ITEM 1A. RISK FACTORS
We
have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, results
of operations and future growth prospects. Our business could be harmed by any of these risks. The risks and uncertainties described
below are not the only ones we face. The trading price of our common stock could decline due to any of these risks, and you may lose
all or part of your investment. In assessing these risks, you should also refer to the other information contained in this Annual Report
on Form 10-K, including our consolidated financial statements and related notes.
Risk
Factors Summary
Our
business operations are subject to numerous risks, factors and uncertainties, including those outside of our control, that could cause
our actual results to be harmed, including risks regarding the following:
Risks
Relating to Our Business and Industry
● the timelines of our clinical trials;
● the regulation requirements for our product candidates;
● our licensee’s ability to commercialize TLANDO may be limited;
● the market’s acceptance of our products;
● physicians and patients using other products may not switch to our product;
● any possible failure to comply with federal and state healthcare laws;
● the ongoing outbreak of coronavirus around the world;
● difficulties in managing the growth of the Company;
● any product liability claims;
● any failure to comply with the Controlled Substances Act;
● the defense and resolution of any litigation;
● cyber security risks;
Risks
Related to Our Dependence on Third Parties
● our ability to establish successful collaborations for our products;
Risks
Related to Ownership of Our Common Stock
● the effectiveness of our internal control over financial reporting;
● the volatility of our share price;
● the possibility of delisting of our securities from the Nasdaq Capital Market;
● our decision not to pay dividends on our common stock;
● our management and directors’ ability to exert influence over our affairs;
● volatility in the trading price of our common stock;
Risks
Relating to Our Financial Position and Capital Requirements
● our incurrence of significant operating losses;
● any fluctuation in our operating results;
● limited shares available for issuance to raise capital;
Risks
Relating to Our Intellectual Property
● our ability to protect our intellectual property;
Risks
Relating to Our Business and Industry
The
timelines of our clinical trials may be impacted by numerous factors and any delays may adversely affect our ability to execute our current
business strategy.
Our
expectations regarding the success of our product candidates, including our clinical candidates and lead compounds, and our business
are based on projections which may not be realized for many scientific, business or other reasons. We therefore cannot assure investors
that we will be able to adhere to our current schedule. We set goals that forecast the accomplishment of objectives material to our success:
selecting clinical candidates, product candidates, failures in research, the inability to identify or advance lead compounds, identifying
target patient groups or clinical candidates, the timing and completion of clinical trials, and anticipated regulatory approval. The
actual timing of these events can vary dramatically due to factors such as slow enrollment of subjects in studies, uncertainties in scale-up,
manufacturing and formulation of our compounds, failures in research, the inability to identify clinical candidates, failures in our
clinical trials, requirements for additional clinical trials and uncertainties inherent in the regulatory approval process and regulatory
submissions. Decisions by our partners or collaborators may also affect our timelines and delays in achieving manufacturing capacity.
The length of time necessary to complete clinical trials and to submit an application for marketing approval by applicable regulatory
authorities may also vary significantly based on the type, complexity and novelty of the product candidate involved, as well as other
factors.
LPCN
1148 is in a very early stage of development and is currently undergoing phase 2 clinical evaluation in a proof-of-concept study
for management of liver cirrhosis in male patients and while there are no therapies specifically approved by the FDA for sarcopenia
or cirrhosis beyond treatment of underlying conditions, there are candidates know to be under development for cirrhosis related indication(s).
LPCN
1148 is in a very early stage of development and consequently the risk that we may fail to commercialize LPCN 1148 and related products
is high. This development program is susceptible
to technical failures in ongoing and future clinical studies, regulatory hurdles for further testing and/or meeting FDAs needs for NDA
filing or approval. The results of the current phase 2 clinical evaluation may not support continued development or regulatory approval.
While we believe there is a potential to gain Orphan Drug Designation for an indication or condition in male liver cirrhosis, the
FDA may not grant such designation which could adversely impact development or the commercial potential of LPCN 1148.
LPCN
1144 is in a very early stage of development and may not be further developed for a variety of reasons.
LPCN
1144 is in a very early stage of development and consequently the risk that we fail to commercialize LPCN 1144 and related products is
high. In particular, we have only recently announced topline primary and key secondary endpoint results from our Phase 2 LiFT
clinical study.
Although
our results from the LiFT clinical study results were positive for NASH resolution with no worsening of fibrosis, these results
may not be indicative of ultimate success in a larger Phase 2/3 clinical study with required FDA endpoints and populations needed for
regulatory approval of LPCN 1144 for the treatment of NASH.
In
addition, a number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical
trials, even after achieving positive results in early-stage development. The FDA currently insists on histopathology endpoint for diagnosis
and assessment of efficacy in a pivotal trial. Accordingly, our results from our LiFT study may not be predictive of the results
we may obtain from further studies and trials.
Several
factors could significantly affect the prospects for LPCN 1144, including factors relating to the regulatory approval, competitive landscape
and clinical development challenges for LPCN 1144. The anticipated Phase 3 programs for an NDA filing for LPCN 1144 will be very long
and resource intensive.
LPCN 1111 is in a very early stage of development
and may not be further developed for a variety of reasons.
LPCN 1111 is in a very early
stage of development. We have completed a Phase 2a and Phase 2b study in hypogonadal men. Future studies may not have clinical results
that support continued develop and/or a path towards regulatory approval and commercialization.
In addition, the active ingredient
in LPCN 1111 has only been manufactured on a small scale. Scaling up into larger batches could be challenging and our ability to procure
adequate material in a timely manner to further develop LPCN 1111 is uncertain. We also may not be able to engage a manufacturer who
can supply adequate quantities of the drug substance in compliance with cGMP.
Several
factors could significantly affect the prospects for LPCN 1111, including Antares’ option to license LPCN 1111 (TLANDO XR) as such
option is available to them under the Antares License Agreement, and factors relating to the regulatory approval and clinical development
challenges for LPCN 1111 discussed above. The anticipated phase 3 program for an NDA filing for LPCN 1111, however, could be very long
and expensive.
LPCN
1107 is in a very early stage of development and may not be further developed for a variety of reasons.
LPCN
1107 is in a very early stage of development and consequently the risk that we fail to commercialize LPCN 1107 and related products is
high. In particular, we have only conducted three phase 1 clinical studies with this product candidate. Two of the studies were in healthy
pregnant women and one was in healthy women. Although these studies demonstrated oral absorption of LPCN 1107 is possible, we may not
be able to match Cavg blood levels shown with the intramuscular injection comparator product over a longer duration. Furthermore, our
completed phase 1 clinical studies may not be predictive of safety concerns that may arise in pregnant women or demonstrate that LPCN
1107 has an adequate safety profile to warrant further development. The FDA may also require further preclinical studies. All of these
factors can impact the timing of and our ability to continue development of LPCN 1107.
In
addition, a number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late-stage clinical
trials, even after achieving positive results in early-stage development. Accordingly, our results from our Phase 1a, our Phase 1b and
our multi-dose PK dose selection studies may not be predictive of the results we may obtain from further studies and trials.
A
traditional PK/PD based phase 2 clinical study in the intended patient population may not be required prior to entering into Phase 3.
Therefore, based on the results of our multi-dose PK study results, we had an end-of-phase 2 meeting with the FDA in the second quarter
of 2016, as well as subsequent guidance meetings to agree on a pivotal Phase 2b/3 development plan for LPCN 1107. However, these discussions
will need to be updated based on recent developments with Covis’ Makena®. We plan to resume our interactions with the FDA to
discuss our pivotal Phase 2b/3 clinical trial design and better understand next steps to advance LPCN 1107 after completion of our ongoing
food effect study. Once the pivotal Phase 2b/3 clinical trial is started, the anticipated Phase 2b/3 program for an NDA filing for LPCN
1107 will be very long and expensive.
The
FDA has concluded that Makena, based on Makena’s failed definitive PROLONG study, a competing product with the same active ingredient
and similar target indication, is ineffective and has proposed that it be withdrawn from the market, but the final decision is still
pending. It is entirely possible that any pivotal study may require a placebo-controlled trial design. Therefore, given the uncertainly
of the status of the current standard of care, Makena and its generics, Lipocine may face significant challenges in patient recruitment
for a placebo-controlled trial, be faced with significant resource investment to conduct additional trials, and face potential perceived
risk of efficacy failure in a pivotal study resulting in no further development of LPCN 1107.
LPCN 1154 and LPCN 2101 a very early stage
of development and may not be further developed for a variety of reasons.
Our oral NAS comprising programs
(LPCN 1154 and LPCN 2101) are in a very early stage of development and consequently the risk that we may fail to commercialize LPCN 1154,
LPCN 2101, and related products is high. We have not conducted clinical studies of these programs and the ultimate regulatory or technical
success of each of the neuroactive steroids under investigation in these programs is uncertain. The current limited pre-clinical results
we have observed may not be replicated in larger studies, future PK phase 2, or pivotal studies with a potential “to be marketed
formulation”. We may not be able get IND clearance in a timely manner or may be unable to further test in-clinic due to other regulatory
hurdles.
In addition, our oral NAS
product candidates may not be effective in treating PPD or WWE or may not have differentiation from competitive products on the market
or in development. We may expend significant resources before determining that these programs are not viable candidates for regulatory
approval and commercialization.
Our
research and development programs and processes are at an early stage of development, which makes it difficult to evaluate our business
and prospects or predict if or when we will successfully commercialize our product candidates.
Our
operations to date have primarily been limited to conducting research and development activities under license and collaboration agreements.
Our current portfolio consists of product candidates at various clinical stages of development in addition to our out-licensed product
TLANDO. We have never marketed or commercialized a drug product. Consequently, any predictions about our future performance may not be
as accurate as they could be if we were further along our commercialization path. In addition, as a pre-commercial stage business, we
may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors.
Our
clinical product candidates are at an early stage of development and will require significant further investment and regulatory approvals
prior to marketing and commercialization. As such, our product development processes for oral neuro active steroids, LPCN 1148, LPCN
1111, LPCN 1144, and LPCN 1107 are very risky and uncertain, and our product candidates may fail to advance beyond the current study.
Even if we obtain required financing, we cannot ensure successful product development or that we will obtain regulatory approval or successfully
commercialize any of our product candidates and generate product revenues.
All
of our clinical candidates will be subject to extensive regulation which can be costly and time consuming, cause delays or prevent approval
of the products for commercialization.
Our
clinical development of oral neuro active steroids, LPCN 1148, LPCN 1111, LPCN 1144, and LPCN 1107 and any future product candidates
is subject to extensive regulations by the FDA. Product development is a very lengthy and expensive process and can vary significantly
based upon the product candidate’s novelty and complexity. Regulations are subject to change and regulatory agencies have significant
discretion in the approval process.
Numerous
statutes and regulations govern human testing and the manufacture and sale of human therapeutic products in the United States. Such legislation
and regulation bears upon, among other things, the approval of protocols and human testing, the approval of manufacturing facilities,
safety of the product candidates, testing procedures and controlled research, review and approval of manufacturing, preclinical and clinical
data prior to marketing approval including adherence to cGMP during production and storage as well as regulation of marketing activities
including advertising and labeling.
In
order to obtain regulatory clearance for the commercial sale of any of our product candidates, we must demonstrate through preclinical
studies and clinical trials that the potential product is safe and efficacious for use in humans for each target indication. Obtaining
approval of any of our product candidates is an extensive, lengthy, expensive and uncertain process, and the FDA may delay, limit or
deny approval for many reasons, including:
● the FDA may not accept data generated at our clinical trial sites;
● the FDA may require development of a REMS as a condition of approval;
Preclinical
and clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product
candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain FDA approval for their
products.
No
assurance can be given that current regulations relating to regulatory approval will not change or become more stringent. The FDA may
also require that we amend clinical trial protocols and/or run additional trials in order to provide additional information regarding
the safety, efficacy or equivalency of any compound for which we seek regulatory approval. Moreover, any regulatory approval of a drug
which is eventually obtained may entail limitations on the indicated uses for which that drug may be marketed. Furthermore, product approvals
may be withdrawn or limited in some way if problems occur following initial marketing or if compliance with regulatory standards is not
maintained. The FDA could become more risk averse to any side effects or set higher standards of safety and efficacy prior to reviewing
or approving a product. This could result in a product not being approved
We
are substantially dependent on the success of our licensed product candidate, TLANDO, for which we received tentative approval
from the FDA and which may not receive final regulatory approval or be successfully commercialized.
TLANDO
is currently our only product candidate that has completed Phase 3 clinical trials. In October 2021, we entered into the Antares License
Agreement with Antares, pursuant to which we granted Antares an exclusive, royalty-bearing, sublicensable right and license to develop
and commercialize, upon final approval of TLANDO from the FDA, our TLANDO product with respect to TRT in the U.S. None of our other products
have been approved for sale. Therefore, at this stage, our ability to realize revenue depends on TLANDO’s successful regulatory approval and commercialization, if final approval is obtained. The commercial success of TLANDO depends almost entirely on
Antares’ commercialization efforts and we have very limited ability to influence Antares’ efforts, including the amount and
timing of resources they devote, if any, to the commercialization of TLANDO.
On
December 8, 2020, the FDA informed us that it granted tentative 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). In granting tentative approval, the
FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval, but TLANDO has not received
final approval and is not eligible for final approval and marketing in the U.S. until the expiration of the exclusivity period previously
granted to Clarus with respect to JATENZO®, which expires on March 27, 2022. Antares will not be able to market TLANDO in the U.S.
until that time. Any delay in receiving final FDA approval could adversely affect Antares’s commercialization efforts and ability
to compete with other TRT products and have a material adverse effect on our business.
Under
the PREA, if TLANDO receives full approval, our licensing partner, Antares, will need to address the PREA requirement to assess the safety
and effectiveness of TLANDO in pediatric patients. The FDA has also required us to conduct 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. The timetables for these post-marketing requirements will be established at the time of full approval of
TLANDO. Antares will be responsible for any required studies after approval of TLANDO.
Even
if final regulatory approval of TLANDO is obtained, the success of TLANDO, and our ability to realize royalty revenue, will depend on
the commercialization efforts of Antares. If Antares is not able to successfully commercialize TLANDO, we may not realize any royalty
revenue under the Antares License Agreement and our business 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.
Any
regulatory approval of TLANDO, once obtained, including the FDA’s tentative approval, may be withdrawn. Ultimately, the failure
to obtain and maintain regulatory approvals would prevent TLANDO from being marketed and would have a material adverse effect on our
business.
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. Even if our TLANDO and our LPCN
1111 are approved, physicians and patients may be deterred from prescribing and using T-replacement therapies, which could depress
demand for TLANDO and LPCN 1111 and compromise the successful commercialization of TLANDO and LPCN 1111, if final approval
is obtained.
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:
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 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:
Additionally,
the FDA stated that it will require manufacturers of approved T-replacement products to conduct a well-designed clinical trial
to more clearly address the question of whether an increased risk of heart attack or stroke exists among users of T-replacement products.
The FDA encouraged manufacturers to work together on conducting a clinical trial, although the FDA will allow manufacturers to work separately
if they so choose.
On
December 8, 2020, the FDA tentatively approved TLANDO. As part of their approval, the FDA has required us to include 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 after it has received final approval, which could adversely affect our business.
The
FDA has also required us to conduct certain post-marketing studies to (i) assess patient understanding of key risks relating to TLANDO
and (ii) evaluate development of adrenal insufficiency with chronic TLANDO therapy. Antares is responsible for conducting these post-marketing
studies. Negative outcomes from such studies could adversely affect the ability of Antares to successfully commercialize TLANDO, which
would adversely affect our ability to realize royalty revenue under the Antares License Agreement.
If
we fail to obtain adequate healthcare reimbursement for our products, our revenue-generating ability will be diminished and there is
no assurance that the anticipated market for our products will be sustained.
We
believe that there could be many different applications for products successfully derived from our technologies and that the anticipated
market for products under development could continue to expand. However, due to competition from existing or new products, potential
changes to the class TRT label by the FDA and the yet to be established commercial viability of our products, no assurance can be given
that these beliefs will prove to be correct. Physicians, patients, formularies, payors or the medical community in general may not accept
or utilize any products that we or our collaborative partners may develop. Other drugs may be approved during our clinical testing which
could change the accepted treatments for the disease targeted and make our compound obsolete.
Our
ability to commercialize our products with success may depend, in part, on the extent to which coverage and adequate reimbursement to
patients for the cost of such products and related treatment will be available from governmental health administration authorities, private
health coverage insurers and other organizations, as well as the ability of private payors to pay for or afford our drugs. Adequate third-party
coverage may not be available to patients to allow us to maintain price levels sufficient for us to realize an appropriate return on
our investment in product development.
Coverage
and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payers can be critical
to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more
established or lower cost therapeutic alternatives are already available or subsequently become available. Additionally, current manufacturers
of drug products may have agreements with payors that may limit the ability of new products to get on formulary or require a step edit
with an existing product before reimbursement or a new product will occur. Even if we obtain coverage for our products, the resulting
reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are less
likely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our
products. Payers may require a more arduous prior authorization process as a condition to payment for TRT therapy. This could adversely
affect the market for TRT products.
In
the United States and in many other countries, pricing and/or profitability of some or all prescription pharmaceuticals and biopharmaceuticals
are subject to varying degrees of government control. Healthcare reform and controls on healthcare spending may limit the price we charge
for any products and the amounts thereof that we can sell. In particular, in the United States, the federal government and private insurers
have changed and have considered ways to change, the manner in which healthcare services are provided. In March 2010, ACA became law
in the United States. ACA substantially changes the way healthcare is financed by both governmental and private insurers and significantly
affects the healthcare industry. The provisions of ACA of importance to our potential product candidates include the following:
In
addition, other legislative changes have been proposed and adopted since ACA was enacted. On August 2, 2011, the Budget Control Act of
2011, created, among other things, measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked
with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required
goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions
to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama signed into law
the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several providers and increased the
statute of limitations period for the government to recover overpayments to providers from three to five years. The Medicare Access and
CHIP Reauthorization Act of 2015 was signed into law on April 16, 2015 and implemented the most significant change in Medicare reimbursement
since the ACA was enacted. This 2015 law authorizes a new Medicare pay –for-performance reimbursement system for physicians, which
will reward physicians for performance on metrics related to quality of care, resource use, meaningful use of electronic medical records,
and clinical practice improvement activities. The Bipartisan Budget Act was enacted on November 2, 2015, and among provisions, restricts
the types of facilities that may receive hospital reimbursement under Medicare. These new laws may result in additional reductions in
Medicare and other healthcare funding, which could have a material adverse effect on our customers and accordingly, our financial operations.
We
anticipate that ACA will result in additional downward pressure on the reimbursement we may receive for any approved and covered product
and could seriously harm our business. Any reduction in reimbursement from Medicare and other government programs may result in a similar
reduction in payments from private payers. In the future, the U.S. government may institute further controls and different reimbursement
schemes and limits on Medicare and Medicaid spending or reimbursement that may affect the payments we could collect from sales of any
products in the United States.
The
Department of Health and Human Services Office of Inspector General issued final regulations on November 30, 2020 to eliminate safe harbor
protection under the anti-kickback statute for drug price reductions that pharmaceutical manufacturers pay to Medicare and Medicaid plan
sponsors and their pharmacy benefit managers. The proposal reflects a clear intent to substantially alter many of the current drug discount
and services compensation practices among pharmaceutical manufacturers and Medicare and Medicaid managed care organizations and their
pharmacy benefit managers. The proposal also reflects a skepticism that current drug discount and compensation practices among manufacturers
and pharmacy benefit managers are sufficiently transparent to health plans to ensure that all appropriate cost reductions and value is
passed through to health plans and reflected in lower health plans costs and lower premiums for beneficiaries. The Biden Administration
has delayed the effective date of this rule until January 1, 2023, and a lawsuit initiated by the Pharmaceutical Care Management Administration
has challenged this final rule. If the regulation becomes effective, it could result in lower prices for pharmaceutical products in general.
The
Centers for Medicare and Medicaid Services issued an interim final rule on November 20, 2020, that would tie prices for certain drugs
under Medicare Part B to the lowest price for those drugs available in certain countries that are members of the Organization for Economic
Co-operation and Development. This “most favored nation” drug pricing rule is also the subject of lawsuits, and a federal
court has placed an injunction on the implementation of the rule. This rule, if finalized, could also result in lower prices for pharmaceutical
products in general.
The
Biden Administration will have the opportunity to address these regulations as well as drug pricing, health care access, and other health
care reform issues. Any further legislative or administrative action to reduce reimbursement or health benefits to beneficiaries under
the Medicare or Medicaid program could affect the payment we could collect from sale of any product in the United States.
There
is substantial competition in the TRT market, which may result in others discovering, developing or commercializing products before or
more successfully than us or our licensing partner.
We
expect to face significant competition for any of our product candidates, if approved. In particular, once final approval is obtained,
TLANDO would compete in the T-replacement therapies market, which is competitive and currently dominated by the sale of T-gels and T-injectables.
Receipt of future potential payments under our licensing agreement will depend, in large part, on our licensing partner’s ability
to obtain an adequate share of the market. Potential competitors in North America, Europe and elsewhere include major pharmaceutical
companies, specialty pharmaceutical companies, biotechnology firms, universities and other research institutions and government agencies.
Other pharmaceutical companies may develop oral T-replacement therapies that compete with TLANDO. For example, because TU is not a patented
compound and is commercially available to third parties, it is possible that competitors may design methods of TU administration that
would be outside the scope of the claims of either our issued patents or our patent applications. This would enable their products to
effectively compete with TLANDO, which could have a negative effect on potential payments under our licensing agreement.
The
following T-replacement therapies currently on the market in the United States would compete with TLANDO:
● Oral-T, such as Jatenzo;
● Branded, longer-acting injectables, such as Aveed (marketed by Endo);
● T-nasals, such as Natesto (marketed by Acerus);
● transdermal patches, such as Androderm (marketed by Allergan);
● buccal patches, such as Striant (marketed by Endo);
● generic testosterone enanthate intra-muscular injectables;
● authorized generic and generic T-gels; and
● subcutaneous injectable pellets, such as Testopel (marketed by Endo).
On
March 27, 2019, Clarus’ product JATENZO®, an oral TU product, was approved by the FDA and also received three years of marketing
exclusivity. On February 10, 2020, Clarus announced that JATENZO® has been launched and is commercially available. Based on the FDA’s
tentative approval of TLANDO, the marketing of TLANDO cannot begin until after March 27, 2022, the expiration of the exclusivity period
granted to Clarus with respect to JATENZO®.
We
are also aware of other pharmaceutical companies that have T-replacement therapies or testosterone therapies in development that may
be approved for marketing in the United States or outside of the United States.
Based
on publicly available information, we believe that several other T-replacement therapies that would be competitive with TLANDO are in
varying stages of development, some of which may be approved, marketed and/or commercialized prior to TLANDO. These therapies include
T-gels, oral-T, an aromatase inhibitor, a new class of drugs called Selective Androgen Receptor Modulators and hydroalcoholic gel formulations
of DHT.
In
light of the competitive landscape above, TLANDO will not be the only oral TRT to market, which may significantly affect the market acceptance
and commercial success of TLANDO.
Furthermore,
many of our potential competitors have substantially greater financial, technical, and human resources than we do and significantly greater
experience in the discovery and development of drug candidates, obtaining FDA and other marketing approvals of products and the commercialization
of those products. Accordingly, our competitors may be more successful than we may be in obtaining FDA approval for drugs and achieving
widespread market acceptance. Our competitors’ drugs may be more effective, or more effectively marketed and sold, than our products
and may render our products obsolete or non-competitive before we can recover the expenses of developing and commercializing them. We
anticipate that we will face intense and increasing competition as new drugs enter the market and advanced technologies become available.
Failure to successfully compete in this market would materially and negatively impact our business and operations.
Even
if TLANDO is approved by the FDA, our licensee’s ability to commercialize TLANDO may be limited.
Our
licensee partner’s ability to commercialize TLANDO, should it receive final approval, is uncertain. Our licensee’s ability
to commercially launch TLANDO is contingent upon numerous factors including, among other things, receipt of final FDA approval, the completion
of post-marketing studies, the availability of commercial launch supplies, the impact of COVID-19, commercial acceptance by patients,
the medical community, and third-party payors, and the resources that our licensee devotes to the commercialization of TLANDO.
If our licensee is unable to successfully launch TLANDO commercially at scale, our business and operations could be adversely affected.
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, including Antares under the Antares License Agreement with respect to TLANDO, 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.
Even
if we receive marketing approval in the United States, we may never receive regulatory approval to market our products outside the United
States, which could reduce the size of our potential markets and have a material adverse impact on our business.
In
order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory requirements
of other countries regarding safety and efficacy.
Approval
procedures vary among countries and can involve additional product candidate testing and additional administrative review periods. The
time required to obtain approvals in other countries might differ from that required to obtain FDA approval. The marketing approval process
in other countries may include all of the risks detailed above regarding FDA approval in the United States as well as other risks. In
particular, in many countries outside of the United States, products must receive pricing and reimbursement approval before the product
can be commercialized. This can result in substantial delays in such countries. Marketing approval in one country does not ensure marketing
approval in another, but a failure or delay in obtaining marketing approval in one country may have a negative effect on the regulatory
process in others. Failure to obtain marketing approval in other countries or any delay or setback in obtaining such approval would impair
our ability to market our products in such foreign markets. Any such impairment would reduce the size of our potential markets, which
could have an adverse impact on our business, results of operations and prospects.
We
are subject to stringent government regulations concerning the clinical testing of our products and will continue to be subject to government
regulation of any product that receives regulatory approval.
Numerous
statutes and regulations govern human testing and the manufacture and sale of human therapeutic products in the United States and other
countries where we intend to market our products. Such legislation and regulation bears upon, among other things, the approval of clinical
study protocols and human testing of our products, the approval of manufacturing facilities, testing procedures and controlled research,
the review and approval of manufacturing, preclinical and clinical data prior to marketing approval, including adherence to cGMP during
production and storage, and marketing activities including advertising and labeling.
Clinical
trials may be delayed or suspended at any time by us or by the FDA or by other similar regulatory authorities if it is determined at
any time that patients may be or are being exposed to unacceptable health risks, including the risk of death, or if compounds are not
manufactured under acceptable cGMP conditions or with acceptable quality. Current regulations relating to regulatory approval may change
or become more stringent. The agencies may also require additional clinical trials to be run in order to provide additional information
regarding the safety, efficacy or equivalency of any compound for which we seek regulatory approval. Moreover, any regulatory approval
of a drug which is eventually obtained may entail limitations on the indicated uses for which that drug may be marketed. Furthermore,
product approvals may be withdrawn or limited in some way if problems occur following initial marketing or if compliance with regulatory
standards is not maintained. Regulatory agencies could become more risk adverse to any side effects or set higher standards of safety
and efficacy prior to reviewing or approving a product. This could result in a product not being approved.
If
we, or any future marketing collaborators or CMOs, fail to comply with applicable regulatory requirements, we may be subject to sanctions
including fines, product recalls or seizures and related publicity requirements, injunctions, total or partial suspension of production,
civil penalties, suspension or withdrawals of previously granted regulatory approvals, warning or untitled letters, refusal to approve
pending applications for marketing approval of new products or of supplements to approved applications, import or export bans or restrictions,
and criminal prosecution and penalties. Any of these penalties could delay or prevent the promotion, marketing or sale of our products.
The
successful commercialization of our product candidates and ability to generate significant revenue will depend on achieving market acceptance.
Even
if our product candidates are successfully developed and receive regulatory approval, they may not gain market acceptance among physicians,
patients, healthcare payers such as private insurers or governments and other funding parties and the medical community. The degree of
market acceptance for our products, if approved, will depend on a number of factors, including:
● the prevalence and severity of any adverse side effects;
● limitations or warnings contained in the labeling approved by the FDA;
● pricing and cost effectiveness;
● our ability to increase awareness of our products through marketing efforts;
● our ability to obtain sufficient third-party coverage or reimbursement; and
If
our product candidates are approved but do not achieve an adequate level of acceptance by physicians, healthcare payors and patients,
we may not generate sufficient revenue from our products and we may never become or remain profitable. In addition, our efforts to educate
the medical community and third-party payors on the benefits of our products may require significant resources and may never be successful.
Even
if we obtain marketing approval for our products, physicians and patients using existing products may choose not to switch to our products.
Physicians
often show a reluctance to switch their patients from existing drug products even when new and potentially more effective and convenient
treatments enter the market. Also, physicians may be reluctant to switch patients if adequate reimbursement for new products is not available.
In addition, patients often acclimate to the brand or type of drug product that they are currently taking and do not want to switch unless
their physicians recommend switching products or they are required to switch drug treatments due to lack of reimbursement for existing
drug treatments and only if the new product has adequate reimbursement. The existence of either or both of physician or patient reluctance
in switching to our products would have an adverse effect on our operating results and financial condition.
The
FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses. If we are found
to have improperly promoted off-label uses, we may become subject to significant liability.
The
FDA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as our
product candidates. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies
as reflected in the product’s approved labeling. The FDA may impose further requirements or restrictions on the distribution or
use of our product candidates as part of a REMS plan, such as limiting prescribing to certain physicians or medical centers that have
undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll
in a registry. If we receive marketing approval for our product candidates, physicians may nevertheless prescribe our products to their
patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become
subject to significant liability, including potential liability under federal civil and criminal false claims acts. The federal government
has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging
in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified
promotional conduct is changed or curtailed.
If
we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws,
we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.
As
a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid
or other third-party payers, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’
rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by
both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
Because
of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is possible that some of our business
activities could be subject to challenge under one or more of such laws. To the extent that any of our product candidates is ultimately
sold in countries other than the United States, we may be subject to similar laws and regulations in those countries. If we or our operations
are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject
to penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, exclusion from participating in government
healthcare programs, contractual damages, reputational harm and the curtailment or restructuring of our operations. Any penalties, damages,
fines, curtailment or restructuring of our operations could materially adversely affect our ability to operate our business and our financial
results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks
cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause
us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving
and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.
The
Department of Health and Human Services Office of Inspector General proposed new regulations on February 6, 2019 to eliminate safe harbor
protection under the anti-kickback statute for drug price reductions that pharmaceutical manufacturers pay to Medicare and Medicaid plan
sponsors and their pharmacy benefit managers. The proposal reflects a clear intent to substantially alter many of the current drug discount
and services compensation practices among pharmaceutical manufacturers and Medicare and Medicaid managed care organizations and their
pharmacy benefit managers. The proposal also reflects a skepticism that current drug discount and compensation practices among manufacturers
and pharmacy benefit managers are sufficiently transparent to health plans to ensure that all appropriate cost reductions and value is
passed through to health plans and reflected in lower health plans costs and lower premiums for beneficiaries. If the proposal is finalized,
it could result in lower prices for pharmaceutical products in general. The Biden Administration has delayed the effective date of this
rule until January 1, 2023, and a lawsuit initiated by the Pharmaceutical Care Management Administration has challenged this final rule.
If the regulation becomes effective, it could result in lower prices for pharmaceutical products in general.
The
Biden Administration will have the opportunity to address these regulations as well as drug pricing, health care access, and other health
care reform issues. Any further legislative or administrative action to reduce reimbursement or health benefits to beneficiaries under
the Medicare or Medicaid program could affect the payment we could collect from sale of any product in the United States.
The
ongoing outbreak of coronavirus around the world could adversely impact our business and operating results.
In
December 2019, a novel strain of coronavirus, SARS-CoV-2, was reported to have surfaced in Wuhan, China. Since then, SARS-CoV-2, and
the resulting disease COVID-19, has spread to multiple countries, including the United States and all of the primary markets where we
conduct business.
The
duration and extent of COVID-19’s impact on our business may be difficult to assess or predict. The widespread pandemic has resulted,
and may continue to result for an extended period, in significant disruption of global financial markets, reducing our ability to access
capital, which would negatively affect our liquidity. Further, quarantines or government reaction or shutdowns for COVID-19 could disrupt
our operations and harm our business, financial condition and results of operations. Our key personnel and other employees could also
be affected by COVID-19, potentially reducing their availability, and an outbreak such as COVID-19 or the procedures we take to mitigate
its effect on our workforce could reduce the efficiency of our operations or prove insufficient. We may delay or reduce certain capital
spending and certain projects until the travel and logistical impacts of COVID-19 are lifted, which will delay the completion of such
projects.
In
addition, the conduct of clinical trials and studies required to obtain regulatory approvals for our products have been and we expect
may continue to be affected by the COVID-19 pandemic. As hospital resources are prioritized for the COVID-19 outbreak and quarantines
impede patient movement or interrupt healthcare services, clinical studies may continue to be disrupted. If we are unable to successfully
complete our clinical studies, our business and operating results will be harmed. Further, we believe that subject drop-out rates and
the number of subjects that ultimately complete clinical studies could be negatively impacted by COVID-19. Interruptions caused by COVID-19
may also limit our ability to collect data from clinical studies. If we are unable to complete or effectively collect data from clinical
studies, our business and operating results will be harmed.
The
global outbreak of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 outbreak is highly uncertain and subject
to change. We do not yet know the full extent of potential delays or impacts on our business or the global economy as a whole. However,
these effects have harmed our business, financial condition and results of operations in the near term and could have a continuing material
impact on our operations, sales and ability to continue as a going concern.
Our
future success depends on our ability to retain our chief executive officer and other key executives and to attract, retain and motivate
qualified personnel.
We
are highly dependent on Dr. Mahesh V. Patel and the other principal members of our executive team. Employment with our executives and
other employees are “at will”, meaning that there is no mandatory fixed term and their employment with us may be terminated
by us or by them for any or no reason. The loss of the services of any of our executives or other key employees might impede the achievement
of our research, development and commercialization objectives. Recruiting and retaining qualified scientific personnel, and accounting
personnel will also be critical to our success. We may not be able to attract and retain qualified personnel on acceptable terms, or
at all, given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition
for the hiring of scientific personnel from universities and research institutions. Failure to succeed in clinical trials may make it
more challenging to recruit and retain qualified scientific personnel.
In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our development
and commercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under
consulting or advisory contracts with other entities that may limit their availability to us.
We
will need to grow our Company, and we may encounter difficulties in managing this growth, which could disrupt our operations.
As