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ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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:
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complete
the OLE clinical study with LPCN 1144;
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conduct
further development of our other product candidates, including LPCN 1144, LPCN 1148, LPCN 1154 and LPCN 1107;
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continue
our research efforts;
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research
new product candidates or new uses for our existing products candidates;
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maintain,
expand and protect our intellectual property portfolio; and
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provide
general and administrative support for our operations.
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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.
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Change
from baseline (CBL)
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Placebo-adjusted
CBL
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Treatment
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%
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p-value
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%
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p
value
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A (n = 18)
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-7.7
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<0.0001
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-6.1
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0.0001
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B (n = 19)
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-9.2
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<0.0001
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-7.5
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<0.0001
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Placebo (n = 19)
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-1.7
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NS
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n/a
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n/a
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*
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.*
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Change
from baseline (CBL)
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Placebo-adjusted
CBL
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Treatment
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%
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p
value
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%
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p
value
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A (n = 17)
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-40.0
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<0.0001
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-30.0
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0.0002
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B (n = 17)
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-46.9
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<0.0001
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-37.0
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<0.0001
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Placebo (n = 18)
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-9.9
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NS
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n/a
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n/a
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*
Based on available data.
Responders
with > 30% Relative Reduction in Liver Fat at Week 12, Intent to Treat Dataset (n=56)*.
Treatment
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Responder
(%
of subjects)
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p
value
vs
Placebo
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A (n = 18)
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66.7
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0.0058
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B (n = 19)
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63.2
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0.0026
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Placebo (n = 19)
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15.8
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*
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
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Placebo
(n = 11)
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Treatment
A (n=13)
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Treatment
B (n=13)
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NASH Resolution responders, n (%) 2
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1 (9%)
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7 (54%)3
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9, (69%)4
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NASH Resolution with No Worsening of Fibrosis responders, n (%)
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0 (0%)
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6 (46%)3
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9 (69%)5
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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, including identifying the dose expected to be tested in a Phase 3 study. Good dose-response relationship was observed over the tested
dose range in the Phase 2b study. Additionally, the target Phase 3 dose met primary and secondary end points. Overall, TLANDO XR was
well tolerated with no drug-related severe or serious adverse events reported in the Phase 2b study.
Additionally
in October 2014, we completed a Phase 2a POC study in hypogonadal men. The Phase 2a open-label, dose-escalating single and multiple dose
study enrolled 12 males. Results from the Phase 2a clinical study demonstrated the feasibility of a once daily dosing with TLANDO XR
in hypogonadal men and a good dose response. Additionally, the study confirmed that steady state is achieved by day 14 with consistent
inter-day performance observed on day 14, 21 and 28. No subjects exceeded Cmax of 1500 ng/dL at any time during the 28-day dosing period
on multi-dose exposure. Overall, TLANDO XR was well tolerated with no serious adverse events (“AE’s”) reported.
We
have also completed a preclinical toxicology study with TLANDO XR in dogs.
In
February 2018 we had a meeting with the FDA to discuss these pre-clinical results and to discuss the Phase 3 clinical study and path
forward for TLANDO XR. Based on the results of the FDA meeting and additional pre-clinical trials conducted after the FDA meeting, we
have proposed a Phase 3 protocol for TLANDO XR and have solicited FDA feedback. Based on initial FDA feedback, we expect the Phase 3
clinical trial design to follow the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use
(“ICH”) guidelines and will include a three-month efficacy treatment period and a one-year safety component for up to 100
subjects. We continue to refine the Phase 3 protocol and plan to request FDA approval of the protocol once it is finalized. Additionally,
the FDA previously requested that a food effect study needs to be completed, and that ambulatory blood pressure monitoring (“ABPM”)
be included as part of the Phase 3 clinical study. We are currently transferring the manufacturing of TLANDO XR to a third-party contract
manufacturer and scaling up the formulation. After that is complete, we anticipate the next steps in developing TLANDO XR will be to
conduct a food effect/phlebotomy study with TLANDO XR. Under the terms of the Antares License Agreement, Antares has been granted an
option, exercisable on or before March 31, 2022, to license TLANDO XR to develop and commercialize upon approval..
LPCN
1148: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Management of Cirrhosis
Cirrhosis
is end-stage NAFLD for which there is no FDA approved drug treatment. Liver cirrhosis is estimated to affect in excess of 600,000 Americans,
with men affected at twice the rate of women, and results in approximately 45,000 deaths every year. Due to a lack of available organs,
only a third of waitlisted patients are getting liver transplants, and patients that do receive a transplant are increasingly being described
as frail. Low testosterone affects up to 90% of cirrhotic men, and is a predictor of mortality and increased adverse events including
ascites, hepatic encephalopathy, and clinically significant portal hypertension. We are targeting LPCN 1148 for the management of symptoms
associated with liver cirrhosis. We believe LPCN 1148 targets unmet needs for cirrhosis subjects including improvement in the quality
of life of patients while on the liver transplant waiting list, prevention or reduction in the occurrence of decompensation events and
improvement in post liver transplant survival, including outcomes and costs.
LPCN
1148 comprises a novel prodrug of bioidentical testosterone,TL We are currently making preparations to initiate a Phase 2 POC study (NCT04874350)
in male cirrhotic subjects to evaluate the therapeutic potential of LPCN 1148 for the management of cirrhotic subjects. The planned Phase
2 POC study is a prospective, multi-center, randomized, placebo-controlled study in approximately 48 to 60 male cirrhotic patients that
are on the liver transplant list. Subjects will be randomized 1:1 to one of two arms. The treatment arm is an oral dose of a testosterone
ester and the second arm is matching placebo. The primary endpoint is change in skeletal muscle index at week 24 with key secondary endpoints
including change in liver frailty index and number of waitlist events, including all-cause mortality. Total treatment is expected to
be 52 weeks. We currently expect the first subject will be dosed in the fourth quarter of 2021.
LPCN
1154: An Oral Neuro-Steroid Candidate for the Treatment of Postpartum Depression
PPD,
a major depressive disorder that is under diagnosed in the U.S., impacts approximately 1 in 7 women after giving birth. PPD can lead
to devastating consequences for a woman, her newborn and her family. Currently, there is no oral therapy approved for the treatment of
PPD. The active moiety in LPCN 1154 is an endogenous positive allosteric modulator of γ-aminobutyric acid (“GABAA”)
receptor. LPCN 1154 is expected to be an “at home” treatment with easier treatment access than the current standard of care
invasive option that requires hospitalization with significant limitations. Moreover, LPCN 1154 is expected to provide the required level
of privacy for a mother, avoiding bonding/breast feeding interruptions due to the required hospitalizations for the current option.
On
June 14, 2021, we announced that the FDA has cleared the Company’s Investigational New Drug Application (“IND”) to
initiate a Phase 2 study to evaluate the therapeutic potential of LPCN 1154 for the treatment of PPD in adults. We have completed a PK
study to assess dose proportionality with LPCN 1154 in which dose proportionality was observed. Pending further PK analyses, we plan
to conduct a proof-of-concept study to evaluate the safety, tolerability, and efficacy of LPCN 1154 in adult female subjects diagnosed
with PPD in the future.
LPCN
1107: An Oral Product Candidate for the Prevention of Preterm Birth
We
believe LPCN 1107 has the potential to become the first oral HPC product indicated for the reduction of risk of PTB (delivery less than
37 weeks) in women with singleton pregnancy who have a history of singleton spontaneous PTB. Prevention of PTB is a significant unmet
need as approximately 11.7% of all U.S. pregnancies result in PTB, a leading cause of neonatal mortality and morbidity.
We
have completed a multi-dose PK dose selection study in pregnant women. The objective of the multi-dose PK selection study was to assess
HPC blood levels in order to identify the appropriate LPCN 1107 Phase 3 dose. The multi-dose PK dose selection study was an open-label,
four-period, four-treatment, randomized, single and multiple dose, PK study in pregnant women of three dose levels of LPCN 1107 and the
IM HPC (Makena®). The study enrolled 12 healthy pregnant women (average age of 27 years) with a gestational age of approximately
16 to 19 weeks. Subjects received three dose levels of LPCN 1107 (400 mg BID, 600 mg BID, or 800 mg BID) in a randomized, crossover manner
during the first three treatment periods and then received five weekly injections of HPC during the fourth treatment period. During each
of the LPCN 1107 treatment periods, subjects received a single dose of LPCN 1107 on Day 1 followed by twice daily administration from
Day 2 to Day 8. Following completion of the three LPCN 1107 treatment periods and a washout period, all subjects received five weekly
injections of HPC. Results from this study demonstrated that average steady state HPC levels (Cavg0-24) were comparable or higher for
all three LPCN 1107 doses than for injectable HPC. Additionally, HPC levels as a function of daily dose were linear for the three LPCN
1107 doses. Also, unlike the injectable HPC, steady state exposure was achieved for all three LPCN 1107 doses within seven days. We have
also completed a POC Phase 1b clinical study of LPCN 1107 in healthy pregnant women in January 2015 and a POC Phase 1a clinical study
of LPCN 1107 in healthy non-pregnant women in May 2014. These studies were designed to determine the PK and bioavailability of LPCN 1107
relative to an IM HPC, as well as safety and tolerability.
A
traditional PK/PD based Phase 2 clinical study in the intended patient population is not expected to be required prior to entering into
Phase 3. Therefore, based on the results of our multi-dose PK study we had an End-of-Phase 2 meeting and subsequent guidance meetings
with the FDA to define a pivotal Phase 2b/3 development plan for LPCN 1107. However, these discussions will need to be updated based
on recent developments with Covis’ Makena®. We plan to resume our interactions with the FDA to discuss our pivotal clinical
trial design and better understand next steps to advance LPCN 1107 after completion of the planned food-effect study.
We
do not anticipate the initiation of a pivotal study with LPCN 1107 to occur until the required food effect study is complete. We are
exploring the possibility of licensing LPCN 1107 to a third party, although no licensing agreement has been entered into by the Company.
No assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would
be on acceptable terms.
The
FDA has granted orphan drug designation to LPCN 1107 based on a major contribution to patient care. Orphan designation qualifies Lipocine
for various development incentives, including tax credits for qualified clinical testing, and a waiver of the prescription drug user
fee when we file our NDA.
Recent
Competition Update
On
October 5, 2020, the FDA’s CDER proposed that Makena be withdrawn from the market because the PROLONG trial failed to verify the
clinical benefit of Makena and concluded that the available evidence does not show Makena is effective for its approved use.
CDER
issued AMAG, the NDA holder at the time, a Notice of Opportunity for Hearing to withdraw approval of Makena, for which AMAG Pharmaceuticals
responded by requesting a hearing and providing detail on the company’s position, recognizing clinicians’ decade-long use
of Makena’s treatment and the public health implications of withdrawing approval. The FDA Commissioner has recently granted Covis
a public hearing although the date of that hearing is not publicly known. During this time, Makena and the approved generics of Makena
will remain on the market until the FDA makes a final decision about these products.
Currently,
Makena and the approved generics of Makena are the only products approved for the prevention of recurrent preterm birth.
The
FDA also indicated that it intends to hold a meeting with experts in obstetrics, neonatal care, and clinical trial design to discuss
how to facilitate development of effective and safe therapies to treat preterm birth.
Financial
Operations Overview
Revenue
To
date, we have not generated any revenues from product sales and do not expect to do so until one of our product candidates receives approval
from the FDA. Revenues to date have been generated substantially from license fees, royalty and milestone payments and research support
from our licensees. Since our inception through September 30, 2021, we have generated $28.1 million in revenue under our various license
and collaboration arrangements and from government grants. We may never generate revenues from TLANDO or any of our other clinical or
preclinical development programs or licensed products as we or our licensees may never succeed in obtaining regulatory approval or commercializing
any of these product candidates.
Research
and Development Expenses
Research
and development expenses consist primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid to
external service providers such as contract research organizations and contract manufacturing organizations, contractual obligations
for clinical development, clinical sites, manufacturing and scale-up for late-stage clinical trials, formulation of clinical drug supplies,
and expenses associated with regulatory submissions. Research and development expenses also include an allocation of indirect costs,
such as those for facilities, office expense, and depreciation of equipment based on the ratio of direct labor hours for research and
development personnel to total direct labor hours for all personnel. We expense research and development expenses as incurred. Since
our inception, we have spent approximately $126.3 million in research and development expenses through September 30, 2021.
On
December 8, 2020 we received tentative approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males
for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the
FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not
received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously
granted to Clarus with respect to Jatenzo®, which expires on March 27, 2022. 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. Under the terms of the Antares License Agreement, all future research and development activities for TLANDO will be conducted
and paid for by Antares. Any further expenditures, if needed, are subject to numerous uncertainties regarding timing and cost to completion.
We
expect to continue to incur significant costs as we develop our other product candidates, including the ongoing LiFT Phase 2 OLE
clinical study with LPCN 1144 and the planned Phase 2 study with LPCN 1148.
In
general, the cost of clinical trials may vary significantly over the life of a project as a result of uncertainties in clinical development,
including, among others:
|
●
|
the
number of sites included in the trials;
|
|
|
|
|
●
|
the
length of time required to enroll suitable subjects;
|
|
|
|
|
●
|
the
duration of subject follow-ups;
|
|
|
|
|
●
|
the
length of time required to collect, analyze and report trial results;
|
|
|
|
|
●
|
the
cost, timing and outcome of regulatory review; and
|
|
|
|
|
●
|
potential
changes by the FDA in clinical trial and NDA filing requirements.
|
We
have also incurred significant manufacturing costs to prepare launch supplies for TLANDO. However, any additional expenditures required
to prepare for a commercial launch of TLANDO, should it be approved, will be paid by Antares.
Future
research and development expenditures are subject to numerous uncertainties regarding timing and cost to completion, including, among
others:
|
●
|
the
timing and outcome of regulatory filings and FDA reviews and actions for product candidates;
|
|
|
|
|
●
|
our
dependence on third-party manufacturers for the production of satisfactory finished product for registration and launch should regulatory
approval be obtained on any of our product candidates;
|
|
|
|
|
●
|
the
potential for future license or co-promote arrangements for our product candidates, when such arrangements will be secured, if at
all, and to what degree such arrangements would affect our future plans and capital requirements; and
|
|
|
|
|
●
|
the
effect on our product development activities of actions taken by the FDA or other regulatory authorities.
|
A
change of outcome for any of these variables with respect to our product development candidates could mean a substantial change in the
costs and timing associated with these efforts, will require us to raise additional capital, and may require us to reduce operations.
Given
the stage of clinical development and the significant risks and uncertainties inherent in the clinical development, manufacturing and
regulatory approval process, we are unable to estimate with any certainty the time or cost to complete the development of LPCN 1144,
TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 and other product candidates. Clinical development timelines, the probability of success and
development costs can differ materially from expectations and results from our clinical trials may not be favorable. If we are successful
in progressing LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 or other product candidates into later stage development, we will
require additional capital. The amount and timing of our future research and development expenses for these product candidates will depend
on the preclinical and clinical success of both our current development activities and potential development of new product candidates,
as well as ongoing assessments of the commercial potential of such activities.
Summary
of Research and Development Expense
We
are conducting on-going clinical and regulatory activities with most of our product candidates. Additionally, we incur costs for our
other research programs. The following table summarizes our research and development expenses:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
External service provider
costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TLANDO
|
|
$
|
5,446
|
|
|
$
|
471,874
|
|
|
$
|
114,697
|
|
|
$
|
679,351
|
|
LPCN 1144
|
|
|
404,676
|
|
|
|
1,223,863
|
|
|
|
1,721,948
|
|
|
|
4,284,302
|
|
TLANDO XR
|
|
|
80,300
|
|
|
|
-
|
|
|
|
80,300
|
|
|
|
71,898
|
|
LPCN 1154
|
|
|
805,722
|
|
|
|
-
|
|
|
|
907,794
|
|
|
|
-
|
|
LPCN 1148
|
|
|
383,597
|
|
|
|
-
|
|
|
|
383,597
|
|
|
|
-
|
|
LPCN 1107
|
|
|
6,000
|
|
|
|
1,500
|
|
|
|
61,381
|
|
|
|
3,860
|
|
Total external service
provider costs
|
|
|
1,685,741
|
|
|
|
1,697,237
|
|
|
|
3,269,717
|
|
|
|
5,039,411
|
|
Internal personnel costs
|
|
|
524,599
|
|
|
|
561,461
|
|
|
|
1,609,571
|
|
|
|
1,736,167
|
|
Other research and development
costs
|
|
|
156,181
|
|
|
|
229,163
|
|
|
|
532,460
|
|
|
|
493,021
|
|
Total research and development
|
|
$
|
2,366,521
|
|
|
$
|
2,487,861
|
|
|
$
|
5,411,748
|
|
|
$
|
7,268,599
|
|
We
expect research and development expenses to increase in the future as we complete on-going clinical studies, including the LiFT
Phase 2 OLE clinical study with LPCN 1144, and as we conduct future clinical studies with LPCN 1148, LPCN 1154 and LPCN 1107. However,
if we are unable to raise additional capital, we may need to reduce research and development expenses in order to extend our ability
to continue as a going concern.
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation related to our executive,
finance, business development, and support functions. Other general and administrative expenses include rent and utilities, travel expenses,
professional fees for auditing, tax and legal services, litigation settlement and market research and market analytics.
General
and administrative expenses also include expenses for the cost of preparing, filling and prosecuting patent applications and maintaining,
enforcing and defending intellectual property-related claims, including the patent interference and patent infringement lawsuits against
Clarus.
We
expect that general and administrative expenses will decrease in the future as we expect to incur decreased legal fees due to the global
settlement agreement (“Global Agreement”) with Clarus. We expect that such decreases will be offset by other increases as
we mature as a public company, including legal and consulting fees, accounting and audit fees, director fees, increased directors’
and officers’ insurance premiums, fees for investor relations services and enhanced business and accounting systems, litigation
costs, professional fees and other costs. However, if we are unable to raise additional capital, we may need to further reduce general
and administrative expenses in order to extend our ability to continue as a going concern.
Other
Expense (Income), Net
Other
expense (income), net, consists primarily of interest income earned on our cash, cash equivalents and marketable investment securities,
interest expense incurred on our outstanding Loan and Security Agreement, losses (gains) on our warrant liability and litigation settlement
accruals.
Results
of Operations
Comparison
of the Three Months Ended September 30, 2021 and 2020
The
following table summarizes our results of operations for the three months ended September 30, 2021 and 2020:
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Variance
|
|
License revenue
|
|
$
|
54,994
|
|
|
$
|
-
|
|
|
|
54,994
|
|
Research and development expenses
|
|
|
2,366,521
|
|
|
|
2,487,861
|
|
|
|
(121,340
|
)
|
General and administrative expenses
|
|
|
1,222,146
|
|
|
|
1,887,195
|
|
|
|
(665,049
|
)
|
Interest and investment income
|
|
|
(17,264
|
)
|
|
|
(5,614
|
)
|
|
|
11,650
|
|
Interest expense
|
|
|
44,839
|
|
|
|
84,293
|
|
|
|
(39,454
|
)
|
Gain on warrant liability
|
|
|
(479,951
|
)
|
|
|
(140,477
|
)
|
|
|
339,474
|
|
Revenue
We
recognized license revenue of $55,000 during the three months ended September 30, 2021, compared to no license revenue recognized during
the three ended September 30, 2020. License revenue in 2021 relates to payments received from Spriaso LLC (“Spriaso”) under
a licensing agreement in the cough and cold field.
Research
and Development Expenses
The
decrease in research and development expenses during the three months ended September 30, 2021 was primarily due to a $819,000 decrease
in contract research organization expense and outside consulting costs related to the LPCN 1144 LiFT Phase 2 clinical study in
NASH subjects, a $466,000 decrease in costs associated with TLANDO, a $37,000 decrease in personnel expense, net decreases in other R&D
expenses of $68,000. The decreases were offset by a $806,000 increase in costs related to LPCN 1154, a $384,000 increase in costs related
to LPCN 1148, and a $80,000 increase in costs for TLANDO XR.
General
and Administrative Expenses
The
decrease in general and administrative expenses during the three months ended September 30, 2021 was primarily due to a $552,000 decrease
in legal costs in 2021 as compared to 2020 relating to a decrease the following legal activities: lawsuit filed against Clarus for patent
infringement in April 2019 and the on-going class action lawsuit defense; and a $122,000 decrease in personnel costs, which was mainly
due to a decrease in stock compensation expense. These decreases were offset mainly by a $31,000 increase in corporate insurance expenses.
Interest
and Investment Income
The
increase in interest and investment income during the three months ended September 30, 2021 was due to higher cash and marketable investment
securities balances in 2021 compared to 2020.
Interest
Expense
The
decrease in interest expense during the three months ended September 30, 2021 was due to a decrease in interest expense on our Loan and
Security Agreement with Silicon Valley Bank (“SVB”), as a result of lower principal balances in 2021 compared to 2020.
Loss
(Gain) on Warrant Liability
We
recorded a gain of $480,000 and $140,000, respectively, on warrant liability during the three months ended September 30, 2021 and 2020
related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. The gain in 2021 was
attributable to a decrease in the value of warrants outstanding as of September 30, 2021 as compared to June 30, 2021 due to a decrease
in our stock price. The gain in 2020 was mainly due to a decrease in the value of warrants outstanding as of September 30, 2020 as compared
to June 30, 2020 primarily attributable to a decrease in the value of warrants exercised during the period, offset by an increase in
the value of warrants outstanding as of September 30, 2020 as compared to June 30, 2020 due to an increase in our stock price. There
were no common stock warrants from the November 2019 Offering (as defined below) exercised during the three months ended September 30,
2021 and 2020, respectively. The warrants are classified as a liability due to a provision contained within the warrant agreement which
allows the warrant holder the option to elect to receive an amount of cash equal to the value of the warrants as determined in accordance
with the Black-Scholes option pricing model with certain defined assumptions upon a change of control. The warrant liability will continue
to fluctuate in the future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants,
the volatility of our stock price, the risk-free interest rate and the number of common stock warrants outstanding.
Comparison
of the Nine Months Ended September 30, 2021 and 2020
The
following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020:
|
|
Nine
months ended September 30,
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Variance
|
|
License revenue
|
|
$
|
54,994
|
|
|
$
|
-
|
|
|
|
54,994
|
|
Research and development expenses
|
|
|
5,411,748
|
|
|
|
7,268,599
|
|
|
|
(1,856,851
|
)
|
General and administrative expenses
|
|
|
4,281,690
|
|
|
|
5,925,991
|
|
|
|
(1,644,301
|
)
|
Interest and investment income
|
|
|
(45,257
|
)
|
|
|
(72,729
|
)
|
|
|
(27,472
|
)
|
Interest expense
|
|
|
171,241
|
|
|
|
305,485
|
|
|
|
(134,244
|
)
|
Loss (gain) on warrant liability
|
|
|
(506,208
|
)
|
|
|
3,025,997
|
|
|
|
3,532,205
|
|
Litigation settlement
|
|
|
4,000,000
|
|
|
|
—
|
|
|
|
4,000,000
|
|
Income tax expense
|
|
|
200
|
|
|
|
200
|
|
|
|
-
|
|
Revenue
We
recognized license revenue of $55,000 during the nine months ended September 30, 2021, compared to no license revenue recognized during
the nine ended September 30, 2020. License revenue in 2021 relates to payments received from Spriaso under a licensing agreement in the
cough and cold field.
Research
and Development Expenses
The
decrease in research and development expenses during the nine months ended September 30, 2021 was primarily due to a $2.6 million decrease
in contract research organization expense and outside consulting costs related to the LPCN 1144 LiFT Phase 2 clinical study in
NASH subjects, a $565,000 decrease in costs associated with TLANDO and a $127,000 net decrease in personnel expense which was mainly
due to a decrease in stock compensation expense offset by increases in salaries partially due to headcount increases. These decreases
were offset by a $908,000 increase in costs related to LPCN 1154, a $384,000 increase in costs associated with LPCN 1148 and a $58,000
increase in costs for LPCN 1107, as well as increases in other R&D expenses of $48,000.
General
and Administrative Expenses
The
decrease in general and administrative expenses during the nine months ended September 30, 2021 was primarily due to a $1.4 million decrease
in legal costs in 2021 as compared to 2020 relating to a decrease the following legal activities: lawsuit filed against Clarus Therapeutics
Inc. for patent infringement in April 2019 and the on-going class action lawsuit defense; and, a decrease of $410,000 in personnel costs
mainly due a reduction in stock compensation expense. These decreases were offset by a $131,000 increase in corporate insurance expenses
and a $35,000 increase in other general and administrative expenses.
Interest
and Investment Income
The
decrease in interest and investment income during the nine months ended September 30, 2021 was due to lower interest rates in 2021 compared
to 2020, despite higher cash and marketable investment securities balances.
Interest
Expense
The
decrease in interest expense during the nine months ended September 30, 2021 was due to a decrease in interest expense on our Loan and
Security Agreement with SVB, mainly as a result of lower principal balances 2021 compared to 2020.
Loss
(Gain) on Warrant Liability
We
recorded a gain of $506,000 and a loss of $3.0 million, respectively, on warrant liability during the nine months ended September
30, 2021 and 2020 related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering.
The gain in 2021 was attributable to a decrease in the value of warrants outstanding as of September 30, 2021 as compared to
December 31, 2020 due to a small decrease in the number of warrants outstanding, a decrease in our volatility, and a shorter term
remaining on the outstanding warrants. The loss in 2020 was mainly due to an increase in the value of warrants outstanding as of
September 30, 2020 as compared to December 31, 2019 due to an increase in our stock price. There were 10,000 and 10,127,000 common
stock warrants from the November 2019 Offering exercised during the nine months ended September 30, 2021 and 2020, respectively. The
warrants are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the
option to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes
option pricing model with certain defined assumptions upon a change of control. The warrant liability will continue to fluctuate in
the future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the
volatility of our stock price, the risk-free interest rate and the number of common stock warrants outstanding.
Litigation
Settlement
We
recorded an expense of $4.0 million and zero, respectively, on litigation settlement during the nine months ended September 30, 2021
and 2020 related to the Global Agreement with Clarus to resolve all outstanding claims in the on-going intellectual property litigation
between the two companies as well as the on-going interference proceeding between the two companies. Under the terms of the settlement,
we agreed to pay Clarus $4.0 million payable as follows: $2.5 million immediately, $1.0 million on July 13, 2022 and $500,000 on July
13, 2023. No future royalties are owing from either party. Under the terms of the Global Agreement, Lipocine and Clarus have agreed to
dismiss the Lipocine Inc. v Clarus Therapeutics, Inc., No 19-cv-622 (WCB) litigation presently pending in the U.S. District Court for
the District of Delaware. Also, both parties have reached an agreement on the interference proceedings captioned Clarus Therapeutics,
Inc. v. Lipocine Inc., Interference No. 106,128 presently pending in the U.S. Patent and Trademark Office.
Liquidity
and Capital Resources
Since
our inception, our operations have been primarily financed through sales of our equity securities, debt and payments received under our
license and collaboration arrangements. We have devoted our resources to funding research and development programs, including discovery
research, preclinical and clinical development activities. We have incurred operating losses in most years since our inception and we
expect to continue to incur operating losses into the foreseeable future as we advance clinical development of LPCN 1144, TLANDO XR,
LPCN 1148, LPCN 1154, LPCN 1107 and any other product candidate, including continued research efforts.
As
of September 30, 2021, we had $38.7 million of unrestricted cash, cash equivalents and marketable investment securities compared to $19.7
million at December 31, 2020. Additionally, as of December 31, 2020 we had $5.0 million of restricted cash, which was required to be
maintained as cash collateral under the SVB Loan and Security Agreement until TLANDO is approved by the FDA. However on February 16,
2021, we amended the Loan and Security Agreement with SVB to, among other things, remove the cash collateral requirement.
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. 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. Our ability to realize benefits from the Antares License Agreement, including milestone and royalty payments, is subject
to a number of risks. We may not realize milestone or royalty payments in anticipated amounts, or at all.
On
January 28, 2021, we completed a public offering of securities registered under an effective registration statement filed pursuant to
the Securities Act of 1933, as amended (“January 2021 Offering”). The gross proceeds from the January 2021 Offering were
approximately $28.7 million, before deducting underwriter fees and other offering expenses of $1.9 million. In the January 2021 Offering,
we sold 16,428,571 shares of our common stock.
On
April 21, 2020, we entered into a loan (the “Loan”) from SVB in the aggregate amount of $234,000, pursuant to the Paycheck
Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which
was in the form of a note dated April 21, 2020, originally matured on April 21, 2022 and bears interest at a rate of 1.0% per annum,
payable monthly commencing on November 21, 2020. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are
used for qualifying expenses as described in the CARES Act. On November 2, 2020, we were notified by the Small Business Administration
that our PPP Loan had been forgiven.
On
February 27, 2020, we completed a registered direct offering of securities registered under an effective registration statement filed
pursuant to the Securities Act of 1933, as amended (“February 2020 Offering”). The gross proceeds from the February 2020
Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of $347,000. In the February
2020 Offering, the Company sold 10,084,034 Class A Units, with each Class A Unit consisting of one share of common stock and a one-half
of one common warrant to purchase one share of common stock, at a price of $0.595 per Class A Unit. The common stock warrants were immediately
exercisable at an exercise price of $0.53 per share, subject to adjustment, and expire on February 27, 2025. By their terms, however,
the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise,
more than 4.99% (or, at the election of the holder, 9.99%) of the shares of common stock then outstanding after giving effect to such
exercise.
On
January 5, 2018, we entered into the Loan and Security Agreement with SVB pursuant to which SVB agreed to lend us $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 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, which interest is payable monthly. Additionally on April 1, 2020, we entered into a Deferral Agreement with SVB. Under
the Deferral Agreement, principal repayments were deferred by six months and we were only required to make monthly interest payments
during the deferral period. The Loan matures on June 1, 2022. Previously, we were only required to make monthly interest payments until
December 31, 2018, following which we also made equal monthly payments of principal and interest until the signing of the Deferral Agreement.
We will also be required to pay an additional final payment at maturity equal to $650,000 (the “Final Payment Charge”). At
our option, we 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, we granted to SVB a security interest in substantially all of our
assets now owned or hereafter acquired, excluding intellectual property and certain other assets. In addition, as TLANDO was not approved
by the FDA by May 31, 2018, we were required to maintain $5.0 million of cash collateral at SVB until such time as TLANDO is approved
by the FDA. However on February 16, 2021, we amended the Loan and Security Agreement with SVB to, among other things, remove the financial
trigger and financial trigger release event provisions requiring us to maintain a minimum cash collateral value and collateral pledge
thereof. While any amounts are outstanding under the Loan and Security Agreement, we are 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 us and the collateral securing the credit facility, including foreclosure
against the property securing the credit facilities, including our cash. These events of default include, among other things, any failure
by us 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 us in an amount greater than $100,000 individually or in the
aggregate.
On
March 6, 2017, we entered into the Sales Agreement with Cantor Fitzgerald & Co. (“Cantor”) pursuant to which we may issue
and sell, from time to time, shares of our common stock having an aggregate offering price of up to the amount we have registered on
an effective registration statement pursuant to which the offering is being made. We currently have registered up to $50.0 million for
sale under the Sales Agreement, pursuant to our Registration Statement on Form S-3 (File No. 333-250072) (the “Form S-3”),
through Cantor as our sales agent. Cantor may sell our 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 of 1933, as amended, 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. We
pay Cantor 3.0% of the aggregate gross proceeds from each sale of shares under the Sales Agreement. We have also provided Cantor with
customary indemnification rights.
The
shares of our common stock sold under the Sales Agreement are sold and issued pursuant to our Form S-3, which was previously declared
effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements.
We
are not obligated to make any sales of our common stock under the 2020 Sales Agreement. The offering of our common stock pursuant to
the 2020 Sales Agreement will terminate upon the termination of the 2020 Sales Agreement as permitted therein. We and Cantor may each
terminate the 2020 Sales Agreement at any time upon ten days’ prior notice.
During
the three months ended September 30, 2021, we did not sell any shares of our common stock our current Registration Statement on Form
S-3 (File No. 333-250072). As of September 30, 2021, we had $41.2 million available for sale under the Sales Agreement.
We
believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating requirements
through at least September 30, 2022 which include planned and on-going clinical studies for LPCN 1144 and LPCN 1148, future clinical
studies for TLANDO XR, LPCN 1154 and LPCN 1107, compliance with regulatory requirements, and satisfaction of our obligations under the
settlement agreement with Clarus. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available
capital resources sooner than we currently expect if additional activities are performed by us including new clinical studies for LPCN
1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107. While we believe we have sufficient liquidity and capital resources to fund our
projected operating requirements through at least September 30, 2022, we will need to raise additional capital at some point through
the equity or debt markets or through additional out-licensing activities, either before or after September 30, 2022, to support our
operations. If we are unsuccessful in raising additional capital, our ability to continue as a going concern will be limited. Further,
our operating plan may change, and we 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, our capital resources may be consumed more rapidly
if we pursue additional clinical studies for LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107. Conversely, our capital resources
could last longer if we reduce expenses, reduce the number of activities currently contemplated under our operating plan or if we terminate,
modify or suspend on-going clinical studies. We can raise capital pursuant to the Sales Agreement but may choose not to issue common
stock if our market price is too low to justify such sales in our discretion. In addition, we currently have 1,586,959 unissued and unreserved
shares available for issuance at September 30, 2021. Without sufficient shares available for issuance, our ability to raise capital through
sales of equity, including under the Sales Agreement, is limited. There are numerous risks and uncertainties associated with the development
and, subject to approval by the FDA, commercialization of our product candidates. There are numerous risks and uncertainties impacting
our ability to enter into collaborations with third parties to participate in the development and potential commercialization of our
product candidates, and the potential benefits to us of such arrangements, including the Antares License Agreement. Licensees of our
product candidates, including Antares, may not successfully commercialize our products and, as a result, we may not receive anticipated
royalty or other payments under such arrangements. Additionally, TLANDO is not eligible for final FDA approval until March 2022 and,
therefore, we do not expect to receive any royalty or milestone payments until after such time, if any such payments will be received
at all. We are unable to precisely estimate the amounts of increased capital outlays and operating expenditures associated with our anticipated
or unanticipated clinical studies and ongoing development efforts. All of these factors affect our need for additional capital resources.
To fund future operations, we will need to ultimately raise additional capital and our requirements will depend on many factors, including
the following:
|
●
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the
scope, rate of progress, results and cost of our clinical studies, preclinical testing and other related activities for all of our
product candidates, including LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154 and LPCN 1107;
|
|
|
|
|
●
|
the
cost of manufacturing clinical supplies, and establishing commercial supplies, of our product candidates and any products that we
may develop;
|
|
|
|
|
●
|
the
cost and timing of establishing sales, marketing and distribution capabilities, if any;
|
|
|
|
|
●
|
the
terms and timing of any collaborative, licensing, settlement and other arrangements that we may establish;
|
|
|
|
|
●
|
the
number and characteristics of product candidates that we pursue;
|
|
|
|
|
●
|
the
cost, timing and outcomes of regulatory approvals;
|
|
|
|
|
●
|
the
timing, receipt and amount of sales, profit sharing or royalties, if any, from our potential products;
|
|
|
|
|
●
|
the
cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
|
|
|
|
|
●
|
the
extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements
relating to any of these types of transactions; and
|
|
|
|
|
●
|
the
extent to which we grow significantly in the number of employees or the scope of our operations.
|
Funding
may not be available to us on favorable terms, or at all. Also, market conditions may prevent us from accessing the debt and equity capital
markets, including sales of our common stock through the Sales Agreement. If we are unable to obtain adequate financing when needed,
we may have to delay, reduce the scope of or suspend one or more of our clinical studies, research and development programs or, if any
of our product candidates receive approval from the FDA, commercialization efforts. We may seek to raise any necessary additional capital
through a combination of public or private equity offerings, including the Sales Agreement, debt financings, collaborations, strategic
alliances, licensing arrangements and other marketing and distribution arrangements. These arrangements may not be available to us or
available on terms favorable to us. To the extent that we raise additional capital through marketing and distribution arrangements, other
collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product
candidates, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will
be diluted, and the terms of these securities may include liquidation or other preferences, warrants or other terms that adversely affect
our stockholders’ rights or further complicate raising additional capital in the future. If we raise additional capital through
debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends. If we are unable, for any reason, to raise needed capital, we will have to
reduce costs, delay research and development programs, liquidate assets, dispose of rights, commercialize products or product candidates
earlier than planned or on less favorable terms than desired or reduce or cease operations.
Sources
and Uses of Cash
The
following table provides a summary of our cash flows for the nine months ended September 30, 2021 and 2020:
|
|
Nine Months Ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash used in operating activities
|
|
$
|
(13,405,843
|
)
|
|
$
|
(11,619,069
|
)
|
Cash used in investing activities
|
|
|
(34,057,767
|
)
|
|
|
(1,515,297
|
)
|
Cash provided by financing activities
|
|
|
27,763,333
|
|
|
|
16,344,029
|
|
Net
Cash From Operating Activities
During
the nine months ended September 30, 2021 and 2020, net cash used in operating activities was $13.4 million and $11.6 million, respectively.
Net
cash used in operating activities during the nine months September 30, 2021 and 2020 was primarily attributable to cash outlays to support
ongoing operations, including research and development expenses and general and administrative expenses. During 2021 and 2020, we were
performing activities related to the LPCN 1144 LiFT Phase 2 paired biopsy clinical study. During 2021, we were also preparing
for a future trial with LPCN 1154 and we entered into the Global Agreement with Clarus. During 2020, we were also performing activities
around the submission of the TLANDO NDA.
Net
Cash From Investing Activities
During
the nine months ended September 30, 2021 and 2020, net cash used in investing activities was $34.1 million and $1.5 million, respectively.
Net
cash used in investing activities during the nine months ended September 30, 2021 and 2020, was primarily the result of purchasing marketable
investment securities, net, of $34.1 million and $1.5 million, respectively. There were no capital expenditures for the nine months ended
September 30, 2021 and 2020.
Net
Cash From Financing Activities
During
the nine months ended September 30, 2021 and 2020 net cash provided by financing activities was $27.8 million and $16.3 million, respectively.
Net
cash provided by financing activities during the nine months ended September 30, 2021 was attributable to the net proceeds from the sale
of 16,428,571 shares of common stock pursuant to January 2021 Offering resulting in net proceeds of $26.8 million and $3.4 million in
proceeds from the sale of 1,811,238 shares of common stock pursuant to the Sales Agreement with Cantor, offset by $2.5 million in debt
principal repayments under the SVB Loan and Security Agreement.
Net
cash provided by financing activities during the nine months ended September 30, 2020 was attributable to the net proceeds from the sale
of 10,084,034 shares of common stock pursuant to the February 2020 Offering resulting in net proceeds of $5.7 million, to $7.7 million
in proceeds from the exercise of warrants, $3.9 million in proceeds from the sale of 2,830,000 shares of common stock pursuant to the
ATM and $234,000 in loan proceeds under the Payment Protection Program, offset by $1.1 million in debt principal repayments under the
SVB Loan and Security Agreement.
Contractual
Commitments and Contingencies
Long-Term
Debt Obligations and Interest on Debt
On
January 5, 2018, we entered into a Loan and Security Agreement with SVB pursuant to which SVB agreed to lend us $10.0 million. The principal
borrowed under the Loan and Security Agreement bears interest at a rate equal to the Prime Rate plus one percent per annum, which interest
is payable monthly. The loan matures on June 1, 2022 and we were required to make equal monthly payments of principal and interest for
the remaining term of the loan beginning on January 1, 2019 although there was a principal deferment period of six months beginning on
April 1, 2020 due to COVID-19. We will also be required to pay the Final Payment Charge at maturity.
On
April 21, 2020, we were granted a Loan from SVB in the aggregate amount of approximately $234,000, pursuant to the PPP under Division
A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which was in the form of a Note dated April 21, 2020, originally
matured on April 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 21, 2020. Under the
terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES
Act. On November 2, 2020, we were notified by the Small Business Administration that our PPP Loan had been forgiven.
Purchase
Obligations
We
enter into contracts and issue purchase orders in the normal course of business with clinical research organizations for clinical trials
and clinical and commercial supply manufacturing and with vendors for preclinical research studies, research supplies and other services
and products for operating purposes. These contracts generally provide for termination on notice and are cancellable obligations.
Operating
Leases
In
August 2004, we entered into an agreement to lease our facility in Salt Lake City, Utah consisting of office and laboratory space which
serves as our corporate headquarters. On March 3, 2021, we modified and extended the lease through February 28, 2022.
Critical
Accounting Policies and Significant Judgments and Estimates
Our
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements
which we have prepared in accordance with U.S. generally accepted accounting principles. In preparing our financial statements, we are
required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. There have been no significant
and material changes in our critical accounting policies during the nine months ended September 30, 2021, as compared to those disclosed
in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and
Significant Judgments and Estimates” in our Form 10-K filed March 11, 2021.
New
Accounting Standards
Refer
to Note 12, in “Notes to Unaudited Condensed Consolidated Financial Statements” for a discussion of accounting standards
not yet adopted.