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xbrli:pure
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
September 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:
|
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
November 9, 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 Nine Months Ended September 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 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,453,543 |
) |
|
|
(16,453,543 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized net gain on
marketable investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
513 |
|
|
|
- |
|
|
|
513 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based
compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,138,594 |
|
|
|
- |
|
|
|
- |
|
|
|
1,138,594 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
15,097,651 |
|
|
|
1,510 |
|
|
|
- |
|
|
|
- |
|
|
|
7,673,366 |
|
|
|
- |
|
|
|
- |
|
|
|
7,674,876 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Settlement of warrant
liability on warrant exercises |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,313,338 |
|
|
|
- |
|
|
|
- |
|
|
|
6,313,338 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common stock sold through
ATM offering |
|
|
2,830,000 |
|
|
|
283 |
|
|
|
- |
|
|
|
- |
|
|
|
3,893,304 |
|
|
|
- |
|
|
|
- |
|
|
|
3,893,587 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balances at September 30,
2020 |
|
|
65,686,150 |
|
|
$ |
6,569 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
182,062,701 |
|
|
$ |
475 |
|
|
$ |
(167,520,732 |
) |
|
$ |
14,508,301 |
|
| |
|
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 June 30,
2021 |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
217,986,752 |
|
|
$ |
(186 |
) |
|
$ |
(182,209,131 |
) |
|
$ |
35,745,553 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,081,297 |
) |
|
|
(3,081,297 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized net loss on
marketable investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,234 |
) |
|
|
- |
|
|
|
(3,234 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based
compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
154,998 |
|
|
|
- |
|
|
|
- |
|
|
|
154,998 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs associated with ATM
offering |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(4,932 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,932 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balances at September 30,
2021 |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
218,136,818 |
|
|
$ |
(3,420 |
) |
|
$ |
(185,290,428 |
) |
|
$ |
32,811,088 |
|
| |
|
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 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13,258,420 |
) |
|
|
(13,258,420 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unrealized net loss on
marketable investment securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,420 |
) |
|
|
- |
|
|
|
(3,420 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stock-based
compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
449,311 |
|
|
|
- |
|
|
|
- |
|
|
|
449,311 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 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 |
|
|
|
- |
|
|
|
- |
|
|
|
3,411,002 |
|
|
|
- |
|
|
|
- |
|
|
|
3,411,183 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balances at September 30,
2021 |
|
|
88,290,650 |
|
|
$ |
8,830 |
|
|
|
5,710 |
|
|
$ |
(40,712 |
) |
|
$ |
218,136,818 |
|
|
$ |
(3,420 |
) |
|
$ |
(185,290,428 |
) |
|
$ |
32,811,088 |
|
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 nine months ended September 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 September 30, 2022 which
includes planned and on-going clinical studies for LPCN 1144 and
LPCN 1148, future clinical studies for LPCN 1107 and LPCN 1154 and
compliance with regulatory requirements. 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 new clinical studies for LPCN 1144, TLANDO XR,
LPCN 1148, LPCN 1154 and LPCN 1107. While the Company believes it
has sufficient liquidity and capital resources to fund our
projected operating requirements through at least September 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 September 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, LPCN 1154 and LPCN 1107. 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 or if the Company receives more revenue under the
license agreement (the “Antares License Agreement”) with Antares
Pharma, Inc. (“Antares”) than planned.
|
|
(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 nine
months ended September 30, 2021 and 2020:
Schedule
of Computation of Basic and Diluted Earnings (loss) Per Share of
Common Stock
| |
|
Three Months
Ended
September
30,
|
|
|
Nine Months
Ended
September
30,
|
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| Basic loss per share
attributable to common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(3,081,297 |
) |
|
$ |
(4,313,258 |
) |
|
$ |
(13,258,420 |
) |
|
$ |
(16,453,543 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted avg. common
shares outstanding |
|
|
88,290,650 |
|
|
|
64,833,714 |
|
|
|
86,477,640 |
|
|
|
52,030,431 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic loss per share
attributable to common stock |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.32 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted loss per share
attributable to common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Numerator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(3,081,297 |
) |
|
$ |
(4,313,258 |
) |
|
$ |
(13,258,420 |
) |
|
$ |
(16,453,543 |
) |
| Denominator |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted avg. common
shares outstanding |
|
|
88,290,650 |
|
|
|
64,833,714 |
|
|
|
86,477,640 |
|
|
|
52,030,431 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted loss per share
attributable to common stock |
|
$ |
(0.03 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.32 |
) |
The
computation of diluted loss per share for the nine months ended
September 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
| |
|
September
30, |
|
| |
|
2021 |
|
|
2020 |
|
| Stock
options |
|
|
3,913,705 |
|
|
|
2,958,485 |
|
| Unvested restricted
stock units |
|
|
- |
|
|
|
605,682 |
|
| Warrants |
|
|
1,934,366 |
|
|
|
1,944,366 |
|
| (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 September 30, 2021 and December 31, 2020 were
as follows:
Schedule
of Available-for-Sale Securities
|
September
30, 2021 |
|
Amortized
Cost |
|
|
Gross
unrealized holding gains |
|
|
Gross
unrealized holding losses |
|
|
Aggregate
fair value |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Corporate bonds, notes
and commercial paper |
|
$ |
34,148,800 |
|
|
$ |
- |
|
|
$ |
(3,420 |
) |
|
$ |
34,145,380 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
34,148,800 |
|
|
$ |
- |
|
|
$ |
(3,420 |
) |
|
$ |
34,145,380 |
|
|
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
September 30, 2021 are as follows:
Schedule
of Maturities of Debt Securities Classified as Available-for-sale
Securities
|
September
30, 2021 |
|
Amortized
Cost |
|
|
Aggregate
fair value |
|
|
Due within
one year |
|
$ |
34,148,800 |
|
|
$ |
34,145,380 |
|
| |
|
$ |
34,148,800 |
|
|
$ |
34,145,380 |
|
There were
no sales of marketable investment
securities during the three and nine months ended September 30,
2021 and 2020 and therefore no
realized gains or losses. Additionally, $2.8
million and $450,000
marketable investment securities matured during the three months
ended September 30, 2021 and 2020, respectively and $3.3
million and $4.8
million of marketable investment securities matured during the nine
months ended September 30, 2021 and 2020, respectively. The Company
determined there were no
other-than-temporary impairments for the three and nine months
ended September 30, 2021 and 2020.
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 September 30, 2021 and December 31,
2020:
Schedule of Fair Value, Assets
Measured on Recurring Basis
| |
|
|
|
|
Fair value
measurements at reporting date using |
|
| |
|
September
30,
2021
|
|
|
Level 1
inputs |
|
|
Level 2
inputs |
|
|
Level 3
inputs |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents - money market funds |
|
$ |
4,080,187 |
|
|
$ |
4,080,187 |
|
|
$ |
- |
|
|
$ |
- |
|
| Commercial
Paper |
|
|
11,193,493 |
|
|
|
- |
|
|
|
11,193,493 |
|
|
|
- |
|
| Corporate bonds and
notes |
|
|
22,951,887 |
|
|
|
- |
|
|
|
22,951,887 |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
38,225,567 |
|
|
$ |
4,080,187 |
|
|
$ |
34,145,380 |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
liability |
|
$ |
645,478 |
|
|
|
- |
|
|
|
- |
|
|
|
645,478 |
|
| |
|
$ |
38,871,045 |
|
|
$ |
4,080,187 |
|
|
$ |
34,145,380 |
|
|
$ |
645,478 |
|
| |
|
|
|
|
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 September 30, 2021,
include (i) volatility of 59.69%, (ii) risk free interest
rate of 0.53%, (iii) strike price of
$0.50, (iv) fair value of common stock
of $1.09, and (v) expected
life of 3.13 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 nine months ended September 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 September 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 $636,000 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. On September 9,
2021, SVB consented to the Antares Licensing Agreement which among
other things provides Antares a license to certain intellectual
property as well as assigns Antares the TLANDO® trademark. 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 September 30, 2021 (excluding accrued final payment fee) are as
follows:
Schedule
of Maturities of Debt
|
Years
Ending December 31, |
|
Amount
(in
thousands)
|
|
| 2021 |
|
$ |
833 |
|
| 2022 |
|
|
1,667 |
|
| Thereafter |
|
|
— |
|
|
|
$ |
2,500 |
|
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 September 30, 2021
the tax deferrals totaled $36,000 and are
included in accrued liabilities.
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 September
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 nine months ended September 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
$1.8
million in each of the three months ended September 30, 2021 and
2020 and $3.4
million and $5.1
million, respectively, for the nine months ended September 30, 2021
and 2020 under these agreements and has recorded these expenses in
research and development expenses.
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
September 30, 2021 are:
Schedule
of Future Minimum Rental Payments for Operating
Leases
| |
|
Operating |
|
| |
|
leases |
|
|
Year
ending December 31: |
|
|
|
|
|
2021 |
|
|
82,596 |
|
|
2022 |
|
|
55,064 |
|
| |
|
|
|
|
|
Total
minimum lease payments |
|
$ |
137,660 |
|
The
Company’s rent expense was $83,000 for each of the three
months ended September 30, 2021 and 2020 and was $248,000 for each of the nine
months ended September 30, 2021 and 2020.
|
(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
September 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 September
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 nine months ended September 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 nine months ended September 30,
2020, the Company sold
2,830,000 shares at a weighted average sales price of
$1.43
per share under the ATM for aggregate gross proceeds of $4.0
million and net proceeds of $3.9
million pursuant to the prior Registration Statement on Form S-3
(File No. 333-220942). As of September 30, 2021, the Company had
$41.2
million available for sale under the Sales 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 and again on November 1, 2021, the Company adopted
a Second Amended and Restated Rights Agreement pursuant to which
the expiration date was extended to November 1, 2024, unless the
rights are earlier redeemed or exchanged by the Company.
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
$155,000
and $352,000,
respectively, for the three months ended September 30, 2021 and
2020, and amounted to $449,000
and $1.1
million, respectively, for the nine months ended September 30, 2021
and 2020, and is allocated as follows:
Schedule
of Employee Service Share-based Compensation, Allocation of
Recognized Period Costs
| |
|
Three Months
Ended
September
30,
|
|
|
Nine Months
Ended
September
30,
|
|
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Research and
development |
|
$ |
70,911 |
|
|
$ |
150,435 |
|
|
$ |
207,280 |
|
|
$ |
484,876 |
|
| General and
administrative |
|
|
84,087 |
|
|
|
201,188 |
|
|
|
242,031 |
|
|
|
653,718 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
154,998 |
|
|
$ |
351,623 |
|
|
$ |
449,311 |
|
|
$ |
1,138,594 |
|
The Company
did not issue any stock options during each of the three months
ended September 30, 2021 and 2020 and issued
376,000 and
739,000 stock options, respectively, during the nine
months ended September 30, 2021 and 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 nine months ended September 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 |
|
|
5.79 years |
|
|
|
5.81 years |
|
| Risk-free interest
rate |
|
|
53.56 |
% |
|
|
1.33 |
% |
| Expected dividend
yield |
|
|
— |
|
|
|
— |
|
| Expected
volatility |
|
|
101.68 |
% |
|
|
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
September 30, 2021, there was $941,000
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
2.0 years and will be adjusted for subsequent changes in
estimated forfeitures.
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
1,586,959 shares remaining available for grant as of
September 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 |
|
|
(22,169 |
) |
|
|
6.41 |
|
| Balance at September
30, 2021 |
|
|
3,913,705 |
|
|
|
3.16 |
|
| |
|
|
|
|
|
|
|
|
| Options exercisable at
September 30, 2021 |
|
|
2,606,227 |
|
|
|
4.14 |
|
The
following table summarizes information about stock options
outstanding and exercisable at September 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
3,913,705 |
|
|
|
6.14 |
|
|
$ |
3.16 |
|
|
$ |
382,749 |
|
|
|
2,606,227 |
|
|
|
4.69 |
|
|
$ |
4.14 |
|
|
$ |
217,335 |
|
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 nine months ended September 30, 2021, and no stock
options exercised during the three and nine months ended September
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
September 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 September 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
| |
|
September
30,
2021
|
|
|
December
31,
2020
|
|
| Expected life in
years |
|
|
3.13 |
|
|
|
3.88 |
|
| Risk-free interest
rate |
|
|
0.53 |
% |
|
|
0.27 |
% |
| Dividend
yield |
|
|
— |
|
|
|
— |
|
| Volatility |
|
|
59.69 |
% |
|
|
88.46 |
% |
| Stock
price |
|
$ |
1.09 |
|
|
$ |
1.36 |
|
During the
three and nine months ended September 30, 2021, the Company
recorded a non-cash gain of $480,000 and
$506,000,
respectively, from the change in fair value of the November 2019
Offering warrants. During the three and nine months ended September
30, 2020, the Company recorded a non-cash gain of $140,000 and a
non-cash loss of $3.0
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 |
|
|
(506,208 |
) |
| Balance at September
30, 2021 |
|
$ |
645,478 |
|
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.
Schedule
of Number of Warrants Outstanding and the Weighted Average Exercise
Price
The
following table summarizes the number of common stock 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 September
30, 2021 |
|
|
1,934,366 |
|
|
$ |
0.51 |
|
During the
three and nine months ended September 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,
respectively. Additionally, during the three and nine months ended
September 30, 2020,
1,478,844 and
15,097,651 common stock warrants to purchase one share of
our common stock were exercised, respectively, resulting in
proceeds of approximately $761,000
and $7.7
million, respectively.
The
following table summarizes information about common stock warrants
outstanding at September 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. A hearing on the motion to dismiss has been scheduled for
January 12, 2022. 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
reinstated upon written agreement of Spriaso and the Company. The
Company did not receive any reimbursements during the three and
nine months ended September 30, 2021 or 2020. Additionally, during
the three and nine months ended September 30, 2021 and 2020, the
Company received $55,000
and
zero, respectively, in licensing
payments from Spriaso. 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.
On October
14, 2021, the Company entered into the Antares License Agreement
with Antares, pursuant to which the Company granted to Antares an
exclusive, royalty-bearing, sublicensable right and license to
develop and commercialize, upon final approval of TLANDO® from the
U.S. Food and Drug Administration (“FDA”), the Company’s TLANDO
product with respect to testosterone replacement therapy in males
for conditions associated with a deficiency or absence of
endogenous testosterone, as indicated in NDA No. 208088, treatment
of Klinefelter syndrome, and pediatric indications relating to
testosterone replacement therapy in males for conditions associated
with a deficiency or absence of endogenous testosterone (the
“Field”), in each case within the United States. The Antares
License Agreement also provides Antares with an option, exercisable
on or before March 31, 2022, to license TLANDO XR, the
Company’s potential once-daily oral product candidate for
testosterone replacement therapy. Upon execution of the Antares
License Agreement, Antares paid to the Company an initial payment
of $11.0 million. Antares will also make
additional payments of $5.0
million to the Company on each of January 1, 2025, and January 1,
2026, provided that certain conditions are satisfied. The Company
is also eligible to receive milestone payments of up to $160.0 million in the aggregate,
depending on the achievement of certain sales milestones in a
single calendar year with respect to all products licensed by
Antares under the Antares License Agreement. In addition, upon
commercialization, the Company will receive tiered royalty payments
at rates ranging from percentages in the mid-teens to up to
20% of net sales of
TLANDO in the United States, subject to certain minimum royalty
obligations. If Antares exercises its option to license TLANDO XR,
the Company will be entitled to an additional payment of $4.0 million, as well as development
milestone payments of up to $35.0 million in
the aggregate and tiered royalty payments at rates ranging from
percentages in the mid-teens to
20% of net sales of TLANDO XR in the United States. The
Company retains development and commercialization rights in the
rest of the world, and with respect to applications outside of the
Field inside or outside the United States. Antares will also
purchase certain existing inventory of licensed products from the
Company, subject to testing and acceptance procedures. Finally,
pursuant to the terms of the Antares License Agreement, Antares is
generally responsible for expenses relating to the development
(including the conduct of any clinical trials) and
commercialization of licensed products in the Field in the United
States, while the Company is generally responsible for expenses
relating to development activities outside of the Field and/or the
United States.
|
|
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
U.S. Securities and Exchange Commission (“SEC”) on March 11, 2021,
our first quarter Form 10-Q filed with the SEC on May 6, 2021, our
second quarter Form 10-Q filed with the SEC on August 5, 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 June 30, 2021 filed with the
SEC on August 5, 2021, 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
pharmacokinetic (“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 testosterone
replacement therapy (“TRT”) comprised of testosterone undecanoate
(“TU”). On December 8, 2020, we received tentative approval from
the United States Food and Drug Administration (“FDA”) regarding
our new drug application (“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. (“Clarus”) with respect to Jatenzo®, which expires on March
27, 2022. The FDA has affirmed that the resubmission of the NDA for
TLANDO will be a Class 1 resubmission. A Class 1 NDA resubmission
includes a two-month FDA review goal period. On October 14, 2021,
we entered into a license agreement (the “Antares License
Agreement”) with Antares Pharma, Inc. (“Antares”), pursuant to
which we granted to Antares an exclusive, royalty-bearing,
sublicensable right and license to develop and commercialize, upon
final approval of TLANDO from the FDA, our TLANDO product with
respect to TRT in the U.S. We and Antares 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
which will be conducted and paid for by Antares.
Additional
pipeline candidates include LPCN 1144, an oral prodrug of
bioidentical testosterone comprised of TU for the treatment of
non-cirrhotic non-alcoholic steatohepatitis (“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 comprising a novel prodrug of bioidentical
testosterone, testosterone laurate (“TL”), 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 hydroxy progesterone caproate
(“HPC”) product indicated for the prevention of recurrent preterm
birth (“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 an open label extension (“OLE”) study to
the Liver Fat intervention with oral Testosterone (“LiFT “)
proof-of-concept (“POC”) Phase 2 clinical study, a paired-biopsy
study in confirmed non-cirrhotic NASH subjects. Positive top-line
primary endpoint results after 12 weeks of treatment in the
LiFT clinical study were released in January 2021.
Treatments with LPCN 1144 resulted in robust liver fat reduction,
assessed by magnetic resonance imaging, proton density fat fraction
(“MRI-PDFF”) technique, and showed improvement of liver injury
markers with no observed tolerability issues. Additionally, key
secondary endpoint results after 36 weeks of treatment in the
LiFT clinical study were released in August 2021. Treatments
with LPCN 1144 met the non-alcoholic steatohepatitis (“NASH”)
resolution regulatory endpoint, showed positive effects in
appendicular lean mass and whole-body fat mass and continued to
show substantial reductions in markers of liver injury compared to
placebo.
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 or royalties 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 September
30, 2021, we had an accumulated deficit of $185.3 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 $13.3 million for the nine
months ended September 30, 2021, compared to $16.5 million for the
nine months ended September 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 recently settled
litigation, associated with our operations.
We expect to
continue to incur significant expenses and operating losses for the
foreseeable future as we:
| |
● |
complete the OLE
clinical study with LPCN 1144; |
| |
|
|
| |
● |
conduct further
development of our other product candidates, including LPCN 1144,
LPCN 1148, LPCN 1154 and LPCN 1107; |
| |
|
|
| |
● |
continue our research
efforts; |
| |
|
|
| |
● |
research new product
candidates or new uses for our existing products
candidates; |
| |
|
|
| |
● |
maintain, expand and
protect our intellectual property portfolio; and |
| |
|
|
| |
● |
provide general and
administrative support for our operations. |
To fund
future long-term operations, including the potential
commercialization of our 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 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 symptoms associated with
cirrhosis, LPCN 1148, an oral neuro-steroid targeted for the
treatment of PPD, LPCN
1154, an oral therapy for the prevention of recurrent PTB, LPCN
1107, and we continue to explore other product candidates targeting
indications with a significant unmet need. On October 14, 2021, we
entered into the Antares License Agreement with Antares, pursuant
to which we granted to Antares an exclusive, royalty-bearing,
sublicensable right and license to develop and commercialize, upon
final approval of TLANDO from the FDA, our TLANDO product with
respect to TRT in the U.S. The Antares License Agreement also
provides Antares with an option, exercisable on or before March 31,
2022, to license TLANDO XR.
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 testosterone
(“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 Products, Inc. (“Abbott”).
Following a portfolio review associated with the spin-off of AbbVie
Inc. 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. The FDA has affirmed that the resubmission of the NDA for
TLANDO will be a Class 1 resubmission. A Class 1 NDA resubmission
includes a two-month FDA review goal period. 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, under the terms of the Antares Licensing Agreement,
Antares 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 which will be conducted and paid for by Antares. The
timetables for these post-marketing requirements will be
established at the time of full approval of TLANDO.
Upon
execution of the Antares License Agreement, Antares paid to us an
initial payment of $11.0 million. Antares will also make additional
payments of $5.0 million to us on each of January 1, 2025 and
January 1, 2026, provided that certain conditions are satisfied. We
are also eligible to receive milestone payments of up to $160.0
million in the aggregate, depending on the achievement of certain
sales milestones in a single calendar year with respect to all
products licensed by Antares under the Antares License Agreement.
In addition, upon commercialization, we will receive tiered royalty
payments at rates ranging from percentages in the mid-teens to up
to 20% of net sales of TLANDO in the United States, subject to
certain minimum royalty obligations. If Antares exercises its
option to license TLANDO XR, we will be entitled to an additional
payment of $4.0 million, as well as development milestone payments
of up to $35.0 million in the aggregate and tiered royalty payments
at rates ranging from percentages in the mid-teens to 20% of net
sales of TLANDO XR in the United States.
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 TRTs. 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 TRTs 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 TRTs
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 dihydrotestosterone (“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 non-alcoholic fatty liver
disease (“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 hepatitis C virus, hepatitis B
virus, 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
Alanine
aminotransferase (“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. Aspartate aminotransferase (“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 National
Institute of Diabetes and Digestive Kidney Diseases 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
recently completed the LiFT Phase 2 clinical study in
confirmed non-cirrhotic NASH subjects. The LiFT clinical
study was 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).
The primary
endpoint of the LiFT clinical study was 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 included assessment of
histological change for NASH resolution and/or fibrosis improvement
as well as liver fat data. The LiFT clinical study was not
powered to assess statistical significance of any of the secondary
endpoints. Other important endpoints included the following: change
in liver injury markers, anthropomorphic measurements, lipids,
insulin resistance and inflammatory/fibrosis markers; as well as
patient reported outcomes.
Additionally, subjects
have access to LPCN 1144 through an OLE study. The extension study
will enable the collection of additional data on LPCN 1144 for up
to a total of 72 weeks of therapy. The OLE is currently on-going
and has enrolled 25 subjects. We expect topline results from the
OLE study mid-2022.
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:
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)
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.
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
Liver
biopsies were performed at baseline (“BL”) and after 36 weeks of
treatment (“EOS”). Prespecified biopsy analyses included NASH
Clinical Research Network (“CRN”) scoring as well as a continuous
paired (“Paired Technique”) and digital technique (“Digital
Technique-Fibronest”). All biopsy analyses were performed on the
same slides and the reads for the three techniques were done
independently. Analysis sets included the NASH Resolution Set (all
subjects that have BL and EOS biopsy with NASH at BL [NAS ≥4 with
lobular inflammation score ≥ 1 and hepatocyte ballooning score ≥1
at BL] (n=37)), the Biopsy Set (all subjects with baseline and EOS
biopsies (n=44)), and the Safety Set (all randomized subjects
(n=56)).
Both LPCN
1144 treatment arms met with statistical significance the
pre-specified accelerated approval regulatory endpoint of NASH
resolution with no worsening of fibrosis based on NASH CRN scoring.
Additionally, both treatment arms showed substantial improvement of
the observed NASH activity in steatosis, inflammation and
ballooning.
Key results
are presented in the following table:
| Histology NASH CRN
Scoring Outcomes1 |
| |
| |
|
|
Placebo
(n =
11)
|
|
|
|
Treatment
A
(n=13)
|
|
|
|
Treatment
B
(n=13)
|
|
|
NASH
Resolution responders, n (%) 2 |
|
|
1 (9%) |
|
|
|
7
(54%)3 |
|
|
|
9,
(69%)4 |
|
| NASH Resolution
with No Worsening of Fibrosis responders, n (%) |
|
|
0 (0%) |
|
|
|
6
(46%)3 |
|
|
|
9
(69%)5 |
|
1
NASH Resolution Set
2
Improvement in NASH defined as improvement in ballooning or
inflammation, and no worsening of ballooning or
inflammation
3
p < 0.05 vs placebo
4
p < 0.01 vs placebo
5
p < 0.001 vs placebo
Both LPCN
1144 treatment arms showed significant improvement in NASH without
worsening of fibrosis using Paired Technique, which concurred with
the NASH CRN scoring findings (per Biopsy Set; NASH Improvement
responders: Placebo – 13%, Treatment A – 60%, Treatment B – 57%;
NASH Improvement with No Worsening of Fibrosis responders: Placebo
– 13%, Treatment A – 60%, Treatment B – 57%).
The
treatment effects on fibrosis improvement need confirmation in a
larger study.
In both
treatment arms substantial reductions in markers of liver injury
compared to placebo were observed post four weeks of treatment and
were sustained through EOS. Using all available Safety Set data,
ALT decreased up to a mean of 23.4 U/L at EOS from all group mean
baseline of 51.5 U/L and AST decreased up to a mean of 13.3 U/L at
EOS from all group mean baseline of 31.9 U/L.
Positive
effects in appendicular lean mass and whole-body fat mass, an
indicator overall tissue quality, based on dual-energy X-ray
absorptiometry scans were noted in both LPCN 1144 treatment
arms.
During the
36 weeks of treatment, LPCN 1144 was well tolerated with an overall
safety profile comparable to placebo. Frequency and severity of
treatment emergent adverse events (“TEAEs”) in both treatment arms
were comparable to placebo. Study drug related TEAEs were mild to
moderate. Four subjects discontinued due to TEAEs in the placebo
arm vs one subject in total across the treatment arms.
Cardiovascular events were balanced among groups with hematocrit
increases averaging <2% in the treatment arms, no observed
thromboembolic events, and comparable blood pressure changes in
both treatment arms to placebo.
There were
no reported cases of hepatocellular carcinoma or Drug Induced Liver
Injury (“DILI”). Weight change from baseline, GI adverse events and
prostate-specific antigens (“PSA”) changes were small and
comparable among groups. Additionally, no clinically meaningful
changes in lipids in treatment groups were noted compared to
placebo, and rates of pedal edema were low and similar in all
arms.
We have
requested a meeting with the FDA to discuss the clinical
development path forward with LPCN 1144. We anticipate that the
meeting will occur in the first quarter of 2022.
During
November 2021, the FDA granted Fast Track Designation to LPCN 1144
as a treatment for non-cirrhotic NASH. The Fast Track program is
designed to accelerate the development and expedite the review of
products, such as LPCN 1144, which are intended to treat serious
diseases and for which there is an unmet medical need.
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, in