UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended SeptemberJune 30, 20222023
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-36395
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| DARÉ BIOSCIENCE, INC. (Exact Name of Registrant as Specified in its Charter) | |
Delaware (State or Other Jurisdiction of Incorporation) | | 20-4139823 (IRS Employer Identification No.) |
| | |
3655 Nobel Drive, Suite 260 San Diego, CA (Address of Principal Executive Offices) | (858) 926-7655 (Registrant’s telephone number, including area code) | 92122 (Zip Code) |
| | |
| (Former name, former address and former fiscal year, if changed since last report) |
| Securities registered pursuant to Section 12(b) of the Act: |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common Stock | DARE | Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
| Large Accelerated Filer | | o | | Accelerated filer | o |
| Non-accelerated filer | | x | | Smaller reporting company | x |
Emerging growth company | | o | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
As of NovemberAugust 9, 2022, 84,825,4812023, 87,785,166 shares of the Registrant’s Common Stock, par value $0.0001, were issued and outstanding.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, in particular “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations,” of Part I. Financial Information, and the information incorporated by reference herein contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this report, including statements regarding our strategy, future operations, future financial position, projected revenue, funding and expenses, prospects, plans and objectives of management, are forward-looking statements. Forward-looking statements, in some cases, can be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” "pursue," “should,” “would,” “contemplate,” "project,” “target,” “tend to,” or the negative version of these words and similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those factors described in Part II, Item 1A, "Risk Factors", in this report, and elsewhere in this report. Given these uncertainties, you should not place undue reliance on any forward-looking statement. The following factors are among those that may cause such differences:
•Inability to raise additional capital, under favorable terms or at all, and continue as a going concern;
•Failure to complete development of our product candidates or submit and obtain United States Food and Drug Administration, or FDA, or foreign regulatory authority approval and commercializefor our product candidates if approved, on projected timelines or budgets, or at all;
•Inability to demonstrate sufficient safety and efficacy of our product candidates;
•The timely supply of XACIATO™ and our clinical trial supplies, including their components as well as the finished product, in the quantities needed in accordance with current good manufacturing practices, our specifications and other applicable requirements;
•The performance of third parties on which we rely to conduct nonclinical studies and clinical trials of our product candidates;
•Our failure, or a failure of a strategic collaborator, to successfully commercialize our product candidates, if approved, or our failure to otherwise monetize our portfolio programs and assets;
•The termstiming and conditionsamount of our strategic collaborations, includingfuture royalty and milestone payments to us, if any, under our out-license agreements for commercialization of XACIATO and Ovaprene®;
•A decisionTermination by the collaborators with whom we have entered intoa collaborator of our respective out-license agreements for commercialization of XACIATO and Ovaprene, or, in the case of Ovaprene, a decision by the collaborator not to discontinue their interest in XACIATO and Ovaprene, respectively, or to terminate such agreement, ormake the failurelicense grant fully effective following its review of our out-license agreement for Ovaprene to become fully effective;the results of a pivotal clinical trial of Ovaprene;
•The performance of third parties on which we rely to commercialize, or assist us in commercializing, XACIATO and any future product;
•Difficulties with establishing and maintaining existing collaborations relating to the development and/or commercialization if approved, of our product candidates, or establishing new ones on a timely basis or on acceptable terms, or at all;
•Our lossThe terms and conditions of or inabilityany future strategic collaborations relating to attract, key personnel;our product candidates;
•The degree of market acceptance that XACIATO and any future product achieves;
•Coverage and reimbursement levels for XACIATO and any future product by government health care programs, private health insurance companies and other third-party payors;
•Our loss of, or inability to attract, key personnel;
•A change in the FDA's prior determination that the Center for Devices and Radiological Health would lead the review of a premarket approval application for potential marketing approval of Ovaprene;
•A change in regulatory requirements for our product candidates, including the development pathway pursuant to Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or the FDA's 505(b)(2) pathway;
•Unsuccessful clinical trial outcomes stemming from clinical trial designs, failure to enroll a sufficient number of patients, higher than anticipated patient dropout rates, failure to meet established clinical endpoints, undesirable side effects and other safety concerns;
•AdverseUnfavorable differences between preliminary, interim or topline clinical study data reported by us and final study results;
•Communication from the FDA or another regulatory authority, including a complete response letter, that itsuch agency does not accept or agree with our assumptions, estimates, calculations, conclusions or analyses of clinical or nonclinical study data regarding a product candidate, or that itsuch agency interprets or weighs the importance of study data differently than we have in a manner that negatively impacts the candidate's prospects for regulatory approval in a timely manner, or at all;
•Failure to monetize our portfolio through licenses, partnerships or other types of commercialization agreements, structured financings, or on our own;
•Failure to select product candidates that capitalize on the most scientifically, clinically or commercially promising or profitable indications or therapeutic areas within women's health including due to our limited financial resources;
•Loss or impairment of our in-licensed rights to develop and commercialize XACIATO and our product candidates;
•Our payment and other obligations under our in-license and acquisition agreements for XACIATO and our product candidates;
•Developments by our competitors that make XACIATO, or any potential product we develop, less competitive or obsolete;
•The impact of the macroeconomic conditions,Macroeconomic factors, including inflation, interest rates and recessionary pressures, geopolitical conflicts and events, public health emergencies such as the COVID-19 pandemic and any future pandemic, epidemic, or similar public health threat or natural disasters on our business, operations and financial condition, or on those of third parties on which we rely;disasters;
•ReducedWeak interest in women's health relative to other healthcare sectors byfrom the investment community or from pharmaceutical companies and other potential development and commercialization collaborators;
•Cyber-attacks, security breaches or similar events compromising our technology systems and data, our financial resources and other assets, or the technology systems and data of third parties on which we rely;
•Difficulty in introducing branded products in a market made up of generic products;
•Inability to adequately protect or enforce our, or our licensor’s, intellectual property rights;
•Lack of patent protection for the active ingredients in XACIATO and certain of our product candidates that expose those product candidatesthem to competition from other formulations using the same active ingredients;
•Higher risk of failure associated with product candidates in pre-clinical stages of development that may lead investors to assign them little to no value and make these assets difficult to fund;
•Dependence on grant funding for pre-clinical development of DARE-LARC1;
•Disputes or other developments concerning our intellectual property rights;
•Actual and anticipated fluctuations in our quarterly or annual operating results or results that differ from investors' expectations for such results;
•Price and volume fluctuations in the stock market, and in our stock in particular, which could cause investors to experience losses and subject us to securities class-action litigation;
•Failure to maintain the listing of our common stock on the Nasdaq Capital Market or another nationally recognized exchange;
•Development of unexpected safety, efficacy or quality concerns related to our product or product candidates or(or third-party products or product candidates that share similar characteristics or drug substances;substances), whether or not scientifically justified, leading to delays in or discontinuation of product development, product recalls or withdrawals, diminished sales, and/or other significant negative consequences;
•Product liability claims or governmental investigations;
•Strict government regulations on our business, including laws and regulations designed to control health care product pricing and various fraud and abuse laws, including, without limitation, the Inflation Reduction Act of 2022, the U.S. federal Anti-Kickback Statute, the U.S. federal False Claims Act and the U.S. Foreign Corrupt Practices Act;
•RegulationsChanges in government laws and regulations in the United States and other jurisdictions, including laws and regulations governing the production research, development, approval, clearance, manufacturing, supply, distribution, pricing and/or marketing of XACIATOour products, product candidates and any future products;related intellectual property, health care information and data privacy and security laws, transparency laws and fraud and abuse laws, and the enforcement thereof affecting our business; and
•Increased costs as a result of operating as a public company, and substantial time devoted by our management to compliance initiatives and corporate governance practices.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
All forward-looking statements in this report are current only as of the date of this report. We do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events, except as required by law.
TABLE OF CONTENTS
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| Item 1. | | |
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| Item 2. | | |
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| Item 3. | | |
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| Item 4. | | |
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| Item 1. | | |
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| Item 1A. | | |
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| Item 2. | | |
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| Item 3. | | |
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| Item 4. | | |
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| Item 5. | | |
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| Item 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Daré Bioscience, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| | | September 30,
2022 | | December 31,
2021 | | June 30,
2023 | | December 31,
2022 |
| | (unaudited) | | | | (unaudited) | | |
| Assets | Assets | | Assets | |
| Current assets | Current assets | | Current assets | |
| Cash and cash equivalents | Cash and cash equivalents | $ | 40,389,546 | | | $ | 51,674,087 | | Cash and cash equivalents | $ | 13,329,101 | | | $ | 34,669,605 | |
| | Other receivables | Other receivables | 2,292,041 | | | 1,145,317 | | Other receivables | 572,466 | | | 1,703,160 | |
| Prepaid expenses | Prepaid expenses | 6,885,498 | | | 2,476,612 | | Prepaid expenses | 8,069,622 | | | 6,665,988 | |
| | Other current assets | | Other current assets | 272,100 | | | — | |
| Total current assets | Total current assets | 49,567,085 | | | 55,296,016 | | Total current assets | 22,243,289 | | | 43,038,753 | |
| Property and equipment, net | Property and equipment, net | 72,833 | | | 26,041 | | Property and equipment, net | 45,785 | | | 64,908 | |
| | Other non-current assets | Other non-current assets | 736,514 | | | 485,120 | | Other non-current assets | 920,880 | | | 722,722 | |
| Total assets | Total assets | $ | 50,376,432 | | | $ | 55,807,177 | | Total assets | $ | 23,209,954 | | | $ | 43,826,383 | |
| Liabilities and stockholders’ equity | | | | |
| Liabilities and stockholders’ equity (deficit) | | Liabilities and stockholders’ equity (deficit) | | | |
| Current liabilities | Current liabilities | | Current liabilities | |
| Accounts payable | Accounts payable | $ | 3,477,192 | | | $ | 2,103,083 | | Accounts payable | $ | 6,541,115 | | | $ | 2,027,953 | |
| Accrued expenses | Accrued expenses | 4,136,330 | | | 3,136,244 | | Accrued expenses | 4,193,799 | | | 10,894,016 | |
| Deferred grant funding | Deferred grant funding | 14,836,416 | | | 10,542,983 | | Deferred grant funding | 13,694,085 | | | 18,303,567 | |
| Current portion of lease liabilities | Current portion of lease liabilities | 388,135 | | | 270,546 | | Current portion of lease liabilities | 271,825 | | | 398,391 | |
| Total current liabilities | Total current liabilities | 22,838,073 | | | 16,052,856 | | Total current liabilities | 24,700,824 | | | 31,623,927 | |
| Deferred license revenue | 1,000,000 | | | 1,000,000 | | |
| Deferred revenue | | Deferred revenue | 1,205,206 | | | 1,000,000 | |
| | Lease liabilities long-term | Lease liabilities long-term | 194,587 | | | — | | Lease liabilities long-term | 23,326 | | | 90,346 | |
| Total liabilities | Total liabilities | 24,032,660 | | | 17,052,856 | | Total liabilities | 25,929,356 | | | 32,714,273 | |
| Commitments and contingencies (Note 7) | Commitments and contingencies (Note 7) | | | | Commitments and contingencies (Note 7) | | | |
| Stockholders' equity | | |
| Stockholders' equity (deficit) | | Stockholders' equity (deficit) | |
| Preferred stock, $0.01 par value, 5,000,000 shares authorized; None issued and outstanding | Preferred stock, $0.01 par value, 5,000,000 shares authorized; None issued and outstanding | — | | | — | | Preferred stock, $0.01 par value, 5,000,000 shares authorized; None issued and outstanding | — | | | — | |
| Common stock, $0.0001 par value; 240,000,000 shares authorized; 84,825,481 and 83,944,119 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 8,482 | | | 8,394 | | |
| Common stock, $0.0001 par value; 240,000,000 shares authorized; 86,633,588 and 84,825,481 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | | Common stock, $0.0001 par value; 240,000,000 shares authorized; 86,633,588 and 84,825,481 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 8,663 | | | 8,482 | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | (530,740) | | | (154,973) | | Accumulated other comprehensive loss | (404,467) | | | (351,311) | |
| Additional paid-in capital | Additional paid-in capital | 151,997,447 | | | 149,027,802 | | Additional paid-in capital | 155,555,775 | | | 152,529,579 | |
| Accumulated deficit | Accumulated deficit | (125,131,417) | | | (110,126,902) | | Accumulated deficit | (157,879,373) | | | (141,074,640) | |
| Total stockholders' equity | 26,343,772 | | | 38,754,321 | | |
| Total liabilities and stockholders' equity | $ | 50,376,432 | | | $ | 55,807,177 | | |
| Total stockholders' equity (deficit) | | Total stockholders' equity (deficit) | (2,719,402) | | | 11,112,110 | |
| Total liabilities and stockholders' equity (deficit) | | Total liabilities and stockholders' equity (deficit) | $ | 23,209,954 | | | $ | 43,826,383 | |
|
See accompanying notes.
Daré Bioscience, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive LossIncome (Loss)
(Unaudited)
| | | Three months ended September 30, | | Nine months ended September 30, | | Three months ended June 30, | | Six months ended June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| Revenue | Revenue | | | | | | | | Revenue | | | | | | | |
| License fee revenue | License fee revenue | $ | — | | | $ | — | | | $ | 10,000,000 | | | $ | — | | License fee revenue | $ | — | | | $ | 10,000,000 | | | $ | — | | | $ | 10,000,000 | |
| Total revenue | Total revenue | — | | | — | | | 10,000,000 | | | — | | Total revenue | — | | | 10,000,000 | | | — | | | 10,000,000 | |
| | Operating expenses | Operating expenses | | Operating expenses | |
| General and administrative | General and administrative | 2,651,543 | | | 2,211,334 | | | 8,014,424 | | | 5,949,299 | | General and administrative | 2,920,672 | | | 2,792,894 | | | 6,258,098 | | | 5,362,881 | |
| Research and development | Research and development | 4,462,250 | | | 10,432,603 | | | 17,065,497 | | | 23,501,098 | | Research and development | 6,043,684 | | | 6,797,784 | | | 11,063,907 | | | 12,603,247 | |
| License fee expense | License fee expense | 25,000 | | | 25,000 | | | 75,000 | | | 75,000 | | License fee expense | 25,000 | | | 25,000 | | | 50,000 | | | 50,000 | |
| Total operating expenses | Total operating expenses | 7,138,793 | | | 12,668,937 | | | 25,154,921 | | | 29,525,397 | | Total operating expenses | 8,989,356 | | | 9,615,678 | | | 17,372,005 | | | 18,016,128 | |
| | Loss from operations | (7,138,793) | | | (12,668,937) | | | (15,154,921) | | | (29,525,397) | | |
| Income (loss) from operations | | Income (loss) from operations | (8,989,356) | | | 384,322 | | | (17,372,005) | | | (8,016,128) | |
| Other income | Other income | 118,950 | | | 1,508 | | | 150,406 | | | 1,686 | | Other income | 227,124 | | | 29,676 | | | 567,272 | | | 31,456 | |
| Gain on extinguishment of note payable | — | | | — | | | — | | | 369,887 | | |
| Net loss | $ | (7,019,843) | | | $ | (12,667,429) | | | $ | (15,004,515) | | | $ | (29,153,824) | | |
| | Net income (loss) | | Net income (loss) | $ | (8,762,232) | | | $ | 413,998 | | | $ | (16,804,733) | | | $ | (7,984,672) | |
| | Foreign currency translation adjustments | Foreign currency translation adjustments | (230,748) | | | (63,281) | | | (375,767) | | | (79,002) | | Foreign currency translation adjustments | (31,151) | | | (135,869) | | | (53,156) | | | (145,019) | |
| Comprehensive loss | $ | (7,250,591) | | | $ | (12,730,710) | | | $ | (15,380,282) | | | $ | (29,232,826) | | |
| Loss per common share - basic and diluted | $ | (0.08) | | | $ | (0.18) | | | $ | (0.18) | | | $ | (0.45) | | |
| Comprehensive income (loss) | | Comprehensive income (loss) | $ | (8,793,383) | | | $ | 278,129 | | | $ | (16,857,889) | | | $ | (8,129,691) | |
| | Income (loss) per common share: | | Income (loss) per common share: | |
| Basic | | Basic | $ | (0.10) | | | $ | — | | | $ | (0.19) | | | $ | (0.10) | |
| Diluted | | Diluted | $ | (0.10) | | | $ | — | | | $ | (0.19) | | | $ | (0.10) | |
| | Weighted average number of shares outstanding: | Weighted average number of shares outstanding: | | | | | | | | Weighted average number of shares outstanding: | |
| Basic and diluted | 84,822,516 | | | 70,775,508 | | | 85,553,134 | | | 64,196,162 | | |
| | Basic | | Basic | 86,403,117 | | | 84,682,765 | | | 86,976,129 | | | 84,682,765 | |
| Diluted | | Diluted | 86,403,117 | | | 85,369,424 | | | 86,976,129 | | | 84,682,765 | |
See accompanying notes.
Daré Bioscience, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| | | | | Additional | | Accumulated
other | | | | Total |
| Common stock | | paid-in | | comprehensive | | Accumulated | | stockholders' |
| Shares | | Amount | | capital | | loss | | deficit | | equity |
| Balance at December 31, 2021 | 83,944,119 | | | $ | 8,394 | | | $ | 149,027,802 | | | $ | (154,973) | | | $ | (110,126,902) | | | $ | 38,754,321 | |
| Stock-based compensation | — | | | — | | | 532,409 | | | — | | | — | | | 532,409 | |
| Net loss | — | | | — | | | — | | | — | | | (8,398,670) | | | (8,398,670) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (9,150) | | | — | | | (9,150) | |
| Balance at March 31, 2022 | 83,944,119 | | | $ | 8,394 | | | $ | 149,560,211 | | | $ | (164,123) | | | $ | (118,525,572) | | | $ | 30,878,910 | |
| Stock-based compensation | — | | | — | | | 537,521 | | | — | | | — | | | 537,521 | |
| Issuance of common stock, net of issuance costs | 751,040 | | | 75 | | | 1,218,675 | | | — | | | — | | | 1,218,750 | |
| Stock options exercised | 125,699 | | | 13 | | | 120,136 | | | — | | | — | | | 120,149 | |
| Net income | — | | | — | | | — | | | — | | | 413,998 | | | 413,998 | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (135,869) | | | — | | | (135,869) | |
| Balance at June 30, 2022 | 84,820,858 | | | $ | 8,482 | | | $ | 151,436,543 | | | $ | (299,992) | | | $ | (118,111,574) | | | $ | 33,033,459 | |
| Stock-based compensation | — | | | — | | | 556,448 | | | — | | | — | | | 556,448 | |
| | | | | | | | | | | |
| Stock options exercised | 4,623 | | | — | | | 4,456 | | | — | | | — | | | 4,456 | |
| Net loss | — | | | — | | | — | | | — | | | (7,019,843) | | | (7,019,843) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (230,748) | | | — | | | (230,748) | |
| Balance at September 30, 2022 | 84,825,481 | | | $ | 8,482 | | | $ | 151,997,447 | | | $ | (530,740) | | | $ | (125,131,417) | | | $ | 26,343,772 | |
| | | | | | | | | | | |
See accompanying notes.
Daré Bioscience, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| | | | | Additional | | Accumulated
other | | | | Total |
| Common stock | | paid-in | | comprehensive | | Accumulated | | stockholders' |
| Shares | | Amount | | capital | | loss | | deficit | | equity (deficit) |
| Balance at December 31, 2020 | 41,596,253 | | | $ | 4,159 | | | $ | 70,366,293 | | | $ | (91,388) | | | $ | (71,430,797) | | | $ | (1,151,733) | |
| Stock-based compensation | — | | | — | | | 365,911 | | | — | | | — | | | 365,911 | |
| Issuance of common stock, net of issuance costs | 5,664,069 | | | 567 | | | 11,323,573 | | | — | | | — | | | 11,324,140 | |
| Issuance of common stock from the exercise of warrants | 52,500 | | | 5 | | | 50,395 | | | — | | | — | | | 50,400 | |
| Net loss | — | | | — | | | — | | | — | | | (7,323,644) | | | (7,323,644) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (6,841) | | | — | | | (6,841) | |
| Balance at March 31, 2021 | 47,312,822 | | | $ | 4,731 | | | $ | 82,106,172 | | | $ | (98,229) | | | $ | (78,754,441) | | | $ | 3,258,233 | |
| Stock-based compensation | — | | | $ | — | | | $ | 405,478 | | | $ | — | | | $ | — | | | $ | 405,478 | |
| Issuance of common stock, net of issuance costs | 10,096,701 | | | 1,010 | | | 13,250,914 | | | — | | | — | | | 13,251,924 | |
| Net loss | — | | | — | | | — | | | — | | | (9,162,751) | | | (9,162,751) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (8,880) | | | — | | | (8,880) | |
| Balance at June 30, 2021 | 57,409,523 | | | $ | 5,741 | | | $ | 95,762,564 | | | $ | (107,109) | | | $ | (87,917,192) | | | $ | 7,744,004 | |
| Stock-based compensation | — | | | — | | | 439,497 | | | — | | | — | | | 439,497 | |
| Issuance of common stock, net of issuance costs | 18,282,392 | | | 1,828 | | | 35,010,220 | | | — | | | — | | | 35,012,048 | |
| Issuance of common stock from the exercise of warrants | 212,985 | | | 21 | | | 204,445 | | | — | | | — | | | 204,466 | |
| Issuance of common stock in connection with milestone payment | 696,724 | | | 70 | | | 1,219,216 | | | — | | | — | | | 1,219,286 | |
| Net loss | — | | | — | | | — | | | — | | | (12,667,429) | | | (12,667,429) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (63,281) | | | — | | | (63,281) | |
| Balance at September 30, 2021 | 76,601,624 | | | $ | 7,660 | | | $ | 132,635,942 | | | $ | (170,390) | | | $ | (100,584,621) | | | $ | 31,888,591 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2023 |
| | | | | Additional | | Accumulated
other | | | | Total |
| Common stock | | paid-in | | comprehensive | | Accumulated | | stockholders' |
| Shares | | Amount | | capital | | loss | | deficit | | equity (deficit) |
| Balance at December 31, 2022 | 84,825,481 | | | $ | 8,482 | | | $ | 152,529,579 | | | $ | (351,311) | | | $ | (141,074,640) | | | $ | 11,112,110 | |
| Stock-based compensation | — | | | — | | | 624,621 | | | — | | | — | | | 624,621 | |
| Issuance of common stock from the exercise of warrants | 1,353,515 | | | 136 | | | 1,299,239 | | | — | | | — | | | 1,299,375 | |
| Net loss | — | | | — | | | — | | | — | | | (8,042,501) | | | (8,042,501) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (22,005) | | | — | | | (22,005) | |
| Balance at March 31, 2023 | 86,178,996 | | | $ | 8,618 | | | $ | 154,453,439 | | | $ | (373,316) | | | $ | (149,117,141) | | | $ | 4,971,600 | |
| Stock-based compensation | — | | | — | | | 650,186 | | | — | | | — | | | 650,186 | |
| Issuance of common stock, net of issuance costs | 454,592 | | | 45 | | | 452,150 | | | — | | | — | | | 452,195 | |
| Net loss | — | | | — | | | — | | | — | | | (8,762,232) | | | (8,762,232) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (31,151) | | | — | | | (31,151) | |
| Balance at June 30, 2023 | 86,633,588 | | | $ | 8,663 | | | $ | 155,555,775 | | | $ | (404,467) | | | $ | (157,879,373) | | | $ | (2,719,402) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2022 |
| | | | | Additional | | Accumulated
other | | | | Total |
| Common stock | | paid-in | | comprehensive | | Accumulated | | stockholders' |
| Shares | | Amount | | capital | | loss | | deficit | | equity |
| Balance at December 31, 2021 | 83,944,119 | | | $ | 8,394 | | | $ | 149,027,802 | | | $ | (154,973) | | | $ | (110,126,902) | | | $ | 38,754,321 | |
| Stock-based compensation | — | | | — | | | 532,409 | | | — | | | — | | | 532,409 | |
| Net loss | — | | | — | | | — | | | — | | | (8,398,670) | | | (8,398,670) | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (9,150) | | | — | | | (9,150) | |
| Balance at March 31, 2022 | 83,944,119 | | | $ | 8,394 | | | $ | 149,560,211 | | | $ | (164,123) | | | $ | (118,525,572) | | | $ | 30,878,910 | |
| Stock-based compensation | — | | | — | | | 537,521 | | | — | | | — | | | 537,521 | |
| Issuance of common stock, net of issuance costs | 751,040 | | | 75 | | | 1,218,675 | | | — | | | — | | | 1,218,750 | |
| Stock options exercised | 125,699 | | | 13 | | | 120,136 | | | — | | | — | | | 120,149 | |
| Net income | — | | | — | | | — | | | — | | | 413,998 | | | 413,998 | |
| Foreign currency translation adjustments | — | | | — | | | — | | | (135,869) | | | — | | | (135,869) | |
| Balance at June 30, 2022 | 84,820,858 | | | $ | 8,482 | | | $ | 151,436,543 | | | $ | (299,992) | | | $ | (118,111,574) | | | $ | 33,033,459 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
See accompanying notes.
Daré Bioscience, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Nine months ended September 30, | | Six months ended June 30, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Cash flows from operating activities | Cash flows from operating activities | | | | Cash flows from operating activities | | | |
| Net loss | Net loss | $ | (15,004,515) | | | $ | (29,153,824) | | Net loss | $ | (16,804,733) | | | $ | (7,984,672) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | Adjustments to reconcile net loss to net cash used in operating activities: | | Adjustments to reconcile net loss to net cash used in operating activities: | |
| Depreciation | 13,580 | | | 19,366 | | |
| Stock-based compensation | 1,626,378 | | | 1,210,886 | | |
| Depreciation expense | | Depreciation expense | 19,123 | | | 10,546 | |
| Stock-based compensation expense | | Stock-based compensation expense | 1,274,807 | | | 1,069,930 | |
| Non-cash operating lease cost | Non-cash operating lease cost | 29,320 | | | (69,356) | | Non-cash operating lease cost | (11,811) | | | 9,940 | |
| Gain on early termination of lease | (46,477) | | | — | | |
| Non-cash loss on settlement of contingent liability | — | | | 44,286 | | |
| Gain on extinguishment of notes payable and accrued interest | — | | | (369,887) | | |
| | Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
| | Accounts receivable | | Accounts receivable | — | | | (10,000,000) | |
| Other receivables | Other receivables | (1,146,724) | | | 303,921 | | Other receivables | 1,130,694 | | | (992,334) | |
| Prepaid expenses | Prepaid expenses | (4,408,886) | | | (661,849) | | Prepaid expenses | (1,403,634) | | | (3,427,756) | |
| | Other current assets | | Other current assets | (272,100) | | | — | |
| Other non-current assets | Other non-current assets | 77,939 | | | 57,247 | | Other non-current assets | (44,934) | | | 91,690 | |
| Accounts payable | Accounts payable | 1,374,109 | | | (415,602) | | Accounts payable | 4,513,162 | | | (988,855) | |
| Accrued expenses | Accrued expenses | 1,000,086 | | | 594,629 | | Accrued expenses | (6,700,216) | | | 3,211,123 | |
| Deferred grant funding | Deferred grant funding | 4,293,433 | | | 9,592,045 | | Deferred grant funding | (4,609,482) | | | (1,791,598) | |
| | Deferred revenue | | Deferred revenue | 205,206 | | | — | |
| Net cash used in operating activities | Net cash used in operating activities | (12,191,757) | | | (18,848,138) | | Net cash used in operating activities | (22,703,918) | | | (20,791,986) | |
| Cash flows from investing activities | Cash flows from investing activities | | | | Cash flows from investing activities | | | |
| Purchases of property and equipment | Purchases of property and equipment | (60,372) | | | (14,524) | | Purchases of property and equipment | — | | | (5,369) | |
| Net cash used in investing activities | Net cash used in investing activities | (60,372) | | | (14,524) | | Net cash used in investing activities | — | | | (5,369) | |
| Cash flows from financing activities | Cash flows from financing activities | | | | Cash flows from financing activities | | | |
| Net proceeds from issuance of common stock | Net proceeds from issuance of common stock | 1,218,750 | | | 59,588,112 | | Net proceeds from issuance of common stock | 452,195 | | | 1,218,750 | |
| Proceeds from the exercise of stock options | 124,605 | | | 254,866 | | |
| | Proceeds from the exercise of common stock warrants | | Proceeds from the exercise of common stock warrants | 1,299,375 | | | 120,149 | |
| Net cash provided by financing activities | Net cash provided by financing activities | 1,343,355 | | | 59,842,978 | | Net cash provided by financing activities | 1,751,570 | | | 1,338,899 | |
| Effect of exchange rate changes on cash and cash equivalents | (375,767) | | | (79,002) | | |
| Net change in cash and cash equivalents | (11,284,541) | | | 40,901,314 | | |
| Cash and cash equivalents, beginning of period | 51,674,087 | | | 4,669,467 | | |
| Cash and cash equivalents, end of period | $ | 40,389,546 | | | $ | 45,570,781 | | |
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | | Effect of exchange rate changes on cash and cash equivalents and restricted cash | (53,156) | | | (145,019) | |
| Net change in cash, cash equivalents and restricted cash | | Net change in cash, cash equivalents and restricted cash | (21,005,504) | | | (19,603,475) | |
| Cash, cash equivalents and restricted cash, beginning of period | | Cash, cash equivalents and restricted cash, beginning of period | 34,669,605 | | | 51,674,087 | |
| Cash, cash equivalents and restricted cash, end of period | | Cash, cash equivalents and restricted cash, end of period | $ | 13,664,101 | | | $ | 32,070,612 | |
| | Reconciliation of cash, cash equivalents and restricted cash to amounts reported in the condensed consolidated balance sheets: | | Reconciliation of cash, cash equivalents and restricted cash to amounts reported in the condensed consolidated balance sheets: | |
| Cash and cash equivalents | | Cash and cash equivalents | $ | 13,329,101 | | | $ | 32,070,612 | |
| Restricted cash included in other non-current assets | | Restricted cash included in other non-current assets | 335,000 | | | — | |
| Total cash, cash equivalents and restricted cash | | Total cash, cash equivalents and restricted cash | $ | 13,664,101 | | | $ | 32,070,612 | |
| | Supplemental disclosure of non-cash investing and financing activities: | Supplemental disclosure of non-cash investing and financing activities: | | | | Supplemental disclosure of non-cash investing and financing activities: | |
| Operating right-of-use assets obtained in exchange for new operating lease liabilities, net | Operating right-of-use assets obtained in exchange for new operating lease liabilities, net | $ | 585,942 | | | $ | 308,533 | | Operating right-of-use assets obtained in exchange for new operating lease liabilities, net | $ | — | | | $ | 1,043,590 | |
| Forgiveness of Paycheck Protection Program note payable | $ | — | | | $ | 369,887 | | |
| Settlement of contingent closing consideration liability with stock issuance in connection with acquisition of business | $ | — | | | $ | 925,000 | | |
| Milestone payment paid in common stock | $ | — | | | $ | 250,000 | | |
|
See accompanying notes.
Daré Bioscience, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Daré Bioscience, Inc. is a biopharmaceutical company committed to advancing innovative products for women’s health. Daré Bioscience, Inc. and its wholly owned subsidiaries operate one segment. In this report, the “Company” refers collectively to Daré Bioscience, Inc. and its wholly owned subsidiaries, unless otherwise stated or the context otherwise requires.
The Company began assembling its diverse portfolio in 2017 through acquisitions, exclusive in-licenses and other collaborations. The Company's programs target unmet needs in women's health in the areas of contraception, fertility,vaginal health, reproductive health, menopause, sexual health, and vaginal and sexual health,fertility, and aim to expand treatment options, enhance outcomes and improve ease of use for women.
The Company’s primary operations have consisted of, and are expected to continue to consist primarily of, research and development activities to advance its product candidates through clinical development and regulatory approval.
The Company's portfolio includes one FDA-approved product, drug and drug/device product candidates and potential product candidates in various stages of development.
The Company's FDA-approved product, XACIATO™ (clindamycin phosphate)phosphate vaginal gel, 2%), was approved by the FDA in December 2021, as a single-dose prescription medication for the treatment of bacterial vaginosis in female patients 12 years of age and older. In March 2022, the Company entered into aan exclusive global license agreement with an affiliate of Organon & Co., Organon International GmbH, or Organon, to commercialize XACIATO. That agreement became effective onin June 30, 2022, and in July 2022, the Company received the upfront $10.0 million non-refundable and non-creditable payment due underupon the effectiveness of the agreement.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, as defined by the Financial Accounting Standards Board, or FASB, for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results of the interim periods presented.
Interim financial results are not necessarily indicative of results anticipated for any other interim period or for the full year. The accompanying condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021,2022, or the 20212022 10-K.
Cash, Cash Equivalents and Restricted Cash
The Company considers cash and all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. The Company has an aggregate of approximately $0.3 million in restricted cash related to (i) letters of credit established under real property leases for the Company's wholly owned subsidiary, Dare MB Inc., that serve as security for potential future default of lease payments, and (ii) collateralized cash for the Company's credit cards. The restricted cash is unavailable for withdrawal or for usage for general obligations and are included in other non-current assets on the Company's consolidated balance sheets.
Going Concern
The Company prepared its condensed consolidated financial statements on a going concern basis, which assumes that the Company will realize its assets and satisfy its liabilities in the normal course of business. Although the Company reported net income of approximately $0.4 million for its fiscal quarter ended June 30, 2022 as a result of the upfront one-time payment due under its license agreement with Organon to commercialize XACIATO, theThe Company has a history of losses from operations, expects negative cash flows from its operations to continue for the foreseeable future, and expects that its net losses will continue for at least the next several years as it develops and seeks to bring to market its existing product candidates and to potentially acquire, license and develop additional product candidates. These circumstances raise substantial doubt about the Company's ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of the Company's ability to continue as a going concern.
As of SeptemberJune 30, 2022,2023, the Company had an accumulated deficit of approximately $125.1$157.9 million, cash and cash equivalents of approximately $40.4$13.3 million, a deferred grant funding liabilityliabilities under the Company's grant agreements related to DARE-LARC1 and DARE-LBT of $14.8approximately $13.7 million, (representingand a working capital deficit of approximately $2.5 million. Substantially all of the Company's cash and cash equivalents at June 30, 2023 represented grant funds received under such grant agreements that may be applied solely toward direct costs for the development of DARE-LARC1 and DARE-LBT, other than approximately 10% of such funds, which are included in cashmay be applied toward general overhead and cash equivalents), and working capitaladministration expenses that support the entire operations of approximately $26.7 million.the Company. For the ninesix months ended SeptemberJune 30, 2022,2023, the Company incurred a net loss of approximately $15.0$16.8 million and had negative cash flow from operations of approximately $12.2$22.7 million.
The Company expects its primary uses of capital to be staff-related expenses, the cost of clinical trials and regulatory activities related to its product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, payments due to third-parties under the Company's in-license and acquisition agreements including upon the occurrence of commercial milestones for XACIATO and development milestones for the Company’s product candidates, legal expenses, other regulatory expenses and general overhead costs. The Company’s future funding requirements could also include significant costs related to commercialization of its product candidates, if approved, depending on the type, nature and terms of commercial collaborations the Company establishes.
The Company has devoted significant resources to building its portfolio of product candidates and to research and development activities related to these product candidates. The Company or its licensees must obtain regulatory approvals to market and sell any of its product candidates in the future and to market and sell XACIATO anywhere outside the U.S. The Company will need to generate sufficient safety and efficacy data on each of its product candidates in order to apply for regulatory approvals and for such assets to be attractive assets to potential strategic collaborators to license or to acquire, and for the Company to generate revenue through license fees, royalties on net revenues and commercial milestones related to such product candidates.
Based on the Company's current operating plan estimates, the Company does not have sufficient cash to satisfy its working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements. The Company will need to raise substantial additional capital to continue to fund its operations and to successfully execute its current strategy. The Company may continue to seek to raise capital through the sale of shares of its common stock under its at-the-market, or ATM, sales agreement or through other types of equity transactions. However, when the Company can effect such sales and the amount of shares the Company can sell depends on a variety of factors including, among others, market conditions, the trading price of its common stock, its determination as to the appropriate sources of funding for its operations, and the number of authorized shares of common stock that are available for issuance.For the foreseeable future, the Company will evaluate and may pursue a variety of capital raising options on an on-going basis, including equity and debt financings, government or other grant funding, collaborations, structured financings, and strategic alliances, or other similar types of arrangements, to cover its operating expenses, and the cost of any license or other acquisition of new product candidates or technologies. The amount and timing of the Company's capital needs have been, and will continue to be, highly dependent on many factors, including the product development programs the Company chooses to pursue, the pace and results of its clinical development efforts, and the nature and extent of the potential expansion of its product candidate portfolio, if any. If the Company raises capital through collaborations, structured financings, strategic alliances or other similar types of arrangements, it may be required to relinquish some or all of its rights to potential revenue or to intellectual property rights for its product candidates on terms that are not favorable to the Company.
There can be no assurance that capital will be available when needed or that, if available, it will be obtained on terms favorable to the Company and its stockholders. In addition, equity or debt financings may have a dilutive effect on the holdings of the Company's existing stockholders, and debt financings may subject the Company to restrictive covenants, operational restrictions and security interests in its assets. If the Company cannot raise capital when needed, on favorable terms or at all, the Company will not be able to continue development of its product candidates, will need to reevaluate its planned operations and may need to delay, scale back or eliminate some or all of its development programs, reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations. If the Company becomes unable to continue as a going concern, the Company may have to liquidate its assets, and might realize significantly less than the values at which they are carried on its condensed consolidated financial statements, and stockholders may lose all or part of their investment in the Company's common stock. The Company's condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company’s significant accounting policies are described in Note 2 to the consolidated financial statements included in the 20212022 10-K. Since the date of those consolidated financial statements,on which the 2022 10-K was filed with the U.S. Securities and Exchange Commission, or the SEC, there have been no material changes to the Company’s significant accounting policies.
Fair Value of Financial Instruments
GAAP defines fair value as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date, and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. The three-level hierarchy of valuation techniques established to measure fair value is defined as follows:
•Level 1: inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
•Level 2: inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities.
•Level 3: unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following tables present the classification within the fair value hierarchy of financial assets and liabilities that are remeasured on a recurring basis as of SeptemberJune 30, 20222023 and December 31, 2021.2022. There were no financial assets or liabilities that were remeasured using a quoted price in active markets for identical assets (Level 2) or using unobservable inputs (Level 3) as of SeptemberJune 30, 20222023 or December 31, 2021.2022.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Balance at September 30, 2022 | | | | | | | |
| Current assets: | | | | | | | |
Cash equivalents (1) | $ | 39,083,471 | | | $ | — | | | $ | — | | | $ | 39,083,471 | |
| Balance at December 31, 2021 | | | | | | | |
| Current assets: | | | | | | | |
Cash equivalents (1) | $ | 49,666,064 | | | $ | — | | | $ | — | | | $ | 49,666,064 | |
(1) Represents cash held in money market funds. |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements |
| Level 1 | | Level 2 | | Level 3 | | Total |
| Balance at June 30, 2023 | | | | | | | |
| Current assets: | | | | | | | |
Cash equivalents (1) | $ | 10,837,944 | | | $ | — | | | $ | — | | | $ | 10,837,944 | |
| Balance at December 31, 2022 | | | | | | | |
| Current assets: | | | | | | | |
Cash equivalents (1) | $ | 33,238,658 | | | $ | — | | | $ | — | | | $ | 33,238,658 | |
(1) Represents cash held in money market funds. |
Revenue Recognition
TheUnder Accounting Standards Codification Topic 606, or ASC 606, the Company recognizes revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligations. At contract inception, the Company assesses the goods or services agreed upon within each contract, assesses whether each good or service is distinct, and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
In a contract with multiple performance obligations, the Company develops estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations. The estimation of the stand-alone selling price(s) may include estimates regarding forecasted revenues or costs, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. Any change made to estimated progress towards completion of a performance obligation and, therefore, revenue recognized will be recorded as a change in estimate. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
Collaboration Revenues. The Company enters into collaboration and licensing agreements under which it out-licenses certain rights to its products or product candidates to third parties. The terms of these arrangements typically include payment of one or more of the following to the Company: non-refundable, up-front license fees; development, regulatory and/or commercial milestone payments; and royalties on net sales of licensed products. To date,As of June 30, 2023, the Company has not recognized any collaboration revenues.
License Fees.Fee Revenue. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in a contract, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. To date, the Company has recognized $10.0 million in license fee revenue, all of which represents the upfront payment due under its license agreement for XACIATO.
Royalties. For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date,As of June 30, 2023, the Company has not recognized any royalty revenue.
Product Supply. Arrangements that include a promise for future supply of product for commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. The Company evaluates whether it is the principal or agent in the arrangement. The evaluation is based on the degree the Company controls the specified product at any time before transfer to the customer. Revenues are recognized on a gross basis if the Company is in the capacity of principal and on a net basis if the Company is in the capacity of an agent. To date,As of June 30, 2023, the Company has not recognized any revenue associated with product supply arrangements.
Milestones. At the inception of each arrangement in which the Company is a licensor and that includes developmental, regulatory or commercial milestones, the Company evaluates whether achieving the milestones is considered probable and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments not within the Company's control, such as where achievement of the specified milestone depends on activities of a third party or regulatory approval, are not considered probable of being achieved until the specified milestone occurs. To date,As of June 30, 2023, the Company has not recognized any milestone revenue.
3. STRATEGIC AGREEMENTS
Strategic Agreements for Product Commercialization
Organon Exclusive License Agreement
In March 2022, the Company entered into an exclusive license agreement with Organon pursuant to which Organon will obtain exclusive worldwide rights to develop, manufacture and commercialize XACIATO and other future intravaginal or urological products for human use formulated with clindamycin that rely on intellectual property controlled by the Company. The agreement became effective on June 30, 2022 following the satisfaction of closing conditions.
The following is a summary of other terms of the Organon license agreement:
Upfront PaymentBayer License. . Upon the effectiveness of the agreement, the Company recorded the transaction price of $10.0 million as license fee revenue in the accompanying condensed consolidated statement of operations. The $10.0 million was received in July 2022.
Royalty and Milestone Payments. The Company will be entitled to receive tiered double-digit royalties based on net sales and up to $182.5 million in milestone payments as follows: $2.5 million following the first commercial sale of a licensed product in the United States; and up to $180.0 million in tiered commercial sales milestones and regulatory milestones. Royalty payments will be subject to customary reductions and offsets.
The royalty period for each licensed product will continue on a country-by-country basis from the first commercial sale of the licensed product in the country until the expiration of the later of (i) the date that no valid patent claim would be infringed in the absence of the license granted under the agreement by the sale of the licensed product in the country, (ii) 10 years after the end of the month in which the first commercial sale of the licensed product in the country occurred, and (iii) the expiration of regulatory market exclusivity for the licensed product in that country.
The Company concluded at the inception of the agreement that the transaction price should not include the variable consideration related to unachieved development, regulatory, commercial milestones and future sales-based royalty payments. This consideration was determined to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal in cumulative revenue. The Company re-evaluates the transaction price at each reporting period as uncertain events are resolved and other changes in circumstances occur. For the three and nine months ended September 30, 2022, no adjustments were made to the transaction price.
The Company will recognize any consideration related to sales-based payments, including milestones and royalties which relate predominantly to the license granted, at the later of (i) when or as the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Regulatory Interactions and Product Supply. The Company will be responsible for regulatory interactions and for providing product supply on an interim basis until Organon assumes such responsibilities. Until such time, Organon will purchase all of its product requirements of XACIATO from the Company at a transfer price equal to the Company's manufacturing costs plus a single-digit percentage markup.
Term. Unless terminated earlier, the agreement will expire on a product-by-product and country-by-country basis upon expiration of the applicable royalty period for each licensed product. In addition to customary termination rights for both parties, following the first anniversary of the effective date of the agreement, Organon may terminate the agreement in its entirety or on a country-by-country basis at any time in Organon's sole discretion on 120 days' advance written notice.
Other. The terms of the agreement provide Organon exclusive worldwide rights of first negotiation for specified potential future products of the Company.
Bayer HealthCare License Agreement
In January 2020, the Company entered into a license agreement with Bayer HealthCare LLC, or Bayer, regarding the further development and commercialization of Ovaprene in the U.S. TheUpon execution of the agreement, the Company received a $1.0 million upfront non-refundable license fee payment from Bayer, and Bayer agreed to support the Company in development and regulatory activities by providing the equivalent of two experts to advise the Company in clinical, regulatory, preclinical, commercial, CMC and product supply matters.Bayer. Bayer, in its sole discretion, has the right to make the license effective by paying the Company an additional $20.0 million, referred to as the Clinical Trial and Manufacturing Activities Fee. Such license would be exclusive with regard to the commercialization of Ovaprene for human contraception in the U.S. and co-exclusive with the Company with regard to development.
million. The Company concluded that there was one significant performance obligation related to the $1.0 million upfront payment: a distinct license to commercialize Ovaprene effective upon the receipt of the $20.0 million fee. The $1.0 million upfront payment will be recorded as license revenue at the earlier of (1) the point in time the Company receives the $20.0 million fee, the license is transferred to Bayer and Bayer is able to use and benefit from the license and (2) the termination of the agreement. As of SeptemberJune 30, 2023, neither of the foregoing had occurred. The $1.0 million payment is recorded as deferred license revenue in the Company's consolidated balance sheets at June 30, 2023 and December 31, 2022.
The Company will also be entitled to receive (a) milestone payments totaling up to $310.0 million related to the commercial sales of Ovaprene, if all such milestones are achieved, (b) tiered royalties starting in the low double digits based on annual net sales of Ovaprene during a calendar year, subject to customary royalty reductions and offsets, and (c) a percentage of sublicense revenue.
Potential future payments for variable consideration, such as commercial milestones, will be recognized when it is probable that, if recorded, a significant reversal will not take place. Potential future royalty payments will be recorded as revenue when the associated sales occur. (See Note 3, Strategic Agreements.)
3. STRATEGIC AGREEMENTS
Strategic Agreements for Product Commercialization
Organon Exclusive License Agreement
In March 2022, the Company entered into an exclusive license agreement with Organon, which became effective in June 2022, whereby Organon licensed exclusive worldwide rights to develop, manufacture and commercialize XACIATO and other future intravaginal or urological products for human use formulated with clindamycin that rely on intellectual property controlled by the Company. In July 2022, the Company received a $10.0 million non-refundable and non-creditable payment from Organon, which was recorded as license fee revenue.
Under the terms of the license agreement in effect as of June 30, 2023, the Company is entitled to receive tiered double-digit royalties based on net sales and up to $182.5 million in milestone payments as follows: $2.5 million following the first commercial sale of a licensed product in the United States; and up to $180.0 million in tiered commercial sales milestones and regulatory milestones. Royalty payments will be subject to customary reductions and offsets. Subsequent to June 30, 2023, the Company and Organon entered into an amendment to the license agreement, which changed some of the payment terms. (See Note 10, Subsequent Events.)
At the inception of the agreement, the Company concluded that the transaction price was $10.0 million and should not include the variable consideration related to unachieved development, regulatory, commercial milestones and future sales-based royalty payments. This consideration was determined to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal in cumulative revenue. The Company re-evaluates the transaction price at each reporting period as uncertain events are resolved and other changes in circumstances occur. For the quarter ended June 30, 2023, no adjustments were made to the transaction price.
The Company will recognize any consideration related to sales-based payments, including milestones and royalties which relate predominantly to the license granted, at the later of (i) when or as the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
The Company is responsible for regulatory interactions and for providing product supply on an interim basis until Organon assumes such responsibilities. Until such time, Organon will purchase all of its product requirements of XACIATO from the Company at a transfer price equal to the Company's manufacturing costs plus a single-digit percentage markup.
Unless terminated earlier, the agreement will expire on a product-by-product and country-by-country basis upon expiration of the applicable royalty period for each licensed product. In addition to customary termination rights for both parties, following the first anniversary of the effective date of the agreement, Organon may terminate the agreement in its entirety or on a country-by-country basis at any time in Organon's sole discretion on 120 days' advance written notice.
Bayer HealthCare License Agreement
In January 2020, the Company entered into a license agreement with Bayer, regarding the further development and commercialization of Ovaprene in the U.S. The Company received a $1.0 million upfront non-refundable license fee payment from Bayer and Bayer agreed to support the Company in development and regulatory activities by providing the equivalent of two experts to advise the Company in clinical, regulatory, preclinical, commercial, CMC and product supply matters. The Company is responsible for the pivotal trial for Ovaprene and for its development and regulatory activities and has product supply obligations. Bayer, in its sole discretion, has the right to make the license effective by paying the Company an additional $20.0 million, referred to as the $20.0 million fee. After payment of the $20.0 million fee, Bayer will be responsible for the commercialization of Ovaprene for human contraception in the U.S. Such license would be exclusive as to the commercialization of Ovaprene for human contraception in the U.S. and co-exclusive with the Company with regard to development.
The Company concluded there was one significant performance obligation related to the $1.0 million upfront payment: a distinct license to commercialize Ovaprene effective upon the receipt of the $20.0 million fee. The $1.0 million upfront payment will be recorded as license revenue at the earlier of either the point in time the Company receives the $20.0 million fee, the license is transferred to Bayer and Bayer is able to use and benefit from the license or the termination of the agreement. As of June 30, 2023, neither of the foregoing had occurred. The $1.0 million payment is recorded as long-term deferred license revenue in the Company's condensed consolidated balance sheetsheets at SeptemberJune 30, 20222023 and December 31, 2021.2022.
The followingCompany is a summary of other terms of the Bayer license agreement:
Milestone & Royalty Payments. The Company will be entitled to receive (a) a milestone payment in the low double-digit millions upon the first commercial sale of Ovaprene in the U.S. and escalating milestone payments based on annual net sales of Ovaprene during a calendar year, totaling up to $310.0 million if all such milestones, including the first commercial sale, are achieved, (b) tiered royalties starting in the low double digits based on annual net sales of Ovaprene during a calendar year, subject to customary royalty reductions and offsets, and (c) a percentage of sublicense revenue.
Efforts. The Company is responsible for the pivotal trial for Ovaprene and for its development and regulatory activities and has product supply obligations. After payment of the Clinical Trial and Manufacturing Activities Fee, Bayer will be responsible for the commercialization of Ovaprene for human contraception in the U.S.
Term. The initial term of the agreement, which is subject to automatic renewal terms, continues until the later of (a) the expiration of any valid claim covering the manufacture, use, sale or import of Ovaprene in the U.S.; or (b) 15 years from the first commercial sale of Ovaprene in the U.S. In addition to customary termination rights for both parties, Bayer may terminate the agreement at any time on 90 days' notice and the agreement will automatically terminate if the Company does not receive the Clinical Trial and Manufacturing Activities Fee$20.0 million fee if and when due.
Strategic Agreements for Pipeline Development
Hammock/Hennepin License Agreement
In August 2022, the Company entered into a license agreement with Hennepin Life Sciences LLC, or Hennepin, under which the Company acquired the exclusive global rights to develop and commercialize treatments delivering the novel antimicrobial glycerol monolaurate (GML) intravaginally for a variety of health conditions including bacterial, fungal, and viral infections. Under the agreement, the Company received an exclusive, worldwide, royalty-bearing license to research, develop and commercialize the licensed technology. The Company is entitled to sublicense the rights granted to it under the agreement.
Under the terms of the license agreement, the Company agreed to make potential future payments and sales milestone payments of up to $6.25 million in the aggregate upon achieving certain development and regulatory milestones, and of up to $45.0 million in the aggregate upon achieving certain commercial sales milestones for each product covered by the licenses granted under the agreement, which may be paid, in the Company’s sole discretion, in cash or shares of the Company’s common stock.Additionally, Hennepin is eligible to receive tiered royalties in low single-digit to low double-digit percentages based on worldwide net sales of products and processes covered by the licenses granted under the agreement.As of June 30, 2023, no payments have been made under this agreement.
MBI Acquisition
In November 2019, the Company acquired Dare MB Inc., or MBI, to secure the rights to develop a long-acting reversible contraception method, that a woman can turn on or off herself, according to her own needs. This candidate is now known as DARE-LARC1.
Under the terms of the merger agreement, the Company agreed to pay former MBI stockholders: (a) up to $46.5 million contingent upon the achievement of specified funding, product development and regulatory milestones; (b) up to $55.0 million contingent upon the achievement of specified amounts of aggregate net sales of products incorporating the intellectual property the Company acquired in the merger; and (c) tiered royalty payments ranging from low single-digit to low double-digit percentages based on annual net sales of such products sold by the Company (but not by sublicensee) and a percentage of sublicense revenue related to such products.
In June 2021, a total of $1.25 million of the contingent consideration became payable upon the achievement of certain of the funding and product development milestone events. In accordance with the terms of the merger agreement, the Company’s board of directors elected to pay a portion of these milestone payments in shares of the Company’s common stock, and in September 2021, the Company issued approximately 700,000 shares of its common stock to former stockholders of MBI and paid $75,000 in cash to the stockholders’ representative in satisfaction of the $1.25 million in milestone payments associated with milestones achieved in June 2021.
TriLogic and MilanaPharm License Agreement / Hammock Assignment and License Agreement
In December 2018, the Company entered into (a) an Assignment Agreementassignment agreement with Hammock Pharmaceuticals, Inc., or the Assignment Agreement, and (b) a First Amendmentfirst amendment to License Agreementlicense agreement with TriLogic Pharma, LLC and MilanaPharm LLC, or the License Amendment. Both agreements relate to the Exclusive License Agreementexclusive license agreement among Hammock, TriLogic and MilanaPharm dated as of January 9, 2017, or the MilanaPharm License Agreement. Under the Assignment Agreement and the MilanaPharm License Agreement, as amended by the License Amendment, the Company acquired an exclusive, worldwide license under certain intellectual property to, among other things, develop and commercialize products for the diagnosis, treatment and prevention of human diseases or conditions in or through any intravaginal or urological applications. The licensed intellectual property relates to the hydrogel drug delivery platform of TriLogic and MilanaPharm known as TRI-726. In XACIATO, this proprietary technology is formulated with clindamycin for the treatment of bacterial vaginosis. EachIn December 2019, the Company entered into amendments to each of the Assignment Agreement and License Amendment was amended in December 2019, andAmendment. In September 2021, the Company entered into a second amendment to the License Agreement. In March 2022, the Company entered into a Consent, Waiver and Stand-By License Agreement waswith TriLogic, MilanaPharm and Organon, which further amended in September 2021 and March 2022.the License Agreement.
The following is a summary of otherUnder the terms of the License Amendment, as amended:
License Fees. A total of $235,000 in license fees were payable to MilanaPharm,Agreement, the final installment of which was $110,000 paid in 2020.
Milestone Payments. The Company paid MilanaPharm $300,000 in the aggregate upon achievement of certain clinical and regulatory development milestones $50,000in the aggregate of which$300,000 to MilanaPharm, the final payment of $250,000 was paid in 2020 and $250,000 of which was paidexpensed in 2021. The Company may also pay MilanaPharm up to $500,000 upon the first commercial sale in the United States of the first licensed product for each vaginal use and urological use, and up to $250,000 upon the first commercial sale in the United States of each successive licensed products for each vaginal or urological use. In addition, upon achievement of $50.0 million in cumulative worldwide net sales of licensed products the Company must pay MilanaPharm $1.0 millionmillion. MilanaPharm is also eligible to MilanaPharm.
Foreign Sublicense Income. The Company will pay MilanaPharmreceive (a) a low double-digit percentage of all income received by the Company or its affiliates in connection with any sublicense granted to a third party for use outside of the United States, subject to certain exclusions.
Royalty Payments. During the royalty term, the Company will pay MilanaPharmexclusions, and (b) high single-digit to low double-digit royalties based on annual worldwide net sales of licensed products and processes. The royalty term, which is determined on a country-by-country basis and licensed product-by-product basis (or process-by-process basis), begins with the first commercial sale of a licensed product or process in a country and terminates on the latest of (1) the expiration date of the last valid claim of the licensed patent rights that cover the method of use of such product or process in such country, or (2) 10 years following the first commercial sale of such product or process in such country. Royalty payments are subject to reduction in certain circumstances, including as a result of generic competition, patent prosecution expenses incurred by the Company, or payments to third parties for rights or know-how required for the Company to exercise the licenses granted to it under the MilanaPharm License Agreement or that are strategically important or could add value to a licensed product or process in a manner expected to materially generate or increase sales.
Efforts. The Company must use commercially reasonable efforts and resources to (1) develop and commercialize at least one licensed product or process in the United States and at least one licensed product or process in at least one of Canada, the United Kingdom, France, Germany, Italy or Spain, and (2) continue to commercialize that product or process following the first commercial sale of a licensed product or process in the applicable jurisdiction.
Term. Unless earlier terminated, the license term continues until (1) on a licensed product-by-product (or process-by-process basis) and country-by-country basis, the date of expiration of the royalty term with respect to such licensed product in such country, and (2) the expiration of all applicable royalty terms under the MilanaPharm License Agreement with respect to all licensed products and processes in all countries. Upon expiration of the term with respect to any licensed product or process in a country (but not upon earlier termination of the MilanaPharm License Agreement), the licenses granted to the Company under the MilanaPharm License Agreement will convert automatically to an exclusive, fully paid-up, royalty-free, perpetual, non-terminable and irrevocable right and license under the licensed intellectual property.
In addition to customary termination rights for all parties, MilanaPharm may terminate the license granted to the Company solely with respect to a licensed product or process in a country if, after having launched such product or process in such country, (1) the Company or its affiliates or sublicensees discontinue the sale of such product or process in such country and MilanaPharm notifies the Company of such termination within 60 days of having first been notified by the Company of such discontinuation, or (2) the Company or its affiliates or sublicensees (A) discontinue all commercially reasonable marketing efforts to sell, and discontinue all sales of, such product or process in such country for nine months or more, (B) fail to resume such commercially reasonable marketing efforts within 120 days of having been notified of such failure by MilanaPharm, (C) fail to reasonably demonstrate a strategic justification for the discontinuation and failure to resume to MilanaPharm, and (D) MilanaPharm gives 90 days’ notice to the Company.
The following is a summary of other terms of the Assignment Agreement, as amended:
Assignment; Technology Transfer. Hammock assigned and transferred to the Company all of its right, title and interest in and to the MilanaPharm License Agreementlicense agreement and agreed to cooperate to transfer to the Company all of the data, materials and the licensed technology in its possession pursuant to a technology transfer planplan. Hammock is eligible to be agreed upon by the parties, with a goal for the Company to independently practice the licensed intellectual property as soon as commercially practical in order to develop and commercialize the licensed products and processes.
Fees. A total of $512,500 in fees were payable to Hammock, the final installment of which was $137,500 paid in 2020.
Milestone Payments. The Company will pay Hammockreceive up to $1.1 million in the aggregate upon achievement of certain clinical and regulatory development milestones, $100,000$850,000 of which washas been paid in 2020as of June 30, 2023.
Pear Tree Acquisition
In May 2018, the Company acquired Pear Tree Pharmaceuticals, Inc., or Pear Tree, to secure exclusive, sublicensable, worldwide rights under certain patents and $750,000know-how to develop and commercialize a proprietary formulation of which was paid in 2021. The remaining milestone does not relatetamoxifen for vaginal administration. This acquisition led to a bacterial vaginosis product.
Term. The Assignment Agreement will terminate upon the later of (1) completion of the parties' technology transfer plan, and (2) payment to Hammock of the last of the milestone payments.Company's DARE-VVA1 program.
ADVA-Tec License Agreement
In March 2017, the Company entered into a license agreement with ADVA-Tec, Inc., under which the Company was granted the exclusive right to develop and commercialize Ovaprene for human contraceptive use worldwide. The Company must use commercially reasonable efforts to develop and commercialize Ovaprene and must meet certain minimum spending amounts per year, including $2.5 million per year to cover such activities until a final premarket approval application, or PMA, is filed, or until the first commercial sale of Ovaprene, whichever occurs first. ADVA-Tec will conduct certain research and development work as necessary to allow the Company to seek a PMA from the FDA and will provide the Company with clinical trial and commercial supplies of Ovaprene, either directly or through a CMO, on commercially reasonable terms.
Under the license agreement, in addition to an exclusive license to ADVA-Tec's and its affiliates' intellectual property rights for all uses of Ovaprene as a human contraceptive device, the Company has a right of first refusal to license these patents and patent applications for additional indications.
The following is a summary of other terms of the ADVA-Tec license agreement:
Milestone Payments. Themerger agreement, the Company willagreed to pay to ADVA-Tec: (1)the former stockholders of Pear Tree: (a) up to $14.6$15.5 million in the aggregate based on the achievement of specifiedupon achieving certain clinical development and regulatory milestones $200,000 of which was paid in 2021;by licensed products, and (2)(b) up to $20.0 million in the aggregate based on the achievement of certain worldwide net sales milestones. The remaining development and regulatory milestones include: the FDA's approval to commence a pivotal clinical trial; successful completion of such pivotal clinical trial; the FDA's acceptance of a PMA filing for Ovaprene; the FDA's approval of the PMA for Ovaprene; CE Marking of Ovaprene in at least three designated European countries; obtaining regulatory approval in at least three designated European countries; and obtaining regulatory approval in Japan. If the Company sublicenses its rights to Ovaprene, the Company will pay to ADVA-Tec a single digit percentage of the upfront payment or license fee due on or around the effective date of the sublicense.
Royalty Payments. The Company will pay to ADVA-Tec tiered royalties of between 1% and 10% based on percentages of annual net sales of Ovaprene by the Company in specified regions. If the Company sublicenses its rights to Ovaprene, in lieu of the foregoing royalties, the Company will pay to ADVA-Tec a low mid-double digit percentage of the royalty revenue the Company receives from the sublicensee.
Term. Unless earlier terminated, the license the Company received under the agreement continues on a country-by-country basis until the later of the life of the licensed patents or the Company's last commercial sale of Ovaprene. In addition to customary termination rights for both parties: (A) the Company may terminate the agreement with or without cause in whole or on a country-by-country basis upon 60 days prior written notice; and (B) ADVA-Tec may terminate the agreement if the Company develops or commercializes any non-hormonal ring-based vaginal contraceptive device competitive to Ovaprene or if the Company fails to: (1) in certain limited circumstances, commercialize Ovaprene in certain designated countries within three years of the first commercial sale of Ovaprene; (2) satisfy the annual spending obligation described above, (3) use commercially reasonable efforts to complete all necessary pre-clinical and clinical studies required to support and submit a PMA, (4) conduct clinical trials as set forth in the development plan to which the Company and ADVA-Tec agree, and as may be modified by a joint research committee, unless such failure is caused by events outside of the Company’s reasonable control, or (5) enroll a patient in the first non-significant risk medical device study or clinical trial as allowed by an institutional review board within six months of the production and release of Ovaprene, unless such failure is caused by events outside of the Company’s reasonable control.
SST License and Collaboration Agreement
In February 2018, the Company entered into a license and collaboration agreement with Strategic Science & Technologies-D, LLC and Strategic Science & Technologies, LLC, referred to collectively as SST, under which the Company received an exclusive, royalty-bearing, sublicensable license to develop and commercialize, in all countries and geographic territories of the world, for all indications for women related to female sexual dysfunction and/or female reproductive health, including the treatment of female sexual arousal disorder, or the Field of Use, SST’s topical formulation of Sildenafil Cream, 3.6% as it existed as of the effective date of the agreement, or any other topically applied pharmaceutical product containing sildenafil or a salt thereof as a pharmaceutically active ingredient, alone or with other active ingredients, but specifically excluding any product containing ibuprofen or any salt derivative of ibuprofen, or the Licensed Products.
The following is a summary of other terms of the SST license and collaboration agreement:
Invention Ownership. The Company retains rights to inventions made by its employees, SST retains rights to inventions made by its employees, and each party owns a 50% undivided interest in all joint inventions.
Joint Development Committee. The parties will collaborate through a joint development committee that will determine the strategic objectives for, and generally oversee, the development efforts of both parties under the agreement.
Development. The Company must use commercially reasonable efforts to develop the Licensed Products in the Field of Use in accordance with a development plan in the agreement, and to commercialize the Licensed Products in the Field of Use. The Company is responsible for all reasonable internal and external costs and expenses incurred by SST in its performance of the development activities it must perform under the agreement.
Royalty Payments. SST will be eligible to receive tiered royalties based on percentages of annual net sales of Licensed Products by the Company in the single digits to the low double digits. If the Company sublicenses Licensed Products, SST will be eligible to receive the greater of a low mid-double digit percentage of the sublicense revenue the Company receives from the sublicensee or tiered royalties based on percentages of annual net sales of Licensed Products by the sublicensee in the single digits. In each case, the royalties are subject to customary reductions and offsets.
Milestone Payments. SST will be eligible to receive payments (1) ranging from $0.5 million to $18.0 million in the aggregate on achieving certain clinical and regulatory milestones in the U.S. and worldwide, and (2) between $10.0 million to $100.0$47.0 million in the aggregate upon achieving certain commercial milestones by licensed products. Additionally, the former stockholders of Pear Tree are eligible to receive tiered royalties based on single-digit to low double-digit percentages of annual net sales milestones. Ifof licensed products by the Company has entered into strategic development or distribution partnerships relatedits affiliates, subject to customary reductions and offsets, and a portion of royalties the Company receives from sublicensees. Both the milestone and royalty payments may be made, in the Company's sole discretion, in cash or in shares of its common stock in accordance with the terms of the merger agreement. Under the merger agreement, in addition to customary royalty reductions and offsets, royalty payments and payments based on income received from sublicensees of licensed products made by the Company to Pear Tree's licensors are creditable against all royalty and sublicense revenue share payments payable to the Licensed Products atformer stockholders of Pear Tree.
The Company agreed to pay licensors of Pear Tree (a) up to approximately $3.2 million in the time certain milestones are achieved, additional milestone payments (1) ranging from $2.0 million to $10.0 millionaggregate upon achieving certain clinical development, regulatory and regulatorycommercial milestones by each licensed product, and (2) ranging from $10.0 million to $125.0 million upon achieving certain commercial sales milestones would be due to SST.
Term. The Company’s license continues(b) semi-annual royalties based on a country-by-country basis untilsingle-digit percentage of net sales of licensed products by the laterCompany or its affiliates, subject to customary reductions and offsets, or a portion of 10 yearsany royalties the Company or its affiliates receives from sublicensees, and a low double-digit percentage of all sublicensing fees or other lump sum payments or compensation the dateCompany receives from sublicensees, subject to customary exclusions. The milestone payments to the licensors of the first commercial sale of such Licensed Product or the expiration of the last valid claim of patent rights covering the Licensed ProductPear Tree may be made, in the FieldCompany's sole discretion, in cash or in shares of Use. Upon expiration (but not termination) of the agreementits common stock in a particular country, the Company will have a fully paid-up license under the licensed intellectual property to develop and commercialize the applicable Licensed Products in the applicable country on a non-exclusive basis.
Termination.In addition to customary termination rights for both parties: (1) prior to receipt of approval by a regulatory authority necessary for commercialization of a Licensed Product in the corresponding jurisdiction, including NDA approval, the Company may terminate the agreement without cause upon 90 days prior written notice; (2) following receipt of approval by a regulatory authority necessary for commercialization of a Licensed Product in the corresponding jurisdiction, including NDA approval, the Company may terminate the agreement without cause upon 180 days prior written notice; and (3) SST may terminate the agreement with respect to the applicable Licensed Product(s) in the applicable country(ies) upon 30 days’ notice if the Company fails to use commercially reasonable efforts to perform development activities in substantial accordance with the development plan and do not cure such failure within 60 daysterms of receiptthe license agreements. Portions of SST's notice thereof.certain milestone payments made to Pear Tree's licensors may be creditable against royalty payments due to Pear Tree's licensors.
Catalent JNP License Agreement
In April 2018, the Company entered into an exclusive license agreement with Catalent JNP, Inc. (formerly known as Juniper Pharmaceuticals, Inc., and which the Company refers to as Catalent),or Catalent, under which Catalent granted the Company (a) an exclusive, royalty-bearing worldwide license under certain patent rights, either owned by or exclusively licensed to Catalent, to make, have made, use, have used, sell, have sold, import and have imported products and processes, and (b) a non-exclusive, royalty-bearing worldwide license to use certain technological information owned by Catalent to make, have made, use, have used, sell, have sold, import and have imported products and processes. The Company is entitled to sublicense the rights granted to it under this agreement.
Upfront Fee. TheUnder the terms of the license agreement, the Company paid a $250,000 non-creditable upfront license fee to Catalent in connection with the execution of the agreement.
Annual Maintenance Fee. The Companyagreement and will pay ana $100,000 annual license maintenance fee to Catalent on each anniversary of the date of the agreement, the amount of which will be $50,000 for the first two years and $100,000 thereafter, and whichagreement. The annual maintenance fee will be creditable against royalties and other payments due to Catalent in the same calendar year but may not be carried forward to any other year. The Company made the first payments in April 2019.
Milestone Payments. The Company must make potential future development and sales milestone payments of (1)Catalent is eligible to receive up to (a) $13.5 million in the aggregate upon achieving certain clinicalin payments based on the achievement of specified development and regulatory milestones, $1.0 million of which became payable in the third quarterhas been paid as of 2021,June 30, 2023; and in accordance with the license agreement, the amount payable was offset by the $100,000 annual maintenance fee, resulting in a net amount of $900,000 paid during the third quarter of 2021, and (2)(b) up to $30.3 million in the aggregate upon achieving certainin payments based on the achievement of specified commercial sales milestones for each product or process covered by the licenses granted under the agreement.
Royalty Payments. During the royalty term, the Company will pay Additionally, Catalent mid-single-digitis eligible to receive mid single-digit to low double-digit royalties based on worldwide net sales of products and processes covered by the licenses granted under the agreement. In lieu of such royalty payments, the Company will pay Catalent a low double-digit percentage of all sublicense income the Company receives for the sublicense of rights under the agreement to a third party. The royalty term, which is determined on a country-by-country basis and product-by-product basis (or process-by-process basis), begins with the first commercial sale of a product or process in a country and terminates on the latest of (1) the expiration date of the last valid claim within the licensed patent rights with respect to such product or process in such country, (2) 10 years following the first commercial sale of such product or process in such country, and (3) when one or more generic products for such product or process are commercially available in such country, except that if there is no such generic product by the 10th year following the first commercial sale in such country, then the royalty term will terminate on the 10-year anniversary of the first commercial sale in such country.
Efforts. The Company must use commercially reasonable efforts to develop and make at least one product or process available to the public, which efforts include achieving specific diligence requirements by specific dates specified in the agreement.
Term. Unless earlier terminated, the term of the agreement will continue on a country-by-country basis until the later of (1) the expiration date of the last valid claim within such country, or (2) 10 years from the date of first commercial sale of a product or process in such country. Upon expiration (but not early termination) of the agreement, the licenses granted thereunder will convert automatically to fully-paid irrevocable licenses. Catalent may terminate the agreement (1) upon 30 days’ notice for the Company’s uncured breach of any payment obligation under the agreement, (2) if the Company fails to maintain required insurance, (3) immediately upon the Company’s insolvency or the making of an assignment for the benefit of the Company’s creditors or if a bankruptcy petition is filed for or against the Company, which petition is not dismissed within 90 days, or (4) upon 60 days’ notice for any uncured material breach by the Company of any of the Company’s other obligations under the agreement. The Company may terminate the agreement on a country-by-country basis for any reason by giving 180 days’ notice (or 90 days’ notice if such termination occurs prior to receipt of marketing approval in the United States). If Catalent terminates the agreement for the reason described in clause (4) above or if the Company terminates the agreement, Catalent will have full access including the right to use and reference all product data generated during the term of the agreement that is owned by the Company.
Adare Development and Option Agreement
In March 2018, the Company entered into an exclusive development and option agreement with Adare Pharma Solutions (formerly known asPharmaceuticals USA, Inc., or Adare, Pharmaceuticalsfor the development and Orbis Biosciences,potential exclusive worldwide license of injectable formulations of etonogestrel for contraceptive protection over 6-month and which12-month periods (which the Company refers to as Adare), for the development of two long-acting injectable etonogestrel contraceptives with 6-DARE-204 and 12-month durations (now referred to as ADARE-204 and ADARE-214,DARE-214, respectively). The agreement, as amended, provides the Company with an option to negotiate an exclusive, worldwide, royalty-bearing license, agreementwith rights to sublicense, for the programs if the Company funds the conduct of specified development work by Adare.work. The Company has no obligation to exercise its option.
SST License and Collaboration Agreement
In August 2022,February 2018, the Company entered into a license and collaboration agreement with Hennepin Life SciencesStrategic Science & Technologies-D LLC or Hennepin,and Strategic Science & Technologies, LLC, referred to collectively as SST, under which the Company acquired the exclusive global rights to develop and commercialize treatments delivering the novel antimicrobial glycerol monolaurate (GML) intravaginally for a variety of health conditions including bacterial, fungal, and viral infections. Under the agreement, the Company received an exclusive, worldwide, royalty-bearing, sublicensable license to research, develop and commercialize, the licensed technology. The Company is entitled to sublicense the rights granted to it under the agreement.
The following is a summary of other termsin all countries and geographic territories of the agreement:world, for all indications for women related to female sexual dysfunction and/or female reproductive health, including treatment of female sexual arousal disorder and/or female sexual interest/arousal disorder, or the Field of Use, SST’s topical formulation of Sildenafil Cream, 3.6% as it existed as of the effective date of the agreement, or any other topically applied pharmaceutical product containing sildenafil or a salt thereof as a pharmaceutically active ingredient, alone or with other active ingredients, but specifically excluding any product containing ibuprofen or any salt derivative of ibuprofen, or the Licensed Products.
Milestone Payments. The Company agreedSST will be eligible to make potential future development and sales milestonereceive payments of (1) up to $6.25$18.0 million in the aggregate upon achieving certain clinical and regulatory milestones in the U.S. and (2)worldwide, and up to $45.0$100.0 million in the aggregate upon achieving certain commercial sales milestones for each product covered by the licenses granted under the agreement, which may be paid, in the Company’s sole discretion, in cash or shares of the Company’s common stock.
Royalty Payments. The Company will pay Hennepin low-single-digit to low double-digit royalties based on worldwide net sales of products and processes covered by the licenses granted under the agreement.
Efforts. The Company must use commercially reasonable efforts to develop and introduce to market at least one product.
Term. Unless earlier terminated, the term of the agreement shall expire in its entirety upon the last to expire royalty term. In addition to customary termination rights for both parties,milestones. If the Company may elect to terminate the agreement at any time, withenters into strategic development or without cause, on a country-by-country basis and Hennepin may terminate the agreement if the Company does not undertake any development work with respectdistribution partnerships related to the licensed intellectual property for five consecutive years from the date of the agreement.
MBI Acquisition
In November 2019, the Company acquired Dare MB Inc. (formerly, Microchips Biotech, Inc.), or MBI, to secure the rights to develop a long-acting reversible contraception method that a woman can turn on or off herself, according to her own needs. This candidate is now known as DARE-LARC1.
In connection with the MBI acquisition, the Company issued an aggregate of approximately 3.0 million shares of its common stock to the holders of shares of MBI's capital stock outstanding immediately prior to the effective time of the merger and agreed to pay the former MBI stockholders: (a) up to $46.5 million contingent upon the achievement of specified funding, product development and regulatory milestones; (b) up to $55.0 million contingent upon the achievement of specified amounts of aggregate net sales of products incorporating the intellectual property acquired by the Company in the merger; (c) tiered royalty payments ranging from low single-digit to low double-digit percentages of the proceeds from annual net sales of such products received by the Company (but not by sublicensees), subject to customary provisions permitting royalty reductions and offset; and (d) a percentage of sublicense revenue related to such products. The Company agreed to use commercially reasonable efforts to achieve specified development and regulatory objectives relating to DARE-LARC1. In June 2021, a total of $1.25 million of the contingent consideration became payable upon the achievement of certain of the funding and product development milestone events, $1.0 million of which was recorded as contingent consideration on the Company's consolidated balance sheets upon the completion of the MBI acquisition and $250,000 of which was expensed in 2021. In July 2021, the Company’s board of directors elected to make theseLicensed Products, additional milestone payments in shares of the Company’s common stock,would be due to the extent permissible under the terms of the merger agreement with MBI, and, in September 2021, the Company issued approximately 700,000 shares of its common stock to former stockholders of MBI and paid $75,000 in cash to the stockholders’ representative in accordance with the terms of the merger agreement in satisfaction of the $1.25 million in milestone payments associated with milestones achieved in June 2021. See Note 7.
Pear Tree Acquisition
In May 2018, the Company completed its acquisition of Pear Tree Pharmaceuticals, Inc., or Pear Tree. The Company acquired Pear Tree to secure the rights to develop a proprietary vaginal formulation of tamoxifen, now known as DARE-VVA1, as a potential treatment for vulvar and vaginal atrophy.
Milestone Payments. The Company must make contingent payments to certain Pear Tree licensors and former stockholders of Pear Tree that become payable upon achievement of specified clinical, regulatory and commercial milestones, which may be paid, in the Company’s sole discretion, in cash or shares of the Company’s common stock.
Royalty Payments. Subject to royalty reductions and offsets, the former stockholders of Pear Tree and certain Pear Tree licensors will beSST. Additionally, SST is eligible to receive tiered royalties based on percentages of annual net sales of certainlicensed products byin the Companysingle-digit to mid double-digits subject to customary royalty reductions and offsets, and a percentage of sublicense revenue.
ADVA-Tec License Agreement
In March 2017, the Company entered into a license agreement with ADVA-Tec, Inc., or ADVA-Tec, under which the Company was granted the exclusive right to develop and commercialize Ovaprene for human contraceptive use worldwide.
Under the terms of the license agreement, the Company will pay ADVA-Tec (a) up to $14.6 million in the aggregate based on the achievement of specified development and regulatory milestones, $1.2 million of which has been paid; and (b) up to $20.0 million in the aggregate based on the achievement of certain worldwide net sales milestones.
Additionally, ADVA-Tec is eligible to receive royalties based on aggregate annual net sales of Ovaprene in specified regions at a royalty rate that will vary between 1% and 10% and will increase based on various net sales thresholds, subject to customary reductions and offsets.
If the Company sublicenses its rights under the agreement, in lieu of royalty payments to ADVA-Tec, ADVA-Tec is eligible to receive a double-digit percentage of sublicense revenue received by the Company during the royalty term; provided, however, that for sublicense revenue the Company receives basedprior to the first commercial sale of a licensed product that represents an upfront payment or license fee due on net salesor around the effective date of certain products by sublicensees.the sublicense, ADVA-Tec is eligible to receive a single-digit percentage of that sublicense revenue.
4. STOCKHOLDERS’ EQUITY
Increase in Authorized Shares of Common Stock
In July 2022, following the approval of the Company's stockholders at its annual meeting of stockholders, the Company amended its restated certificate of incorporation to increase the Company's authorized shares of common stock to 240,000,000.
March 2023 ATM Sales Agreement
In March 2023, the Company entered into a sales agreement with Stifel, Nicolaus & Company, Incorporated, or Stifel, and Cantor Fitzgerald & Co., or Cantor, to sell shares of its common stock from time to time through an "at-the-market," or ATM, equity offering program under which Stifel and Cantor act as the Company's agent. The Company agreed to pay a commission equal to 3% of the gross proceeds of any common stock sold under the agreement or such lower amount as the Company and Stifel and Cantor agree, plus certain legal expenses. Shares of the Company's common stock sold under the agreement will be issued pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-254862), the base prospectus included therein, originally filed with the SEC on March 30, 2021 and declared effective by the SEC on April 7, 2021, the prospectus supplement dated March 31, 2023 relating to the offering of up to $50.0 million of shares of the Company's common stock under the sales agreement, and any subsequent prospectus supplement related to the offering of shares of the Company's common stock under the sales agreement.
During the six months ended June 30, 2023, the Company sold 454,592 shares of common stock under this agreement and received aggregate gross proceeds of approximately $463,000 and incurred sales agent commissions and fees of approximately $11,000.
October 2021 ATM Sales Agreement
In October 2021, the Company entered into a sales agreement with SVB Securities LLC (formerly known as SVB Leerink LLC) to sell shares of its common stock from time to time through an "at-the-market," or ATM equity offering program under which SVB Leerink actsSecurities acted as the Company's agent. The Company agreed to pay a commission equal to 3%sold no shares of the gross proceeds of anyits common stock sold under the agreement plus certain legal expenses. Sharesduring either of the Company's common stock sold undersix months ended June 30, 2023 or 2022. The Company terminated the agreement will be issued pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-254862) and the base prospectus included therein, originally filed with the SEC onin March 30, 2021, and declared effective on April 7, 2021, and the prospectus supplement dated October 13, 2021 relating to the offering of up to $50.0 million in shares of the Company's common stock under this sales agreement, and any subsequent prospectus supplement filed with the SEC related to this ATM equity offering program.
During the nine months ended September 30, 2022, the Company sold approximately 751,000 shares of common stock under this agreement for gross proceeds of approximately $1.3 million and incurred offering expenses of approximately $42,000.2023.
April 2021 ATM Sales Agreement
In April 2021, the Company entered into a sales agreement with SVB Securities LLC to sell shares of its common stock from time to time through an ATM equity offering program under which SVB Securities actsacted as the Company's agent. Under the sales agreement, the Company may issue and sell up to $50.0 million of shares of its common stock. The Company agreed to pay a commission equal to 3% of the gross proceeds of any common stock sold under the agreement, plus certain legal expenses. Any shares of the Company's common stock sold under the agreement will be issued pursuant to the Company's shelf registration statement on Form S-3 (File No. 333-254862) and the base prospectus included therein, originally filed with the SEC on March 30, 2021, and declared effective on April 7, 2021, and the prospectus supplement dated April 7, 2021 filed with the SEC on April 8, 2021.
During the nine months ended September 30, 2022, the Company sold no shares under this agreement. During the nine months ended September 30, 2021, the Company sold approximately 26.0 million shares of common stock under this agreement for gross proceeds of approximately $46.9 million and incurred offering expenses of approximately $1.6 million.
2018 ATM Sales Agreement
In January 2018 the Company entered into a common stock sales agreement with H.C. Wainwright & Co., LLC, or Wainwright, relating to the offering and sale of shares of its common stock from time to time in an ATM equity offering program through Wainwright, acting as sales agent. Underunder the agreement Wainwright was entitled to a commission at a fixed commission rate equal to 3.0%during either of the gross proceeds per share sold under the agreement. In March 2021, thesix months ended June 30, 2023 or 2022. The Company provided notice to Wainwright to terminateterminated the agreement and the agreement terminated in April 2021. During the nine months ended September 30, 2021, the Company sold approximately 3.3 million shares of common stock under this agreement for gross proceeds of approximately $7.7 million and incurred offering expenses of approximately $245,000.
Equity Line
In April 2020, the Company entered into a purchase agreement, or the Purchase Agreement, and a registration rights agreement with Lincoln Park Capital Fund, LLC, or Lincoln Park. Under the terms and subject to the conditions of the Purchase Agreement, the Company had the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park was obligated to purchase up to $15.0 million of the Company’s common stock. The Company incurred legal, accounting, and other fees related to the Purchase Agreement of approximately $374,000. These costs were amortized and expensed as shares were sold under the Purchase Agreement. As of December 31, 2021, the Company had sold and Lincoln Park had purchased $15.0 million of the Company's common stock under the Purchase Agreement, there were no unamortized costs, and no more shares of common stock may be sold by the Company to Lincoln Park under the Purchase Agreement. During the nine months ended September 30, 2021, the Company sold, and Lincoln Park purchased, 4.8 million shares under the Purchase Agreement for gross proceeds to the Company of approximately $7.0 million and recognized offering expenses of approximately $207,000.March 2023.
Common Stock Warrants
In February 2018, the Company closedconnection with an underwritten public offering in connection with whichFebruary 2018, the Company issued to the investors in that offering, warrants exercisable through February 2023 and that initially hadwith an initial exercise price of $3.00 per share. The Company estimated the fair value of the warrants includeas of February 15, 2018 to be approximately $3.0 million which was recorded in equity as of the grant date. The warrants included a price-based anti-dilution provision, which providesprovided that, subject to certain limited exceptions, the exercise price of the warrants willwould be reduced each time the Company issuesissued or sellssold (or iswas deemed to issuehave issued or sell)sold) securities for a net consideration per share less than the exercise price of those warrants in effect immediately prior to such issuance or sale. In addition, subject to certain exceptions, if the Company issues, sellsissued, sold or entersentered into any agreement to issue or sell securities at a price which variesvaried or may vary with the market price of the shares of the Company’s common stock, the warrant holders havehad the right to substitute such variable price for the exercise price of the warrant then in effect. These warrants are exercisable only for cash, unless a registration statement covering the shares issued upon exercise of the warrants is not effective, in which case the warrants may be exercised on a cashless basis. A registration statement covering the shares issued upon exercise of the warrants is currently effective. The Company estimated the fair value of the warrants as of February 15, 2018 to be approximately $3.0 million which was recorded in equity as of the grant date. The Company early adopted ASU 2017-11 as of January 1, 2018 and recorded the fair value of the warrants as equity.
In April 2019 and July 2020, in accordance with the price-based anti-dilution provision discussed above, the exercise price of these warrants was automatically reduced to $0.98 per share and to $0.96 per share, respectively, and as a result of the triggering of the anti-dilution provision, $0.8 million and $6,863, respectively, was recorded to additional paid-in capital.
respectively. During the ninesix months ended SeptemberJune 30, 2022, no warrants were exercised. During the nine months ended September 30, 2021,2023, warrants to purchase 265,4851,353,515 shares of common stock were exercised for gross proceeds of $254,866. approximately $1.3 million and the remaining unexercised warrants expired on February 15, 2023. No warrants were exercised during the six months ended June 30, 2022.
As of SeptemberJune 30, 2022,2023, the Company had the following warrants outstanding:
| | | | | | | | | | | | | | | | | |
Shares Underlying
Outstanding Warrants | | Exercise Price | | Expiration Date |
| 6,500 | | $ | 10.00 | | 04/04/2026 |
| 1,374,515 | | $ | 0.96 | | 02/15/2023 |
| 1,381,015 | | | | | |
| | | | | | | | | | | | | | | | | |
Shares Underlying
Outstanding Warrants | | Exercise Price | | Expiration Date |
| 6,500 | | $ | 10.00 | | 04/04/2026 |
| 6,500 | | | | | |
5. STOCK-BASED COMPENSATION
2014 Employee Stock Purchase Plan
The Company’s 2014 Employee Stock Purchase Plan, or the ESPP, became effective in April 2014, but no offering period has been initiated thereunder since January 2017. There was no stock-based compensation related to the ESPP for the ninesix months ended SeptemberJune 30, 20222023 or SeptemberJune 30, 2021.
Amended and Restated 2014 Stock Incentive Plan
The Amended and Restated 2014 Stock Incentive Plan, or the Amended 2014 Plan, provided for the grant of options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, officers and directors, and consultants and advisors. There were 2,046,885 shares of common stock authorized for issuance under the Amended 2014 Plan when it was approved by the Company's stockholders in July 2018. The number of authorized shares increased annually on the first day of each fiscal year by the least of (i) 2,000,000, (ii) 4% of the number of outstanding shares of common stock on such date, or (iii) an amount determined by the Company’s board of directors. On January 1, 2022, the number of authorized shares increased by 2,000,000 to 2,201,855. On June 23, 2022,As a result of the Amended 2014 Plan was superseded byapproval of the 2022 Plan (as defined below), and by the Company's stockholders on June 23, 2022, no further awards have been or will be granted under the Amended 2014 Plan. Awards outstandingOutstanding awards previously granted under the Amended 2014 Plan will continue to remain outstanding pursuant toin accordance with their terms and conditions.terms.
2022 Stock Incentive Plan
In April 2022, the Company's board of directors approved the Daré Bioscience, Inc. 2022 Stock Incentive Plan, or the 2022 Plan, which was subsequently approved by the Company's stockholders on June 23, 2022, and became effective as of that date. The 2022 Plan provides for the grant of stock-based incentive awards to employees, consultants, advisors, and directors.
The number of shares of common stock authorized for issuance under the 2022 Plan is (a) 10,117,305; plus (b) up to 6,144,682 shares subject to awards granted under the Amended 2014 Plan or the 2007 Stock Incentive Plan that expire, terminate or are otherwise forfeited on or after June 23, 2022.
Summary of Stock Option Activity
The table below summarizes stock option activity under the Company's stock incentive plans and related information for the ninesix months ended SeptemberJune 30, 2022.2023. The exercise price of all options granted during the ninesix months ended SeptemberJune 30, 20222023 was equal to the market value of the Company’s common stock on the date of grant. As of SeptemberJune 30, 2022,2023, unamortized stock-based compensation expense of approximately $4.7$5.6 million will be amortized over a weighted average period of 2.562.47 years. At September 30, 2022, 9,576,581The number of shares of common stock were available for future awards granted under the 2022 Plan.Plan at June 30, 2023 was 6,718,916.
| | | | | | | | | | | |
| Number of Shares | | Weighted Average
Exercise Price |
| Outstanding at December 31, 2021 | 4,717,602 | | | $ | 1.65 | |
| Granted | 2,346,692 | | | 1.50 | |
| Exercised | (130,322) | | | 0.96 | |
| Canceled/forfeited | (321,418) | | | 1.94 | |
| Expired | — | | | — | |
| Outstanding at September 30, 2022 | 6,612,554 | | | $ | 1.60 | |
| Exercisable at September 30, 2022 | 3,337,063 | | | $ | 1.49 | |
| | | | | | | | | | | |
| Number of Shares | | Weighted Average
Exercise Price |
| Outstanding at December 31, 2022 | 6,612,554 | | | $ | 1.60 | |
| Granted | 2,857,665 | | | 1.13 | |
| Exercised | — | | | |
| Cancelled/forfeited | — | | | |
| Expired | — | | | |
| Outstanding at June 30, 2023 | 9,470,219 | | | $ | 1.46 | |
| Exercisable at June 30, 2023 | 4,769,873 | | | $ | 1.50 | |
Compensation Expense
Total stock-based compensation expense related to stock options granted to employees and directors recognized in the condensed consolidated statements of operations is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 |
| Research and development | $ | 168,323 | | | $ | 144,876 | | | $ | 514,875 | | | $ | 389,913 | |
| General and administrative | $ | 388,125 | | | $ | 294,621 | | | $ | 1,111,504 | | | $ | 820,973 | |
| Total | $ | 556,448 | | | $ | 439,497 | | | $ | 1,626,379 | | | $ | 1,210,886 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
| Research and development | $ | 210,198 | | | $ | 171,938 | | | $ | 410,499 | | | $ | 346,552 | |
| General and administrative | 439,988 | | | 365,583 | | | 864,308 | | | 723,378 | |
| Total | $ | 650,186 | | | $ | 537,521 | | | $ | 1,274,807 | | | $ | 1,069,930 | |
`6. LEASED PROPERTIES
The Company's lease for its corporate headquarters (3,169 square feet of office space) commenced on July 1, 2018. In February 2022, the Company entered into an amendment to extend the term of the lease for two years such that the term now expires on August 31, 2024.
MBI, a wholly owned subsidiary the Company acquired in November 2019, leases general office space in Lexington, Massachusetts. The lease for that space commenced on July 1, 2013. In February 2022, the Company entered into an amendment to extend the term of the lease for three years to December 31, 2025, subject to the landlord's right to terminate the lease on December 31, 2023. The extension of the lease in February 2022 resulted in an increase in operating lease liabilities and ROU assets of approximately $1.0 million. In September 2022, the landlord exercised its option to terminate the lease, resulting in the new lease term ending on December 31, 2023. The termination of the lease resulted in a reduction of operating lease liabilities and ROU assets of approximately $504,000 and $458,000, respectively, and a $46,000 gain on the modification of the lease which iswas included as a reduction to research and development expense for the year ended December 31, 2022. MBI entered into a new lease for general office space in June 2023 that will commence on December 1, 2023 and will create an obligation to pay approximately $1.4 million over the lease period of three and nine months ended September 30, 2022.years.
MBI previously leased warehouse space in Billerica, Massachusetts, under a lease that commenced on October 1, 2016 and terminated on March 31, 2022.
Under the terms of each lease, the lessee pays base annual rent (subject to an annual fixed percentage increase), plus property taxes, and other normal and necessary expenses, such as utilities, 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 leases do not require material variable lease payments, residual value guarantees or restrictive covenants.
The leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. 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 within a particular currency environment. The Company uses an incremental borrowing rate consisting of the current prime rate plus 200 basis points for operating leases that commenced prior to January 2019 (and all of the Company's operating leases commenced prior to such date). The depreciable lives of operating leases and leasehold improvements are limited by the expected lease term.
At SeptemberJune 30, 2022,2023, the Company reported operating lease ROU assets of approximately $546,000$276,000 in other non-current assets, and approximately $388,000 and $195,000, respectively,$272,000 in current portion of lease liabilities, and approximately $23,000 in lease liabilities long-term onin the condensed consolidated balance sheet.sheets.
Total operating lease costs were approximately $116,000$145,000 and $134,000$284,000 for the three and six months ended SeptemberJune 30, 2022 and September 30, 2021,2023, respectively, and $469,000$150,000 and $420,000$340,000 for the ninethree and six months ended SeptemberJune 30, 2022, and September 30, 2021, respectively. Operating lease costs consist of monthly lease payments expense, common area maintenance and other repair and maintenance costs and are included in general and administrative expenses in the condensed consolidated statements of operations.
Cash paid for amounts included in the measurement of operating lease liabilities was approximately $81,000$105,000 and $117,000$209,000 for the three and six months ended SeptemberJune 30, 2022 and September 30, 2021,2023, respectively, and $231,000$80,000 and $343,000$203,000 for the ninethree and six months ended SeptemberJune 30, 2022, and September 30, 2021, respectively. These amounts are included in operating activities in the condensed consolidated statements of cash flows. At SeptemberJune 30, 2022,2023, operating leases had a weighted average remaining lease term of 1.580.83 years.
As of SeptemberJune 30, 2022,2023, future minimum lease payments under the Company's operating leases are as follows:follows (does not include any minimum lease payments under the lease MBI entered in June 2023 because the lease does not commence until December 1, 2023):
| | | Remainder of 2022 | $ | 105,000 | | |
| 2023 | 422,000 | | |
| Remainder of 2023 | | Remainder of 2023 | $ | 213,000 | |
| 2024 | 2024 | 93,000 | | 2024 | 93,000 | |
| | | Total future minimum lease payments | Total future minimum lease payments | 620,000 | | Total future minimum lease payments | 306,000 | |
| Less: accreted interest | Less: accreted interest | 37,000 | | Less: accreted interest | 10,000 | |
| Total operating lease liabilities | Total operating lease liabilities | $ | 583,000 | | Total operating lease liabilities | $ | 296,000 | |
7. COMMITMENTS AND CONTINGENCIES
CRADA with NICHD for the Pivotal Phase 3 Study of Ovaprene
In July 2021, the Company entered into a Cooperative Research and Development Agreement, or the CRADA, with the U.S. Department of Health and Human Services, as represented by the Eunice Kennedy Shriver National Institute of Child Health and Human Development, or NICHD, for the conduct of a multi-center, non-comparative, pivotal Phase 3 clinical study of Ovaprene, or the Ovaprene Phase 3. The Ovaprene Phase 3 will be conducted within NICHD’s Contraceptive Clinical Trial Network with NICHD's selected contract research organization providing clinical coordination and data collection and management services for the Ovaprene Phase 3. The Company and NICHD will each provide medical oversight and final data review and analysis for the Ovaprene Phase 3 and will work together to prepare the final report of the results of the Ovaprene Phase 3. The Company is responsible for providing clinical supplies of Ovaprene, coordinating interactions with the FDA, preparing and submitting supportive regulatory documentation, and providing a total of $5.5 million in payments to NICHD to be applied toward the costs of conducting the Ovaprene Phase 3. NICHD will beis responsible for the other costs related to the conduct of the Ovaprene Phase 3. In accordance with the payment schedule under the CRADA, the Company has paidmade aggregate payments of $5.0 million of the total amount payable to NICHD, $3.5 million of which was paid during the first quarter ofin 2022. At September 30, 2022, theThe Company's remaining amount of the Company's payment obligation under the CRADA at June 30, 2023 was $0.5 million, which is due in the second quarter of 2023.million.
As discussed in Note 3 above, in connection with the acquisition of MBI, the Company agreed to pay additional consideration of up to $46.5 million to the former stockholders of MBI contingent upon the achievement of specified funding, product development and regulatory milestones. In June 2021, $1.25 million of that additional consideration became payable upon the achievement of certain of the funding and product development milestone events, $1.0 million of which was previously recorded as contingent consideration on the Company's consolidated balance sheets upon the completion of the MBI acquisition and $250,000 of which was expensed in 2021. In July 2021, the Company’s board of directors elected to make these milestone payments in shares of the Company’s common stock, to the extent permissible under the terms of the merger agreement with MBI, and, in September 2021, the Company issued approximately 700,000 shares of its common stock to former stockholders of MBI and paid $75,000 to the stockholders’ representative in accordance with the terms of the merger agreement in satisfaction of the $1.25 million in milestone payments associated with milestones achieved in June 2021.
Note Payable
In April 2020, due to the economic uncertainty resulting from the impact of the COVID-19 pandemic on the Company's operations and to support its ongoing operations and retain all employees, the Company applied for and received a loan of $367,285 under the Paycheck Protection Program, or the PPP, of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, administered by the U.S. Small Business Administration, or the SBA. Under the terms of the PPP, the loan proceeds could be used for "qualifying expenses" and, subject to specified limitations in the CARES Act and under the terms of the PPP, certain amounts of the loan, including accrued interest, may be forgiven if used for qualifying expenses. In January 2021, the Company was notified that the principal balance of its PPP loan and all accrued interest, which together totaled $369,887, were fully forgiven by the SBA. The Company recorded a gain on extinguishment of note payable and debt forgiveness income with respect to such loan forgiveness in the first quarter of 2021.
8. GRANT AWARDS
NICHD Non-Dilutive Grant Funding
The Company has received notices of awards and non-dilutive grant funding from NICHD to support the development of Ovaprene, DARE-PTB1, DARE-LARC1 and ADARE-204/DARE-204/214. NICHD issues notices of awards to the Company for a specified amount, and the Company must incur and track expenses eligible for reimbursement under the award and submit a detailed accounting of such expenses to receive payment. If the Company receives payments under the award, the amounts of such payments are recognized in the statements of operations as a reduction to research and development activities as the related costs are incurred to meet those obligations over the period.
Ovaprene
From 2018 through 2021, the Company received approximately $1.9 million of non-dilutive grant funding from NICHD for clinical development efforts supporting Ovaprene. All funds under the final notice of award had been disbursed as of December 31, 2021.
DARE-PTB1
In August 2020, the Company received a notice of award of a grant from NICHD to support the development of DARE-PTB1. The award in the amount of $300,000 was for what is referred to as the "Phase I" segment of the project outlined in the Company's grant application, which is ongoing. Additional potential funding of up to approximately $2.0 million for the "Phase II" segment of the project outlined in the grant application is contingent upon satisfying specified requirements, including, assessment of the results of the Phase I segment, determination that the Phase I goals were achieved, and availability of funds. There is no guarantee the Company will receive any Phase II award.
The Company recorded credits to research and development expense for costs related to the NICHD award of approximately $500 and $20,000$721 during the three and ninesix months ended SeptemberJune 30, 2023, and $2,500 and $19,500 during the three and six months ended June 30, 2022, respectively. At June 30, 2023 the Company recorded a receivable for expenses incurred through such date that it believes are reimbursable under the grant of $721. No receivable was recorded at December 31, 2022.
DARE-LARC1
In September 2021, the Company received a notice of award of a grant from NICHD to support the development of DARE-LARC1. The award in the amount of approximately $300,000 iswas to be used to explore device insertion and removal in non-clinical studies, which is ongoing.nonclinical studies.
The Company recorded credits to research and development expense of approximately $3,000$0 and $196,000$32,000 for costs related to the NICHD award during the three and ninesix months ended SeptemberJune 30, 2023, respectively, and $27,800 and $193,000 for the three and six months ended June 30, 2022, respectively. At September 30, 2022, theThe Company recorded a receivable of approximately $2,000$33,000 at December 31, 2022 for expenses incurred through such date that it believes are eligible for reimbursementwere subsequently reimbursed under the grant. No receivable was recorded at June 30, 2023. The Company received aggregate reimbursements under the NICHD award of approximately $278,000 during the grant period, which ended in June 2023. No further funds are available under this award.
ADARE-204DARE-204 and ADARE-214DARE-214
In May 2022, the Company received a notice of award of a grant from NICHD of approximately $249,000 to support end-user research to better understand women's preferences for a long-acting injectable contraceptive method. The findings from the research will inform the Company's target product profile and guide its development priorities for ADARE-204DARE-204 and ADARE-214.DARE-214.
The Company recorded credits to research and development expense of approximately $65,000$32,700 and $81,500 for costs related to the NICHD award during both the three and ninesix months ended SeptemberJune 30, 2022. At September 30, 2022,2023, respectively, with no such credits recorded in the same periods of the prior year. The Company recorded a receivable of approximately $65,000$33,040 and $24,000 at June 30, 2023 and December 31, 2022, respectively, for expenses incurred through such date that it believes is eligible for reimbursement under the grant.
Other Non-Dilutive Grant Funding
MBI2022 DARE-LBT Grant Agreement
The Company's wholly-owned subsidiary, MBI, was awarded $5.4 million to supportIn November 2022, the development of DARE-LARC1 under a grantCompany entered into an agreement with the Bill & Melinda Gates Foundation, or the Foundation.Foundation, under which the Company was awarded $585,000 to support the development of DARE-LBT. The Company is required to apply the funds it receives under the agreement solely toward direct costs for the development of DARE-LBT, other than approximately 10% of such funds, which it may apply toward general overhead and administration expenses that support the entire operations of the Company. The Company receives funding period under this agreement ended on June 30, 2021. Expensesin advance and tracks and reports eligible for funding wereexpenses incurred tracked and reported to the Foundation. MBIAny unspent funds and any funds spent that have not yet been depreciated or expensed are recorded as a deferred grant funding liability in the Company's condensed consolidated balance sheets.
The Company received aggregate payments under this agreementthe full amount of the award in November 2022. As of June 30, 2023, the Company has recorded a deferred grant funding liability of approximately $5.4 million. At June 30, 2021, all payments under this agreement associated with research and development expenses for DARE-LARC1 had been incurred and reported to$544,000 in the Foundation.
Company's condensed consolidated balance sheets.2021 DARE-LARC1 Grant Agreement
In June 2021, the Company entered into an agreement with the Foundation or the 2021 DARE-LARC1 Grant Agreement, under which the Company was awarded up to $48.95$49.0 million to support the development of DARE-LARC1. The 2021Company is required to apply the funds it receives under the agreement solely toward direct costs for the development of DARE-LARC1, Grant Agreement willother than approximately 10% of such funds, which it may apply toward general overhead and administration expenses that support the entire operations of the Company. The agreement supports technology development and preclinical activities over the period of June 30, 2021 to November 1, 2026, to advance DARE-LARC1 in non-clinicalnonclinical proof of principle studies. Under the 2021 DARE-LARC1 Grant Agreement, theThe Company receives funding in advance and tracks and reports eligible expenses incurred to the Foundation. Any unspent funds and any funds spent that have not yet been depreciated or expensed are recorded as a deferred grant funding liability in the Company's condensed consolidated balance sheet.sheets.
In July 2022, theThe Company received an initial payment of approximately $8.0$11.5 million from the Foundation under thein 2021, DARE-LARC1 Grant Agreement.and aggregate payments of approximately $12.4 million in 2022. As of SeptemberJune 30, 2022,2023, the Company has received a cumulative total of approximately $19.4$23.9 million in non-dilutive funding under the 2021 DARE-LARC1 Grant Agreementagreement and recorded approximately $14.8 million ofa deferred grant funding liability of approximately $13.1 million in the Company's condensed consolidated balance sheet.sheets. Additional payments under the 2021 DARE-LARC1 Grant Agreement are contingent upon the DARE-LARC1 program’s achievement of specified development and reporting milestones.
9. NET LOSS PER SHARE
The Company computes basic net loss per share, or EPS, using the weighted average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted EPS is based upon the weighted average number of common shares and potentially dilutive securities (common share equivalents) outstanding during the period. Dilutive securities include the dilutive effect of in-the-money options and warrants, which is calculated based on the average share price for each period using the treasury stock method. Under the treasury stock method, the exercise price of an option or warrant, the amount of compensation cost, if any, for future service that the Company has not yet recognized, and the amount of estimated tax benefits that would be recorded in paid-in capital, if any, when the option or warrant is exercised are assumed to be used to repurchase shares in the current period. Dilutive securities are excluded from the diluted EPS calculation if their effect is anti-dilutive.
The following potentially dilutive outstanding securities were excluded from diluted EPS for the period indicated because of their anti-dilutive effect:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Potentially dilutive securities | | Three Months Ended
September 30, | | Nine Months Ended
September 30, |
| | | 2022 | | 2021 | | 2022 | | 2021 |
| Stock options | | 6,612,554 | | | 4,802,666 | | | 6,612,554 | | | 4,802,666 | |
| Warrants | | 1,381,015 | | | 1,643,158 | | | 1,381,015 | | | 1,643,158 | |
| Total | | 7,993,569 | | | 6,445,824 | | | 7,993,569 | | | 6,445,824 | |
10. SUBSEQUENT EVENTS
Ovaprene IDE Application Approval
On October 10, 2022, the FDA approved the Company's Investigational Device Exemption, or IDE, application for a single arm, open-label pivotal contraceptive efficacy study of Ovaprene and provided the Company with recommended additional study design considerations. Implementing such study design considerations will further position the study to collect safety and effectiveness data to enable the preparation of, and to support the submission of, a PMA application. The Company expects to make a $1.0 million milestone payment as a result.
Receipt of Australia Research and Development Cash Credit
On October 3, 2022, the Company received a research and development rebate from the government of Australia in the amount of approximately $786,000 for clinical work performed in Australia in 2021. The rebate is accounted for as an offset to research and development expense. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Potentially dilutive securities | | Three Months Ended
June 30, | | Six Months Ended
June 30, |
| | | 2023 | | 2022 | | 2023 | | 2022 |
| Stock options | | 9,470,219 | | | 6,053,156 | | | 9,470,219 | | | 6,417,533 | |
| Warrants | | 6,500 | | | 1,058,733 | | | 6,500 | | | 1,381,015 | |
| Total | | 9,476,719 | | | 7,111,889 | | | 9,476,719 | | | 7,798,548 | |
10. SUBSEQUENT EVENTS
ATM Sales
During July and August 2023, the Company sold an aggregate of 1,151,578 shares of common stock under its ATM equity offering program and received aggregate gross proceeds of approximately $946,000 and incurred sales agent commissions and fees of approximately $22,000 (See Note 4, Stockholders' Equity).
NICHD Non-Dilutive Grant Award
On July 28, 2023, the Company received a notice of award of a grant from NICHD of approximately $385,000 to support preclinical development of a potential new therapeutic for the prevention of idiopathic preterm birth. The grant funds will support activities related to the conduct and completion of proof-of-concept target validation studies in collaboration with the University of South Florida, or USF, which are to occur over a 12-month period. The Company will track expenses eligible for reimbursement under the grant award and submit a detailed accounting of such expenses to receive payment of the grant funds. The amounts of any such payments will be recognized in the Company's statement of operations as a reduction to research and development activities as the related costs are incurred to meet those obligations over the project period.
Insurance Financing
On July 18, 2023, the Company obtained financing for certain director and officer and other liability insurance premiums. The agreement for such financing assigns to the lender a first priority lien on and a security interest in the financed insurance policies and any additional premium required in the financed insurance policies including (a) all returned or unearned premiums, (b) all additional cash contributions or collateral amounts assessed by the insurance companies in relation to the financed insurance policies and financed by the lender, (c) any credits generated by the financed insurance policies, (d) dividend payments, and (e) loss payments which reduce unearned premiums. If any circumstances exist in which premiums related to any financed insurance policy could become fully earned in the event of loss, the lender will be named a loss-payee with respect to such policy.
The total premiums, taxes and fees financed is approximately $0.8 million with an annual interest rate of approximately 8.0%. In consideration of the premium payment by the lender to the insurance companies or the agent or broker, the Company unconditionally promises to pay the lender the amount financed plus interest and other charges permitted under the agreement. The Company will pay the insurance financing through monthly installment payments through April 20, 2024. The amount financed will be recognized as an insurance financing payable in the Company's consolidated balance sheets.
Amendment to Exclusive License Agreement with Organon
On July 4, 2023, the Company entered into an amendment to its exclusive license agreement with Organon to commercialize XACIATO. Under the amendment, Organon agreed to pay $1.0 million to the Company as reimbursement for fees paid to the FDA in connection with the submission of the new drug application for XACIATO (known as PDUFA fees) and other manufacturing expenses and to support continued advancement of the development and commercialization of XACIATO, which will be recognized as license fee revenue in the third quarter of 2023. The Company received such amount in July 2023. The amount payable by Organon to the Company following the first commercial sale of a licensed product in the United States was revised to $1.8 million.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto for the year ended December 31, 20212022 included in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, or our 20212022 10-K, filed with the Securities and Exchange Commission, or SEC, on March 31, 2022.30, 2023. Past operating results are not necessarily indicative of results that may occur in future periods.
The following discussion includes forward-looking statements. See “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS,” above. Forward-looking statements are not guarantees of future performance and our actual results may differ materially from those currently anticipated and from historical results depending upon a variety of factors, including, but not limited to, those discussed in Part I, Item 1A. Risk Factors of our 20212022 10-K, and in our subsequent filings with the SEC, including any discussed in Part II, Item 1A of this report under the heading “Risk Factors,” which are incorporated herein by reference.
In this report, “we,” “us,” “our,” “Daré” or the “Company” refer collectively to Daré Bioscience, Inc. and its wholly owned subsidiaries, unless otherwise stated or the context otherwise requires. All information presented in this report is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending December 31 and the associated quarters, months and periods of those fiscal years.
Daré Bioscience® is a registered trademark of Daré Bioscience, Inc. and XACIATO™ is a trademark of Daré Bioscience, Inc. with registration pending. Ovaprene® is a registered trademark licensed to Daré Bioscience, Inc. All other trademarks, service marks or trade names appearing in this report are the property of their respective owners. Use or display by us of other parties’ trademarks, service marks or trade names is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark, service mark or trade name owners.
Business Overview
We are a biopharmaceutical company committed to advancing innovative products for women’s health. We are driven by a mission to identify, develop and bring to market a diverse portfolio of differentiated therapies that prioritize women's health and well-being, expand treatment options, and improve outcomes, primarily in the areas of contraception, fertilityvaginal health, reproductive health, menopause, sexual health and vaginal and sexual health.fertility. Our business strategy is to in-license or otherwise acquire the rights to differentiated product candidates in our areas of focus, some of which have existing clinical proof-of-concept data, to take those candidates through mid to late-stage clinical development or regulatory approval, and to establish and leverage strategic collaborations to achieve commercialization. We and our wholly owned subsidiaries operate in one business segment.
Our first product, XACIATO [zah-she-AH-toe] (clindamycin phosphate) vaginal gel, 2%, was approved by the FDA in December 2021 as a single-dose prescription medication for the treatment of bacterial vaginosis in female patients 12 years of age and older. In March 2022, we entered into an exclusive global license agreement with an affiliate of Organon & Co., Organon International GmbH, or Organon, which became fully effective in June 2022, whereby Organon licensed exclusive worldwide rights to develop, manufacture and commercialize XACIATO. Accordingly, our potential future revenue from the commercialization of XACIATO will consist of royalties based on net sales and milestone payments from Organon, and, for an interim period, payments from Organon for commercial supply of XACIATO. We anticipate the first commercial sale of XACIATO in the U.S. in the first half of 2023.
Our product pipeline includes diverse programs that target unmet needs in women's health in the areas of contraception, fertilityvaginal health, reproductive health, menopause, sexual health and vaginal and sexual healthfertility, and aim to expand treatment options, enhance outcomes and improve ease of use for women. We are primarily focused on progressing the development of our existing portfolio of product candidates. We areHowever, we also exploringexplore opportunities to expand our portfolio by leveraging assets to which we hold rights or obtaining rights to new assets, with continued focus solely on women's health.
Our current portfolio includes twofour product candidates in advanced clinical development:development (Phase 2 to Phase 3):
•OvapreneOvaprene®, a hormone-free, monthly intravaginal contraceptive; and
•Sildenafil Cream, 3.6%, a proprietary cream formulation of sildenafil for topical administration to the vulva and vaginafemale genitalia on demand for the treatment of female sexual arousal disorder (FSAD) and/or FSAD.female sexual interest/arousal disorder (FSIAD);
•DARE-HRT1, an intravaginal ring designed to deliver both bio-identical estradiol and progesterone together, continuously over a 28-day period, for the treatment of moderate-to-severe vasomotor symptoms, as part of menopausal hormone therapy; and
•DARE-VVA1, a proprietary formulation of tamoxifen for intravaginal administration being developed as a hormone-free alternative to estrogen-based therapies for the treatment of moderate to severe vulvovaginal atrophy.
Our portfolio also includes fourfive product candidates in Phase 1 clinical development or that we believe are Phase 1-ready:
•DARE-HRT1DARE-PDM1, , a combination bio-identical estradiol and progesterone intravaginal ring, or IVR,proprietary hydrogel formulation of diclofenac, a nonsteroidal anti-inflammatory drug, for thevaginal administration as a treatment of menopausal symptoms, including vasomotor symptoms, as part of hormone therapy following menopause;for primary dysmenorrhea;
•DARE-VVA1DARE-204 and DARE-214, a vaginally delivered formulationinjectable formulations of tamoxifenetonogestrel designed to treat vulvar vaginal atrophy, or VVA, as an option for women with hormone-receptor positive breast cancer;provide contraception over 6-month and 12-month periods, respectively;
•DARE-FRT1, an intravaginal ring containingdesigned to deliver bio-identical progesterone continuously for broaderup to 14 days for luteal phase support as part of an in vitro fertilization treatment plan; and
•DARE-PTB1, an intravaginal ring containingdesigned to deliver bio-identical progesterone continuously for up to 14 days for the prevention of preterm birth.
In addition, our portfolio includes thesefive pre-clinical stage potential product candidates:
•ADARE-204 and ADARE-214, injectable formulations of etonogestrel designed to provide contraceptive protection over 6-month and 12-month periods, respectivelyprograms:
•DARE-LARC1, a contraceptive implant delivering levonorgestrel with a woman-centered design that has the potential to be a long-acting, yet convenient and user-controlled contraceptive option;
•DARE-GML, an intravaginally-delivered potential multi-target antimicrobial agent formulated with glycerol monolaurate (GML), which has shown broad antimicrobial activity, killing bacteria and viruses; and
•DARE-LBT, a novel hydrogel formulation for vaginal delivery of live biotherapeutics to support vaginal health;
•DARE-RH1, a novel approach to non-hormonal contraception for both men and women by targeting the CatSper ion channel.channel; and
•DARE-PTB2, a novel approach for the prevention and treatment of idiopathic preterm birth through inhibition of a stress response protein.
The product candidates and potential product candidates in our portfolio will require review and approval from the FDA, or a comparable foreign regulatory authority, prior to being marketed or sold. See below and ITEM 1. "BUSINESS," in Part I of our 2022 10-K for additional information regarding our product and product candidates.
Our primary operations have consisted of research and development activities to advance our portfolio of product candidates through late-stage clinical development andand/or regulatory approval. We expect our research and development expenses will continue to represent the majority of our operating expenses for at least the next twelve months. For the remainder of 2022,2023, we expect to continue to focus our resources on advancement of Ovaprene, and Sildenafil Cream, 3.6%, DARE-HRT1 and our other product candidates that have reached the human clinical study development phase. In addition, we expect to incur significant research and development expenses for the DARE-LARC1 program for the next several years, but we also expect such expenses will be supported by non-dilutive funding provided under a grant agreement we entered into in June 2021.
The process of developing and obtaining regulatory approvals for prescription drug and drug/device products in the United States and in foreign jurisdictions is inherently uncertain and requires the expenditure of substantial financial resources without any guarantee of success. As discussed below, we will need to raise substantial additional capital to continue to fund our operations and execute our current business strategy. To datethe extent we have generated $10.0 million inreceive regulatory approvals, such as the FDA’s approval of XACIATO, the commercialization of any product and compliance with subsequently applicable laws and regulations requires the expenditure of further substantial financial resources without any guarantee of commercial success. The amount of post-approval financial resources required for commercialization and the potential revenue allwe may receive from sales of any product will vary significantly depending on many factors, including whether, and the extent to which, represents the upfront payment underwe establish our license agreementown sales and marketing capabilities and/or enter into and maintain commercial collaborations with Organon to commercialize XACIATO.third parties with established commercialization infrastructure. We are also subject to severala number of other risks common to biopharmaceutical companies, including, but not limited to, dependence on key employees, dependencereliance on third-party collaborators, and service providers competition from other companies, the needand suppliers, being able to develop commercially viable products in a timely and cost-effective manner, dependence on intellectual property we own or in-license and the need to obtain adequate additional capital to fund the development of product candidates. We are also subject to several risks common to other companies in the industry, including rapid technology change, regulatory approval of products,protect that intellectual property and maintain those license agreements, uncertainty of market acceptance of products, successuncertainty of third parties in the marketing, salethird-party payor coverage, pricing and distribution of ourreimbursement for products, rapid technology change, intense competition, from substitute products and larger companies, compliance with government regulations, protectionproduct liability claims, and exposure to cybersecurity threats and incidents.
XACIATO
Activities in preparation for commercial launch of proprietary technology, and product liability.
The COVID-19 pandemic remains an evolving and uncertain risk to our business, operating results, financial condition and stock price. To date, we believe the pandemic contributed to a slower than expected initial pace of enrollment in our Phase 2b clinical study of Sildenafil Cream, 3.6% and delays in commencement of clinical studies and nonclinical testing for more than one of our earlier stage clinical programs, but has not had a material adverse effect on our business as a whole. Continued uncertainty regarding the duration and impact of the pandemic on the U.S. and global economies, healthcare systems, workplace environments and capital markets, preclude any prediction as to the ultimate effect of the pandemic on our business. See the risk factor in Part I, Item 1A of our 2021 10-K titled, The COVID-19 pandemic has negatively impacted our business and,XACIATO (clindamycin phosphate) vaginal gel, 2% in the future, may materiallyUnited States, including manufacturing-related activities, are ongoing and adversely affect our business, financial condition and results and stock price, including by increasing the cost and timelines for our clinical development programs.
XACIATO
first commercial sale is expected in 2023. In March 2022,July 2023, we entered into an amendment to our exclusive global license agreement with Organon and received $1.0 million from Organon as reimbursement for fees paid to develop, manufacturethe FDA in connection with submission of the new drug application (NDA) for XACIATO (known as PDUFA fees) and commercialize XACIATO. The agreement became effective on June 30, 2022 followingother manufacturing expenses and to support continued advancement of the satisfactiondevelopment and commercialization of closing conditions, andXACIATO, which will be recognized as license fee revenue in July 2022,the third quarter of 2023. Following the first commercial sale of XACIATO, we received the $10.0 million non-refundable and non-creditable payment from Organon. We are entitled to receive a $2.5$1.8 million milestone payment following the first commercial sale offrom Organon and a licensed product in the United States. XACIATO launch preparation activities, including validation of the manufacturing process,$0.5 million payment from us to a third-party licensor will become payable. Under our agreement with Organon, we are ongoing and will continue into 2023, and the first commercial sale in the U.S. is expected in the first half of 2023. We will also be eligibleentitled to receive future potential milestone payments of up to $180.0 million and tiered double-digit royalties based on net sales.sales and up to $180.0 million in tiered commercial sales milestones and regulatory milestones.
Under the terms of our agreement with Organon, for an interim period, we will remain the holder of the FDA’s marketing approval for XACIATO and be responsible for all regulatory interactions and for providing commercial product supply on an interim basis untilsupply. Upon Organon's request, we will assist with the transfer of the NDA by the FDA to Organon, assumes such responsibilities. Until such time,as well as the transfer of manufacturing responsibilities to Organon. As the current NDA holder, we will continue to be responsible for regulatory and compliance matters following commercial launch, though Organon is responsible for commercializing, promoting, determining pricing, and negotiating reimbursement matters related to XACIATO. Organon will purchase all of its product requirements of XACIATO from us at a transfer price equal to our manufacturing costs plus a single-digit percentage markup. We will fulfill our commercial supply obligations through the contract manufacturer that provided clinical supplies of XACIATO for our pivotal Phase 3 DARE-BVFREE clinical study of XACIATO. We will not be responsible for other costs of commercializing XACIATO.
Clinical-Stage ProgramsProgram Updates
Ovaprene
In October 2022, we announced that the FDA approved an Investigational Device Exemption, or IDE, application allowing us to conduct a single arm, open-label pivotal contraceptive efficacy study of Ovaprene. The multi-center, non-comparative pivotal Phase 3 clinical study will evaluate Ovaprene’s effectiveness as a contraceptive device along with its safety and usability over a 12-monthusability. We will target having approximately 250 women complete approximately 12-months (13 menstrual cycles) duration. If successful,of use of Ovaprene. Based on typical dropout rates for contraceptive efficacy studies, we will seek to enroll more than double the number of subjects we target to complete 13 menstrual cycles of use. We have been working with our collaborators at the National Institutes of Health, or NIH, and at Bayer to review and implement study design considerations provided by the FDA with its IDE approval letter, which we believe will further position the Phase 3 study to collect safety and effectiveness data to enable the preparation of, and to support the submission of, a premarket approval, or PMA, application for Ovaprene. The primary objective of the study is expectedto assess the typical use pregnancy rate over 13 menstrual cycles, or the estimated Pearl Index for Ovaprene. Secondary objectives are to assess Ovaprene's 13-cycle use cumulative pregnancy rate, safety, acceptability, product fit/ease of use, and assessments of vaginal health. If successful, we expect the study to support a premarket approval, or PMA application to the FDA, as well as regulatory filings in Europe and other countries worldwide, to allow for marketing approvals of Ovaprene. Initiation of recruitment forSubject enrollment in the study is targeted for mid-2023.
There is no predicate device for Ovaprene (i.e., there is no existing FDA-approved product thatto begin in the FDA can use to compare with Ovaprene).As such, Ovaprene will be reviewed via a PMA and not a 510(k) premarket submission. While the regulatory process for such a novel product can require more interactions and research to support FDA approval, the benefit is a clearly differentiated product. In order for the planned study to serve as the primary clinical support for a future marketing approval or clearance, the FDA provided additional study design considerations with the IDE approval letter. Implementing such study design considerations will further position the study to collect safety and effectiveness data to enable the preparationfourth quarter of and to support the submission of, a PMA application. We are working with our collaborators at the National Institutes of Health, or NIH, and at Bayer to review and implement the FDA's study design considerations.2023.
The Phase 3 study will be conducted under our Cooperative Research and Development Agreement, or CRADA, with the U.S. Department of Health and Human Services, as represented by the Eunice Kennedy Shriver National Institute of Child Health and Human Development, or the NICHD, part of the NIH, and within NICHD’s Contraceptive Clinical Trial Network. We and NICHD will each provide medical oversight and final data review and analysis for the study and will work together to prepare the final report of the results of the study. We are responsible for providing clinical supplies of Ovaprene, coordinating interactions with the FDA, preparing and submitting supportive regulatory documentation, and providing a total of $5.5 million to NICHD to be applied toward the costs of conducting the Phase 3 study, $5.0 million of which has been paid and the remaining amountpaid. NICHD is due in the second quarter of 2023. NICHD will be responsible for the other costs related to the conduct of the Phase 3 study and will managefor managing the payment of expenses to the contract research organization for the study, the clinical sites, and other parties involved with the study. We and NICHD are in discussions regarding an amendment to the CRADA, which we expect will delay the due date of our remaining $0.5 million payment to NICHD to the fourth quarter of 2023. In the future, depending on the duration of the enrollment period and number of subjects enrolled in the Phase 3 study, there may be costs associated with the study that are not reflected in the current budget under the CRADA, in which case, we and NICHD would discuss the mechanism to potentially provide for additional future payments by us in support of the Phase 3 study. We do not expect any such potential additional amounts to be payable in 2023.
Sildenafil Cream, 3.6%
In October 2022, subject screening forJune 2023, we announced topline results from our exploratory Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6%, or Sildenafil Cream, in premenopausal women with FSAD, and in July 2023, we announced additional data from the study. During the multi-center, double-blind, randomized, placebo-controlled study, subjects used Sildenafil Cream and placebo cream in their home setting over 12 weeks following a 4-week non-drug run-in period and a 4-week, single-blind placebo run-in period. The study was completed, allowinga first of its kind Phase 2b clinical study that included patient reported outcome instruments to screen for a topline data announcement targeteligible women with FSAD and measure efficacy endpoints. There are no treatments approved by the FDA for FSAD, as described in the fourth edition of the second quarterDiagnostic and Statistical Manual (DSM), or for FSIAD, as described in the fifth edition of 2023.the DSM, and thus, there are no efficacy endpoints that have been previously validated in a Phase 3 pivotal study for potential treatments for FSAD or FSIAD.
A total of 252 subjects were enrolled in the 4-week single-blind placebo run-in period and a total of 200 subjects were randomized to the 12-week double-blind dosing period. A total of seven subjects were randomized but not treated in the double-blind dosing period. In the intent to treat (ITT) population, 99 subjects were randomized to the Sildenafil Cream group and 94 subjects were randomized to the placebo cream group. A co-primary endpoint of the study evaluated the efficacy of Sildenafil Cream compared to placebo as measured by change from baseline to end of study (the assessment 12 weeks after randomization) in the Arousal-Sensation Domain of the 28-item Sexual Function Questionnaire. The endpoint did not achieve statistical significance. However, the change at end of study in the Sildenafil Cream group was consistent with how women reported meaningful improvement in an exit interview at the end of the study. The other co-primary endpoint evaluated the efficacy of Sildenafil Cream compared to placebo as measured by change from baseline to end of study in the score for feeling concerned by difficulties with sexual arousal. The change was assessed using one question from the previously validated Female Sexual Distress Scale – Desire, Arousal and Orgasm Survey. This assessment did not differentiate Sildenafil Cream from placebo. The secondary endpoint evaluated the efficacy of Sildenafil Cream compared to placebo as measured by change from baseline to end of study in the number of satisfactory sexual events based on the subjects’ response to a question answered and recorded via electronic diary within 24 hours after each sexual event. When measured at the 4- and 8-week mark after randomization, subjects in the Sildenafil Cream group had a higher proportion of satisfying sexual events during the prior four weeks (68.6% and 74.1% at the 4- and 8-week mark, respectively) compared to subjects in the placebo group (47.9% and 67.9% at the 4- and 8-week mark, respectively) (week 4 P value = 0.04).
Subjects in the Sildenafil Cream group showed improvements in multiple pre-specified exploratory endpoints that evaluated various aspects of the sexual experience, including concerns about difficulties with sexual arousal, arousal lubrication, achievement and pleasure of orgasm, and sexual desire. In an exploratory endpoint regarding concerns about difficulties with sexual arousal, when asked about their overall impression of change regarding their concerns about difficulties with sexual arousal, women treated with Sildenafil Cream were more likely to report an overall improvement. Based on responses to the question at the 4-, 8- and 12-week mark after randomization, 44% to 49% of the subjects treated with Sildenafil Cream reported an overall improvement compared to 37% to 44% of the subjects treated with placebo (P value < 0.01). Exploratory endpoints related to arousal lubrication, orgasm, and sexual desire demonstrated important differences between subjects in the Sildenafil Cream group compared to the placebo group as measured by change from baseline to the 8-week mark after randomization, at P value = 0.059, P value = 0.066, and P value = 0.022, respectively. Improvements in arousal lubrication, orgasm, and sexual desire in the Sildenafil Cream group achieved maximum separation from placebo at the 8-week mark after randomization and these improvements were maintained through end of study, demonstrating persistence while on treatment. In the placebo group, no such trends were observed, with no such improvements achieved at the 8-week mark. While improvements achieved in the Sildenafil Cream group in arousal lubrication, orgasm, and sexual desire by the 8-week mark persisted through end of study, no endpoint achieved statistical significance at end of study. Sildenafil Cream was generally safe and well-tolerated in the study for both the female subjects and their male partners enrolled in the study. There were no treatment related serious adverse events and the majority of treatment related adverse events were mild in severity.
The Phase 2b RESPOND study is a multi-center, double-blind, placebo-controlled clinical study to evaluate the efficacy and safety of Sildenafil Cream, 3.6% in premenopausal patients with female sexual arousal disorder, orFSAD. The primary efficacy endpoint of the study is a composite endpoint that includes patient-reported improvement in genital sensations of arousal and reduction in distress associated with FSAD. The study is designed to evaluate Sildenafil Cream, 3.6% compared to placebo cream over 12 weeks of dosing following both a non-drug and placebo run-in period.
In August 2022, we announced that, based on the results of an interim analysis to evaluate the relative magnitude of the treatment effect, we expected to complete enrollment inWe believe data from the Phase 2b RESPOND study with a revised projected number of subjects in the fourth quarter of 2022. The interim analysis was conducted by an independent third-party statistical resourcesupport Sildenafil Cream’s potential to improve female genital arousal and we,orgasm, as well as our collaborator, Strategic Science & Technologies, LLC, continuesexual desire, suggesting that FSAD and/or FSIAD are potential indications to remain blindedpursue, and we plan to resultsadvance clinical development of the study by treatment group. While the study was originally expected to randomize a minimum of 400 subjects into the double-blind dosing period from 40 to 50 sites in the U.S. to achieve 150 subjects per arm completing the 12-week double-blind dosing period, based on the analysis of unblinded data by the independent third-party statistical resource to evaluate the relative magnitude of the treatment effect, approximately 160 to 170 subjects are expected to complete the 12-week double-blind dosing period (approximately 80 to 85 subjects per arm). The reduction in the number of subjects should not be viewed as indicative of the magnitude of the treatment effect. The relative magnitude of the treatment effect seen in the interim analysis should not be viewed as predictive that topline data will show Sildenafil Cream 3.6% achieved theinto a Phase 3 pivotal study. Phase 3 clinical study design, including primary and secondary efficacy endpoints, study duration, timing for efficacy endpoint assessment, use of endpoints that reduce burden on study subjects (e.g., 28-day recall assessments as opposed to recall assessments within 24 hours after each sexual event), and inclusion/exclusion criteria for study subjects, will be determined following psychometric analyses we are conducting of the Phase 2b RESPOND study.study data and future discussions with the FDA, including an end of Phase 2 meeting with the FDA.
In April 2023, we announced the initiation of subject enrollment in a Phase 1, single-dose, double-blind, placebo-controlled, 3-way crossover clinical study of Sildenafil Cream using thermography to assess the pharmacodynamic (PD) and pharmacokinetic (PK) characterization of Sildenafil Cream. We expect this study will enroll approximately 15 women and be completed in 2023. Data from the study will expand our existing clinical and nonclinical data for Sildenafil Cream and are expected to support the ongoing development of Sildenafil Cream as a potential treatment for FSAD and/or FSIAD.
DARE-HRT1
In October 2022 and January 2023, we announced topline results of our Phase 1/2 clinical study of DARE-HRT1 conducted by our wholly owned subsidiary in Australia. The randomized, open-label, two arm, parallel group study was designed to evaluateevaluated the pharmacokinetics (PK)PK of two versions of DARE-HRT1 (estradiol 80 µg/progesterone 4 mg IVRintravaginal ring (IVR) and estradiol 160 µg/progesterone 8 mg IVR) in approximately 20 healthy, post-menopausal women over approximately three consecutive months of use. The study also collected safety, usability, acceptability and symptom-relief data including the vasomotor symptoms, (VMS)or VMS, as well as the vaginal symptoms of menopause. The levels of estradiol released from both the lower and higher dose formulation of DARE-HRT1 evaluated in the study achieved statistically significant improvement in VMS as well as the genitourinary symptoms of menopause, and vaginal pH and maturation index. Menopausal symptoms, including hot flashes and night sweats, were reduced compared with baseline in both DARE-HRT1 dose groups (p<0.01).Participants also showed significant improvement from baseline in all measures surveyedBased on The Menopausal Quality of Life Survey (MENQOL), which surveys not only parameters of VMS, but also physical, psychosocial and sexual symptoms (p<0.01 on all domains). With DARE-HRT1 use, vaginal pH significantly decreased compared to baseline (p<0.01) and cytologic tests of the vaginal epithelium (vaginal maturation index) showed significant normalization (all p values <0.01 for increases in superficial cells, increases in intermediate cells and decreases in parabasal cells from baseline) among all participants.The most common genitourinary symptom, vaginal dryness, which was reported by 70% of participants at baseline, showed significant improvement in both DARE-HRT1 groups (p<0.01) and this subset also experienced significant decreases in vaginal pain with DARE-HRT1 use (p<0.01).
The study treatment was well toleratedpre-IND communications with the types of most common adverse events consistent with other vaginal products. There were only two early discontinuations due to an adverse event,FDA and no serious adverse events were reported. DARE-HRT1 had a high level of acceptability in the study, with 100% of subjects reporting that the IVR was comfortable to wear, and there were no reports of the IVR being expelled from the vagina during use. Additionally, over 95% of subjects stated they would be either somewhat or very likely to use the IVR for a women’s health condition or unrelated disease if needed. We anticipate that the topline PK data from the Phase 1/2 study, will be availablewe plan to advance DARE-HRT1 directly into a Phase 3 clinical trial. We believe FDA approval of DARE-HRT1 for the treatment of moderate to severe VMS due to menopause in women with intact uteri is achievable via the FDA's 505(b)(2) pathway supported by a single, placebo-controlled Phase 3 clinical trial and reported later ina scientifically justified PK “bridge” (via a relative bioavailability trial) between DARE-HRT1 and the fourth quarter of 2022.
selected listed estradiol and progesterone drugs. Ongoing activities to support progressing DARE-HRT1 directly into a Phase 3 clinical study to support registration include manufacturing and non-clinical studies to support an investigational new drug, or IND, submission to the FDA and the IND-opening Phase 3 study.DARE-VVA1
In September 2021,November 2022, we announced initiationtopline results from of our Phase 1/2 clinical study of DARE-VVA1.DARE-VVA1 conducted by our wholly owned subsidiary in Australia. The randomized, multi-center, double-blind, parallel-arm, placebo-controlled, dose-ranging study will evaluateenrolled 17 postmenopausal women with vulvovaginal atrophy (VVA), and evaluated the safety, tolerability, plasma PK and pharmacodynamics (PD)PD of DARE-VVA1. We believe the results of the Phase 1/2 study support ongoing development of DARE-VVA1 in postmenopausal participants withas a potential hormone-free treatment for moderate to severe VVA in 15VVA. We are conducting activities to 20 postmenopausal women, includingsupport an IND submission to the FDA and an IND-opening Phase 2 clinical study.
DARE-PDM1
In February 2023, we announced the start of a cohortPhase 1 clinical study of women with a history of hormone-receptor positive breast cancer, at three study sites. The studyDARE-PDM1, which is being conducted by our wholly owned subsidiary in Australia. Eligible participants will be randomly allocatedThe DARE-PDM1 Phase 1 study, DARE-PDM1-001, is a multi-center, randomized, placebo-controlled, double-blind, three-arm parallel group study expected to oneenroll approximately 36 healthy, premenopausal women with primary dysmenorrhea. This study is designed to assess the systemic (plasma) and local mucosal (vaginal fluid) diclofenac PK and safety after a single dose and during three daily doses of five treatment groups (approximately five participants per group) that will evaluate four dose levels (1 mg, 5 mg, 10 mg, and 20 mg) and avaginally administered DARE-PDM1, given in two different strengths (1% or 3% diclofenac in 2.5 mL of hydrogel) versus placebo. Following a screening visit, DARE-VVA1 will be self-administered intravaginally once a day for the first two weeks, and then twice a week for the following six weeks for a total treatment period of 56 days.In each treatment group, participants will have serial blood sampling for PK analysis and undergo safety evaluations and preliminary assessments of effectiveness. Following the completion of the treatment period, participants will attend a safety follow-up visit. The primary endpoints of the study will evaluate the safety and tolerability of DARE-VVA1 by vaginal administration and determine the plasma PK of DARE-VVA1 after intravaginal application. Secondary endpoints will evaluatealso assess, as an exploratory endpoint, the preliminary dysmenorrhea treatment efficacy and PD of DARE-VVA1DARE-PDM1, when dosed in termsthree daily doses at the onset of the most bothersome symptom and changes in vaginal cytology and pH.dysmenorrhea symptoms, compared to a no-treatment, baseline, control cycle. The study observation period will encompass approximately three menstrual cycles. We anticipate reportingannouncing topline data from the study in 2023.
DARE-204 and DARE-214
We are conducting development activities in preparation for Phase 1/21 clinical study laterstudies of DARE-204 and DARE-214 by our wholly-owned subsidiary in Australia. We do not expect to commence the fourth quarter of 2022.Phase 1 studies in 2023.
DARE-FRT1 and DARE-PTB1
We are conducting development activities in preparation for Phase 1 clinical studies of DARE-FRT1 and DARE-PTB1. We do not expect to commence clinical development activities of these product candidates in 2022.
ADARE-204 and ADARE-214
We are conducting development activities in preparation for Phase 1 clinical studies of ADARE-204 and ADARE-214. We do not expect to commence clinical development activities of these product candidates in 2022. We anticipate a Phase 1 clinical study of ADARE-204 and ADARE-214 by our wholly owned subsidiary in Australia in 2023.
Recent Events
Ovaprene IDE Application Approval forPositive Topline Data from Exploratory Phase 3 Clinical2b RESPOND Study of Sildenafil Cream
As discussed above, in October 2022, the FDA approved our IDE application for a single arm, open-label pivotal contraceptive efficacy study of Ovaprene.
Positive Topline Data from DARE-HRT1 Phase 1/2 Clinical Study
As discussed above, in October 2022,June 2023, we announced topline data from our exploratory Phase 1/22b RESPOND clinical study of DARE-HRT1.Sildenafil Cream, and in July 2023, we announced additional data from the study. See "Clinical-Stage Program Updates-Sildenafil Cream, 3.6%," above.
Amendment to Exclusive License Agreement with Organon
As discussed above, in July 2023, we entered into an amendment to our exclusive license agreement with Organon to commercialize XACIATO. See "XACIATO," above.
Receipt of AustraliaCash Rebate under Australian Research and Development Cash CreditTax Incentive Program
In October 2022,June 2023, we received a research and developmentcash rebate from the government of Australia in the amount of approximately $786,000$1.6 million for clinical work performedresearch and development expenditures incurred in Australia in 2021.2022. The rebate is accounted for as an offseta reduction to research and development expense.expenses.
License Agreement with Hennepin Life Sciences to Expand Product Candidate Pipeline
In August 2022, we entered into a license agreement with Hennepin Life Sciences LLC, or Hennepin, under which we acquired the exclusive global rights to develop and commercialize treatments delivering the novel antimicrobial glycerol monolaurate (GML) intravaginally for a variety of health conditions including bacterial, fungal, and viral infections. Under the agreement, we received an exclusive, worldwide, royalty-bearing license to research, develop and commercialize the licensed technology. We agreed to make potential future milestone payments through the term of the license based on clinical, regulatory, and commercial events, and to pay royalties based on commercial sales. We are entitled to sublicense the rights granted to us under this agreement.
Receipt of Payment Under XACIATO License Agreement
As discussed above, in July 2022, we received the $10.0 million upfront payment from Organon under our XACIATO license agreement.
Receipt of Payment Under 2021 DARE-LARC1NICHD Non-Dilutive Grant AgreementAward
In July 2022,2023, we received a notice of award of a grant from NICHD of approximately $8.0 million from$385,000 to support preclinical development of a potential new therapeutic for the prevention of idiopathic preterm birth. The grant funds will support activities related to the conduct and completion of proof-of-concept target validation studies in collaboration with the University of South Florida, or USF, which are to occur over a 12-month period. We previously entered into an option agreement with the University of South Florida Research Foundation, underInc., or USFRF, a nonprofit Florida corporation that is a direct support organization of USF, pursuant to which we have an exclusive right, and not an obligation, to elect to negotiate to acquire the 2021 DARE-LARC1 Grant Agreement.exclusive worldwide rights in the field of human reproduction to patents and know-how controlled by USFRF relating to the potential therapeutic whose development is being supported by the NICHD award.
Increase in Authorized Shares of Common StockIn July 2022, following the approval of our stockholders at our annual meeting of stockholders, we amended our restated certificate of incorporation to increase our authorized shares of common stock to 240,000,000.
Financial Overview
Revenue
To date we have generated $10.0$11.0 million in revenue, all$10.0 million of which represents the upfront payment under our license agreement with Organon to commercialize XACIATO, which is recognized as license fee revenue.revenue, and $1.0 million of which represents the reimbursement for PDUFA fees and other manufacturing expenses and to support continued advancement of the development and commercialization of XACIATO, which will be recognized as license fee revenue in the third quarter of 2023. In the future, we may generate revenue from royalties and commercial milestones based on the net sales of XACIATO, from product sales of other approved products, if any, and from license fees, milestone payments, and research and development payments in connection with strategic collaborations. In the future and for an interim period, we may also generate revenue from commercial supply of XACIATO to Organon. Our ability to generate such revenue, with respect to XACIATO, will depend on the extent to which its commercialization is successful, and with respect to our product candidates, will depend on their successful clinical development, the receipt of regulatory approvals to market such product candidates and the eventual successful commercialization of products. If the commercialization of XACIATO is not successful or we fail to complete the development of our product candidates in a timely manner, or to receive regulatory approval for such product candidates, our ability to generate future revenue and our results of operations would be materially adversely affected.
Research and Development Expenses
The majority of our operating expenses during a fiscal year are research and development expenses, a significant portion of which, excluding those funded by non-dilutive grants, are associated with the clinical development for our product candidates that have reached the human clinical study development phase. Research and development expenses include research and development costs for our product candidates and transaction costs related to our acquisitions. We recognize all research and development expenses as they are incurred. Research and development expenses consist primarily of:
•expenses incurred under agreements with clinical trial sites and consultants that conduct research and development and regulatory affairs activities on our behalf;
•laboratory and vendor expenses related to the execution of nonclinical studies and clinical trials;
•contract manufacturing expenses, primarily for the production of clinical supplies;
•transaction costs related to acquisitions of companies, technologies and related intellectual property, and other assets;
•milestone payments due to third parties under acquisition and in-licensing arrangements we incur, or the incurrence of which we deem probable; and
•internal costs associated with activities performed by our research and development organization and generally benefit multiple programs.
In 2021, our research and development expenses consisted primarily of costs associated with the continued development of XACIATO, Ovaprene and Sildenafil Cream, 3.6%, and during the first three quarters of 2022, our research and development expenses consisted primarily of costs associated with the continued development of Ovaprene and Sildenafil Cream 3.6%. We expect research and development expenses to increase in the future as we continue to investInvestment in the development of and seekseeking regulatory approval for our clinical-stage and Phase 1-ready product candidates and asthe development of any other potential product candidates we may develop are advancedadvance into and through clinical trials in the pursuit of regulatory approvals. Such activitiesapprovals, will increase our research and development expenses. Activities associated with the foregoing will require a significant increase in investment in regulatory support, clinical supplies, inventory build-up related costs, and the payment of success-based milestones to licensors. In addition, we continue to evaluate opportunities to acquire or in-license other product candidates and technologies, which may result in higher research and development expenses due to, among other factors, license fee and/or milestone payments.
We recognize the Australian Research and Development Tax Incentive Program, or the Tax Incentive, as a reduction of research and development expenses. The amounts are determined based on our eligible research and development expenditures and are non-refundable, provided that in order to qualify for the Tax Incentive the filing entity must have revenue of less than AUD $20.0 million during the tax year for which a reimbursement claim is made and cannot be controlled by an income tax exempt entity. The Tax Incentive is recognized when there is reasonable assurance that the Tax Incentive will be received, the relevant expenditure has been incurred, and the amount can be reliably measured or reliably estimated.
We receive funding through grants that support activities related to the development of certain of our product candidates. As we incur eligible expenses under those grants, we recognize grant funding in the statements of operations as a reduction to research and development expense (contra-research and development expense). For more information, see Note 2, Basis of Presentation and Summary of Significant Accounting Policies – Grant Funding, to our consolidated financial statements contained in our 2022 10-K and Note 8, Grant Awards, to our condensed consolidated financial statements contained in this report. For the three and six months ended June 30, 2023 and 2022, we recognized contra-research and development expenses of approximately $2.2 million and $4.7 million, respectively, and $1.0 million and $2.0 million, respectively.
Conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may not obtain regulatory approval for any product candidate on a timely or cost-effective basis, or at all. The probability of success of our product candidates may be affected by numerous factors, including clinical results and data, competition, intellectual property rights, manufacturing capability and commercial viability. As a result, we cannot accurately determine the duration and completion costs of development projects or when and to what extent we will generate revenue from the commercialization of any of our product candidates.
License Fee ExpenseExpenses
License fee expense consistsexpenses consist of up-front license fees and annual license fees due under our in-licensing arrangements.
General and Administrative ExpenseExpenses
General and administrative expenses consist of personnel costs, facility expenses, expenses for outside professional services, including legal, audit and accounting services. Personnel costs consist of salaries, benefits and stock-based compensation. Facility expenses consist of rent and other related costs.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based on our interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Preparing these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our unauditedaccompanying condensed consolidated interim financial statements, refer to Item 7 in Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to our financial statements contained in our 20212022 10-K, and Note 2 to our unaudited condensed consolidated financial statements contained in this report.
Results of Operations
Comparison of Three Months Ended SeptemberJune 30, 20222023 and 20212022 (Unaudited)
The following table summarizes our condensed consolidated results of operations for the periods indicated, together with the changes in those items in terms of dollars and percentage:
| | | Three Months Ended September 30, | | Change | | | Three Months Ended June 30, | | Change | |
| | 2022 | | 2021 | | $ | | % | | | 2023 | | 2022 | | $ | | % | |
| Revenues: | Revenues: | | | | | | | | | Revenues: | | | | | | | | |
| License fee revenue | License fee revenue | $ | — | | | $ | — | | | $ | — | | | — | % | | License fee revenue | $ | — | | | $ | 10,000,000 | | | $ | (10,000,000) | | | (100) | % | |
| Total revenue | Total revenue | — | | | — | | | — | | | — | % | | Total revenue | — | | | 10,000,000 | | | (10,000,000) | | | (100) | % | |
| Operating expenses: | Operating expenses: | | | Operating expenses: | | |
| General and administrative | General and administrative | 2,651,543 | | | 2,211,334 | | | 440,209 | | | 20 | % | | General and administrative | 2,920,672 | | | 2,792,894 | | | 127,778 | | | 5 | % | |
| Research and development | Research and development | 4,462,250 | | | 10,432,603 | | | (5,970,353) | | | (57) | % | | Research and development | 6,043,684 | | | 6,797,784 | | | (754,100) | | | (11) | % | |
| License fee expense | 25,000 | | | 25,000 | | | — | | | — | % | | |
| License fee expenses | | License fee expenses | 25,000 | | | 25,000 | | | — | | | — | % | |
| Total operating expenses | Total operating expenses | 7,138,793 | | | 12,668,937 | | | (5,530,144) | | | (44) | % | | Total operating expenses | 8,989,356 | | | 9,615,678 | | | (626,322) | | | (7) | % | |
| Loss from operations | (7,138,793) | | | (12,668,937) | | | 5,530,144 | | | (44) | % | | |
| Income (loss) from operations | | Income (loss) from operations | (8,989,356) | | | 384,322 | | | (9,373,678) | | | (2439) | % | |
| Other income | Other income | 118,950 | | | 1,508 | | | 117,442 | | | 7788 | % | | Other income | 227,124 | | | 29,676 | | | 197,448 | | | 665 | % | |
| | Net loss | $ | (7,019,843) | | | $ | (12,667,429) | | | $ | 5,647,586 | | | (45) | % | | |
| Net income (loss) | | Net income (loss) | $ | (8,762,232) | | | $ | 413,998 | | | $ | (9,176,230) | | | (2216) | % | |
| | Other comprehensive loss: | | | | | | | | | |
| Other comprehensive income (loss): | | Other comprehensive income (loss): | | | | | | | | |
| Foreign currency translation adjustments | Foreign currency translation adjustments | (230,748) | | | (63,281) | | | (167,467) | | | 265 | % | | Foreign currency translation adjustments | (31,151) | | | (135,869) | | | 104,718 | | | (77) | % | |
| Comprehensive loss | $ | (7,250,591) | | | $ | (12,730,710) | | | $ | 5,480,119 | | | (43) | % | | |
| Comprehensive income (loss) | | Comprehensive income (loss) | $ | (8,793,383) | | | $ | 278,129 | | | $ | (9,071,512) | | | (3262) | % | |
|
Revenues
License fee revenue for the three months ended June 30, 2022 relates to our license agreement with Organon to commercialize XACIATO. We earned $10.0 million in license fee revenue related to the transfer of the license and related know-how to Organon upon effectiveness of the agreement on June 30, 2022.
General and administrative expenses
The increase of approximately $0.4 million$128,000 in general and administrative expenses for the three months ended SeptemberJune 30, 20222023 as compared to the three months ended SeptemberJune 30, 20212022 was primarily attributable to an increaseincreases in (i) professional services expense of approximately $339,000. Also contributing to the increases were increases in (i) general corporate overhead$148,000, (ii) personnel costs of approximately $129,000, (ii)$104,000, and (iii) stock-based compensation expense of approximately $94,000, and (iii) personnel costs of approximately $36,000.$74,000. These increases were partially offset by decreases in (a) commercial-readiness expenses of approximately $140,000, and (b)general corporate overhead, including rent and facilities expenses, of $38,000.approximately $158,000.
Research and development expenses
The decrease of approximately $754,000 in research and development expenses for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 was primarily attributable to decreases in expenses related to our Sildenafil Cream Phase 2b RESPOND clinical study of approximately $1.2 million, and decreases in expenses related to clinical trial and manufacturing and regulatory affairs activities for our clinical-stage product candidate Ovaprene of approximately $831,000, partially offset by increases in costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately $1.3 million.
License fee expenses
For each of the three months ended June 30, 2023 and June 30, 2022, we accrued $25,000 of the $100,000 annual license maintenance fee payable under our license agreement related to DARE-HRT1.
For further discussion of these license fees, see Note 3 to our condensed consolidated financial statements contained in this report.
Other income
The increase of $0.2 million in other income for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 was primarily due to an increase in interest earned on cash balances in the current period.
Comparison of Six Months Ended June 30, 2023 and 2022 (Unaudited)
The following table summarizes our condensed consolidated results of operations for the periods indicated, together with the changes in those items in terms of dollars and percentage:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended
June 30, | | Change | | |
| 2023 | | 2022 | | $ | | % | | |
| Revenues: | | | | | | | | | |
| License fee revenue | $ | — | | | $ | 10,000,000 | | | $ | (10,000,000) | | | 100 | % | | |
| Total revenue | — | | | 10,000,000 | | | (10,000,000) | | | 100 | % | | |
| Operating expenses: | | | | | | | | | |
| General and administrative | 6,258,098 | | | 5,362,881 | | | 895,217 | | | 17 | % | | |
| Research and development | 11,063,907 | | | 12,603,247 | | | (1,539,340) | | | (12) | % | | |
| License fee expenses | 50,000 | | | 50,000 | | | — | | | — | % | | |
| Total operating expenses | 17,372,005 | | | 18,016,128 | | | (644,123) | | | (4) | % | | |
| Loss from operations | (17,372,005) | | | (8,016,128) | | | (9,355,877) | | | 117 | % | | |
| Other income | 567,272 | | | 31,456 | | | 535,816 | | | 1703 | % | | |
| Net loss | $ | (16,804,733) | | | $ | (7,984,672) | | | $ | (8,820,061) | | | 110 | % | | |
| | | | | | | | | |
| Other comprehensive loss: | | | | | | | | | |
| Foreign currency translation adjustments | (53,156) | | | (145,019) | | | 91,863 | | | (63) | % | | |
| Comprehensive loss | $ | (16,857,889) | | | $ | (8,129,691) | | | $ | (8,728,198) | | | 107 | % | | |
| | | | | | | | | |
Revenues
License fee revenue relates to our license agreement with Organon to commercialize XACIATO. See "—Comparison of Three Months Ended June 30, 2023 and 2022 (Unaudited)—Revenues," above.
General and administrative expenses
The increase of approximately $895,000 in general and administrative expenses for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 was primarily attributable to (i) a one-time fraud loss of approximately $230,000, net of proceeds we received under an insurance policy, related to criminal fraud commonly referred to as "business email compromise fraud" to which we were subject, and (ii) increases in (a) professional services expense of approximately $226,000, (b) commercial-readiness expenses of approximately $199,000, (c) personnel costs of approximately $153,000, and (d) stock-based compensation expense of approximately $141,000. These increases were partially offset by decreases in general corporate overhead, including rent and facilities expenses, of approximately $54,000.
Research and development expenses
The decrease of approximately $1.5 million in research and development expenses for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 was primarily attributable to decreases in (i) expenses related to clinical trial and manufacturing and regulatory affairs activities for our clinical-stage product candidate Ovaprene of approximately $1.9 million, (ii) costs related to our Sildenafil Cream exploratory Phase 2b RESPOND clinical study of approximately $1.5 million, and (iii) costs related to our pre-clinical development activities of approximately $219,000, partially offset by increases in costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately $2.1 million.
License fee expenses
For each of the six months ended June 30, 2023 and June 30, 2022, we accrued $50,000 of the $100,000 annual license maintenance fee payable under our license agreement related to DARE-HRT1.
For further discussion of these license fees, see Note 3 to our condensed consolidated financial statements contained in this report.
Other income
The increase of approximately $0.5 million in other income for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 was primarily due to an increase in interest earned on cash balances in the current period.
Liquidity and Capital Resources
Plan of Operations and Future Funding Requirements
At June 30, 2023, our accumulated deficit was approximately $157.9 million, our cash and cash equivalents were approximately $13.3 million, our deferred grant funding liabilities under our grant agreements related to DARE-LARC1 and DARE-LBT were approximately $13.1 million and $0.6 million, respectively, and our working capital deficit was approximately $2.5 million. Substantially all of our cash and cash equivalents at June 30, 2023 represented funds received under such grant agreements and such funds may be applied solely toward direct costs for the development of DARE-LARC1 and DARE-LBT, other than approximately 10% of such funds, which may be applied toward general overhead and administration expenses that support our entire operations. We incurred a loss from operations of approximately $16.8 million and had negative cash flow from operations of approximately $22.7 million during the six months ended June 30, 2023.
We expect an increaseto incur significant losses from operations and negative cash flows from operations for the foreseeable future as we continue to develop and seek to bring to market our existing product candidates and as we seek to potentially acquire, license and develop additional product candidates. We expect our primary uses of capital to be staff-related expenses, the cost of clinical trials and regulatory activities related to our product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, payments to third-party licensors upon the occurrence of commercial milestones for XACIATO and development milestones for our product candidates pursuant to terms of the agreements under which we acquired or in-licensed rights to those programs, legal expenses, other regulatory expenses and general overhead costs. Our future funding requirements could also include significant costs related to commercialization of our product candidates, if approved, depending on the type, nature and terms of commercial collaborations we establish, and in particular, if we determine to engage in commercialization activities directly as opposed to through a third-party collaborator. The amount and timing of our capital needs have and will continue to depend highly on many factors, including the pace at which our clinical development programs proceed and the expenses associated therewith. In large part, we can control the pace of advancement of our development programs and, therefore, we can control the timing of when we incur most of our research and development expenses.
Currently, our sources of potential license fee revenue are our license agreements relating to XACIATO and Ovaprene. If the first commercial sale of XACIATO in the U.S. occurs in 2023 as expected, we will receive a $1.8 million milestone payment and we will be eligible to receive royalty payments at rates in the tiered double-digits based on annual net sales of XACIATO. We do not expect royalty payments for 2023 net sales of XACIATO to materially impact our cash resources or requirements. In regard to our license agreement relating to the commercialization of Ovaprene in the U.S., if approved, we are not eligible to receive any additional payments from our collaborator until after we complete the planned pivotal Phase 3 clinical study of Ovaprene.
We anticipate our general and administrative expenses of approximately 25%to increase in 20222023 compared to 20212022 primarily due to increased personnel expensescosts and other general corporate overhead. Our generalGeneral and administrative expenses in 2021 were approximately $8.4 million. Our 2022 generalhave included and administrative expenses willare expected to include additional costs related to commercial-readiness activities and obtaining commercial suppliessupply of XACIATO from our contract manufacturer. Under the terms of our license agreement with Organon, Organon will purchase XACIATO from us at a price equal to our manufacturing costs plus a single digit percentage markup. As a result, we do not anticipate our costs for providing XACIATO to Organon will have a material impact on our cash resources and requirements. Following commercial launch of XACIATO, we expect our general and administrative expenses will include payments by us under our in-license agreement for XACIATO, including a $500,000 milestone payment upon first commercial sale of XACIATO in the U.S., which is expected to occur in the first half of 2023, and royalty payments at rates in the high single-digit to low double-digits based on annual net sales of XACIATO.
ResearchThe majority of our operating expenses during a fiscal year are research and development expenses,
a significant portion of which, excluding those funded by non-dilutive grants, are associated with the clinical development for our product candidates that have reached the human clinical study development phase. The decreaseamount of approximately $6.0 million inour research and development expenses for the three months ended September 30, 2022 as comparedremainder of 2023 is difficult to predict with certainty and will depend on the three months ended September 30, 2021 was attributable to decreases in (i) costs for twopace and extent of our clinical-stage product candidates, Sildenafil Cream 3.6% and Ovaprene, of approximately $4.8 million related to the ongoing Sildenafil Cream, 3.6% Phase 2b RESPOND clinical trial and manufacturing and regulatory affairs activities for Ovaprene, (ii) costs related to development activities for XACIATO of approximately $823,000 as a result of the completion of the Phase 3 clinical trial for XACIATO in December 2020, (iii) costs related to development activities for our preclinical programs of approximately $388,000, (iv) costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately $277,000, and (v) rent and facilities expenses of approximately $54,000. These decreases were partially offset by increases in (a) personnel costs of approximately $358,000, and (b) stock-based compensation expense of approximately $23,000.
We expect our research and development expenses to remain approximately flat in 2022 compared to 2021. Our research and development expenses in 2021 were approximately $30.6 million. We expectactivities. Factors that impact the pace and extent of our research and development activities and, therefore our research and development spend, to vary across fiscal quarters, making them difficult to predict. We expect our research and development spend for 2022 to be less than previously anticipated due to changes in the pace and extent of research and development activities related to our clinical-stage and Phase 1-ready product candidates. Factors that impact the pace and extent of our research and development activities and spend include, without limitation, our cash resources, reprioritization of development programs and activities, the scope, timing of commencement, and rate of progress of our clinical trials and preclinical studies, the cost and timing of manufacture and receipt of clinical supplies, timing of regulatory approval of a clinical study or alignment on study design, the results of our clinical trials and preclinical studies, and the extent to which we establish strategic collaborations or other arrangements and the terms of such arrangements. In regard to Sildenafil Cream, 3.6%, weWe currently anticipate that the total cost of the Phase 2b RESPOND clinical trialour research and development expenses for 2023 will be approximately $20.0 million, approximately $9.5 million of which was recordedless than our research and development expenses for 2022, in prior fiscal years.
License fee expense
For each of the three months ended September 30, 2022 and September 30, 2021, we accrued $25,000 of the $100,000 annual license maintenance fee payable under our license agreement related to DARE-HRT1.
For further discussion of these license fees, see Note 3 to our unaudited condensed consolidated financial statements contained in this report.
Other income
The increase of $117,442 in other income for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021 was primarilypart due to an increase in interest earned on cash balances in the current period.
Comparison of Nine Months Ended September 30, 2022 and 2021 (Unaudited)
The following table summarizes our condensed consolidated results of operations for the periods indicated, together with the changes in those items in terms of dollars and percentage:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine months ended September 30, | | Change |
| 2022 | | 2021 | | $ | | % |
| Revenues: | | | | | | | |
| License fee revenue | $ | 10,000,000 | | | $ | — | | | $ | 10,000,000 | | | 100 | % |
| Total revenue | 10,000,000 | | | — | | | 10,000,000 | | | 100 | % |
| Operating expenses: | | | | | | | |
| General and administrative | 8,014,424 | | | 5,949,299 | | | 2,065,125 | | | 35 | % |
| Research and development | 17,065,497 | | | 23,501,098 | | | (6,435,601) | | | (27) | % |
| License fee expense | 75,000 | | | 75,000 | | | — | | | — | % |
| Total operating expenses | 25,154,921 | | | 29,525,397 | | | (4,370,476) | | | (15) | % |
| Loss from operations | (15,154,921) | | | (29,525,397) | | | 14,370,476 | | | (49) | % |
| Other income | 150,406 | | | 1,686 | | | 148,720 | | | 8821 | % |
| Gain on extinguishment of note payable | — | | | 369,887 | | | (369,887) | | | (100) | % |
| Net loss | $ | (15,004,515) | | | $ | (29,153,824) | | | $ | 14,149,309 | | | (49) | % |
| Other comprehensive loss: | | | | | | | |
| Foreign currency translation adjustments | (375,767) | | | (79,002) | | | (296,765) | | | 376 | % |
| Comprehensive loss | $ | (15,380,282) | | | $ | (29,232,826) | | | $ | 13,852,544 | | | (47) | % |
Revenues
License fee revenue relates to our license agreement with Organon to commercialize XACIATO. We earned $10.0 million in revenue during the nine months ended September 30, 2022, related to the transfer of the license and related know-how to Organon upon effectiveness of the agreement on June 30, 2022. We do not expect to receive additional revenue under this agreement in 2022. If the first commercial sale of XACIATO in the U.S. occurs in the first half of 2023 as expected,cost-savings measures we should receive an additional $2.5 million under this agreement as a milestone payment following such first sale.
We did not recognize any revenue for the nine months ended September 30, 2021.
General and administrative expenses
The increase of approximately $2.1 million in general and administrative expenses for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was primarily attributable to increases in (i) professional services expense of approximately $1.2 million, (ii) general corporate overhead expenses of $316,000, (iii) stock-based compensation expense of approximately $291,000, (iv) personnel costs of approximately $189,000, and (v) commercial-readiness expenses of approximately $73,000.
Research and development expenses
The decrease of approximately $6.4 million inhave implemented. Our research and development expenses for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was attributable to decreasesremainder of 2023 will be primarily associated with our exploratory Phase 2b RESPOND clinical study and ongoing Phase 1 thermography clinical study of Sildenafil Cream, manufacturing activities in (i) costs related to manufacturing and regulatory affairs activities for Ovaprene of approximately $3.1 million, (ii) costs related to development activities for XACIATO of approximately $2.5 million as a result of the completion of theconnection with our pivotal Phase 3 clinical trial for XACIATO in December 2020, (iii) costs related to development activitiesstudy of Ovaprene, and variable expenses for our Phase 1other programs, the timing of when we incur the majority of such expenses we can control.
We closely monitor our cash resources and Phase 1-ready programs of approximately $1.1 million, and (iv) costs related to development activities forwe have implemented cost-savings measures, primarily by controlling our preclinical programs of approximately $712,000. Such decreases were partially offset by increases in (a) personnel costs of approximately $689,000, (b) stock-based compensation expense of approximately $125,000, and (c) rent and facilities expenses of $107,000 attributable to the allocation of a portion of rent and facilities expense included in general and administrative in 2021 tospend on research and development in 2022.
License fee expense
For each of the nine months ended September 30, 2022 and September 30, 2021, we accrued $75,000 of the $100,000 annual license maintenance fee payable under our license agreementactivities related to DARE-HRT1.
For further discussionclinical-stage programs other than Ovaprene and Sildenafil Cream. These cost-savings measures may impact anticipated development timelines for our clinical-stage programs, including DARE-HRT1, DARE-VVA1 and DARE-204/214. We will need additional capital to fund our operating needs into the fourth quarter of these license fees, see Note 32023 and to meet our unaudited condensed consolidated financial statements containedcurrent obligations as they become due. We are in this report.
Other income
The increaseongoing discussions with multiple potential third-party sources of $148,720 in other income for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 was primarily due to an increase in interest earned on cash balances in the current period.
Gain on extinguishmentadditional capital, including non-dilutive sources of note payable
The $369,887 recorded as a gain on extinguishment of note payablecapital, and debt forgiveness income in 2021 represents the forgiveness of all the principal and accrued interest of the loan we obtained under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act.
Liquidity and Capital Resources
Plan of Operations and Future Funding Requirements
We prepared the accompanying condensed consolidated financial statements on a going concern basis, which assumesbelieve that we will realizebe able to obtain sufficient capital when needed in a manner that will not materially impact the development of our assets and satisfy our liabilities in the normal course of business. We have a history of losses from operations, we expect negative cash flows from our operations to continue for the foreseeable future, and we expect that our net losses will continue for at least the next several years as we develop and seek to bring to market our existing product candidates and as we seek to potentially acquire, license and develop additional product candidates. These circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertaintyHowever, many aspects of our ability to remain a going concern.
At September 30, 2022, our accumulated deficit was approximately $125.1 million, our cash and cash equivalents were approximately $40.4 million, our deferred grant funding liability under our grant agreement related to DARE-LARC1 was $14.8 million (representing grant funds received that may be applied solely for the development of DARE-LARC1 and which are included in cash and cash equivalents), and our working capital was approximately $26.7 million. We incurred a loss from operations of approximately $15.0 million and had negative cash flow from operations of approximately $12.2 million during the nine months ended September 30, 2022.
We expect our primary uses of capital to be staff-related expenses, the cost of clinical trials and regulatory activities related to our product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, payments to third-parties upon the occurrence of commercial milestones for XACIATO and development milestones for our product candidates pursuant to terms of the agreements under which we acquired or in-licensed rights to those programs, legal expenses, other regulatory expenses and general overhead costs. Our future funding requirements could also include significant costs related to commercialization of our product candidates, if approved, depending on the type, nature and terms of commercial collaborations we establish.
We expect to incur significant losses from operations and negative cash flows from operations in 2022 and 2023, driven by our research and development expenses. We anticipate our expenses, and in particular our research and development expenses, to be significant in 2023 as they were in 2022as we continue to develop our product candidates, with a focus on our candidates that have reached the human clinical study development phase. Under the terms of our license agreement with Organon, Organon will purchase all of its product requirements of XACIATO from us at a price equal to our manufacturing costs plus a single digit percentage markup. As a result, we do not anticipate our costs of providing XACIATO commercial supplies will have a material impact on our cash resources and requirements.
Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements. Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock. During the nine months ended September 30, 2022, we received $10.0 million in license fee revenue under our license agreement for XACIATO, approximately $8.0 million under our grant agreement for pre-clinical development of DARE-LARC1, and we generated approximately $1.2 million in net proceeds from sales of our common stock. Subsequent to September 30, 2022, we received a research and development rebate from the government of Australia in the amount of approximately $786,000 for clinical work performed in Australia in 2021.
We will need to raise substantialobtain additional capital to continue to fund our operations and to successfully execute our current business strategy. We will continue to seek to raise capital through the sale of shares of our common stock under our ATM sales agreements, however, when we effect such sales and the amount of shares we can sell depends on a variety of factors including, among others, market conditions, the trading price of our common stock, and our determination as to the appropriate sources of funding for our operations. For the foreseeable future, we will evaluate and may pursue a variety of capital raising options on an on-going basis, including equity and debt financings, government or other grant funding, collaborations, structured financings, and strategic alliances, or other similar types of arrangements, to cover our operating expenses, and the cost of any license or other acquisition of new product candidates or technologies. The amount and timing of our capital needs have been and will continue to depend highly on many factors, including the product development programs we choose to pursue, the pace and results of our clinical development efforts, and the nature and extent of expansion of our product candidate portfolio, if any. If we raise capital through collaborations, structured financings, strategic alliances or other similar types of arrangements, we may be required to relinquish some or all of our rights to potential revenue or to intellectual property rights for our product candidates on terms that are not favorable to us.
Thereentirely within our control and there can be no assurance that capitalwe will be availablereceive additional capital when needed, on favorable terms, or that, if available, it will be obtained on terms favorable to us and our stockholders. In addition, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders, and debt financings may subject us to restrictive covenants, operational restrictions and security interests in our assets.at all. If we cannot raise capital when needed, on favorable terms or at all, we will not be able to continue development of our product candidates, will need to reevaluate our planned operations and may need to delay, scale back or eliminate some or all of our development programs, reduce expenses, file for bankruptcy, reorganize, merge with another entity, or cease operations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and stockholders may lose all or part of their investment in our common stock. See the risk factor in Part I, Item 1A of our 2021 10-KPart II of this report titled, We will need to raise substantial additional capital to continue our operations and execute our business strategy,. and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.
Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock. We have also received a significant amount of cash through non-dilutive grants and strategic collaborations. We will continue to evaluate and may pursue a variety of capital raising options on an on-going basis, including sales of equity (including sales of our common stock in ATM offerings), debt financings, government or other grant funding, collaborations, structured financings, and strategic alliances or other similar types of arrangements, to cover our operating expenses, and the cost of any license or other acquisition of new product candidates or technologies. There can be no assurance that capital will be available when needed or that, if available, it will be obtained on terms favorable to us and our stockholders. Our ability to raise capital through sales of our common stock will depend on a variety of factors including, among others, market conditions, the trading price and volume of our common stock, our clinical and commercial developments, and investor sentiment. In addition, macroeconomic factors and volatility in the financial market, which may be exacerbated in the short term by concerns over inflation, rising interest rates, economic recession, adverse developments affecting financial institutions or the financial services industry, impacts of the war in Ukraine, strained relations between the U.S. and several other countries, and social and political discord and unrest in the U.S., among other things, may make equity or debt financings more difficult, more costly or more dilutive to our stockholders, and may increase competition for, or limit the availability of, funding from other potential third-party sources of capital, such as strategic collaborators and sources of grant funding.
In addition, equity or debt financings may have a dilutive effect on the holdings of our existing stockholders, and debt financings may subject us to restrictive covenants, operational restrictions and security interests in our assets. If we raise capital through collaborations, structured financings, strategic alliances or other similar types of arrangements, we may be required to relinquish some or all of our rights to potential revenue or to intellectual property rights for our product candidates on terms that are not favorable to us.
We prepared the accompanying condensed consolidated financial statements on a going concern basis, which assumes that we will realize our assets and satisfy our liabilities in the normal course of business. As discussed above, there is substantial doubt about our ability to continue as a going concern because we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
| | | Nine months ended September 30, | | Six months ended June 30, |
| | 2022 | | 2021 | | 2023 | | 2022 |
| Net cash used in operating activities | Net cash used in operating activities | $ | (12,191,757) | | | $ | (18,848,138) | | Net cash used in operating activities | $ | (22,703,918) | | | $ | (20,791,986) | |
| Net cash used in investing activities | Net cash used in investing activities | (60,372) | | | (14,524) | | Net cash used in investing activities | — | | | (5,369) | |
| Net cash provided by financing activities | Net cash provided by financing activities | 1,343,355 | | | 59,842,978 | | Net cash provided by financing activities | 1,751,570 | | | 1,338,899 | |
| Effect of exchange rate changes on cash and cash equivalents | (375,767) | | | (79,002) | | |
| Net increase (decrease) in cash and cash equivalents | $ | (11,284,541) | | | $ | 40,901,314 | | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | (53,156) | | | (145,019) | |
| Net decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | $ | (21,005,504) | | | $ | (19,603,475) | |
Net cash used in operating activities
Cash used in operating activities for the ninesix months ended SeptemberJune 30, 20222023 included the net loss of $15.0$16.8 million, decreased by non-cash stock-based compensation expense of approximately $1.6$1.3 million. Components providing operating cash were an increase in accounts payable of approximately $4.5 million, a decrease in other receivables of approximately $1.1 million, and an increase in deferred revenue of approximately $0.2 million related to XACIATO commercial product supply. Components reducing operating cash were a decrease in accrued expenses of approximately $6.7 million, a decrease in deferred grant funding of approximately $4.3$4.6 million, an increase in accounts payableprepaid expenses of approximately $1.4 million, and a one-time fraud loss of $0.2 million related to a "business email compromise fraud" to which we were subject, net of insurance reimbursement, which was recognized in general and administrative expenses.
Cash used in operating activities for the six months ended June 30, 2022 included the net loss of $8.0 million, decreased by non-cash stock-based compensation expense of approximately $1.1 million. A component providing operating cash was an increase in accrued expenses of approximately $1.0$3.2 million. Components reducing operating cash were an increase in accounts receivable of $10.0 million related to our exclusive license agreement for XACIATO, an increase in prepaid expenses of approximately $4.4$3.4 million, anda decrease in deferred grant funding of approximately $1.8 million, an increase in other receivables of approximately $1.1 million.
Cash used in operating activities for the nine months ended September 30, 2021 included the net loss of $29.2$1.0 million, decreased by non-cash stock-based compensation expense of approximately $1.2 million and increased by the non-cash gain on the extinguishment of the note payable and accrued interest of approximately $370,000. Components providing operating cash were an increase in deferred grant funding of approximately $9.6 million, an increase in accrued expenses of approximately $0.6 million, and a decrease in other receivables of approximately $0.3 million related to the receipt of the 2020 Australian cash research and development tax credit in April 2021. Components reducing operating cash were an increase in prepaid expenses of approximately $662,000 and a decrease in accounts payable of approximately $416,000.$1.0 million.
Net cash used in investing activities
No cash was used in investing activities for the six months ended June 30, 2023. Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 2022 and September 30, 2021 was approximately $60,000 and $14,500, respectively.de minimis.
Net cash provided by financing activities
Cash provided by financing activities for the ninesix months ended SeptemberJune 30, 2023 and June 30, 2022 and September 30, 2021 consisted of approximately $1.3$1.8 million and $59.8$1.2 million in the aggregate, respectively, primarily fromconsisted of sales of our common stock under our ATM sales agreement.agreement and upon the exercise of warrants.
License and Royalty Agreements
We agreed to make royalty and milestone payments under the license and development agreements related to XACIATO, Ovaprene, and Sildenafil Cream, 3.6%, and under other agreements related to our other clinical and preclinical candidates. During the remainder of 2023, based on our current expectations regarding the development of our product candidates and sales of XACIATO, we expect to pay approximately $2.7 million in royalty and milestone payments under the license and development agreements, which is significantly less than our previously reported expected amount, primarily due to lesser anticipated royalty payments we may owe with respect to sales of XACIATO resulting from the delay of its commercial launch from earlier expectations.For further discussion of these potential payments, see Note 3 to our unaudited condensed consolidated financial statements contained in this report.
Other ContractsContractual Obligations
We enter into contracts in the normal course of business with various third parties for research studies, clinical trials, testing and other services. These contracts generally provide for termination upon notice, and we do not believe that our non-cancelable obligations under these agreements are material.
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 applicable SEC rules.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Under SEC rules and regulations, as a smaller reporting company we are not required to provide the information required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on an evaluation performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective as of SeptemberJune 30, 20222023 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various claims and legal proceedings. Regardless of outcome, litigation and other legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. As of the date of filing this report, there is no material pending legal proceeding to which we are a party or to which any of our property is subject, and management is not aware of any contemplated proceeding by any governmental authority against us.
Item 1A. Risk Factors
An investment in shares of our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described in our 20212022 10-K, in addition to other information in this report, before investing in our common stock. The occurrence of any of these risks could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment. ThereExcept as discussed below, there have been no material changes from the risk factors disclosed in Part I, Item 1A. Risk Factors in our 2021 10-K2022 10-K.
We will need to raise substantial additional capital to continue our operations and execute our business strategy, and we may not be able to raise adequate capital on a timely basis, on favorable terms, or at all.
We have a history of losses from operations, we expect negative cash flows from our operations to continue for the foreseeable future, and we expect that our net losses will continue for the foreseeable future as we develop and seek to bring to market our existing product candidates and as we seek to potentially acquire or license and develop additional product candidates. These circumstances raise substantial doubt about our ability to continue as a going concern. Our financial statements as of December 31, 2022 and June 30, 2023 were prepared under the assumption that we will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty. At June 30, 2023, our accumulated deficit was approximately $157.9 million, our cash and cash equivalents were approximately $13.3 million, our deferred grant funding liabilities under our grant agreements related to DARE-LARC1 and DARE-LBT were approximately $13.7 million, and we had a working capital deficit of approximately $2.5 million. Substantially all of our cash and cash equivalents at June 30, 2023 represented funds received under such grant agreements and such funds may be applied solely toward direct costs for the development of DARE-LARC1 and DARE-LBT, other than approximately 10% of such funds, which may be applied toward general overhead and administration expenses that support our entire operations. We will require additional capital to fund our operating needs into the fourth quarter of 2023 and to meet our current obligations as described below.they become due. Advancing our investigational women's health products through clinical development and pursuing regulatory approval and commercialization will require substantial additional investment. We will need to raise substantial additional capital to continue to fund our operations and execute our current business strategy. The amount and timing of our capital needs have and will continue to depend highly on many factors, as discussed further below as well as under "ITEM 2. MANAGEMENT'S DISCUSSION OF AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—Liquidity and Capital Resources—Plan of Operations and Future Funding Requirements" in Part I of this report.
Our management has devoted, and may continue to devote, significant time and we may incur substantial costs in pursuing, evaluating and negotiating potential capital-raising transactions and those efforts may not prove successful on a timely basis, or at all. If we cannot raise adequate additional capital when needed, we may be forced to reduce, or even terminate our operations. We may delay, scale back or eliminate one or more of our product development programs; delay, limit or terminate activities in support of our third-party collaborator’s commercialization of XACIATO in the U.S.; relinquish rights under our license agreements with third parties relating to our product and product candidates; forgo opportunities to expand our product portfolio; take other measures to reduce our expenses; reorganize or merge with another entity; or file for bankruptcy or cease operations. If we become unable to continue as a going concern, we may have to liquidate our assets, and might realize significantly less than the values at which they are carried on our financial statements, and our stockholders may lose all or part of their investment in our common stock.
Our capital needs have depended on, and will continue to depend on, many factors that are highly variable and difficult to predict, including:
•the product development programs we choose to pursue;
•the cost and pace of preclinical and clinical development;
Legislation•the results of preclinical activities and legislativeclinical trials;
•the cost and timing of obtaining clinical supplies of product candidates and commercial supplies of products;
•the cost and timing of regulatory proposals intendedsubmissions and decisions by the FDA and other regulatory authorities on our applications to contain health care costs may adversely affectcommence and advance clinical development of and to market our business.product candidates;
The containment•the amount and timing of health care costs has become a prioritypayments to third parties required under acquisition, in-license and other agreements relating our rights to develop and commercialize our product and product candidates;
•the cost and timing of federalcommercialization activities we undertake or engage third parties to undertake for any approved product;
•the amount and state governmentstiming of future royalty, milestone or other payments, if any, we receive under our commercial collaboration agreements for XACIATO and Ovaprene;
•our ability to maintain, and establish new, strategic collaborations relating to the development and/or commercialization of our product and product candidates;
•the extent to which we acquire, in-license, or otherwise invest in new product candidates or technologies and the pricesterms of drug products have beenany such transaction; and
•the cost and timing of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending any intellectual property-related claims, including any claims by third parties that we are infringing upon their intellectual property rights.
Should we add product candidates to our portfolio, should our existing product candidates require testing or other capital-intensive development activities that we do not anticipate, should the duration of our clinical trials be longer than anticipated, should manufacturing and supply be disrupted, or should regulatory approvals be delayed, our cash resources will be further strained. Should our product development efforts succeed, we will need to develop a focuscommercialization plan for each product, which may also require significant resources to create and implement. In addition, the terms of any collaboration agreements for development and/or commercialization of our product and product candidates may significantly impact our need for additional capital. Because of these uncertainties and the other risks and uncertainties discussed in the “Risk Factors” sections of this effort. For example, therereport and our 2022 10-K, we cannot reasonably estimate the amount funding necessary to successfully complete development of and seek regulatory approval for our product candidates or to commercialize any approved products. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have been several recent U.S. Congressional inquiriessufficient funds for our planned operations.
We may seek to raise additional capital through a variety of means, including equity, equity-linked or debt securities offerings, government or other grant funding, strategic collaborations or alliances, debt, royalty monetization or other structured financings, or other similar types of arrangements. Our past success in raising capital through equity offerings, grant funding and proposed bills designed to, amongcollaboration agreements should not be viewed as an indication we will be successful in raising capital through those or any other things, bring more transparency to drug pricing, reviewmeans in the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs.future. We expect that federal, state and local governments in the U.S. will continue to consider legislation directed at lowering the total cost of health care and prescription drugs. Individual states in the United States have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In December 2020, the U.S. Supreme Court held unanimously that federal law does not preempt the states’our ability to regulate pharmaceutical benefit managers and other members of the health care and pharmaceutical supply chain, an important decision that may lead to further and more aggressive efforts by states in this area.
The Biden Administration has also indicated that lowering prescription drug prices is a priority, and the Department of Health and Human Services, or DHHS, released a drug pricing plan in September 2021 that indicates the Administration supports aggressive actions such as allowing DHHS to negotiate the cost of Medicare Part B and D drugs. Such significant changes will require either new legislation to be passed by Congress or time-consuming administrative actions. Most recently, on August 16, 2022, President Biden signed into the law the Inflation Reduction Act of 2022, or the IRA. Among other things, the IRA has multiple provisions that may impact the prices of drug products that are both sold into the Medicare program and throughout the United States. Starting in 2023, a manufacturer of drugs or biological products covered by Medicare Parts B or D must pay a rebate to the federal government if their drug product’s price increases faster than the rate of inflation. This calculation is made on a drug product by drug product basisraise additional capital and the amount of the rebate owedcapital available to the federal government is directly dependentus will depend not only on the volume of a drug product that is paidprogress we and our collaborators make toward successfully developing, obtaining regulatory approval for by Medicare Parts B or D. Additionally, starting for payment year 2026, the Centers for Medicare and Medicaid Services, or CMS, will negotiate drug prices annually for a select number of single source Part D drugs without generic or biosimilar competition. CMS will also negotiate drug prices for a select number of Part B drugs starting for payment year 2028. If a drug product is selected by CMS for negotiation, it is expected that the revenue generated from such drug will decrease. It is unclear how these forthcoming changes in the way that CMS does business with certain members of the biopharmaceutical industry may impact coverage or reimbursement decisions across the industry as a whole.
It is uncertain whether and how future legislation or regulatory changes could affect prospects for XACIATO orcommercializing our product and product candidates, but also on factors outside of our control, such as macroeconomic and financial market conditions. To the extent we seek to obtain additional capital before achieving clinical, regulatory and/or what actions third-party payorssales milestones or when our stock price or trading volume or both are low, or when the general market for biopharmaceutical or women’s health companies is weak, additional capital may take in responsenot be available to any such health care reform proposalsus on favorable terms, or legislation. Adoption of price controlsat all.
Unstable and cost-containment measures,unfavorable market and adoption of more restrictive policies in jurisdictions with existing controls and measures reforms,economic conditions may prevent or limit our ability, or the ability of a commercial collaborator, to commercialize XACIATO or any future products as well asharm our ability to generate revenueraise additional capital. An economic downturn, recession or recessionary concerns, increased inflation, rising interest rates, adverse developments affecting financial institutions or the financial services industry, or the occurrence or continued occurrence of events similar to those in recent years, such as the COVID-19 pandemic or other public health emergencies, geopolitical conflict (such as the war in Ukraine), natural/environmental disasters, supply-chain disruptions, terrorist attacks, strained relations between the U.S. and attain profitability.a number of other countries, social and political discord and unrest in the U.S. and other countries, and government shutdowns, among others, increase market volatility and have long-term adverse effects on the U.S. and global economies and financial markets. Volatility and deterioration in the financial markets and liquidity constraints or other adverse developments affecting financial institutions may make equity or debt financings more difficult, more costly or more dilutive and may increase competition for, or limit the availability of, funding from other third-party sources, such as from strategic collaborations and government and other grants.
FailureThere is no assurance that we will continue to satisfy the listing requirements of the Nasdaq Capital Market.
Our common stock is listed on the Nasdaq Capital Market. As previously reported, on July 19, 2023, we received a letter from the Listing Qualifications Department (the “Nasdaq Staff”) of the Nasdaq Stock Market (“Nasdaq”) notifying us that, for the last 30 consecutive business days, the closing bid price for our common stock was below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”), and that we have initial period of 180 calendar days, or until January 16, 2024 (the “Compliance Date”), to regain compliance. We will regain compliance if the closing bid price of our common stock is at least $1.00 for a minimum of 10 consecutive business days during such 180-day period, unless the Nasdaq Staff exercises its discretion to extend such 10-day period.
If we have not regained compliance by the Compliance Date, we may be eligible for an additional 180 calendar day compliance period. To qualify for this additional compliance period, we would have to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the Minimum Bid Price Requirement, including having stockholders’ equity of at least $5.0 million under the “Equity Standard” or of at least $4.0 million under the “Market Value of Listed Securities Standard” or “Net Income Standard,” and we would need to provide written notice of our intention to cure the minimum bid price deficiency during the additional compliance period, by effecting a reverse stock split, if necessary. If we are not granted the additional compliance period for any reason, the Nasdaq Staff will provide written notice to us that our common stock will be subject to delisting. At that time, we may appeal the Nasdaq Staff’s delisting determination to a Nasdaq Hearing Panel.
In addition, the Nasdaq Capital Market requires that companies have: (x) stockholders' equity of at least $2.5 million; (y) a market value of listed securities of at least $35 million; or (z) net income from continuing operations of $500,000 in the company's most recently completed fiscal year or in two of the three most recently completed fiscal years. Our stockholders' equity at June 30, 2023 was negative $2.7 million and we do not currently meet either of the two alternative compliance standards described in clause (y) and (z). Accordingly, we expect to receive a commercial collaboratorseparate notice from Nasdaq informing us that we do not meet the foregoing continued listing requirements. If we receive such a notice, we expect to obtain timelybe afforded 45 days to submit a plan to regain compliance with the stockholders' equity requirement for Nasdaq's consideration, and adequate coverageif the plan is accepted, to be granted an extension period of up to 180 calendar days from the date of the deficiency notice to regain compliance. If the plan is not accepted or if we are unable to regain compliance within any extension period granted by Nasdaq, Nasdaq would be required to issue a delisting determination, which we expect we would be entitled to request a hearing before a Nasdaq Hearings Panel to present a plan to regain compliance and pricingto request a further extension period to regain compliance.
There can be no assurance we will regain compliance with the Minimum Bid Price Requirement or continue to satisfy the other continued listing requirements of The Nasdaq Capital Market. The delisting of our common stock, or the commencement of delisting proceedings, for XACIATOwhatever reason could, among other things, substantially impair our ability to raise additional capital; result in the loss of interest from institutional investors, the loss of confidence in our company by investors and employees, and in fewer financing, strategic and business development opportunities; and result in potential breaches of agreements under which we made representations or covenants relating to our compliance with applicable listing requirements. Claims related to any future products,such breaches, with or obtaining such coveragewithout merit, could result in costly litigation, significant liabilities and pricing at unfavorable levels,diversion of our management’s time and attention and could materially adversely affecthave a material adverse effect on our business, financial condition, business and results of operationsoperations. In addition, the suspension or delisting of our common stock, or the commencement of delisting proceedings, for whatever reason may materially impair our stockholders’ ability to buy and prospects.sell shares of our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) None.
(b) None.
(c) None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
(a) None.
(b) None.
(c) Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item in this report.
Item 6. Exhibits
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| | | | Incorporated by Reference | | | | |
Exhibit Number | | Description of Exhibit | | Form | | File No. | | Filing Date | | Exhibit No. | | Filed Herewith |
| | | | | | | | | | | | |
| 3.1 | | | | 10-Q | | 001-36395 | | 8/9/22 | | 3.1 | | |
| | | | | | | | | | | | |
| 31.1 | | | | | | | | | | | | X |
| | | | | | | | | | | | |
| 31.2 | | | | | | | | | | | | X |
| | | | | | | | | | | | |
| 32.1 | | | | | | | | | | | | # |
| | | | | | | | | | | | |
| 32.2 | | | | | | | | | | | | # |
| | | | | | | | | | | | |
| 101.INS | | XBRL Instance Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| # | | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing of the registrant whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Incorporated by Reference | | | | |
Exhibit Number | | Description of Exhibit | | Form | | File No. | | Filing Date | | Exhibit No. | | Filed Herewith |
| | | | | | | | | | | | |
| 3.1 | | | | | | | | | | | | X |
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| 31.1 | | | | | | | | | | | | X |
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| 31.2 | | | | | | | | | | | | X |
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| 32.1 | | | | | | | | | | | | # |
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| 32.2 | | | | | | | | | | | | # |
| | | | | | | | | | | | |
| 101.INS | | XBRL Instance Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.SCH | | XBRL Taxonomy Extension Schema Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.LAB | | XBRL Taxonomy Extension Label Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| 101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | | | X |
| | | | | | | | | | | | |
| # | | Furnished herewith. This certification is being furnished solely to accompany this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing of the registrant whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
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.
| | | | | | | | |
| | Daré Bioscience, Inc. |
| | |
Date: NovemberAugust 10, 20222023 | By: | /s/ Sabrina Martucci Johnson |
| | Sabrina Martucci Johnson |
| | President and Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
Date: NovemberAugust 10, 20222023 | By: | /s/ Lisa Walters-Hoffert |
| | Lisa Walters-Hoffert |
| | Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
