Lipocine Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto and other financial information included elsewhere in this report. For additional context with which to understand our financial condition and results of operations, see the management’s discussion and analysis included in our Form 10-K, filed with the SEC on March 7, 2024, our first quarter Form 10-Q filed with the SEC on May 9, 2024, as well as the financial statements and related notes contained therein. As used in the discussion below, “we,” “our,” and “us” refers to Lipocine. Forward-Looking Statements This section and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements may refer to such matters as products, product benefits, pre-clinical and clinical development timelines, clinical and regulatory expectations and plans, expected responses to regulatory actions, anticipated financial performance, future revenues or earnings, business prospects, projected ventures, new products and services, anticipated market performance, expected research and development and other expenses, future expectations for liquidity and capital resources needs and similar matters. Such words as “may”, “will”, “expect”, “continue”, “estimate”, “project”, and “intend” and similar terms and expressions are intended to identify forward looking statements. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A (Risk Factors) of our Form 10-K filed with the SEC on March 7, 2024 and Item 1A (Risk Factors) of our Form 10-Q for the quarter ended March 31, 2024 filed with the SEC on May 9, 2024. Except as required by applicable law, we assume no obligation to revise or update any forward-looking statements for any reason. Overview of Our Business We are a biopharmaceutical company focused on leveraging our proprietary Lip’ral platform to develop differentiated products through the oral delivery of previously difficult to deliver molecules, focused on treating Central Nervous System (“CNS”) disorders. Our proprietary delivery technologies are designed to improve patient compliance and safety through orally available treatment options. Our primary development programs are based on oral delivery solutions for poorly bioavailable drugs. We have a portfolio of differentiated innovative product candidates that target high unmet needs for neurological and psychiatric CNS disorders, liver diseases, and hormone supplementation for men and women. On January 12, 2024, we entered into the Verity License Agreement for the development and commercialization of our approved product, TLANDO®, an oral testosterone replacement therapy (“TRT”) comprised of testosterone undecanoate (“TU”), with Verity Pharma pursuant to which we granted to Verity Pharma an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize the TLANDO product for TRT in the U.S. and Canada. Any FDA required post-marketing studies will also be the responsibility of Verity Pharma. On March 28, 2022, the FDA approved TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. On June 7, 2022, our former commercial partner Antares (a wholly owned subsidiary of Halozyme) announced the commercial launch of TLANDO, an oral treatment indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone (primary or hypogonadotropic hypogonadism). Additional clinical development pipeline candidates include: LPCN 1154 for postpartum depression (“PPD”); LPCN 2101 for epilepsy; LPCN 2203 for essential tremor and LPCN 2401 for improved body composition in chronic weight management. In addition to our clinical development product candidates, we have assets for which we expect to seek partnerships to enable further development including TLANDO for territories outside of North America, LPCN 1148 comprising a novel prodrug of testosterone and testosterone laurate (“TL”), for the management of decompensated cirrhosis, LPCN 1144, an oral prodrug of androgen receptor modulator for the treatment of non-cirrhotic non-alcoholic steatohepatitis (“NASH”) which has completed Phase 2 testing; and LPCN 1107, potentially the first oral hydroxy progesterone caproate (“HPC”) product indicated for the prevention of recurrent preterm birth (“PTB”), which has completed a dose finding clinical study in pregnant women and has been granted orphan drug designation by the FDA. 22 The following chart summarizes the status of our product candidate development and partnering programs: Corporate Strategy Our goal is to become a leading biopharmaceutical company focused on leveraging our proprietary Lip’ral drug delivery technology platform to develop differentiated products through oral delivery of previously difficult to deliver molecules for CNS disorders. The key components of our strategy are to: Advance LPCN 1154 and other CNS product candidates. We intend to focus on the development of endogenous neuroactive steroids (“NASs”) which have broad applicability in treating various CNS conditions where we can leverage our technology platform to develop highly differentiated oral therapeutics. Our priority is on the development of LPCN 1154, a fast-acting oral antidepressant for postpartum depression (“PPD”) with potential for outpatient use. Support Verity Pharma in commercialization of our licensed oral TRT option. We believe the TRT market needs a differentiated, convenient oral option. We have exclusively licensed rights to TLANDO to Verity Pharma for commercialization of TLANDO in the U.S. and Canada. We plan to support Verity Pharma’s efforts to effectively enable the availability of TLANDO to patients in a timely manner, in addition to receiving milestone and royalty payments associated with TLANDO commercialization as agreed to in the Verity License Agreement. Develop partnership(s) to continue the advancement of pipeline assets . We continuously strive to prioritize our resources in seeking partnerships for our pipeline assets. We are currently exploring partnerships for our liver programs LPCN 1144, our candidate for treatment of non-cirrhotic NASH and LPCN 1148 for the management of decompensated cirrhosis including prevention of the recurrence of overt hepatic encephalopathy, LPCN 2401 for improved body composition in chronic weight management as an adjunct therapy to or as a monotherapy post cessation of incretin mimetics use, and LPCN 1107, our candidate for prevention of pre-term birth. We are also exploring the possibility of licensing LPCN 1021 (known as TLANDO in the United States) and LPCN 1111 to third parties outside the United States and Canada, although no licensing agreement has been entered into by the Company. 23 Our Pipeline Product Candidates Our pipeline of clinical development candidates includes LPCN 1154 for PPD, LPCN 2101 for epilepsy, LPCN 2203 for essential tremor, and LPCN 2401 as an aid for improved body composition in chronic weight management. We will continue to explore other product development candidates targeting CNS indications with a significant unmet need. We will also continue efforts to enter into partnership arrangements for the continued development and/or marketing of LPCN 1144, LPCN 1148, LPCN 2401, LPCN 1107 as well as for the TRT assets (TLANDO and LPCN 1111) outside of the United States and Canada. Our products are based on our proprietary Lip’ral drug delivery technology platform. Lip’ral-based TLANDO was approved by the FDA in March 2022. Lip’ral technology is a patented technology based on lipidic compositions which form an optimal dispersed phase in the gastrointestinal environment for improved absorption of insoluble drugs. The drug loaded dispersed phase presents the solubilized drug efficiently at the absorption site (gastrointestinal tract membrane) thus improving the absorption process and making the drug less dependent on physiological variables such as dilution, gastro-intestinal pH and food effects for absorption. Lip’ral-based formulation enables improved solubilization and higher drug-loading capacity, which can lead to improved bioavailability, reduced dose, faster and more consistent absorption, reduced variability, reduced sensitivity to food effects, improved patient compliance, and targeted lymphatic delivery where appropriate. TRT Franchise – TLANDO and LPCN (TLANDO XR) TLANDO: An Oral Product for Testosterone Replacement Therapy As previously described, under the Verity License Agreement, in January 2024 we granted to Verity Pharma an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize TLANDO, our product for TRT, in the U.S. and Canada effective February 1, 2024. TLANDO received FDA approval on March 28, 2022. Any FDA requirement to conduct certain post-marketing studies will be the responsibility of Verity Pharma. Proof-of-concept for TLANDO was initially established in 2006, and TLANDO was subsequently licensed in 2009 to Solvay Pharmaceuticals, Inc., which was then acquired by Abbott Products, Inc. (“Abbott”). Following a portfolio review associated with the spin-off of AbbVie Inc. by Abbott in 2011, the rights to TLANDO were reacquired by us. All obligations under the prior license agreement have been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales of TLANDO. Such royalties are limited to $1 million in the first 2 calendar years following product launch, after which period there is no cap on royalties and no maximum aggregate amount. If generic versions of any such product are introduced, then royalties are reduced by 50%. TLANDO was commercially launched on June 7, 2022. During the three and six months ended June 30, 2024, we incurred royalty expense of approximately $7,000 and $16,000, respectively. Since TLANDO received full FDA approval, under the terms of the Verity License Agreement, Verity Pharma will need to assess the safety and effectiveness of TLANDO in pediatric patients, as required by the Pediatric Research Equity Act. The FDA may also require certain post-marketing studies to be conducted which will also be the responsibility of Verity Pharma. Upon execution of the Verity License Agreement, Verity Pharma paid us an initial payment of $2.5 million which was received on signing of the License Agreement and $5 million which was received on February 1, 2024. Verity Pharma is also required to make an additional payment of $2.5 million to us before January 1, 2025, and an additional payment of $1 million to us before January 1, 2026. We are also eligible to receive milestone payments of up to $259 million in the aggregate, depending on the achievement of certain sales milestones in a single calendar year and/or development milestones with respect to products licensed by Verity Pharma under the Verity License Agreement. In addition, we will receive tiered royalty payments at rates ranging from 12% up to 18% of net sales of all products licensed under the Verity License Agreement in the United States and Canada. We are exploring the possibility of licensing LPCN 1021 (known as TLANDO in the United States) to third parties outside the United States and Canada, although no licensing agreement has been entered into by the Company. If and when an agreement is made with a partner, such arrangement would likely be partially contingent upon obtaining local regulatory approval. No assurance can be given that any license agreement will be completed or, if an agreement is completed, that such an agreement would be on terms favorable to us. LPCN 1111: A Next-Generation Long-Acting Oral Product Candidate for TRT As previously described, under the terms of the Verity License Agreement, we have licensed the development and commercialization rights to LPCN 1111 (TLANDO XR) in the U.S. and Canada to Verity Pharma. We will continue to explore the possibility of partnering LPCN 1111 with third parties outside the United States and Canada, although no partnering agreement has been entered into by the Company. No assurance can be given that any license agreement outside North America will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. 24 LPCN 1111 is a next-generation, novel ester prodrug of testosterone comprised of testosterone tridecanoate which uses our proprietary delivery technology to enhance solubility and improve systemic absorption. We completed a Phase 2b dose finding study in hypogonadal men in the third quarter of 2016. The primary objectives of the Phase 2b clinical study were to determine the starting Phase 3 dose of LPCN 1111 along with safety and tolerability of LPCN 1111 and its metabolites following oral administration of single and multiple doses in hypogonadal men. Good dose-response relationship was observed over the tested dose range in the Phase 2b study. Additionally, the target Phase 3 dose met primary and secondary end points. Overall, LPCN 1111 was well tolerated with no drug-related severe or serious adverse events reported in the Phase 2b study. All future development and commercialization of LPCN 1111 in the U.S. and Canada will be the responsibility of Verity Pharma. Oral Programs for CNS Disorders Some preferred endogenous or naturally occurring NAS present in the central nervous system act as positive allosteric modulators (“PAMs”) of the GABA A receptor, the major biological target of the inhibitory neurotransmitter γ-aminobutyric acid (“GABA A” ). To improve oral delivery of these modulators, several synthetic NAS derivatives of endogenous GABA A receptor PAMs have been developed for therapeutic use in the past few decades. We believe through utilization of our proprietary technology we may have the ability to enable effective oral delivery of endogenous GABA A receptor PAMs which historically had been deemed to be not orally bioavailable. As a novel drug class, NASs have received considerable attention because of their potential to treat various neuropsychiatric conditions including depression, movement disorders, epilepsy, anxiety, and neurodegenerative diseases. We have conducted Phase 1 pharmacokinetic (“PK”) studies for each of our three lead NAS candidates which have demonstrated promising PK results, safety, and tolerability and we are evaluating additional undisclosed CNS-focused candidates. LPCN 1154: Product Candidate for PPD Our most advanced NAS candidate is LPCN 1154, a non-invasive, rapid onset, oral formulation of the neuroactive steroid brexanolone which we are developing for the treatment of PPD. In accordance with the FDA’s feedback on our proposal for establishing the efficacy of LPCN 1154 through a pivotal PK bridge to an approved IV infusion brexanolone via a 505(b)(2) NDA filing. The company has completed clinical oral PK studies including a pilot food effect study and a pilot PK bridge study. In addition, as a prelude to a LPCN 1154 pivotal study, a multi-dose study was done confirming the dosing regimen for the pivotal study using the scaled up “to be marketed” formulation required for NDA filing. In June 2024, we announced results from the pivotal PK study which demonstrated LPCN 1154 meets bioequivalence with comparator, IV brexanolone, meeting standard bioequivalence criteria and C trough criteria. LPCN 1154 treatment was well-tolerated with no sedation nor somnolence events observed in the pivotal study. We are currently conducting labeling studies such as a food effect study, PK profiling in women with PPD, and metabolite profiling, and are targeting NDA submission for LPCN 1154 by the end of the fourth quarter of 2024. PPD PPD, a type of major depressive disorder with onset either during pregnancy or within four weeks of delivery, refers to depression persisting up to 12 months after childbirth. PPD can be clinically segmented by the severity of symptoms and presence of a comorbidity, including epilepsy. Approximately 1 in 8 mothers suffers from PPD in the United States alone; this equates to approximately 500,000 women being affected by PPD annually. Disease Overview - PPD ● PPD is distinct from the “baby blues,” a condition that up to 70% of all new mother’s experience; “baby blues” tend to be short-lived emotional conditions that do not interfere with daily activities. ● Symptoms of PPD include hallmarks of major depression, including, but not limited to, sadness, depressed mood, loss of interest, change in appetite, insomnia, sleeping too much, fatigue, difficulty thinking/concentrating, excessive crying, fear of harming the baby/oneself, and/or thoughts of death or suicide. ● During pregnancy, levels of endogenous NASs increase considerably along with levels of progesterone; however, they drop sharply postpartum. It has been hypothesized that the rapid perinatal decrease in circulating levels of endogenous NASs may be involved in the development of PPD. The first approved treatment option for PPD was an injectable containing endogenous NASs. 25 ● Depression may persist long after child delivery. Additionally, approximately 40% of women relapse in subsequent pregnancies or on other occasions. ● Psychiatric comorbidities are common in patients with epilepsy. Patients with epilepsy are at high risk for major depressive disorders and PPD. Reported PPD rates are higher among women with epilepsy than the general population. Associated Risk Factors ● Genetic: family history and/or previous experience of depression or other mood disorders ● Physiological: rapid changes in sex hormones, stress hormones, and thyroid hormone levels during and after delivery ● Environmental: stressful life events, changes in relationships at home and at work, and/or lack of familial support Unmet Medical Need We believe there is considerable unmet need within women with PPD due to a lack of convenient and fast-acting oral therapies. Selective Serotonin Reuptake Inhibitors (“SSRIs”) have been the traditional first-line choice for women with severe PPD and require weeks for onset of efficacy; therefore, a need for an oral treatment option with a faster onset of action remains a significant unmet need in treating PPD, especially in mothers with moderate to severe depression prone to harmful actions. Injectable brexanolone (Zulresso™, Sage Therapeutics) became the first FDA-approved treatment for postpartum depression. However, numerous factors limit the utilization of injectable brexanolone such as method of administration, cost, and safety concerns. In addition to Zulresso, SAGE Therapeutics received FDA approval for zuranolone (brand name ZURZUVAE™) in August 2023 and Zurzuvae was launched commercially in December 2023. Zuranolone, a synthetic neuroactive steroid derivative, is an oral, once daily 14-day treatment for postpartum depression and is the first oral medication approved by the FDA for the treatment of postpartum depression. Per label, besides long terminal half-life of approximately 19.7 to 24.6 hours and dosage modifications needed for concomitant use with CYP3A4 modulators, warnings and precautions include CNS depressant effects, impaired ability to drive or engage in other potentially hazardous activities and embryo-fetal toxicity. We believe LPCN 1154 targets the current unmet need for robust, rapid relief with 48-hour dosing duration through a convenient oral therapy candidate comprising bioidentical NASs with good tolerability. LPCN 2101: NAS for Epilepsy We are currently evaluating an additional NAS candidate, LPCN 2101, for women with epilepsy (“WWE”). We have completed pre-clinical and Phase 1 studies for LPCN 2101 which demonstrated promising PK results, safety and tolerability. In July 2022 our IND was accepted by the FDA for LPCN 2101 for adults with epilepsy and we plan to initiate a Phase 2 IND opening proof-of-concept study to evaluate the safety, tolerability, and efficacy of LPCN 2101, subject to resource prioritization. Disease Overview – Epilepsy Epilepsy is defined by the 1) occurrence of at least two unprovoked seizures more than 24 hours apart, 2) occurrence of one unprovoked seizure and a probability of further seizures occurring over the next 10 years, and/or 3) diagnosis of an epilepsy syndrome. Patients with epilepsy have increased risk of mortality due to direct effects of seizures (e.g., status epilepticus, car accidents) and indirect effects of seizures (e.g., suicide, cardiovascular effects). Epilepsy is a disorder of the brain that causes seizures, affecting the physical, mental, and social well-being of persons, and is associated with a 2 to 3 times greater mortality rate compared with the general population. About 60-65% of epilepsy is idiopathic and about 30% of patients are refractory (i.e., epilepsy not well managed with currently available Anti-Seizure Medications (“ASMs”). Epilepsy is the most common neurological disorder during pregnancy. It is estimated that approximately 900,000 childbearing (“CB”) age women suffer from active epilepsy in the U.S. Women of CB age with epilepsy face many additional challenges due to hormonal influences on seizure activity and endocrine function throughout the different phases of their reproductive cycles. Elevated estrogen or decreased progesterone levels can exacerbate seizure frequency. Often, these women experience hormonal and endogenous NAS imbalances, coupled with fluctuations in the blood levels of ASMs that impact control of seizures, efficacy of oral contraceptives, any coexisting anxiety and/or depression and any associated sleep impairment. Epileptic patients are 5-20 times more likely to develop depression. 26 Clinical segmentation can be categorized by epilepsy type, comorbidities and patient subgroups. Categorization of focal epilepsy, generalized epilepsy, combined focal and generalized epilepsy, and unknown epilepsy can guide the choice of ASM. Special patient subgroups, including WWE of CB age and elderly patients, require special care and management of epilepsy. Comorbidities such as depression and anxiety may be co-treated with therapies that do not aggravate seizures and have no drug interaction with the ASM used for epilepsy. While lowest effective dose and monotherapy are preferred, management of patients with epilepsy is focused on controlling seizures, avoiding adverse events, and maintaining quality of life. Despite a wide range of ASMs available, about 30% of all people with epilepsy still fail to respond to treatment effectively. Women with epilepsy face specific challenges throughout their lifespan because of seizures, ASMs, and hormonal fluctuations. Women with epilepsy were once counseled to avoid pregnancy, but epilepsy is no longer considered a contraindication to pregnancy. Caregivers for WWE in the preconception phase either intending to start a family (planning pregnancy) or using contraception to prevent an unplanned pregnancy face significant challenges to balance seizure control efficacy with the selection and dosage of ASMs and ASM-related risks such as, among other risks, fetal-neonatal toxicity, contraception failure, and psychiatric side effects. Several ASMs are known to have teratogenic effects on the developing fetus (converging evidence from registry studies indicates that teratogenic risks are highest with valproate, followed by carbamazepine and topiramate). Other commonly prescribed ASMs, including older generation agents, such as phenobarbital and phenytoin, have been associated with higher risks as compared with lamotrigine, levetiracetam, clonazepam and gabapentin (Vajda et al., 2014; Voinescu and Pennell, 2015). Moreover, risks associated with ASMs are considerable early in pregnancy; therefore, it is necessary that WWE of CB age undergo counseling, monitoring, and adjustment to the most appropriate ASM prior to becoming pregnant. It is preferable that WWE of CB age discuss seizure control with their doctor for at least 6 months before conception and, if possible, cease ASM therapy or use the lowest effective dose of a single anticonvulsant according to the type of epilepsy and the fetal toxicity of the ASM. Anxiety, depression, lack of adherence to ASM, and/or contraception failure may be experienced by women who are worried about unplanned pregnancy or are late in confirming pregnancy, planned or unplanned. ASMs can reduce the efficacy of oral contraceptives, compounding this problem. Complex, multidirectional interactions between female hormones, seizures, and ASMs exist. Most hormones act as NASs and can thus modulate brain excitability. Any changes in endogenous or exogenous hormone levels can affect the occurrence of seizures, either directly or via PK interactions that modify the plasma levels of ASMs (Harden, 2008). The PK interactions between oral contraceptives and ASMs are bidirectional (Johnston and Crawford, 2014). The efficacy of hormonal contraception may be diminished for women taking CYP-P450 enzyme inducing ASMs. Epilepsy is not a medical condition in which contraceptives are contraindicated. Contraceptive failure, possibly related to ASMs, may be responsible for up to 1 in 4 unplanned pregnancies in WWE (~12.5% of all WWE pregnancies), versus a rate of 1% in healthy women. Unmet need to treat WWE in CB age It is estimated that approximately 900,000 CB age women suffer from active epilepsy in the U.S. Women of CB age with epilepsy face many additional challenges such as hormonal influences on seizure activity and endocrine function throughout the different phases of their reproductive cycles, and approximately 30% of patients with epilepsy cannot be efficiently controlled with available ASMs making consideration of newer pharmacological treatment development options important. Managing uncontrolled seizures in WWE of CB age is the primary aim during preconception, pregnancy, and postpartum phases. Therefore, uncompromised ASM efficacy with acceptable variability and less or no drug-drug interactions achieved with lowest possible monotherapy dose to address fetal toxicity concerns remain highly unmet needs. Moreover, control of seizures including prevention of breakthrough seizures is critical when planning for pregnancy and also during pregnancy, as it can also lead to undesired falls or auto-accidents and compromise freedom to drive. Select ASMs have the potential to induce contraception failures, reproductive hormone imbalance, anxiety, and depression. There remains an unmet need for an ASM without the aforementioned downsides, with no to low fetal-neonatal toxicity and without breast-feeding concerns, as well as the potential to treat associated comorbidities. While over 30 molecules have been approved for the treatment of epilepsy in the U.S., no epilepsy drug has been specifically approved for WWE of CB age. We believe our endogenous NASs as GABA A PAMs, while targeting the goal of seizure control, also have the potential for additional benefits in psychiatric disorders comorbidities (e.g., anxiety and/or depression) and sleep impairment. Moreover, these oral endogenous NASs could potentially address some of the fetal toxicity concerns related to unplanned or planned pregnancy in WWE. (1) (1) Ref: S.Bangar et al. Functional Neurology 2016; 31(3): 127-134; Reimers et al. Seizure. 2015 May; 28: 66-70. 27 LPCN 2203: Oral Product for Management of Essential Tremor LPCN 2203 is an oral candidate for management of essential tremor comprising a bioidentical GABA modulating NAS. We have successfully completed oral pharmacokinetics with bioidentical GABA Modulating NAS and are planning to submit a protocol for a proof-of-concept phase 2 study for ET to the FDA. Disease Overview - Essential Tremor Essential Tremor (“ET”) is one of the most common movement disorders in the United States, affecting an estimated 7 million in the U.S. For ET patients, uncontrollable shaking of the hands, head, voice, or legs creates difficulty eating, dressing, writing, and pursuing other day-to-day tasks. The etiology of ET is largely unknown, but reduced GABA A receptor levels and decreased GABAergic activity have been observed in ET. While ET is often associated with aging populations, ET can begin much earlier in life, with a progressive disease course that can eventually necessitate a care partner. Social anxiety and depressive symptoms can manifest in patients with ET as tremor severity increases, and may negatively impact a patient’s ability to work and engage in hobbies. In an interview study of ET patients and care partners, the most common impacts on activities of daily living are pouring liquids and writing/typing (100%) and grooming/hygiene, drinking, dressing, eating, and reading (80-85%). Overall, 90% of participants noted the emotional impact of ET, with 75% reporting tremor-related worry or anxiety. The only FDA approved pharmacological treatment for ET was approved more than 50 years ago, and the majority of patients with ET experience a sub-optimal response with standard-of-care treatments, highlighting numerous and compelling unmet needs in care such as daytime efficacy and improved tolerability, a PRN (pro re nata) or “as needed” option, and a superior benefit-to-risk profile. (1) (2) (1) Ref: Louis ED, Ottman R. Tremor Other Kyperkinet Mov (NY). 2014;4:259. (2) Ref: Gerbasi et.al. Patient experiences in essential tremor: Mapping functional impacts to existing measures using qualitative research. MDS 2023. Other Pipeline Candidates We continue to pursue opportunities for partnering and/or development arrangements for the continued development and/or marketing of LPCN 2401, LPCN 1148, LPCN 1144, and LPCN 1107. We do not currently anticipate conducting any further significant development activities with respect to these products and product candidates without the participation of a partner. There can be no guarantee that we will be able to identify or enter into partnering arrangements on terms that are beneficial to us or at all. Even if we do enter into partnering arrangements, such arrangements may not be sufficient to successfully develop and commercialize these products. LPCN 2401: For Improved Body Composition in Chronic Weight Management LPCN 2401 is an oral formulation of a proprietary combination of anabolic androgen receptor agonist and α-alpha tocopherol, an antioxidant metabolic modifier. LPCN 2401 is expected to have a favorable benefit to risk profile as a non-invasive option with demonstrated benefits to the liver. LPCN 2401 has potential for use in combination with incretin mimetics (GLP-1/GIP agonists) including amplification of GLP-1 insulinotropic actions which is supported by studies demonstrating the role of androgen receptor agonist in regulation of GLP-1 through: ● Enhancement of GLP-1-mediated insulin release from β cells through genomic- and non-genomic mechanisms ● Increase in GLP-1 Receptor Expression in diabetics and non-diabetics ● Promoting proliferation of β cells and improving insulin sensitivity Target benefits of LPCN 2401 in combination with GLP-1 agonists include improved body composition with quality weight loss while attenuating lean mass loss, a serious unmet need, in addition to quality fat loss through appreciable abdominal fat loss. Moreover, as an adjunct to incretin mimetics, LPCN 2401 may increase weight loss, particularly in diabetics, through increased expression activity of GLP1R and increased effectiveness of GIP1 therapies secondary to actions at GLP1R (glucose lowering). LPCN 2401 could also be potentially used as monotherapy post discontinuation of GLP-1 agonist to manage weight/fat regain and durability of diabetes remission. 28 Data from preclinical and clinical studies support the potential of LPCN 2401 in improving body composition. In April 2024, Lipocine announced results from a multi-center prospective, blinded Phase 2 study, which demonstrated increases in lean mass of 4.4%, decreases in fat mass of 6.7%, reduction in android fat of 4.1% and increased bone mineral content of 2.8% in a population consistent with FDA guidance for developing products for weight management. As an adjunct therapy to incretin mimetics, LPCN 2401 has the potential to attenuate weight rebound, ameliorate loss of muscle mass, improve muscle quality and functionality, amplify fat mass loss with improved body composition, maintain weight, prevent “fat overshoot,” and accelerate muscle rebound post incretin mimetic discontinuation. We plan to request a meeting with the FDA to discuss the study design for a proof-of-concept phase 2 study for LPCN 2401. We may explore the possibility of partnering with a third party, although no partnering agreement has been entered into by the Company. No assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. Disease Overview – Obesity Management Approximately 74% of US adults age 20 and older are either obese or overweight, and an estimated 30% of the US adult population has a BMI ≥ 30 kg/m 2 . Obesity is a chronic, relapsing health risk defined by excess body fat. Excess body fat increases the risk of death and major comorbidities such as type 2 diabetes, hypertension, dyslipidemia, cardiovascular disease, osteoarthritis of the knee, sleep apnea, and some cancers 1 . Reportedly, ~24M 2 obese elderly are most vulnerable to losing muscle mass. The rapid weight loss observed with the approved weight management medications includes unwanted lean mass loss, up to 40% of the patient’s total weight lost. Moreover, discontinuation of these therapies frequently results in a rapid regain in weight. Loss of lean mass has multiple negative health implications including weakness/fatigue, lowered metabolism which can cause a regain in fat mass, declines in neuromuscular function, potential effects on emotion and psychological states, and increased risk of injury. Several recent studies showed that body composition, especially lean body mass (muscle) may play an independent role in survival of patients with diseases such as cancer and cardiovascular diseases (DH Lee and EL Giovannucci, Exp Biol Med. 2018). Therefore, a focus on body composition in obesity management to sustainably lose fat mass while maintaining lean mass should be an essential goal. There is a significant unmet need for an oral, efficacious, muscle preserving/gaining option for chronic obesity/weight management that ameliorates the loss of lean mass associated with GLP-1/GIP agonist treatment, resulting in a higher quality weight loss. Moreover, there is a need for a chronic long-term pharmacotherapy option to maintain weight upon cessation of incretin mimetic therapy, prevent fat/weight rebound “overshoot” and minimize lag in muscle recovery to prevent collateral fattening as well as improve the durability of any achieved diabetes remission while on GLP-1. (1) Ref: Caterson and Hubbard et al. 2004; Calle and Thun et al. 1999 (2) Ref: Flynn et al. Morgan Stanley, February 27, 2024 LPCN 1148: Oral Product Candidate for the Management of Decompensated Cirrhosis We are currently evaluating LPCN 1148 comprising testosterone laurate (“TL”) for the management of decompensated cirrhosis. We believe LPCN 1148 targets unmet needs for cirrhosis subjects including improvement in the quality of life of patients while on the liver transplant waiting list, prevention or reduction in the occurrence of new decompensation events such as hepatic encephalopathy (“HE”), and improvement in post liver transplant survival, including outcomes and costs. We are exploring the possibility of partnering with a third party for the development and/or marketing of LPCN 1148, although no partnering agreement has been entered into by the Company. No assurance can be given that any partnering agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. We conducted a Phase 2 proof of concept (“POC”) study (NCT04874350) in male subjects with cirrhosis to evaluate the therapeutic potential of LPCN 1148 for the management of sarcopenia. The Phase 2 POC study was a prospective, multi-center, randomized, placebo-controlled study in male sarcopenic cirrhotic patients. Subjects were initially randomized 1:1 to 1 of 2 arms. The treatment arm was an oral dose of LPCN 1148, and the second arm was a matching placebo. There were no restrictions on patients with respect to background therapies, including current standard of care, diet or exercise. The primary endpoint was a change in skeletal muscle index at week 24 with key secondary endpoints including change in liver frailty index, rates of breakthrough HE, and number of waitlist events, including all-cause mortality. Total treatment was 52 weeks, with 24-week placebo-controlled treatment subjects receiving LPCN 1148 in the 28-week open-label extension (“OLE”) phase of the study for the duration of the study through week 52. 29 In July 2023 we announced that the Phase 2 study met the study primary endpoint, increased skeletal muscle index (L3-SMI) relative to placebo (P<.01), in patients with cirrhosis. The study also demonstrated improvements in clinical outcomes such as prevention of new decompensation events including HE, rates of hospitalizations, and patient reported outcomes (“PROs”). LPCN 1148 was well-tolerated, with adverse event (“AE”) rates and severities similar to placebo and no mortality was noted in the LPCN 1148 treatment group, nor were there any cases of drug-induced liver injury. In March 2024 we announced that 24-week L3-SMI increases were maintained through 52 weeks of LPCN 1148 intervention and that placebo patients who switched to LPCN 1148 in the open label extension period of the study had increases in L3-SMI. Furthermore, fewer overt hepatic encephalopathy (“OHE”) events were observed in LPCN 1148 treated patients and time to first recurrent OHE event was longer for treated patients. LPCN 1148 was well-tolerated, with AE rates and severities similar to placebo and fewer participants experienced serious or severe adverse events when switched from placebo to LPCN 1148 and patients on therapy were hospitalized for fewer days. We plan to request a Type C meeting with the FDA to discuss the clinical development plan for LPCN 1148 in 2024. Disease Overview – Cirrhosis There are over 2 million cases of cirrhosis worldwide, with over 500,000 people living with decompensated cirrhosis in the U.S. Non-alcoholic fatty liver disease is the most rapidly increasing indication for liver transplant. 62% of those on the liver transplant (“LT”) waitlist are male and the economic burden (approximately $812,500/transplant) is high and continues to increase. Each year about half of the approximately 17,000 people in U.S. on the LT waitlist undergo transplant, while nearly 3,000 patients either die or are removed from the list because they were “too sick to transplant.” Liver cirrhosis is defined as the histological development of regenerative nodules surrounded by fibrous bands. Patients with cirrhosis typically have a years-long silent, asymptomatic phase (compensated cirrhosis) until decreasing liver function and increasing portal pressure move the patient into the symptomatic phase (decompensated cirrhosis). Transition to decompensated cirrhosis is marked by clinical events including ascites, encephalopathy, jaundice, and/or variceal hemorrhage. Decompensated subjects survive on average less than 2 years. Common causes of liver cirrhosis include alcoholic liver disease, non-alcoholic fatty liver disease (“NAFLD”), chronic hepatitis B and C, primary biliary cirrhosis (“PBC”), and primary sclerosing cholangitis (“PSC”) and some patients have liver disease of unknown cause (cryptogenic). Common complications in patients with cirrhosis may include: compromised liver function, portal hypertension, varices in GI tract with internal bleeding, edema, ascites, hepatic encephalopathy, compromised immunity with post-transplant acute rejection risk, high sodium levels, increased bilirubin, low albumin level, insulin resistance with impaired peripheral uptake of glucose, depression, accelerated muscle disorder in the form of sarcopenia, myosteatosis, and frailty with compromised energetics, bone diseases (e.g., osteoporosis), high alkaline phosphatase (“ALP”), cachexia, malnutrition, weight loss (>5%), symptoms of hypogonadism such as abnormal hair distribution, anemia, sexual dysfunction, testicular atrophy, muscle wasting, fatigue, osteoporosis, gynecomastia, inflammation with elevated cytokines, and infection risk leading to hospital admissions and possibly death. HE, a significant decompensation event in patients with cirrhosis, is a brain dysfunction caused by liver insufficiency and/or portal systemic shunting. Because the damaged liver cannot function normally (as in cirrhosis), neurotoxins such as ammonia are inadequately removed from systemic circulation and travel to the brain, where they affect neurotransmission. This can cause episodes of HE, which may present as alterations in consciousness, cognition, and behavior that range from minimal to severe. Overt HE occurs in 30% to 40% of patients with cirrhosis at some point during the clinical course of their disease. As the burden of chronic liver disease and cirrhosis is increasing, the frequency of HE is also increasing. LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH We are exploring the possibility of partnering with a third party for LPCN 1144, although no partnering agreement has been entered into by the Company. No assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. 30 Disease Overview – NASH NASH is an advanced state of non-alcoholic fatty liver disease (“NAFLD”) that can progress to a cirrhotic liver or liver failure, require liver transplant, and can result in hepatocellular carcinoma/ liver cancer, and death. Progression of NASH to end stage liver disease is one of the leading causes of liver failure requiring liver transplantation. Importantly, beyond these critical conditions, NASH and NAFLD patients additionally suffer heightened cardiovascular risk and die more frequently from cardiovascular events than from liver disease. NAFLD/NASH is becoming more common due to its strong correlation with obesity and metabolic syndrome, including components of metabolic syndrome such as diabetes, cardiovascular disease and high blood pressure. 20% to 30% of the U.S. population is estimated to suffer from NAFLD, with a large proportion of that group, 15% to 20%, progressing to NASH, which lacks an effective therapy. NASH is a silent killer that affects millions in the U.S. Diagnoses have been on the rise and are expected to increase dramatically in the next decade. Approximately 50% of NASH patients are adult males. In men, especially with comorbidities associated with NAFLD/NASH, testosterone deficiency has been associated with an increased accumulation of visceral adipose tissue and insulin resistance, which could be factors contributing to NAFLD/NASH. There is currently no approved therapy for the treatment of NASH although there are several drug candidates currently under development with many having clinical failures to date. The critical pathophysiologic mechanisms underlying the development and progression of NASH include reduced ability to handle lipids, increased insulin resistance, injury to hepatocytes and liver fibrosis in response to hepatocyte injury. NASH patients have an excessive accumulation of fat in the liver resulting primarily from a caloric intake above and beyond energy needs. A healthy liver contains less than 5% fat, but a liver in someone with NASH can contain more than 20% fat. This abnormal liver fat contributes to the progression to NASH, a liver necro-inflammatory state that can lead to scarring, also known as fibrosis, and, for some, can progress to cirrhosis and liver failure. Current Status We have completed the LiFT Phase 2 clinical study in biopsy-confirmed non-cirrhotic NASH subjects. The LiFT clinical study was a prospective, multi-center, randomized, double-blind, placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal and eugonadal male NASH subjects with grade F1-F3 fibrosis and a target NAFLD Activity Score ≥ 4 with a 36-week treatment period. The LiFT clinical study enrolled 56 biopsy confirmed NASH male subjects. Subjects were randomized 1:1:1 to one of three arms (Treatment A was a twice daily oral dose of 142 mg testosterone equivalent, Treatment B was a twice daily oral dose of 142 mg testosterone equivalent formulated with 217 mg of d-alpha tocopherol equivalent, and the third arm was a twice daily matching placebo). The primary endpoint of the LiFT clinical study was change in hepatic fat fraction via MRI-PDFF and exploratory liver fat/marker end points post 12 weeks of treatment. Additionally, key secondary endpoints post 36 weeks of treatment included assessment of histological change for NASH resolution and/or fibrosis improvement (biopsy) as well as liver fat data (MRI-PDFF). The LiFT clinical study was not powered to assess statistical significance of any of the secondary endpoints. Other important endpoints included the following: change in liver injury markers, anthropomorphic measurements, body composition including lean mass, fat mass, and bone mineral density, lipids, insulin resistance and inflammatory/fibrosis markers; as well as patient reported outcomes. Treatments with LPCN 1144 post 12 weeks of treatment in the LiFT study resulted in robust liver fat reduction, assessed by MRI-PDFF, and showed improvement of liver injury markers with no observed tolerability issues. Liver biopsies were performed at baseline (“BL”) and after 36 weeks of treatment (“EOS”). Pre-specified biopsy analyses included NASH Clinical Research Network (“CRN”) scoring as well as a continuous paired (“Paired Technique”) and digital technique (“Digital Technique-Fibronest”). All biopsy analyses were performed on the same slides and the reads for the three techniques were done independently. Analysis sets included the NASH Resolution Set (all subjects that have BL and EOS biopsy with NASH at BL [NAS ≥4 with lobular inflammation score ≥ 1 and hepatocyte ballooning score ≥1 at BL] (n=37)), the Biopsy Set (all subjects with baseline and EOS biopsies (n=44)), and the Safety Set (all randomized subjects (n=56)). Both LPCN 1144 treatment arms met with statistical significance the pre-specified accelerated approval regulatory endpoint of NASH resolution with no worsening of fibrosis based on NASH CRN scoring. Additionally, both treatment arms showed substantial improvement of the observed NASH activity in steatosis, inflammation, and ballooning. During the 36 weeks of treatment, LPCN 1144 was well tolerated with an overall safety profile comparable to placebo. Additionally, subjects were given the option to have access to LPCN 1144 through an open label extension (“OLE”) study. The extension study enabled the collection of additional data on LPCN 1144 for up to a total of 72 weeks of therapy, as well as data for 36 weeks of therapy for those subjects on placebo in the LiFT study. Key results from the OLE study are as follows: ● LPCN 1144 was well tolerated over 72-week exposure with no observed safety signals; ● Liver injury markers were reduced and maintained with extended LPCN 1144 treatment; and ● Observed liver histology improvements support further development. In November 2021, the FDA granted Fast Track Designation to LPCN 1144 as a treatment for non-cirrhotic NASH. The Fast Track program is designed to accelerate the development and expedite the review of products, such as LPCN 1144, which are intended to treat serious diseases and for which there is an unmet medical need. 31 We had a written only response from the FDA for a LPCN 1144 Type C meeting with the FDA in January 2022 to discuss the development path forward with LPCN 1144. The FDA acknowledged that the NDA submission of LPCN 1144 would be via the 505(b)2 regulatory pathway and agreed that no additional non-clinical studies are needed to support an NDA submission. The FDA acknowledged that subjects in the LiFT study achieved improvements in key components associated with NASH histopathology after 36-weeks of treatment with LPCN 1144 in adult males and agreed that the proposed multicomponent primary surrogate endpoint is acceptable for seeking approval under the accelerated approval pathway. The FDA agreed that the proposed primary multicomponent surrogate endpoint, NASH resolution with no worsening of fibrosis, is acceptable for seeking approval under the accelerated approval pathway and the FDA recommended a Phase 3 trial with a study duration of 72 weeks. In July 2022, Lipocine held an End of Phase 2 meeting with the FDA for LPCN 1144 for NASH. The FDA recommended a Phase 2 dose ranging study be conducted to identify the optimal dose prior to conducting a pivotal study. The FDA agreed to the proposed unique testosterone ester, testosterone laurate, for future clinical studies. LPCN 1107: An Oral Product Candidate for the Prevention of Preterm Birth (“PTB”) We are exploring the possibility of partnering with a third party for the development and/or marketing of LPCN 1107, although no partnering agreement has been entered into by the Company. No assurance can be given that any partnering agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. We believe LPCN 1107 has the potential to become the first oral hydroxyprogesterone caproate (“HPC”) product indicated for the reduction of risk of PTB (delivery less than 37 weeks) in women with singleton pregnancy who have a history of singleton spontaneous PTB. Prevention of PTB is a significant unmet need as approximately 11% of all U.S. pregnancies result in PTB, a leading cause of neonatal mortality and morbidity. Current Status We have completed a multi-dose PK dose selection study in pregnant women. The objective of the multi-dose PK selection study was to assess HPC blood levels in order to identify the appropriate LPCN 1107 Phase 3 dose. The multi-dose PK dose selection study was an open-label, 4-period, 4-treatment, randomized, single and multiple dose PK study in pregnant women with 3 dose levels of LPCN 1107 and the IM HPC (Makena®). The study enrolled 12 healthy pregnant women (average age of 27 years) with a gestational age of approximately 16 to 19 weeks. Subjects received three dose levels of LPCN 1107 (400 mg BID, 600 mg BID, or 800 mg BID) in a randomized, crossover manner during the first 3 treatment periods and then received 5 weekly injections of HPC during the fourth treatment period. During each of the LPCN 1107 treatment periods, subjects received a single dose of LPCN 1107 on Day 1 followed by twice daily administration from Day 2 to Day 8. Following completion of the 3 LPCN 1107 treatment periods and a washout period, all subjects received 5 weekly injections of HPC. Results from this study demonstrated that average steady state HPC levels (Cavg0-24) were comparable or higher for all 3 LPCN 1107 doses than for injectable HPC. Additionally, HPC levels as a function of daily dose were linear for the 3 LPCN 1107 doses. Also, unlike the injectable HPC, steady state exposure was achieved for all 3 LPCN 1107 doses within 7 days. A traditional PK/PD based Phase 2 clinical study in the intended patient population is not expected to be required prior to entering into Phase 3. Therefore, based on the results of our multi-dose PK study we had an End-of-Phase 2 meeting and subsequent guidance meetings with the FDA to define a pivotal Phase 2b/3 development plan for LPCN 1107. However, these discussions may be updated based on recent developments with Covis’ Makena® as described below. We have completed a food effect study to characterize the dosing regimen for the pivotal study and we have submitted a pivotal clinical study protocol to the FDA. The FDA has granted orphan drug designation to LPCN 1107 based on a major contribution to patient care. Orphan designation qualifies Lipocine for various development incentives, including tax credits for qualified clinical testing, and a waiver of the prescription drug user fee when we file our NDA. Recent Competition Update On October 5, 2020, the FDA’s Center for Drug Evaluation and Research (“CDER”) proposed that Makena be withdrawn from the market because the PROLONG trial failed to verify the clinical benefit of Makena and concluded that the available evidence does not show Makena is effective for its approved use. The CDER issued AMAG Pharmaceuticals, the NDA holder at the time, a Notice of Opportunity for Hearing (“NOOH”) to withdraw approval of Makena, for which AMAG Pharmaceuticals responded by requesting a hearing and providing detail on the company’s position, recognizing clinicians’ decade-long use of treatment with Makena and the public health implications of withdrawing approval. The FDA Commissioner held a public hearing with Covis from October 17 through 19, 2022, which resulted in a 14-1 vote recommending removal of the product from the market. On October 31, 2022, Covis approached the CDER and outlined a plan of orderly withdrawal which would set a withdrawal timeframe sufficient for current patients to complete their courses of treatment. The CDER declined this proposal. On March 6, 2023, Covis announced its plan to voluntarily withdraw Makena from the market and submitted a request to the CDER for a minimum 21-week wind-down. On April 6, 2023, the FDA withdrew its approval of Makena and ordered the immediate withdrawal of Makena and several approved generic versions of the drug, making it unlawful for the drug to be distributed in the U.S. The FDA stated that in light of the unmet need for a treatment for preventing preterm birth and improving neonatal outcomes, it is imperative that the medical and scientific communities increase their efforts to find effective treatments and stated their hope that the decision to withdraw Makena will help galvanize further research. The FDA further stated their commitment to working together with patients, researchers, and drug developers to advance the development of safe and effective therapies that are urgently needed as a treatment for the prevention of preterm birth. 32 Financial Operations Overview Revenue To date, we have not generated any revenues from product sales and do not expect to do so until one of our product candidates receives approval from the FDA. Revenues to date have been generated substantially from license fees, royalty and milestone payments and research support from our licensees. Since our inception through June 30, 2024, we have generated $49.6 million in revenue under our various license and collaboration arrangements and from government grants. We have entered into the Verity License Agreement with the potential for revenue from future milestones and royalties, but we may never generate revenues from any of our clinical or preclinical development programs or licensed products as we may never succeed in obtaining regulatory approval or commercializing any of these product candidates. Research and Development Expenses Research and development expenses consist primarily of salaries, benefits, stock-based compensation and related personnel costs, fees paid to external service providers such as contract research organizations and contract manufacturing organizations, contractual obligations for clinical development, clinical sites, manufacturing and scale-up for late stage clinical trials, formulation of clinical drug supplies, and expenses associated with regulatory submissions. Research and development expenses also include an allocation of indirect costs, such as those for facilities, office expense, and depreciation of equipment based on the ratio of direct labor hours for research and development personnel to total direct labor hours for all personnel. We expense research and development expenses as incurred. Since our inception, we have spent approximately $151.9 million in research and development expenses through June 30, 2024. We expect to continue to incur significant costs as we develop our other product candidates, including our CNS product candidates, as well as the development of any future pipeline product candidates. In general, the cost of clinical trials may vary significantly over the life of a project as a result of uncertainties in clinical development, including, among others: ● the number of sites included in the trials; ● the length of time required to enroll suitable subjects; ● the duration of subject follow-ups; ● the length of time required to collect, analyze and report trial results; ● the cost, timing and outcome of regulatory review; and ● potential changes by the FDA in clinical trial and NDA filing requirements. Future research and development expenditures are subject to numerous uncertainties regarding timing and cost to completion, including, among others: ● the timing and outcome of regulatory filings and FDA reviews and actions for product candidates; ● our dependence on third-party manufacturers for the production of satisfactory finished products for registration and launch should regulatory approval be obtained on any of our product candidates; ● the potential for future license or co-promote arrangements for our product candidates, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our future plans and capital requirements; and ● the effect on our product development activities of actions taken by the FDA or other regulatory authorities. A change of outcome for any of these variables with respect to the development of our product development candidates could mean a substantial change in the costs and timing associated with these efforts, could require us to raise additional capital, and may require us to reduce operations. Given the stage of clinical development and the significant risks and uncertainties inherent in the clinical development, manufacturing, and regulatory approval process, we are unable to estimate with any certainty the time or cost to complete the development of LPCN 1154, LPCN 2101, LPCN 2203, LPCN 2401, LPCN 1148, LPCN 1144, LPCN 1111, LPCN 1107 and other product candidates. Clinical development timelines, the probability of success, and development costs can differ materially from expectations and results from our clinical trials may not be favorable. If we are successful in progressing LPCN 1154, LPCN 2101, LPCN 2203 or other future product candidates into later stage development, we will require additional capital. The amount and timing of our future research and development expenses for these product candidates will depend on the pre-clinical and clinical success of both our current development activities and potential development of new product candidates, as well as ongoing assessments of the commercial potential of such activities. We will continue efforts to enter into partnership arrangements for the continued development and/or marketing of LPCN 1144, LPCN 1148, LPCN 2401, LPCN 1107 and TLANDO and LPCN 1111 outside of North America. 33 We expect to continue to incur significant research and development expenses in the future as we complete on-going clinical studies, including the studies for our CNS product candidates and as we conduct future clinical studies, including when and if we conduct Phase 2 clinical studies with our development product candidates and when and if we conduct Phase 3 clinical studies with LPCN 1144, LPCN 1148, and LPCN 1107. We are also exploring the possibility of licensing LPCN 1144, LPCN 1148, LPCN 2401 and LPCN 1107, although we have not entered into a licensing agreement and no assurance can be given that any license agreement will be completed, or, if an agreement is completed, that such an agreement would be on terms favorable to us. If we are unable to raise additional capital or obtain non-dilutive financing, we may need to reduce research and development expenses in order to extend our ability to continue as a going concern. General and Administrative Expenses General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance, business development and administrative support functions. Other general and administrative expenses include rent and utilities, travel expenses, and professional fees for auditing, tax, legal, and various other services. General and administrative expenses also include expenses for the cost of preparing, filling and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims. We expect that general and administrative expenses will increase in the future as we continue as a public company. These fees include legal and consulting fees, accounting and audit fees, director fees, directors’ and officers’ insurance premiums, fees for investor relations services and enhanced business and accounting systems, litigation costs, professional fees and other costs. However, if we are unable to raise additional capital, we may need to reduce general and administrative expenses in order to extend our ability to continue as a going concern. Other Income and Expense Other income and expense consists primarily of interest income earned on our cash, cash equivalents and marketable investment securities, imputed interest on minimum royalties under the Antares Licensing Agreement in 2023, and losses (gains) on our warrant liability. Results of Operations Comparison of the Three Months Ended June 30, 2024 The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023: Three Months Ended June 30, 2024 2023 Variance Revenue $ 89,565 $ - $ 89,565 Research and development expenses 1,874,721 2,515,211 (640,490 ) General and administrative expenses 1,507,412 1,440,394 67,018 Interest and investment income 308,845 379,521 (70,676 ) Unrealized gain (loss) on warrant liability (84,430 ) 27,455 (111,885 ) Income tax expense (481 ) - (481 ) Revenue We recognized revenue of approximately $90,000 consisting of royalty revenue received from our Verity License Agreement during the three months ended June 30, 2024, and revenue of $0 during the three months ended June 30, 2023, respectively. 34 Research and Development Expenses The decrease in research and development expenses during the three months ended June 30, 2024, as compared to the three months ended June 30, 2023 consists of a $1.2 million decrease in contract research organization expense and outside consulting costs related to the wind down of our LPCN 1148 study in 2024, a $70,000 decrease in TLANDO related costs, and a $47,000 decrease in personnel related costs, offset by a $430,000 increase in costs related to our LPCN 1154 clinical studies, a $183,000 increase in other research and development related costs and a $24,000 increase in LPCN 2401 development costs. General and Administrative Expenses The increase in general and administrative expenses during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 consists of a $268,000 increase in business development expenses and a $129,000 increase in corporate legal fees. These increases are offset by a $82,000 decrease in corporate insurance expense, a $69,000 decrease in professional fees related to the 2023 reverse stock split, a $62,000 decrease in other various administrative consulting fees, a $62,000 decrease in travel related expenses, and a $56,000 decrease in various other general and administrative expenses. Interest and Investment Income The decrease in interest and investment income during the three months ended June 30, 2024 compared to interest and investment income during the three months ended June 30, 2023 was due to somewhat lower cash and marketable investment securities balances, in addition to no longer having imputed interest income on the Antares License Agreement contract asset in the six months ended June 30, 2024. Gain (Loss) on Warrant Liability We recorded a loss of approximately $84,000 and a gain of approximately $27,000 on warrant liability during the three months ended June 30, 2024 and 2023, respectively, related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. The loss in 2024 resulted from an increase in the fair value of warrants mainly due to a higher stock price at the end of the second quarter of 2024 compared to the stock price at the end of the first quarter of 2024. The gain in 2023 was attributable to a decrease in the fair value of warrants outstanding as of June 30, 2023 as compared to March 31, 2023, which was primarily due to the decrease in our stock price at the end of the second quarter 2023 compared to the stock price at the end of the first quarter of 2023. No common stock warrants from the November 2019 Offering were exercised during the either three or six months ended June 30, 2024 or 2023. The warrants are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a change of control. The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility of our stock price, the risk-free interest rate and the number of common stock warrants outstanding. Comparison of the Six Months Ended June 30, 2024 The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023: Six Months Ended June 30, 2024 2023 Variance Revenue $ 7,706,738 $ 54,990 $ 7,651,748 Research and development expenses 4,693,646 5,621,521 (927,875 ) General and administrative expenses 3,083,131 2,727,708 355,423 Interest and investment income 640,209 749,991 (109,782 ) Unrealized gain (loss) on warrant liability (124,502 ) 125,589 (250,091 ) Income tax expense (681 ) (200 ) (481 ) Revenue We recognized revenue of $7.7 million primarily consisting of licensing revenue received from our Verity License Agreement during the six months ended June 30, 2024, and licensing revenue of $55,000 during the six months ended June 30, 2023, respectively. 35 Research and Development Expenses The decrease in research and development expenses during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023 consists of an $2.2 million decrease in contract research organization expense and outside consulting costs related to the wind down of our LPCN 1148 study in 2024, a $136,000 decrease in personnel related costs, and a $47,000 decrease in LPCN 1111 and LPCN 1144 clinical study costs. These decreases were offset by a $1.3 million increase in costs related to our LPCN 1154 clinical studies, a $46,000 increase in TLANDO related costs, a $36,000 increase in other research and development related costs, and a $24,000 increase in LPCN 2401 development costs. General and Administrative Expenses The increase in general and administrative expenses during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 consists of a $789,000 increase in business development expenses, a $98,000 increase in corporate legal fees, and a $23,000 increase in director fees. These increases were offset by a $165,000 decrease in corporate insurance expense, a $124,000 decrease in costs related to our reverse stock split in 2023, a $144,000 decrease in various administrative consulting fees, a $57,000 decrease in personnel salaries and benefits, a $39,000 decrease in travel related costs, and a $26,000 decrease in various other general and administrative expenses. Interest and Investment Income The decrease in interest and investment income during the six months ended June 30, 2024 compared to interest and investment income during the six months ended June 30, 2023 was due to somewhat lower cash and marketable investment securities balances, in addition to no longer having imputed interest income on the Antares License Agreement contract asset in the six months ended June 30, 2024. Gain (Loss) on Warrant Liability We recorded a loss of approximately $125,000 and a gain of approximately $126,000 on warrant liability during the six months ended June 30, 2024 and 2023, respectively, related to the change in the fair value of outstanding common stock warrants issued in the November 2019 Offering. The loss in 2024 resulted from an increase in the fair value of warrants mainly due to a higher stock price at the end of the second quarter of 2024 compared to the stock price on December 31, 2023. The gain in 2023 was attributable to a decrease in the fair value of warrants outstanding as of June 30, 2023 as compared to December 31, 2022, primarily due to the decrease in our stock price at the end of the second quarter 2023 compared to the stock price on December 31, 2022, in addition to higher interest rates. No common stock warrants from the November 2019 Offering were exercised during either the six months ended June 30, 2024 or the six months ended June 30, 2023. The warrants are classified as a liability due to a provision contained within the warrant agreement which allows the warrant holder the option to elect to receive an amount of cash equal to the value of the warrants as determined in accordance with the Black-Scholes option pricing model with certain defined assumptions upon a change of control. The warrant liability will continue to fluctuate in the future based on inputs to the Black-Scholes model including our current stock price, the remaining life of the warrants, the volatility of our stock price, the risk-free interest rate and the number of common stock warrants outstanding. Liquidity and Capital Resources Since our inception, our operations have been primarily financed through sales of our equity securities, issuances of debt and payments received under our license and collaboration arrangements. We have devoted our resources to funding research and development programs, including discovery research, and preclinical and clinical development activities. We have incurred operating losses in most years since our inception and we expect to continue to incur operating losses into the foreseeable future as we advance the clinical development of LPCN 1154, LPCN 2101, LPCN 2203, LPCN 2401 and any other future product candidates, including continued research efforts. As of June 30, 2024, we had $22.5 million of unrestricted cash, cash equivalents and marketable investment securities compared to $22.0 million at December 31, 2023. 36 On January 12, 2024, we entered into the Verity License Agreement with Verity Pharma, pursuant to which we granted to Verity Pharma an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize our TLANDO product with respect to TRT in the U.S. and Canada. Upon execution of the Verity License Agreement in January 2024 and upon transition of the commercialization of TLANDO from Antares to Verity Pharma in February 2024, Verity Pharma paid us initial payments of $2.5 million and $5 million, respectively. Verity Pharma has also agreed to make additional payments to us of $2.5 million before January 1, 2025, and $1 million before January 1, 2026. The Verity License Agreement also provides Verity Pharma with a license to develop and commercialize TLANDO XR (LPCN 1111), our potential next generation, once daily oral product candidate for testosterone replacement therapy comprised of testosterone tridecanoate (“TT”) in the U.S. and Canada. We are eligible to receive milestone payments of up to $259 million in the aggregate, depending on the achievement of certain development milestones and sales milestones in a single calendar year with respect to all products licensed by Verity Pharma under the Verity License Agreement. In addition, we receive tiered royalty payments at rates ranging from 12% up to 18% of net sales of all products licensed to Verity Pharma in the United States and Canada. Our ability to realize benefits from the Verity License Agreement, including milestone and royalty payments, is subject to a number of risks. We may not realize milestone or royalty payments in anticipated amounts, or at all. On March 6, 2017, we entered into a sales agreement (“Cantor Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”) as sales agent pursuant to which we agreed to sell shares of our common stock, having registered up to $50.0 million for sale under the Cantor Sales Agreement. During the three and six months ended June 30, 2024, we sold 32,110 shares of our common stock under the Cantor Sales Agreement. On April 24, 2024, we terminated the Cantor Sales Agreement. From the inception of the Cantor Sales Agreement to the termination of the agreement, we sold in aggregate 996,821 shares of our common stock for $33.5 million. On April 26, 2024, we entered into a sales agreement with A.G.P. (the “A.G.P. Sales Agreement”) pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to the amount we registered on an effective registration statement pursuant to which the offering is being made. We currently have registered up to $10,616,169 of shares of common shares for sale under the Sales Agreement, pursuant to the Registration Statement on Form S-3, as amended (File No. 333-275716) (the “Form S-3”), through A.G.P. as sales agent. A.G.P. may sell our common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act, including sales made directly on or through the Nasdaq Capital Market or any other existing trade market for our common stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to prevailing market prices, or any other method permitted by law. A.G.P. will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and regulations to sell shares under the A.G.P. Sales Agreement. We will pay A.G.P. 3.0% of the aggregate gross proceeds from each sale of shares under the A.G.P. Sales Agreement. In addition, we have also provided A.G.P. with customary indemnification rights. Our shares of common stock to be sold under the A.G.P. Sales Agreement will be sold and issued pursuant to the Form S-3, as amended, which was previously declared effective by the Securities and Exchange Commission, and the related prospectus and one or more prospectus supplements. We are not obligated to make any sales of our common stock under the A.G.P. Sales Agreement. The offering of common stock pursuant to the A.G.P. Sales Agreement will terminate upon the termination of the A.G.P. Sales Agreement as permitted therein. We and A.G.P. may each terminate the A.G.P. Sales Agreement at any time upon ten days’ prior notice. As of June 30, 2024, we had not sold any shares under the A.G.P. Sales Agreement. We believe that our existing capital resources, together with interest thereon, will be sufficient to meet our projected operating requirements through at least August 8, 2025 which include on-going clinical studies for LPCN 1154, and/or LPCN 2101, research and development activities, and compliance with regulatory requirements. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect if additional activities are performed by us including new clinical studies for LPCN 2401, LPCN 2203, LPCN 1148, LPCN 1144, LPCN 1111, and/or LPCN 1107. While we believe we have sufficient liquidity and capital resources to fund our projected operating requirements through at least August 8, 2025, we will need to raise additional capital at some point through the equity or debt markets or through additional out-licensing activities, either before or after August 8, 2025, to support our operations. If we are unsuccessful in raising additional capital as necessary, our ability to continue as a going concern will be limited. Further, our operating plan may change, and we may need additional funds to meet operational needs and capital requirements for product development, regulatory compliance and clinical trial activities sooner than planned. In addition, our capital resources may be consumed more rapidly if we pursue additional clinical studies for LPCN 1154, LPCN 2401, LPCN 2101, LPCN 2203, LPCN 1148, LPCN 1144, and/or LPCN 1107. Conversely, our capital resources could last longer if we reduce expenses, reduce the number of activities currently contemplated under our operating plan or if we terminate, modify or suspend on-going clinical studies. We can raise capital pursuant to the A.G.P. Sales Agreement but may choose not to issue common stock if our market price is too low to justify such sales in our discretion. There are numerous risks and uncertainties associated with the development and, subject to approval by the FDA, commercialization of our product candidates. There are numerous risks and uncertainties impacting our ability to enter into collaborations with third parties to participate in the development and potential commercialization of our product candidates. We are unable to precisely estimate the amounts of increased capital outlays and operating expenditures associated with our anticipated or unanticipated clinical studies and ongoing development efforts. All of these factors affect our need for additional capital resources. To fund future operations, we will need to ultimately raise additional capital and our requirements will depend on many factors, including the following: ● the scope, rate of progress, results and cost of our clinical studies, pre-clinical testing and other related activities for all of our product candidates, including LPCN 1154, LPCN 2101 LPCN 2203, LPCN 2401, LPCN 1148, LPCN 1144, and LPCN 1107; 37 ● the cost of manufacturing clinical supplies and establishing commercial supplies, of our product candidates and any products that we may develop; ● the cost and timing of establishing sales, marketing and distribution capabilities, if any; ● the terms and timing of any collaborative, licensing, settlement and other arrangements that we may establish; ● the number and characteristics of product candidates that we pursue; ● the cost, timing and outcomes of regulatory approvals; ● the timing, receipt and amount of sales, profit sharing, milestones or royalties, if any, from our potential products; ● the cost of preparing, filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; ● the extent to which we acquire or invest in businesses, products or technologies, although we currently have no commitments or agreements relating to any of these types of transactions; and ● the extent to which we grow significantly in the number of employees or the scope of our operations. Funding may not be available to us on favorable terms, or at all. Also, market conditions may prevent us from accessing the debt and equity capital markets, including sales of our common stock through the Sales Agreement. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical studies, research and development programs or, if any of our product candidates receive approval from the FDA, commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, including the Sales Agreement, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. These arrangements may not be available to us or available on terms favorable to us. To the extent that we raise additional capital through marketing and distribution arrangements, other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences, warrants or other terms that adversely affect our stockholders’ rights or further complicate raising additional capital in the future. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable, for any reason, to raise needed capital, we will have to reduce costs, delay research and development programs, liquidate assets, dispose of rights, commercialize products or product candidates earlier than planned or on less favorable terms than desired or reduce or cease operations. Sources and Uses of Cash The following table provides a summary of our cash flows for the six months ended June 30, 2024 and 2023: Six Months Ended June 30, 2024 2023 Cash used in operating activities $ (90,258 ) $ (7,237,654 ) Cash provided by investing activities 662,531 9,115,069 Cash provided by (used in) financing activities 209,340 (11,216 ) 38 Net Cash from Operating Activities During the six months ended June 30, 2024 and June 30, 2023, net cash used in operating activities was $90,000 and $7.2 million, respectively. Net cash used in operating activities during the six months ended June 30, 2024, was primarily attributable to cash required to support ongoing operations, including research and development expenses and general and administrative expenses, offset by cash provided by the Verity License Agreement of $7.5 million, Net cash used in operating activities during the six months ended June 30, 2023, was mainly primarily attributable to cash outlays to support ongoing operations, including research and development expenses and general and administrative expenses. During 2023, we performed activities primarily related to our Phase 2 POC study in male subjects with cirrhosis with LPCN 1148 and clinical studies related to LPCN 1154. Net Cash from Investing Activities During the six months ended June 30, 2024 and June 30, 2023, net cash provided by investing activities was $663,000 and $9.1 million. Net cash provided by investing activities during the six months ended June 30, 2024 and June 30, 2023, was primarily the result of the maturities of marketable investments securities, net. There were no capital expenditures during the six months ended June 30, 2024, and approximately $4,000 in capital expenditures during the six months ended June 30, 2023. Net Cash from Financing Activities During the six months ended June 30, 2024 and 2023, net cash provided by financing activities and net cash used in financing activities was approximately $209,000 and $11,000, respectively. Net cash provided by financing activities during the six months ended June 30, 2024, primarily resulted from the sale of 32,110 shares of common stock at a weighted average price of $6.77 per share under the ATM Sales Agreement. Net cash used in financing activities during the six months ended June 30, 2023 was related to costs associated with the Cantor Sales Agreement. Contractual Commitments and Contingencies Purchase Obligations We enter into contracts and issue purchase orders in the normal course of business with clinical research organizations for clinical trials and clinical and commercial supply manufacturing and with vendors for pre-clinical research studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination on notice and are cancellable obligations. Operating Leases In August 2004, we entered into an agreement to lease our facility in Salt Lake City, Utah consisting of office and laboratory space which serves as our corporate headquarters. On January 24, 2024, we modified and extended the lease through February 28, 2025. Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements which we have prepared in accordance with U.S. generally accepted accounting principles (US GAAP). In preparing our financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We concluded that licensing revenue recognized in conjunction with the Verity License Agreement met the requirements under ASC 606, Revenue from Contracts with Customers. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. License revenue from payments to be received in the future will be recognized when it is probable that we will receive license payments under the terms of the Verity License Agreement. 39 There have been no significant and material changes in our critical accounting policies during the six months ended June 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Significant Judgments and Estimates” in our Form 10-K filed March 7, 2024. Accounting Standards Issued Not Adopted In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280. The enhanced disclosure requirements include: title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances. This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. This change will apply retrospectively to all periods presented. Management is currently assessing the impact of the adoption of this ASU on the financials statements of the Company.