TherapeuticsMD Inc (NYSEMKT:TXMD) just announced that it is launching a $12.4 million public offering and that, concurrent to the offering, the company will be voluntarily delisting from the NYSE and becoming a NASDAQ stock.
On the back of the news, TherapeuticsMD shares have taken a real hit. The company is down around 13% from its Monday close and trades for a 23% discount to its early September peak.
Back in August, we published this piece outlining our thoughts on TherapeuticsMD and, specifically, suggesting it’s as close to a sure thing in the biotechnology space that you’re going to get. In the wake of the recent action, we maintain this stance and suggest that the latest decline is nothing but an opportunity to pick up a discounted exposure to an eventual upside revaluation.
So why are we so sure of this one?
For those new to the company, TherapeuticsMD has developed an asset called TX-004HR, which is targeting the treatment of moderate-to-severe vaginal pain during sexual intercourse (dyspareunia), a symptom of vulvar and vaginal atrophy (VVA) due to menopause. The company collected what looked like some strong data, submitted it to the FDA as part of a New Drug Application (NDA) and looked as though it was in line for a relatively speedy and painless regulatory approval. However, shortly after submission, the agency responded with a Complete Response Letter (CRL) detailing the fact that it required some long-term safety data before approval could be considered.
At the time, TherapeuticsMD noted that this was something of an oversight on the part of the FDA and that the agency should have outlined its long-term data requirement at protocol approval. This could become important near-term, for reasons we will get into in a little more detail shortly.
Anyway, TherapeuticsMD collected the data and has resubmitted it. On November 3, the company will sit down with the FDA as part of a type A meeting and will learn whether the data it has collected (as was collected from legacy trials as opposed to sponsor run) will be sufficient to warrant approval or whether TherapeuticsMD will have to carry out additional trials itself to collect the data it needs.
So here’s the thing.
If the FDA accepts data as is, TherapeuticsMD is going to run in anticipation of a near-term approval. If the FDA requires further data, TherapeuticsMD is very likely to still pick up an approval, but it’s going to have to spend some money conducting trials before it does.
Both scenarios end with an approval. The latter adds an additional time and money factor to the situation, but that’s about all.
The latest raise, as per the registration prospectus, is primarily going to be used for pre-commercialization efforts related to TX-004HR. in other words, if we see the more favorable of the first two scenarios play out, the cash will be used to execute on a rollout strategy. If receive less favorable outcome, the cash would be used to conduct the trials required to satisfy the FDA and, then, to execute on a rollout strategy.
The voluntary delisting isn’t really a factor in all of this for us. NASDAQ is likely more favorable to biotechnology companies than NYSE anyway, so while some traders might panic at the site of the word ‘delisting’, that sort of response is unwarranted.
So, the bottom line here is that it’s almost certainly only a matter of time (i.e. when not if) before TherapeuticsMD can start to generate revenues with TX-004HR and, whichever way you look at it, the upcoming raise was unavoidable. Markets will now look to November 3 as a potential upside catalyst for the company and, if it hits press is favorable, all is well. Even if it doesn’t, however, the subsequent dip in share price will only serve to cheapen any exposure to the eventual upside run.
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Image courtesy of Ed Uthman via Flickr
Disclosure: We have no position in TXMD and have not been compensated for this article.