Lipocine(US:LPCN)2019-08-07 12:01PART I—FINANCIAL INFORMATION 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 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 approved22 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 - Lipocine is a clinical-stage biopharmaceutical company developing oral drug products for metabolic and endocrine disorders using its proprietary delivery technologies72 - 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, 201972 - 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 $6.7 million for the first six months of 201977 Our Product Candidates - The FDA accepted the NDA for TLANDO with a PDUFA goal date of November 9, 2019, following a previous Complete Response Letter (CRL) in May 2018, which the company believes has been addressed through an ABPM clinical study and a definitive phlebotomy study828485 - LPCN 1144, an oral testosterone product for pre-cirrhotic non-alcoholic steatohepatitis (NASH), has completed a Proof-Of-Concept study showing significant liver fat reduction, and a Phase 2 paired-biopsy study (LiFT) has been initiated7475115 - Other pipeline candidates include TLANDO XR (LPCN 1111) for once-daily TRT, LPCN 1148 for NASH cirrhosis, and LPCN 1107 for prevention of preterm birth, with development of LPCN 1107 paused pending additional capital or out-licensing7479127 Results of Operations Comparison of Operating Results (Three Months Ended June 30) | Expense Category | 2019 ($) | 2018 ($) | Variance ($) | | :--- | :--- | :--- | :--- | | Research and development | $1,964,146 | $1,482,378 | $481,768 | | General and administrative | $1,386,457 | $1,682,031 | ($295,574) | - R&D expenses increased in Q2 2019 primarily due to costs for the LPCN 1144 Phase 2 study and activities related to the TLANDO NDA filing144 - G&A expenses decreased in Q2 2019 mainly due to lower personnel costs following the elimination of the commercial sales and marketing team in 2018145 Comparison of Operating Results (Six Months Ended June 30) | Category | 2019 ($) | 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 - 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 cash153 - 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 commercialization159 - 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 repayments168 - 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 FDA154 Quantitative and Qualitative Disclosures About Market Risks 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 debt176 - 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 value177 - 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 expense178 Controls and Procedures 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, 2019181 - 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 controls182 PART II—OTHER INFORMATION This section details legal proceedings, updated risk factors, and other required disclosures including equity sales, defaults, and exhibits Legal Proceedings 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 invention184 - 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 filing185 - In April 2019, Lipocine filed a patent infringement lawsuit against Clarus, alleging that its JATENZO® product infringes six of Lipocine's U.S. patents186 Risk Factors 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 approval188189190 - The company faces risks from ongoing litigation, including a shareholder derivative suit and patent disputes, which could require substantial costs and divert management attention197199 - 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 operations204 - The company's common stock is thinly traded, which can lead to significant price volatility and may make it difficult for stockholders to sell shares202203 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the period - None209 Defaults Upon Senior Securities There were no defaults upon senior securities during the period - None210 Mine Safety Disclosures This item is not applicable to the company - None211 Other Information There is no other information to report for the period - None212 Exhibits 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 files215