Lipocine(LPCN) - 2019 Q4 - Annual Report

PART I Business 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] - 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] - The product pipeline includes LPCN 1144 (NASH), TLANDO XR (next-gen TRT), LPCN 1148 (NASH cirrhosis), and LPCN 1107 (preterm birth)[18] Research and Development Expenses | Year | Amount (in millions) | | :--- | :--- | | 2019 | $7.5 | | 2018 | $6.5 | Product Candidates 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][32] - 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][61] - 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][66] - 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][69] - 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][73][74] 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][53] - 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][85] - 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] Manufacturing and Intellectual Property 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] - The patent portfolio for Oral TU (TLANDO) includes 11 issued U.S. patents expiring between 2029-2030 and numerous pending applications[94] - 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] Government Regulation 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][105][106][107] - 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][114][74] - 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] Risk Factors 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][135] - 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][142] - The company faces substantial competition, including from JATENZO®, an approved oral TRT, and generic T-gels, leading to downward pricing pressure[166][173] - 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] - Intellectual property litigation, including a lawsuit against Clarus Therapeutics for patent infringement related to JATENZO®, consumes capital and management resources[234][293] - On December 27, 2019, the company received a NASDAQ notice for failing to maintain the minimum $1.00 bid price, risking delisting[262] Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - None[308] Properties 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] Legal Proceedings 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] - 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] - 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][313] Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable[314] PART II Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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] - As of March 12, 2020, there were approximately 103 holders of record of common stock[319] - The company plans no cash dividends, intending to retain future earnings for business development[326] Selected Financial Data 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 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] 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] - Existing capital resources are sufficient to fund operations through at least March 31, 2021, but additional capital will be required thereafter[420] - 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][413] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - A 1% increase in the prime rate would increase annual interest expense on the SVB loan by approximately $63,000[448] Financial Statements and Supplementary Data 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 The company reports no changes in or disagreements with its accountants regarding accounting and financial disclosure - None[582] Controls and Procedures 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] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019, based on the COSO framework[586] Other Information The company reports no other information for this item - None[588] PART III Directors, Executive Officers and Corporate Governance 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] Executive Compensation 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] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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] Certain Relationships and Related Transactions, and Director Independence 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] Principal Accountant Fees and Services 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] PART IV Exhibits and Financial Statement Schedules 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][598] 10-K Summary The company reports no summary for this item - None[605]