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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2023
Commitments and Contingencies [Abstract] |
Commitments and contingencies | 8. Commitments and contingencies Leases In October 2018, we entered into a lease for executive, administrative, operations and sales offices in Boca Raton, Florida. The lease includes 62,748 rentable square feet, or the full premises, of which the lease on 7,561 square feet commenced in 2018 and the lease on 48,651 square feet commenced in August 2019, or the full premises commencement date. In June 2019, we entered into an agreement with the same lessors to lease additional 6,536 square feet of administrative office space in the same location, pursuant to an addendum to such lease, which commenced in May 2020. The lease will expire 11 years after the full premises commencement date, unless terminated earlier in accordance with the terms of the lease. We have the option to extend the term of the lease for two additional consecutive periods of five years. The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised. The term of the lease includes escalating rent and free rent periods. We are also responsible for certain other operating costs under the lease, including electricity and utility expenses. As a result of shifting our business to become a license company and terminating our employees, we have sublet the majority of our headquarters and are in the process of subleasing the remainder. We anticipate that sublease income will approximate the amounts due under our existing leases, therefore no impairment of the right of use asset was recorded in 2023. For 2023 and 2022, operating lease expense (including all variable costs) related to our real estate leases was $2.3 and $2.1 million, respectively. In 2023 and 2022, our rental income on sublease of our three suites which were subleased following the vitaCare transaction was $1.3 million and $0.0 million, respectively. As of December 31, 2023, our remaining lease payments were as follows (in thousands):
Year ending December 31, |  |  |
2024 |  |  | 1,477 |
2025 |  |  | 1,513 |
2026 |  |  | 1,551 |
2027 |  |  | 1,590 |
2028 |  |  | 1,630 |
Thereafter |  |  | 2,664 |
Total undiscounted lease payments |  |  | 10,425 |
Less: imputed interest |  |  | 2,420 |
Present value of lease payments |  | $ | 8,005 |
The following table sets forth supplemental balance sheet information related to leases (in thousands):
|  | As of December 31, |
|  | 2023 |  |  | 2022 |
Assets: |  |  |  |  |  |
Operating lease right-of-use assets |  | $ | 6,873 |  |  | $ | 7,580 |
Liabilities: |  |  |  |  |  |  |  |
Operating lease liabilities current (included in accrued expenses and other current liabilities) |  | $ | 1,473 |  |  | $ | 1,390 |
Operating lease liabilities, non-current |  | $ | 6,532 |  |  |  | 7,369 |
Total operating lease liabilities |  | $ | 8,005 |  |  | $ | 8,759 |
The following table presents other information related to leases:
|  | As of December 31, |
|  | 2023 |  |  | 2022 |
Weighted average remaining term (years) - operating leases |  |  | 6.7 |  |  |  | 7.7 |
Weighted average discount rate - operating leases |  |  | 8.3 | % |  |  | 8.3 | %
Cash paid for amounts included in the measurement of lease liabilities from operating lease (in thousands) |  | $ | 1,443 |  |  | $ | 1,413 |
Right-of-use assets obtained in exchange for new operating lease obligations (non-cash in thousands) |  | $ | — |  |  | $ | — |
Mayne Pharma Agreement Mayne Pharma paid us approximately $12.1 million at closing on December 30, 2022, for the acquisition of net working capital, subject to certain adjustments as determined in accordance with the Transaction Agreement. While the Transaction Agreement calls for much of the net working capital to be trued-up shortly after the Closing Date in 2023, for a period of one year following the Closing Date in the case of payer rebates and wholesale distributor fees and two years following the Closing Date in the case for allowance for returns, net working capital amounts will be adjusted to arrive at final net working capital under the Transaction Agreement. In September 2023, we revised certain accrual estimates including increasing our working capital adjustment accrual from $3.5 million to $5.5 million for amounts anticipated to be owed under the Transaction Agreement. In December 2023, we made a $5.5 million payment to Mayne Pharma to settle certain working capital amounts that were required to be trued-up shortly after the Closing Date, excluding the allowance for returns, allowance for payer rebates, and allowance for wholesale distributor fees. In February 2024, the Company received Mayne Pharma’s calculation of allowance for payer rebates and wholesale distributor fees which differed significantly from the Company’s estimate of the allowances. The Company believes its estimated allowances for payer rebates and wholesale distributor fees are reasonable and intends to resolve this matter through the process outlined in the Transaction Agreement. Given the recent receipt of Mayne Pharma’s allowance calculation and the nature of the estimates involved, the outcome of this matter is uncertain at this point. As a result, the Company cannot reasonably estimate a range of loss, and accordingly, the Company has not accrued any additional liability associated with Mayne Pharma’s allowance calculation for payer rebates and wholesale distributor fees. Additionally and as of December 31, 2023, the Company believes no additional accrual is required for amounts that may be owed for the allowance for returns. The Company has not recorded any contingent gains or receivables for any such allowances. Management continues to monitor the unresolved and pending net working capital items as changes to estimated amounts owed or amounts due from Mayne Pharma that may be material. Population Council License Agreement Under the terms of our license agreement with the Population Council, Inc. (the “Population Council License Agreement”), we paid the Population Council a milestone payment of $20.0 million in 2018, which was within 30 days following the approval by the FDA of the New Drug Application (“NDA”) for ANNOVERA, and $20.0 million in 2019 following the first commercial batch release of ANNOVERA. The aggregate $40.0 million of milestone payments were recorded as license rights. The Population Council was also eligible to receive future payments upon the achievement of certain commercial sales milestones of ANNOVERA. On December 30, 2022, we assigned the ANNOVERA license to Mayne Pharma. Our rights and obligations under the Population Council License Agreement have been transferred to Mayne Pharma and may revert back to us upon the occurrence of certain events. Legal proceedings In February 2020, we received a Paragraph IV certification notice letter (the “IMVEXXY Notice Letter”) regarding an Abbreviated New Drug Application (“ANDA”) submitted to the FDA by Teva Pharmaceuticals USA, Inc. (“Teva”). The ANDA seeks approval from the FDA to commercially manufacture, use, or sell a generic version of the 4 mcg and 10 mcg doses of IMVEXXY. In the IMVEXXY Notice Letter, Teva alleges that TherapeuticsMD patents listed in the FDA’s Orange Book that claim compositions and methods of IMVEXXY (the “IMVEXXY Patents”) are invalid, unenforceable, and/or will not be infringed by Teva’s commercial manufacture, use, or sale of its proposed generic drug product. The IMVEXXY Patents identified in the IMVEXXY Notice Letter expire in 2032 or 2033. In April 2020, we filed a complaint for patent infringement against Teva in the United States District Court for the District of New Jersey arising from Teva’s ANDA filing with the FDA. We are seeking, among other relief, an order that the effective date of any FDA approval of Teva’s ANDA would be a date no earlier than the expiration of the IMVEXXY Patents and equitable relief enjoining Teva from infringing the IMVEXXY Patents. Teva has filed its answer and counterclaim to the complaint, alleging that the IMVEXXY Patents are invalid and not infringed. In July 2021, following a proposal by Teva, the District Court entered an order temporarily staying all proceedings in the IMVEXXY litigation, which order was filed under seal. In September 2021, the District Court made available a public version of the order following the parties’ agreement to a consent motion to redact information Teva contended was confidential. The order provides that the statutory stay that prevents the FDA from granting final approval of the ANDA for 30 months from the date of the IMVEXXY Notice Letter will be extended for the number of days that the stay of the IMVEXXY litigation is in place. The length of the stay of the IMVEXXY litigation is dependent on further action by Teva. We have incurred and recorded legal costs amounting to $2.3 million in prepaid expenses and other current assets as of December 31, 2023, for the IMVEXXY Paragraph IV legal proceeding since we believe that we will successfully prevail in this legal proceeding. Upon the successful conclusion of the legal proceeding, the related capitalized legal costs will be reclassified to patents, in license rights and other intangible assets, net, in the accompanying consolidated balance sheets, and such costs will be amortized over the remaining useful life of the patents. If we are unsuccessful in this legal proceeding, then the related capitalized legal costs for this legal preceding and any unamortized IMVEXXY patent costs that were previously capitalized will be immediately expensed in the period in which we become aware of an unsuccessful legal proceeding. Beginning on December 30, 2022 and per the Mayne License Agreement, Mayne Pharma is responsible for all enforcement of our patents, including the litigation discussed above with respect to Teva. In September 2023, one of our former contractors retained to market ANNOVERA under Title X, filed a lawsuit that accused us of breach of contract. We answered their complaint and filed breach of contract counterclaims. From time to time, we are involved in other litigations and proceedings in the ordinary course of business. We are not currently involved in any other litigations and proceedings that we believe would have a material effect on our consolidated financial condition, results of operations, or cash flows. Off-balance sheet arrangements As of December 31, 2023 and 2022 we had no off-balance sheet arrangements that have had or are reasonably likely to have current or future effects on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that we consider material. Employment agreements In connection with our 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 30, 2022. Severance obligations for all employees other than executive officers were paid in full in the first quarter of 2023. As of December 31, 2023, we employ one full-time employee primarily engaged in an executive position. We have engaged external consultants 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. The separation of our former Interim Co-Chief Executive Officers, former Interim Chief Financial Officer and other executives from TherapeuticsMD was each a termination without “Good Cause,” as defined in their respective employment agreements. In the aggregate, as of December 31, 2023, we have accrued severance liabilities for executive termination obligations of $0.4 million.

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