Lipocine(LPCN) - 2019 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - The CRL identified one deficiency: the efficacy trial did not meet the three secondary endpoints for maximal testosterone concentrations (Cmax)[80] - 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] Our Product Candidates 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] - 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] - 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][131] - LPCN 1148 (NASH Cirrhosis): The company expects to file an Investigational New Drug (IND) application by December 31, 2019[127] Results of Operations 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] - 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] Liquidity and Capital Resources 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] - 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] - 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] - 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][158] Quantitative and Qualitative Disclosures About Market Risks 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] - 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] Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[186] PART II—OTHER INFORMATION Legal Proceedings 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] - A shareholder derivative complaint was filed on February 15, 2019, against certain officers and directors for alleged breaches of fiduciary duty[189] - Clarus has appealed a December 2018 PTAB ruling that was in favor of Lipocine, which had canceled all claims in a Clarus patent[188] Risk Factors 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][193] - 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] - The company is engaged in patent litigation with Clarus and defending a shareholder derivative lawsuit, which will require substantial costs and resources[199][202] - 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] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported[209] Exhibits This section lists all exhibits filed with the report, including officer certifications and XBRL data files