Lipocine Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Lipocine is a clinical-stage biopharmaceutical company developing oral therapies for metabolic and endocrine disorders. It reported no product-sales revenue.
Financial results and liquidity
| Metric | Q1 2020 | Q1 2019 / comparison |
|---|---|---|
| Revenue | None from product sales | Company says historical revenue arose mainly from licenses, royalties, milestones and grants |
| Research and development expense | $2.51 million | $1.95 million; up $0.56 million |
| General and administrative expense | $2.09 million | $1.18 million; up $0.91 million |
| Operating loss | $4.60 million | $3.13 million |
| Net loss | $5.77 million | $3.22 million |
| Loss per share | $0.14 | $0.14 |
| Cash used in operating activities | $3.38 million | $3.00 million |
- At March 31, cash and cash equivalents were $15.13 million; restricted cash was $5.00 million and marketable securities were $0.45 million. The company described unrestricted cash, cash equivalents and marketable securities as $15.6 million.
- Total liabilities were $14.44 million, including approximately $6.35 million of debt ($1.67 million current and $4.69 million non-current) and a $5.69 million warrant liability. The warrant liability generated a $1.10 million non-cash loss in Q1.
- Financing cash flow was $4.88 million, primarily from $5.65 million net proceeds from the February equity offering, partly offset by $0.83 million in debt repayments. Investing activities provided $3.90 million, largely from net maturities of securities.
- Management expected existing capital resources to fund projected operations through at least February 15, 2021, but said additional capital would be needed. This estimate depends on assumptions and could change.
Material changes and financing
- R&D costs rose mainly because of LPCN 1144’s LiFT Phase 2 study; lower TLANDO spending partly offset the increase. G&A rose primarily due to legal costs, including the Clarus patent litigation.
- On February 27, Lipocine issued 10.08 million common shares in a registered direct offering for approximately $6.0 million gross and $5.65 million net, with warrants attached. The issuance materially increased the share count.
- On April 1, 2020, SVB deferred principal repayments by six months; interest payments continue, and the loan matures June 1, 2022. The $5.0 million cash collateral remains restricted pending TLANDO approval.
- Subsequent to quarter-end, the company received a $233,537 Paycheck Protection Program loan, potentially forgivable for qualifying expenses. On April 10, it disclosed that future ATM sales were limited to $5.0 million under applicable Form S-3 restrictions.
Outlook, development programs and risks
- TLANDO: Following the FDA’s November 2019 Complete Response Letter citing failure to meet three Cmax secondary endpoints, Lipocine resubmitted its NDA on February 28, 2020. The FDA assigned an August 28, 2020 PDUFA date after indicating that reanalysis of existing data appeared to be a reasonable path. Approval is not assured. The filing also notes uncertainty about whether JATENZO’s exclusivity could delay TLANDO approval until March 2022.
- LPCN 1144: The LiFT Phase 2 paired-biopsy study is ongoing. Top-line MRI-PDFF liver-fat data were expected in Q4 2020 and biopsy data in Q2 2021, with possible COVID-19-related delays.
- Other candidates: Lipocine planned to focus 2020 efforts mainly on TLANDO and LPCN 1144. It did not expect to start studies for TLANDO XR, LPCN 1148 or LPCN 1107 in 2020 without additional funding or a licensing arrangement. The FDA accepted LPCN 1148’s IND on May 5, after quarter-end.
- Funding and operating risk: The company expects continuing losses and must raise further capital through equity, debt, licensing or other arrangements. Financing may be unavailable or dilutive; insufficient funds could force reduced or delayed research, trials or operations.
- COVID-19: The filing warns of potential disruption to clinical trials, operations, capital access and timelines. Lipocine identified possible delays to LPCN 1144 study milestones.
- Litigation: The Clarus patent case, including counterclaims of non-infringement and invalidity, was in fact discovery; a jury trial was scheduled for February 2021. Shareholder derivative and securities class-action cases also remained pending. No loss liability was recorded because management said losses were not probable or estimable; the class-action insurance retention is $1.25 million.
- Other: The company reported effective disclosure controls at March 31, 2020 and no material changes to internal control over financial reporting during the quarter.
Most important facts for investors to verify
- FDA review outcome and timing for TLANDO, including the August 28, 2020 PDUFA date and any implications of JATENZO exclusivity.
- Actual cash burn, restricted-cash requirements and whether financing extends beyond management’s projected February 15, 2021 runway.
- LiFT enrollment, COVID-related delays and delivery of LPCN 1144’s expected data milestones.
- Potential dilution from outstanding warrants and future equity or ATM issuance; the filing reports 16.92 million warrants outstanding at March 31.
- Developments and costs in the Clarus patent case and shareholder litigation, as well as the status and possible forgiveness of the PPP loan.