Lipocine Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Lipocine is a specialty pharmaceutical company developing oral therapies, primarily for men’s and women’s health. Its lead candidate, TLANDO, was under FDA review; the PDUFA action goal date was May 8, 2018.
Financial results and position
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $428,031, all license/royalty revenue | $0 |
| Research and development | $1.38 million | $3.08 million |
| General and administrative | $1.69 million | $1.83 million |
| Operating loss | $2.64 million | $4.91 million |
| Net loss | $2.72 million; $0.13 per share | $4.86 million; $0.26 per share |
| Cash used in operations | $3.75 million | $3.14 million |
- Cash and cash equivalents were $8.56 million; marketable securities were $19.20 million at March 31, 2018. Together, these totaled $27.76 million, versus $21.47 million at December 31, 2017.
- Total assets were $31.68 million and stockholders’ equity was $16.67 million. Debt had a $10.0 million principal balance; the balance sheet reported $1.34 million current and $8.72 million non-current debt.
- Q1 financing cash flow included $10.0 million borrowed from Silicon Valley Bank (SVB). No ATM shares were sold in Q1 2018.
- No product-sales revenue or gross margin was reported. The $428,031 revenue was royalty income from related party Spriaso, LLC.
Changes versus the prior comparable period
- Net loss narrowed by approximately $2.14 million, mainly as R&D expense fell by $1.71 million after TLANDO dosing studies completed in 2017. Lower R&D was partly offset by increased outside services and LPCN 1107 manufacturing costs.
- License revenue increased from zero, reflecting Spriaso royalty payments. Interest expense of $192,466 arose following the SVB loan; interest and investment income increased to $110,181 from $48,355.
- Operating cash use increased by approximately $607,000 despite the lower net loss, including changes in accrued expenses and other working-capital items.
Outlook, risks, and unusual items
- Management estimated existing capital would fund projected operating requirements through March 31, 2019, but said additional capital would eventually be required. The estimate depends on assumptions and could change, particularly if further TLANDO studies or commercialization spending are needed.
- Management expected about $3.4 million of additional R&D costs to conduct and complete the TLANDO ambulatory blood-pressure (ABPM) study. The study was planned following FDA feedback on its protocol; timing, cost, and regulatory requirements remained uncertain.
- The FDA advisory committee voted 6–13 against TLANDO’s overall benefit/risk profile. Lipocine was addressing committee topics and warned that the FDA could issue another complete response letter, requiring further studies, delay, and expense. The company had not held FDA labeling discussions.
- Management planned to prioritize TLANDO in 2018. It did not expect to start Phase 3 studies for LPCN 1111 or LPCN 1107 in 2018 absent additional capital or an out-license. FDA feedback could require additional work for LPCN 1111; the LPCN 1107 Phase 3 protocol remained subject to FDA review and a food-effect study.
- The SVB loan bears interest at prime plus 1%, matures December 1, 2021, and requires interest-only payments through December 2018, followed by principal and interest. TLANDO approval by May 31, 2018 could extend interest-only payments through June 2019. If not approved by that date, $5.0 million of cash collateral must be maintained at SVB until approval. The loan is secured by substantially all company assets other than intellectual property and certain other assets, and includes covenants and default provisions.
- A securities class action settlement was preliminarily approved, subject to final court approval. The company recorded a $4.25 million settlement liability and a $3.57 million insurance recovery receivable. A final approval hearing was scheduled for July 2, 2018; the company stated that the settlement would resolve the claims if finally approved.
- A PTAB patent interference involving Clarus remained in progress. Clarus stated it would not file a substantive opposition to Lipocine’s priority motion; the proceeding’s outcome and effects were unresolved.
Most important facts for investors to verify
- FDA’s TLANDO decision and any requirements for additional studies, including ABPM or phlebotomy work.
- Actual cash burn and whether the stated runway through March 31, 2019 remains achievable; potential need, timing, and terms of additional financing.
- SVB loan terms, including the cash-collateral condition, repayment schedule, covenants, and final payment charge.
- Final court approval and insurance recovery for the securities litigation settlement.
- FDA development requirements, funding, and any partnering progress for LPCN 1111 and LPCN 1107.