SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

This ~~quarterly report~~Quarterly Report on Form 10-Q includes statements that are, or may be deemed, “forward-looking statements.” In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “designed,” “could,” “might,” “will,” “should,” “approximately” or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Quarterly Report on Form 10-Q and include statements regarding our current intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned manufacturing and commercialization of Twirla^®, the potential market acceptance and uptake of Twirla^®, the development of ~~Twirla and~~ our other potential product candidates, the strength and breadth of our intellectual property, our ongoing and planned clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our potential product candidates, the legal and regulatory landscape impacting our business, the degree of clinical utility of our products, particularly in specific patient populations, expectations ~~and assessments~~ regarding clinical trial data, ~~our development and validation of manufacturing capabilities,~~ our results of operations, financial condition, liquidity, prospects, growth and strategies, including expense reduction strategies, the length of time that we will be able to continue to fund our operating expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that may affect the industry or us.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include:

·
● our available cash and our ability to obtain additional funding to fund our business plan without delay and to continue as a going concern;
● our ability to successfully maintain and enhance the commercialization and increase the uptake for Twirla, our only approved product;
● the rate and degree of market acceptance of Twirla by physicians, patients, clinics, institutions, third-party payors and others in the healthcare community;

●our ability to obtain adequate coverage and ~~maintain regulatory approval of our product candidates, and the labeling under any approval we may obtain;~~

· ~~our inability to timely obtain from our third party manufacturer, Corium, sufficient quantities or quality of our product candidates or other materials required~~reimbursement for ~~a clinical trial;~~

· ~~our ability along with Corium to complete successfully the qualification and validation of equipment related to the expansion of Corium’s manufacturing facility;~~

· ~~the success and timing of our clinical trials;~~

· ~~our available cash;~~

· ~~regulatory developments~~Twirla in the United States from private and ~~foreign countries;~~

· ~~our plans to develop and commercialize our product candidates;~~

· ~~the size and growth of the potential markets for our product candidates and our ability to serve those markets;~~

· ~~the rate and degree of market acceptance of any of our product candidates;~~

· ~~the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;~~

· ~~our ability to obtain additional funding;~~

· ~~our ability to obtain and maintain intellectual property protection for our product candidates;~~

· ~~the successful development of our sales and marketing capabilities;~~

· ~~the performance of~~public third-party ~~manufacturers;~~payors;

●

the size and growth of the markets for Twirla and our ability to serve those markets;

●

the effects of the ongoing COVID-19 pandemic on our commercialization efforts, clinical trials, supply chain, operations and the operations of third parties we rely on for services such as manufacturing, marketing support and sales support, as well as the effects of the COVID-19 pandemic on our potential customer base;

●

regulatory and legislative developments in the United States and foreign countries, which could include, among other things, a government shutdown;

●

the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

· ~~our ability to successfully implement our strategy.~~

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●

The growth in demand for Twirla and our ability to manage the levels of Twirla inventory, which could result in our having to write off inventory and our inability to meet the minimum requirements under our supply agreement with Corium.

●

our ability to timely obtain from our third-party manufacturer, Corium, sufficient quantities or quality of Twirla or other materials required for a clinical trial or other tests and studies;

●

the ability of Corium to produce commercial supply in quantities and quality sufficient to satisfy market demand for Twirla;

●

the performance and financial condition of Corium or any of the suppliers;

●

our ability to design and successfully complete a post-marketing long-term, prospective observational safety study comparing risks for venous thromboembolism, or VTE, and arterial thromboembolism, or ATE, in new users of Twirla to new users of oral combined hormonal contraceptives, or CHCs, and new users of Xulane in U.S. women of reproductive age using CHCs and successfully complete a post-marketing commitment, or PMC, to assess the residual drug content of Twirla after use;

●

our ability to maintain regulatory approval of Twirla and the labeling under any approval we obtain;

●

our ability to obtain and maintain intellectual property protection for Twirla and our product candidates;

●

the success and timing of our clinical trials or other studies, including post-marketing studies for Twirla;

●

development of unexpected safety or efficacy concerns related to Twirla;

●

our ability to continue to develop and maintain successful sales and marketing capabilities, including our ability to maintain an effective sales force or failure to build-out and implement an effective health care compliance program;

●

our ability to come into compliance with the listing requirements of the Nasdaq Capital Market;

●

our ability to retain key employees and recruit the additional personnel we will need to support our commercialization plan for Twirla; and

●

our ability to successfully implement our strategy.

Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q. You should also read carefully the factors described in the “Risk Factors” ~~section~~included in Part I, Item 1A of ~~this~~our Annual Report on Form ~~10-Q~~10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission on March 30, 2022 to better understand ~~the~~significant risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, ~~the~~any such inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard any of these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and ~~third party~~third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and ~~third party~~third-party research, surveys and studies are reliable, we have not independently verified such data.

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We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

~~Twirla®~~Twirla® is one of our trademarks used in this Form 10-Q. This Form 10-Q also includes trademarks, tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this Form 10-Q may appear without the ® ~~and ™ symbols,~~symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

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Agile Therapeutics, Inc.

Part I — Financial Information

ITEM 1. Financial Statements

Agile Therapeutics, Inc.

Balance Sheets

(Unaudited)

~~(Unaudited)~~

(in thousands, except par value and share data)

September 30,
2017

December 31,
2016

Assets

Current assets:

Cash and cash equivalents

$
43,806

$
48,750

Prepaid expenses

1,161

2,768

Total current assets

44,967

51,518

Property and equipment, net

13,426

12,330

Other assets

18

18

Total assets

$
58,411

$
63,866

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$
2,823

$
2,050

Accrued expenses

1,857

3,644

Loan payable, current portion

6,190

5,104

Warrant liability

90

172

Total current liabilities

10,960

10,970

Loan payable, long-term

5,887

10,607

Commitments and contingencies

Stockholders’ equity:

Common stock, $.0001 par value, authorized 150,000,000 shares; 34,158,004 shares issued and outstanding as of September 30, 2017 and 28,759,731 shares issued and outstanding as of December 31, 2016;

3

3

Additional paid-in capital

257,093

235,754

Accumulated deficit

(215,532
)
(193,468
)
Total stockholders’ equity

41,564

42,289

Total liabilities and stockholders’ equity

$
58,411

$
63,866


	September 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	6,145	$	19,143
Accounts receivable, net		3,711		1,533
Inventory, net		1,797		966
Prepaid expenses and other current assets		3,834		2,283
Total current assets		15,487		23,925
Property and equipment, net		203		12,447
Right of use asset		761		949
Other non-current assets		2,012		2,012
Total assets	$	18,463	$	39,333

Liabilities and stockholders’ equity
Current liabilities:
Long-term debt, current portion	$	1,318	$	16,833
Accounts payable		4,906		8,707
Accrued expenses		5,152		3,563
Lease liability, current portion		277		175
Total current liabilities		11,653		29,278

Lease liabilities, long-term		550		784
Long-term debt		—		—
Total liabilities		12,203		30,062
Commitments and contingencies (Note 10)
Stockholders’ equity
Preferred stock, $.0001 par value, 10,000,000 shares authorized, 4,850 issued and no shares outstanding at September 30, 2022 and no shares issued and outstanding at December 31, 2021		—		—
Common stock, $.0001 par value, 300,000,000 shares authorized, 39,026,823 and 3,034,901 issued and outstanding at September 30, 2022 and December 31, 2021, respectively		4		—
Additional paid-in capital		437,027		396,388
Accumulated deficit		(430,771)		(387,117)
Total stockholders’ equity		6,260		9,271
Total liabilities and stockholders’ equity	$	18,463	$	39,333

See accompanying notes to unaudited financial statements.

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Agile Therapeutics, Inc.

Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except per share and share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

Revenues, net	$	3,002	$	1,287	$	6,888	$	2,587
Cost of product revenues		1,425		2,711		5,183		5,017
Gross profit (loss)		1,577		(1,424)		1,705		(2,430)

Operating expenses:
Research and development	$	788	$	1,593	$	2,901	$	4,568
Selling and marketing		5,560		9,386		23,523		30,263
General and administrative		2,815		3,371		9,837		11,386
Loss on disposition of assets		11,122		—		11,122		—
Total operating expenses		20,285		14,350		47,383		46,217
Loss from operations		(18,708)		(15,774)		(45,678)		(48,647)

Other income (expense)
Interest income		46		1		50		24
Interest expense		(1,004)		(999)		(2,699)		(2,914)
Total other income (expense), net		(958)		(998)		(2,649)		(2,890)
Loss before benefit from income taxes		(19,666)		(16,772)		(48,327)		(51,537)
Benefit from income taxes		—		—		4,675		—
Net loss	$	(19,666)	$	(16,772)	$	(43,652)	$	(51,537)

Net loss per share (basic and diluted)	$	(0.53)	$	7.20	$	(2.91)	$	(22.80)

Weighted-average common shares (basic and diluted)		36,997,836		2,343,930		14,998,534		2,251,205

Comprehensive loss:
Net loss	$	(19,666)	$	(16,772)	$	(43,652)	$	(51,537)
Other comprehensive income:
Unrealized loss on marketable securities		—		—		—		(3)
Comprehensive loss	$	(19,666)	$	(16,772)	$	(43,652)	$	(51,540)

See accompanying notes to unaudited financial statements.

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Agile Therapeutics, Inc.

Statements of ~~Operations~~Changes in Stockholders’ Equity

(Unaudited)

~~(Unaudited)~~

(in thousands, except ~~par value and~~ share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Operating expenses:

Research and development

$
3,175

$
4,911

$
11,694

$
15,415

General and administrative

3,526

2,180

9,130

6,497

Total operating expenses

6,701

7,091

20,824

21,912

Loss from operations

(6,701
)
(7,091
)
(20,824
)
(21,912
)
Other income (expense)

Interest expense

(459
)
(784
)
(1,509
)
(1,879
)
Interest income

78

33

187

83

Change in fair value of warrants

(20
)
38

82

168

Loss before benefit from income taxes

(7,102
)
(7,804
)
(22,064
)
(23,540
)
Benefit from income taxes

—

—

—

—

Net loss

$
(7,102
)
$
(7,804
)
$
(22,064
)
$
(23,540
)

Net loss per share - basic and diluted

$
(0.22
)
$
(0.27
)
$
(0.74
)
$
(0.84
)

Weighted-average shares outstanding —basic and diluted

31,937,628

28,754,458

29,847,972

28,110,587


	Preferred Stock			Common Stock			Additional		Accumulated				Total
	Number of			Number of			Paid-in		Other Comprehensive		Accumulated		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Income		Deficit		Equity
Balance December 31, 2021	—	$	—	3,034,901	$	—	$	396,388	$	—	$	(387,117)	$	9,271
Share-based compensation - stock options and RSUs	—		—	—		—		764		—		—		764
Issuance of common stock pursuant to at-the market stock sales, net of expenses	—		—	25,623		—		348		—		—		348
Issuance of series A and B convertible preferred stock in a registered direct offering (Note 8)	4,850		4,850	—		—		—		—		—		4,850
Registered direct financing costs, inclusive of warrants			(965)					244		—		—		(721)
Conversion of series A convertible preferred stock	(2,425)		(897)	303,125		—		897		—		—		—
Vesting of RSUs	—		—	1,773		—		—		—		—		—
Warrants issued in connection with registered direct offering	—		(2,101)	—		—		2,101		—		—		—
Net loss	—		—	—		—		—		—		(11,769)		(11,769)
Balance March 31, 2022	2,425	$	887	3,365,422	$	—	$	400,742	$	—	$	(398,886)	$	2,743
Share-based compensation - stock options and RSUs	—		—	—		—		669		—		—		669
Fractional shares retired as a result of reverse split	—		—	(10)		—		—		—		—		—
Issuance of common stock pursuant to at-the market stock sales, net of expenses	—		—	8,687,502		1		12,225		—		—		12,226
Conversion of series B convertible preferred stock	(2,425)		(887)	303,125		—		887		—		—		—
Vesting of RSUs	—		—	4,118		—		—		—		—		—
Net loss	—		—	—		—		—		—		(12,219)		(12,219)
Balance June 30, 2022	—	$	—	12,360,157	$	1	$	414,523	$	—	$	(411,105)	$	3,419
Share-based compensation - stock options and RSUs	—		—	—		—		536		—		—		536
Issuance of common stock pursuant to a public offering, net of expenses	—		—	26,666,666		3		21,968		—		—		21,971
Net loss	—		—	—		—		—		—		(19,666)		(19,666)
Balance September 30, 2022	—		—	39,026,823	$	4	$	437,027	$	—	$	(430,771)	$	6,260

See accompanying notes to unaudited financial statements.

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Agile Therapeutics, Inc.

Statements of ~~Cash Flows~~Changes in Stockholders' Equity

(Unaudited)

~~(Unaudited)~~

(in ~~thousands)~~thousands, except share data)

Nine Months Ended September 30,

2017

2016

Cash flows from operating activities

Net loss

$
(22,064
)
$
(23,540
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation

16

14

Noncash stock based compensation

2,727

2,607

Noncash interest

520

759

Change in fair value of warrants

(82
)
(168
)
Changes in operating assets and liabilities:

Prepaid expenses and other current assets

1,606

595

Other assets

—

—

Accounts payable and accrued expenses

(1,473
)
(648
)
Net cash used in operating activities

(18,750
)
(20,381
)

Cash flows from investing activities

Acquisition of property and equipment

(771
)
(25
)
Net cash used in investing activities

(771
)
(25
)

Cash flows from financing activities

Cash paid for debt financing costs

—

(175
)
Principal payments on long-term debt

(4,035
)
(985
)
Return of principal payments on long-term debt

—

985

Proceeds from the issuance of common stock, net

18,536

37,527

Proceeds from exercise of stock options

76

329

Net cash provided by financing activities

14,577

37,681

Ne (decrease) increase in cash and cash equivalents

(4,944
)
17,275

Cash and cash equivalents, beginning of period

48,750

34,395

Cash and cash equivalents, end of period

$
43,806

$
51,670

Supplemental disclosure of noncash financing activities

Supplemental cash flow information

Interest paid

$
1,023

$
1,125

Income taxes paid

$
—

$
—


	Common Stock			Additional		Accumulated					Total
	Number of			Paid-in		Other Comprehensive		Accumulated			Stockholders'
	Shares	Amount		Capital		Income		Deficit			Equity
Balance December 31, 2020	2,189,094	$	—	$	361,548	$	3	$	(312,223)	$	49,328
Share-based compensation - stock options and RSUs	—		—		742		—		—		742
Issuance of common stock pursuant to at-the market stock sales, net of expenses	13,023		—		960		—		—		960
Issuance of common stock upon exercise of stock options	3,160		—		75		—		—		75
Vesting of RSUs	1,316		—		—		—		—		—
Warrants issued in connection with long-term debt	—		—		1,080		—		—		1,080
Unrealized net gain on marketable securities	—		—		—		(3)		—		(3)
Net loss	—		—		—		—		(17,128)		(17,128)
Balance March 31, 2021	2,206,593	$	—	$	364,405	$	—	$	(329,351)	$	35,054
Share-based compensation - stock options and RSUs	—		—		843		—		—		843
Issuance of common stock pursuant to at-the market stock sales, net of expenses	114,826		—		6,349		—		—		6,349
Vesting of RSUs	1,786		—		—		—		—		—
Unrealized net gain on marketable securities	—		—		—		—		—		—
Net loss	—		—		—		—		(17,637)		(17,637)
Balance June 30, 2021	2,323,205	$	—	$	371,597	$	—	$	(346,988)	$	24,609
Share-based compensation - stock options and RSUs	—		—		887		—		—		887
Issuance of common stock pursuant to at-the market stock sales, net of expenses	45,030		—		1,956		—		—		1,956
Unrealized net gain on marketable securities	—		—		—		—		—		—
Net loss	—		—		—		—		(16,772)		(16,772)
Balance September 30, 2021	2,368,235	$	—	$	374,440	$	—	$	(363,760)	$	10,680

See accompanying notes to unaudited financial statements.

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Agile Therapeutics, Inc.

~~Notes to Unaudited Financial~~ Statements of Cash Flows

(Unaudited)

~~September 30, 2017~~

(in ~~thousands, except share and per share data)~~thousands)


	Nine Months Ended
	September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(43,652)	$	(51,537)
Adjustments to reconcile net loss to net cash used in operating activities:
Noncash inventory reserve		—		1,415
Depreciation		1,255		1,546
Amortization		188		102
Loss on disposition of assets		11,122		—
Noncash stock-based compensation		1,969		2,472
Noncash amortization of deferred financing costs		1,635		1,262
Changes in operating assets and liabilities:
Accounts receivable		(2,178)		(444)
Inventory		(831)		(4,875)
Prepaid expenses and other assets		(1,551)		(885)
Accounts payable and accrued expenses		(2,213)		2,462
Lease liability		(132)		(102)
Net cash used in operating activities		(34,388)		(48,584)

Cash flows from investing activities:
Sales and maturities of marketable securities		—		39,729
Acquisition of property and equipment		(133)		(214)
Net cash (used in) provided by investing activities		(133)		39,515

Cash flows from financing activities:
Proceeds from issuance of preferred stock in registered direct offering, net of offering costs		4,129		—
Proceeds from issuance of common stock in public offering, net of offering costs		21,971		—
Proceeds from At-the-Market sales of common stock, net of offering costs		12,573		9,266
Repayments of long-term debt		(17,150)		—
Proceeds from exercise of stock options		—		75
Net cash provided by financing activities		21,523		9,341

Net (decrease) increase in cash and cash equivalents		(12,998)		272
Cash and cash equivalents, beginning of period		19,143		14,463
Cash and cash equivalents, end of period	$	6,145	$	14,735

Supplemental disclosure of noncash financing activities
Warrants issued in connection with long-term debt	$	—	$	1,080
Warrants issued in connection with preferred stock offering		2,101		—
Conversion of Series A preferred stock into common stock		897		—
Conversion of Series B preferred stock into common stock		887		—
Supplemental cash flow information
Interest paid	$	1,078	$	1,782

See accompanyingnotes to unaudited financial statements.

Table of Contents

1. Organization and Description of Business

Nature of Operations

Agile Therapeutics, Inc. (“Agile” or the “Company”) was incorporated in Delaware on December 22, 1997. Agile is a ~~forward-thinking~~ women’s healthcare company dedicated to fulfilling the unmet health needs of today’s women. The Company’s activities since inception have consisted principally of raising capital, ~~and~~ performing research and ~~development.~~development, including development of the Company’s lead product, Twirla ^®, and more recently commercializing Twirla. The Company is headquartered in Princeton, New Jersey.

The Company’s ~~lead~~sole approved product, ~~candidate, Twirla®,~~Twirla, also known prior to its approval as AG200-15, is a once-weekly prescription contraceptive patch that ~~is at~~received approval from the ~~end of Phase 3 clinical development.~~U.S. Food and Drug Administration, or FDA, in February 2020 and was commercially launched in early December 2020. Substantially all of the Company’s resources are currently dedicated to ~~developing and seeking regulatory approval for Twirla.~~commercializing Twirla in the United States. The Company has ~~not~~ generated minimal product revenue to date and is subject to a number of risks similar to those of other early stage companies, including, but not limited to, dependence on key individuals, the difficulties and uncertainties inherent in the development of commercially usable products, market acceptance of products, protection of proprietary technology, the potential need to obtain additional capital necessary to fund the development of its products, reliance on a consistent supply chain both for Twirla and in general, macroeconomic factors such as inflation, competition from larger ~~companies.~~companies, and compliance with FDA and other government regulations. If the Company does not successfully commercialize Twirla, it will be unable to generate recurring product revenue or achieve profitability. The Company has incurred operating losses and negative cash flows from operating activities each year since inception. As of September 30, ~~2017,~~2022, the Company had an accumulated deficit of approximately ~~$215.5~~$431 million.

The Company expects to continue to incur significant operating expenses for the foreseeable future in connection with its ongoing activities, as the Company:

●

maintains a sales and marketing infrastructure to support the continued commercialization of Twirla in the United States;

●

continues to commercialize Twirla and seek increased uptake of Twirla in the United States;

●

works towards completing its post-marketing evaluations of Twirla agreed upon with the FDA upon Twirla’s approval;

●

continues to evaluate additional line extensions for Twirla and initiates development of potential product candidates in addition to Twirla;

●

maintains, leverages and expands the Company’s intellectual property portfolio; and

●

maintains operational, financial and management information systems and personnel, including personnel to support the Company’s product development and future commercialization efforts.

The Company has financed its operations to date primarily through the issuance and sale of its common stock in both public and private offerings (see Note 7)8), private placements of its convertible preferred stock, venture loans, and non-dilutive grant funding. ~~The Company expects to continue to incur net losses into the foreseeable future.~~

Going Concern

As of September 30, ~~2017,~~2022, the Company had cash and cash equivalents of ~~$43.8~~ $6.1 million. We believe our current cash will support operations through December 31, 2022.

The Company ~~believes~~has generated losses since inception, used substantial cash in operations, and anticipates it will continue to incur net losses for the foreseeable future. The Company’s future success depends on its ability to obtain additional capital and/or implement various strategic alternatives, and there can be no assurance that ~~its existing cash~~any financing can be realized by the Company, or if realized, what the terms of any such financing may be, or that any amount that the Company is able to raise will be adequate. If the Company is unable to obtain funds when needed or on acceptable terms, the Company then will be unable to continue the commercialization of Twirla, and ~~cash equivalents will not~~ be ~~sufficient~~required to ~~fund its current~~

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cut operating costs, and ~~planned operations through~~forego future development and other opportunities. Based upon the ~~next 12 months, which raises~~foregoing, management has concluded that there is substantial doubt about the Company’s ability to continue as a going ~~concern. The Company has based~~concern through the 12 months following the date on which this ~~belief~~Quarterly Report on assumptions and estimates that may prove to be wrong, and the Company could spend its available cash and cash equivalents less or more rapidly than expected. The Company will continue to require additional funding to support its continued development and commercialization efforts for Twirla as well as advancing the development of its other product candidates. Management intends to seek additional capital through equity and/or debt financings or through other sources of financing in the future. Adequate additional funding may not be available to the Company on acceptable terms, or at all. If the CompanyForm 10-Q is unable to raise additional capital when required or on acceptable terms, the Company may be required to delay or scale back the planned development and planned commercialization of Twirla and its business, operating results and financial condition would be adversely affected.

filed.

The unaudited ~~condensed~~ financial statements as of September 30, ~~2017~~2022 have been prepared under the assumption that the Company will continue as a going concern for the next 12 months. The Company’s ability to continue as a going concern is dependent upon its uncertain ability to obtain additional equity and/or debt financing and reduce expenditures. The unaudited condensed financial statements as of September 30, 2017 do not include any adjustments that might result from the outcome of this uncertainty.

~~Agile Therapeutics, Inc.~~

~~Notes to Unaudited Financial Statements~~

~~September 30, 2017~~

~~(in thousands, except share and per share data)~~

~~1. Organization and Description of Business (Continued)~~

Basis of Presentation

The accompanying unaudited interim ~~condensed~~ financial statements have been prepared by the Company ~~without audit,~~ in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP ~~have~~has been condensed or omitted pursuant to such rules and regulations. These interim ~~condensed~~ financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2016~~2021 as filed with the ~~SEC.~~SEC on March 30, 2022.

In the opinion of management, the unaudited interim ~~condensed~~ financial statements ~~reflects~~reflect all adjustments, which are normal recurring adjustments, necessary for the fair presentation of the financial information for the interim periods ~~have been made. Certain prior period amounts have been reclassified to conform to the current period presentation.~~presented. The results of operations for the three and nine months ended September 30, ~~2017~~2022 are not necessarily indicative of the operating results for the full fiscal year or any future period.

The accompanying unaudited financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has incurred recurring losses and negative cash flows from operations. If the COVID-19 pandemic or other factors impact the Company’s current business plan or its ability to generate revenue from the launch of Twirla, the Company believes it has the ability to revise its commercial plans, including curtailing sales and marketing spending, to allow it to continue to fund its operations.

2. Summary of Significant Accounting Policies

The Company’s complete listing of significant accounting policies is described in Note 2 to the Company’s audited financial statements as of December 31, ~~2016~~2021 included in its ~~annual report~~Annual Report on Form 10-K filed with the ~~SEC.~~SEC on March 30, 2022.

Reverse Stock Split

On April 26, 2022, the Company effectuated a one-for-forty reverse stock split of its outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split reduces the Company’s shares of outstanding common stock, stock options, RSUs, and warrants to buy shares of our common stock. Fractional shares of common stock that would have otherwise resulted from the Reverse Stock Split were rounded down to the nearest whole share and cash in lieu of payments were made to stockholders. All share and per share data for all periods presented in the accompanying financial statements and the related disclosures have been adjusted retrospectively to reflect the Reverse Stock Split. The number of authorized shares of common stock and the par value per share remains unchanged.

Use of Estimates

The preparation of the Company’s financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates and judgments on historical experience and various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amounts of revenue and expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, revenue recognition, costs of product revenues, inventory reserves, the accounting for common stock warrants, stock-based compensation, ~~income taxes,~~ and accounting for

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research and development costs. ~~Actual~~As future events and their effects cannot be determined with precision, actual results could differ significantly from ~~those~~these estimates.

Risks and Uncertainties

While Twirla has been approved by the U.S. Food and Drug Administration, or FDA, other potential product candidates developed by the Company will require approval from the FDA prior to commercial sales. There can be no assurance that the Company’s other product candidates will receive the required approval. If the Company is denied approval or such approval is delayed, or is unable to obtain the necessary financing to complete development and approval, there could be a material adverse impact on the Company’s financial condition and results of operations.

It should be noted that current public health threats could adversely affect the Company’s ongoing or planned business operations. In particular, the ongoing COVID-19 pandemic has resulted in federal, state and local governments and private entities mandating various restrictions, including travel restrictions, access restrictions, restrictions on public gatherings, and stay at home orders. The most significant impacts to the Company’s business were encountered by sales representatives promoting Twirla in the field, as some offices limited opportunities for face-to-face interactions with healthcare providers. In many cases COVID-19 restrictions have recently eased, but re-implementation of such restrictions, if necessary in the future may disrupt the Company’s business and/or could adversely affect the Company’s commercialization plans and results. The Company cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if the Company or any of the third parties with whom it engages, including personnel at third-party manufacturing facilities and other third parties with whom the Company conducts business, were to experience shutdowns or other business disruptions, the Company’s ability to conduct its business in the manner and on the timeline presently planned could be materially and adversely impacted. It is unknown how long these conditions will last and what the complete effect will be on the Company. While to date the Company has been able to continue to execute its overall business plan, some of its business activities slowed and took longer to complete as the Company adjusted to the challenges of operating in a largely remote setting with its employees. While the Company has acclimated to a hybrid work model with its employees, another shut down necessitating work in a completely remote environment could result in delays to its business activities and commercialization plan. Overall, the Company recognizes the challenges of commercializing a new product in a pandemic, and it will continue to closely monitor events as they develop and plan for alternative and mitigating measures that it can implement if needed.

Cash and Cash Equivalents

The Company considers all highly-liquid investments with an original maturity of three months or less when purchased to be cash equivalents. All cash and cash equivalents are held in U.S. financial institutions. Cash and cash equivalents include money market funds that invest primarily in commercial paper and U.S. government and U.S. government agency obligations.

The Company maintains balances with financial institutions in excess of the Federal Deposit Insurance Corporation limit.

Trade Accounts Receivable and Allowances

Trade accounts receivable are amounts owed to the Company by its customers for product that has been delivered. The trade accounts receivable are recorded at the invoice amount, less prompt pay and other discounts, chargebacks, and an allowance for credit losses, if any. The allowance for credit losses represents the Company’s estimate of losses over the life of the receivables. The Company evaluates forward looking economic factors and uses professional judgment to determine the allowance for credit losses. The credit loss reserves are reviewed and adjusted periodically. Credit loss reserves were not material as of September 30, 2022 or December 31, 2021.

Trade accounts receivable are aged based on the contractual payment terms. When the collectability of an invoice is no longer probable, the Company will create a reserve for that specific receivable. If a receivable is determined to be uncollectible, it is charged against the general credit loss reserve or the reserve for the specific receivable, if one exists.

Fair Value of Financial Instruments

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In accordance with Accounting Standards Codification (“ASC”) 825, Financial Instruments, disclosures of fair value information about financial instruments are required, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Cash and cash equivalents are carried at fair value (see Note 3).

~~Financial~~Other financial instruments, including accounts receivable, accounts payable and accrued liabilities, are carried at cost, which approximates fair value given their short-term nature.

~~Agile Therapeutics, Inc.~~Inventory

~~Notes~~Inventory is valued utilizing the weighted average costing method. The Company records an inventory reserve for losses associated with dated, expired, excess or obsolete items. This reserve is based on management’s current knowledge with respect to ~~Unaudited Financial Statements~~inventory levels, planned production and sales volume assumptions.

Property and Equipment

Property and equipment, consisting of manufacturing equipment, office equipment and computer equipment, is stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance, are charged to earnings in the period in which costs are incurred.

In the third quarter, the Company transferred manufacturing equipment with a book value of $11.1 million to Corium in exchange for relief from minimum material purchase requirements. The Company recorded a loss of $11.1 million for both the three and nine months ended September 30, ~~2017~~2022 on this disposition.

Long-Lived Assets

In accordance with ASC 360, Property, Plant and Equipment, the Company’s policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. At September 30, 2022, no indicators of impairment were present.

Research and Development Expenses

Research and development expenses consist primarily of costs related to personnel, including salaries and other personnel-related expenses, expenses related to manufacturing, clinical trial expenses, consulting fees and support services used in product development. All research and development costs are charged to operations as incurred in accordance with ASC 730, Research and Development.

In certain circumstances, the Company is required to make advance payments to vendors for goods or services that will be received in the future for use in research and development activities. In such circumstances, the advance payments are deferred and are expensed when the activity has been performed or when the goods have been received.

~~(in thousands, except share and per share data)~~Advertising Costs

The Company has elected to expense advertising costs when incurred. Advertising costs totaled $0.9 million and $2.7 million for the three months ended September 30, 2022 and 2021, respectively, and totaled $6.1 million and $8.8 million for the nine months ending September 30, 2022 and 2021, respectively.

~~2. Summary~~Deferred Financing Costs

Costs directly attributable to the Company’s senior secured term loan (see Note 7) are deferred and reported as a reduction of ~~Significant Accounting Policies (Continued)~~the related term loan. These costs represent a 1% facility fee paid directly to the lender, legal fees and other costs related to the term loan and are being amortized over the term of the loan. Amortization of deferred financing costs charged to interest expense was $146,000 and $69,000 for the three months ended September 30, 2022 and 2021, respectively, and was $284,000 and $208,000 for the nine months ended September 30, 2022 and 2021, respectively.

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Concentrations of Credit Risk

Financial instruments which potentially subject the Company to credit risk consist principally of cash, cash equivalents, marketable securities and accounts receivable. The Company invests its cash, cash equivalents and marketable securities in debt instruments and interest-bearing accounts in United States financial institutions, the balances of which exceed federally insured limits. The Company has not recognized any losses from credit risks on such accounts. The Company mitigates credit risk by limiting the investment type and maturity to securities that preserve capital, maintain liquidity and have a high credit quality. The Company has no financial instruments with off balance sheet risk of accounting loss.

Major customers of the Company are defined as those constituting greater than 10% of its total revenue. In the three months ended September 30, 2022, the Company had sales to five customers that individually accounted for more than 10% of its total revenue. These customers had sales of $0.8 million, $0.7 million, $0.6 million, $0.5 million and $0.3 million, respectively, which represented 95% of total revenues in the quarter. In the nine months ended September 30, 2022, the Company had sales to three customers that individually accounted for more than 10% of its total revenue. These customers had sales of $2.0 million, $1.8 million and $1.6 million, respectively,which represented 79% of total revenues for the nine months ended September 30, 2022. Accounts receivable related to the five customers comprised 32%, 25%, 24%, 8%, and 10%, respectively, as of September 30, 2022.

~~Warrants~~Revenue Recognition

The Company recognizes revenue from the sale of its product, Twirla, in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). The provisions of ASC 606 require the following steps to determine revenue recognition: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

In accordance with ASC 606, the Company recognizes revenue at the point in time when its performance obligation is satisfied by transferring control of the promised goods or services to a customer. In accordance with the Company’s contracts with customers, control of the product is transferred upon the conveyance of title, which occurs when the product is sold to and received by a customer. The Company’s customers are located in the United States and consist primarily of wholesale distributors. Trade accounts receivable due to the Company from contracts with its customers are stated separately in the balance sheet, net of various allowances as described in the Trade Accounts Receivable and Allowance policy.

The amount of revenue recognized by the Company is equal to the amount of consideration that is expected to be received from the sale of product to its customers. Revenue is only recognized when it is probable that a significant reversal will not occur in future periods. To determine whether a significant reversal will occur in future periods, the Company assesses both the likelihood and magnitude of any such potential reversal of revenue.

Twirla is sold to customers at the Wholesale Acquisition Cost (WAC). However, the Company records product revenue, net of reserves for applicable variable consideration. These types of variable consideration items reduce revenue and include the following:

•

Distribution services fees;

•

Prompt pay and other discounts;

•

Product returns;

•

Chargebacks;

•

Rebates; and

•

Co-payment assistance.

An estimate for each variable consideration item is made and is recorded in conjunction with the revenue being recognized. Generally, if the estimated amount is payable to a customer, it is recorded as a reduction to accounts receivable. If the estimated amount is payable to an entity other than a customer, it is recorded as a current liability. An estimated amount of variable consideration may differ from the actual amount. At each balance sheet date, these

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provisions are analyzed, and adjustments are made if necessary. Any adjustments made to these provisions would affect net product revenue and earnings in the current period.

In accordance with ASC 606, the Company must make significant judgments to determine the estimate for certain variable consideration. For example, the Company must estimate the percentage of end-users that will obtain the product through public insurance such as Medicaid or through private commercial insurance. To determine these estimates, the Company relies on industry standard data and trend analysis as historical sales data for Twirla are not yet available based on the December 2020 launch date. Once historical data becomes available, the Company will incorporate Twirla specific data into its estimates of variable consideration.

The Company uses the following specific considerations to estimate variable consideration.

Distribution services fees– The Company pays distribution service fees to its wholesale distributors. These fees are a contractually fixed percentage of WAC and are calculated at the time of sale based on the purchase amount. The Company records these fees as contra trade accounts receivable on the balance sheet.

Prompt pay and other discounts – The Company incentivizes its customers to pay their invoices on time through prompt pay discounts. These discounts are an industry standard practice and the Company offers a prompt pay discount to each wholesale distributor customer. The specific prompt pay terms vary by customer and are contractually fixed. Prompt pay discounts are typically taken by the Company’s customers, so an estimate of the discount is recorded at the time of sale based on the WAC. Prompt pay discount estimates are recorded as contra trade accounts receivable on the balance sheet.

The Company may also give other discounts to its customers to incentivize purchases and promote customer loyalty. The terms of such discounts may vary by customer. These discounts reduce gross product revenue at the time the revenue is recorded.

Product returns – Customers have the right to return product that is within six months or less of the labeled expiration date or that is past the expiration date by no more than twelve months. Twirla was commercially launched in December 2020 and with limited historical sales data, an estimate for product returns as of September 30, 2022 was made based on industry-standard data and trend analysis. As time passes and historical data becomes available, the Company will use historical sales and return data to estimate future product returns.

Chargebacks– Certain government entities and indirect customers (for example group purchasing organizations and 340B covered entities) will be able to purchase the product at a price discounted below WAC. The difference between the price paid by the government or other indirect purchaser and the price paid by the wholesale distributor will be charged back to the Company. The Company estimates the amount in chargebacks based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Estimated chargebacks are recorded as contra trade accounts receivable on the balance sheet.

Rebates– The Company will be subject to mandatory discount obligations under the Medicaid and Tricare programs. The rebate amounts for these programs are determined by statutory requirements or contractual arrangements. Rebates are owed after the product has been dispensed to an end user and the Company has been invoiced. Rebates for Medicaid and Tricare are typically invoiced in arrears. The Company estimates the amount in rebates based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Rebate estimates are recorded as other current liabilities on the balance sheet.

Co-payment assistance - The Company offers a co-payment assistance program to commercially insured patients whose insurance requires a co-payment to be made when filling their prescription. This is a voluntary program that is intended to provide financial assistance to patients meeting certain eligibility requirements. The Company estimates the amount of co-payment assistance based on the expected number of claims and related cost that is associated with the revenue being recognized for product that remains in the distribution channel at the end of each reporting period. Co-payment assistance estimates are recorded as other current liabilities on the balance sheet.

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Provisions for the revenue reserves described above totaled $3.2 million and $0.6 million for the three months ending September 30, 2022 and September 30, 2021, respectively, and $6.1 million and $0.9 million for the nine months ending September 30, 2022 and 2021, respectively. As of September 30, 2022, reserves on the balance sheet associated with variable consideration were $3.7 million.

Warrants

The Company accounts for its warrants to purchase ~~redeemable convertible~~common stock in accordance with ASC 480, Distinguishing Liabilities from Equity. ASC 480 requires that a financial instrument, other than an outstanding share, that, at inception, is indexed to an obligation to repurchase the issuer’s equity shares, regardless of the timing or the probability of the redemption feature, and may require the issuer to settle the obligation by transferring assets be classified as a liability. The Company measures the fair value of its warrant liability using the Black-Scholes option pricing model with changes in fair value recognized as increases or reductions to other income (expense) in the statement of operations.

In connection with entering into a senior secured term loan facility in February 2020, the ~~completion~~Company issued warrants to purchase 35,000 shares of its common stock. In connection with an amendment to that facility in February 2021, the Company issued a warrant to purchase 11,250 shares of the Company’s ~~initial~~common stock. These warrant instruments qualify for equity classification and have been allocated based upon the relative fair value of the base instrument and the warrant. These warrants are subject to repricing in the event of an offering of securities at a price lower than the existing strike price before December 31, 2022. See Note 7 for additional information.

In connection with an underwritten public offering completed in ~~May 2014,~~October 2021, the Company issued warrants to purchase 333,333shares of ~~Series A-1~~its common stock. This offering also triggered an adjustment to the exercise price of the existing warrants mentioned above, which resulted in a reduction of the strike price for these warrants. This reduction resulted in an immaterial increase to additional paid-in-capital. See Notes 7 and ~~Series A-2 preferred stock expired unexercised and~~8 for additional information.

In connection with a registered direct offering completed in March 2022, the Company issued warrants to purchase 1,242,813shares of ~~Series C preferred stock automatically converted~~its common stock. This offering also triggered an adjustment to the exercise price of the existing warrants mentioned above, which resulted in a reduction of the strike price for these warrants. This reduction resulted in an immaterial increase to additional paid-in-capital. See Notes 7 and 8 for additional information.

In connection with a letter agreement and waiver entered into with an investor on April 2022, the Company issued warrants to purchase 212,188shares of common ~~stock. Warrants~~stock, subject to adjustment thereunder. See Note 8 for additional information.

In connection with non-standard anti-dilution provisions (referred to as down round protection) are classified as liabilities and re-measured each reporting period. As of September 30, 2017, there were outstanding 62,505a public offering completed in July 2022, the Company issued warrants to purchase 54,666,665 shares of its common ~~stock at $6.00 per share. These~~stock. This offering also triggered an adjustment to the exercise price of the existing warrants ~~expire on December 14, 2019.~~

~~The warrants issued~~ in connection with the ~~Company’s debt financing completed~~senior secured term loan facility mentioned above, which resulted in ~~February 2015 (see Note 6) are classified as~~ a ~~component~~reduction of ~~stockholders’ equity.~~ the strike price for these warrants.

Income Taxes

The ~~value of such warrants was determined~~Company accounts for deferred taxes using the ~~Black-Scholes option-pricing model.~~asset and liability method as specified by ASC 740, Income Taxes. Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and the tax basis of assets and liabilities, operating losses and tax credit carryforwards. Deferred income taxes are measured using the enacted tax rates and laws that are anticipated to be in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits which are not expected to be realized. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted.

The Company has adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The Company has no uncertain tax positions as of September 30, 2022 that qualify for either recognition or disclosure in the financial statements under this guidance.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. The Company grants stock options for a fixed number of shares to employees and non-employees

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with an exercise price equal to no less than the fair value of the shares at grant date. Compensation cost is recognized for all share-based payments granted and is based on the grant-date fair value estimated using the weighted-average assumption of the Black-Scholes option pricing model based on key assumptions such as stock price, expected volatility and expected term. The Company elects to account for forfeitures when they occur. The equity instrument is not considered to be issued until the instrument vests. As a result, compensation cost is recognized over the requisite service period with an offsetting credit to additional paid-in capital.
The Company also awards restricted stock units (“RSUs”) to employees and its board of directors. RSUs are generally subject to forfeiture if employment terminates prior to the completion of the vesting restrictions. The Company expenses the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse. In April 2017, the Company granted up to 260,000 shares pf performance-based restricted stock units (“Performance Units”) under the Company’s 2014 Incentive Compensation Plan, to executive officers which are primarily contingent upon achievement of performance goals during the performance period beginning on the date of grant and ending on December 31, 2018 as set forth in each officer’s performance unit agreement. For awards with a performance condition which affects the vesting of the Performance Units, cost is recognized only if the performance condition is probable of being satisfied. Given the uncertainty of the achievement of the performance goals during the performance period, the Company has not recorded compensation expense related to these awards for the three and nine months ended September 30, 2017.
~~Awards for consultants are accounted for under ASC 505-50,~~ ~~Equity Based Payments to Non-Employees~~~~. Any compensation expense related to consultants is marked-to-market over the applicable vesting period as they vest.~~
~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~2. Summary of Significant Accounting Policies (Continued)~~
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period determined using the treasury-stock and if-converted methods. For purposes of the diluted net loss per share calculation, common stock warrants, unvested RSUs and stock options are considered to be potentially dilutive securities but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive, and therefore, basic and diluted net loss per share were the same for all periods presented.
The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share for both the three and nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, respectively, because to do so would be anti-dilutive (in common equivalent shares):

September 30,

2017

2016

September 30,


2022

2021

Common stock warrants

242,779

242,779

56,501,249

46,250

Unvested restricted stock units

7,125

6,342

Common stock options

3,798,951

2,829,939

278,854

258,808

Unvested restricted stock units

264,361

33,334

Total

4,306,091

3,106,052

56,787,228

311,400

~~Going Concern~~
~~Accounting Standards Update (“ASU”) No. 2014-15,~~ ~~Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,~~ defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The Company will perform quarterly evaluations to identify current conditions which may raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Recent Accounting Pronouncements
In ~~February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02,~~ ~~Leases~~. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company will be evaluating the impact of the pending adoption of the new standard on the Company’s financial statements.
~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~2. Summary of Significant Accounting Policies (Continued)~~
~~Recent Accounting Pronouncements (Continued)~~
~~In July 2017,~~May 2021, the FASB issued ASU ~~No. 2017-11,~~ 2021-04, Earnings Per Share (Topic 260)~~; Distinguishing Liabilities from Equity~~, Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation— Stock Compensation (Topic ~~480);~~718), and Derivatives and ~~Hedging (Topic 815)~~Hedging—Contracts in Entity’s Own Equity (Subtopic 815- 40): ~~(Part 1)~~Issuer’s Accounting for Certain ~~Financial Instruments with Down Round Features, (Part II) Replacement~~Modifications or Exchanges of ~~the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.”~~ ~~This~~ Freestanding Equity-Classified Written Call Options (“ASU eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. ASU 2017-112021-04”). The guidance is effective for ~~annual periods beginning after December 31, 2018. Early adoption is permitted.~~the Company on January 1, 2022. The ~~Company is currently evaluating the impact of the~~ adoption of ~~ASU 2017-11~~this standard did not have a material impact on its financial statements.

3. Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, describes the fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
·                  ~~Level 1 — Quotes prices in active markets for identical assets and~~
● Level 1 — Quoted prices in active markets for identical assets or liabilities. The Company’s Level 1 assets consist of cash and cash equivalents. The Company has no Level 1 liabilities.

Table of ~~cash and cash equivalents. The Company has no Level 1 liabilities.~~Contents

· Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. The Company has no Level 2 assets or liabilities.

· Level 3 — Unobservable inputs that are supported by little or no market data and which require internal development of assumptions about how market participant price the fair value of the assets or liabilities. The Company’s Level 3 liabilities consist of the warrant liability.

~~The Company is required to mark the value of its warrant liability to market and recognize the change in valuation in its statements of operations each reporting period.~~

~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~3. Fair Value Measurements (Continued)~~
● Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted market prices for similar assets or liabilities in active markets or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. The Company has no Level 2 assets or liabilities.
● Level 3 — Unobservable inputs that are supported by little or no market data and which require internal development of assumptions about how market participants price the fair value of the assets or liabilities. The Company has no Level 3 assets or liabilities.
The following table sets forth the Company’s financial instruments measured at fair value by level within the fair value hierarchy as of September 30, ~~2017~~2022 and December 31, ~~2016.~~2021 (in thousands):

Level 1

Level 2

Level 3

September 30, 2017

Assets:

Cash equivalents

$
43,745

$
—

$
—

Total assets at fair value

$
43,745

$
—

$
—

Liabilities:

Common stock warrants

$
—

$
—

$
90

Total liabilities at fair value

$
—

$
—

$
90


Level 1

Level 2

Level 3
September 30, 2022

Assets:

Cash and cash equivalents

$
6,145

$
—

$
—
Total assets at fair value

$
6,145

$
—

$
—


Level 1

Level 2

Level 3
December 31, 2021

Assets:

Cash and cash equivalents

$
19,143

$
—

$
—
Total assets at fair value

$
19,143

$
—

$
—

There were no transfers between Level 1, 2 or 3 during 2022 or 2021.

4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):

September 30,

December 31,


2022

2021

Prepaid insurance

$
1,033

$
775

Other

2,801

1,508

Total prepaid expenses and other current assets

$
3,834

$
2,283

5. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):

September 30,

December 31,


2022

2021

Accrued compensation

$
1,955

$
2,086

Accrued professional fees and other

3,197

1,477

Total accrued liabilities

$
5,152

$
3,563

6. Leases
The Company has no finance leases and one operating lease for its corporate headquarters in Princeton, NJ. The current lease commenced on December 1, 2021 and terminates on March 31, 2025. The lease provides the Company with an option to extend the lease for an additional five years. Under the terms of the lease, the Company pays base annual rent subject to a fixed dollar amount increase each year, a fixed monthly charge for electricity, and other normal operating expenses such as taxes, repairs, and maintenance. The Company evaluates renewal options at lease inception and on an ongoing basis and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. The lease does not require variable lease payments, residual value guarantees or restrictive covenants.

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The lease does not provide an implicit rate, therefore the Company used its incremental borrowing rate as the discount rate when measuring the operating lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.
Operating lease expense was $90,000 and $38,000 for the three months ended September 30, 2022 and 2021, respectively. Operating lease expense was $271,000 and $113,000 for the nine months ended September 30, 2022 and 2021, respectively. Operating cash flows used for operating leases during the three months ended September 30, 2022 and 2021 were $42,000 and $35,000, respectively. Operating cash flows used for operating leases during the nine months ended September 30, 2022 and 2021 were $132,000 and $102,000 respectively. As of September 30, 2022, the weighted-average remaining lease term was 2.50 years and the weighted average discount rate was 11.8%.
Future minimum lease payments under non-cancellable leases as of September 30, 2022 were as follows (in thousands):

2022

$
66
2023

390
2024

398
2025

100
Total

$
954
Less: Interest

(127)
Present value of lease liability

$
827

7. Credit Agreement and Guaranty
On February 10, 2020 (the “Closing Date”), the Company entered into a Credit Agreement and Guaranty with Perceptive Credit Holdings III, LP, a related party (“Perceptive”), for a senior secured term loan credit facility of up to $35.0 million, (the “Perceptive Credit Agreement”). A first tranche of $5.0 million was funded on execution of the Perceptive Credit Agreement. A second tranche of $15.0 million was funded as a result of the approval of Twirla by the FDA. On February 26, 2021 the Perceptive Credit Agreement was amended (the “Amended Perceptive Credit Agreement”) by creating a fourth tranche of $10.0 million that was to be available to the Company based on the achievement of a revenue milestone. The other tranches of debt under the Amended Perceptive Credit Agreement are no longer available to the Company. On January 7, 2022, the Company prepaid $5.0 million of the outstanding debt, and Perceptive waived the prepayment premium. On July 8, 2022, the Company prepaid $5.0 million of the outstanding debt, and Perceptive waived the prepayment premium. On July 25, 2022, the Company entered into a fifth amendment to the Amended Perceptive Credit Agreement, as amended (the “Fifth Amendment”). Pursuant to the Fifth Amendment, Perceptive agreed to release its security interest in certain assets being transferred from the Company to Corium in connection with an amendment to the Company’s Manufacturing and Commercialization Agreement with Corium and waive the Company’s obligations to comply with certain financial covenants through the end of 2022. In exchange, the Company agreed to prepay $7 million of outstanding principal under the Amended Perceptive Credit Agreement using the proceeds of recent sales under the Company’s ATM program with H.C. Wainwright & Co., LLC. Such payment was made on July 25, 2022.

The facility will mature on February 10, 2024 (the “Maturity Date”). Pursuant to the Fifth Amendment, beginning August 31, 2022, the Company began making monthly principal payments in an amount equal to $75,000, continuing until February 10, 2024, at which time all remaining principal amount outstanding is due.

Borrowings under the Fifth Amendment will accrue interest at an annual rate equal to the London Interbank Offered Rate for one-month deposits (“LIBOR”) plus 10.25%, provided that LIBOR shall not be less than 1.5%. The rate of interest in effect as of the Closing Date and at September 30, 2022 was 11.75%. Upon the occurrence and during the continuance of any event of default under the Fifth Amendment, the interest rate automatically increases by 3.0% per annum.

The Company may prepay any outstanding loans in whole or in part. Any such prepayment of the loans is subject to a prepayment premium of 4.0% if such prepayment occurs after February 10, 2022 and on or prior to February 10, 2023; and 2.0% if such prepayment occurs after February 10, 2023 and prior to the Maturity Date.

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All of the Company’s obligations under the Amended Perceptive Agreement are secured by a first-priority lien and security interest in substantially all of the Company’s tangible and intangible assets, including intellectual property.

The Amended Perceptive Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customary for similar financings. The negative covenants restrict or limit the ability of the Company to, among other things and subject to certain exceptions contained in the Amended Perceptive Credit Agreement, incur new indebtedness; create liens on assets; engage in certain fundamental corporate changes, such as mergers or acquisitions, or changes to the Company’s business activities; make certain investments or restricted payments (each as defined in the Amended Perceptive Credit Agreement); change its fiscal year; pay dividends; repay other certain indebtedness; engage in certain affiliate transactions; or enter into, amend or terminate any other agreements that have the impact of restricting the Company’s ability to make loan repayments under the Amended Perceptive Credit Agreement. In addition, the Company must (i) at all times prior to the Maturity Date maintain a minimum cash balance of $3.0 million; and (ii) as of the last day of each fiscal quarter commencing with the fiscal quarter ending December 31, 2022, report revenues for the trailing 12-month period that exceed the amounts set forth in the Amended Perceptive Credit Agreement, which range from $53.0 million for the fiscal quarter ending December 31, 2022 to $87.1 million for the fiscal quarter ending December 31, 2023. In the event the Company does not pay off the remainder of the outstanding principal under the facility, the Company will need to negotiate for a waiver of its obligations to comply with the covenants relating to revenues for Twirla in the first quarter of 2023.

In connection with the Perceptive Credit Agreement, the Company issued to Perceptive two warrants to purchase an aggregate of 35,000 shares of the Company’s common stock (together, the “2020 Perceptive Warrants”). The first warrant is exercisable for 17,500 shares of common stock at an exercise price of $149.60 per share. The second warrant is exercisable for 17,500 shares of common stock at an exercise price of $186.80 per share. The 2020 Perceptive Warrants expire on February 10, 2027. In connection with the Amended Perceptive Credit Agreement, the Company issued to Perceptive a warrant to purchase 11,250 shares of the Company’s common stock (the “2021 Perceptive Warrant” and, together with the 2020 Perceptive Warrants, the “Perceptive Warrants”) at an exercise price of $114.80 per share. The 2021 Perceptive Warrant expires on February 26, 2028. The Perceptive Warrants contain anti-dilution provisions and other warrant holder protections and are not exercisable to the extent that Perceptive would beneficially own more than 19.99% of the Company’s common stock as a result of the exercise.

As a result of the public offering of the Company’s common stock completed in October 2021 (see Note 8), the anti-dilution provision of the Perceptive Warrants was triggered, resulting in a reduction of the strike price for the Perceptive Warrants. Warrants to purchase 17,500 shares of common stock that had an exercise price of $186.80 per share were reduced to $141.60 per share, warrants to purchase 17,500 shares of common stock that had an exercise price of $149.60 per share were reduced to $115.20 per share, and warrants to purchase 11,250 shares of common stock that had an exercise price of $114.80 per share were reduced to $90.80 per share.

As a result of the registered direct offering completed in March 2022 (see Note 8), the anti-dilution provision of the Perceptive Warrants was again triggered resulting in a further reduction of the strike price for the Perceptive Warrants. Warrants to purchase 17,500 shares of common stock that had an adjusted exercise price of $141.60 per share were reduced to $105.52 per share, warrants to purchase 17,500 shares of common stock that had an adjusted exercise price of $115.20 per share were reduced to $86.61 per share, and warrants to purchase 11,250 shares of common stock that had an adjusted exercise price of $90.80 per share were reduced to $69.13 per share.

As a result of the public offering of the Company’s common stock completed in July 2022 (see Note 8), the anti-dilution provision of the Perceptive Warrants was again triggered resulting in a reduction of the strike price for the Perceptive Warrants. Warrants to purchase 17,500 shares of common stock that had an exercise price of $105.52 per share were reduced to $14.90 per share, warrants to purchase 17,500 shares of common stock that had an exercise price of $86.61 per share were reduced to $12.37 per share, and warrants to purchase 11,250 shares of common stock that had an exercise price of $69.13 per share were reduced to $10.03 per share.

The Company allocated the proceeds of $20.0 million in accordance with ASC 470 based on the relative fair values of the debt and the Perceptive Warrants. The relative fair value of the Perceptive Warrants of approximately $3.6 million at the time of issuance, which was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the debt. The significant assumptions used in

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preparing the option pricing model for valuing the ~~Company’s warrants as of September 30, 2017~~Perceptive Warrants issued include (i) volatility (70.0%), (ii) risk free interest rate of 1.62% (estimated using treasury bonds with a 2.25 year life), (iii) strike price ($6.00) for the common stock warrants, (iv) fair value of common stock ($4.46) and (v) expected life (2.25 years).
~~The following is a rollforward of the fair value of Level 3 warrants:~~
Beginning balance at December 31, 2016

$
172

Change in fair value

(82
)
Ending balance at September 30, 2017

$
90

Level 1

Level 2

Level 3

December 31, 2016

Assets:

Cash equivalents

$
48,659

$
—

$
—

Total assets at fair value

$
48,659

$
—

$
—

Liabilities:

Common stock warrants

$
—

$
—

$
172

Total liabilities at fair value

$
—

$
—

$
172

~~The significant assumptions used in preparing the option pricing model for valuing the Company’s warrants as of December 31, 2016 include (i) volatility (75.0%~~), (ii) risk free interest rate of 1.47% (estimated using treasury bonds with a ~~3 year~~7-year life), (iii) strike ~~price ($6.00)~~prices of $149.60 and $186.80 for the common stock warrants, (iv) fair value of common stock ($~~5.70)~~160.40) and (v) expected life ~~(three~~(7 years).
There were no transfers between Level 1, 2 or 3 during 2017 or 2016. If the Company’s estimates regarding the fair value of its warrants are inaccurate, a future adjustment to these estimated fair values may be required. Additionally, these estimated fair values could change significantly.
~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~4. Prepaid Expenses~~
~~Prepaid expenses consist of the following:~~

September 30,
2017

December 31,
2016

Prepaid clinical trial expense

$
327

$
2,005

Prepaid insurance

626

665

Other

208

98

Total prepaid expenses

$
1,161

$
2,768

~~5. Accrued Liabilities~~
~~Accrued liabilities consist of the following:~~

September 30,
2017

December 31,
2016

Employee bonuses

$
946

$
1,041

Accrued clinical trial costs

281

1,908

Other

630

695

Total accrued liabilities

$
1,857

$
3,644

~~6. Loan and Security Agreements~~
~~Oxford Finance LLC~~
In December 2012, the Company entered into a Loan and Security Agreement (the “Oxford Loan”) with Oxford Finance LLC (“Oxford”) pursuant to which the Company borrowed a total of $15.0 million from Oxford. The ~~Oxford Loan accrued interest at a fixed annual rate equal to 9.20% (Three-month U.S. Libor rate of 0.47% plus 8.73%).~~
Interest on the Oxford Loan was payable monthly and principal was due in 30 equal consecutive monthly installments beginning on February 1, 2015 and ending on July 1, 2017. In addition, the Company was required to make a final payment of $675 on the maturity date of the Oxford Loan (July 1, 2017).
~~In connection with the Oxford Loan, the Company issued Oxford warrants to purchase 62,505 shares of common stock at an exercise price of $6.00 per share. These warrants expire on December 14, 2019.~~
~~In February 2015, the Company terminated and repaid all amounts outstanding under the Oxford Loan and recorded a loss on the extinguishment of the Oxford Loan (see further discussion below).~~
~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~6. Loan and Security Agreements (Continued)~~
~~Hercules Capital, Inc.~~
In February 2015, the Company entered into a loan and security agreement (the “Hercules Loan”) with Hercules Capital, Inc. (“Hercules”) for a term loan of up to $25.0 million. In August 2016, the Company entered into the First Amendment to Loan and Security Agreement (the “First Amendment”) with Hercules which amended certain terms of the Hercules Loan. In May 2017, the Company entered into the Second Amendment to Loan and Security Agreement (the “Second Amendment”) with Hercules which further amended certain terms of the Hercules Loan. A first tranche of $16.5 million was funded upon execution of the Hercules Loan, approximately $15.5 million of which was used to repay the Company’s existing term loan with Oxford.
The First Amendment extended the Company’s option to draw down the second tranche of $8.5 million (the “Second Term Loan Advance”) of the term loan facility provided under the Hercules Loan (the “Term Loan”) until March 31, 2017, and makes the Second Term Loan Advance subject to the consent of Hercules, among other customary conditions. The Second Amendment further extended the Company’s option to draw the Second Term Loan Advance until January 31, 2018, and continues to make the Second Term Loan Advance subject to the consent of Hercules, among other customary conditions. The First Amendment also extended the interest-only payments until January 31, 2017, in connection with the first tranche of $16.5 million (the “First Term Loan Advance” and together with the Second Term Loan Advance, the “Term Loan Advances”).
The First Amendment provides the Term Loan will mature on December 1, 2018. As a result of the First Amendment, and in connection with the extension of the interest-only period from the First Term Loan Advance, Hercules returned to the Company the principal payments paid by the Company in July and August 2016, which such returned payments will once again constitute outstanding Term Loan advances under the Hercules Loan. In connection with the execution of the First Amendment, the Company paid Hercules a facility fee of $165. The facility fee represents a debt issue cost which is being reflected as a reduction to the carrying amount of loan payable in accordance with ASU 2015-03. Such issue costs are being amortized to interest expense over the life of the loan using the effective interest method.
The Hercules Loan accrues interest at a rate of the greater of 9.0% or 9.0% plus Prime minus 4.25% and is payable monthly. Principal is due in 23 consecutive monthly installments beginning on February 1, 2017 and ending on December 1, 2018. In addition, the Company is required to make a final payment of $610.5 on the maturity date of the Hercules Loan (December 1, 2018). ~~The amount of the end of term final payment is being accrued over the loan term as interest expense~~.
The Company may prepay all, but not less than all, of the Hercules Loan subject to a prepayment premium of 1.0% of the outstanding principal. The obligations of the Company under the Hercules Loan are secured by a perfected first position lien on all of the assets of the Company, excluding intellectual property assets.
In connection with the Hercules Loan, the Company issued Hercules a warrant to purchase 180,274 shares of the Company’s common stock at an exercise price of $5.89 per share which expires on February 24, 2020 and granted Hercules the right to participate in future equity financings in an amount up to $2.0 million while the loan and warrant are outstanding.
~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~6. Loan and Security Agreements (Continued)~~
~~The Company allocated the proceeds of $16.5 million in accordance with ASC 470 based on the relative fair values. The relative~~ fair value of the ~~warrants~~2021 Perceptive Warrants of approximately ~~$1.2~~$1.1 million at the time of issuance, which was determined using the Black-Scholes ~~option pricing~~option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the debt. The significant assumptions used in preparing the option pricing model for valuing the ~~Company’s warrant~~2021 Perceptive Warrants issued ~~to Hercules~~ include (i) volatility ~~(75.0%~~(103.5%), (ii) risk free interest rate of ~~1.22%~~1.15% (estimated using treasury bonds with a ~~4 year~~7-year life), (iii) strike price ~~($5.89)~~of $114.80 for the common stock warrant, (iv) fair value of common stock ($~~9.82)~~114.80) and (v) expected life ~~(four~~(7 years). The ~~discount~~fair value of the warrants as well as the debt issue costs incurred in connection with the entry into the Perceptive Credit Agreement, including a facility fee of 1% of the total amount of loans available under the facility, are presented as a direct deduction from the carrying amount of the term loan on the consolidated balance sheet as detailed below (in thousands).

September 30,

December 31,

2022

2021
Notes payable

$
2,850

$
20,000
Debt issuance costs

(266)

(550)
Warrant discount

(1,266)

(2,617)
Total debt

$
1,318

$
16,833
Less, current portion

1,318

16,833
Long-term debt, less current portion

$
—

$
—

The fair value of the warrants and the debt isissue costs are being amortized toutilizing the effective interest ~~expense~~method over the term of the ~~debt.~~loan. The Company recorded interest expense for the amortization of the fair value of the warrants and debt issue costs of $838,000 and $399,000 for the three months ended September 30, 2022 and 2021, respectively. The Company recorded interest expense for the amortization of the fair value of the warrants and debt issue costs of $1,635,000 and $1,132,000 for the nine months ended September 30, 2022 and 2021, respectively.

7.
8. Stockholders’ Equity
On January 7, 2022, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of shares of common stock authorized for issuance from 150,000,000 shares to 300,000,000 shares.
On April 26, 2022, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment, or the Certificate of Amendment, to the Company’s Amended and Restated Certificate of Incorporation, which became effective on April 26, 2022. The Certificate of Amendment implemented the Reverse Stock Split. On the effective date of April 26, 2022, the number of the Company’s issued and outstanding shares of common stock was decreased from 146,741,862 to 3,668,546 and the par value remained unchanged. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who would otherwise have been entitled to receive a fractional share received a cash payment in lieu thereof. The Reverse Stock Split affected all shares of the Company’s common stock outstanding immediately prior to the effective date of the Reverse Stock Split, as well as the number of shares of common stock available for issuance under the Company’s equity incentive plans. In addition, the Reverse Stock Split effected a reduction in the number of shares of common stock issuable upon the exercise of stock options, restricted stock units, or warrants outstanding.
Shelf Registration Statement
On ~~June 19, 2015,~~October 2, 2020, the Company filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of ~~$150.0~~$200.0 million (the ~~“2015~~“2020 Shelf Registration Statement”). On ~~July 1, 2015,~~October 14, 2020, the ~~2015~~2020 Shelf Registration Statement was declared effective by the SEC. ~~The Company completed offerings of common stock in both January 2016 and August 2017 utilizing the 2015 Shelf Registration Statement (see below).~~ In the future, the Company may ~~also~~ periodically offer one or more of these securities in amounts, prices and terms to be announced when and if the securities are offered. At the time any of the securities covered by the ~~2015~~2020 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

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~~2016~~ Public ~~Offering of Common Stock~~Offerings

In ~~January 2016,~~October 2021, the Company completed ~~an underwritten~~a public offering of ~~5,511,812~~666,666 shares of its common stock and warrants to purchase 333,333 shares of its common stock at a ~~public offering~~combined price of ~~$6.35~~$34.00 per ~~share. In February 2016, the underwriters~~share of common stock and one-half of a warrant to purchase one share of common stock. Proceeds from the public offering, net of ~~common stock exercised in full their option to purchase an additional 826,771 shares of common stock at the public offering price of $6.35 per share, less~~ underwriting discounts, commissions and ~~commissions. A total of 6,338,583 shares of common stock~~offering expenses were ~~sold in the public offering resulting in total net proceeds of~~ approximately ~~$37.5~~$21.1 million. One of the Company’s stockholders, who was also affiliated with a member of the Company’s board of directors at the time of the public offering, purchased 393,700 shares of common stock for approximately $2.5 million in the public offering.

~~2017 Public Offering of Common Stock~~

In ~~August 2017,~~July 2022, the Company completed ~~an underwritten~~a public offering of ~~5,333,334~~(1) 19,148,332 shares of its common stock and warrants to purchase 38,296,664 shares of its common stock at a ~~public offering~~combined price of ~~$3.75~~$0.90 per ~~share.~~share of common stock and warrants and (2) 7,518,334 pre-funded warrants to purchase 7,518,334 shares of its common stock and warrants to purchase 15,036,668 shares of its common stock at a combined price of $0.8999 per share of common stock and pre-funded warrant. Proceeds from the ~~this~~public offering, net of underwriting discounts, commissions and ~~other~~ offering ~~costs~~expenses were approximately ~~$18.5~~$22.0 million.

~~Agile Therapeutics, Inc.~~
~~Notes to Unaudited Financial Statements~~ATM Sales Agreement

In March 2021, the Company entered into a common stock sales agreement (the “2021 ATM Agreement”) under which the Company may sell up to an aggregate of $50.0 million in gross proceeds through the sale of shares of common stock from time to time in “at-the-market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended). The Company agreed to pay a commission of up to 3% of the gross proceeds of any common stock sold under the 2021 ATM Agreement. During the year ended December 31, 2021, the Company issued and sold 172,879 shares of common stock under the 2021 ATM Agreement resulting in net proceeds to the Company of approximately $9.3 million.
On January 10, 2022, the Company filed a prospectus supplement to its 2020 Shelf Registration Statement registering an at-the-market offering program (the “January 2022 ATM”) the Company entered into for the sale of up to $50.0 million of shares of its common stock. The Company agreed to pay a commission of up to 3% of the gross proceeds of any common stock sold under the January 2022 ATM. During the nine months ended September 30, ~~2017~~2022, the Company issued and sold 25,623 shares of common stock under the January 2022 ATM resulting in net proceeds to the Company of approximately $0.3 million. On April 26, 2022, the Company terminated the January 2022 ATM.

(On April 27, 2022, the Company entered into a new at-the-market offering program (“April 2022 ATM”) with H.C. Wainwright LLC and Co. (the “Sales Agent”), under which the Company may, from time to time in ~~thousands, except~~its sole discretion, issue and sell through or to the Sales Agent, acting as the Company’s agent, up to $12,841,000 of shares of the Company’s common stock (the “Placement Shares”). The Company agreed to pay the Sales Agent a commission of up to 3.0% of the gross sales proceeds of any Placement Shares sold under the April 2022 ATM. Through September 30, 2022, the Company issued and sold a total of 8,687,502 shares of common stock under the April 2022 ATM Agreement, representing the entire capacity of the April 2022 ATM, resulting in net proceeds of approximately $12.2 million. On August 22, 2022, the Company increased the April 2022 ATM (“August 2022 ATM”). As increased, the Company may now offer and sell, from time to time through the Sales Agent, shares of the Company’s common stock having an aggregate offering price of up to$75.0 million.

Registered Direct Offering
On March 14, 2022, the Company filed a prospectus supplement to its 2020 Shelf Registration Statement registering a direct offering (the “2022 Preferred Stock Offering”) of 2,425 shares of Series A convertible preferred stock (the “Series A Preferred Stock”) and 2,425 shares of Series B convertible preferred stock (the “Series B Preferred Stock”) and Series A warrants (the “Series A Warrants”) to purchase up to an aggregate of 606,250 shares of the common stock of the Company and Series B warrants (the “Series B Warrants”) to purchase up to an aggregate of 606,250 shares of common Stock. Each share of Series A Preferred Stock and Series B Preferred Stock has a stated value of $1,000 per share and a conversion price of $8.00 per share. The shares of preferred stock issued in the 2022 Preferred Stock Offering are convertible into an aggregate of 606,250 shares of common stock. The Series A Warrants have an exercise price of $10.40 per share, ~~data)~~will become exercisable six months following the date of issuance, and will expire 5 years following the initial exercise date. The Series B Warrants have an exercise price of $10.40 per share, will become exercisable six months following the date of issuance, and will expire one and one-half years following the initial exercise date. Proceeds from the 2022 Preferred Stock Offering, net of the placement

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agent’s fees and offering expenses were approximately $4.1 million. A portion of the placement agent’s fees included warrants to purchase 30,313 shares of the common stock of the Company at a strike price of $10.00 per share. The warrants become exercisable six months following the date of issuance and will expire 5 years following the commencement of sales in the 2022 Preferred Stock Offering.
The Company allocated the net proceeds of $4.1 million in accordance with ASC 470 based on the relative fair values of the preferred stock and the Series A Warrants and Series B Warrants (collectively, the “Warrants”). The relative fair value of the Warrants of approximately $2.1 million at the time of issuance, which was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the preferred stock. The significant assumptions used in preparing the option pricing model for valuing the Warrants issued include (i) volatility of 111.9% for the Series A warrants and 69.7% for the Series B Warrants, (ii) risk free interest rate of 2.1% for the Series A Warrants and 1.6% for the Series B Warrants, (iii) strike price of $10.40, (iv) fair value of common stock ($9.48) and (v) expected life of 5.5 years for the Series A Warrants and 1.5 years for the Series B Warrants.
~~7. Stockholders’ Equity (Continued)~~On March 15, 2022, 2,425 shares of the Series A Preferred Stock were converted into 303,125 shares of the Company’s common stock. On April 4, 2022, 2,425 shares of the Series B Preferred Stock were converted into 303,125 shares of the Company’s common stock.
On April 25, 2022, the Company entered into a letter agreement and waiver (the “Letter Agreement”) with Armistice Capital Master Fund Ltd. (“Armistice”), pursuant to which Armistice consented to the Company entering into and effecting an at-the-market (“ATM”) offering facility. On March 14, 2022, the Company entered into the 2022 Preferred Stock Offering with Armistice, under which agreement, the Company was restricted from entering into and effecting an ATM offering facility until the 180-day anniversary of the Closing Date. Pursuant to the Letter Agreement, the Company issued to Armisitice a new common stock purchase warrant (“New Warrant”), on the same terms and conditions as the Series A Warrants, provided that such New Warrant shall be exercisable into 212,188 warrant shares, subject to adjustment thereunder. The Series A Warrants have an exercise price of $10.40 per share, and will become exercisable six months following the date of issuance, and will expire 5 years following the initial exercise date. The New Warrant is exercisable 6 months after the date of the Letter Agreement.
Stock-Based Compensation Expense
Stock-based compensation expense was allocated as ~~follows:~~follows (in thousands):

Three Months Ended
September 30,

2017

2016

Three Months Ended

Nine Months Ended

September 30,

September 30,


2022

2021

2022

2021

Cost of goods sold

$
29

$
84

$
104

$
219

Research and development

$
309

$
299

90

134

284

362

Selling and marketing

40

31

120

109

General and administrative

658

641

377

638

1,461

1,782

Total stock-based compensation expense

$
967

$
940

Total

$
536

$
887

$
1,969

$
2,472

Nine Months Ended
September 30,

2017

2016

Research and development

$
889

$
796

General and administrative

1,838

1,811

Total stock-based compensation expense

$
2,727

$
2,607

~~8. Related Party Transactions~~9. Income Taxes
~~Between March 17, 2014~~The Company has participated in the State of New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) sponsored by The New Jersey Economic Development Authority. The Program enables approved biotechnology companies with unused NOLs and ~~July 6, 2016, one~~unused research and development credits to sell these tax benefits for at least 80% of the ~~Managing Partners~~value of ~~SmartPharma LLC, or SmartPharma, an entity which provides commercial~~the tax benefits to unaffiliated, profitable corporate taxpayers in the State of New Jersey. The Program is administered by The New Jersey Economic Development Authority and ~~business development consulting services~~the New Jersey Department of the Treasury’s Division of Taxation. The Company had previously reached the maximum lifetime benefit of $15.0 million under the historical Program, however in January 2021 the Program was amended to extend the maximum lifetime benefit to $20.0 million. The Company received final approval in March 2022 for $4.7 million of additional cash benefit that was received in April 2022.

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10. Commitments and Contingencies
The Company has several firm purchase commitments, primarily related to the ~~Company, served as Chief Commercial Officer~~manufacture and supply of Twirla and the supply of a field force of sales representatives to provide certain detailing services, sales operation services, compliance services, and training services. Future firm purchase commitments under these agreements, the last of which ends in 2033 total $239.1 million. This amount does not represent all of the ~~Company.~~Company’s anticipated purchases in the future, but instead represents only purchases that are the subject of contractually obligated minimum purchases. The minimum commitments disclosed are determined based on non-cancelable minimum spend in 2021 or termination amounts. Additionally, the Company purchases products and services as needed with no firm commitment.
In April 2020, the Company entered into a manufacturing and commercialization agreement with Corium, Inc., (the “Corium Agreement”). Under the Corium Agreement, the Company has a requirement to order quarterly minimum volumes of approximately $5.6 million of product. In the event that the Company does not order the minimum volume, the Company is required to pay an additional fee equal to twenty-five percent (25%) per unit of the transfer price for all units ordered in that quarter. The Company did not meet the minimum volume order in the first or second quarter of 2022, and has, therefore, paid the additional 25% per unit fee as a penalty for all units ordered during the period. Based on current demand expectations for Twirla, the Company did not expect to meet the minimum volume order for the balance of 2022 and would be subject to the additional fee on future purchases. On July 25, 2022 the Company and Corium entered into Amendment No. 1 to the Corium Agreement (the “Amendment”) that is designed to restructure the contract minimums applicable to the purchase of manufactured Twirla and other services provided by Corium, transfer equipment ownership to Corium to support the manufacture of Twirla and extend the term of the Corium Agreement. Pursuant to the Amendment, the parties agreed to adjust the process for the Company providing Corium certain binding and non-binding forecasts required under the Corium Agreement. Additionally, Corium will not enforce the original quantity minimums in the Corium Agreement, which are waived and replaced by new minimums that are based on Corium’s revenue for product purchased by the Company, expiring raw materials, and other services billed by Corium to support batch production and release. The guaranteed minimum revenue requirement for 2022 is $5.3 million, for 2023 is $7.0 million, and is $22.5 million for 2024 and each year thereafter. In the event that the Company does not meet the guaranteed minimum revenue requirements in any given year, the Company will be required to make additional payments to Corium for the shortfall. The Company agreed to make certain monthly supplemental payments to Corium through December 2023, which payments are eligible to be retroactively reduced based upon product orders placed by the Company during 2022 and 2023 meeting certain designated thresholds. In connection with the ~~appointment~~supplemental payments, Corium will retain the proceeds for the sale of ~~this individual as Chief Commercial Officer,~~certain raw materials to which the Company ~~amended its consulting agreement with SmartPharma~~would otherwise have economic right to ~~remove this individual~~offset such supplemental payments. Further, the Company agreed to reimburse Corium for any unused raw materials in the event the Company’s actual product requirements are lower than initially forecasted. Pursuant to the Amendment, the term of the Corium Agreement was extended to December 31, 2033. Pursuant to the Amendment, the parties agreed to transfer ownership of certain manufacturing equipment used in the manufacture of Twirla from the ~~list~~Company to Corium under a Bill of persons providing service under the consulting agreement. SmartPharma invoiced the Company $0.6 and $3.3 of fees for the three and nine months ended September 30, 2016. In connection with the resignation of our Chief Commercial Officer, who was affiliated with SmartPharma, onSale dated July ~~6, 2016, the Company appointed a new Chief Commercial Officer.~~
~~Agile Therapeutics, Inc.~~25, 2022.
~~Notes to Unaudited Financial Statements~~
~~September 30, 2017~~
~~(in thousands, except share and per share data)~~
~~9. Commitments and Contingencies~~
~~Legal Proceedings~~
~~On January 6, 2017, and January 20, 2017, two previously disclosed complaints captioned~~ ~~Peng v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~~~, No. 17-cv-119 (D.N.J.), and~~ ~~Lichtenthal v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~, No. 17-cv-405 (D.N.J.), respectively, were filed in the United States District Court for the District of New Jersey on behalf of a putative class of investors who purchased shares of the Company’s common stock from March 9, 2016, through January 3, 2017. The complaints alleged ~~violations of the federal securities laws based on public statements made regarding the Company’s Phase 3 SECURE clinical trial~~ ~~and sought an unspecified amount of damages to be determined at trial. The Company denied all allegations in the complaints. On May 15, 2017, the complaints were consolidated the lawsuits as~~ ~~In re Agile Therapeutics, Inc. Securities Litigation~~, Master File No. 17-cv-119 (D.N.J.), and Hoyt W. Clark was appointed as a class representative for the putative class. On June 26, 2017, Mr. Clark agreed to dismiss the consolidated case voluntarily, without payment by the Company of any consideration and with each side bearing its own attorneys’ fees and costs. The presiding judge dismissed the consolidated action with prejudice as to all defendants on July 13, 2017.
The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. An unfavorable outcome to any legal matter, if material, could have an adverse effect on the ~~Company’s~~Company's operations or its financial position. As of September 30, ~~2017,~~2022, the Company has not recorded a provision for any contingent losses.

~~ITEM~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and notes thereto included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the “SEC”) on March ~~15, 2017.~~30, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in ~~the~~Part 1, Item 1A, “Risk Factors” ~~section~~ of ~~this Quarterly~~our Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Dollars in the text and in tabular format are presented in thousands, except per share data, or as otherwise indicated.

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Overview

~~Overview~~

We are a ~~forward-thinking~~ women’s healthcare company dedicated to fulfilling the unmet health needs of today’s women. We are committed to innovating in women’s healthcare where there continues to be unmet needs – not only in contraception – but also in other meaningful women’s health therapeutic areas.

Our ~~current~~first and only product, ~~candidates are designed to provide women with contraceptive options that offer greater convenience~~Twirla, which was approved in February 2020 and ~~facilitate compliance. Our lead product candidate, Twirla~~®~~, also known as AG200-15,~~launched in early December 2020, is a once-weekly prescription combination hormonal contraceptive patch. It exposes patients to an estrogen dose consistent with commonly prescribed combined hormonal contraceptives, or CHCs, and is lower than the estrogen dose found in other marketed contraceptive patches. We believe there is a market need for a contraceptive patch that is designed to deliver 30 mcg of estrogen and 120 mcg of progestin in a convenient once-weekly dosage form that may support compliance in a noninvasive fashion. Twirla leverages our proprietary transdermal patch technology called Skinfusion^®. Skinfusion is designed to allow drug delivery through the skin while promoting patch adhesion and patient comfort and wearability, which may help support compliance.

With the approval of Twirla we are now focused on our advancement as a commercial company. During 2022, we plan to continue implementing our commercialization plan for Twirla, with the goal of becoming a contraceptive market leader, and ultimately, pursuing opportunities to broaden our portfolio to address areas of unmet medical need in women’s health.

Our Strategy

Our near-term goal is to establish an initial franchise in the multi-billion dollar U.S. hormonal contraceptive market built on approval of Twirla in the U.S. Our resources are currently focused on the commercialization of Twirla. We also expect to explore possible expansion through business development activities, such as acquiring access to new products through in-licensing, co-promotion or other collaborative arrangements.

Our current priorities are as follows:

●

Continue to implement our commercialization plans for Twirla to increase uptake of Twirla in the United States, through targeted digital direct to consumer advertising, including Connected TV (“CTV”) advertising in key markets, growing our telemedicine presence, and driving growth in the non-retail channel;

●

Continue to expand access to Twirla through multiple business channels including third-party payor contracts, retail and specialty pharmacies, telemedicine and government contracting, and non-retail channels, including public health centers;

●

Reduce our operating loss and continue to progress towards generating positive cash flows;

●

Expand coverage and reimbursement for Twirla in the United States from private and public third-party payors;

●

Maintain and manage the supply chain for Twirla to support increased commercialization of Twirla across the United States and working through existing and future inventory prior to product becoming short-dated;

●

Continue to manage our available cash and obtain financing to fund our business plan without delay;

●

Evaluate the advancement of our existing pipeline and its possible expansion through business development activities; and

●

Continue to implement our obligations related to our post-marketing commitment and the post-marketing requirement studies of Twirla.

It should be noted that current public health threats could adversely affect our ongoing or planned business operations. In particular, the ongoing COVID-19 pandemic has resulted in federal, state and local governments and private entities mandating various restrictions, including travel restrictions, access restrictions, restrictions on public

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gatherings, and stay at home orders. The most significant impacts to our business were encountered by sales representatives promoting Twirla in the ~~end~~field, as some offices limited opportunities for face-to-face interactions with healthcare providers. In many cases COVID-19 restrictions have recently eased, but re-implementation of ~~Phase 3 clinical development.~~such restrictions if necessary in the future may disrupt our business and/or could adversely affect our commercialization plans and results. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including personnel at third-party manufacturing facilities and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timeline presently planned could be materially and adversely impacted. It is unknown how long these conditions will last and what the complete effect will be on us. While to date we have been able to continue to execute our overall business plan, some of our business activities slowed and took longer to complete as we adjusted to the challenges of operating in a largely remote setting with our employees. While we have acclimated to a hybrid work model with our employees, another shut down necessitating work in a completely remote environment could result in delays to our business activities and commercialization plan. Overall, we recognize the challenges of commercializing a new product in a pandemic, will continue to closely monitor events as they develop, and plan for alternative and mitigating measures that we can implement if needed.

Financial Overview

Since our inception in 1997, we have devoted substantial resources to developing and seeking regulatory approval for Twirla, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. We incurred research and development expenses of $20.9 million, $25.6 million and $13.4 million during the years ended December 31, 2016, 2015 and 2014, respectively. We incurred research and development expenses of $3.2 million and $11.7 million for the three and nine months ended September 30, 2017, respectively. WeWhile we anticipate that a ~~significant~~ portion of our operating expenses will continue to be related to research and development as we ~~continue to develop~~pursue our post-marketing studies for Twirla, including planning our long-term, prospective observational safety study, which is a post marketing requirement from the FDA, and advance our pipeline of product candidates. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla. We will require additional capital to fund our operating needs including, among other items, continued commercial activities after the initial commercial launch of Twirla, if approved, and to advanceevaluate the development of our ~~other product candidates.~~

pipeline, our operating expenses have substantially shifted towards commercialization activities for Twirla. As of September 30, 2022, we have significantly reduced our operating expenses through a number of measures, including optimizing our sales force, reducing reliance on third-party service providers, targeting our advertising spend, and reorganizing our executive leadership team and general personnel. We are committed to continue to look for ways to reduce expenses and focus efforts and resources on commercialization and uptake of Twirla.

We have funded our operations primarily through sales of common stock, convertible preferred stock, convertible promissory notes and term loans. As of September 30, ~~2017~~2022, and December 31, ~~2016 respectively,~~2021, we had ~~$43.8~~$6.1 million and ~~$48.8~~$19.1 million in cash and cash ~~equivalents.~~equivalents, respectively.

On February 10, 2020, we entered into a Credit Agreement and Guaranty with Perceptive Credit Holdings III, LP, a related party (“Perceptive”), for a senior secured term loan credit facility of up to $35.0 million (the “Perceptive Credit Agreement”). A first tranche of $5.0 million was funded on execution of the Perceptive Credit Agreement. A second tranche of $15.0 million was funded as a result of the approval of Twirla by the FDA. On February 26, 2021 the Perceptive Credit Agreement was amended (the “Amended Perceptive Credit Agreement”) by creating a fourth tranche of $10.0 million that was to be available based on the achievement of a revenue milestone. The other tranches of debt under the Amended Perceptive Credit Facility are no longer available to us. In connection with the Amended Perceptive Credit Agreement, the Company issued to Perceptive a warrant to purchase 11,250 shares of the Company’s common stock with an exercise price of $10.03 per share.

On January 7, 2022, we prepaid $5.0 million of the outstanding debt, and Perceptive waived the prepayment premium. On July 8, 2022, we prepaid $5.0 million of the outstanding debt, and Perceptive waived the prepayment premium. On July 25, 2022, we entered into a fifth amendment to the Amended Perceptive Credit Agreement, as amended (the “Fifth Amendment”). Pursuant to the Fifth Amendment, Perceptive agreed to release its security interest in certain assets being transferred from the Company to Corium in connection with an amendment to the Company’s Manufacturing and Commercialization Agreement with Corium and waive our obligations to comply with certain financial covenants through the end of 2022. In exchange, we agreed to prepay $7 million of outstanding principal under the Amended Perceptive Credit Agreement using the proceeds of recent sales under our ATM program with H.C. Wainwright & Co., LLC. Such payment was made on July 25, 2022, and Perceptive waived the prepayment premium. Pursuant to the Fifth Amendment, beginning August 31, 2022, we began making monthly principal payments in an amount equal to $75,000 continuing until February 10, 2024, at which time all remaining principal amount outstanding is due.

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In ~~May 2014,~~March 2021, we ~~completed our initial public offering whereby~~entered into a common stock sales agreement (the “2021 ATM Agreement”) under which we ~~sold 9,166,667~~are authorized to sell up to an aggregate of $50.0 million in gross proceeds through the sale of shares of common stock atfrom time to time in “at-the-market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended). We agreed to pay a ~~public offering price~~commission of ~~$6.00 per share, before underwriting discounts~~up to 3% of the gross proceeds of any common stock sold under this agreement. During the year ended December 31, 2021, we issued and ~~expenses. The aggregate net proceeds received by us from the initial public offering were approximately $49.7 million.~~

~~In January 2015, we completed~~sold a ~~private placement~~total of ~~3,418,804~~172,879 shares of common stock ~~at $5.85 per share. Proceeds from~~under the ~~private placement,~~2021 ATM Agreement resulting in net proceeds of ~~commissions and other offering costs were~~ approximately ~~$19.3~~$9.3 million.

In February 2015, we entered into a loan and security agreement with Hercules Technology Growth Capital, Inc. or Hercules, for a term loan of up to $25.0 million, which we refer to as the Hercules Loan Agreement. A first tranche of $16.5 million was funded upon execution of the Hercules Loan Agreement, approximately $15.5 million of which was used to repay our existing term loan. The Hercules Loan Agreement was amended in August 2016 to, among other things, extend the period during which we can draw the second tranche of $8.5 million to March 31, 2017 and extended the period during which we make interest-only payments until January 31, 2017. ~~The Hercules Loan Agreement was further amended in May 2017 to extend the period~~ ~~during which we can draw the second tranche of $8.5 million to January 31, 2018. On February 1, 2017, we began making principal payments~~

~~with respect to the Hercules Loan. See further discussion in “Funding Requirements and Other Liquidity Matters” below.~~
In ~~January 2016,~~October 2021, we ~~closed an underwritten~~completed a public offering of ~~5,511,812~~666,666 shares of our common stock and warrants to purchase 333,333 shares of our common stock at a ~~public offering~~combined price of ~~$6.35~~$34.00 per ~~share. In February 2016, the underwriters of the public offering~~share of common stock ~~exercised in full their option~~and one-half of a warrant to purchase ~~an additional 826,771 shares~~one share of common stock at the public offering price of $6.35 per share, less underwriting discounts and commissions. A total of 6,338,583 shares of common stock were sold in the public offering, resulting in total net proceeds of approximately $37.5 million.
~~In August 2017, we completed an underwritten public offering of 5,333,334 shares of common stock at a public offering price of $3.75 per share.~~stock. Proceeds from ~~our August 2017~~the public offering, net of underwriting discounts, commissions and ~~other~~ offering ~~costs~~expenses were approximately ~~$18.5~~$21.1 million.
In January 2022, we entered into a common stock sales agreement (the “January 2022 ATM”) under which we are authorized to sell up to an aggregate of $50.0 million in gross proceeds through the sale of shares of common stock from time to time in “at-the-market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended). We agreed to pay a commission of up to 3% of the gross proceeds of any common stock sold under this agreement. During the nine months ended September 30, 2022 we issued and sold a total of 25,623 shares of common stock under the January 2022 ATM resulting in net proceeds of approximately $0.3 million. On April 26, 2022, we terminated the January 2022 ATM.
On March 13, 2022, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single healthcare-focused institutional investor (the “Purchaser”), pursuant to which the Company issued, in a registered direct offering (the “2022 Preferred Stock Offering”), 2,425 shares of Series A convertible preferred stock (the “Series A Preferred Stock”) and 2,425 shares of Series B convertible preferred stock (the “Series B Preferred Stock”) and Series A warrants (the “Series A Warrants”) to purchase up to an aggregate of 606,250 shares of the common stock of the Company and Series B warrants (the “Series B Warrants”) to purchase up to an aggregate of 606,250 shares of common stock. Each share of Series A Preferred Stock and Series B Preferred Stock has a stated value of $1,000 per share and a conversion price of $8.00 per share. The shares of preferred stock issued in the offering are convertible into an aggregate of 606,250 shares of common stock. The Series A Warrants have an exercise price of $10.40 per share, will become exercisable six months following the date of issuance, and will expire 5 years following the initial exercise date. The Series B Warrants have an exercise price of $10.40 per share, will become exercisable six months following the date of issuance, and will expire one and one-half years following the initial exercise date. The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchaser and customary indemnification rights and obligations of the parties. Total gross proceeds from the 2022 Preferred Stock Offering, before deducting the placement agent's fees and other estimated offering expenses, are $4.9 million. The 2022 Preferred Stock Offering closed on March 14, 2022.
On April 25, 2022, we entered into a letter agreement and waiver (the “Letter Agreement”) with Armistice Capital Master Fund Ltd. (“Armistice”), pursuant to which Armistice consented to us entering into and effecting an at-the-market (“ATM”) offering facility. Pursuant to the Letter Agreement, we issued to Armisitice a new common stock purchase warrant (“New Warrant”), on the same terms and conditions as the Series A Warrants, provided that such New Warrant shall be exercisable into 212,188 warrant shares, subject to adjustment thereunder. The Series A Warrants have an exercise price of $10.40 per share, and will become exercisable six months following the date of issuance, and will expire 5 years following the initial exercise date.
On April 27, 2022, we entered into a new at-the-market offering program (the “April 2022 ATM”) with H.C. Wainwright LLC, and Co. (the “Sales Agent”) under which we were authorized to sell up to an aggregate of $12,841,000 in gross proceeds through the sale of shares of common stock from time to time in “at the market” equity offerings (as defined in Rule 415 promulgated under the Securities Act of 1933, as amended). We agreed to pay a commission of up to 3% of the gross proceeds of any common stock sold under this agreement. Through September 30, 2022, we issued and sold a total of 8,687,502 shares of common stock under the April 2022 ATM, representing the entire capacity of the April 2022 ATM, resulting in net proceeds of approximately $12.2 million. On August 22, 2022, the we increased the April 2022 ATM (“August 2022 ATM”). As increased, we may now offer and sell shares of the Company’s common stock having an aggregate offering price of up to$75.0 million.

On July 6, 2022, we completed a best efforts public offering (the “Offering”) in which we raised net proceeds of $22.0 million through the sale of 19,148,332 shares of common stock and 7,518,334 pre-funded warrants (“Series B pre-funded warrants”) to purchase 7,518,334 shares of common stock. Both the sales of shares of common stock and

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pre-funded warrants were accompanied by Series A-1 and Series A-2 warrants (together the “Series A warrants”) to purchase shares of common stock. The Series A-1 warrants are exercisable immediately and will expire five years from the date of issuance, and the Series A-2 warrants are exercisable immediately and will expire thirteen months from the date of issuance. H.C. Wainwright acted as the exclusive placement agent in connection with the Offering and, as compensation, received a cash fee of 7% of the aggregate proceeds raised in the Offering. We also issued to certain designees of H.C. Wainwright warrants to purchase up to 1,333,333 shares of commons stock with an exercise price of $1.125 per share.

Moving forward, we plan to monitor our cash and cash equivalents balances, in an effort to ensure we have adequate liquidity to fund our operations. If the COVID-19 pandemic or other factors impact our current business plan or our ability to generate revenue from the launch of Twirla, we believe we have the ability to revise our commercial plans, including curtailing sales and marketing spending, to allow us to continue to fund our operations.

We have ~~not~~ generated ~~any~~minimal revenue and have never been profitable for any year. Our net loss was ~~$28.7~~$74.9 million, ~~$30.3~~$51.9 million and ~~$16.1~~$18.6 million for the years ended December 31, ~~2016, 2015~~2021, 2020 and ~~2014,~~2019, respectively. Our net loss was ~~$7.1~~$20.0 million and ~~$22.1~~$16.8 million for the three months ended September 30, 2022 and 2021, respectively. Our net loss was $43.6 million and $51.5 million for the nine months ended September 30, ~~2017,~~2022 and 2021, respectively. We expect to continue to incur ~~increased expenses and increasing~~significant operating losses for the foreseeable future as we ~~seek the approval of~~commercialize Twirla. This includes commercially launching Twirla, advancing our New Drug Application, or NDA for Twirla, which was supplemented with the results of our completed Phase 3 clinical trial, which we refer to as the SECURE clinical trial, to respond to the U.S. Food and Drug Administration, or FDA’s February 2013 Complete Response Letter, or CRL, and was received by the FDA on June 26, 2017, complete the qualification and validation of our commercial manufacturing process, initiate pre-launch commercial activities, commercially launch Twirla, advance our other potential product candidates and ~~expand~~expanding our research and development programs.~~Substantially all~~

Going Concern

As of September 30, 2022, we had cash and cash equivalents of $6.1 million. We believe our ~~resources are currently dedicated~~current cash will support operations through December 31, 2022.

We have generated losses since inception, used substantial cash in operations, and anticipate we will continue to ~~developing and seeking regulatory approval~~incur net losses for ~~Twirla. We will require~~the foreseeable future. Our future success depends on our ability to obtain additional capital and/or implement various strategic alternatives, and there can be no assurance that any financing can be realized by us, or if realized, what the terms of any such financing may be, or that any amount that we are able to ~~fund our operating needs including, among other items, continued commercial activities after~~raise will be adequate. If we are unable to obtain funds when needed or on acceptable terms, we then will be unable to continue the ~~initial commercial launch~~commercialization of Twirla, ~~if approved,~~ and be required to ~~advance~~cut operating costs, and forego future development and other opportunities. Based upon the ~~development~~foregoing, management has concluded that there is substantial doubt about our ability to continue as a going concern through the 12 months following the date on which this Quarterly Report on Form 10-Q is filed.

The unaudited financial statements as of ~~our other product candidates.~~September 30, 2022 have been prepared under the assumption that we will continue as a going concern for the next 12 months.

We do not own any manufacturing facilities and rely on our ~~third party~~contract manufacturer, ~~Corium International, Inc., or~~ Corium, for all aspects of the manufacturing of Twirla. We will need to continue to invest in the manufacturing process for Twirla, and incur significant expenses, in order to ~~complete the equipment qualification and validation related to the expansion of Corium’s manufacturing capabilities in order to~~ be capable of supplying projected commercial quantities of Twirla, if approved. Based on our interactions with the FDA on the chemistry, manufacturing and controls, or CMC issues raised in the CRL and our plan with Corium to validate the commercial scale equipment to manufacture Twirla, we believe weTwirla. We have addressed the CMC CRL issues in the resubmission of our NDA. We continue to plan the process of scaling up the commercial manufacturing capabilities for Twirla with Corium and the associated costs and timelines. We expect the validation and expansion of our commercial manufacturing process to be completed after the target ~~Prescription Drug User Fee Act, or~~ ~~PDUFA goal date of December 26, 2017. If we obtain regulatory approval for Twirla, we expect to incur~~incurred significant expenses in order to create an infrastructure to support the commercialization of Twirla, including sales, marketing, distribution, medical affairs and compliance ~~functions, which will require additional capital.~~

~~In December 2016, we completed the SECURE clinical trial, in which we enrolled over 2,000 women for up to one year of treatment. We announced top-line data in early January 2017.~~ In March 2017, at our request, we met with the FDA to share preliminary data from the SECURE clinical trial, including key safety data and BMI-related efficacy findings, and to seek FDA input as to whether the SECURE clinical trial results constitute a basis for addressing the clinical deficiencies cited in the CRL. We also requested feedback on whether the proposed Twirla NDA content will meet the FDA’s requirements for submission. The FDA did not provide us with any feedback on whether the results of the SECURE clinical trial and the contents of the planned, resubmitted NDA will be sufficient to obtain regulatory approval of Twirla. ~~We resubmitted our NDA for Twirla which was received by the FDA on June 26, 2017 and we were given a target PDUFA goal date of December 26, 2017.~~

We have incurred and will continue to incur additional costs associated with operating as a public company. Accordingly, we will need additional financing to support our continuing operations and pipeline in addition to Twirla. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include collaborations with third parties. Adequate additional financing may not be available to

~~us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.~~functions. We will need to generate significant revenue to achieve profitability, and we may never do so.
Financial Operations Overview
Revenue
~~Revenue~~
To date, we have ~~not~~ generated ~~any revenue.~~minimal revenue from product sales. In the future, in addition to revenue from product sales, we may generate revenue from ~~product sales,~~ license fees, milestone payments ~~and~~or royalties from the sale of products developed using our intellectual property. Our ability to generate revenue and become profitable depends on our ability to successfully commercialize Twirla and any product candidates that we may advance in the future. If we fail to ~~complete the development of~~successfully commercialize Twirla, or any other product candidates we advance in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, ~~will~~could be adversely affected.

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For the three months ended September 30, 2022 and 2021, net sales totaled $3.1 million and $1.3 million, respectively, representing the sale of 33,282 units and 10,650 units, respectively. For the nine months ended September 30, 2022 and 2021, net sales totaled $7.0 million and $2.6 million, respectively, representing the sale of 71,652 units and 20,976 units, respectively. The increase in net sales was driven by increased sales in both the retail and non-retail channel through our collaboration with Afaxys.

Cost of Product Revenues

Cost of product revenues include direct and indirect costs related to the manufacturing of Twirla sold, including packaging services, freight, obsolescence, and allocation of overhead costs that are primarily fixed such as depreciation, salaries and benefits, and insurance. We expect these relatively fixed costs to become less significant as a percentage of sales with anticipated volume increases. There was no direct cost of product revenue on approximately 3,000 units sold in the nine months ended September 30, 2021, as those units were validation inventory which was previously expensed as research and development expense in the fourth quarter of 2020.

For the three months ended September 30, 2022 and 2021, cost of product revenues totaled $1.4 million and $2.7 million, respectively. For the nine months ended September 30, 2022 and 2021, cost of product revenues totaled $5.2 million and $5.0 million, respectively.

Research and Development Expenses

Since our inception and through approval of Twirla by the FDA in February 2020, we ~~have~~ focused our resources on our research and development activities. Research and development expenses consist primarily of costs incurred for the development of Twirla and other current and future potential product candidates, and include:

· ~~expenses incurred under agreements with contract research organizations, or CROs, and investigative sites that conduct our clinical trials and preclinical studies;~~

· ~~employee-related expenses, including salaries, benefits, travel and stock-based compensation expenses;~~

· ~~the cost of acquiring, developing and manufacturing clinical trial materials, including the supply of our product candidates;~~

· ~~costs associated with research, development and regulatory activities; and~~

· ~~costs associated with equipment scale-up required for commercial production.~~

●

expenses incurred under agreements with contract research organizations, or CROs, and investigative sites that conduct our clinical trials and preclinical studies;

●

employee-related expenses, including salaries, benefits, travel and stock-based compensation expenses;

●

the cost of acquiring, developing and manufacturing clinical trial materials, including the supply of our potential product candidates; and

●

costs associated with research, development and regulatory activities.

Research and development costs are expensed as incurred. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by our ~~third party~~third-party vendors.

Research and development activities are central to our business ~~model.~~model and to date, our research and development expenses have related primarily to the development of Twirla. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis, as the majority of our past and planned expenses have been and will be in support of Twirla. In 2017, we expect the expenses associated with the SECURE clinical trial to decrease as compared to 2016 as we complete the close-out activities associated with the trial and because no additional clinical trials are planned at this time. During 2017, we expect to increase activities related to equipment qualification and validation of our commercial manufacturing process as we continue to prepare for the commercialization of Twirla.

To date, our research and development expenses have related primarily to the development of Twirla. As we near completion of the SECURE clinical trial close-out activities and completed the resubmission of our Twirla NDA, we expect research and development expenses to continue to shift away from costs associated with our SECURE clinical trial and NDA resubmission and toward the costs associated with completing the qualification and validation of our commercial manufacturing process. We began incurring expenses for the clinical development of AG200-SP in the second half of 2016. We have decided to postpone the planned Phase 2 clinical trial for AG200-SP and will continue to evaluate the timing for initiating dosing of subjects for the planned Phase 2 clinical trial, which is dependent on financial and other capital resources. For the three months ended September 30, ~~2017~~2022 and

~~2016,~~ 2021, our research and development expenses were approximately ~~$3.2~~$0.8 million and ~~$4.9~~$1.6 million, respectively. For the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, our research and development expenses were approximately ~~$11.7~~$2.9 million and ~~$15.4~~$4.6 million, ~~respectively.~~respectively The following table summarizes our research and development expenses by functional area.

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands)

(In thousands)


2022

2021

2022

2021

Clinical development

$
115

$
1,011

$
917

$
2,496
Regulatory

107

36

366

174
Personnel related

476

397

1,334

1,592

Table of Contents

Manufacturing—commercialization

—

15

—

(56)
Stock-based compensation

90

134

284

362
Total research and development expenses

$
788

$
1,593

$
2,901

$
4,568

Three months ended
September 30,

Nine months ended
September 30,

(In thousands)

2017

2016

2017

2016

Clinical development

$
588

$
3,030

$
2,609

$
9,942

Regulatory

95

72

1,191

225

Personnel related

675

665

2,129

1,910

Manufacturing — commercialization

1,379

470

4,082

1,431

Manufacturing

129

375

794

1,111

Stock-based compensation

309

299

889

796

Total research and development expenses

$
3,175

$
4,911

$
11,694

$
15,415

~~We have nearly completed the close-out activities associated with our SECURE clinical trial for Twirla and expect the process to be complete by the end of 2017.~~ It is difficult to determine with any certainty the exact duration and completion costs of any of our future clinical trials of Twirla or our ~~other~~ current and future potential product candidates we may advance. It is also difficult to determine if, when or to what extent we will generate revenue from the commercialization and sale of Twirla or our potential product candidates that obtain regulatory approval. ~~Our current business plan assumes the FDA will complete its review of~~
Future research and development costs incurred for our ~~NDA resubmission by the target PDUFA goal date, December 26, 2017. We may, however, never succeed in achieving regulatory approval for Twirla or any of our~~potential product candidates ~~or such approval may be delayed. The duration, costs~~ and ~~timing of clinical trials and development of our other product candidates in addition to Twirla~~required post-marketing studies will depend on a variety of factors, including the uncertainties of future clinical trials and preclinical studies, the rate of subject enrollment, ~~obtaining~~access to additional capital, and significant and changing government regulation. For the foreseeable future, we expect the current public health crisis to have a negative effect on the conduct of clinical trials. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, or experience issues with our manufacturing capabilities, we could be required to expend significant additional financial resources and time with respect to the development of that product candidate. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, ~~as well as~~coupled with an assessment of each product candidate’s commercial potential. Substantially all of our resources are currently dedicated to ~~developing~~commercializing Twirla.
Selling and ~~seeking regulatory approval~~Marketing Expenses
Selling and marketing expenses consist principally of the cost of salaries and related costs for ~~Twirla. We will require additional capital to fund~~personnel in sales and marketing, our ~~operating needs, including, among other items, continued commercial activities, after~~contract sales force, brand building, advocacy, market research and consulting. Selling and marketing expenses are expensed as incurred.
For the three months ended September 30, 2022 and 2021, our ~~initial~~selling and marketing expenses totaled approximately $5.6 million and $9.4 million, respectively. For the nine months ended September 30, 2022 and 2021, our selling and marketing expenses totaled approximately $23.5 million and $30.3 million, respectively. Our commercial launch of Twirla ~~if approved,~~in the United States utilized a contract sales force. We anticipate that our selling and marketing expenses will continue to be significant as ~~well as advancing the development of~~ our ~~other product candidates.~~commercialization efforts continue.
General and Administrative Expenses
General and administrative expenses consist principally of salaries and related costs for personnel in executive, finance and administrative functions including payroll taxes and health insurance, stock-based compensation and travel expenses. Other general and administrative expenses include facility-related costs, insurance and professional fees for legal, patent review, consulting and accounting services. General and administrative expenses are expensed as incurred.
For the three months ended September 30, ~~2017~~2022 and ~~2016,~~2021, our general and administrative expenses totaled approximately ~~$3.5~~$2.8 million and ~~$2.2~~$3.4 million, respectively. For the nine months ended September 30, ~~2017~~2022 and ~~2016,~~2021, our general and administrative expenses totaled approximately ~~$9.1~~$9.8 million and ~~$6.5~~$11.4 million, respectively. We anticipate that our general and administrative expenses will ~~increase~~stabilize in the ~~future with the continued research,~~
development and potential commercialization of Twirla, its planned line extensions, and any of our other product candidates, and as we operate as a public company. These increases will likely include increased legal and accounting services, stock registration and printing fees, addition of new personnel to support compliance and communication needs, increased insurance premiums, outside consultants and investor relations. Additionally, if in the future we believe regulatory approval of Twirla or any of our other product candidates appears likely, we anticipate that we would continue to increase preparations for commercial operations, which would result in an increase in payroll and other expenses, particularly with respect to the sales and marketing of our product candidates.
future.
Critical Accounting Policies and Significant Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations ~~are~~is based ~~upon~~on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting ~~principles.~~principles, or U.S. GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosures. On an ongoing basis, our actual results may differ significantly from our estimates.

Table of Contents

There have been no material changes to our critical accounting policies and estimates from the information ~~provided~~ discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~annual report~~Annual Report on Form ~~10-K.~~10-K, as filed with the SEC on March 30, 2022.

Table of Contents

Results of Operations

Comparison of the Three Months Ended September 30, ~~2017~~2022 and ~~2016~~2021

Three Months Ended



September 30,

(In thousands)


2022

2021

Change

Revenues, net

$
3,002

$
1,287

$
1,715
Cost of product revenues

1,425

2,711

(1,286)
Gross profit

1,577

(1,424)

3,001

Operating expenses:






Research and development

$
788

$
1,593

$
(805)
Selling and marketing

5,560

9,386

(3,826)
General and administrative

2,815

3,371

(556)
Loss on disposition of assets

11,122

—

11,122
Total operating expenses

20,285

14,350

5,935
Loss from operations

$
(18,708)

$
(15,774)

(2,934)

Other income (expense)






Interest income

46

1

45
Interest expense

(1,004)

(999)

(5)
Total other income (expense), net

(958)

(998)

40
Loss before benefit from income taxes

(19,666)

(16,772)

(2,894)
Benefit from income taxes

—

—

—
Net loss

$
(19,666)

$
(16,772)

$
(2,894)

Three months
ended
September 30,

2017

2016

Change

(In thousands)

Operating expenses:

Research and development

$
3,175

$
4,911

$
(1,736
)
General and administrative

3,526

2,180

1,346

Total operating expenses

6,701

7,091

(390
)
Other income (expenses)

Interest expense

(459
)
(784
)
325

Interest income

78

33

45

Change in fair value of warrants

(20
)
38

(58
)
Loss before income taxes

(7,102
)
(7,804
)
702

Benefit from income taxes

—

—

—

Net loss

$
(7,102
)
$
(7,804
)
$
702

~~Research and development expenses.~~ ~~Research and development expenses decreased~~Revenues. Revenues, net increased by $1.7 million or ~~35%,~~133% from ~~$4.9~~$1.3 million for the three months ended September 30, ~~2016~~2021 to ~~$3.2~~$3.0 million for the three months ended September 30, ~~2017.~~ 2022. Revenue, net consists of sales of Twirla, which was approved by the FDA in February 2020 and launched in the US in December 2020, and reflects the shipment of Twirla to specialty distributors, net of estimates for applicable variable consideration, which consist primarily of wholesale distribution fees, prompt pay and other discounts, rebates, chargebacks, product returns and co-pay assistance programs.
Cost of product revenues. Cost of product revenues totaled $1.4 million and consist of direct and indirect costs related to the manufacturing of Twirla sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs that are primarily fixed such as depreciation, salaries and benefits, and insurance. Cost of product revenues in the prior period included $1.4 million of obsolescence reserves for inventory not expected to be sold prior to its shelf life date.
Research and development expenses.Research and development expenses decreased by $0.8 million, or 51%, from $1.6 million for the three months ended September 30, 2021 to $0.8 million for the three months ended September 30, 2022. This decrease in research and development expenses was primarily due to ~~the following:~~
·a decrease in clinical development expenses of $2.4 million for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016. During the fourth quarter of 2016, we completed subject visits for our SECURE clinical trial. This decrease reflects reduced clinical trial activity in the three months ended September 30, 2017 as compared to the three months ended September 30, 2016 as we complete the close-out activities associated with our SECURE clinical trial; and
·                  ~~an increase in manufacturing commercialization~~ expenses of $0.9 million for the three months ended September 30, ~~2017~~2022 as compared to the three months ended September 30, ~~2016.~~ 2021. This ~~increase~~decrease reflects ~~materials, labor and other costs associated with the scale-up process and the on-going qualification process of the commercial manufacturing equipment. During the remainder of 2017, we~~
~~expect these expenses to increase significantly as we continue to advance our plan~~a reduction in spending related to ~~equipment qualification~~our pipeline evaluation and ~~validation of our commercial manufacturing process~~development.
Selling and ~~as we continue to prepare for the commercialization of Twirla.~~
~~General~~marketing expenses. Selling and ~~administrative expenses.~~ ~~General and administrative~~marketing expenses ~~increased~~decreased by ~~$1.3~~$3.8 million, or ~~62%~~41%, from ~~$2.2~~$9.4 million for the three months ended September 30, ~~2016~~2021 to ~~$3.5~~$5.6 million for the three months ended September 30, ~~2017.~~2022. This ~~increase~~decrease in selling and marketing expenses is due to reduced spending on marketing initiatives and the optimization of our contract sales force.
General and administrative expenses. General and administrative expenses decreased by $0.6 million, or 16%, from $3.4 million for the three months ended September 30, 2021 to $2.8 million for the three months ended September 30, 2022. This decrease in general and administrative expense was primarily due to reduced headcount.

Table of Contents

Loss on disposition of assets. In accordance with ASC 610-20, we recognized an $11.1 million one-time, non-cash charge, which represents the ~~following:~~

· ~~an increase~~loss on the transferof fixed assets to Corium in ~~commercial development expense of $1.1 million for~~connection with the ~~three months ended September 30, 2017 compared~~amended Corium agreement (see Note 10 to the ~~three months ended September 30, 2016. This increase relates to the initiation of certain pre-commercialization activities such as brand building, advocacy~~financial statements).

Interest income. Interest income comprises interest earned on cash and ~~consulting. During the remainder of 2017, we expect these expenses to increase significantly as we continue to prepare for the commercialization of Twirla.~~cash equivalents.

Interest expense. Interest expense is ~~primarily~~ attributable to our term loan with ~~Hercules for the three months ended September 30, 2017~~Perceptive and ~~2016, respectively. Interest expense also~~ includes the amortization of the discount associated with allocating value to the common stock warrants issued to ~~Hercules,~~Perceptive and the amortization of the deferred financing costs associated with the term ~~loan and the accrual of the final payment due to Hercules.~~loan. Interest expense ~~decreased by $0.3~~was flat at $1.0 million ~~or 41%, from $0.8 million~~ for both the three months ended September 30, ~~2016 to $0.5 million for the three months ended~~2022 and September 30, ~~2017. This decrease is primarily the result~~2021 as higher non-cash interest amortization of ~~a decrease in the principal outstanding under our term loan with Hercules for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016.~~

~~Interest income.~~ ~~Interest income comprises interest earned on cash and cash equivalents.~~

~~Change in fair value of warrants.~~ Certain of our warrants to purchase shares of our convertible preferred stock (prior to our initial public offering, or IPO) and common stock (post-IPO) are recorded at fair value and are subject to re-measurement at each balance sheet date. These liabilities are re-measured at each balance sheet date with the corresponding charge to earnings recorded within change in fair value of warrant liability. The fair value of the convertible preferred stock warrants (prior to the IPO) and common stock warrants with non-standard anti-dilution provisions are determined using the Black-Scholes option pricing model which incorporates a number of assumptions and judgments to estimate the fair value of these warrants including the fair value per share of the underlying stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield, credit spread and expected volatility of the price of the underlying stock. During the three months ended September 30, 2017, we reported expense of $20 thousand related to the increase in the fair value of the warrants ~~as compared~~and debt issue costs offset lower cash interest due to ~~income of $38 thousand for~~principal payments made on the three months ended September 30, 2016, representing an increase in expense of $58 thousand. The market price of our common stock has been and may continue to be volatile. Consequently, future fluctuations in the price of our common stock may cause significant increases or decreases in the fair value of the warrant liability.term loan.

Comparison of the Nine Months Ended September 30, ~~2017~~2022 and ~~2016~~2021

Nine Months Ended



September 30,

(In thousands)

2022

2021

Change

Revenues, net

$
6,888

$
2,587

$
4,301
Cost of product revenues

5,183

5,017

166
Gross profit

1,705

(2,430)

4,135

Operating expenses:






Research and development

$
2,901

$
4,568

$
(1,667)
Selling and marketing

23,523

30,263

(6,740)
General and administrative

9,837

11,386

(1,549)
Loss on disposition of assets

11,122

—

11,122
Total operating expenses

47,383

46,217

1,166
Loss from operations

$
(45,678)

$
(48,647)

2,969

Other income (expense)






Interest income

50

24

26
Interest expense

(2,699)

(2,914)

215
Total other income (expense), net

(2,649)

(2,890)

241
Loss before benefit from income taxes

(48,327)

(51,537)

3,210
Benefit from income taxes

4,675

—

4,675
Net loss

$
(43,652)

$
(51,537)

$
7,885

Nine months
ended
September 30,

2017

2016

Change

(In thousands)

Operating expenses:

Research and development

$
11,694

$
15,415

$
(3,721
)
General and administrative

9,130

6,497

2,633

Total operating expenses

20,824

21,912

(1,088
)
Other income (expenses)

Interest expense

(1,509
)
(1,879
)
370

Interest income

187

83

104

Change in fair value of warrants

82

168

(86
)
Loss before income taxes

(22,064
)
(23,540
)
1,476

Benefit from income taxes

—

—

—

Net loss

$
(22,064
)
$
(23,540
)
$
1,476

~~Research and development expenses.~~ ~~Research and development expenses decreased~~Revenues. Revenues, net increased by ~~$3.7~~$4.3 million or ~~24%,~~166% from ~~$15.4~~$2.6 million for the nine months ended September 30, ~~2016~~2021 to ~~$11.7~~$6.9 million for the nine months ended September 30, ~~2017.~~2022. Revenue, net consists of sales of Twirla, which was approved by the FDA in February 2020 and launched in the US in December 2020, and reflects the shipment of Twirla to specialty distributors, net of estimates for applicable variable consideration, which consist primarily of wholesale distribution fees, prompt pay and other discounts, rebates, chargebacks, product returns and co-pay assistance programs.
Cost of product revenues. Cost of product revenues totaled $5.2 million and consist of direct and indirect costs related to the manufacturing of Twirla sold, including third-party manufacturing costs, packaging services, freight, and allocation of overhead costs that are primarily fixed such as depreciation, salaries and benefits, and insurance. Additional costs incurred in the nine months ending September 30, 2022 include $0.7 million of supplemental payments and expired raw materials payments to Corium as agreed to under the amended Corium agreement. Additional costs incurred in the nine months ending September 30, 2021 include $1.4 million obsolescence reserves for inventory not expected to be sold prior to its shelf life date.

Table of Contents

Research and development expenses. Research and development expenses decreased by $1.7 million, or 36%, from $4.6 million for the nine months ended September 30, 2021 to $2.9 million for the nine months ended September 30, 2022. This decrease in research and development expenses was primarily due to ~~the following:~~

·a decrease in clinical development expenses of ~~$7.3~~$1.6 million for the nine months ended September 30, ~~2017~~2022 as compared to the nine months ended September 30, ~~2016. During the fourth quarter of 2016, we completed subject visits for our SECURE clinical trial.~~ 2021. This decrease reflects ~~reduced clinical trial activity~~a reduction in ~~the nine months ended September 30, 2017 as compared~~spending related to ~~the nine months ended September 30, 2016 as we complete the close-out activities associated with~~ our ~~SECURE clinical trial;~~pipeline evaluation and development.

· ~~an increase in manufacturing commercialization~~Selling and marketing expenses. Selling and marketing expenses ~~of $2.7~~decreased by $6.7 million, or 22%, from $30.3 million for the nine months ended September 30, ~~2017 as compared~~2021 to the nine months ended September 30, 2016. This increase reflects materials, labor and other costs associated with the scale-up process and the on-going qualification process of the commercial manufacturing equipment. During the remainder of 2017, we expect these expenses to increase significantly as we continue to advance our plan related to equipment qualification and validation of our commercial manufacturing process and as we continue to prepare for the commercialization of Twirla; and

· ~~an increase in regulatory expenses of $0.9~~$23.5 million for the nine months ended September 30, ~~2017 as compared~~2022. This decrease in selling and marketing expenses is due to reduced spending on marketing initiatives and the ~~nine months ended September 30, 2016. This increase primarily represents external costs associated with the preparation~~optimization of our ~~NDA resubmission and response to the CRL.~~contract sales force.

General and administrative expenses. General and administrative expenses ~~increased~~decreased by ~~$2.6~~$1.5 million, or ~~41%~~14%, from ~~$6.5~~$11.4 million for the nine months ended September 30, ~~2016~~2021 to ~~$9.1~~$9.8 million for the nine months ended September 30, ~~2017.~~2022. This ~~increase~~decrease in general and administrative expense was primarily due to the ~~following:~~previously announced forfeiture of senior management bonuses for 2021and reduced headcount, partially offset by higher professional fees.

·Loss on disposition of assets. In accordance with ASC 610-20, we recognized an ~~increase~~$11.1 million one-time, non-cash charge, which represents the loss on the transferof fixed assets to Corium in ~~commercial development expense of $2.2 million for~~connection with the ~~nine months ended September 30, 2017 compared~~amended Corium agreement (see Note 10 to the ~~nine months ended September 30, 2016. This increase relates to the initiation of certain pre-commercialization activities such as brand building, advocacy~~financial statements).

Interest expense. Interest expense is ~~primarily~~ attributable to our term loan with ~~Hercules for the nine months ended September 30, 2017~~Perceptive and ~~2016, respectively. Interest expense also~~ includes the amortization of the discount associated with allocating value to the common stock warrants issued to ~~Hercules,~~Perceptive and the amortization of the deferred financing costs associated with the term ~~loan and the accrual of the final payment due to Hercules.~~loan. Interest

expense decreased by ~~$0.4 million, or 20% from $1.9 million~~$215,000 for the nine months ended September 30, 2016 to $1.5 million for the three months ended September 30, 2017. This decrease is primarily the result of a decrease in the principal outstanding under our term loan with Hercules for the nine months ended September 30, 2017 as2022 compared to the nine months ended September 30, ~~2016.~~
~~Interest income.~~ ~~Interest income comprises~~2021 as higher non-cash interest ~~earned on cash and cash equivalents.~~
~~Change in fair value~~amortization of ~~warrants.~~ Certain of our warrants to purchase shares of our convertible preferred stock (prior to our initial public offering, or IPO) and common stock (post IPO) are recorded at fair value and are subject to re-measurement at each balance sheet date. These liabilities are re-measured at each balance sheet date with the corresponding charge to earnings recorded within change in fair value of warrant liability. The fair value of the convertible preferred stock warrants (prior to the IPO) and common stock warrants with non-standard anti-dilution provisions are determined using the Black-Scholes option pricing model which incorporates a number of assumptions and judgments to estimate the fair value of these warrants including the fair value per share of the underlying stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield, credit spread and expected volatility of the price of the underlying stock. During the nine months ended September 30, 2017, we reported income of $82 thousand related to the decrease in the fair value of the warrants ~~as compared~~and debt issue costs offset lower cash interest due to principal payments made on the term loan.
Benefit from income taxes. Benefit from income taxes reflects $4.7 million received under the State of ~~$0.2 million~~New Jersey’s Technology Business Tax Certificate Transfer Program (the “Program”) sponsored by The New Jersey Economic Development Authority. The Program enables approved biotechnology companies with unused NOLs and unused research and development credits to sell these tax benefits for ~~the nine months ended September 30, 2016. The market price~~at least 80% of ~~our common stock has been and may continue to be volatile. Consequently, future fluctuations in~~ the ~~price of our common stock may cause significant increases or decreases in the fair~~ value of the ~~warrant liability.~~tax benefits to unaffiliated, profitable corporate taxpayers in the State of New Jersey. The Program is administered by The New Jersey Economic Development Authority and the New Jersey Department of the Treasury’s Division of Taxation. We have reached the maximum lifetime benefit $20.0 million.
Liquidity and Capital Resources
At September 30, ~~2017,~~2022, we had cash and cash equivalents totaling ~~$43.8~~$6.1 million. We invest our cash equivalents in short-term highly liquid, interest-bearing investment-grade and government securities in order to preserve principal.
The following table sets forth the primary sources and uses of cash for the periods ~~indicated (in thousands):~~indicated:

Nine Months Ended September 30,

(In thousands)


2022

2021


Net cash used in operating activities

$
(34,388)

$
(48,584)

Net cash (used in) provided by investing activities

(133)

39,515

Net cash provided by financing activities

21,523

9,341

Net (decrease) increase in cash and cash equivalents

$
(12,998)

$
272

Nine months ended
September 30,

2017

2016

Cash used in operating activities

$
(18,750
)
$
(20,381
)
Cash used in investing activities

(771
)
(25
)
Cash provided by financing activities

14,577

37,681

Net increase (decrease) in cash and cash equivalents

$
(4,944
)
$
17,275

Table of Contents

Operating Activities

We ~~have~~ incurred significant costs in the area of research and development, including CRO fees, manufacturing, regulatory and other clinical trial costs, as ~~our primary product candidate~~ Twirla was being developed. With the approval of Twirla early in 2020, our operating expenses shifted substantially to selling and marketing as we built out our commercial infrastructure. Net cash used in operating activities was ~~$18.8~~$34.4 million for the nine months ended September 30, ~~2017~~2022 and consisted primarily of a net loss of ~~$22.1~~$43.6 million ~~which was~~and negative working capital changes of $7.0 million, offset by non-cash stock-based compensation expense of ~~$2.7~~$2.0 million, depreciation expense of $1.3 million, a $11.1 million non-cash loss on the disposition of fixed assets, and $1.8 million of other non-cash charges, primarily interest ~~expense of $0.5 million and a working capital decrease of $0.1 million.~~expense. Net cash used in operating activities was ~~$20.4~~$48.6 million for the nine months ended September 30, ~~2016~~2021 and consisted primarily of a net loss of ~~$23.5~~$51.5 million ~~which was~~and $3.8 million in negative working capital changes, offset by a non-cash ~~stock based~~inventory reserve of $1.4 million, non-cash stock-based compensation expense of ~~$2.6~~$2.5 million, depreciation expense of $1.5 million, and ~~a working capital increase~~$1.4 million of ~~$0.3 million. We began incurring expenses for the clinical development of AG200-SP in the third quarter of 2016.~~ We have decided to postpone the planned Phase 2 clinical trial for AG200-SP and will continue to evaluate the timing for initiating dosing of subjects for the planned Phase 2 clinical trial, which is dependent on financial and other capital resources. The decreased clinical development expenses are being offset by increased commercial development and commercial manufacturing expenses which will continue to increase as we prepare for the commercialization of Twirla.non-cash charges, primarily interest expense.

Investing Activities
Net cash used in investing activities for the nine months ended September 30, ~~2017 and 2016~~2022 was ~~$0.8~~$0.1 million and ~~$25 thousand, respectively. Cash used in~~consisted of acquisitions of equipment. Net cash provided by investing activities for ~~these periods~~the nine months ended September 30, 2021 was $39.5 million and primarily represents ~~the acquisition~~net sales and maturities of ~~equipment to be used in the commercialization of Twirla, if approved.~~marketable securities.
Financing Activities
Net cash provided by financing activities for the nine months ended September 30, ~~2017~~2022 was ~~$14.6~~$21.5 million, which ~~primarily represented~~consists of net proceeds of ~~$18.5~~$4.1 million ~~received~~ from the sale of ~~5,333,334~~preferred stock in a registered direct offering, net proceeds of $22.0 million from the sale 26,666,666 shares of our common stock in ~~August 2017,~~a public offering, and proceeds of $12.6 million from the sale of 8,713,125 shares of our common stock through an at-the-market, or ATM sales program, partially offset ~~in part,~~ by a principal ~~payments pf $4.0 million under the Hercules Loan Agreement, which began on February 1, 2017.~~payment of short-term debt of $17.0 million. Net cash provided by financing activities for the nine months ended September 30, ~~2016~~2021 was ~~$37.7~~$9.3 million, which ~~included (i)~~consists of net proceeds of ~~$37.5~~$9.3 million ~~received~~ from the sale of ~~6,338,583~~6,915,151 shares of our common stock under the 2021 ATM Agreement, and ~~(ii)~~stock option proceeds of ~~$0.3 million from the exercise of stock options.~~$0.1 million.
Funding Requirements and Other Liquidity Matters
~~The resubmission of~~We closely monitor our ~~NDA for Twirla was received by~~cash and cash equivalents balances, in an effort to ensure we have adequate liquidity to fund the ~~FDA on June 26, 2017. We are continuing to plan for the commercialization of Twirla, and advancing our plan for the scale-up~~operations of the ~~commercial manufacturing process for Twirla. We expect to continue to incur significant expenses and increasing operating losses for~~Company. If the ~~foreseeable future. We anticipate that our expenses will increase substantially if and as we:~~
·                  ~~seek marketing approval for Twirla;~~
·                  ~~establish a sales and marketing infrastructure to commercialize Twirla in the United States, if approved;~~
·                  ~~continue the equipment qualification and validation related to the expansion of Corium’s manufacturing facility in preparation for potential commercial operations;~~
·                  ~~continue to evaluate additional line extensions for Twirla and initiate development of product candidates in addition to Twirla;~~
·                  ~~maintain, leverage and expand our intellectual property portfolio; and~~
·                  ~~add operational, financial and management information systems and personnel, including personnel to support our product development and future commercialization efforts.~~
~~Based on~~COVID-19 pandemic or other factors impact our current business plan ~~we expect that~~or our ~~existing cash and cash equivalents as of September 30, 2017, will enable us~~ability to ~~fund our operating expenses and capital expenditures requirements into~~generate revenue from the ~~second quarter of 2018.~~ Our current business plan assumes the FDA will complete its review of our NDA resubmission by the target PDUFA goal date, December 26, 2017, initiation of certain pre-commercial activities prior to approvallaunch of Twirla, ~~and initiation and completion of validation of our commercial manufacturing process after the target PDUFA goal date, if the FDA approves Twirla. We expect that~~ we will require additional capital to fund operating needs thereafter, including among other items, continued commercial activities after the initial commercial launch for Twirla and advancing the development of our other product candidates. We cannot assure you that the FDA will approve Twirla, that the FDA’s timeline for review will be within six months, or that we will timely complete the qualification and validation of our commercial manufacturing process. In the event of unforeseen changes to our planned timelines and business plan assumptions, as stated above, we still believe ~~that~~ we have the ability to revise our commercial plans, including curtailing sales and marketing spending, to allow us to continue ~~funding operations into the second quarter of 2018 by postponing certain planned commercial and validation spending.~~ ~~We have based this estimate on assumptions that may prove~~ to ~~be wrong, and we may use~~fund our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development, including, among other things, manufacturing scale up, FDA review of the NDA for Twirla and commercialization of Twirla, if approved, we are unable to estimate the amounts of
~~increased capital outlays and operating expenses associated with completing the development of Twirla. Our future capital requirements will depend on many factors, including:~~
·                  ~~the costs and timing of final close-out activities for the Phase 3 SECURE clinical trial for Twirla;~~
·                  ~~the costs, timing and outcome of regulatory review of Twirla;~~
·                  ~~the costs of the equipment qualification and validation related to the expansion of Corium’s manufacturing facility in preparation for potential commercial operations;~~
·                  ~~the costs of future commercialization activities, including the commercial launch, product sales, marketing, manufacturing and distribution, for Twirla, if approved;~~
·                  ~~the revenue, if any, received from commercial sales of Twirla, if approved;~~
·                  ~~the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; and~~
·                  ~~the costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements or other arrangements that we may establish.~~
Until such time, if ever, as we can generate substantial cash flows from product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with pharmaceutical partners, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates, including Twirla, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts, or even terminate our operations, or grant rights to develop and market Twirla that we would otherwise prefer to develop and market ourselves.
~~Contractual Obligations and Commitments~~
~~The following table summarizes our contractual obligations and commitments as of September 30, 2017 that will affect our future liquidity:~~

Total

Less than
1 year

1 - 3 years

3 - 5 years

More than
5 years

(In thousands)

Term loan

$
14,066

$
7,395

$
6,671

—

—

Operating lease

639

198

441

—

Total

$
14,705

$
7,593

$
7,112

$
—

$
—

~~Our operating lease commitment relates to our lease of office space in Princeton, New Jersey. In August 2015, we renewed this lease with the new term to expire in November 2020.~~
~~January 2015 Private Placement~~
In January 2015, we completed a private placement of 3,418,804 shares of common stock at $5.85 per share. Proceeds from our private placement, net of commissions and other offering costs, were $19.3 million.
~~February 2015 Loan and Security Agreement — Hercules Capital, Inc.~~
The first tranche of the Hercules Loan was funded in February 2015. In August 2016, we entered into the First Amendment to Loan and Security Agreement, or the “First Amendment” with Hercules which amends certain terms of the Hercules Loan Agreement.
The First Amendment extends our option to draw down the second tranche of $8.5 million referred to as the “Second Term Loan Advance”, of the term loan facility provided under the Hercules Loan, or the Term Loan, until March 31, 2017 and makes the Second Term Loan Advance subject to the consent of Hercules, among other customary conditions. ~~The Hercules Loan Agreement was further amended in May 2017 to extend the period~~ during which we can draw the second tranche of $8.5 million to January 31, 2018 and continues to make the Second Term Loan Advance subject to the consent of Hercules, among other customary conditions. The First Amendment also extended the interest-only payments until January 31, 2017, in connection with the first tranche of $16.5 million, or the First Term Loan Advance, and together with the Second Term Loan Advance, referred to as the Term Loan Advances.
The First Amendment provides that the Term Loan will mature on December 1, 2018. The First Amendment also provides that as part of the extension of the interest-only period from the First Term Loan Advance, Hercules returned to us the principal payments paid by us in July and August 2016, which such returned payments will once again constitute Term Loan Advances under the Hercules Loan. In connection with the execution of the First Amendment, we paid Hercules a facility fee of $0.165 million.
The Hercules Loan accrues interest at a rate of the greater of 9.0% or 9.0% plus Prime minus 4.25% and is payable monthly. Principal is due in 23 consecutive monthly installments beginning on February 1, 2017 and ending on December 1, 2018.operations. In addition, ~~we are required to make a final payment of $610,500~~ on the maturity date of the Hercules Loan, December 1, 2018. The final payment is being accrued and recorded to interest expense over the life of the Hercules Loan. On February 1, 2017, we began making principal payments with respect to the Hercules Loan.
We may prepay all, but not less than all, of the Hercules Loan subject to a prepayment premium of 3.0% of the outstanding principal if prepaid during the first year, 2.0% of the outstanding principal if prepaid during the second year and 1.0% of the outstanding principal if prepaid after the second year. Our obligations under the Hercules Loan are secured by a perfected first position lien on all of our assets, excluding intellectual property assets.
In connection with the Hercules Loan, we issued Hercules a warrant to purchase 180,274 shares of our common stock at an exercise price of $5.89 per share and granted Hercules the right to participate in future equity financings in an amount up to $2.0 million while the loan and warrant are outstanding.
We allocated the proceeds of $16.5 million in accordance with ASC 470 based on the relative fair values. The relative fair value of the warrants of approximately $1.2 million at the time of issuance, which was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the debt. The discount on the debt is being amortized to interest expense over the term of the debt.
~~In December 2012, we entered into a Loan and Security Agreement, the Oxford Loan, with Oxford Finance, LLC, or Oxford, pursuant to which we borrowed a total of $15.0 million from Oxford.~~
In February 2015, we terminated and repaid all amounts outstanding under the Oxford Loan. As a result of this repayment, we recorded a loss on the extinguishment of debt of approximately $1.0 million on our statement of operations for the year ended December 31, 2015, primarily representing a prepayment premium and the write off of deferred financing costs.
~~Shelf Registration Statement~~
~~On June 19, 2015,~~October 2, 2020 we filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of ~~$150.0~~$200.0 million ~~which we refer to as the 2015~~(the “2020 Shelf Registration ~~Statement.~~Statement”). On ~~July 1, 2015,~~October 14, 2020, the ~~2015~~2020 Shelf Registration Statement was declared effective by the SEC. ~~During the first quarter of 2016 and the third quarter of 2017, we completed offerings of common stock utilizing the 2015 Shelf Registration Statement (see below).~~ In the future, we may periodically offer one or more of these securities in amounts, at prices, and on terms to be announced when and if the securities are offered. At ~~the~~any time any of the securities covered by the ~~2015~~2020 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.
On March 18, 2021, we filed a prospectus supplement to our 2020 Shelf Registration Statement registering an at-the-market offering program we entered into for the sale of up to $50.0 million of shares of our common stock. During the year ended December 31, 2021, we sold 172,879 shares of our common stock under the at-the-market program resulting in net proceeds of approximately $9.3 million.
~~2016 Public Offering of Common Stock~~
~~In January 2016,~~On October 8, 2021, we ~~closed an underwritten~~filed a prospectus supplement to our 2020 Shelf Registration Statement registering a public offering of ~~5,511,812~~666,666 shares of common stock ~~registered under the 2015 Shelf Registration Statement~~sold together with warrants to purchase up to 333,333 shares of our common stock at a ~~public~~combined offering price of ~~$6.35~~$34.00 per ~~share. In February 2016, the underwriters of the public offering~~share of common stock ~~exercised in full, their option~~and one-half of a warrant to purchase ~~an additional 826,771 shares~~one share of common ~~stock at the public offering~~stock. The warrants have an exercise price of ~~$6.35~~$340.00 per share, ~~less underwriting discounts~~are exercisable immediately, and ~~commissions. A total~~will expire five years from the date of ~~6,338,583 shares of common stock were sold in~~issuance. On October 13, 2021, we completed the ~~public~~ offering ~~resulting in total net~~and realized proceeds of approximately $37.5 million. One of our stockholders, who is also affiliated with an individual that was at the time a member of our Board of Directors, purchased 393,700 shares of common stock for approximately $2.5$21.1 million, ~~in the public offering.~~
~~2017 Public Offering of Common Stock~~
In August 2017, we completed an underwritten public offering of 5,333,334 shares of common stock registered under the 2015 Shelf Registration Statement at a public offering price of $3.75 per share. Proceeds from this public offering, net of underwriting discounts, commissions and ~~other~~ offering ~~costs~~expenses.

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On January 10, 2022, we filed a prospectus supplement to our 2020 Shelf Registration Statement registering the January 2022 ATM. During the nine months ending September 30, 2022, we sold and issued 25,623 shares of common stock resulting in net proceeds of $0.3 million under the January 2022 ATM. On April, 26, 2022, we terminated the January 2022 ATM.

On March 13, 2022, we entered into the 2022 Preferred Stock Offering. The 2022 Preferred Stock Offering closed on March 14, 2022 and total net proceeds were approximately ~~$18.5~~$4.1 million.

On April 27, 2022, we entered into the April 2022 ATM. Through September 30, 2022, we issued and sold a total of 8,687,502 shares of common stock under the April 2022 ATM, representing the entire capacity of the April 2022 ATM, resulting in net proceeds of approximately $12.2 million. On August 22, 2022, we increased the April 2022 ATM (“August 2022 ATM”). As increased, we may now offer and sell shares of the Company’s common stock having an aggregate offering price of up to$75.0 million.

On July 6, 2022, we completed the Offering. H.C. Wainwright acted as the exclusive placement agent in connection with the Offering and, as compensation, received a cash fee of 7% of the aggregate procees raised in the Offering. We also issued to certain designees of H.C. Wainwright warrants to purchase up to 1,333,333 shares of common stock with an exercise price of $1.125 per share. Proceeds from the Offering, net of placement agent fees and offering expenses were approximately $22.0 million.

We expect to continue to incur significant operating expenses for the foreseeable future in connection with our ongoing activities as we:

maintain a sales and marketing infrastructure to support the continued commercialization of Twirla in the United States;

•

continue to commercialize Twirla and seek increased uptake of Twirla in the United States;

•

continue to evaluate additional line extensions for Twirla and initiate development of potential product candidates in addition to Twirla;

maintain, leverage and expand our intellectual property portfolio; and

maintain operational, financial and management information systems and personnel, including personnel to support our product development and future commercialization efforts.

Contractual Obligations and Commitments

In April 2020, we entered into a Manufacturing and Commercialization agreement with Corium, Inc., which we refer to as the Corium Agreement, and which replaced our previous development agreement. Pursuant to the Corium Agreement, Corium will manufacture and supply all of our product requirements for Twirla at certain specified rates. Under the terms of the Corium Agreement, Corium is to be the exclusive supplier of Twirla for ten years. The Corium Agreement included a quarterly minimum purchase commitment and a fixed price per unit for two years from December 2020, the date of the first commercial batch purchase order invoice, depending on annual purchase volume. During 2021, we did not meet all of our minimum quantity purchases from Corium, and as a result, paid penalties as required by our agreement with Corium. On July 25, we, along with Corium, amended the Corium Agreement to restructure the minimums applicable to the purchase of manufactured Twirla and to extend the term of the Corium Agreement until December 31, 2033. The Corium Agreement terminates automatically on December 31, 2033, but may be terminated for any reason upon the written mutual agreement of both parties; provided, however, that the parties must confer in good faith regarding possible mutual termination. In the event of such termination, we may still effect purchase orders after the notice of termination is given and until the time any such termination becomes effective. As of September 30, 2022, the minimum amount committed totals $234.7 million.

In April 2020, we entered into a project agreement with inVentiv Commercial Services, LLC, or inVentiv, a Syneos Health Group Company, which we refer to as the Syneos Agreement, under our Master Services Agreement with inVentiv. Pursuant to the Syneos Agreement, inVentiv, through its affiliate Syneos Selling Solutions, will provide a field force of sales representatives to provide certain detailing services, sales operation services,

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compliance services and training services with respect to Twirla to us in exchange for an up-front implementation fee and a fixed monthly fee. Effective February 1, 2022, we entered into an amendment to the Syneos Agreement that extended the term until August 23, 2024. At that time, the Syneos Agreement will terminate automatically unless extended upon the mutual written agreement of the Parties. We may terminate the Syneos Agreement for any reason upon timely written notice without incurring a termination fee. As of September 30, 2022, the minimum amount committed totals $3.4 million.

Our operating lease commitment relates to our lease of office space in Princeton, New Jersey. The lease for this space commenced in December 2021, and the minimum payments over the remaining 33 month term totals $1.0 million as of September 30, 2022.

Recent Accounting Pronouncements

~~In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15,~~ ~~Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,~~ which defines management’s responsibility to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosures if there is substantial doubt about its ability to continue as a going concern. The new standard is effective for the annual period ending after December 15, 2016, and for interim periods thereafter. We adopted ASU 2014-15 in the fourth quarter of 2016, which resulted in no change to our financial statements. Additionally, we will perform quarterly evaluations to identify current conditions which may raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. See Note 12 to our financial statements ~~for additional information on our liquidity risks and management’s plans.~~that discusses new accounting pronouncements.

~~In February 2016, the FASB issued ASU No. 2016-02,~~ ~~Leases~~. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the statement of operations. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We will be evaluating the impact of the pending adoption of the new standard on our financial statements.

~~In July 2017, the FASB issued ASU No. 2017-11,~~ Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part 1) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.” This ASU eliminates the requirement to consider “down round” features when determining whether certain equity-linked financial instruments or embedded features are indexed to an entity’s own stock. ASU 2017-11 is effective for annual periods beginning after December 31, 2018. Early adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2017-11 on our financial statements.
~~Off-Balance Sheet Arrangements~~
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
We are exposed to market risks in the ordinary course of our business. Market risk is the risk of change in fair value of a financial instrument due to changes in interest rates, equity prices, financing, exchange rates or other factors. These market risks are principally limited to interest rate fluctuations.
We had cash and cash equivalents of ~~$43.8~~$6.1 million and ~~$48.8~~$19.1 million at September 30, ~~2017~~2022 and December 31, ~~2016,~~2021, respectively, consisting primarily of funds in cash and money market accounts. The primary objective of our investment activities is to preserve principal and liquidity while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of our investment portfolio, we do not believe an immediate 10.0% increase in interest rates would have a material effect on the fair market value of our portfolio, and accordingly we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
Our results of operations and cash flows are subject to fluctuations due to changes in interest rates. We do not believe that we are materially exposed to changes in interest rates. We do not currently use interest rate derivative instruments to manage exposure to interest rate changes. We estimate that a 1% unfavorable change in interest rates would not have a material effect on interest expense for the nine months ended September 30, 2022.
Inflation Risk
Inflation generally affects us by increasing our cost of labor and pricing of contracts and agreements. We do not believe that inflation had a material effect on our business, financial condition, or results of operations during the three ~~and nine~~ months ended September 30, ~~2017, respectively.~~2022.

Item 4. Controls and Procedures.
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures as of such date are effective, at the reasonable assurance level, in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including

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our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes to Internal ~~Controls~~Control Over Financial Reporting
There ~~has~~have been no ~~change~~changes in our internal ~~controls~~control over financial reporting that occurred during the period covered by this report that ~~has~~have materially affected, or isare reasonably likely to materially affect, the ~~company’s~~Company’s internal control over financial reporting.
Part II: Other Information
Item 1. Legal Proceedings.
~~On January 6, 2017, and January 20, 2017, two previously disclosed complaints captioned~~ ~~Peng v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~~~, No. 17-cv-119 (D.N.J.), and~~ ~~Lichtenthal v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~, No. 17-cv-405 (D.N.J.), respectively, were filed in the United States District Court for the District of New Jersey on behalf of a putative class of investors who purchased shares of the Company’s common stock from March 9, 2016, through January 3, 2017. The complaints alleged ~~violations of the federal securities laws based on public statements made regarding our Phase 3 SECURE clinical trial~~ ~~and sought an unspecified amount of damages to be determined at trial. We denied all allegations in the complaints. On May 15, 2017, the complaints were consolidated as~~ ~~In re Agile Therapeutics, Inc. Securities Litigation~~, Master File No. 17-cv-119 (D.N.J.), and Hoyt W. Clark was appointed as class representative for the putative class. On June 26, 2017, Mr. Clark agreed to dismiss the case voluntarily, without payment by us of any consideration and with each side bearing its own attorneys’ fees and costs. The presiding judge dismissed the consolidated action with prejudice as to all defendants on July 13, 2017.
~~Item 1A. Risk Factors.~~
Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors set forth below as well as the other information contained in this Quarterly Report on Form 10-Q and in our other public filings in evaluating our business. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently view to be immaterial may also materially adversely affect our business, financial condition or results of operations. In these circumstances, the market price of our common stock would likely decline.
~~Risks Related to the Clinical Trial Process and Regulatory Approval for Our Product Candidates~~
~~We have not obtained regulatory approval for any of our product candidates in the United States or any other country.~~
We currently do not have any product candidates that have gained regulatory approval for sale in the United States or any other country, and we cannot guarantee that we will ever have marketable products. Our business is substantially dependent on our ability to complete the development of, obtain regulatory approval for and successfully commercialize product candidates in a timely manner. We cannot commercialize product candidates in the United States without first obtaining regulatory approval to market each product candidate from the U.S. Food and Drug Administration, or FDA; similarly, we cannot commercialize product candidates outside of the United States without obtaining regulatory approval from comparable foreign regulatory authorities. We are not currently ~~pursuing~~subject to any ~~regulatory approvals for Twirla or any other product candidate outside the United States.~~material legal proceedings.
Item 1A.    Risk Factors.
~~Before obtaining regulatory approvals~~The following updated risk factor should be considered in addition to our risk factors previously reported in our Annual Report on Form 10-K for the ~~commercial sale~~year ended December 31, 2021.

Risks Related to Ownership of any product candidate for a target indication, we must demonstrate in preclinical studies and well-controlled clinical trials and, with respect to approval in the United States, to the satisfaction of the FDA, that the product candidate is safe and effective for use for that target indication and that the manufacturing facilities, processes and controlsOur Common Stock

We are adequate. In the United States, it is necessary to submit a new drug application, or NDA, to obtain FDA approval. An NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety and efficacy for each desired indication, although we may partially rely on published scientific literature or the FDA’s prior approval of similar products. The NDA must also include significant information regarding the chemistry, manufacturing and controls for the product. The FDA may further inspect our manufacturing facilities to ensure that the facilities can manufacture our product candidates and our products, if and when approved,not in compliance with the applicable regulatory requirements, as well as inspect our clinical trial sites to ensure that our studies are properly conducted. Obtaining approval of an NDA is a lengthy, expensive and uncertain process, and approval may not be obtained. Upon submission, or resubmission, of an NDA, the FDA must make an initial determination that
the application is sufficiently complete to accept the submission for filing. We cannot be certain that any submissions we might make will be accepted for filing and review by the FDA, or ultimately be approved. If the application is not approved, the FDA may require that we conduct additional clinical or preclinical trials, or take other actions before it will reconsider our application, which we experienced in the previous submission of our NDA for Twirla in 2012. If the FDA requires additional studies or data, we would incur increased costs and delays in the marketing approval process, which may require us to expend more resources than we have available. In addition, the FDA may not consider any additional information to be complete or sufficient to support approval.
We have previously conducted two Phase 3 clinical trials for Twirla, and we filed an NDA, with the FDA for Twirla in April 2012. The FDA issued a Complete Response Letter, or CRL, in February 2013, identifying certain issues, including a request for additional clinical data, quality information and chemistry, manufacturing and controls information, which must be addressed before approval can be granted. We haveNasdaq continued to interact with the FDA on its CMC and other questions and continued additional supportive testing in order to respond to the FDA’s CMC questions. In addition, we have gathered the requested information and have conducted an additional Phase 3 clinical trial for Twirla®, which we refer to as the SECURE clinical trial. The SECURE clinical trial commenced enrollment during the third quarter of 2014 and was completed in December 2016. In January 2017, we announced top-line results. Based on the results of the SECURE clinical trial and additional information relating to the manufacture of Twirla, we resubmitted our NDA which was received by the FDA on June 26, 2017, acknowledged as a complete response ready for FDA review on July 27, 2017, and assigned a target goal date under the Prescription Drug User Fee Act, or PDUFA, for completion of the FDA’s review, or Target PDUFA Goal Date, of December 26, 2017. Our NDA resubmission, as discussed more fully below, is intended to be a complete response to the CRL. Although we met with the FDA in October 2013 to discuss an additional Phase 3 clinical trial as requested in the CRL and have received substantial written comments from the FDA in subsequent interactions, we have not sought and have not obtained agreement with the FDA on a special protocol assessment regarding the completed SECURE clinical trial. In March 2017, at our request, we met with the FDA to share preliminary data from the SECURE clinical trial, including key safety data and BMI-related efficacy findings, and to seek FDA input as to whether the SECURE clinical trial results constitute a basis for addressing the clinical deficiencies cited in the CRL. We also requested feedback on whether the proposed Twirla NDA content will meet the FDA’s requirements for submission. In April 2017, we received final meeting minutes from our March 2017 meeting with the FDA. The FDA indicated that based on the preliminary information provided by us, the SECURE clinical trial results appear acceptable for resubmission and provided feedback on our proposed approach to the FDA’s other questions in the CRL, including those questions relating to our analysis to support manufacturing controls and release specifications and our use of laser etching on the Twirla patches. The FDA further provided responses to us regarding the presentation of efficacy, safety and clinical pharmacology analyses in the NDA and requested that subgroup analysis of efficacy by body weight be provided. The FDA did not provide us with any feedback on whether the results of the SECURE clinical trial and the contents of the planned, resubmitted NDA would be sufficient to obtain regulatory approval of Twirla. Our resubmitted NDA included efficacy and safety data from the SECURE clinical trial, the requested manufacturing information, and a summary response to the CRL and is intended to address the questions raised in the CRL. We cannot predict whether regulators will agree with our conclusions regarding the results of the SECURE clinical trial or any clinical trials we have conducted to date, including whether our data are reliable and generalizable. For example, based on the SECURE top-line data, the Pearl Index for the overall intent to treat population of subjects 35 years of age and under was 4.80 with an upper-bound of the 95% confidence interval of 6.06, but in the obese subpopulation of subjects 35 years of age and under, the Pearl Index was 6.42 with an upper-bound of the 95% confidence interval of 8.88. If we were to exclude the top-line data on the obese subpopulation, our Pearl Index for non-obese patients was 3.94 with an upper-bound of the 95% confidence interval of 5.35. The highest Pearl Index for a hormonal contraceptive product approved by the FDA to date was 3.19 and the highest upper-bound of the 95% confidence interval was 5.03. In the combined safety database for our three Agile Phase 3 trials (n>3,000), there were 5 subjects with potentially study drug related deep vein thromboses, or DVTs, or pulmonary embolisms, or PEs, 4 of whom were obese (BMI > ~~30 kg/m~~2). Although ultimate approvability of a hormonal contraceptive is based on a risk/benefit assessment of the overall safety and efficacy profile of a product, not only a specific Pearl Index, the FDA could conclude that the Pearl Index is too high to demonstrate efficacy and an adequate risk/benefit profile for either the overall study population or a subgroup of the study population. Accordingly, the FDA may not approve our Twirla NDA. Alternatively, the FDA may determine that for a specific subgroup of patients, Twirla has lower efficacy and presents a higher risk, necessitating labeling restrictions. For instance, the FDA may require labeling restrictions on the use of Twirla for patients in certain BMI categories. As such, we may not obtain approval of Twirla based on these data or any other basis, or if approved,
may only receive approval with significant labeling restrictions. In addition, the FDA may re-inspect our manufacturing partner’s facilities as well as SECURE clinical trial sites during its review of our resubmission before approval can be granted. The FDA may also determine that our responses to the manufacturing questions in the CRL are not sufficient or require additional analyses and/or studies and deny approval of the Twirla NDA on this basis as well.
Regulatory authorities outside of the United States, such as in Europe and Japan and in emerging markets, also have requirements for approval of drugs for commercial sale with which we must comply prior to marketing in those areas. Regulatory requirements can vary widely from country to country and could delay or prevent the introduction of our product candidates. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and obtaining regulatory approval in one country does not mean that regulatory approval will be obtained in any other country. However, the failure to obtain regulatory approval in one jurisdiction could have a negative impact on our ability to obtain approval in a different jurisdiction. Approval processes vary among countries and can involve additional product candidate testing and validation and additional administrative review periods. Seeking foreign regulatory approval could require additional non-clinical studies or clinical trials, which could be costly and time consuming. Foreign regulatory approval may include all of the risks associated with obtaining FDA approval. For all of these reasons, if we seek foreign regulatory approval for Twirla or any of our other product candidates, we may not obtain such approvals on a timely basis, if at all.
The process to develop, obtain regulatory approval for and commercialize product candidates is long, complex and costly both inside and outside of the United States, and approval is never guaranteed. Even if our product candidates were to successfully obtain approval from regulatory authorities, any such approval might significantly limit the approved indications for use, including more limited patient populations, require that precautions, contraindications or warnings be included on the product labeling, including black box warnings, require expensive and time-consuming post-approval clinical studies, risk evaluation and mitigation strategies, or REMS, or surveillance as conditions of approval, or, through the product label, the approval may limit the claims that we may make, which may impede the successful commercialization of our product candidates. For example, we believe that Twirla, if approved, will have labeling consistent with all other marketed hormonal contraceptive products, which include class labeling that warns of risks of certain serious conditions, including venous and arterial blood clots, such as heart attacks, thromboembolism and stroke, as well as liver tumors, gallbladder disease, and hypertension, and a boxed warning regarding risks of smoking and CHC use, particularly in women over 35 years old who smoke. However, regulatory authorities may require the inclusion of additional statements about adverse events in the labeling, including additional black box warnings or contraindications. Following any approval for commercial sale of our product candidates, certain changes to the product, such as changes in manufacturing processes and additional labeling claims, as well as new safety information, will be subject to additional FDA notification, or review and approval. Also, regulatory approval for any of our product candidates may be withdrawn.listing requirements. If we are unable to ~~obtain regulatory approval for~~comply with the continued listing requirements of the Nasdaq Capital Market, our ~~product candidates in one or more jurisdictions, or any approval contains significant limitations,~~common stock could be delisted, which could affect our common stock's market price and liquidity and reduce our ability to market to our full target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed. Furthermore, we may not be able to obtain sufficient funding or generate sufficient revenue and cash flows to continue our operations at planned levels and be forced to reduce, or even terminate, our operations.raise capital.

~~The publicly reported results of the SECURE clinical trial are based on top-line data and may ultimately differ from actual results submitted to the FDA.~~
In January 2017, we publicly reported top-line results of the SECURE clinical trial. Generally, top-line results are based on preliminary analyses of efficacy and safety data, and therefore the reported results, findings and conclusions related to the SECURE clinical trial were subject to change following the full analysis. Since the initial reporting of the top-line data, all analyses as planned in the statistical analysis plan have been completed and submitted to the FDA. Additional public disclosures of clinical trial data have also been provided in the form of posters and an oral presentation although such public disclosures did not contain the complete, final clinical trial results. The clinical trial data that were submitted to the FDA in our NDA for Twirla on June 26, 2017, contained the final, complete clinical trial results, and contain minor differences from the results that were reported in January 2017 and subsequent posters and oral presentation. While, as expected, minor updates in the study results have occurred since the original top-line data were reported, we believe the overall conclusions regarding the efficacy and safety results of the SECURE clinical trial have not changed. However, third parties, including regulatory agencies,
may not accept or agree with our assumptions, estimations, calculations or analyses or may interpret or weigh the importance of data differently, which could impact the potential for approval of Twirla, or if approved, the labeling and commercial value of Twirla and our business in general.
~~The FDA may disagree with our interpretation of clinical results obtained from~~ ~~the SECURE clinical trial~~, our results do not guarantee support for regulatory approval of our NDA, and, even if the SECURE clinical trial data are deemed to be positive by the FDA, the FDA may disagree with other aspects of the SECURE clinical trial and decline to approve Twirla for the proposed indication.
We have reported positive top-line data from the SECURE clinical trial. However, even if we believe that the data from the SECURE clinical trial are positive, the FDA could determine that the data from the SECURE clinical trial were negative or inconclusive or could reach a different conclusion than we did on that same data. Negative or inconclusive results of a clinical trial or difference of opinion could cause the FDA to decline to approve our application or require us to repeat the trial or conduct additional clinical trials prior to obtaining approval for commercialization, and there is no guarantee that additional trials would achieve positive results to the satisfaction of the FDA or that the FDA will agree with our interpretation of the results. Any such determination by the FDA would delay the timing of our commercialization plan for Twirla or prevent its further development, or the further development of our other product candidates, and adversely affect our business operations. Additionally, the FDA may provide review commentary at any time during the resubmission and review process which could delay the review timeline, adversely affect the review process, or even prevent the approval of Twirla, any of which would adversely affect our business. We may not be able to appropriately remedy issues that the FDA may raise in its review of our NDA resubmission, and we may not have sufficient time or financial resources to conduct future activities to remediate issues raised by the FDA.
In March 2017, at our request, we met with the FDA to share preliminary data from the SECURE clinical trial, including key safety data and BMI-related efficacy findings, and to seek FDA input as to whether the SECURE clinical trial results constitute a basis for addressing the clinical deficiencies cited in the CRL. We also requested feedback on whether the proposed Twirla NDA content will meet the FDA’s requirements for submission. In April 2017, we received final meeting minutes from our March meeting with the FDA. The FDA indicated that based on the preliminary information provided by us, the SECURE clinical trial results appear acceptable for resubmission and provided feedback on our proposed approach to the FDA’s other questions in the CRL, including those questions relating to analysis to support manufacturing controls and release specifications and use of laser etching on the Twirla patches. The FDA further provided responses to us regarding the presentation of efficacy, safety and clinical pharmacology analyses in the NDA and requested that subgroup analysis of efficacy by body weight be provided. The FDA did not provide us with any feedback on whether the results of the SECURE clinical trial and the contents of the planned, resubmitted NDA will be sufficient to obtain regulatory approval of Twirla. There is no guarantee that the data obtained from the SECURE clinical trial will be supportive of, or guarantee, or result in our successfully obtaining FDA approval of Twirla in a timely fashion and for a commercially viable indication, if at all. For example, the FDA could determine that the trial did not meet its objectives, or the FDA could still have concerns regarding the conduct of the SECURE clinical trial, including regarding discontinuance of subjects from the trial. At any future point in time, the FDA could require us to complete further clinical or preclinical trials, or take other actions which could delay or preclude approval of the NDA and would require us to obtain significant additional funding. There is no guarantee such funding would be available to us on favorable terms, if at all, nor is there any guarantee that FDA would consider any additional information complete or sufficient to support approval. During its review of the Twirla resubmission NDA, the FDA may hold an advisory committee meeting to obtain committee input on the safety and efficacy of Twirla. Typically, advisory committees will provide responses to specific questions asked by the FDA, including the committee’s view on the approvability of the product candidate under review. Advisory committee decisions are not binding but an adverse decision at the advisory committee may have a negative impact on the regulatory review of Twirla. Additionally, we may choose to engage in the dispute resolution process with the FDA if we do not receive approval, which could extend the timeline for any potential approval.
Further, we have resubmitted our NDA for Twirla with the clinical data from the SECURE clinical trial and there is no guarantee that such data will be deemed sufficient by the FDA. While we designed the protocols for the SECURE clinical trial to address the issues raised in the CRL, there is no guarantee that the FDA will deem such
protocols or results from the study sufficient to address those issues when they are formally reviewed as a part of an NDA resubmission or to demonstrate safety and efficacy to the satisfaction of the FDA. The FDA has significant discretion in the review process, and we cannot predict whether the FDA will agree with our conclusions regarding the results of the SECURE clinical trial, including whether our data are reliable and generalizable. For example, the FDA may disagree with our calculations relating to the number of pregnancies occurring on study, or may view the SECURE data as insufficient to demonstrate a favorable benefit/risk profile for approval for the proposed indication. In addition, based on top-line data, the Pearl Index for the overall intent to treat population of subjects 35 years of age and under was 4.80 with an upper-bound of the 95% confidence interval of 6.06, but in the obese subpopulation of subjects 35 years of age and under, the Pearl Index was 6.42 with an upper-bound of the 95% confidence interval of 8.88. If we were to exclude the top-line data on the obese subpopulation, our Pearl Index for non-obese patients was 3.94 with an upper-bound of the 95% confidence interval of 5.35. The highest Pearl Index for a hormonal contraceptive product approved by the FDA to date was 3.19 and the highest upper-bound of the 95% confidence interval was 5.03. In the combined safety database for our three Agile Phase 3 trials (n>3,000), there were 5 subjects with potentially study drug related DVTs or PEs, 4 of whom were obese (BMI > ~~30 kg/m~~2). Although ultimate approvability of a hormonal contraceptive is based on a risk/benefit assessment of the overall safety and efficacy profile of a product, not only a specific Pearl Index, the FDA could conclude that our Pearl Index for either the overall study population or a subgroup of the study population or only the non-obese study population is too high to demonstrate efficacy and an adequate risk/benefit profile, and as such, the FDA could decline to approve Twirla on this or any other basis. Further, the FDA may not agree with our analysis of the relationship between BMI and efficacy for Twirla and the FDA may interpret our overall data differently than we do and may decline to approve Twirla on this or any other basis.
Moreover, even if we obtain approval of Twirla, any such approval might significantly limit the approved indications for use, including by limiting the approved label for use by more limited patient populations than we propose, require that precautions, contraindications or warnings be included on the product labeling, including black box warnings, require expensive and time-consuming post-approval clinical studies, risk evaluation and mitigation strategies, or REMS, or surveillance as conditions of approval, or, through the product label, the approval may limit the claims that we may make, which may impede the successful commercialization of Twirla. For example, the FDA may deem the higher Pearl Index in the obese subpopulation when combined with safety findings for this subpopulation to warrant a labeling limitation or warning for such subpopulation, which could limit the commercial potential of the product, if approved. Moreover, because we did not conduct any head-to-head studies of Twirla against Ortho Evra, we will not be able to make direct comparative claims regarding the safety, efficacy or pharmacokinetics of Twirla and Ortho Evra or its generic version, Xulane®.
Failure can occur at any stage of clinical development. If the clinical trials for Twirla or any of our current or future product candidates are unsuccessful, we could be required to abandon development.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. A failure of one or more clinical trials can occur at any stage of testing for a variety of reasons. The outcome of preclinical testing and early clinical trials may not be predictive of the outcome of later clinical trials, and interim results of a clinical trial do not necessarily predict final results. In some instances, there can be significant variability in safety or efficacy results between different trials of the same product candidate due to numerous factors, including changes in or adherence to trial protocols, differences in size and type of the subject populations and the rates of dropout among clinical trial subjects. Our future clinical trial results therefore may not demonstrate safety and efficacy sufficient to obtain regulatory approval for our product candidates. For example,On August 15, 2022, we received a ~~CRL~~deficiency letter from the FDA with respect to an NDA previously filed for Twirla, in which the FDA requested, among other items, additional Phase 3 clinical data to support the application. The SECURE clinical trial was designed in consultation with the FDA and is different than the design of our previous clinical trials of Twirla and it is possible that the FDA could conclude that there was significant variability in the safety and efficacy results of these trials. Additionally, while our SECURE clinical trial was designed and implemented in a manner to address the FDA’s comments and guidance, it is possible that the FDA could conclude the data are not supportive of approval, reliableNasdaq Stock Market, or generalizable. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trials may not be successful.
Flaws in the design of a clinical trial may not become apparent until the clinical trial is well-advanced. We have limited experience in designing contraceptive clinical trials and may be unable to design and execute clinical trials to support regulatory approval of our product candidates. In addition, clinical trials often reveal that it is not practical or feasible to continue development efforts for a product candidate.
We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to subjects. Furthermore, regulatory agencies, Institutional Review Boards, or IRBs, or data safety monitoring boards, if utilized in our clinical trials, may at any time order the temporary or permanent discontinuation of our clinical trials or requestNasdaq, indicating that we cease using certain investigators in the clinical trials if such regulatory agencies or boards believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to subjects. Since our inception, we have not voluntarily or involuntarily suspended or terminated a clinical trial due to unacceptable safety risks to subjects.
If the results of the clinical trials for our current product candidates or clinical trials for any future product candidates do not achieve the primary efficacy endpoints or demonstrate unexpected safety issues, the prospects for approval of our product candidates will be materially adversely affected. For example, in the CRL that we received from the FDA in connection with the NDA previously filed for Twirla, one of the FDA’s comments was that acceptable evidence of efficacy was not demonstrated, as measured by Pearl Index, or PI. Specifically, in our completed Phase 3 trials, the PI was higher than that seen in registration trials for previously approved hormonal contraceptives. Experts seem to agree that inconsistent or incorrect use is a major contributor to the increased PI seen in more recent contraceptive trials. The PI values from clinical trials are also affected by additional factors, including differences in study design, increased sensitivity of early pregnancy tests, weight and body mass index, or BMI, of the study population and user experience. For example, consistent with other recent hormonal contraceptive clinical trials, including Ortho Evra® ~~and Quartette~~®, and the 2015 meta-analysis conducted by FDA authors on the effect of obesity on the effectiveness of hormonal contraceptives, a relationship between obesity and efficacy was observed among subjects 35 years of age and under in our SECURE clinical trial. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many companies that believed their product candidates performed satisfactorily in preclinical studies and clinical trials have failed to achieve similar results in later clinical trials, including longer-term trials, or have failed to obtain regulatory approval of their product candidates. Many compounds that initially showed promise in clinical trials or earlier preclinical studies have later been found to cause undesirable or unexpected adverse effects that have prevented further development of the compound. The FDA may interpret the data from the SECURE clinical trial differently than we do and may decline to approve Twirla on this or any other basis.
In addition to the circumstances noted above, we may experience numerous unforeseen events that could cause our clinical trials to be delayed, suspended or terminated, or which could delay or prevent our ability to receive regulatory approval for or commercialize our product candidates, including:
·                  Clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials or implement a clinical hold;
·                  The number of subjects required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of these clinical trials at a higher rate than we anticipate. For instance, we experienced a high withdrawal rate in our original Phase 3 clinical trials for Twirla and we experienced slower than anticipated enrollment in our SECURE clinical trial;
·                  Our third party contract research organization, or CRO, or study sites may fail to comply with regulatory requirements or the clinical trial protocol, or meet their contractual obligations to us in a timely manner, or at all. For instance, investigator compliance with study procedures was an issue that we encountered in our two Phase 3 clinical trials for Twirla completed prior to SECURE;
·                  ~~Regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or amend a trial protocol;~~
·                  ~~We may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and our CRO;~~
·                  ~~We may have delays in adding new investigators or clinical trial sites, or we may experience a withdrawal of clinical trial sites;~~
·                  ~~We may elect or be required to suspend or terminate clinical trials of our product candidates based on a finding that the subjects are being exposed to health risks, or due to other reasons;~~
·                  ~~The cost of clinical trials for our product candidates may be greater than we anticipate;~~
·                  ~~The supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may be insufficient or inadequate;~~
·                  ~~There may be changes in government regulations or administrative actions;~~
·                  ~~Our product candidates may have undesirable adverse effects or other unexpected characteristics;~~
·                  ~~We may not be able to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;~~
·                  ~~We may not be able to demonstrate that a product candidate provides an advantage over current standards of care or future competitive therapies in development; and~~
·                  ~~There may be changes in the approval policies or regulations that render our data insufficient for approval.~~
If we elect or are required to suspend or terminate a clinical trial for any of our product candidates, or our product candidate development is otherwise delayed, our development costs may increase, our commercial prospects will be adversely impacted, any periods during which we may have the exclusive right to commercialize our product candidates may be shortened and our ability to generate product revenues may be delayed or eliminated.
In December 2016, we completed our SECURE clinical trial for Twirla and, as we have previously announced, we expect to conduct additional clinical trials in the future for our other product candidates subject to available funding. Subject enrollment for our future clinical trials, which is a significant factor in the timing of clinical trials, is affected by a variety of factors, including the following:
·                  ~~Size and nature of the subject population;~~
·                  ~~Proximity of subjects to clinical sites and the number of sites;~~
·                  ~~Effectiveness of publicity created by clinical trial sites regarding the trial;~~
·                  ~~Eligibility and exclusion criteria for the trial;~~
·                  ~~Design of the clinical trial, including factors such as frequency of required assessments, length of the study and ongoing monitoring requirements;~~
·                  ~~Competing clinical trials;~~
·                  Clinician and subject perceptions as to the potential advantages or disadvantages of the product candidate being studied in relation to other available therapies, including any products that may be approved for the indications we are investigating;
·                  ~~Subjects’ ability~~ to comply with the ~~specific instructions related~~minimum bid price requirement, which requires that companies listed on the Nasdaq Capital Market maintain a minimum bid price of at least $1.00 per share (the “Bid Price Requirement”). The notification of noncompliance had no immediate effect on the listing of our common stock.

In accordance with Nasdaq rules, we have a 180-calendar day grace period, or until February 13, 2023 (the “Compliance Date”), to regain compliance with the ~~trial protocol, proper documentation~~Bid Price Requirement. The continued listing standard would have been met if our common stock had a minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days during the 180-calendar day grace period. If we do not regain compliance with the Bid Price Requirement by the Compliance Date, Nasdaq may grant an additional 180 calendar day compliance period, if we meet the continued listing requirement for value of publicly held shares and ~~use~~all other initial listing standards for The Nasdaq Capital Market and provide written notice of our intention to cure the ~~drug product. For instance, in our two Phase 3 clinical trials for Twirla completed prior to SECURE, there was~~deficiency during the second 180 calendar day compliance period by effecting a ~~high rate of subject noncompliance;~~reverse stock split, if necessary.

·                  ~~Inability to obtain or maintain subject informed consents;~~
·                  ~~Risk that enrolled subjects will drop out before completion;~~
·                  ~~Subject’s relationship with her partner; and~~
·                  ~~Other events~~If we do not regain compliance within the allotted compliance period(s), including any extensions that may ~~occur and are beyond~~be granted by Nasdaq, Nasdaq will provide notice that our ~~control.~~
Furthermore, we plan to rely on a CRO and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we may have agreements governing their committed activities, we have limited influence over their actual performance. Additionally, the CRO and clinical trial sites may have business, regulatory, personnel or other issues that keep us from satisfactorily completing our clinical trials. Any delays or unanticipated problems during clinical trials, such as additional monitoring of clinical trial sites, slower than anticipated enrollment in our clinical trials or subjects dropping out of or being excluded from participation in our clinical trials at a higher rate than we anticipate, could increase our costs, slow down our product development and approval process and harm our business. For example, we experienced a slower than expected rate of enrollment for our SECURE clinical trial of Twirla, which we began enrolling in the fourth quarter of 2014, and, as a result, we completed the clinical trial in December 2016.
Regulatory approval may be substantially delayed or may not be obtained for one or all of our product candidates if regulatory authorities require additional time or studies to assess the safety and efficacy of our product candidates.
~~We may be unable to initiate or complete development of our product candidates on schedule, if at all. The timing for the completion of the studies for our product candidates other than Twirla~~common stock will require funding beyond our existing cash and cash equivalents. In addition, if regulatory authorities require additional time or studies to assess the safety or efficacy of Twirla, we may not have or be able to obtain adequate funding to complete the necessary steps for approval for any or all of our product candidates. Additional delays may result if the FDA, an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. Studies required to demonstrate the safety and efficacy of our product candidates are time consuming, expensive and together take several years or more to complete. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we may seek to develop in the future will ever obtain regulatory approval. Delays in regulatory approvals or rejections of applications for regulatory approval in the United States, Europe, Japan or other markets may result from many factors, including:
·                  ~~Our inability to obtain sufficient funds required for a clinical trial;~~
·                  ~~Regulatory requests for additional analyses, reports, data, non- clinical and preclinical studies and clinical trials;~~
·                  ~~Regulatory questions regarding interpretations of data and results and the emergence of new information regarding our product candidates or other products;~~
·                  Clinical holds, other regulatory objections to commencing or continuing a clinical trial or the inability to obtain regulatory approval to commence a clinical trial in countries that require such approvals;
·                  ~~Failure to reach agreement with the FDA or non-U.S. regulators regarding the scope or design of our clinical trials;~~
·                  ~~Our inability to enroll or retain a sufficient number of subjects who meet the inclusion and exclusion criteria in our clinical trials;~~
·                  ~~Our inability to conduct our clinical trials in accordance with regulatory requirements or our clinical trial protocols;~~
·                  ~~Unfavorable or inconclusive results of clinical trials and supportive non-clinical studies, including unfavorable results regarding safety or efficacy of our product candidates during clinical trials;~~
·                  ~~Failure to meet the level of statistical significance required for approval;~~
·                  ~~Any determination that a clinical trial presents unacceptable health risks to subjects;~~
·                  ~~Lack of adequate funding to commence or continue our clinical trials due to unforeseen costs or other business decisions;~~
·                  ~~Our inability to reach agreements on acceptable terms with prospective CROs and trial sites, the terms of which can~~ be subject to ~~extensive negotiation and may vary significantly among different CROs and trial sites;~~
·                  Our inability to identify and maintain a sufficient number of sites, many of which may already be engaged in other clinical trial programs, including other clinical trials for the same indications targeted by our product candidates;
·                  ~~Our inability to obtain approval from IRBs to conduct clinical trials at their respective sites;~~
·                  ~~Our inability to timely obtain from our third party manufacturer sufficient quantities or quality of the product candidate or other materials required for a clinical trial;~~
·                  Our inability to adequately address the FDA’s request in the CRL for additional information on controls and release specifications related to Twirla, and manufacturing and control information related to the Drug Master File of one of the raw materials in Twirla, and validate our commercial manufacturing process;
·                  ~~We may be unable to obtain approval for the manufacturing processes or facilities of the third party manufacturer with whom we contract for clinical and commercial supplies;~~
·                  ~~We may be unable to obtain agreement from the FDA on product labeling;~~
·                  ~~We may have insufficient funds to pay the significant user fees required by the FDA upon the filing of any future NDAs; and~~
·                  ~~We may have difficulty in maintaining contact with subjects, resulting in incomplete data.~~
In December 2016, we completed our Phase 3 SECURE clinical trial and announced top-line data in early January 2017. In March 2017, at our request, we met with the FDA to share preliminary data from the SECURE clinical trial, including key safety data and BMI-related efficacy findings, and to seek FDA input as to whether the SECURE clinical trial results constitute a basis for addressing the clinical deficiencies cited in the CRL. We also requested feedback on whether the proposed Twirla NDA content will meet the FDA’s requirements for submission. In April 2017, we received final meeting minutes from our March meeting with the FDA. The FDA indicateddelisting. At that based on the preliminary information provided by us, the SECURE clinical trial results appear acceptable for resubmission and provided feedback on our proposed approach to the FDA’s other questions in the CRL, including those questions relating to analysis to support manufacturing controls and release specifications and use of laser etching on the Twirla patches. The FDA further provided responses to us regarding the presentation of efficacy, safety and clinical pharmacology analyses in the NDA and requested that subgroup analysis of efficacy by body weight be provided. The FDA did not provide us with any feedback on whether the results of the SECURE clinical trial and the contents of the planned, resubmitted NDA will be sufficient to obtain regulatory approval of Twirla. Our resubmitted NDA was received by the FDA on June 26, 2017 and acknowledged as a complete response ready
for FDA review on July 26, 2017, with a Target PDUFA Goal Date of December 26, 2017. The resubmitted NDA included efficacy and safety data from the SECURE clinical trial, the requested manufacturing information, and a summary response to the CRL and is intended to address the questions raised in the CRL. The FDA’s review of our NDA is subject to all the risks described above in addition to, among other things, the FDA’s assessment of our specific response to the CRL and the efficacy and safety of Twirla as demonstrated in the final SECURE clinical trial results. The lengthy and unpredictable approval process, as well as the unpredictability of future clinical trial results, may result in our failure to obtain regulatory approval to market Twirla or any of our other product candidates, which would significantly harm our business, results of operations and prospects, andtime, we may ~~be unable~~appeal the Nasdaq staff's determination to ~~continue our operations at planned levels and be forced to reduce, or even terminate, our operations.~~a Hearings Panel.
Changes in regulatory requirements and guidance may also occur and we may need to amend clinical trial protocols submitted to applicable regulatory authorities or conduct additional studies to reflect these changes. Amendments and additional studies may require us to resubmit clinical trial protocols to Institutional Review Boards and regulatory authorities for re-examination, which may impact the costs, timing or successful completion of a clinical trial.
If we are required to conduct additional clinical trials or other studies with respect to any of our product candidates beyond those that we contemplated, if we are unable to successfully complete our clinical trials or other studies or if the results of these studies are not positive or are only modestly positive, we may be delayed in obtaining regulatory approval for our product candidates, we may not be able to obtain regulatory approval at all or we may obtain approval for indications that are not as broad as intended. For example, the FDA issued a CRL in response to our original NDA for Twirla requesting, among other items, an additional Phase 3 clinical study, which has delayed our ability to obtain regulatory approval for that product candidate. We may also experience delays due to changes in regulatory requirements and guidance, which may require protocol amendments or the conduct of additional studies. These amendments and additional studies may require regulatory or IRB approval. The approval and conduct of these studies may delay, limit or preclude regulatory approval for our product candidates. Our product development costs will also increase if we experience delays in testing or approvals and we may not have sufficient funding to complete the testing and approval process for any of our product candidates. Significant clinical trial delays could allow our competitors to bring products to market before we do and impair our ability to commercialize our products if and when approved. If any of this occurs, our business will be materially harmed.
Our product candidates may have undesirable adverse effects, which may delay or prevent regulatory approval or, if approval is received, require our products to be taken off the market, require them to include safety warnings or otherwise limit their sales.
Unforeseen adverse effects from any of our product candidates could arise either during clinical development or, if approved, after the approved product has been marketed. In the combined safety population of our Phase 3 trials completed prior to the SECURE clinical trial, there were a total of 22 serious adverse events, or SAEs, of which 16 occurred in the Twirla cohort, which had approximately 2.3 times as many subjects as the oral contraceptive comparator cohort. Three of the 16 SAEs in the Twirla cohort (0.2% of the overall Twirla safety population) were considered to be possibly related to Twirla, and included one drug overdose with Benadryl, one case of uncontrollable nausea and vomiting and one instance of DVT. In addition to the SAEs described above, some subjects taking Twirla experienced non-serious adverse events, such as nausea, headache, application site irritation and breast tenderness. Subjects receiving the oral contraceptive comparator also experienced non-serious adverse events such as nausea, headache and breast tenderness, though at different rates. In the SECURE clinical trial, SAEs were observed in approximately 2.0% of the SECURE clinical trial population, and 0.6% of subjects had SAEs that were considered potentially study drug related, including DVT, PE, gallbladder disease, ectopic pregnancy, and depression. In the combined safety database for the three Agile Phase 3 trials (n >3,000), there were 5 subjects with potentially study drug related DVTs or PEs, 4 of whom were obese (BMI >30kg/m2).
Any undesirable adverse effects that may be caused by our product candidates could interrupt, delay or halt clinical trials and could result in more restrictive labeling or the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications, and in turn prevent us from commercializing our product candidates and generating revenues from their sale. For instance, FDA may determine that for specific subgroups of patients, Twirla has lower efficacy and presents a higher risk. Accordingly, FDA may not approve our Twirla NDA or may require labeling restrictions. By example, FDA may require labeling restrictions on the use of Twirla for patients in certain BMI categories. Adverse effects in any clinical trial could also impact subject recruitment or the
ability or willingness of enrolled subjects to complete the trial, or result in product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
In addition, if any of our product candidates receive regulatory approval and we or others later identify undesirable adverse effects caused by the product, we could face one or more of the following consequences:
·                  ~~We may suspend marketing of, withdraw or recall the product;~~
·                  ~~Regulatory authorities may require the addition of labeling statements, such as a black box warning or a contraindication, or other labeling changes;~~
·                  ~~Regulatory authorities may withdraw their approval of the product;~~
·                  ~~Regulatory authorities may seize or detain the product or seek an injunction against its manufacture or distribution;~~
·                  The FDA or other regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the product;
·                  The FDA may require the establishment or modification of a REMS or a comparable foreign authority may require the establishment or modification of a similar strategy that may, for instance, require us to issue a medication guide outlining the risks of such adverse effects for distribution to patients, or restrict distribution of the product, if and when approved, and impose burdensome implementation requirements on us;
·                  ~~We may be required to conduct additional trials;~~
·                  ~~We may be required to change the way that the product is administered;~~
·                  ~~We may be subject to litigation or product liability claims, fines, injunctions or criminal penalties;~~
·                  ~~Regulatory authorities may impose additional restrictions on marketing and distribution of the product; and~~
·                  ~~Our reputation may suffer.~~
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product or could substantially increase the costs and expenses of commercializing such product, which in turn could delay or prevent us from generating significant revenues from its sale.
Our development and commercialization strategy for Twirla depends, in part, on published scientific literature and the FDA’s prior findings regarding the safety and efficacy of approved products containing Ethinyl Estradiol and Levonorgestrel based on data not developed by us, but upon which the FDA may rely in reviewing our NDA.
The Hatch-Waxman Act added Section 505(b)(2) to the Federal Food, Drug and Cosmetic Act, or FDCA, Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from investigations that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted. The FDA interprets Section 505(b)(2) of the FDCA, for purposes of approving an NDA, to permit the applicant to rely, in part, upon published literature or the FDA’s previous findings of safety and efficacy for an approved product. The FDA also requires companies to perform additional clinical trials or measurements to support any deviation from the previously approved product and to support the reliance on the applicable published literature or referenced product. The FDA may then approve the new product candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant. The label, however, may require all or some of the limitations, contraindications, warnings or precautions included
in the reference product’s label, including a black box warning, or may require additional limitations, contraindications, warnings or precautions. We have submitted an NDA for Twirla under Section 505(b)(2) and as such the NDA relied, in part, on the FDA’s previous findings of safety and efficacy from investigations for approved products containing ethinyl estradiol, or EE, and levonorgestrel, or LNG, and published scientific literature for which we have not received a right of reference. We also plan to rely on the 505(b)(2) pathway for our other product candidates. We received a CRL in response to our Section 505(b)(2) NDA for Twirla, in which the FDA requested, among other things, that we conduct an additional Phase 3 clinical trial. Even though we may be able to take advantage of Section 505(b)(2) to support potential U.S. approval for Twirla, the FDA may require us to perform additional clinical trials or measurements to support approval over and above the clinical trials that we have already completed. In addition, notwithstanding the approval of many products by the FDA pursuant to Section 505(b)(2), over the last few years some pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA changes its interpretation of Section 505(b)(2), or if the FDA’s interpretation is successfully challenged in court, this could delay or even prevent the FDA from approving any Section 505(b)(2) NDAs that we submit. Such a result could require us to conduct additional testing and costly clinical trials, which could substantially delay or prevent the approval and launch of our product candidates, including Twirla.
~~Risks Related to Our Financial Position and Need for Capital~~
We have incurred operating losses in each year since our inception and expect to continue to incur substantial losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern.

We ~~have incurred losses in each year since our inception in December 1997. Our net loss was $28.7 million, $30.3 million and $16.1 million for~~intend to monitor the years ended December 31, 2016, 2015 and 2014, respectively. Our net loss was $7.1 million and $22.1 million for the three and nine month periods ended September 30, 2017. As of September 30, 2017, we had an accumulated deficit of approximately $215.5 million. We believe that our existing cash and cash equivalents will not be sufficient to fund our current and planned operations through the next 12 months, which raises substantial doubt about our ability to continue as a going concern. Substantial doubt about our ability to continue as a going concern may create negative reactions to theclosing bid price of our common stock and ~~we may have a more difficult time obtaining financing in~~consider our available options to resolve the ~~future.~~
Specialty pharmaceutical product development is a speculative undertaking, involves a substantial degree of risk and is a capital-intensive business. We expect to incur expenses without corresponding revenues until we are able to obtain regulatory approval and subsequently sell Twirla in significant quantities, which may not happen. We have devoted most of our financial resources to research and development, including our non-clinical development activities and clinical trials. We expect to incur increased expenses as we complete the development of Twirla, respond to the CRL and supplement our NDAnoncompliance with the results of the SECURE clinical trial, complete the qualification and validation of our commercial manufacturing process, initiate pre-launch commercial activities, commercially launch Twirla, advance our other product candidates and expand our research and development programs. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla. We will require additional capital to fund operating needs, including, among other items, continued commercial activities after the initial commercial launch of Twirla, if approved, and for advancing the development of our other product candidates. To date, we have financed our operations primarily through sales of common stock, convertible preferred stock and convertible promissory notes and to a lesser extent, through term loans and government grants. Our product candidates will require the completion of regulatory review, significant marketing efforts and substantial investment before they can provide us with any revenue.
Assuming we obtain FDA approval, we expect that our expenses will increase as we prepare for the commercial launch of Twirla. As a result, we expect to continue to incur substantial losses for the foreseeable future, and these losses may increase. We are uncertain when or if we will be able to achieve or sustain profitability. If we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Failure to become and remain profitable would impair our ability to sustain operations and adversely affect the price of our common stock and our ability to raise capital. If we do not obtain FDA approval of Twirla and/or are unable to obtain additional funding, we will need to reassess our operating capital needs and may be unable to continue our operations at planned levels and be forced to reduce, or even terminate, our operations.
~~We have never been profitable. Currently, we have no products approved for commercial sale, no source of revenue and we may never become profitable.~~
We have never been profitable and do not expect to be profitable in the foreseeable future. We have no products approved for commercial sale and to date have not generated any revenue from product sales. Our ability to generate revenue and become profitable depends upon our ability to successfully complete the development of and obtain the necessary regulatory approvals for our product candidates. We have been engaged in developing Twirla and our Skinfusion® technology since our inception. To date, we have not generated any revenue from Twirla, and we may never be able to obtain regulatory approval for the marketing of Twirla. Further, even if we are able to gain approval for and commercialize Twirla or any other product candidate, thereBid Price Requirement. There can be no assurance that we will ~~generate significant revenues or ever achieve profitability. Our ability to generate product revenue depends on a number of factors, including our ability to:~~
·                  ~~Successfully complete clinical development of, and receive regulatory approval for, our product candidates;~~
·                  ~~Obtain additional capital for the commercial launch of Twirla, if approved, as well as advancing the development or our other product candidates;~~
·                  ~~Set an acceptable price for our products, if approved, and obtain adequate coverage and reimbursement from third party payors;~~
·                  ~~Obtain commercial quantities of our products, if approved, at acceptable cost levels; and~~
·                  ~~Successfully market and sell our products, if approved, in the United States and abroad.~~
~~In addition, because of the numerous risks and uncertainties associated with product candidate development, we are unable to predict the timing or amount of increased expenses, or when, or if, we will~~ be able to achieve or maintain profitability. In addition, our expenses could increase beyond our current expectations if we are required by the FDA or other regulatory authorities to perform studies in addition to those that we currently anticipate. Even if our product candidates are approved for commercial sale, we anticipate incurring significant costs associatedregain compliance with the ~~commercial launch of these products.~~
~~Our ability~~Bid Price Requirement or will otherwise be in compliance with other Nasdaq listing criteria. If our securities are delisted, it could be more difficult to ~~become~~buy or sell our securities and ~~remain profitable depends on our ability~~ to ~~generate revenue. Even if we are able to generate revenues from~~obtain accurate quotations, and the ~~sale~~price of our products, if approved, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or obtain additional funding, or are unable to sustain profitability onsecurities could suffer a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decreasematerial decline. Delisting could also impair the ~~value~~liquidity of our ~~company~~common stock and could ~~impair~~harm our ability to raise capital ~~expand our business or continue our operations. A decline in the value of our company could also cause you to lose all or part of your investment.~~
If we fail to obtain the capital necessary to fund our operations, we may be unable to obtain regulatory approval of or commercialize Twirla in the United States and we could be forced to share our rights to commercialize Twirla with third partiesthrough alternative financing sources on terms ~~that may not be favorable to us.~~
We need large amounts of capital to support our development and commercialization efforts for Twirla. If we are unable to secure sufficient capital to fund our operations, we will not be able to continue these efforts and we might have to enter into strategic collaborations that could require us to share commercial rights to Twirla with third parties in ways that we currently do not intend or on terms that may not be favorable to us. Our cash and cash equivalents were $43.8 million as of September 30, 2017. Based on our current business plan, we believe that our cash and cash equivalents as of September 30, 2017 will be sufficient to meet our operating requirements into the
~~second quarter of 2018.~~ Our current business plan assumes the FDA will complete its review of our NDA resubmission by the Target PDUFA Goal Date, December 26, 2017, initiation of certain pre-commercial activities prior to approval and initiation and completion of validation of our commercial manufacturing process after the Target PDUFA Goal Date, if the FDA approves Twirla. We will require additional capital to fund operating needs thereafter, including among other items, continued commercial activities after the initial commercial launch for Twirla and advancing the development of our other product candidates. We cannot assure you that the FDA will approve Twirla, that the FDA’s timeline for review will be within six months, or that we will timely complete the qualification and validation of our commercial manufacturing process. In the event of unforeseen changes to our planned timelines and business plan assumptions, as stated above, we still believe that we have the ability to continue funding operations into the second quarter of 2018 by postponing certain planned commercial and validation spending. We may also need to raise additional funds sooner if we choose to expand more rapidly than we presently anticipate or we encounter any unforeseen events that affect our current business plan. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms and not enter into strategic collaborations, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts, or even terminate our operations.
Our operating activities may be restricted as a result of covenants related to the outstanding indebtedness under our loan agreement and we may be required to repay the outstanding indebtedness in an event of default, which could have a materially adverse effect on our business.
In February 2015, we entered into a loan and security agreement, referred to herein as the Hercules Loan Agreement, with Hercules Capital, Inc., or Hercules, for a term loan of up to $25.0 million. The Hercules Loan Agreement was amended effective August 25, 2016. A first tranche of $16.5 million was funded upon execution of the Hercules Loan Agreement, approximately $15.5 million of which was used to repay our term loan with Oxford. Under terms of the Hercules Loan Agreement, we may, but are not obligated to, draw an additional tranche of up to $8.5 million through March 31, 2017, subject to the achievement of certain clinical milestones. The Hercules Loan Agreement was further amended in May 2017 to extend the period ~~during which we can draw the second tranche of $8.5 million to January 31, 2018.~~
The Hercules Loan Agreement subjects us to various customary covenants, including requirements as to financial reporting and insurance, and restrictions on our ability to dispose of our business or property, change our line of business, liquidate or dissolve, enter into any change in control transaction, merge or consolidate with any other entity or acquire all or substantially all the capital stock or property of another entity, incur additional indebtedness, incur certain types of liens on our property, including our intellectual property, pay any dividends or other distributions on our capital stock other than dividends payable solely in capital stock or redeem our capital stock. Our business may be adversely affected by these restrictions on our ability to operate our business.
The Hercules Loan Agreement is secured by substantially all of our property other than our intellectual property. As a result of the amendment to the Hercules Loan Agreement, we were required to make interest-only payments through January 2017. On February 1, 2017, we began making principal payments with respect to the Hercules Loan. The Hercules Loan Agreement currently bears interest at rate of 9.0% per annum and matures on December 1, 2018.
Additionally, we may be required to repay the outstanding indebtedness under the term loan if an event of default occurs under the Hercules Loan Agreement. Under the Hercules Loan Agreement, an event of default will occur if, among other things, we fail to make payments under the Hercules Loan Agreement or we breach any of our covenants under the Hercules Loan Agreement, subject to specified cure periods with respect to certain breaches; Hercules determines in good faith that we are unable to satisfy our obligations under the Hercules Loan Agreement as they become due and that our principal investors do not intend to fund amounts necessary to satisfy such obligations; we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings; we are unable to pay our debts as they become due; or we default on contracts with third parties which would permit Hercules to accelerate the maturity of such indebtedness or that could have a material adverse effect on us. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In that case, we may be required to delay, limit, reduce or terminate our product candidate development or commercialization efforts or grant to others rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Hercules could also
exercise its rights as collateral agent to take possession and dispose of the collateral securing the loan for its benefit, which collateral includes all of our property other than our intellectual property. Our business, financial condition and results of operations could be materially adversely affected as a result of any of these events.
We will need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates.
~~Our operations have consumed substantial amounts of cash since inception. From our inception to September 30, 2017, we have cumulative net cash flows used by operating activities of $~~188.8 million. We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates. We will need to obtain additional financing to conduct additional trials for the approval of our product candidates if requested by regulatory authorities, and to complete the development of any additional product candidates we might acquire. Moreover, our fixed expenses such as rent, interest expense and other contractual commitments are substantial and are expected to increase in the future.
~~Our future funding requirements will depend on many factors, including, but not limited to:~~
·                  ~~Time and cost necessary to obtain regulatory approvals that may be required by regulatory authorities;~~
·                  ~~Our ability to successfully commercialize our product candidates, if approved;~~
·                  ~~Our ability to have commercial product successfully manufactured consistent with FDA regulations;~~
·                  Amount of sales and other revenues from product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party coverage and reimbursement;
·                  ~~Sales and marketing costs associated with commercializing our products, if approved, including the cost and timing of expanding our marketing and sales capabilities;~~
·                  ~~Progress, timing, scope and costs of our clinical trials, including the ability to timely enroll subjects in our ongoing, planned and potential future clinical trials;~~
·                  ~~Terms and timing of any potential future collaborations, licensing or other arrangements that we may establish;~~
·                  ~~Cash requirements of any future acquisitions or the development of other product candidates;~~
·                  ~~Costs of operating as a public company;~~
·                  ~~Time and cost necessary to respond to technological and market developments;~~
·                  ~~Costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and~~
·                  ~~Costs associated with any potential business or product acquisitions, strategic collaborations, licensing agreements or other arrangements that we may establish.~~
Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we raise additional funds through collaborations, strategic alliances or
marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.
~~Based on our current business plan, we believe that our cash~~all, and cash equivalents as of September 30, 2017 will be sufficient to meet our operating requirements into the second quarter of 2018. Our current business plan assumes the FDA will complete its review of our NDA resubmission by the Target PDUFA Goal Date, December 26, 2017, initiation of certain pre-commercial activities prior to approval of Twirla and initiation and completion of validation of our commercial manufacturing process after the Target PDUFA Goal Date, if the FDA approves Twirla. We expect that we will require additional capital to fund operating needs thereafter, including among other items, continued commercial activities after the initial commercial launch for Twirla and advancing the development of our other product candidates. other than Twirla. Accordingly, we will be required to obtain further funding through other public or private offerings, debt financing, collaboration or licensing arrangements or other sources. Adequate additional funding may not be available to us on acceptable terms, or at all. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our forecast of the period of time through which our financial resources will be adequate to support our operating requirements is a forward- looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this “Risk Factors” section. For instance, we cannot assure you that the FDA will approve Twirla, that the FDA’s timeline for review will be within six months, or that we will timely complete the qualification and validation of our commercial manufacturing process. We have based this estimate on a number of assumptions that may prove to be wrong, and changing circumstances beyond our control may cause us to consume capital more rapidly than we currently anticipate. Our inability to obtain additional funding when we need it could seriously harm our business and we may be unable to continue our operations at planned levels and be forced to reduce, or even terminate, our operations.
~~Raising additional capital may cause dilution to our existing stockholders or restrict our operations.~~
We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. The sale of additional equity or convertible debt securities could result in the issuance of additional shares of our capital stock and could result in dilution to our stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing research and development efforts. This could harm our business, operating results and financial condition and cause the price of our common stock to fall.
~~We are a development stage company which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.~~
We are a development stage company. We were incorporated and commenced active operations in 1997. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital and developing our product candidates. We have not yet demonstrated our ability to successfully complete a Phase 3 registration trial for, obtain regulatory approval of, or manufacture on a commercial scale any of our product candidates, or arrange for a third party to do so on our behalf, or conduct sales and marketing activities necessary for successful product commercialization. Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In addition, as a development stage company, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition from a company with a focus on product candidate development to a company capable of supporting commercial activities. We may not be successful in such a transition.
~~Risks Relating to the Commercialization of Our Product Candidates~~
~~We are substantially dependent on the commercial success of Twirla.~~
Assuming FDA approval, Twirla will be the first product that we commercialize. The rest of our pipeline of products are in earlier stages of clinical development and will require additional clinical and product development and funding in order to advance towards commercialization, which could take considerable time. If Twirla is not approved, our ability to advance our pipeline would be significantly adversely affected. In addition, we will require additional capital for the commercial launch of Twirla. Our ability to generate revenues and become profitable will depend in large part on the commercial success of Twirla. Potential prescribers of Twirla include physicians, nurse practitioners (NPs), physician’s assistants (PAs) and pharmacists. Registered Pharmacists (RPh) are authorized to prescribe contraceptives in some states currently, and others have pending legislation that would allow pharmacists to prescribe contraceptives. If Twirla or any other product that we commercialize in the future does not gain an adequate level of acceptance among prescribers, patients and third parties, we may not generate significant product revenues or become profitable. Market acceptance of Twirla, and any other product that we commercialize, by prescribers, patients and third party payors will depend on a number of factors, some of which are beyond our control, including:
·                  ~~Efficacy, safety and other potential advantages of our product candidates in relation to alternative treatments;~~
·                  ~~Relative convenience and ease of administration of our product candidates;~~
·                  Availability of adequate coverage or reimbursement of our product candidates by third parties, such as insurance companies and other payors, and by government healthcare programs, including Medicare, Medicaid and state health insurance exchanges;
·                  ~~Prevalence and severity of adverse events associated with our product candidates;~~
·                  ~~Cost of our product candidates in relation to alternative treatments, including generic products;~~
·                  ~~Extent and strength of our third-party manufacturer and supplier support and ability to meet our market demand;~~
·                  ~~Extent and strength of our marketing and distribution support;~~
·                  ~~Limitations or warnings contained in our product’s FDA approved labeling; and~~
·                  ~~Distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or voluntary risk management plan.~~
For example, if Twirla is approved by the FDA, prescribers and patients may not be immediately receptive to a transdermal contraceptive system, as opposed to a pill or any other method, and may be slow to adopt it as an accepted treatment for the prevention of pregnancy. In addition, even though we believe Twirla has significant advantages over other treatment options, because no head-to-head trials comparing Twirla to the competing approved patch product have been conducted, the prescribing information approved by the FDA may not contain claims that Twirla is safer or more effective than the currently approved patch product, or other claims that may be necessary for successful marketing of Twirla. Accordingly, we will not be permitted to promote Twirla, if approved, for any comparative advantages to the currently marketed contraceptive patch. The availability of numerous inexpensive generic forms of contraceptive products may also limit acceptance of Twirla among prescribers, patients and third party payors. If Twirla does not achieve an adequate level of acceptance among prescribers, patients and third party payors, we may not generate significant product revenues or become profitable.
~~It will be difficult for us to profitably sell Twirla, if approved, or any other product that we obtain marketing approval for in the future if coverage and reimbursement for such product is limited.~~
Market acceptance and sales of Twirla, if approved, or any other product that we obtain marketing approval for in the future, will depend on coverage and reimbursement policies and may be affected by future healthcare reform measures. Government authorities and third party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels for approved medications. A primary trend in the U.S. healthcare industry is cost containment. Government authorities and these third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. We cannot be sure that coverage or reimbursement will be available for Twirla, if approved, or any other product that we obtain marketing approval for in the future and, if coverage is available, we cannot be sure of the level of reimbursement. Reimbursement may impact the demand for, or the price of, Twirla, if approved, and any other products that we obtain marketing approval for and commercialize. Numerous generic products may be available at lower prices than branded therapy products, such as Twirla, which may also reduce the likelihood and level of reimbursement for Twirla or other products. If coverage and reimbursement are not available or are available only at limited levels, we may not be able to successfully commercialize Twirla, if approved, or any other product for which we obtain marketing approval.
If we are unable to establish effective marketing and sales capabilities for Twirla, if approved, or enter into agreements with third parties to market and sell Twirla, we may be unable to generate product revenues.
We are seeking approval for Twirla from the FDA for a contraception indication. Following our original submission of the NDA, we received a CRL from the FDA requesting, among other things, additional Phase 3 data. Our ability to commercialize Twirla, and the timing of Twirla commercialization, is dependent on FDA’s review of our data from the SECURE clinical trial and our NDA for Twirla, and other items such as timely and successful completion of validation of equipment for commercial manufacturing, ultimate FDA approval, and additional capital. Our current business plan assumes the FDA will complete its review of our NDA resubmission by the Target PDUFA Goal Date, December 26, 2017, initiation of certain pre-commercial activities prior to approval and initiation and completion of validation of our commercial manufacturing process after the Target PDUFA Goal Date, if the FDA approves Twirla. We cannot assure you that the FDA will approve Twirla, that the FDA’s timeline for review will be within six months, or that we along with Corium International, Inc., or Corium, our third party manufacturer, will be able to complete validation of our commercial manufacturing successfully and in a timely manner.
At present, we have no sales personnel and a limited number of marketing personnel. Initially, we do not plan to establish our own sales force, but rather we intend to engage a contract sales organization. Depending on our available capital resources, we plan to hire a limited number of additional marketing personnel and engage a contract sales organization in the United States until shortly prior to FDA approval of Twirla. At the time of our anticipated commercial launch of Twirla, assuming regulatory approval by the FDA, our sales and marketing team will have worked together for only a limited period of time. If our regulatory review period by the FDA is extended beyond six months, we may need to postpone initiating certain commercial activities in order to preserve cash, in which case our ability to launch Twirla would be compromised. We cannot guarantee that we will be successful in marketing Twirla in the United States.
We may not be able to establish our own sales force or a contract sales force in a cost-effective manner or realize a positive return on this investment. In addition, we will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. Factors that may inhibit our efforts to commercialize Twirla, if approved, in the United States without strategic partners or licensees include:
·                  ~~Our ability to obtain additional capital;~~
·                  ~~Our inability to timely recruit and retain adequate numbers of effective sales and marketing personnel;~~
·                  ~~The inability of sales personnel to obtain access to or persuade adequate numbers of prescribers to prescribe Twirla;~~
·                  ~~The lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines;~~
·                  ~~The costs associated with training sales and marketing personnel on legal and regulatory compliance matters and monitoring their actions;~~
·                  ~~Liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements; and~~
·                  ~~Unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract sales organization.~~
If we are not successful in recruiting sales and marketing personnel or in building a sales and marketing infrastructure, or if we do not successfully enter into appropriate collaboration arrangements, we will have difficulty commercializing Twirla, which would adversely affect our business, operating results and financial condition.
If we intend to commercialize Twirla outside the United States, we will likely enter into collaboration agreements with pharmaceutical partners, and we may have limited or no control over the sales, marketing and distribution activities of these third parties. Our future revenues may depend on the success of the efforts of these third parties.
To the extent that we rely on, or partner with, third parties to commercialize Twirla, if approved, or any other product candidate for which we obtain marketing approval in the future, we may receive less revenue than if we commercialized these products ourselves. In addition, we would have less control over the sales efforts of any other third parties involved in our commercialization efforts. We, however, may remain responsible for the conduct of any contract sales force, which could expose us to legal and regulatory enforcement actions and liability. In the event that we are unable to partner with a third party marketing and sales organization, our ability to generate product revenues may be limited in the United States, internationally or both.
~~A variety of risks associated with potential international business relationships could materially adversely affect our business.~~
We may enter into agreements with third parties for the development and commercialization of Twirla and possibly other product candidates in international markets. If we do so, we would be subject to additional risks related to entering into international business relationships, including:
·                  ~~Differing regulatory requirements in foreign countries including, among others, requirements relating to drug approvals, reimbursement and sales and marketing practices;~~
·                  ~~Potentially reduced protection for intellectual property rights;~~
·                  The potential for so-called parallel importing, which is when a local seller, faced with higher local prices, opts to import goods from a foreign market with lower prices, rather than buying them locally;
·                  ~~Unexpected changes in tariffs, trade barriers and regulatory requirements;~~
·                  ~~Economic weakness, including inflation, or political instability in foreign economies and markets;~~
·                  ~~Compliance with tax, employment, immigration and labor laws for employees traveling and working abroad;~~
·                  ~~Foreign taxes;~~
·                  ~~Foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other risks incident to doing business in another country;~~
·                  ~~Workforce uncertainty in countries where labor unrest is more common than in the United States;~~
·                  ~~Production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and~~
·                  ~~Business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes, volcanoes, typhoons, floods, tsunamis, hurricanes and fires.~~
~~These and other risks may materially adversely affect our ability to develop and commercialize products in international markets and may harm our business.~~
~~Even if we receive regulatory approval for Twirla, we still may not be able to successfully commercialize it and the revenue that we generate from its sales, if any, may be limited.~~
The commercial success of Twirla in any indication for which we obtain marketing approval from the FDA or other regulatory authorities will depend upon the contraceptive market landscape as well as acceptance and uptake of Twirla by prescribers, patients and third-party payors.
~~Risks related to the contraceptive market landscape include:~~
·                  ~~The prescription contraceptive market could experience a decrease in growth or negative growth if fewer women choose to use hormonal contraception;~~
·                  ~~The perceived safety of hormonal contraceptives could be negatively affected by media reports of adverse effects and advertisements for class action lawsuits due to adverse effects;~~
·                  ~~Price pressures from third party payors, including managed care organizations and government-sponsored health systems, could limit our revenue;~~
·                  ~~The proportion of the contraceptive market comprised of generic products continues to increase, making introduction of a branded contraceptive difficult and expensive;~~
·                  ~~Competition in the contraceptive market could increase, with the introduction of new contraceptives, including the potential of a new generic or branded competitive contraceptive patch;~~
·                  ~~Competition from generic contraceptive products could increase as additional generic contraceptives receive FDA approval;~~
·                  Healthcare reform activities, including, without limitation, the repeal, reform or replacement of the Patient Protection and Affordable Care Act, as amended by the Healthcare and Education Reconciliation Act of 2010 or, collectively, the Affordable Care Act, or ACA, and its effect on pharmaceutical coverage, reimbursement and pricing could limit our revenue; and
·                  ~~Access to the prescriber universe, particularly obstetrics and gynecology physicians, could be limited, decreasing our ability to promote Twirla efficiently.~~
·                  ~~Our ability to access pharmacists in states where they are authorized by law to prescribe contraceptives could be limited, decreasing our ability to promote Twirla~~
~~The degree of acceptance and uptake of Twirla, if approved, by prescribers, patients and third-party payors will depend upon a number of factors, including:~~
·                  ~~The level of contraceptive effectiveness of Twirla demonstrated in our clinical trials;~~
·                  ~~The incidence and severity of adverse effects associated with Twirla;~~
·                  ~~Limitations on use or warnings contained in FDA-approved labeling, which could include, for example, limitations on the use of Twirla for women based on BMI or weight;~~
·                  ~~Acceptability to patients of the appearance and feel of Twirla;~~
·                  ~~Willingness of patients to try a new contraceptive and to use a transdermal patch as their form of contraception;~~
·                  ~~Willingness of prescribers to prescribe a contraceptive patch in light of safety issues and restrictive labeling of the currently marketed contraceptive patch;~~
·                  ~~The cost of Twirla to the patient, as compared to other contraceptive products and methods;~~
·                  Our ability to obtain and maintain sufficient third party coverage or reimbursement for Twirla from private health insurers, government healthcare programs (including Medicare, Medicaid and 340B Clinics) and other third party payors; and
·                  ~~The effectiveness of our or any future collaborators’ sales and marketing strategies.~~
In addition, even if we obtain regulatory approval, the timing of an approval may reduce our ability to commercialize Twirla successfully. For example, if the approval process takes too long, we may miss market opportunities, give other companies the ability to develop competing products, and require us to raise additional capital, which could delay our commercial launch. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render Twirla not commercially viable. For example, regulatory authorities may grant approval contingent on the performance of costly post- marketing clinical trials or other post-marketing commitments, including REMS, or may approve Twirla with a label that contains fewer, or more limited, indications than requested, warnings, precautions or contraindications, including black box warnings, and the label may not include the claims necessary or desirable for the successful commercialization of Twirla. Any of the foregoing scenarios could materially harm the commercial prospects for Twirla.
Moreover, we may face additional generic or other drug product competition sooner than we anticipate for Twirla or our other product candidates, which would potentially limit their commercial success. We believe that we may be eligible for three years of FDA marketing exclusivity for Twirla and our other product candidates. The FDCA provides a period of three years of marketing exclusivity for an NDA, Section 505(b)(2) NDA or supplement to an existing NDA for a drug product that contains a previously approved active moiety, if new clinical investigations, other than bioavailability or bioequivalence studies, were conducted or sponsored by the applicant and are determined by the FDA to be essential to the approval of the application. This three year marketing exclusivity, however, does not protect drug products from all competition. For instance, it does not protect against the approval of a full NDA. It also would only protect against the approval of a product that contains the same conditions of approval as our product candidates. We may not receive the three year exclusivity for any of our product candidates, and, even if we do, it may not adequately protect us from competition. Competition that our product candidates may face from generic or similar versions of our product candidates could materially and adversely impact our future revenue, profitability and cash flows and substantially limit our ability to obtain a return on the investments we have made in those product candidates.
If Twirla is approved, but does not achieve an adequate level of acceptance by prescribers, third-party payors and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate prescribers, patients and third party payors on the benefits of Twirla may require significant resources and may never be successful. Even if we are able to demonstrate and maintain a competitive advantage over our competitors and become profitable, if the market for hormonal contraceptives fails to achieve expected future growth or decreases, we may not generate sufficient revenue or sustain profitability. Our ability to generate sufficient revenue from Twirla will also be dependent on our ability to support the commercial demand for Twirla and we cannot assure you that we along with our manufacturing partner Corium will be able to complete validation of our commercial manufacturing successfully and in a timely manner, and, ultimately, adequately meet the commercial demand for Twirla, if approved.
~~The proportion of the contraceptive market that is made up of generic products continues to increase, making introduction of a branded contraceptive difficult and expensive.~~
The proportion of the U.S. market that is made up of generic products has been increasing over time. In 2005, generic contraceptive products held 47% of prescription volume and 34% of sales and, by 2011, those values had risen to 68% and 44%, respectively. For the year ended December 31, 2016, approximately 83% of the prescription volume and approximately 43% of sales of combined hormonal contraceptives, or CHCs, in the U.S. were generated by generic products. If this trend continues, it may be more difficult to introduce Twirla, if approved, as a branded contraceptive, at a price that will maximize our revenue and profits. Also, there may be additional marketing costs to introduce Twirla in order to overcome the trend towards generics and to gain access to reimbursement by payors. If we are unable to introduce Twirla at a price that is commensurate with that of current branded contraceptive products, or we are unable to gain reimbursement from payors for Twirla, or if patients are unwilling to pay any price differential between Twirla and a generic contraceptive, our revenues will be limited. For example, in light of the introduction of the generic version of the Ortho Evra product by Mylan Inc. in April 2014, and the subsequent discontinuation of distribution of Ortho Evra in October 2014 by Janssen in order to be competitive and gain market share, we may increase the rebates available to commercial payors or we may provide incentives to consumers covered by non-governmental payors, such as coupons or rebates, in order to make up for the difference in the co-payment for Twirla and the generic patch product.
~~Prescribers, patients and payors may not adopt a new contraceptive patch due to concerns based upon the prior experience with or perception of the currently marketed contraceptive patch.~~
~~The Ortho Evra~~® ~~contraceptive patch, or Evra, was introduced in early 2002 and was the first FDA-approved contraceptive patch. The following is a brief history of the Evra market experience:~~
·                  Evra had rapid uptake in the contraceptive market, achieving a 10% share of the CHC market by September 2003. The initial approved labeling for Evra indicated that it delivered a daily EE dose of 20 micrograms.
·                  ~~Following the approval of Evra, the manufacturer of Evra and the FDA began receiving reports of thrombotic and thromboembolic events.~~
·                  A pharmacokinetic study was conducted in 2005 and later published in the Journal of Clinical Pharmacology comparing Evra to an oral contraceptive, which demonstrated that Evra was delivering higher serum concentrations of EE compared to an oral contraceptive with an EE dose of 35 micrograms. A pharmacokinetic study evaluates how the body handles a given drug over time; these studies are conducted by measuring the amount of time it takes for the drug to be absorbed, distributed and eliminated throughout the body.
·                  Johnson & Johnson, the manufacturer of Evra, revised the Evra labeling in November 2005 to include information that EE exposure with Evra is 60% higher than that of an oral contraceptive containing EE of 35 micrograms, based on area under the curve, a commonly-used metric for measuring EE exposure in contraceptives. This information was ultimately included in a unique black box warning and bolded warning in the Evra labeling.
·                  The FDA held a Joint Meeting of the Advisory Committees for Reproductive Health Drugs and Drug Safety and Risk Management on December 9, 2011. The Committees concluded that users of Evra have an increased risk of venous thromboembolism, or VTE compared to users of second generation contraceptives, such as those containing LNG. The Committees, through a vote, concluded that the benefits of Evra outweighed the risks, but that the current package insert did not adequately reflect the risk/benefit profile.
·                  ~~A subsequent change to the labeling for Evra was implemented in August 2012.~~
·                  ~~The Evra market share declined rapidly following the labeling changes, from a peak share of 11% in 2005, to 4% by the end of 2006, to 1.4% by the end of 2013.~~
·                  In April 2014, the Evra label was revised to provide revised dosage form and strength information. However, this revision did not affect the unique black box warning and bolded warning in the Evra label.
·                  The approval of a generic equivalent to Evra, Xulane® was announced by Mylan Inc. in April 2014. Subsequently, in October 2014, Janssen discontinued distribution of Evra and currently over 99% of patch prescriptions are filled with the generic.
We have conducted pharmacokinetic studies of Twirla to demonstrate that it delivers a daily EE dose of approximately 30 micrograms, comparable to a low-dose oral contraceptive. However, because none of our completed or planned clinical trials studied or expect to study Twirla in a head-to-head comparison with Evra, if Twirla is approved by the FDA, we will not be able to make direct comparative claims regarding the safety and efficacy of Twirla as compared to Evra. While we expect Twirla, if approved, to have the same black box warning currently required for all CHCs, we cannot predict whether the FDA will require that we include information in the Twirla labeling or black box warning regarding the additional risks associated with the Evra patch. Assuming approval, if we are not able to convince prescribers, patients and payors that Twirla delivers a low daily dose of EE, this may limit uptake and usage of Twirla and our revenue will be limited.
~~We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.~~
The biotechnology and pharmaceutical industries are intensely competitive. We would have significant competition with contraceptive products already in the marketplace, many of which have substantially greater name recognition, commercial infrastructures and financial, technical and personnel resources than we have. Any new product that competes with a previously approved product may need to demonstrate compelling advantages in efficacy, convenience, tolerability or safety to be commercially successful. In addition, new products developed by others could emerge as competitors to Twirla, if approved. If we are not able to compete effectively against our current and future competitors, our business will not grow and our financial condition and operations will suffer.
Our potential competitors include large, well-established pharmaceutical companies, and specialty pharmaceutical sales and marketing companies. These companies include Merck & Co., Inc., or Merck, which markets Nuvaring®~~, Allergan, Inc., or Allergan, which markets several branded and generic contraceptives including Loestrin~~® ~~24, Minastrin® 24 and LoLoestrin~~®~~, Teva Pharmaceutical Industries Ltd., or Teva, which markets several branded and generic contraceptives including Gianvi~~® ~~and Quartette~~®~~, Bayer AG, or Bayer, which markets Beyaz~~® ~~and Mirena~~®~~, Johnson & Johnson, which markets Ortho-Tri-Cyclen~~® ~~Lo, Pfizer Inc., which markets Alesse~~® and Mylan Inc. which markets Xulane™, a generic version of Ortho Evra. Additionally, several generic manufacturers currently market and continue to introduce new generic contraceptives, including Sandoz International GmbH, Glenmark Pharmaceuticals Ltd., Lupin Pharmaceuticals, Inc., and Amneal Pharmaceuticals LLC.
There are other contraceptive product candidates in development that, if approved, would potentially compete with Twirla. Specifically, Bayer has a contraceptive patch approved in the European Union, or E.U. Bayer entered into a license and distribution agreement for the sale of this contraceptive patch in Europe with Gedeon Richter Ltd. Other companies that have new contraceptive product candidates in various stages of development include Teva (oral contraceptive in Phase 3), Merck (vaginal ring and oral contraceptive in Phase 3), Allergan (vaginal ring in Phase 3) and Antares Pharma, Inc. (transdermal gel contraceptive in Phase 2).
~~Sales of our products, if approved, may be adversely affected by the consolidation among wholesale drug distributors and the growth of large retail drug store chains.~~
The network through which we will sell our products, if and when approved, has undergone significant consolidation marked by mergers and acquisitions among wholesale distributors and the growth of large retail drugstore chains. As a result, a small number of large distributors control a significant share of the market. In 2012,
three companies generated about 85% of all revenues from drug distribution in the United States, and in 2010, four chain pharmacy companies owned about 30% of all retail pharmacy outlets. Consolidation of drug wholesalers and retailers, as well as any increased pricing pressure that those entities face from their customers, including the U.S. government, may increase pricing pressure and place other competitive pressures on drug manufacturers, including us.
Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and to commercialize Twirla and our other product candidates and may affect the prices we may obtain.
In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for Twirla, restrict or regulate post-approval activities and affect our ability to profitably sell Twirla.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA’s regulations, guidance or interpretations will change, or what the impact of such changes on the potential marketing approval of Twirla, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.
In March 2010, President Obama signed into law the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the healthcare industry and impose additional healthcare policy reforms. The ACA, among other things, increased the Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program for both branded and generic drugs, extended the rebate program to certain individuals enrolled in Medicaid managed care organizations, addressed new methodologies by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are line extension products and expanded the 340B drug discount program (excluding orphan drugs) to other entities. Further, the ACA imposed a significant annual tax on companies that manufacture or import branded prescription drug products. Substantial new provisions affecting compliance have also been enacted, which may require us to modify our business practices with regard to healthcare practitioners.
Of particular relevance to our business is the ACA requirement that all health plans, with limited exceptions, cover certain preventive services for women with no cost-sharing, which means no deductible, no co-insurance and no co-payments by the patient. Contraceptive methods and counseling, including all FDA-approved contraceptive methods as prescribed, are included in the ACA mandate, and this has come to be known as the “contraceptive mandate.” Under the ACA, payors are only required to cover one favored product within each contraceptive “method” without imposing any cost-sharing obligations on the patient. For example, the introduction of a generic contraceptive patch product with a price that will likely be lower than the price of Twirla makes it less clear that Twirla would have a preferred position, such as coverage without a co-insurance payment, under the ACA contraceptive mandate. Other products within the same method may also be covered, but payors are allowed to use reasonable medical management techniques, such as the application of cost-sharing obligations. An amendment was issued that provided an exemption to the contraceptive mandate for group health plans established or maintained by religious employers. However, the contraceptive mandate has remained controversial, with several legal challenges filed around the country. In June 2014, the U.S. Supreme Court ruled that owners of certain private companies can object to the contraceptive mandate on religious grounds and in November 2015, the Court agreed to hear arguments from non-profit organizations requesting similar treatment. In October 2017, the U.S. Department of Health and Human Services announced it will seek to issue regulations that will allow all companies to qualify for the exemption from the contraceptive mandate on the basis of religious and moral grounds. Although it is too early to determine the full effect of the contraceptive mandate and other provisions of the ACA on our business, the law appears likely to continue the pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs. Moreover, the U.S. Congress is potentially pursuing legislation, which, if passed and signed into law by the new administration, would repeal and possibly replace certain aspects of the ACA. Further, on January 20, 2017, the new administration signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory
~~burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices among others.~~ There are several proposals to reform the federal healthcare laws being advocated and it is still unclear whether such reform efforts will succeed and if so, which proposals will ultimately be successful. Therefore, it is difficult to determine the full effect of the ACA or any other healthcare reform efforts on our business. Any replacement, however, would likely provide less aggregate health care coverage.
In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created 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 of Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will stay in effect through 2024 unless additional Congressional action is taken. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or ATRA, which among other things, further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of our product candidates and reduce our profitability.
Moreover, the Drug Quality and Security Act imposes obligations on manufacturers of pharmaceutical products related to product tracking and tracing. Among the requirements of this legislation, manufacturers are required to provide certain information regarding the drug product to individuals and entities to which product ownership is transferred, will be required to label drug product with a product identifier toward the end of 2017 and are required to keep certain records regarding the drug product. The transfer of information to subsequent product owners by manufacturers will be required to be done electronically toward the end of 2017. Manufacturers must also verify that purchasers of the manufacturers’ products are appropriately licensed. Further, under this legislation, manufactures have drug product investigation, quarantine, disposition, and FDA and trading partner notification responsibilities related to counterfeit, diverted, stolen and intentionally adulterated products, as well as products that are the subject of fraudulent transactions or which are otherwise unfit for distribution such that they would be reasonably likely to result in serious health consequences or death.
~~Third party coverage and reimbursement and healthcare cost containment initiatives and treatment guidelines may constrain our future revenues.~~
Our ability to successfully market Twirla and other product candidates, if approved, will depend in part on the level of coverage and reimbursement that government authorities, private health insurers and other organizations provide for Twirla or our other product candidates and contraceptives in general. Countries in which Twirla or our other product candidates are sold through reimbursement schemes under national health insurance programs frequently require that manufacturers and sellers of pharmaceutical products obtain governmental approval of initial prices and any subsequent price increases. In certain countries, including the United States, government-funded and private medical care plans can exert significant indirect pressure on prices. We may not be able to sell Twirla or our other product candidates profitably if adequate prices are not approved or coverage and reimbursement are unavailable or limited in scope. Increasingly, third party payors attempt to contain healthcare costs in ways that are likely to impact our development of products including:
·                  ~~Failing to approve or challenging the prices charged for healthcare products;~~
·                  ~~Introducing reimportation schemes from lower-priced jurisdictions;~~
·                  ~~Limiting both coverage and the amount of reimbursement for new therapeutic products;~~
·                  ~~Denying or limiting coverage for products that are approved by the regulatory agencies but are considered to be experimental or investigational by third party payors; and~~
·                  ~~Refusing to provide coverage when an approved product is used for off-label indications.~~
~~Risks Related to Manufacturing and Our Reliance on Third Parties~~
We have no manufacturing capacity and anticipate continued reliance on Corium, our third party manufacturer, for the development and commercialization of our product candidates in accordance with manufacturing regulations.
We rely on Corium International, Inc., or Corium, our third party manufacturer, to produce clinical supplies of Twirla and our other product candidates, and we plan to continue relying on them for commercial supplies and samples of our product candidates, if approved. We do not own or operate, and have no plans to establish, any manufacturing facilities for our product candidates. We lack the resources and the capabilities to manufacture Twirla or any of our product candidates on a clinical or commercial scale. The facilities used by Corium to manufacture our product candidates must be approved by the FDA pursuant to inspections that are conducted in connection with the FDA’s review of our NDA for Twirla. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as Current Good Manufacturing Practices, or cGMPs, for manufacture of our product candidates and our products, if and when approved, which includes compliance with FDA’s regulations concerning drug manufacturing and certain limited regulations pertaining to device manufacturing. If Corium or other contract manufacturers that we may use cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure or maintain regulatory approval for their manufacturing facilities, and we may not be able to obtain or secure regulatory approval for our product candidates. In addition, we have no control over the ability of our contract manufacturer to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities that would also require FDA approval and which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved. Moreover, if our contract manufacturer cannot successfully manufacture materials that conform to our specifications and the strict regulatory requirements of the FDA or others, we or our manufacturers may be subject to other regulatory enforcement action such as adverse inspectional findings, Warning Letters, Untitled Letters, recall requests, withdrawal of product or investigational approvals, clinical holds or termination of clinical trials, disgorgement, restitution, exclusion from federal healthcare programs, product seizures and detention, consent decrees, corporate integrity agreements, criminal and civil penalties, including imprisonment, refusal to permit import or export of the product and injunction against or restriction of manufacture or distribution. If our contract manufacturer experiences issues in its manufacturing process or is unable to produce clinical supplies in adequate quantity and quality, any clinical trials could be delayed or our ability to receive regulatory approval of our product candidates could be negatively affected. Additionally, if there are changes to the manufacturing process for Twirla or to our formulation for Twirla that require a change in the manufacturing process, we could experience significant additional cost and our ability to receive regulatory approval could be delayed.
The machinery and process to produce the commercial supply of Twirla must be qualified and validated, which is time-consuming and expensive, and this machinery is located within one manufacturing site and is customized to the particular manufacturing specifications of Twirla. If Corium is unable to qualify and validate this equipment and the processes in a timely manner and successfully produce validation batches, our ability to launch and commercialize Twirla will be compromised and we could require additional capital to complete the validation process. If this customized equipment malfunctions at any time during the production process, the time it may take Corium to secure replacement parts, to undertake repairs and to revalidate the equipment and process could limit our ability to meet the commercial demand for Twirla. Similar manufacturing conditions may also apply to our other product candidates. This may increase the risk that the third party manufacturer may not manufacture Twirla in accordance with the applicable regulatory requirements, that we may not have sufficient quantities of Twirla or our product candidates or that we may not have such quantities at an acceptable cost, any of which could delay, prevent, or impair the commercialization of Twirla, if approved, and the development of our product candidates.
Although we have manufacturing agreements with Corium for the clinical and commercial supply of Twirla, Corium and several of its suppliers of raw materials will be single source providers to us for a significant period of time. In particular, Corium manufactures Twirla using EE and LNG and components that it purchases from
third parties, most of which are single source suppliers of the applicable material. We do not have any control over the process or timing of the acquisition of these raw materials by Corium. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a third party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates.
Because we outsource all of our manufacturing processes, there is no guarantee that there will be sufficient supplies to fulfill our requirements or that we may obtain such supplies on acceptable terms. Although Corium intends to enter into agreements with critical manufacturers, component fabricators and secondary service providers to secure commercial supply of Twirla, not all of such suppliers and service providers will be under contract. Any delays in obtaining adequate supplies of our product candidates could limit our ability to meet commercial demand for Twirla.
In addition, in the event Twirla is approved and achieves significant market share, Corium may not possess adequate manufacturing capabilities to meet market demand for Twirla. If it becomes necessary to engage an additional third party manufacturer to produce Twirla, we may need to license certain manufacturing know-how from Corium, or our commercial supply will be limited while the new third party manufacturer develops the necessary know-how to manufacture Twirla and while we obtain regulatory approval for the addition of a new manufacturer.
~~Reliance on a third party manufacturer subjects us to risks that would not affect us if we manufactured the product candidates ourselves, including:~~
·                  ~~Reliance on the third party for regulatory compliance and quality assurance;~~
·                  ~~Reduced control over the manufacturing process for our product candidates;~~
·                  ~~The possible breach of the manufacturing agreements by the third party because of factors beyond our control;~~
·                  ~~The possibility of termination or nonrenewal of the agreements by the third party because of our breach of the manufacturing agreement or based on their own business priorities; and~~
·                  ~~The disruption and costs associated with changing suppliers.~~
Our product candidates may compete with other products and product candidates for access to manufacturing resources and facilities. There are a limited number of manufacturers that operate under cGMP requirements and that are both capable of manufacturing for us and willing to do so. If our existing third party manufacturer, or the third parties that we may engage in the future to manufacture a product for commercial sale or for our clinical trials, should cease to continue to manufacture our product candidates for any reason, we likely would experience delays in obtaining sufficient quantities of our product candidates for us to meet commercial demand or to advance our clinical trials while we identify and qualify replacement suppliers. If for any reason we are unable to obtain adequate supplies of our product candidates or the drug substances used to manufacture them, it will be more difficult for us to develop our product candidates and compete effectively.
Our third party manufacturer is subject to regulatory requirements, covering manufacturing, testing, quality control and record keeping relating to our product candidates, and subject to ongoing inspections by the regulatory agencies. In addition to the above-described regulatory actions, failures by our third party manufacturer to comply with applicable regulations may result in ~~long delays and interruptions to our manufacturing capacity while we seek to secure another third party manufacturer that meets all regulatory requirements.~~
~~We are dependent on numerous third parties in Corium’s supply chain for the supply~~potential loss of our product candidates, and if Corium fails to maintain supply relationships with these third parties, develop new relationships with other third parties or suffers disruptions in supply, we may be unable to continue to develop our product candidates, or, assuming FDA approval, commercialize Twirla.
We, through our manufacturing partner Corium, rely on a number of third parties for the supply of active ingredients, other raw materials and laboratory services for the supply of our product candidates and, assuming FDA approval, commercialization of Twirla. Our ability to develop our product candidates depends, in part, on Corium’s ability to successfully obtain the active pharmaceutical ingredients used in our product candidates, in accordance with regulatory requirements and in sufficient quantities for clinical testing and later commercialization. If Corium fails to develop and maintain supply relationships with these third parties, we may be unable to continue to develop our product candidates or commercialize any approved products in the future.
We, through Corium, also rely on certain third parties as the current sole source of the materials they supply. Although many of these materials are produced in more than one location or are available from another supplier, if any of these materials becomes unavailable to us for any reason, we likely would incur added costs and delays in identifying or qualifying replacement materials and there can be no assurance that replacements would be available to us on acceptable terms, or at all. In certain cases we may be required to get regulatory approval to use alternative suppliers, and this process of approval could delay development of our product candidates and, assuming FDA approval, commercial production of Twirla, indefinitely. For example, the sole manufacturer of one of the components of the packaging of our Twirla patch notified us that it would be discontinuing manufacture of the component. We currently believe that manufacturing of this component has now been discontinued. In conjunction with Corium, we were able to secure an amount of inventory of the packaging component that we believe will last until at least 2019. We are currently evaluating sources for a replacement for this discontinued component and, assuming FDA approval of this replacement material, we could eventually use the replacement material in connection with the commercial production of Twirla.
If Corium’s third party suppliers fail to deliver the required quantities of sub-components and starting materials, in accordance with all regulatory requirements, and on a timely basis and at commercially reasonable prices, and we and Corium are unable to find one or more replacement suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and on a timely basis, the continued development of our product candidates, and assuming FDA approval, commercialization of Twirla, would be impeded, delayed, limited or prevented, which could harm our business, results of operations, financial condition and prospects.
If the manufacturing facilities of Corium are not maintained in a manner that is compliant with cGMP requirements, we may need to find alternative manufacturers and suppliers, which could result in supply interruptions of Twirla and our other product candidates, additional costs and lost revenues.
Corium’s facilities used for the manufacture of our product candidates must be maintained in a manner compliant with cGMP requirements, including obtaining favorable inspection reports. We do not control the manufacturing process and are dependent on Corium for compliance with the FDA’s requirements for manufacture of Twirla and our other product candidates. If Corium cannot successfully manufacture material components and finished products that conform to our specifications and the FDA’s strict regulatory requirements, they and we may be subject to regulatory action, including adverse inspectional findings, Warning Letters, Untitled Letters, product recall requests, withdrawal of product or investigational approvals, non-approval of marketing applications, clinical holds or termination of clinical trials, disgorgement, restitution, exclusion from federal healthcare programs, detentions or seizures, refusal to allow the import or export of a product, injunction against or restriction of manufacture or distribution, consent decrees, corporate integrity agreements, criminal and civil penalties, including imprisonment, and Corium may not be able to maintain FDA approval for its manufacturing facilities or acceptance of its manufacturing data in regulatory filings. If Corium’s facilities cannot maintain compliance with FDA requirements, we may need to find and successfully qualify alternative manufacturing facilities, which could result in supply interruptions of Twirla and our other product candidates and substantial additional costs as a result of such delays, including costs with respect to finding alternative manufacturing facilities, and lost revenues.
We rely on third parties to conduct aspects of our clinical trials. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or comply with applicable regulatory requirements, we may be delayed in obtaining or ultimately not be able to obtain marketing approval for our product candidates.
We currently rely on CROs and clinical trial sites for most aspects of our clinical trials, including trial conduct, data management, statistical analysis and electronic compilation of our NDA. We may enter into agreements with additional CROs and clinical trial sites to obtain additional resources and expertise in an attempt to accelerate our progress with regard to new or ongoing clinical and preclinical programs. Entering into relationships with CROs and clinical trial sites involves substantial cost and requires extensive management time and focus. In addition, typically there is a transition period between engagement of a CRO and clinical trial sites and the time the CRO and sites commences work. As a result, delays may occur, which may materially impact our ability to meet our desired clinical development timelines and ultimately have a material adverse impact on our operating results, financial condition or future prospects.
As CROs and clinical investigators are not our employees, we cannot control whether or not they devote sufficient time and resources to our clinical trials for which they are engaged to perform, and whether they comply with the applicable regulatory requirements, known as Current Good Clinical Practices, or cGCPs, which are regulations and guidelines enforcedconfidence by the FDA, the Competent Authorities of the Member States of the European Economic Area, or EEA, and comparable foreign regulatory authorities for all of our product candidates in clinical development, which include requirements related to the conduct of the study, subject informed consent, and IRB approval. Regulatory authorities enforce these cGCPs through periodic inspections of trial sponsors, principal investigators and trial sites. Although we may rely on third parties for the execution of our trials, we are nevertheless responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards and our reliance on CROs and clinical trial sites does not relieve us of our regulatory responsibilities. If we, any of our CROs, or clinical trial sites fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, European Medicines Agency or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications, in addition to SECURE. We cannot assure you that, upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with cGCP regulations. In addition, our clinical trials must be conducted with product candidate materials produced under cGMP regulations. Our failure to comply with these regulations may require us to discontinue or repeat clinical trials, which would delay the regulatory approval process. If the CROs or clinical trial sites we engage do not successfully carry out their contractual duties or obligations, conduct the clinical trials in accordance with all regulatory requirements and the applicable protocols, or meet expected deadlines, or if they need to be replaced, or the quality or accuracy of the data they provide is compromised due to the failure to adhere to regulatory requirements or for other reasons, then our development programs may be extended, delayed or terminated, or we may not be able to obtain marketing approval for or successfully commercialize our product candidates. Failure to comply with clinical trial regulatory requirements may further subject us to regulatory action, including Warning Letters, Untitled Letters, adverse inspectional findings, clinical holds or termination of clinical trials, non-approval of marketing applications, criminal and civil penalties, including imprisonment, injunction against manufacture or distribution and debarment. As a result, our financial results and the commercial prospects for our product candidates would be harmed and our costs would increase.
~~Any collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.~~
We may seek partnerships, collaborations and other strategic transactions to maximize the commercial potential of Twirla, our other product candidates and our proprietary technologies in the United States and territories throughout the world. We may enter into such arrangements on a selective basis depending on the merits of retaining commercialization rights for ourselves as compared to entering into selective collaboration arrangements with leading pharmaceutical or biotechnology companies for Twirla and each of our other product candidates and technologies, both in the United States and internationally. We face competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time consuming to negotiate, document and implement. We may not be successful in our efforts to establish and implement collaborations or other alternative arrangements should we choose to enter into such arrangements. The terms of any collaborations or other arrangements that we may establish may not be favorable to us.
Any future collaborations that we enter into may not be successful. The success of our collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations.
Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters could lead to delays in the development process or commercialization of our product candidates and, in some cases, termination of the collaboration arrangement. These disagreements can be difficult to resolve if neither of the parties has final decision making authority.
Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration could adversely affect us financially and could harm our business reputation.
~~If we fail to establish an effective distribution process our business may be adversely affected.~~
We do not currently have the infrastructure necessary for distributing pharmaceutical products. We intend to contract with third party logistics wholesalers to warehouse these products and distribute them to pharmacies. This distribution network will require significant coordination with our sales and marketing and finance organizations. Failure to secure contracts with wholesalers could negatively impact the distribution of our products, if and when approved, and failure to coordinate financial systems could negatively impact our ability to accurately report product revenue. If we are unable to effectively establish and manage the distribution process, the commercial launch and sales of our products, if and when approved, will be delayed or severely compromised and our results of operations may be harmed. Distribution practices will also need to comply with the applicable regulatory requirements. If our distributors do not comply with the applicable regulatory requirements, we could be exposed to potential enforcement actions.
~~Risks Related to Regulatory Matters Following Approval~~
Even if we obtain marketing approval for Twirla or other product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, Twirla or other product candidates could be subject to labeling and other restrictions, including withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems.
Even if we obtain U.S. regulatory approval of Twirla or other product candidates, the FDA may still impose significant restrictions on their indicated uses, including more limited patient populations, require that precautions, contraindications, or warnings be included on the product labeling, including black box warnings, or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, and post-market surveillance to monitor safety and efficacy. Claims that we may make may also be restricted through our approved labeling. For example, based on the SECURE top-line data, the Pearl Index for the overall intent to treat population of subjects 35 years of age and under was 4.80 with an upper-bound of the 95% confidence interval of 6.06, but in the obese subpopulation of subjects 35 years of age and under, the Pearl Index was 6.42 with an upper-bound of the 95% confidence interval of 8.88. The highest Pearl Index for a hormonal contraceptive product approved by the FDA to date was 3.19 and the highest upper-bound of the 95% confidence interval was 5.03. In the combined safety database for our three Agile Phase 3 trials (n>3,000), there were 5 subjects with potentially study drug related DVTs or PEs, 4 of whom were obese (BMI > ~~30 kg/m~~2). Although ultimate approvability of a hormonal contraceptive is based on a risk/benefit assessment of the overall safety and efficacy profile of a product, not only a specific Pearl Index, the FDA could conclude that the Pearl Index in the overall population or a subpopulation is too high to demonstrate efficacy and an adequate risk/benefit profile. As such, we may not obtain approval of Twirla based on these data or any other basis. Even if we receive approval of Twirla, FDA may determine that for a specific subgroup of patients, Twirla has lower efficacy and presents a higher risk, necessitating labeling restrictions. For instance, FDA may require labeling restrictions on the use of Twirla for patients in certain BMI categories or otherwise require labeling limitations or warnings for such subpopulation, which could limit the commercial potential of the product, if approved. FDA may further require us to include other information and/or data in the label for Twirla that may make it more difficult for us to successfully commercialize
the product, if approved. For instance, FDA may require us to include the Pearl Index results from the previously conducted Phase 3 trials, which were higher than the SECURE clinical trial’s overall and certain sub-group Pearl Index results. We will discuss specific labeling requirements with the FDA in the future.
If approved, Twirla and our other product candidates will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, import, export, safety surveillance, advertising, marketing promotion, recordkeeping, reporting of adverse events and other post-market information, and further development. These requirements include registration with the FDA, listing of our drug products, payment of annual fees, as well as continued compliance with cGCPs for any clinical trials that we conduct post-approval. Application holders must notify the FDA, and depending on the nature of the change, obtain FDA pre-approval for product manufacturing changes. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents. If we are found to be noncompliant with applicable requirements, the FDA and other government authorities may issue a Warning Letter or Untitled Letter, or take other regulatory action such as a product seizure and detention, withdrawal of product approval, request for a recall, refusal to allow the import or export of the product, criminal or civil penalties, injunction against or restriction of manufacture or distribution, consent decrees, disgorgement, restitution, clinical holds or terminations of clinical trials, exclusion from federal healthcare programs, corporate integrity agreements, or imprisonment.
The FDA has the authority to require a REMS as part of an NDA or after approval, which may impose further requirements or restrictions on the information that patients must be provided, distribution or use of an approved drug, 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 or requiring treated patients to enroll in a registry.
With respect to sales and marketing activities by us or any future collaborative partner, advertising and promotional materials must comply with the FDA’s rules in addition to other applicable federal and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws, which impact, among other things, our proposed sales, marketing and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.
In addition, if Twirla and our other product candidates are approved, our product labeling, advertising and promotional materials would be subject to regulatory requirements and continuing review by the FDA, Department of Justice, Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress and the public. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling, a practice known as off-label promotion. If we receive marketing approval for Twirla or our other product candidates, physicians may nevertheless prescribe the 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 and government fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions. 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 of permanent injunctions under which specified promotional conduct is changed or curtailed. For example, we believe that Twirla, if approved, will have a label consistent with all other marketed hormonal contraceptive products, which include class labeling that warns of risks of certain serious conditions, including venous and arterial blood clots, such as heart attacks, thromboembolism and stroke, as well as liver tumors, gallbladder disease, and hypertension, and a black box warning regarding risks of smoking and CHC use, particularly in women over 35 years old that smoke.
~~However, regulatory authorities may require the inclusion of additional statements about adverse events in the label, including additional black box warnings or contraindications.~~
In the United States, engaging in the impermissible promotion of our products, following approval, for off-label uses can also subject us to false claims litigation under federal and state statutes, which can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we promote or distribute drug products through, for example, corporate integrity agreements, and debarment, suspension or exclusion from participation in federal and state healthcare programs. These false claims statutes include the federal civil False Claims Act, which allows any individual to bring a lawsuit against a pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims, or causing others to present such false or fraudulent claims, for payment by a federal program such as Medicare or Medicaid. If the government decides to intervene and prevails in the lawsuit, the individual will share in the proceeds from any fines or settlement funds. If the government declines to intervene, the individual may pursue the case alone. Since 2004, these False Claims Act lawsuits against pharmaceutical companies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements regarding certain sales practices promoting off-label drug uses involving fines that are as much as $3.0 billion. This growth in litigation has increased the risk that a pharmaceutical company will have to defend a false claim action, pay settlement fines or restitution, as well as criminal and civil penalties, agree to comply with burdensome reporting and compliance obligations, and be excluded from Medicare, Medicaid and other federal and state healthcare programs. If we do not lawfully promote our approved products, if any, we may become subject to such litigation and, if we do not successfully defend against such actions, those actions may have a material adverse effect on our business, financial condition, results of operations and prospects.
If we or a regulatory agency discover previously unknown problems with a product candidate, once approved, such as adverse events of unanticipated severity or frequency, data integrity issues with regulatory filings, problems with the facility where the product is manufactured or we or our manufacturers or others working on our behalf fail to comply with applicable regulatory requirements before or after marketing approval, we may be subject to reporting obligations as well as the following administrative or judicial sanctions:
·                  ~~Restrictions on the marketing, distribution or manufacturing of the product, withdrawal of the product from the market, or requests for product recalls;~~
·                  ~~Issuance of Warning Letters, Cyber Letters or Untitled Letters;~~
·                  ~~Mandate modification to promotional materials and labeling or require us to provide corrective information to healthcare providers;~~
·                  ~~FDA or regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings and other safety information about the product;~~
·                  Require us to enter into a consent decree or corporate integrity agreement, which can include imposition of various fines, reimbursement for inspection costs, required due dates for specific actions and penalties for noncompliance;
·                  ~~Clinical holds or termination of clinical trials;~~
·                  ~~Injunctions or the imposition of civil or criminal penalties, imprisonment, monetary fines disgorgement or restitution;~~
·                  ~~Suspension or withdrawal of regulatory approval;~~
·                  ~~Suspension of any ongoing clinical trials;~~
·                  ~~Refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;~~
·                  ~~Debarment;~~
·                  ~~Exclusion from participation in federal healthcare programs or refusal of government contracts;~~
·                  ~~Suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or~~
·                  ~~Product seizure or detention or refusal to permit the import or export of product.~~
The occurrence of any event or penalty described above may inhibit our ability to commercialize Twirla or our other product candidates, if approved, and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.
Moreover, the FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay marketing approval, and the sale and promotion of our product candidates. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
Even if Twirla receives marketing approval by the FDA in the United States, we may never receive marketing approval for or commercialize Twirla or any other product candidates outside the United States.
In order to market Twirla or any other product candidate outside the United States, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our product candidates. The time required to obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. The marketing approval process in other countries may include all of the risks associated with obtaining FDA approval in the United States, as well as other risks. For example, legislation analogous to Section 505(b)(2) of the FDCA in the United States, which relates to the ability of an NDA applicant to use published data not developed by such applicant, may not exist in other countries. In territories where data is not freely available, we may not have the ability to commercialize our products, when and if approved, without negotiating rights from third parties to refer to their clinical data in our regulatory applications, which could require the expenditure of significant additional funds. Further, we may be unable to obtain rights to the necessary clinical data and may be required to develop our own proprietary safety and efficacy dossiers. In addition, in many countries outside the United States, it is required that a product receive pricing and reimbursement approval before the product can be commercialized. This can result in substantial delays in such countries. Further, the product labeling requirements outside the United States may be different and inconsistent with the U.S. labeling and to the detriment to the product, and therefore negatively affect the ability to market in countries outside the United States.
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. In addition, we may be subject to fines, suspension or withdrawal of marketing approvals, product recalls, seizure of products, operating restrictions and criminal prosecution if we fail to comply with applicable foreign regulatory requirements. If we fail to comply with regulatory requirements in international markets or to obtain and maintain required approvals, our ability to market to our full target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.
~~We will need to obtain FDA approval of any proposed product names, and any failure or delay associated with such approval may adversely affect our business.~~
We have received conditional approval from the FDA for the use of Twirla as the proprietary name for our lead product candidate, AG200-15. However, this approval is conditional upon a further and final review by the FDA at the time of NDA approval. Additionally, any name we intend to use for our other product candidates will require approval from the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or USPTO. The FDA typically conducts a review of proposed product names,
including an evaluation of the potential for confusion with other product names. The FDA may also object to a product name if it believes the name inappropriately implies medical claims or contributes to an overstatement of efficacy. If the FDA objects to any of our proposed product names, we may be required to adopt alternative names for our product candidates. If we adopt alternative names, we would lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.
Our relationships with physicians, customers and payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, exclusion from government healthcare programs, contractual damages, reputational harm and diminished profits and future earnings.
Healthcare providers, physicians and others play a primary role in the recommendation and prescription of any product candidates that we commercialize. Our arrangements with third-party payors, including government healthcare programs, and customers will expose us to broadly-applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute Twirla, if approved, and any other product candidates we commercialize. Restrictions under applicable federal and state healthcare laws and regulations include the following:
·                  The federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
·                  The federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government;
·                  The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
·                  HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and its implementing regulations, impose obligations on covered healthcare providers, health plans and healthcare clearinghouses, as well as their business associates that create receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
·                  The federal physician payment transparency requirements under the ACA and applicable regulations require manufacturers of drugs, devices, biologics and medical supplies to report certain information to the Department of Health and Human Services including information related to payments and other transfers of value made to physicians and teaching hospitals and the ownership and investment interests held by physicians and their immediate family members; and
·                  Analogous state laws and regulations, such as state anti-kickback and false claims laws that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures and drug pricing; and state laws governing the privacy and security of
~~health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.~~
The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the relevant government or regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Moreover, recent healthcare reform legislation has strengthened these laws. For example, the ACA, among other things, amended the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes; such that a person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them. In addition, the ACA provided that the government may assert that a claim including items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the false claims statutes.
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations are costly. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations, including anticipated activities conducted by our sales team in the sale of Twirla or our other product candidates, if approved, are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to a variety of different consequences, depending upon which law we are found to have violated, including significant civil, criminal and administrative penalties, damages, fines, exclusion from government funded healthcare programs, such as Medicare and Medicaid, corporate integrity agreements, refusal of government contracts, contract debarment and the curtailment or restructuring of our operations. If any of the physicians or other providers or entities with whom we expect to do business is found to not be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
~~Risks Related to Intellectual Property Rights~~
~~We may not be able to protect our proprietary technology in the marketplace.~~
~~We depend on our ability to protect our proprietary technology. We rely on trade secret, patent, copyright and trademark laws, and confidentiality, licensing and other agreements with~~investors, employees, and ~~third parties, all~~fewer business development opportunities.
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Table of which offer only limited protection. Our success depends in large part on our ability and any future licensee’s ability to maintain our patents and to obtain additional patent protection in the United States and other countries with respect to our proprietary technology and products. We believe we will be able to obtain, through prosecution of our pending patent applications, additional patent protection for our proprietary technology. If we are compelled to spend significant time and money protecting or enforcing our patents, designing around patents held by others or licensing or acquiring, potentially for large fees, patents or other proprietary rights held by others, our business and financial prospects may be harmed. If we are unable to effectively protect the intellectual property that we own, other companies may be able to offer for sale the same or similar products containing the generically available active pharmaceutical ingredients in our product candidates, which could materially adversely affect our competitive business position and harm our business prospects. Our patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing the same or similar products or limit the length of term of patent protection that we may have for our product candidates. Even if our patents are unchallenged, they may not adequately protect our intellectual property, provide exclusivity for our product candidates or prevent others from designing around our claims. Any of these outcomes could impair our ability to prevent competition from third parties, which may have an adverse impact on our business.Contents

The patent positions of pharmaceutical products are often complex and uncertain. The breadth of claims allowed in pharmaceutical patents in the United States and many jurisdictions outside of the United States is not consistent. For example, in many jurisdictions the support standards for pharmaceutical patents are becoming increasingly strict. Some countries prohibit method of treatment claims in patents. Changes in either the patent laws or interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or create uncertainty. In addition, publication of information related to our current product candidates and potential products may prevent us from obtaining or enforcing patents relating to these product candidates and potential products, including without limitation transdermal delivery systems and methods of using such transdermal delivery systems. Our product candidates contain generically available active pharmaceutical ingredients. As a

result, new chemical entity patents directed to the active pharmaceutical ingredients in our product candidates, which are generally believed to offer the strongest form of patent protection, are not available for our product candidates.
~~Patents that we own or may license in the future do not necessarily ensure the protection of our intellectual property for a number of reasons, including without limitation the following:~~
·                  ~~The active pharmaceutical ingredients in our product candidates are generic and therefore our patents do not include claims directed solely to the active pharmaceutical ingredients;~~
·                  ~~Our patents may not be broad or strong enough to prevent competition from other products that are identical or similar to our product candidates using the same active pharmaceutical ingredients;~~
·                  There can be no assurance that the term of patent protection will be long enough for our company to realize sufficient economic value under the patents following commercialization of our product candidates;
·                  We do not expect, upon approval of our NDA, to receive patent term restoration under the Hatch-Waxman Act for the patents that have been, or will be, submitted to the FDA for listing in the Orange Book;
·                  Our issued patents and pending patent applications that may issue as patents in the future may not prevent entry into the U.S. market or other markets of generic versions of our Twirla and AG890 product candidates;
·                  Our patents may face paragraph IV challenges from potential generic of 505(b)(2) applicants, asserting that our applicable patents are invalid, enforceable, or will not be infringed by the manufacture, use, or sale of the competitive drug product;
·                  ~~We do not at this time own or control issued foreign patents in all markets that would prevent generic entry into some markets for our product candidates;~~
·                  ~~We may be required to disclaim part of the term of one or more patents;~~
·                  ~~There may be prior art of which we are not aware that may affect the validity or enforceability of one or more patent claims;~~
·                  There may be prior art of which we are aware, which we do not believe affects the validity or enforceability of a patent claim, but which, nonetheless, ultimately may be found to affect the validity or enforceability of a patent claim;
·                  ~~There may be other patents issued to others that will affect our freedom to operate;~~
·                  ~~If our patents are challenged, a patent office or a court could determine that they are invalid or unenforceable;~~
·                  ~~There might be changes in the law that governs patentability, validity and infringement of our patents that adversely affects the scope or enforceability of our patent rights;~~
·                  ~~A court could determine that a competitor’s technology or product that is the same as or similar to, our product candidates does not infringe our patents; and~~
·                  ~~Our patents could irretrievably lapse due to failure to pay fees or otherwise comply with regulations or could be subject to compulsory licensing.~~
~~If we encounter delays in our development or clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced.~~
Our competitors may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner. Our competitors may seek to market generic versions of any approved products by submitting abbreviated new drug applications to the FDA in which our competitors claim that our patents are invalid, unenforceable or not infringed. Alternatively, our competitors may seek approval to market their own products that are the same as, similar to or otherwise competitive with our product candidates. In these circumstances, we may need to defend or assert our patents, by means including filing lawsuits alleging patent infringement. In any of these types of proceedings, a court or government agency with jurisdiction may find our patents invalid, unenforceable or not infringed. We may also fail to identify patentable aspects of our research and development before it is too late to obtain patent protection. Even if we have valid and enforceable patents, these patents still may not provide protection against competing products or processes sufficient to achieve our business objectives.
The issuance of a patent is not conclusive as to its inventorship, scope, ownership, priority, validity or enforceability. In that regard, third parties may challenge our patents in the courts or patent offices in the United States and abroad. Such challenges may result in loss of exclusivity or freedom to operate or in patent claims being narrowed, invalidated or held unenforceable, in whole or in part, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our technology and potential products. In addition, given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting such candidates might expire or be held invalid or unenforceable before our company can realize sufficient economic value following commercialization of our product candidates.
Our intellectual property portfolio is currently comprised of issued patents and pending patent applications. If our issued patents are found to be invalid, not enforceable or not infringed by competitor products, or pending patent applications fail to issue or fail to issue with a scope that is meaningful to our product candidates, our business will be adversely affected.
There can be no assurance that our pending patent applications will result in issued patents in the United States or foreign jurisdictions in which such applications are pending. Even if patents do issue on any of these applications, there can be no assurance that a third party will not challenge their validity or enforceability, that we will obtain sufficient claim scope or term in those patents to prevent a third party from competing successfully with our product candidates~~, or that, even if our patents are found to be valid, enforceable, and infringed, a legal tribunal would enjoin infringing activity.~~
~~We may not be able to enforce our intellectual property rights throughout the world.~~
The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection, especially those relating to life sciences. To the extent that we have obtained or are able to obtain patents or other intellectual property rights in any foreign jurisdictions, it may be difficult for us to stop the infringement of our patents or the misappropriation of other intellectual property rights. For example, some foreign countries have compulsory licensing laws under which a patent owner must grant licenses to third parties. In addition, many countries limit the availability of certain types of patent rights and enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit.
Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our technology and product candidates, and the enforcement of intellectual property.
~~Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.~~
On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO, and may become involved in post-grant proceedings including reexamination, post-grant review, inter-partes review, or derivation or interference proceedings challenging our patent rights or the patent rights of others. An adverse determination in any such submission, proceeding or litigation could reduce the scope or enforceability of, or invalidate, our patent rights, which could adversely affect our competitive position.
The USPTO has developed regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, did not become effective until March 16, 2013. However, the full impact of the Leahy-Smith Act and the courts’ review of any appeals to related proceedings, is in its early stages. Accordingly, the full impact that the Leahy-Smith Act will have on the operation of our business is not clear. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, as well as our ability to bring about timely favorable resolution of any disputes involving our patents and the patents of others.
Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for noncompliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in unenforceability, invalidity, abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in unenforceability, invalidity, abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we or any future licensors fail to maintain the patents and patent applications covering our product candidates, our competitive position would be adversely affected.
We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing our products, when and if approved.
Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties. For example, there could be issued patents of which we are not aware that our current or future product candidates infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe.
Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in the scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. There may be currently pending applications of which we are unaware that may later result in issued patents that our current or future product candidates infringe. For example, pending applications may exist that claim or can be amended to claim subject matter that our current or future product candidates infringe. Competitors may file continuing patent applications claiming priority to already issued patents in the form of continuation, divisional or continuation-in-part applications, in order to maintain the pendency of a patent family and attempt to cover our product candidates.
Third parties may assert that we are employing their proprietary technology without authorization and may sue us for patent or other intellectual property infringement or misappropriation. These lawsuits are costly and could adversely affect our results of operations and divert the attention of managerial and scientific personnel. If we are sued for patent infringement, we would need to demonstrate that our product candidates or methods either do not infringe the claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this. Proving invalidity or unenforceability is difficult. For example, in the United States, proving invalidity requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel could be diverted in pursuing these proceedings, which could have a material adverse effect on us. In addition, we may not have sufficient resources to bring these actions to a successful conclusion. If a court holds that any third-party patents are valid, enforceable and cover our product candidates or their use, the holders of any of these patents may be able to block our ability to commercialize our product candidates unless we acquire or obtain a license under the applicable patents or until the patents expire. We may not be able to enter into licensing arrangements or make other arrangements at a reasonable cost or on reasonable terms. Any inability to secure licenses or alternative technology could result in delays in the introduction of our product candidates or lead to prohibition of the manufacture or sale of product candidates by us. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be found liable for monetary damages, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information, know-how or trade secrets could have a similar negative impact on our business. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.
We may be subject to claims that we or our employees have misappropriated the intellectual property, including know-how or trade secrets, of a third party, or that claim ownership of what we regard as our own intellectual property.
Many of our employees, consultants and contractors were previously employed at or engaged by biotechnology companies or other pharmaceutical companies, including our competitors or potential competitors. Some of these employees, consultants and contractors, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment. Although we try to ensure that our employees, consultants and contractors do not use the intellectual property and other proprietary information or know-how or trade secrets of others in their work for us, we may be subject to claims that we or these employees, consultants and contractors have used or disclosed such intellectual property, including know-how, trade secrets or other proprietary information. Litigation may be necessary to defend against these claims. We are not aware of any threatened or pending claims related to these matters or concerning agreements with our senior management, or other of our employees, consultants and contractors, but litigation may be necessary in the future to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, or personnel or access to consultants and contractors. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.
In addition, while we typically require our employees, consultants and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own, which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending against such claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.
~~We may be unable to adequately prevent disclosure of trade secrets and other proprietary information.~~
We rely on trade secrets to protect our proprietary technological advances and know-how, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. We rely in part on confidentiality agreements with our employees, consultants, contractors, outside scientific collaborators, sponsored researchers and other advisors, including the third parties we rely on to manufacture our product candidates, to protect our trade secrets and other proprietary information. However, any party with whom we have executed such an agreement may breach that agreement and disclose our proprietary information, including our trade secrets. Accordingly, these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights. In addition, others may independently discover our trade secrets and proprietary information. Further, the FDA, as part of its Transparency Initiative, a proposal to increase disclosure and make data more accessible to the public, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all. Failure to obtain or maintain trade secret protection could enable competitors to use our proprietary information to develop products that compete with our products or cause additional, material adverse effects upon our competitive business position and financial results.
~~Any lawsuits relating to infringement of intellectual property rights brought by or against us will be costly and time consuming and may adversely impact the price of our common stock.~~
We may be required to initiate litigation to enforce or defend our intellectual property rights. These lawsuits can be very time consuming and costly. There is a substantial amount of litigation involving patent and other intellectual property rights in the pharmaceutical industry generally. Such litigation or proceedings could substantially increase our operating expenses and reduce the resources available for development activities or any future sales, marketing or distribution activities.
In infringement litigation, any award of monetary damages we receive may not be commercially valuable. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information and trade secrets could be compromised by disclosure during litigation. Moreover, there can be no assurance that we will have sufficient financial or other resources to file and pursue such infringement claims, which typically last for years before they are resolved. Further, any claims we assert against a perceived infringer could provoke these parties to assert counterclaims against us alleging that we have infringed their patents. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.
~~In addition, our patents and patent applications in the United States and other jurisdiction could face other challenges, such as derivation or interference proceedings, opposition proceedings,~~ ~~inter partes~~ review, reexamination proceedings, third party submissions of prior art, and other forms of post-grant challenges. In the United States, for example, post-grant review, which is similar to opposition proceedings available in many countries other than the U.S., was newly established by the Leahy-Smith Act. Any of these challenges, if successful, could result in the invalidation of, or in a narrowing of the scope or preventing the issuance of, any of our patents and patent applications subject to challenge. Any of these challenges, regardless of their success, would likely be time consuming and expensive to defend and resolve and would divert our management and scientific personnel’s time and attention.
In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the market price of our common stock.
~~Intellectual property disputes could cause us to spend substantial resources and distract our personnel from their normal responsibilities.~~
Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings.
~~Risks Related to the Development of Our Additional Product Candidates~~
If we fail to develop and commercialize Twirla and our current pipeline of additional product candidates, our prospects for future growth and our ability to reach or sustain profitability may be limited.
A key element of our long-term strategy is to develop, obtain regulatory approval for and commercialize our portfolio of product candidates in addition to Twirla. To do so, we plan to utilize our proprietary transdermal delivery technology, Skinfusion, to develop additional product candidates. We may not be successful in our efforts to develop our portfolio of additional product candidates, and any product candidates we do develop may not produce commercially viable products that safely and effectively treat their indicated conditions. To date, our efforts have identified three additional product candidates in addition to Twirla, including AG200-ER, which is a regimen designed to allow a woman to extend the length of her cycle, AG200-SP, which is a regimen designed to provide shorter, lighter periods, and AG890, which is a progestin-only contraceptive patch intended for use by women who are unable or unwilling to take estrogen. AG200-SP and AG200-ER are intended to be Twirla line extensions that would expand the use of Twirla beyond its initial approved use. In July 2016, we began preparations for an initial Phase 2 clinical trial examining the use of AG200-SP along with a smaller lower dose combination ethinyl estradiol/levonorgestrel patch (SmP) in the fourth week of the woman’s cycle. We have decided to postpone the trial and will continue to evaluate the timing for initiating dosing of subjects for this Phase 2 clinical trial, which is dependent on financial and other capital resources. Our planned Phase 2 clinical trial of AG200-SP (SmP) is only the initial clinical trial in this program and AG200-SP (SmP) may require additional clinical trials to establish the safety and efficacy of this product candidate. The other product candidates in our pipeline will likely require additional product development efforts to optimize patch formulations and dosing. In addition, we will need to conduct additional clinical trials to establish the safety and efficacy of these product candidates which will require additional capital. Our ability to develop these product candidates, in particular AG200-SP and AG200-ER, could be significantly affected by our inability to get Twirla approved. Substantially all of our resources are currently dedicated to developing and seeking regulatory approval for Twirla. We will require additional capital to advance the development of our other product candidates.
Our development programs may initially show promise in identifying potential product leads, yet fail to produce product candidates for clinical development. In addition, identifying new treatment needs and product candidates requires substantial technical, financial and human resources on our part. If we are unable to obtain development partners or additional development program funding, or to continue to devote substantial technical and human resources to such programs, we may have to delay or abandon these programs. Any product candidate that we successfully identify may require substantial additional development efforts prior to commercial sale, including preclinical studies, extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities. All product candidates are susceptible to the risks of failure that are inherent in pharmaceutical product development.
~~We may be unable to license or acquire suitable additional product candidates or technologies from third parties for a number of reasons.~~
The licensing and acquisition of pharmaceutical products is competitive. A number of more established companies are also pursuing strategies to license or acquire products. These established companies may have a competitive advantage over us due to their size, cash resources or greater clinical development and
commercialization capabilities. In addition, we expect competition in acquiring product candidates to increase, which may lead to fewer suitable acquisition opportunities for us as well as higher acquisition prices.
~~Other factors that may prevent us from licensing or otherwise acquiring suitable product candidates include the following:~~
·                  ~~We may be unable to license or acquire the relevant technology on terms that would allow us to make an appropriate return on our investment in such product;~~
·                  ~~Companies that perceive us to be their competitor may be unwilling to assign or license their product rights to us;~~
·                  ~~We may be unable to identify suitable products or product candidates within our areas of expertise; or~~
·                  ~~We may not have sufficient funds to acquire, develop or commercialize additional product candidates or technologies.~~
~~Risks Related to Our Business Operations and Industry~~
~~In order to establish our sales and marketing infrastructure, we will need to grow the size of our organization, and we may experience difficulties in managing this growth.~~
As of September 30, 2017, we had a total of 19 full-time employees, and we use third-party consultants to assist with our current sales and marketing functions. As our development and commercialization plans and strategies develop, we expect to need to expand the size of our employee base for managerial, operational, sales, marketing, financial and other resources. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. In addition, our management may have to divert a disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these growth activities. Our future financial performance and our ability to commercialize Twirla, if approved, and any other future product candidates and our ability to compete effectively will depend, in part, on our ability to effectively manage any future growth.
~~If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.~~
Our ability to compete in the highly competitive pharmaceuticals industry depends in large part upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel. In order to induce valuable employees to remain with us, we have provided these employees with stock options that vest over time. The value to employees of stock options that vest over time is significantly affected by movements in our stock price that we cannot control and may at any time be insufficient to counteract more lucrative offers from other companies.
Our management team has expertise in many different aspects of drug development and commercialization. Competition for skilled personnel in our market is intense and competition for experienced personnel may limit our ability to hire and retain highly qualified personnel on acceptable terms. Despite our efforts to retain valuable employees, members of our management, scientific and medical teams may terminate their employment with us on short notice. We have employment agreements with our named executive officers which includes Alfred Altomari, our Chairman and Chief Executive Officer. The employments agreement provide for at-will employment, which means that Mr. Altomari or any of our other employees could leave our employment at any time, with or without notice. The loss of the services of any of our executive officers or other key employees could potentially harm our business, operating results or financial condition. In particular, we believe that the loss of the services of Mr. Altomari, or Dr. Elizabeth Garner, our Chief Medical Officer, may have a material adverse effect on our business. We do not currently carry “key person” insurance on the lives of members of executive management. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel.
Other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than those that we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate of and success with which we can develop and commercialize product candidates would be limited.
~~If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of Twirla or our other product candidates, if approved.~~
We face a potential risk of product liability as a result of the clinical testing of Twirla and our other product candidates and will face an even greater risk if we commercialize Twirla or our other product candidates, if approved or any other current or future product candidate. For example, we may be sued if any product candidate we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of the product candidate subject to such claims. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:
·                  ~~Decreased demand for Twirla or any future product candidates that we may develop;~~
·                  ~~Injury to our reputation;~~
·                  ~~Withdrawal of clinical trial participants;~~
·                  ~~Costs to defend any related litigation;~~
·                  ~~A diversion of management’s time and our resources;~~
·                  ~~Substantial monetary awards to trial participants or patients;~~
·                  ~~Product recalls, withdrawals or labeling, marketing or promotional restrictions;~~
·                  ~~Loss of revenue;~~
·                  ~~The inability to commercialize Twirla or our other product candidates, if approved;~~
·                  ~~A decline in our stock price; and~~
·                  ~~Exposure to adverse publicity.~~
We have obtained limited product liability insurance coverage for our products and our clinical trials with a $10.0 million annual aggregate coverage limit. Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of product candidates we develop. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
~~We may acquire businesses or products, or form strategic alliances in the future, and we may not realize the benefits of such acquisitions or alliances.~~
We may acquire additional businesses or products, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new products resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction.
~~Our business is affected by macroeconomic conditions.~~
Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and foreign currency exchange rates, and overall economic conditions and uncertainties, including those resulting from political instability and the current and future conditions in the global financial markets. For instance, if inflation or other factors were to significantly increase our business costs, it may not be feasible to pass through price increases to patients. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the value of our investments and our ability to liquidate our investments in order to fund our operations, if necessary.
Interest rates and the ability to access credit markets could also adversely affect the ability of patients, payors and distributors to purchase, pay for and effectively distribute our products if and when approved. Similarly, these macroeconomic factors could affect the ability of our current or potential future contract manufacturers, sole-source or single-source suppliers, or licensees to remain in business or otherwise manufacture or supply our product candidates. Failure by any of them to remain in business could affect our ability to manufacture product candidates.
~~We continue to incur significant increased costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives.~~
As a public company, we continue to incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the NASDAQ Global Market, impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure controls and internal control over financial reporting and changes in corporate governance practices. Our management and other personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our legal and financial compliance costs and have made some activities more time-consuming and costly. We estimate that we will annually incur approximately $2.0 million in expenses in response to these requirements.
Section 404(a) of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the SEC. However, for as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) December 31, 2019; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. We will incur substantial accounting expense and expend significant management efforts to comply with internal control over financial reporting requirements. We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with these requirements in a timely manner or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, and we could be subject to sanctions or investigations by the NASDAQ Global Market, the SEC or other regulatory authorities, which would require additional financial and management resources.
~~Business interruptions could delay us in the process of developing our product candidates and could disrupt our sales.~~
Our headquarters are located in Princeton, New Jersey, and Corium, our contract manufacturer, is located in Grand Rapids, Michigan. We are vulnerable to natural disasters, such as severe storms and other events that could disrupt our or Corium’s operations. We do not carry insurance for natural disasters and we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our business operations.
~~Our business and operations would suffer in the event of system failures.~~
Despite the implementation of security measures, our internal computer systems, and those of our CROs and other third parties on which we rely, are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product candidates could be delayed.
Our employees, independent contractors, principal investigators, CROs, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements and insider trading, which could significantly harm our business.
We are exposed to the risk that employees, independent contractors, principal investigators, CROs, consultants, commercial partners and vendors may engage in fraudulent or other illegal activity, fraud or other misconduct. Misconduct by these parties could include intentional, reckless or negligent conduct or disclosure of unauthorized activities to us that violates: (i) the law and regulations of the FDA and non-U.S. regulators, including those laws that require the reporting of true, complete and accurate information to the FDA and non-U.S. regulators, (ii) healthcare fraud and abuse laws and regulations in the United States and abroad and (iii) laws that require the true, complete and accurate reporting of financial information or data. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct in violation of these laws may also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. We have adopted a code of conduct, but it is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including regulatory enforcement actions, the imposition of significant civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, corporate integrity agreements, contractual damages,
~~reputational harm, diminished profits and future earnings and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations.~~
Our ability to use net operating loss and tax credit carryforwards and certain built-in losses to reduce future tax payments may be limited by provisions of the Internal Revenue Code, and may be subject to further limitation as a result of our initial public offering.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, contain rules that limit the ability of a company that undergoes an ownership change, which is generally any change in ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss and tax credit carryforwards and certain built-in losses recognized in years after the ownership change. These rules generally operate by focusing on ownership changes involving stockholders owning, directly or indirectly, 5% or more of the stock of a company and any change in ownership arising from a new issuance of stock by the company. Generally, if an ownership change occurs, the yearly taxable income limitation on the use of net operating loss and tax credit carryforwards and certain built-in losses is equal to the product of the applicable long-term tax exempt rate and the value of the company’s stock immediately before the ownership change. We may be unable to offset future taxable income, if any, with losses, or our tax liability with credits, before such losses and credits expire and therefore would incur larger federal income tax liability.
In addition, it is possible that the transactions relating to our initial public offering, either on a standalone basis or when combined with future transactions, has caused us to undergo one or more additional ownership changes. In that event, we generally would not be able to use our pre-change loss or credit carryovers or certain built-in losses prior to such ownership change to offset future taxable income in excess of the annual limitations imposed by Sections 382 and 383. We have not completed a study to assess whether an ownership change has occurred, or whether there have been multiple ownership changes since our inception.
~~Risks Related to Ownership of Our Common Stock~~
~~An active trading market for our common stock may not be sustained.~~
In May 2014, we closed our initial public offering. Prior to our initial public offering, there was no public market for shares of our common stock. Although we have completed our initial public offering and shares of our common stock are listed and trading on The NASDAQ Global Market, an active trading market for our shares may not be sustained. If an active market for our common stock does not continue, it may be difficult for our stockholders to sell their shares without depressing the market price for the shares or sell their shares at or above the prices at which they acquired their shares or sell their shares at the time they would like to sell. Any inactive trading market for our common stock may also impair our ability to raise capital to continue to fund our operations by selling shares.
~~We expect that our stock price may fluctuate significantly.~~
Prior to our initial public offering, you could not buy or sell our common stock publicly. The trading price of our common stock is highly volatile and is subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume. In addition to the factors discussed in this “Risk Factors” section and elsewhere in this quarterly report, these factors include:
·                  Any delay in filing our response to the CRL received from the FDA with respect to Twirla and any adverse development or perceived adverse development with respect to the FDA’s review of our response;
·                  ~~Adverse results in our SECURE clinical trial for Twirla;~~
·                  ~~Our failure to commercialize Twirla, if approved, or develop and commercialize additional product candidates;~~
·                  ~~Unanticipated efficacy, safety or tolerability concerns related to the use of Twirla;~~
·                  ~~Regulatory actions with respect to Twirla;~~
·                  ~~Inability to obtain adequate product supply of Twirla or inability to do so at acceptable prices;~~
·                  ~~Adverse results or delays in our clinical trials for our other product candidates;~~
·                  ~~Changes in laws or regulations applicable to Twirla or any future product candidates, including but not limited to clinical trial requirements for approvals;~~
·                  ~~Actual or anticipated fluctuations in our financial condition and operating results;~~
·                  ~~Actual or anticipated changes in our growth rate relative to our competitors;~~
·                  ~~Competition from existing products or new products that may emerge;~~
·                  ~~Announcements by us, our collaborators or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;~~
·                  ~~Failure to meet or exceed financial estimates and projections of the investment community or that we provide to the public;~~
·                  ~~Issuance of new or updated research or reports by securities analysts;~~
·                  ~~Fluctuations in the valuation of companies perceived by investors to be comparable to us;~~
·                  ~~Share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;~~
·                  ~~Additions or departures of key management or scientific personnel;~~
·                  ~~Disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;~~
·                  ~~Announcement or expectation of additional debt or equity financing efforts;~~
·                  ~~Sales of our common stock by us, our insiders or our other stockholders; and~~
·                  ~~General economic and market conditions.~~
These and other market and industry factors may cause the market price and demand for our common stock to fluctuate substantially, regardless of our actual operating performance, which may limit or prevent investors from readily selling their shares of common stock and may otherwise negatively affect the liquidity of our common stock. In addition, the stock market in general, and the NASDAQ Global Market and the stock prices of pharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past, when the market price of a stock has been volatile, holders of that stock have instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management. For example, ~~On January 6, 2017, and January 20, 2017, two previously disclosed complaints captioned~~ ~~Peng v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~~~, No. 17-cv-119 (D.N.J.), and~~ ~~Lichtenthal v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~, No. 17-cv-405 (D.N.J.), respectively, were filed in the United States District Court for the District of New Jersey on behalf of a putative class of investors who purchased shares of the Company’s common stock from March 9, 2016, through January 3, 2017. The complaints alleged violations of the federal securities laws based on public statements made regarding our Phase 3 SECURE clinical trial and sought an
~~unspecified amount of damages to be determined at trial.~~ ~~We denied all allegations in the complaints.~~ ~~On May 15, 2017, the complaints were consolidated as~~ ~~In re Agile Therapeutics, Inc. Securities Litigation~~, Master File No. 17-cv-119 (D.N.J.), and Hoyt W. Clark was appointed as class representative for the putative class. On June 26, 2017, Mr. Clark agreed to dismiss the case voluntarily, without payment by us of any consideration and with each side bearing its own attorneys’ fees and costs. The presiding judge dismissed the consolidated action with prejudice as to all defendants on July 13, 2017.
~~Future sales of shares of our common stock by existing stockholders could cause our stock price to decline.~~
If our existing stockholders sell substantial amounts of our common stock in the public market, or if the public perceives that such sales could occur, this could have an adverse impact on the market price of our common stock, even if there is no relationship between such sales and the performance of our business.
As of November 3, 2017, we had 34,186,342 shares of common stock outstanding. Of these shares, 30,450,044 shares of common stock are freely tradeable, without restriction, in the public market. Moreover, a relatively small number of our stockholders own large blocks of shares. We cannot predict the effect, if any, that public sales of these shares or the availability of these shares for sale will have on the market price of our common stock.
In addition, the 4,063,312 shares subject to outstanding options and restricted stock units under our stock option plans and the 245,833 shares reserved for future issuance under our stock option plans will become eligible for sale in the public market in the future, subject to certain legal and contractual limitations.
~~We may be subject to securities litigation, which is expensive and could divert management attention.~~
Our market price of our common stock may be volatile, and in the past companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation. Litigation of this type could result in substantial costs and diversion of management’s attention and resources, which could adversely impact our business. Any adverse determination in litigation could also subject us to significant liabilities. ~~On January 6, 2017, and January 20, 2017, two previously disclosed complaints captioned~~ ~~Peng v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~~~, No. 17-cv-119 (D.N.J.), and~~ ~~Lichtenthal v. Agile Therapeutics, Inc., Alfred Altomari, and Elizabeth Garner~~, No. 17-cv-405 (D.N.J.), respectively, were filed in the United States District Court for the District of New Jersey on behalf of a putative class of investors who purchased shares of the Company’s common stock from March 9, 2016, through January 3, 2017. The complaints alleged violations of the federal securities laws based on public statements made regarding our Phase 3 SECURE clinical trial and sought an unspecified amount of damages to be determined at trial. We denied all allegations in the complaints. On May 15, 2017, the complaints were consolidated as ~~In re Agile Therapeutics, Inc. Securities Litigation~~, Master File No. 17-cv-119 (D.N.J.), and Hoyt W. Clark was appointed as class representative for the putative class. On June 26, 2017, Mr. Clark agreed to dismiss the case voluntarily, without payment by us of any consideration and with each side bearing its own attorneys’ fees and costs. The presiding judge dismissed the consolidated action with prejudice as to all defendants on July 13, 2017.
Our existing principal stockholders, executive officers and directors own a significant percentage of our common stock and will be able to exert a significant control over matters submitted to our stockholders for approval.
As of September 30, 2017, our executive officers, directors, director nominees, holders of 5% or more of our capital stock and their respective affiliates together beneficially owned approximately 50.2% of our outstanding voting stock.
This significant concentration of share ownership may adversely affect the trading price for our common stock because investors often perceive disadvantages in owning stock in companies with controlling stockholders. As a result, these stockholders, if they acted together, could significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions. These stockholders may be able to determine all matters requiring stockholder approval. The interests of these stockholders may not always coincide with our interests or the interests of other stockholders. This may also
prevent or discourage unsolicited acquisition proposals or offers for our common stock that other stockholders may feel are in their best interest and our large stockholders may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.
We will have broad discretion in how we use the net proceeds from our public offerings. We may not use these proceeds effectively, which could affect our results of operations and cause our stock price to decline.
We will have considerable discretion in the application of the net proceeds from our completed public offerings. We intend to use the majority of the net proceeds from our completed public offerings to obtain marketing approval for Twirla, begin preparations for the U.S. commercial launch of Twirla, complete the equipment qualification and validation related to the expansion of Corium’s manufacturing capabilities in preparation for potential commercial operations, develop our product pipeline, and for working capital and other general corporate purposes, which may include funding for the hiring of additional personnel, validation of capital equipment and the costs of operating as a public company. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds from our recently completed private placement and public offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from our recently completed public offerings in a manner that does not produce income or that loses value.
We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) December 31, 2019; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
~~Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.~~
Because of the exemptions from various reporting requirements allowed to us as an “emerging growth company” we may be less attractive to investors and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.
If we fail to maintain an effective system of internal control over financial reporting in the future, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses or that may
require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begin its Section 404 reviews, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the NASDAQ Global Market, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.
~~Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.~~
We are subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, of the Exchange Act. Our disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by us in reports we file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.
We have never paid dividends on our common stock and we do not anticipate paying any dividends in the foreseeable future. Consequently, any gains from an investment in our common stock will likely depend on whether the price of our common stock increases.
We have not paid dividends on our common stock to date and we currently intend to retain our future earnings, if any, to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future. Consequently, in the foreseeable future, you will likely only experience a gain from your investment in our common stock if the price of our common stock increases.
~~If equity research analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.~~
The trading market for our common stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our common stock could decline if one or more equity analysts downgrade our common stock or if analysts issue other unfavorable commentary or cease publishing reports about us or our business.
Anti-takeover provisions in our organizational documents and Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders to replace or remove our current management.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:
·                  ~~Authorize the issuance of preferred stock which can be created and issued by the board of directors without prior stockholder approval, with rights senior to those of our common stock;~~
·                  ~~Provide for a classified board of directors, with each director serving a staggered three-year term;~~
·                  ~~Prohibit our stockholders from filling board vacancies, calling special stockholder meetings or taking action by written consent;~~
·                  ~~Provide for the removal of a director only with cause and by the affirmative vote of the holders of 75% or more of the shares then entitled to vote at an election of our directors;~~
·                  ~~Require advance written notice of stockholder proposals and director nominations; and~~
·                  ~~Require any action instituted against our officers or directors in connection with their service to the Company to be brought in the state of Delaware.~~
In addition, we are subject to the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy contest involving our company. This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline
Item 6. Exhibits.
The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which is incorporated herein by reference.
Exhibit Index

Exhibit

Number

Description of Document
~~Number~~

~~Description of Document~~
4.1

Form of Series A-1 Warrant (incorporated by reference, Exhibit 4.1 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

4.2

Form of Series A-2 Warrant (incorporated by reference, Exhibit 4.2 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

4.3

Form of Series B Pre-Funded Warrant (incorporated by reference, Exhibit 4.3 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

4.4

Form of Placement Agent Warrant (incorporated by reference, Exhibit 4.4 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

10.1

Fifth Amendment to Credit Agreement and Guaranty among Agile Therapeutics, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto and Perceptive Credit Holdings III, LP, dated as of July 25, 2022.

10.2

Amendment No. 1 to Manufacturing and Commercialization Agreement, by and between Corium, Inc. and Agile Therapeutics, Inc., dated as of July 25, 2022, and Bill of Sale by Agile Therapeutics, Inc. to Corium, Inc., dated as of July 25, 2022.

10.3

Form of Securities Purchase Agreement, by and between Agile Therapeutics, Inc. and certain purchasers (incorporated by reference, Exhibit 10.1 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

31.1

Certification of the Registrant’s Chief Executive Officer ~~pursuant to Rule 13a-14(a)/15d-14(a), as adopted~~ pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002, dated November 6, 2017.~~2002.

31.2

Certification of the Registrant’s Chief Financial Officer ~~pursuant to Rule 13a-14(a)/15d-14(a), as adopted~~ pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002, dated November 6, 2017.~~2002.

~~32.1~~32.1**

Certification of the Registrant’s Chief Executive Officer ~~pursuant to 18 U.S.C. §1350, as adopted~~ pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002, November 6, 2017.~~2002.

~~32.2~~32.2**

Certification of the Registrant’s Chief Financial Officer ~~pursuant to 18 U.S.C. §1350, as adopted~~ pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002, November 6, 2017.~~2002.

101

~~Interactive data files pursuant to Rule 405 of Regulation S-T:~~The following materials from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022 formatted in Inline Extensible Business Reporting Language (XBRL): (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) the Notes to Financial Statements.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

** The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates them by reference.

Table of Contents

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November ~~6, 2017~~7, 2022
Agile Therapeutics, Inc.

By:
/s/ Alfred Altomari

Alfred Altomari

President and Chief Executive Officer ~~(Principal~~
(Principal Executive Officer)

~~Date: November 6, 2017~~

Date: November 7, 2022

By:
/s/ ~~Scott M. Coiante~~Jason Butch

~~Scott M. Coiante~~Jason Butch

Vice President and Chief Accounting Officer
(Principal Financial ~~Officer (Principal Financial and Accounting~~ Officer)

82

Delaware		23-2936302
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol	Name of exchange on which registered:
Common stock, par value $0.0001 per share	AGRX	The Nasdaq Capital Market

Large accelerated filer o◻		Accelerated filer x◻

Non-accelerated filer o⌧		Smaller reporting company o⌧
~~(Do not check if smaller reporting company)~~
		Emerging growth company x◻


PART I:I: FINANCIAL INFORMATION	16
Item 1. Financial Statements	16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1525
Item 3. Quantitative and Qualitative Disclosures About Market Risk	2738
Item 4. Controls and Procedures	2738

PART ~~II:~~II: OTHER INFORMATION
Item 1. Legal Proceedings	2939
Item 1A. Risk Factors	2939
Item 6. Exhibits	8040

	September 30, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	43,806		$	48,750
Prepaid expenses	1,161			2,768
Total current assets	44,967			51,518
Property and equipment, net	13,426			12,330
Other assets	18			18
Total assets	$	58,411		$	63,866

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,823		$	2,050
Accrued expenses	1,857			3,644
Loan payable, current portion	6,190			5,104
Warrant liability	90			172
Total current liabilities	10,960			10,970
Loan payable, long-term	5,887			10,607
Commitments and contingencies
Stockholders’ equity:
Common stock, $.0001 par value, authorized 150,000,000 shares; 34,158,004 shares issued and outstanding as of September 30, 2017 and 28,759,731 shares issued and outstanding as of December 31, 2016;	3			3
Additional paid-in capital	257,093			235,754
Accumulated deficit	(215,532		)	(193,468		)
Total stockholders’ equity	41,564			42,289
Total liabilities and stockholders’ equity	$	58,411		$	63,866

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Operating expenses:
Research and development	$	3,175		$	4,911		$	11,694		$	15,415
General and administrative	3,526			2,180			9,130			6,497
Total operating expenses	6,701			7,091			20,824			21,912
Loss from operations	(6,701		)	(7,091		)	(20,824		)	(21,912		)
Other income (expense)
Interest expense	(459		)	(784		)	(1,509		)	(1,879		)
Interest income	78			33			187			83
Change in fair value of warrants	(20		)	38			82			168
Loss before benefit from income taxes	(7,102		)	(7,804		)	(22,064		)	(23,540		)
Benefit from income taxes	—			—			—			—
Net loss	$	(7,102	)	$	(7,804	)	$	(22,064	)	$	(23,540	)

Net loss per share - basic and diluted	$	(0.22	)	$	(0.27	)	$	(0.74	)	$	(0.84	)

Weighted-average shares outstanding —basic and diluted	31,937,628			28,754,458			29,847,972			28,110,587

	Nine Months Ended September 30,
	2017			2016
Cash flows from operating activities
Net loss	$	(22,064	)	$	(23,540	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	16			14
Noncash stock based compensation	2,727			2,607
Noncash interest	520			759
Change in fair value of warrants	(82		)	(168		)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	1,606			595
Other assets	—			—
Accounts payable and accrued expenses	(1,473		)	(648		)
Net cash used in operating activities	(18,750		)	(20,381		)

Cash flows from investing activities
Acquisition of property and equipment	(771		)	(25		)
Net cash used in investing activities	(771		)	(25		)

Cash flows from financing activities
Cash paid for debt financing costs	—			(175		)
Principal payments on long-term debt	(4,035		)	(985		)
Return of principal payments on long-term debt	—			985
Proceeds from the issuance of common stock, net	18,536			37,527
Proceeds from exercise of stock options	76			329
Net cash provided by financing activities	14,577			37,681
Ne (decrease) increase in cash and cash equivalents	(4,944		)	17,275
Cash and cash equivalents, beginning of period	48,750			34,395
Cash and cash equivalents, end of period	$	43,806		$	51,670

Supplemental disclosure of noncash financing activities

Supplemental cash flow information
Interest paid	$	1,023		$	1,125
Income taxes paid	$	—		$	—

	Level 1		Level 2		Level 3
September 30, 2017
Assets:
Cash equivalents	$	43,745	$	—	$	—
Total assets at fair value	$	43,745	$	—	$	—
Liabilities:
Common stock warrants	$	—	$	—	$	90
Total liabilities at fair value	$	—	$	—	$	90


2022	$	66
2023		390
2024		398
2025		100
Total	$	954
Less: Interest		(127)
Present value of lease liability	$	827

Beginning balance at December 31, 2016	$	172
Change in fair value	(82		)
Ending balance at September 30, 2017	$	90

	September 30, 2017		December 31, 2016
Prepaid clinical trial expense	$	327	$	2,005
Prepaid insurance	626		665
Other	208		98
Total prepaid expenses	$	1,161	$	2,768

	September 30, 2017		December 31, 2016
Employee bonuses	$	946	$	1,041
Accrued clinical trial costs	281		1,908
Other	630		695
Total accrued liabilities	$	1,857	$	3,644

Manufacturing—commercialization		—		15		—		(56)
Stock-based compensation		90		134		284		362
Total research and development expenses	$	788	$	1,593	$	2,901	$	4,568

	Three months ended September 30,				Nine months ended September 30,
	(In thousands)
	2017		2016		2017		2016

Clinical development	$	588	$	3,030	$	2,609	$	9,942
Regulatory	95		72		1,191		225
Personnel related	675		665		2,129		1,910
Manufacturing — commercialization	1,379		470		4,082		1,431
Manufacturing	129		375		794		1,111
Stock-based compensation	309		299		889		796
Total research and development expenses	$	3,175	$	4,911	$	11,694	$	15,415

	Three months ended September 30,
	2017			2016			Change
	(In thousands)
Operating expenses:
Research and development	$	3,175		$	4,911		$	(1,736	)
General and administrative	3,526			2,180			1,346
Total operating expenses	6,701			7,091			(390		)
Other income (expenses)
Interest expense	(459		)	(784		)	325
Interest income	78			33			45
Change in fair value of warrants	(20		)	38			(58		)
Loss before income taxes	(7,102		)	(7,804		)	702
Benefit from income taxes	—			—			—
Net loss	$	(7,102	)	$	(7,804	)	$	702

	Nine months ended September 30,
	2017			2016			Change
	(In thousands)
Operating expenses:
Research and development	$	11,694		$	15,415		$	(3,721	)
General and administrative	9,130			6,497			2,633
Total operating expenses	20,824			21,912			(1,088		)
Other income (expenses)
Interest expense	(1,509		)	(1,879		)	370
Interest income	187			83			104
Change in fair value of warrants	82			168			(86		)
Loss before income taxes	(22,064		)	(23,540		)	1,476
Benefit from income taxes	—			—			—
Net loss	$	(22,064	)	$	(23,540	)	$	1,476

	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(In thousands)
Term loan	$	14,066	$	7,395	$	6,671	—		—
Operating lease	639		198		441				—
Total	$	14,705	$	7,593	$	7,112	$	—	$	—


Exhibit
Number		Description of Document
~~Number~~		~~Description of Document~~
4.1		Form of Series A-1 Warrant (incorporated by reference, Exhibit 4.1 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

4.2		Form of Series A-2 Warrant (incorporated by reference, Exhibit 4.2 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

4.3		Form of Series B Pre-Funded Warrant (incorporated by reference, Exhibit 4.3 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

4.4		Form of Placement Agent Warrant (incorporated by reference, Exhibit 4.4 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

10.1		Fifth Amendment to Credit Agreement and Guaranty among Agile Therapeutics, Inc., the guarantors from time to time party thereto, the lenders from time to time party thereto and Perceptive Credit Holdings III, LP, dated as of July 25, 2022.

10.2		Amendment No. 1 to Manufacturing and Commercialization Agreement, by and between Corium, Inc. and Agile Therapeutics, Inc., dated as of July 25, 2022, and Bill of Sale by Agile Therapeutics, Inc. to Corium, Inc., dated as of July 25, 2022.

10.3		Form of Securities Purchase Agreement, by and between Agile Therapeutics, Inc. and certain purchasers (incorporated by reference, Exhibit 10.1 to the Company’s Current Report on Form 8-K, file number 001-36464, filed on July 8, 2022.)

31.1		Certification of the Registrant’s Chief Executive Officer ~~pursuant to Rule 13a-14(a)/15d-14(a), as adopted~~ pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002, dated November 6, 2017.~~2002.

31.2		Certification of the Registrant’s Chief Financial Officer ~~pursuant to Rule 13a-14(a)/15d-14(a), as adopted~~ pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002, dated November 6, 2017.~~2002.

~~32.1~~32.1**		Certification of the Registrant’s Chief Executive Officer ~~pursuant to 18 U.S.C. §1350, as adopted~~ pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002, November 6, 2017.~~2002.

~~32.2~~32.2**		Certification of the Registrant’s Chief Financial Officer ~~pursuant to 18 U.S.C. §1350, as adopted~~ pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002, November 6, 2017.~~2002.

101		~~Interactive data files pursuant to Rule 405 of Regulation S-T:~~The following materials from the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2022 formatted in Inline Extensible Business Reporting Language (XBRL): (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity, (v) Statements of Cash Flows, and (vi) the Notes to Financial Statements.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)


Date: November ~~6, 2017~~7, 2022	Agile Therapeutics, Inc.


	By:	/s/ Alfred Altomari
		Alfred Altomari
		President and Chief Executive Officer ~~(Principal~~ (Principal Executive Officer)

~~Date: November 6, 2017~~
Date: November 7, 2022

	By:	/s/ ~~Scott M. Coiante~~Jason Butch
		~~Scott M. Coiante~~Jason Butch
		Vice President and Chief Accounting Officer (Principal Financial ~~Officer (Principal Financial and Accounting~~ Officer)