TherapeuticsMD, Inc. 10-K

Item 7. Management’s discussion and analysis of financial condition and results of operations You should read the following discussion and analysis in conjunction with the information set forth under our consolidated financial statements and the notes to those financial statements included elsewhere in this 2021 10-K Report. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. See “Statement Regarding Forward-Looking Information.” Our actual results may differ materially from those contained in or implied by any forward-looking statements as a result of various factors, including, but not limited to, the risks and uncertainties described under “Risk Factors” elsewhere in this 2021 10-K Report. Certain amounts in the Management’s discussion and analysis of financial condition and results of operations may not add due to rounding, and all percentages have been calculated using unrounded amounts. 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. During 2021, 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. vitaCare Divestiture On March 6, 2022, we entered into a stock purchase agreement (the “Purchase Agreement”) with GoodRx, Inc. (“GoodRx”), a Delaware corporation and wholly-owned subsidiary of GoodRx Holdings, Inc. (“GoodRx Holdings”), which provides for the sale of all of the issued and outstanding capital stock of our vitaCare Prescription Services subsidiary (“vitaCare”) to GoodRx (the “vitaCare Divestiture”). Under the terms of the Purchase Agreement, upon the closing of the vitaCare Divestiture (the “Closing”), we will receive a cash payment of $150.0 million, subject to adjustment as provided in the Purchase Agreement and customary holdbacks. In addition, 54 we may receive up to an additional of $7.0 million in earn-out consideration, contingent upon vitaCare’s financial performance through 2023 as determined in accordance with the terms of the Purchase Agreement. The Purchase Agreement contains customary representations and warranties, covenants and indemnities of the parties thereto. In addition, the Purchase Agreement provides that at the Closing: (i) we will enter into a long-term services agreement with vitaCare to continue utilization of the vitaCare platform with respect to our products; (ii) we and vitaCare will enter into a transition services agreement for us to provide certain transition services to vitaCare for up to 12 months following the Closing; and (iii) certain employees of ours and/or vitaCare will enter into employment agreements with GoodRx, The vitaCare Divestiture is expected to close in the second quarter of 2022, subject to the satisfaction or waiver of certain customary conditions, including the receipt of certain regulatory approvals. COVID-19 With multiple variant strains of the SARS-Cov-2 virus and the COVID-19 disease that it causes (collectively, “COVID-19”) still circulating, we continue to be subject to risks and uncertainties in connection with the COVID-19 pandemic. The extent of the future impact of the COVID-19 pandemic on our business continues to be highly uncertain and difficult to predict. 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. As part of our response to the COVID-19 pandemic, we implemented measures to reduce marketing expenses for 2020 and we also implemented cost saving measures in 2020 and 2021, which included negotiating lower fees or suspending services from third-party vendors; implementing a company-wide hiring restriction; delaying or cancelling non-critical information technology projects; and eliminating non-essential travel, entertainment, meeting, and event expenses. In addition, we have implemented a significant cost savings initiative that is designed to reduce our annual costs in 2022 by at least $40.0 million. This figure does not include estimated annualized cost savings of approximately $20.0 million from, or the costs associated with the vitaCare Divestiture. The full impact of the COVID-19 pandemic continues to evolve. However, we remain committed to the execution of our corporate goals, despite the ongoing COVID-19 pandemic, as demonstrated in part by the increase in product revenue throughout 2021. The future extent to which the COVID-19 pandemic may continue to materially impact our financial condition, liquidity, or results of operations remains uncertain. We are continuing to assess the effect of the COVID-19 pandemic on our operations by monitoring the spread of COVID-19 and the various actions implemented to combat the pandemic throughout the world. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future. While we currently believe that our COVID-19 contingency plan has the ability to mitigate many of the negative effects of the COVID-19 pandemic on our business, the severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, the duration of any “social distancing” orders, the ability of our sales force to access healthcare providers to promote our products, increases in unemployment, which could reduce access to commercial health insurance for our patients, thus limiting payer coverage for our products, and the impact of the pandemic on our global supply chain, all of which remain uncertain. Our future results of operations and liquidity could be materially adversely affected by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions, uncertain demand, and the impact of any initiatives or programs that we may undertake to address financial and operations challenges that we may face. 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 because 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. 55 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. 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 December 31, 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. 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 2021, we had BIJUVA sales of $1.4 million made through the Theramex License Agreement, and such sales were included as product revenue in the statements of operations. As of December 31, 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 is commercially sold by us in the U.S. pursuant to the terms of the Population Council License Agreement. 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 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 the strong 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. Results of operations 2021 compared to 2020 Revenue. Our total revenue 2021 was $87.0 million, an increase of $22.1 million, or 34.0%, compared to 2020. 56 The following table sets forth our revenue during these periods (in thousands): 2021 2020 Product revenue: ANNOVERA $ 37,943 $ 19,611 IMVEXXY 31,533 27,139 BIJUVA 10,579 6,354 Prescription vitamin 5,725 9,768 Product revenue, net 85,780 62,872 License revenue 1,171 2,000 Total revenue, net $ 86,951 $ 64,872 Our sales of ANNOVERA were $37.9 million for 2021, an increase of $18.3 million, or 93.5%, compared to 2020. This increase was primarily due to a 128.6% increase in sales volume, which was partially offset by a 15.4% decrease in the average sale price. Our sales of IMVEXXY were $31.5 million for 2021, an increase of $4.4 million, or 16.2%, compared to 2020. This increase was primarily attributable to a 31.0% increase in the average sale price, which was partially offset by a 11.3% decrease in sales volume. Both the higher average sale price and lower sales volume was primarily a result of a change in the IMVEXXY copay assistance program to increase the price paid by the customer. Our sales of BIJUVA were $10.6 million for 2021, an increase of $4.2 million, or 66.5%, compared to 2020. Included in our BIJUVA sales for 2021 was $1.4 million of sales made through the Theramex License Agreement. Without the sales made through the Theramex License Agreement, our sales of BIJUVA for 2021 were $9.2 million, an increase of $2.8 million, or 44.4%, compared to 2020. This increase was primarily attributable to a 43.0% increase in the average sale price and a 1.0% increase in sales volume. T he higher average sale price reflects a change in the BIJUVA copay assistance program to increase the price paid by the customer. 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 and BIJUVA 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 $5.7 million for 2021, a decrease of $4.0 million, or 41.4%, compared to 2020. This decrease was primarily due to a 36.0% decrease in sales volume and an 8.5% decrease in the average sale price. The decrease in sales volume of our prescription vitamin reflects our sales focus to grow our contraceptive and menopause pharmaceutical products. On a consolidated basis, our total product sales were $85.8 million for 2021, an increase of $22.9 million, or 36.4%, compared to 2020. Our license revenue was $1.2 million for 2021, a decrease of $0.8 million, or 41.5%, compared to 2020. This decrease was entirely due to the timing of achieving previously established milestone payment targets. Gross profit. Our gross profit for 2021 was $68.1 million, an increase of $19.2 million, or 39.3%, compared to 2020. The following table sets forth our gross profit during these periods (in thousands): 2021 2020 Product $ 66,942 $ 46,897 License 1,171 2,000 Total gross profit $ 68,113 $ 48,897 The increase in our gross profit was primarily a result of an increase of 36.4% in product revenue and a 3.4% increase in our product gross margin from 74.6% for 2020 to 78.1% for 2021, partially offset by a decrease in license revenue of $0.8 million. The increase in product gross margins was mainly due to $3.0 million in lower inventory obsolescence charges in 2021 compared to 2020, partially offset by an overall decrease in profit margins of our products of 1.8%. Operating expenses. Total operating expenses for 2021 were $207.9 million, an increase of $3.4 million, or 1.7%, compared to 2020. Our operating expenses for 2021 included $12.4 million of severances for former senior executives, including our former chief executive officer and former executive vice president of operations. Of the total severance amount, $8.1 million was related to share-based compensation recorded in connection with accelerated vesting of certain share-based payment awards for the former senior executives. Without such executive severances, our total operating expenses for 2021 would have been $195.5 million, a decrease of $8.9 million, 57 or 4 . 4 %, compared to 2020 . The type of operating expenses reported in prior years have been reclassified to conform to the current year’s presentation. The following table sets forth our operating expense categories (in thousands): 2021 2020 Selling and marketing $ 108,195 $ 117,052 General and administrative 92,602 76,954 Research and development 7,086 10,432 Total operating expenses $ 207,883 $ 204,438 Our selling and marketing costs were $108.2 million for 2021, a decrease of $8.9 million, or 7.6%, compared to 2020. This decrease was primarily due to $12.5 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020, $6.1 million in lower product sample costs mainly due to the write down of product samples in 2020, primarily related to BIJUVA, and $2.9 million in lower marketing costs primarily related to a national selling and marketing event that occurred during 2020 prior to the COVID-19 pandemic. These decreases were partially offset by $3.9 million in higher advertising expenditures in order t o support the commercialization of our pharmaceutical products, $7.4 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 $1.6 million in higher costs related to physician education expenses and transportation expenses for traveling sales staff. Our general and administrative costs were $92.6 million for 2021, an increase of $15.6 million, or 20.3%, compared to 2020. Of the total increase, $12.4 million was related to executive severances recorded in 2021. The remaining increase was $3.3 million, or 4.3%, compared to 2020. This increase was primarily attributable to $1.8 million in higher compensation and employee benefit costs, $0.8 million in higher insurance, and $2.6 million in higher professional fees, such as consulting, recruiting, legal, etc. Overall, these increases are in support of our efforts to expand the commercialization of our pharmaceutical products. These increases were partially offset by $1.5 million in lower expenditures attributable to information technology and dues and subscriptions, and $1.1 million in write-down of our patents and trademarks related to impairment in 2020. Our R&D costs were $7.1 million for 2021, a decrease of $3.3 million, or 32.1%, compared to 2020. This decrease was primarily attributable to $2.0 million in lower research related costs, $1.0 million in lower compensation and employee benefit costs and $0.4 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. Loss from operations. For 2021, we had a loss from operations of $139.8 million, compared to $155.5 million for 2020. This $15.8 million improvement was attributable to $19.2 million in higher gross profit, partially offset by $3.4 million in higher operating expenses. Our loss from operations for 2021 included $12.4 million of severances for former senior executives. Without such executive severances, for 2021, we would have had a loss from operations of $127.4 million. 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 2021, our non-operating expenses were $32.6 million, compared to $28.0 million for 2020. This $4.7 million increase was primarily attributable to a $4.7 million increase in interest prepayment fees, including the recording of an $2.2 million accrual for interest prepayment fees for 2021 associated with our future debt service, and $3.2 million in higher amortization expense of deferred financing costs. These increases were partially offset by $3.5 million in lower interest expense due to overall lower average debt balance during 2021 compared to 2020. Net Loss. For 2021, we had a net loss of $172.4 million, or $0.43 per basic and diluted common share, compared to $183.5 million, or $0.67 per basic and diluted common share, for 2020. Our net loss for 2021 included $12.4 million of executive severances recorded for former senior executives. Without such executive severances, for 2021, we would have had a net loss of $160.0 million, or $0.40 per basic and diluted common share. 58 2020 compared to 2019 Revenue. Our total revenue 2020 was $64.9 million, an increase of $15.2 million, or 30.7%, compared to 2019. Despite slower than anticipated growth of our product revenue due to the impact of COVID-19 pandemic, product revenue increased primarily due to continued ramping up of sales of ANNOVERA, IMVEXXY and BIJUVA for 2020, as compared to 2019, partially offset by a decrease in prenatal vitamins sales. The following table sets forth our revenue during these periods (in thousands): 2020 2019 Product revenue: ANNOVERA $ 19,611 $ 6,167 IMVEXXY 27,139 16,252 BIJUVA 6,354 1,836 Prescription vitamin 9,768 9,886 Product revenue, net 62,872 34,141 License revenue 2,000 15,506 Total revenue, net $ 64,872 $ 49,647 Our sales of ANNOVERA were $19.6 million for 2020, an increase of $13.4 million, or 218.0%, compared to 2019. This increase was primarily due to a 107.9% increase in sales volume and a 53.0% increase in the average sale price. Our sales of IMVEXXY were $27.1 million for 2020, an increase of $10.9 million, or 67.0%, compared to 2019. This increase was primarily attributable to an 80.2% increase in the average sale price, which was partially offset by a 7.3% decrease in sales volume. Our sales of BIJUVA were $6.4 million for 2020, a decrease of $4.5 million, or 246.1%, compared to 2019. This increase was primarily attributable to a 181.3% increase in the average sale price and a 23.0% 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. 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 $9.8 million for 2020, a decrease of $0.1 million, or 1.2%, compared to 2019. This decrease was primarily due to a 14.7% decrease in sales volume, which was partially offset by a 15.9% increase in the average sale price. On a consolidated basis, our total product sales were $62.9 million for 2020, an increase of $28.7 million, or 84.2%, compared to 2019. Our license revenue was $2.0 million for 2020, a decrease of $13.5 million, or 87.1%, compared to 2019. This decrease was entirely due to the timing of achieving previously established milestone payment targets. Gross profit. Our gross profit for 2020 was $48.9 million, an increase of $5.6 million, or 12.9%, compared to 2019. The following table sets forth our gross profit during these periods (in thousands): 2020 2019 Product $ 46,897 $ 27,806 License 2,000 15,506 Total gross profit $ 48,897 $ 43,312 The increase in our gross profit was primarily a result of an increase of 84.2% in product revenue, partially offset by 6.9% decrease in our product gross margin from 81.4% for 2019 to 74.6% for 2020, and a decrease in license revenue of $13.5 million. The decrease in product gross margin was mainly due to $4.1 million in inventory obsolescence charges for 2020, which was primarily related to the impact of the COVID-19 pandemic on our business, resulting in decreased demand for our products. Operating expenses. Total operating expenses for 2020 were $204.4 million, an increase of $9.9 million, or 5.1%, compared to 2019. The type of operating expenses reported in prior years have been reclassified to conform to the current year’s presentation. 59 The following table sets forth our operating expense categories (in thousands): 2020 2019 Selling and marketing $ 117,052 $ 114,231 General and administrative 76,954 60,494 Research and development 10,432 19,792 Total operating expenses $ 204,438 $ 194,517 Our selling and marketing costs were $117.1 million for 2020, a decrease of $2.8 million, or 2.5%, compared to 2019. This increase was primarily due to $14.7 million in lower outsourced sales personnel costs mainly attributable to the onboarding of such sales personnel in the third quarter of 2020, $12.3 million in lower marketing costs, and $3.4 million in lower costs related to physician education expenses and transportation expenses for traveling sales staff. Overall, lower costs for marketing and traveling sales staff reflect our 2020 cost cutting initiatives put in place at the beginning of the COVID-19 pandemic. These decreases were partially offset by (i) $26.8 million in higher advertising expenditures in order t o support the significant initiative related to the launch of ANNOVERA in March 2020, which was subsequently paused as a result of the COVID-19 pandemic and relaunched in July 2020, as well as continued support of the commercialization of BIJUVA and IMVEXXY, (ii) $5.0 million in higher product sample costs mainly due to the 2019 write down of product samples, primarily related to BIJUVA, and (iii) $1.4 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 2019. Our general and administrative costs were $77.0 million for 2020, an increase of $16.5 million, or 27.2%, compared to 2019. This increase was primarily due to $12.4 million in higher compensation and employee benefit costs, $1.9 million in higher dues and subscriptions, $1.3 million increase in rent primarily due to our new leased offices, $1.4 million in higher insurance expenses, reflecting an overall increase in market insurance rates, and $1.1 million in write-down of our patents and trademarks related to impairment. Overall, higher costs for compensation and employee benefit, dues and subscriptions and rent were mainly in support of our efforts to expand the commercialization of our products. These increases were partially offset by $1.0 million in lower employee traveling costs, and $0.8 million in lower professional fees, such as consulting, recruiting, legal, etc. Our R&D costs were $10.4 million for 2020, a decrease of $9.4 million, or 47.3%, compared to 2019. This decrease was primarily attributable to $4.2 million in lower research related costs, $3.5 million in lower compensation and employee benefit costs, $1.0 million in lower legal and professional fees, and $0.4 million in lower employee traveling 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. Loss from operations. For 2020, we had a loss from operations of $155.6 million, compared to $151.2 million for 2019. This $4.3 million of additional loss was attributable to $9.9 million in higher operating expenses, partially offset by $5.6 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 2020, our non-operating expenses were $28.0 million, compared to $24.9 million for 2019. This $3.1 million increase was primarily attributable to $9.5 million in higher interest expense primarily due to overall higher debt balance during 2020 compared to 2019, and $1.7 million in higher amortization expense of deferred financing costs. Net Loss. For 2020, we had a net loss of $183.5 million, or $0.67 per basic and diluted common share, compared to $176.1 million, or $0.72 per basic and diluted common share, for 2019. 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 December 31, 2021, we had cash totaling $65.1 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. 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 Nasdaq or otherwise at market prices prevailing at the time of sale, at 60 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 Nasdaq 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 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 December 31, 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 $39.4 million, after deducting discounts and commissions to the sales agent and estimated offering expenses. Subsequently, through the date of this 2021 10-K 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. On March 6, 2022, we signed a definitive agreement for the vitaCare Divestiture, which is expected to close in the second quarter of 2022, subject to the satisfaction or waiver of certain customary conditions, including the receipt of certain regulatory approvals. Upon the closing of the vitaCare Divestiture, we will receive a cash payment of $150.0 million, subject to adjustment and customary holdbacks. In addition, we may receive up to an additional of $7.0 million in earn-out consideration. We have agreed to utilize the first $120.0 million of net proceeds from the vitaCare Divestiture and all net proceeds of the vitaCare Divestiture in excess of $135.0 million pay to the Lenders as a prepayment of the loans under the Financing Agreement. Cash flows 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. Financing activities currently represent the principal source of our cash flow. The following table reflects the major categories of cash flows for each of the periods (in thousands) . 2021 2020 2019 Net cash used in operating activities $ (142,693 ) $ (159,471 ) $ (165,718 ) Net cash used in investing activities (2,223 ) (1,598 ) (23,892 ) Net cash provided by financing activities 129,552 80,725 188,827 2021 compared to 2020 Operating Activities. Net cash used in operating activities in 2021 was $142.7 million, compared to net cash used in operating activities of $159.5 million for 2020. This decrease of $16.8 million or 10.5%, was primarily due to a $11.1 million decrease in our net loss, a $2.8 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. Net cash used in investing activities for 2021 was $2.2 million, compared to net cash used in investing activities of $1.6 million for 2020. This increase of $0.6 million, or 39.1%, was primarily due to higher patent related costs. Financing Activities. Net cash provided by financing activities was for 2021 was $129.6 million, compared to net cash provided by financing activities of $80.7 million for 2020. This increase of $48.8 million, or 60.5%, was primarily related to a $152.4 million increase in proceeds from sale of common stock, partially offset by a $3.9 million increase in the payment of debt financing fees, a $50.0 million in repayment of debt in 2021, and a $50.0 million in borrowing of debt in 2020. 61 2020 compared to 2019 Operating Activities. Net cash used in operating activities in 2020 was $159.5 million, compared to net cash used in operating activities of $165.7 million for 2019. This decrease of $6.2 million or 3.8%, was primarily due to a $10.7 million decrease in cash usage related to changes in operating assets and liabilities, and a $2.9 million increase in non-cash expenditure adjustments, partially offset by a $7.4 million increase in our net loss. Investing Activities. Net cash used in investing activities for 2020 was $1.6 million, compared to net cash used in investing activities of $23.9 million for 2019. This decrease of $22.3 million, or 93.3%, was primarily due to a payment for intellectual property license in 2019 and lower purchase of fixed assets. Financing Activities. Net cash provided by financing activities was for 2020 was $80.7 million, compared to net cash provided by financing activities of $188.8 million for 2019. This decrease of $108.1 million, or 57.2%, was primarily related to a $150.0 million decrease in borrowings of debt and a $45.3 million decrease in proceeds from sale of common stock, partially offset by a $5.4 million increase in the payment of debt financing fees, and a $81.7 million in repayment of debt in 2019. For additional details, see the consolidated statements of cash flows included in this 2021 10-K 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. As of December 31, 2021, our net DSO was 148 days, compared to 165 days as of December 31, 2020, respectively. 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. As of December 31, 2021, our gross DSO was 72 days, compared to 67 days as of December 31, 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. Debt. We had $200.0 million and $250.0 million in term loans outstanding under our Financing Agreement as of December 31, 2021 and 2020, respectively. In March 2022, we entered into Amendment No. 9 to the Financing Agreement (“Amendment No. 9”) pursuant to which, among other things: (i) the lenders waived various Company breaches of the Financing Agreement, including breaches of the $60 million minimum cash covenant and the minimum net revenue covenants for the fourth quarter of 2021, and removed the minimum net revenue covenant for the first quarter of 2022; (ii) the Company and the lenders agreed to reduced minimum cash covenants under the Financing Agreement; (iii) the lenders waived the existing $60.0 million prepayment penalty under the Financing Agreement and the Company agreed to a paid in kind amendment fee of $30.0 million, which fee was added to the principal amount of the loans under the Financing Agreement, $16.0 million of which fee is waivable in certain conditions; and (iv) the maturity date of the Financing Agreement was amended to June 1, 2022. The Financing Agreement contains customary restrictions and covenants applicable to us that are customary for financings of this type. Among other requirements, the Financing Agreement also requires us to maintain a minimum unrestricted cash balance. For additional information regarding our debt, see "Note 8. Debt" to the consolidated financial statements included in this 2021 10-K Report. For additional information, see the discussion of our risks and uncertainties related to COVID-19 in Note 1. Basis of Presentation, new accounting standards and summary of significant accounting policies " to the consolidated financial statements included in "Part IV. Item 15. Exhibits and Financial Statement Schedules " of this 2021 10-K Report. Going concern We incurred a net loss of $172.4 million during the year ended December 31, 2021, and as of that date, our current liabilities exceeded our current assets by $133.4 million and our total liabilities exceeded our total assets by $93.6 million. We will need to raise additional capital to repay the entire principal balance of our Financing Agreement, which matures on June 1, 2022, and to provide additional 62 liquidity to fund our losses until our operations become cash flow positive . T o address our capital needs, we are pursuing various equity and debt financing and other alternatives , including the vitaCare Divestiture . 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 , including the price of our common stock and the potential delisting of our common stock from Nasdaq, 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. 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 2021 10-K Report. 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. See Item 1A. Risk Factors – “Our dependence upon third parties for the manufacture and supply of our existing women’s healthcare products may cause delays in, or prevent us from, successfully commercializing, and marketing our products” 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 accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Contractual obligations, off-balance sheet arrangements, purchase commitments and employment agreements Our contractual obligations and off-balance sheet arrangements are set forth below. For additional information on any of the following and other obligations and arrangements, see "Note 8. Debt" and "Note 9. Commitments and Contingencies" to the consolidated financial statements included in this 2021 10-K Report. Contractual obligations A summary of contractual obligations is as follows: Total Year 1 Years 2-3 Years 4-5 > 5 years Debt obligations (1) $ 230,000 $ 230,000 $ — $ — $ — Interest obligations (2) 9,336 9,336 — — — Purchase obligations (3) 36,501 7,258 8,196 9,521 11,526 Operating lease obligations 13,280 1,413 2,920 3,064 5,883 Total contractual obligations $ 289,117 $ 248,007 $ 11,116 $ 12,585 $ 17,409 (1) Debt obligations are shown based on the contractual obligations of the Financing Agreement in accordance with Amendment No. 9 to the Financing Agreement. (2) Interest obligations are on the contractual obligations of the Financing Agreement in accordance with Amendment No. 9 to the Financing Agreement and interest rates in place as of December 31, 2021. (3) Includes manufacturing purchase commitments described below. The amounts presented here represent our estimates of the minimum required payments under our agreements. In the ordinary course of business, we enter into agreements with third parties that include indemnification provisions, which, in our judgment, are normal and customary for companies in our industry sector. These agreements are typically with business partners, clinical sites, and suppliers. Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or incurred by the indemnified parties with respect to our drugs or drug candidates, use of such drugs or drug candidates, or other actions taken or omitted by us. The maximum potential amount of future payments we could be required to make 63 under these indemnification provisions is sometimes unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. As a result, the estimated fair value of liabilities relating to these provisions is minimal. Accordingly, we have no liabilities recorded for these provisions as of December 31, 2021 and 2020. In the normal course of business, we may be confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits, claims, environmental actions, or the actions of various regulatory agencies. We consult with counsel and other appropriate experts to assess the claim. If, in our opinion, we have incurred a probable loss as set forth by U.S. GAAP, an estimate is made of the loss and the appropriate accounting entries are reflected in our financial statements. Purchase commitments Information regarding purchase commitments is in "Note 9. Commitments and contingencies" to the consolidated financial statements included in this 2021 10-K Report. Employment agreements Information regarding employment agreements is in "Note 9. Commitments and contingencies" to the consolidated financial statements included in this 2021 10-K Report. Critical accounting policies and estimates Management's discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included elsewhere in this 2021 10‑K Report, which has been prepared in accordance with U.S. GAAP (“U.S. GAAP”). The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to unbilled revenue and associated costs of sales, allowance for credit losses, goodwill and identifiable intangible assets, certain accrued liabilities, and income taxes. We base our estimates on historical experience and on other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the areas described below as critical to our business operations and the understanding of our results of operations given the uncertainties associated with the assumptions underlying each estimate. For a detailed discussion on the application of these and other significant accounting policies, see “Note 1. Basis of presentation, new accounting standards and summary of significant accounting policies” to the consolidated financial statements included in this 2021 10-K Report. Segment reporting We manage and operate as one business, which is focused on creating and commercializing products targeted exclusively for women. Our business operations are managed by a single executive leadership team, which is led by our chief executive officer. We do not operate separate lines of business with respect to any of our products, and we do not prepare discrete financial information with respect to separate products. All product sales are derived from sales within the United States. Accordingly, we view our business as one reportable operating segment. Revenue recognition We determine the amount of revenue to be recognized through application of the following steps: • Identification of the contract with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and • Recognition of revenue when or as we satisfy the performance obligations. Essentially all of our revenue is generated through contracts with our customers, who are primarily wholesale distributors and retail pharmacies. A performance obligation is a promise in a contract to transfer a product or service to a customer. A good or service is considered to be transferred when the customer receives the goods or service or obtains control, and we treat shipping as a fulfillment activity rather than as a separate obligation. We generally recognize revenue at a point in time when all of our performance obligations under the terms of a contract are satisfied. Revenue is recognized upon transfer of control of promised products or services in an amount 64 that reflects the consideration we expect to receive in exchange for those products or services. The collectability of consideration on the contract is reasonably assured before revenue is recognized. To the extent that customer payment has been received before all recognition criteria are met, these revenues are initially deferred in other accruals on the balance sheet and the revenue is recognized in the period that all recognition criteria have been met. For additional discussion on prescription products and license revenue, see “K. Revenue recognition” in Note 1. Basis of presentation, new accounting standards and summary of significant accounting policies to the consolidated financial statements included in this 2021 10-K Report. Share-based payment awards We account for share-based payment awards on a fair value basis of the equity instrument issued. Under fair value accounting, the grant-date fair value of the share-based payment award is amortized as compensation expense, on a straight-line basis, over the service period (generally, the vesting period) for both graded and cliff vesting awards. We have elected to account for forfeitures as they occur. Income taxes Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and income tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in income tax rates is recorded as a component of the income tax provision in the period that includes the enactment date. Regular assessments are made on the likelihood that our deferred tax assets will be recovered from our future taxable income. Our evaluation is based on estimates, assumptions, and includes an analysis of available positive and negative evidence, giving weight based on the evidence’s relative objectivity. Sources of positive evidence include estimates of future taxable income, future reversal of existing taxable temporary differences, taxable income in carryback years, and available tax planning strategies. Sources of negative evidence include current and cumulative losses in recent years, losses expected in early future years, any history of operating losses or tax credit carryforwards expiring unused, and unsettled circumstances that, if unfavorably resolved, would adversely affect future profit levels. The remaining carrying value of our deferred tax assets, after recording the valuation allowance on our deferred tax assets, is based on our present belief that it is more likely than not that we will be able to generate sufficient future taxable income to utilize such deferred tax assets. The amount of the remaining deferred tax assets considered recoverable could be adjusted if our estimates of future taxable income during the carryforward period change favorably or unfavorably. To the extent we believe that it is more likely than not that some or all the remaining deferred tax assets will not be realized, we must establish a valuation allowance against those deferred tax assets, resulting in additional income tax expense in the period such determination is made. To the extent a valuation allowance currently exists, we will continue to monitor all positive and negative evidence until we believe it is more likely than not that it is no longer necessary, resulting in an income tax benefit in the period such determination is made. Our policy is to recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. Significant judgment is required in evaluating our tax positions, and in determining our provisions for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We establish reserves when, despite our belief that the income tax return positions are fully supportable, certain positions are likely to be challenged and we may ultimately not prevail in defending those positions. Recent accounting pronouncements Information regarding accounting standards adopted during 2021 is included in "Note 1. Basis of Presentation, New Accounting Standards and Significant Accounting Policies" to the consolidated financial statements. Item 7A. Quantitative and qualitative disclosures about market risk As a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and pursuant to Instruction 6 to Item 201(e) of Regulation S-K, we are not required to provide this information. Item 8. Financial statements and supplementary data Reference is made to the financial statements, the notes thereto, and the reports thereon, commencing on page F-1 of this 2021 10-K Report, which financial statements, notes, and reports are incorporated herein by reference. 65 Item 9. Change in and disagreements with accountants on accounting and financial disclosure None.