Summary
- TherapeuticsMD has been a blemish on my speculative biotech/pharma portfolio for over a year. I went against my rules for trading a premium-priced bio and paid for it.
- The COVID-19 pandemic had a big impact on the women's health industry and TherapeuticsMD experienced a major disruption in their commercial activities. As a result, their Q2 numbers were disappointing.
- I discuss why I decided to go against my rules and why I see the current share price to be opportunity to add or start a contrarian position.
TherapeuticsMD (TXMD) has been a blight in my speculative portfolio for nearly two years as the share price continues to deteriorate and investor sentiment hits rock bottom. At first, I was willing to pay a premium and was confident that the company’s impressive product portfolio and commercial progress were going to justify the price. Now, I am kicking myself for trusting the market to see the pending value in TXMD; I was foolish. I should have stuck to my methodical approach to premium speculative investments, which would have had me dipping my toe in now. Obviously, I cannot go back in time and redo my investment; however, I am looking at TXMD with a fresh perspective. The company had a rough time with the COVID-19 pandemic, but I believe it is primed to make a strong resurgence as the country opens up and the women's health industry returns to normal operations. Consequently, I believe TXMD is still worthy of speculative investment at these prices.
I intend to recap my original investment thesis and why I decided to break my own rules to jump on TXMD too early. In addition, I discuss why I would be looking to take a contrarian position at this point. Finally, I reveal my plans to manage my misallocated TXMD position.
The Thesis
At first, I was apprehensive about establishing a position in TXMD, but I was willing to take a chance at trading the ticker as they approached several potent catalysts. At that time, TherapeuticsMD looked like it was ready to quickly grow into a leading women’s health company/brand due to its comprehensive pipeline that covered a patient throughout their adult life (Figure 1).
Figure 1: TherapeuticsMD Product Portfolio (Source: TXMD)
In addition, the company’s products have an impressive total addressable market that totals roughly $50 billion (Figure 2). Not only did TherapeuticsMD’s products have a big market, but their products were also unique enough to grab a substantial portion of those markets.
Figure 2: TXMD TAM (Source: Old TXMD Investor Presentation) (Note: TX-001HR is BIJUVA)
What is more, the company already had a sales force in place that was pushing their prenatal vitamin line in target offices. So, the sales force already had a relationship with their target prescribers for their FDA approved products.
I thought the combination of a comprehensive product portfolio, a large total addressable market, and an established sales force would justify the premium share price. So, it was easy to hold onto the majority of my shares and wait for the company's first big earnings to cash in a big profit on position and let the rest ride.
