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 SEC on March 11, 2021, our first quarter Form 10-Q filed with the SEC on May 6,
2021, as well as the financial statements and related notes contained therein.
As
used in the discussion below, “we,” “our,” and “us” refers to Lipocine.
Forward-Looking
Statements
This
section and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking
statements provide current expectations of future events based on certain assumptions and include any statement that does not directly
relate to any historical or current fact. Forward-looking statements may refer to such matters as products, product benefits, pre-clinical
and clinical development timelines, clinical and regulatory expectations and plans, expected responses to regulatory actions, anticipated
financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market
performance, expected research and development and other expenses, future expectations for liquidity and capital resources needs and
similar matters. Such words as “may”, “will”, “expect”, “continue”, “estimate”,
“project”, and “intend” and similar terms and expressions are intended to identify forward looking statements.
Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed
in Part II, Item 1A (Risk Factors) of this Form 10-Q, or in Part II, Item 1A (Risk Factors) of our Form 10-Q for the quarter ended March
31, 2021 filed with the SEC on May 6, 2021 or in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March 11, 2021.
Except as required by applicable law, we assume no obligation to revise or update any forward-looking statements for any reason.
Overview
of Our Business
We
are a clinical-stage biopharmaceutical company focused on applying our oral drug delivery technology for the development of pharmaceutical
products focusing on metabolic and endocrine disorders. Our proprietary delivery technologies are designed to improve patient compliance
and safety through orally available treatment options. Our primary development programs are based on oral delivery solutions for poorly
bioavailable drugs. We have a portfolio of proprietary product candidates designed to produce favorable PK characteristics and facilitate
lower dosing requirements, bypass first-pass metabolism in certain cases, reduce side effects, and eliminate gastrointestinal interactions
that limit bioavailability.
Our
most advanced product candidate, TLANDO®, is an oral TRT comprised of TU. On December 8, 2020, we received tentative approval from
the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous
testosterone, also known as hypogonadism. In granting tentative approval, the FDA concluded that TLANDO has met all required quality,
safety and efficacy standards necessary for approval. However, TLANDO has not received final approval and is not eligible for final approval
to market in the U.S. until the expiration of the exclusivity period previously granted to Clarus Therapeutics, Inc. with respect to
Jatenzo®, which expires on March 27, 2022. We remain committed to taking appropriate
actions with the goal of receiving final approval to permit the launch of TLANDO. The FDA has also required us to conduct certain post-marketing
studies to (i) assess patient understanding of key risks relating to TLANDO and (ii) evaluate development of adrenal insufficiency with
chronic TLANDO therapy.
Additional
pipeline candidates include LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU for the treatment of
non-cirrhotic NASH which is currently in Phase 2 testing, TLANDO® XR, a next generation oral TRT product comprised of
testosterone tridecanoate (“TT”) with the potential for once daily dosing which has completed Phase 2 testing, LPCN
1148, an oral prodrug of bioidentical testosterone for the management of symptoms associated with cirrhosis, LPCN 1154, an
oral neuro-steroid targeted for the treatment of postpartum depression (“PPD”),
and LPCN 1107, potentially the first oral HPC product indicated for the prevention of recurrent PTB, which has completed a dose
finding Phase 2 clinical study and has been granted orphan drug designation by the FDA.
LPCN
1144 is currently being tested in the LiFT (“Liver Fat intervention with oral Testosterone”) proof-of-concept (“POC”)
Phase 2 clinical study, a paired-biopsy study in confirmed non-cirrhotic NASH subjects. Study enrollment has been completed and positive
top-line primary endpoint results after 12 weeks of treatment were released in January 2021. Treatments with LPCN 1144 resulted in robust
liver fat reduction, assessed by MRI-PDFF technique, and showed improvement of liver injury markers with no observed tolerability issues.
To
date, we have funded our operations primarily through the sale of equity securities, debt and convertible debt and through up-front payments,
research funding and royalty and milestone payments from our license and collaboration arrangements. We have not generated any revenues
from product sales and we do not expect to generate revenue from product sales unless and until we obtain regulatory approval of TLANDO
or other products.
We
have incurred losses in most years since our inception. As of June 30, 2021, we had an accumulated deficit of $182.2 million. Income
and losses fluctuate year to year, primarily depending on the nature and timing of research and development occurring on our product
candidates. Our net loss was $10.2 million for the six months ended June 30, 2021, compared to $12.1 million for the six months ended
June 30, 2020. Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate development
programs, our research activities and general and administrative costs, including on-going litigation, associated with our operations.
We
expect to continue to incur significant expenses and operating losses for the foreseeable future as we:
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conduct
any other post-approval clinical studies required in support of TLANDO;
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perform
pre-commercialization and commercialization activities in support of TLANDO;
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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 products or new uses for our existing products;
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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, including on-going litigation.
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To
fund future long-term operations, including the potential commercialization of TLANDO or other products, we will need to raise additional
capital. The amount and timing of future funding requirements will depend on many factors, including capital market conditions, regulatory
requirements and outcomes related to TLANDO, regulatory requirements related to our other product development programs, the timing and
results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs,
our ability to license our products to third parties, the pursuit of various potential commercial activities and strategies associated
with our development programs and related general and administrative support. We anticipate that we will seek to fund our operations
through public or private equity or debt financings or other sources, such as potential license, partnering and collaboration agreements.
We cannot be certain that anticipated additional financing will be available to us on favorable terms, in amounts sufficient to fund
our operations or at all. Although we have previously been successful in obtaining financing through public and private equity securities
offerings and our license and collaboration agreements, there can be no assurance that we will be able to do so in the future.
Our
Product Candidates
Our
current portfolio includes our most advanced product candidate, TLANDO, an oral TRT product candidate, which received tentative approval
from the FDA on December 8, 2020. Additionally, we are in the process of establishing our pipeline of other clinical candidates including
an oral androgen therapy for the treatment of non-cirrhotic NASH, LPCN 1144, a next-generation potential once daily oral TRT, TLANDO
XR, an androgen therapy for the management of cirrhosis, LPCN 1148, an oral neuro-steroid targeted for the treatment of PPD,
LPCN 1154, an oral therapy for the prevention of PTB, LPCN 1107, and we continue to explore other product candidates targeting
indications with a significant unmet need.
These
products are based on our proprietary Lip’ral drug delivery technology platform. Lip’ral technology is a patented technology
based on lipidic compositions which form an optimal dispersed phase in the gastrointestinal environment for improved absorption of insoluble
drugs. The drug loaded dispersed phase presents the solubilized drug efficiently at the absorption site (gastrointestinal tract membrane)
thus improving the absorption process and making the drug less dependent on physiological variables such as dilution, gastro-intestinal
pH and food effects for absorption. Lip’ral based formulation enables improved solubilization and higher drug-loading capacity,
which can lead to improved bioavailability, reduced dose, faster and more consistent absorption, reduced variability, reduced sensitivity
to food effects, improved patient compliance, and targeted lymphatic delivery where appropriate.
Our
Development Pipeline
TLANDO:
An Oral Product Candidate for Testosterone Replacement Therapy
Our
most advanced product, TLANDO, is an oral formulation of the chemical, TU, which is an eleven carbon side chain attached to T. TU is
an ester prodrug of T. An ester is chemically formed by bonding an acid and an alcohol. Upon the cleavage, or breaking, of the ester
bond, T is formed. TU has been approved for use outside the United States for many years for delivery via intra-muscular injection and
in oral dosage form and more recently TU has received regulatory approval in the United States for delivery via intra-muscular injection
and in oral dosage form. We are using our proprietary technology to facilitate steady gastrointestinal solubilization and absorption
of TU. Proof of concept was initially established in 2006, and subsequently TLANDO was licensed in 2009 to Solvay Pharmaceuticals, Inc.
which was then acquired by Abbott. Following a portfolio review associated with the spin-off of AbbVie by Abbott in 2011, the rights
to TLANDO were reacquired by us. All obligations under the prior license agreement have been completed except that Lipocine will owe
Abbott a perpetual 1% royalty on net sales. Such royalties are limited to $1 million in the first two calendar years following product
launch, after which period there is not a cap on royalties and no maximum aggregate amount. If generic versions of any such product are
introduced, then royalties are reduced by 50%.
NDA
PDUFA Outcome
On
December 8, 2020 we received tentative approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males
for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the
FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not
received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously
granted to Clarus with respect to Jatenzo®, which expires on March 27, 2022. We remain
committed to taking appropriate actions with the goal of receiving final approval to permit the launch of TLANDO.
Under
the Pediatric Research Equity Act (“PREA”), if TLANDO receives full approval, we will need to address the PREA requirement
to assess the safety and effectiveness of TLANDO in pediatric patients. The FDA has also required us to conduct certain post-marketing
studies including: (i) conduct an appropriately designed label comprehension and knowledge study that assesses patient understanding
of key risk messages in the Medication Guide for TLANDO and (ii) conduct an appropriately designed one-year trial to evaluate development
of adrenal insufficiency with chronic TLANDO therapy. The timetables for these post-marketing requirements will be established at the
time of full approval of TLANDO. We are actively pursuing and currently evaluating commercial alternatives with TLANDO, should it receive
FDA approval, including out-licensing TLANDO to a third-party, launching TLANDO on our own, or launching TLANDO on our own with the assistance
from a “risk share” partner.
Recent
Competition Update
On
March 27, 2019, Clarus’ product JATENZO®, an oral TU product, was approved by the FDA and also received three years of data
exclusivity. On February 10, 2020, Clarus announced that JATENZO® has been launched and is commercially available. Based on the FDA’s
tentative approval of TLANDO, we will not be able to begin marketing TLANDO until receiving final approval no earlier than March 27,
2022, the expiration of the exclusivity period granted to Clarus with respect to JATENZO®.
Additionally,
our competitors may introduce other T-replacement therapies. For example, on January 5, 2021 Marius submitted a NDA to the FDA seeking
approval of KYZATREX®, its novel oral TU soft gelatin capsule for the treatment of primary and secondary hypogonadism in adult men.
According to Marius, it has been assigned a PDUFA date of October 31, 2021 for KYZATREX®.
We
are also aware of other pharmaceutical companies that have T-replacement therapies or testosterone therapies in development that may
be approved for marketing in the United States or outside of the United States.
Based
on publicly available information, we believe that several other T-replacement therapies that would be competitive with TLANDO are in
varying stages of development, some of which may be approved, marketed and/or commercialized prior to TLANDO. These therapies include
T-gels, oral-T, an aromatase inhibitor, a new class of drugs called Selective Androgen Receptor Modulators and hydroalcoholic gel formulations
of DHT.
LPCN
1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH
We
are currently evaluating LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU, for the treatment of non-cirrhotic
NASH. NASH is a more advanced state of NAFLD and can progress to a cirrhotic liver and eventually hepatocellular carcinoma/ liver cancer.
Twenty to thirty percent of the U.S. population is estimated to suffer from NAFLD and fifteen to twenty percent of this group progress
to NASH, which is a substantially large population that lacks effective therapy. Currently, there are no FDA approved treatments for
NASH, a silent killer that affects approximately 30 million Americans. Approximately 50% of NASH patients are in adult males. NAFLD/NASH
is becoming more common due to its strong correlation with obesity and metabolic syndrome, including components of metabolic syndrome
such as diabetes, cardiovascular disease and high blood pressure. In men, especially with comorbidities associated with NAFLD/NASH, testosterone
deficiency has been associated with an increased accumulation of visceral adipose tissue and insulin resistance, which could be factors
contributing to NAFLD/NASH. There is currently no approved therapy for the treatment of NASH although there are several drug candidates
currently under development with many having clinical failures to date.
History
of Liver Disease
The
liver is the largest internal organ in the human body and its proper function is indispensable for many critical metabolic functions,
including the regulation of lipid and sugar metabolism, the production of important proteins, including those involved in blood clotting,
and purification of blood. There are over 100 described diseases of the liver, and because of its many functions, these can be highly
debilitating and life-threatening unless effectively treated. Liver diseases can result from injury to the liver caused by a variety
of insults, including HCV, HBV, obesity, chronic excessive alcohol use or autoimmune diseases. Regardless of the underlying cause of
the disease, there are important similarities in the disease progression including increased inflammatory activity and excessive liver
cell apoptosis, which if unresolved leads to fibrosis. Fibrosis, if allowed to progress, will lead to cirrhosis, or excessive scarring
of the liver, and eventually reduced liver function. Some patients with liver cirrhosis have a partially functioning liver and may appear
asymptomatic for long periods of time, which is referred to as decompensated liver disease. Decompensated liver disease is when the liver
is unable to perform its normal functions. Many people with active liver disease remain undiagnosed largely because liver disease patients
are often asymptomatic for many years.
Markers
of Liver Cell Death
ALT
is an enzyme that is produced in liver cells and is naturally found in the blood of healthy individuals. In liver disease, liver cells
are damaged and as a consequence, ALT is released into the blood, increasing ALT levels above the normal range. Physicians routinely
test blood levels of ALT to monitor the health of a patient’s liver. ALT level is a clinically important biochemical marker of
the severity of liver inflammation and ongoing liver disease. Elevated levels of ALT represent general markers of liver cell death and
inflammation without regard to any specific mechanism. AST is a second enzyme found in the blood that is produced in the liver and routinely
measured by physicians along with ALT. As with ALT, AST is often elevated in liver disease and, like ALT, is considered an overall marker
of liver inflammation.
Relationship
between Hypogonadism and NAFLD
Preclinical
and clinical studies in the NAFLD/NASH literature have shown the prevalence of testosterone deficiency across the NAFLD/NASH histological
spectrum wherein low testosterone was independently associated with NAFLD/NASH with an inverse relationship between testosterone and
NAFLD/NASH symptom severity. A recent NIDDK report suggests that 75% of biopsy confirmed NASH subjects have less than 372 ng/dL of total
testosterone and that the degree of fibrosis severity is inversely related to free testosterone levels; thus, providing a good rationale
for testing LPCN 1144 in adult NASH patients regardless of their hypogonadal status. We have received clearance from the FDA to clinically
investigate LPCN 1144 in an expanded target population of adult male NASH patients. Specifically, the FDA waived the limitation of only
testing LPCN 1144 in NASH subjects with total testosterone levels below 300 ng/dL (threshold for hypogonadism).
Current
Status
We
have initiated the LiFT Phase 2 clinical study in confirmed non-cirrhotic NASH subjects. The LiFT clinical study is a prospective,
multi-center, randomized, double-blind, placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal or eugonadal male NASH
subjects with grade F1/F3 fibrosis and a NAFLD Activity Score ≥ 4 with a 36-week treatment period. The LiFT clinical study
enrolled 56 biopsy confirmed NASH male subjects. Subjects were randomized 1:1:1 to one of three arms (Treatment A is a twice daily oral
dose of 142 mg testosterone equivalent, Treatment B is a twice daily oral dose of 142 mg testosterone equivalent formulated with 217
mg of d-alpha tocopherol equivalent, and the third arm is twice daily matching placebo). We currently expect 36-week biopsy data in August
2021.
The
primary endpoint of the LiFT clinical study is change in hepatic fat fraction via MRI-PDFF and exploratory liver fat/marker end
points post 12 weeks of treatment. Additionally, key secondary endpoints post 36 weeks of treatment include assessment of histological
change for NASH resolution and/or fibrosis improvement as well as liver fat data. Other important endpoints include the following: change
in liver injury markers, anthropomorphic measurements, lipids, insulin resistance and inflammatory/fibrosis markers; as well as patient
reported outcomes.
Additionally,
subjects will have access to LPCN 1144 through an open label extension study. The extension study will enable the collection of additional
data on LPCN 1144 for up to a total of 72 weeks of therapy.
Treatments
with LPCN 1144 post 12 weeks of treatment resulted in robust liver fat reduction, assessed by MRI-PDFF, and showed improvement of liver
injury markers with no observed tolerability issues. Inclusion of d-alpha tocopherol formulated with the testosterone prodrug resulted
in additional liver benefits, notably improved key liver markers without compromising tolerability.
Key
results are presented in the following tables:
Table
1. Mean absolute liver fat using MRI-PDFF in all subjects (n=56)* at Week 12.
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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)
Table
2. 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.
Table
3. 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
Table
4. Average changes in key serum liver injury markers ALT and AST at Week 12 (n=52)*.
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ALT (U/L)
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AST (U/L)
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Absolute
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Placebo-Adjusted Absolute
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Absolute
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Placebo-Adjusted Absolute
|
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Treatment
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CBL
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p value
vs BL
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CBL
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p value
vs Placebo
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CBL
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p value
vs BL
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CBL
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p value
vs Placebo
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A (n = 16)
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-9.4
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0.0054
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-11.1
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0.0164
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|
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-4.9
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0.0402
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-7.7
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0.0216
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B (n = 19)
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-22.4
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<0.0001
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-24.1
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<0.0001
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|
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-10.4
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<0.0001
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|
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-13.2
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|
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0.0001
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Placebo (n = 17)
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1.8
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|
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NS
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|
|
|
n/a
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|
|
|
n/a
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|
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2.8
|
|
|
|
NS
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|
|
|
n/a
|
|
|
|
n/a
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*
All available data
During
the 12 weeks of treatment, the observed rate and severity of Treatment Emergent Adverse Events (“TEAEs”) in both the LPCN
1144 treatment arms were comparable to the placebo arm. Three subjects in the placebo group and one subject in the combined treatment
arms discontinued study drug due to TEAEs. We currently expect 36-week biopsy data in August 2021.
Previous
to the LiFT clinical study, we completed a 16-week POC liver imaging clinical study to assess liver fat changes in hypogonadal
men at risk of developing NASH using MRI-PDFF technique. Treatment results from the POC liver imaging study demonstrated that 48% of
the treated NAFLD subjects, defined as baseline liver fat of at least 5%, had NAFLD resolution, defined as liver fat <5% post treatment.
Additionally, 100% of the subjects experiencing NAFLD resolution had at least a 35% relative liver fat reduction from baseline with a
relative mean liver fat reduction of 55% in this group.
TLANDO
XR: A Next-Generation Long-Acting Oral Product Candidate for TRT
TLANDO
XR is a next-generation, novel ester prodrug of testosterone comprised of TT which uses the Lip’ral technology to enhance solubility
and improve systemic absorption. We completed a Phase 2b dose finding study in hypogonadal men in the third quarter of 2016. The primary
objectives of the Phase 2b clinical study were to determine the starting Phase 3 dose of TLANDO XR along with safety and tolerability
of TLANDO XR and its metabolites following oral administration of single and multiple doses in hypogonadal men. The Phase 2b clinical
trial was a randomized, open label, two-period, multi-dose PK study that enrolled hypogonadal males into five treatment groups. Each
of the 12 subjects in a group received treatment for 14 days. Results of the Phase 2b study suggest that the primary objectives were
met, including identifying the dose expected to be tested in a Phase 3 study. Good dose-response relationship was observed over the tested
dose range in the Phase 2b study. Additionally, the target Phase 3 dose met primary and secondary end points. Overall, TLANDO XR was
well tolerated with no drug-related severe or serious adverse events reported in the Phase 2b study.
Additionally
in October 2014, we completed a Phase 2a proof -of-concept (“POC”) study in hypogonadal men. The Phase 2a open-label, dose-escalating
single and multiple dose study enrolled 12 males. Results from the Phase 2a clinical study demonstrated the feasibility of a once daily
dosing with TLANDO XR in hypogonadal men and a good dose response. Additionally, the study confirmed that steady state is achieved by
day 14 with consistent inter-day performance observed on day 14, 21 and 28. No subjects exceeded Cmax of 1500 ng/dL at any time during
the 28-day dosing period on multi-dose exposure. Overall, TLANDO XR was well tolerated with no serious AE’s reported.
We
have also completed a preclinical toxicology study with TLANDO XR in dogs.
In
February 2018 we had a meeting with the FDA to discuss these pre-clinical results and to discuss the Phase 3 clinical study and path
forward for TLANDO XR. Based on the results of the FDA meeting and additional pre-clinical trials conducted after the FDA meeting, we
have proposed a Phase 3 protocol for TLANDO XR and have solicited FDA feedback. Based on initial FDA feedback, we expect the Phase 3
clinical trial design to follow the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use
(“ICH”) guidelines and will include a three-month efficacy treatment period and a one-year safety component for up to 100
subjects. We continue to refine the Phase 3 protocol and plan to request FDA approval of the protocol once it is finalized. Additionally,
the FDA previously requested that a food effect study needs to be completed, and that ambulatory blood pressure monitoring (“ABPM”)
be included as part of the Phase 3 clinical study. We anticipate the next steps in developing TLANDO XR will be to scale up the formulation
and conduct a food effect study with TLANDO XR. We are also exploring the possibility of licensing TLANDO XR to a third party, although
no licensing agreement has been entered into by us.
LPCN
1148: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Management of Cirrhosis
Cirrhosis
is end-stage NAFLD for which there is no FDA approved drug treatment. Liver cirrhosis is estimated to affect in excess of 600,000 Americans,
with men affected at twice the rate of women, and results in approximately 45,000 deaths every year. Due to a lack of available organs,
only a third of waitlisted patients are getting liver transplants, and patients that do receive a transplant are increasingly being described
as frail. Low testosterone affects up to 90% of cirrhotic men, and is a predictor of mortality and increased adverse events including
ascites, hepatic encephalopathy, and clinically significant portal hypertension. We are targeting LPCN 1148 for the management of symptoms
associated with liver cirrhosis. We believe LPCN 1148 targets unmet needs for cirrhosis subjects including improvement in the quality
of life of patients while on the liver transplant waiting list, prevention or reduction in the occurrence of decompensation events and
improvement in post liver transplant survival, including outcomes and costs.
We
are currently planning to conduct a Phase 2 POC study (NCT04874350) in male cirrhotic subjects to evaluate the therapeutic potential
of LPCN 1148 for the management of cirrhotic subjects. The planned Phase 2 POC study is a prospective, multi-center, randomized,
placebo-controlled study in approximately 48 to 60 male cirrhotic patients that are on the liver transplant list. Subjects will be
randomized 1:1 to one of two arms. The treatment arm is an oral dose of a testosterone ester and the second arm is matching placebo.
The primary endpoint is change in skeletal muscle index at week 24 with key secondary endpoints including change in liver frailty
index and number of waitlist events, including all-cause mortality. Total treatment is expected to be 52
weeks. We currently expect the first subject will be dosed in the fourth quarter of 2021.
LPCN
1154: An Oral Neuro-Steroid Candidate for the Treatment of Postpartum Depression
PPD
is a major depressive disorder that is under diagnosed in the U.S., impacts approximately 1 in 7 women after giving birth. PPD
can lead to devastating consequences for a woman, her newborn and her family. Currently, there is no oral therapy approved for the treatment
of PPD. The active moiety in LPCN 1154 is an endogenous positive allosteric modulator of γ-aminobutyric acid (“GABAA”)
receptor. LPCN 1154 is expected to be an “at home” treatment with easier treatment access than the current standard of care
invasive option that requires hospitalization with significant limitations. Moreover, LPCN 1154 is expected to provide the required level
of privacy for a mother, avoiding bonding/breast feeding interruptions due to the required hospitalizations for the current option.
On
June 14, 2021, we announced that the FDA has cleared the Company’s Investigational New Drug Application (“IND”) to
initiate a Phase 2 study to evaluate the therapeutic potential of LPCN 1154 for the treatment of PPD in adults. We recently initiated
a pharmacokinetic (“PK”) study to assess dose proportionality with LPCN 11154 with top-line results expected in the third
quarter of 2021. Following the PK study, we plan to conduct a proof-of-concept study to evaluate the safety, tolerability, and efficacy
of LPCN 1154 in adult female subjects diagnosed with PPD. We expect the first subject dosed will occur in the fourth quarter of 2021.
LPCN
1107: An Oral Product Candidate for the Prevention of Preterm Birth
We
believe LPCN 1107 has the potential to become the first oral HPC product indicated for the reduction of risk of PTB (delivery less than
37 weeks) in women with singleton pregnancy who have a history of singleton spontaneous PTB. Prevention of PTB is a significant unmet
need as approximately 11.7% of all U.S. pregnancies result in PTB, a leading cause of neonatal mortality and morbidity.
We
have completed a multi-dose PK dose selection study in pregnant women. The objective of the multi-dose PK selection study was to assess
HPC blood levels in order to identify the appropriate LPCN 1107 Phase 3 dose. The multi-dose PK dose selection study was an open-label,
four-period, four-treatment, randomized, single and multiple dose, PK study in pregnant women of three dose levels of LPCN 1107 and the
IM HPC (Makena®). The study enrolled 12 healthy pregnant women (average age of 27 years) with a gestational age of approximately
16 to 19 weeks. Subjects received three dose levels of LPCN 1107 (400 mg BID, 600 mg BID, or 800 mg BID) in a randomized, crossover manner
during the first three treatment periods and then received five weekly injections of HPC during the fourth treatment period. During each
of the LPCN 1107 treatment periods, subjects received a single dose of LPCN 1107 on Day 1 followed by twice daily administration from
Day 2 to Day 8. Following completion of the three LPCN 1107 treatment periods and a washout period, all subjects received five weekly
injections of HPC. Results from this study demonstrated that average steady state HPC levels (Cavg0-24) were comparable or higher for
all three LPCN 1107 doses than for injectable HPC. Additionally, HPC levels as a function of daily dose were linear for the three LPCN
1107 doses. Also, unlike the injectable HPC, steady state exposure was achieved for all three LPCN 1107 doses within seven days. We have
also completed a proof-of-concept Phase 1b clinical study of LPCN 1107 in healthy pregnant women in January 2015 and a POC Phase 1a clinical
study of LPCN 1107 in healthy non-pregnant women in May 2014. These studies were designed to determine the PK and bioavailability of
LPCN 1107 relative to an IM HPC, as well as safety and tolerability.
A
traditional PK/PD based Phase 2 clinical study in the intended patient population is not expected to be required prior to entering into
Phase 3. Therefore, based on the results of our multi-dose PK study we had an End-of-Phase 2 meeting and subsequent guidance meetings
with the FDA to define a pivotal Phase 2b/3 development plan for LPCN 1107. However, these discussions will need to be updated based
on recent developments with Covis’ Makena®. We plan to resume our interactions with the FDA to discuss our pivotal Phase 2b/3
clinical trial design and better understand next steps to advance LPCN 1107. Additionally, a pivotal Phase 2b/3 study will not occur
until the results from a planned food-effect study with LPCN 1107 are reviewed by the FDA, though manufacturing scale-up work for LPCN
1107 has been completed.
We
do not anticipate the initiation of a pivotal Phase 2b/3 study with LPCN 1107 to occur until the required food effect study is complete.
We currently intend to proceed with plans to conduct the required food effect clinical study. We are exploring the possibility of licensing
LPCN 1107 to a third party, although no licensing agreement has been entered into by the Company. No assurance can be given that any
license agreement will be completed, or, if an agreement is completed, that such an agreement would be on acceptable terms.
The
FDA has granted orphan drug designation to LPCN 1107 based on a major contribution to patient care. Orphan designation qualifies Lipocine
for various development incentives, including tax credits for qualified clinical testing, and a waiver of the prescription drug user
fee when we file our NDA.
Recent
Competition Update
On
October 5, 2020, the FDA’s CDER proposed that Makena be withdrawn from the market because the PROLONG trial failed to verify the
clinical benefit of Makena and concluded that the available evidence does not show Makena is effective for its approved use.
CDER
issued AMAG, the NDA holder at the time, a Notice of Opportunity for Hearing (“NOOH”) to withdraw approval of Makena, for
which AMAG Pharmaceuticals responded by requesting a hearing and providing detail on the company’s position, recognizing clinicians’
decade-long use of Makena’s treatment and the public health implications of withdrawing approval. The FDA Commissioner has not
determined whether it will hold a public hearing, and if one is granted, the process is expected to take months. During this time, Makena
and the approved generics of Makena will remain on the market until the FDA makes a final decision about these products.
Currently,
Makena and the approved generics of Makena are the only products approved for the prevention of recurrent preterm birth.
The
FDA also indicated that it intends to hold a meeting with experts in obstetrics, neonatal care, and clinical trial design to discuss
how to facilitate development of effective and safe therapies to treat preterm birth.
Financial
Operations Overview
Revenue
To
date, we have not generated any revenues from product sales and do not expect to do so until one of our product candidates receives approval
from the FDA. Revenues to date have been generated substantially from license fees, royalty and milestone payments and research support
from our licensees. Since our inception through June 30, 2021, we have generated $28.1 million in revenue under our various license and
collaboration arrangements and from government grants. We may never generate revenues from TLANDO or any of our other clinical or preclinical
development programs or licensed products as we may never succeed in obtaining regulatory approval or commercializing any of these product
candidates.
Research
and Development Expenses
Research
and development expenses consist primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid to
external service providers such as contract research organizations and contract manufacturing organizations, contractual obligations
for clinical development, clinical sites, manufacturing and scale-up for late-stage clinical trials, formulation of clinical drug supplies,
and expenses associated with regulatory submissions. Research and development expenses also include an allocation of indirect costs,
such as those for facilities, office expense, travel, and depreciation of equipment based on the ratio of direct labor hours for research
and development personnel to total direct labor hours for all personnel. We expense research and development expenses as incurred. Since
our inception, we have spent approximately $123.9 million in research and development expenses through June 30, 2021.
On
December 8, 2020 we received tentative approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males
for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the
FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not
received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously
granted to Clarus with respect to Jatenzo®, which expires on March 27, 2022. As a
result, we are uncertain as to whether we will incur additional research and developments costs for TLANDO. Any further expenditures,
if needed, are subject to numerous uncertainties regarding timing and cost to completion.
We
expect to continue to incur significant costs as we develop our other product candidates, including the ongoing LiFT Phase 2 clinical
study with LPCN 1144.
In
general, the cost of clinical trials may vary significantly over the life of a project as a result of uncertainties in clinical development,
including, among others:
|
●
|
the number of sites included in the trials;
|
|
|
|
|
●
|
the length of time required to enroll suitable subjects;
|
|
|
|
|
●
|
the duration of subject follow-ups;
|
|
|
|
|
●
|
the length of time required to collect, analyze and
report trial results;
|
|
|
|
|
●
|
the cost, timing and outcome of regulatory review;
and
|
|
|
|
|
●
|
potential changes by the FDA in clinical trial and
NDA filing requirements for testosterone replacement therapies.
|
We
have also incurred significant manufacturing costs to prepare launch supplies for TLANDO and additional expenditures will be required
to prepare for a commercial launch of TLANDO, should it be approved, if it is not out-licensed. However, future expenditures are subject
to numerous uncertainties regarding timing and cost to completion, including, among others:
|
●
|
the timing and outcome of regulatory filings and FDA
reviews and actions for TLANDO;
|
|
|
|
|
●
|
our dependence on third-party manufacturers for the
production of satisfactory finished product for registration and launch should regulatory approval be obtained;
|
|
|
|
|
●
|
the potential for future license or co-promote arrangements
for TLANDO, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our future plans
and capital requirements; and
|
|
|
|
|
●
|
the effect on our product development activities of
actions taken by the FDA or other regulatory authorities.
|
A
change of outcome for any of these variables with respect to the development of TLANDO and our other product development candidates could
mean a substantial change in the costs and timing associated with these efforts, will require us to raise additional capital, and may
require us to reduce operations.
Given
the stage of clinical development and the significant risks and uncertainties inherent in the clinical development, manufacturing and
regulatory approval process, we are unable to estimate with any certainty the time or cost to complete the development of LPCN 1144,
TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 and other product candidates. Clinical development timelines, the probability of success and
development costs can differ materially from expectations and results from our clinical trials may not be favorable. If we are successful
in progressing LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154, LPCN 1107 or other product candidates into later stage development, we will
require additional capital. The amount and timing of our future research and development expenses for these product candidates will depend
on the preclinical and clinical success of both our current development activities and potential development of new product candidates,
as well as ongoing assessments of the commercial potential of such activities.
Summary
of Research and Development Expense
We
are conducting on-going clinical and regulatory activities with most of our product candidates. Additionally, we incur costs for our
other research programs. The following table summarizes our research and development expenses:
|
|
Three
Months Ended June 30,
|
|
|
Six
Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
External service provider
costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TLANDO
|
|
$
|
22,528
|
|
|
$
|
122,544
|
|
|
$
|
109,251
|
|
|
$
|
207,477
|
|
LPCN 1144
|
|
|
554,042
|
|
|
|
1,330,886
|
|
|
|
1,317,272
|
|
|
|
3,060,439
|
|
TLANDO
XR
|
|
|
-
|
|
|
|
1,490
|
|
|
|
-
|
|
|
|
71,898
|
|
LPCN 1154
|
|
|
94,642
|
|
|
|
-
|
|
|
|
102,073
|
|
|
|
-
|
|
LPCN
1107
|
|
|
54,381
|
|
|
|
1,360
|
|
|
|
55,381
|
|
|
|
2,360
|
|
Total external service provider
costs
|
|
|
725,593
|
|
|
|
1,456,280
|
|
|
|
1,583,977
|
|
|
|
3,342,174
|
|
Internal personnel costs
|
|
|
514,705
|
|
|
|
682,334
|
|
|
|
1,084,972
|
|
|
|
1,174,705
|
|
Other
research and development costs
|
|
|
224,389
|
|
|
|
130,370
|
|
|
|
376,279
|
|
|
|
263,860
|
|
Total
research and development
|
|
$
|
1,464,687
|
|
|
$
|
2,268,984
|
|
|
$
|
3,045,228
|
|
|
$
|
4,780,739
|
|
We
expect research and development expenses to increase in the future as we complete on-going clinical studies, including the LiFT
Phase 2 clinical study with LPCN 1144, as we conduct future clinical studies with LPCN 1148, LPCN 1154 and LPCN 1107, and as we manufacture
commercial supplies of TLANDO pre-approval if it is not out-licensed. However, if we are unable to raise additional capital, we may need
to reduce research and development expenses in order to extend our ability to continue as a going concern.
General
and Administrative Expenses
General
and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation related to our executive,
finance, business development, marketing, sales and support functions. Other general and administrative expenses include rent and utilities,
travel expenses, professional fees for auditing, tax and legal services, litigation settlement and market research and market analytics.
General
and administrative expenses also include expenses for the cost of preparing, filling and prosecuting patent applications and maintaining,
enforcing and defending intellectual property-related claims, including the patent interference and patent infringement lawsuits against
Clarus.
We
expect that general and administrative expenses will decrease in the future as we expect to incur decreased legal fees due to the global
settlement agreement (“Global Agreement”) with Clarus. We expect that such decreases will be offset by other increases as
we mature as a public company, including legal and consulting fees, accounting and audit fees, director fees, increased directors’
and officers’ insurance premiums, fees for investor relations services and enhanced business and accounting systems, litigation
costs, professional fees and other costs. If TLANDO is approved by the FDA and it is not out-licensed, we expect we will incur significant
additional expenses relating to the commercialization of TLANDO, including, among other things, expenses relating to building out sales
and marketing teams, manufacturing expenses, expenses relating to licensing TLANDO to third parties, and other expenses. However, if
we are unable to raise additional capital, we may need to further reduce general and administrative expenses in order to extend our ability
to continue as a going concern. If we are unable to raise additional capital, we may be unable to effectively commercialize TLANDO if
not out-licensed after receiving FDA approval.
Other
Expense (Income), Net
Other
expense (income), net consists primarily of interest income earned on our cash, cash equivalents and marketable investment securities
and interest expense incurred on our outstanding Loan and Security Agreement, losses (gains) on our warrant liability and litigation
settlement accruals.
Results
of Operations
Comparison
of the Three Months Ended June 30, 2021 and 2020
The
following table summarizes our results of operations for the three months ended June 30, 2021 and 2020:
|
|
Three Months Ended June 30,
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Variance
|
|
Research and development expenses
|
|
$
|
1,464,687
|
|
|
$
|
2,268,984
|
|
|
|
(804,297
|
)
|
General and administrative expenses
|
|
|
1,525,592
|
|
|
|
1,953,535
|
|
|
|
(427,943
|
)
|
Interest and investment income
|
|
|
(17,344
|
)
|
|
|
(7,177
|
)
|
|
|
10,167
|
|
Interest expense
|
|
|
57,428
|
|
|
|
87,847
|
|
|
|
(30,419
|
)
|
Loss (gain) on warrant liability
|
|
|
(221,322
|
)
|
|
|
2,066,445
|
|
|
|
(2,287,767
|
)
|
Litigation settlement
|
|
|
4,000,000
|
|
|
|
—
|
|
|
|
4,000,000
|
|
Research
and Development Expenses
The
decrease in research and development expenses during the three months ended June 30, 2021 was primarily due to a $777,000 decrease in
contract research organization expense and outside consulting costs related to the LPCN 1144 LiFT Phase 2 clinical study in NASH
subjects, a $100,000 decrease in costs associated with TLANDO and a $168,000 decrease in personnel expense which was mainly due to a
decrease in stock compensation and bonus expense. The decreases were offset by a $95,000 increase in costs related to LPCN 1154 and a
$53,000 increase in costs for LPCN 1107, as well as net increases in other R&D expenses of $94,000.
General
and Administrative Expenses
The
decrease in general and administrative expenses during the three months ended June 30, 2021 was primarily due to a $273,000 decrease
in personnel costs, which was mainly due to a decrease in stock compensation and bonus expense, and a $239,000 decrease in legal costs
in 2021 as compared to 2020 relating to a decrease the following legal activities: lawsuit filed against Clarus Therapeutics Inc. for
patent infringement in April 2019 and the on-going class action lawsuit defense. These decreases were offset by a $49,000 increase in
corporate insurance expenses and a $35,000 increase in other general and administrative expenses.
Interest
and Investment Income
The
increase in interest and investment income during the three months ended June 30, 2021 was due to higher cash and marketable investment
securities balances in 2021 compared to 2020.
Interest
Expense
The
decrease in interest expense during the three months ended June 30, 2021 was due to a decrease in interest expense on our Loan and Security
Agreement with SVB, as a result of lower principal balances and lower interest rates in 2021 compared to 2020.
Loss
(Gain) on Warrant Liability
We
recorded a gain of $221,000 and a loss of $2.1 million, respectively, on warrant liability during the three months ended June 30, 2021
and 2020 related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. The gain
in 2021 was attributable to a decrease in the value of warrants outstanding as of June 30, 2021 as compared to March 31, 2021 due to
a decrease in our stock price. The loss in 2020 was mainly due to an increase in the value of warrants outstanding as of June 30, 2020
as compared to March 31, 2020 due to an increase in our stock price. There were zero and 10,006,000 common stock warrants from the
November 2019 Offering exercised during the three months ended June 30, 2021 and 2020, respectively. The warrants are classified as a
liability due to a provision contained within the warrant agreement which allows the warrant holder the option to elect to receive an
amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model with certain
defined assumptions upon a change of control. The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes
model including our current stock price, the remaining life of the warrants, the volatility of our stock price, the risk-free interest
rate and the number of common stock warrants outstanding.
Litigation
Settlement
We
recorded an expense of $4.0 million and zero, respectively, on litigation settlement during the three months ended June 30, 2021 and
2020 related to the Global Agreement with Clarus to resolve all outstanding claims in the on-going intellectual property litigation between
the two companies as well as the on-going interference proceeding between the two companies. Under the terms of the settlement, we agreed
to pay Clarus $4.0 million payable as follows: $2.5 million immediately, $1.0 million on July 13, 2022 and $500,000 on July 13, 2023.
No future royalties are owing from either party. Under the terms of the Global Agreement, Lipocine and Clarus have agreed to dismiss
the Lipocine Inc. v Clarus Therapeutics, Inc., No 19-cv-622 (WCB) litigation in the U.S. District Court for the District
of Delaware. Also, both parties have reached an agreement on the interference proceedings captioned Clarus Therapeutics, Inc. v. Lipocine
Inc., Interference No. 106,128 in the U.S. Patent and Trademark Office.
Comparison
of the Six Months Ended June 30, 2021 and 2020
The
following table summarizes our results of operations for the six months ended June 30, 2021 and 2020:
|
|
Six months ended June 30,
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Variance
|
|
Research and development expenses
|
|
$
|
3,045,228
|
|
|
$
|
4,780,739
|
|
|
|
(1,735,511
|
)
|
General and administrative expenses
|
|
|
3,059,544
|
|
|
|
4,038,795
|
|
|
|
(979,251
|
)
|
Interest and investment income
|
|
|
(27,993
|
)
|
|
|
(67,115
|
)
|
|
|
(39,122
|
)
|
Interest expense
|
|
|
126,401
|
|
|
|
221,192
|
|
|
|
(94,791
|
)
|
Loss (gain) on warrant liability
|
|
|
(26,257
|
)
|
|
|
3,166,474
|
|
|
|
(3,192,731
|
)
|
Litigation settlement
|
|
|
4,000,000
|
|
|
|
—
|
|
|
|
4,000,000
|
|
Income tax expense
|
|
|
200
|
|
|
|
200
|
|
|
|
-
|
|
Research
and Development Expenses
The
decrease in research and development expenses during the six months ended June 30, 2021 was primarily due to a $1.7 million decrease
in contract research organization expense and outside consulting costs related to the LPCN 1144 LiFT Phase 2 clinical study in
NASH subjects, a $98,000 decrease in costs associated with TLANDO and a $90,000 net decrease in personnel expense which was mainly due
to a decrease in stock compensation expense offset by increases in salaries partially due to headcount increases. These decreases were
offset by a $102,000 increase in costs related to LPCN 1154 and a $53,000 increase in costs for LPCN 1107, as well as increases in other
R&D expenses of $41,000.
General
and Administrative Expenses
The
decrease in general and administrative expenses during the six months ended June 30, 2021 was primarily due to a $847,000 decrease in
legal costs in 2021 as compared to 2020 relating to a decrease the following legal activities: lawsuit filed against Clarus Therapeutics
Inc. for patent infringement in April 2019 and the on-going class action lawsuit defense, and a decrease of $288,000 in personnel costs
mainly due a reduction in stock compensation expense. These decreases were offset by a $99,000 increase in corporate insurance expenses
and a $57,000 increase in other general and administrative expenses.
Interest
and Investment Income
The
decrease in interest and investment income during the six months ended June 30, 2021 was due to lower interest rates in 2021 compared
to 2020, despite higher cash and marketable investment securities balances.
Interest
Expense
The
decrease in interest expense during the six months ended June 30, 2021 was due to a decrease in interest expense on our Loan and Security
Agreement with SVB, mainly as a result of lower principal balances 2021 compared to 2020.
Loss
(Gain) on Warrant Liability
We
recorded a gain of $26,000 and a loss of $3.2 million, respectively, on warrant liability during the six months ended June
30, 2021 and 2020 related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering.
The gain in 2021 was attributable to a decrease in the value of warrants outstanding as of June 30, 2021 as compared to December 31,
2020 due to a small decrease in the number of warrants outstanding, a decrease in our volatility and the shorter term remaining on
the outstanding warrants and the loss in 2020 was mainly due to an increase in the value of warrants outstanding as of June 30, 2020
as compared to December 31, 2019 due to an increase in our stock price. There were 10,000 and 10,127,000 common stock warrants from
the November 2019 Offering exercised during the six months ended June 30, 2021 and 2020, respectively. The warrants are classified
as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option to elect to
receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model
with certain defined assumptions upon a change of control. The warrant liability will continue to fluctuate in the future based on
inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility of our stock
price, the risk-free interest rate and the number of common stock warrants outstanding.
Litigation
Settlement
We
recorded an expense of $4.0 million and zero, respectively, on litigation settlement during the six months ended June 30, 2021 and 2020
related to the Global Agreement with Clarus to resolve all outstanding claims in the on-going intellectual property litigation between
the two companies as well as the on-going interference proceeding between the two companies. Under the terms of the settlement, we agreed
to pay Clarus $4.0 million payable as follows: $2.5 million immediately, $1.0 million on July 13, 2022 and $500,000 on July 13, 2023.
Liquidity
and Capital Resources
Since
our inception, our operations have been primarily financed through sales of our equity securities, debt and payments received under our
license and collaboration arrangements. We have devoted our resources to funding research and development programs, including discovery
research, preclinical and clinical development activities. We have incurred operating losses in most years since our inception and we
expect to continue to incur operating losses into the foreseeable future as we evaluate our options related to TLANDO should it receive
final approval and it’s not out-licensed and as we advance clinical development of LPCN 1144, TLANDO XR, LPCN 1148, LPCN 1154,
LPCN 1107 and any other product candidate, including continued research efforts.
As
of June 30, 2021, we had $46.6 million of unrestricted cash, cash equivalents and marketable investment securities compared to $19.7
million at December 31, 2020. Additionally, as of December 31, 2020 we had $5.0 million of restricted cash, which was required to be
maintained as cash collateral under the SVB Loan and Security Agreement until TLANDO is approved by the FDA. However on February 16,
2021, we amended the Loan and Security Agreement with SVB (as defined below) to, among other things, remove the cash collateral requirement.
On
January 28, 2021, we completed a public offering of securities registered under an effective registration statement filed pursuant to
the Securities Act of 1933, as amended (“January 2021 Offering”). The gross proceeds from the January 2021 Offering were
approximately $28.7 million, before deducting underwriter fees and other offering expenses of $1.9 million. In the January 2021 Offering,
we sold 16,428,571 shares of our common stock.
On
April 21, 2020, we entered into a loan (the “Loan”) from SVB in the aggregate amount of $234,000, pursuant to the Paycheck
Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which
was in the form of a note dated April 21, 2020, originally matured on April 21, 2022 and bears interest at a rate of 1.0% per annum,
payable monthly commencing on November 21, 2020. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are
used for qualifying expenses as described in the CARES Act. On November 2, 2020, we were notified by the Small Business Administration
that our PPP Loan had been forgiven.
On
February 27, 2020, we completed a registered direct offering of securities registered under an effective registration statement filed
pursuant to the Securities Act of 1933, as amended (“February 2020 Offering”). The gross proceeds from the February 2020
Offering were approximately $6.0 million, before deducting placement agent fees and other offering expenses of $347,000. In the February
2020 Offering, the Company sold 10,084,034 Class A Units, with each Class A Unit consisting of one share of common stock and a one-half
of one common warrant to purchase one share of common stock, at a price of $0.595 per Class A Unit. The common stock warrants were immediately
exercisable at an exercise price of $0.53 per share, subject to adjustment, and expire on February 27, 2025. By their terms, however,
the common stock warrants cannot be exercised at any time that the common stock warrant holder would beneficially own, after such exercise,
more than 4.99% (or, at 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, we completed the 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 common stock and a common warrant to purchase one share
of 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 common stock and one common warrant to purchase one share of 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
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 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), 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,
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 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.
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 June 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 June 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 June 30, 2022 which includes an on-going clinical study for LPCN 1144, future clinical studies for LPCN 1148 and LPCN
1154, compliance with regulatory requirements, satisfaction of our obligations under the settlement agreement with Clarus, and on-going
litigation activities. 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 pre-commercial and commercial activities
for TLANDO if not out-licensed and 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 June 30, 2022, we will
need to raise additional capital at some point through the equity or debt markets or through out-licensing activities, either before
or after June 30, 2022, to support our operations, including, if FDA approval is received, potential commercialization activities for
TLANDO. 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 when not restricted due to terms of
previous financings but may choose not to issue common stock if our market price is too low to justify such sales in our discretion.
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. 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 and pre-commercialization 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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further clinical development requirements or other
requirements of the FDA related to approval of TLANDO;
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the cost and timing of pre-commercialization and commercialization
activities in support of TLANDO;
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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;
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the cost of manufacturing clinical supplies, and establishing
commercial supplies, of our product candidates and any products that we may develop;
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the cost and timing of establishing sales, marketing
and distribution capabilities, if any;
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the terms and timing of any collaborative, licensing,
settlement and other arrangements that we may establish;
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the number and characteristics of product candidates
that we pursue;
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the cost, timing and outcomes of regulatory approvals;
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the timing, receipt and amount of sales, profit sharing
or royalties, if any, from our potential products;
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the cost of preparing, filing, prosecuting, defending
and enforcing any patent claims and other intellectual property rights;
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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
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the extent to which we grow significantly in the number
of employees or the scope of our operations.
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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 six months ended June 30, 2021 and 2020:
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Six Months Ended June 30,
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2021
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2020
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Cash used in operating activities
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$
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(6,425,056
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)
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$
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(7,455,510
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)
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Cash used in investing activities
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(35,426,211
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)
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(116,811
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)
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Cash provided by financing activities
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28,601,598
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11,681,616
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Net
Cash From Operating Activities
During
the six months ended June 30, 2021 and 2020, net cash used in operating activities was $6.4 million and $7.5 million, respectively.
Net
cash used in operating activities during the six months June 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 as well as preparing for future trials
with LPCN 1154 in 2021. During 2020, we also were performing activities around the submission of the TLANDO NDA.
Net
Cash From Investing Activities
During
the six months ended June 30, 2021 and 2020, net cash used in investing activities was $35.4 million and $117,000, respectively.
Net
cash used in investing activities during the six months ended June 30, 2021 and 2020, was primarily the result of purchasing marketable
investment securities, net, of $35.4 million and $117,000, respectively. There were no capital expenditures for the six months ended
June 30, 2021 and 2020.
Net
Cash From Financing Activities
During
the six months ended June 30, 2021 and 2020 net cash provided by financing activities was $28.6 million and $11.7 million, respectively.
Net
cash provided by financing activities during the six months ended June 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 $1.7 million in debt principal
repayments under the SVB Loan and Security Agreement.
Net
cash provided by financing activities during the six months ended June 30, 2020 was attributable to the net proceeds from the sale of
10,084,034 shares of common stock pursuant to February 2020 Offering resulting in net proceeds of $5.7 million, to $6.9 million in proceeds
from the exercise of warrants and to $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 are required to make equal monthly payments of principal and interest for
the remaining term of the loan beginning on November 1, 2020 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 six months ended June 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.
Off-Balance
Sheet Arrangements
None.