Rebound May Be in Store for Beaten-Down Shares of TherapeuticsMD

Although many biotechnology stocks have fallen precipitously this year due to disappointing clinical trial results, what is the deal with a stock that has skidded from its highs late last year despite encouraging research and development news?

That would be TherapeuticsMD (TXMD) .

The stock has declined from more than $11 in late December to less than $7, despite announcing the Food and Drug Administration's acceptance last month of its 505(b)(2) new drug application for Yuvvexy, which treats dyspareunia during menopause. TherapeuticsMD expects to receive a regulatory decision for Yuvvexy by mid-May.

TherapeuticsMD's share slide, while tracking the overall biotech market, has also responded to disappointing second-quarter results.

The company reported a revenue decline of 9% to $4.4 million, primarily due to lower pricing for its line of prenatal and over-the-counter vitamins, though unit volumes increased slightly. The second-quarter loss was $21.1 million or 11 cents a share, narrower than the $27.2 million loss a year earlier but about the same as the first-quarter loss of $21 million.

The two primary contributors to the second-quarter loss were R&D expenses of $13.8 million, which were less than a year earlier, and selling, general and administrative costs of $10.6 million, which was more than a year earlier.

Cash burn for the first six months of the year was about $35 million. With more than $166 million in cash on hand, the company has well over two years' worth of funds available to finance operations.

TherapeuticsMD late last year reached a market capitalization of more than $2 billion. This lofty valuation was clearly not a result of its $20 million in annual revenue vitamin business but rather from its late-stage clinical products and core hormone technology, SYMBODA.

Meanwhile, Yuvvexy addresses a $20 billion market of 32 million women suffering from menopause-related chronic and progressive vulvar and vaginal atrophy. Competitors in this fragmented market include Allergan, Novo Nordisk, Pfizer and Japan's Shionogi.

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An even larger market is addressed by TherapeuticMD's THX-001HR, now in Phase 3 trials, of 36 million women, or $25 billion, suffering from moderate to severe hot flashes due to menopause. Top-line results for TherapeuticMD's THX-001HR Replenish Phase 3 trial are expected out by the end of this year, and THX-001HR may hold a marketing advantage as the potential first and only bio-identical FDA-approved combination hormone therapy product with bio-identical 17 β-estradiol and bio-identical progesterone.

TherapeuticsMD plans to use its team of 50 sales representatives to market new products, with up to 100 more added in smaller geographic territories as the company expands.

Further down the road, TherapeuticsMD has intellectual property related to transdermal patch-delivered hormone therapy, including TX-005HR (transdermal progesterone) and TX-006HR (transdermal 17 β-estradiol plus progesterone), both ready to begin early-stage human clinical trials once the FDA gives the green light.

What catalysts could help TherapeuticsMD's share price bounce back this year?

Filing its NDA for its second main pipeline product, THX-001HR, by the end of this year will be a positive event. A return to revenue growth in its marketed products for the third quarter would also be viewed as a positive.

Although the company has remained independent so far to date related to product marketing, a partnership agreement either for non-U.S. territories for its two Phase 3 products or perhaps a worldwide deal for its earlier-stage assets would also provide a spark, whether it was by adding financial muscle or by identifying a potential acquirer. Alternatively, with plenty of financial resources, TherapeuticsMD could make an acquisition of its own, adding to the number of products in its sales reps' marketing basket or expanding its R&D portfolio.

Let's now look at several small-cap companies also in the women's health market.

1. Female Health (FHCO)
This Chicago-based consumer health company markets the FC2 female condom that provides women dual protection against unintended pregnancy and sexually transmitted infections, including HIV/AIDS. The FC2 is sold worldwide, primarily to large non-profit agencies, governments and other commercial agencies.

Sales of FC2 have stalled at about $25 million on an annual basis, so Female Health has signed an agreement to merge into privately held Aspen Park Pharmaceuticals, a more diversified developer of both women's and men's health products. The merger, if ratified by shareholders, is expected to be completed this year, and the combined companies will remain public, with Aspen Park Pharmaceuticals management leading the new firm.

2. Juniper Pharmaceuticals  (JNP)
Formerly Columbia Labs, Boston-based Juniper Pharmaceuticals just recently brought in a new chief executive, Alicia Secor. Juniper Pharmaceuticals has one approved product, CRINONE, a progesterone gel used for progesterone supplementation or replacement in infertile women with progesterone deficiency, which is licensed to Allergan in the U.S. and Merck KGaA internationally.

The company is also developing three pipeline products, including JNP-0101, an oxybutynin intravaginal ring to treat overactive bladder; JNP-0201, a product candidate with natural progesterone and natural estradiol for used in hormone replacement therapy in menopausal women; and JNP-0301, a progesterone IVR used for the prevention of pre-term birth. The company also has a pharmaceutical service business based in the U.K., and combined saw its revenue grow 16% to $11.9 million in the second quarter.

Juniper Pharmaceuticals recently suffered a setback when its Phase 2 trial for COL-1077 10% lidocaine vaginal gel for pain relief in women undergoing endometrial biopsies was discontinued due to lack of efficacy, but the company hopes to rebound with the initiation of a Phase 1 study for its JNP-0101 sometime next year. With close to $50 million in annual revenue, $13 million in cash on hand and a market cap of less than $60 million, Juniper Pharmaceutical shares remain a bargain for investors or acquirers, alike.

3. OvaScience (OVAS)
OvaScience is developing new fertility treatment options based around its discovery of egg precursor cells, immature egg cells found inside the protective ovarian lining. OvaScience's Augment fertility treatment is available in certain in vitro fertility clinics in Canada, Japan and Western Europe but not yet in the U.S.

The company is also developing the OvaPrime fertility treatment, which could allow a woman to increase her egg reserve and the OvaTure next-generation IVF treatment, which could help a woman produce healthy, young, fertilizable eggs without hormone injections. OvaScience has brought in a new management team with experience internationally and completed a new round of financing.

The company hopes by the end of this year to determine a way to enter the U.S. market with Augment. OvaScience held close to $148 million in cash at the end of June, with a market cap of just $250 million.

4. Viveve Medical (VIVE)
Medical-device manufacturer Viveve Medical just recently received 510(k) regulatory clearance from the FDA for its Viveve System indicated for use in general surgical procedures for electrocoagulation and hemostasis. Earlier this fall, Viveve Medical filed an investigational device exemption to the FDA for authorization to begin is VIVEVE II study, which will use the company's patented reverse-thermal gradient radio frequency technology to tighten vaginal tissue.

Viveve Medical recently added to its cash coffers with a $15 million equity offering and simultaneously listed on Nasdaq.

This article is commentary by an independent contributor. At the time of publication, the author owned shares of PFE.

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