What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-04-07 compared with 2022-03-23 · 198 added, 291 removed, 106 unchanged (82% of the section changed)

5 unchanged sentences

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.

TherapeuticsMD was previously 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.

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

On December 30, 2022, the Company completed the Mayne Transaction pursuant to which the Company and its subsidiaries (i) granted Mayne Pharma an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA and prescription prenatal vitamin products sold under the BocaGreenMD® and vitaMedMD® brands in the United States and its possessions and territories, (ii) assigned to Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma in connection therewith.

Pursuant to a License Agreement, dated December 4, 2022, the Company granted Mayne Pharma, on the Closing Date, (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States for commercialization in the United States and its possessions and territories.

Pursuant to the Mayne License Agreement, Mayne Pharma will make one-time, milestone payments to the Company of each of (i) $5.0 million if aggregate net sales of all Products in the United States during a calendar year reach $100.0 million, (ii) $10.0 million if aggregate net sales of all Products in the United States during a calendar year reach $200.0 million and (iii) $15.0 million if aggregate net sales of all Products in the United States during a calendar year reach $300.0 million.

Further, Mayne Pharma will pay to the Company royalties on net sales of all Products in the United States at a royalty rate of 8.0% on the first $80 million in annual net sales and 7.5% on annual net sales above $80.0 million, subject to certain adjustments, for a period of 20 years following the Closing Date.

The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of ( i ) the expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States.

Mayne Pharma will pay to the Company minimal annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain further adjustments, including as described below.

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

Pursuant to a Transaction Agreement, dated December 4, 2022, between the Company and Mayne Pharma, the Company sold to Mayne Pharma, at closing, certain assets for Mayne Pharma to commercialize the Products in the United States, including the Company’s exclusive license from the Population Council to commercialize ANNOVERA.

The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the Mayne License Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net working capital as determined in accordance with the Transaction Agreement and subject to certain adjustments, (iii) a cash payment of approximately $1.0 million at closing for prepaid royalties in connection with the Mayne License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the Mayne License Agreement, as amended.

On the Closing Date, the Company and Mayne Pharma entered into Amendment No.

1 to the Mayne License Agreement.

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

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

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

As part of the transformation that included the Mayne License Agreement, historical results of commercial operations have been reflected as discontinued operations in the Company’s consolidated financial statements for all periods prior to the Closing Date.

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

Additional disclosures regarding discontinued operations are provided in Note 2 Discontinued Operations to the consolidated financial statements included in this Annual Report.

The Company also has license agreements with strategic partners to commercialize IMVEXXY and BIJUVA outside of the U.S.

In July 2018, we entered into a the Knight License Agreement with Knight pursuant to which we granted Knight an exclusive license to commercialize IMVEXXY and BIJUVA in Canada and Israel.

In June 2019, we entered into the “Theramex License Agreement with Theramex to commercialize IMVEXXY and BIJUVA outside of the U.S., excluding Canada and Israel.

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

In connection with the Company’s transformation into a pharmaceutical royalty company, the termination of our executive management team (except for Mr.

Marlan Walker, our former General Counsel and current Chief Executive Officer) and all other employees was completed by December 31, 2022.

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

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

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

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.

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.

On April 14, 2022, we completed the divestiture of vitaCare with the sale of all vitaCare’s issued and outstanding capital stock (the “vitaCare Divestiture”).

We received net proceeds of $142.6 million, net of transaction costs of $7.2 million, and we recognized a gain on sale of business of $143.4 million.

Included in the net proceeds amount was $11.3 million of customary holdbacks as provided in the Purchase Agreement, which is recorded as restricted cash in the consolidated balance sheets.

The restricted cash was held by an escrow agent and was released to us in March 2023.

Additionally, we may receive up to an additional $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.

We will record the contingent consideration at the settlement amount when the consideration is realized or realizable.

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.

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

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

The operations of vitaCare were classified as discontinued operations in December 2022, when the Company completed the change in its business by becoming a royalty company.

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.

As of the date of the filing of this Annual Report, the future extent to which the COVID-19 pandemic may continue to materially impact our financial condition, liquidity, or results of operations remains uncertain and difficult to predict.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession or depression that has occurred or may occur in the future.

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.

Portfolio of our licensed products

On December 30, 2022, we granted an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin products sold under the BocaGreenMD® and vitaMedMD® brands and assigning the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma.

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.

As part of the FDA’s approval of IMVEXXY, we 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.

On December 30, 2022, we granted an exclusive license to commercialize the Company’s IMVEXXY in the United States and its possessions and territories to Mayne Pharma.

We also have entered into licensing agreements with third parties to market and sell IMVEXXY outside of the U.S.

We entered into the Knight License Agreement, with Knight pursuant to which, we granted Knight an exclusive license to commercialize IMVEXXY in Canada and Israel.

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

As of December 31, 2022, no IMVEXXY sales had been made through these licensing agreements.

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.

In connection with the observational study, we would have been required to provide progress reports to the FDA on an annual basis.

The obligation to conduct this study was transferred to Mayne Pharma as part of the License Agreement.

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.

On December 30, 2022, we granted an exclusive license commercialize the Company’s BIJUVA in the United States and its possessions and territories to Mayne Pharma.

We also 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 2022 and 2021, we had BIJUVA sales of $ 1.4 million made through the Theramex License Agreement, and such sales were included as license revenue in the statement s of operations.

In addition, in 2021, we received milestone payments comprised of an aggregate of EUR 1.0 million, or $1.2 million, in regulatory milestone payments based on regulatory approvals for BIJUVA in certain specified markets .

ANNOVERA (segesterone acetate (“SA”) and ethinyl estradiol (“EE”) vaginal system)

On December 30, 2022, we assigned the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma.

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.

ANNOVERA is commercially sold 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.

We 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.

In August 2021, we filed a supplemental New Drug Application (“NDA”) with the FDA to modify the testing specifications for ANNOVERA to allow increased consistency of supply of ANNOVERA.

In May 2022, the FDA approved the supplemental NDA for 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.

On December 30, 2022, we granted an exclusive license to commercialize, in the United States and its possessions and territories, 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 to Mayne Pharma.

Results of operations

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

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

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

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

2022 compared to 2021

Our total revenue 2021 was $87.0 million, an increase of $22.1 million, or 34.0%, compared to 2020.

The following table sets forth our revenue during these periods (in thousands):

Product revenue:

Prescription vitamin

Year ended December 31,

Product revenue, net

1 unchanged sentence

Total revenue, net

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):

Total gross profit

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%.

Cost of revenue

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,

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):

Selling and marketing

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Research and development

Restructuring expense

Total operating expenses

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.

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.

2020 compared to 2019

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):

Product revenue:

Prescription vitamin

Product revenue, net

License revenue

Total revenue, net

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.

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.

Income (loss) from operations

Other (expense) income:

Other (expense) income, net

Total other (expense) income, net

Income (loss) from continuing operations before income taxes

Provision for income taxes

Net income (loss) from continuing operations

Income (loss) from discontinued operations, net of income taxes

Net income (loss)

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

Revenue from continuing operations is related to our license agreements.

We recorded $70.0 million in license revenue related to the allocation of the initial upfront payment and guaranteed minimum royalties from the Mayne License Agreement during the year ended December 31, 2022, and $2.6 million in license revenue related to achieving previously established milestone payment targets and sales from other licensee during the year ended December 31, 2021.

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):

Total gross profit

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.

Our gross profit for 2022 was $68.6 million, an increase of $67.4 million, compared to 2021.

The increase in our gross profit was primarily a result of an increase in license revenue related to the initial upfront payment and guaranteed minimums from the Mayne Transaction.

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.

The following table sets forth our operating expense categories (in thousands):

Selling and marketing

General and administrative

Research and development

Total operating expenses

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.

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.

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.

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.

Total operating expenses for 2022 were $67.4 million, a decrease of $13.4 million, or 16.6%, compared to 2021.

Total operating expenses decreased primarily due to lower general and administrative expenses described below during 2022, partially offset by $9.5 million of restructuring expenses including severance, employee termination costs contract termination costs and write off of fixed assets related to restructuring activities following the Mayne Transaction.

Our general and administrative costs were $57.9 million for 2022, a decrease of $22.8 million, or 28.3%, compared to 2021.

This decrease was primarily related to $12.7 million in lower compensation and employee benefit costs, $6.7 million in lower stock-based compensation expenses, and $3.6 million in lower information technology expenses.

These decreases were partially offset by $3.2 million in higher expenditures attributable to various professional fees, such as legal, consulting, etc.

Income (loss) from operations.

For 2022, we had an income from operations of $1.2 million, as compared to a loss from operations of $79.6 million for 2021.

This change was attributable to $13.4 million in lower operating expenses and $67.4 million in higher gross profit.

Other income (expense), net.

In 2022, we had non-operating expense of $0.1 million compared to non-operating income of $0.2 million in 2021.

P rovision for income taxes .

In 2022 or 2021 , we recorded no provision for income taxes for continuing operations.

Net income (loss) from continuing operations .

For 2022, we had a net income of $1.1 million, or $0.12 per basic and $0.11 per diluted common share, compared to a loss of $79.3 million, or $9.96 per basic and diluted common share, for 2021.

Discontinued Operations— Revenues were $80.7 million for 2022, a decrease of $3.6 million, or 4.3%, as compared to the prior year.

The decrease was driven by a decrease in IMVEXXY revenue of $4.7 million, lower BIJUVA revenue of $0.5 million and lower prenatal vitamins revenue of $2.2 million, partially offset by higher revenue of ANNOVERA of $3.8 million.

Operating expenses were $97.6 million for 2022, a decrease of $35.7 million, as compared to the prior year.

Operating expenses decreased due to lower selling and marketing expenses of $33.0 million and lower research and development expenses of $2.1 million as compared to the prior year, partially offset by restructuring charges of $6.2 million recorded in 2022, which were recorded due to our business shift after granting an exclusive license to commercialize the Company’s IMVEXXY, BIJUVA, and prescription prenatal vitamin products and assigning the Company’s exclusive license to commercialize ANNOVERA to Mayne Pharma.

The decrease in operating expenses also reflected the reduction of vitaCare operating expenses in connection with its divestiture in April 2022 and the termination of employees on December 31, 2022 following the Mayne Transaction.

Operating loss from discontinued operations was $32.5 million, a decrease of $27.7 million as compared to the prior year.

We reclassified certain expenses that were associated with debt that was required to be repaid as a result of transaction with Mayne Pharma and the vitaCare divestiture to discontinued operations, which included interest, amortization of deferred financing costs as well as expense for accretion of the Company’s newly-designated Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”) and loss on extinguishment of debt.

Discontinued operations other income (expense) reflects a $143.4 million gain on the sale of the vitaCare business and a $62.0 million gain on sale of ANNOVERA, net of transaction costs partially offset by $17.0 million in expense for accretion of Series A Preferred Stock in 2022, $8.4 million in loss on extinguishment of debt in connection with amendments to the Financing Agreement (as defined below) during 2022 and $3.1 million in higher interest expense and amortization of deferred financing costs as compared to 2021.

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

Liquidity and capital resources

O ur primary use of cash is to fund the continued commercialization of our hormone therapy and contraceptive products.

Our primary use of cash is to fund the continued operations of our company.

We have funded our operations primarily through public offerings of our common stock and private placements of equity and debt securities.

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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

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.

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) .

Net cash used in operating activities

On April 14, 2022, we completed the vitaCare Divestiture and included $11.3 million of customary holdbacks, as provided in the Purchase Agreement, which is recorded as restricted cash in the consolidated balance sheets.

The restricted cash was held by an escrow agent and was be released to us in March 2023.

Additionally, we may receive up to an additional $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.

We utilized $120.0 million of net proceeds from the vitaCare Divestiture to make a prepayment of the loans under the Financing Agreement under the terms of Amendment No.

9 of the Financing Agreement.

On December 30, 2022, we granted Mayne Pharma (i) an exclusive, sublicensable, perpetual, irrevocable license to research, develop, register, manufacture, have manufactured, market, sell, use, and commercialize the Licensed Products in the United States and its possessions and territories and (ii) an exclusive, sublicensable, perpetual, irrevocable license to manufacture, have manufactured, import and have imported the Licensed Products outside the United States for commercialization in the United States and its possessions and territories.

The total consideration from Mayne Pharma to us under the License Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net working capital as determined in accordance with the transaction agreement dated December 4, 2022, and subject to certain adjustments, (iii) a cash payment of approximately $1.0 million at closing for prepaid royalties in connection with the License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the License Agreement, as amended.

The royalty rate will decrease to 2.0% on a Product-by-Product basis upon the earlier to occur of (i) the expiration or revocation of the last patent covering a Product and (ii) a generic version of a Product launching in the United States.

Mayne Pharma will pay to the Company minimal annual royalties of $3.0 million per year for 12 years, adjusted for inflation at an annual rate of 3%, subject to certain

further adjustments, including as described below.

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

See “Going Concern” below for further discussion related to our ability to generate and obtain adequate amounts of cash to meet our liquidity needs and our plans for to satisfy our such needs in the short-term and in the long-term.

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

Cash flow from continuing operations

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by financing activities

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.

Net cash (used in) provided by financing activities

2022 compared to 2021

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.

Operating Activities from continuing operations.

Net cash provided by operating activities in 2022 was $9.4 million, compared to net cash used in operating activities of $55.1 million for 2021.

This decrease of $64.5 million or 117%, was primarily due to a $80.4 million decrease in our net loss from continuing operations resulting from allocated to day one license revenue from the Mayne Transaction, a $8.7 million decrease in cash usage related to changes in operating assets and liabilities, and a $7.2 million increase in non-cash expenditure adjustments as compared to 2021.

Investing Activities from continuing operations.

Net cash used in investing activities for 2022 was $0.4 million, compared to net cash used in investing activities of $2.2 million for 2021.

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.

This change was due to lower fixed asset and patent related costs as compared to 2021.

Financing Activities from continuing operations.

Net cash used in financing activities for 2022 was $235.2 million, compared to net cash provided by financing activities of $129.6 million for 2021.

This change of $364.8 million, or 281.6%, was primarily related to higher repayment of debt of $169.4 million as compared to 2021, the redemption of our Series A Preferred Stock of $38.7 million at liquidation preference, and the repayment of make-whole derivative of $3.0 million as compared to 2021.

This was partially offset by proceeds from Series A Preferred Stock of $21.7 million, proceeds from make-whole payment of $3.3 million, lower proceeds from sale of common stock of $181.7 million, lower payment for financing fees of $3.5 million and lower proceeds from sale of stock related to employee stock purchase plan of $0.2 million as compared to 2021.

Operating Activities from discontinued operations.

Net cash used in operating activities in 2022 was $13.4 million as compared to net cash used in operating activities of $87.6 million for 2021.

This decrease relates to a decrease in net loss of $204.0 million reflecting four months of vitaCare activities in 2022 as compared to a full year in 2021 and reductions in marketing expenses for the commercial business as well as lower research and development expenses to preserve cash in 2022, as well as increase in non-cash expenditure adjustments which included debt financing fees, non-cash interest expense, accretion of Series A Preferred Stock and make-whole payment accretion and the loss of extinguishment of debt as compared to 2021.

Investing Activities from discontinued operations.

Net cash provided by investing activities for 2022 was $223.8 million which included proceeds from divesture of vitaCare of $142.6 million and proceeds from the sale of ANNOVERA of $81.2 million in 2022.

For additional details, see the consolidated statements of cash flows included in this 2022 10-K Report.

Other liquidity measures

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.

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.

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.

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

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 .

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

As of December 31, 2022, we had a royalty receivable of $1.5 million relating to the short-term portion of receivable from Mayne Pharma and $20.3 million relating to the long term portion of royalty receivable which includes royalties recognized from the Minimum Annual Royalty.

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

On December 30, Mayne Pharma acquired our inventory balance of approximately $8.4 million , which is subject to certain net working capital adjustments.

On December 30, 2022, we repaid all obligations under the Financing Agreement and the Financing Agreement was terminated.

Debt to the consolidated financial statements included in this Annual Report.

Going c oncern

On December 4, 2022, we entered into agreements with Mayne Pharma pursuant to which we (i) granted Mayne Pharma an exclusive license to commercialize IMVEXXY, BIJUVA, and prescription prenatal vitamin products (in the United States and its possessions and territories), (ii) assigned to Mayne Pharma the Company’s exclusive license to commercialize ANNOVERA in the United States and its possessions and territories, and (iii) sold certain other assets to Mayne Pharma.

The total consideration from Mayne Pharma to the Company for the purchase of the Transferred Assets and the grant of the licenses under the License Agreement was (i) a cash payment of $140.0 million at closing, (ii) a cash payment of approximately $12.1 million at closing for the acquisition of net working capital subject to certain adjustments, (iii) a cash payment of approximately $1.0 million at closing for prepaid royalties in connection with the License Agreement Amendment and (iv) the right to receive the contingent consideration set forth in the License Agreement, as amended.

On the Closing Date, we repaid all obligations under the Financing Agreement, dated as of April 24, 2019, as amended, with Sixth Street Specialty Lending, Inc., as administrative agent, the various lenders from time-to-time party thereto, and certain of the Company’s subsidiaries party thereto from time to time as guarantors (the “Financing Agreement”) and the Financing Agreement was terminated.

Following the transaction with Mayne Pharma, we changed our business to become a royalty company, currently receiving royalties on products licensed to pharmaceutical organizations that possess commercial capabilities in the relevant territories.

We may need to raise additional capital to provide additional liquidity to fund our operations until we become cash flow positive.

To address our capital needs, we are pursuing various equity and debt financing and other alternatives.

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 .

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

To the extent that we raise additional capital through the sale of such securities, the ownership interests of our existing stockholders will be diluted, and the terms of these new securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders.

If we are not successful in obtaining additional financing, we could be forced to discontinue or curtail our business operations, sell assets at unfavorable prices, or merge, consolidate, or combine with a company with greater financial resources in a transaction that might be unfavorable to us.

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.

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.

Along with considering additional financing and other strategic alternatives, we have reviewed numerous potential scenarios in connection with steps that we may take to reduce our operating expenses.

Our ability to sell equity securities may be limited by market conditions, including the market price of our common stock and the potential delisting of our common stock from the Nasdaq Global Select Market, and our available authorized shares.

If Mayne Pharma’s sales of IMVEXXY, BIJUVA, or ANNOVERA are delayed, if the net working capital settlement with Mayne Pharma under the Transaction Agreement is greater than estimated, or if we are unsuccessful with future financings and or the continued impact of the COVID-19 pandemic or the supply chains related to the third-party contract manufacturers is worse than we anticipate, our existing cash reserves would be insufficient to satisfy our liquidity.

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.

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A summary of contractual obligations is as follows:

Debt obligations (1)

Interest obligations (2)

Purchase obligations (3)

Operating lease obligations

Total contractual obligations

Debt obligations are shown based on the contractual obligations of the Financing Agreement in accordance with Amendment No.

9 to the Financing Agreement.

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.

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

under these indemnification provisions is sometimes unlimited.

Pursuant to these agreements, we generally agree to indemnify, hold harmless, and reimburse indemnified parties for losses suffered or omitted by us.

The maximum potential amount of future payments we could be required to make under these indemnification provisions is sometimes unlimited.

We have not incurred material costs to defend lawsuits or settle claims related to these indemnification provisions.

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Accordingly, we have no liabilities recorded for these provisions as of December 31, 2022 and 2021.

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

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

These generally relate to lawsuits, claims, environmental actions, or the actions of various regulatory agencies.

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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.

On an ongoing basis, we evaluate our estimates, including those related to unbilled revenue, 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.

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Basis of presentation, new accounting standards and summary of significant accounting policies” to the consolidated financial statements included in this 2022 10-K Report.

Discontinued Operations

Discontinued operations comprise activities that were disposed of at the end of the period, represent a separate major line of business that can be clearly distinguished for operational and financial reporting purposes and represent a business shift having a major effect on the Company’s operations and financial results according to Accounting Standard Codification (“ASC”) Topic 205, Presentation of Financial Statements.

An adjustment has been made to the consolidated statements of operations for the twelve months ended December 31, 2022 and 2021 to reclassify commercial activities and vitaCare activities to discontinued operations as the cessation of these operations, in the aggregate, represented a business shift that will have a major effect on the Company’s operations and financial results.

For additional information, see Note 2 - Discontinued Operations, in the notes to the consolidated financial statements appearing elsewhere in this 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 manage and operate as one business, which prior to December 2022 was focused on creating and commercializing products targeted exclusively for women and after we signed License Agreement with Mayne Pharma, it is focused on collecting royalties from licensing our products.

Our business 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;

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

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.

License revenue

License arrangements may consist of non-refundable upfront license fees, exclusive licensed rights to patented or patent pending technology, and various performance or sales milestones and future product royalty payments.

Some of these arrangements may include multiple performance obligations.

Non-refundable up-front fees that are not contingent on any future performance by us, and do not require continuing involvement on our part, are recognized as revenue when the right to use functional intellectual property is transferred to the customer.

On December 30, 2022, we closed a License Agreement with Mayne Pharma pursuant to which we sold to Mayne Pharma the exclusive license rights in our product ANNOVERA and granted an exclusive license in other products, including IMVEXXY and BIJUVA.

Under the terms of the License Agreement, we received $140 million at closing and we are eligible to receive additional payments in the aggregate of up to an additional $30 million based on the achievement of sales milestones (collectively, the “Milestone Amounts”).

The proceeds at closing were allocated between consideration for the sale of ANNOVERA and the initial license fee for the Licensed Products, as the sale of ANNOVERA was accounted for under ASC 610-20, Gains and Losses from Derecognition of Nonfinancial Assets in arriving at the gain on disposal (see Note 2 to the financial statements included in this Annual Report), while the license grant of the other products were recognized under the provisions of ASC 606, Revenue from Contracts with Customers, as a license of functional intellectual asset.

The proceeds were allocated among the Licensed Products on the relative net present value of forecasted future product sales from those products.

The Milestone Amounts will be recognized, as applicable, in subsequent periods based on actual product sales that exceed the respective net sales milestones as such variable consideration is constrained by the occurrence of the subsequent sales.

Our royalty revenue recognized in 2022 primarily related to royalties provided for under the Mayne License Agreement based on Mayne Pharma’s sales of the Licensed Products subject to that agreement.

Under the agreement, the Mayne License Agreement, the Company is entitled to earn royalties on net sales of all of the Licensed Products at a royalty rate of (i) 8% on the first $80 million of net sales of the Licensed Products and (ii) 7.5% on net sales of all of the Licensed Products after the first $80 million of net sales.

The royalty rate is subject to a 2% reduction upon the earlier to occur of (i) the expiration or revocation of the last valid claim covering a Licensed Product, and (ii) a generic product launch (a “LOE”).

We are entitled to minimum annual royalties beginning with the year ending December 31, 2023 ($3 million annual minimum) and continuing with 3% annual increases through the year ending December 31, 2034 (the “Minimum Annual Royalty”).

The Minimum Annual Royalty totaled $42.6 million, and this total amount was allocated among the Licensed Products on the relative net present value of forecasted future product sales from those products.

The portion allocated to consideration for the sale of ANNOVERA was attributed towards the gain on disposal of that asset.

For the remaining portion allocated to the license grants for the other products, we determined that the minimum guarantee underlying the Minimum Annual Royalty should be treated as fixed consideration and recognized under ASC 606 at the point in time when the license was transferred.

Since the Minimum Annual Royalty will be received in annual installments through 2034, we determined the transaction price allocated under ASC 606 contained a significant financing component, and we therefore determined the initial royalty revenue and corresponding receivable based on the present value of the allocated Minimum Annual Royalty.

The present value was calculated using a discount rate of 10.45%, based on the credit characteristics of Mayne Pharma and the timing of future payments, and the value will be accreted to full value through the earlier of January 1, 2034 or a LOE.

This royalty receivable is a contract asset as of December 31, 2022, and is further subject to offset by Mayne Pharma.

Royalty revenue earned in excess of the Minimum Annual Royalty will be recognized under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following:

1) when the subsequent sale occurs or 2) when the performance obligation to which some or all of the sales-based royalty has been allocated has been satisfied (or partially satisfied).

We applied the royalty recognition constraint required under the guidance for sales-based royalties, which requires a sales-based royalty to be recorded no sooner than the underlying sale.

Therefore, royalties on sales of products commercialized by Mayne Pharma will be recognized in the subsequent periods that the Licensed Products are sold.

For additional discussion on revenue, see “L.

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 2022 10-K Report.

During 2022 and 2021, we had BIJUVA sales of $1.4 million made through the Theramex License Agreement, and such sales were included as license revenue in the statement s of operations.

We previously granted licenses to commercialize the Company’s BIJUVA product outside of the United States to Theramex and Knight.

Share-based payment awards

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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.

Restructuring Costs.

Our restructuring costs consist primarily of severance, employee termination costs contract termination costs and write off of fixed assets related to restructuring activities.

Recent accounting pronouncements

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Basis of Presentation, New Accounting Standards and Significant Accounting Policies" to the consolidated financial statements.

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.

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.

Change in and disagreements with accountants on accounting and financial disclosure

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

What changed 10-K

Item 7. Management’s Discussion and Analysis