WASHINGTON, D.C. 20549 FORM 10-Q x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION For Quarterly Period ended June 30, 2020 ¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to . Commission File Number: 001-36357 LIPOCINE INC. (Exact name of registrant as specified in its charter) Delaware 99-0370688 (State or Other Jurisdiction of Incorporation or ...

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Lipocine Inc. reported a Q1 2020 net loss of $5.8 million, with total assets at $21.0 million and liabilities at $14.4 million [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $21.0 million as of March 31, 2020, driven by cash, while total liabilities rose to $14.4 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2020 (USD) | December 31, 2019 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $15,134,789 | $9,728,523 | | Total current assets | $20,965,448 | $19,630,973 | | Total assets | $20,991,956 | $19,658,280 | | Total current liabilities | $4,059,855 | $4,964,877 | | Warrant liability | $5,691,229 | $4,591,200 | | Total liabilities | $14,439,220 | $13,370,484 | | Total stockholders' equity | $6,552,736 | $6,287,796 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a net loss of $5.8 million for Q1 2020, up from $3.2 million in Q1 2019, driven by higher operating expenses and a $1.1 million unrealized warrant loss Condensed Consolidated Statements of Operations (Unaudited) | Metric | Three Months Ended March 31, 2020 (USD) | Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Research and development | $2,511,754 | $1,949,821 | | General and administrative | $2,085,261 | $1,175,927 | | Total operating expenses | $4,597,015 | $3,125,748 | | Operating loss | ($4,597,015) | ($3,125,748) | | Unrealized loss on warrant liability | ($1,100,029) | - | | Net loss | ($5,770,651) | ($3,224,472) | | Basic and Diluted loss per share | ($0.14) | ($0.14) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2020 saw $3.4 million cash used in operations, $3.9 million provided by investing, and $4.9 million from financing, resulting in a $5.4 million net cash increase Summary of Cash Flows (Unaudited) | Activity | Three Months Ended March 31, 2020 (USD) | Three Months Ended March 31, 2019 (USD) | | :--- | :--- | :--- | | Cash used in operating activities | ($3,376,262) | ($3,002,879) | | Cash provided by (used in) investing activities | $3,902,221 | ($2,082,438) | | Cash provided by financing activities | $4,880,307 | $5,229,881 | | Net increase in cash and cash equivalents | $5,406,266 | $144,564 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail capital sufficiency through February 2021, a **$10.0 million** SVB loan, a **$6.0 million** stock offering, and ongoing legal proceedings - The company believes its existing capital resources will be sufficient to meet operating requirements through at least February 15, 2021, but will need to raise additional capital. Failure to do so would create a risk to its ability to continue as a going concern[22](index=22&type=chunk) - The company has a **$10.0 million** Loan and Security Agreement with Silicon Valley Bank (SVB), with principal repayments deferred by six months under an April 1, 2020 agreement. The loan is secured by substantially all assets and requires **$5.0 million** of restricted cash collateral until TLANDO is approved by the FDA[36](index=36&type=chunk)[37](index=37&type=chunk) - In February 2020, the company completed a registered direct offering, raising gross proceeds of approximately **$6.0 million** by selling 10,084,034 Class A Units at **$0.595** per unit[49](index=49&type=chunk) - The company is engaged in ongoing litigation, including a patent infringement lawsuit against Clarus regarding its JATENZO® product, a shareholder derivative complaint, and a shareholder class action lawsuit. The company has not recorded a liability for these matters as the outcomes are not considered probable or estimable[74](index=74&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) - Subsequent to the quarter end, on April 21, 2020, the company was granted a Paycheck Protection Program (PPP) loan of **$233,537**[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Lipocine, a clinical-stage biopharmaceutical company, discusses its lead candidate TLANDO™ (PDUFA August 2020), LPCN 1144 for NASH in Phase 2, Q1 2020 net loss of $5.8 million, and liquidity [Overview of Our Business and Product Candidates](index=21&type=section&id=Overview%20of%20Our%20Business%20and%20Product%20Candidates) The company focuses on TLANDO™, an oral testosterone replacement therapy with an August 2020 PDUFA date, and LPCN 1144 for NASH in Phase 2 - The company's most advanced product candidate, TLANDO™, received a Complete Response Letter (CRL) from the FDA in November 2019 due to not meeting three secondary endpoints for maximal testosterone concentrations (Cmax)[91](index=91&type=chunk) - Following a Post Action meeting, the company resubmitted the TLANDO™ NDA on February 28, 2020, and has been assigned a PDUFA date of **August 28, 2020**[91](index=91&type=chunk) - LPCN 1144 is being tested in the LiFT Phase 2 clinical study for pre-cirrhotic NASH. Top-line liver fat reduction data is expected in **Q4 2020**, with 36-week biopsy data expected by **Q2 2021**, subject to potential COVID-19 delays[134](index=134&type=chunk) - The company plans to focus its 2020 efforts on TLANDO and LPCN 1144 and does not anticipate initiating Phase 3 studies for TLANDO XR or LPCN 1107 unless additional capital is secured or the candidates are out-licensed[137](index=137&type=chunk)[144](index=144&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q1 2020 R&D expenses rose by **$0.6 million** to **$2.5 million**, G&A by **$0.9 million** to **$2.1 million** (due to legal costs), and an **$1.1 million** unrealized warrant loss was recorded Comparison of Operating Results (Q1 2020 vs Q1 2019) | Expense Category | Q1 2020 (USD) | Q1 2019 (USD) | Variance (USD) | | :--- | :--- | :--- | :--- | | Research and development | $2,511,754 | $1,949,821 | $561,933 | | General and administrative | $2,085,261 | $1,175,927 | $909,334 | | Unrealized loss on warrant liability | $1,100,029 | - | $1,100,029 | - The increase in R&D expenses was primarily driven by **$1.7 million** in costs for the LPCN 1144 LiFT Phase 2 clinical study, offset by a **$1.2 million** decrease in costs for TLANDO following the completion of its ABPM study[158](index=158&type=chunk) - The increase in G&A expenses was mainly due to a **$1.0 million** rise in legal costs associated with the patent infringement lawsuit filed against Clarus[159](index=159&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2020, the company held **$15.6 million** in unrestricted cash and **$5.0 million** restricted, sufficient until February 2021, but additional capital is needed - The company believes its existing capital resources will be sufficient to meet projected operating requirements through at least **February 15, 2021**[172](index=172&type=chunk) - The company will need to raise additional capital to support operations, the ongoing LPCN 1144 clinical study, and litigation. If unsuccessful, its ability to continue as a going concern will be limited[172](index=172&type=chunk) - In February 2020, the company raised gross proceeds of approximately **$6.0 million** through a registered direct offering[165](index=165&type=chunk) - In April 2020, the company received a Paycheck Protection Program (PPP) loan of **$233,537**[164](index=164&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company faces interest rate risk from its investment portfolio and variable-rate SVB loan, with a 1% prime rate change impacting annual interest expense by **$73,000** to **$89,000** - The company's main market risk is interest rate risk affecting its investment portfolio and its variable-rate debt[190](index=190&type=chunk) - A one percent increase in the prime rate would increase annual interest expense on the SVB loan by **$73,000**, while a one percent decrease would reduce it by **$89,000**[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the reporting period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[194](index=194&type=chunk) - There were no material changes in internal control over financial reporting during the most recent fiscal quarter[196](index=196&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in three significant legal proceedings: a shareholder derivative complaint, a patent infringement lawsuit against Clarus, and a shareholder class action lawsuit - A shareholder derivative complaint was filed against certain current and former officers and directors regarding allegedly false and misleading statements about the TLANDO NDA filing. A motion to dismiss is pending[196](index=196&type=chunk) - The company filed a lawsuit against Clarus alleging its JATENZO® product infringes on six Lipocine patents. A five-day jury trial is scheduled to begin on **February 8, 2021**[197](index=197&type=chunk) - A shareholder class action lawsuit was filed against the company and certain officers, alleging misleading statements about deficiencies in the TLANDO NDA. The company has insurance for such claims with a **$1.25 million** retention[198](index=198&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) Key risk factors include COVID-19 impacts, substantial litigation costs, reliance on a sole manufacturer for TLANDO, warrant liability volatility, and restrictive loan covenants - The ongoing COVID-19 pandemic could disrupt clinical trials, reduce access to capital, and harm business operations and financial results[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) - The company may have to dedicate substantial resources to defend against ongoing shareholder lawsuits, which could divert managerial attention and financial resources from business operations[202](index=202&type=chunk) - The company relies on a sole contract manufacturer, M.W. Encap Ltd., for the supply of TLANDO capsules, and any disruption could significantly harm the business[212](index=212&type=chunk) - The fair value of the warrant liability from the November 2019 offering is subject to material fluctuations based on the company's stock price, which could impact reported financial results[215](index=215&type=chunk)[216](index=216&type=chunk) - The loan agreement with SVB contains restrictive covenants that could adversely impact the business, and failure to comply could result in the debt becoming immediately payable[220](index=220&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed under this item [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including warrant forms, securities agreements, CEO/CFO certifications, and XBRL data - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer, as well as documents related to a securities purchase agreement and XBRL data[236](index=236&type=chunk)

PART I [Business](index=4&type=section&id=Item%201.%20Business) Lipocine Inc. is a clinical-stage biopharmaceutical company developing oral drug delivery solutions for metabolic and endocrine disorders - The company focuses on developing pharmaceutical products for metabolic and endocrine disorders using its proprietary oral drug delivery technology[15](index=15&type=chunk) - The lead product candidate, TLANDO™ (oral TRT), had its NDA resubmitted on **February 28, 2020**, with a PDUFA date of **August 28, 2020**, following a CRL from the FDA[16](index=16&type=chunk) - The product pipeline includes LPCN 1144 (NASH), TLANDO XR (next-gen TRT), LPCN 1148 (NASH cirrhosis), and LPCN 1107 (preterm birth)[18](index=18&type=chunk) Research and Development Expenses | Year | Amount (in millions) | | :--- | :--- | | 2019 | $7.5 | | 2018 | $6.5 | [Product Candidates](index=6&type=section&id=Product%20Candidates) The company's portfolio, based on Lip'ral technology, features TLANDO™ as its lead candidate and other drugs for NASH and preterm birth in development - TLANDO™ (oral TU) is the most advanced product candidate, with NDA resubmitted on **February 28, 2020**, and a PDUFA date of **August 28, 2020**, following a CRL on **November 8, 2019**, citing secondary Cmax endpoint deficiency[29](index=29&type=chunk)[32](index=32&type=chunk) - LPCN 1144 for pre-cirrhotic NASH is in the LiFT Phase 2 clinical study, with prior Proof-Of-Concept showing substantial liver fat reductions[54](index=54&type=chunk)[61](index=61&type=chunk) - TLANDO XR (LPCN 1111), a potential once-daily oral TRT, completed Phase 2b testing, with further development contingent on additional capital or out-licensing[62](index=62&type=chunk)[66](index=66&type=chunk) - LPCN 1148 for NASH in cirrhotic patients plans an IND filing in **March 2020**, but a Phase 2 study depends on additional funding or licensing[67](index=67&type=chunk)[69](index=69&type=chunk) - LPCN 1107, an oral HPC for preventing preterm birth, received orphan drug designation, with a Phase 3 study planned but not initiated in **2020** without additional capital or a licensing agreement[70](index=70&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Competition](index=13&type=section&id=Competition) The company faces significant competition across its target markets, including established TRT therapies and emerging treatments for NASH and preterm birth - The TRT market is highly competitive, with dominant products including gels like AbbVie's AndroGel® and injectables; Clarus Therapeutics' oral TRT, JATENZO®, was approved in **March 2019** and launched in **February 2020**[76](index=76&type=chunk)[53](index=53&type=chunk) - The NASH market has no FDA-approved medications, but several companies, including Genfit, Gilead, and Allergan, have product candidates in Phase 3 or earlier development[84](index=84&type=chunk)[85](index=85&type=chunk) - The primary competitor for LPCN 1107 in preventing preterm birth is AMAG Pharmaceuticals' Makena®, an injectable HPC, whose approval future is uncertain following a negative advisory committee vote[87](index=87&type=chunk) [Manufacturing and Intellectual Property](index=15&type=section&id=Manufacturing%20and%20Intellectual%20Property) The company utilizes a third-party manufacturer for TLANDO and protects its product candidates with an extensive intellectual property portfolio - The company has a Commercial Manufacturing Services and Supply Agreement with M.W. Encap Ltd. (a subsidiary of Lonza) for TLANDO manufacture[89](index=89&type=chunk) - The patent portfolio for Oral TU (TLANDO) includes **11 issued U.S. patents** expiring between **2029-2030** and numerous pending applications[94](index=94&type=chunk) - The portfolio for TLANDO XR includes **2 issued U.S. patents** expiring in **2035**, and LPCN 1107 includes **6 U.S. patents** expiring in **2031**[94](index=94&type=chunk) [Government Regulation](index=17&type=section&id=Government%20Regulation) The company's drug development and commercialization are subject to extensive FDA regulations, encompassing preclinical studies, clinical trials, and post-market requirements - The FDA drug approval process requires extensive preclinical and clinical trials (Phase 1, 2, and 3) to demonstrate safety and efficacy before NDA submission and approval[101](index=101&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - FDA Orphan Drug Designation for rare diseases (fewer than **200,000 individuals** in the U.S.) provides incentives like **seven years of market exclusivity**; LPCN 1107 has this designation[113](index=113&type=chunk)[114](index=114&type=chunk)[74](index=74&type=chunk) - Sales of approved products depend on coverage and reimbursement from third-party payers, including government programs and private insurers, who increasingly focus on cost-effectiveness[120](index=120&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks, primarily concerning TLANDO's regulatory approval, market competition, capital requirements, and ongoing intellectual property litigation - Company success is highly dependent on TLANDO, which has received **three Complete Response Letters (CRLs)** from the FDA, creating significant uncertainty for approval and commercialization[134](index=134&type=chunk)[135](index=135&type=chunk) - The TRT market faces risks from potential FDA label restrictions and perceived health risks (e.g., cardiovascular events), which could shrink the market and harm TLANDO sales if approved[139](index=139&type=chunk)[142](index=142&type=chunk) - The company faces substantial competition, including from JATENZO®, an approved oral TRT, and generic T-gels, leading to downward pricing pressure[166](index=166&type=chunk)[173](index=173&type=chunk) - Substantial additional capital is required to continue operations and fund clinical trials; failure to secure funding could lead to program delays, reductions, or cessation[274](index=274&type=chunk) - Intellectual property litigation, including a lawsuit against Clarus Therapeutics for patent infringement related to JATENZO®, consumes capital and management resources[234](index=234&type=chunk)[293](index=293&type=chunk) - On **December 27, 2019**, the company received a NASDAQ notice for failing to maintain the minimum **$1.00 bid price**, risking delisting[262](index=262&type=chunk) [Unresolved Staff Comments](index=55&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the Securities and Exchange Commission - None[308](index=308&type=chunk) [Properties](index=55&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters in Salt Lake City, Utah, with the current facility deemed adequate for its operational needs - The company leases its corporate headquarters in Salt Lake City, Utah, with the lease expiring on **February 28, 2021**[309](index=309&type=chunk) [Legal Proceedings](index=55&type=section&id=Item%203.%20Legal%20Proceedings) The company is engaged in patent litigation with Clarus Therapeutics and is defending against shareholder lawsuits concerning TLANDO NDA disclosures - The company is appealing a PTAB judgment that canceled all claims on Clarus's '428 Patent, with oral arguments at the CAFC scheduled for **April 6, 2020**[310](index=310&type=chunk) - On **April 2, 2019**, Lipocine filed a lawsuit against Clarus alleging its JATENZO® product infringes six of Lipocine's patents, with a jury trial scheduled for **February 8, 2021**[312](index=312&type=chunk) - The company is defending a shareholder derivative complaint (**February 15, 2019**) and a shareholder class action lawsuit (**November 14, 2019**) alleging misleading statements about the TLANDO NDA[311](index=311&type=chunk)[313](index=313&type=chunk) [Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not Applicable[314](index=314&type=chunk) PART II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=56&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Lipocine's common stock trades on The NASDAQ Capital Market, with the company prioritizing retained earnings for future growth over cash dividends - The company's common stock is listed on The NASDAQ Capital Market under the ticker **LPCN**[317](index=317&type=chunk) - As of **March 12, 2020**, there were approximately **103 holders of record** of common stock[319](index=319&type=chunk) - The company plans no cash dividends, intending to retain future earnings for business development[326](index=326&type=chunk) [Selected Financial Data](index=57&type=section&id=Item%206.%20Selected%20Financial%20Data) The company's selected financial data for the past five years reflects consistent operating losses and a growing accumulated deficit Selected Financial Data | | 2019 (in millions) | 2018 (in millions) | 2017 (in millions) | 2016 (in millions) | 2015 (in millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Operating loss** | $(12.900) | $(11.326) | $(21.218) | $(19.187) | $(18.382) | | **Net loss** | $(13.007) | $(11.660) | $(20.983) | $(18.972) | $(18.208) | | **Net loss per share** | $(0.50) | $(0.55) | $(1.05) | $(1.04) | $(1.11) | | **Total assets** | $19.658 | $20.852 | $25.325 | $27.343 | $45.377 | | **Total liabilities** | $13.370 | $11.418 | $6.345 | $1.326 | $3.392 | | **Shareholders' equity** | $6.288 | $9.434 | $18.980 | $26.017 | $41.985 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=58&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, noting increased net loss in 2019 due to R&D and legal costs, and the need for additional capital beyond March 2021 - The company's primary focus in **2020** is on TLANDO regulatory approval and LPCN 1144 clinical development[386](index=386&type=chunk) Comparison of Results for Years Ended Dec 31 | Metric | 2019 (in millions) | 2018 (in millions) | | :--- | :--- | :--- | | **Net Loss** | $13.0 | $11.7 | | **R&D Expenses** | $7.5 | $6.5 | | **G&A Expenses** | $5.6 | $5.3 | - The increase in R&D expense in **2019** was mainly due to costs for the LPCN 1144 LiFT Phase 2 clinical study, offset by decreased TLANDO-related costs after NDA filing[405](index=405&type=chunk) - Existing capital resources are sufficient to fund operations through at least **March 31, 2021**, but additional capital will be required thereafter[420](index=420&type=chunk) - The company raised gross proceeds of approximately **$6.0 million** in a **November 2019** public offering and another **$6.0 million** in a **February 2020** registered direct offering[412](index=412&type=chunk)[413](index=413&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk from its investment portfolio and variable-rate debt, with a 1% prime rate increase impacting annual interest expense by $63,000 - The company's primary market risk is interest rate risk associated with its investment portfolio and variable-rate debt[446](index=446&type=chunk) - The investment portfolio is managed to preserve principal and maintain liquidity, and the impact of a **10% change** in interest rates is considered insignificant[447](index=447&type=chunk) - A **1% increase** in the prime rate would increase annual interest expense on the SVB loan by approximately **$63,000**[448](index=448&type=chunk) [Financial Statements and Supplementary Data](index=76&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2019 and 2018, including balance sheets, statements of operations, equity, and cash flows Key Balance Sheet Data (as of Dec 31, 2019) | Account | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $9.7 | | Restricted cash | $5.0 | | Marketable investment securities | $4.3 | | Total Assets | $19.7 | | Total Liabilities | $13.4 | | Total Stockholders' Equity | $6.3 | Key Operations Data (for year ended Dec 31, 2019) | Account | Amount (in millions) | | :--- | :--- | | Total Revenues | $0.165 | | R&D Expense | $7.5 | | G&A Expense | $5.6 | | Net Loss | $(13.0) | | Net Loss Per Share | $(0.50) | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=104&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[582](index=582&type=chunk) [Controls and Procedures](index=104&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019 - Management concluded that the company's disclosure controls and procedures were effective as of **December 31, 2019**[584](index=584&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of **December 31, 2019**, based on the COSO framework[586](index=586&type=chunk) [Other Information](index=104&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[588](index=588&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=105&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement[591](index=591&type=chunk) [Executive Compensation](index=105&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the company's 2019 definitive Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement[592](index=592&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=105&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and related stockholder matters are incorporated by reference from the company's 2019 definitive Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement[593](index=593&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=105&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement[594](index=594&type=chunk) [Principal Accountant Fees and Services](index=105&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the company's 2019 definitive Proxy Statement - Information is incorporated by reference from the definitive Proxy Statement[595](index=595&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=105&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section details the financial statements and exhibits filed as part of the Annual Report on Form 10-K - This section lists all financial statements and exhibits filed with the Form 10-K[597](index=597&type=chunk)[598](index=598&type=chunk) [10-K Summary](index=109&type=section&id=Item%2016.%2010-K%20Summary) The company reports no summary for this item - None[605](index=605&type=chunk)

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company reported a net loss and decreased assets for the period, with a significant regulatory setback for its lead drug candidate TLANDO Condensed Consolidated Balance Sheet (Unaudited) | | September 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total current assets** | $17,310,742 | $20,809,203 | | **Total assets** | $17,341,910 | $20,851,953 | | **Total current liabilities** | $5,234,733 | $4,491,748 | | **Total liabilities** | $9,836,570 | $11,418,280 | | **Total stockholders' equity** | $7,505,340 | $9,433,673 | Condensed Consolidated Statements of Operations (Unaudited) | | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | **Total revenues** | $164,990 | $0 | $164,990 | $428,031 | | **Operating loss** | $(2,975,688) | $(2,353,056) | $(9,451,538) | $(8,154,451) | | **Net loss** | $(3,060,200) | $(2,459,072) | $(9,715,269) | $(8,434,543) | | **Basic and Diluted loss per share** | $(0.12) | $(0.12) | $(0.40) | $(0.40) | Condensed Consolidated Statements of Cash Flows (Unaudited, Nine Months Ended) | | September 30, 2019 | September 30, 2018 | | :--- | :--- | :--- | | **Cash used in operating activities** | $(8,358,175) | $(9,845,998) | | **Cash provided by investing activities** | $2,440,822 | $6,347,294 | | **Cash provided by financing activities** | $4,504,322 | $10,090,761 | | **Net (decrease) increase in cash** | $(1,413,031) | $6,592,057 | - The company received a **Complete Response Letter (CRL)** from the FDA regarding its New Drug Application (NDA) for TLANDO on November 8, 2019[75](index=75&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company discusses the FDA's rejection of its lead candidate TLANDO, pipeline progress, and significant going concern risks due to limited capital [Overview of Our Business](index=23&type=section&id=Overview%20of%20Our%20Business) The company's lead candidate TLANDO received a CRL from the FDA due to efficacy endpoint failures, while its NASH candidate LPCN 1144 advances - On November 8, 2019, the company received a **Complete Response Letter (CRL)** from the FDA for its TLANDO New Drug Application (NDA)[79](index=79&type=chunk) - The CRL identified one deficiency: the efficacy trial **did not meet the three secondary endpoints** for maximal testosterone concentrations (Cmax)[80](index=80&type=chunk) - The company's pipeline includes LPCN 1144 for pre-cirrhotic NASH, TLANDO XR (next-gen TRT), LPCN 1148 for NASH cirrhosis, and LPCN 1107 for prevention of preterm birth[81](index=81&type=chunk) [Our Product Candidates](index=26&type=section&id=Our%20Product%20Candidates) The pipeline is led by TLANDO, which received a CRL, while LPCN 1144 for NASH shows progress and other candidates face funding-dependent delays - **TLANDO**: Received a CRL on November 8, 2019, because the efficacy trial did not meet three Cmax secondary endpoints[90](index=90&type=chunk) - **LPCN 1144 (NASH)**: Currently in the LiFT Phase 2 clinical study, with top-line liver fat reduction data expected in mid-2020 and 36-week biopsy data by late 2020 or early 2021[120](index=120&type=chunk) - **LPCN 1107 (Preterm Birth)**: The company does not anticipate initiating a Phase 3 study in 2019 unless additional capital is secured or the product is out-licensed[130](index=130&type=chunk)[131](index=131&type=chunk) - **LPCN 1148 (NASH Cirrhosis)**: The company expects to file an Investigational New Drug (IND) application by December 31, 2019[127](index=127&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Operating expenses increased year-over-year, driven by higher R&D costs for the LPCN 1144 study and increased G&A legal fees Comparison of Operations (Three Months Ended Sep 30) | | 2019 | 2018 | Variance | | :--- | :--- | :--- | :--- | | **License revenue** | $164,990 | $0 | $164,990 | | **Research and development expenses** | $1,713,417 | $1,422,919 | $290,498 | | **General and administrative expenses** | $1,427,261 | $930,137 | $497,124 | Comparison of Operations (Nine Months Ended Sep 30) | | 2019 | 2018 | Variance | | :--- | :--- | :--- | :--- | | **License revenue** | $164,990 | $428,031 | $(263,041) | | **Research and development expenses** | $5,626,883 | $4,282,823 | $1,344,060 | | **General and administrative expenses** | $3,989,645 | $4,299,659 | $(310,014) | - The increase in Q3 2019 R&D expenses was primarily due to costs related to the **LPCN 1144 LiFT Phase 2 clinical study**[147](index=147&type=chunk) - The increase in Q3 2019 G&A expenses was primarily due to a **$565,000 increase in legal fees**, mainly from the patent infringement lawsuit against Clarus[148](index=148&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Existing capital is only sufficient through March 2020, creating substantial doubt about its ability to continue as a going concern - The company believes its existing capital resources will be sufficient to meet projected operating requirements **only through at least March 31, 2020**[163](index=163&type=chunk) - The company will need to raise additional capital to support operations, and if unsuccessful, its ability to continue as a **going concern will become a risk**[163](index=163&type=chunk) - As of September 30, 2019, the company had sold 6,261,342 shares under its ATM Sales Agreement, resulting in **net proceeds of approximately $18.2 million** since program inception[162](index=162&type=chunk) - The company has a $10.0 million loan with Silicon Valley Bank, which requires maintaining **$5.0 million of restricted cash** as collateral until TLANDO is approved by the FDA[157](index=157&type=chunk)[158](index=158&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company is exposed to interest rate risk from its investment portfolio and variable-rate debt with Silicon Valley Bank - The company's investment portfolio is subject to interest rate risk, but a hypothetical 10% increase in rates is **not expected to have a significant impact** on the fair value of its marketable securities[181](index=181&type=chunk) - The company's **$10.0 million loan from SVB** bears interest at a variable rate, and a 1% increase in the prime rate would result in a $79,000 increase in future annual interest expense[182](index=182&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective as of September 30, 2019**[185](index=185&type=chunk) - **No material changes** in internal control over financial reporting occurred during the most recent fiscal quarter[186](index=186&type=chunk) [PART II—OTHER INFORMATION](index=47&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in multiple legal proceedings, including patent litigation with Clarus and a shareholder derivative lawsuit - On April 2, 2019, Lipocine filed a lawsuit against Clarus Therapeutics alleging that its JATENZO® product **infringes six of Lipocine's U.S. patents**[190](index=190&type=chunk) - A **shareholder derivative complaint** was filed on February 15, 2019, against certain officers and directors for alleged breaches of fiduciary duty[189](index=189&type=chunk) - Clarus has appealed a December 2018 PTAB ruling that was in favor of Lipocine, which had **canceled all claims in a Clarus patent**[188](index=188&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.Risk%20Factors) Key risks include the uncertain approval of TLANDO, significant going concern risk due to funding needs, ongoing litigation, and stock price volatility - The company's business depends primarily on the success of TLANDO, which recently received its **third Complete Response Letter (CRL)** from the FDA[192](index=192&type=chunk)[193](index=193&type=chunk) - The company will need substantial additional capital as existing resources are only projected to last through **March 31, 2020**, creating a going concern risk[203](index=203&type=chunk) - The company is engaged in **patent litigation with Clarus** and defending a shareholder derivative lawsuit, which will require substantial costs and resources[199](index=199&type=chunk)[202](index=202&type=chunk) - The company's common stock is **thinly traded**, with an average daily volume of approximately 147,000 shares in Q3 2019, which can lead to significant price volatility[207](index=207&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities were reported during the period - None reported[209](index=209&type=chunk) [Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including officer certifications and XBRL data files

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section provides the company's unaudited financial statements, management's analysis of financial condition and operations, market risk disclosures, and internal controls [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Lipocine Inc. as of June 30, 2019, including the balance sheet, statement of operations, statement of changes in stockholders' equity, and statement of cash flows Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2019 ($) | December 31, 2018 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $3,664,319 | $8,077,539 | | Total current assets | $19,641,755 | $20,809,203 | | Total assets | $19,676,783 | $20,851,953 | | **Liabilities & Equity** | | | | Total current liabilities | $4,442,820 | $4,491,748 | | Total liabilities | $9,826,577 | $11,418,280 | | Total stockholders' equity | $9,850,206 | $9,433,673 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | | Total revenues | $0 | $0 | | Research and development | $1,964,146 | $3,913,466 | | General and administrative | $1,386,457 | $2,562,385 | | Operating loss | ($3,350,603) | ($6,475,851) | | Net loss | ($3,430,597) | ($6,655,069) | | Basic and Diluted loss per share | ($0.14) | ($0.28) | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :--- | :--- | :--- | | Cash used in operating activities | ($5,560,807) | ($6,486,336) | | Cash used in investing activities | ($3,530,190) | ($122,334) | | Cash provided by financing activities | $4,677,777 | $10,000,000 | | Net (decrease) in cash | ($4,413,220) | $3,391,330 | - The company believes its existing capital resources are sufficient to meet operating requirements through at least March 31, 2020, but will need to raise additional capital to support long-term operations and commercialization of TLANDO, if approved[22](index=22&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Lipocine is a clinical-stage biopharmaceutical company focused on oral drug delivery for metabolic and endocrine disorders, with its lead candidate TLANDO having an FDA PDUFA goal date of November 9, 2019 [Overview of Our Business](index=21&type=section&id=Overview%20of%20Our%20Business) - Lipocine is a clinical-stage biopharmaceutical company developing oral drug products for metabolic and endocrine disorders using its proprietary delivery technologies[72](index=72&type=chunk) - The most advanced product candidate, TLANDO™, is an oral testosterone replacement therapy, with its New Drug Application (NDA) accepted by the FDA and a Prescription Drug User Fee Act (PDUFA) goal date of November 9, 2019[72](index=72&type=chunk) - The company has incurred losses in most years since inception, with an accumulated deficit of **$145 million** as of June 30, 2019, and a net loss of **$6.7 million** for the first six months of 2019[77](index=77&type=chunk) [Our Product Candidates](index=22&type=section&id=Our%20Product%20Candidates) - The FDA accepted the NDA for TLANDO with a PDUFA goal date of November 9, 2019, following a previous Complete Response Letter (CRL) in May 2018, which the company believes has been addressed through an ABPM clinical study and a definitive phlebotomy study[82](index=82&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) - LPCN 1144, an oral testosterone product for pre-cirrhotic non-alcoholic steatohepatitis (NASH), has completed a Proof-Of-Concept study showing significant liver fat reduction, and a Phase 2 paired-biopsy study (LiFT) has been initiated[74](index=74&type=chunk)[75](index=75&type=chunk)[115](index=115&type=chunk) - Other pipeline candidates include TLANDO XR (LPCN 1111) for once-daily TRT, LPCN 1148 for NASH cirrhosis, and LPCN 1107 for prevention of preterm birth, with development of LPCN 1107 paused pending additional capital or out-licensing[74](index=74&type=chunk)[79](index=79&type=chunk)[127](index=127&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Comparison of Operating Results (Three Months Ended June 30) | Expense Category | 2019 ($) | 2018 ($) | Variance ($) | | :--- | :--- | :--- | :--- | | Research and development | $1,964,146 | $1,482,378 | $481,768 | | General and administrative | $1,386,457 | $1,682,031 | ($295,574) | - R&D expenses increased in Q2 2019 primarily due to costs for the LPCN 1144 Phase 2 study and activities related to the TLANDO NDA filing[144](index=144&type=chunk) - G&A expenses decreased in Q2 2019 mainly due to lower personnel costs following the elimination of the commercial sales and marketing team in 2018[145](index=145&type=chunk) Comparison of Operating Results (Six Months Ended June 30) | Category | 2019 ($) | 2018 ($) | Variance ($) | | :--- | :--- | :--- | :--- | | License revenue | $0 | $428,031 | ($428,031) | | Research and development | $3,913,466 | $2,859,905 | $1,053,561 | | General and administrative | $2,562,385 | $3,369,522 | ($807,137) | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2019, the company had **$14.5 million** in unrestricted cash, cash equivalents, and marketable securities, plus **$5.0 million** in restricted cash[153](index=153&type=chunk) - The company believes existing capital is sufficient to fund operations through at least March 31, 2020, but will require additional capital for long-term development and commercialization[159](index=159&type=chunk) - During the first six months of 2019, the company raised net proceeds of **$6.3 million** from its "at the market" (ATM) offering and made **$1.7 million** in debt principal repayments[168](index=168&type=chunk) - The company has a **$10.0 million** loan with Silicon Valley Bank (SVB), which requires maintaining **$5.0 million** in restricted cash as collateral until TLANDO is approved by the FDA[154](index=154&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company's primary market risk exposure is to interest rate fluctuations, affecting its investment portfolio and variable-rate debt, with a hypothetical 10% interest rate increase having an insignificant impact on marketable securities - The company's main market risk is interest rate risk on its investment portfolio and variable-rate debt[176](index=176&type=chunk) - The investment portfolio consists of high-quality, liquid, investment-grade securities, with a hypothetical **10% increase** in interest rates deemed to have an insignificant impact on the portfolio's fair value[177](index=177&type=chunk) - The company has a **$10.0 million** variable-rate loan with SVB, where a **one percent change** in the prime rate would result in a change of approximately **$96,000 to $119,000** in future interest expense[178](index=178&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2019, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[181](index=181&type=chunk) - There were no changes in internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[182](index=182&type=chunk) [PART II—OTHER INFORMATION](index=44&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section details legal proceedings, updated risk factors, and other required disclosures including equity sales, defaults, and exhibits [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in several legal matters, including an appeal by Clarus Therapeutics regarding a PTAB judgment, a shareholder derivative complaint, and a patent infringement lawsuit filed by Lipocine against Clarus - Clarus Therapeutics has appealed a December 2018 PTAB ruling that canceled all claims in its '428 patent after an interference proceeding where Lipocine was granted priority of invention[184](index=184&type=chunk) - A shareholder derivative complaint was filed in February 2019 against certain current and former officers and directors, alleging breaches of fiduciary duty related to statements about the TLANDO NDA filing[185](index=185&type=chunk) - In April 2019, Lipocine filed a patent infringement lawsuit against Clarus, alleging that its JATENZO® product infringes six of Lipocine's U.S. patents[186](index=186&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section highlights updated risks, emphasizing the company's primary dependence on the success of its lead product candidate, TLANDO, and the need for substantial additional capital - The company's success is primarily dependent on TLANDO, which has received two Complete Response Letters (CRLs) from the FDA, and despite an NDA resubmission with a PDUFA date of November 9, 2019, there is no guarantee of approval[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - The company faces risks from ongoing litigation, including a shareholder derivative suit and patent disputes, which could require substantial costs and divert management attention[197](index=197&type=chunk)[199](index=199&type=chunk) - Substantial additional capital is needed to fund operations beyond March 31, 2020, and failure to secure financing could force the company to delay, reduce, or cease operations[204](index=204&type=chunk) - The company's common stock is thinly traded, which can lead to significant price volatility and may make it difficult for stockholders to sell shares[202](index=202&type=chunk)[203](index=203&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None[209](index=209&type=chunk) [Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[210](index=210&type=chunk) [Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[211](index=211&type=chunk) [Other Information](index=50&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None[212](index=212&type=chunk) [Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - The exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL interactive data files[215](index=215&type=chunk)

[PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) For the three months ended March 31, 2019, Lipocine Inc. reported a **net loss of $3.2 million**, compared to a **net loss of $2.7 million** for the same period in 2018, ending the quarter with **$13.2 million** in cash, cash equivalents, and restricted cash, an increase primarily driven by proceeds from an ATM stock offering and a debt agreement, with total assets at **$23.0 million** Condensed Consolidated Balance Sheets Balance Sheet Summary (as of March 31, 2019) | Account | March 31, 2019 (USD) | December 31, 2018 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $8,222,103 | $8,077,539 | | Restricted cash | $5,000,000 | $5,000,000 | | Marketable investment securities | $9,300,338 | $7,173,037 | | **Total Assets** | **$22,989,108** | **$20,851,953** | | **Liabilities & Equity** | | | | Total liabilities | $10,437,414 | $11,418,280 | | Total stockholders' equity | $12,551,694 | $9,433,673 | | **Total Liabilities & Equity** | **$22,989,108** | **$20,851,953** | Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary (Three Months Ended March 31) | Account | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | License revenue | $0 | $428,031 | | Research and development | $1,949,321 | $1,377,527 | | General and administrative | $1,175,927 | $1,687,490 | | **Operating loss** | **($3,125,248)** | **($2,636,986)** | | **Net loss** | **($3,224,472)** | **($2,719,971)** | | **Basic and Diluted loss per share** | **($0.14)** | **($0.13)** | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Three Months Ended March 31) | Activity | 2019 (USD) | 2018 (USD) | | :--- | :--- | :--- | | Cash used in operating activities | ($3,002,879) | ($3,746,211) | | Cash used in investing activities | ($2,082,438) | ($903,225) | | Cash provided by financing activities | $5,229,881 | $10,000,000 | | **Net increase in cash** | **$144,564** | **$5,350,564** | Notes to Condensed Consolidated Financial Statements - The company entered into a **$10.0 million** Loan and Security Agreement with Silicon Valley Bank in January 2018, bearing interest at Prime + **1%**. As of March 31, 2019, the company is required to maintain **$5.0 million** of restricted cash as collateral until TLANDO is approved by the FDA[34](index=34&type=chunk)[35](index=35&type=chunk) - During Q1 2019, the company sold **2,843,467 shares** of common stock through its "at the market" (ATM) offering agreement with Cantor Fitzgerald & Co., generating aggregate gross proceeds of **$6.2 million** and net proceeds of **$6.1 million**[46](index=46&type=chunk)[48](index=48&type=chunk) - A shareholder derivative complaint was filed against certain current and former officers and directors on February 15, 2019, alleging breaches of fiduciary duty related to statements about the TLANDO New Drug Application (NDA) The company intends to defend itself vigorously[63](index=63&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion focuses on addressing the FDA's Complete Response Letter for TLANDO, with plans to resubmit the NDA in May 2019, highlighting progress in its pipeline, particularly with LPCN 1144 for NASH, noting R&D expenses increased to **$1.9 million** in Q1 2019 from **$1.4 million** in Q1 2018 due to the TLANDO ABPM study, while G&A expenses decreased, and the company raised **$6.1 million** net proceeds from its ATM offering, believing existing capital is sufficient through at least March 31, 2020 Overview of Our Business - Lipocine is a pharmaceutical company focused on developing products for metabolic and endocrine disorders using its proprietary oral drug delivery technology[74](index=74&type=chunk) - The most advanced product candidate is TLANDO™, an oral testosterone replacement therapy (TRT) The company received a Complete Response Letter (CRL) from the FDA in May 2018, identifying four deficiencies that need to be addressed before potential approval[74](index=74&type=chunk) - The company has incurred losses in most years, with an accumulated deficit of **$141.3 million** as of March 31, 2019 The net loss for Q1 2019 was **$3.2 million**[78](index=78&type=chunk) Our Product Candidates - **TLANDO:** Following a second CRL, the company completed an Ambulatory Blood Pressure Monitoring (ABPM) study and a definitive phlebotomy study to address FDA deficiencies An NDA resubmission was expected in May 2019[87](index=87&type=chunk) - **LPCN 1144 (NASH):** A Proof-of-Concept liver imaging study showed substantial liver fat reductions in hypogonadal males at risk for NASH The company received IND clearance and is initiating a Phase 2 clinical study[113](index=113&type=chunk)[114](index=114&type=chunk) - **TLANDO XR (LPCN 1111):** A next-generation, once-daily oral TRT candidate that has completed Phase 2 testing Further pre-clinical or clinical trials may be required before initiating a Phase 3 study[75](index=75&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) - **LPCN 1107 (Preterm Birth):** An oral candidate for preventing preterm birth While an End-of-Phase 2 meeting with the FDA is complete, initiation of a Phase 3 study is not anticipated in 2019 due to capital constraints, unless the product is out-licensed[124](index=124&type=chunk) Results of Operations Comparison of Operations (Three Months Ended March 31) | Account | 2019 (USD) | 2018 (USD) | Variance (USD) | | :--- | :--- | :--- | :--- | | License revenue | $0 | $428,031 | ($428,031) | | Research and development expenses | $1,949,321 | $1,377,527 | $571,794 | | General and administrative expenses | $1,175,927 | $1,687,490 | ($511,563) | - R&D expenses increased primarily due to costs for the TLANDO ABPM study[140](index=140&type=chunk) - G&A expenses decreased mainly due to lower personnel costs, including a reduction in the commercial sales and marketing team compared to 2018[141](index=141&type=chunk) Liquidity and Capital Resources - As of March 31, 2019, the company had **$17.5 million** in unrestricted cash, cash equivalents, and marketable securities, plus **$5.0 million** in restricted cash[144](index=144&type=chunk) - In Q1 2019, the company raised net proceeds of approximately **$6.1 million** from its ATM offering and made **$833,000** in debt principal repayments[160](index=160&type=chunk) - Management believes existing capital resources are sufficient to meet projected operating requirements through at least March 31, 2020, but additional capital will be needed to support long-term development and potential commercialization[150](index=150&type=chunk) [Quantitative and Qualitative Disclosures About Market Risks](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) The company's primary market risk exposure is to interest rate fluctuations, affecting interest income from its investment portfolio of high-quality, investment-grade securities and interest expense on its variable-rate **$10.0 million** loan from SVB, without using derivative financial instruments for speculative purposes - The company's investment portfolio is subject to interest rate risk, but a hypothetical **10%** increase in rates is expected to have an insignificant impact on the fair value of its marketable securities[169](index=169&type=chunk) - The **$10.0 million** Loan and Security Agreement with SVB has a variable interest rate A **1%** increase in the prime rate would result in a **$115,000** increase in future annual interest expense[170](index=170&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of March 31, 2019, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2019[172](index=172&type=chunk) - No material changes to the company's internal control over financial reporting were identified during the most recent fiscal quarter[173](index=173&type=chunk) [PART II—OTHER INFORMATION](index=40&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is engaged in multiple legal matters, including ongoing patent litigation with Clarus Therapeutics, where Clarus is appealing a PTAB judgment that favored Lipocine, a separate lawsuit filed by Lipocine alleging Clarus's **JATENZO®** product infringes on six of its patents, and a shareholder derivative complaint filed against the company's management in February 2019 - On February 19, 2019, Clarus appealed a Patent Trial and Appeal Board (PTAB) judgment that granted Lipocine priority and canceled claims in a Clarus patent[175](index=175&type=chunk) - On April 3, 2019, Lipocine filed a lawsuit against Clarus, alleging that its product **JATENZO®** infringes on six of Lipocine's U.S. patents[177](index=177&type=chunk) - A shareholder derivative complaint was filed on February 15, 2019, against certain officers and directors, alleging breaches of fiduciary duty related to statements made about the TLANDO NDA filing[176](index=176&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company's primary risk is its dependence on the successful regulatory approval and commercialization of its lead product, TLANDO, which has received two Complete Response Letters from the FDA, facing significant competition in the testosterone replacement therapy market, including from the recently approved oral product **Jatenzo®**, with its NASH candidate LPCN 1144 in early development, and a history of significant operating losses necessitating future capital raises - The company's business depends primarily on the success of TLANDO, which has received two CRLs from the FDA and may not receive regulatory approval The NDA resubmission was expected in May 2019[179](index=179&type=chunk)[183](index=183&type=chunk) - The company faces substantial competition in the TRT market from established products and newly approved oral therapies like **Jatenzo®**, marketed by Clarus Therapeutics[191](index=191&type=chunk)[193](index=193&type=chunk) - LPCN 1144 for NASH is in a very early stage of development, and positive results from a small Proof-of-Concept study may not be indicative of success in larger, more rigorous clinical trials[197](index=197&type=chunk) - The company has a history of significant operating losses, with an accumulated deficit of **$141.3 million** as of March 31, 2019, and anticipates continued losses, which will require raising additional capital in the future[203](index=203&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None [Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - None [Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable, the company reported no mine safety disclosures - None [Other Information](index=46&type=section&id=Item%205.%20Other%20Information) The company reported no other information required to be disclosed in a report on Form 8-K during the fourth quarter that was not previously reported - None [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) The report lists the exhibits filed, which include certifications by the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as XBRL interactive data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906[209](index=209&type=chunk) - XBRL Instance Document and related taxonomy files were also submitted as part of the filing[209](index=209&type=chunk)

Part I [Business Overview](index=4&type=section&id=Item%201.%20Business) The company develops drug products for men's and women's health using its proprietary oral drug delivery technology - The company focuses on developing drug products in men's and women's health using its oral drug delivery technology to improve patient compliance and safety through oral therapies[16](index=16&type=chunk) - The lead product candidate, TLANDO™, an oral testosterone replacement therapy (TRT), received a Complete Response Letter (CRL) from the FDA on May 8, 2018, identifying four deficiencies[16](index=16&type=chunk)[17](index=17&type=chunk) - The company is conducting an Ambulatory Blood Pressure Monitoring (ABPM) clinical study and has completed a definitive phlebotomy study to address the FDA's CRL, with an NDA resubmission for TLANDO planned for mid-2019[17](index=17&type=chunk)[34](index=34&type=chunk) - Other pipeline candidates include LPCN 1144 for non-alcoholic steatohepatitis (NASH), LPCN 1111 (next-generation oral TRT), and LPCN 1107 for preventing recurrent preterm birth[18](index=18&type=chunk)[29](index=29&type=chunk) [General Business Overview](index=4&type=section&id=General%20Business%20Overview) Lipocine Inc is a specialty pharmaceutical company developing products for men's and women's health using its proprietary oral drug delivery technology - The company focuses on developing drug products in men's and women's health using its oral drug delivery technology to improve patient compliance and safety[16](index=16&type=chunk) - TLANDO™ received a Complete Response Letter (CRL) from the FDA on May 8, 2018, identifying four deficiencies, including in-vitro conversion of testosterone undecanoate (TU) to testosterone (T), blood pressure increase risks, Cmax data reliability, and discontinuation criteria[17](index=17&type=chunk) - The company is conducting an Ambulatory Blood Pressure Monitoring (ABPM) clinical study and has completed a definitive phlebotomy study, with results expected in Q1 2019 and plans to resubmit the TLANDO NDA in mid-2019[17](index=17&type=chunk) - Other pipeline candidates include LPCN 1144 (for NASH), LPCN 1111 (next-generation oral TRT), and LPCN 1107 (for prevention of preterm birth)[18](index=18&type=chunk) [Industry Background](index=5&type=section&id=Industry%20Background) The testosterone replacement therapy market is growing, driven by increased awareness of hypogonadism and its associated health risks - Testosterone is the primary circulating male hormone, crucial for reproductive tissue development and secondary male characteristics like muscle growth and bone density[20](index=20&type=chunk) - Low serum testosterone can lead to erectile dysfunction, decreased libido, reduced muscle mass, increased body fat, and is an independent predictor of cardiovascular risk factors[21](index=21&type=chunk) - The U.S. Testosterone Replacement Therapy (TRT) market, after contracting from its 2013 peak, has resumed growth, reaching **$1.7 billion** with approximately **7.2 million prescriptions** in 2018[21](index=21&type=chunk)[28](index=28&type=chunk) - The current U.S. TRT market is dominated by injections in prescription volume and topical gels in sales revenue[27](index=27&type=chunk)[28](index=28&type=chunk) [Testosterone Background](index=5&type=section&id=Testosterone%20Background) Testosterone is the primary male hormone essential for reproductive development and secondary male characteristics - Testosterone is the primary circulating male hormone, crucial for reproductive tissue development and secondary male characteristics such as muscle growth and bone density[20](index=20&type=chunk) - Testosterone circulates in the body in either bound (approximately 60% to SHBG, 40% loosely to albumin) or free (approximately 1%) forms[20](index=20&type=chunk) - Circulating testosterone concentrations vary significantly over time and between individuals, influenced by genetics, medical conditions, lifestyle, and medications[20](index=20&type=chunk) [Hypogonadism Overview](index=5&type=section&id=Hypogonadism%20Overview) Hypogonadism, a permanent deficiency of sex hormones, leads to various clinical effects and is a predictor of cardiovascular risk - Low serum testosterone can lead to erectile dysfunction, decreased libido, reduced muscle mass and strength, increased body fat, lower bone density, decreased vitality, and depressed mood[21](index=21&type=chunk) - Low serum testosterone concentration is an independent predictor of cardiovascular risk factors such as obesity, dyslipidemia, hypertension, type 2 diabetes, and systemic inflammation[21](index=21&type=chunk) - Hypogonadism, a permanent deficiency of sex hormones, is classified as primary (affecting the gonads) or secondary (affecting the hypothalamus and pituitary)[22](index=22&type=chunk) [Diagnosis and Treatment of Hypogonadism](index=5&type=section&id=Diagnosis%20and%20Treatment%20of%20Hypogonadism) Diagnosing hypogonadism requires both biochemical tests and clinical symptom assessment, with testosterone replacement therapy being the primary treatment - Diagnosing male hypogonadism requires at least two morning serum testosterone level tests combined with a clinical assessment of the patient's symptoms[23](index=23&type=chunk) - Testosterone replacement therapy (TRT) is the treatment for male hypogonadism, with benefits including improved sexual function, bone density, muscle development, cognition, and reduced associated risk factors[24](index=24&type=chunk) [Testosterone Replacement Market](index=6&type=section&id=Testosterone%20Replacement%20Market) The U.S. testosterone replacement market reached $1.7 billion in 2018, with injections leading in prescriptions and topical gels leading in sales - In 2018, the U.S. male testosterone market size was **$1.7 billion**, with approximately **7.2 million** testosterone replacement prescriptions[28](index=28&type=chunk) - Injections are the most prescribed dosage form in the market, while topical gels account for the majority of sales revenue[28](index=28&type=chunk) - Oral therapies have historically not been widely adopted due to low bioavailability and significant side effects such as liver toxicity[26](index=26&type=chunk) - Market growth is primarily driven by increased awareness among patients and physicians of hypogonadism and its broad medical consequences[28](index=28&type=chunk) [Product Candidates](index=6&type=section&id=Product%20Candidates) The company's pipeline features TLANDO for TRT, LPCN 1144 for NASH, LPCN 1111 for next-gen TRT, and LPCN 1107 for preterm birth prevention - The company's current pipeline includes its most advanced product, TLANDO for oral testosterone replacement therapy, along with LPCN 1144 (for NASH), LPCN 1111 (next-generation oral TRT), and LPCN 1107 (for prevention of preterm birth)[29](index=29&type=chunk) - All products are based on the company's proprietary Lip'ral drug delivery technology platform, which aims to improve the absorption of poorly soluble drugs[30](index=30&type=chunk) [TLANDO: An Oral Product Candidate for Testosterone Replacement Therapy](index=7&type=section&id=TLANDO%3A%20An%20Oral%20Product%20Candidate%20for%20Testosterone%20Replacement%20Therapy) TLANDO is an oral testosterone undecanoate formulation currently addressing FDA deficiencies for its New Drug Application - TLANDO is an oral formulation of testosterone undecanoate (TU) that utilizes the company's proprietary technology to facilitate stable gastrointestinal solubilization and absorption[31](index=31&type=chunk) - TLANDO received a Complete Response Letter (CRL) from the FDA on May 8, 2018, which identified four deficiencies, including in-vitro conversion of TU to T, blood pressure increase risks, Cmax data reliability, and discontinuation criteria[33](index=33&type=chunk) - The company has completed a definitive phlebotomy study showing no significant in-vitro TU to T conversion under recommended conditions and is conducting an ABPM clinical study, with plans to resubmit the NDA in mid-2019[34](index=34&type=chunk)[37](index=37&type=chunk) [NDA Resubmission Status](index=7&type=section&id=NDA%20Resubmission%20Status) TLANDO's NDA is being prepared for resubmission in mid-2019 after addressing deficiencies from two prior FDA Complete Response Letters - TLANDO's NDA first received a CRL from the FDA on June 28, 2016, requesting information related to the dosing algorithm[32](index=32&type=chunk) - The company resubmitted the NDA in August 2017 but received a second CRL on May 8, 2018, citing four new deficiencies: in-vitro TU to T conversion, blood pressure increase risk, Cmax data reliability, and discontinuation criteria[33](index=33&type=chunk) - The company has completed a definitive phlebotomy study and is conducting an ABPM clinical study to address the CRL deficiencies, with plans to resubmit the NDA in mid-2019[34](index=34&type=chunk) [Definitive Phlebotomy Study Results](index=8&type=section&id=Definitive%20Phlebotomy%20Study%20Results) The definitive phlebotomy study confirmed no significant in-vitro conversion of testosterone undecanoate to testosterone under recommended conditions - The definitive phlebotomy study was designed to confirm the reliability of TLANDO's Phase 3 study results and assess the impact of sample collection/processing time deviations[35](index=35&type=chunk) - Study results showed a **mean difference of -1.0%** in testosterone concentration between serum samples processed within 30 minutes and immediately processed plasma samples, which was not statistically significant (p = 0.91)[37](index=37&type=chunk) - This indicates **no significant in-vitro conversion** of TU to T in testosterone measurements under the recommended conditions[37](index=37&type=chunk) [DV and DF Studies Results](index=8&type=section&id=DV%20and%20DF%20Studies%20Results) The DV and DF studies demonstrated the efficacy of TLANDO's fixed-dose regimen, meeting FDA primary efficacy guidelines - The DV study confirmed the efficacy of TLANDO's fixed-dose regimen, with **80% of subjects** achieving an average testosterone level (Cavg) within the normal range (300-1080 ng/dL), meeting the FDA's primary efficacy guideline[39](index=39&type=chunk)[40](index=40&type=chunk) - The DF study restored Cavg to the normal range in **70% of subjects**, confirming that twice-daily (BID) dosing is an appropriate regimen for TLANDO[39](index=39&type=chunk) - The adverse event (AE) profile for TLANDO in the DV and DF studies was consistent with the prior SOAR clinical trial, with all drug-related AEs being mild or moderate and no serious events reported[41](index=41&type=chunk) - In the DV study's Cmax analysis, **85% of subjects** had a Cmax below 1500 ng/dL, while the DF study's Cmax analysis met all thresholds[43](index=43&type=chunk)[44](index=44&type=chunk) [SOAR Study Results](index=9&type=section&id=SOAR%20Study%20Results) The SOAR Phase 3 study showed TLANDO was well-tolerated with no major adverse events and an AE profile comparable to the active control - SOAR was a randomized, open-label, parallel-group, active-controlled Phase 3 clinical study of TLANDO, assessing its efficacy and 52-week safety in hypogonadal men[45](index=45&type=chunk) - TLANDO treatment was **well-tolerated**, with no hepatic, cardiac, or drug-related serious adverse events (SAEs)[47](index=47&type=chunk) - TLANDO's overall adverse event (AE) profile was comparable to the active control group, AndroGel 1.62%, with a consistent cardiac AE profile and no serious cardiac AEs[48](index=48&type=chunk) [Food Effect Study](index=9&type=section&id=Food%20Effect%20Study) The food effect study demonstrated that TLANDO's bioavailability is not affected by the fat content of meals - TLANDO's label "food effect" study results indicated that the bioavailability of testosterone is **not affected by changes in meal fat content**[48](index=48&type=chunk) - Testosterone levels were comparable between standard-fat, low-fat, and high-fat meals[48](index=48&type=chunk) [Other Safety Requirements](index=9&type=section&id=Other%20Safety%20Requirements) The company does not anticipate needing pre-approval cardiovascular risk studies for TLANDO but may be required to conduct them post-approval - The company does not expect to be required to conduct a heart attack and stroke risk study prior to the potential approval of TLANDO[49](index=49&type=chunk) - The company may be required to conduct a heart attack and stroke risk study post-approval, either on its own or as part of a consortium of sponsors with approved TRT products[49](index=49&type=chunk) [LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH](index=9&type=section&id=LPCN%201144%3A%20An%20Oral%20Prodrug%20of%20Bioidentical%20Testosterone%20Product%20Candidate%20for%20the%20Treatment%20of%20NASH) LPCN 1144 is an oral testosterone prodrug being developed for NASH, with promising initial results in reducing liver fat - LPCN 1144 is an oral prodrug of bioidentical testosterone being evaluated for the treatment of non-alcoholic steatohepatitis (NASH)[50](index=50&type=chunk) - NASH is an advanced stage of NAFLD that can progress to cirrhosis and liver cancer and is closely associated with obesity and metabolic syndrome[50](index=50&type=chunk) - Interim results from a proof-of-concept (POC) liver imaging study showed that LPCN 1144 led to a **7.6% absolute mean reduction** and a **38% relative mean reduction** in liver fat in subjects with ≥10% baseline liver fat content[55](index=55&type=chunk) - The FDA has cleared the IND application for LPCN 1144, enabling the initiation of a Phase 2 clinical study in biopsy-confirmed NASH patients with F2/F3 fibrosis[56](index=56&type=chunk) [History of Liver Disease](index=10&type=section&id=History%20of%20Liver%20Disease) The liver is a vital organ for metabolism, and liver disease progression involves inflammation and fibrosis, potentially leading to cirrhosis - The liver, the body's largest internal organ, is essential for critical metabolic functions including lipid and glucose metabolism regulation, protein production, and blood purification[51](index=51&type=chunk) - Liver disease can be caused by various factors, including Hepatitis C (HCV), Hepatitis B (HBV), obesity, chronic excessive alcohol consumption, or autoimmune diseases[51](index=51&type=chunk) - The progression of liver disease typically involves increased inflammatory activity and excessive hepatocyte apoptosis, which can lead to fibrosis and, if advanced, cirrhosis and impaired liver function[51](index=51&type=chunk) [Markers of Liver Cell Death](index=10&type=section&id=Markers%20of%20Liver%20Cell%20Death) Elevated levels of liver enzymes ALT and AST in the blood serve as key biochemical markers for liver cell damage and inflammation - Alanine aminotransferase (ALT) and aspartate aminotransferase (AST) are enzymes produced by liver cells, and their elevated blood levels are markers of hepatocyte injury and inflammation[52](index=52&type=chunk) - ALT levels are a clinically important biochemical marker of liver inflammation and the severity of ongoing liver disease[52](index=52&type=chunk) [Relationship between Hypogonadism and NAFLD](index=10&type=section&id=Relationship%20between%20Hypogonadism%20and%20NAFLD) Clinical evidence suggests a strong link between low testosterone levels and the severity of NAFLD/NASH, with testosterone therapy showing potential benefits - Clinical studies show that testosterone deficiency is prevalent in patients with NAFLD/NASH, and low testosterone levels are negatively correlated with the severity of NAFLD/NASH symptoms[53](index=53&type=chunk) - Post-hoc analyses of existing clinical trials indicate that testosterone therapy can significantly and consistently reduce key serum biomarkers associated with NAFLD/NASH, such as liver enzymes and serum triglycerides[54](index=54&type=chunk) [Current Status](index=10&type=section&id=Current%20Status) LPCN 1144 has shown positive interim results in a POC study and has received FDA clearance to begin a Phase 2 clinical trial for NASH - LPCN 1144 is undergoing a proof-of-concept (POC) study to assess its effect on liver fat changes in hypogonadal men at risk for NASH, with results expected in Q1 2019[55](index=55&type=chunk) - Interim results from the POC liver imaging study showed a **7.6% absolute mean reduction** and a **38% relative mean reduction** in liver fat in subjects with ≥10% baseline liver fat content[55](index=55&type=chunk) - The FDA has cleared the IND application for LPCN 1144, enabling a 36-week Phase 2 clinical study in hypogonadal men with biopsy-confirmed NASH and F2/F3 fibrosis[56](index=56&type=chunk) [LPCN 1111: A Next-Generation Oral Product Candidate for TRT](index=11&type=section&id=LPCN%201111%3A%20A%20Next-Generation%20Oral%20Product%20Candidate%20for%20TRT) LPCN 1111 is a next-generation oral TRT candidate whose Phase 3 study is delayed pending additional funding and regulatory requirements - LPCN 1111 is a next-generation oral testosterone ester prodrug utilizing Lip'ral technology to enhance solubility and improve systemic absorption[57](index=57&type=chunk) - Completed Phase 2b dose-finding and Phase 2a proof-of-concept studies both demonstrated a good dose-response relationship and tolerability, with no drug-related serious adverse events[57](index=57&type=chunk)[58](index=58&type=chunk) - The FDA has requested additional preclinical or clinical trials, including an ABPM study, leading the company to prioritize TLANDO and LPCN 1144 in 2019[60](index=60&type=chunk) - The Phase 3 study for LPCN 1111 is **not expected to commence in 2019** unless additional funding or out-licensing of the product is secured[60](index=60&type=chunk) [LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth](index=11&type=section&id=LPCN%201107%3A%20An%20Oral%20Product%20Candidate%20for%20the%20Prevention%20of%20Preterm%20Birth) LPCN 1107 is a potential first-in-class oral HPC product for preventing preterm birth, having received Orphan Drug Designation from the FDA - LPCN 1107 has the potential to be the **first oral hydroxyprogesterone caproate (HPC) product** for the prevention of recurrent preterm birth in women with a singleton pregnancy and a history of spontaneous preterm birth[61](index=61&type=chunk) - A multi-dose PK select study showed that the mean steady-state HPC levels (Cavg0-24) for LPCN 1107 were comparable to or greater than injectable HPC at all three doses tested[62](index=62&type=chunk) - The FDA has agreed to a randomized, open-label, two-arm Phase 3 clinical study design, providing positive feedback on the 800 mg BID dose and an alternative primary endpoint[63](index=63&type=chunk) - The company has received **Orphan Drug Designation** for LPCN 1107, which provides development incentives such as clinical testing tax credits and an NDA application fee waiver[64](index=64&type=chunk) [Research and Development](index=12&type=section&id=Research%20and%20Development) The company's R&D pipeline includes four product candidates, with expenses totaling $6.5 million in 2018 - The company currently has four products in its development pipeline: TLANDO, LPCN 1144, LPCN 1111, and LPCN 1107[65](index=65&type=chunk) R&D Expenses | Year | R&D Expenses (million USD) | | :--- | :--- | | 2018 | 6.5 | | 2017 | 11.0 | [Competition](index=12&type=section&id=Competition) The testosterone replacement therapy market is highly competitive, with gels and injectables dominating, though an oral option could offer advantages - The testosterone replacement therapy market is highly competitive, with major players including AbbVie, Endo, Allergan, Antares Pharma, and Aytu BioScience[66](index=66&type=chunk) - The market is dominated by gel products (like AndroGel, Testim) in sales and injectable products (like Aveed, Xyosted) in prescription volume[67](index=67&type=chunk) - The company believes a safe and effective oral therapy could improve patient convenience and adherence while eliminating the transference risk of gels and injection site reactions of injectables[67](index=67&type=chunk) - Other therapies in development include Clarus Therapeutics' oral testosterone undecanoate Jatenzo®, as well as various testosterone therapies from Marius Pharmaceuticals, Novartis, and TesoRx Pharma LLC[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) [Testosterone Market Overview](index=12&type=section&id=Testosterone%20Market%20Overview) The competitive TRT market is led by gels in sales and injectables in prescriptions, with generic entry posing a pricing risk - Testosterone gels dominate the TRT market in terms of sales, while intramuscular injections have the highest market share in annual prescription volume[67](index=67&type=chunk) - Existing competitor products include gels (AndroGel, Testim, Fortesta), topical solutions (Axiron), injectables (XYOSTED, Aveed), an intranasal product (Natesto), methyltestosterone (Methitest, Testred), a transdermal patch (Androderm), and a buccal tablet (Striant)[66](index=66&type=chunk)[161](index=161&type=chunk) - The market entry of generic T-gels could create **downward pricing pressure** on all T-replacement therapies, potentially negatively impacting the company's business and financial performance[166](index=166&type=chunk)[167](index=167&type=chunk) [Other Therapies in Development](index=14&type=section&id=Other%20Therapies%20in%20Development) There is growing interest in developing oral testosterone and non-testosterone therapies, with several companies advancing candidates through clinical trials - There is increasing interest in the development of oral testosterone replacement therapies as well as non-testosterone therapies[70](index=70&type=chunk) - Clarus Therapeutics' Jatenzo® (oral TU softgel) has completed Phase 3 clinical studies but has twice received a CRL from the FDA, primarily due to clinically significant blood pressure increases[71](index=71&type=chunk) - Marius Pharmaceuticals is developing an oral testosterone ester and has completed Phase 2 clinical trials with plans for a Phase 3 study[72](index=72&type=chunk) - TesoRx Pharma LLC is developing a potential once-daily oral bio-identical testosterone, TSX-002, and a next-generation oral testosterone ester, TSX-011[74](index=74&type=chunk) - Novartis is developing an aromatase inhibitor, BGS649, for the treatment of obese, hypogonadal men[73](index=73&type=chunk) [Hydroxyprogesterone caproate, or HPC, Preterm Birth, or PTB, Market Overview](index=14&type=section&id=Hydroxyprogesterone%20caproate%2C%20or%20HPC%2C%20Preterm%20Birth%2C%20or%20PTB%2C%20Market%20Overview) The preterm birth market is dominated by AMAG's injectable Makena®, though its market exclusivity has expired, opening the door for competitors - Preterm birth (PTB), defined as delivery before 37 weeks of gestation, is a leading cause of neonatal death and morbidity in the U.S., affecting approximately **11.7% of all U.S. pregnancies**[75](index=75&type=chunk) - The only currently approved therapy for preventing preterm birth is a weekly intramuscular injection of hydroxyprogesterone caproate (HPC) from AMAG Pharmaceuticals, Inc., branded as Makena®[75](index=75&type=chunk) - Makena's seven-year orphan drug exclusivity expired in February 2018, and generic versions became available later that year[75](index=75&type=chunk) - Intramuscular injections are associated with significant pain, discomfort, and injection site reactions, prompting AMAG to develop a subcutaneous auto-injector to protect its market share[75](index=75&type=chunk) Makena® Sales Data | Metric | Amount (million USD) | | :--- | :--- | | Estimated 2018 net sales of Makena® and its authorized generic | 322.3 | [Manufacturing Agreement](index=14&type=section&id=Manufacturing%20Agreement) The company has a commercial manufacturing and supply agreement with M.W. Encap Ltd. for the production of TLANDO - The company has a commercial manufacturing services and supply agreement with M.W. Encap Ltd. for the production and supply of commercial batches of TLANDO[77](index=77&type=chunk) - The company has committed to purchasing a minimum annual quantity of TLANDO for five years post-FDA approval, with a binding three-month rolling forecast[77](index=77&type=chunk) - The agreement can be terminated if Encap fails to meet reasonable demand for TLANDO, for material breach, or if either party becomes insolvent[78](index=78&type=chunk) - Encap is also responsible for conducting ICH stability studies on TLANDO capsules to support the NDA resubmission[79](index=79&type=chunk) [Intellectual Property](index=15&type=section&id=Intellectual%20Property) The company maintains a substantial patent portfolio to protect its drug delivery technology and product candidates, including TLANDO - The company owns or controls **21 issued U.S. patents**, 26 pending U.S. patent applications, 20 issued foreign patents, and 50 pending foreign patent applications, with a significant portion related to TLANDO[80](index=80&type=chunk) - The patent portfolio covers lipid-based drug delivery technology, oral pharmaceutical compositions of testosterone esters, oral dosage forms, and high-strength testosterone ester capsule formulations[80](index=80&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[85](index=85&type=chunk) - Ten U.S. patents related to TLANDO are expected to expire in **2019, 2020, 2029, and 2030**, at which point certain advantages from FDA Orange Book listing may be lost[87](index=87&type=chunk) - LPCN 1107 and LPCN 1111 also have corresponding U.S. and foreign patents and applications, with expected expirations in 2031/2032 and 2029/2034, respectively[88](index=88&type=chunk)[89](index=89&type=chunk) [Government Regulation](index=16&type=section&id=Government%20Regulation) The company's operations are subject to extensive government regulation, primarily by the FDA, covering all stages of product development and commercialization - The company's product development and manufacturing are subject to stringent regulation by government agencies worldwide, particularly the U.S. FDA, covering all stages from R&D to marketing[92](index=92&type=chunk)[93](index=93&type=chunk) - The U.S. new drug approval process is lengthy and resource-intensive, involving preclinical studies, an IND application, three phases of clinical trials, and an NDA submission, with uncertain outcomes[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[104](index=104&type=chunk) - Approved products are subject to ongoing FDA regulatory requirements, including record-keeping, adverse event reporting, product sampling and distribution, and rules governing promotion and advertising[108](index=108&type=chunk) - The 21st Century Cures Act aims to accelerate the approval of new drugs and medical devices by encouraging the FDA to consider new data types and clinical trial designs[110](index=110&type=chunk) - The company must also comply with federal and state healthcare laws, such as anti-kickback statutes, false claims acts, HIPAA, and the Physician Payments Sunshine Act, as well as policies on drug coverage, pricing, and reimbursement[111](index=111&type=chunk)[113](index=113&type=chunk) [The Regulatory Process for Drug Development](index=16&type=section&id=The%20Regulatory%20Process%20for%20Drug%20Development) Drug development is strictly regulated by government agencies, with the FDA overseeing all stages from research to post-market surveillance in the U.S - Drug development and manufacturing activities are subject to stringent regulation by government agencies worldwide, such as the U.S. FDA[92](index=92&type=chunk) - Regulation covers R&D, testing, manufacturing, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, post-market monitoring and reporting, marketing, and import/export[92](index=92&type=chunk) - Compliance with Good Laboratory Practices (GLP), Good Clinical Practices (GCP), and current Good Manufacturing Practices (cGMP) is mandatory[92](index=92&type=chunk) [United States Pharmaceutical Product Development Process](index=16&type=section&id=United%20States%20Pharmaceutical%20Product%20Development%20Process) The U.S. drug development process is a lengthy, costly, and highly regulated pathway overseen by the FDA, involving multiple stages from preclinical research to NDA submission - In the U.S., the FDA regulates pharmaceutical products under the Federal Food, Drug, and Cosmetic Act, making the approval process lengthy and resource-intensive[93](index=93&type=chunk)[94](index=94&type=chunk) - The drug development process includes preclinical studies (laboratory evaluations, animal studies), an IND application, three phases of clinical trials (Phase 1, 2, and 3), and an NDA submission[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[104](index=104&type=chunk) - Clinical trials must be conducted in accordance with the FDA's GCP requirements and receive approval from an independent Institutional Review Board (IRB)[97](index=97&type=chunk) - Any non-compliance can result in FDA sanctions, including refusal to approve, withdrawal of approval, clinical holds, warning letters, product recalls, and fines[93](index=93&type=chunk) [Orphan Drug Designation](index=18&type=section&id=Orphan%20Drug%20Designation) Orphan Drug Designation provides market exclusivity and financial incentives for drugs treating rare diseases, but can also block approval of competing products - Orphan Drug Designation is granted to drugs intended to treat rare diseases (affecting fewer than 200,000 patients in the U.S.) and must be requested before NDA submission[105](index=105&type=chunk) - A product that receives Orphan Drug Designation and is the first to be approved for the indication is entitled to **seven years of market exclusivity**, along with incentives like clinical research tax credits and an NDA application fee waiver[106](index=106&type=chunk)[115](index=115&type=chunk) - Orphan drug exclusivity can also block the approval of a company's product if a competitor's identical drug is approved first[106](index=106&type=chunk) [Post-Approval Requirements](index=20&type=section&id=Post-Approval%20Requirements) FDA-approved drugs are subject to ongoing regulatory oversight, including reporting, advertising restrictions, and potential post-market study requirements - FDA-approved drugs are subject to ongoing regulatory oversight, including requirements for record-keeping, adverse event reporting, and providing updated safety and efficacy information[108](index=108&type=chunk) - Compliance with FDA promotional and advertising regulations is required, including standards for direct-to-consumer advertising and a prohibition on promoting products for unapproved uses ("off-label" use)[108](index=108&type=chunk) - The FDA may require post-approval studies (Phase 4 trials), Risk Evaluation and Mitigation Strategies (REMS), and surveillance, or impose restrictions on product distribution and use[109](index=109&type=chunk) [21st Century Cures Act](index=20&type=section&id=21st%20Century%20Cures%20Act) The 21st Century Cures Act aims to accelerate drug and medical device approvals by allowing new data types and clinical trial designs - The 21st Century Cures Act, enacted on December 13, 2016, introduced significant changes to how the FDA approves new drugs and medical devices[110](index=110&type=chunk) - The act requires the FDA to consider new data types, such as patient experience data, and allows drug manufacturers to use new clinical trial designs to help speed up approvals[110](index=110&type=chunk) - Its implementation depends on subsequent regulations and policies developed by the FDA[110](index=110&type=chunk) [Other Healthcare Laws and Compliance Requirements](index=20&type=section&id=Other%20Healthcare%20Laws%20and%20Compliance%20Requirements) The company must comply with a complex web of federal and state healthcare laws, including anti-kickback and false claims statutes - The company's U.S. activities are subject to federal and state healthcare laws, including anti-kickback statutes, false claims acts, HIPAA privacy and security provisions, and the Physician Payments Sunshine Act[111](index=111&type=chunk) - These laws restrict marketing practices, educational programs, pricing policies, and relationships with healthcare providers, and require reporting of financial arrangements with physicians and teaching hospitals[111](index=111&type=chunk) - Non-compliance can lead to **significant fines**, exclusion from government healthcare programs, reputational harm, and disruption of business operations[111](index=111&type=chunk) - If products are sold abroad, the company must also comply with similar foreign laws and regulations[112](index=112&type=chunk) [Pharmaceutical Coverage, Pricing and Reimbursement](index=21&type=section&id=Pharmaceutical%20Coverage%2C%20Pricing%20and%20Reimbursement) Product sales depend on third-party payor coverage and reimbursement, which is increasingly uncertain due to cost-containment pressures - The sale of the company's products depends on coverage and adequate reimbursement from third-party payors, including government health administration authorities and private health insurers[113](index=113&type=chunk) - Third-party payors are increasingly focused on the medical necessity and cost-effectiveness of medical products, creating uncertainty in pricing and reimbursement for new drugs[113](index=113&type=chunk) - Government and third-party payors attempt to control costs by limiting coverage and reimbursement amounts, especially when lower-cost generic alternatives are available[113](index=113&type=chunk][114](index=114&type=chunk) - Failure to secure adequate reimbursement would significantly impact the commercial viability and profitability of the company's products[114](index=114&type=chunk) [Priority Review](index=21&type=section&id=Priority%20Review) Priority Review is an FDA designation that shortens the review timeline for drugs addressing unmet medical needs - Priority Review is an FDA designation for an NDA that applies to products addressing unmet medical needs[116](index=116&type=chunk) - Priority Review shortens the FDA's goal date for taking action to **eight months for new molecular entities** and **six months for non-new molecular entities**, compared to the standard review times of 12 and 10 months, respectively[116](index=116&type=chunk) [Accelerated Approval](index=21&type=section&id=Accelerated%20Approval) The Accelerated Approval program allows for earlier marketing of promising drugs for life-threatening diseases based on surrogate endpoints - Accelerated Approval (Subpart H Approval) is a program designed to bring promising products for life-threatening diseases to market earlier based on evidence from surrogate endpoints[117](index=117&type=chunk) - This approval may be considered provisional, requiring the company to commit to completing clinical studies to formally demonstrate patient benefit[117](index=117&type=chunk) [Related Party Transaction](index=21&type=section&id=Related%20Party%20Transaction) The company has an ongoing assignment, license, and services agreement with Spriaso LLC, an entity majority-owned by company insiders - In 2013, the company entered into an assignment, license, and services agreement with Spriaso LLC, an entity majority-owned by company executives and directors[119](index=119&type=chunk) - The company assigned its intellectual property in the cough and cold field to Spriaso in exchange for a potential cash royalty of **20% of Spriaso's net proceeds**, up to a maximum of **$10 million**[120](index=120&type=chunk) - The company received an exclusive license back to the intellectual property for use outside the cough and cold field[120](index=120&type=chunk) - The company provides facility and employee services to Spriaso, with the services agreement having been renewed multiple times, most recently through January 23, 2019[121](index=121&type=chunk) [Employees](index=23&type=section&id=Employees) As of December 31, 2018, the company had 10 full-time employees, split between drug development and administrative functions - As of December 31, 2018, the company had **10 full-time employees** and regularly uses consultants[122](index=122&type=chunk) - Five employees are engaged in drug development activities, and five are in administrative, management, marketing, and sales functions[122](index=122&type=chunk) - None of the employees are unionized or covered by a collective bargaining agreement[122](index=122&type=chunk) [Available Information](index=23&type=section&id=Available%20Information) The company makes its SEC filings, including annual and quarterly reports, available free of charge on its investor relations website - The company provides free access to its annual reports (Form 10-K), quarterly reports (Form 10-Q), and current reports (Form 8-K) through its investor relations website at ir.lipocine.com[123](index=123&type=chunk) - These filings are made available as soon as reasonably practicable after they are electronically filed with the U.S. Securities and Exchange Commission (SEC)[123](index=123&type=chunk) - The reports are also available on the SEC's website at http://www.sec.gov[123](index=123&type=chunk) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to clinical trials, regulatory approval, market competition, and financial stability - Clinical trial timelines may be delayed by various factors, adversely affecting the company's business strategy[125](index=125&type=chunk) - The company is **highly dependent on the success of its lead product candidate, TLANDO**, which has previously received a CRL from the FDA and may not gain regulatory approval or be successfully commercialized[126](index=126&type=chunk) - If the FDA clarifies, modifies, or restricts the indicated population for T-replacement therapies, the market could shrink, materially and adversely affecting the company's ability to sell and obtain reimbursement for TLANDO and LPCN 1111[135](index=135&type=chunk) - If T-replacement therapies are found or perceived to have health risks, the company's ability to sell TLANDO and LPCN 1111 could be materially and adversely affected[138](index=138&type=chunk) - The company will require **substantial additional capital** to fund future operations and may have to delay, reduce, or cease operations if it is not available[254](index=254&type=chunk) - The company faces **intense competition** in the testosterone replacement therapy market, which could result in other companies discovering, developing, or commercializing products before or more successfully than the company[160](index=160&type=chunk) - The company's success is partly dependent on its ability to protect its intellectual property; protecting proprietary rights and technology is difficult and expensive and may not be adequately secured[266](index=266&type=chunk) [Risks Relating to Our Business and Industry](index=23&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) The company's business is exposed to risks from clinical trial delays, regulatory hurdles, market competition, and the need for additional capital - Clinical trial timelines may be delayed by various factors, adversely affecting the company's business strategy[125](index=125&type=chunk) - The company is **highly dependent on the success of its lead product candidate, TLANDO**, which has previously received a Complete Response Letter (CRL) from the FDA and may not gain regulatory approval or be successfully commercialized[126](index=126&type=chunk) - If the FDA clarifies, modifies, or restricts the indicated population for T-replacement therapies, the market could shrink, materially and adversely affecting the company's ability to sell and obtain reimbursement for TLANDO and LPCN 1111[135](index=135&type=chunk) - If T-replacement therapies are found or perceived to have health risks, the company's ability to sell TLANDO and LPCN 1111 could be materially and adversely affected[138](index=138&type=chunk) - The company faces **intense competition** in the testosterone replacement therapy market, which could result in other companies discovering, developing, or commercializing products before or more successfully than the company[160](index=160&type=chunk) - The company will require **substantial additional capital** to fund future operations and may have to delay, reduce, or cease operations if it is not available[254](index=254&type=chunk) [Risks Related to Our Dependence on Third Parties](index=46&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) The company's heavy reliance on third-party contractors and single-source suppliers creates significant operational and supply chain risks - The company relies on third-party contractors and vendors for R&D, clinical trials, and manufacturing, resulting in less direct control over trial execution, timing, and data management[223](index=223&type=chunk)[224](index=224&type=chunk) - The company depends on a **single third-party supplier** for the active pharmaceutical ingredient (TU) for TLANDO, and the loss of this supplier could lead to an inability to obtain TU in a timely manner or at an increased price[229](index=229&type=chunk) - The company relies on a limited number of third-party suppliers for the inactive ingredients of TLANDO, and the loss of these suppliers could result in an inability to obtain them in a timely manner or at an increased price[230](index=230&type=chunk) - **M.W. Encap Ltd. is the sole contract manufacturer** for TLANDO capsules, and the loss of this supplier would seriously harm the company's business[231](index=231&type=chunk) - Failure to establish successful collaborations could force the company to alter its development and commercialization plans or incur significant costs to undertake these activities on its own[233](index=233&type=chunk)[234](index=234&type=chunk) [Risks Related to Ownership of Our Common Stock](index=49&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Ownership of the company's common stock is subject to high price volatility, potential dilution, and limited liquidity - The company's stock price is expected to be **highly volatile**, influenced by factors such as clinical trial results, regulatory decisions, market sentiment, and macroeconomic events[239](index=239&type=chunk)[240](index=240&type=chunk][241](index=241&type=chunk) - Anti-takeover provisions in the company's charter and Delaware law could prevent or delay a change in control, potentially depressing the trading price of the common stock[244](index=244&type=chunk)[245](index=245&type=chunk][246](index=246&type=chunk) - The company has **no current plans to pay dividends**, and investors must rely on stock price appreciation for a return on their investment[249](index=249&type=chunk) - The **low trading volume** of the company's common stock may lead to higher price volatility than that of more established issuers, and investors may have difficulty selling shares at their desired price[251](index=251&type=chunk][252](index=252&type=chunk) - Failure of securities or industry analysts to publish research or the publication of inaccurate/unfavorable research could cause the company's stock price to decline[253](index=253&type=chunk) [Risks Relating to Our Financial Position and Capital Requirements](index=54&type=section&id=Risks%20Relating%20to%20Our%20Financial%20Position%20and%20Capital%20Requirements) The company requires substantial additional capital to fund operations and faces risks from its existing debt and potential future financing activities - The company will require **substantial additional capital** to fund operations and product development, and failure to obtain it in a timely manner could lead to delays, reductions, or cessation of operations[254](index=254&type=chunk][256](index=256&type=chunk) - The existing loan agreement contains restrictive covenants, and non-compliance could result in the immediate maturity of the debt, materially and adversely affecting the company's liquidity, financial condition, and results of operations[257](index=257&type=chunk) - The company may not generate sufficient cash flow to service its debt and may need to refinance, sell assets, or seek additional equity[258](index=258&type=chunk) - Raising capital through equity financing could be **dilutive to existing stockholders**, while debt financing could increase fixed payment obligations and restrict the company's actions[259](index=259&type=chunk) - The company has not yet generated product revenue, may not achieve or maintain profitability, and its operating results may fluctuate significantly[262](index=262&type=chunk][263](index=263&type=chunk][264](index=264&type=chunk][265](index=265&type=chunk) [Risks Relating to Our Intellectual Property](index=58&type=section&id=Risks%20Relating%20to%20Our%20Intellectual%20Property) The company's success depends on protecting its intellectual property, which is a difficult, costly, and uncertain process - The company's commercial success depends on patent, trademark, and trade secret protection, but protecting proprietary rights is **difficult, costly, and cannot be guaranteed**[266](index=266&type=chunk][269](index=269&type=chunk][270](index=270&type=chunk) - The patent position is highly uncertain, and changes in legal interpretation and regulations could diminish the value of intellectual property or narrow the scope of patent protection[269](index=269&type=chunk) - Trade secrets are difficult to protect and may be unintentionally or willfully disclosed to competitors by employees, consultants, or collaborators[270](index=270&type=chunk][272](index=272&type=chunk) - The company's patents may be found invalid or unenforceable, or be infringed by third parties, and the company lacks patent protection in many countries[273](index=273&type=chunk][287](index=287&type=chunk) - Some U.S. patents, including those for TLANDO-related technology, are expected to expire between **2019 and 2030**, at which point market exclusivity advantages may be lost[273](index=273&type=chunk) - The company may face patent infringement lawsuits, which are time-consuming and costly and could result in unfavorable outcomes, including being barred from selling products or paying substantial damages[275](index=275&type=chunk][282](index=282&type=chunk][285](index=285&type=chunk) [Unresolved Staff Comments](index=66&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments in this report [Properties](index=66&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters in Salt Lake City, Utah, under a lease expiring in February 2020 - The company's corporate headquarters are located in a leased facility in Salt Lake City, Utah[292](index=292&type=chunk) - The lease is set to expire on **February 28, 2020**[292](index=292&type=chunk) - The company believes its existing facilities are adequate to meet its current anticipated needs[292](index=292&type=chunk) [Legal Proceedings](index=66&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in patent litigation with Clarus Therapeutics and recently settled a shareholder class action lawsuit - The company is in a patent interference proceeding with Clarus Therapeutics; the PTAB ruled in the company's favor on December 21, 2018, canceling Clarus's '428 patent, but Clarus filed an appeal on February 19, 2019[293](index=293&type=chunk) - The company was a defendant in a shareholder class action lawsuit that was settled on July 2, 2018, for **$4.3 million**, of which the company's insurance carrier paid **$3.6 million**[294](index=294&type=chunk][295](index=295&type=chunk) - On February 15, 2019, the company received a new shareholder derivative lawsuit alleging breach of fiduciary duties and unjust enrichment by executives and directors, which the company intends to defend vigorously[297](index=297&type=chunk) [Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable Part II [Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=68&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Capital Market under "LPCN" and has significantly underperformed market indices - The company's common stock is listed on The Nasdaq Capital Market under the symbol "LPCN"[301](index=301&type=chunk) - As of March 4, 2019, there were approximately **106 holders of record** of the company's common stock[303](index=303&type=chunk) - The company does not intend to pay any cash dividends in the foreseeable future, planning to retain future earnings to finance business growth and development[310](index=310&type=chunk) 2013-2018 Cumulative Return | Metric | 2013/12/31 | 2014/12/31 | 2015/12/31 | 2016/12/31 | 2017/12/31 | 2018/12/31 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lipocine Inc. (LPCN) | $100.00 | $63.76 | $156.73 | $44.61 | $41.70 | $15.76 | | NASDAQ Composite Index (^IXIC) | $100.00 | $113.40 | $119.89 | $128.89 | $165.29 | $158.87 | | NASDAQ Biotechnology Index (^NBI) | $100.00 | $134.10 | $149.42 | $117.02 | $141.66 | $128.45 | | NYSE Pharmaceutical Index (^DRG) | $100.00 | $113.83 | $115.67 | $102.88 | $116.42 | $121.52 | [Market Information](index=68&type=section&id=Market%20Information) The company's common stock is listed on The Nasdaq Capital Market under the trading symbol "LPCN" - The company's common stock is listed on The Nasdaq Capital Market under the trading symbol "LPCN"[301](index=301&type=chunk) [Holders](index=68&type=section&id=Holders) As of March 4, 2019, there were approximately 106 registered holders of the company's common stock - As of March 4, 2019, there were approximately **106 registered holders** of the company's common stock[303](index=303&type=chunk) [Performance Graph and Table](index=69&type=section&id=Performance%20Graph%20and%20Table) The company's stock performance from 2013 to 2018 has significantly lagged behind major market and industry indices - The graph compares the cumulative total return of the company's common stock, the NASDAQ Composite Index, the NASDAQ Biotechnology Index, and the NYSE Pharmaceutical Index from December 31, 2013, to December 31, 2018[306](index=306&type=chunk) - The comparison assumes an initial investment of **$100**[307](index=307&type=chunk) 2013-2018 Cumulative Return | Metric | 2013/12/31 | 2014/12/31 | 2015/12/31 | 2016/12/31 | 2017/12/31 | 2018/12/31 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Lipocine Inc. (LPCN) | $100.00 | $63.76 | $156.73 | $44.61 | $41.70 | $15.76 | | NASDAQ Composite Index (^IXIC) | $100.00 | $113.40 | $119.89 | $128.89 | $165.29 | $158.87 | | NASDAQ Biotechnology Index (^NBI) | $100.00 | $134.10 | $149.42 | $117.02 | $141.66 | $128.45 | | NYSE Pharmaceutical Index (^DRG) | $100.00 | $113.83 | $115.67 | $102.88 | $116.42 | $121.52 | [Dividends](index=69&type=section&id=Dividends) The company does not plan to pay cash dividends in the foreseeable future, retaining earnings for business growth - The company does not intend to pay any cash dividends in the foreseeable future[310](index=310&type=chunk) - The company plans to retain future earnings to finance the growth and development of its business[310](index=310&type=chunk) [Selected Financial Data](index=69&type=section&id=Item%206.%20Selected%20Financial%20Data) The company has consistently reported operating and net losses from 2014 to 2018, with a growing accumulated deficit Selected Balance Sheet Data (as of December 31) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash, cash equivalents, restricted cash and marketable securities | $20,250,576 | $21,468,070 | $26,840,286 | $44,382,827 | $27,666,055 | | Total assets | $20,851,953 | $25,325,114 | $27,342,970 | $45,377,278 | $27,993,502 | | Total liabilities | $11,418,280 | $6,345,126 | $1,633,532 | $1,326,169 | $3,391,861 | | Accumulated deficit | $(138,059,845) | $(126,399,823) | $(105,416,963) | $(86,445,455) | $(68,237,077) | | Stockholders' equity | $9,433,673 | $18,979,988 | $26,016,801 | $41,985,417 | $26,539,970 | Selected Statement of Operations Data (as of December 31) | Metric | 2018 | 2017 | 2016 | 2015 | 2014 | | :--- | :--- | :--- | :--- | :--- | :--- | | Loss from operations | $(11,325,819) | $(21,217,976) | $(19,186,834) | $(18,382,068) | $(20,480,814) | | Net loss | $(11,660,022) | $(20,982,860) | $(18,971,508) | $(18,208,378) | $(20,372,676) | | Basic loss per share | $(0.55) | $(1.60) | $(1.05) | $(1.04) | $(1.11) | | Diluted loss per share | $(0.55) | $(1.60) | $(1.05) | $(1.04) | $(1.11) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=71&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company continues to incur significant operating losses while advancing its product pipeline, requiring additional future financing - The company is a specialty pharmaceutical firm focused on developing products for men's and women's health using its oral drug delivery technology[317](index=317&type=chunk) - Its lead product candidate, TLANDO™, an oral TRT, is currently addressing deficiencies from an FDA CRL with plans to resubmit its NDA in mid-2019[317](index=317&type=chunk)[331](index=331&type=chunk) - The company has an **accumulated deficit of $138.1 million**, incurred a **net loss of $11.7 million in 2018**, and expects to continue generating significant operating losses[322](index=322&type=chunk)[323](index=323&type=chunk)[264](index=264&type=chunk) - Operations are funded primarily through equity sales, debt, and collaboration payments, with a need for additional capital to support future R&D and commercialization[321](index=321&type=chunk)[323](index=323&type=chunk) [Overview of Our Business](index=71&type=section&id=Overview%20of%20Our%20Business) The company is a specialty pharmaceutical firm focused on oral drug delivery for men's and women's health, currently advancing its lead candidate TLANDO - The company is a specialty pharmaceutical firm focused on developing products for men's and women's health using its oral drug delivery technology[317](index=317&type=chunk) - Its most advanced product candidate, TLANDO™, an oral testosterone replacement therapy (TRT), received a Complete Response Letter (CRL) from the FDA on May 8, 2018, identifying four deficiencies[317](index=317&type=chunk) - The company is addressing the CRL deficiencies through an ABPM clinical study and a completed definitive phlebotomy study, with plans to resubmit the NDA in mid-2019[317](index=317&type=chunk)[318](index=318&type=chunk)[330](index=330&type=chunk) - Other pipeline candidates include LPCN 1144 (for NASH), LPCN 1111 (next-generation oral TRT), and LPCN 1107 (for prevention of preterm birth)[319](index=319&type=chunk) - The company has incurred losses in most years since inception, with an **accumulated deficit of $138.1 million** as of December 31, 2018, and a **net loss of $11.7 million** for 2018[322](index=322&type=chunk) - The company expects to continue incurring significant operating losses and will require additional financing to support R&D and commercialization efforts[323](index=323&type=chunk) [Our Product Candidates](index=74&type=section&id=Our%20Product%20Candidates) The company's pipeline includes TLANDO for TRT, LPCN 1144 for NASH, LPCN 1111 for next-gen TRT, and LPCN 1107 for preterm birth - The company's current pipeline includes its most advanced product, TLANDO for oral testosterone replacement therapy, along with LPCN 1144 (for NASH), LPCN 1111 (a potential next-generation once-daily oral TRT), and LPCN 1107 (an oral therapy for prevention of preterm birth)[325](index=325&type=chunk) [Our Development Pipeline](index=74&type=section&id=Our%20Development%20Pipeline) The company is advancing its pipeline, focusing on TLANDO's NDA resubmission and a Phase 2 study for LPCN 1144 in NASH - TLANDO, an oral TRT, is addressing FDA CRL deficiencies related to in-vitro conversion, blood pressure risk, Cmax data, and discontinuation criteria, with an NDA resubmission planned for mid-2019[327](index=327&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - LPCN 1144, an oral testosterone prodrug for NASH, showed significant liver fat reduction in a POC study, and the FDA has cleared an IND for a Phase 2 clinical study[347](index=347&type=chunk)[352](index=352&type=chunk)[354](index=354&type=chunk) - LPCN 1111, a next-generation oral TRT, has completed Phase 2a and 2b studies, but its Phase 3 study is not expected to start in 2019 pending additional funding and regulatory requirements[355](index=355&type=chunk)[356](index=356&type=chunk)[358](index=358&type=chunk) - LPCN 1107, an oral candidate for preventing preterm birth, demonstrated comparable or greater HPC levels than injectable HPC in a PK study, and the FDA has agreed to a Phase 3 study design[359](index=359&type=chunk)[360](index=360&type=chunk)[361](index=361&type=chunk) [TLANDO: An Oral Product Candidate for Testosterone Replacement Therapy](index=74&type=section&id=TLANDO%3A%20An%20Oral%20Product%20Candidate%20for%20Testosterone%20Replacement%20Therapy_74) TLANDO is an oral testosterone undecanoate formulation currently addressing FDA deficiencies for its New Drug Application - TLANDO is an oral formulation of testosterone undecanoate (TU) that utilizes the company's proprietary technology to facilitate stable gastrointestinal solubilization and absorption[327](index=327&type=chunk) - TLANDO received a Complete Response Letter (CRL) from the FDA on May 8, 2018, which identified four deficiencies, including in-vitro conversion of TU to T, blood pressure increase risks, Cmax data reliability, and discontinuation criteria[329](index=329&type=chunk) - The company has completed a definitive phlebotomy study showing no significant in-vitro TU to T conversion under recommended conditions and is conducting an ABPM clinical study, with plans to resubmit the NDA in mid-2019[330](index=330&type=chunk)[334](index=334&type=chunk) [LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH](index=78&type=section&id=LPCN%201144%3A%20An%20Oral%20Prodrug%20of%20Bioidentical%20Testosterone%20Product%20Candidate%20for%20the%20Treatment%20of%20NASH_78) LPCN 1144 is an oral testosterone prodrug being developed for NASH, with promising initial results in reducing liver fat - LPCN 1144 is an oral prodrug of bioidentical testosterone being evaluated for the treatment of non-alcoholic steatohepatitis (NASH)[347](index=347&type=chunk) - NASH is an advanced stage of NAFLD that can progress to cirrhosis and liver cancer and is closely associated with obesity and metabolic syndrome[347](index=347&type=chunk) - Interim results from a proof-of-concept (POC) liver imaging study showed that LPCN 1144 led to a **7.6% absolute mean reduction** and a **38% relative mean reduction** in liver fat in subjects with ≥10% baseline liver fat content[352](index=352&type=chunk) - The FDA has cleared the IND application for LPCN 1144, enabling the initiation of a Phase 2 clinical study in biopsy-confirmed NASH patients with F2/F3 fibrosis[354](index=354&type=chunk) [LPCN 1111: A Next-Generation Oral Product Candidate for TRT](index=80&type=section&id=LPCN%201111%3A%20A%20Next-Generation%20Oral%20Product%20Candidate%20for%20TRT_80) LPCN 1111 is a next-generation oral TRT candidate whose Phase 3 study is delayed pending additional funding and regulatory requirements - LPCN 1111 is a next-generation oral testosterone ester prodrug utilizing Lip'ral technology to enhance solubility and improve systemic absorption[355](index=355&type=chunk) - Completed Phase 2b dose-finding and Phase 2a proof-of-concept studies both demonstrated a good dose-response relationship and tolerability, with no drug-related serious adverse events[355](index=355&type=chunk)[356](index=356&type=chunk) - The FDA has requested additional preclinical or clinical trials, including an ABPM study, leading the company to prioritize TLANDO and LPCN 1144 in 2019[358](index=358&type=chunk) - The Phase 3 study for LPCN 1111 is **not expected to commence in 2019** unless additional funding or out-licensing of the product is secured[358](index=358&type=chunk) [LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth](index=80&type=section&id=LPCN%201107%3A%20An%20Oral%20Product%20Candidate%20for%20the%20Prevention%20of%20Preterm%20Birth_80) LPCN 1107 is a potential first-in-class oral HPC product for preventing preterm birth, having received Orphan Drug Designation from the FDA - LPCN 1107 has the potential to be the **first oral hydroxyprogesterone caproate (HPC) product** for the prevention of recurrent preterm birth in women with a singleton pregnancy and a history of spontaneous preterm birth[359](index=359&type=chunk) - A multi-dose PK select study showed that the mean steady-state HPC levels (Cavg0-24) for LPCN 1107 were comparable to or greater than injectable HPC at all three doses tested[360](index=360&type=chunk) - The FDA has agreed to a randomized, open-label, two-arm Phase 3 clinical study design, providing positive feedback on the 800 mg BID dose and an alternative primary endpoint[361](index=361&type=chunk) - The company has received **Orphan Drug Designation** for LPCN 1107, which provides development incentives such as clinical testing tax credits and an NDA application fee waiver[362](index=362&type=chunk) [Financial Operations Overview](index=81&type=section&id=Financial%20Operations%20Overview) The company's financial operations are characterized by a lack of product revenue, significant R&D expenses, and reliance on external funding - The company has not yet generated revenue from product sales, with income primarily from license fees, milestone payments, and research support[363](index=363&type=chunk) - R&D is the primary expense, with a cumulative spend of approximately **$103.6 million** as of December 31, 2018, and is expected to increase significantly for TLANDO's clinical studies and NDA resubmission, as well as other pipeline development[364](index=364&type=chunk)[365](index=365&type=chunk)[371](index=371&type=chunk) - General and administrative expenses are expected to decrease before TLANDO's approval but will increase substantially post-launch to support commercialization[374](index=374&type=chunk) - Restructuring charges relate primarily to a 2016 workforce reduction, with no similar charges in 2017 or 2018[375](index=375&type=chunk) - Other income and expense, net, primarily consists of interest income from cash and marketable securities and interest expense from loan agreements[376](index=376&type=chunk) [Revenue](index=81&type=section&id=Revenue) The company has not generated product sales revenue and relies on licensing, milestone payments, and research support for income - The company has not yet generated revenue from product sales and does not expect to until a product receives FDA approval[363](index=363&type=chunk) - Revenue has primarily come from license fees, milestone payments, and research support under license and collaboration agreements[363](index=363&type=chunk) - From inception through December 31, 2018, the company has generated **$27.9 million** in revenue from license and collaboration agreements and government grants[363](index=363&type=chunk) [Research and Development Expenses](index=81&type=section&id=Research%20and%20Development%20Expenses) R&D expenses are expected to increase as the company advances its clin