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TherapeuticsMD Inc (NYSEMKT:TXMD) Just Validated Our Long Term Thesis

TherapeuticsMD Inc (NYSEMKT:TXMD) Just Validated Our Long Term Thesis
Written by
Chris Sandburg
Published on
November 7, 2017
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Back at the end of September, we published this piece on TherapeuticsMD Inc (NYSEMKT:TXMD).The company has just collapsed from early month highs in and around $6.90 a share and the dip kicked off a pretty substantial decline to bottom out during the middle of last week at $4.36.That's a nearly 40% decline in less than a month.At the time of our coverage, we put forward the thesis that – however far this stock fell – it would eventually rebound and that, in turn, the farther the fall, the deeper the discount to the eventual recovery.Yesterday, management put out the release that confirmed our argument.On the back of the release, the company closed up more than 31% and, premarket on Tuesday, has picked up a couple more percentage points to enter the session today at around $5.75. TXMD ChartThat's still a little off highs and we think that, going forward, said highs will be left in the rearview mirror – assuming the fundamentals that underpin our thesis remain in place.Here's what we are looking for going forward as supportive of this argument.For those that missed our previous coverage, our argument for a return to the upside was rooted in a Complete Response Letter (CRL) issued by the FDA back in May, in response to the company's New Drug Application (NDA) for a drug called Yuvvexy. It's a self-administration gel capsule designed for the treatment of moderate to severe pain during intercourse in post-menopausal women.When women go through menopause, they stop (largely) producing estrogen and this results in the thinning of cells that line the vaginal wall. This causes pain and the current standard of care treatment is essentially an estrogen replacement therapy designed to reinforce the thinning cells. The problem is, however, the steroidal therapy is linked to cancer and has other side effects (rooted in the steroids) associated with it.With Yuvvexy, the company has reduced the dose required to induce the efficacy afforded by the current SOC, with the aim being to reduce the side effects and, additionally, the longer term risk of cancer.Anyway, the company submitted its application supported by some great efficacy data and a three-month safety study. The FDA responded saying it wanted a twelve-month safety study, presumably rooted in the just discussed cancer risk.TherapeuticsMD has (since the CRL) maintained that the FDA caught it off guard with the request and that it would be able to persuade the agency to let it resubmit the application without the long-term study data. Markets weren’t convinced. For reasons we outlined in this piece, we were.And it turns out our faith was justified.As per the outcome of a meeting that took place at the end of last week, the FDA has said it will allow a twelve month post-approval study in place of the pre-approval study it initially requested, meaning the company can get its drug to market and start generating revenues before having to find (in its entirety) what might turn out to be a pretty expensive safety study.This is important not only because it pretty much guarantees approval near term, but also because it removes the threat of dilution that was hanging over the company before this development hit press.So what's next?Management expects to resubmit the application in the coming weeks and we expect a quick acceptance by the agency. Once accepted, we're looking at anywhere between 3-6 months before we see an outcome. Given what's happened to date, we think the result should weight towards the nearer timeframe, meaning we could see an approval during the first quarter of next year.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on TXMD, sign up below!Image courtesy of Hey Paul Studios via FlickrDisclosure: We have no position in TXMD and have not been compensated for this article.

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