Daré Bioscience(DARE) - 2023 Q4 - Annual Report

Part I Business Daré Bioscience is a biopharmaceutical company focused on women's health, advancing a pipeline of product candidates through clinical development and strategic commercial partnerships - The company's business model is to in-license or acquire promising women's health product candidates, develop them through mid- to late-stage clinical trials, and then partner with larger companies for commercialization[20] - XACIATO™, the company's first FDA-approved product for bacterial vaginosis, was launched in the U.S. in Q4 2023 by commercial partner Organon[21] - The company's advanced clinical pipeline targets key areas in women's health: Ovaprene® for contraception (pivotal Phase 3), Sildenafil Cream for female sexual arousal disorder (Phase 3 preparation), and DARE-HRT1 for menopause symptoms (Phase 3 preparation)[24] - Daré actively seeks non-dilutive funding and has received significant grants to support development, including up to approximately $49.0 million for the DARE-LARC1 program[28][89] Our Pipeline: Clinical-Stage Programs The company's diverse clinical-stage pipeline is led by Ovaprene®, Sildenafil Cream, and DARE-HRT1, which are advancing toward or are in late-stage development Advanced Clinical Pipeline Status | Product Candidate | Indication | Development Status | | :--- | :--- | :--- | | Ovaprene® | Monthly Contraception (Hormone-free) | Pivotal Phase 3 study commenced Q4 2023 | | Sildenafil Cream, 3.6% | Female Sexual Arousal Disorder (FSAD) | End-of-Phase 2 meeting with FDA completed; preparing for Phase 3 | | DARE-HRT1 | Menopause Symptoms (Hormone Therapy) | Phase 1/2 study completed; preparing for Phase 3 | | DARE-VVA1 | Painful Intercourse (VVA) | IND cleared; preparing for Phase 2 study | | DARE-CIN | HPV / Cervical Dysplasia | Phase 1 and proof-of-concept studies completed | - The pivotal Phase 3 study for Ovaprene® commenced in December 2023, aiming to enroll approximately 250 participants to complete 13 menstrual cycles of use[41][42] - Following the Phase 2b RESPOND study, Daré held a successful end-of-Phase 2 meeting with the FDA in January 2024, aligning on key elements for the Sildenafil Cream Phase 3 program[53][54] Strategic Agreements and Financing The company has secured key commercialization and financing agreements, including partnerships with Organon and Bayer and a royalty interest financing deal - The exclusive worldwide license agreement with Organon for XACIATO provides for tiered double-digit royalties on net sales and up to $180.0 million in potential milestone payments[100] - The license agreement with Bayer for U.S. commercialization of Ovaprene gives Bayer the option to pay Daré $20.0 million to make the license effective, with potential for up to $310.0 million in sales-based milestones[103][104] - In December 2023, Daré entered into a royalty interest financing agreement, receiving an initial $5.0 million with the option for up to $7.0 million more[157][158] Intellectual Property The company protects its product portfolio through a combination of in-licensed and owned patents, trade secrets, and trademarks across key global jurisdictions - XACIATO is protected by three licensed U.S. patents, with expirations in December 2028 and September 2036[165] - Ovaprene is covered by nine granted U.S. patents and seven granted foreign patents, with pending applications that could extend protection to 2035[166][167] - Sildenafil Cream is protected by 10 U.S. patents and 13 foreign patents, with U.S. patents having terms expiring in June 2029[168] Government Regulation The company's operations are subject to extensive regulation by the FDA and other authorities, utilizing pathways like 505(b)(2) to streamline development - The company's products are subject to rigorous premarket review and post-marketing oversight by the FDA and other government bodies[186][188] - Daré plans to utilize the FDA's 505(b)(2) pathway for many of its product candidates, which allows reliance on prior findings of safety and efficacy for an approved product[204] - Combination products like Ovaprene (drug-device) are subject to complex regulatory processes with the FDA's Office of Combination Products[238][240] Risk Factors The company faces significant financial risks regarding its going concern status, alongside clinical development, third-party reliance, and commercialization uncertainties - The company requires substantial additional capital to continue operations and has a history of losses, raising substantial doubt about its ability to continue as a going concern[324] - Clinical development is inherently uncertain, and failure to successfully complete trials and obtain regulatory approval for key product candidates like Ovaprene and Sildenafil Cream would materially harm the business[320][352] - The company is heavily reliant on third parties, including Organon for XACIATO commercialization revenue and single-source contract manufacturers for product supply[320][405] - On July 19, 2023, the company was notified by Nasdaq of non-compliance with the minimum $1.00 bid price requirement, with an exception until July 15, 2024, to regain compliance[578][579] Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - None[602] Cybersecurity Cybersecurity risk is managed through an enterprise program overseen by the audit committee, and no material threats have been identified to date - Cybersecurity risk is managed through an enterprise risk management program overseen by the audit committee, which receives periodic updates from management and an external IT consultant[603][608] - The company utilizes multiple security layers, conducts annual cybersecurity assessments, and maintains an incident response plan to safeguard information assets and operational integrity[604][605] - The company does not believe there are any risks from cybersecurity threats that have materially affected or are reasonably likely to materially affect its business, operations, or financial condition[606] Part II Market for 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 "DARE," and it has never paid cash dividends, retaining earnings for growth - The company's common stock is listed on the Nasdaq Capital Market under the trading symbol 'DARE'[614] - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[616] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $30.2 million in 2023 with decreased revenue and R&D expenses, and requires additional capital to fund operations Consolidated Results of Operations (2023 vs. 2022) | | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $2,807,885 | $10,000,000 | $(7,192,115) | (72)% | | R&D Expenses | $21,538,074 | $30,042,217 | $(8,504,143) | (28)% | | G&A Expenses | $12,109,691 | $11,243,271 | $866,420 | 8% | | Loss from Operations | $(30,939,880) | $(31,385,488) | $445,608 | 1% | | Net Loss | $(30,161,391) | $(30,947,738) | $786,347 | (3)% | - The company will need to raise additional capital to fund its operating needs into the third quarter of 2024, which raises substantial doubt about its ability to continue as a going concern[674][678] - Revenue in 2023 of $2.8 million was primarily from a $1.8 million milestone payment and a $1.0 million license fee amendment from Organon, down from $10.0 million in 2022[664] - R&D expenses decreased by $8.5 million in 2023, mainly due to a $6.4 million reduction in development costs for Sildenafil Cream[666] Controls and Procedures Management concluded that the company's disclosure controls, procedures, and internal control over financial reporting were effective as of year-end 2023 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[695] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO 2013 framework[699] - No changes in internal control over financial reporting occurred during the fourth quarter of 2023 that have materially affected, or are reasonably likely to materially affect, these controls[701] Part III Directors, Executive Officers and Corporate Governance Required information regarding directors, officers, and corporate governance is incorporated by reference from the company's 2024 proxy statement - Information for this item is incorporated by reference from the company's 2024 Proxy Statement[706] Executive Compensation Required information concerning executive compensation is incorporated by reference from the company's 2024 proxy statement - Information for this item is incorporated by reference from the company's 2024 Proxy Statement[707] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Required information concerning security ownership is incorporated by reference from the company's 2024 proxy statement - Information for this item is incorporated by reference from the company's 2024 Proxy Statement[708] Certain Relationships and Related Transactions, and Director Independence Required information concerning related party transactions and director independence is incorporated by reference from the company's 2024 proxy statement - Information for this item is incorporated by reference from the company's 2024 Proxy Statement[709] Principal Accountant Fees and Services Required information concerning principal accountant fees and services is incorporated by reference from the company's 2024 proxy statement - Information for this item is incorporated by reference from the company's 2024 Proxy Statement[710] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed with the Form 10-K, including key commercial and financing agreements - This section contains the index to the Consolidated Financial Statements, which begin on page F-1[713] - A list of exhibits is provided, including key commercial agreements with Organon and Bayer, and the recent Royalty Interest Financing Agreement[715][717] Financial Statements Report of Independent Registered Public Accounting Firm The auditor's report provides a clean opinion on the financial statements but includes a paragraph highlighting substantial doubt about the company's going concern status - The auditor's report contains a "going concern" paragraph, citing recurring losses, negative cash flow, and dependence on additional financing, which raise substantial doubt about the company's ability to continue operations[730] - The auditor's opinion states that the financial statements for the year ended December 31, 2023, are fairly presented in conformity with U.S. GAAP[729] Consolidated Financial Statements The company's financial position weakened in 2023, with cash decreasing to $10.5 million, total assets declining, and a shift to a stockholders' deficit of $5.0 million Key Balance Sheet Data (as of Dec 31) | | 2023 | 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,476,056 | $34,669,605 | | Total Assets | $21,282,215 | $43,826,383 | | Total Liabilities | $26,329,855 | $32,714,273 | | Total stockholders' equity (deficit) | $(5,047,640) | $11,112,110 | Key Cash Flow Data (Year Ended Dec 31) | | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,856,654) | $(18,088,429) | | Net cash provided by financing activities | $15,637,120 | $1,343,354 | | Net decrease in cash | $(23,858,549) | $(17,004,482) | Notes to Consolidated Financial Statements The notes detail the going concern uncertainty, terms of strategic agreements, equity financing activities, and significant non-dilutive grant funding - Note 2 (Going Concern): The financial statements were prepared on a going concern basis, but management notes that the company's history of losses and need for additional capital raise substantial doubt about this assumption[765][768] - Note 11 (Sale of Future Royalties): In December 2023, the company received $5.0 million from the sale of an interest in future XACIATO royalties, which was recorded as a liability[890][892][898] - Note 13 (Grant Awards): The company has received significant non-dilutive funding from the Bill & Melinda Gates Foundation for its DARE-LARC1 program, with a cumulative total of $28.4 million received as of December 31, 2023[916][917][918] - Note 8 (Stockholders' Equity): In 2023, the company raised approximately $7.0 million (net) from a registered direct offering of stock and warrants in September, and approximately $2.3 million (net) from its ATM sales agreement[860][861]