Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
We continue to remain positive on TherapeuticsMD Inc. (NYSEMKT:TXMD) shares, a specialty pharmaceuticals company developing advanced-stage pharmaceutical hormone replacement therapy (HRT) products. Shares of TXMD have been on the rise after the House of Representatives passed a compounding safety bill - The Drug Quality and Security Act. While the passage of the bill has surprised many, we had predicted in a previous article that the bill would likely be passed. Although the bill still has to pass through the Senate, its passage in the House is crucial having been seen as a major hurdle. Earlier in the week, the company also announced achievement of significant proof-of-concept in phase 1, first-in-class soft gel vaginal formulation TX12-004HR. In addition, the company also hired a clinical expert. Before discussing what kind of impact these developments could have on TherapeuticsMD, let us just recap what the House bill is in essence about.
Making HRT safer
As we discussed in the previous article, drugs that address a single hormonal issue or monotherapies do not work well in hormone therapy. This is due to the fact that when a drug suppresses one problem hormone, the levels of another problem hormone increase. This issue created a need for developing combination therapies for HRT. Currently, the only drugs for HRT that have been approved by the FDA are monotherapeutic bio-identicals. As a result, doctors have been forced to send women needing HRT to compounding pharmacies that create over-the-counter hormone therapies by compounding non-FDA approved synthetic drugs. These therapies unfortunately have severe side-effects such as cancer.
The risks posed by existing over-the-counter therapies led lawmakers to propose a new bill on HRT drugs safety and efficacy. The bill proposed not allowing manufacturing and limiting distribution of compound products in large quantities unless there is shortage of drugs. Also proposed was for traditional pharmacies to be permitted to compound variations of already approved drugs only if the prescription fulfills patients' requirements. The bill also introduced a Do Not Compound list that prohibits the compounding of certain drugs as well as FDA approved drugs that are not in shortage. This will have a major impact on the scope of compounding pharmacies to provide polytherapies for HRT.
As we had expected, the House of Representatives have passed the bill. Right before the government shutdown, the House passed the compounding legislation. Analysts at Jefferies noted in a recent research report that they expect the bill to be passed by the Senate post-shutdown. The analysts noted that the House conservatives were seen as a major obstacle for the bill, however, surprisingly, the legislation received overwhelming bipartisan support. Even though some of the aspects of the bill have not been passed, the legislation provides FDA with more teeth, according to Jefferies. The legislation still includes provisions such as prohibition of essential copies of approved drugs, certain to make it difficult to make drugs, or to make inaccurate claims.
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