Lipocine(LPCN) - 2018 Q4 - Annual Report

Part I Business Overview 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] - 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][17] - 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][34] - 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][29] General Business Overview 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] - 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] - 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] - Other pipeline candidates include LPCN 1144 (for NASH), LPCN 1111 (next-generation oral TRT), and LPCN 1107 (for prevention of preterm birth)[18] Industry Background 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] - 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] - 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][28] - The current U.S. TRT market is dominated by injections in prescription volume and topical gels in sales revenue[27][28] Testosterone Background 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] - Testosterone circulates in the body in either bound (approximately 60% to SHBG, 40% loosely to albumin) or free (approximately 1%) forms[20] - Circulating testosterone concentrations vary significantly over time and between individuals, influenced by genetics, medical conditions, lifestyle, and medications[20] Hypogonadism Overview 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] - Low serum testosterone concentration is an independent predictor of cardiovascular risk factors such as obesity, dyslipidemia, hypertension, type 2 diabetes, and systemic inflammation[21] - Hypogonadism, a permanent deficiency of sex hormones, is classified as primary (affecting the gonads) or secondary (affecting the hypothalamus and pituitary)[22] Diagnosis and Treatment of Hypogonadism 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] - 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] Testosterone Replacement Market 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] - Injections are the most prescribed dosage form in the market, while topical gels account for the majority of sales revenue[28] - Oral therapies have historically not been widely adopted due to low bioavailability and significant side effects such as liver toxicity[26] - Market growth is primarily driven by increased awareness among patients and physicians of hypogonadism and its broad medical consequences[28] Product Candidates 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] - 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] TLANDO: An Oral Product Candidate for Testosterone Replacement Therapy 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] - 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] - 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][37] NDA Resubmission Status 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] - 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] - 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] Definitive Phlebotomy Study Results 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] - 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] - This indicates no significant in-vitro conversion of TU to T in testosterone measurements under the recommended conditions[37] DV and DF Studies Results 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][40] - 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] - 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] - 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][44] SOAR Study Results 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] - TLANDO treatment was well-tolerated, with no hepatic, cardiac, or drug-related serious adverse events (SAEs)[47] - 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] Food Effect Study 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] - Testosterone levels were comparable between standard-fat, low-fat, and high-fat meals[48] Other Safety Requirements 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] - 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] LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH 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] - 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] - 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] - 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] History of Liver Disease 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] - Liver disease can be caused by various factors, including Hepatitis C (HCV), Hepatitis B (HBV), obesity, chronic excessive alcohol consumption, or autoimmune diseases[51] - 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] Markers of Liver Cell Death 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] - ALT levels are a clinically important biochemical marker of liver inflammation and the severity of ongoing liver disease[52] Relationship between Hypogonadism and NAFLD 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] - 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] Current Status 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] - 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] - 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] LPCN 1111: A Next-Generation Oral Product Candidate for TRT 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] - 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][58] - 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] - 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] LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth 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] - 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] - 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] - 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] Research and Development 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] R&D Expenses | Year | R&D Expenses (million USD) | | :--- | :--- | | 2018 | 6.5 | | 2017 | 11.0 | 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] - The market is dominated by gel products (like AndroGel, Testim) in sales and injectable products (like Aveed, Xyosted) in prescription volume[67] - 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] - 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][71][72][73][74] Testosterone Market Overview 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] - 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][161] - 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][167] Other Therapies in Development 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] - 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] - Marius Pharmaceuticals is developing an oral testosterone ester and has completed Phase 2 clinical trials with plans for a Phase 3 study[72] - 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] - Novartis is developing an aromatase inhibitor, BGS649, for the treatment of obese, hypogonadal men[73] Hydroxyprogesterone caproate, or HPC, Preterm Birth, or PTB, Market Overview 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] - 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] - Makena's seven-year orphan drug exclusivity expired in February 2018, and generic versions became available later that year[75] - 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] Makena® Sales Data | Metric | Amount (million USD) | | :--- | :--- | | Estimated 2018 net sales of Makena® and its authorized generic | 322.3 | Manufacturing Agreement 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] - 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] - The agreement can be terminated if Encap fails to meet reasonable demand for TLANDO, for material breach, or if either party becomes insolvent[78] - Encap is also responsible for conducting ICH stability studies on TLANDO capsules to support the NDA resubmission[79] Intellectual Property 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] - 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][82][83][85] - 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] - 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][89] Government Regulation 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][93] - 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][95][97][98][99][100][104] - 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] - 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] - 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][113] The Regulatory Process for Drug Development 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] - 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] - Compliance with Good Laboratory Practices (GLP), Good Clinical Practices (GCP), and current Good Manufacturing Practices (cGMP) is mandatory[92] United States Pharmaceutical Product Development Process 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][94] - 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][95][97][98][99][100][104] - Clinical trials must be conducted in accordance with the FDA's GCP requirements and receive approval from an independent Institutional Review Board (IRB)[97] - Any non-compliance can result in FDA sanctions, including refusal to approve, withdrawal of approval, clinical holds, warning letters, product recalls, and fines[93] Orphan Drug Designation 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] - 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][115] - Orphan drug exclusivity can also block the approval of a company's product if a competitor's identical drug is approved first[106] Post-Approval Requirements 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] - 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] - 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] 21st Century Cures Act 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] - 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] - Its implementation depends on subsequent regulations and policies developed by the FDA[110] Other Healthcare Laws and Compliance Requirements 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] - 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] - Non-compliance can lead to significant fines, exclusion from government healthcare programs, reputational harm, and disruption of business operations[111] - If products are sold abroad, the company must also comply with similar foreign laws and regulations[112] Pharmaceutical Coverage, Pricing and Reimbursement 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] - 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] - 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] - Failure to secure adequate reimbursement would significantly impact the commercial viability and profitability of the company's products[114] Priority Review 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] - 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] Accelerated Approval 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] - This approval may be considered provisional, requiring the company to commit to completing clinical studies to formally demonstrate patient benefit[117] Related Party Transaction 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] - 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] - The company received an exclusive license back to the intellectual property for use outside the cough and cold field[120] - 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] 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] - Five employees are engaged in drug development activities, and five are in administrative, management, marketing, and sales functions[122] - None of the employees are unionized or covered by a collective bargaining agreement[122] Available Information 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] - 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] - The reports are also available on the SEC's website at http://www.sec.gov[123](index=123&type=chunk) Risk Factors 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] - 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] - 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] - 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] - 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] - 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] - 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] Risks Relating to Our Business and Industry 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] - 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] - 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] - 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] - 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] - 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] Risks Related to Our Dependence on Third Parties 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][224] - 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] - 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] - 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] - 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][234] Risks Related to Ownership of Our Common Stock 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][240](index=240&type=chunk][241] - 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][245](index=245&type=chunk][246] - The company has no current plans to pay dividends, and investors must rely on stock price appreciation for a return on their investment[249] - 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] - 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] Risks Relating to Our Financial Position and Capital Requirements 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] - 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] - The company may not generate sufficient cash flow to service its debt and may need to refinance, sell assets, or seek additional equity[258] - 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] - 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] Risks Relating to Our Intellectual Property 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] - 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] - 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] - 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] - 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] - 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] Unresolved Staff Comments There are no unresolved staff comments in this report Properties 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] - The lease is set to expire on February 28, 2020[292] - The company believes its existing facilities are adequate to meet its current anticipated needs[292] Legal Proceedings 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] - 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] - 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] Mine Safety Disclosures Not applicable Part II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - As of March 4, 2019, there were approximately 106 holders of record of the company's common stock[303] - 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] 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 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] 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] Performance Graph and Table 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] - The comparison assumes an initial investment of $100[307] 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 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] - The company plans to retain future earnings to finance the growth and development of its business[310] Selected Financial Data 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 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] - 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][331] - 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][323][264] - 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][323] Overview of Our Business 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] - 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] - 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][318][330] - Other pipeline candidates include LPCN 1144 (for NASH), LPCN 1111 (next-generation oral TRT), and LPCN 1107 (for prevention of preterm birth)[319] - 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] - The company expects to continue incurring significant operating losses and will require additional financing to support R&D and commercialization efforts[323] Our Product Candidates 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] Our Development Pipeline 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][329][330] - 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][352][354] - 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][356][358] - 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][360][361] TLANDO: An Oral Product Candidate for Testosterone Replacement Therapy 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] - 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] - 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][334] LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH 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] - 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] - 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] - 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] LPCN 1111: A Next-Generation Oral Product Candidate for TRT 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] - 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][356] - 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] - 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] LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth 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] - 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] - 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] - 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] Financial Operations Overview 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] - 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][365][371] - General and administrative expenses are expected to decrease before TLANDO's approval but will increase substantially post-launch to support commercialization[374] - Restructuring charges relate primarily to a 2016 workforce reduction, with no similar charges in 2017 or 2018[375] - Other income and expense, net, primarily consists of interest income from cash and marketable securities and interest expense from loan agreements[376] 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] - Revenue has primarily come from license fees, milestone payments, and research support under license and collaboration agreements[363] - From inception through December 31, 2018, the company has generated $27.9 million in revenue from license and collaboration agreements and government grants[363] Research and Development Expenses R&D expenses are expected to increase as the company advances its clin