Lipocine Inc. 10-Q

ITEM 1A. RISK FACTORS In addition to the other information set forth in this Report, consider the risk factors discussed in Part 1, “Item 1A. Risk Factors” in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 10, 2023, risk factors discussed in Item 1A of the Form 10-Q for the quarter ended March 31, 2023 filed with the SEC on May 11, 2023, and risk factors discussed in Item 1A of the Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 10, 2023, and the risk factors discussed in Item 1A of this Form 10-Q, which could materially affect our business, financial condition or future results. The risks described in the aforementioned report are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be not material also may materially adversely affect the Company’s business, financial condition and or operating results. The following are the risk factors that have materially changed from our risk factors included in our Form 10-K for the year ended December 31, 2022, filed with the SEC on March 10, 2023: Risks Related to Our Business and Industry Due to Antares’ termination of our License Agreement, we are seeking a new commercial partner for our FDA approved product TLANDO, however there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all TLANDO is currently our only product that has completed Phase 3 clinical trials. None of our other products have been approved for sale. Therefore, at this stage, our ability to realize revenue depends substantially on TLANDO’s successful commercialization. On October 2, 2023, we received notice from Antares of Antares’ termination of the License Agreement which stated that the License Agreement will terminate effective January 31, 2024. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue from Antares. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. On March 29, 2022, the FDA granted approval to TLANDO for testosterone replacement therapy in adult males indicated for conditions associated with a deficiency or absence of endogenous testosterone: primary hypogonadism (congenital or acquired) and hypogonadotropic hypogonadism (congenital or acquired). Our ability to realize royalty revenue, will depend on the commercialization efforts of Antares. If we are unable to find a new commercialization partner to successfully commercialize TLANDO, we may not realize any future revenue under the Antares License Agreement and our business could be adversely affected. Additionally, regulatory approval of TLANDO may be withdrawn and the failure to maintain regulatory approvals would prevent TLANDO from being marketed. Under the Pediatric Research Equity Act (“PREA”), the PREA requirement to assess the safety and effectiveness of TLANDO in pediatric patients will need to be addressed. The FDA required certain post-marketing studies including: (i) conduct an appropriately designed label comprehension and knowledge study that assesses patient understanding of key risk messages in the Medication Guide for TLANDO and (ii) conduct an appropriately designed one-year trial to evaluate development of adrenal insufficiency with chronic TLANDO therapy. Such studies have not yet been completed. If we or a future licensing partner do not complete these studies, or if the results of such studies are negative, our business, including our ability to successfully commercialize TLANDO, could be adversely affected. In the event that we seek regulatory approval of TLANDO outside the United States, such markets have requirements for approval of drug candidates with which we must comply prior to marketing. Obtaining regulatory approval for marketing of TLANDO in one country does not ensure we will be able to obtain regulatory approval in other countries but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in other countries. If T-replacement therapies are found, or are perceived, to create health risks, our ability to realize any revenue from TLANDO and LPCN 1111 could be materially adversely affected, and our business could be harmed. For TLANDO and LPCN 1111, if approved, physicians and patients may be deterred from prescribing and using T-replacement therapies, which could depress demand for TLANDO and compromise the successful commercialization of TLANDO and LPCN 1111, if approved. Certain publications have suggested potential health risks associated with T-replacement therapy, such as increased cardiovascular disease risk, including increased risk of heart attack or stroke, fluid retention, sleep apnea, breast tenderness or enlargement, increased red blood cells, development of clinical prostate disease, including prostate cancer, and the suppression of sperm production. These potential health risks are described in various articles, including the following publications: ● a 2014 publication in PLOS ONE, which found that, compared to the one year prior to beginning T-replacement therapy, the risk of heart attack doubled 90 days after the start of T deficiency treatment in older men regardless of their history of heart disease and was two to three times higher in men younger than 65 with a history of heart disease; ● a 2013 publication in the Journal of the American Medical Association , which reported that hypogonadal men receiving T-replacement therapy developed a 30% increase in the risk of stroke, heart attack and death; and ● a 2013 publication in BMC Medicine, which concluded that exogenous T increased the risk of cardiovascular-related events, particularly in trials not funded by the pharmaceutical industry. 42 Prompted by these events, the FDA announced on January 31, 2014, that it will investigate the risk of stroke, heart attack, and death in men taking FDA-approved testosterone products and that the FDA would hold a T-class Advisory Committee meeting on September 17, 2014, to discuss this topic further. The FDA has also asked health care professionals and patients to report side effects involving prescription testosterone products to the agency. Following the FDA’s announcement, the Endocrine Society, a professional medical organization, released a statement in February 2014 in support of further studies regarding the risks and benefits of FDA-approved T-replacement products for men with age-related T deficiency. Specifically, the Endocrine Society noted that large-scale randomized controlled trials are needed to determine the risks and benefits of T-replacement therapy in older men. In addition, the Endocrine Society recommended that patients should be informed of the potential cardiovascular risks in middle-aged and older men associated with T-replacement therapies. Also following the FDA’s announcement, Public Citizen, a consumer advocacy organization, petitioned the FDA to add a “black box” warning about the increased risks of heart attacks and other cardiovascular dangers to the product labels of all T-replacement therapies. In addition, this petition urged the FDA to delay its decision date on approving Aveed, a long-acting T-injectable developed by Endo, which was subsequently approved by the FDA in March 2014. In July 2014, the FDA responded to the Public Citizen petition and denied the petition. Additionally, in June 2014 the FDA announced that it would require the manufacturers of testosterone drugs to update the warning label to include blood clots including deep vein thrombosis and pulmonary embolism. At the T-class Advisory Committee meeting held on September 17, 2014, the Advisory Committee discussed (i) the identification of the appropriate patient population for whom T-replacement therapy should be indicated and (ii) the potential risk of major adverse cardiovascular events, defined as non-fatal stroke, non-fatal myocardial infarction and cardiovascular death associated with T-replacement therapy. At the meeting, 16 of the 21 members of the Advisory Committee voted that the FDA should require sponsors of testosterone products to conduct a post marketing study (e.g. observational study or controlled clinical trial) to further assess the potential cardiovascular risk. Further, 12 of these members voted that such post marketing study be required only if the T-replacement therapy is also approved for age-related hypogonadism. The Advisory Committee also held a meeting on September 18, 2014, to evaluate the safety and efficacy of JATENZO® (previously Rextoro), an oral TU submitted to the FDA by Clarus for the proposed indication of T-replacement therapy. 18 of the 21 members of the Advisory Committee voted that the overall benefit/risk profile of JATENZO® was not acceptable to support approval for T-replacement therapy. The Advisory Committee agreed that an oral TU as a T-replacement therapy is promising and that it would be of great value to patients to have an oral treatment option, but they did not believe the current JATENZO® data supported approval. On March 3, 2015, the FDA issued a safety announcement addressing the Advisory Committee’s recommendations and communicated its expectations related to label revisions and additional clinical requirements. The FDA’s safety assessment recommended the following label modifications/restrictions in the indicated population for T-replacement therapy: ● limiting use of T-replacement products to men who have low testosterone caused by certain medical conditions; ● prior to initiating use of T-replacement products, confirm diagnosis of hypogonadism by ensuring that serum testosterone has been measured in the morning on at least two separate days and that these concentrations are below the normal range; ● adding cautionary language stating that the safety and efficacy of TRT products with age-related hypogonadism have not been established; and ● adding cautionary language stating that some studies have shown an increased risk of myocardial infarction and stroke associated with use of T-replacement products. On March 29, 2022, the FDA approved TLANDO. As part of their approval, the FDA required the inclusion of certain warnings and precautions in our labeling for TLANDO, including a “black box warning,” including warnings relating to blood pressure increases and an indication that the safety and efficacy of TLANDO in males less than 18 years has not been established. These warnings may deter physicians and patients from using TLANDO, which could adversely affect our business. 43 The FDA has also required that certain post-marketing studies be conducted to (i) assess patient understanding of key risks relating to TLANDO and (ii) evaluate development of adrenal insufficiency with chronic TLANDO therapy. Negative outcomes from such studies could adversely affect the successful commercialization of TLANDO, which would adversely affect our ability to realize future revenue from TLANDO. We will not be able to successfully commercialize our product candidates without establishing sales, marketing and market access capabilities internally or through collaborators. We currently do not have a sales, marketing and market access staff. If and when any of our product candidates are commercialized, we may not be able to find suitable sales and marketing staff and collaborators for our product candidates. The outside collaborators we work with may not be adequate or successful and any collaborators could terminate or materially reduce the effort they direct to our products. The development of collaborations or an internal sales force and marketing, market access and sales capability will require significant capital, management resources and time. The cost of establishing such a sales force may exceed any potential product revenues and our marketing, market access and sales efforts may be unsuccessful. If we are unable to develop an internal marketing, market access and sales capability or if we are unable to enter into a marketing and sales arrangement with a third party on acceptable terms, we may be unable to successfully commercialize our product candidates. We previously entered into the Antares License Agreement for TLANDO with respect to TRT in the U.S. We received notice from Antares on October 2, 2023 of Antares’ termination of the License Agreement which stated that the License Agreement will terminate effective January 31, 2024. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue from Antares. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. Risks Related to Our Dependence on Third Parties We may enter into license agreements and/or collaborations with third parties for the development and commercialization of our drug candidates. If those collaborations, including are not successful, we may not be able to capitalize on the market potential of these drug candidates and may have to alter our development and commercialization plans for our products. Our drug development programs for our product candidates will require substantial additional cash to fund expenses. We have not yet established any collaborative arrangements relating to the development or commercialization of LPCN 1154, LPCN 2101, LPCN 1111, LPCN 1144, LPCN 1148, or LPCN 1107. We previously entered into the Antares License Agreement for TLANDO with respect to TRT in the U.S. We received notice from Antares on October 2, 2023 of Antares’ termination of the License Agreement which stated that the License Agreement will terminate effective January 31, 2024. As a result of the termination of the License Agreement, we do not anticipate recognizing any future material revenue from Antares. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. We intend to continue to develop our product candidates in the United States with or without a partner although our ability to advance these product candidates will depend on our capital resources and/or our ability to find a suitable partner to further develop our product candidates. We may also seek to enter into collaborative arrangements to develop and commercialize our product candidates outside the United States. We will face significant competition in seeking appropriate collaborators and these collaborations are complex and time-consuming to negotiate and document. We may not be able to negotiate collaborations on acceptable terms or in a timely manner, or at all. If that were to occur, we may have to curtail the development or delay commercialization of our product candidates in certain geographies, reduce the scope of our sales or marketing activities, reduce the scope of our development plans, or increase our expenditures and undertake development or commercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities either inside or outside of the United States on our own, we may need to obtain additional capital, which may not be available to us on acceptable terms, or at all. To the extent we have, and if we do enter into any further such arrangements with any third parties, we will likely have limited control over the amount and timing of resources that our partners dedicate to the development or commercialization of our product candidates. As a result, our ability to generate revenue from such arrangements will depend on the efforts of such third parties. 44 Our ability to generate revenues from this and other collaborative arrangements will depend on our collaborators’ abilities and efforts to successfully perform the functions agreed to with them in these arrangements. License agreements and/or collaborations involving our drug candidates pose numerous risks to us, including the following: ● partners have significant discretion in determining the efforts and resources that they will apply to these efforts and may not perform their obligations as expected; ● partners may de-emphasize or not pursue development and commercialization of our drug candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the partners’ strategic focus, including as a result of a sale or disposition of a business unit or development function, or available funding or external factors such as an acquisition that diverts resources or creates competing priorities; ● partners may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a drug candidate, repeat or conduct new clinical trials or require a new formulation of a drug candidate for clinical testing; ● partners could independently develop, or develop with third parties, products that compete directly or indirectly with our products or drug candidates if the partners believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; ● partners may not be able to acquire and maintain supplier and manufacturer relationships necessary to successfully commercialize our products; ● a partner with marketing and distribution rights to multiple products may not commit sufficient resources to the marketing and distribution of our product relative to other products; ● partners may not properly obtain, maintain, defend or enforce our intellectual property rights or may use our proprietary information and intellectual property in such a way as to invite litigation or other intellectual property related proceedings that could jeopardize or invalidate our proprietary information and intellectual property or expose us to potential litigation or other intellectual property related proceedings; ● disputes may arise between our partners and us that result in the delay or termination of the research, development or commercialization of our products or drug candidates or that result in costly litigation or arbitration that diverts management attention and resources; ● agreements may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable drug candidates; ● agreements may not lead to development or commercialization of drug candidates in the most efficient manner or at all; and ● if a partner of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. If our future licenses or collaborations we may enter into, if any, are not successful, our business, financial condition, results of operations, prospects and development and commercialization efforts may be adversely affected. As a result of the termination of the License Agreement with Antares, we do not anticipate recognizing any future material revenue from Antares. While we plan to seek a commercialization partner for TLANDO, there can be no guarantee that we will be able to enter into such a transaction on terms favorable to us or at all. Risks Related to Ownership of Our Common Stock The value of our warrants outstanding from the November 2019 Offering is subject to potential material increases and decreases based on fluctuations in the price of our common stock, among other factors. In November 2019, we completed a public offering of common stock and warrants to purchase common stock (the “November 2019 Offering”). Gross proceeds from the November 2019 Offering were approximately $6.0 million. In the November 2019 Offering, the Company sold (i) 614,706 Class A Units, with each Class A Unit consisting of one share of common stock and a common stock warrant to purchase one share of common stock, and (ii) 91,177 Class B Units, with each Class B Unit consisting of one pre-funded warrant to purchase one share of common stock and one common stock warrant to purchase one share of common stock at a price of $8.50 per Class A Unit and $8.4998 per Class B Unit. The pre-funded warrants were issued in lieu of common stock in order to ensure the purchaser did not exceed certain beneficial ownership limitations. The pre-funded warrants were immediately exercisable at an exercise price of $.00017 per share, subject to adjustment. Additionally, the common stock warrants were immediately exercisable at an exercise price of $8.50 per share and expire on November 17, 2024. As of September 30, 2023, there were 64,362 common stock warrants outstanding. We account for the common stock warrants as a derivative instrument, and changes in the fair value of the warrants are included under other income (expense) in the Company’s statements of operations for each reporting period. On September 30, 2023, the aggregate fair value of the warrant liability included in the Company’s consolidated balance sheet was approximately $29,000. We use the Black-Scholes option pricing model to determine the fair value of the warrants. As a result, the option-pricing model requires the input of several assumptions, including the stock price volatility, share price and risk-free interest rate. Changes in these assumptions can materially affect the fair value estimate. While the liability may only result from a change of control at that point in time, we ultimately may incur amounts significantly different than the carrying value. 45 Our management and directors will be able to exert influence over our affairs. As of September 30, 2023, our executive officers and directors beneficially owned approximately 5.6% of our common stock. These stockholders, if they act together, may be able to influence our management and affairs and all matters requiring stockholder approval, including significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might affect the market price of our common stock. The market price of our common stock has been volatile over the past year and may continue to be volatile. The market price and trading volume of our common stock has been volatile over the past year and it may continue to be volatile. Over the past year, on a post-reverse stock split basis, our common stock has traded as low as $2.83 and as high as $9.86 per share. We cannot predict the price at which our common stock will trade in the future and it may decline. The price at which our common stock trades may fluctuate significantly and may be influenced by many factors, including our financial results; developments generally affecting our industry; general economic, industry and market conditions; the depth and liquidity of the market for our common stock; investor perceptions of our business; reports by industry analysts; announcements by other market participants, including, among others, investors, our competitors, and our customers; regulatory action affecting our business; and the impact of other “Risk Factors” discussed herein and in our Annual Report. In addition, changes in the trading price of our common stock may be inconsistent with our operating results and outlook. The volatility of the market price of our common stock may adversely affect investors’ ability to purchase or sell shares of our common stock. Risks Relating to Our Financial Position and Capital Requirements We have incurred significant operating losses in most years since our inception and anticipate that we will incur continued losses for the foreseeable future. We have focused a significant portion of our efforts on developing TLANDO and more recently on LPCN 1154, LPCN 2101, LPCN 1148 and LPCN 1144. We have funded our operations to date through sales of our equity securities, debt and payments received under our license and collaboration arrangements. We have incurred losses in most years since our inception. As of September 30, 2023, we had an accumulated deficit of $197.5 million. Substantially all of our operating losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. These losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital. We expect our research and development expenses to continue to be significant in connection with clinical trials associated with LPCN 1154 and LPCN 1148, and, subject to resource availability, for LPCN 2101, LPCN 1111, LPCN 1144, and LPCN 1107, and possibly increased research and development costs if further clinical trials are initiated. As a result, we expect to continue to incur significant operating losses for the foreseeable future as we evaluate further clinical development of LPCN 1154, LPCN 2101, LPCN 1148, LPCN 1111, LPCN 1144, and LPCN 1107, and our other programs and continued research efforts. Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the extent of any future losses or when we will become profitable, if at all. We may not be able to maintain our listing on the NASDAQ Capital Market, which would adversely affect the price and liquidity of our common stock. As a small capitalization pharmaceutical company, the price of our common shares has been, and is likely to continue to be, highly volatile. Any announcements concerning us or our competitors, clinical trial results, quarterly variations in operating results, introduction of new products, delays in the introduction of new products or changes in product pricing policies by us or our competitors, acquisition or loss of significant customers, partners and suppliers, changes in earnings estimates or our ratings by analysts, regulatory developments, or fluctuations in the economy or general market conditions, among other factors, could cause the market price of our common shares to fluctuate substantially. There can be no assurance that the market price of our common shares will not decline below its current price or that it will not experience significant fluctuations in the future, including fluctuations that are unrelated to our performance. Currently our common stock is quoted on the NASDAQ Capital Market under the symbol “LPCN”. We must satisfy certain minimum listing maintenance requirements to maintain the NASDAQ Capital Market quotation, including certain governance requirements and a series of financial tests relating to stockholders’ equity or net income or market value, public float, number of market makers and stockholders, market capitalization, and maintaining a minimum bid price of $1.00 per share. If we are not able to maintain compliance with the Nasdaq Listing Rules, our securities may be subject to delisting. 46 If Nasdaq delists our common stock from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including: ● a limited availability of market quotations for our securities; ● reduced liquidity for our securities; ● a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; ● a limited amount of news and analyst coverage; and ● a decreased ability to issue additional securities or obtain additional financing in the future. The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If our common stock continues to be listed on NASDAQ, our common stock will be a covered security. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. ITEM 6. EXHIBITS INDEX TO EXHIBITS Incorporation By Reference Exhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 3.1 Amended and Restated Bylaws 8-K 333-178230 3.3 7/25/2013 3.2 Amendment to the Amended and Restated Bylaws of Lipocine Inc. 8-K 001-36357 3.1 3/10/2023 3.3 Amended and Restated Certificate of Incorporation 8-K 333-178230 3.2 7/25/2013 3.4 Certificate of Designation of Series A Junior Participating Preferred Stock. 8-K 001-36357 3.1 12/1/2015 3.5 Certificate of Increase of Series A Junior Participating Preferred Stock 8-K 001-36357 3.1 11/1/2021 3.6 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Lipocine Inc. 8-K 001-36357 3.1 6/28/2022 3.7 Certificate of Designation of Series B Preferred Stock 8-K 001-36357 3.2 3/10/2023 3.8 Certificate of Amendment to the Amended and Restated Certificated of Incorporation of Lipocine Inc. 8-K 001-36357 3.1 5/11/2023 47 Incorporation By Reference Exhibit Number Exhibit Description Form SEC File No. Exhibit Filing Date 31.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 * Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 * Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 (1) 32.2 * Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350 (1) 101.INS * XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH * Inline XBRL Taxonomy Extension Schema Document 101.CAL * Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF * Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB * Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE * Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * ** + Filed herewith Management contract or compensation plan or arrangement Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been submitted separately with the Securities and Exchange Commission (1) This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Registrant under the Securities Act, or the Exchange Act (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing. 48 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Lipocine Inc. (Registrant) Dated: November 8, 2023 /s/ Mahesh V. Patel Mahesh V. Patel, President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) Dated: November 8, 2023 /s/ Krista Fogarty Krista Fogarty, Corporate Controller (Principal Accounting Officer) 49