose of vaginal estradiol available. IMVEXXY is a small, digitally inserted, softgel vaginal insert that dissolves when inserted into the vagina. It is administered mess-free, without the need for an applicator, and can be used any time of day. IMVEXXY provides a mechanism of action and dosing that are familiar and comfortable for patients, with no patient education required for dose application or applicators. IMVEXXY demonstrated efficacy as early as two weeks (secondary endpoint) and maintained efficacy through week 12 in clinical studies, with no increase in systemic hormone levels beyond the normal postmenopausal range (the clinical relevance of systemic absorption rates for vaginal estrogen therapies is not known). As part of the FDA’s approval of IMVEXXY, we have committed to conduct a post-approval observational study to evaluate the risk of endometrial cancer in post-menopausal women with a uterus who use a low-dose vaginal estrogen unopposed by a progestogen. The FDA has also asked the sponsors of other vaginal estrogen products to participate in the observational study. In connection with the observational study, we will be required to provide progress reports to the FDA on an annual basis. The development of this method is underway, and we do not believe that the costs will be material on an annual basis. We market and sell IMVEXXY in the U.S. and have entered into licensing agreements with third parties to market and sell IMVEXXY outside of the U.S. We have entered into a license and supply agreement (the “Knight License Agreement”), with Knight Therapeutics, Inc. (“Knight”) pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY in Canada and Israel. We have entered into a licensing and supply agreement (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 September 30, 2021, no IMVEXXY sales have been made through these licensing agreements. BIJUVA (estradiol and progesterone) capsules, 1 mg/100 mg This pharmaceutical product is the first and only FDA approved bioidentical hormone therapy combination of estradiol and progesterone in a single, oral capsule for the treatment of moderate-to-severe vasomotor symptoms (commonly known as hot flashes or flushes) due to menopause in women with a uterus. The estrogen and progesterone in BIJUVA have the same chemical and molecular structure as the hormones that are naturally produced in a woman’s body. BIJUVA offers the convenience of a single-capsule combination of two hormones (estradiol and progesterone), which may improve a user’s compliance. The estradiol and progesterone in BIJUVA are plant-based, not animal-sourced, and does not contain peanut oil unlike other FDA approved progesterone products. BIJUVA provides a sustained steady state of estradiol which reduced the frequency and severity of hot flashes in clinical studies with no demonstrated impact on a patient’s weight or blood pressure. Additionally, through clinical trials, BIJUVA has demonstrated endometrial safety and greater than 90% amenorrhea rates, while providing no clinically meaningful changes in mammograms. In January 2020, we submitted a New Drug Application (“NDA”), efficacy supplement for the 0.5 mg/100 mg dose of BIJUVA to the FDA for review and potential approval. The NDA efficacy supplement used existing data from our Phase 3 REPLENISH trial for BIJUVA, for which we announced results in December 2016, together with additional information and analyses. In November 2020, we withdrew the NDA efficacy supplement. We filed a Formal Dispute Resolution Request (“FDRR”) with the FDA that disputed the FDA’s requirement that the NDA efficacy supplement meet approval standards that have not been required of other approved drugs in BIJUVA’s therapeutic class. In March 2021, the FDA granted the FDRR in our favor. In May 2021 we resubmitted the NDA efficacy 20 supplement for the 0.5 mg/100 mg dose of BIJUVA to the FDA for review and potential approval. T he NDA efficacy supplement has been accepted for review by the FDA with a target action date for the completion of the FDA’s review under the Prescription Drug User Fee Act of March 21, 2022. Notwithstanding our FDRR, there can be no assurance that FDA will approve the 0.5 mg/100 mg dose of BIJUVA, or, if approved, the timing of such approval. We market and sell BIJUVA in the U.S. and have entered into licensing agreements with third parties to market and sell BIJUVA outside of the U.S. We have entered into the Knight License Agreement with Knight pursuant to which we granted Knight an exclusive license to commercialize BIJUVA in Canada and Israel. We have entered into the Theramex License Agreement with Theramex pursuant to which we granted Theramex an exclusive license to commercialize BIJUVA for human use outside of the U.S., except for Canada and Israel. During the third quarter and the first nine months of 2021, we had BIJUVA sales of $0.7 million made through the Theramex License Agreement, and such sales were included as product revenue in the statement of operations. As of September 30, 2021, no BIJUVA sales have been made through the Knight License Agreement. ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol (“EE”) vaginal system) This pharmaceutical product is a one-year ring-shaped contraceptive vaginal system (“CVS”) and the first and only patient-controlled, procedure-free, reversible prescription contraceptive that can prevent pregnancy for up to a total of 13 cycles (one year). ANNOVERA, which is made with a silicone elastomer, contains SA, a 19-nor progesterone derivative also known as Nestorone ® , and EE. EE is an approved active ingredient in many marketed hormonal contraceptive products. SA is classified as a new chemical entity by the FDA and is a potent progestin that, based on pharmacological studies in animals and in vitro, does not bind to the androgen or estrogen receptors and has no glucocorticoid activity at contraceptive doses. ANNOVERA can be inserted and removed by the woman herself without the aid of a healthcare provider and, unlike oral contraceptives, ANNOVERA does not require daily administration to obtain the contraceptive effect. After 21 days of use, the woman removes ANNOVERA for seven days, thereby providing a regular bleeding pattern (i.e., withdrawal/scheduled bleeding). The same CVS is then re-inserted for additional 21/7-days in/out, for up to a total of 13 cycles (one year). ANNOVERA releases daily vaginal doses of both active ingredients (SA and EE). The claimed release rate of 150 µg/day SA and 13 µg/day EE is supported by the calculated average release rate from an ex vivo analysis of ANNOVERA used for 13 cycles and is also supported by data from 13 cycles of in vitro release. ANNOVERA is commercially sold by us in the U.S. pursuant to the terms of the Population Council License Agreement with Population Council. As part of the approval of ANNOVERA, the FDA has required a post-approval observational study be performed to measure the risk of venous thromboembolism. We have agreed to perform and pay the costs and expenses associated with this post-approval study, provided that if the costs and expenses associated with such post-approval study exceed $20.0 million, half of such excess will offset against royalties or other payments owed by us to the Population Council under the Population Council License Agreement. Given the observational nature of the study, we do not believe that the costs of the study will be material on an annual basis. We believe that ANNOVERA competes across all the contraception options for women with a particular focus on those women seeking a long-lasting option without a procedure. For patients, ANNOVERA provides a single, long-lasting, reversible birth control product that does not require a procedure at the doctor’s office for insertion or removal, empowering women to be in control of their fertility and menstruation with a 21/7 regimen. We believe that ANNOVERA is a unique alternative for women who have previously chosen other forms of birth control. These include nulliparous women (or women who have never given birth), women who are considering an IUD but would rather not have a procedure, women who are between pregnancies but desire protection without a long-term commitment, and women who are not satisfied with oral options due to the daily usage or potential side effects. We believe that the strong initial commercial net revenue per unit of ANNOVERA and commercial insurance adoption provide us with an opportunity to deploy additional financial resources to maximize ANNOVERA’s consumer-focused commercialization strategy and leverage the ability of doctor/patient choice of contraceptive to override insurance company formularies when necessary. As part of this strategy, we are pursuing distribution opportunities for ANNOVERA to provide women with additional access to ANNOVERA, particularly during the COVID-19 pandemic, with multiple telehealth platforms that extend the reach of ANNOVERA. Prenatal vitamin products We manufacture and distribute our prescription prenatal vitamin product lines under our vitaMedMD brand name and authorized generic formulations of some of our prescription prenatal vitamin products under our BocaGreenMD Prena1 name. We will continue to support the vitaMedMD and BocaGreenMD products as they are important products to our core customers and help provide us with continued access to sell our women’s health portfolio. Our current prenatal vitamin product line features a unique, proprietary combination of FOLMAX™, FePlus™, and pur-DHA™ and includes the following products: vitaTrue™, vitaPearl™, vitaMedMD One Rx Prenatal Multivitamin, vitaMedMD RediChew ® Rx Prenatal Multivitamin, BocaGreenMD Prena1 True, BocaGreenMD 21 Prena1 Pearl , and BocaGreenMD Prena1 Chew . All of our prenatal vitamins are gluten, sugar, and lactose-free. A prenatal vitamin option that is both vegan and kosher is also available for women with special dietary needs. We believe our product attributes result in greater consumer acceptance and satisfaction than competitive products while offering the highest quality and patented ingredients. Results of operations Three months ended September 30, 2021 compared with three months ended September 30, 2020 Revenue. Our total revenue for the third quarter of 2021 was $25.4 million, an increase of $6.1 million, or 31.6%, compared to the third quarter of 2020. The following table sets forth our revenue during these periods (in thousands): Three Months Ended September 30, 2021 2020 ANNOVERA $ 11,807 $ 6,419 IMVEXXY 8,016 6,841 BIJUVA 3,298 1,646 Prescription vitamin 1,348 2,436 Product revenue, net 24,469 17,342 License revenue 937 2,000 Total revenue, net $ 25,406 $ 19,342 Our sales of ANNOVERA were $11.8 million for the third quarter of 2021, an increase of $5.4 million, or 83.9%, compared to the third quarter of 2020. This increase was primarily due to a 107.6% increase in sales volume, which was partially offset by a 11.4% decrease in the average sale price. Our sales of IMVEXXY were $8.0 million for the third quarter of 2021, an increase of $1.2 million, or 17.2%, compared to the third quarter of 2020. This increase was primarily attributable to a 34.9% increase in the average sale price, which was partially offset by a 13.1% decrease in sales volume. Our sales of BIJUVA were $3.3 million for the third quarter of 2021, an increase of $1.7 million, or 100.4%, compared to the third quarter of 2020. Included in our BIJUVA sales for the third quarter of 2021 was $0.7 million of sales made through the Theramex License Agreement. Without the sales made through the Theramex License Agreement, our sales of BIJUVA were $2.6 million for the third quarter of 2021, an increase of $1.0 million, or 58.0%, compared to the third quarter of 2020. This increase was primarily attributable to a 47.0 % increase in the avera g e sale price and a 7.5% increase in sales volume. Sales of our products utilize copay assistance programs that allow eligible enrolled patients to access the products at a reasonable cost regardless of insurance coverage. These programs may change from time to time, as shown above with a change in the IMVEXXY copay assistance program. We expect that our net product revenue will improve from changes in our copay card price in the long term and increases in commercial and Medicare payer coverage when we fully complete the process needed to adjudicate ANNOVERA, IMVEXXY, and BIJUVA prescriptions at pharmacies. Our prescription vitamin sales were $1.3 million for the third quarter of 2021, a decrease of $1.1 million, or 44.7%, compared to the third quarter of 2020. This decrease was primarily due to a 32.8% decrease in sales volume and a 17.6% decrease in the aver a ge s a le pri c e. On a consolidated basis, our total product sales were $24.5 million for the third quarter of 2021, an increase of $7.1 million, or 41.1%, compared to the third quarter of 2020. Our license revenue was $0.9 million for the third quarter of 2021, a decrease of $1.1 million, or 53.2%, compared to the third quarter of 2020. This decrease was entirely due to the timing of achieving previously established milestone payment targets. 22 Gross profit. Our gross profit for the third quarter of 2021 was $ 20 . 1 million, an increase of $ 4 . 1 million, or 2 5 . 3 %, compared to the third quarter of 2020. The following table sets forth our gross profit during these periods (in thousands): Three Months Ended September 30, 2021 2020 Product $ 19,187 $ 14,063 License 937 2,000 Total gross profit $ 20,124 $ 16,063 The increase in our gross profit was primarily a result of an increase of 41.1% in product revenue, partially offset by a 2.7% decrease in our product gross margin from 81.1% for the third quarter of 2020 to 78.4% for the third quarter of 2021. This decrease in product gross margins reflects the impact of $0.7 million of BIJUVA export sales, which were sold at cost. Operating expenses. Total operating expenses for the third quarter of 2021 were $60.0 million, an increase of $19.0 million, or 46.3%, compared to the third quarter of 2020. Of the total increase, $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021. The remining increase was $11.7 million, or 28.5%, compared to the third quarter of 2020. The type of operating expenses reported in prior periods have been reclassified to conform to the current period’s presentation. The following table sets forth our operating expense categories (in thousands): Three Months Ended September 30, 2021 2020 Selling and marketing $ 30,005 $ 22,373 General and administrative 28,435 16,637 Research and development 1,605 2,027 Total operating expenses $ 60,045 $ 41,037 Our selling and marketing costs were $30.0 million for the third quarter of 2021, an increase of $7.6 million, or 34.1%, compared to the third quarter of 2020. This increase was primarily due to $6.4 million in higher advertising, $2.2 million in higher compensation and employee benefit costs to support the sales growth of our pharmaceutical products, reflecting the continued impact of our formerly outsourced sales personnel who were onboarded in the third quarter of 2020, and $0.8 million in higher marketing costs. These increases were partially offset by $1.6 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020 and $0.5 million in lower product sample costs. Our general and administrative costs were $28.4 million for the third quarter of 2021, an increase of $11.8 million, or 70.9%, compared to the third quarter of 2020. Of the total increase, $7.3 million was related to non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021. The remaining increase was $4.5 million, or 27.0%, compared to the third quarter of 2020. This increase was primarily related to $2.9 million in higher compensation and employee benefit costs, of which $1.1 million was related to the accrual of bonuses expected to be paid in the first quarter of 2022, and $2.1 million in higher expenditures attributable to various professional fees, such as consulting, recruiting, legal, etc., in support of our efforts to expand the commercialization of our products. These increases were partially offset by $0.6 million in lower expenditures attributable to the write-off of certain intangible assets during the third quarter of 2020. Our R&D costs consist mainly of costs incurred under agreements with contract research organizations (“CROs”) and other third parties that conduct our clinical related studies, compensation, and benefit costs related employees engaged in R&D activities, costs to developing our chemistry, manufacturing, and controls capabilities, costs related to manufacturing validation, and costs associated with other research activities and regulatory approvals. With regards to costs of clinical trials, they may vary significantly over the life of a project owing to a variety of factors and we base our expenses related to clinical trials on estimates based on our experience and estimates from CROs and other third parties. R&D expenditures for the drug products will continue after the clinical trial completes for on-going stability and laboratory testing, regulatory submission, and response work. Our R&D costs were $1.6 million for the third quarter of 2021, a decrease of $0.4 million, or 20.8%, compared to the third quarter of 2020. This decrease was primarily attributable to $0.5 million in lower lab research costs, partially offset by $0.1 million in higher compensation and employee benefit costs. We have reduced our R&D expenditures since 2019 as we refocus our resources towards the continued commercialization of our pharmaceutical products. Accordingly, we continue to deploy limited resources in the development of new products, to perform stability testing and validation on our pharmaceutical products, to develop and validate secondary manufacturers, to prepare regulatory submissions, and work with regulatory authorities on existing submissions. 23 Loss from operations . For the third quarter of 2021, we had a loss from operations of $ 3 9 . 9 million , compared to $ 2 5.0 million for the third quarter of 2020 . Of t h e $14. 9 million total increase , $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021. The rem a ining increase of $ 7.6 million was attributable to higher operating expenses , partially offset by $4. 1 million in higher gross profit . We anticipate that we will continue to have operating losses for the near future until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA, although there is no assurance that our efforts will be successful. Other expense, net. For the third quarter of 2021, our non-operating expenses were $7.5 million, compared to $7.6 million for the third quarter of 2020. This $0.1 million decrease was attributable to $1.3 million in lower interest expense due to overall lower average debt balance during the third quarter of 2021 compared to the third quarter of 2020, partially offset by the recording of an $0.7 million accrual for interest prepayment fees in the third quarter of 2021 associated with our future debt service, and $0.5 million in higher amortization expense of deferred financing costs. Net Loss. For the third quarter of 2021, we had a net loss of $47.4 million, or $0.11 per basic and diluted common share, compared to $32.6 million, or $0.12 per basic and diluted common share, for the third quarter of 2020. Our net loss for the third quarter of 2021 included $7.3 million of non-cash and cash severances recorded for certain former senior executives. Without such severances, we would have had a net loss of $40.1 million, or $0.10 per basic and diluted common share, for the third quarter of 2021. Nine months ended September 30, 2021 compared with nine months ended September 30, 2020 Revenue. Our total revenue for the first nine months of 2021 was $68.3 million, an increase of $26.0 million, or 61.4%, compared to the first nine months of 2020. The following table sets forth our revenue during these periods (in thousands): Nine Months Ended September 30, 2021 2020 ANNOVERA $ 30,112 $ 10,527 IMVEXXY 24,866 18,319 BIJUVA 7,899 4,110 Prescription vitamin 4,225 7,338 Product revenue, net 67,102 40,294 License revenue 1,171 2,000 Total revenue, net $ 68,273 $ 42,294 Our sales of ANNOVERA were $30.1 million for the first nine months of 2021, an increase of $19.6 million, or 186.0%, compared to the first nine months of 2020. This increase was primarily due to a 236.4% increase in sales volume, which was partially offset by a 15.0% decrease in the average sale price. Our sales of IMVEXXY were $24.9 million for the first nine months of 2021, an increase of $6.5 million, or 35.7%, compared to the first nine months of 2020. This increase was primarily attributable to a 40.8% increase in the average sale price, which was partially offset by a 3.6% decrease in sales volume. Our sales of BIJUVA were $7.9 million for the first nine months of 2021, an increase of $3.8 million, or 92.2%, compared to the first nine months of 2020. Included in our BIJUVA sales for the first nine months of 2021 was $0.7 million of sales made through the Theramex License Agreement. Without the sales made through the Theramex License Agreement, our sales of BIJUVA were $7.2 million for the third quarter of 2021, an increase of $3.1 million, or 75.2%, compared to the first nine months of 2020. This increase was primarily attributable to a 55.9% increase in the avera g e sale price and a 12.4% increase in sales volume. Sales of our products utilize copay assistance programs that allow eligible enrolled patients to access the products at a reasonable cost regardless of insurance coverage. These programs may change from time to time, as shown above with a change in IMVEXXY copay assistance program. We expect that our net product revenue will improve from changes in our copay card price in the long term and increases in commercial and Medicare payer coverage when we fully complete the process needed to adjudicate ANNOVERA, IMVEXXY, and BIJUVA prescriptions at pharmacies. Our prescription vitamin sales were $4.2 million for the first nine months of 2021, a decrease of $3.1 million, or 42.4%, compared to the first nine months of 2020. This decrease was primarily due to a 29.6% decrease in sales volu m e and a 18.2% decrease in the aver a ge s a le pri c e. On a consolidated basis, our total product sales were $67.1 million for the first nine months of 2021, an increase of $26.8 million, or 66.5%, compared to the first nine months of 2020. 24 Our licens e revenue was $1. 2 million for the first nine months of 2021, a decrease of $0. 8 million, or 41 . 5 %, compared to the first nine months o f 2020. This de crease was entirely due to the timing of achieving previously established milestone payment targets. Gross profit. Our gross profit for the first nine months of 2021 was $54.2 million, an increase of $22.3 million, or 69.8%, compared to the first nine months of 2020. The following table sets forth our gross profit during these periods (in thousands): Nine Months Ended September 30, 2021 2020 Product $ 53,001 $ 29,900 License 1,171 2,000 Total gross profit $ 54,172 $ 31,900 The increase in our gross profit was primarily a result of an increase of 66.5% in product revenue and a 4.8% increase in our product gross margin from 74.2% for the first nine months of 2020 to 79.0% for the first nine months of 2021. This increase was mainly due to $1.1 million in lower inventory obsolescence charges for the first nine months of 2021 compared to the first nine months of 2020, and an overall improvement in the profit margins of our products of 0.9%. Operating expenses. Total operating expenses for the first nine months of 2021 were $158.6 million, an increase of $5.7 million, or 3.7%, compared to the first nine months of 2020. Of the total increase, $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021. Without such severances, our total operating expenses for the first nine months of 2021 would have decreased by $1.6 million, or 1.0%, compared to the first nine months of 2020. The type of operating expenses reported in prior periods have been reclassified to conform to the current period’s presentation. The following table sets forth our operating expense categories (in thousands): Nine Months Ended September 30, 2021 2020 Selling and marketing $ 86,193 $ 91,056 General and administrative 66,691 53,740 Research and development 5,666 8,038 Total operating expenses $ 158,550 $ 152,834 Our selling and marketing costs were $86.2 million for the first nine months of 2021, a decrease of $4.9 million, or 5.3%, compared to the first nine months of 2020. This decrease was primarily due to $13.4 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020, $5.5 million in lower product sample costs mainly due to the third quarter of 2020 write down of product samples, primarily related to BIJUVA, and $2.5 million in lower marketing costs primarily related to a national selling and marketing event that occurred during the first nine months of 2020 prior to the COVID-19 pandemic. These decreases were partially offset by $9.3 million in higher advertising expenditures, $6.4 million in higher salaries and employee benefit costs to support the sales growth of our pharmaceutical products, reflecting the continued impact of our formerly outsourced sales personnel who were onboarded in the third quarter of 2020, and $0.9 million and in higher costs related to physician education expenses and transportation expenses for traveling sales staff. Overall, our lower selling and marketing costs for the first nine months of 2021 reflect our cost cutting initiatives put in place at the beginning of the COVID-19 pandemic. Our general and administrative costs were $66.7 million for the first nine months of 2021, an increase of $13.0 million, or 24.1%, compared to the first nine months of 2020. Of the total increase, $7.3 million was related non-cash and cash severances recorded for certain former senior executives during the third quarter of 2021. The remaining increase was $5.7 million, or 10.5%, compared to the first nine months of 2020. This increase was primarily attributable to $4.5 million in higher compensation and employee benefit costs, of which $2.3 million was related to the accrual of bonuses expected to be paid in the first quarter of 2022, $1.4 million in higher costs attributable to bad debt expense and insurance, and $1.1 million in higher professional fees, such as consulting, recruiting, legal, etc., in support of our efforts to expand the commercialization of our products. These increases were partially offset by $1.3 million in lower expenditures attributable to information technology and dues and subscriptions. Our R&D costs were $5.7 million for the first nine months of 2021, a decrease of $2.4 million, or 29.5%, compared to the first nine months of 2020. This decrease was primarily attributable to $1.6 million in lower lab research costs, $0.4 million in lower compensation and employee benefit costs and $0.3 million in lower legal and professional fees. We have reduced our R&D expenditures since 2019 as we refocus our resources towards the continued commercialization of our pharmaceutical products. Accordingly, we continue to deploy limited resources in the development of new products, to perform stability testing and validation on our pharmaceutical products, to develop and validate secondary manufacturers, to prepare regulatory submissions, and work with regulatory authorities on existing submissions. 25 Loss from operations. For the first nine months of 202 1, we had a loss from operations of $ 104.4 million, compared to $ 120 . 9 million for the first nine months of 202 0 . This $ 16.5 million improvement was attributable to higher gross profit of $ 2 2 . 3 million, partially offset by $ 5.7 million in higher operating expenses. Our loss from operation s for the first nine months of 2021 included $7.3 million of non-cash and cash severances recorded for certain former senior executives. Without such severances, we would have had a loss from operations of $ 97.1 million for the first nine months of 2021. We anticipate that we will continue to have operating losses for the near future until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA, although there is no assurance that our efforts will be successful. Other expense, net. For the first nine months of 2021, our non-operating expenses were $25.1 million, compared to $20.5 million for the first nine months of 2020. This $4.6 million increase was primarily attributable to a $4.0 million increase in interest prepayment fees, including the recording of an $1.5 million accrual for interest prepayment fees in the first nine months of 2021 associated with our future debt service, and $2.5 million in higher amortization expense of deferred financing costs. These increases were partially offset by $2.1 million in lower interest expense due to overall lower average debt balance during the first nine months of 2021 compared to the first nine months of 2020. Net Loss. For the first nine months of 2021, we had a net loss of $129.5 million, or $0.33 per basic and diluted common share, compared to $141.4 million, or $0.52 per basic and diluted common share, for the first nine months of 2020. Our net loss for the first nine months of 2021 included $7.3 million of non-cash and cash severances recorded for certain former senior executives. Without such severances, we would have had a net loss of $122.2 million, or $0.31 per basic and diluted common share, for the first nine months of 2021. Liquidity and capital resources O ur primary use of cash is to fund the continued commercialization of our hormone therapy and contraceptive products. We have funded our operations primarily through public offerings of our common stock and private placements of equity and debt securities. As of September 30, 2021, we had cash totaling $104.8 million. We maintain cash at financial institutions that at times may exceed the Federal Deposit Insurance Corporation insured limits of approximately $0.3 million per bank. We have never experienced any losses related to these funds. In November 2020, we entered into an at-the-market offering program (the “2020 ATM Program”) relating to shares of our common stock. The 2020 ATM Program permitted us to offer and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through or to the sales agent under the 2020 ATM Program. Sales of our common stock were permitted to be made from time to time in at-the-market offerings as defined in Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), including by means of ordinary broker’s transactions on the Nasdaq Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices, or as otherwise agreed to with the sales agent. The sales agent was entitled to compensation at a fixed commission rate of 3.0% of the aggregate gross sales price per share sold. As of February 8, 2021, sales of shares of our common stock under the 2020 ATM Program were completed when we sold an aggregate total of 28,600,689 shares of our common stock at an average sale price of $1.75 per share. For the 2020 ATM Program, we received net proceeds of $48.1 million, after deducting the discounts and commissions to the sales agent and estimated offering expenses. In February 2021, we closed on an underwritten public offering of our common stock, pursuant to which we issued 59,459,460 shares of our common stock at an offering price of $1.85 per share, and we received net proceeds of $96.6 million, after deducting the underwriting discounts and commissions and estimated offering expenses. In March 2021, we entered into an at-the-market offering program (the “2021 ATM Program”) relating to shares of our common stock. The 2021 ATM Program permits us to offer and sell shares of our common stock having an aggregate offering price of up to $100.0 million from time to time through or to the sales agent under the 2021 ATM Program. Sales of our common stock may be made from time to time in at-the-market offerings as defined in Rule 415 of the Securities Act, including by means of ordinary broker’s transactions on the Nasdaq Stock Exchange or otherwise at market prices prevailing at the time of sale, at prices related to prevailing market prices, or as otherwise agreed to with the sales agent. The sales agent will be entitled to compensation at a fixed commission rate of 3.0% of the aggregate gross sales price per share sold. The sales agent is not required to sell any specific number or dollar amounts of securities but will act as sales agent and use commercially reasonable efforts to sell on our behalf all of the shares of common stock requested to be sold by us, consistent with its normal trading and sales practices, on mutually agreed terms between us and the sales agent. Through September 30, 2021, we have sold a total of 33,705,315 shares of our common stock under the 2021 ATM Program at an average sale price of $1.21 per share and we received estimated net proceeds of $38.8 million, after deducting discounts and commissions to the sales agent and estimated offering expenses. Subsequently, through the date of this 10-Q Report, we have not sold any additional shares of our common stock under the 2021 ATM Program. Future sales, if any, under the 2021 ATM Program will depend on a variety of factors, including among others, market conditions, the trading price of our common stock, determinations by us of the appropriate sources of funding, and potential uses of funding available to us. 26 Cash flows The following table reflects the major categories of cash flows for each of the periods (in thousands) . Nine Months Ended September 30, 2021 2020 Net cash used in operating activities $ (103,135 ) $ (129,114 ) Net cash used in investing activities (709 ) (1,104 ) Net cash provided by financing activities 128,199 49,022 Operating Activities. The principal use of cash in operating activities was to fund our current expenditures in support of our continued commercialization activities for IMVEXXY, BIJUVA, and ANNOVERA, sales, marketing, scale-up and manufacturing activities, adjusted for non-cash items. For the first nine months of 2021, net cash used in operating activities was $103.1 million, compared to net cash used in operating activities of $129.1 million for the first nine months of 2020. This decrease of $26.0 million, or 20.1%, was primarily due to a $12.0 million decrease in our net loss, a $12.2 million decrease in cash usage related to changes in operating assets and liabilities, and a $2.8 million increase in non-cash expenditure adjustments. Investing Activities. For the first nine months of 2021, net cash used in investing activities was $0.7 million, compared to net cash used in investing activities of $1.1 million for the first nine months of 2020. This decrease of $0.4 million, or 35.8%, was primarily due to lower patent related costs. Financing Activities. Financing activities currently represent the principal source of our cash flow. For the first nine months of 2021, net cash provided by financing activities was $128.2 million, compared to net cash provided by financing activities of $49.0 million for the first nine months of 2020. This increase of $79.2 million, or 161.5%, was primarily related to sales of our common stock, consisting of $182.9 million in net proceeds in 2021, partially offset by a $50.0 million in repayment of debt in 2021, a $3.9 million increase in the payment of debt financing fees in 2021, and $50.0 million in borrowing of debt in 2020. For additional details, see the consolidated statements of cash flows in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report. Other liquidity measures Receivable. Our net days sales outstanding (“DSO”) is calculated by dividing average gross accounts receivable less the reserve for doubtful accounts, chargebacks, and payment discounts by the average daily net product revenue during the last four quarters for each respective quarterly period. Our net DSO was 126 days as of September 30, 2021, compared to 165 days as of December 31, 2020 and 128 days as of September 30, 2020. Our gross DSO is calculated by dividing average gross accounts receivable by the average daily gross product revenue to distributors during the last four quarters for each respective quarterly period. Our gross DSO was 61 days as of September 30, 2021, compared to 67 days as of December 31, 2020 and 50 days as of September 30, 2020. Our DSO have fluctuated and will continue to fluctuate in the future due to variety of factors, including longer payment terms associated with the continued commercialization of IMVEXXY, BIJUVA, and ANNOVERA and changes in the healthcare industry. Our exposure to credit losses may increase if our customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the COVID-19 pandemic, or other customer-specific factors. Although we have historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables in the future. Inventory. We rely on third parties to manufacture our finished products, and we have entered into long-term supply agreements for the manufacture of ANNOVERA, IMVEXXY, and BIJUVA. We do not have a long-term supply agreement for the manufacture of our prescription vitamins. Additionally, we do not have long-term contracts for the supply of the active pharmaceutical ingredient (“API”) used in ANNOVERA and BIJUVA. One of our third party contract manufacturers that manufactures ANNOVERA has recently experienced an increase in difficulties with the manufacturing process for ANNOVERA resulting in batch failures. The challenges are multifactorial and include variability in raw material supply and normal manufacturing variation due to a semi-manual process. This has recently resulted in challenges to supply ANNOVERA consistently within the approved specification at a rate that meets the projected demand for ANNOVERA. To mitigate the manufacturing challenges, in August 2021 we filed a supplemental NDA to modify the manufacturing (testing) specification to allow for normal manufacturing variation that would increase the consistency of manufacturing and supply of ANNOVERA. There can be no assurance that such a modification will be approved by the FDA. If the FDA fails to approve the requested modification by the Prescription Drug User Fee Act (“PDUFA”) date of December 12, 2021, our third party contract manufacturer may not be able to supply us with sufficient ANNOVERA to adequately supply the market or generate sufficient revenue to meet the covenants under the 27 Financing Agreement. If we are unable to achieve any of the total minimum net revenue requirements or otherwise comply with any other covenant of the Financing Agreement, all or a portion of our obligations under the Financing Agreement may be declared immediately due and payable, which would have an adverse effect on our business, results of operations and financial condition. If any of our third party contract manufacturers or any suppliers of raw materials or API experience further difficulties, do not comply with the terms of an agreement between us, or do not devote sufficient time, energy, and care to providing our manufacturing needs, we could experience additional interruptions in the supply of our products, which may have a material adverse impact on our revenue, results of operations and financial position and ability to meet our revenue and other covenants under our Financing Agreement. Debt. We had $200.0 million and $250.0 million in term loans outstanding under our Financing Agreement as of September 30, 2021 and December 31, 2020, respectively. For additional information, see Note 8, Debt in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report. The Financing Agreement requires us to maintain a minimum unrestricted cash balance of $60.0 million. As of the filing date of this 10-Q Report, our cash balance was above the required minimum balance. Based on our current projections, we will need to raise additional capital to remain in compliance with the minimum cash balance covenant for the next twelve months from the date of this 10-Q Report. In order to address our projected capital needs, we are pursuing various equity financing and other alternatives including the sale of an interest in vitaCare Prescription Services for which we commenced a sale process. The equity financing alternatives may include the private 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. 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. Along with considering additional financings, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating expenses. Based on our analysis, we believe that our existing cash reserves along with potential proceeds from the sale of certain non-core assets of the Company and proceeds from potential future financings, if available to us, would be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months from the date of this Quarterly Report on Form 10-Q. If we are unsuccessful with future financings and if the successful commercialization of IMVEXXY, BIJUVA, or ANNOVERA is delayed, or the continued impact of the COVID-19 pandemic or issues in our supply chains related to our third party contract manufacturers on our business is worse than we anticipate, our existing cash reserves would be insufficient to maintain compliance with the Financing Agreement covenants or satisfy our liquidity requirements until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA. See Inventory above for additional information regarding risks associated with our contract manufacturers, particularly for ANNOVERA. The presence of these projected factors in conjunction with the uncertainty of the capital markets raises substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the issuance of these financial statements. The Financing Agreement also requires us to maintain certain minimum quarterly product net revenue requirements and several other restrictive covenants which could also be affected by the continued impact of the COVID-19 pandemic or issues in our supply chains related to our third-party contract manufacturers. These and other terms in the Financing Agreement have to be monitored closely for compliance and could restrict our ability to grow our business or enter into transactions that we believe would be beneficial to our business. If we are unable to maintain the minimum unrestricted cash balance, achieve any of the total minimum net revenue requirements or otherwise comply with any other covenant of the Financing Agreement, all or a portion of our obligations under the Financing Agreement may be declared immediately due and payable, which would have an adverse effect on our business, results of operations and financial condition. Risks and uncertainties related to COVID-19. 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. The ultimate global recovery from the pandemic will be dependent on, among other things, actions taken by governments and businesses to contain and combat the virus, including any variant strains, the speed and effectiveness of vaccine production and global distribution, as well as how quickly, and to what extent, normal economic and operating conditions can resume on a sustainable basis globally. For additional information, see the discussion of our risks and uncertainties related to COVID-19 in Note 1, Basis of presentation and summary of significant accounting policies in Item 1, Financial Statements, appearing elsewhere in this 10-Q Report, and in our 2020 10-K Report. Going Concern 28 As of the filing date of this Quarterly Report on Form 10-Q, our cash balance was above the $60.0 million balance as required by the Financing Agreement. Based on our current projections, we will need to raise additional capital to remain in compliance with this minimum cash balance covenant for the next twelve months from the issuance of these financial statements. In order to address our projected capital needs, we are pursuing various equity financing and other alternatives including the sale of an interest in vitaCare Prescription Services for which we commenced a sale process. The equity financing alternatives may include the private 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. 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. Along with considering additional financings, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating expenses. Based on our analysis, we believe that our existing cash reserves along with potential proceeds from the sale of certain non-core assets of the Company and proceeds from potential future financings, if available to us, would be sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months from the date of this Quarterly Report on Form 10-Q. If we are unsuccessful with future financings and if the successful commercialization of IMVEXXY, BIJUVA, or ANNOVERA is delayed, or the continued impact of the COVID-19 pandemic or issues in our supply chains related to our third party contract manufacturers on our business is worse than we anticipate, our existing cash reserves would be insufficient to maintain compliance with the Financing Agreement covenants or satisfy our liquidity requirements until we are able to successfully commercialize IMVEXXY, BIJUVA, and ANNOVERA. If we are unable to comply with these covenants of the Financing Agreement, all or a portion of our obligations under the Financing Agreement may be declared immediately due and payable, which would have an adverse effect on our business, results of operations and financial condition. The presence of these projected factors in conjunction with the uncertainty of the capital markets raises substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the issuance of these financial statements. Additionally, if circumstances were to require our independent registered public accounting firm to include a going concern uncertainty in their report on our annual consolidated financial statements, such matter would also take us out of compliance with certain of the Financing Agreement covenants. If we are unable to comply with these covenants of the Financing Agreement, all or a portion of our obligations under the Financing Agreement may be declared immediately due and payable, which would have an adverse effect on our business, results of operations and financial condition. The accompanying unaudited consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Recent accounting pronouncements Information regarding new accounting pronouncements is included in Note 1, B asis of presentation and summary of significant accounting policies in Item 1, Financial Statements appearing elsewhere in this 10-Q Report. Critical accounting estimates Calculation of variable consideration related to sales deductions The determination of a transaction price is one of the five-steps which we access in accordance with the revenue recognition accounting guidance. The transaction price of a contract is the amount of consideration which we expect to be entitled to in exchange for transferring promised goods or services to a customer. Prescription products are sold at fixed wholesale acquisition cost (“WAC”), determined based on our list price. However, the total transaction price is variable as it is calculated net of estimated product returns, chargebacks, rebates, coupons, discounts and wholesaler fees. These estimates are based on the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to the customer) or a current liability (if the amount is payable to a party other than a customer). In order to determine the transaction price, we estimate the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract or each variable consideration. The estimated amount of variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative product revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. In determining amounts of variable consideration to include in a contract’s transaction price, we rely on our historical experience and other evidence that supports our qualitative assessment of whether product revenue would be subject to a significant reversal. We consider all the facts and circumstances associated with both the risk of a product revenue reversal arising from an uncertain future 29 event and the magnitude of the reversal if that uncertain event were to occur. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our original estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such changes in estimates become known. We accept returns of unsalable prescription products sold through wholesale distributors within a return period of six months prior to and up to 12 months following product expiration. ANNOVERA cannot be returned before the expiration date and expired ANNOVERA can be returned up to 12 months past the expiration date. Our prescription vitamins, IMVEXXY and BIJUVA currently have a shelf life of 24 months from the date of manufacture and ANNOVERA currently has a shelf life of 18 months from the date of manufacture. We do not allow product returns for prescription products that have been dispensed to a patient. We estimate the amount of our product sales that may be returned by our customers and record this estimate as a reduction of product revenue in the period the related product revenue is recognized. Where historical rates of return exist, we use history as a basis to establish a returns reserve for products shipped to wholesalers. For our newly launched products, for which the right of return exists but for which we currently do not have history of product returns, we estimate returns based on available industry data, our own sales information and our visibility into the inventory remaining in the distribution channel. At the end of each reporting period, we may decide to constrain product revenue for product returns based on information from various sources, including channel inventory levels and dating and sell-through data, the expiration dates of products currently being shipped, price changes of competitive products and any introductions of generic products. We recognize the amount of expected returns as a refund liability, representing the obligation to return the customer’s consideration. Since our returns primarily consist of expired and short dated products that will not be resold, we do not record a return asset for the right to recover the goods returned by the customer at the time of the initial sale (when recognition of product revenue is deferred due to the anticipated return). We offer various rebate and discount programs in an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty. We estimate the allowance for consumer rebates and coupons that we have offered based on our experience and industry averages, which is reviewed, and adjusted, if necessary, on a quarterly basis. Estimates relating to these rebates and coupons are deducted from gross product revenue at the time the product revenue is recognized. We record distributor fees based on amounts stated in contracts. We estimate chargebacks based on number of units sold during the period taking into account prices stated in contracts and our historical experience. We provide invoice discounts to our customers for prompt payment. Estimates relating to invoice discounts and chargebacks are deducted from gross product revenue at the time the product revenue is recognized. We offer a co-pay assistance program for eligible enrolled patients whose out of pocket costs are reduced to a more affordable price. This allows patients to access the product at a reasonable cost and is in line with our responsible pricing approach. We reimburse pharmacies for this discount through third-party vendors. The variable consideration is estimated based on contract prices, the estimated percentage of patients that will utilize the copay assistance, the average assistance paid, the estimated levels of inventory in the distribution channel and the current level of prescriptions covered by patients’ insurance. Payers may change coverage levels for our prescription products positively or negatively, at any time up to the time that we have formerly contracted coverage with the payer. As such, the net transaction price of our prescription products is susceptible to such changes in coverage levels, which are outside of our influence. As a result, we constrain variable consideration for our prescription products to an amount that will not result in a significant product revenue reversal in future periods. Our ability to estimate the net transaction price for our prescription products is constrained by our estimates of the amount to be paid for the co-pay assistance program which is directly related to the level of prescriptions paid for by insurance. As such, we record an accrual to reduce gross sales for the estimated co-pay and other patient assistance based on currently available third-party data and our internal analyses. 30