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UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10-Q
☒ |
Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 |
For
Quarterly Period ended
June 30,
2021
☐ |
Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934 |
For the
transition period from to .
Commission File
Number:
001-36357
LIPOCINE INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
99-0370688 |
(State or
Other Jurisdiction of
Incorporation or
Organization)
|
|
(IRS
Employer
Identification
No.)
|
|
|
|
675 Arapeen Drive,
Suite 202,
Salt Lake City,
Utah
|
|
84108 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
801-994-7383
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title of
each class |
|
Trading
Symbol(s) |
|
Name of each
exchange on which registered |
Common Stock, par value $0.0001 per share |
|
LPCN |
|
The
NASDAQ Stock Market LLC |
Indicate by
check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes: ☒ No ☐
Indicate by
check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes ☒ No ☐
Indicate by
check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act (Check one):
Large accelerated
filer |
☐ |
Accelerated
filer |
☐ |
Non-accelerated filer |
☒ |
Smaller reporting
company |
☒ |
Emerging growth
company |
☐ |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a)
of the Exchange Act. ☐
Indicate by
check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ☐
No ☒
Outstanding
Shares
As of August
4, 2021, the registrant had 88,290,650
shares of common stock outstanding.
TABLE OF
CONTENTS
PART I—FINANCIAL
INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
LIPOCINE
INC. AND SUBSIDIARIES
Condensed
Consolidated Balance Sheets
(Unaudited)
See
accompanying notes to unaudited condensed consolidated financial
statements
LIPOCINE
INC. AND SUBSIDIARIES
Condensed
Consolidated Statements of Operations and Comprehensive
Loss
(Unaudited)
See
accompanying notes to unaudited condensed consolidated financial
statements
LIPOCINE
INC. AND SUBSIDIARIES
Condensed
Consolidated Statements of Changes in Stockholders’
Equity
For the
Three and Six Months Ended June 30, 2021 and 2020
(Unaudited)
|
|
Common
Stock |
|
|
Treasury
Stock |
|
|
Additional |
|
|
Accumulated
Other |
|
|
|
|
|
Total |
|
|
|
Number
of
Shares
|
|
|
Amount |
|
|
Number
of
Shares
|
|
|
Amount |
|
|
Paid-In
Capital |
|
|
Comprehensive
Loss |
|
|
Accumulated
Deficit |
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
December 31, 2019 |
|
|
37,649,465 |
|
|
$ |
3,766 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
157,391,969 |
|
|
$ |
(38 |
) |
|
$ |
(151,067,189 |
) |
|
$ |
6,287,796 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12,140,285 |
) |
|
|
(12,140,285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
net gain on marketable investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(66 |
) |
|
|
- |
|
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
786,971 |
|
|
|
- |
|
|
|
- |
|
|
|
786,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
restricted stock units |
|
|
25,000 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
sold through equity offering |
|
|
10,084,034 |
|
|
|
1,008 |
|
|
|
- |
|
|
|
- |
|
|
|
5,652,132 |
|
|
|
- |
|
|
|
- |
|
|
|
5,653,140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
issued for warrant exercises |
|
|
13,618,807 |
|
|
|
1,362 |
|
|
|
- |
|
|
|
- |
|
|
|
6,912,796 |
|
|
|
- |
|
|
|
- |
|
|
|
6,914,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of
warrant liability on warrant exercises |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,591,362 |
|
|
|
- |
|
|
|
- |
|
|
|
5,591,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
associated with ATM offering |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,108 |
) |
|
|
- |
|
|
|
- |
|
|
|
(8,108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
June 30, 2020 |
|
|
61,377,306 |
|
|
$ |
6,138 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
176,327,120 |
|
|
$ |
(104 |
) |
|
$ |
(163,207,474 |
) |
|
$ |
13,084,968 |
|
|
|
Common
Stock |
|
|
Treasury
Stock |
|
|
Additional |
|
|
Accumulated
Other |
|
|
|
|
|
Total |
|
|
|
Number
of
Shares
|
|
|
Amount |
|
|
Number
of
Shares
|
|
|
Amount |
|
|
Paid-In
Capital |
|
|
Comprehensive
Gain (Loss) |
|
|
Accumulated
Deficit |
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
March 31, 2021 |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
217,845,280 |
|
|
$ |
(22,459 |
) |
|
$ |
(175,400,090 |
) |
|
$ |
42,390,849 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(6,809,041 |
) |
|
|
(6,809,041 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
net gain on marketable investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,273 |
|
|
|
- |
|
|
|
22,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
146,747 |
|
|
|
- |
|
|
|
- |
|
|
|
146,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
associated with ATM offering |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,275 |
) |
|
|
- |
|
|
|
- |
|
|
|
(5,275 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
June 30, 2021 |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
217,986,752 |
|
|
$ |
(186 |
) |
|
$ |
(182,209,131 |
) |
|
$ |
35,745,553 |
|
|
|
Common
Stock |
|
|
Treasury
Stock |
|
|
Additional |
|
|
Accumulated
Other |
|
|
|
|
|
Total |
|
|
|
Number
of
Shares
|
|
|
Amount |
|
|
Number
of
Shares
|
|
|
Amount |
|
|
Paid-In
Capital |
|
|
Comprehensive
Gain (Loss) |
|
|
Accumulated
Deficit |
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
December 31, 2020 |
|
|
70,036,257 |
|
|
$ |
7,005 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
187,407,634 |
|
|
$ |
- |
|
|
$ |
(172,032,008 |
) |
|
$ |
15,341,919 |
|
Balances |
|
|
70,036,257 |
|
|
$ |
7,005 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
187,407,634 |
|
|
$ |
- |
|
|
$ |
(172,032,008 |
) |
|
$ |
15,341,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(10,177,123 |
) |
|
|
(10,177,123 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
net loss on marketable investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(186 |
) |
|
|
- |
|
|
|
(186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
294,313 |
|
|
|
- |
|
|
|
- |
|
|
|
294,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
exercises |
|
|
4,584 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,693 |
|
|
|
- |
|
|
|
- |
|
|
|
6,693 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
sold through equity offering |
|
|
16,428,571 |
|
|
|
1,643 |
|
|
|
- |
|
|
|
- |
|
|
|
26,838,814 |
|
|
|
- |
|
|
|
- |
|
|
|
26,840,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
issued for warrant exercises |
|
|
10,000 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
4,999 |
|
|
|
- |
|
|
|
- |
|
|
|
5,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement of
warrant liability on warrant exercises |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,365 |
|
|
|
- |
|
|
|
- |
|
|
|
18,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
sold through ATM offering |
|
|
1,811,238 |
|
|
|
181 |
|
|
|
- |
|
|
|
- |
|
|
|
3,415,934 |
|
|
|
- |
|
|
|
- |
|
|
|
3,416,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at
June 30, 2021 |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
217,986,752 |
|
|
$ |
(186 |
) |
|
$ |
(182,209,131 |
) |
|
$ |
35,745,553 |
|
Balances |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
217,986,752 |
|
|
$ |
(186 |
) |
|
$ |
(182,209,131 |
) |
|
$ |
35,745,553 |
|
See
accompanying notes to unaudited condensed consolidated financial
statements
LIPOCINE
INC. AND SUBSIDIARIES
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
See
accompanying notes to unaudited condensed consolidated financial
statements
LIPOCINE
INC.
Notes to
Condensed Consolidated Financial Statements
(Unaudited)
(1)
Basis of
Presentation
The
accompanying unaudited condensed consolidated financial statements
included herein have been prepared by Lipocine Inc. (“Lipocine” or
the “Company”) in accordance with the rules and regulations of the
United States Securities and Exchange Commission (“SEC”). The
unaudited condensed consolidated financial statements are comprised
of the financial statements of Lipocine and its subsidiaries,
collectively referred to as the Company. In management’s opinion,
the interim financial data presented includes all adjustments
(consisting solely of normal recurring items) necessary for fair
presentation. All intercompany accounts and transactions have been
eliminated. Certain information required by U.S. generally accepted
accounting principles has been condensed or omitted in accordance
with rules and regulations of the SEC. Operating results for the
three and six months ended June 30, 2021 are not necessarily
indicative of the results that may be expected for any future
period or for the year ending December 31, 2021.
These
unaudited condensed consolidated financial statements should be
read in conjunction with the Company’s audited consolidated
financial statements and the notes thereto for the year ended
December 31, 2020.
The
preparation of the unaudited condensed consolidated financial
statements requires management to make estimates and assumptions
relating to reporting of the assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
condensed consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period in
conformity with U.S. generally accepted accounting principles.
Actual results could differ from these estimates.
The Company
believes that its existing capital resources, together with
interest thereon, will be sufficient to meet its projected
operating requirements through at least June 30, 2022 which
includes an on-going clinical study for LPCN 1144, future clinical
studies for LPCN 1148 and LPCN 1154, compliance with regulatory
requirements and on-going litigation and settlement activities. The
Company has based this estimate on assumptions that may prove to be
wrong, and the Company could utilize its available capital
resources sooner than it currently expects if additional activities
are performed by the Company including pre-commercial and
commercial activities for TLANDO and new clinical studies for LPCN
1144, TLANDO XR, LPCN 1148 and LPCN 1154. While the Company
believes it has sufficient liquidity and capital resources to fund
our projected operating requirements through at least June 30,
2022, the Company will need to raise additional capital at some
point through the equity or debt markets or through out-licensing
activities, before or after June 30, 2022, to support its
operations. If the Company is unsuccessful in raising additional
capital, its ability to continue as a going concern will become a
risk. Further, the Company’s operating plan may change, and the
Company may need additional funds to meet operational needs and
capital requirements for product development, regulatory compliance
and clinical trial activities sooner than planned. In addition, the
Company’s capital resources may be consumed more rapidly if it
pursues additional clinical studies for LPCN 1144, TLANDO XR, LPCN
1148 and LPCN 1154. Conversely, the Company’s capital resources
could last longer if it reduces expenses, reduces the number of
activities currently contemplated under our operating plan or if it
terminates, modifies the design or suspends on-going clinical
studies..
(2)
Earnings (Loss) per
Share
Basic
earnings (loss) per share is calculated by dividing net income
(loss) available to common shareholders by the weighted average
number of common shares outstanding during the period. Diluted
earnings (loss) per share is based on the weighted average number
of common shares outstanding plus, where applicable, the additional
potential common shares that would have been outstanding related to
dilutive options, warrants and, unvested restricted stock units to
the extent such shares are dilutive.
The
following table sets forth the computation of basic and diluted
earnings (loss) per share of common stock for the three and six
months ended June 30, 2021 and 2020:
Schedule
of Computation of Basic and Diluted Earnings (loss) Per Share of
Common Stock
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
Basic loss per
share attributable to common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(6,809,041 |
) |
|
$ |
(6,369,634 |
) |
|
$ |
(10,177,123 |
) |
|
$ |
(12,140,285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted avg.
common shares outstanding |
|
|
88,290,650 |
|
|
|
49,769,253 |
|
|
|
85,556,110 |
|
|
|
45,558,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per
share attributable to common stock |
|
$ |
(0.08 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss per
share attributable to common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(6,809,041 |
) |
|
$ |
(6,369,634 |
) |
|
$ |
(10,177,123 |
) |
|
$ |
(12,140,285 |
) |
Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted avg.
common shares outstanding |
|
|
88,290,650 |
|
|
|
49,769,253 |
|
|
|
85,556,110 |
|
|
|
45,558,442 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted loss
per share attributable to common stock |
|
$ |
(0.08 |
) |
|
$ |
(0.13 |
) |
|
$ |
(0.12 |
) |
|
$ |
(0.27 |
) |
The
computation of diluted loss per share for the six months ended June
30, 2021 and 2020 does not include the following stock options and
warrants to purchase shares or unvested restricted stock units in
the computation of diluted loss per share because these instruments
were antidilutive:
Schedule
of Antidilutive Securities Excluded from Computation of Earnings
Per Share
|
|
June 30, |
|
|
|
2021 |
|
|
2020 |
|
Stock options |
|
|
3,915,790 |
|
|
|
3,012,041 |
|
Unvested restricted stock units |
|
|
- |
|
|
|
605,682 |
|
Warrants |
|
|
1,934,366 |
|
|
|
3,423,210 |
|
(3)
Marketable Investment
Securities
The Company
has classified its marketable investment securities as
available-for-sale securities, all of which are debt securities.
These securities are carried at fair value with unrealized holding
gains and losses, net of the related tax effect, included in
accumulated other comprehensive income (loss) in stockholders’
equity until realized. Gains and losses on investment security
transactions are reported on the specific-identification method.
Dividend income is recognized on the ex-dividend date and interest
income is recognized on an accrual basis. The amortized cost, gross
unrealized holding gains, gross unrealized holding losses, and fair
value for available-for-sale securities by major security type and
class of security at June 30, 2021 and December 31, 2020 were as
follows:
Schedule
of Available-for-Sale Securities
June 30, 2021 |
|
Amortized
Cost
|
|
|
Gross
unrealized holding
gains
|
|
|
Gross
unrealized
holding
losses
|
|
|
Aggregate
fair
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds, notes and commercial paper |
|
$ |
35,672,245 |
|
|
$ |
- |
|
|
$ |
(186 |
) |
|
$ |
35,672,059 |
|
|
|
$ |
35,672,245 |
|
|
$ |
- |
|
|
$ |
(186 |
) |
|
$ |
35,672,059 |
|
December 31, 2020 |
|
Amortized
Cost
|
|
|
Gross
unrealized
holding
gains
|
|
|
Gross
unrealized
holding
losses
|
|
|
Aggregate
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
449,992 |
|
|
|
- |
|
|
|
- |
|
|
$ |
449,992 |
|
|
|
$ |
449,992 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
449,992 |
|
Maturities
of debt securities classified as available-for-sale securities at
June 30, 2021 are as follows:
Schedule
of Maturities of Debt Securities Classified as Available-for-sale
Securities
June 30, 2021 |
|
Amortized
Cost
|
|
|
Aggregate
fair value
|
|
Due
within one year |
|
$ |
35,672,245 |
|
|
$ |
35,672,059 |
|
|
|
$ |
35,672,245 |
|
|
$ |
35,672,059 |
|
There were
no sales of marketable investment securities during the three and
six months ended June 30, 2021 and 2020 and therefore no
realized gains or losses. Additionally, during the three months
ended June 30, 2021 and 2020, no
marketable investment securities matured, and $450,000
and $4.3
million of marketable investment securities matured during the six
months ended June 30, 2021 and 2020, respectively. The Company
determined there were no
other-than-temporary impairments for the three and six months ended
June 30, 2021 and 2020.
(4)
Fair
Value
The Company
utilizes valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs to the extent
possible. The Company determines fair value based on assumptions
that market participants would use in pricing an asset or liability
in the principal or most advantageous market. When considering
market participant assumptions in fair value measurements, the
following fair value hierarchy distinguishes between observable and
unobservable inputs, which are categorized in one of the following
levels:
|
● |
Level 1
Inputs: Quoted prices for identical instruments in active
markets. |
|
● |
Level 2
Inputs: Quoted prices for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that
are not active, and model-derived valuation in which all
significant inputs and significant value drivers are observable in
active markets. |
|
● |
Level 3
Inputs: Valuations derived from valuation techniques in which one
or more significant inputs or significant value drivers are
unobservable. |
All of the
Company’s financial instruments are valued using quoted prices in
active markets or based on other observable inputs. For accrued
interest income, prepaid and other current assets, accounts
payable, and accrued expenses, the carrying amounts approximate
fair value because of the short maturity of these instruments. The
following table presents the placement in the fair value hierarchy
of assets and liabilities that are measured at fair value on a
recurring basis at June 30, 2021 and December 31, 2020:
Schedule
of Fair Value, Assets Measured on Recurring Basis
|
|
|
|
|
Fair value measurements at reporting date using |
|
|
|
June 30, 2021 |
|
|
Level 1 inputs |
|
|
Level 2 inputs |
|
|
Level 3 inputs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents - money market funds |
|
$ |
10,179,073 |
|
|
$ |
10,179,073 |
|
|
$ |
- |
|
|
$ |
- |
|
Commercial
Paper |
|
|
13,987,623 |
|
|
|
- |
|
|
|
13,987,623 |
|
|
|
- |
|
Corporate bonds and notes |
|
|
21,684,436 |
|
|
|
- |
|
|
|
21,684,436 |
|
|
|
- |
|
|
|
$ |
45,851,132 |
|
|
$ |
10,179,073 |
|
|
$ |
35,672,059 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability |
|
$ |
1,125,429 |
|
|
|
- |
|
|
|
- |
|
|
|
1,125,429 |
|
|
|
$ |
46,976,561 |
|
|
$ |
10,179,073 |
|
|
$ |
35,672,059 |
|
|
$ |
1,125,429 |
|
|
|
|
|
|
Fair value
measurements at reporting date using |
|
|
|
December 31, 2020 |
|
|
Level 1
inputs |
|
|
Level 2
inputs |
|
|
Level 3
inputs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents - money market funds |
|
$ |
18,399,585 |
|
|
$ |
18,399,585 |
|
|
$ |
- |
|
|
$ |
- |
|
Commercial paper |
|
|
449,992 |
|
|
|
- |
|
|
|
449,992 |
|
|
|
- |
|
|
|
$ |
18,849,577 |
|
|
$ |
18,399,585 |
|
|
$ |
449,992 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liability |
|
$ |
1,170,051 |
|
|
|
- |
|
|
|
- |
|
|
|
1,170,051 |
|
|
|
$ |
20,019,628 |
|
|
$ |
18,399,585 |
|
|
$ |
449,992 |
|
|
$ |
1,170,051 |
|
The
following methods and assumptions were used to determine the fair
value of each class of assets and liabilities recorded at fair
value in the balance sheets:
Cash
equivalents: Cash equivalents primarily consist of highly-rated
money market funds and treasury bills with original maturities to
the Company of three months or less and are purchased daily at par
value with specified yield rates. Cash equivalents related to money
market funds and treasury bills are classified within Level 1 of
the fair value hierarchy because they are valued using quoted
market prices or broker or dealer quotations for similar
assets.
Corporate
bonds, notes, and commercial paper: The Company uses a third-party
pricing service to value these investments. Corporate bonds, notes
and commercial paper are classified within Level 2 of the fair
value hierarchy because they are valued using broker/dealer quotes,
bids and offers, benchmark yields and credit spreads and other
observable inputs.
Warrant
liability: The warrant
liability (which relates to warrants to purchase shares of common
stock) is marked-to-market each reporting period with the change in
fair value recorded to other income (expense) in the accompanying
statements of operations until the warrants are exercised, expire
or other facts and circumstances lead the warrant liability to be
reclassified to stockholders’ equity. The fair value of the warrant
liability is estimated using a Black-Scholes option-pricing model.
The significant assumptions used in preparing the option pricing
model for valuing the warrant liability as of June 30, 2021,
include (i) volatility of 72.62%, (ii) risk free interest
rate of 0.46%, (iii) strike price of
$0.50, (iv) fair value of common stock
of $1.40, and (v) expected
life of 3.38 years. The significant
assumptions used in preparing the option pricing model for valuing
the warrant liability as of December 31, 2020, include (i)
volatility of 88.46%, (ii) risk free interest
rate of 0.27%, (iii) strike price of
$0.50, (iv) fair value of common stock
of $1.36, and (v) expected
life of 3.9 years.
The
Company’s accounting policy is to recognize transfers between
levels of the fair value hierarchy on the date of the event or
change in circumstances that caused the transfer. There were no
transfers into or out of Level 1, Level 2, or Level 3 for the three
and six months ended June 30, 2021.
(5)
Loan and Security
Agreements and Other Liabilities
Silicon
Valley Bank Loan
On January
5, 2018, the Company entered into a Loan and Security Agreement
(the “Loan and Security Agreement”) with Silicon Valley Bank
(“SVB”) pursuant to which SVB agreed to lend the Company $10.0 million.
The principal borrowed under the Loan and Security Agreement bears
interest at a rate equal to the Prime Rate, as reported in the
money rates section of The Wall Street Journal or any successor
publication representing the rate of interest per annum then in
effect, plus one percent per annum (4.25% as of June 30, 2021), which
interest is payable monthly. Additionally on April 1, 2020,
the Company entered into a Deferral Agreement with SVB. Under the
Deferral Agreement, principal repayments were deferred by six
months and the Company was only required to make monthly interest
payments. The loan matures on June 1, 2022.
Previously, the Company only made monthly interest payments until
December 31, 2018, following which the Company also made equal
monthly payments of principal and interest until the signing of the
Deferral Agreement. The Company will also be required to pay an
additional final payment at maturity equal to $650,000
(the “Final Payment Charge”). The Final Payment Charge will be due
on the scheduled maturity date and to date approximately $624,000 has been
recognized as an increase to the principal balance with a
corresponding charge to interest expense with the remaining final
payment charge to be recognized over the term of the facility using
the effective interest method. At its option, the Company may
prepay all amounts owed under the Loan and Security Agreement
(including all accrued and unpaid interest and the Final Payment
Charge).
In
connection with the Loan and Security Agreement, the Company
granted to SVB a security interest in substantially all of the
Company’s assets now owned or hereafter acquired, excluding
intellectual property and certain other assets. In addition, as
TLANDO was not approved by the United States Food and Drug
Administration (“FDA”) prior to May 31, 2018, the Company
maintained $5.0 million
of cash collateral at SVB as required under the Loan and Security
Agreement until such time as TLANDO is approved by the FDA. However
on February 16, 2021, the Company amended the Loan and Security
Agreement with SVB to, among other things, remove the financial
trigger and financial trigger release event provisions requiring
the Company to maintain a minimum cash collateral value and
collateral pledge thereof.
While any amounts
are outstanding under the Loan and Security Agreement, the Company
is subject to a number of affirmative and negative covenants,
including covenants regarding dispositions of property, business
combinations or acquisitions, incurrence of additional indebtedness
and transactions with affiliates, among other customary covenants.
The credit facility also includes events of default, the occurrence
and continuation of which could cause interest to be charged at the
rate that is otherwise applicable plus 5.0%
and would provide SVB, as collateral agent, with the right to
exercise remedies against the Company and the collateral securing
the credit facility, including foreclosure against the property
securing the credit facilities, including its cash. These
events of default include, among other things, any failure by the
Company to pay principal or interest due under the credit facility,
a breach of certain covenants under the credit facility, the
Company’s insolvency, a material adverse change, and one or more
judgments against the Company in an amount greater than $100,000
individually or in the aggregate.
Future
maturities of principal payments on the Loan and Security Agreement
at June 30, 2021 (excluding accrued final payment fee) are as
follows:
Schedule
of Maturities of Debt
|
|
|
|
Years Ending December 31, |
|
Amount
(in thousands)
|
|
2021 |
|
$ |
1,666 |
|
2022 |
|
|
1,667 |
|
Thereafter |
|
|
— |
|
Long-term
Debt |
|
$ |
3,333 |
|
Other
Effective
June 15, 2020 and through December 31, 2020, the Company deferred
Federal Insurance Contributions Act (“FICA”) taxes under the CARES
Act Section 2302. Payment of these tax deferrals are delayed to
December 31, 2021 and December 31, 2022. As of June 30, 2021 the
tax deferrals totaled $36,000 and are
included in accrued liabilities.
(6)
Income
Taxes
The tax
provision for interim periods is determined using an estimate of
the Company’s effective tax rate for the full year adjusted for
discrete items, if any, that are taken into account in the relevant
period. Each quarter the Company updates its estimate of the annual
effective tax rate, and if the estimated tax rate changes, the
Company makes a cumulative adjustment.
At June 30,
2021 and December 31, 2020, the Company had a full valuation
allowance against its deferred tax assets, net of expected
reversals of existing deferred tax liabilities, as it believes it
is more likely than not that these benefits will not be
realized.
(7)
Contractual
Agreements
(a)
Abbott Products, Inc.
On March 29,
2012, the Company terminated its collaborative agreement with
Solvay Pharmaceuticals, Inc. (later acquired by Abbott Products,
Inc.) for TLANDO. As part of the termination, the Company
reacquired the rights to the intellectual property from Abbott. All
obligations under the prior license agreement have been completed
except that Lipocine will owe Abbott a perpetual 1% royalty on net sales.
Such royalties are limited to $1.0 million in
the first two calendar years following product launch, after which
period there is not a cap on royalties and no maximum aggregate
amount. If generic versions of any such product are introduced,
then royalties are reduced by 50%.
The Company did not incur any royalties expense during the three
and six months ended June 30, 2021 and 2020.
(b)
Contract Research and Development
The Company
has entered into agreements with various contract organizations
that conduct preclinical, clinical, analytical and manufacturing
development work on behalf of the Company as well as a number of
independent contractors and primarily clinical researchers who
serve as advisors to the Company. The Company incurred expenses of
$786,000
and $1.2
million, respectively, for the three months ended June 30, 2021 and
2020 and $1.7
million and $2.9
million, respectively, for the six months ended June 30, 2021 and
2020 under these agreements and has recorded these expenses in
research and development expenses.
(8)
Leases
On August 6,
2004, the Company assumed a non-cancelable operating lease for
office space and laboratory facilities in Salt Lake City, Utah. On
May 6, 2014, the Company modified and extended the lease through
February 28, 2018. On February 8, 2018, the Company extended the
lease through February 28, 2019, on January 2, 2019, the Company
extended the lease through February 29, 2020, on February 24, 2020,
the Company extended the lease through February 28, 2021 and on
March 3, 2021, the Company extended the lease through February 28,
2022.
Future
minimum lease payments under non-cancelable operating leases as of
June 30, 2021 are:
Schedule
of Future Minimum Rental Payments for Operating
Leases
|
|
|
|
|
|
Operating |
|
|
|
leases |
|
Year ending December 31: |
|
|
|
2021 |
|
|
165,191 |
|
2022 |
|
|
55,064 |
|
|
|
|
|
|
Total
minimum lease payments |
|
$ |
220,255 |
|
The
Company’s rent expense was $83,000 for each of the three
months ended June 30, 2021 and 2020 and was $165,000 for each of the six
months ended June 30, 2021 and 2020.
(9)
Stockholders’
Equity
(a)
Issuance of Common Stock
On January
28, 2021, the Company completed a public offering of securities
registered under an effective registration statement filed pursuant
to the Securities Act of 1933, as amended (“January 2021
Offering”). The gross proceeds from the January 2021 Offering were
approximately $28.7
million, before deducting underwriter fees and other offering
expenses of $1.9 million.
In the January 2021 Offering, the Company sold 16,428,571
shares of its common stock.
On February
27, 2020, the Company completed a registered direct offering of
securities registered under an effective registration statement
filed pursuant to the Securities Act of 1933, as amended (“February
2020 Offering”). The gross proceeds from the February 2020 Offering
were approximately $6.0
million, before deducting placement agent fees and other offering
expenses of $347,000. In
the February 2020 Offering, the Company sold 10,084,034
Class A Units at an offering price of $0.595 per unit, with
each Class A Unit consisting of one share of its common stock and
one-half of a common warrant to purchase one share of common stock
at an exercise price of $0.53 per share of
common stock. Additionally, the common stock warrants were
immediately exercisable and expire on February 27, 2025. By their
terms, however, the common stock warrants cannot be exercised at
any time that the common stock warrant holder would beneficially
own, after such exercise, more than 4.99% (or, at the election of
the holder, 9.99%) of the shares of common stock then outstanding
after giving effect to such exercise.
On November
18, 2019, the Company completed a public offering of securities
registered under an effective registration statement filed pursuant
to the Securities Act of 1933, as amended (“November 2019
Offering”). The gross proceeds from the November 2019 Offering were
approximately $6.0
million,
before deducting placement agent fees and other offering expenses
of $404,000.
In the November 2019 Offering, the Company sold (i)
10,450,000 Class A Units, with each
Class A Unit consisting of one share of its common stock and a
common warrant to purchase one share of its common stock, and (ii)
1,550,000 Class B Units, with each
Class B Unit consisting of one pre-funded warrant to purchase one
share of its common stock and a common warrant to purchase one
share of its common stock, at a price of $0.50
per Class A
Unit and $0.4999
per Class B
Unit. The pre-funded warrants, which were exercised for common
stock in December 2019, were issued in lieu of common stock in
order to ensure the purchaser did not exceed certain beneficial
ownership limitations. The pre-funded warrants were immediately
exercisable at an exercise price of $.0001
per share,
subject to adjustment. Additionally, the common stock warrants were
immediately exercisable at an exercise price of $0.50
per share,
subject to adjustment, and expire on November 17, 2024. By their
terms, however, neither the pre-funded warrants nor the common
stock warrants can be exercised at any time that the pre-funded
warrant holder or the common stock warrant holder would
beneficially own, after such exercise, more than 4.99% (or, at the
election of the holder, 9.99%) of the shares of common stock then
outstanding after giving effect to such exercise. On the date of
the November 2019 Offering, the Company allocated approximately
$768,000
and
$4.8
million to
common stock/additional paid-in capital and warrant liability,
respectively.
On March 6,
2017, the Company entered into the Sales Agreement with Cantor
Fitzgerald & Co. (“Cantor”) pursuant to which the Company may
issue and sell, from time to time, shares of its common stock
having an aggregate offering price of up to the amount the Company
registered on an effective registration statement pursuant to which
the offering is being made. The Company currently has registered up
to $50.0 million for sale under the Sales Agreement, pursuant to
the Registration Statement on Form S-3 (File No. 333-250072)
through Cantor as the Company’s sales agent. Cantor may sell the
Company’s common stock by any method permitted by law deemed to be
an “at the market offering” as defined in Rule 415(a)(4) of the
Securities Act, including sales made directly on or through the
Nasdaq Capital Market or any other existing trade market for our
common stock, in negotiated transactions at market prices
prevailing at the time of sale or at prices related to prevailing
market prices, or any other method permitted by law. Cantor uses
its commercially reasonable efforts consistent with its normal
trading and sales practices and applicable law and regulations to
sell these shares. The Company pays Cantor 3.0%
of the aggregate gross proceeds from each sale of shares under the
Sales Agreement. In addition, the Company has also provided Cantor
with customary indemnification rights.
The shares
of the Company’s common stock sold under the Sales Agreement are
sold and issued pursuant to the Registration Statement on Form S-3
(File No. 333-250072) (the “Form S-3”), which was previously
declared effective by the Securities and Exchange Commission, and
the related prospectus and one or more prospectus
supplements.
The Company
is not obligated to make any sales of its common stock under the
Sales Agreement. The offering of common stock pursuant to the Sales
Agreement will terminate upon the termination of the Sales
Agreement as permitted therein. The Company and Cantor may each
terminate the Sales Agreement at any time upon ten days’ prior
notice.
As of June
30, 2021, we had sold an aggregate of 15,023,073
shares at a weighted-average sales price of $2.19 per share under
the Sales Agreement for aggregate gross proceeds of $32.9
million and net proceeds of $31.7 million, after deducting sales
agent commission and discounts and our other offering costs. During
the three months ended June 30, 2021, the Company did not sell any
shares of our common stock pursuant to the current Registration
Statement on Form S-3 (File No. 333-250072). During the six months
ended June 30, 2021, the Company sold 1,811,238
shares of our common stock pursuant to the current Registration
Statement on Form S-3 (File No. 333-250072) at a weighted-average
sales price of $1.95 per share,
resulting in net proceeds of approximately $3.4 million under the
Sales Agreement which is net of $112,000 in
expenses. During the three and six months ended June 30, 2020, the
Company did not sell any shares of our common stock pursuant to the
prior Registration Statement on Form S-3 (File No. 333-220942). As
of June 30, 2021, the Company had $41.2
million available for sale under the Sales Agreement.
(b)
Rights Agreement
On November
13, 2015, the Company and American Stock Transfer & Trust
Company, LLC, as Rights Agent, entered into a Rights Agreement.
Also on November 12, 2015, the board of directors of the Company
authorized and the Company declared a dividend of one preferred
stock purchase right (each a “Right” and collectively, the
“Rights”) for each outstanding share of common stock of the
Company. The dividend was payable to stockholders of record as of
the close of business on November 30, 2015 and entitles the
registered holder to purchase from the Company one one-thousandth
of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock of the Company at a price of
$63.96
per one-thousandth share (the “Purchase Price”). The Rights will
generally become exercisable upon the earlier to occur of (i) 10
business days following a public announcement that a person or
group of affiliated or associated persons has become an Acquiring
Person (as defined below) or (ii) 10 business days (or such later
date as may be determined by action of the board of directors prior
to such time as any person or group of affiliated or associated
persons becomes an Acquiring Person) following the commencement of,
or announcement of an intention to make, a tender offer or exchange
offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of the outstanding
common stock of the Company. Except in certain situations, a person
or group of affiliated or associated persons becomes an “Acquiring
Person” upon acquiring beneficial ownership of 15% or more of the
outstanding shares of common stock of the Company.
In general,
in the event a person becomes an Acquiring Person, then each Right
not owned by such Acquiring Person will entitle its holder to
purchase from the Company, at the Right’s then current exercise
price, in lieu of shares of Series A Junior Participating Preferred
Stock, common stock of the Company with a market value of twice the
Purchase Price. In addition, if after any person has become an
Acquiring Person, (a) the Company is acquired in a merger or other
business combination, or (b) 50% or more of the Company’s assets,
or assets accounting for 50% or more of its earning power, are
sold, leased, exchanged or otherwise transferred (in one or more
transactions), proper provision shall be made so that each holder
of a Right (other than the Acquiring Person, its affiliates and
associates and certain transferees thereof, whose Rights became
void) shall thereafter have the right to purchase from the
acquiring corporation, for the Purchase Price, that number of
shares of common stock of the acquiring corporation which at the
time of such transaction would have a market value of twice the
Purchase Price.
The Company
will be entitled to redeem the Rights at $0.001
per Right at any time prior to the time an Acquiring Person becomes
such. The terms of the Rights are set forth in the Rights
Agreement, which is summarized in the Company’s Current Report on
Form 8-K dated November 13, 2015. The rights plan was originally
set to expire on November 12, 2018; however, on November 5, 2018
our Board of Directors approved an Amended and Restated Rights
Agreement pursuant to which the expiration date was extended to
November 5, 2021, unless the rights are earlier redeemed or
exchanged by the Company.
(c)
Share-Based Payments
The Company
recognizes stock-based compensation expense for grants of stock
option awards, restricted stock units and restricted stock under
the Company’s Incentive Plan to employees, nonemployees and
nonemployee members of the Company’s board of directors based on
the grant-date fair value of those awards. The grant-date fair
value of an award is generally recognized as compensation expense
over the award’s requisite service period. In addition, the Company
has granted performance-based stock option awards and restricted
stock units, which vest based upon the Company satisfying certain
performance conditions. Potential compensation cost, measured on
the grant date, related to these performance options will be
recognized only if, and when, the Company estimates that these
options or units will vest, which is based on whether the Company
considers the performance conditions to be probable of attainment.
The Company’s estimates of the number of performance-based options
or units that will vest will be revised, if necessary, in
subsequent periods.
The Company
uses the Black-Scholes model to compute the estimated fair value of
stock option awards. Using this model, fair value is calculated
based on assumptions with respect to (i) expected volatility of the
Company’s common stock price, (ii) the periods of time over which
employees and members of the board of directors are expected to
hold their options prior to exercise (expected term), (iii)
expected dividend yield on the Common Stock, and (iv) risk-free
interest rates. Stock-based compensation expense also includes an
estimate, which is made at the time of grant, of the number of
awards that are expected to be forfeited. This estimate is revised,
if necessary, in subsequent periods if actual forfeitures differ
from those estimates. Stock-based compensation cost that has been
expensed in the statements of operations amounted to approximately
$147,000
and $465,000,
respectively, for the three months ended June 30, 2021 and 2020,
and amounted to $294,000
and $787,000,
respectively, for the six months ended June 30, 2021 and 2020, and
is allocated as follows:
Schedule
of Employee Service Share-based Compensation, Allocation of
Recognized Period Costs
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development |
|
$ |
69,483 |
|
|
$ |
199,777 |
|
|
$ |
136,369 |
|
|
$ |
334,441 |
|
General and
administrative |
|
|
77,264 |
|
|
|
265,281 |
|
|
|
157,944 |
|
|
|
452,530 |
|
Allocated
Share-based Compensation Expense |
|
$ |
146,747 |
|
|
$ |
465,058 |
|
|
$ |
294,313 |
|
|
$ |
786,971 |
|
The Company
issued
66,000 stock options and
376,000 stock options, respectively, during the three and
six months ended June 30, 2021 and issued
113,000 and
739,000 stock options during the three and six months ended
June 30, 2020.
Key
assumptions used in the determination of the fair value of stock
options granted are as follows:
Expected
Term: The expected term represents the period that the
stock-based awards are expected to be outstanding. Due to limited
historical experience of similar awards, the expected term was
estimated using the simplified method in accordance with the
provisions of Staff Accounting Bulletin (“SAB”) No. 107,
Share-Based Payment, for awards with stated or implied
service periods. The simplified method defines the expected term as
the average of the contractual term and the vesting period of the
stock option. For awards with performance conditions, and that have
the contractual term to satisfy the performance condition, the
contractual term was used.
Risk-Free
Interest Rate: The risk-free interest rate used was based on
the implied yield currently available on U.S. Treasury issues with
an equivalent remaining term.
Expected
Dividend: The expected dividend assumption is based on
management’s current expectation about the Company’s anticipated
dividend policy. The Company does not anticipate declaring
dividends in the foreseeable future.
Expected
Volatility: The volatility factor is based solely on the
Company’s trading history.
For options
granted during the six months ended June 30, 2021 and 2020, the
Company calculated the fair value of each option grant on the
respective dates of grant using the following weighted average
assumptions:
Schedule
of Key Assumption of Fair Value of Stock Options
Granted
|
|
2021 |
|
|
2020 |
|
Expected term |
|
|
5.70 years |
|
|
|
5.81 years |
|
Risk-free interest
rate |
|
|
0.52 |
% |
|
|
1.33 |
% |
Expected dividend yield |
|
|
— |
|
|
|
— |
|
Expected volatility |
|
|
95.52 |
% |
|
|
99.52 |
% |
FASB ASC
718, Stock Compensation, requires the Company to recognize
compensation expense for the portion of options that are expected
to vest. Therefore, the Company applied estimated forfeiture rates
that were derived from historical employee termination behavior. If
the actual number of forfeitures differs from those estimated by
management, additional adjustments to compensation expense may be
required in future periods.
As of June
30, 2021, there was $1.1
million of total unrecognized compensation cost related to unvested
share-based compensation arrangements granted under the Company’s
stock option plan. That cost is expected to be recognized over a
weighted average period of
2.21 years and will be adjusted for subsequent changes in
estimated forfeitures.
(d)
Stock Option Plan
In April
2014, the board of directors adopted the 2014 Stock and Incentive
Plan (“2014 Plan”) subject to shareholder approval which was
received in June 2014. The 2014 Plan provides for the granting of
nonqualified and incentive stock options, stock appreciation
rights, restricted stock units, restricted stock and dividend
equivalents. An aggregate of
1,000,000 shares were authorized for issuance under the 2014
Plan. Additionally,
271,906 remaining authorized shares under the 2011 Equity
Incentive Plan (“2011 Plan”) were issuable under the 2014 Plan at
the time of the 2014 Plan adoption. Upon receiving shareholder
approval in June 2016, the 2014 Plan was amended and restated to
increase the authorized number of shares of common stock of the
Company issuable under all awards granted under the 2014 Plan from
1,271,906 to
2,471,906. Additionally, upon receiving shareholder approval
in June 2018, the 2014 Plan was further amended and restated to
increase the authorized number of shares of common stock of the
Company issuable under all awards granted under the 2014 Plan from
2,471,906 to
3,221,906. Finally, upon receiving shareholder approval in
June 2020, the 2014 Plan was further amended and restated to
increase the authorized number of shares of common stock of the
Company issuable under all awards granted under the 2014 Plan from
3,221,906 to
5,721,906. The board of directors, on an option-by-option
basis, determines the number of shares, exercise price, term, and
vesting period for options granted. Options granted generally have
a ten-year contractual
life. The Company issues shares of common stock upon the exercise
of options with the source of those shares of common stock being
either newly issued shares or shares held in treasury. An aggregate
of
5,721,906 shares are authorized for issuance under the 2014
Plan, with
1,584,874 shares remaining available for grant as of June
30, 2021.
A summary of
stock option activity is as follows:
Schedule
of Stock Option Activity
|
|
Outstanding stock options |
|
|
|
Number of shares |
|
|
Weighted average exercise price |
|
Balance at December 31, 2020 |
|
|
3,564,458 |
|
|
$ |
3.36 |
|
Options granted |
|
|
376,000 |
|
|
|
1.44 |
|
Options exercised |
|
|
(4,584 |
) |
|
|
1.46 |
|
Options forfeited |
|
|
- |
|
|
|
- |
|
Options cancelled |
|
|
(20,084 |
) |
|
|
6.45 |
|
Balance at June 30, 2021 |
|
|
3,915,790 |
|
|
|
3.16 |
|
|
|
|
|
|
|
|
|
|
Options exercisable at June 30, 2021 |
|
|
2,528,729 |
|
|
|
4.24 |
|
The
following table summarizes information about stock options
outstanding and exercisable at June 30, 2021:
Schedule
of Share-based Compensation of Stock Options Outstanding and
Exercisable
Options outstanding |
|
Options exercisable |
Number outstanding |
|
Weighted average remaining contractual life (Years) |
|
|
Weighted average exercise price |
|
|
Aggregate intrinsic value |
|
|
Number exerciseable |
|
Weighted average remaining contractual life (Years) |
|
|
Weighted average exercise price |
|
|
Aggregate intrinsic value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,915,790 |
|
|
6.39 |
|
|
$ |
3.16 |
|
|
$ |
636,639 |
|
|
2,528,729 |
|
|
4.84 |
|
|
$ |
4.24 |
|
|
$ |
311,190 |
|
The
intrinsic value for stock options is defined as the difference
between the current market value and the exercise price. There were
zero and
4,584, respectively, stock
options exercised during the three and six months ended June 30,
2021, and
no stock options exercised
during the three and six months ended June 30, 2020.
(e)
Common Stock Warrants
The Company
accounts for its common stock warrants under ASC 480,
Distinguishing Liabilities from Equity, which requires any
financial instrument, other than an outstanding share, that, at
inception, embodies an obligation to repurchase the issuer’s equity
shares, or is indexed to such an obligation, and requires or may
require the issuer to settle the obligation by transferring assets,
to be classified as a liability. In accordance with ASC 480, the
Company’s outstanding warrants from the November 2019 Offering are
classified as a liability. The liability is adjusted to fair value
at each reporting period, with the changes in fair value recognized
as gain (loss) on change in fair value of warrant liability in the
Company’s consolidated statements of operations. The warrants
issued in the November 2019 Offering allow the warrant holder, if
certain change in control events occur, the option to receive an
amount of cash equal to the value of the warrants as determined in
accordance with the Black-Scholes option pricing model with certain
defined assumptions upon a fundamental transaction.
As of June
30, 2021, the Company had 1,094,030 common stock warrants
outstanding from the November 2019 Offering to purchase an equal
number of shares of common stock. The fair value of these warrants
on June 30, 2021 and on December 31, 2020 was determined using the
Black-Scholes option pricing model with the following Level 3
inputs (as defined in the November 2019 Offering):
Schedule
of Fair Value of Warrants
|
|
June 30,
2021 |
|
|
December 31,
2020 |
|
Expected life in
years |
|
|
3.38 |
|
|
|
3.88 |
|
Risk-free interest rate |
|
|
0.46 |
% |
|
|
0.27 |
% |
Dividend yield |
|
|
— |
|
|
|
— |
|
Volatility |
|
|
72.62 |
% |
|
|
88.46 |
% |
Stock price |
|
$ |
1.40 |
|
|
$ |
1.36 |
|
During the
three and six months ended June 30, 2021, the Company recorded a
non-cash gain of $221,000 and
$26,000,
respectively, from the change in fair value of the November 2019
Offering warrants. During the three and six months ended June 30,
2020, the Company recorded a non-cash loss of $2.1 million and
$3.2 million from
the change in fair value of the November 2019 Offering warrants.
The following table is a reconciliation of the warrant liability
measured at fair value using level 3 inputs:
Schedule
of Reconciliation of Warrant Liability
|
|
Warrant Liability |
|
Balance at December 31, 2020 |
|
$ |
1,170,051 |
|
Settlement of
liability on warrant exercise |
|
|
(18,365 |
) |
Change in fair value of common stock warrants |
|
|
(26,257 |
) |
Balance at June 30, 2021 |
|
$ |
1,125,429 |
|
Additionally, in the
February 2020 Offering, the Company issued 5,042,017 common stock warrants, however,
because these warrants do not provide the warrant holder the option
to put the warrant back to the Company, the warrants are classified
as equity.
The
following table summarizes the number of common stock warrants
outstanding and the weighted average exercise price:
Schedule of Number of Warrants Outstanding and the
Weighted Average Exercise Price
|
|
Warrants |
|
|
Weighted Average
Exercise Price
|
|
Outstanding at December
31, 2020 |
|
|
1,944,366 |
|
|
$ |
0.51 |
|
Issued |
|
|
- |
|
|
|
- |
|
Exercised |
|
|
(10,000 |
) |
|
|
0.50 |
|
Expired |
|
|
- |
|
|
|
- |
|
Cancelled |
|
|
- |
|
|
|
- |
|
Forfeited |
|
|
- |
|
|
|
- |
|
Balance at
June 30, 2021 |
|
|
1,934,366 |
|
|
$ |
0.51 |
|
During the
three and six months ended June 30, 2021,
zero and 10,000
common stock warrants to purchase one share of our common stock
were exercised, respectively, resulting in proceeds of
zero and $5,000.
Additionally, during the three and six months ended June 30, 2020,
13,497,807 and
13,618,807 common
stock warrants to purchase one share of our common stock were
exercised, respectively, resulting in proceeds of approximately
$6.9
million in each of the three and six-month periods ending June 30,
2020.
The following
table summarizes information about common stock warrants
outstanding at June 30, 2021:
(10)
Commitments and
Contingencies
Litigation
The Company
is involved in various lawsuits, claims and other legal matters
from time to time that arise in the ordinary course of conducting
business. The Company records a liability when a particular
contingency is probable and estimable.
On April 2,
2019, the Company filed a lawsuit against Clarus in the United
States District Court for the District of Delaware alleging that
Clarus’s JATENZO® product infringes six of Lipocine’s issued U.S.
patents: 9,034,858; 9,205,057; 9,480,690; 9,757,390; 6,569,463; and
6,923,988. However on February 11, 2020, the Company voluntarily
dismissed allegations of patent infringement for expired U.S.
Patent Nos. 6,569,463 and 6,923,988 in an effort to streamline the
issues and associated costs for dispute. Clarus has answered the
complaint and asserted counterclaims of non-infringement,
inequitable conduct and invalidity. The Company answered Clarus’s
counterclaims on April 29, 2019. The Court held a scheduling
conference on August 15, 2019, a claim construction hearing on
February 11, 2020 and a Summary Judgement Hearing on January 15,
2021. In May 2021, the Court granted Clarus’ motion for Summary
Judgment, finding the asserted claims of Lipocine’s U.S. patents
9,034,858; 9,205,057; 9,480,690; and 9,757,390 invalid for failure
to satisfy the written description requirement of 35 U.S.C. § 112.
Clarus still had remaining counterclaims before the Court. On July
13, 2021, Clarus and the Company entered into a global settlement
agreement (“Global Agreement’) which resolved all outstanding
claims of this litigation as well as the on-going United States
Patent and Trademark Office (“USPTO”) Interference No. 106,128
between the parties. Under the terms of the Global Agreement, the
Company agreed to pay Clarus $4.0 million payable as
follows: $2.5 million immediately,
$1.0 million on July 13, 2022
and $500,000 on July 13, 2023. No
future royalties are owing from either party. On July 15, 2021, the
Court dismissed with prejudice the Company’s claims and Clarus’
counterclaims.
On November
14, 2019, the Company and certain of its officers were named as
defendants in a purported shareholder class action lawsuit,
Solomon Abady v. Lipocine Inc. et al., 2:19-cv-00906-PMW,
filed in the United District Court for the District of Utah. The
complaint alleges that the defendants made false and/or misleading
statements and/or failed to disclose that our filing of the NDA for
TLANDO to the FDA contained deficiencies and as a result the
defendants’ statements about our business and operations were false
and misleading and/or lacked a reasonable basis in violation of
federal securities laws. The lawsuit seeks certification as a class
action (for a purported class of purchasers of the Company’s
securities from March 27, 2019 through November 8, 2019),
compensatory damages in an unspecified amount, and unspecified
equitable or injunctive relief. The Company has insurance that
covers claims of this nature. The retention amount payable by the
Company under our policy is $1.25 million. The Company filed a
motion to dismiss the class action lawsuit on July 24, 2020. In
response, the plaintiffs filed their response to the motion to
dismiss the class action lawsuit on September 22, 2020 and the
Company filed its reply to its motion to dismiss on October 22,
2020. The Company intends to vigorously defend itself against these
allegations and has not recorded a liability related to this
shareholder class action lawsuit as the outcome is not probable nor
can an estimate be made of loss, if any.
On March 13,
2020, the Company filed U.S. patent application serial number
16/818,779 (“the Lipocine ‘779 Application”) with the USPTO. On
October 16 and November 3, 2020, Lipocine filed suggestions for
interference with the USPTO requesting that a patent interference
be declared between the Lipocine ‘779 Application and US patent
application serial number 16/656,178 to Clarus Therapeutics, Inc.
(“the Clarus ‘178 Application”). Pursuant to the Company’s request,
the Patent Trial and Appeal Board (“PTAB”) at the USPTO declared
the interference on January 4, 2021 to ultimately determine, as
between the Company and Clarus, who is entitled to the claimed
subject matter. The interference number is 106,128, and the Company
was initially declared Senior Party. A conference call with the
PTAB was held on January 25, 2021 to discuss proposed motions. On
February 1, 2021, the PTAB issued an order authorizing certain
motions and setting the schedule for the preliminary motions phase.
On July 13, 2021, Clarus and the Company entered into the Global
Agreement to resolve interference No. 106,128 among other items. On
July 26, 2021, the PTAB granted the Company’s request for adverse
judgment in interference No. 106,128 in accordance with the Global
Agreement.
Guarantees and
Indemnifications
In the
ordinary course of business, the Company enters into agreements,
such as lease agreements, licensing agreements, clinical trial
agreements, and certain services agreements, containing standard
guarantee and / or indemnification provisions. Additionally, the
Company has indemnified its directors and officers to the maximum
extent permitted under the laws of the State of
Delaware.
(11)
Agreement with
Spriaso, LLC
On July 23,
2013, the Company entered into an assignment/license and a services
agreement with Spriaso, a related-party that is majority-owned by
certain current and former directors of Lipocine Inc. and their
affiliates. Under the license agreement, the Company assigned and
transferred to Spriaso all of the Company’s rights, title and
interest in its intellectual property to develop products for the
cough and cold field. In addition, Spriaso received all rights and
obligations under the Company’s product development agreement with
a third-party. In exchange, the Company will receive a royalty of
20 percent of the net proceeds
received by Spriaso, up to a maximum of $10.0 million. Spriaso also
granted back to the Company an exclusive license to such
intellectual property to develop products outside of the cough and
cold field. Under the service agreement, the
Company provided facilities and up to 10 percent of the services of
certain employees to Spriaso for a period of 18 months which
expired January 23, 2015. Effective January 23, 2015, the Company
entered into an amended services agreement with Spriaso in which
the Company agreed to continue providing up to 10 percent of the
services of certain employees to Spriaso at a rate of $230/hour for a period
of six months. The agreement was further amended on July 23,
2015, on January 23, 2016, on July 23, 2016, on January 23, 2017,
on July 23, 2017, on January 23, 2018, on July 23, 2018 and again
on January 23, 2019 to extend the term of the agreement for an
additional six months. The agreement was further amended on July
23, 2019 and again on July 23, 2020 to extend the term of the
agreement for an additional twelve months. The agreement may be
extended upon written agreement of Spriaso and the Company. The
Company did not receive any reimbursements during the three and six
months ended June 30, 2021 and 2020, respectively. Spriaso filed
its first NDA and as an affiliated entity of the Company, it used
up the one-time waiver for user fees for a small business
submitting its first human drug application to the FDA. Spriaso is
considered a variable interest entity under the FASB ASC Topic
810-10, Consolidations, however the Company is not the
primary beneficiary and has therefore not consolidated
Spriaso.
(12)
Recent Accounting
Pronouncements
Accounting
Pronouncements Issued Not Yet Adopted
In 2016,
the FASB issued Accounting Standards
Update (“ASU”) 2016-13, Measurement
of Credit Losses on Financial Instruments (“ASU 2016-13”). This
standard replaces the incurred loss impairment methodology in
current GAAP with a methodology that reflects expected credit
losses on instruments within its scope, including trade
receivables, and requires entities to measure all expected credit
losses for financial assets held at the reporting date based on
historical experience, current conditions and reasonable and
supportable forecasts. The original effective date for ASU 2016-13
was for annual and interim periods beginning after December 15,
2019.
However, in
October 2019, the FASB issued ASU 2019-10, Financial Instruments
- Credit Losses, Derivatives and Hedging, and Leases: Effective
Dates, which deferred the effective date of ASU 2016-13 for
certain entities, including those that are eligible to be smaller
reporting companies. A company’s determination about whether
it is eligible for the deferral is a one-time assessment as of
November 15, 2019 based on its most recent determination of its
small reporting company eligibility as of the last business day of
the most recently completed second quarter. Based on this
determination, the Company qualifies as a smaller reporting entity
and is therefore eligible for the deferral of adoption of ASU
2016-13, resulting in a new effective date of January 1, 2023. The
Company has historically not had credit losses on financial
instruments and is currently evaluating the impact the adoption of
ASU 2016-13 will have on its consolidated financial
statements.
ITEM 2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
The
following discussion of our financial condition and results of
operations should be read in conjunction with our unaudited
condensed consolidated financial statements and the related notes
thereto and other financial information included elsewhere in this
report. For additional context with which to understand our
financial condition and results of operations, see the management’s
discussion and analysis included in our Form 10-K, filed with the
SEC on March 11, 2021, our first quarter Form 10-Q filed with the
SEC on May 6, 2021, as well as the financial statements and related
notes contained therein.
As used
in the discussion below, “we,” “our,” and “us” refers to
Lipocine.
Forward-Looking
Statements
This section
and other parts of this report contain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that involve risks and uncertainties. Forward-looking
statements provide current expectations of future events based on
certain assumptions and include any statement that does not
directly relate to any historical or current fact. Forward-looking
statements may refer to such matters as products, product benefits,
pre-clinical and clinical development timelines, clinical and
regulatory expectations and plans, expected responses to regulatory
actions, anticipated financial performance, future revenues or
earnings, business prospects, projected ventures, new products and
services, anticipated market performance, expected research and
development and other expenses, future expectations for liquidity
and capital resources needs and similar matters. Such words as
“may”, “will”, “expect”, “continue”, “estimate”, “project”, and
“intend” and similar terms and expressions are intended to identify
forward looking statements. Forward-looking statements are not
guarantees of future performance and our actual results may differ
significantly from the results discussed in the forward-looking
statements. Factors that might cause such differences include, but
are not limited to, those discussed in Part II, Item 1A (Risk
Factors) of this Form 10-Q, or in Part II, Item 1A (Risk Factors)
of our Form 10-Q for the quarter ended March 31, 2021 filed with
the SEC on May 6, 2021 or in Part I, Item 1A (Risk Factors) of our
Form 10-K filed with the SEC on March 11, 2021. Except as required
by applicable law, we assume no obligation to revise or update any
forward-looking statements for any reason.
Overview
of Our Business
We are a
clinical-stage biopharmaceutical company focused on applying our
oral drug delivery technology for the development of pharmaceutical
products focusing on metabolic and endocrine disorders. Our
proprietary delivery technologies are designed to improve patient
compliance and safety through orally available treatment options.
Our primary development programs are based on oral delivery
solutions for poorly bioavailable drugs. We have a portfolio of
proprietary product candidates designed to produce favorable PK
characteristics and facilitate lower dosing requirements, bypass
first-pass metabolism in certain cases, reduce side effects, and
eliminate gastrointestinal interactions that limit
bioavailability.
Our most
advanced product candidate, TLANDO®, is an oral TRT comprised of
TU. On December 8, 2020, we received tentative approval from the
FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in
adult males for conditions associated with a deficiency of
endogenous testosterone, also known as hypogonadism. In granting
tentative approval, the FDA concluded that TLANDO has met all
required quality, safety and efficacy standards necessary for
approval. However, TLANDO has not received final approval and is
not eligible for final approval to market in the U.S. until the
expiration of the exclusivity period previously granted to Clarus
Therapeutics, Inc. with respect to Jatenzo®, which expires on March
27, 2022. We remain committed to taking appropriate actions with
the goal of receiving final approval to permit the launch of
TLANDO. The FDA has also required us to conduct certain
post-marketing studies to (i) assess patient understanding of key
risks relating to TLANDO and (ii) evaluate development of adrenal
insufficiency with chronic TLANDO therapy.
Additional
pipeline candidates include LPCN 1144, an oral prodrug of
bioidentical testosterone comprised of TU for the treatment of
non-cirrhotic NASH which is currently in Phase 2 testing, TLANDO®
XR, a next generation oral TRT product comprised of testosterone
tridecanoate (“TT”) with the potential for once daily dosing which
has completed Phase 2 testing, LPCN 1148, an oral prodrug of
bioidentical testosterone for the management of symptoms associated
with cirrhosis, LPCN 1154, an oral neuro-steroid targeted for the
treatment of postpartum depression (“PPD”), and LPCN 1107, potentially the
first oral HPC product indicated for the prevention of recurrent
PTB, which has completed a dose finding Phase 2 clinical study and
has been granted orphan drug designation by the FDA.
LPCN 1144 is
currently being tested in the LiFT (“Liver Fat intervention
with oral Testosterone”) proof-of-concept (“POC”) Phase 2 clinical
study, a paired-biopsy study in confirmed non-cirrhotic NASH
subjects. Study enrollment has been completed and positive top-line
primary endpoint results after 12 weeks of treatment were released
in January 2021. Treatments with LPCN 1144 resulted in robust liver
fat reduction, assessed by MRI-PDFF technique, and showed
improvement of liver injury markers with no observed tolerability
issues.
To date, we
have funded our operations primarily through the sale of equity
securities, debt and convertible debt and through up-front
payments, research funding and royalty and milestone payments from
our license and collaboration arrangements. We have not generated
any revenues from product sales and we do not expect to generate
revenue from product sales unless and until we obtain regulatory
approval of TLANDO or other products.
We have
incurred losses in most years since our inception. As of June 30,
2021, we had an accumulated deficit of $182.2 million. Income and
losses fluctuate year to year, primarily depending on the nature
and timing of research and development occurring on our product
candidates. Our net loss was $10.2 million for the six months ended
June 30, 2021, compared to $12.1 million for the six months ended
June 30, 2020. Substantially all of our operating losses resulted
from expenses incurred in connection with our product candidate
development programs, our research activities and general and
administrative costs, including on-going litigation, associated
with our operations.
We expect to
continue to incur significant expenses and operating losses for the
foreseeable future as we:
|
● |
conduct any
other post-approval clinical studies required in support of
TLANDO; |
|
● |
perform
pre-commercialization and commercialization activities in support
of TLANDO; |
|
● |
conduct
further development of our other product candidates, including LPCN
1144, LPCN 1148, LPCN 1154 and LPCN 1107; |
|
● |
continue our
research efforts; |
|
● |
research new
products or new uses for our existing products; |
|
● |
maintain,
expand and protect our intellectual property portfolio;
and |
|
● |
provide
general and administrative support for our operations, including
on-going litigation. |
To fund
future long-term operations, including the potential
commercialization of TLANDO or other products, we will need to
raise additional capital. The amount and timing of future funding
requirements will depend on many factors, including capital market
conditions, regulatory requirements and outcomes related to TLANDO,
regulatory requirements related to our other product development
programs, the timing and results of our ongoing development
efforts, the potential expansion of our current development
programs, potential new development programs, our ability to
license our products to third parties, the pursuit of various
potential commercial activities and strategies associated with our
development programs and related general and administrative
support. We anticipate that we will seek to fund our operations
through public or private equity or debt financings or other
sources, such as potential license, partnering and collaboration
agreements. We cannot be certain that anticipated additional
financing will be available to us on favorable terms, in amounts
sufficient to fund our operations or at all. Although we have
previously been successful in obtaining financing through public
and private equity securities offerings and our license and
collaboration agreements, there can be no assurance that we will be
able to do so in the future.
Our
Product Candidates
Our current
portfolio includes our most advanced product candidate, TLANDO, an
oral TRT product candidate, which received tentative approval from
the FDA on December 8, 2020. Additionally, we are in the process of
establishing our pipeline of other clinical candidates including an
oral androgen therapy for the treatment of non-cirrhotic NASH, LPCN
1144, a next-generation potential once daily oral TRT, TLANDO XR,
an androgen therapy for the management of cirrhosis, LPCN 1148, an
oral neuro-steroid targeted for the treatment of PPD, LPCN 1154, an oral therapy for
the prevention of PTB, LPCN 1107, and we continue to explore other
product candidates targeting indications with a significant unmet
need.
These
products are based on our proprietary Lip’ral drug delivery
technology platform. Lip’ral technology is a patented technology
based on lipidic compositions which form an optimal dispersed phase
in the gastrointestinal environment for improved absorption of
insoluble drugs. The drug loaded dispersed phase presents the
solubilized drug efficiently at the absorption site
(gastrointestinal tract membrane) thus improving the absorption
process and making the drug less dependent on physiological
variables such as dilution, gastro-intestinal pH and food effects
for absorption. Lip’ral based formulation enables improved
solubilization and higher drug-loading capacity, which can lead to
improved bioavailability, reduced dose, faster and more consistent
absorption, reduced variability, reduced sensitivity to food
effects, improved patient compliance, and targeted lymphatic
delivery where appropriate.
Our
Development Pipeline
TLANDO:
An Oral Product Candidate for Testosterone Replacement
Therapy
Our most
advanced product, TLANDO, is an oral formulation of the chemical,
TU, which is an eleven carbon side chain attached to T. TU is an
ester prodrug of T. An ester is chemically formed by bonding an
acid and an alcohol. Upon the cleavage, or breaking, of the ester
bond, T is formed. TU has been approved for use outside the United
States for many years for delivery via intra-muscular injection and
in oral dosage form and more recently TU has received regulatory
approval in the United States for delivery via intra-muscular
injection and in oral dosage form. We are using our proprietary
technology to facilitate steady gastrointestinal solubilization and
absorption of TU. Proof of concept was initially established in
2006, and subsequently TLANDO was licensed in 2009 to Solvay
Pharmaceuticals, Inc. which was then acquired by Abbott. Following
a portfolio review associated with the spin-off of AbbVie by Abbott
in 2011, the rights to TLANDO were reacquired by us. All
obligations under the prior license agreement have been completed
except that Lipocine will owe Abbott a perpetual 1% royalty on net
sales. Such royalties are limited to $1 million in the first two
calendar years following product launch, after which period there
is not a cap on royalties and no maximum aggregate amount. If
generic versions of any such product are introduced, then royalties
are reduced by 50%.
NDA PDUFA
Outcome
On December
8, 2020 we received tentative approval from the FDA regarding our
NDA filed in February 2020 for TLANDO as a TRT in adult males for
conditions associated with a deficiency of endogenous testosterone,
also known as hypogonadism. In granting tentative approval, the FDA
concluded that TLANDO has met all required quality, safety and
efficacy standards necessary for approval. However, TLANDO has not
received final approval and is not eligible for final approval to
market in the U.S. until the expiration of the exclusivity period
previously granted to Clarus with respect to Jatenzo®, which expires on March
27, 2022. We remain committed to taking appropriate actions with
the goal of receiving final approval to permit the launch of
TLANDO.
Under the
Pediatric Research Equity Act (“PREA”), if TLANDO receives full
approval, we will need to address the PREA requirement to assess
the safety and effectiveness of TLANDO in pediatric patients. The
FDA has also required us to conduct certain post-marketing studies
including: (i) conduct an appropriately designed label
comprehension and knowledge study that assesses patient
understanding of key risk messages in the Medication Guide for
TLANDO and (ii) conduct an appropriately designed one-year trial to
evaluate development of adrenal insufficiency with chronic TLANDO
therapy. The timetables for these post-marketing requirements will
be established at the time of full approval of TLANDO. We are
actively pursuing and currently evaluating commercial alternatives
with TLANDO, should it receive FDA approval, including
out-licensing TLANDO to a third-party, launching TLANDO on our own,
or launching TLANDO on our own with the assistance from a “risk
share” partner.
Recent
Competition Update
On March 27,
2019, Clarus’ product JATENZO®, an oral TU product, was approved by
the FDA and also received three years of data exclusivity. On
February 10, 2020, Clarus announced that JATENZO® has been launched
and is commercially available. Based on the FDA’s tentative
approval of TLANDO, we will not be able to begin marketing TLANDO
until receiving final approval no earlier than March 27, 2022, the
expiration of the exclusivity period granted to Clarus with respect
to JATENZO®.
Additionally, our
competitors may introduce other T-replacement therapies. For
example, on January 5, 2021 Marius submitted a NDA to the FDA
seeking approval of KYZATREX®, its novel oral TU soft gelatin
capsule for the treatment of primary and secondary hypogonadism in
adult men. According to Marius, it has been assigned a PDUFA date
of October 31, 2021 for KYZATREX®.
We are also
aware of other pharmaceutical companies that have T-replacement
therapies or testosterone therapies in development that may be
approved for marketing in the United States or outside of the
United States.
Based on
publicly available information, we believe that several other
T-replacement therapies that would be competitive with TLANDO are
in varying stages of development, some of which may be approved,
marketed and/or commercialized prior to TLANDO. These therapies
include T-gels, oral-T, an aromatase inhibitor, a new class of
drugs called Selective Androgen Receptor Modulators and
hydroalcoholic gel formulations of DHT.
LPCN
1144: An Oral Prodrug of Bioidentical Testosterone Product
Candidate for the Treatment of NASH
We are
currently evaluating LPCN 1144, an oral prodrug of bioidentical
testosterone comprised of TU, for the treatment of non-cirrhotic
NASH. NASH is a more advanced state of NAFLD and can progress to a
cirrhotic liver and eventually hepatocellular carcinoma/ liver
cancer. Twenty to thirty percent of the U.S. population is
estimated to suffer from NAFLD and fifteen to twenty percent of
this group progress to NASH, which is a substantially large
population that lacks effective therapy. Currently, there are no
FDA approved treatments for NASH, a silent killer that affects
approximately 30 million Americans. Approximately 50% of NASH
patients are in adult males. NAFLD/NASH is becoming more common due
to its strong correlation with obesity and metabolic syndrome,
including components of metabolic syndrome such as diabetes,
cardiovascular disease and high blood pressure. In men, especially
with comorbidities associated with NAFLD/NASH, testosterone
deficiency has been associated with an increased accumulation of
visceral adipose tissue and insulin resistance, which could be
factors contributing to NAFLD/NASH. There is currently no approved
therapy for the treatment of NASH although there are several drug
candidates currently under development with many having clinical
failures to date.
History
of Liver Disease
The liver is
the largest internal organ in the human body and its proper
function is indispensable for many critical metabolic functions,
including the regulation of lipid and sugar metabolism, the
production of important proteins, including those involved in blood
clotting, and purification of blood. There are over 100 described
diseases of the liver, and because of its many functions, these can
be highly debilitating and life-threatening unless effectively
treated. Liver diseases can result from injury to the liver caused
by a variety of insults, including HCV, HBV, obesity, chronic
excessive alcohol use or autoimmune diseases. Regardless of the
underlying cause of the disease, there are important similarities
in the disease progression including increased inflammatory
activity and excessive liver cell apoptosis, which if unresolved
leads to fibrosis. Fibrosis, if allowed to progress, will lead to
cirrhosis, or excessive scarring of the liver, and eventually
reduced liver function. Some patients with liver cirrhosis have a
partially functioning liver and may appear asymptomatic for long
periods of time, which is referred to as decompensated liver
disease. Decompensated liver disease is when the liver is unable to
perform its normal functions. Many people with active liver disease
remain undiagnosed largely because liver disease patients are often
asymptomatic for many years.
Markers
of Liver Cell Death
ALT is an
enzyme that is produced in liver cells and is naturally found in
the blood of healthy individuals. In liver disease, liver cells are
damaged and as a consequence, ALT is released into the blood,
increasing ALT levels above the normal range. Physicians routinely
test blood levels of ALT to monitor the health of a patient’s
liver. ALT level is a clinically important biochemical marker of
the severity of liver inflammation and ongoing liver disease.
Elevated levels of ALT represent general markers of liver cell
death and inflammation without regard to any specific mechanism.
AST is a second enzyme found in the blood that is produced in the
liver and routinely measured by physicians along with ALT. As with
ALT, AST is often elevated in liver disease and, like ALT, is
considered an overall marker of liver inflammation.
Relationship between
Hypogonadism and NAFLD
Preclinical
and clinical studies in the NAFLD/NASH literature have shown the
prevalence of testosterone deficiency across the NAFLD/NASH
histological spectrum wherein low testosterone was independently
associated with NAFLD/NASH with an inverse relationship between
testosterone and NAFLD/NASH symptom severity. A recent NIDDK report
suggests that 75% of biopsy confirmed NASH subjects have less than
372 ng/dL of total testosterone and that the degree of fibrosis
severity is inversely related to free testosterone levels; thus,
providing a good rationale for testing LPCN 1144 in adult NASH
patients regardless of their hypogonadal status. We have received
clearance from the FDA to clinically investigate LPCN 1144 in an
expanded target population of adult male NASH patients.
Specifically, the FDA waived the limitation of only testing LPCN
1144 in NASH subjects with total testosterone levels below 300
ng/dL (threshold for hypogonadism).
Current
Status
We have
initiated the LiFT Phase 2 clinical study in confirmed
non-cirrhotic NASH subjects. The LiFT clinical study is a
prospective, multi-center, randomized, double-blind,
placebo-controlled multiple-arm study in biopsy-confirmed
hypogonadal or eugonadal male NASH subjects with grade F1/F3
fibrosis and a NAFLD Activity Score ≥ 4 with a 36-week treatment
period. The LiFT clinical study enrolled 56 biopsy confirmed
NASH male subjects. Subjects were randomized 1:1:1 to one of three
arms (Treatment A is a twice daily oral dose of 142 mg testosterone
equivalent, Treatment B is a twice daily oral dose of 142 mg
testosterone equivalent formulated with 217 mg of d-alpha
tocopherol equivalent, and the third arm is twice daily matching
placebo). We currently expect 36-week biopsy data in August
2021.
The primary
endpoint of the LiFT clinical study is change in hepatic fat
fraction via MRI-PDFF and exploratory liver fat/marker end points
post 12 weeks of treatment. Additionally, key secondary endpoints
post 36 weeks of treatment include assessment of histological
change for NASH resolution and/or fibrosis improvement as well as
liver fat data. Other important endpoints include the following:
change in liver injury markers, anthropomorphic measurements,
lipids, insulin resistance and inflammatory/fibrosis markers; as
well as patient reported outcomes.
Additionally, subjects
will have access to LPCN 1144 through an open label extension
study. The extension study will enable the collection of additional
data on LPCN 1144 for up to a total of 72 weeks of
therapy.
Treatments
with LPCN 1144 post 12 weeks of treatment resulted in robust liver
fat reduction, assessed by MRI-PDFF, and showed improvement of
liver injury markers with no observed tolerability issues.
Inclusion of d-alpha tocopherol formulated with the testosterone
prodrug resulted in additional liver benefits, notably improved key
liver markers without compromising tolerability.
Key results
are presented in the following tables:
Table 1.
Mean absolute liver fat using MRI-PDFF in all subjects (n=56)* at
Week 12.
|
|
Change from baseline (CBL) |
|
Placebo-adjusted CBL |
Treatment |
|
% |
|
p-value |
|
% |
|
p value |
A (n =
18) |
|
-7.7 |
|
<0.0001 |
|
-6.1 |
|
0.0001 |
B (n = 19) |
|
-9.2 |
|
<0.0001 |
|
-7.5 |
|
<0.0001 |
Placebo (n =
19) |
|
-1.7 |
|
NS |
|
n/a |
|
n/a |
* Missing
data was obtained using Multiple Imputation
NS: Not
significant (p > 0.05)
Table 2.
Mean relative liver fat using MRI-PDFF at Week 12 in subjects
(n=52) with liver fat ≥ 5% at baseline.*
|
|
Change from baseline (CBL) |
|
Placebo-adjusted CBL |
Treatment |
|
% |
|
p value |
|
% |
|
p value |
A (n = 17) |
|
-40.0 |
|
<0.0001 |
|
-30.0 |
|
0.0002 |
B (n =
17) |
|
-46.9 |
|
<0.0001 |
|
-37.0 |
|
<0.0001 |
Placebo (n = 18) |
|
-9.9 |
|
NS |
|
n/a |
|
n/a |
* Based on
available data.
Table 3.
Responders with > 30% Relative Reduction in Liver Fat at Week
12, Intent to Treat Dataset (n=56)*.
Treatment |
|
Responder
(% of
subjects)
|
|
p
value
vs
Placebo
|
A (n =
18) |
|
66.7 |
|
0.0058 |
B (n = 19) |
|
63.2 |
|
0.0026 |
Placebo (n =
19) |
|
15.8 |
|
|
* Subjects
with missing data are considered non-responders
Table
4. Average changes in key serum liver injury markers ALT and AST at
Week 12 (n=52)*.
|
|
ALT (U/L) |
|
|
AST (U/L) |
|
|
|
Absolute |
|
|
Placebo-Adjusted Absolute |
|
|
Absolute |
|
|
Placebo-Adjusted Absolute |
|
Treatment |
|
CBL |
|
|
p value
vs BL
|
|
|
CBL |
|
|
p value
vs Placebo
|
|
|
CBL |
|
|
p value
vs BL
|
|
|
CBL |
|
|
p value
vs Placebo
|
|
A (n =
16) |
|
|
-9.4 |
|
|
|
0.0054 |
|
|
|
-11.1 |
|
|
|
0.0164 |
|
|
|
-4.9 |
|
|
|
0.0402 |
|
|
|
-7.7 |
|
|
|
0.0216 |
|
B (n = 19) |
|
|
-22.4 |
|
|
|
<0.0001 |
|
|
|
-24.1 |
|
|
|
<0.0001 |
|
|
|
-10.4 |
|
|
|
<0.0001 |
|
|
|
-13.2 |
|
|
|
0.0001 |
|
Placebo (n =
17) |
|
|
1.8 |
|
|
|
NS |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
2.8 |
|
|
|
NS |
|
|
|
n/a |
|
|
|
n/a |
|
* All
available data
During the
12 weeks of treatment, the observed rate and severity of Treatment
Emergent Adverse Events (“TEAEs”) in both the LPCN 1144 treatment
arms were comparable to the placebo arm. Three subjects in the
placebo group and one subject in the combined treatment arms
discontinued study drug due to TEAEs. We currently expect 36-week
biopsy data in August 2021.
Previous to
the LiFT clinical study, we completed a 16-week POC liver
imaging clinical study to assess liver fat changes in hypogonadal
men at risk of developing NASH using MRI-PDFF technique. Treatment
results from the POC liver imaging study demonstrated that 48% of
the treated NAFLD subjects, defined as baseline liver fat of at
least 5%, had NAFLD resolution, defined as liver fat <5% post
treatment. Additionally, 100% of the subjects experiencing NAFLD
resolution had at least a 35% relative liver fat reduction from
baseline with a relative mean liver fat reduction of 55% in this
group.
TLANDO
XR: A Next-Generation Long-Acting Oral Product Candidate for
TRT
TLANDO XR is
a next-generation, novel ester prodrug of testosterone comprised of
TT which uses the Lip’ral technology to enhance solubility and
improve systemic absorption. We completed a Phase 2b dose finding
study in hypogonadal men in the third quarter of 2016. The primary
objectives of the Phase 2b clinical study were to determine the
starting Phase 3 dose of TLANDO XR along with safety and
tolerability of TLANDO XR and its metabolites following oral
administration of single and multiple doses in hypogonadal men. The
Phase 2b clinical trial was a randomized, open label, two-period,
multi-dose PK study that enrolled hypogonadal males into five
treatment groups. Each of the 12 subjects in a group received
treatment for 14 days. Results of the Phase 2b study suggest that
the primary objectives were met, including identifying the dose
expected to be tested in a Phase 3 study. Good dose-response
relationship was observed over the tested dose range in the Phase
2b study. Additionally, the target Phase 3 dose met primary and
secondary end points. Overall, TLANDO XR was well tolerated with no
drug-related severe or serious adverse events reported in the Phase
2b study.
Additionally
in October 2014, we completed a Phase 2a proof -of-concept (“POC”)
study in hypogonadal men. The Phase 2a open-label, dose-escalating
single and multiple dose study enrolled 12 males. Results from the
Phase 2a clinical study demonstrated the feasibility of a once
daily dosing with TLANDO XR in hypogonadal men and a good dose
response. Additionally, the study confirmed that steady state is
achieved by day 14 with consistent inter-day performance observed
on day 14, 21 and 28. No subjects exceeded Cmax of 1500 ng/dL at
any time during the 28-day dosing period on multi-dose exposure.
Overall, TLANDO XR was well tolerated with no serious AE’s
reported.
We have also
completed a preclinical toxicology study with TLANDO XR in
dogs.
In February
2018 we had a meeting with the FDA to discuss these pre-clinical
results and to discuss the Phase 3 clinical study and path forward
for TLANDO XR. Based on the results of the FDA meeting and
additional pre-clinical trials conducted after the FDA meeting, we
have proposed a Phase 3 protocol for TLANDO XR and have solicited
FDA feedback. Based on initial FDA feedback, we expect the Phase 3
clinical trial design to follow the International Council for
Harmonisation of Technical Requirements for Pharmaceuticals for
Human Use (“ICH”) guidelines and will include a three-month
efficacy treatment period and a one-year safety component for up to
100 subjects. We continue to refine the Phase 3 protocol and plan
to request FDA approval of the protocol once it is finalized.
Additionally, the FDA previously requested that a food effect study
needs to be completed, and that ambulatory blood pressure
monitoring (“ABPM”) be included as part of the Phase 3 clinical
study. We anticipate the next steps in developing TLANDO XR will be
to scale up the formulation and conduct a food effect study with
TLANDO XR. We are also exploring the possibility of licensing
TLANDO XR to a third party, although no licensing agreement has
been entered into by us.
LPCN
1148: An Oral Prodrug of Bioidentical Testosterone Product
Candidate for the Management of Cirrhosis
Cirrhosis is
end-stage NAFLD for which there is no FDA approved drug treatment.
Liver cirrhosis is estimated to affect in excess of 600,000
Americans, with men affected at twice the rate of women, and
results in approximately 45,000 deaths every year. Due to a lack of
available organs, only a third of waitlisted patients are getting
liver transplants, and patients that do receive a transplant are
increasingly being described as frail. Low testosterone affects up
to 90% of cirrhotic men, and is a predictor of mortality and
increased adverse events including ascites, hepatic encephalopathy,
and clinically significant portal hypertension. We are targeting
LPCN 1148 for the management of symptoms associated with liver
cirrhosis. We believe LPCN 1148 targets unmet needs for cirrhosis
subjects including improvement in the quality of life of patients
while on the liver transplant waiting list, prevention or reduction
in the occurrence of decompensation events and improvement in post
liver transplant survival, including outcomes and costs.
We are
currently planning to conduct a Phase 2 POC study (NCT04874350) in
male cirrhotic subjects to evaluate the therapeutic potential of
LPCN 1148 for the management of cirrhotic subjects. The planned
Phase 2 POC study is a prospective, multi-center, randomized,
placebo-controlled study in approximately 48 to 60 male cirrhotic
patients that are on the liver transplant list. Subjects will be
randomized 1:1 to one of two arms. The treatment arm is an oral
dose of a testosterone ester and the second arm is matching
placebo. The primary endpoint is change in skeletal muscle index at
week 24 with key secondary endpoints including change in liver
frailty index and number of waitlist events, including all-cause
mortality. Total treatment is expected to be 52 weeks. We currently
expect the first subject will be dosed in the fourth quarter of
2021.
LPCN
1154: An Oral Neuro-Steroid Candidate for the Treatment of
Postpartum Depression
PPD is a
major depressive disorder that is under diagnosed in the U.S.,
impacts approximately 1 in 7 women after giving birth. PPD can lead
to devastating consequences for a woman, her newborn and her
family. Currently, there is no oral therapy approved for the
treatment of PPD. The active moiety in LPCN 1154 is an endogenous
positive allosteric modulator of γ-aminobutyric acid
(“GABAA”) receptor. LPCN 1154 is expected to be an “at
home” treatment with easier treatment access than the current
standard of care invasive option that requires hospitalization with
significant limitations. Moreover, LPCN 1154 is expected to provide
the required level of privacy for a mother, avoiding bonding/breast
feeding interruptions due to the required hospitalizations for the
current option.
On June 14,
2021, we announced that the FDA has cleared the Company’s
Investigational New Drug Application (“IND”) to initiate a Phase 2
study to evaluate the therapeutic potential of LPCN 1154 for the
treatment of PPD in adults. We recently initiated a pharmacokinetic
(“PK”) study to assess dose proportionality with LPCN 11154 with
top-line results expected in the third quarter of 2021. Following
the PK study, we plan to conduct a proof-of-concept study to
evaluate the safety, tolerability, and efficacy of LPCN 1154 in
adult female subjects diagnosed with PPD. We expect the first
subject dosed will occur in the fourth quarter of 2021.
LPCN
1107: An Oral Product Candidate for the Prevention of Preterm
Birth
We believe
LPCN 1107 has the potential to become the first oral HPC product
indicated for the reduction of risk of PTB (delivery less than 37
weeks) in women with singleton pregnancy who have a history of
singleton spontaneous PTB. Prevention of PTB is a significant unmet
need as approximately 11.7% of all U.S. pregnancies result in PTB,
a leading cause of neonatal mortality and morbidity.
We have
completed a multi-dose PK dose selection study in pregnant women.
The objective of the multi-dose PK selection study was to assess
HPC blood levels in order to identify the appropriate LPCN 1107
Phase 3 dose. The multi-dose PK dose selection study was an
open-label, four-period, four-treatment, randomized, single and
multiple dose, PK study in pregnant women of three dose levels of
LPCN 1107 and the IM HPC (Makena®). The study enrolled 12 healthy
pregnant women (average age of 27 years) with a gestational age of
approximately 16 to 19 weeks. Subjects received three dose levels
of LPCN 1107 (400 mg BID, 600 mg BID, or 800 mg BID) in a
randomized, crossover manner during the first three treatment
periods and then received five weekly injections of HPC during the
fourth treatment period. During each of the LPCN 1107 treatment
periods, subjects received a single dose of LPCN 1107 on Day 1
followed by twice daily administration from Day 2 to Day 8.
Following completion of the three LPCN 1107 treatment periods and a
washout period, all subjects received five weekly injections of
HPC. Results from this study demonstrated that average steady state
HPC levels (Cavg0-24) were comparable or higher for all three LPCN
1107 doses than for injectable HPC. Additionally, HPC levels as a
function of daily dose were linear for the three LPCN 1107 doses.
Also, unlike the injectable HPC, steady state exposure was achieved
for all three LPCN 1107 doses within seven days. We have also
completed a proof-of-concept Phase 1b clinical study of LPCN 1107
in healthy pregnant women in January 2015 and a POC Phase 1a
clinical study of LPCN 1107 in healthy non-pregnant women in May
2014. These studies were designed to determine the PK and
bioavailability of LPCN 1107 relative to an IM HPC, as well as
safety and tolerability.
A
traditional PK/PD based Phase 2 clinical study in the intended
patient population is not expected to be required prior to entering
into Phase 3. Therefore, based on the results of our multi-dose PK
study we had an End-of-Phase 2 meeting and subsequent guidance
meetings with the FDA to define a pivotal Phase 2b/3 development
plan for LPCN 1107. However, these discussions will need to be
updated based on recent developments with Covis’ Makena®. We plan
to resume our interactions with the FDA to discuss our pivotal
Phase 2b/3 clinical trial design and better understand next steps
to advance LPCN 1107. Additionally, a pivotal Phase 2b/3 study will
not occur until the results from a planned food-effect study with
LPCN 1107 are reviewed by the FDA, though manufacturing scale-up
work for LPCN 1107 has been completed.
We do not
anticipate the initiation of a pivotal Phase 2b/3 study with LPCN
1107 to occur until the required food effect study is complete. We
currently intend to proceed with plans to conduct the required food
effect clinical study. We are exploring the possibility of
licensing LPCN 1107 to a third party, although no licensing
agreement has been entered into by the Company. No assurance can be
given that any license agreement will be completed, or, if an
agreement is completed, that such an agreement would be on
acceptable terms.
The FDA has
granted orphan drug designation to LPCN 1107 based on a major
contribution to patient care. Orphan designation qualifies Lipocine
for various development incentives, including tax credits for
qualified clinical testing, and a waiver of the prescription drug
user fee when we file our NDA.
Recent
Competition Update
On October
5, 2020, the FDA’s CDER proposed that Makena be withdrawn from the
market because the PROLONG trial failed to verify the clinical
benefit of Makena and concluded that the available evidence does
not show Makena is effective for its approved use.
CDER issued
AMAG, the NDA holder at the time, a Notice of Opportunity for
Hearing (“NOOH”) to withdraw approval of Makena, for which AMAG
Pharmaceuticals responded by requesting a hearing and providing
detail on the company’s position, recognizing clinicians’
decade-long use of Makena’s treatment and the public health
implications of withdrawing approval. The FDA Commissioner has not
determined whether it will hold a public hearing, and if one is
granted, the process is expected to take months. During this time,
Makena and the approved generics of Makena will remain on the
market until the FDA makes a final decision about these
products.
Currently,
Makena and the approved generics of Makena are the only products
approved for the prevention of recurrent preterm birth.
The FDA also
indicated that it intends to hold a meeting with experts in
obstetrics, neonatal care, and clinical trial design to discuss how
to facilitate development of effective and safe therapies to treat
preterm birth.
Financial
Operations Overview
Revenue
To date, we
have not generated any revenues from product sales and do not
expect to do so until one of our product candidates receives
approval from the FDA. Revenues to date have been generated
substantially from license fees, royalty and milestone payments and
research support from our licensees. Since our inception through
June 30, 2021, we have generated $28.1 million in revenue under our
various license and collaboration arrangements and from government
grants. We may never generate revenues from TLANDO or any of our
other clinical or preclinical development programs or licensed
products as we may never succeed in obtaining regulatory approval
or commercializing any of these product candidates.
Research and
Development Expenses
Research and
development expenses consist primarily of salaries, benefits,
stock-based compensation and related personnel costs, fees paid to
external service providers such as contract research organizations
and contract manufacturing organizations, contractual obligations
for clinical development, clinical sites, manufacturing and
scale-up for late-stage clinical trials, formulation of clinical
drug supplies, and expenses associated with regulatory submissions.
Research and development expenses also include an allocation of
indirect costs, such as those for facilities, office expense,
travel, and depreciation of equipment based on the ratio of direct
labor hours for research and development personnel to total direct
labor hours for all personnel. We expense research and development
expenses as incurred. Since our inception, we have spent
approximately $123.9 million in research and development expenses
through June 30, 2021.
On December
8, 2020 we received tentative approval from the FDA regarding our
NDA filed in February 2020 for TLANDO as a TRT in adult males for
conditions associated with a deficiency of endogenous testosterone,
also known as hypogonadism. In granting tentative approval, the FDA
concluded that TLANDO has met all required quality, safety and
efficacy standards necessary for approval. However, TLANDO has not
received final approval and is not eligible for final approval to
market in the U.S. until the expiration of the exclusivity period
previously granted to Clarus with respect to Jatenzo®, which expires on March
27, 2022. As a result, we are uncertain as to whether we will incur
additional research and developments costs for TLANDO. Any further
expenditures, if needed, are subject to numerous uncertainties
regarding timing and cost to completion.
We expect to
continue to incur significant costs as we develop our other product
candidates, including the ongoing LiFT Phase 2 clinical
study with LPCN 1144.
In general,
the cost of clinical trials may vary significantly over the life of
a project as a result of uncertainties in clinical development,
including, among others:
|
● |
the number
of sites included in the trials; |
|
|
|
|
● |
the length
of time required to enroll suitable subjects; |
|
|
|
|
● |
the duration
of subject follow-ups; |
|
|
|
|
● |
the length
of time required to collect, analyze and report trial
results; |
|
|
|
|
● |
the cost,
timing and outcome of regulatory review; and |
|
|
|
|
● |
potential
changes by the FDA in clinical trial and NDA filing requirements
for testosterone replacement therapies. |
We have also
incurred significant manufacturing costs to prepare launch supplies
for TLANDO and additional expenditures will be required to prepare
for a commercial launch of TLANDO, should it be approved, if it is
not out-licensed. However, future expenditures are subject to
numerous uncertainties regarding timing and cost to completion,
including, among others:
|
● |
the timing
and outcome of regulatory filings and FDA reviews and actions for
TLANDO; |
|
|
|
|
● |
our
dependence on third-party manufacturers for the production of
satisfactory finished product for registration and launch should
regulatory approval be obtained; |
|
|
|
|
● |
the
potential for future license or co-promote arrangements for TLANDO,
when such arrangements will be secured, if at all, and to what
degree such arrangements would affect our future plans and capital
requirements; and |
|
|
|
|
● |
the effect
on our product development activities of actions taken by the FDA
or other regulatory authorities. |
A change of
outcome for any of these variables with respect to the development
of TLANDO and our other product development candidates could mean a
substantial change in the costs and timing associated with these
efforts, will require us to raise additional capital, and may
require us to reduce operations.
Given the
stage of clinical development and the significant risks and
uncertainties inherent in the clinical development, manufacturing
and regulatory approval process, we are unable to estimate with any
certainty the time or cost to complete the development of LPCN
1144, TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 and other product
candidates. Clinical development timelines, the probability of
success and development costs can differ materially from
expectations and results from our clinical trials may not be
favorable. If we are successful in progressing LPCN 1144, TLANDO
XR, LPCN 1148, LPCN 1154, LPCN 1107 or other product candidates
into later stage development, we will require additional capital.
The amount and timing of our future research and development
expenses for these product candidates will depend on the
preclinical and clinical success of both our current development
activities and potential development of new product candidates, as
well as ongoing assessments of the commercial potential of such
activities.
Summary of
Research and Development Expense
We are
conducting on-going clinical and regulatory activities with most of
our product candidates. Additionally, we incur costs for our other
research programs. The following table summarizes our research and
development expenses:
|
|
Three Months
Ended June 30, |
|
|
Six Months
Ended June 30, |
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
External
service provider costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TLANDO |
|
$ |
22,528 |
|
|
$ |
122,544 |
|
|
$ |
109,251 |
|
|
$ |
207,477 |
|
LPCN
1144 |
|
|
554,042 |
|
|
|
1,330,886 |
|
|
|
1,317,272 |
|
|
|
3,060,439 |
|
TLANDO
XR |
|
|
- |
|
|
|
1,490 |
|
|
|
- |
|
|
|
71,898 |
|
LPCN
1154 |
|
|
94,642 |
|
|
|
- |
|
|
|
102,073 |
|
|
|
- |
|
LPCN
1107 |
|
|
54,381 |
|
|
|
1,360 |
|
|
|
55,381 |
|
|
|
2,360 |
|
Total
external service provider costs |
|
|
725,593 |
|
|
|
1,456,280 |
|
|
|
1,583,977 |
|
|
|
3,342,174 |
|
Internal
personnel costs |
|
|
514,705 |
|
|
|
682,334 |
|
|
|
1,084,972 |
|
|
|
1,174,705 |
|
Other
research and development costs |
|
|
224,389 |
|
|
|
130,370 |
|
|
|
376,279 |
|
|
|
263,860 |
|
Total
research and development |
|
$ |
1,464,687 |
|
|
$ |
2,268,984 |
|
|
$ |
3,045,228 |
|
|
$ |
4,780,739 |
|
We expect
research and development expenses to increase in the future as we
complete on-going clinical studies, including the LiFT Phase
2 clinical study with LPCN 1144, as we conduct future clinical
studies with LPCN 1148, LPCN 1154 and LPCN 1107, and as we
manufacture commercial supplies of TLANDO pre-approval if it is not
out-licensed. However, if we are unable to raise additional
capital, we may need to reduce research and development expenses in
order to extend our ability to continue as a going
concern.
General and
Administrative Expenses
General and
administrative expenses consist primarily of salaries and related
benefits, including stock-based compensation related to our
executive, finance, business development, marketing, sales and
support functions. Other general and administrative expenses
include rent and utilities, travel expenses, professional fees for
auditing, tax and legal services, litigation settlement and market
research and market analytics.
General and
administrative expenses also include expenses for the cost of
preparing, filling and prosecuting patent applications and
maintaining, enforcing and defending intellectual property-related
claims, including the patent interference and patent infringement
lawsuits against Clarus.
We expect
that general and administrative expenses will decrease in the
future as we expect to incur decreased legal fees due to the global
settlement agreement (“Global Agreement”) with Clarus. We expect
that such decreases will be offset by other increases as we mature
as a public company, including legal and consulting fees,
accounting and audit fees, director fees, increased directors’ and
officers’ insurance premiums, fees for investor relations services
and enhanced business and accounting systems, litigation costs,
professional fees and other costs. If TLANDO is approved by the FDA
and it is not out-licensed, we expect we will incur significant
additional expenses relating to the commercialization of TLANDO,
including, among other things, expenses relating to building out
sales and marketing teams, manufacturing expenses, expenses
relating to licensing TLANDO to third parties, and other expenses.
However, if we are unable to raise additional capital, we may need
to further reduce general and administrative expenses in order to
extend our ability to continue as a going concern. If we are unable
to raise additional capital, we may be unable to effectively
commercialize TLANDO if not out-licensed after receiving FDA
approval.
Other
Expense (Income), Net
Other
expense (income), net consists primarily of interest income earned
on our cash, cash equivalents and marketable investment securities
and interest expense incurred on our outstanding Loan and Security
Agreement, losses (gains) on our warrant liability and litigation
settlement accruals.
Results
of Operations
Comparison of the
Three Months Ended June 30, 2021 and 2020
The
following table summarizes our results of operations for the three
months ended June 30, 2021 and 2020:
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
Variance |
|
Research and development
expenses |
|
$ |
1,464,687 |
|
|
$ |
2,268,984 |
|
|
|
(804,297 |
) |
General and administrative
expenses |
|
|
1,525,592 |
|
|
|
1,953,535 |
|
|
|
(427,943 |
) |
Interest and investment income |
|
|
(17,344 |
) |
|
|
(7,177 |
) |
|
|
10,167 |
|
Interest expense |
|
|
57,428 |
|
|
|
87,847 |
|
|
|
(30,419 |
) |
Loss (gain) on warrant liability |
|
|
(221,322 |
) |
|
|
2,066,445 |
|
|
|
(2,287,767 |
) |
Litigation settlement |
|
|
4,000,000 |
|
|
|
— |
|
|
|
4,000,000 |
|
Research
and Development Expenses
The decrease
in research and development expenses during the three months ended
June 30, 2021 was primarily due to a $777,000 decrease in contract
research organization expense and outside consulting costs related
to the LPCN 1144 LiFT Phase 2 clinical study in NASH
subjects, a $100,000 decrease in costs associated with TLANDO and a
$168,000 decrease in personnel expense which was mainly due to a
decrease in stock compensation and bonus expense. The decreases
were offset by a $95,000 increase in costs related to LPCN 1154 and
a $53,000 increase in costs for LPCN 1107, as well as net increases
in other R&D expenses of $94,000.
General
and Administrative Expenses
The decrease
in general and administrative expenses during the three months
ended June 30, 2021 was primarily due to a $273,000 decrease in
personnel costs, which was mainly due to a decrease in stock
compensation and bonus expense, and a $239,000 decrease in legal
costs in 2021 as compared to 2020 relating to a decrease the
following legal activities: lawsuit filed against Clarus
Therapeutics Inc. for patent infringement in April 2019 and the
on-going class action lawsuit defense. These decreases were offset
by a $49,000 increase in corporate insurance expenses and a $35,000
increase in other general and administrative expenses.
Interest
and Investment Income
The increase
in interest and investment income during the three months ended
June 30, 2021 was due to higher cash and marketable investment
securities balances in 2021 compared to 2020.
Interest
Expense
The decrease
in interest expense during the three months ended June 30, 2021 was
due to a decrease in interest expense on our Loan and Security
Agreement with SVB, as a result of lower principal balances and
lower interest rates in 2021 compared to 2020.
Loss
(Gain) on Warrant Liability
We recorded
a gain of $221,000 and a loss of $2.1 million, respectively, on
warrant liability during the three months ended June 30, 2021 and
2020 related to the change in the fair value of outstanding common
stock warrants issued in the November 2019 Offering. The gain in
2021 was attributable to a decrease in the value of warrants
outstanding as of June 30, 2021 as compared to March 31, 2021 due
to a decrease in our stock price. The loss in 2020 was mainly due
to an increase in the value of warrants outstanding as of June 30,
2020 as compared to March 31, 2020 due to an increase in our stock
price. There were zero and 10,006,000 common stock warrants from
the November 2019 Offering exercised during the three months ended
June 30, 2021 and 2020, respectively. The warrants are classified
as a liability due to a provision contained within the warrant
agreement which allows the warrant holder the option to elect to
receive an amount of cash equal to the value of the warrants as
determined in accordance with the Black-Scholes option pricing
model with certain defined assumptions upon a change of control.
The warrant liability will continue to fluctuate in the future
based on inputs to the Black-Scholes model including our current
stock price, the remaining life of the warrants, the volatility of
our stock price, the risk-free interest rate and the number of
common stock warrants outstanding.
Litigation
Settlement
We recorded
an expense of $4.0 million and zero, respectively, on litigation
settlement during the three months ended June 30, 2021 and 2020
related to the Global Agreement with Clarus to resolve all
outstanding claims in the on-going intellectual property litigation
between the two companies as well as the on-going interference
proceeding between the two companies. Under the terms of the
settlement, we agreed to pay Clarus $4.0 million payable as
follows: $2.5 million immediately, $1.0 million on July 13, 2022
and $500,000 on July 13, 2023. No future royalties are owing from
either party. Under the terms of the Global Agreement, Lipocine and
Clarus have agreed to dismiss the Lipocine Inc. v Clarus
Therapeutics, Inc., No 19-cv-622 (WCB) litigation in the U.S.
District Court for the District of Delaware. Also, both parties
have reached an agreement on the interference proceedings captioned
Clarus Therapeutics, Inc. v. Lipocine Inc., Interference No.
106,128 in the U.S. Patent and Trademark Office.
Comparison of the
Six Months Ended June 30, 2021 and 2020
The
following table summarizes our results of operations for the six
months ended June 30, 2021 and 2020:
|
|
Six months ended June 30, |
|
|
|
|
|
|
2021 |
|
|
2020 |
|
|
Variance |
|
Research and development
expenses |
|
$ |
3,045,228 |
|
|
$ |
4,780,739 |
|
|
|
(1,735,511 |
) |
General and administrative
expenses |
|
|
3,059,544 |
|
|
|
4,038,795 |
|
|
|
(979,251 |
) |
Interest and investment income |
|
|
(27,993 |
) |
|
|
(67,115 |
) |
|
|
(39,122 |
) |
Interest expense |
|
|
126,401 |
|
|
|
221,192 |
|
|
|
(94,791 |
) |
Loss (gain) on warrant liability |
|
|
(26,257 |
) |
|
|
3,166,474 |
|
|
|
(3,192,731 |
) |
Litigation settlement |
|
|
4,000,000 |
|
|
|
— |
|
|
|
4,000,000 |
|
Income tax expense |
|
|
200 |
|
|
|
200 |
|
|
|
- |
|
Research
and Development Expenses
The decrease
in research and development expenses during the six months ended
June 30, 2021 was primarily due to a $1.7 million decrease in
contract research organization expense and outside consulting costs
related to the LPCN 1144 LiFT Phase 2 clinical study in NASH
subjects, a $98,000 decrease in costs associated with TLANDO and a
$90,000 net decrease in personnel expense which was mainly due to a
decrease in stock compensation expense offset by increases in
salaries partially due to headcount increases. These decreases were
offset by a $102,000 increase in costs related to LPCN 1154 and a
$53,000 increase in costs for LPCN 1107, as well as increases in
other R&D expenses of $41,000.
General
and Administrative Expenses
The decrease
in general and administrative expenses during the six months ended
June 30, 2021 was primarily due to a $847,000 decrease in legal
costs in 2021 as compared to 2020 relating to a decrease the
following legal activities: lawsuit filed against Clarus
Therapeutics Inc. for patent infringement in April 2019 and the
on-going class action lawsuit defense, and a decrease of $288,000
in personnel costs mainly due a reduction in stock compensation
expense. These decreases were offset by a $99,000 increase in
corporate insurance expenses and a $57,000 increase in other
general and administrative expenses.
Interest
and Investment Income
The decrease
in interest and investment income during the six months ended June
30, 2021 was due to lower interest rates in 2021 compared to 2020,
despite higher cash and marketable investment securities
balances.
Interest
Expense
The decrease
in interest expense during the six months ended June 30, 2021 was
due to a decrease in interest expense on our Loan and Security
Agreement with SVB, mainly as a result of lower principal balances
2021 compared to 2020.
Loss
(Gain) on Warrant Liability
We recorded
a gain of $26,000 and a loss of $3.2 million, respectively, on
warrant liability during the six months ended June 30, 2021 and
2020 related to the change in the fair value of outstanding common
stock warrants issued in the November 2019 Offering. The gain in
2021 was attributable to a decrease in the value of warrants
outstanding as of June 30, 2021 as compared to December 31, 2020
due to a small decrease in the number of warrants outstanding, a
decrease in our volatility and the shorter term remaining on the
outstanding warrants and the loss in 2020 was mainly due to an
increase in the value of warrants outstanding as of June 30, 2020
as compared to December 31, 2019 due to an increase in our stock
price. There were 10,000 and 10,127,000 common stock warrants from
the November 2019 Offering exercised during the six months ended
June 30, 2021 and 2020, respectively. The warrants are classified
as a liability due to a provision contained within the warrant
agreement which allows the warrant holder the option to elect to
receive an amount of cash equal to the value of the warrants as
determined in accordance with the Black-Scholes option pricing
model with certain defined assumptions upon a change of control.
The warrant liability will continue to fluctuate in the future
based on inputs to the Black-Scholes model including our current
stock price, the remaining life of the warrants, the volatility of
our stock price, the risk-free interest rate and the number of
common stock warrants outstanding.
Litigation
Settlement
We recorded
an expense of $4.0 million and zero, respectively, on litigation
settlement during the six months ended June 30, 2021 and 2020
related to the Global Agreement with Clarus to resolve all
outstanding claims in the on-going intellectual property litigation
between the two companies as well as the on-going interference
proceeding between the two companies. Under the terms of the
settlement, we agreed to pay Clarus $4.0 million payable as
follows: $2.5 million immediately, $1.0 million on July 13, 2022
and $500,000 on July 13, 2023.
Liquidity
and Capital Resources
Since our
inception, our operations have been primarily financed through
sales of our equity securities, debt and payments received under
our license and collaboration arrangements. We have devoted our
resources to funding research and development programs, including
discovery research, preclinical and clinical development
activities. We have incurred operating losses in most years since
our inception and we expect to continue to incur operating losses
into the foreseeable future as we evaluate our options related to
TLANDO should it receive final approval and it’s not out-licensed
and as we advance clinical development of LPCN 1144, TLANDO XR,
LPCN 1148, LPCN 1154, LPCN 1107 and any other product candidate,
including continued research efforts.
As of June
30, 2021, we had $46.6 million of unrestricted cash, cash
equivalents and marketable investment securities compared to $19.7
million at December 31, 2020. Additionally, as of December 31, 2020
we had $5.0 million of restricted cash, which was required to be
maintained as cash collateral under the SVB Loan and Security
Agreement until TLANDO is approved by the FDA. However on February
16, 2021, we amended the Loan and Security Agreement with SVB (as
defined below) to, among other things, remove the cash collateral
requirement.
On January
28, 2021, we completed a public offering of securities registered
under an effective registration statement filed pursuant to the
Securities Act of 1933, as amended (“January 2021 Offering”). The
gross proceeds from the January 2021 Offering were approximately
$28.7 million, before deducting underwriter fees and other offering
expenses of $1.9 million. In the January 2021 Offering, we sold
16,428,571 shares of our common stock.
On April 21,
2020, we entered into a loan (the “Loan”) from SVB in the aggregate
amount of $234,000, pursuant to the Paycheck Protection Program
(the “PPP”) under Division A, Title I of the CARES Act, which was
enacted March 27, 2020. The Loan, which was in the form of a note
dated April 21, 2020, originally matured on April 21, 2022 and
bears interest at a rate of 1.0% per annum, payable monthly
commencing on November 21, 2020. Under the terms of the PPP,
certain amounts of the Loan may be forgiven if they are used for
qualifying expenses as described in the CARES Act. On November 2,
2020, we were notified by the Small Business Administration that
our PPP Loan had been forgiven.
On February
27, 2020, we completed a registered direct offering of securities
registered under an effective registration statement filed pursuant
to the Securities Act of 1933, as amended (“February 2020
Offering”). The gross proceeds from the February 2020 Offering were
approximately $6.0 million, before deducting placement agent fees
and other offering expenses of $347,000. In the February 2020
Offering, the Company sold 10,084,034 Class A Units, with each
Class A Unit consisting of one share of common stock and a one-half
of one common warrant to purchase one share of common stock, at a
price of $0.595 per Class A Unit. The common stock warrants were
immediately exercisable at an exercise price of $0.53 per share,
subject to adjustment, and expire on February 27, 2025. By their
terms, however, the common stock warrants cannot be exercised at
any time that the common stock warrant holder would beneficially
own, after such exercise, more than 4.99% (or, at t