TherapeuticsMD (TXMD -5.88%) is a small-cap pharmaceutical stock that focuses on women's health issues. The company is still in its early growth stages, but with three products already in its portfolio, it could be an attractive growth opportunity for investors today.
The stock has been struggling and it trades for less than $1 away from its 52-week low, so let's take a closer look to see if it's headed even lower, or if investors should consider buying shares of the company today.
Lack of profitability likely a concern for investors
Over the trailing 12 months, TherapeuticsMD has incurred net losses totaling $166 million. Losses have, unfortunately, been the norm for the company, and there hasn't been much progress made toward breakeven. In two years, the company's selling, general, and administrative costs of $45 million have tripled, and while revenue has increased as well, it simply hasn't come fast enough to offset the rise in costs. To make matters worse, the company isn't even cash-flow positive as it has burned cash from its operating activities in each of the past 10 quarters.
That's a problem for investors because if TherapeuticsMD isn't generating cash on its own, it'll have to raise it through either debt or equity. Neither option is particularly attractive to investors as the former will lead to more expenses, while the latter will result in share dilution. But that's nothing new for investors, either. Unfortunately, with the stock price down more than 50% over the past 12 months while the S&P 500 has risen 23%, TherapeuticsMD stock has already taken a big hit and can't afford to take many more.
Will there be enough growth, and will it come fast enough?
The company is banking on multiple drugs to help pull the company out of the red, including Imvexxy, Bijuva, and Annovera. In its third-quarter results released in November, the company saw good growth among these products. Imvexxy, which is a vaginal estrogen therapy, saw year-over-year revenue growth of 53%. At $4.8 million in revenue, it made up more than half of the company's product revenue of $8.2 million and was responsible for the growth in that section.
Bijuva, which relieves hot flashes that occur during menopause, brought in $491,000 in sales, and Annovera, a contraceptive vaginal ring, added another $400,000 in revenue. Neither of these products generated any sales for TherapeuticsMD in the prior-year quarter, as they were both launched in 2019. Imvexxy, however, hit the markets in the latter half of 2018.
The reason TherapeuticsMD had such a strong quarter, with sales growth of 583%, was thanks to license revenue, which totaled $15.5 million. That revenue came from an upfront fee in relation to a license agreement. Last year, Theramex and TherapeuticsMD reached an agreement where Theramex will commercialize Bijuva and Imvexxy outside of the U.S. market.
Without the upfront fee, TherapeuticsMD's numbers would have looked even worse in Q3. And while the company is making moves to commercialize its products, the question is how long it will take for the company to be profitable, and whether investors are willing to wait. The company projects that its three products, Imvexxy, Bijuva, and Annovera, will peak at around $1.85 billion in sales, according to Fool.com. It's fair to say that the company is nowhere near reaching that today, and there's no guarantee that it ever will. It's making progress, but it may not be quick enough given the company's cash burn and falling share price.
Is TherapeuticsMD worth the risk?
Given how early the company still is in its business, now may not be the right time to consider investing in TherapeuticsMD. While there's certainly potential there, there are still many question marks surrounding how well the company's products will do. It's a competitive industry, and with many women's health products on the market, it may not be easy for TherapeuticsMD to generate the growth it's expecting and hoping for. The early results are strong, but investors will need to see more. In the meantime, the company is going to continue spending on promoting its products and sales efforts, all of which could drain the company's cash.
For now, investors are better off waiting to see how TherapeuticsMD does and how popular its products prove to be with consumers before investing in the pharmaceutical stock.