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Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-30 · 141 added, 128 removed, 168 unchanged (62% of the section changed)

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We and our wholly-owned subsidiaries operate in one business segment.

Our first product, XACIATO [zah-she-AH-toe] (clindamycin phosphate) vaginal gel, 2%, was approved by the FDA in December 2021 as a single-dose prescription medication for the treatment of bacterial vaginosis in female patients 12 years of age and older.

In March 2022, we entered into an exclusive global license agreement with an affiliate of Organon & Co., Organon International GmbH, or Organon, to commercialize XACIATO.

Accordingly, our potential future revenue from the commercialization of XACIATO will consist of royalties based on net sales and

milestone payments from Organon.

We anticipate the first commercial sale of XACIATO in the U.S.

in the first half of 2023.

The first FDA-approved product to emerge from our portfolio of women's health product candidates is XACIATO (clindamycin phosphate) vaginal gel 2%, or XACIATO (pronounced zah-she-AH-toe).

XACIATO was approved by the FDA in December 2021 as a single-dose prescription medication for the treatment of bacterial vaginosis in females 12 years of age and older.

In March 2022, we entered into an agreement with an affiliate of Organon & Co., Organon International GmbH, or Organon, which became fully effective in June 2022, whereby Organon licensed exclusive worldwide rights to develop, manufacture and commercialize XACIATO.

Accordingly, our

potential future revenue from the commercialization of XACIATO will consist of royalties based on net sales and milestone payments from Organon.

Organon commenced U.S.

marketing of XACIATO in the fourth quarter of 2023.

Our product pipeline includes diverse programs that target unmet needs in women's health in the areas of contraception, vaginal health, reproductive health, menopause, sexual health and fertility, and aim to expand treatment options, enhance outcomes and improve ease of use for women.

We are primarily focused on progressing the development of our existing portfolio of product candidates.

However, we are also exploring opportunities to expand our portfolio by leveraging assets to which we hold rights or obtaining rights to new assets, with continued focus solely on women's health.

Our current portfolio includes three product candidates in advanced clinical development:

• Ovaprene® , a hormone-free, monthly contraceptive;

• Sildenafil Cream, 3.6% , a proprietary cream formulation of sildenafil for topical administration to the vulva and vagina for the treatment of female sexual arousal disorder;

• DARE-HRT1 , a combination bio-identical estradiol and progesterone intravaginal ring, for the treatment of menopausal symptoms, including vasomotor symptoms, as part of hormone therapy following menopause;

Our portfolio also includes six product candidates in Phase 1 or Phase 1/2 clinical development or that we believe are Phase 1-ready:

• DARE-VVA1 , a proprietary formulation of tamoxifen for intravaginal administration being developed to treat moderate to severe vulvar vaginal atrophy in women with or at risk for hormone-receptor positive (HR+) breast cancer;

However, we also explore opportunities to expand our portfolio by leveraging assets to which we hold rights or obtaining rights to new assets, with continued focus solely on women's health.

Our current portfolio includes five product candidates in advanced clinical development (Phase 2-ready to Phase 3):

• Ovaprene® , a hormone-free, monthly intravaginal contraceptive;

• Sildenafil Cream, 3.6% , a proprietary cream formulation of sildenafil for topical administration to the female genitalia on demand for the treatment of female sexual arousal disorder (FSAD);

• DARE-HRT1 , an intravaginal ring designed to deliver both bio-identical estradiol and progesterone together, continuously over a 28-day period, for the treatment of moderate-to-severe vasomotor symptoms, as part of menopausal hormone therapy;

• DARE-VVA1 , a proprietary formulation of tamoxifen for intravaginal administration being developed as a hormone-free alternative to estrogen-based therapies for the treatment of moderate-to-severe dyspareunia, or pain during sexual intercourse, a symptom of vulvar and vaginal atrophy associated with menopause;

• DARE-CIN , a proprietary, fixed-dose formulation of lopinavir and ritonavir in a soft gel vaginal insert for the treatment of cervical intraepithelial neoplasia (CIN) and other human papillomavirus (HPV)-related pathologies.

Our portfolio also includes five product candidates in Phase 1 clinical development or that we believe are Phase 1-ready:

• DARE-PDM1, a proprietary hydrogel formulation of diclofenac, a nonsteroidal anti-inflammatory drug, for vaginal administration as a treatment for primary dysmenorrhea;

• DARE-204 and DARE-214 , injectable formulations of etonogestrel designed to provide contraception over 6-month and 12-month periods, respectively;

• DARE-FRT1 , an intravaginal ring containing bio-identical progesterone for broader luteal phase support as part of an in vitro fertilization treatment plan;

• DARE-PTB1 , an intravaginal ring containing bio-identical progesterone for the prevention of preterm birth.

In addition, our portfolio includes four pre-clinical stage product candidates:

• DARE-FRT1 , an intravaginal ring designed to deliver bio-identical progesterone continuously for up to 14 days for luteal phase support as part of an in vitro fertilization treatment plan;

• DARE-PTB1 , an intravaginal ring designed to deliver bio-identical progesterone continuously for up to 14 days for the prevention of preterm birth.

In addition, our portfolio includes five preclinical stage programs:

• DARE-LARC1 , a contraceptive implant delivering levonorgestrel with a woman-centered design that has the potential to be a long-acting, yet convenient and user-controlled contraceptive option;

• DARE-GML , an intravaginally-delivered potential multi-target antimicrobial agent formulated with glycerol monolaurate (GML), which has shown broad antimicrobial activity, killing bacteria and viruses;

• DARE-LBT , a novel hydrogel formulation for vaginal delivery of live biotherapeutics to support vaginal health;

• DARE-RH1 , a novel approach to non-hormonal contraception for both men and women by targeting the CatSper ion channel;

The product candidates we are developing will require review and approval from the FDA, or a comparable foreign regulatory authority, prior to being marketed or sold.

• DARE-PTB2 , a novel approach for the prevention and treatment of idiopathic preterm birth through inhibition of a stress response protein.

The product candidates and potential product candidates in our portfolio will require review and approval from the FDA, or a comparable foreign regulatory authority, prior to being marketed or sold.

"BUSINESS," in Part I of this report for additional information regarding our product and product candidates.

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We expect our research and development expenses will continue to represent the majority of our operating expenses for at least the next twelve months.

In 2023, we expect to focus our resources on advancement of Ovaprene, Sildenafil Cream, 3.6%, DARE-HRT1 and our other product candidates that have reached the human clinical study development phase.

In addition, we expect to incur significant research and development expenses for the DARE-LARC1 program for the next several

years, but we also expect such expenses will be supported by non-dilutive funding provided under a grant agreement we entered into in June 2021.

The process of developing and obtaining regulatory approvals for prescription drug and drug/device products in the United States and in foreign jurisdictions is inherently uncertain and requires the expenditure of substantial financial resources without any guarantee of success.

Until we secure additional capital to fund our operating needs, we will focus our resources primarily on advancement of Ovaprene and Sildenafil Cream.

In addition, we expect to incur significant research and development expenses for the DARE-LARC1 program for the next several years, but we also expect such expenses will be supported by non-dilutive funding provided under a grant agreement we entered into in June 2021.

As discussed below, we will need to raise substantial additional capital to continue to fund our operations and execute our current business strategy.

To the extent we receive regulatory approvals, such as the FDA’s approval of XACIATO, the commercialization of any product and compliance with subsequently applicable laws and regulations requires the expenditure of further substantial financial resources without any guarantee of commercial success.

We are also subject to a number of other risks common to biopharmaceutical companies, including, but not limited to, dependence on key employees, reliance on third-party collaborators, service providers and suppliers, being able to develop commercially viable products in a timely and cost-effective manner, dependence on intellectual property we own or in-license and the need to protect that intellectual property and maintain those license agreements, uncertainty of market acceptance of products, uncertainty of third-party payor coverage, pricing and reimbursement for products, rapid technology change, intense competition, compliance with government regulations, product liability claims, and exposure to cybersecurity threats and incidents.

To the extent we receive regulatory approvals to market and sell our product candidates, the commercialization of any product and compliance with subsequently applicable laws and regulations requires the expenditure of further substantial financial resources without any guarantee of commercial success.

The amount of post-approval financial resources required for commercialization and the potential revenue we may receive from sales of any product will vary significantly depending on many factors, including whether, and the extent to which, we establish our own sales and marketing capabilities and/or enter into and maintain commercial collaborations with third parties with established commercialization infrastructure.

We are also subject to a number of other risks common to biopharmaceutical companies, including, but not limited to, dependence on key employees, reliance on third-party collaborators and service providers, being able to develop commercially viable products in a timely and cost-effective manner, dependence on intellectual property we own or in-license and the need to protect that intellectual property and maintain those license agreements, uncertainty of market acceptance of products, uncertainty of third-party payor coverage, pricing and reimbursement for products, rapid technology change, intense competition, compliance with government regulations, product liability, and exposure to cybersecurity threats and incidents.

The COVID-19 pandemic remains an evolving and uncertain risk to our business, operating results, financial condition and stock price.

To date, we believe the pandemic contributed to a slower than expected initial pace of enrollment in our exploratory Phase 2b clinical study of Sildenafil Cream, 3.6% and delays in commencement of clinical studies and nonclinical testing for more than one of our earlier stage clinical programs, but it has not had a material adverse effect on our business as a whole.

Future impacts may include delay or disruption of our clinical trials, including as a result of potential constraints or disruptions in the supply chains for our product candidates.

Continued uncertainty regarding the duration and impact of the pandemic on the U.S.

and global economies, healthcare systems, workplace environments and capital markets, preclude any prediction as to the ultimate effect of the pandemic on our business.

See the risk factor in Part I, Item 1A of this report titled, Business interruptions resulting from the COVID-19 pandemic or future public health crises, natural disasters or telecommunication and electrical failures may materially and adversely affect our business, operating results and financial condition.

Recent Events

Termination of 2021 ATM Sales Agreements

In April and October 2021, we entered into common stock sales agreements with SVB Securities LLC relating to the offering and sale of shares of our common stock from time to time in ATM offerings through SVB Securities, acting as sales agent.

In March 2023, we provided notice to SVB Securities to terminate both agreements, and the agreements terminated on March 30, 2023.

We are exploring entering into a new sales agreement for an ATM offering, but there can be no assurance that we will establish a new ATM facility.

Initiation of Phase 1 Study of DARE-PDM1

As discussed in ITEM 1.

"BUSINESS," in Part I of this report, in February 2023, we announced the start of a Phase 1 study of DARE-PDM1 which is being conducted by our wholly owned subsidiary in Australia.

Positive Topline Data from DARE-HRT1 Phase 1/2 Clinical Study

As discussed in ITEM 1.

"BUSINESS," in Part I of this report, in January 2023, we announced topline data from our Phase 1/2 clinical study of DARE-HRT1, as well as plans to progress DARE-HRT1 directly into a Phase 3 clinical study to support an NDA for DARE-HRT1 for the treatment of moderate to severe vasomotor symptoms due to menopause.

Receipt of Payment Under 2021 DARE-LARC1 Grant Agreement

In December 2022, we received a grant payment of approximately $4.4 million under our June 2021 grant agreement with the Bill & Melinda Gates Foundation, or the Foundation.

We are eligible to receive up to approximately $49.0 million in the aggregate of non-dilutive funding under this agreement.

As of the date of this report, we have received payments totaling approximately $23.9 million under the agreement.

Future grant payments are contingent upon the DARE-LARC1 program's achievement of development and reporting milestones specified in the agreement.

Receipt of Grant to Develop Novel Hydrogel Formulation for Vaginal Delivery of Live Biotherapeutics to Support Vaginal Health

In November 2022, we entered into a grant agreement with the Foundation for approximately $585,000 to support activities related to development of a vaginal thermosetting gel formulation for the delivery of live biotherapeutics that can be reconstituted at the point of care.

We received payment of the full amount of the grant, and DARE-LBT program activities are being funded by this grant.

Positive Topline Data from DARE-VVA1 Phase 1/2 Clinical Study

As discussed in ITEM 1.

"BUSINESS," in Part I of this report, in November 2022, we announced topline data from our Phase 1/2 clinical study of DARE-VVA1.

Subject Screening Completed for Exploratory Phase 2b RESPOND Study of Sildenafil Cream, 3.6%

Sildenafil Cream Positive End-of-Phase 2b Meeting with FDA

As discussed in ITEM 1.

"BUSINESS," in Part I of this report, in November 2022, we announced that subject screening for the exploratory Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6% was complete and that topline data are targeted for the second quarter of 2023.

Ovaprene IDE Application Approval for Phase 3 Clinical Study

"BUSINESS" in Part I of this report, in January 2024, we announced the successful completion of an end-of-Phase 2 meeting with the FDA supporting advancement of Sildenafil Cream for the treatment of FSAD to Phase 3 clinical development.

Noncompliance with Nasdaq’s Minimum Bid Price Requirement

On January 17, 2024, the Nasdaq Staff notified us that because we had not timely regained compliance with the Minimum Bid Price Requirement, our common stock was subject to delisting from The Nasdaq Capital Market unless we timely requested a hearing before the Nasdaq Hearings Panel, or the Panel, to appeal the Nasdaq Staff’s delisting determination.

We submitted a timely request for a hearing before the Panel, which stayed the suspension and delisting of our common stock pending the decision of the Panel and the expiration of any extension period granted by the Panel.

On February 27, 2024, the Panel notified us that, based on its review of the written record, which included our commitment to effect a reverse stock split if necessary to regain compliance with the Minimum Bid Price Requirement, it determined to grant us a temporary exception until July 15, 2024 (the “Exception Period”) to regain compliance with the Minimum Bid Price Requirement.

The Panel granted the temporary exception subject to us obtaining board of directors and stockholder approval for and effecting the reverse stock split on or before specified dates that would enable us to demonstrate compliance with the Minimum Bid Price Requirement by evidencing a closing bid price of $1.00 or more per share for a minimum of ten consecutive trading sessions on or before July 15, 2024.

The Panel advised us that, during the Exception Period, we must provide Nasdaq with prompt notification of any significant events that may affect our compliance with Nasdaq listing requirements, including any event that may call into question our ability to meet the terms of the temporary exception.

The Panel also advised us that should we fail to meet any of the terms of the temporary exception, our common stock will immediately be delisted.

Receipt of Grant to Support Biotherapeutic Product Development

On January 17, 2024, we entered into a grant agreement with the Bill & Melinda Gates Foundation, or the Foundation, pursuant to which we received $750,000 in grant funding to gather and analyze data on the global bacterial biologic supply chain to help the Foundation identify potential contract manufacturing organization partners for manufacturing clinical and commercial supplies of bacteria-based biotherapeutic products.

Royalty Interest Financing Agreement

On December 21, 2023, we entered into a royalty interest financing agreement with United in Endeavour, LLC, or United, pursuant to which we sold to United an interest in royalty and milestone payments we receive from Organon based on net sales of XACIATO for a purchase price of up to $12 million.

We received a payment of $5.0 million from United on the date of the agreement, and until December 31, 2026, we may, in our sole discretion, elect to receive up to three additional payments from United of up to an aggregate of $7 million.

Pursuant to the terms of the agreement, on December 21, 2023, we issued to United a warrant to purchase up to 5.0 million shares of our common stock.

In addition, for every additional $1.0 million payment we elect to receive from United under the agreement, we agreed to issue warrants to purchase up to 1.0 million shares of our common stock, for an aggregate of warrants to purchase up to 7.0 million shares of our common stock.

The initial warrant has, and each additional warrant, if any, will have, an exercise price of $0.3467 per share, subject to customary adjustments, and is or will be exercisable, in full or in part, at any time from the date of issuance on or prior to the fifth anniversary of the date of issuance of the particular warrant.

For more information, see ITEM 1.

“BUSINESS— Royalty Interest Financing Agreement” in Part I of this report and Note 11 “Sale of Future Royalties” to the accompanying consolidated financial statements.

Positive Topline Data from Phase 1 Clinical Study of DARE-PDM1

As discussed in ITEM 1.

"BUSINESS," in Part I of this report, in October 2022, we announced that the FDA approved our Investigational Device Exemption (IDE) application for a single arm, open-label pivotal contraceptive efficacy study of Ovaprene.

"BUSINESS" in Part I of this report, on December 20, 2023, we announced positive topline data from our Phase 1 clinical study of DARE-PDM1.

Financial Overview

To date we have generated $10.0 million in revenue, all of which represents the upfront payment under our license agreement with Organon to commercialize XACIATO, which is recognized as license fee revenue.

In the future, we may generate revenue from royalties and commercial milestones based on the net sales of XACIATO, from product sales of other approved products, if any, and from license fees, milestone payments, research and

development payments in connection with strategic collaborations.

To date we have generated approximately $12.8 million in revenue, all from payments received under our license agreement with Organon to commercialize XACIATO.

In the future, we expect to continue to generate revenue from royalties based on the net sales of XACIATO and we may generate revenue from commercial milestones based on the net sales of XACIATO, from product sales of other approved products, if any, and from license fees, milestone payments, and research and development payments in connection with strategic collaborations.

Our ability to generate such revenue, with respect to XACIATO, will depend on the extent to which its commercialization is successful, and with respect to our product candidates, will depend on their successful clinical development, the receipt of regulatory approvals to market such product candidates and the eventual successful commercialization of products.

If the commercialization of XACIATO is not successful or we fail to complete the development of our product candidates in a timely manner, or to receive regulatory approval for such product candidates, our ability to generate future revenue and our results of operations would be materially adversely affected.

If XACIATO is not commercially successful or we fail to complete the development of our product candidates in a timely manner, or to receive regulatory approval for such product candidates, our ability to generate future revenue and our results of operations would be materially adversely affected.

Research and Development Expenses

The majority of our operating expenses during a fiscal year are research and development expenses, a significant portion of which, excluding those funded by non-dilutive grants, are associated with the clinical development for our product candidates that have reached the human clinical study development phase.

Research and development expenses include research and development costs for our product candidates and transaction costs related to our acquisitions.

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• internal costs associated with activities performed by our research and development organization and generally benefit multiple programs.

We recognize the Australian Research and Development Tax Incentive Program, or the Tax Incentive, as a reduction of research and development expense.

Investment in the development of and seeking regulatory approval for our clinical-stage and Phase 1-ready product candidates and the development of any other potential product candidates we may advance into and through clinical trials in the pursuit of regulatory approvals, will increase our research and development expenses.

Activities associated with the foregoing will require a significant increase in investment in regulatory support, clinical supplies, inventory build-up related costs, and the payment of success-based milestones to licensors.

In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to, among other factors, license fee and/or milestone payments.

Until the first commercial sale of XACIATO, we recognized contract manufacturing expenses associated with producing commercial supplies of XACIATO and costs of regulatory affairs activities related to XACIATO as research and development expenses.

Following the first commercial sale of XACIATO, and during the interim period when we were the NDA holder of XACIATO and provided commercial supplies of XACIATO to Organon, those expenses are recognized as general and administrative expenses.

We recognize the Australian Research and Development Tax Incentive Program, or the Tax Incentive, as a reduction of research and development expenses.

The amounts are determined based on our eligible research and development expenditures and are non-refundable, provided that in order to qualify for the Tax Incentive the filing entity must have revenue of less than AUD $20.0 million during the tax year for which a reimbursement claim is made and cannot be controlled by an income tax exempt entity.

The Tax Incentive is recognized when there is reasonable assurance that the Tax Incentive will be received, the relevant expenditure has been incurred, and the amount can be reliably measured or reliably estimated.

In 2022, our research and development expenses consisted primarily of costs associated with the continued development of Ovaprene and Sildenafil Cream 3.6%.

We expect research and development expenses to increase in the future as we continue to invest in the development of and seek regulatory approval for our clinical-stage and Phase 1-ready product candidates and as any other potential product candidates we may develop are advanced into and through clinical trials in the pursuit of regulatory approvals.

Such activities will require a significant increase in investment in regulatory support, clinical supplies, inventory build-up related costs, and the payment of success-based milestones to licensors.

We receive funding through grants that support activities related to the development of certain of our product candidates.

As we incur eligible expenses under those grants, we recognize grant funding in the statements of operations as a reduction to research and development expenses (contra-research and development expense).

For more information, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies – Grant Funding, to our consolidated financial statements contained herein.

For the years ended December 31, 2023 and 2022, we recognized contra-research and development expense of approximately $9.3 million and $5.6 million, respectively.

Conducting clinical trials necessary to obtain regulatory approval is costly and time consuming.

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General and Administrative Expenses

General and administrative expenses consist of personnel costs, facility expenses, expenses for outside professional services, including legal, audit and accounting services.

General and administrative expenses consist of personnel costs, facility expenses, expenses for outside professional services, including legal, audit and accounting services, commercial-readiness expenses, and royalty and milestone expenses.

Personnel costs consist of salaries, benefits and stock-based compensation.

Facility expenses consist of rent and other related costs.

Commercial-readiness expenses consist of consultant and advisor costs.

Royalty and milestone expenses consist of payments we owe under our in-license agreements.

Recently Issued Accounting Standards

From time to time, the Financial Accounting Standards board, or FASB, or other standard setting bodies issue new accounting pronouncements.

Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update.

Updates to the FASB Accounting Standards Codification, or ASC, are communicated through issuance of an Accounting Standards Update.

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements.

We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

We have evaluated recently issued

accounting pronouncements and determined that there is no material impact on our financial position or results of operations.

Critical Accounting Policies and Estimates

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Revenue Recognition

Under Accounting Standards Codification Topic 606, or ASC 606, we recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

Under ASC Topic 606, or ASC 606, we recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

To determine revenue recognition for contracts with customers, we perform five steps:

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At contract inception, we assess the goods or services agreed upon within each contract, assess whether each good or service is distinct, and determines those that are performance obligations.

We then recognizes as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

We then recognize as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

In a contract with multiple performance obligations, we develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations.

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We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

To date, we have recognized $10.0 million in license fee revenue, all of which represents the upfront payment due under our license agreement for XACIATO.

recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, we have not recognized any royalty revenue.

To date, we have recognized $11.0 million in license fee revenue, all from payments received under our license agreement with Organon to commercialize XACIATO.

At the inception of each arrangement in which we are a licensor and that includes developmental, regulatory or commercial milestones, we evaluate whether achieving the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments not within our control, such as where achievement of the specified milestone depends on activities of a third party or regulatory approval, are not considered probable of being achieved until the specified milestone occurs.

To date, we have recognized $1.8 million of milestone revenue, which represents the $1.8 million

milestone payment we received under our license agreement with Organon in connection with the first commercial sale of XACIATO.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, we have recognized approximately $7,900 of royalty revenue.

Product Supply.

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If we are in the capacity of an agent, revenues are recognized on a net basis.

To date, we have not recognized any revenue associated with product supply arrangements.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

To date, we have not recognized any milestone revenue.

To date, we have recognized approximately $205,000 in revenue (and $201,000 in other expense attributed to the cost of revenue) associated with our XACIATO product supply arrangement, which is recorded in other income in our consolidated statements of operations and comprehensive loss.

In connection with the transfer of the NDA for XACIATO to Organon in December 2023, that arrangement was terminated and we will not recognize product supply revenue associated with that arrangement in the future.

Stock-Based Compensation

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Our clinical trial accruals are dependent upon accurate reporting by CROs and other third-party vendors.

Although we do not expect our estimates to differ materially from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low for any particular period.

too low for any particular period.

For the years ended December 31, 2023 and December 31, 2022 there were no material adjustments to our prior period estimates of accrued expenses for clinical trials.

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License fee revenue $ 1,000,000 $ 10,000,000 $ (9,000,000) (90) %

Milestone revenue 1,800,000 — 1,800,000 — %

Royalty revenue

7,885 — 7,885 — %

Total revenue 2,807,885 10,000,000 (7,192,115) (72) %

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Other income 778,489 437,750 340,739 78 %

Gain on extinguishment of note payable — 369,887 (369,887) (100) %

Net loss $ (30,161,391) $ (30,947,738) $ 786,347 (3) %

License fee revenue for the year ended December 31, 2022 relates to our license agreement with Organon to commercialize XACIATO.

We earned $10.0 million in revenue related to the transfer of the license and related know-how to Organon upon effectiveness of the agreement on June 30, 2022.

We did not recognize any revenue for the year ended December 31, 2021.

Revenues for the years ended December 31, 2023 and 2022 related to our license agreement with Organon to commercialize XACIATO.

For 2023, we recognized $1.0 million in license fee revenue upon execution of the amendment to the license agreement in July 2023, $1.8 million in milestone revenue in connection with the first commercial sale of XACIATO, and approximately $7,900 in royalties from net sales of XACIATO in the fourth quarter.

For 2022, we recognized $10.0 million in license fee revenue related to the transfer of the license and related know-how to Organon upon effectiveness of the license agreement in June 2022.

General and administrative expenses

The increase of approximately $2.9 million in general and administrative expenses from 2021 to 2022 was primarily attributable to increases in (i) professional services expenses of approximately $1.5 million, (ii) stock-based compensation expense of approximately $406,000, (iii) personnel costs of approximately $363,000, (iv) general corporate overhead expenses of approximately $307,000, and (v) expenses related to commercial-readiness activities for XACIATO of approximately $294,000.

The increase of approximately $0.9 million in general and administrative expenses from 2022 to 2023 was primarily attributable to (i) a $0.5 million commercial milestone due under our license agreement for XACIATO, (ii) $0.4 million of commercial-readiness expenses related to XACIATO, (iii) a one-time fraud loss of approximately $0.2 million, net of proceeds we received under an insurance policy, related to criminal fraud commonly referred to as "business email compromise fraud" to which we were subject, and (iv) an increase in stock-based compensation expense of approximately $0.2 million.

The foregoing were partially offset by decreases in personnel costs of approximately $0.6 million due to decreased bonus expense, and general corporate overhead, including rent and facilities expenses, of approximately $26,000.

Research and development expenses

The decrease of approximately $575,000 in research and development expenses from 2021 to 2022 was primarily attributable to decreases in (i) costs related to development activities for XACIATO of approximately $4.1 million, (ii) costs related to manufacturing and regulatory affairs activities for Ovaprene of approximately $1.7 million, and (iii) costs related to development activities for our preclinical programs and other development expenses of approximately $1.3 million.

Such decreases were partially offset by increases in (a) costs related to development activities for Sildenafil Cream, 3.6% of approximately $4.0 million, (b) costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately $1.3 million, (c) personnel costs of approximately $892,000, (d) rent and facilities expenses of $170,000 attributable to the allocation of a portion of rent and facilities expense included in general and administrative in 2021 to research and development in 2022, and (e) stock-based compensation expense of approximately $152,000.

The decrease of approximately $8.5 million in research and development expenses from 2022 to 2023 was primarily attributable to decreases in (i) costs related to development activities for Sildenafil Cream of approximately $6.4 million, (ii) costs related to manufacturing and regulatory affairs activities for Ovaprene of approximately $2.0 million, (iii) costs related to development activities for XACIATO of approximately $0.2 million, (iv) rent and facilities expenses of approximately $0.1 million, and (v) costs related to development activities for our preclinical programs and other development expenses of approximately $69,000.

Such decreases were partially offset by increases in (a) costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately $0.2 million, and (b) stock-based compensation expense of approximately $0.1 million.

License fee expenses

For each of the years ended December 31, 2023 and December 31, 2022 we accrued or paid $100,000 of the annual license maintenance fee payable under our license agreement related to DARE-HRT1.

See Note 3 "Strategic Agreements— Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements for more information about our license agreements.

Other income and gain on extinguishment of note payable

The increase of $435,230 in other income from 2021 to 2022 was primarily due to an increase in interest earned on cash balances in 2022.

The $369,887 recorded as a gain on extinguishment of note payable and debt forgiveness income represents the forgiveness of all the principal and accrued interest of the loan we obtained under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act, administered by the U.S.

Small Business Administration, which forgiveness occurred during the first quarter of 2021.

For further discussion of this annual license maintenance fee, see Note 3 "Strategic Agreements— Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements.

The increase of $0.3 million in other income from 2022 to 2023 was primarily due to an increase in interest earned on cash balances in 2023 due to higher interest rates.

Liquidity and Capital Resources

Plan of Operations and Future Funding Requirements

At December 31, 2022, our accumulated deficit was approximately $141.1 million, our cash and cash equivalents were approximately $34.7 million, our deferred grant funding liabilities under our grant agreements related to DARE-LARC1 and DARE-LBT were approximately $17.7 million and $573,000, respectively (representing grant funds received that may be applied solely toward direct costs and a portion of indirect costs for the development of those programs and which are included in cash and cash equivalents), and our working capital was approximately $11.4 million.

We incurred a loss of operations of approximately $30.9 million and had negative cash flow from operations of approximately $18.1 million for the year ended December 31, 2022.

We expect to incur significant losses from operations and negative cash flows from operations for the foreseeable future as we continue to develop and seek to bring to market our existing product candidates and as we seek to potentially acquire, license and develop additional product candidates.

We expect our primary uses of capital to be staff-related expenses, the cost of clinical trials and regulatory activities related to our product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, payments to third-party licensors upon the occurrence of commercial milestones for XACIATO and development milestones for our product candidates pursuant to terms of the agreements under which we acquired or in-licensed rights to those programs, legal expenses, other regulatory expenses and general overhead costs.

Based on current development plans for our product candidates, we anticipate both our general and administrative and research and development expenses to increase in 2023 compared to 2022 as we continue to focus on the advancement of Ovaprene, Sildenafil Cream, 3.6%, DARE-HRT1 and our other product candidates that have reached the human clinical study development phase.

If the first commercial sale of XACIATO in the U.S.

occurs in the first half of 2023 as expected, we will receive a $2.5 million milestone payment and we will be eligible to receive royalty payments at rates in the low double-digits based on annual net sales of XACIATO.

After taking into account our royalty payment obligations under our in-license agreement for XACIATO, we do not expect royalty payments received during 2023 to materially affect our cash resources or requirements.

Our general and administrative expenses for 2023 are expected to increase primarily due to increased personnel costs and other general corporate overhead, and are expected to include costs related to commercial-readiness activities and obtaining commercial supply of XACIATO from our contract manufacturer.

Under the terms of our license agreement with Organon, Organon will purchase XACIATO from us at a price equal to our manufacturing costs plus a single digit percentage markup.

As a result, we do not anticipate our costs for providing XACIATO to Organon will have a material impact on our cash resources and requirements.

Following commercial launch of XACIATO, we expect our general and administrative expenses will include payments by us under our in-license agreement for XACIATO, including a $500,000 milestone payment upon first commercial sale of XACIATO in the U.S.

and royalty payments at rates in the high single-digit to low double-digits based on annual net sales of XACIATO.

The amount of our research and development expenses for 2023 is difficult to predict with certainty and will depend on the pace and extent of our research and development activities.

Factors that impact the pace and extent of our research and development activities and, therefore our research and development spend include, without limitation, our cash resources, reprioritization of development programs and activities, the scope, timing of commencement, and rate of progress of our clinical trials and preclinical studies, the cost and timing of manufacture and receipt of clinical supplies, timing of regulatory approval of a clinical study or alignment on study design, the results of our clinical trials and preclinical studies, and the extent to which we establish strategic collaborations or other arrangements and the terms of such arrangements.

Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying financial statements.

The amount and timing of our capital needs have and will continue to depend

highly on many factors, including the pace at which our clinical development programs proceed and the expenses associated therewith.

At December 31, 2023, our accumulated deficit was approximately $171.2 million, our cash and cash equivalents were approximately $10.5 million, and our working capital deficit was approximately $2.9 million.

We incurred a loss of approximately $30.2 million and had negative cash flow from operations of approximately $38.9 million for the year ended December 31, 2023.

Our cash and cash equivalents at December 31, 2023 represented funds received under grant agreements related to DARE-LARC1 and DARE-LBT and such funds may be applied solely toward direct costs for the development of DARE-LARC1 and DARE-LBT, other than approximately 10% of such funds, which may be applied toward general overhead and administration expenses that support our entire operations.

For additional information about these grant agreements, see "—Deferred Grant Funding" and "—Grant Agreements," below.

We expect to incur significant losses from operations and negative cash flows from operations for the foreseeable future as we continue to develop and seek to bring to market our product candidates.

We can control the timing of when we incur a majority of those expenses.

During the first half of 2023, our research and development expenses will be primarily associated with the anticipated completion of our exploratory Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6%, manufacturing activities in preparation for the commencement of our pivotal Phase 3 clinical study of Ovaprene, and variable expenses for our other programs, the timing of when we incur such expenses we can control.

We closely monitor our cash resources and, if all of our clinical development programs proceed on currently anticipated timelines, we will need additional capital by the middle of this year to fund operations and the continued development of all such programs on such timelines.

We are in ongoing discussions with multiple potential third-party sources of additional capital and we believe that we will be able to obtain sufficient capital when needed in a manner that will not materially impact the development of our product candidates.

However, many aspects of our ability to obtain additional capital are not entirely within our control and there can be no assurance that we will receive additional capital as and when needed.

Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of our common stock.

In large part, we can control the pace of advancement of our development programs and therefore, we can control the timing of when we incur most of our research and development expenses.

Our future funding requirements could also include significant costs related to commercialization of our product candidates, if approved, depending on the type, nature and terms of commercial collaborations we establish, and in particular, if we determine to engage in commercialization activities directly as opposed to through a third-party collaborator.

We anticipate our general and administrative expenses for 2024 will be consistent with our general and administrative expenses for 2023.

Under the royalty interest financing agreement we entered into in December 2023, we may, in our sole discretion, elect to receive up to an additional aggregate amount of $7.0 million.

Under our license agreement relating to XACIATO, we may receive royalty payments based on net sales of XACIATO, however, we do not expect such royalty payments for 2024 to materially impact our cash resources or requirements.

We closely monitor our limited cash resources and we have implemented cost-savings measures, primarily by controlling our spend on research and development activities related to clinical-stage programs other than Ovaprene and Sildenafil Cream.

Our research and development expenses for 2024, until we secure additional capital to fund our operating needs, will continue to be primarily associated with manufacturing activities in connection with our ongoing pivotal Phase 3 clinical study of Ovaprene and activities, including regulatory affairs activities, related to advancing Sildenafil Cream toward a Phase 3 clinical study.

However, we plan to continue to advance preclinical development of DARE-LARC1, the costs of which are being supported by grant funding.

We will need additional capital to fund our operating needs into the third quarter of 2024 and to meet our current obligations as they become due.

We are in ongoing discussions with multiple potential third-party sources of additional capital, including non-dilutive sources of capital.

Many aspects of our ability to obtain additional capital are not entirely within our control and there can be no assurance that we will receive additional capital when needed, on

favorable terms, or at all.

If we cannot raise capital when needed, on favorable terms or at all, we will not be able to continue development of our product candidates, will need to reevaluate our planned operations and may need to delay, scale back or eliminate some or all of our development programs, reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations.

If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and stockholders may lose all or part of their investment in our common stock.

See the risk factor in Item 1A of Part I of this report titled, We will need to raise substantial additional capital to continue our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.

Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock.

We have also received a significant amount of cash through non-dilutive grants and strategic collaborations.

We will continue to evaluate and may pursue a variety of capital raising options on an on-going basis, including sales of equity (including sales of our common stock in ATM offerings), debt financings, government or other grant funding, collaborations, structured financings, and strategic alliances or other similar types of arrangements, to cover our operating expenses, and the cost of any license or other acquisition of new product candidates or technologies.

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Our ability to raise capital through sales of our common stock will depend on a variety of factors including, among others, market conditions, the trading price and volume of our common stock, our clinical and commercial developments, and investor sentiment.

In addition, macroeconomic factors and volatility in the financial market, which may be exacerbated in the short term by concerns over inflation, rising interest rates, economic recession, adverse developments affecting financial institutions or the financial services industry, failure of the U.S.

government to raise the federal debt ceiling, impacts of the war in Ukraine, strained relations between the U.S.

In addition, macroeconomic factors and volatility in the financial market, which may be exacerbated in the short term by concerns over inflation, interest rates, economic recession, adverse developments affecting financial institutions or the financial services industry, impacts of the wars in Ukraine and the Middle East, strained relations between the U.S.

and several other countries, and social and political discord and unrest in the U.S., among other things, may make equity or debt financings more difficult, more costly or more dilutive to our stockholders, and may increase competition for, or limit the availability of, funding from other potential third-party sources of capital, such as strategic collaborators and sources of grant funding.

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If we raise capital through collaborations, structured financings, strategic alliances or other similar types of arrangements, we may be required to relinquish some or all of our rights to potential revenue or to intellectual property rights for our product candidates on terms that are not favorable to us.

"RISK FACTORS—Risks Related to Our Financial Position and Capital Needs — We will need to raise substantial additional capital to continue our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all, ” above.

We prepared the accompanying consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business.

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The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.

Deferred Grant Funding

We have received substantial funding under grant agreements related to DARE-LARC1 and DARE-LBT.

Under these agreements, and under the agreement we received from the Foundation in January 2024 to fund activities related to bacteria-based live biotherapeutic product development, we generally receive grant funds before we incur the eligible expenses.

Funds received that have not been spent are recorded both as cash and cash equivalents and as a deferred grant funding liability in our consolidated balance sheets.

Our deferred grant funding liability also includes grant funds spent but not yet expensed in accordance with GAAP.

As of December 31, 2023, our deferred grant funding liability was approximately $13.7 million, which primarily consisted of unspent funds for the DARE-LARC1 program.

The balance of our deferred grant funding liability at December 31, 2023 primarily consisted of funds for the DARE-LARC1 program that have been spent but not yet expensed in accordance with GAAP.

For more information about these grant agreements, see "—Grant Agreements" below, and Note 2, Basis of Presentation and Summary of Significant Accounting Policies—Grant Funding, and Note 13, Grant Awards-Other Non-Dilutive Grant Funding to the accompanying consolidated financial statements.

The following table shows a summary of our cash flows for the periods indicated:

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Effect of exchange rate changes on cash and cash equivalents (9,585) (196,338)

Net increase (decrease) in cash $ (17,004,482) $ 47,004,620

Net decrease in cash

$ (23,858,549) $ (17,004,482)

Net cash used in operating activities

Cash used in operating activities during the year ended December 31, 2023 included the net loss of $30.2 million, decreased by non-cash stock-based compensation expense of approximately $2.5 million.

Components providing operating cash were an increase in accounts payable of approximately $1.4 million, a decrease in other receivables of approximately $0.8 million, and a decrease in prepaid expenses of approximately $0.5 million.

Components reducing operating cash were a decrease in accrued expenses of approximately $8.3 million, a decrease in deferred grant funding of approximately $4.6 million, an increase in deposits of $1.2 million primarily related to deposits paid for the construction of capital equipment, and a decrease in other non-current assets of approximately $10,000.

Cash used in operating activities during the year ended December 31, 2022 included the net loss of $30.9 million, decreased by non-cash stock-based compensation expense of approximately $2.2 million.

Components providing operating cash were an increase in accrued expenses of approximately $7.8 million, and an increase in deferred grant funding of approximately $7.8 million.

Components reducing operating cash were an increase in prepaid expenses of approximately $4.2 million, an increase in other receivables of approximately $558,000, and a decrease in accounts payable of approximately $75,000.

Cash used in operating activities during the year ended December 31, 2021 included the net loss of $38.7 million, decreased by non-cash stock-based compensation expense of approximately $1.6 million, and increased by the non-cash gain on extinguishment of the note payable and accrued interest of approximately $370,000.

Components providing operating cash were an increase in deferred grant funding of approximately $9.0 million, and an increase in accounts payable of approximately $1.1 million.

Components reducing operating cash were an increase in other receivables of approximately $685,000, an increase in prepaid expenses of approximately $622,000, and a decrease in accrued expenses of approximately $46,000.

Components reducing operating cash were an increase in prepaid expenses of approximately $4.2 million, an increase in other receivables of approximately $0.6 million, and a decrease in accounts payable of approximately $75,000.

Net cash used in investing activities

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Net cash provided by financing activities

Net cash provided by financing activities during the years ended December 31, 2022 and December 31, 2021 was approximately $1.3 million and $75.8 million, respectively, consisting primarily of net proceeds from sales of our common stock under our ATM sales agreements, and in 2021, our equity line.

Cash provided by financing activities during the year ended December 31, 2023 consisted of proceeds from (i) the sale of our common stock and warrants in the registered direct offering completed in September 2023 of approximately $7.0 million, (ii) the sale of future royalties of approximately $4.7 million, net, (iii) the sales of our common stock under our ATM sales agreement of approximately $2.3 million, net, (iv) the exercise of warrants of approximately $1.3 million, and (v) the financing of certain director and officer and other liability insurance premiums of approximately $0.6 million net of payments made of approximately $0.3 million.

Cash provided by financing activities of during the year ended December 31, 2022 consisted primarily of net proceeds from sales of our common stock under our ATM sales agreement.

License and Royalty Agreements

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During 2024, based on our current expectations regarding the development of our product candidates and sales of XACIATO, we expect to pay approximately $2.8 million in royalty and milestone payments under the license and development agreements.

For further discussion of these potential payments, see Note 3 "Strategic Agreements—Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements for more information about our license agreements.

For further discussion of these potential payments, see Note 3 "Strategic Agreements—Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements.

Grant Agreements

We have received substantial funding under grant agreements related to DARE-LARC1 and DARE-LBT.

In September 2023, following an assessment of our activities and the milestones we achieved to date, we received $4.5

million as the latest installment under the grant agreement to advance the preclinical development of DARE-LARC1.

Grant funds under these agreements, and under the agreement we received from the Foundation in January 2024 to fund activities related to bacteria-based live biotherapeutic product development, generally are received before we incur the eligible expenses.

Unspent grant funds are recorded as deferred grant funding liability in our consolidated balance sheets and our deferred grant funding liability as of December 31, 2023 primarily consisted of unspent grant funds for the DARE-LARC1 program.

For more information, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies—Grant Funding, and Note 13, Grant Awards-Other Non-Dilutive Grant Funding to the accompanying consolidated financial statements.

Other Contractual Obligations

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What changed 10-K

Item 7. Management’s Discussion and Analysis