A N N U A L R E P O RT 2 0 21
Weʼre 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, fertility and vaginal and sexual health.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 10-K
___________________________________________________
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR
THE TRANSITION PERIOD FROM _____ TO_____
Commission File No. 001-36395
DARÉ BIOSCIENCE, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or other jurisdiction of incorporation)
3655 Nobel Drive, Suite 260
San Diego, CA
(Address of Principal Executive Offices)
20-4139823
(IRS Employer Identification No.)
92122
(Zip Code)
Registrant’s telephone number, including area code: (858) 926-7655
Securities registered under Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, Par Value $0.0001 Per Share
DARE
Nasdaq Capital Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o
Securities registered under Section 12(g) of the Act: None
No x
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, a smaller reporting
company or an 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
Non-accelerated filer
☐
x
Accelerated filer
Smaller reporting company
Emerging growth company
☐
x
☐
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 provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant on the last business day of the
registrant’s most recently completed second fiscal quarter (June 30, 2021), was approximately $85,850,000 based on the closing price of the
registrant's common stock as reported on the Nasdaq Capital Market on such date. This excludes shares of common stock held by affiliates on
such date. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power directly, or indirectly,
to direct or cause the direction of the management or policies of the registrant, or that such person is controlled by or under common control with
the registrant. The determination of affiliate status for this purpose may not be conclusive for other purposes.
As of March 30, 2022, there were 83,944,119 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement relating to its 2022 annual meeting of shareholders (the “2022 Proxy Statement”) are
incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 2022 Proxy Statement will be filed with the U.S.
Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
Daré Bioscience, Inc. and Subsidiaries
Form 10-K – ANNUAL REPORT
For the Fiscal Year Ended December 31, 2021
Table of Contents
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
ITEM 5.
ITEM 6.
ITEM 7.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A.
Quantitative and Qualitative Disclosures about Market Risk
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 9C.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16.
Financial Statements and Supplementary Data
Changes in and Disagreement With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions That Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Financial Statements
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F-1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I
This Annual Report on Form 10-K, in particular ITEM 1. "BUSINESS," ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” 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 I,
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, submit and obtain United States Food and Drug
Administration, or FDA, or foreign regulatory authority approval and commercialize our products candidates on
projected timelines or budgets, or at all;
Inability to demonstrate sufficient safety and efficacy of our product candidates;
The ability of third parties on which we rely to timely supply and manufacture our commercial product 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;
terms and conditions of our strategic collaborations,
The
commercialization of XACIATO™ and Ovaprene®;
including our out-license agreements
for
A decision by a commercial collaborator to discontinue its interest in our product or product candidate or to
terminate our license agreement, or the failure of such license agreement to become fully effective;
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 collaborations relating to the development and/or commercialization
of our product candidates on a timely basis or on acceptable terms, or at all;
• Our loss of, or inability to attract, key personnel;
•
•
•
•
•
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;
A change in the FDA's prior determination that the Center for Devices and Radiological Health would lead the
review of a premarket 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;
1
•
•
•
•
•
Adverse 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 it 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 it 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 candidates through licenses, partnerships or other types of commercialization
agreements;
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 due to 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 less competitive or obsolete;
The impact of the macroeconomic conditions, geopolitical events, 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;
Cyber-attacks, security breaches or similar events compromising our technology systems or the technology
systems 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 candidates 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;
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 concerns related to our product or product candidates, or third-party products
or product candidates that share similar characteristics or drug substances;
Product liability claims or governmental investigations;
Strict government regulations on our business, including various fraud and abuse laws, including, without
limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal False Claims Act and the U.S. Foreign Corrupt
Practices Act;
Regulations governing the production or marketing of XACIATO and any future products; 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.
2
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.
ITEM 1. BUSINESS
The terms “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 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.
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, fertility and vaginal and sexual health.
Our first product, XACIATO™ (clindamycin phosphate vaginal gel, 2%), was approved by the FDA in
December 2021 for the treatment of bacterial vaginosis in females 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, to commercialize XACIATO. XACIATO is expected to be available commercially in the United States in the
fourth quarter of 2022.
We began assembling our diverse portfolio of clinical-stage product candidates and pre-clinical programs in
2017 through acquisitions, exclusive in-licenses and other collaborations. Our programs target unmet needs in
women’s health in the areas of contraception, fertility and vaginal and sexual health 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 product candidates. We are also exploring 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. We believe the product candidates in our portfolio offer innovative approaches that may provide meaningful
benefits over current therapeutic or contraceptive options. We evaluate potential new product candidates based on
similar selection criteria as we applied in assembling our existing portfolio. Our product candidates, if approved for
commercial sale, would be prescription products.
The following graphic summarizes our portfolio, including targeted indications, development status and
milestones:
3
4
Our Strategy
Our goal is to bring to market innovative products in women’s health, primarily in the areas of contraception,
fertility and vaginal and sexual health. We plan to achieve this goal by advancing the drug and drug/device
combination product candidates in our portfolio through mid- to late-stage clinical development, and potentially
regulatory approval, as well as by establishing and leveraging strategic partnerships and other collaborations to
complete product development and commercialize our products, if approved. We are also exploring portfolio
expansion through both business development activities that may result in acquiring, or acquiring access to, new
product candidates through in-licensing or other collaborative arrangements, and leveraging assets we previously
acquired or in-licensed from third parties. As with our current portfolio, we look for innovations in women’s health that
have (a) attractive market opportunities and potential to address an unmet medical need, including through new
formulations, manners of application or delivery methods of well-known drug substances that result in novel, product
candidates customized for women, (b) human proof-of-concept clinical data previously generated by third parties and/
or potential to utilize the FDA's 505(b)(2) pathway, and (c) potential to become a first-in-category or first-line product.
We believe that there is an opportunity to fill the gap that exists in the development of innovations in women’s
health between (a) non-profit organizations, small private companies and individual entrepreneurs that discover,
innovate and conduct early-stage research and clinical development of product candidates, and (b) pharmaceutical
companies that conduct late-stage clinical development and commercialize approved products. We believe that the
development activities between these two ends of this spectrum (early pre-clinical and clinical development of product
candidates on the one hand and late-stage clinical trials and commercialization of product candidates on the other)
are currently underserved. In addition, we believe there are gaps in treatment options in the women's health market
and there is an opportunity to provide therapies that address persistent unmet needs. We intend to fill the mid-stage
development gap and to expand treatment options for women.
Key elements of our business strategy are as follows:
•
•
•
•
Advance clinical development of the product candidates in our portfolio through mid- to late-stage
clinical development or regulatory approval. We are targeting a 2022 commencement of a pivotal
Phase 3 clinical study of Ovaprene in collaboration with the Eunice Kennedy Shriver National Institute
of Child Health and Human Development, or NICHD. In addition, our Phase 2b RESPOND clinical
study of Sildenafil Cream, 3.6% in women with female sexual arousal disorder, or FSAD, is ongoing.
In 2022, we also expect to complete our ongoing Phase 1/2 clinical study of DARE-VVA1 and we are
commencing a Phase 1/2 clinical study of DARE-HRT1.
Explore opportunities to expand our portfolio, with the women’s health market as our sole focus.
While simultaneously advancing our current portfolio, we intend to continue to identify other important
unmet needs in women’s health and explore opportunities to build our product pipeline by acquiring or
in-licensing new programs or leveraging assets we previously acquired or in-licensed to create new
programs that meet our selection criteria.
Pursue strategic collaborations to enhance our development and commercialization capabilities. We
intend to develop and maintain strategic relationships with commercial stage companies that are
leaders or emerging leaders in the women’s health market, as well as with other entities, where we
believe such collaborations will accelerate or otherwise improve upon our clinical development and/or
product commercialization capabilities. Our license agreement with Bayer to commercialize
Ovaprene, if approved, and our Cooperative Research and Development Agreement, or CRADA, with
NICHD for the conduct of the Phase 3 clinical study of Ovaprene are examples of these efforts.
Seek non-dilutive funding to support product development. We intend to advance development of our
programs through a variety of means, including through non-dilutive funding. For example, technology
development and other preclinical activities for DARE-LARC1 have been supported by funding under
grant agreements with a private foundation and we anticipate that our 2021 grant agreement will
continue to fund pre-clinical activities for that program through most of 2026, contingent upon the
program's achievement of specified milestones. In addition, clinical development of Ovaprene and
pre-clinical development activities for DARE-LARC1 and DARE-PTB1 have been supported by
NICHD grant awards.
5
XACIATO
XACIATO [zah-she-AH-toe] (clindamycin phosphate) vaginal gel (formerly known as DARE-BV1), a
lincosamide antibacterial, received FDA approval in December 2021 for the treatment of bacterial vaginosis in female
patients 12 years of age and older. XACIATO is a clear, colorless, viscous gel, which contains clindamycin at a
concentration of 2%. A single-dose user-filled disposable applicator delivers 5 g of vaginal gel containing 100 mg of
clindamycin.
XACIATO is our first and only approved product. We achieved FDA approval of XACIATO three years after
acquiring rights to the program. We commenced and completed a successful pivotal clinical study, prepared and filed
a new drug application with the FDA and received notification from the FDA of U.S. marketing approval, all during the
COVID-19 pandemic.
In March 2022, we entered into an exclusive license agreement with Organon pursuant to which Organon will
obtain exclusive worldwide rights to develop, manufacture and commercialize XACIATO. XACIATO is expected to be
available commercially in the United States in the fourth quarter of 2022. See "Strategic Agreements for Product
Commercialization" below for further discussion of the terms of our agreement with Organon.
XACIATO previously received both Qualified Infectious Disease Product (QIDP) and Fast Track designations
from the FDA for the treatment of bacterial vaginosis in women. As a result of the QIDP designation, XACIATO was
eligible to receive a five-year extension of the three years of data exclusivity in the U.S. available to the product based
on the submission of new clinical data that were essential to its approval. The FDA granted XACIATO for the
treatment of bacterial vaginosis in female patients 12 years of age and older three years of data exclusivity, which was
extended by five years, such that the data exclusivity period is set to expire on December 7, 2029. XACIATO has also
been designated as a reference listed drug by the FDA for purposes of future generic drug development. The data
exclusivity period should block the FDA from approving either a subsequent abbreviated NDA or 505(b)(2) NDA that
relies in whole or in part on our protected clinical data. See also "Government Regulation - U.S. Government
Regulation- New Drug Marketing Exclusivity under the Hatch-Waxman Act Amendments & GAIN Exclusivity
Extension" below.
According to the Centers for Disease Control and Prevention, or the CDC, bacterial vaginosis is the most
common vaginal condition in women ages 15-44. Bacterial vaginosis is a type of vaginal inflammation caused by the
overgrowth of certain bacteria naturally found in the vagina. Symptoms include vaginal discharge, vaginal odor,
vaginal pain, itching or burning, and burning during urination. We entered this therapeutic category because we felt
there was a significant unmet need for better treatment. Branded prescription products that received FDA approval
before XACIATO for the treatment of bacterial vaginosis have clinical cure rates (based on the Amsel criteria) ranging
from 37-68%.
XACIATO is contraindicated in individuals with a history of hypersensitivity to clindamycin or lincomycin. Its
prescribing information contains warnings and precautions about clostridioides difficile-associated diarrhea,
XACIATO’s incompatibility with and potential to weaken polyurethane condoms so as to make them unreliable for
preventing pregnancy or protecting against sexually transmitted diseases (therefore, polyurethane condoms should
not be used during treatment with XACIATO or for 7 days following treatment; latex or polyisoprene condoms should
be used), and vaginal candida infections. The most common adverse reactions reported in >2% of patients and at a
higher rate in the XACIATO group than in the placebo group in the pivotal DARE-BVFREE trial were vulvovaginal
candidiasis and vulvovaginal discomfort. Systemic clindamycin has neuromuscular blocking properties that may
enhance the action of other neuromuscular blocking agents. It should be used with caution in patients receiving such
agents.
Other clindamycin vaginal products have been used to treat pregnant women during the second and third
trimester. XACIATO has not been studied in pregnant women. However, based on the low systemic absorption of
XACIATO following the intravaginal route of administration in nonpregnant women, maternal use is not likely to result
in significant fetal exposure to the drug. Similarly, because systemic absorption following intravaginal administration of
clindamycin is low, transfer of the drug into breastmilk is likely to be low and adverse effects on the breastfed infant
are not expected. The safety and effectiveness of XACIATO have not been established in pediatric patients younger
than 12 years of age. XACIATO has not been evaluated in geriatric patients (65 years of age or older) to determine
whether they respond differently than younger patients.
6
Clinical Data
The efficacy of XACIATO as a treatment of bacterial vaginosis in females 12 years of age and older was
demonstrated in the Phase 3 DARE-BVFREE trial (NCT04370548), a randomized, double-blind, placebo-controlled
clinical study that randomized 307 patients at 32 centers across the United States. A single dose of XACIATO was
compared to a single dose of placebo vaginal gel (hydroxyethylcellulose [HEC] Universal Placebo Gel) for the
treatment of bacterial vaginosis. Patients were evaluated at three timepoints: a Day 1 screening/randomization visit, a
Day 7 to 14 Interim Assessment visit, and a Day 21 to 30 Test of Cure visit. The total study duration was up to
approximately one month for each individual patient.
To be eligible, patients had to have a clinical diagnosis of bacterial vaginosis defined as an off-white (milky or
gray), thin, homogeneous discharge with minimal or absent pruritus and inflammation of the vulva and vagina, clue
cells > 20% of the total epithelial cells on microscopic examination of the saline wet mount, vaginal secretion pH of >
4.5, and a fishy odor of the vaginal discharge with the addition of a drop of 10% KOH (i.e., a positive whiff test). The
307 patients were randomized in a 2:1 ratio, with 204 in the XACIATO group and 103 in the placebo group. The
modified Intent-To-Treat (mITT) Population excluded women with a positive test result for other concomitant vaginal or
cervical infections at baseline, including a positive vaginal culture for Candida spp. or who had a baseline Nugent
score of < 7.
Clinical Cure was defined as resolution of the abnormal vaginal discharge associated with bacterial vaginosis,
a negative 10% KOH whiff test, and clue cells < 20% of the total epithelial cells in the saline wet mount.
Bacteriological Cure was defined as a Nugent score < 4. Therapeutic Cure was defined as the presence of both a
Clinical Cure and Bacteriological Cure. In the mITT population, a statistically significantly greater percentage of
patients experienced Clinical Cure, Bacteriological Cure, and Therapeutic Cure at the Test of Cure (Day 21-30) visit in
the XACIATO arm compared to placebo (Table 1). Statistically significant results for the endpoints were also achieved
at the Interim Assessment visit (Day 7-14).
Table 1: Summary of Clinical Cure, Bacteriological Cure, and Therapeutic Cure (mITT Population)
Interim Assessment visit (day 7-14)
Treatment
Difference (%)
[95% Confidence
Interval]
Placebo
(N = 59)
n (%)
XACIATO
(N = 122)
n (%)
Test of Cure visit (day 21-30)
XACIATO
(N = 122)
n (%)
Placebo
(N = 59)
n (%)
Treatment
Difference (%)
[95% Confidence
Interval]
93 (76.2)
14 (23.7)
52.5 (38.0, 67.0)
86 (70.5)
21 (35.6)
34.9 (19.0, 50.8)
50 (41.0)
2 (3.4)
37.6 (26.5, 48.7)
53 (43.4)
3 (5.1)
38.4 (26.7, 50.1)
43 (35.2)
0
32.5 (25.5, 45.0)
45 (36.9)
3 (5.1)
31.8 (20.3, 43.3)
Parameter
Clinical
Cure
Bacteriological
Cure
Therapeutic
Cure
The percentage of patients with Clinical Cure at the Test of Cure visit was also significantly higher in the
XACIATO group compared to the placebo group among the subsets of patients defined by prior episodes of bacterial
vaginosis (≤ 3 episodes and >3 episodes in the previous 12 months) at 71.3% (72/101) for XACIATO and 39.1%
(18/46) placebo, and 70.0% (14/20) for XACIATO and 23.1% (3/13) placebo, respectively.
The median age of the patients in the trial was 35 years (range 15-59 years). The population was 56% Black
or African American and 41% White. Persons of Hispanic or Latino ethnicity made up 25% of the population. A history
of prior bacterial vaginosis was noted in 89% of the population. XACIATO was well-tolerated in the trial.
Our Pipeline: Clinical-Stage Programs
Ovaprene®
We believe the need for more effective and convenient options is particularly true with contraception. While a
variety of hormonal and non-hormonal options exist, there is a notable void: an effective, short-acting, hormone-free
method of contraception that does not require intervention at the time of intercourse.
Ovaprene is a novel, investigational hormone-free monthly intravaginal contraceptive designed to be worn
conveniently over multiple weeks (one menstrual cycle) and with the potential to achieve “typical use” contraceptive
7
efficacy approaching that of current FDA-approved non-implanted hormonal contraceptive methods (pills, patches and
vaginal rings), which is approximately 91% typical use efficacy. Typical use contraceptive efficacy refers to the
expected rate of pregnancy prevention during the first year of actual use of a method, including sometimes using the
method in a way that is not correct or not consistent. Ovaprene features a proprietary knitted polymer barrier to
physically block sperm from entering the cervical canal within a silicone-reinforced ring that releases non-hormonal
agent ferrous gluconate to impede sperm motility. Unlike current FDA-approved monthly intravaginal contraceptives,
Ovaprene does not contain hormones, but, consistent with those monthly intravaginal contraceptives, including
Merck’s NuvaRing®, Ovaprene is designed to be a “one size fits most” monthly, self-administered product. If
approved, Ovaprene could be the first hormone-free, monthly contraceptive option for women.
Ovaprene is composed of both device and drug components and is considered a combination product by the
FDA. Ovaprene previously underwent a request for designation process with the FDA that determined that the Center
for Devices and Radiological Health, or CDRH, would lead the review of a premarket approval, or PMA, for potential
marketing approval in the U.S.
Clinical Data
In a postcoital test, or PCT, pilot clinical study conducted by the previous sponsor in 20 women and published
in The Journal of Reproductive Medicine® in 2009, Ovaprene demonstrated the ability to immobilize sperm and
prevent their progression into the cervical mucus. The study also demonstrated the acceptability of the device to both
partners. No colposcopic abnormalities, no significant changes in vaginal flora and no serious adverse effects were
observed.
In November 2019, we announced positive topline results of our PCT clinical trial of Ovaprene. We designed
the PCT clinical trial to assess general safety and effectiveness in preventing progressively motile sperm from
reaching the cervical canal following intercourse and acceptability of the product to the patient. The study evaluated
23 women over the course of five menstrual cycles, with each woman assessed over approximately 21 visits. Each
woman’s cervical mucus was measured at several points during the study, including a baseline measurement at
menstrual cycle 1 that excluded the use of any product. Subsequent cycles and visits included the use of a diaphragm
during intercourse (menstrual cycle 2) and Ovaprene (menstrual cycles 3, 4 and 5). The primary endpoint of the study
was to evaluate changes from baseline in PCT results due to device use, as represented by the proportion of women
and cycles with an average of fewer than five progressively motile sperm (PMS) per high power field (HPF) in
midcycle cervical mucus collected two to three hours after intercourse with Ovaprene in place.
Our PCT clinical trial met its primary endpoint: Ovaprene prevented the requisite number of sperm from
reaching the cervix across all women and all cycles evaluated. Specifically, in 100% of women and cycles, an average
of less than five PMS per HPF were present in the midcycle cervical mucus collected two to three hours after
intercourse with Ovaprene in place. To calculate the average number of PMS, PMS were counted across each of nine
HPFs and averaged. Women enrolled in the study who completed at least one Ovaprene PCT (N=26) had a mean of
27.21 PMS/HPF in their baseline cycle when no contraception was used, a mean of 0.22 PMS/HPF in their diaphragm
cycle, which was anticipated based on published studies, and a mean of 0.48 PMS/HPF in their Ovaprene PCT
cycles, with a median of zero PMS. No serious or severe adverse events were reported or observed.
PCT clinical trials have been used as a surrogate marker for contraceptive effectiveness. Infertility research
suggests that higher rates of pregnancy are associated with PMS per HPF of from greater than one to greater than 20
sperm, and less than five PMS per HPF is considered indicative of contraceptive effectiveness.
Pivotal Phase 3 Clinical Study
In January 2022, we initiated an Investigational Device Exemption, or IDE, review process with the FDA for a
multi-center, non-comparative, pivotal Phase 3 clinical study of the safety and efficacy of Ovaprene to prevent
pregnancy. Our IDE submission was subsequently converted to an IDE pre-submission so that the FDA could engage
in a collaborative discussion with us regarding items that must be addressed prior to enrollment of any subjects in the
Phase 3 study. This process is ongoing and we believe it will allow us to finalize the protocol and design of the study
as the registration study to support a future PMA submission. Based on communications with the FDA, in terms of
study sample size and duration, we expect that at least 200 subjects completing 12 months of Ovaprene use will be
adequate. We are targeting commencement of the Phase 3 study during 2022.
In July 2021, we entered into the CRADA with the U.S. Department of Health and Human Services, as
represented by NICHD, part of the National Institutes of Health, for the conduct of the Phase 3 study, which will be
conducted within NICHD’s Contraceptive Clinical Trial Network with NICHD contractor Health Decisions Inc., a
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contract research organization, providing clinical coordination and data collection and management services. 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 in payments to NICHD to be applied toward the costs of conducting the Phase 3 study. NICHD
will be responsible for the other costs related to the conduct of the Phase 3 study and will manage the payment of
expenses to Health Decisions Inc., the clinical sites, and other parties involved with the study. If the planned Phase 3
study is successful, we expect the data to support a pre-market approval submission, or PMA, to the FDA, as well as
regulatory filings in Europe and other countries worldwide, to allow for marketing approvals of Ovaprene.
In addition to the CRADA, we are collaborating with ADVA-Tec, Inc. and Bayer HealthCare LLC, or Bayer, for
the development and commercialization of Ovaprene as part of two strategic collaborations announced in March 2017
and January 2020, respectively. See "Strategic Agreements for Pipeline Development" and "Strategic Agreements for
Product Commercialization" below for discussion of the terms of each collaboration.
Sildenafil Cream, 3.6%
While numerous pharmaceutical products have been developed and approved to treat erectile dysfunction in
men, women continue to lack effective options for female sexual arousal disorder, or FSAD, the most analogous
condition of the various types of female sexual dysfunction disorders. We are developing Sildenafil Cream, 3.6%, an
investigational proprietary cream formulation of sildenafil, a phosphodiesterase-5 inhibitor and the active ingredient in
the male erectile dysfunction drug Viagra®, for topical administration to the vulva and vagina for treatment of FSAD.
Today, there are no FDA-approved products that specifically address the symptoms or underlying pathology of FSAD.
We plan to leverage the existing data and established safety profile of sildenafil and the Viagra® brand to utilize the
FDA’s 505(b)(2) pathway to obtain marketing approval of Sildenafil Cream, 3.6% in the U.S. for the treatment of
women suffering from FSAD. If approved, Sildenafil Cream, 3.6% could be the first FDA-approved FSAD treatment
option for women.
FSAD is a condition characterized primarily by a persistent or recurrent inability to attain or maintain sufficient
genital arousal (an adequate lubrication-swelling response) during sexual activity, frequently resulting in distress or
interpersonal difficulty. This is distinct from hypoactive sexual desire disorder (HSDD) in women, which is
characterized primarily by a lack of sexual desire. As with erectile dysfunction in men, FSAD in women is associated
with insufficient blood flow to the genitalia. Sildenafil Cream, 3.6% is designed to facilitate vasodilation and increase
genital blood flow, and, as a result, to provide improvements in the female genital arousal response, while avoiding
systemic side effects observed with oral formulations of sildenafil.
Clinical Data
In a Phase 1 clinical study of three escalating doses of topical sildenafil cream (1 g cream with 35 mg
sildenafil; 2 g cream with 71 mg sildenafil; and 4 g cream with 142 mg sildenafil) in 20 healthy post-menopausal
women using a crossover study design, topical sildenafil cream demonstrated significantly lower systemic exposure to
sildenafil compared to a 50 mg oral sildenafil dose, and topical sildenafil cream was safe and well tolerated at
clinically relevant doses (1-2 g cream). Study subjects reported favorable product characteristics: easy to use and
readily absorbed.
In a Phase 2a, single center, single-dose, double-blind, placebo-controlled, 2-way crossover study, women
with FSAD, ages 21 to 60, received a single 2 g dose of Sildenafil Cream, 3.6%. Of the 35 women enrolled, 31 (15
pre-menopausal and 16 post-menopausal) completed the study. The primary objective was to evaluate the efficacy of
Sildenafil Cream, 3.6% compared to placebo cream assessed by participant-reported levels of subjective cognitive
sexual arousal and by physiological genital arousal response. Sildenafil Cream, 3.6% demonstrated increases in
measurable blood flow to the genital tissue compared to placebo (mean change in vaginal pulse amplitude analysis)
using a vaginal photoplethysmograph approximately 30 minutes post-dosing.
A Phase 1, single-dose, double-blind, placebo-controlled, two-way crossover study to evaluate the feasibility
of using thermography to assess the pharmacodynamics of Sildenafil Cream, 3.6% in normal healthy women was
conducted at a single center. During the thermography study, genital temperature, a surrogate for genital blood flow,
was captured and recorded utilizing an infrared camera capable of detecting heat patterns from blood flow in body
tissues. The study, which was designed to evaluate up to 10 subjects, achieved the study objectives based on a
planned interim analysis of the first six completed subjects, and thus additional subjects were not enrolled. In this
study, Sildenafil Cream, 3.6% demonstrated significantly greater increases in genital temperature compared to
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placebo cream, indicating a positive impact on genital blood flow during the 30-minute post-dosing testing session,
with statistical separation from placebo cream within the first 15 minutes after dosing. Additionally, significantly greater
self-reported arousal responses were reported during Sildenafil Cream, 3.6% visits compared to placebo cream visits.
In 2019, as part of our Phase 2b clinical program for Sildenafil Cream, 3.6%, we completed a non-
interventional study, or the content validity study, designed to identify and document the genital arousal symptoms that
are most important and relevant to women with FSAD. Participants who met the eligibility criteria participated in one-
on-one, in-depth interviews conducted by subject matter experts in the field of clinical outcome assessments and
female sexual medicine. The findings of that study helped facilitate alignment with the FDA on acceptable efficacy
endpoints in our Phase 2b clinical study and future Phase 3 program, including with respect to the patient reported
outcome, or PRO, instruments to be used to screen eligible patients with FSAD and to measure achievement of the
primary efficacy endpoint in the Phase 2b study.
Phase 2b RESPOND Clinical Study
In March 2021, we announced initiation of our Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6% in
women with FSAD. During the Phase 2b RESPOND clinical study, subjects will use Sildenafil Cream, 3.6% and
placebo cream in their home setting and will document genital arousal symptoms and distress using PRO
instruments. 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 Phase 2b
RESPOND clinical 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. The study is expected to randomize 400 to 590
subjects into the double-blind dosing period at 40 to 50 clinical sites in the U.S. to ensure a total of 300 (150:150) to
440 (220:220) subjects complete the 12-week double-blind dosing period. The final size of the study will be
determined by a single interim analysis for unblinded sample size re-estimation, based on the study’s adaptive design.
An adaptive design implemented in accordance with the FDA’s Guidance for Industry on adaptive designs for clinical
trials of drugs mitigates the risk of the study being underpowered if the true treatment effect and variability are
significantly different from estimates based on published data but are still clinically meaningful. The pace of enrollment
of participants in the trial has been slower than initially expected. While the COVID-19 pandemic contributed in part to
the slower pace of enrollment, we identified a number of other contributing factors, and we implemented mitigation
strategies and adapted certain requirements to increase study subject recruitment. We do not expect these changes
to impact trial results. We anticipate that the planned interim analysis will be conducted in 2022, after which we will be
able to predict the timeframe for announcement of topline data from this trial.
We are developing Sildenafil Cream, 3.6% with Strategic Science & Technologies-D LLC under our license
and collaboration agreement announced in February 2018. See “Strategic Agreements for Pipeline Development”
below for discussion of the terms of this collaboration.
DARE-HRT1
DARE-HRT1 is a unique intravaginal ring, or IVR, designed to deliver bio-identical 17β-estradiol and bio-
identical progesterone continuously over a 28-day period as part of a hormone therapy regimen to treat the vasomotor
symptoms, or VMS, and genitourinary syndrome associated with menopause. The IVR technology used in DARE-
HRT1 was developed by Dr. Robert Langer from the Massachusetts Institute of Technology and Dr. William Crowley
from Massachusetts General Hospital and Harvard Medical School. Unlike other vaginal ring technologies, ours is
designed to release drugs via a solid ethylene vinyl acetate polymer matrix without the need for a membrane or
reservoir to contain the active drug or control the release, allowing for sustained drug delivery over time periods
ranging from weeks to months. Hormone therapy is considered the most effective treatment for vasomotor symptoms,
commonly referred to as hot flashes, and the genitourinary syndrome of menopause, and it has been shown to
prevent bone loss and fracture.
Following clinical development, we intend to leverage existing safety and efficacy data on estradiol and
progesterone, the active ingredients in DARE-HRT1, to utilize the FDA's 505(b)(2) pathway to obtain marketing
approval in the U.S.
There are currently no FDA-approved IVRs that deliver bio-identical progesterone in combination with bio-
identical estradiol. As such, DARE-HRT1 has the potential to be a first-in-category product that offers monthly
convenience for women.
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Clinical Data
In June 2021, we announced positive topline results from our Phase 1 clinical trial of DARE-HRT1. The
randomized, open-label, three-arm, parallel group trial evaluated the pharmacokinetics, or PK, and safety of DARE-
HRT1 in approximately 30 healthy, post-menopausal women with intact uteri, and was conducted by our wholly owned
Australian subsidiary at specialty women's health sites in Australia. The primary objective of the study was to describe
the PK parameters of two different dose combinations (estradiol 80 µg/progesterone 4 mg IVR and estradiol 160 µg/
progesterone 8 mg IVR) over 28 days. Secondary endpoints of the study were to assess the safety and tolerability of
DARE-HRT1 and compare the systemic exposure of estradiol, estrone, and progesterone of DARE-HRT1 over 28
days against a daily combination of oral estrogen (Estrofem®) and oral progesterone (Prometrium®). Baseline-
corrected steady state release level data from the study demonstrate that both the lower (IVR1) and higher (IVR2)
dose versions of DARE-HRT1 successfully delivered the bio-identical estradiol and bio-identical progesterone over
the 28-day evaluation period (Table 2).
Table 2: Baseline-Corrected Steady State Levels of Estradiol and Progesterone
DARE-HRT1 IVR1 (n=10)
DARE-HRT1 IVR2 (n=11)
Steady State
(Standard Deviation)
Estradiol 20.6 (16.8) pg/mL
Progesterone 1.32 (0.20) ng/mL
Estradiol 32.5 (9.3) pg/mL
Progesterone 2.23 (0.61) ng/mL
The levels of estradiol released from each formulation of DARE-HRT1 evaluated in the study achieved or
exceeded the levels that were targeted for hormone therapy. Target levels of estradiol for hormone treatment for either
the VMS or vaginal symptoms of menopause were established by reviewing PK levels published for FDA-approved
products for both the treatment of VMS as well as the genitourinary symptoms of menopause. Based on the estradiol
PK data in the Phase 1 study, the results support further development of DARE-HRT1 as a potentially effective
hormone therapy for both VMS and vaginal symptoms associated with menopause. The levels of progesterone
released from each version of DARE-HRT1 evaluated in the study met the objectives of releasing progesterone.
Progesterone is used in hormone therapy to reduce the impact of estrogen on nontarget sites, such as the
endometrium, to prevent estrogen-induced endometrial hyperplasia.
The study treatment was well tolerated with the most common adverse events consistent with other vaginal
products. There was only one early discontinuation due to an adverse event, which was found to be unrelated to study
treatment or participation, and no serious adverse events were reported. The proportion of participants reporting
adverse events was similar across all dose groups, the two DARE-HRT1 groups as well as the group receiving a daily
combination of FDA-approved oral estrogen and oral progesterone products, with 89% of adverse events mild in
severity and all other adverse events (11%) rated as moderate.
DARE-HRT1 had a high level of acceptability in the study, with over 80% of subjects on the lower and higher
dose versions of DARE-HRT1 reporting the IVR as comfortable or very comfortable. Additionally, over 80% of subjects
in each IVR dose group stated they were either somewhat or very likely to use the IVR for a women’s health condition
or disease if needed.
Phase 1/2 Clinical Study
We are commencing a Phase 1/2 clinical study of DARE-HRT1 in Australia in the second quarter of 2022. The
open-label study will evaluate the PK of the lower and higher dose versions of DARE-HRT1 in approximately 20
healthy, post-menopausal women with intact uteri over approximately three consecutive months of use. The study will
also collect safety, usability, acceptability and symptom-relief data.
We are developing DARE-HRT1 under our license agreement with Catalent JNP, Inc. See “Strategic
Agreements for Pipeline Development” below for discussion of the terms of that agreement.
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DARE-VVA1
DARE-VVA1 is a proprietary formulation of tamoxifen for vaginal administration. We are developing DARE-
VVA1 as an alternative to estrogen-based therapies for the treatment of moderate to severe vulvar and vaginal
atrophy, or VVA, in women with or at risk for hormone-receptor positive (HR+) breast cancer, including women on anti-
cancer therapy, to treat the symptoms of VVA. Tamoxifen is a well-known and well-characterized selective estrogen
receptor modulator, or SERM. Tamoxifen has unique properties that produce different effects in different types of
tissues. In breast tissue, tamoxifen acts as an estrogen antagonist, meaning that it can inhibit estrogen's effect and
hence why it may be effective in treating HR+ breast cancer. However, in other tissue, including vaginal tissue,
tamoxifen has been reported to exert an estrogen-like response. This has the potential to have a favorable effect on
vaginal cytology. VVA is an inflammation of the vaginal epithelium due to the reduction in levels of circulating estrogen,
which is characterized by pain during intercourse, vaginal dryness and irritation. Commonly used therapies for VVA
are estrogen-based and often contraindicated in HR+ breast cancer patients, or patients with a genetic predisposition
or history of familial disease, because of the concern that estrogen use will promote recurrence or occurrence of
disease. Due to the prevalence of aromatase inhibitors for the treatment of HR+ breast cancer, the prevalence of VVA
in post-menopausal breast cancer patients is estimated to be between 42 and 70 percent. We intend to leverage the
existing safety and efficacy data for tamoxifen to utilize the FDA’s 505(b)(2) pathway to obtain marketing approval of
DARE-VVA1 in the U.S.
An exploratory study of vaginal administration of tamoxifen in four healthy postmenopausal women diagnosed
with VVA published in Clinical and Experimental Obstetrics & Gynecology demonstrated that tamoxifen self-
administered intravaginally for three months clinically benefited women with symptoms of VVA without significant
systemic absorption of the study drug. In the open-label prospective cohort study with no placebo arm, participants
were instructed to self-administer a vaginal suppository containing tamoxifen (20 mg) daily for one week and twice
weekly for three months. The study treatment was effective in reducing vaginal pH and vaginal dryness. When
measured after eight weeks on the study treatment, serum tamoxifen levels were negligible, 5.8 ng/ml (median), with
a range of 1.0 to 10.0 ng/ml. In comparison, after three months of once daily administration of oral dose of 20-mg
tamoxifen, Nolvadex® (tamoxifen citrate) tablets, the average steady state plasma concentration of tamoxifen is 122
ng/ml (range of 71 to 183 ng/ml).
In September 2021, we announced initiation of our Phase 1/2 clinical study of DARE-VVA1. The randomized,
multi-center, double-blind, parallel-arm, placebo-controlled, dose-ranging study is designed to evaluate the safety,
tolerability, PK, and pharmacodynamics (PD) of DARE-VVA1 in postmenopausal participants with moderate to severe
VVA and is being conducted by our wholly owned Australian subsidiary. We expect the study will enroll approximately
40 postmenopausal women with VVA, including a cohort of women with a history of hormone-receptor positive breast
cancer, at approximately three study sites. Eligible participants will be randomly allocated to one of the five treatment
groups (approximately 8 participants per group) that will evaluate four dose levels (1 mg, 5 mg, 10 mg, and 20 mg)
and a 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 evaluate the preliminary efficacy and PD of DARE-VVA1 in terms of the most bothersome symptom and
changes in vaginal cytology and pH. We anticipate reporting topline data from the study in the second half of 2022.
We acquired the DARE-VVA1 program through our acquisition of Pear Tree Pharmaceuticals in 2018. See
"Strategic Agreements for Pipeline Development" below for discussion of that merger agreement.
DARE-FRT1 and DARE-PTB1
DARE-FRT1 and DARE-PTB1 are IVRs designed to release bio-identical progesterone over a 14-day period.
DARE-FRT1 is being developed for broader luteal phase support as part of an in vitro fertilization, or IVF, treatment
plan. DARE-PTB1 is being developed for the prevention of preterm birth. Each of DARE-FRT1 and DARE-PTB1 was
developed from the same IVR technology platform as DARE-HRT1. We are conducting development activities in
preparation for Phase 1 clinical studies of these product candidates. We intend to leverage the existing safety and
efficacy data for progesterone to utilize the FDA’s 505(b)(2) pathway to obtain marketing approval of DARE-FRT1 and
DARE-PTB1 in the U.S.
We are developing DARE-FRT1 and DARE-PTB1 under our license agreement with Catalent JNP, Inc. See
"Strategic Agreements for Pipeline Development " below for discussion of the terms of that agreement.
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Our Pipeline: Pre-Clinical Stage Programs
Our pre-clinical stage programs are:
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;
ADARE-204 and ADARE-214,
•
contraception over 6-month and 12-month periods, respectively; and
injectable
formulations of etonogestrel designed
to provide
DARE-RH1, a novel approach to non-hormonal contraception for both men and women by targeting
•
the CatSper ion channel.
DARE-LARC1, our potential user-controlled, long-acting reversible contraceptive, is designed to store and
precisely deliver hundreds of therapeutic doses of the contraceptive levonorgestrel over a period of years and to be
controlled by the user, without further intervention by a healthcare provider. DARE-LARC1’s woman-centered design
seeks to offer the benefits of traditional long-acting reversible contraceptives with the added flexibility and
convenience for the user to pause and resume release of levonorgestrel, depending on her desire for fertility or
contraceptive protection. Under a grant agreement we entered into in June 2021, we may receive up to $48.95 million,
payable over approximately five years, to advance development of the technology through nonclinical proof of
principle studies to enable an investigational new drug, or IND, submission. We received an initial payment under that
grant of $11.45 million in 2021. Additional payments are contingent upon the DARE-LARC1 program's achievement of
development and reporting milestones specified in the grant agreement. Additionally in 2021, we received an
unrelated NICHD grant award of approximately $300,000 to be used to explore device insertion and removal in
nonclinical studies.
Sales and Marketing
We do not have established marketing, sales or distribution infrastructure or capabilities. In order to
commercialize any of our product candidates if approved for commercial sale, we must either establish a sales and
marketing organization with technical expertise and supporting distribution capabilities or collaborate with third-parties
that have sales and marketing experience. Our approach is to develop an appropriate commercialization strategy for
each of our product candidates based on the size of the market opportunity, the level of competition and the
anticipated complexity of the launch. As we move our product candidates through development toward, and in some
cases, through regulatory approval, we evaluate several options for each product candidate's commercialization
strategy. These options include building our own sales force and other commercial infrastructure, entering into
strategic marketing partnerships with third parties, including commercial sales organizations or other pharmaceutical
or biotechnology companies, out-licensing the product to other pharmaceutical or biotechnology companies, and
combinations of these strategies. We have entered into an exclusive license agreement with Organon to out-license
worldwide commercialization of XACIATO and an exclusive license agreement with Bayer to out-license U.S.
commercialization of Ovaprene. Each of these licensees has established marketing, sales and distribution capabilities
in women's health. We expect to continue to evaluate each product opportunity and pursue the commercialization
strategy that we believe will maximize the return on our assets in and outside of the U.S. for our stockholders. We
have engaged third parties to assist in commercial planning and other commercial readiness activities for our product
candidates and intend to continue to do so, as needed.
See “Strategic Agreements for Product Commercialization” below for a discussion of the terms of our out-
license agreements.
Manufacturing and Supply
We do not own or operate, nor do we expect to own or operate, facilities for manufacturing, storage and
distribution, or testing of our product or product candidates. We rely on third parties to supply and manufacture our
product candidates and other materials necessary to conduct pre-clinical testing, clinical trials and other activities
required for regulatory approval of our product candidates, and expect to continue to do so in the future. In addition, to
the extent our commercialization strategy for a product requires that we undertake commercial supply obligations, we
intend to rely on contract manufacturers and suppliers for manufacture, storage, distribution and testing of our finished
commercial products and their respective components, including the active pharmaceutical ingredients, or API. These
arrangements require less upfront capital expenditure and allow us to maintain a smaller and more flexible
infrastructure.
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Under the terms of our license agreement with Organon, we will be responsible for providing product supply
of XACIATO on an interim basis until Organon assumes such responsibility. In March 2022, we entered into a long-
term supply and manufacturing agreement with the contract manufacturing organization, or CMO, that provided
clinical supplies of XACIATO for our pivotal Phase 3 DARE-BVFREE clinical study. This CMO currently is our sole
source for commercial supplies of XACIATO. Under the terms of our agreement, the CMO is responsible for obtaining
supplies, at our expense, of all the components necessary for the manufacture of XACIATO, including the API,
clindamycin. Our agreement contemplates potential assignment by us to a commercial collaborator. We expect to
have sufficient quantities of XACIATO finished product to support commercial launch in 2022.
Under our agreements with ADVA-Tec and SST, respectively, ADVA-Tec is responsible for providing all clinical
trial and commercial supplies of Ovaprene, either directly or through a CMO, and SST is responsible for providing
Sildenafil Cream, 3.6% for the Phase 2b clinical study. Other than our agreement with ADVA-Tec, we have no long-
term arrangements for the production or supply of our product candidates or the materials required to produce them.
We expect that our current arrangements will meet our foreseeable needs for clinical trial materials or,
generally, that alternative supply sources will be readily available. However, we may experience manufacturing and
supply delays and disruptions in connection with CMOs scaling up production to meet our clinical supply requirements
for later stage clinical studies. In addition, some key raw materials or components of our clinical-stage product
candidates, including Ovaprene and Sildenafil Cream, 3.6%, have only a single source of supply and alternative
supply sources may not be readily available. Global supply chain disruptions related to the COVID-19 pandemic and
recent geopolitical events may contribute to manufacturing and supply delays. See ITEM 1A. "RISK FACTORS –
Risks Related to Product Research & Development and Regulatory Approval – Manufacturing and supply delays and
disruptions may significantly delay our clinical studies and be expensive for us to resolve” below.
Strategic Agreements for Product Commercialization
Organon License Agreement
On March 31, 2022, we 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 we
control. Under the agreement, we will receive a $10.0 million non-refundable and non-creditable payment following
the effective date of the agreement and 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, which is expected to occur during the fourth quarter of 2022; 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.
Under the agreement, we 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 us at a transfer price equal to our manufacturing costs plus a single-digit percentage
markup.
The effective date of the agreement will occur following the satisfaction of closing conditions that include
receipt of all applicable approvals, or the expiration or termination of all applicable waiting periods, required under
applicable antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 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.
The agreement includes customary representations and warranties, covenants and indemnification
obligations of each party.
In addition, the terms of the agreement provide Organon exclusive worldwide rights of first negotiation for
specified potential future products of ours.
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Bayer License Agreement
In January 2020, we entered into a license agreement with Bayer regarding the further development and
commercialization of Ovaprene in the U.S. We received a $1.0 million upfront non-refundable payment from Bayer
and Bayer agreed to support us in development and regulatory activities by providing the equivalent of two experts to
advise us in clinical, regulatory, preclinical, commercial, CMC and product supply matters. Bayer, in its sole discretion,
has the right to make the license effective by paying us 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 us with regard to development.
The following is a summary of the other terms of the Bayer license agreement:
Milestone Payments Paid by Bayer. We 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. We will be responsible for the pivotal trial for Ovaprene and for its development and regulatory
activities and we have 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 we do not receive the Clinical Trial and Manufacturing Activities Fee if and when due.
Strategic Agreements for Pipeline Development
Hammock/MilanaPharm Assignment and License Agreement
In December 2018, we entered into (a) an Assignment Agreement with Hammock Pharmaceuticals, Inc., or
the Assignment Agreement, and (b) a First Amendment to License Agreement with TriLogic Pharma, LLC and
MilanaPharm LLC, or the License Amendment. Both agreements relate to the Exclusive 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, we
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. In December 2019, we entered into amendments to each of the
Assignment Agreement and License Amendment. In September 2021, we entered into another amendment to the
License Agreement.
The following is a summary of other terms of the License Amendment, as amended:
License Fees. A total of $235,000 in license fees were payable to MilanaPharm, the final installment of which
was $110,000 paid in 2020.
Milestone Payments. We paid MilanaPharm $300,000 in the aggregate upon achievement of certain clinical
and regulatory development milestones, $50,000 of which was paid in 2020, and $250,000 of which was paid in 2021.
We may also pay MilanaPharm up to $1.75 million in the aggregate upon achieving certain commercial sales
milestones.
Foreign Sublicense Income. We will pay MilanaPharm a low double-digit percentage of all income received by
us or our affiliates in connection with any sublicense granted to a third party for use outside of the United States,
subject to certain exclusions.
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Royalty Payments. During the royalty term, we will pay MilanaPharm 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 us, or payments to third parties for rights or know-how required for us 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. We 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 us 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
us solely with respect to a licensed product or process in a country if, after having launched such product or process
in such country, (1) we or our affiliates or sublicensees discontinue the sale of such product or process in such country
and MilanaPharm notifies us of such termination within 60 days of having first been notified by us of such
discontinuation, or (2) we or our 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 us.
The following is a summary of other terms of the Assignment Agreement, as amended.
Assignment; Technology Transfer. Hammock assigned and transferred to us all of its right, title and interest in
and to the MilanaPharm License Agreement and agreed to cooperate to transfer to us all of the data, materials and
the licensed technology in its possession pursuant to a technology transfer plan to be agreed upon by the parties, with
a goal for us 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 paid in 2020.
Milestone Payments. We will pay Hammock up to $1.1 million in the aggregate upon achievement of certain
clinical and regulatory development milestones, $100,000 of which was paid in 2020 and $750,000 of which was paid
in 2021. The remaining milestone does not relate 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.
ADVA-Tec License Agreement
In March 2017, we entered into a license agreement with ADVA-Tec, Inc., under which we were granted an
exclusive license to develop and commercialize Ovaprene for human contraceptive use worldwide. We 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 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 us to seek a PMA from the FDA and will provide us with clinical trial and commercial supplies of
Ovaprene, either directly or through a CMO, on commercially reasonable terms.
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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, we have 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. We will pay to ADVA-Tec: (1) up to $14.6 million in the aggregate based on the
achievement of specified development and regulatory milestones, $200,000 of which was paid in 2021; and (2) up to
$20 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.
Royalty Payments. After the commercial launch of Ovaprene, we will pay ADVA-Tec 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.
Term. Unless earlier terminated, the license we received under the agreement continues on a country-by-
country basis until the later of the life of the licensed patents or our last commercial sale of Ovaprene. In addition to
customary termination rights for both parties: (A) we 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 we
develop or commercialize any non-hormonal ring-based vaginal contraceptive device competitive to Ovaprene or if we
fail 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 we and ADVA-Tec agree, and as
may be modified by a joint research committee, unless such failure is caused by events outside of our 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 our reasonable control.
Cooperative Research and Development Agreement with NICHD
In July 2021, we entered into a CRADA with the U.S. Department of Health and Human Services, as
represented by NICHD, part of the National Institutes of Health, or NIH, for the conduct of a pivotal Phase 3 clinical
study of Ovaprene. See also “Our Pipeline: Clinical Stage Programs – Ovaprene” above. Pursuant to the terms of the
CRADA, we are responsible for providing a total of $5.5 million in four payments to NICHD to be applied toward the
costs of conducting the Phase 3 study, a total of $1.5 million of which we paid in two installments 2021 and $3.5
million of which we paid in the first quarter of 2022 in accordance with the payment schedule under the CRADA. The
final payment, due in the second quarter of 2023, is $500,000. NICHD will be responsible for the other costs related to
the conduct of the Phase 3 study and will manage the payment of expenses to other parties involved with the study.
Either we or NICHD may terminate the CRADA for any reason upon 30 days’ prior written notice to the other party. If
the CRADA is terminated before completion of the Phase 3 study, NICHD will cooperate with us to transfer the data
and the conduct of the study to us or our designee and will continue to conduct the study for so long as necessary to
enable such transfer to be completed without interrupting the study. If we terminate the CRADA before the completion
of any active study protocol, we generally will be responsible for providing sufficient clinical supplies of Ovaprene to
NICHD in order to complete the study. NICHD may retain and use payments we make under the CRADA for up to one
year after expiration or termination to cover costs associated with the conduct of activities described under the
research plan in the CRADA that were initiated prior to expiration or termination, and any unused funds will be
returned to us. Under the CRADA, each party granted the other party rights to use their respective background
inventions solely to the extent necessary to conduct the activities described in the research plan in the CRADA.
Subject to the U.S. government’s nonexclusive, nontransferable, irrevocable, paid-up right to practice any CRADA
invention for research or other government purposes, each party will own inventions, data and materials produced by
its employees, and both parties will jointly own inventions jointly invented by their employees in performing the
research plan. Under the CRADA, we were granted an exclusive option to negotiate an exclusive or nonexclusive
development and commercialization license with a field of use that does not exceed the scope of the research plan to
rights that the U.S. government may have in inventions jointly or independently invented by NICHD employees for
which a patent application is filed. The CRADA also contains customary representations, warranties, and
indemnification and confidentiality obligations. The CRADA expires five years from its effective date.
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SST License and Collaboration Agreement
In February 2018, we entered into a license and collaboration agreement with Strategic Science and
Technologies-D, LLC and Strategic Science Technologies, LLC, referred to collectively as SST, under which we
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 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 this 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 agreement:
Invention Ownership. We retain rights to inventions made by our 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. We 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. We are 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 in the single digits to the mid double digits, subject to customary royalty reductions and offsets, and
a percentage of sublicense revenue.
Milestone Payments. SST will be eligible to receive payments (1) ranging from $0.5 million to $18.0 million in
the aggregate upon achieving certain clinical and regulatory milestones in the U.S. and worldwide, and (2) between
$10.0 million to $100 million in the aggregate upon achieving certain commercial sales milestones. If we enter into
strategic development or distribution partnerships related to the Licensed Products, additional milestone payments
would be due to SST.
License Term. Our license continues on a country-by-country basis until the later of 10 years from the date of
the first commercial sale of such Licensed Product or the expiration of the last valid claim of patent rights covering the
Licensed Product in the Field of Use. Upon expiration (but not termination) of the agreement in a particular country,
we 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, we 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, we 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 we fail to use commercially reasonable efforts to perform development activities in
substantial accordance with the development plan and do not cure such failure within 60 days of receipt of SST's
notice thereof.
Catalent JNP License Agreement
In April 2018, we entered into an exclusive license agreement with Catalent JNP, Inc. (formerly known as
Juniper Pharmaceuticals, Inc., and which we refer to as Catalent in this report), under which Catalent granted us (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. We are
entitled to sublicense the rights granted to us under this agreement.
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The following is a summary of other terms of the Catalent license agreement:
Upfront Fee. We paid a $250,000 non-creditable upfront license fee to Catalent in connection with the
execution of the agreement.
Annual Maintenance Fee. We will pay an 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
which 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. We made the first of these payments in April 2019.
Milestone Payments. We must make potential future development and sales milestone payments of (1) up to
$13.5 million in the aggregate upon achieving certain clinical and regulatory milestones, $1.0 million of which became
payable in the third quarter of 2021, and in accordance with the license agreement, the amount 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)
up to $30.3 million in the aggregate upon achieving certain commercial sales milestones for each product or process
covered by the licenses granted under the agreement.
Royalty Payments. During the royalty term, we will pay Catalent 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, we will pay Catalent a low double-digit percentage of all sublicense income we receive
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. We 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 our uncured breach of any payment obligation under the agreement, (2) if
we fail to maintain required insurance, (3) immediately upon our insolvency or the making of an assignment for the
benefit of our creditors or if a bankruptcy petition is filed for or against us, which petition is not dismissed within 90
days, or (4) upon 60 days’ notice for any uncured material breach by us of any of our other obligations under the
agreement. We 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 we terminate 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 us.
Pear Tree Acquisition
In May 2018, we completed our acquisition of Pear Tree Pharmaceuticals, Inc., or Pear Tree. We 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. Contingent payments to the Pear Tree former stockholders or their representatives that
become payable upon achievement of specified clinical, regulatory and commercial milestones, may be paid, in our
sole discretion, in cash or shares of our common stock.
Royalty Payments. The former stockholders of Pear Tree will be eligible to receive, subject to certain offsets,
tiered royalties, including customary provisions permitting royalty reductions and offset, based on percentages of
annual net sales of certain products subject to license agreements we assumed and a percentage of sublicense
revenue.
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MBI Acquisition
In November 2019, we 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.
At the closing of the merger, we issued an aggregate of approximately 3.0 million shares of our common stock
to the holders of shares of MBI’s capital stock outstanding immediately prior to the effective time of the merger. The
transaction was valued at $2.4 million, based on the fair value of the approximately 3.0 million shares issued at $0.79
per share, which was the closing price per share of our common stock on the date of closing. The shares were issued
in consideration of MBI's cash and cash equivalents of $6.1 million, less net liabilities of $3.5 million and transaction
costs of $202,000, which was allocated based on the relative fair value of the assets acquired and liabilities assumed.
We agreed to pay the following additional consideration to 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 we acquired in the merger; (c) tiered royalty payments ranging from low single-digit to low
double-digit percentages of annual net sales of such products, subject to customary provisions permitting royalty
reductions and offset; and (d) a percentage of sublicense revenue related to such products. We 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 that potential additional 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 our consolidated balance sheets upon the completion of the MBI acquisition and $250,000 of which
was expensed in 2021. In July 2021, our board of directors elected to make these milestone payments in shares of
our common stock, to the extent permissible under the terms of the merger agreement with MBI, and, in September
2021, we issued approximately 700,000 shares of our 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.
Adare Development and Option Agreement
In March 2018, we entered into an exclusive development and option agreement with Adare Pharmaceuticals
(formerly known as Orbis Biosciences, and which we refer to as Adare), for the development of long-acting injectable
etonogestrel contraceptive with 6- and 12-month durations (now known as ADARE-204 and ADARE-214,
respectively). The agreement provides us with an option to negotiate an exclusive license agreement for the programs
if we fund the conduct of specified development work by Adare.
Intellectual Property
We actively seek to protect the proprietary technology that we consider important to our business in the
United States and other jurisdictions internationally. We also rely upon trade secrets and contracts to protect our
proprietary information.
Patents
The medical device and pharmaceutical industries are characterized by the existence of a large number of
patents and frequent litigation based on allegations of patent infringement. Patent litigation can involve complex
factual and legal questions, and its outcome is uncertain. Any claim relating to infringement of third party patents that
is successfully asserted against us or our licensors may require us to pay substantial damages or may limit our or our
licensors' ability to rely on such patent protection. Any third party claim successfully alleging the invalidity or
unenforceability of the patents may also limit our or our licensors' ability to rely on such patent protection. Even if we,
or our licensors were to prevail in any such action, any litigation could be costly and time-consuming and would divert
the attention of management and key personnel from our business operations. Also, if our product candidates or any
future products are found to infringe the patents of others, our development, manufacture, and sale of these potential
products could be severely restricted or prohibited. In addition, there can be no assurance that any patent applications
filed by us or our licensors will result in the grant of a patent either in the United States or elsewhere, or that any
patents granted will be valid and enforceable, or that any patents will provide a competitive advantage or afford
protection against competitors with similar technologies. Because of the importance of the patents underlying our
product candidates, our business and our prospects may be harmed if we fail to maintain existing or obtain new
patent rights or if we and our licensors fail to protect key intellectual property rights.
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Under the terms of the Assignment Agreement with Hammock Pharmaceuticals, Inc. and the License
Amendment with TriLogic Pharma, LLC and MilanaPharm, LLC, regarding the thermosetting hydrogel platform which
includes XACIATO, we are the exclusive licensee of three issued U.S. patents, two of which are set to expire in
December 2028 and one of which is set to expire in September 2036, subject to any extensions or disclaimers, and
three foreign patents, including one European Patent Office, or EPO, patent validated in four countries, that expire in
December 2028, subject to any extensions or disclaimers. One of the three issued U.S. patents is listed in the FDA’s
compendium of “Approved Drug Products with Therapeutic Equivalence Evaluation," known as the Orange Book,
under the Patent Exclusivity Information for XACIATO. In addition, we have rights to three pending foreign patent
applications and one pending U.S. patent application. If issued, the patent term for these patents issuing from these
pending applications would be expected to expire in 2036, subject to any extensions or disclaimers.
Under the terms of the ADVA-Tec license agreement, regarding Ovaprene, we are the exclusive licensee of
nine granted U.S. patents, one pending U.S. patent application, eight granted foreign patents, including four EPO
patents validated in a total of 55 countries, and seven pending foreign patent applications. Two of the patents that are
particularly important to the protection of Ovaprene have terms until August 2028, which includes days added to the
term by patent term adjustment, and a third patent has a term that expires in July 2027, including patent term
adjustment, each of such terms being subject to any future extensions or disclaimers.
Under the terms of the SST license agreement, regarding Sildenafil Cream, 3.6%, we are the exclusive
licensee in the Field of Use of 22 issued patents worldwide (nine U.S. patents and 13 foreign patents, including two
EPO patents validated in a total of 24 countries). Additionally, there is one patent application pending in the US, one in
Europe, and two in other international markets. The issued U.S. patents have a patent term that expires in June 2029,
including any patent term adjustment, and may be eligible for regulatory exclusivity under the Hatch-Waxman Act,
while several foreign patents have a term through that is set to expire in late 2031, each of such terms being subject
to any future extensions of disclaimers.
Under the terms of the Catalent license agreement, regarding our intravaginal ring platform which includes
DARE-HRT1, we are the exclusive licensee of four issued U.S. patents with patent terms set to expire in April 2024,
November 2024, February 2025, and September 2027, including patent term adjustment, four issued foreign patents
with patent terms until April 2024, including one European patent validated in three countries, as well as one pending
U.S. application and two pending foreign applications that if granted are expected to have patent terms that expire in
May 2038, subject to any extensions or disclaimers.
When we acquired Pear Tree Pharmaceuticals, Inc. in 2018, regarding DARE-VVA1, we obtained the rights to
three U.S. patents and one Japanese patent. The patent term for the U.S. patents are expected to expire in June
2027, June 2028, and May 2035 including any patent term adjustment, extensions or disclaimers. The Japanese
patent has a term that is set to expire in June 2027.
When we acquired MBI in 2019, we obtained the rights to over 100 patents and applications. The key
technology underlying the platform is supported by 16 U.S. patents and 45 foreign patents, including six EPO patents
validated in various European countries, and six pending patent applications, including two U.S. applications and one
Patent Cooperation Treaty (PCT) international application. We believe that three of the most recently granted patent
families are most directly applicable to our DARE-LARC1 program. Those patent families have patent terms that are
set to expire 2032, 2033, and 2034 respectively, subject to any extensions or disclaimers. Those patent families
include patents granted in the U.S., E.U. and other key international markets. One pending U.S. patent application,
which has a pending PCT international counterpart, related to DARE-LARC1, if granted, would have a patent term that
would be expected to expire in 2040, subject to any extensions or disclaimers.
We also rely upon trade secret rights to protect our product candidates as well as other technologies that
may be used to discover, validate and commercialize our current or any future product candidates. We presently seek
protection, in part, through confidentiality and proprietary information agreements.
Trademarks
We hold a domestic registration for the trademark Daré Bioscience and our registration for the XACIATO
trademark in the U.S. is pending. In accordance with the terms of the ADVA-Tec license agreement, we are the
exclusive licensee of the Ovaprene registered trademark.
Competition
The industries in which we operate (biopharmaceutical, specialty pharmaceutical, biotechnology and medical
device) are highly competitive and subject to rapid and significant change. Our success is highly dependent upon our
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ability to acquire or in-license, develop and obtain regulatory approval for innovative medical products on a cost-
effective basis and to market them successfully, either on our own or together with strategic partners. We face and will
continue to face intense competition from a variety of businesses, including large, fully integrated, well-established
pharmaceutical companies that already possess a significant share of the women’s health market. Many of our
potential competitors have greater clinical, regulatory, manufacturing, marketing, distribution, compliance and financial
resources and experience than we do. See ITEM 1A. "RISK FACTORS—Risks Related to Commercialization of
XACIATO and Our Product Candidates— Our product candidates, if approved, and XACIATO will face intense
competition and our business and operating results will suffer if we, or our commercial collaborators, fail to compete
effectively” and “— The women's health market includes many generic products and growth in generics is expected to
continue, which could make the successful introduction of our branded products difficult and expensive” below.
XACIATO will compete directly with the multiple generic and branded prescription drug products currently
approved in the U.S. for the treatment of bacterial vaginosis, including oral and vaginal gel formulations of
metronidazole and vaginal cream formulations of clindamycin. Branded, single-dose FDA-approved products for
bacterial vaginosis include Solosec® (secnidazole) oral granules manufactured for and distributed by Lupin
Pharmaceuticals, Inc., Clindesse® (clindamycin phosphate) vaginal cream, 2% manufactured and distributed by
Padagis, and Nuvessa™ (metronidazole vaginal gel 1.3%) distributed by Exeltis USA, Inc. Based on the XACIATO
product profile reflected in the FDA-approved prescribing information, including the consistent cure rates
demonstrated among the subsets of patients defined by prior episodes of bacterial vaginosis (≤ 3 and >3 episodes in
the previous 12 months), and the labeling for special populations such as pregnant and lactating women, we expect
that the product may to be used by health care providers as a first line option for treating bacterial vaginosis.
Our investigational contraceptive products, including Ovaprene, if approved, will compete with a wide range of
prescription and over-the-counter contraceptive options, including hormone-free options such as condoms,
diaphragms, cervical caps, sponges, copper IUDs, spermicides and vaginal gels, as well as hormonal products such
as pills, patches, vaginal rings and injectables. In addition, multiple new methods of pregnancy prevention are in
development, including hormone-free options, and some may be marketed in the U.S. before Ovaprene, potentially
adding to the level of market competition Ovaprene will face, if approved.
Currently, there are no FDA-approved therapies for FSAD. Sildenafil Cream, 3.6% has the potential to be the
first FDA-approved product for the treatment of FSAD.
Over the longer term, our ability, independently or otherwise, to successfully develop, manufacture, market,
distribute and sell any approved products, expand their usage or bring additional new products to the marketplace will
depend on many factors, including, but not limited to, FDA and foreign regulatory agency approval of new products
and of new indications for existing products, the efficacy and safety of our products (alone and relative to other
treatment options), the degree of patent or other protection afforded to particular products, and reimbursement for use
of those products.
Many other organizations are developing drug products and other therapies intended to treat the same
diseases and conditions for which our product candidates are in development, and the success of others may render
potential application of our product candidates obsolete or noncompetitive, even prior to completion of its
development.
Government Regulation
Governmental authorities in the U.S., at the federal, state and local level, and other countries extensively
regulate the research, development, testing, manufacturing, labeling and packaging, storage, recordkeeping,
advertising, promotion, import, export, marketing, and distribution, among other things, of pharmaceutical, medical
device, and drug-device combination products. The process of obtaining regulatory approvals in the U.S. and in
foreign countries and jurisdictions, and the subsequent compliance with appropriate federal, state, local and foreign
statutes and regulations, require the expenditure of substantial time and financial resources.
We and our third-party manufacturers, distributors and contract research organizations, or CROs, may also be
subject to government regulation under other federal, state, and local laws, including the U.S. Foreign Corrupt
Practices Act, the Occupational Safety and Health Act, the Environmental Protection Act, the Clean Air Act, the Health
Insurance Portability and Accountability Act, privacy laws and import, export and customs regulations, as well as
comparable laws and regulations of other countries.
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U.S. Government Regulation
In the U.S., the FDA, under the authorities granted to the agency by the Federal Food, Drug and Cosmetic
Act, or FDCA, and its implementing regulations, subjects pharmaceutical and other regulated medical products to
rigorous premarket review as well as post-marketing oversight and potential enforcement actions. Failure to comply
with applicable U.S. requirements at any time during the product development or approval process, or after approval,
may subject a company to a variety of administrative or judicial sanctions brought by the FDA and the Department of
Justice, or DOJ, or other governmental entities, any of which could have a material adverse effect on us. These
sanctions could include:
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refusal to approve pending or future marketing applications;
warning or untitled letters;
withdrawal of an approval;
imposition of a clinical hold;
voluntary product recalls;
seizures or administrative detention of product;
total or partial suspension of production or distribution; or
injunctions, fines, disgorgement, civil penalties or criminal prosecution.
FDA Approval Process for Prescription Drugs
To obtain approval of a new drug product from the FDA, we must, among other requirements, submit
extensive data supporting its safety and efficacy, as well as detailed information on the manufacture and composition
of the drug and proposed product labeling and packaging. The testing and collection of data and the preparation of
necessary applications are expensive and time-consuming. The FDA may not act quickly or favorably in reviewing
these applications, and we may encounter significant difficulties or costs in our efforts to obtain FDA approvals that
could delay or preclude us from marketing our product candidates.
The process required by the FDA before a new drug may be marketed in the U.S. generally involves some or
all of the following key steps:
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completion of nonclinical studies, such as laboratory tests, animal studies, and formulation studies,
performed in compliance with FDA regulations for good laboratory practices, or GLPs, and other
applicable regulations;
design of a clinical protocol and its submission to the FDA as part of an IND, which must become effective
before human clinical trials may begin;
performance of adequate and well-controlled human clinical trials according to good clinical practices, or
GCPs, to establish the safety and efficacy of the product candidate for its intended use;
submission of a NDA to the FDA along with payment of the application user fee and FDA acceptance of
that NDA;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facilities at which the
active pharmaceutical ingredient, or API, and finished drug product are produced and tested to assess
readiness for commercial manufacturing and conformance to the manufacturing-related elements of the
application, to conduct a data integrity audit, and to assess compliance with current good manufacturing
practices, or cGMP, in order to assure that the facilities, methods and controls are adequate to preserve
the drug candidate’s identity, strength, quality and purity;
possible inspection of selected clinical study sites to confirm compliance with GCP requirements and data
integrity; and
FDA review and approval of the NDA, including satisfactory completion of an FDA advisory committee
review of the product candidate, if applicable, which must occur prior to any commercial marketing or sale
of the drug product in the U.S.
Preclinical Studies
After a therapeutic candidate is identified for development, it enters the preclinical or nonclinical testing stage.
Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal
studies to assess potential safety and efficacy. Preclinical tests intended for submission to the FDA to support the
safety of a product candidate must be conducted in compliance with GLP regulations and the United States
Department of Agriculture’s Animal Welfare Act, if applicable. A drug sponsor must submit the results of the preclinical
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tests, together with manufacturing information, analytical data and any available clinical data or literature, among
other things, to the FDA as part of an IND. Some nonclinical testing may continue after the IND is submitted. In
addition to including the results of the nonclinical studies, the IND will include one or more clinical protocols detailing,
among other things, the objectives of the clinical trial and the safety and effectiveness criteria to be evaluated.
An IND automatically becomes effective 30 days after receipt by the FDA, unless before that time the FDA
raises concerns or questions related to one or more proposed clinical trials and places the clinical trial on a clinical
hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can
begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence. A clinical hold
may occur at any time during the life of an IND and may affect one or more specific studies or all studies conducted
under the IND. Occasionally, clinical holds are imposed due to manufacturing issues that may present safety issues
for the clinical study subjects.
Human Clinical Trials in Support of an NDA
The clinical investigation of an investigational new drug is divided into three phases that typically are
conducted sequentially but may overlap or be combined. The three phases are as follows:
Phase 1. Phase 1 includes initial clinical trials introducing an investigational new drug into humans and may
be conducted in subjects with the target disease or healthy volunteers. These trials are designed to determine the
metabolism and pharmacologic actions of the drug in humans, the side effects associated with increasing doses, and,
if possible, to gain early evidence on effectiveness.
Phase 2. Phase 2 includes the controlled clinical trials conducted to evaluate the effectiveness of the drug
candidate for a particular indication or indications in subjects with the disease or condition under study and to
determine the common short-term side effects and risks associated with the drug. Phase 2 trials are typically well
controlled, closely monitored, and conducted in a relatively small number of subjects.
Phase 3. Phase 3 trials are typically large trials performed after preliminary evidence suggesting effectiveness
of the drug candidate has been obtained. They are intended to gather additional information about the effectiveness
and safety that is needed to evaluate the overall benefit-risk relationship of the drug and to provide an adequate basis
for physician labeling and product marketing approval. Phase 3 trials usually are conducted at geographically
dispersed clinical study sites.
A clinical trial may combine the elements of more than one phase and the FDA often requires more than one
Phase 3 trial to support marketing approval of a product candidate. A company’s designation of a clinical trial as being
of a particular phase is not necessarily indicative that the study will be sufficient to satisfy the FDA requirements of
that phase because this determination cannot be made until the protocol and data have been submitted to and
reviewed by the FDA. Human clinical trials are inherently uncertain and Phase 1, Phase 2 and Phase 3 testing may
not be successfully completed.
A pivotal trial is a clinical trial that is believed to satisfy FDA requirements for the evaluation of a product
candidate’s safety and efficacy such that it can be used, alone or with other pivotal or non-pivotal trials, to support
regulatory approval. Generally, pivotal trials are Phase 3 trials, but they may be Phase 2 trials if the design provides a
well-controlled and reliable assessment of clinical benefit, particularly in an area of unmet medical need.
Clinical trials must be conducted under the supervision of one or more qualified investigators in accordance
with the FDA’s GCP requirements. They must be conducted under protocols detailing the objectives of the trial, dosing
procedures, research subject selection and exclusion criteria and the safety and effectiveness criteria to be evaluated.
Each protocol, and any subsequent material amendment to the protocol, must be submitted to the FDA as part of the
IND, and progress reports detailing the status of the clinical trials must be submitted to the FDA annually. Sponsors
also must report to the FDA serious and unexpected adverse reactions in a timely manner, any clinically important
increase in the rate of a serious suspected adverse reaction over that listed in the protocol or investigation brochure or
any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the
product or therapeutic candidate. The FDA may order the temporary or permanent discontinuation of a clinical trial at
any time, via a clinical hold, or impose other sanctions if it believes that the clinical trial is not being conducted in
accordance with FDA requirements or that the subjects are being exposed to an unacceptable health risk. An
institutional review board, or IRB, is responsible for ensuring that human subjects in clinical studies are protected from
inappropriate study risks. An IRB at each institution participating in the clinical trial must review and approve the
protocol before a clinical trial commences at that institution and must also approve the information regarding the trial
and the consent form that must be provided to each research subject or the subject’s legal representative, monitor the
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trial until completed and otherwise comply with IRB regulations. The IRB also may halt a study, either temporarily or
permanently, for failure to comply with GCP or the IRB’s requirements, or if the investigational new drug has been
associated with unexpected serious harm to patients.
During the development of a new drug product candidate, sponsors are given opportunities to meet with the
FDA at certain points; specifically, prior to the submission of an IND, at the end of Phase 2 and before an NDA is
submitted. Meetings at other times may be requested. These meetings can provide an opportunity for the sponsor to
share information about the data gathered to date and for the FDA to provide advice on the next phase of
development. Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical results and
present their plans for the pivotal Phase 3 clinical trial that they believe will support the approval of the new
therapeutic.
Post-approval trials, sometimes referred to as “Phase 4” clinical trials, may be conducted after initial
marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended
therapeutic indication. In certain instances, FDA may mandate the performance of “Phase 4” clinical trials.
Concurrent with clinical trials, sponsors usually complete additional animal safety studies, develop additional
information about the chemistry and physical characteristics of the product candidate and finalize a process for
manufacturing commercial quantities of the product candidate in accordance with cGMP requirements. The
manufacturing process must be capable of consistently producing quality batches of the product candidate and,
among other criteria, the sponsor must develop methods for testing the identity, strength, quality, and purity of the
finished drug product. Additionally, appropriate packaging must be selected and tested, and stability studies must be
conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.
Marketing Application Submission and FDA Review
Assuming successful completion of all required testing in accordance with all applicable regulatory
requirements, detailed information on the product candidate is submitted to the FDA in the form of an NDA requesting
approval to market the drug for one or more indications. An NDA includes all relevant data available from pertinent
nonclinical studies and clinical trials, including negative or ambiguous results as well as positive findings, together with
detailed information on the product candidate’s chemistry, manufacturing, and controls, or CMC, and proposed
labeling, among other things. To support marketing approval, the data submitted must be sufficient in quality and
quantity to establish the safety and efficacy of the product candidate for its intended use to the satisfaction of the FDA.
Under the Prescription Drug User Fee Act, or PDUFA, each NDA must be accompanied by a significant user
fee. The FDA adjusts the PDUFA user fees on an annual basis. PDUFA also imposes an annual program fee for
prescription drug products. Fee waivers or reductions are available in certain circumstances, such as where a waiver
is necessary to protect the public health, where the fee would present a significant barrier to innovation, or where the
applicant is a small business submitting its first human therapeutic application for review.
Under the goals and policies agreed to by the FDA under PDUFA, the FDA has ten months from receipt in
which to complete its initial review of a standard NDA for a drug that is not a new molecular entity, and six months
from the receipt date for an application with priority review. The FDA does not always meet its PDUFA goal dates, and
the review process is often significantly extended by FDA requests for additional information or clarification and the
sponsor’s process to respond to such inquiries. As a result, the NDA review process can be very lengthy. Most
innovative drug products (other than biological products) obtain FDA marketing approval pursuant to an NDA
submitted under Section 505(b)(1) of the FDCA, commonly referred to as a traditional or "full NDA." In 1984, with
passage of the Drug Price Competition and Patent Term Restoration Act, informally known as the Hatch-Waxman Act,
that established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs based on an
innovator or “reference” product, Congress also enacted Section 505(b)(2) of the FDCA, which provides a hybrid
pathway combining features of a traditional NDA and a generic drug application. Section 505(b)(2) enables the
applicant to rely, in part, on the FDA’s prior findings of safety and efficacy data for an existing product, or published
literature, in support of its application. Section 505(b)(2) NDAs may provide an alternate path to FDA approval for new
or improved formulations or new uses of previously approved products; for example, an applicant may be seeking
approval to market a previously approved drug for new indications or for a new patient population that would require
new clinical data to demonstrate safety or effectiveness. Section 505(b)(2) permits the filing of an NDA in which the
applicant relies, at least in part, on information from studies made to show whether a drug is safe or effective that
were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use. A
Section 505(b)(2) applicant may eliminate or reduce the need to conduct certain pre-clinical or clinical studies, if it can
establish that reliance on studies conducted for a previously-approved product is scientifically appropriate. The FDA
may also require companies to perform additional studies or measurements, including nonclinical and clinical studies,
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to support the change from the approved product. The FDA may then approve the new product candidate for all or
some of the labeled indications for which the referenced product has been approved, as well as for any new indication
for which the Section 505(b)(2) NDA applicant has submitted data.
The FDA conducts a preliminary review of all NDAs it receives, whether submitted under Section 505(b)(1) or
Section 505(b)(2), to ensure that they are sufficiently complete for substantive review before it accepts them for filing.
The FDA may refuse to file any NDA that it deems incomplete or not properly reviewable at the time of submission,
and may request additional information rather than accept an NDA for filing. In this event, the application must be
resubmitted with the additional information. The resubmitted application also is subject to review before the FDA
accepts it for filing. The FDA has 60 days after submission of an NDA to conduct an initial review to determine whether
it is sufficient to accept for filing. If the submission is accepted for filing, the FDA begins an in-depth substantive review
of the NDA. The FDA reviews the NDA to determine, among other things, whether the proposed product is safe and
effective for its intended use, whether it has an acceptable purity profile and whether the product is being
manufactured in accordance with cGMP. During its review of an NDA, the FDA may refer the application to an
advisory committee of independent experts for a recommendation as to whether the application should be approved.
An advisory committee is a panel of independent experts, including clinicians and other scientific experts, that
reviews, evaluates and provides a recommendation as to whether the application should be approved and under what
conditions. The FDA is not bound by the recommendation of an advisory committee, but it typically follows such
recommendations. Data from clinical trials are not always conclusive, and the FDA or its advisory committee may
interpret data differently than the NDA sponsor interprets the same data. The FDA may also re-analyze the clinical trial
data, which could result in extensive discussions between the FDA and the applicant during the review process.
Before approving an NDA, the FDA will typically inspect the facilities at which the product is manufactured.
The FDA will not approve the product unless it determines that the manufacturing processes and facilities are in
compliance with cGMP requirements and adequate to assure consistent production of the product within required
specifications. Additionally, before approving the NDA, the FDA will typically inspect one or more clinical sites to
assure that the clinical trials were conducted in compliance with IND trial requirements and GCP requirements and to
assure the integrity of the clinical data submitted to the FDA. To ensure cGMP and GCP compliance by its employees
and third-party contractors, an applicant must incur significant expenditure of time, money and effort in the areas of
training, record keeping, production and quality control.
The FDA also may require the submission of a risk evaluation and mitigation strategy, or REMS, plan if it
determines that a REMS is necessary to ensure that the benefits of the drug outweigh its risks and to assure the safe
use of the product. The REMS plan could include medication guides, physician communication plans, assessment
plans and/or elements to assure safe use, such as restricted distribution methods, patient registries or other risk
minimization tools. The FDA determines the requirement for a REMS, as well as the specific REMS provisions, on a
case-by-case basis. If the FDA concludes a REMS plan is needed, the sponsor of the NDA must submit a proposed
REMS plan. The FDA will not approve an NDA without a REMS plan, if required.
After evaluating the NDA and all related information, including the advisory committee recommendation, if
any, and inspection reports regarding the manufacturing facilities where the drug product or its API will be produced
and the clinical trial sites, the FDA will either issue an approval letter or, in some cases, a complete response letter, or
CRL, that describes all of the specific deficiencies in the NDA identified by the agency. An approval letter authorizes
commercial marketing of the drug product with specific prescribing information for specific indications. A CRL indicates
that the review cycle of the application is complete and the application will not be approved in its present form. The
deficiencies identified may be minor, for example, requiring labeling changes, or major, for example, requiring
additional clinical trials. Additionally, the CRL may include recommended actions that the applicant might take to place
the application in a condition for approval. If a CRL is issued, the applicant may either resubmit the NDA, addressing
all of the deficiencies identified in the letter, or withdraw the application. If and when those deficiencies have been
addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter to the
applicant. The FDA has committed to reviewing such resubmissions in response to an issued CRL in either two or six
months depending on the type of information included. Even with the submission of this additional information, the
FDA nevertheless may ultimately decide that the NDA does not satisfy the regulatory criteria for approval.
Even if a drug product receives regulatory approval, the approval may be significantly limited to specific
indications and dosages or the indications for use may otherwise be limited, which could restrict the commercial value
of the product. Further, the FDA may require that certain contraindications, warnings or precautions be included in the
product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in
the form of a REMS plan, or otherwise limit the scope of any approval. In addition, the FDA may require post
marketing clinical trials, sometimes referred to as “Phase 4” clinical trials, designed to further assess a product’s
safety and effectiveness, and/or testing and surveillance programs to monitor the safety of approved products that
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have been commercialized. After approval, some types of changes to the approved product, such as adding new
indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and
FDA review and approval.
Special FDA Programs to Facilitate and Expedite Development and Review of Certain New Drugs
The FDA is authorized to designate certain products for expedited development or review if they are intended
to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These
programs include, but are not limited to, fast track designation, QIDP designation, and priority review designation. The
purpose of these programs is to provide important new drugs to patients earlier than could occur under standard FDA
procedures for interacting with and responding to product sponsors during development and regulatory review.
To be eligible for a fast track designation, the FDA must determine, based on the request of a sponsor, that a
product is intended to treat a serious or life threatening disease or condition and demonstrates the potential to
address an unmet medical need by providing a therapy where none exists or a therapy that may be potentially
superior to existing therapy based on efficacy or safety factors. A drug that is designated as a qualified infectious
disease product (“QIDP”) is also eligible for fast track status. Fast track designation provides opportunities for more
frequent interactions with the FDA review team to expedite development and review of the product. The FDA may also
review sections of the NDA for a fast track product on a rolling basis before the complete application is submitted, if
the sponsor and the FDA agree on a schedule for the submission of the application sections, and the sponsor pays
any required user fees upon submission of the first section of the NDA. The FDA may decide to rescind the fast track
designation if it determines that the qualifying criteria no longer apply. In addition, fast track designation may be
withdrawn by the sponsor or rescinded by the FDA if the designation is no longer supported by data emerging in the
clinical trial process.
The Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, included the Generating
Antibiotics Incentives Now Act, or the GAIN Act, which directed FDA to implement QIDP designation program. The
GAIN Act created incentives for the development of antibacterial and antifungal drug products for the treatment of
serious or life-threatening infections. A therapeutic candidate designated as a QIDP is eligible for fast track
designation, and the first marketing application submitted for a specific drug product and indication for which QIDP
designation was granted will be granted priority review. A subsequent application from the same sponsor for the same
product and indication will receive priority review designation only if it otherwise meets the criteria for priority review.
As discussed further below under “New Drug Marketing Exclusivity under the Hatch-Waxman Act Amendments &
GAIN Exclusivity Extension - Qualified Infectious Disease Product Exclusivity,” the GAIN Act also provides the
possibility of a five-year exclusivity extension that is added to any other marketing exclusivity for which a QIDP-
designated drug qualifies upon FDA approval.
Finally, the FDA may designate a product for priority review if it is a drug that treats a serious condition and, if
approved, would provide a significant improvement in safety or effectiveness. The FDA determines at the time that the
marketing application is submitted, on a case-by-case basis, whether the proposed drug represents a significant
improvement in treatment, prevention or diagnosis of disease when compared with other available therapies.
Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition,
elimination or substantial reduction of a treatment-limiting drug reaction, documented enhancement of patient
compliance that may lead to improvement in serious outcomes, or evidence of safety and effectiveness in a new
subpopulation. A priority review designation is intended to direct overall attention and resources to the evaluation of
such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six
months.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no
longer meets the conditions for qualification or decide that the time period for FDA review or approval will not be
shortened. Furthermore, fast track designation, QIDP designation, and priority review do not change the standards for
marketing approval and may not ultimately expedite the development or approval process.
From time to time, new legislation and regulations may be implemented that could significantly change the
statutory provisions governing the approval, manufacturing and marketing of products regulated by the FDA. It is
impossible to predict whether further legislative or regulatory changes will be enacted, or FDA regulations, guidance
or interpretations changed or what the impact of such changes, if any, may be.
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Post-Approval Requirements for Prescription Drugs
Following approval of a new drug product, the manufacturer and the approved drug are subject to pervasive
and continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities,
reporting of adverse experiences with the product, product sampling and distribution restrictions, complying with
promotion and advertising requirements, which include restrictions on promoting drugs for unapproved uses or patient
populations (i.e., “off-label use”) and limitations on industry-sponsored scientific and educational activities. Although
physicians may prescribe legally available products for off-label uses, manufacturers may not market or promote such
uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label
uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability.
Moreover, if there are any modifications to the product, including changes in indications, labeling or
manufacturing processes or facilities, the applicant may be required to submit and obtain FDA approval of a new NDA
or an NDA supplement, which may require the applicant to develop additional data or conduct additional preclinical
studies and clinical trials. In particular, securing FDA approval for new indications is similar to the process for approval
of the original indication and requires, among other things, submitting data from adequate and well-controlled clinical
trials to demonstrate the product’s safety and efficacy in the new indication. Even if such trials are conducted, the FDA
may not approve any expansion of the labeled indications for use in a timely fashion, or at all. There also are
continuing, annual user fee requirements for that are now assessed as program fees for certain NDA-approved drugs.
In addition, FDA regulations require that products be manufactured in specific approved facilities and in
accordance with cGMP. The cGMP regulations include requirements relating to organization of personnel, buildings
and facilities, equipment, control of components and drug product containers and closures, production and process
controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports and
returned or salvaged products. Drug manufacturers and other entities involved in the manufacture and distribution of
approved drugs are required to register their establishments with the FDA and some state agencies, and are subject
to periodic unannounced inspections by the FDA for compliance with cGMP and other requirements. Changes to the
manufacturing process, specifications or container closure system for an approved drug product are strictly regulated
and often require prior FDA approval before being implemented. FDA regulations also require, among other things,
the investigation and correction of any deviations from cGMP and the imposition of reporting and documentation
requirements upon the NDA sponsor and any third-party manufacturers involved in producing the approved drug
product. Accordingly, both sponsors and manufacturers must continue to expend time, money, and effort in the area of
production and quality control to maintain cGMP compliance and other aspects of quality control and quality
assurance, and to ensure ongoing compliance with other statutory requirements of the FDCA, such as the
requirements for making manufacturing changes to an approved NDA.
Accordingly, even after a new drug approval is granted, the FDA may withdraw the approval if compliance with
regulatory requirements and standards is not maintained or if problems occur after the product reaches the market.
Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions
to the approved labeling to add new safety information; imposition of post-market studies or clinical trials to assess
new safety risks; or the imposition of distribution or other restrictions under a REMS plan. Other potential
consequences of regulatory non-compliance include, among other things:
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restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market or product recalls;
fines, warning letters or other enforcement-related letters or clinical holds on post-approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs;
product seizure or detention, or refusal to permit the import or export of products;
injunctions or the imposition of civil or criminal penalties;
consent decrees, corporate integrity agreements, debarment, or exclusion from federal health care
programs; or
• mandated modification of promotional materials and labeling and the issuance of corrective information.
In addition, the distribution of prescription pharmaceutical products is subject to a variety of federal and state
laws, the most recent of which is still in the process of being phased in to the U.S. supply chain and regulatory
framework. The Prescription Drug Marketing Act of 1987, or PDMA, was the first federal law to set minimum standards
for the registration and regulation of drug distributors by the states and to regulate the distribution of drug samples.
Today, both the PDMA and state laws limit the distribution of prescription pharmaceutical product samples and impose
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requirements to ensure accountability in distribution. Congress more recently enacted the Drug Supply Chain Security
Act, or DSCSA, which made significant amendments to the FDCA, including by replacing certain provisions from the
PDMA pertaining to wholesale distribution of prescription drugs with a more comprehensive statutory scheme. The
DSCSA now requires uniform national standards for wholesale distribution and, for the first time, for third-party
logistics providers; it also provides for preemption of certain state laws in the areas of licensure and prescription drug
traceability. The comprehensive system envisioned by this law is being implemented both by the FDA and those
various stakeholders towards the shared goal of building an interoperable electronic system to identify and trace
prescription drugs distributed in the United States for enhanced supply chain security. The DSCSA mandates phased-
in and resource-intensive obligations for pharmaceutical manufacturers, repackagers, wholesale distributors, and
dispensers (primarily pharmacies) over a 10-year period that is expected to culminate in November 2023.
FDA Review and Approval of Medical Devices
Medical devices also are strictly regulated by the FDA in the United States. Under the FDCA, a medical
device is defined as “an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other
similar or related article, including a component, part or accessory which is, among other things: intended for use in
the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or
other animals; or intended to affect the structure or any function of the body of man or other animals, and which does
not achieve its primary intended purposes through chemical action within or on the body of man or other animals and
which is not dependent upon being metabolized for the achievement of any of its primary intended purposes.” This
definition provides a clear distinction between a medical device and other FDA-regulated products such as drugs. If
the primary intended use of a medical product is achieved through chemical action or by being metabolized by the
body, the product is usually a drug or biologic. If not, it is generally a medical device.
Unless an exemption applies, a new medical device may not be marketed in the United States unless and
until it has been cleared through the premarket notification, or 510(k), process, or approved by the FDA pursuant to a
PMA. The information that must be submitted to the FDA in order to obtain clearance or approval to market a new
medical device varies depending on how the medical device is classified by the FDA. As electronic and digital medical
devices have become increasingly connected to the Internet, hospital networks, and other medical devices to provide
features that improve health care and patient accessibility, FDA and other regulatory authorities have recognized that
those same features also increase the risk of potential cybersecurity threats. These types of medical devices may be
vulnerable to security breaches, potentially impacting the safety and effectiveness of the device, and accordingly
device manufacturers are responsible for identifying cybersecurity risks and hazards associated with their products. In
recent years, the FDA has increased its scrutiny of this issue as part of the review and marketing authorization
process for new medical devices; the agency also monitors reports of cybersecurity risks as part of its post-marketing
device surveillance activities.
Medical devices are classified into one of three classes on the basis of the controls deemed by the FDA to be
necessary to reasonably assure their safety and effectiveness. Class I devices are those low risk devices for which
reasonable assurance of safety and effectiveness can be provided by adherence to the FDA’s general controls for
medical devices, which include applicable portions of the FDA’s Quality System Regulation, or QSR; facility
registration and product listing; reporting of adverse medical events and malfunctions; and appropriate, truthful and
non-misleading labeling, advertising and promotional materials. Most Class I devices are exempt from premarket
regulation; however, some Class I devices require premarket clearance by the FDA through the 510(k) process.
Class II devices are moderate risk devices and are subject to the FDA’s general controls, and any other
special controls, such as performance standards, post-market surveillance, and FDA guidelines, deemed necessary
by the FDA to provide reasonable assurance of the devices’ safety and effectiveness. Premarket review and
clearance by the FDA for most Class II devices is accomplished through the 510(k) process, although some Class II
devices are exempt from the 510(k) requirements. To obtain 510(k) clearance, a sponsor must submit to the FDA a
premarket notification demonstrating that the device is substantially equivalent to a device that is already legally
marketed in the United States and for which a PMA was not required (i.e., a Class II device). The device to which the
sponsor’s device is compared for the purpose of determining substantial equivalence is called a “predicate device.”
The FDA’s goal is to make a substantial equivalence determination within 90 days of FDA’s receipt of the 510(k)
application, but it often takes longer if the FDA requests additional information. Most 510(k)s do not require supporting
data from clinical trials, but such data is typically required if the predicate device relied in part on clinical trial data to
obtain clearance. After a device receives 510(k) clearance, any modification that could significantly affect its safety or
effectiveness, or that would constitute a major change in its intended use, will require a new clearance or possibly a
pre-market approval. Premarket notifications are subject to user fees, unless a specific exemption applies.
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Class III devices are deemed by the FDA to pose the greatest risk to patients, such as life-sustaining or life-
supporting devices, devices that present a potential unreasonable risk of illness or injury, or, more generally, devices
whose safety and effectiveness cannot be assured solely by the general controls and special controls described
above. All Class III devices must be reviewed and approved by the FDA through the PMA process. A PMA must be
supported by extensive data including, but not limited to, technical data, nonclinical studies, clinical trials,
manufacturing and labeling to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device for its
intended use. After a PMA is submitted and the FDA determines the application is sufficiently complete, the agency
will accept it for filing and begin an in-depth review of the submitted information. By statute, the FDA has 180 days to
review the accepted application, although review of the application generally can take between one and three years.
During this review period, the FDA may request additional information or clarification of information already provided.
Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and
evaluate the application and provide recommendations to the FDA as to the approvability of the device. Although the
FDA is not bound by the advisory panel decision, it considers such recommendations when making final decisions on
approval. In addition, the FDA will conduct a preapproval inspection of the manufacturing facility to ensure compliance
with the QSR. New PMA applications or supplements are also required for product modifications that affect the safety
and efficacy of the device. PMA (and supplemental PMAs) are subject to significantly higher user fees than are 510(k)
premarket notifications.
Novel medical device types that the FDA has not previously classified as Class I, II or III are automatically
classified into Class III regardless of the level of risk they ultimately pose to patients and/or users. The Food and Drug
Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices
that are automatically placed into Class III due to the absence of a predicate device, called the “Request for
Evaluation of Automatic Class III Designation,” or the De Novo classification procedure. This procedure allows a
manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical
device into Class I or Class II based on a benefit-risk analysis demonstrating the device actually presents low or
moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of
FDASIA, a medical device could only be eligible for De Novo classification if the manufacturer first submitted a 510(k)
premarket notification and received a determination from the FDA that the device was not substantially equivalent.
FDASIA streamlined the De Novo classification pathway by permitting manufacturers to request De Novo
classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not
substantially equivalent determination. Under the provisions enacted under FDASIA, the FDA is required to classify
the device within 120 days following receipt of the De Novo application however, the most recent FDA premarket
review goals state that in fiscal year 2022, FDA will attempt to issue a decision on 70% of all De Novo classification
requests received within 150 days of receipt. If the manufacturer seeks reclassification into Class II, the manufacturer
must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety
and effectiveness of the medical device. In addition, the FDA may reject the reclassification petition if it identifies a
legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to
moderate risk or that general controls would be inadequate to control the risks and special controls cannot be
developed. De Novo classification requests are also subject to user fees, unless a specific exemption applies.
Clinical trials are almost always required to support a PMA application and are sometimes required for a De
Novo classification request or 510(k) premarket notification. In order to conduct a clinical investigation involving
human subjects for the purpose of demonstrating the safety and effectiveness of a medical device, an investigator
acting on behalf of the company must, among other things, apply for and obtain IRB approval of the proposed
investigation. In addition, if the clinical study involves a “significant risk” (as defined by the FDA) to human health, the
company sponsoring the investigation must also submit and obtain FDA approval of an IDE. An IDE must be
supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to test the device
in humans and that the testing protocol is scientifically sound. The IDE must be approved in advance by the FDA for a
specified number of study participants, unless the product is deemed a non-significant risk device and eligible for
abbreviated IDE requirements. Generally, clinical trials for a significant risk device may begin once the IDE is
approved by the FDA and the study protocol and informed consent form are approved by a duly-appointed IRB at
each clinical trial site.
FDA’s IDE regulations govern investigational device labeling, prohibit promotion, and specify an array of GCP
requirements, which include, among other things, recordkeeping, reporting and monitoring responsibilities of study
sponsors and study investigators. Clinical trials must further comply with the FDA’s regulations for IRB approval and
for informed consent and other human subject protections. Required records and reports are subject to inspection by
the FDA. The results of clinical testing may be unfavorable or, even if the intended safety and efficacy success criteria
are achieved, may not be considered sufficient for the FDA to grant approval or clearance of a product.
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Post-Marketing Requirements for Medical Devices
After a medical device is placed on the market, numerous regulatory requirements apply that in some ways
mirror the post-approval requirements for prescription drugs. These include, but are not limited to:
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submitting and updating establishment registration and device listings with the FDA;
compliance with the QSR, which requires manufacturers to follow stringent design, testing, control,
documentation, record maintenance, including maintenance of complaint and related investigation files,
and other quality assurance controls during the manufacturing process;
pre-scheduled or unannounced device facility inspections by the FDA;
labeling regulations, which prohibit the promotion of devices for uncleared or unapproved (or “off-label”)
uses and impose other restrictions relating to promotional activities;
corrections and removal reporting regulations, which require that manufacturers report to the FDA field
corrections or removals if undertaken to reduce a risk to health posed by a device or to remedy a violation
of the FDCA that may present a risk to health; and
post-market surveillance regulations, which apply to certain Class II or III devices when necessary to
protect the public health or to provide additional safety and effectiveness data for the device.
Under the FDA medical device reporting, or MDR, regulations, medical device manufacturers are required to
report to the FDA information that a device has or may have caused or contributed to a death or serious injury or has
malfunctioned in a way that would likely cause or contribute to death or serious injury if the malfunction of the device
or a similar device of such manufacturer were to recur. The decision to file an MDR involves a judgment by the
manufacturer. If the FDA disagrees with the manufacturer’s determination, the FDA can take enforcement action.
Additionally, the FDA has the authority to require the recall of commercialized products in the event of material
deficiencies or defects in design or manufacture. The authority to require a recall must be based on an FDA finding
that there is reasonable probability that the device would cause serious adverse health consequences or death.
Manufacturers may, under their own initiative, recall a product if any distributed devices fail to meet established
specifications, are otherwise misbranded or adulterated, or if any other material deficiency is found. The FDA requires
that certain classifications of recalls be reported to the FDA within ten working days after the recall is initiated.
As with prescription drugs, the failure to comply with applicable device regulatory requirements can result in
enforcement action by the FDA, which may include any of the following sanctions:
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warning letters, fines, injunctions or civil penalties;
recalls, detentions or seizures of products;
operating restrictions;
delays in the introduction of products into the market;
total or partial suspension of production;
delay or refusal of the FDA or other regulators to grant 510(k) clearance or PMA approvals of new or
modified devices;
withdrawals of marketing authorization; or
in the most serious cases, criminal prosecution.
To ensure compliance with regulatory requirements, medical device manufacturers are subject to market
surveillance and periodic, prescheduled or unannounced inspections by the FDA, and these inspections may include
the manufacturing facilities of subcontractors and third-party component suppliers.
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FDA Review and Approval Process for Combination Products
A combination product is a product composed of a combination of two or more FDA-regulated product
constituent parts or products, e.g., drug-device or biologic-device. Such products often raise regulatory, policy and
review management challenges because they integrate constituent parts that are regulated under different types of
regulatory requirements and by different FDA Centers, namely, the Center for Drug Evaluation and Research, or
CDER, the Center for Devices and Radiological Health, or CDRH, or the Center for Biologics Evaluation and
Research, or CBER. Differences in regulatory pathways for each constituent part can impact the regulatory processes
for all aspects of product development and management, including preclinical testing, clinical investigation, marketing
applications, manufacturing and quality control, adverse event reporting, promotion and advertising, and post-
approval modifications. Specifically, under regulations issued by the FDA, a combination product may be:
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a product comprised of two or more regulated constituent parts that are physically, chemically, or
otherwise combined or mixed and produced as a single entity;
two or more separate products packaged together in a single package or as a unit and comprised of drug
and device products;
a drug or device packaged separately that according to its investigational plan or proposed labeling is
intended for use only with an approved individually specified drug or device where both are required to
achieve the intended use, indication, or effect and where upon approval of the proposed product the
labeling of the approved product would need to be changed, e.g., to reflect a change in intended use,
dosage form, strength, route of administration, or significant change in dose; or
any investigational drug or device packaged separately that according to its proposed labeling is for use
only with another individually specified investigational drug, device, or biological product where both are
required to achieve the intended use, indication, or effect.
The FDA’s Office of Combination Products, or OCP, was established to provide prompt determination of the
FDA Center with primary jurisdiction over the review and regulation of a combination product; ensure timely and
effective premarket review by overseeing the timeliness of and coordinating reviews involving more than one center;
ensure consistent and appropriate post-market regulation; resolve disputes regarding review timeliness; and review/
revise agreements, guidance and practices specific to the assignment of combination products.
OCP determines which Center will have primary jurisdiction for the combination product, referred to as the
Lead Center, based on the combination product’s “primary mode of action,” or PMOA. A mode of action is the means
by which a product achieves an intended therapeutic effect or action. The PMOA is the mode of action that provides
the most important therapeutic action of the combination product, or the mode of action expected to make the greatest
contribution to the overall intended therapeutic effects of the combination product. The Lead Center has primary
responsibility for the review and regulation of a combination product; however a second Center is often involved in the
review process, especially to provide input regarding the “secondary” component(s). In most instances, the Lead
Center applies its usual regulatory pathway. For example, a drug-device combination product assigned to CDER will
typically be reviewed under an NDA, while a drug-device combination product assigned to CDRH is typically reviewed
under through a 510(k), PMA, or De Novo classification request.
Often it is difficult for OCP to determine with reasonable certainty the most important therapeutic action of the
combination product. In those difficult cases, OCP will consider consistency with other combination products raising
similar types of safety and effectiveness questions, or which Center has the most expertise to evaluate the most
significant safety and effectiveness questions raised by the combination product. A sponsor may use a voluntary
formal process, known as a Request for Designation, when the product classification is unclear or in dispute, to obtain
a binding decision as to which Center will regulate the combination product. If the sponsor objects to that decision, the
sponsor may request that OCP reconsider its decision.
Combination products are subject to FDA user fees based on the type of application submitted for the
product’s premarket approval or clearance. For example, a combination product for which an NDA is submitted is
subject to the NDA fee under PDUFA. Likewise, a combination product for which a PMA is submitted is subject to the
PMA fee under the Medical Device User Fee and Modernization Act.
Since a combination product incorporates two or more constituent parts that have different regulatory
requirements, a combination product manufacturer must comply with all cGMP and QSR requirements that apply to
each constituent part. The FDA has issued a combination product cGMP regulation, along with final guidance,
describing two approaches a combination product manufacturer may follow to demonstrate compliance. Under these
two options, the manufacturer demonstrates compliance with: (1) All cGMP regulations applicable to each separate
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regulated constituent part included in the combination product; or (2) either the drug cGMP or the QSR, as well as
with specified provisions from the other of these two sets of requirements (also called the “streamlined approach”). In
addition, The 21st Century Cures Act, or the Cures Act, which became law in December 2016 and, among other
things, amended provisions of the FDCA, clarified that for drug-device combination products with a device PMOA and
an FDA-approved drug constituent part, Hatch-Waxman Act requirements apply. Accordingly, a potential patent
dispute regarding the listed drug that is being referenced by the combination product sponsor may delay the
marketing authorization of the combination product. Furthermore, the Cures Act amendments applied Hatch-Waxman
Act exclusivity provisions (e.g., new chemical entity and new clinical investigation) to the device clearance and
approval process for combination products with a device PMOA.
New Drug Marketing Exclusivity under the Hatch-Waxman Act Amendments & GAIN Exclusivity
Extension
Orange Book Listing & Patent Certification
As noted above, Congress created the 505(b)(2) NDA pathway in 1984 as part of the Hatch-Waxman Act
amendments to the FDCA. At the same time, it also established an abbreviated regulatory scheme authorizing the
FDA to approve generic drugs that are shown to contain the same active ingredients as, and to be bioequivalent to,
drugs previously approved by the FDA pursuant to NDAs. To obtain approval of a generic drug, an applicant must
submit an abbreviated new drug application, or ANDA, to the agency. An ANDA is a comprehensive submission that
contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence,
drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing
process validation data and quality control procedures. ANDAs are “abbreviated” because they cannot include
preclinical and clinical data to demonstrate safety and effectiveness. Instead, in support of such applications, a
generic manufacturer must rely on the preclinical and clinical testing previously conducted for a drug product
previously approved under an NDA, known as the reference listed drug, or RLD. Unlike the ANDA pathway, which
does not allow applicants to submit new clinical data other than bioavailability or bioequivalence data, the 505(b)(2)
regulatory pathway does not preclude the possibility that a follow-on applicant would need to conduct additional
clinical trials or nonclinical studies to demonstrate safety or effectiveness of the proposed change(s) being made to a
previously approved drug.
In order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with
respect to the active ingredients, the route of administration, the dosage form, the strength of the drug and the
conditions of use of the drug. At the same time, the FDA must also determine that the generic drug is “bioequivalent”
to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption
of the drug do not show a significant difference from the rate and extent of absorption of the listed drug.” Upon
approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in the
Orange Book. Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for
the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s
designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or
consent of either the prescribing physician or patient.
As part of the NDA review and approval process, applicants are required to list with the FDA each patent that
has claims that cover the applicant’s product or method of therapeutic use. Upon approval of a new drug, each of the
patents listed in the application for the drug is then published in the Orange Book. Drugs listed in the Orange Book
can, in turn, be cited by potential follow-on competitors in support of approval of an ANDA or a 505(b)(2) NDA that
relies in full or in part on the reference product.
When an ANDA applicant submits its application to the FDA, it is required to certify to the FDA concerning any
patents listed for the reference product in the FDA’s Orange Book. Specifically, the ANDA applicant must certify that:
(i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not
expired, but will expire on a particular date and approval is sought after patent expiration; or (iv) the listed patent is
invalid or will not be infringed by the new product. Moreover, to the extent that the Section 505(b)(2) NDA applicant is
relying on studies conducted for an already approved product, the applicant also is required to certify to the FDA
concerning any patents listed for the NDA-approved product in the Orange Book to the same extent that an ANDA
applicant would.
If the follow-on applicant does not challenge the innovator’s listed patents, FDA will not approve the ANDA or
505(b)(2) application until all the listed patents claiming the referenced product have expired. A certification that the
new product will not infringe the already approved product’s listed patents, or that such patents are invalid, is called a
Paragraph IV certification. If the follow-on applicant has provided a Paragraph IV certification to the FDA, the applicant
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must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA or 505(b)(2)
NDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement
lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45
days of the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA or
505(b)(2) NDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in the
infringement case that is favorable to the ANDA/505(b)(2) applicant.
Non-Patent Exclusivity
An ANDA or 505(b)(2) NDA also will not be approved until any applicable non-patent exclusivities listed in the
Orange Book for the referenced product have expired. The Hatch-Waxman Act amendments to the FDCA provided a
five-year period of non-patent data exclusivity within the United States to the first applicant to gain approval of an NDA
for a new chemical entity, or NCE. For the purposes of this provision, an NCE is a drug that contains no active moiety
that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible
for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been
granted, an ANDA or 505(b)(2) NDA may not be filed with the FDA until the expiration of five years unless the
submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four
years following the original product approval.
The FDCA also provides for a period of three years of data exclusivity if an NDA or NDA supplement includes
reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies that were
conducted or sponsored by the applicant, are deemed by the FDA to be essential to the approval of the application or
supplement. This three-year exclusivity period often protects changes to a previously approved drug product, such as
new indications, dosage forms, route of administration or combination of ingredients. Three-year exclusivity would be
available for a drug product that contains a previously approved active moiety, provided the statutory requirement for a
new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not
block the FDA from accepting ANDAs or 505(b)(2) NDAs seeking approval for generic versions of the drug as of the
date of approval of the original drug product; rather, this three-year exclusivity covers only the conditions of use
associated with the new clinical investigations and, as a general matter, does not prohibit the FDA from approving
follow-on applications for drugs containing the original active ingredient.
Five-year and three-year exclusivity also will not delay the submission or approval of a traditional NDA filed
under Section 505(b)(1) of the FDCA; however, an applicant submitting a traditional NDA would be required to
conduct or obtain a right of reference to all of the preclinical studies and adequate and well-controlled clinical trials
necessary to demonstrate safety and effectiveness.
Qualified Infectious Disease Product Exclusivity
Under the GAIN Act amendments to the FDCA, the FDA may designate a product as a QIDP for a specific
use for which it is being studied, upon the written request of a sponsor at any time prior to submission of a marketing
application. In order to qualify for designation as a QIDP, the drug product candidate must qualify as an antibiotic or
antifungal drug for human use intended to treat serious or life-threatening infections, including those caused by either
(i) an antibiotic or antifungal resistant pathogen, including novel or emerging infectious pathogens, or (ii) a so-called
“qualifying pathogen” found on a list of potentially dangerous, drug-resistant organisms established and maintained by
the FDA. In addition to the expedited review benefits that a QIDP-designated drug candidate may be eligible for
(described above under “Special FDA Programs to Facilitate and Expedite Development and Review of Certain New
Drugs”), such a drug that is approved for the use for which the QIDP designation was granted will receive a five-year
extension to any non-patent marketing exclusivity period for which the drug qualified upon approval, such as a five-
year NCE exclusivity or three-year new clinical data exclusivity. This so-called GAIN exclusivity extension is not
available to a QIDP-designated drug that has previously received the five-year extension period, such as when an
applicant is seeking approval for a new indication or new strength for a marketed infectious disease product.
Patent Term Extension
A patent claiming a prescription drug or medical device for which FDA approval is granted may be eligible for
a limited patent term extension under the FDCA, which permits a patent restoration of up to five years for patent term
lost during product development and the FDA regulatory review provided that certain statutory and regulatory
requirements are met. The length of the patent term extension is related to the length of time the drug or medical
device is under regulatory review while the patent is in force. The restoration period granted on a patent covering a
new FDA-regulated medical product is typically one-half the time between the date a clinical investigation on human
beings is begun and the submission date of an application for premarket approval of the product, plus the time
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between the submission date of an application for approval of the product and the ultimate approval date. Patent term
restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s
approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the
application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers
multiple products for which approval is sought can only be extended in connection with one of the marketing
approvals. The U.S. Patent and Trademark Office reviews and approves the application for any patent term extension
or restoration in consultation with the FDA.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of certain FDA-regulated products, including prescription drugs and medical
devices, are required to register and disclose certain clinical trial information on a public registry maintained by the
U.S. National Institutes of Health, or NIH. In particular, information related to the product, patient population, phase of
investigation, study sites and investigators and other aspects of the clinical trial is made public as part of the
registration of the clinical trial. Competitors may use this publicly available information to gain knowledge regarding
the progress of development programs. Although sponsors are also obligated to disclose the results of their clinical
trials after completion, disclosure of the results can be delayed in some cases for up to two years after the date of
completion of the trial. Failure to timely register a covered clinical study or to submit study results as provided for in
the law can give rise to civil monetary penalties and also prevent the non-compliant party from receiving future grant
funds from the federal government. The NIH’s Final Rule on ClinicalTrials.gov registration and reporting requirements
became effective in 2017, and both NIH and the FDA have recently begun enforcing those requirements against non-
compliant clinical trial sponsors.
Other U.S. Health Care Laws and Compliance Requirements
In addition to FDA requirements, several other types of state and federal laws apply and will apply to our
operations. These laws include, among others, health care information and data privacy protection laws, transparency
laws, and fraud and abuse laws, such as:
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The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully
offering, providing, soliciting or receiving remuneration, directly or indirectly, overtly or covertly, in cash or
in kind, to induce either the referral of an individual, for an item or service or the purchasing or ordering of
a good or service, for which payment may be made under federal health care programs such as the
Medicare and Medicaid programs. The federal Anti-Kickback Statute is subject to evolving interpretations.
In the past, the government has enforced the federal Anti-Kickback Statute to reach large settlements with
health care companies based on sham consulting and other financial arrangements with physicians. A
person or entity does not need to have actual knowledge of the statute or specific intent to violate it in
order to have committed a violation. In addition, the government may assert that a claim including items
or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent
claim for purposes of the civil False Claims Act;
The federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary
penalties laws prohibit, among other things, any person or entity from knowingly presenting, or causing to
be presented, a false, fictitious or fraudulent claim for payment to the U.S. government, knowingly
making, using, or causing to be made or used, a false record or statement material to a false or fraudulent
claim to the U.S. government, or from knowingly making a false statement to avoid, decrease or conceal
an obligation to pay money to the U.S. government. Actions under these laws may be brought by the
Attorney General or as a qui tam action by a private individual in the name of the government. The federal
government uses these laws, and the accompanying threat of significant liability, in its investigation and
prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in
connection with the promotion of products for unapproved uses and other allegedly unlawful sales and
marketing practices;
The U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, created new
federal, civil and criminal statutes that prohibit among other actions, knowingly and willfully executing, or
attempting to execute, a scheme to defraud any health care benefit program, including private third-party
payors, knowingly and willfully embezzling or stealing from a health care benefit program, willfully
obstructing a criminal investigation of a health care offense, and knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement
in connection with the delivery of or payment for health care benefits, items or services. Similar to the
federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to have committed a violation;
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The Physician Payments Sunshine Act, enacted as part of the ACA (defined below), among other things,
imposes reporting requirements on manufacturers of FDA-approved drugs, devices, biologics and
medical supplies covered by Medicare or Medicaid to report, on an annual basis, to the Centers for
Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to
physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors and, beginning in
2022 for payments and other transfers of value provided in the previous year, certain advanced non-
physician health care practitioners) and teaching hospitals, as well as ownership and investment interests
held by physicians and their immediate family members in such manufacturers;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or
HITECH, and their respective implementing regulations impose specified requirements relating to the
privacy, security and transmission of individually identifiable health information. Among other things,
HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,”
defined as independent contractors or agents of covered entities, which include certain health care
providers, health plans, and health care clearinghouses, that create, receive, maintain or transmit
protected health information in connection with providing a service for or on behalf of a covered entity.
HITECH also increased the civil and criminal penalties that may be imposed against covered entities,
business associates and possibly other persons, and gave state attorneys general new authority to file
civil actions for damages or injunctions in federal courts to enforce HIPAA and seek attorney’s fees and
costs associated with pursuing federal civil actions; and
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State and local laws which require the registration of pharmaceutical sales representatives.
The majority of states also have statutes or regulations similar to the aforementioned federal anti-kickback
and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in
several states, apply regardless of the payor. We may be subject to state laws governing the privacy and security of
health information in certain circumstances, many of which differ from each other in significant ways and often are not
preempted by HIPAA, thus complicating compliance efforts. In addition, we may be subject to reporting requirements
under state transparency laws, as well as state laws that require pharmaceutical companies to comply with the
industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal
government that otherwise restricts certain payments that may be made to health care providers and entities.
Moreover, in November 2020, the U.S. Department of Health and Human Services finalized significant
changes to the regulations implementing the Anti-Kickback Statute and the civil monetary penalty rules regarding
beneficiary inducements, with the goal of offering the health care industry more flexibility and reducing the regulatory
burden associated with those fraud and abuse laws, particularly with respect to value-based arrangements among
industry participants.
To the extent we commercialize or co-promote our products, if approved, and because such products could
be reimbursed under federal and other governmental health care programs, we expect to develop a compliance
program that establishes internal controls to facilitate adherence to the rules and health care program requirements.
Although compliance programs and adherence thereto may mitigate the risk of violation of and subsequent
investigation and prosecution for violations of the laws described above, the risks cannot be eliminated entirely.
Ensuring that our current and future business arrangements with third parties comply with applicable health care laws
and regulations could involve substantial costs. It is possible that governmental authorities will conclude that our
business practices do not comply with current or future statutes, regulations, agency guidance or case law involving
applicable fraud and abuse or other health care laws and regulations. If we or our operations are found to be in
violation of any of the laws described above or any other governmental regulations that apply to us, we may be
subject to significant civil, criminal and administrative penalties, including monetary damages, fines, individual
imprisonment, disgorgement, loss of eligibility to obtain approvals from the FDA, exclusion from participation in
government contracting, health care reimbursement or other government programs, including Medicare and Medicaid,
contractual damages, reputational harm, administrative burdens, diminished profits and future earnings, additional
reporting requirements if we become subject to a corporate integrity agreement or other agreement to resolve
allegations of non-compliance with any of these laws, and/or the curtailment or restructuring of our operations. If any
of the physicians or other health care providers or entities with whom we expect to do business is found to be not in
compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including
exclusions from government funded health care programs.
Coverage, Pricing, and Reimbursement
Sales of our drug and drug-device combination products, if approved, will depend, in part, on the extent to
which the costs of our products will be covered by third-party payors, such as government health care programs,
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private health insurers, managed health care providers, and other organizations. These third-party payors are
increasingly challenging drug prices and examining the medical necessity and cost-effectiveness of medical products
and services, in addition to their safety and efficacy. If these third-party payors do not consider our products to be
cost-effective compared to other therapies, they may not cover our products after approval as a benefit under their
plans or, even if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable
basis.
Significant uncertainty exists as to the reimbursement status for newly approved prescription products,
including coding, coverage and payment. Sales of any products for which we obtain marketing approval will depend in
part on coverage and adequate payment from third-party payors. There is no uniform policy requirement for coverage
and reimbursement for prescription products among third-party payors in the United States; therefore coverage and
reimbursement for prescription products can differ significantly from payor to payor.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company
may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-
effectiveness of the product, in addition to the costs required to obtain FDA or other comparable regulatory approvals.
A payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be
approved. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a
rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for
new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment
rates may vary according to the use of the product and the clinical setting in which it is used, may be based on
payments allowed for lower cost products that are already reimbursed and may be incorporated into existing
payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by
third-party payors and by any future relaxation of laws that presently restrict imports of products from countries where
they may be sold at lower prices than in the United States. In the United States, third-party payors often rely upon
Medicare coverage policy and payment limitations in setting their own reimbursement policies, but they also have their
own methods and approval process apart from Medicare coverage and reimbursement determinations. Accordingly,
one third-party payor’s determination to provide coverage for a product does not assure that other payors will also
provide coverage for the product.
Accordingly, the coverage determination process is often a time-consuming and costly process that will
require us to provide scientific and clinical support for the use of our products to each payor separately, with no
assurance that coverage and adequate payment will be applied consistently or granted at all. The process for
determining whether a payor will cover and how much it will reimburse a product may be separate from the process of
seeking approval of the product or for setting the price of the product. Even if reimbursement is provided, market
acceptance of our products may be adversely affected if the amount of payment for our products proves to be
unprofitable for health care providers or less profitable than alternative treatments or if administrative burdens make
our products less desirable to use.
Additionally, the containment of health care costs has become a priority of federal and state governments and
the prices of drug products have been a focus in this effort. For example, there have been several recent U.S.
Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing,
review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for drugs. 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. 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’ ability to regulate pharmaceutical benefit managers, or PBMs, 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 Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation
Act of 2010, collectively referred to as the ACA, enacted in March 2010, has had and is expected to continue to have
a significant impact on the health care industry. The ACA, among other things, imposes a significant annual fee on
certain companies that manufacture or import branded prescription drug products. The ACA also increased the
Medicaid rebate rate and the volume of rebated drugs has been expanded to include beneficiaries in Medicaid
managed care organizations. The ACA also expanded the 340B drug discount program (excluding orphan drugs),
including a 50% discount on brand name drugs for Medicare Part D participants in the coverage gap, and revised the
definition of “average manufacturer price” for reporting purposes, which could increase the amount of the Medicaid
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drug rebates paid to states. It also contains substantial provisions intended to broaden access to health insurance,
reduce or constrain the growth of health care spending, enhance remedies against health care fraud and abuse, add
new transparency requirements for the health care industry, impose new taxes and fees on pharmaceutical
manufacturers, and impose additional health policy reforms, any or all of which may affect our business.
Since enactment of the ACA, there have been judicial and Congressional challenges to certain aspects of the
ACA, and as a result certain sections of the ACA have not been fully implemented or have been effectively repealed
through Executive Orders and/or executive agency actions. However, following several years of litigation in the federal
courts, in June 2021, the U.S. Supreme Court upheld the ACA when it dismissed a legal challenge to the ACA’s
constitutionality. Further legislative and regulatory changes under the ACA remain possible, although the new federal
administration under President Biden has signaled that it plans to build on the ACA and expand the number of people
who are eligible for health insurance subsidies under it. It is unknown what form any such changes or any law would
take, and how or whether it may affect the biopharmaceutical industry as a whole or our business in the future. We
expect that changes or additions to the ACA, the Medicare and Medicaid programs, such as changes allowing the
federal government to directly negotiate drug prices, and changes stemming from other healthcare reform measures,
especially with regard to healthcare access, financing or other legislation in individual states, could have a material
adverse effect on the health care industry in the United States.
Other legislative changes have also been proposed and adopted since the ACA was enacted. These changes
include aggregate reductions to Medicare payments to providers of up to 2% per fiscal year pursuant to the Budget
Control Act of 2011, which began in 2013 and will remain in effect through 2030 unless additional Congressional
action is taken. The Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, which was signed into law
on March 27, 2020 and was designed to provide financial support and resources to individuals and businesses
affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31,
2020 (the suspension was subsequently extended through March 31, 2022, with a reduction of the suspension to 1%
sequester through June 30, 2022), and extended the sequester by one year, through 2030, in order to offset the
added expense of the 2020 cancellation. The 2021 Consolidated Appropriations Act was subsequently signed into law
on December 27, 2020 and extends the CARES Act suspension period to March 31, 2021.
The Biden Administration, which assumed control of the Executive Branch on January 20, 2021, has indicated
that lowering prescription drug prices is a priority. For example, in July 2021, President Biden issued a sweeping
executive order on promoting competition in the American economy that includes several mandates pertaining to the
pharmaceutical and health care insurance industries. Among other things, the executive order directs the FDA to work
towards implementing a system for importing drugs from Canada (following on a Trump administration notice-and-
comment rulemaking on Canadian drug importation that was finalized in October 2020). The Biden order also called
on HHS to release a comprehensive plan to combat high prescription drug prices, and it includes several directives
regarding the Federal Trade Commission’s oversight of potentially anticompetitive practices within the pharmaceutical
industry. The drug pricing plan released by HHS in September 2021 in response to the executive order makes clear
that the Biden Administration supports aggressive action to address rising drug prices, including allowing HHS to
negotiate the cost of Medicare Part B and D drugs, but such significant changes will require either new legislation to
be passed by Congress or time-consuming administrative actions.
It is uncertain whether and how future legislation or regulatory changes could affect prospects for our product
candidates or what actions federal, state, or commercial payors for pharmaceutical products may take in response to
any such health care reform proposals or legislation. Adoption of price controls and cost-containment measures, and
adoption of more restrictive policies in jurisdictions with existing controls and measures reforms may prevent or limit
our ability to generate revenue, attain profitability or commercialize our product candidates.
Data Privacy and the Protection of Personal Information
We are subject to laws and regulations governing data privacy and the protection of personal information
including health information. The legislative and regulatory landscape for privacy and data protection continues to
evolve, and there has been an increasing focus on privacy and data protection issues which will continue to affect our
business. In the United States, we may be subject to state security breach notification laws, state laws protecting the
privacy of health and personal information and federal and state consumer protections laws that regulate the
collection, use, disclosure and transmission of personal information. These laws overlap and often conflict and each of
these laws is subject to varying interpretations by courts and government agencies, creating complex compliance
issues. If we fail to comply with applicable laws and regulations we could be subject to penalties or sanctions,
including criminal penalties. Our customers and research partners must comply with laws governing the privacy and
security of health information, including HIPAA, HITECH and state health information privacy laws. If we knowingly
obtain health information that is protected under HIPAA, called “protected health information,” our customers or
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research collaborators may be subject to enforcement and we may have direct liability for the unlawful receipt of
protected health information or for aiding and abetting a HIPAA violation.
State laws protecting health and personal information are becoming increasingly stringent. For example,
California has implemented the California Confidentiality of Medical Information Act that imposes restrictive
requirements regulating the use and disclosure of health information and other personally identifiable information, and
California has recently adopted the California Consumer Privacy Act of 2018, or CCPA. The CCPA mirrors a number
of the key provisions of the European General Data Protection Regulation, or GDPR, described below. The CCPA
establishes a new privacy framework for covered businesses by creating an expanded definition of personal
information, establishing new data privacy rights for consumers in the State of California, imposing special rules on
the collection of consumer data from minors, and creating a new and potentially severe statutory damages framework
for violations of the CCPA and for businesses that fail to implement reasonable security procedures and practices to
prevent data breaches. Additionally, a new privacy law, the California Privacy Rights Act, or CPRA, was approved by
California voters in the election on November 3, 2020. The CPRA will modify the CCPA significantly, potentially
resulting in further uncertainty, additional costs and expenses in an effort to comply and additional potential for harm
and liability for failure to comply. Other states in the U.S. are considering privacy laws similar to CCPA. In February
2021, the Virginia legislature became the second to enact a state-specific law called the Consumer Data Protection
Act, which includes key differences from California’s law, further complicating compliance by industry and other
stakeholders.
Health Care Reform and Potential Changes to Laws and Regulations
FDA and other regulatory authority policies may change and additional government regulations may be
enacted that could prevent, limit or delay regulatory approval of our product candidates. For example, in August 2017,
the FDA Reauthorization Act was signed into law, which reauthorized the FDA’s user fee programs and included
additional drug and device provisions that build on the Cures Act enacted in December 2016. Furthermore, the next
FDA Reauthorization Act is currently being negotiated and is due to be submitted to Congress in 2022. If we are slow
or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are
not able to maintain regulatory compliance, we may lose any marketing approval that we otherwise may have
obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects,
financial condition and results of operations.
Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting
changes in health care systems with the stated goals of containing health care costs, improving quality and/or
expanding access. Government authorities and other third-party payors have attempted to control costs by limiting
coverage and the amount of reimbursement for particular medical products and services, implementing reductions in
Medicare and other health care funding and applying new payment methodologies. In addition to the sweeping
reforms contained in the ACA (summarized above in the section entitled “Coverage, Pricing, and Reimbursement”),
other legislative changes have been proposed and adopted in the United States that may affect health care
expenditures. For example, the 2020 Consolidated Appropriations Act (P.L. 116-94) included a piece of bipartisan
legislation called the Creating and Restoring Equal Access to Equivalent Samples Act, or the CREATES Act. The
CREATES Act aims to address the concern articulated by both the FDA and others in the industry that some brand
manufacturers have improperly restricted the distribution of their products, including by invoking the existence of a
REMS program for certain products, to deny generic product developers access to samples of brand products.
Because generic product developers need samples to conduct certain comparative testing required by the FDA, some
have attributed the inability to timely obtain samples as a cause of delay in the entry of generic products. To remedy
this concern, the CREATES Act establishes a private cause of action that permits a generic product developer to sue
the brand manufacturer to compel it to furnish the necessary samples on “commercially reasonable, market-based
terms.” Whether and how generic product developments will use this new pathway, as well as the likely outcome of
any legal challenges to provisions of the CREATES Act, remain highly uncertain and its potential effects on our future
commercial products are unknown.
Other new laws may result in additional reductions in Medicare and other health care funding, which could
have an adverse effect on customers for our approved product and, accordingly, our financial operations. We cannot
predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative
or executive action, either in the United States or abroad. We expect that additional state and federal health care
reform measures will be adopted in the future, any of which could limit the amounts that federal and state
governments will pay for health care products and services. Moreover, if we are slow or unable to adapt to changes in
existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory
compliance, our therapeutic candidates may lose any marketing approval that may have been obtained and we may
not achieve or sustain profitability, which would adversely affect our business.
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Government Regulation Outside the U.S.
In addition to regulations in the U.S., we may be subject to a variety of regulations in foreign jurisdictions that
govern, among other things, clinical trials and any commercial sales and distribution of our products, if approved,
either directly or through our distribution partners. Whether or not we obtain FDA approval for a product candidate, we
must obtain the requisite approvals from regulatory authorities in foreign jurisdictions prior to the commencement of
clinical trials or marketing and sale of the product in those countries. The foreign regulatory approval process includes
all of the risks associated with the FDA approval described above, and the time required to obtain approval in other
countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Some foreign
jurisdictions have a drug product approval process similar to that in the U.S., which requires the submission of a
clinical trial application much like the IND prior to the commencement of clinical studies. In Europe, for example, a
clinical trial application, or CTA, must be submitted to each country’s national health authority and an independent
ethics committee, much like the FDA and IRB, respectively. Once the CTA is approved in accordance with a country’s
requirements, clinical trial development may proceed. To obtain regulatory approval of a therapeutic product candidate
under European Union, or EU, regulatory systems, we would be required to submit a Marketing Authorisation
Application, which is similar to the NDA, except that, among other things, there are country-specific document
requirements. For countries outside of the EU, such as countries in Eastern Europe, Latin America or Asia, and
recently the United Kingdom, the requirements governing the conduct of clinical trials, product approval, pricing and
reimbursement vary from country to country. Regulatory approval in one country or jurisdiction does not ensure
regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may
negatively impact the regulatory process in others. Moreover, some nations may not accept clinical studies performed
for U.S. approval to support approval in their countries or require that additional studies be performed on natives of
their countries. In addition, in certain foreign markets, the pricing of drug products is subject to government control
and reimbursement may in some cases be unavailable or insufficient. We face the risk that the resulting prices would
be insufficient to generate an acceptable return to us or any future partner of ours. If we fail to comply with applicable
foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of
regulatory approvals, product recalls, seizure of products, operating restrictions, and criminal prosecution.
International marketing and distribution of medical devices are also subject to foreign government regulations,
which may vary substantially from country to country. There is a trend towards harmonization of quality system
standards for medical device products among the European Union, United States, Canada and various other
industrialized countries.
As of January 31, 2020, the United Kingdom is no longer a member state of the EU, and therefore a separate
marketing authorization application and approval will be required to market a medicinal product in the U.K. The
Medicines and Healthcare products Regulatory Agency is the U.K.’s standalone pharmaceutical and medical devices
regulator.
Review and Approval of Medicinal Products in the European Union
As in the United States, medicinal products can be marketed in the EU only if a marketing authorization from
the competent regulatory agencies has been obtained. Similar to the United States, the various phases of preclinical
and clinical research in the EU are subject to significant regulatory controls. Also similar to the United States, when a
drug-device combination product’s principal intended action is accomplished by the drug constituent part, the EU
regulates the combination product as a medicinal product.
Pursuant to the European Clinical Trials Directive, a system for the approval of clinical trials in the EU has
been implemented through national legislation of the member states. Under this system, an applicant must obtain
approval from the competent national authority of an EU member state in which the clinical trial is to be conducted.
Furthermore, the applicant may only start a clinical trial after a competent ethics committee has issued a favorable
opinion. Clinical trial applications must be accompanied by an investigational medicinal product dossier with
supporting information prescribed by the European Clinical Trials Directive and corresponding national laws of the
member states and further detailed in applicable guidance documents. In April 2014, the new Clinical Trials
Regulation, (EU) No 536/2014 (Clinical Trials Regulation) was adopted and became effective on January 31, 2022.
The Clinical Trials Regulation will be directly applicable in all the EU Member States, repealing the current Clinical
Trials Directive 2001/20/EC. Conduct of all clinical trials performed in the EU will continue to be bound by currently
applicable provisions until the new Clinical Trials Regulation becomes applicable. The extent to which ongoing clinical
trials will be governed by the Clinical Trials Regulation will depend on when the Clinical Trials Regulation becomes
applicable and on the duration of the individual clinical trial. If a clinical trial continues for more than three years from
the day on which the Clinical Trials Regulation becomes applicable the Clinical Trials Regulation will at that time begin
to apply to the clinical trial.
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The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trials in the
European Union. The main characteristics of the regulation include: a streamlined application procedure via a single
entry point, the “EU portal”; a single set of documents to be prepared and submitted for the application as well as
simplified reporting procedures for clinical trial sponsors; and a harmonized procedure for the assessment of
applications for clinical trials, which is divided in two parts. Part I is assessed by the competent authorities of all EU
Member States in which an application for authorization of a clinical trial has been submitted (Member States
concerned). Part II is assessed separately by each Member State concerned. Strict deadlines have been established
for the assessment of clinical trial applications. The role of the relevant ethics committees in the assessment
procedure will continue to be governed by the national law of the concerned EU Member State. However, overall
related timelines will be defined by the Clinical Trials Regulation.
To obtain marketing approval of a drug in the EU, an applicant must submit an marketing authorization
application (“MAA”) either under a centralized or decentralized procedure. The centralized procedure provides for the
grant of a single marketing authorization by the European Commission that is valid for all EU member states, Iceland,
Lichtenstein and Norway. The centralized procedure is compulsory for specific products, including for medicines
produced by certain biotechnological processes, products designated as orphan medicinal products, advanced
therapy products (such as gene-therapy, somatic cell-therapy or tissue-engineered medicines) and products with a
new active substance indicated for the treatment of certain diseases. For products with a new active substance
indicated for the treatment of certain diseases and products that are highly innovative or for which a centralized
process is in the interest of patients, the centralized procedure may be optional. Under the centralized procedure the
maximum timeframe for the evaluation of an MAA by the European Medicines Agency (“EMA”) is 210 days, excluding
clock stops, when additional written or oral information is to be provided by the applicant in response to questions
asked by the Committee for Medicinal Products for Human Use (“CHMP”). Accelerated assessment might be granted
by the CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest,
particularly from the point of view of therapeutic innovation. The timeframe for the evaluation of an MAA under the
accelerated assessment procedure is of 150 days, excluding stop-clocks.
The decentralized procedure is available to applicants who wish to market a product in specific EU member
states where such product has not received marketing approval in any EU member states before. The decentralized
procedure provides for an applicant to apply to one-member state to assess the application (the reference member
state) and specifically list other member states in which it wishes to obtain approval (concerned member states).
Under this procedure, an applicant submits an application based on identical dossiers and related materials, including
a draft summary of product characteristics, and draft labelling and package leaflet, to the reference member state and
each concerned member state. The reference member state prepares a draft assessment report and drafts of the
related materials within 210 days after receipt of a valid application which is then reviewed and approved commented
on by the concerned member states. Within 90 days of receiving the reference member state’s assessment report and
related materials, each concerned member state must decide whether to approve the assessment report and related
materials.
In the EU, only products for which marketing authorizations have been granted may be promoted. A marketing
authorization is valid for five years in principle and the marketing authorization may be renewed after five years on the
basis of a re-evaluation of the risk-benefit balance by the EMA or by the competent authority of the authorizing
member state. To this end, the marketing authorization holder must provide the EMA or the competent authority with a
consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the
marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. Once
renewed, the marketing authorization is valid for an unlimited period, unless the European Commission or the
competent authority decides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-
year renewal. Any authorization which is not followed by the actual placing of the drug on the EU market (in case of
centralized procedure) or on the market of the authorizing member state within three years after authorization ceases
to be valid (the so-called sunset clause).
Moreover, even if authorized to be marketed in the EU, prescription-only medicines may only be promoted to
health care professionals, not the general public. All promotion should be in accordance with the particulars listed in
the summary of product characteristics. Promotional materials must also comply with various laws, and codes of
conduct developed by pharmaceutical industry bodies in the EU which govern (among other things) the training of
sales staff, promotional claims and their justification, comparative advertising, misleading advertising, endorsements,
and (where permitted) advertising to the general public. Failure to comply with these requirements could lead to the
imposition of penalties by the competent authorities of the EU member states. The penalties could include warnings,
orders to discontinue the promotion of the drug product, seizure of promotional materials, fines and possible
imprisonment.
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Prior to May 26, 2021, the date on which the new Medical Device Regulation ("MDR") became effective,
medical devices marketed in Europe were required to comply with the Essential Requirements defined in Annex I to
the EU Medical Devices Directive, or MDD, a coordinated system for the authorization of medical devices. The MDD
regulated the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Devices
that comply with the requirements of a relevant directive are entitled to bear the CE conformity marking, indicating that
the device conforms to the essential requirements of the applicable directives. The method of assessing conformity
depended on the class of the product, but normally involved a combination of self-assessment by the manufacturer
and a third-party assessment by a “Notified Body.” This third-party assessment may consist of an audit of the
manufacturer’s quality system and specific testing of the manufacturer’s product.
In 2017, European Union regulatory bodies finalized a new Medical Device Regulation (“MDR”), which
replaced the existing MDD framework and provided three years for transition and compliance, for a final effective date
of May 26, 2020. As a result of the COVID-19 pandemic, however, the European Parliament voted in April 2020 to
postpone implementation of the MDR by one year, giving the medical device industry and Notified Bodies until May
26, 2021 to come into compliance. The MDR changes several aspects of the existing regulatory framework for
medical device marketing in Europe and is expected to result in increased regulatory oversight of all medical devices
marketed in the EU, which may, in turn, increase the costs, time and requirements that need to be met in order to
place an innovative or high-risk medical device on the European market. Specifically, the MDR will require changes in
the clinical evidence required for medical devices, post-market clinical follow-up evidence, annual reporting of safety
information for Class III products, and bi-annual reporting for Class II products, unique device identification, or UDI, for
all products, submission of core data elements to a European UDI database prior to placement of a device on the
market, reclassification of medical devices, and multiple other labeling changes. An assessment by a Notified Body of
one country within the European Union and designated under the MDR is required in order for a manufacturer to
commercially distribute the product throughout the EU. A CE certificate issued under the MDD before May 26, 2021
may remain valid until May 25, 2024 under certain conditions. However, we must acquire approvals under the MDR
for new products and renew our existing CE mark certificates once our current certifications expire, which could be
challenging and costly.
Review and Approval of Medicinal Products in Canada
Health Canada is the Canadian federal authority that regulates, evaluates and monitors the safety,
effectiveness, and quality of drugs, medical devices, and other therapeutic products available to Canadians. Health
Canada’s regulatory process for review, approval and regulatory oversight of products is similar to the regulatory
process conducted by the FDA. To initiate clinical testing of a drug candidate in human subjects in Canada, a CTA
must be filed with and approved by Health Canada. In addition, all federally regulated trials must be approved and
monitored by research ethics boards. The review boards study and approve study-related documents and monitor trial
data.
Prior to being given market authorization for a drug product, a manufacturer must present substantive
scientific evidence of a product’s safety, efficacy and quality as required by the Food and Drugs Act (Canada) and its
associated regulations, including the Food and Drug Regulations. This information is usually submitted in the form of a
New Drug Submission, or NDS. Health Canada reviews the submitted information, sometimes using external
consultants and advisory committees, to evaluate the potential benefits and risks of a drug. If after of the review, the
conclusion is that the patient benefits outweigh the risks associated with the drug, the drug is issued a Drug
Identification Number (“DIN”), followed by a Notice of Compliance (“NOC"), which permits the market authorization
holder (i.e., the NOC and DIN holder) to market the drug in Canada. Drugs granted an NOC may be subject to
additional postmarket surveillance and reporting requirements.
All establishments engaged in the fabrication, packaging/labeling, importation, distribution, and wholesale of
drugs and operation of a testing laboratory relating to drugs are required to hold a Drug Establishment License to
conduct one or more of the licensed activities unless expressly exempted under the Food and Drug Regulations. The
basis for the issuance of a Drug Establishment License is to ensure the facility complies with cGMP as stipulated in
the Food and Drug Regulations and as determined by cGMP inspection conducted by Health Canada. An importer of
pharmaceutical products manufactured at foreign sites must also be able to demonstrate that the foreign sites comply
with cGMP, and such foreign sites are included on the importer’s Drug Establishment License.
Regulatory obligations and oversight continue following the initial market approval of a pharmaceutical
product. For example, every market authorization holder must report any new information received concerning
adverse drug reactions, including timely reporting of serious adverse drug reactions that occur in Canada and any
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serious unexpected adverse drug reactions that occur outside of Canada. The market authorization holder must also
notify Health Canada of any new safety and efficacy issues that it becomes aware of after the launch of a product.
The Canadian regulatory approval requirements for new drugs outlined above are similar to those of other
major pharmaceutical markets. While the testing carried out in Canada is often acceptable for the purposes of
regulatory submissions in other countries, individual regulatory authorities may request supplementary testing during
their assessment of any submission. Therefore, the clinical testing conducted under Health Canada authorization or
the approval of regulatory authorities of other countries may not be accepted by regulatory authorities outside Canada
or other countries.
Health Canada has also implemented a similar process as the FDA for regulating combination products
comprising both drug and device constituent parts. The agency considers the principal mechanism of action by which
the claimed effect or purpose of the product is achieved, and then subjects the entire product to regulation under
either the Food and Drug Regulations or the Medical Devices Regulations.
Rest of the World Regulation
In addition to regulations in the United States and Australia, EU, and Canada, we may become subject to a
variety of regulations governing clinical studies and commercial sales and distribution of prescription drug and drug-
device combination products in other jurisdictions around the world. These laws and regulations typically require the
licensing of manufacturing and contract research facilities, carefully controlled research and testing of product
candidates and governmental review and approval of results prior to marketing therapeutic product candidates.
Additionally, they may require adherence to the FDA’s GLPs, GCPs, and GMPs during manufacturing. The process of
new drug approvals by regulators in the United States, Canada and the European Union are generally considered to
be among the most rigorous in the world.
Whether or not FDA, EMA, or Health Canada approval is obtained for a product, we must obtain approval
from the comparable regulatory authorities of other countries before we can commence clinical studies or marketing of
the product in those countries. The approval process varies from country to country and the time may be longer or
shorter than that required for the FDA, EMA, or Health Canada approval. The requirements governing the conduct of
clinical studies, product licensing, pricing and reimbursement vary greatly from country to country. In some
international markets, additional clinical trials may be required prior to the filing or approval of marketing applications
within the country.
Moreover, outside of the United States, pricing and reimbursement schemes vary widely from country to
country. Some countries provide that drug products may be marketed only after a reimbursement price has been
agreed to. Some countries may require the completion of additional studies that compare the cost-effectiveness of a
particular product candidate to currently available therapies. In some countries, cross-border imports from low-priced
markets exert competitive pressure that may reduce pricing within a country. Any country that has price controls or
reimbursement limitations for drug products may not allow favorable reimbursement and pricing arrangements.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things,
fines, suspension of clinical trials, suspension or withdrawal of regulatory approvals, product recalls, seizure of
products, operating restrictions, and criminal prosecution.
Europe – Data Privacy
On May 25, 2018, the GDPR went into effect, implementing a broad data protection framework that expanded
the scope of EU data protection law, including to non-EU entities that process, or control the processing of, personal
data relating to individuals located in the EU, including clinical trial data. The GDPR sets out a number of
requirements that must be complied with when handling the personal data of European Union-based data subjects
including: providing expanded disclosures about how their personal data will be used; higher standards for
organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their
data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for
individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g. access requests);
the principal of accountability and demonstrating compliance through policies, procedures, training and audit; and a
new mandatory data breach regime. In particular, medical or health data, genetic data and biometric data where the
latter is used to uniquely identify an individual are all classified as “special category” data under the GDPR and
afforded greater protection and require additional compliance obligations. Further, EU member states have a broad
right to impose additional conditions – including restrictions – on these data categories. This is because the GDPR
allows EU member states to derogate from the requirements of the GDPR mainly in regard to specific processing
situations (including special category data and processing for scientific or statistical purposes). As the EU states
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continue to reframe their national legislation to harmonize with the GDPR, we will need to monitor compliance with all
relevant EU member states’ laws and regulations, including where permitted derogations from the GDPR are
introduced.
We will also be subject to evolving EU laws on data export, if we transfer data outside the EU to ourselves or
third parties outside of the EU. The GDPR only permits exports of data outside the EU where there is a suitable data
transfer solution in place to safeguard personal data (e.g. the European Union Commission approved Standard
Contractual Clauses). On July 16, 2020, the Court of Justice of the European Union or the CJEU, issued a landmark
opinion in the case Maximilian Schrems vs. Facebook (Case C-311/18), called Schrems II. This decision calls into
question certain data transfer mechanisms as between the EU member states and the U.S. The CJEU is the highest
court in Europe and the Schrems II decision heightens the burden on data importers to assess U.S. national security
laws on their business and future actions of EU data protection authorities are difficult to predict. Consequently, there
is some risk of any data transfers from the European Union being halted. If we have to rely on third parties to carry out
services for us, including processing personal data on our behalf, we are required under the GDPR to enter into
contractual arrangements to help ensure that these third parties only process such data according to our instructions
and have sufficient security measures in place. Any security breach or non-compliance with our contractual terms or
breach of applicable law by such third parties could result in enforcement actions, litigation, fines and penalties or
adverse publicity and could cause customers to lose trust in us, which would have an adverse impact on our
reputation and business. Any contractual arrangements requiring the transfer of personal data from the EU to us in the
United States will require greater scrutiny and assessments as required under Schrems II and may have an adverse
impact on cross-border transfers of personal data, or increase costs of compliance. The GDPR provides an
enforcement authority to impose large penalties for noncompliance, including the potential for fines of up to €20
million or 4% of the annual global revenues of the noncompliant company, whichever is greater. We will be subject to
the GDPR when we have a European Union presence or “establishment” (e.g., EU based subsidiary or operations),
when conducting clinical trials with EU based data subjects, whether the trials are conducted directly by us or through
a vendor or partner, or offering approved products or services to EU-based data subjects, regardless of whether
involving a EU based subsidiary or operations.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act, or FCPA, prohibits U.S. corporations and their representatives from
offering, promising, authorizing or making payments to any foreign government official, government staff member,
political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA would
include interactions with certain health care professionals in many countries, either directly or through third parties.
Our present and future business has been and will continue to be subject to various other U.S. and foreign laws, rules
and/or regulations.
Environmental, Health and Safety Regulation
We are subject to numerous federal, state and local environmental, health and safety, or EHS, laws and
regulations relating to, among other matters, safe working conditions, product stewardship, environmental protection,
and handling or disposition of products, including those governing the generation, storage, handling, use,
transportation, release, and disposal of hazardous or potentially hazardous materials, medical waste, and infectious
materials that may be handled by our research laboratories. Some of these laws and regulations also require us to
obtain licenses or permits to conduct our operations. If we fail to comply with such laws or obtain and comply with the
applicable permits, we could face substantial fines or possible revocation of our permits or limitations on our ability to
conduct our operations. Certain of our development and manufacturing activities involve use of hazardous materials,
and we believe we are in compliance with the applicable environmental laws, regulations, permits, and licenses.
However, we cannot ensure that EHS liabilities will not develop in the future. EHS laws and regulations are complex,
change frequently and have tended to become more stringent over time. Although the costs to comply with applicable
laws and regulations, have not been material, we cannot predict the impact on our business of new or amended laws
or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can
we ensure we will be able to obtain or maintain any required licenses or permits.
Employees
As of March 30, 2022, we had 28 employees. Twenty of our employees are full-time and eight are part-time,
17 are in research and development and 11 are in general and administrative. Given the differing characteristics of our
product candidates, our approach is to engage consultants with experience in varying specialties to help us develop
such candidates. Our numerous consultants serve as an extension to our employee base. We believe this approach
enables us to access the expertise needed in a cost-efficient manner and without the need to rapidly increase the
number of full-time employees and their associated costs. In the future, if we select a commercialization strategy for a
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product or product candidate that requires us to establish marketing, sales or distribution infrastructure and
capabilities, we may need to rapidly increase our employee base.
Company Information
We were incorporated in Delaware in December 2005. Until July 2017, our corporate name was Cerulean
Pharma Inc., or Cerulean. In July 2017, Cerulean completed a business combination with Daré Bioscience
Operations, Inc., at which time we changed our name to “Daré Bioscience, Inc.” and began to focus on development
of innovative, investigational products in women's health. We and our wholly-owned subsidiaries operate in one
business segment.
Available Information
Our website is located at http://www.darebioscience.com. Information found on our website is not
incorporated by reference into this report. We make our filings with the U.S. Securities and Exchange Commission, or
SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any
amendments and exhibits to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, or the Exchange Act, available free of charge on or through our website, as soon
as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains a
website that contains reports, proxy and information statements, and other information regarding our filings at http://
www.sec.gov.
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ITEM 1A. RISK FACTORS
Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our securities speculative or risky.
This summary does not address all of the risks that we face. We urge investors to carefully review and consider the
additional discussion of the risks summarized in this risk factor summary, and other risks that we face, which can be
found below under the heading “Risk Factors,” together with other information in this report, before making investment
decisions regarding our securities.
• We will need to raise additional capital to continue our operations, execute our business strategy and
remain a going concern, and our ability to do so may be limited. If we fail to obtain additional capital, we
may be unable to complete development or obtain regulatory approval to commercialize for our product
candidates.
• We have a limited operating history, have incurred significant losses since our inception and expect to
continue to incur losses for the foreseeable future, which, together with our limited financial resources and
substantial capital requirements, make it difficult to assess our prospects.
• Our business depends on obtaining the approval of regulatory authorities, and in particular, FDA approval,
to market products that we develop. XACIATO is our first and only FDA-approved product. Our other
products are investigational, require the conduct and successful completion of clinical studies and
nonclinical work, and may never complete development or be submitted for or receive regulatory
approval.
• Clinical development is a lengthy and expensive process with an inherently uncertain outcome. Failure to
successfully complete clinical trials and nonclinical activities and obtain regulatory approval to market and
sell our product candidates on our anticipated timelines at reasonable costs to us, or at all, particularly
Ovaprene and Sildenafil Cream, 3.6%, could have a material adverse effect on our business, operating
results and financial condition.
•
The regulatory approval processes of the FDA and comparable foreign authorities are expensive, lengthy,
time-consuming, and inherently unpredictable. If we are not able to obtain regulatory approvals for our
product candidates, our ability to generate product revenue will be materially impaired.
• Drug products and drug/device combination products are complex to manufacture. Manufacturing and
supply delays and disruptions may significantly delay our clinical studies, disrupt commercial supply of
any approved product, and be expensive for us to resolve.
•
Strategic collaborations are a key part of our strategy and our existing strategic collaborations are
important to our business. If we are unable to establish and maintain strategic collaborations, or if they
are not successful, we may require substantial additional capital to develop and commercialize our
products and product candidates and our business and prospects may be materially harmed.
• We have no manufacturing, sales, marketing or distribution infrastructure. We depend heavily on, and
expect to continue to rely on, the performance of third parties, including our strategic collaborators,
contract manufacturers and suppliers, CROs, medical institutions, and scientific, medical, regulatory and
other consultants and advisors to develop our product candidates and commercialize any approved
products. Failure of these third parties to perform as expected could result in substantial delays,
increased costs or
failures of our product development programs, delayed or unsuccessful
commercialization of any approved products, and the need for significant additional capital.
• Due in part to our limited financial and human resources, we may fail to effectively execute our product
development, regulatory submission and commercialization plans in accordance with communicated
timelines, or at all.
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•
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•
The loss or impairment of our rights under our license agreements for XACIATO or any of our product
candidates could prevent us from developing or commercializing them, which could have a material
adverse effect on our business prospects, operations and viability.
The commercial success of XACIATO will depend on Organon’s efforts and capabilities, as well as a
variety of factors, many of which currently are unknown or uncertain, and if commercialization of
XACIATO is not successful, our business and prospects may suffer.
XACIATO and any future products will face intense competition, including from generic products, and our
business, operating results and financial condition will suffer if we, or our commercial collaborators, fail to
compete effectively.
XACIATO and any future products may fail to achieve the degree of market acceptance by physicians,
patients, third-party payors or others in the medical community necessary for commercial success, which
would negatively impact our business.
Failure to successfully obtain coverage and reimbursement for XACIATO and any future products from
government health care programs and private commercial health insurance companies, or the availability
of coverage only at limited levels, would diminish our ability, or that of a commercial collaborator, to
generate net product revenue. If out-of-pocket costs for our products are deemed by women to be
unaffordable, a commercial market may never develop.
• We have a relatively small number of employees, and if we fail to attract and retain key personnel or
experience significant increases in our compensation costs to attract and retain key personnel, our
business may materially suffer.
• We may not be successful in our efforts to identify and acquire or in-license additional product candidates
or technologies, which may limit our growth potential.
• Our failure to adequately protect or enforce our intellectual property rights, and those of our licensors,
could materially harm our proprietary position in the marketplace or prevent or impede the
commercialization of XACIATO and any future products.
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Lack of patent protection for the active ingredients in certain of our products and product candidates,
including XACIATO and Sildenafil Cream, 3.6%, may limit the commercial opportunity for those products if
competitors are able to develop and commercialize safe and effective alternative formulations or methods
of delivery of the active ingredients.
The COVID-19 pandemic, escalating geopolitical events and macroeconomic factors may negatively
impact our business, financial condition and results and our stock price, including by increasing the cost
and timelines for our clinical development programs or negatively impacting our ability to raise additional
capital.
Product liability lawsuits against us could cause us to incur substantial liabilities.
The price of our common stock has been and may continue to be highly volatile and such volatility may be
related or unrelated to our performance and operating results. Volatility in our stock price may subject us
to increased risk of securities litigation, including class-action lawsuits, which could be expensive and
divert management attention.
There is no assurance that we will continue satisfying the listing requirements of the Nasdaq Capital
Market, and failure to do so could result in the suspension or delisting of our common stock, which could,
among other things, limit demand for our common stock, substantially impair our ability to raise additional
capital and have an adverse effect on the market price of, and the efficiency of the trading market for, our
common stock.
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•
Future dilution to our existing stockholders from sales and issuances of our common stock through at-the-
market, or ATM, offerings, other types of public or private offerings of our equity securities and upon the
exercise of stock options and warrants, or the expectation that such sales of equity may occur, could
adversely affect the market price of our common stock, even if our business is doing well.
• Cyber-attacks, security breaches, loss of data and other disruptions to our information technology
systems or those of our strategic collaborators or third-party service providers could compromise sensitive
information related to our business, delay or prevent us from accessing critical information or expose us
to liability, any of which could adversely affect our business and our reputation.
Risk Factors
Investment in our securities involves a high degree of risk and uncertainty. Our business, operating results,
growth prospects and financial condition are subject to various risks, many of which are not exclusively within our
control, that may cause actual performance to differ materially from historical or projected future performance. We
urge investors to consider carefully the risks described below, together with all of the information in this report and our
other public filings, before making investment decisions regarding our securities. Each of these risk factors, as well as
additional risks not presently known to us or that we currently deem immaterial, could adversely affect our business,
operating results, growth prospects or financial condition, as well as the trading price of our common stock, in which
case you may lose all or part of your investment.
Risks Related to Our Financial Position and Capital Needs
We will need to raise additional capital to continue our operations and execute our business strategy.
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 any product candidates we may add to our portfolio in the future.
Advancing our investigational women’s health products through clinical development and pursuing regulatory approval
will require substantial additional investment. We currently do not have the capital necessary to advance all of our
product candidates through research and clinical development and regulatory approval. XACIATO is our first and only
product approved for marketing and sale and we do not anticipate the potential upfront, milestone and royalty
payments to us under our exclusive license agreement for XACIATO will be sufficient to cover all of our operating
expenses. Accordingly, our ability to continue as a going concern and execute our business strategy depends on our
ability to raise additional capital through equity, debt or structured financings, government or other grant funding,
collaborations and strategic alliances or other similar types of arrangements. This report includes disclosures and an
opinion from our independent registered public accounting firm stating that our recurring losses and negative cash
flows from operations raise substantial doubt about our ability to continue as a going concern. Our financial
statements as of December 31, 2021 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.
Our capital needs have depended on, and will continue to depend on, many factors that are highly variable
and difficult to predict, including:
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•
the product development programs we choose to pursue;
the cost and pace of preclinical and clinical development;
clinical trial results;
the cost and timing of obtaining clinical and commercial supplies of products and product candidates;
the cost and timing of regulatory submissions and decisions by the FDA and other regulatory authorities
on our applications to commence clinical development and market our product candidates;
the costs involved in acquiring or in-licensing product candidates or technologies; and
our commercialization plans and the timing and terms of our agreements with third parties relating to
commercialization of any approved product.
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 commercialization 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.
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At December 31, 2021, our cash and cash equivalents were approximately $51.7 million and our accumulated
deficit was approximately $110.1 million. We incurred a net loss of approximately $38.7 million for the year ended
December 31, 2021. We may never become profitable. We expect negative cash flows from our operations to
continue for the foreseeable future. Based on our current operating plan estimates, we do not have sufficient cash to
satisfy our working capital needs and other liquidity requirements over the next 12 months from the date of issuance
of the accompanying consolidated financial statements. We will need to raise additional capital or significantly curtail
our planned operations to remain a going concern.
Additional capital may not be available to us, or even if it is, the cost of such capital may be high. We may be
forced to obtain additional capital before reaching clinical, regulatory and/or sales milestones, when our stock price or
trading volume or both are low, or when the general market for life sciences companies is weak. Raising capital under
any of these or similar scenarios, if we can raise any at all, may lead to significant dilution to our existing stockholders.
See also "Our ability to raise capital may be limited by laws and regulations," and “We are heavily reliant on our ability
to raise capital through capital market transactions. A low trading volume, price and market capitalization together with
our lack of revenue, net losses, limited operating history and limited amount of unissued authorized common stock
may make it difficult and expensive for us to raise additional capital” below.
If we raise capital through collaborations, strategic alliances or other similar types of arrangements, we may
be required to relinquish, on terms that are not favorable to us, rights to some of our technologies or product
candidates that we would otherwise seek to develop or commercialize. In addition, our current and future commercial
license agreements may not provide a level of funding sufficient to satisfy our working capital needs or liquidity
requirements, thus requiring that we continue to seek to raise additional capital to fund product development through
other means. See also “If a commercial counterparty terminates its exclusive license agreement with us or fails to
perform as expected, our need for additional capital may significantly increase,” below. Further, operational
disruptions, resource constraints or shifts in business strategy of potential collaborators as a result of the COVID-19
pandemic, macroeconomic factors or escalating geopolitical events may adversely affect collaboration terms and
opportunities for our product candidates. See also “Risks Related to Our Business Operations and Industry- The
COVID-19 pandemic has negatively impacted our business and, in the future, may materially and adversely affect our
business, financial condition and results and stock price, including by increasing the cost and timelines for our clinical
development programs,” and “- Our business may be adversely affected by unfavorable or unanticipated
macroeconomic conditions and geopolitical events,” below.
There can be no assurance that we can raise capital when needed or on terms favorable to us and our
stockholders. The COVID-19 pandemic, macroeconomic conditions, and heightened global uncertainties may
adversely affect general commercial activity and the U.S. and global economies and financial markets, which
increases uncertainty around our ability to access the capital markets when needed and on acceptable terms. If we
cannot raise capital when needed on acceptable terms, or at all, we will not be able to advance our product
candidates as currently planned or grow our product portfolio, we will need to reevaluate our planned operations, we
may relinquish rights under our license agreements with third parties relating to our product candidates, and we may
need to delay, scale back or eliminate some or all of our development programs, reduce expenses or cease
operations, any of which would have a significant negative impact on our prospects and financial condition, as well as
the trading price of our common stock. Moreover, if we are unable to obtain additional funds on a timely basis, there
will be an increased risk of insolvency and up to a total loss of investment by our stockholders.
We have a limited operating history, have incurred significant losses since our inception and expect to
continue to incur losses for the foreseeable future, which, together with our limited financial resources and
substantial capital requirements, make it difficult to assess our prospects.
We have a limited operating history upon which to evaluate our business and prospects. The development of
drug and drug/device combination products in order to obtain regulatory approval is a highly speculative, lengthy and
expensive undertaking and involves substantial risk. Other than XACIATO, which received FDA approval in December
2021 and has not yet been commercially launched, we have not obtained any regulatory approvals for any of our
product candidates, commercialized any of our product candidates or generated any product revenue. We have not
been profitable since we commenced operations and may never achieve profitability. We have devoted significant
resources to acquiring XACIATO and our product candidates and to research and development, or R&D, activities for
them. Since inception, we have incurred significant operating losses. As discussed above, we must raise additional
capital to finance our operations and remain a going concern.
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If a commercial counterparty terminates its exclusive license agreement with us or fails to perform as
expected, our need for additional capital may significantly increase.
We have entered into an exclusive license agreement with Organon for the commercialization of XACIATO
and an exclusive license agreement with Bayer for the commercialization of Ovaprene, if approved. Each of these
license agreements may be terminated by the licensee for convenience upon the completion of a specified notice
period, subject to limited restrictions. Furthermore, under our agreement with Organon, we will not receive any
payments unless the agreement becomes fully effective, and the effective date of the agreement is subject to the
satisfaction of closing conditions, including antitrust law clearance which is outside of our control. Moreover, under our
agreement with Bayer, Bayer has no future payment obligations to us, unless, after reviewing the results of our pivotal
clinical trial of Ovaprene, it elects, in its sole discretion, to make the license grant under our agreement effective by
making a $20.0 million payment to us. If we do not successfully complete a pivotal clinical trial of Ovaprene in a timely
manner, the license grant may never become effective, and we may not receive any additional payments from Bayer.
Bayer may elect not to make the license grant effective regardless of the outcome of the pivotal clinical trial. If an
exclusive license agreement is terminated early or does not become fully effective, we may realize none or only a
small fraction of the potential value of the agreement to us, and we may need to raise significant additional capital to
pursue further development and commercialization of XACIATO or Ovaprene, as applicable.
If these license agreements are not terminated and the license grants become effective, we expect
XACIATO’s and Ovaprene’s value to us to be generated primarily through royalties based on net sales and
achievement of commercial milestones. The successful or timely achievement of these milestones is largely outside of
our control because the relevant activities will be conducted by the licensee. Accordingly, if the licensee is not
successful or has limited commercialization success, our ability to monetize XACIATO and, if approved, Ovaprene,
may be significantly impaired and our need for additional capital could significantly increase.
In the future, we may depend to a large degree on payments from third-party licensees to fund our operations,
and failure to receive such payments may cause us to, among other things:
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•
pursue raising additional funds through equity or debt financings that could be dilutive to our stockholders
or involve restrictive covenants, operational restrictions and security interests in our assets;
enter into new strategic collaborations that may be less favorable than those we would have obtained
under different circumstances;
delay, reduce or terminate one or more development programs;
reduce headcount;
forgo opportunities to expand our product portfolio; or
consider strategic transactions with a third party.
Our ability to raise capital may be limited by laws and regulations.
During the year ended December 31, 2021 and through March 30, 2022, we raised approximately $70.9
million in gross proceeds through the sale of equity securities under a Form S-3 “shelf” registration statement. Using a
shelf registration statement to raise capital generally takes less time and is less expensive than other means, such as
conducting an offering under a Form S-1 registration statement. We currently have a shelf registration statement
effective, however, our ability to raise capital under this registration statement was in the past, and may again be in
the future, limited by, among other things, current and future SEC rules and regulations impacting the eligibility of
smaller companies to use Form S-3 for primary offerings of securities. For example, in fiscal year 2020, we were
subject to the "baby shelf rule" because the market value of our outstanding shares of common stock held by non-
affiliates, or public float, was less than $75.0 million at the time we filed our shelf registration statement on Form S-3
and remained below $75.0 million during the year. As a result, that we were able to use our shelf registration
statement to raise additional funds only to the extent that the aggregate market value of securities sold by us or on our
behalf pursuant to Instruction I.B.6. of Form S-3 during the 12 calendar months immediately prior to, and including,
any intended sale did not exceed one-third of the aggregate market value of our public float, calculated in accordance
with the instructions to Form S-3. In the future, if our public float were to decline below $75.0 million at the time we file
our next annual report on Form 10-K, which will be due in March of 2023, we could again become subject to the baby
shelf rule. If our ability to offer securities under an effective shelf registration statement is limited, including by the baby
shelf rule, we may choose to conduct an offering of our securities under an exemption from registration under the
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Securities Act or under a Form S-1 registration statement. We would expect either of these alternatives to take more
time and be a more expensive method of raising additional capital relative to using our shelf registration statement.
In addition, under SEC rules and regulations, our common stock must be listed and registered on a national
securities exchange in order to use a Form S-3 registration statement (1) for a primary offering, if our public float is not
at least $75.0 million as of a date within 60 days prior to the date of filing the Form S-3 or a re-evaluation date,
whichever is later, and (2) to register the resale of our securities by persons other than us (i.e., a resale offering).
While our common stock is currently listed on the Nasdaq Capital Market, there can be no assurance that we can
maintain such listing. See, “Risks Related to Our Securities-There is no assurance that we will continue satisfying the
listing requirements of the Nasdaq Capital Market,” below.
Our ability to raise capital on a timely basis through the issuance and sale of equity securities may also be
limited by Nasdaq’s stockholder approval requirement for any transaction that is not a public offering (as defined in
Nasdaq listing rules). For transactions other than public offerings, Nasdaq requires stockholder approval prior to the
issuance or potential issuance of common stock (or securities convertible into or exercisable for common stock) at a
price per share that is less than the "Minimum Price" if the issuance (together with sales by our officers, directors and
substantial shareholders (as defined in Nasdaq listing rules)) would equal 20% or more of our common stock
outstanding before the issuance. Under Nasdaq rules, the "Minimum Price" means a price that is the lower of (i) the
Nasdaq official closing price immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq
official closing price of the common stock for the five trading days immediately preceding the signing of the binding
agreement. In addition, certain prior sales of securities by us may be aggregated with any offering we may propose at
a price that is less than the Minimum Price and which is not considered a public offering by Nasdaq, further limiting
the amount we could raise in the offering. Under Nasdaq rules, stockholder approval is also required prior to the
issuance of securities when the issuance or potential issuance will result in a change of control of our company. Even
if a public offering under Nasdaq rules is not subject to the 20% limitation described above, it may involve publicly
announcing the proposed transaction before it is completed, which often has the effect of depressing a company's
stock price. Accordingly, our existing investors may suffer greater dilution if we seek to raise additional capital through
such a public offering of our securities.
Furthermore, our ability to raise capital through the issuance and sale of equity securities is limited by the
number of shares of our common stock that we are authorized to issue, and increasing the number of authorized
shares of our common stock requires stockholder approval. Currently, we are authorized to issue up to 120,000,000
shares of our common stock and, as of March 30, 2022, 92,244,591 shares of our common stock were outstanding or
reserved for issuance upon exercise of outstanding warrants or stock options or for future equity awards under our
stock incentive plan, which leaves only 27,755,409 shares of our authorized common stock unreserved and available
for issuance.
Obtaining stockholder approval is a costly and time-consuming process. If we must obtain stockholder
approval to increase the amount of common stock we are authorized to issue or for a potential transaction, we would
expect to spend substantial additional money and resources. In addition, seeking stockholder approval would delay
our receipt of otherwise available capital, which may materially and adversely affect our ability to execute our business
plan, and there is no guarantee our stockholders ultimately would approve a proposed increase in our authorized
common stock or a proposed transaction.
We are heavily reliant on our ability to raise capital through capital market transactions. A low trading
volume, price and market capitalization together with our lack of revenue, net losses, limited operating
history and limited amount of unissued authorized common stock may make it difficult and expensive for us
to raise additional capital.
We are heavily reliant on our ability to raise additional capital by selling shares of our common stock or
securities linked to our common stock. Our ability to raise capital through capital market transactions will depend on
several factors, many of which may not be in our favor, including the trading volume and volatile trading price of our
common stock, our relatively low public float and market capitalization, our potential inability to continue to satisfy the
listing requirements of the Nasdaq Capital Market, unfavorable market conditions or other market factors outside of
our control, and the risk factors described elsewhere in this report. In addition, our ability to raise additional capital by
selling shares of our common stock or securities linked to our common stock is limited by the amount of our unissued
authorized common stock. See also “Our ability to raise capital may be limited by laws and regulations,” above, and
the risk factors under “Risks Related to Ownership of Our Common Stock,” below.
Even if we are able to raise additional capital, it will likely be dilutive to existing stockholders and the cost of
such capital may be substantial and may be more expensive than the cost of capital for larger public companies. The
terms of any funding we obtain may not be favorable to us and may be highly dilutive to our stockholders, and debt
financing, if available, may involve restrictive covenants, operational restrictions and security interests in our assets
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that may have negative consequences for us, including, among other things, by increasing our vulnerability to adverse
economic and industry conditions, limiting our ability to obtain additional funding and enter into partnership and other
strategic agreements, and requiring the dedication of a portion of our cash flow to service our indebtedness. There
can be no assurance that we can raise additional capital when needed. Failing to raise additional capital when needed
would have a material adverse effect on our business.
Due in part to our limited financial resources, we may fail to select or capitalize on the most scientifically,
clinically or commercially promising or profitable indications or therapeutic areas for our product candidates,
we may be unable to pursue and complete the clinical trials we would like to pursue and complete, and we
may be unable to commence or complete clinical trials and pursue regulatory approvals in accordance with
our current timeline expectations.
Our current financial and technical resources are limited and not sufficient to develop all of the product
candidates to which we hold licenses or options to license. This may affect our efforts to develop and bring to market
the product candidates currently in our portfolio and any candidates we may add to our portfolio in the future. Due to
our limited resources, we may be required to curtail our development programs and clinical and nonclinical
development activities that might otherwise have led to more rapid progress of our product candidates, or product
candidates that we may in the future choose to develop, through the regulatory and development processes. We may
make determinations with regard to the indications and clinical trials on which to focus our resources that result in our
realization of less than the full potential value of a product candidate. The decisions to allocate our research,
management and financial resources toward particular indications may not lead to positive clinical milestones or to the
development of viable commercial products and may divert resources from better opportunities. Similarly, our
decisions to delay or terminate development programs may also cause us to miss valuable opportunities, including
the potential for some of our product candidates to be first-in-category products.
As a result of financial and other resource constraints, we may be unable to commence or complete our
planned clinical trials or prepare and submit applications for marketing approval of our product candidates in
accordance with our currently anticipated timelines. See also “Risks Related to Product Research & Development,
and Regulatory Approval – Delays in the commencement or completion of clinical testing of product candidates we
are developing or may develop in the future may occur due to any of a number of factors and could result in
significantly increased costs and longer timelines and could impact our ability to ever become profitable” below.
Risks Related to Product Research & Development and Regulatory Approval
XACIATO is our first and only FDA-approved product. The FDA’s approval of XACIATO does not provide any
assurance or predict that we will be successful in developing or achieving regulatory approval of any other
product candidate. If we are unable to successfully conduct and complete development of and obtain
regulatory approvals for our investigational products, which may never occur, our business may fail and you
could lose all or part of your investment.
Historical success in clinical development of and obtaining regulatory approval for a product candidate does
not guarantee or predict future successful outcomes for other investigational products. Each of our development
programs
in pharmaceutical and
to substantial uncertainty of success
biopharmaceutical development.
is unique and subject
inherent
Except for XACIATO, which was approved by the FDA for U.S. marketing in December 2021 but has not yet
been commercially launched, our pipeline consists entirely of investigational products, which we also refer to as
product candidates, which means that they must successfully complete one or more clinical studies to be considered
for marketing approval by the FDA, or similar regulatory authorities for jurisdictions outside of the U.S., and will require
submission of an application to and approval of that application by the FDA to be marketed in the U.S., and will need
to undergo a submission, review and approval process with other regulatory authorities to be marketed outside of the
U.S. FDA or other regulatory authority approval may never be obtained. XACIATO has not been approved for
marketing anywhere outside of the U.S., and cannot be marketed outside of the U.S. unless and until marketing
applications for other jurisdictions are submitted and approved by the applicable regulatory authorities, which may
require additional clinical and nonclinical development, and may never occur. If we are unable to successfully
complete development of and obtain regulatory approvals for our product candidates, our business may fail and you
could lose all or part of your investment.
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We depend heavily on the successful development of our lead product candidates, Ovaprene and Sildenafil
Cream, 3.6%. Clinical development is a lengthy and expensive process with an inherently uncertain outcome.
Failure to successfully develop and obtain regulatory approval to market and sell either of these product
candidates would likely adversely affect our business.
Our business depends on the successful clinical development and regulatory approval of our lead product
candidates, which may never occur. The product candidates we develop require substantial clinical testing to
demonstrate that they are safe and effective for their proposed uses. Clinical testing is expensive, difficult to design
and implement, can take many years to complete and its outcome is inherently uncertain. A failure of one or more
clinical trials could occur at any stage of testing. The outcome of preclinical testing and early clinical trials may not be
predictive of success of later clinical trials, and interim results of a particular clinical trial do not necessarily predict
final results of that trial. Accordingly, while some of our product candidates have undergone clinical trials and
demonstrated positive results, including Ovaprene and Sildenafil Cream, 3.6%, there is no guarantee of successful
outcomes in future clinical studies of these product candidates or of obtaining marketing approval for any of them.
The fact that the active pharmaceutical ingredients in certain of our product candidates, including Sildenafil Cream,
3.6%, have received regulatory approval in other formulations and/or for other indications does not guarantee
successful development of our product candidates for their proposed intended uses. Clinical trials may never
demonstrate sufficient safety and effectiveness to obtain the requisite regulatory approvals for our product candidates.
Even if we conduct and complete clinical trials for our product candidates, we may not obtain regulatory
approval to market and sell any of them on the timelines we anticipate, or at all, which would have a material adverse
effect on our business and operations.
Delays in the commencement or completion of clinical testing of our product candidates may occur due to
any of a number of factors and could result in significantly increased costs and longer timelines and could
impact our ability to ever become profitable.
Clinical trials of our product candidates may not commence, progress or be completed as expected. Delays
could significantly impact our product development costs and timelines, as well as a product candidate’s market
potential, if ultimately approved. The timing of initiation, conduct and completion of clinical trials and other
development activities for our product candidates may vary dramatically due to factors within and outside of our
control and is difficult to predict accurately. We may make statements regarding anticipated timing for
commencement, completion of enrollment, and/or availability of results from our clinical studies, but those statements
are predictions based on significant assumptions and the actual timing of achievement of development milestones
may differ materially from our predictions for a variety of reasons.
lack of adequate capital and the need to obtain additional funding;
The commencement of clinical trials of our product candidates can be delayed for many reasons, including:
•
•
•
delays in obtaining approval from the institutional review boards, or IRBs, of prospective clinical study
sites;
delays in obtaining guidance or authorizations from the FDA or foreign regulatory authorities;
•
•
•
delays in finalizing the trial design as a result of discussions with the FDA, foreign regulatory authorities,
prospective clinical trial investigators or IRBs;
delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites; or
inability to obtain sufficient quantities of clinical product supplies from our contract manufacturers and
suppliers.
Once a clinical trial has begun, it may be delayed, suspended or terminated by us, an IRB, the FDA or other
regulatory authorities as a result of the occurrence of any of a number of events or circumstances, including the
following:
•
•
•
•
•
lack of adequate capital and the need to obtain additional funding;
failure to conduct the clinical trial in accordance with regulatory or IRB requirements;
slower than expected rates of participant recruitment and enrollment;
higher than anticipated participant drop-out rates;
failure of participants to use the investigational product as directed or to report data as per trial protocols;
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•
•
•
•
•
•
inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold;
failure to achieve certain efficacy and/or safety standards;
participants experiencing severe undesirable side effects or other unexpected adverse events related to
the investigational product;
disruptions in or insufficient supply of clinical trial material or inadequate quality of such materials;
failure of our CROs or other third-party service providers to meet their contractual obligations to us in a
timely manner, or at all; or
delays quality control/quality assurance procedures necessary for study database lock and analysis of
unblinded data.
Unexpected serious adverse events or other undesirable side effects could arise during clinical development
and interrupt, delay, or cause the termination of clinical trials, and require us to conduct additional clinical and
nonclinical studies that were not part of our development plan, which could significantly increase the development
costs and timeline for a program and adversely impact its value and our ability to continue product development.
These events may also cause our reputation to suffer and subject us to lawsuits.
The COVID-19 pandemic and recent geopolitical events are evolving and uncertain additional risks to our
development timelines, having the potential to cause or contribute to significant delays in commencement and
completion of our clinical trials. Global supply chain disruptions may adversely affect the ability of contract
manufacturers to manufacture and supply our clinical trial material. Our prospective or contracted clinical trial sites
may temporarily suspend activities at their sites for the safety of their employees or to adhere to government
recommendations or orders related to social distancing and limiting public gatherings, or they may experience
resource constraints, including staffing shortages, stemming from the pandemic and become unable to allocate
adequate resources to reach agreements necessary to commence our clinical trials at their facilities or, even if
agreements are in place, to conduct our clinical trials. For clinical trials that we are able to initiate, we may experience
lower than anticipated subject enrollment and completion rates, including because individuals may avoid medical
settings due to concerns of contracting COVID-19 or may become subject to governmental orders or adhere to
governmental guidelines intended to reduce the spread of COVID-19, or, during periods when COVID-19 case rates
are low, prospective participants may be less inclined to participate in or complete clinical studies that require multiple
clinic visits when they have more freedom to travel and participate in other activities that were not available or
considered too risky during other stages of the pandemic. In addition, increased rates of employee absences due to
worker or family member illness and work-from-home and restricted travel policies implemented in response to the
COVID-19 pandemic may delay any regulatory authority and/or IRB approvals necessary for our clinical trials and/or
prevent our CROs and other third-party contractors who are necessary for the conduct of our clinical trials from
meeting their contractual obligations to us in a timely manner, any of which could delay commencement and
completion of our clinical trials.
Significant clinical trial delays could adversely impact on financial condition and results of operations by
substantially increasing the costs of our development programs. Significant clinical trial delays also could jeopardize
our ability to meet obligations under agreements under which we license our rights to our product candidates, allow
other companies to bring competitive products to market before we do, shorten any period of market exclusivity we
may otherwise have under our patent rights, and weaken our negotiating position in discussions with potential
collaborators, any of which could impair our ability to successfully commercialize our product candidates, if ultimately
approved. Any significant delays in commencement or completion of clinical trials of our product candidates, or the
suspension or termination of a clinical trial, could materially harm our business, financial condition and results of
operations.
Manufacturing and supply delays and disruptions may significantly delay our clinical studies and be
expensive for us to resolve.
Our product and product candidates are complex to manufacture and we rely on single source contract
manufacturers and suppliers. Manufacturing disruptions may occur that may be difficult and expensive to resolve and
may cause substantial delays in development of our product candidates. To date, our clinical-stage product
candidates have been tested only in a relatively small number of clinical study participants. A significant scale-up of
manufacturing by our contract manufacturers and suppliers may be necessary to meet our supply requirements for
Phase 2 or Phase 3 clinical studies, which may take longer and be more expensive than anticipated, potentially
resulting in a significant negative impact our development timelines and costs.
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For example, the pivotal clinical study of Ovaprene will require far more clinical product supplies than were
manufactured for prior clinical and nonclinical studies combined, and the quantity of Ovaprene clinical supplies
needed to support the pivotal clinical study has not yet been produced. A substantial scale up in production is
necessary to meet the study’s requirements, which may not occur on projected timelines and may be more expensive
for us than anticipated. Manufacturing disruptions may delay commencement of the pivotal clinical study or disrupt the
conduct of the study after commencement. Under our agreement with ADVA-Tec, we are dependent on ADVA-Tec and
its contract manufacturers for all Ovaprene clinical and commercial product supplies and we have limited ability to
influence or control the efforts and resources they expend to meet our supply requirements. Furthermore, some of the
key raw materials and components of Ovaprene have only a single source of supply. Global supply chain disruptions
related to the COVID-19 pandemic or recent geopolitical events may contribute to delays in and increased costs for
the manufacture and supply of sufficient quantities of Ovaprene to meet the pivotal clinical study’s requirements.
See also “Risks Related to Our Dependence on Third Parties- We rely on third-party suppliers and
manufacturers for clinical and commercial supplies of XACIATO and our product candidates, including multiple single
source suppliers and manufacturers, and we currently have no plans to build or acquire our own manufacturing
capabilities. If these third parties do not perform as we expect, do not maintain their regulatory approvals or become
subject to negative circumstances, it could delay, prevent or impair our product development or commercialization
efforts, or those of our collaborators,” and “- In some cases, we may be contractually required to obtain clinical or
commercial product supplies from specific third parties or there may be a limited number of third-party suppliers of raw
materials and other components of our product and product candidates, which may heighten our dependence on
those third parties and the risk of manufacturing disruptions” below.
Ovaprene is a drug/device combination and the process for obtaining regulatory approval in the United States
will require compliance with complex procedures because concordance between two centers of the FDA
(CDRH and CDER) is necessary for approval of this combination product. A change in the FDA’s prior
determination that CDER would lead the review of a marketing application for Ovaprene would adversely
impact Ovaprene’s development timeline and significantly raise our costs to complete clinical development
and obtain regulatory approval for Ovaprene.
Ovaprene is composed of both device and drug components and is considered a combination product by the
FDA. Ovaprene previously underwent a request for designation, or RFD, process with the FDA that determined that
CDRH would lead the review of a PMA for potential marketing approval of this product candidate. If the designation
were to be changed to CDER, or if either center were to institute additional requirements for the approval of
Ovaprene, we could be required to complete clinical studies with more patients and over longer periods of time than is
currently anticipated. This would significantly increase the anticipated cost and timeline to completion of Ovaprene’s
development and require us to raise additional funds. Based on discussions with the FDA, we believe that if our
planned pivotal clinical study of Ovaprene is successful, the FDA will not require additional clinical studies to support
the PMA for Ovaprene. However, the FDA may determine that the results of the study are not sufficiently robust or
convincing and require additional clinical and/or nonclinical studies prior to approval of Ovaprene. In addition, our
ability to commence the pivotal clinical study of Ovaprene is subject to the FDA’s review and approval of an IDE, the
timing of which will be later than we anticipated when we initiated the process based feedback from the FDA, and
could delay or contribute to a delay in the commencement of the pivotal clinical study. Because Ovaprene is one of
our lead product candidates, the impact of either a change in the lead FDA review center or the imposition of
additional, currently unplanned requirements for approval could be significant to us and have a material adverse effect
on the prospects for developing Ovaprene, as well as on our business and our financial condition. See also “The
commercial success of Ovaprene will depend on market acceptance of a hormone-free monthly, intravaginal product,
availability and effectiveness of alternative contraceptive products and women's preferences, as well as the success
of Bayer’s marketing and sales efforts” below.
The factors contributing to female sexual dysfunction disorders, including FSAD, are complex and there is
limited clinical trial precedent from which to draw experience, making the design and execution of a clinical
trial that demonstrates effectiveness of Sildenafil Cream, 3.6% in treating FSAD more inherently challenging
and uncertain compared with investigational products for many other conditions.
There are currently no FDA-approved treatments for female sexual arousal disorder, or FSAD, and there is no
precedent program to reference in the design of our clinical trials for Sildenafil Cream, 3.6%. Female sexual
dysfunction disorders in women vary in nature and may be the result of a variety of physiological and psychological
factors. Given the variability of factors contributing to the underlying condition, and the product candidates attributes,
clinical studies to evaluate effectiveness in any subset of the condition under the umbrella of Sexual Dysfunction, such
as FSAD, are complex. While we worked with experts to develop novel patient reported outcome, or PRO,
instruments for our ongoing Phase 2b study of Sildenafil Cream, 3.6%, tested the proposed PRO instruments in a
55
content validity study, reviewed the results of that study with the FDA and aligned with the FDA on the Phase 2b study
design, the Phase 2b study may nevertheless prove difficult to enroll on the anticipated timeline or fail to demonstrate
effectiveness of Sildenafil Cream, 3.6% in treating FSAD. For example, Sildenafil Cream, 3.6% is designed to work
primarily by increasing blood flow to the genital tissue. Therefore, it will be critical for us to identify and enroll patients
in our clinical trials of Sildenafil Cream, 3.6% for whom inadequate blood flow to the genital tissue is the primary
contributor to their arousal disorder. If we fail to screen properly, and instead enroll patients with different contributing
factors, the results of our clinical trials are unlikely to demonstrate effectiveness of Sildenafil Cream, 3.6%.
Conversely, trying to screen out patients with different contributing factors may slow enrollment in a study, delay its
completion and increase its costs. The pace of enrollment of participants in the study during 2021 was slower than
expected. We identified a number of contributing factors and implemented mitigation strategies to increase study
subject recruitment, however, the initial slower pace of enrollment lengthened our original estimated timeline for the
study. We may experience additional delays in enrollment relative to what we currently anticipate, which may further
lengthen the study timeline and increase its overall cost.
Even if we can identify and enroll a sufficient number of women for whom inadequate blood flow to the genital
tissue is the primary contributing factor to their arousal disorder, there is no guaranty that the use of Sildenafil Cream,
3.6% will improve their general feelings of arousal or that the PRO instruments we utilize to measure the effectiveness
of Sildenafil Cream, 3.6% in the study will adequately capture their genital arousal response. Given the factors
contributing to arousal disorders, we may be required to conduct clinical trials in large patient populations, extending
the timeline and increasing the cost of development for Sildenafil Cream, 3.6%. For example, the total number of
participants that the Phase 2b study will seek to randomize has not yet been determined and the high end of the
range is almost 200 more participants than the low end. The final size of the study will be determined by a single
interim analysis for unblinded sample size re-estimation, which analysis has not yet occurred. If the study requires a
number of randomized participants on the high end of the range, then the study could take significantly longer and be
significantly more expensive to complete than if the final size of the study need only be on the low end of the range. If
we are unable to efficiently and successfully complete our Phase 2b clinical trial of Sildenafil Cream, 3.6%, product
development costs for the program would increase significantly, and such failure could negatively impact the
perception of the program’s potential for future clinical and regulatory success, either of which could have a material
adverse effect on our business, results of operations and financial condition, as well as our stock price.
Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time
may change as more patient data become available and are subject to audit and verification procedures that
could result in material changes in the final data, and others, including regulatory authorities, may not agree
with our interpretation of study data.
From time to time, we may publicly disclose interim, preliminary or topline data from our clinical studies, which
is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are
subject to change following a more comprehensive review of the data related to the particular study or trial. We also
make assumptions, estimations, calculations and conclusions as part of our analysis of data, and we may not have
received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results of clinical trials
we report may differ from final results reported for those studies, or different conclusions or considerations may qualify
such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit
and verification procedures that may result in the final data being materially different from the preliminary data we
previously published. As a result, topline data should be viewed with caution until the final, complete data are
available.
Interim data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially
change as patient enrollment continues and more patient data become available. Adverse differences between
preliminary or interim data and final data could significantly harm our business prospects. There can be no guarantee
that a favorable interim analysis will result in a favorable final result at the completion of the clinical trial.
Further, others, including regulatory authorities, may not accept or agree with our assumptions, estimates,
calculations, conclusions or analyses or may interpret or weigh the importance of study data differently than we do,
which could impact the value of the particular program, the approvability or commercialization of the particular product
candidate or product and our company in general. In addition, the information we choose to publicly disclose
regarding a particular study or clinical trial is based on what is typically an extensive set of data and analyses, and
investors and others may disagree with the information we determine is the material or otherwise appropriate
information to include in our public disclosure. Information we determine not to publicly disclose may ultimately be
deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular
product candidate, product or our business. If the topline data that we report differ from actual results, or if others,
including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and
commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects
or financial condition.
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Our business depends on obtaining regulatory approval to market our product candidates in a timely manner,
in particular, FDA approval. The regulatory approval processes of the FDA and comparable foreign
authorities are expensive, lengthy, time-consuming, and inherently unpredictable. If we are not able to obtain
regulatory approvals for our product candidates, our ability to generate product revenue will be materially
impaired.
Our product candidates and the activities associated with their development and commercialization, including
their design, testing, manufacture, release, safety, efficacy, regulatory filings, recordkeeping, labeling, storage,
approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDA, other
regulatory authorities in the U.S., and comparable authorities in other countries or jurisdictions where we seek to test
or market our product candidates. The process of obtaining marketing approvals in the U.S. and elsewhere is
expensive, may take many years and can vary substantially based upon a variety of factors, including the type,
complexity and novelty of the product candidates involved. In addition, requirements for approval may change over
time and our current development plans may not accurately anticipate all applicable requirements for marketing
approval by the FDA or comparable regulatory authorities for jurisdictions outside the U.S.
Our success depends on our ability to obtain regulatory approvals for our product candidates in a timely and
cost-efficient manner. Even if we successfully complete nonclinical studies, clinical studies, manufacturing and other
required activities, we may still experience delays in our efforts to obtain marketing approvals for any of our product
candidates. Marketing approval applications require the submission of extensive clinical and nonclinical data and
supporting information to establish the safety and efficacy of our product candidates for the specified indication. The
process of responding to the FDA or other regulatory authorities’ information requests in the review process,
potentially preparing for and appearing at a public advisory committee or oral hearing, and preparing our third-party
manufacturers and clinical investigators to successfully complete inspections by the FDA or other regulatory
authorities during the approval process requires significant human and financial resources.
We may change the development plan for a product candidate as a result of changes during the development
period in the FDA’s marketing approval policies or the amendment or enactment of additional statutes or regulations,
updated interpretations of applicable policies, statutes or regulations, or upon review of outcomes of other similar
product candidates under development. This could significantly lengthen our development timelines and cost.
The FDA and comparable regulatory authorities in other countries have substantial discretion in the approval
process and may refuse to accept any application or may decide that the data are insufficient for approval and require
additional clinical or nonclinical studies or changes in the manufacturing process or facilities, even if we had
previously aligned with the FDA on such data and other requirements. We cannot assure you that we will obtain any
additional marketing approvals for our product or product candidates in any jurisdiction.
The announcement of new requirements by the FDA, the failure of a competitive product to receive regulatory
approval, or the receipt of a complete response letter from the FDA by another company pursuing the FDA's 505(b)(2)
pathway that may have implications for our proposed regulatory approval pathway could impact how investors and
potential strategic collaborators view the development risks associated with our product candidates. Changing testing
or manufacturing requirements for our product candidates or for product candidates deemed to be comparable to ours
may adversely impact our financial resources, our development timelines and may harm the perception held by others
of our business.
We expect to utilize the FDA’s Section 505(b)(2) pathway for most of our current product candidates and if
that pathway is not available, the development of our product candidates will likely take significantly longer,
cost significantly more and entail significantly greater complexity and risk than currently anticipated, and, in
any case, may not be successful.
We intend to develop and seek approval for many of our product candidates, including Sildenafil Cream,
3.6%, DARE-HRT1, DARE-VVA1, DARE-FRT1, DARE-PTB1, DARE-LARC1 and other candidates we may develop,
including ADARE-204 and ADARE-214, pursuant to the FDA’s 505(b)(2) pathway. If the FDA determines that we may
not use this regulatory pathway, then we would need to seek regulatory approval via a “full” or “stand-alone” NDA
under Section 505(b)(1) of the FDCA. This would require us to conduct additional clinical trials, provide additional
safety and efficacy data and other information, and meet additional standards for regulatory approval including
possibly nonclinical data. If this were to occur, the time and financial resources required to obtain FDA approval, as
well as the development complexity and risk associated with these programs, would likely substantially increase,
which could have a material adverse effect on our business and financial condition.
The Drug Price Competition and Patent Term Restoration Act of 1984, informally known as the Hatch-
Waxman Act, added Section 505(b)(2) to the FDCA. Section 505(b)(2) permits the filing of an NDA where at least
some of the information required for approval comes from studies and information that were not conducted by or for
the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us
under the FDCA, would allow an NDA we submit to the FDA to rely in part on data in the public domain or the FDA’s
prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the
57
development programs for Sildenafil Cream, 3.6%, our current IVR product candidates, DARE-VVA1, DARE-LARC1,
ADARE-204 and ADARE-214.
Notwithstanding the approval of an increasing number of products by the FDA under Section 505(b)(2) over
the last few years, certain brand-name pharmaceutical companies and others have objected to the FDA’s
interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, or
Congress were to amend the statute to alter the currently available regulatory pathway, the FDA may change its
505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA we submit
under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs
are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs
referenced in a Section 505(b)(2) NDA. Even if we are able to utilize the Section 505(b)(2) regulatory pathway for one
or more of our candidates, there is no guarantee this would ultimately lead to faster product development or earlier
approval.
Moreover, any delay resulting from our inability to pursue the FDA's 505(b)(2) pathway could result in new
competitive products reaching the market more quickly than our product candidates, which may have a material
adverse impact our competitive position and prospects. Even if we are allowed to pursue the FDA's 505(b)(2)
pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization.
Our clinical-stage product candidates have only been tested in a small number of women over short periods
of use and no data exists regarding a potential increase in fetal abnormalities in pregnant women.
If our clinical-stage product candidates, including Ovaprene and Sildenafil Cream, 3.6%, are successful in
their clinical development, we expect that women of child-bearing age will use them, and potentially for many months
or years. To date, human clinical studies of these product candidates have been for relatively short periods of time and
these product candidates lack safety data over longer periods of use. For example, while we believe the risk of
adverse fetal development from using these product candidates is low, the impact of these product candidates on fetal
development has not been studied and there are no adequate or well-controlled studies of these product candidates
in pregnant women. Thus, the risk of adverse fetal development from any one or more of these product candidates
may be greater than expected. Should any of these product candidates be shown to increase the risk of adverse fetal
development, our ability to develop those or other product candidates would be substantially impaired, our business
prospects and operations would be materially harmed, and we could also be subject to potential claims and lawsuits.
Pre-clinical product candidates may not be valued by investors and may be difficult to fund.
Given their early stage of development and the lack of data, many pre-clinical assets are often perceived as
having low valuations by investors and potential strategic collaborators, such as pharmaceutical companies. Our
investment of time and resources in such assets may not be appreciated or valued. As a result, it may be difficult for
us to fund such programs. Additionally, past receipt of grant funding may not be predictive of our ability to secure
additional grants to fund further development of a program. If DARE-VVA1, DARE-LARC1, DARE-FRT1, DARE-
PTB1, DARE-RH1 or the injectable etonogestrel product candidates we may license from Adare fail to be valued, our
stock price may be adversely affected.
Several of our product candidates are in pre-clinical stages of development and may never advance to clinical
development.
Pre-clinical studies refer to a stage of research that begins before clinical trials (testing in humans) can begin,
and during which important feasibility, iterative testing and drug safety data are collected. Because of their early
nature, pre-clinical product candidates tend to carry a higher risk of failure as compared with clinical-stage assets.
Pre-clinical candidates must generate sufficient safety and efficacy data through in vitro studies, animal studies and a
variety of tests before they can be considered appropriate for testing in humans. The development risks, timeline and
cost of pre-clinical assets can be high because of the unknowns and absence of data. It can be difficult to identify
relevant tests and animal models for pre-clinical studies. Even if the results from our pre-clinical studies are favorable,
we still may not be able to advance the candidates into clinical trials. If pre-clinical studies of product candidates do
not generate strong data, our pre-clinical stage programs may never progress to clinical development and may prove
to be worthless.
The grants supporting the DARE-LARC1 program do not guarantee that its pre-clinical development will be
successful or that we will be able to fund its clinical development in the future.
The grants supporting pre-clinical development of DARE-LARC1, including the grant agreement under which
we were awarded up to $48.95 million in non-dilutive funding for pre-clinical development of DARE-LARC1, do not
guarantee that its pre-clinical development will be successful, or, even if we are successful with all specified pre-
clinical activities, that we will be able to fund its future clinical development. Further, while we received an initial
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payment of $11.45 million under the grant agreement in 2021, additional payments are contingent upon the DARE-
LARC1 program’s achievement of specified development and reporting milestones during the grant period and our
compliance with other obligations under the agreement, and there is no assurance those milestones will be achieved
or that we will receive additional payments or the full potential amount of the grant.
Risks Related to Our Dependence on Third Parties
Our existing product development and commercialization collaborations are important to our business, and
future collaborations may also be important to us. If we are unable to maintain any of these collaborations, if
these collaborations are not successful, or if we are unable to establish additional strategic collaborations,
our business and prospects may be materially harmed.
We have limited resources and no internal sales, marketing or distribution capabilities. A key aspect of our
strategy is to establish collaborations with third parties, such as large and mid-size pharmaceutical companies and
other third parties with the relevant R&D and/or commercial expertise and infrastructure to help bring our product
candidates to market. We currently do not expect to directly market, sell or distribute any of our products that receive
regulatory approval, and instead intend to enter into agreements with third parties to market, sell and distribute and
provide related support services for those products. For example, we have entered into out-license agreements with
third parties for the commercialization of XACIATO and, if approved, Ovaprene. We also have a CRADA for the
conduct of a pivotal clinical study of Ovaprene with NICHD. We intend to seek additional strategic collaborations.
However, these collaborations make the successful development and commercialization of our products and product
candidates dependent upon the performance of third parties. By entering into strategic collaborations, we may
relinquish control over important elements of product development and commercialization, and the collaborator may
fail to develop or effectively commercialize the applicable products or product candidates. In addition, in the case of
commercial collaborations, our product revenues, may be lower than if we were to sell and distribute products that we
develop ourselves.
Our existing collaborations, and any future strategic collaborations we establish, may involve a number of
significant risks to the success of the product, including that:
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collaborators may have significant discretion in determining the efforts and resources that they will apply
to these collaborations;
collaborators may not perform their obligations as expected;
collaborators may not pursue development or commercialization of a product or product candidate or
elect not to continue or renew a collaboration based on clinical or nonclinical study results, changes in the
collaborators' strategic focus or available funding, or external factors, such as an acquisition or a
pandemic, that divert its resources or create competing priorities;
collaborators may refuse to perform clinical studies or other development work required for approval in a
particular jurisdiction outside the United States;
collaborators may delay or stop clinical studies, provide insufficient funding for or abandon a clinical
program, repeat or conduct new clinical studies or require a new formulation of a product or product
candidate for clinical testing;
collaborators could independently, or together with third parties, develop and commercialize products that
compete directly or indirectly with our products or product candidates if the collaborators believe that
competitive products are more likely to be successfully developed or can be commercialized under terms
that are more economically attractive than ours;
collaborators with marketing and distribution rights to one or more of our products may not commit
sufficient resources to the marketing and distribution of such product or products;
disagreements with collaborators, including disagreements over proprietary rights, contract interpretation,
or product development or commercialization strategy, might cause delays or termination of the research,
development or commercialization of our products or product candidates, might lead to additional
responsibilities for us with respect to products or product candidates, or might result in litigation or
arbitration, any of which would be time-consuming and expensive;
collaborators may not properly maintain or defend our intellectual property rights or may use our
proprietary information in such a way as to invite litigation that could jeopardize or invalidate our
intellectual property or proprietary information or expose us to potential litigation;
collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation
and potential liability;
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collaborators may violate, or be investigated for potentially violating, health care compliance and related
laws and regulations, which may expose us to litigation, enforcement actions or inquiries, or other
potential liability; and
collaborations may be terminated for the convenience of the collaborator and, if terminated, could
significantly delay product development and commercial launch and increase the cost to us to pursue
further development or commercialization of the applicable product or product candidate. For example,
our out-license agreements for XACIATO and Ovaprene and the CRADA with NICHD may be terminated
by the counterparty for convenience upon the completion of a specified notice period, subject to limited
restrictions.
If one of our collaborators terminates its agreement with us or our strategic collaborations otherwise do not
result in the successful development of our product candidates and/or commercialization of any approved products,
we may not receive any future payments under the collaboration, our development programs may not be funded as
we expect, and our ability to establish another collaboration for the applicable product or product candidate may be
negatively impacted. We may be unable to replace any commercial collaborator with an alternate third party on a
timely or commercially reasonable basis, or at all. See also, “Risks Related to Our Financial Position and Capital
Needs- If a commercial counterparty terminates its exclusive license agreement with us or fails to perform as
expected, our need for additional capital may significantly increase,” above and “We rely on, and intend to continue to
rely on, third parties for the execution of significant aspects of our product development programs. Failure of these
third parties to successfully carry out their contractual duties, comply with regulatory requirements and applicable law,
or meet expected deadlines may cause significant delays in our development timelines and/or failure of our
programs,” below. Moreover, the risks relating to product development, regulatory approval and commercialization
and compliance with health care related laws and regulations described in this report also apply to the activities of our
collaborators.
Except to the extent of any license fees or milestone payments under our current and any future collaboration
agreements, because we currently have only one FDA-approved product, our ability to generate revenue over the
next several years will largely be dependent on royalties and other net sales-based payments under our exclusive
license agreement with Organon. Accordingly, our revenues may be dependent on Organon’s ability to successfully
market, sell and distribute XACIATO and to perform its contractual obligations. There is no assurance that the
commercial launch of XACIATO will occur when expected or be successful and the timing and amount of potential
payments to us under the license agreement is uncertain. Apart from Organon’s diligence obligation under our license
agreement, we have no control over the efforts and resources Organon devotes to the marketing and sale of
XACIATO. In addition, the effective date of the license agreement is subject to the satisfaction of closing conditions,
including antitrust law clearance which is outside of our control. The occurrence of any of the risks described above
could negatively impact the commercial success of XACIATO and have a material adverse effect on our business,
financial condition and results of operations.
Termination of the CRADA by NICHD or by us could significantly delay the commencement, conduct and/or
completion of the Phase 3 study of Ovaprene and significantly increase the overall timeline and costs for development
of Ovaprene. Though the CRADA has a five-year term, either party may terminate it for any reason or for no reason
upon 30 days’ prior written notice to the other party. If the CRADA is terminated before completion of the Phase 3
study of Ovaprene, NICHD will cooperate with us to transfer the data and the conduct of the study to us or our
designee and will continue to conduct the study for so long as necessary to enable such transfer to be completed
without interrupting the study. If we terminate the CRADA before the completion of any active study protocol, we
generally will be responsible for providing sufficient clinical supplies of Ovaprene to NICHD in order to complete the
study. NICHD may retain and use payments we make under the CRADA for up to one year after expiration or
termination to cover costs associated with the conduct of activities described under the research plan in the CRADA
that were initiated prior to expiration or termination. If we fail to make any scheduled payment to NICHD under the
CRADA, the final one of which is due in the second quarter of 2023, NICHD is not obligated to carry out research and
development activities until it receives the funds. Suspension by NICHD of activities under the CRADA or termination
by NICHD or by us of the CRADA could have a material adverse effect on the Phase 3 study of Ovaprene and on our
business, results of operations and financial condition, and may cause the market price of our common stock to
decline.
We face significant competition in seeking strategic collaborations. Collaborations can also be complex and
time-consuming arrangements to negotiate and document. If we are unable to reach agreements with suitable
collaborators on a timely basis, on acceptable terms, or at all, we may have to curtail the development of a product or
product candidate, reduce or delay one or more of our other development programs, delay or reduce the scope of any
commercial readiness activities, delay commercialization, or increase our expenditures and undertake development or
commercialization activities at our own expense. Our success in entering into a definitive agreement for any
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collaboration will depend upon, among other things, our assessment of the prospective collaborator’s resources and
expertise, the terms of the proposed collaboration and the proposed collaborator’s evaluation of several factors.
Those factors may include the design and outcomes of our clinical studies, the likelihood of approval by regulatory
authorities, the potential market for the product, the costs and complexities of manufacturing and delivering such
product to customers, the potential of competing products, the strength of the intellectual property and other potential
sources of market exclusivity for such product, the market performance of other products we developed, and industry
and market conditions generally. The prospective collaborator may also have opportunities to collaborate with third
parties on products or technologies that would compete with our products or product candidates and will evaluate
whether those opportunities are more attractive than a collaboration with us. We also face competition in our search
for collaborators from other biotechnology and pharmaceutical companies worldwide, many of which are larger and
able to offer more attractive deals in terms of financial commitments, contribution of human resources, or
development, manufacturing, regulatory or commercial expertise and support. Inadequate capitalization of our
company, or the perception thereof, could negatively affect our negotiating leverage in transactions.
We may also be restricted under existing collaboration agreements from entering into other collaborations on
certain terms with other potential collaborators. For example, the terms of our exclusive license agreement also
provide Organon exclusive worldwide rights of first negotiation for specified potential future products of ours, which
may increase the complexity and time required, or otherwise inhibit our ability to transfer, license, sublicense, assign,
grant or otherwise dispose of any rights in those potential future products to a third party, and lead to delays in their
development and commercialization.
If we are not successful in attracting collaborators, entering into collaborations on acceptable terms and
maintaining our collaborations for the products we develop, we may not complete development of or obtain regulatory
approval for such products and product candidates, or if we obtain regulatory approval, commercial launch may be
delayed and market penetration could be limited. In such event, our ability to generate revenues from such products
and achieve or sustain profitability would be significantly hindered which would materially harm our business and
financial condition.
We rely on third-party suppliers and manufacturers for clinical and commercial supplies of XACIATO and our
product candidates, including multiple single source suppliers and manufacturers, and we currently have no
plans to build or acquire our own manufacturing capabilities. If these third parties do not perform as we
expect, do not maintain their regulatory approvals or become subject to negative circumstances, it could
delay, prevent or impair our product development or commercialization efforts, or those of our collaborators.
XACIATO and our product candidates (including their respective components) must be manufactured,
packaged, tested, and labeled in conformity with cGMP and other applicable regulatory requirements. We do not own
or operate, nor do we expect to own or operate, facilities for manufacturing, storage and distribution, or testing of our
product or product candidates. We rely on third parties to supply and manufacture our product candidates and other
materials necessary to commence and complete pre-clinical testing, clinical trials and other activities required for
regulatory approval of our product candidates, and expect to continue to do so in the future. In addition, we expect to
rely on third parties to manufacture the commercial supplies of XACIATO and any future products. This reliance on
contract manufacturers and suppliers subjects us to inherent uncertainties related to product safety, availability,
security and cost. Holders of NDAs, or other forms of FDA approvals, or those distributing a regulated product under
their own name, are ultimately responsible for compliance with manufacturing obligations even if the manufacturing is
conducted by a third party.
Because we currently rely, and expect to continue to rely, on third parties to supply and manufacture our
product and product candidates and their respective components (including the active pharmaceutical ingredients),
we do not expect to control the manufacturing processes for their production, all of which must be made in
accordance with relevant regulations, which include, among other things, quality control, quality assurance,
compliance with cGMP and the maintenance of records and documentation. Continuous compliance with cGMP and
other applicable requirements, requires significant expenditure of time, money and effort to meet requirements relating
to personnel, facilities, equipment, production and process, labeling and packaging, quality control, recordkeeping and
other requirements. In the future, it is possible that we or our third-party suppliers or manufacturers, or those of our
commercial partners, may fail to comply with cGMP requirements, other applicable FDA regulations, the requirements
of other regulatory bodies or our own requirements, any of which could result in suspension or prevention of
commercialization and/or manufacturing of our products or product candidates, delay or suspension of ongoing
research, including clinical trials, disqualification of data or other enforcement actions such as product recall,
injunctions, civil penalties or criminal prosecutions against us. Furthermore, we or a commercial collaborator, as
applicable, may be unable to replace any third-party supplier or manufacturer with an alternate supplier or
manufacturer on a commercially reasonable or timely basis, or at all. Inability to obtain product quantities needed for
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our clinical trials and to meet commercial demand, as applicable, could have a material adverse effect on our
business, financial condition and results of operations.
If we were to experience an unexpected loss of supply, or if any supplier or manufacturer were unable to meet
our demand for our products or product candidates, including due to geopolitical events, natural disasters or public
health emergencies or pandemics, such as the COVID-19 pandemic, we could experience delays in research,
planned or ongoing clinical trials or commercialization. We might not find alternative suppliers or manufacturers with
FDA approval, of acceptable quality, or able to provide the appropriate volumes and at an acceptable cost. The long
transition periods that may be necessary to switch manufacturers and suppliers could significantly increase our
development costs and result in delays in clinical trials, regulatory submissions and approvals, and, if approved,
commercial launch, and, for commercial products, could result in significant loss of sales and associated revenue.
Third-party suppliers, manufacturers, distributors or regulatory service providers may not perform as agreed
or may terminate their agreements with us, including due to the effects related to geopolitical events, natural disasters,
public health emergencies or pandemics, such as the COVID-19 pandemic, or force majeure events that affect their
facilities or ability to perform. Any significant problem that our suppliers, manufacturers, distributors or regulatory
service providers experience could delay or interrupt supply of materials necessary to produce our products and
product candidates or the finished product, as applicable, until the supplier, manufacturer, distributor or regulatory
service provider cures the problem, until the event that resulted in the delay or interruption is adequately addressed,
or until we locate, negotiate for, validate and receive FDA approval for an alternative provider (when necessary), if one
is available, and we may not have recourse against the party who did not perform or terminated their agreement with
us if such non-performance or termination is excused under our agreements with such party. Failure to obtain the
needed quantities of products and product candidates could have a material and adverse effect on our business,
financial condition, results of operations and prospects.
In some cases, we may be contractually required to obtain clinical or commercial product supplies from
specific third parties or there may be a limited number of third-party suppliers of raw materials and other
components of our product and product candidates, which may heighten our dependence on those third
parties and the risk of manufacturing disruptions.
Under our license agreement with Organon, we will be responsible for providing product supply of XACIATO
on an interim basis. We have entered into a long-term supply and manufacturing agreement for commercial supply of
XACIATO with the same CMO that provided clinical supplies for our Phase 3 DARE-BVFREE clinical study. Under our
supply and manufacturing agreement, we agreed to purchase at least 80% of our XACIATO requirements from the
CMO, subject to limited exceptions. Currently, this CMO is our sole supplier of XACIATO. As a result, XACIATO’s
commercial success will depend in part on the CMO's ability to manufacture and deliver adequate commercial
quantities of the product on agreed upon timelines in accordance with our specifications and in compliance with cGMP
and other applicable requirements. In addition, the CMO relies on other third parties, for supply of raw materials
required to produce XACIATO and those supplies may become more difficult and costly to obtain. For example, the
current single source supplier of clindamycin is located in China. Should this supplier slow production, shut down its
factory or increase its prices for any reason, including due to factors related to the COVID-19 pandemic, recent
geopolitical events, poor political relations between the U.S. and China and increased taxes or imposition of
sanctions, our CMO may not be able to obtain adequate supplies of clindamycin to manufacture sufficient commercial
quantities of XACIATO, which could impede XACIATO’s commercial success. If these circumstances were to occur,
the CMO could be forced to source clindamycin from a different supplier, which could lead to higher costs to us and
disruption in commercial supply of XACIATO. After Organon assumes the manufacturing and supply responsibilities
for XACIATO, we will have no control over the production and supply of the product. Our failure, or after the transfer of
manufacturing responsibilities, Organon’s failure, to produce, or cause to be produced, sufficient quantities of
XACIATO for commercial sale could have a significant negative effect on commercialization efforts and the payments
we receive under our license agreement.
Our agreement with ADVA-Tec restricts our ability to engage a manufacturing source for Ovaprene other than
ADVA-Tec during Ovaprene's development period as well as following regulatory approval, subject to limited
exceptions. If ADVA-Tec fails to provide sufficient clinical supply of Ovaprene on anticipated timelines, our ability to
complete clinical development and seek regulatory approval of Ovaprene could be significantly delayed. A substantial
scale up in production of Ovaprene clinical supplies is necessary to support the planned pivotal Phase 3 clinical study
of Ovaprene, which may not occur on projected timelines and may be more expensive for us than anticipated. If
Ovaprene receives marketing approval, failure by ADVA-Tec to provide sufficient commercial product quantities at
reasonable costs could have a significant adverse effect on our revenue and ability to become profitable.
Furthermore, for some key raw materials and components of Ovaprene, there currently is only a single source of
supply, and alternate sources of supply may not be readily available.
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Under the terms of the SST license agreement, SST will be responsible for obtaining supplies of Sildenafil
Cream, 3.6% for Phase 2 clinical trials expected to be conducted in the United States, which includes the ongoing
Phase 2b clinical study. Thereafter, we will be responsible for obtaining pre-clinical, clinical and commercial supplies
of Sildenafil Cream, 3.6%. Future supplies of raw materials required to produce Sildenafil Cream, 3.6% may be more
difficult and costly to obtain. For example, the current supplier of sildenafil is located in India. Should this supplier slow
production, shut down its factory or increase its prices for any reason, including due to factors related to the
COVID-19 pandemic and recent geopolitical events, we may not be able to obtain adequate supplies of sildenafil to
satisfy our clinical supply requirements.
We rely on, and intend to continue to rely on, third parties for the execution of significant aspects of
our product development programs. Failure of these third parties to successfully carry out their contractual
duties, comply with regulatory requirements and applicable law, or meet expected deadlines may cause
significant delays in our development timelines and/or failure of our programs.
Our business model relies on the outsourcing of important product development functions, tests and services
to CROs, medical institutions and other specialist providers, vendors and consultants. We rely on these third parties to
conduct our clinical trials and perform related activities, including quality assurance, clinical monitoring and clinical
data management, as well as to assist us in preparing, submitting and supporting the applications necessary to gain
marketing approvals for our product candidates. For example, we engaged CROs to run all aspects of the pivotal
Phase 3 clinical trial of XACIATO and the PCT clinical trial for Ovaprene. We similarly expect to rely on CROs and
other third parties to perform all clinical and nonclinical testing and many other important development and regulatory
affairs activities needed to support applications for regulatory approvals of all product candidates we develop. We do
not control these third parties and they may not devote sufficient time and resources to our projects, or their
performance may be substandard, resulting in clinical trial delays or suspensions, delays in submission of our
marketing applications or failure of a regulatory authority to accept our applications for filing. There is no assurance
that the third parties we engage will be able to provide the functions, tests, activities or services as agreed upon, or
provide them at the agreed upon price and timeline or to our requisite quality standards, including due to geopolitical
events, natural disasters, public health emergencies or pandemics, such as the COVID-19 pandemic, or poor
workforce relations or human capital management. We rely on the efforts of these third parties and if they fail to
perform as expected, we could suffer significant delays and additional costs in, and potentially failure of, the
development of one or more of our product candidates.
There is also no assurance these third parties will not make errors in the design, management or retention of
our data or data systems. Any failures by such third parties could lead to a loss of data, which in turn could lead to
delays in clinical development and obtaining regulatory approval. Third parties may not pass FDA or other regulatory
audits, which could delay or prohibit regulatory approval. In addition, the cost of such services could significantly
increase over time. If these third parties do not successfully carry out their contractual duties or meet expected
deadlines, regulatory approval of current and future product candidates may be delayed, prevented or cost
significantly more than expected, all of which could have a material adverse effect on our business, financial condition,
results of operations and prospects.
In particular, as a result of the CRADA, we are highly dependent on NICHD and the third parties it engages for
the commencement, conduct and completion of our pivotal Phase 3 clinical trial of Ovaprene. Pursuant to the terms of
the CRADA, the study will be conducted within NICHD’s Contraceptive Clinical Trial Network, or the CCTN, with
NICHD contractor Health Decisions Inc. providing clinical coordination and data collection and management services
for the study. NICHD is responsible for selecting participating clinical sites from the pool of CCTN sites and, together
with Health Decisions Inc., overseeing the clinical investigators in the conduct of the study, providing clinical site
monitoring and quality assurance along with establishing the electronic data capture database for the study and
performing data analysis, which are key factors to the successful completion of a clinical trial. We do not control these
third parties and, accordingly, our control over the commencement, conduct and completion of the study is limited. If
NICHD or the third parties it engages for the study prioritize other projects over the study or otherwise do not devote
adequate time and resources to the study, or their performance is substandard, commencement and completion of the
study may be delayed or suspended or the study may be unsuccessful, any of which could significantly harm our
business, operating results and financial condition, as well as our relationship with Bayer, and cause the price of our
common stock to decline.
Our ability to develop and commercialize XACIATO and our product candidates depends upon maintaining
rights granted to us under license agreements with third parties. The loss or impairment of our rights under
any of these agreements could have a material adverse effect on our business prospects, operations and
viability.
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Our rights to XACIATO and our product candidates arise from license agreements between us and third-party
licensors. The loss or impairment of our licensed rights to develop and commercialize XACIATO or our product
candidates, including as a result of our inability or other failure (or that of our licensors, in the case of sublicenses) to
meet our obligations under any one of such license agreements, including, without limitation, our payment obligations,
could have a substantial negative effect on our company’s prospects.
In December 2018, we entered into definitive agreements with Hammock Pharmaceuticals, Inc., TriLogic
Pharma LLC and MilanaPharm LLC under which we acquired exclusive global rights to XACIATO for the treatment of
bacterial vaginosis, as well as the rights to utilize the underlying proprietary hydrogel drug delivery technology for any
vaginal or urological application in humans. Under the license agreement with TriLogic Pharma and MilanaPharm, we
must use commercially reasonable efforts and resources consistent with those we undertake in pursuing development
and commercialization of other pharmaceutical products, taking into account program-specific factors, (a) to 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 (b) following the first
commercial sale of a licensed product or process in any jurisdiction, to continue to commercialize that product or
process in that jurisdiction. MilanaPharm may terminate our license if, after having launched such product or process
in such country, we, or our affiliates or sublicensees, as applicable, discontinue the sale of, or commercially
reasonable marketing efforts to sell, such product or process in such country, and fail to resume such efforts or to
reasonably demonstrate a strategic justification for the discontinuation and failure. See ITEM 1. "BUSINESS-Strategic
Agreements for Pipeline Development-Hammock/MilanaPharm Assignment and License Agreement,” above.
We entered into a license agreement with ADVA-Tec for the exclusive worldwide rights to develop and
commercialize Ovaprene that became effective in July 2017. In addition to standard termination rights, ADVA-Tec may
terminate the license agreement if we (1) fail to make significant scheduled investments in product development
activities over the course of the agreement, (2) fail to commercialize Ovaprene within six months of obtaining a pre-
market approval from the FDA, (3) with respect to the license in any particular country, fail to commercialize Ovaprene
in that particular country within three years of the first commercial sale, (4) develop or commercialize a non-hormonal
ring-based vaginal contraceptive device other than Ovaprene, (5) fail to conduct certain clinical trials, or (6) fail to
make certain milestone, sublicense and/or royalty payments to ADVA-Tec, including a milestone payment due upon
the FDA's approval to commence a pivotal human clinical trial of Ovaprene. See ITEM 1. "BUSINESS-Strategic
Agreements for Pipeline Development-ADVA-Tec License Agreement," above.
In February 2018, we entered into a world-wide license and collaboration agreement with SST for the
exclusive worldwide rights to develop and commercialize Sildenafil Cream, 3.6% for all indications for women related
to female sexual dysfunction and/or female reproductive health, including treatment of the female sexual arousal
disorder, or FSAD. The SST license agreement provides that each party will have customary rights to terminate the
agreement in the event of material uncured breach by the other party and under certain other circumstances. The SST
license agreement provides SST with the right to terminate it with respect to the applicable SST licensed products in
specified countries upon 30 days’ notice if we fail to use commercially reasonable efforts to perform development
activities in substantial accordance with the development plan contained in the SST license agreement, or any
updated development plan approved by the joint development committee, and do not cure such failure within 60 days
of receipt of SST’s notice thereof. See ITEM 1. "BUSINESS-Strategic Agreements for Pipeline Development-SST
License and Collaboration Agreement,” above.
In April 2018, we entered into the Catalent license agreement under which we acquired exclusive global rights
to Catalent's IVR technology platform, including the product candidates we now call DARE-HRT1, DARE-FRT1,
DARE-PTB1 and DARE-OAB1. Under this agreement, we 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, and Catalent may terminate the agreement upon 60 days’
notice for any uncured material breach by us of any of our other obligations under the agreement. See ITEM 1.
"BUSINESS-Strategic Agreements for Pipeline Development-Catalent JNP License Agreement,” above.
If we do not meet our obligations under our license agreements in a timely manner, some of which require the
expenditure or payment to the licensor of significant amounts of cash, or if we are unable to obtain an extension of
deadlines for satisfying our obligations, we could lose our rights under these agreements. Moreover, because some of
our rights to XACIATO and our product candidates are sublicensed to us, our license agreements may be terminated
or we may otherwise lose rights to intellectual property underlying our product or product candidates in the event of
termination or loss of rights by our licensors, which may be outside of our control. There is no assurance that we
would be able to renew or renegotiate license agreements on acceptable terms, or at all, if our existing license
agreements (or the underlying agreements in the case of sublicenses) are terminated. Furthermore, we cannot
guarantee that any license agreement will be enforceable. The termination of these license agreements or our inability
to enforce our rights under these license agreements could result in the loss of our ability to develop, manufacture,
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market or sell XACIATO or the product candidate covered by the agreement, as well as our ability to grant rights to
other third parties to collaborate with us in the development and commercialization of our product or product
candidate, which could have a material adverse effect on our business prospects and operations.
Disputes may arise regarding intellectual property subject to, and any of our rights and obligations under, any
license or other strategic agreement, including:
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the scope of rights granted under the license agreement and other interpretation-related issues;
the extent to which our technology and processes infringe, misappropriate or violate the intellectual
property of the licensor that is not subject to the license agreement;
our diligence obligations under the license agreement and what activities satisfy those diligence
obligations;
the sublicensing of patent and other rights to third parties under any such agreement or collaborative
relationships;
the inventorship and ownership of inventions and know-how resulting from the joint creation or use of
intellectual property by our licensors and us and our collaborators; and
the priority of invention of patented technology.
In addition, the agreements under which we license intellectual property or technology to or from third parties
are complex, and certain provisions in such agreements may be susceptible to multiple interpretations. The resolution
of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights
to the relevant intellectual property or technology or increase what we believe to be our financial or other obligations
under the relevant agreement, either of which could have a material adverse effect on our business, financial
condition, results of operations and prospects. Moreover, if disputes over intellectual property that we have licensed
prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we
may be unable to successfully develop and commercialize the affected product or product candidate.
We may seek to license the product and technology rights to additional product candidates in accordance with
our business strategy, but there can be no assurance we will be able to do so on favorable terms or at all. There are
risks, uncertainties and costs associated with identifying, licensing and advancing product candidates through
successful clinical development. Even if we obtained the rights to additional product candidates, there can be no
assurance those candidates would ever be advanced successfully through clinical development.
Risks Related to Commercialization of XACIATO and Our Product Candidates
The commercial success of XACIATO will depend on Organon’s efforts and capabilities, as well as a variety
of factors, many of which currently are unknown or uncertain, and if commercialization of XACIATO is not
successful, our business and prospects may suffer.
If commercialization of XACIATO is not successful, or is perceived to be unsuccessful, our business, financial
condition, results of operations and prospects may suffer, particularly because XACIATO is the first and only product
for which we have received regulatory approval. XACIATO’s commercial success will depend on many factors,
including:
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the capabilities of Organon and its commitment of sufficient resources to market, distribute and sell the
product;
timely and adequate commercial supply of the finished product and its components;
perceived superiority of its cure rates compared to other available treatments;
the extent to which the approved product labeling contains features or expected benefits that differentiate
it from other available treatments;
preferences by health care providers and women for a vaginally administered therapy;
the prevalence and severity of any adverse side effects;
patient satisfaction and willingness to use it again and refer it to others;
price pressure given the high level of generic treatments;
adequate coverage, pricing and reimbursement from third-party payors;
the willingness of patients, without third-party insurance coverage or adequate reimbursement, to pay for
the product;
the success or failure of other branded therapies;
• market exclusivity provided by our intellectual property rights or conferred by regulatory authorities; and
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approval of new entrants, including alternative, non-antibiotic treatment options.
There is no assurance that the commercial launch of XACIATO in the U.S. will occur when expected. There is
no assurance that Organon’s efforts with respect to XACIATO will be successful or that product sales will be able to
generate revenue at the levels or within the timing we expect or at the levels or within the timing necessary to support
our goals. See also the risks and uncertainties described under “Risks Related to Our Dependence on Third Parties,”
above.
If we are unable to establish or maintain commercial collaborations on favorable terms, on a timely basis, or
at all, we may need to establish a commercial infrastructure, which would be costly, could delay product
launch, and may not be successful.
We have no internal sales, marketing or distribution capabilities. We currently do not intend to directly sell or
distribute our products into the market and instead intend to enter into agreements with third parties to market, sell
and distribute and provide related support services for our product candidates that receive regulatory approval. If we
are unable to establish and maintain commercial collaborations on favorable terms, on a timely basis, or at all, to
generate revenue from our products, we would need to establish a sales organization. There are significant risks
involved with establishing our own commercial infrastructure. For example, recruiting and training a sales force is
expensive and time-consuming and could delay product launch. If we recruit and train a sales force and the
commercial launch of the product is delayed or does not occur for any reason, we would have prematurely or
unnecessarily incurred significant commercialization expenses. This may be costly, and our investment would be lost
if we could not retain or reposition our sales and marketing personnel. Both the launch and ongoing commercial
support of our products would require significant capital, which may not be available to us when needed or on
acceptable terms or at all. All of these factors could strain our cash resources and require us to raise additional
capital. In addition, there is no guarantee that our efforts to generate product revenue would be successful.
Factors that may hinder efforts to commercialize our products on our own include:
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our inability to recruit, train and retain adequate numbers of effective sales and marketing personnel;
the inability of sales personnel to obtain access to physicians or educate an adequate number of
physicians as to the benefits of our products;
the lack of complementary products our sales personnel could offer, which may put us at a competitive
disadvantage compared to companies with more extensive product lines; and
unforeseen costs and expenses associated with creating an independent sales and marketing
organization.
The risks described above may also apply if our commercial collaborations do not involve an exclusive license
of substantially all commercialization rights to a third party and we instead enter into co-promotion arrangements with
a third party.
Failure to timely enter into or maintain a commercialization arrangement with a third party or establish our own
commercialization capabilities, could significantly delay commercial launch of our products or require us to reduce the
scope of any sales and marketing activities, which could have a material adverse effect on our business, financial
condition and results of operations.
Our product candidates, if approved, and XACIATO will face intense competition and our business and
operating results will suffer if we, or our commercial collaborators, fail to compete effectively.
The biopharmaceutical
technological
developments. Our competitors and potential competitors include large, well-established pharmaceutical and
biotechnology companies, many of which have robust product portfolios and strong franchises in women’s health.
Many of our competitors or potential competitors, either alone or with strategic collaborators, have:
intensely competitive and characterized by rapid
industry
is
• much greater financial, research, technical and human resources than we have at every stage of the
product development and commercialization life cycle;
• more extensive experience in designing and conducting clinical trials, nonclinical studies, obtaining
regulatory approvals, and in manufacturing, marketing and selling prescription medical products; and
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approved products or product candidates in late stages of development for one or more of our target
indications.
Competitive products may be equally safe and as effective as our products, but sold at a substantially lower
price. Alternatively, competitive products may be safer or more effective, more convenient to use, have better
insurance coverage or reimbursement levels or be more effectively marketed and sold than our products.
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Our products will compete with products that have already been accepted by the medical community and
patients. If our product candidates fail to generate compelling clinical results or if patients and health care providers
fail to adopt our products for their respective indications, their commercial potential could be adversely impacted or
severely diminished. It is possible that the potential advantages of our product candidates do not materialize or that
the approved prescribing information for our products does not describe expected features or benefits. We also expect
to face competition from new products that enter the market over time. We are aware of products currently under
development intended for the same indications as our product candidates. These competitive product candidates may
prove safer, more tolerable and more effective and may be less expensive, introduced to market earlier, or produced,
marketed and sold more effectively or on a more cost-effective basis, than our product candidates. The success of
competitive products may render potential application of our product candidates noncompetitive or obsolete, even
prior to completion of their development.
With respect to XACIATO, there are many FDA-approved products for treating bacterial vaginosis, and many
are generic. XACIATO will compete with those products. Current therapies for the treatment of bacterial vaginosis
primarily consist of oral and vaginal formulations of antibiotics delivered as a single dose or through multiple doses
over consecutive days. Two of the most common antibiotics used today are generic clindamycin and metronidazole. In
particular, XACIATO will likely be compared with Clindesse® (clindamycin phosphate) Vaginal Cream, 2% as this
treatment is a vaginally administered, single dose cream formulation of clindamycin. If health care providers do not
view the prescribing information for XACIATO, including the cure rates that XACIATO demonstrated in the Phase 3
DARE-BVFREE clinical study, as compelling compared with other products available for the treatment of bacterial
vaginosis, or if competitive products have better insurance coverage or reimbursement levels than XACIATO, health
care providers may opt to continue to prescribe existing treatments rather than recommend or prescribe XACIATO to
their patients. In addition, women may prefer orally delivered options to vaginally administered XACIATO unless they
view XACIATO as providing significantly superior efficacy, safety and/or convenience.
The women's health market includes many generic products and growth in generics is expected to continue,
which could make the successful introduction of our branded products difficult and expensive.
The proportion of the U.S. market made up of generic products has been increasing. If this trend continues, it
may be more difficult for us or a commercial collaborator to introduce a new branded medical product, if approved, at
a price that will allow us to achieve acceptable levels of revenue and net income from product sales. Generic
competition is particularly strong in contraception, hormone therapy and the treatment of bacterial vaginosis, which
are areas in which our product candidates, if approved, and XACIATO will compete. In order for our branded products
to develop commercial markets and for third-party payors to cover these higher cost products, our products must
demonstrate better patient compliance and clinical benefit in their clinical trials compared to other available products.
Additional marketing and educational efforts may be required to introduce a new branded prescription medical
product in order to overcome the trend towards generics and gain access to reimbursement by payors. If we or a
commercial collaborator cannot introduce a product at the desired price or gain reimbursement from payors for the
product, or if patients opt for a lower cost generic product rather than pay out-of-pocket or a higher co-pay for our
product, our revenues or royalties and other license fees, as applicable, will be limited.
XACIATO and any future products may fail to achieve the degree of market acceptance by physicians,
patients third-party payors or others in the medical community necessary for commercial success, which
would negatively impact our business.
XACIATO and any future products may fail to gain sufficient market acceptance by physicians, patients, third-
party payors and others in the medical community. If our products do not achieve an adequate level of market
acceptance, they may not generate significant net product revenues, we may not become profitable and we may
suffer reputational harm. The degree of market acceptance of XACIATO and any future products will depend on
several factors, including:
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the timing of our receipt of any marketing approvals;
the terms of any approvals and the countries in which marketing approvals are obtained, such as any
restrictions on the use of our products together with other medications;
the indications for which the products are approved;
demonstrated evidence of efficacy and safety;
availability of alternative treatments and products;
the approval of other products for the same indications as our products;
convenience and ease of administration for patients compared to alternative treatments and products, or
other potential advantages and disadvantages compared to the alternatives;
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adverse publicity about our products or favorable publicity about competing products;
our ability to offer our products for sale at competitive prices;
the willingness of the target patient population to try new therapies and of physicians to prescribe these
therapies;
the success of any physician education programs that we or our commercial collaborators may create for
the products;
the availability of third-party coverage and adequate reimbursement, including patient cost-sharing
programs such as co-pays and deductibles;
the willingness of uninsured patients to pay for the product;
the willingness of pharmacy chains to stock the products;
effectiveness of our or our collaborators’ sales and marketing strategy and efforts; and
the prevalence and severity of any adverse side effects associated with the product.
If XACIATO or any future product does not achieve an adequate level of market acceptance, it could have a
material and adverse effect on our business, financial condition, results of operation and prospects.
The commercial success of Ovaprene, if approved, will depend on market acceptance of a hormone-free,
monthly intravaginal product, availability and effectiveness of alternative contraceptive products and
women's preferences, as well as the success of Bayer’s marketing and sales efforts.
Today, there are a variety of hormonal and non-hormonal contraceptive options available to women, including
oral contraceptive pills and intrauterine devices, newer hormonal contraceptive products including implants,
injectables, vaginal rings, patches, and hormonal intrauterine systems, and non-hormonal methods such as female
condoms, novel diaphragms, and new methods of female sterilization. In surveys, women have said that the features
they consider most important when selecting a contraceptive method are efficacy, ease-of-use and side effects. To
have significant revenue potential as a new contraceptive product option, Ovaprene may need to have a typical use
efficacy outcome (which is the expected rate of pregnancy protection once the product is used widely under everyday
circumstances) comparable to current non-implanted hormonal contraceptive methods (pills, patches and vaginal
rings), which is approximately 86%-91% typical use efficacy. Clinical testing will also need to demonstrate that the
product can be safely worn for multiple weeks.
If we receive regulatory approval to market Ovaprene, its commercial success, or the success of any other
future contraceptive product candidate we may seek to develop, including our current pre-clinical candidates, will
depend upon the contraceptive market and market acceptance of an alternative method. Risks related to market
acceptance include:
• minimum acceptable contraceptive efficacy rates;
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perceived safety differences of hormonal and/or non-hormonal contraceptive options;
changes in health care laws and regulations, including the ACA, and its effect on pharmaceutical
coverage, reimbursement and pricing, and the birth control mandate;
competition from new lower dose hormonal contraceptives with more favorable side effect profiles; and
new generic contraceptive options including a generic version of the hormone-containing intravaginal
product NuvaRing®.
If one or more of these risks occur, it could reduce the market potential for Ovaprene, or any future
contraceptive product we may seek to develop, and place pressure on our business, financial condition, results of
operations and prospects.
Under our license agreement with Bayer, provided the license grant becomes effective, Bayer will have
exclusive rights to market and sell Ovaprene in the U.S. Accordingly, the potential value of Ovaprene to our company
is highly dependent on the efforts and activities of Bayer. Should Ovaprene fail to generate compelling clinical safety
and efficacy data, the license grant under our agreement with Bayer may never become effective. Even if Bayer elects
to make the license agreement effective, Bayer has significant discretion in determining the resources that it will
allocate to commercialization of Ovaprene and Ovaprene’s commercial success may be limited, in which case our
business, financial condition, results of operations and prospects could suffer significantly.
The commercial success of Sildenafil Cream, 3.6%, if approved, will depend on the availability of alternative
products for female sexual dysfunction disorders, the age group for which our product is indicated and
women's preferences, in addition to the market's acceptance of our topical cream.
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Today, there are no FDA-approved products to treat FSAD. While our goal is for Sildenafil Cream, 3.6% to be
the first product to receive such approval, one or more competitive products may be approved before our product.
Even if we achieve our goal of being first-to-market for FSAD, the costs associated with introducing a new product into
the sexual dysfunctions market would likely be significant, and regardless of the amount spent, there is no guarantee
that our new product will be broadly adopted. Women may be hesitant to use Sildenafil Cream, 3.6% for many
reasons, including the lack of experience with any product designed to treat FSAD, the lack or perceived lack of
clinical evidence supporting its benefits, and the out-of-pocket cost of Sildenafil Cream, 3.6%, particularly if it is not
covered by insurance.
In addition, FSAD is a condition that impacts women of many ages, including older and elderly populations.
We have not yet thoroughly studied the topical or clinical pharmacology of Sildenafil Cream, 3.6% in different patient
populations, and sildenafil, the active ingredient in our drug candidate, has not been tested over long periods of time
in older or elderly women. Older or elderly women may react differently and adversely to Sildenafil Cream, 3.6% than
younger populations. Should Sildenafil Cream, 3.6% show increased risk of adverse reactions, or signs thereof, in
older or elderly women during clinical development, the potential market for Sildenafil Cream, 3.6% could be
significantly limited, which could have a material adverse impact on the value of this program.
If we receive marketing approval in the future, our commercial success with Sildenafil Cream, 3.6% will
depend, in large part, on the ability of the product candidate to demonstrate safety and effectiveness in treating FSAD
in clinical trials, as well as our ability to educate doctors and women about the need to diagnose and treat FSAD and
the potential benefits of using of Sildenafil Cream, 3.6%, at which we or any third party with which we may collaborate
to commercialize Sildenafil Cream, 3.6% may not prove successful. Sexual arousal can be influenced by many
emotional and physiological factors. To be successful, our clinical trials of Sildenafil Cream, 3.6% must anticipate such
factors. Sildenafil Cream, 3.6% is designed to increase local blood flow to the genital tissue. Even if Sildenafil Cream,
3.6% demonstrates success in increasing blood flow, the product candidate may not demonstrate a significant, or any,
increase in arousal or improvement in the overall sexual experience in some women in our clinical trials. If we fail to
generate compelling clinical results, we may not receive regulatory approval to market Sildenafil Cream, 3.6%, or, if
approved, many physicians may not prescribe and/or many women diagnosed with sexual arousal disorder may opt
not to try Sildenafil Cream, 3.6%. If we fail to produce strong clinical outcomes, our ability to build a commercial
market for Sildenafil Cream, 3.6% will be materially adversely impacted.
The commercial success of DARE-HRT1, if approved, will depend on the availability of alternative products
for managing the vasomotor and vaginal symptoms of menopause and women's preferences, in addition to
the market's acceptance of our IVR.
Treatments to address the symptoms associated with menopause, including the vasomotor symptoms, also
known as hot flashes, include combinations of prescription hormones, some of which are FDA-approved and others
which are prepared in compounding pharmacies. Numerous products already exist, and this number is likely to
expand with time. In addition, there has been an emerging preference among some women and providers for bio-
identical hormones that are chemically identical to those the body produces. DARE-HRT1 is designed to offer a
convenient vaginal ring that continuously delivers a combination of bio-identical estradiol and progesterone over 28
days. Until relatively recently, no FDA-approved bio-identical hormone treatments existed. In 2018, Bijuva® estradiol
and progesterone capsules, which are to be taken daily, received the first such approval. Studies have failed to
demonstrate that bio-identical hormones are safer than other hormones, so DARE-HRT1 will need to compete with
many types of hormone therapy options in terms of convenience, safety and efficacy in managing symptoms of
menopause.
Risks related to market acceptance of DARE-HRT1, if approved for hormone therapy, include:
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preference for a vaginal ring delivery of hormone therapy over pills, patches and creams by menopausal
women;
data regarding symptom relief of DARE-HRT1 over other hormonal treatments for vasomotor symptoms
associated with menopause;
preference for bio-identical hormones by women and health care providers;
positive or negative news and research regarding bio-identicals;
the success or failure of Bijuva®, the first FDA-approved bio-identical product;
new information supportive or against the use of hormones in menopause; and
availability of insurance reimbursement for DARE-HRT1.
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Depending upon the direction of the factors above, a commercial market for DARE-HRT1 may develop more
slowly than expected, or not at all, and our business, financial condition, results of operation and prospects could be
hurt as a result.
The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of
off-label uses for prescription medical products. If we or any commercial collaborator is found or alleged to
have improperly promoted any of our products for off-label uses, we may become subject to significant
liability, including fines, penalties or injunctions, and reputational harm.
The FDA and other regulatory agencies strictly regulate the promotional claims that may be made about
prescription medical products such as XACIATO. In particular, a product may not be promoted for uses that are not
approved by the FDA (i.e., off-label uses), as reflected in the product’s approved or cleared labeling. Promotional
labeling and advertising for XACIATO, and for any other of our drug products that receive marketing approval, must be
submitted to FDA at the time of first use and the agency actively solicits reports from health care professionals about
improper promotional claims or activities by the drug manufacturer or distributor. Medical device promotion and
advertising are subject to similar off-label restrictions, although without the same requirement to submit promotional
materials to FDA at the time of first use. Both prescription drug and medical device promotional materials must
present a fair balance between the product’s effectiveness and the risks associated with its use, and must be truthful
and not misleading.
If we or a commercial collaborator is alleged or found to have promoted XACIATO or any other future
commercial product for any off-label use, we may become subject to significant liability and reputational harm. The
federal government has levied large civil and criminal fines against companies for alleged improper medical product
promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested
that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is
changed or curtailed. Other enforcement authorities may also take action against a company for promoting an off-
label use of a prescription medical product, which could result in penalties under other statutory authorities, such as
laws prohibiting false claims for reimbursement. See also “Risks Related to Our Business Operations and Industry-
The pharmaceutical and medical device industries are highly regulated and subject to various fraud and abuse laws,
including, without limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal False Claims Act and the U.S.
Foreign Corrupt Practices Act” below.
If we or our commercial collaborators, as applicable, cannot successfully manage the promotion of XACIATO
or our product candidates, if approved in the future, to ensure compliance with these legal and regulatory
requirements, we could become subject to significant liability, our reputation could be damaged, and adoption of our
products could be considerably impaired.
Unexpected safety, efficacy or quality concerns relating to XACIATO could develop, which could have
significant negative consequences for us.
XACIATO was approved by the FDA based on prior findings of safety or effectiveness of previously approved
clindamycin products and on clinical data from the Phase 3 DARE-BVFREE clinical trial, in which 307 patients were
randomized. Following its commercial launch, XACIATO will be used by larger numbers of patients, potentially for
longer periods of time. New data may emerge from market surveillance or clinical trials of XACIATO that we or a third
party may conduct in the future that give rise to safety, efficacy or quality concerns and result in negative
consequences, including:
• modification to the product’s prescribing information, such as the addition of boxed or other warnings,
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contraindications, or limitations of use;
restrictions on the promotion or marketing of the product;
issuance of “Dear Doctor Letters” or similar communications to health care professionals or the public
regarding safety or efficacy concerns;
imposition of post-marketing clinical trial requirements or other post-marketing studies;
product distribution restrictions or other risk management measures, such as a risk evaluation and
mitigation strategy, or REMS, which could include elements to assure safe use;
warning or untitled letters;
suspension or withdrawal of marketing approvals;
withdrawal of the product from the market;
suspension or termination of ongoing clinical trials, if any;
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refusal by regulators to approve pending marketing applications or supplements to approved applications
that we submit;
suspension of, or imposition of restrictions on, our operations or those of our commercial collaborator or
CMO, including costly new manufacturing requirements;
costly and time-consuming corrective actions;
voluntary or mandatory product recalls or withdrawals from the market;
significant reputational harm; and
product liability claims and lawsuits.
Furthermore, the discovery of significant problems with another intravaginally administered or clindamycin-
containing product that implicates XACIATO, or is perceived to implicate XACIATO, could have an adverse impact on
commercialization of XACIATO and our business, including as a result of occurrence of the events described above.
For example, XACIATO has not been studied in pregnant or breastfeeding women. Should increased risk of
miscarriage or other adverse effects on maternal or fetal outcomes or breastfed infants be observed in future data
from market surveillance or clinical trials of XACIATO, or products that implicate or are perceived to implicate
XACIATO, XACIATO’s commercial potential may be limited and we could become subject to product liability claims
and lawsuits.
The occurrence of any of the circumstances described above could reduce XACIATO’s market acceptance,
inhibit or delay its commercialization within or outside of the U.S. and adversely affect sales of XACIATO, which could
have a material adverse impact on our financial condition, operating results and stock price.
If we suffer negative publicity concerning the safety or efficacy of XACIATO or the product candidates we
develop, our reputation could be harmed, product sales could be adversely affected or we may be forced to
cease or curtail product development efforts.
If concerns should arise about the actual or anticipated clinical outcomes regarding the safety of XACIATO or
any of our product candidates, including as a result of safety concerns related to third-party products containing the
same or similar active or excipient substances, such concerns could adversely affect the market’s perception of our
product and product candidates. Negative publicity could be time consuming and expensive to address and could
adversely affect potential opportunities with strategic partners or collaborators, lead to a decline in product sales, and
negatively impact investor sentiment toward a product or product candidate or our company as a whole, which could
lead to a decline in the price of our common stock.
We are and will remain subject to ongoing regulatory requirements even after obtaining regulatory approval
for a product candidate.
Even though XACIATO has been approved by the FDA for the treatment of bacterial vaginosis and even if any
other product candidates we develop are approved, we are and will be subject to ongoing regulatory requirements
with respect to manufacturing, labeling, packaging, storage, advertising, promotion, sampling, record-keeping,
conduct of post-marketing clinical trials and submission of safety, efficacy and other post-approval information,
including both federal and state requirements in the United States and requirements of comparable foreign regulatory
authorities.
In addition, manufacturers and manufacturers’ facilities are required to continuously comply with FDA and
comparable foreign regulatory authority requirements, including ensuring quality control and manufacturing
procedures conform to cGMP regulations and corresponding foreign regulatory manufacturing requirements.
Accordingly, we and our contract manufacturers will be subject to continual review and inspections to assess
compliance with cGMP and adherence to commitments made in our NDA or PMA submissions to the FDA.
Any marketing approvals we receive for our other product candidates in the future may be subject to
limitations on the approved indicated uses for which the product may be marketed or to the conditions of approval, or
contain requirements for potentially costly post-marketing testing, including Phase 4 clinical trials, and surveillance to
monitor the safety and efficacy of the product. In addition, we will be required to report adverse reactions and
production problems, if any, to the FDA and comparable foreign regulatory authorities (when products are approved in
foreign markets). Any new legislation addressing drug safety issues could result in delays in product development or
commercialization, or increased costs to assure compliance.
If a regulatory agency discovers previously unknown problems with XACIATO or a future product, such as
problems with the facility where the product is manufactured, or it disagrees with the promotion, marketing or labeling
of a product, the regulatory agency may impose restrictions on that product or on us or our commercial collaborator,
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including requiring withdrawal of the product from the market. If we are unable to comply with applicable regulatory
requirements, a regulatory agency or enforcement authority may, among other things:
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issue warning letters;
impose civil or criminal penalties;
suspend or withdraw regulatory approval;
suspend any of our ongoing clinical trials;
refuse to approve pending applications or supplements to approved applications submitted by us;
impose restrictions on our operations, including closing our contract manufacturers’ facilities; or
require a product recall.
Any government investigation of alleged violations of law would require us to expend significant time and
resources in response and could generate adverse publicity. Any inability to comply with ongoing regulatory
requirements may significantly and adversely affect our ability to develop and commercialize our products and the
value of our business, and our operating results would be adversely affected.
Failure to successfully obtain coverage and reimbursement for XACIATO and any future products in the
United States, or the availability of coverage only at limited levels, would diminish our ability, or that of a
commercial collaborator, to generate net product revenue.
Coverage from government health care programs and private commercial health insurance companies is
critical to the commercial success of XACIATO and any future products. Market acceptance and sales of XACIATO
and any future products that we or a commercial collaborator may seek to commercialize will depend in part on the
extent to which reimbursement for these products will be available from third-party payors. Third-party payors, such as
government health care programs, private health insurers, managed health care providers, and other organizations,
are increasingly challenging medical product prices and examining the medical necessity and cost-effectiveness of
medical products, in addition to their safety and efficacy. If these third-party payors do not consider XACIATO or any
future product to be cost-effective compared to other available therapies and medical products, they may not cover
our products as a benefit under their plans or, even if they do, the level of payment may not be sufficient to allow us,
or a commercial collaborator, to sell our products on a profitable basis. Coverage decisions can depend upon clinical
and economic standards that disfavor new prescription medical products when more established or lower cost
alternatives are already available or subsequently become available. Third-party payor coverage may not be available
to patients for XACIATO or any future product. If third-party payors do not provide adequate coverage and
reimbursement, health care providers may not prescribe our products or patients may ask their health care providers
to prescribe competing products with more favorable reimbursement.
Significant uncertainty exists as to the reimbursement status for newly approved prescription medical
products, including coverage and payment. There is no uniform policy requirement for coverage and reimbursement
for prescription medical products among third-party payors in the United States; therefore, coverage and
reimbursement for our products could differ significantly from payor to payor. In the U.S., the principal decisions about
reimbursement for new medical products are typically made by the Centers for Medicare and Medicaid Services, or
CMS, as CMS decides whether and to what extent a new medical product will be covered and reimbursed under
Medicare. Third-party payors often rely upon Medicare coverage policy and payment limitations to a substantial
degree in setting their own reimbursement policies, but they also have their own methods and approval process apart
from Medicare coverage and reimbursement determinations. It is difficult to predict what CMS will decide with respect
to reimbursement. Decisions regarding the extent of coverage and amount of reimbursement to be provided for
XACIATO and any future products will be made on a payor-by-payor basis. Accordingly, one third-party payor’s
determination to provide coverage for a product does not assure that other payors will also provide coverage and
adequate reimbursement for the product. Moreover, reimbursement agencies in Europe may be more conservative
than CMS, should XACIATO or any of our product candidates be approved for marketing in Europe.
In addition to CMS and private payors, professional organizations can influence decisions about
reimbursement for new medical products by determining standards of care. In addition, many private payors contract
with commercial vendors who sell software that provides guidelines that attempt to limit utilization of, and therefore
reimbursement for, certain products deemed to provide limited benefit as compared to existing alternatives. Such
organizations may set guidelines that limit reimbursement or utilization of any of our commercialized products.
To secure coverage and reimbursement for XACIATO and any future product, we or a commercial
collaborator may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical
necessity and cost-effectiveness of the product to third-party payors, which costs would be in addition to those
required to obtain FDA or other comparable regulatory approvals. A payor’s decision to provide coverage for a product
does not imply that an adequate reimbursement rate will be approved. Managed care organizations and other private
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insurers frequently adopt their own payment or reimbursement reductions. Consolidation among managed care
organizations has increased the negotiating power of these entities. Third-party payors increasingly employ
formularies to control costs by negotiating discounted prices in exchange for formulary inclusion. Failure to obtain
timely or adequate pricing or formulary placement for XACIATO or any future product, or obtaining such pricing or
placement at unfavorable pricing levels, could materially adversely affect our business, financial conditions, results of
operations and prospects. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all
cases or at a rate that covers our costs, or those of a commercial collaborator. Interim payments for new products, if
applicable, also may not be sufficient to cover our costs, or those of a commercial collaborator, and may not be made
permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used,
may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated into
existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates
required by third-party payors and by any future relaxation of laws that presently restrict imports of products from
countries where they may be sold at lower prices than in the United States.
Accordingly, the coverage determination process is often a time-consuming and costly process that will
require us or our commercial collaborator to provide scientific and clinical support for the use of our products to each
payor separately, with no assurance that coverage and adequate payment will be applied consistently or obtained.
The process for determining whether a payor will cover and how much it will reimburse a product may be separate
from the process of seeking approval of the product or for setting the price of the product. Even if reimbursement is
provided, market acceptance of our products may be adversely affected if the amount of payment for our products
proves to be cost prohibitive for health care providers or their patients, or less profitable than alternative treatments or
products, or if administrative burdens make our products less desirable to use. Our inability, or that of our commercial
collaborator, to obtain coverage and profitable payment rates from both government-funded and private payors for
XACIATO or any future product could have a material adverse effect on our operating results, our ability to raise
capital needed to execute our business strategy and our overall financial condition.
Additionally, the containment of health care costs has become a priority of federal and state governments and
the prices of drug products have been a focus of this effort. For example, there have been several recent U.S.
Congressional inquiries and proposed bills designed to, among other things, bring more transparency to drug pricing,
review the relationship between pricing and manufacturer patient programs, and reform government program
reimbursement methodologies for drugs. 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’ 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. It is uncertain whether and how future legislation or regulatory changes could affect prospects
for XACIATO or our product candidates or what actions third-party payors may take in response to any such health
care reform proposals or legislation. Adoption of price controls and cost-containment measures, and adoption of more
restrictive policies in jurisdictions with existing controls and measures reforms, may prevent or limit our ability, or the
ability of a commercial collaborator, to commercialize XACIATO or any future products as well as our ability to
generate revenue and attain profitability.
Failure by us or a commercial collaborator to obtain timely and adequate coverage and pricing for XACIATO
and any future products, or obtaining such coverage and pricing at unfavorable levels, could materially adversely
affect our business, financial condition, results of operations and prospects.
Even seemingly small copayments or other cost-sharing requirements could dramatically reduce the market
potential for XACIATO and our product candidates.
If the out-of-pocket costs for XACIATO or any of our product candidates, if approved, are deemed by women
to be unaffordable, a commercial market may never develop or the market potential for that product may be
significantly reduced, which could have a material adverse effect on our business, financial condition, and prospects.
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With regard to contraceptive products, the ACA and subsequent regulations enacted by DHHS, require health
plans to provide coverage for women’s preventive care, including all forms of FDA-cleared or approved contraception,
without imposing any cost sharing on the plan beneficiary. These regulations ensure that women in the U.S. who wish
to use an approved form of contraception may request it from their doctors and their health insurance plan must cover
all costs associated with such contraceptive products. In January 2022, the DHHS, Department of Labor, and
Treasury Department jointly issued guidance on implementation of this ACA mandate, among other things. The
recently issued federal guidance makes clear that all FDA-approved or cleared contraceptive products that are
determined by an individual’s medical provider to be medically appropriate for such individual must be covered
without-cost sharing, regardless of whether the product is specifically identified in a Birth Control Guide published by
the FDA. Any future repeal or elimination of the ACA’s preventive care coverage rules would mean that women
seeking to use prescribed forms of contraceptives may have to pay some portion of the cost for such products out-of-
pocket, which could deter some women from using prescription contraceptive products or branded prescription
contraceptive products, including Ovaprene and our other investigational contraceptive products, if and when
approved by the FDA.
As no FDA-approved treatments for FSAD currently exist, there is little precedent to help assess whether
health insurance plans will cover Sildenafil Cream, 3.6% if approved.
Sildenafil Cream, 3.6%, is being developed for female sexual arousal disorder, a life altering, but not a life
threatening, condition, Hence, there is no assurance that third-party reimbursement will be available for Sildenafil
Cream, 3.6%, if approved. Even if reimbursement becomes available, the amount of such reimbursement may not
make our product affordable to women and profitable to us. Insurers may deem Sildenafil Cream, 3.6% to be a life-
style drug and decide not to provide reimbursement. Today, many health insurance plans provide reimbursement for
male sexual arousal medications. However, we cannot predict whether they will continue to do so or whether they will
do so for FSAD treatments as well. The safety and efficacy data from our clinical trials may impact whether Sildenafil
Cream, 3.6% will become eligible for insurance coverage, and if it does, the level of such reimbursement. In an
environment of rapidly rising health care costs, insurers have been looking for ways to reduce costs, which could
make it difficult for new therapies to gain coverage if they are not deemed medically critical or essential. If Sildenafil
Cream, 3.6% fails to obtain insurance coverage, or if the patient’s share of the cost is deemed to be expensive, a
market may never develop for Sildenafil Cream, 3.6%, which would have a material adverse effect on our financial
condition and prospects.
The commercial success of products we develop, if approved, will be impacted by the prescribing information
approved by the FDA and comparable regulatory authorities outside the United States.
The commercial success of any products we develop will significantly depend upon our ability, or that of our
commercial collaborator, to obtain approval from the FDA and other regulatory authorities of prescribing information
for the product that adequately describes expected features or benefits. Failure to achieve such approval will prevent
or substantially limit our or our collaborators’ ability to advertise and promote such features and benefits in order to
differentiate our products from competing products. This failure could have a material adverse effect on our business,
financial condition, results of operations and prospects.
Drug products and drug/device combination products are complex to manufacture, and manufacturing
disruptions may occur that could cause significant delays and disruption in the supply of XACIATO and any
future product.
Our product and product candidates are complex to manufacture and we are dependent on, and expect to
continue to rely on, contract manufacturers and other third parties to supply our products and their components.
Manufacturing disruptions may occur, including as a result of scaling up production to meet commercial requirements
or due to global supply chain disruptions. Such problems may prevent the production of lots that meet the
specifications required for sale of our product and may be difficult and expensive to resolve. In particular because we
rely on single source contract manufacturers and suppliers, if disruptions occur in the operations of one those third
parties, we may experience immediate shortages of our products. If any such issues were to arise with respect to
XACIATO or future products, we could lose sales and associated revenue, incur additional costs, delay commercial
launch of new products or suffer harm to our reputation.
See also ““Risks Related to Our Dependence on Third Parties- We rely on third-party suppliers and
manufacturers for clinical and commercial supplies of XACIATO and our product candidates, including multiple single
source suppliers and manufacturers, and we currently have no plans to build or acquire our own manufacturing
capabilities. If these third parties do not perform as we expect, do not maintain their regulatory approvals or become
subject to negative circumstances, it could delay, prevent or impair our product development or commercialization
efforts, or those of our collaborators,” and “- In some cases, we may be contractually required to obtain clinical or
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commercial product supplies from specific third parties or there may be a limited number of third-party suppliers of raw
materials and other components of our product and product candidates, which may heighten our dependence on
those third parties and the risk of manufacturing disruptions” above.
If competitors obtain approval for generic versions of XACIATO or any future products, our business may
suffer.
Although XACIATO is FDA-approved for commercialization in the United States, it and any future product may
face direct competition from generic products earlier or more aggressively than anticipated, depending upon how well
such approved products perform in the United States prescription drug market. In addition to creating the 505(b)(2)
NDA pathway, the Hatch-Waxman Act amendments to the FDCA authorized the FDA to approve generic drugs that
are the same as drugs previously approved for marketing under the NDA provisions of the statute pursuant to
abbreviated new drug applications, or ANDAs. An ANDA relies on the nonclinical and clinical testing conducted for a
previously approved reference listed drug, or RLD, and must demonstrate to the FDA that the generic drug product is
identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, and the
strength of the drug and also that it is “bioequivalent” to the RLD. The FDA is prohibited by statute from approving an
ANDA when certain marketing or data exclusivity protections apply to the RLD. If a third party is able to demonstrate
bioequivalence without infringing our patents, that third party may then be able to introduce a competing generic
product onto the market.
The FDA granted XACIATO for the treatment of bacterial vaginosis in female patients 12 years of age and
older three years of data exclusivity, which was extended by five years under the GAIN Act, such that the period is set
to expire on December 7, 2029. XACIATO has also been designated as an RLD by the FDA for purposes of future
generic drug development. Accordingly, the data exclusivity period should block the FDA from approving either a
subsequent ANDA or 505(b)(2) NDA that relies in whole or in part on our protected clinical data. We cannot predict the
interest of potential follow-on competitors in the future XACIATO market, whether a third party will attempt to invalidate
our period of exclusivity or otherwise force the FDA to take other actions, or how quickly others may seek to come to
market with competing products after the FDA-granted data exclusivity period ends. Other products candidates we
develop, if approved, may also receive marketing exclusivity under the FDCA that may similarly be subject to
challenge or uncertainty.
We will need to obtain FDA approval of any proposed prescription medical product name, and any failure or
delay associated with such approval may adversely affect our business.
Any name we intend to use for our current or future product candidates will require approval from the FDA
regardless of whether we have secured a formal trademark registration from the United States Patent and Trademark
Office, or USPTO. The FDA typically conducts a review of proposed new prescription medical product names,
including an evaluation of the potential for confusion with other product names. The FDA may also object to a
proposed product name if it believes the name inappropriately implies medical claims or contributes to an
overstatement of efficacy. If the FDA objects to any of our proposed product names, we may be required to adopt
alternative names for our product candidates. If we adopt alternative names, we would lose any goodwill or brand
recognition developed for previously used names and marks as well as the benefit of any existing trademark
applications for such product candidate and may be required to expend significant additional resources in an effort to
identify a suitable product name that would qualify under applicable trademark laws, not infringe the existing rights of
third parties, and be acceptable to the FDA. We or a commercial collaborator may be unable to build a successful
brand identity for a new trademark in a timely manner or at all, which would limit our or our collaborator’s ability to
commercialize our product candidates.
Even if we receive marketing approval from the FDA, we may fail to receive similar approvals outside the
United States, which could substantially limit the value of our products.
To market XACIATO or any future product outside the United States, we, or our commercial collaborators,
must obtain separate marketing approvals from comparable regulatory authorities for each jurisdiction and comply
with numerous and varying regulatory requirements of other countries, including clinical trials, commercial sales,
pricing, manufacturing, distribution and safety requirements. The time required to obtain approval in other countries
might differ from, and be longer than, that required to obtain FDA approval. Approval by the FDA or a comparable
foreign authority does not ensure approval by regulatory authorities in any other countries or jurisdictions, but a failure
to obtain marketing approval in one jurisdiction may adversely impact the likelihood of approval in other jurisdictions.
The marketing approval process in other countries may include all of the risks associated with obtaining FDA approval
in the United States, as well as other risks. Further, for approval in foreign jurisdictions, we may not have rights to
reference the necessary clinical and nonclinical data that we do not own or have licensed rights to use, as we
anticipate doing under the 505(b)(2) regulatory pathway in the United States, and we, or our commercial collaborator,
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may have to develop our own additional data to seek approvals in other jurisdictions. In addition, in many countries
outside the United States, a new product must receive pricing and reimbursement approval prior to commercialization.
This can result in substantial delays in these countries. Additionally, the product labeling requirements outside the
United States may be different and inconsistent with the United States labeling requirements, negatively affecting our
ability to market our products in countries outside the United States.
In addition, we may be subject to fines, suspension or withdrawal of marketing approvals, product recalls,
seizure of products, operating restrictions and criminal prosecution if we, or our commercial collaborator, fail to comply
with applicable foreign regulatory requirements. In such an event, our ability, or our commercial collaborator’s ability,
to market to the full target market for our products will be reduced and our ability to realize the full market potential of
our products will be harmed, which could have a material adverse effect on our business, financial condition, results of
operations and prospects.
Risks Related to Employee Matters and Managing Our Growth
We have a relatively small number of employees to manage and operate our business.
As of March 30, 2022, we had 28 employees, of which 20 were full-time and eight were part-time. Our focus
on limiting cash utilization requires us to manage and operate our business in a highly efficient manner, relying on
consultants and other third-party service providers for product development and operational expertise we require, and
to limit full-time personnel resources. With a small number of employees, our ability to supervise the service providers
we engage may be constrained, which may impact the timing and quality of services we receive. No assurance can
be given that we will be able to run our operations or accomplish all of the objectives we otherwise would seek to
accomplish with the limited personnel resources we currently have.
In response to the COVID-19 pandemic, in March 2020, we implemented work-from-home and restricted
travel policies. Since March 2020, the governors of California and Massachusetts, states in which we have operations,
have issued, rescinded and reinstated statewide or regional stay-at-home orders and individual isolation and
quarantine requirements to help combat the spread of COVID-19 that have impacted our ability to require or allow our
employees to work in our facilities. In addition, many, if not all, of our consultants, collaborators and vendors on which
we rely heavily have implemented similar policies, are or may be subject to similar orders, and/or may re-allocate
resources otherwise intended for our activities to activities intended to address the COVID-19 pandemic. We have
modified, and we may further modify, our work-from-home and restricted travel policies during the course of the
pandemic. When and if we and our collaborators and service providers revert to pre-pandemic policies is
indeterminable currently. Prolonged and indefinite remote working arrangements and travel restrictions may adversely
affect our ability to effectively manage and operate our business, materially increase our expenses and may result in
delays in our anticipated development program timelines.
In addition, we and our collaborators and service providers may be adversely affected by worker shortages
directly or indirectly related to the COVID-19 pandemic that are difficult to predict, plan for or mitigate. For example, in
late 2021, companies across many industries began experiencing severe staffing shortages reportedly caused by
work absences due to a surge in COVID-19 cases and an economic trend known as the Great Resignation in which
employees are voluntarily quitting their jobs in large numbers. Due to our small workforce, if multiple employees
become unable to work or were to resign at roughly the same time, our ability to effectively manage and operate our
business could become significantly impaired and our expenses could increase materially, including as a result of
expenditures related to recruiting, hiring and training qualified new employees and engaging additional consultants
and service providers to perform the job responsibilities of the employees on leave or who resign. If we or our
collaborators or service providers experience staffing shortages, it may result in significant delays in our anticipated
development program timelines.
If we fail to attract and retain management and other key personnel, we may not successfully complete
development of, obtain regulatory approval for or commercialize our product candidates, or otherwise
implement our business plan.
Our ability to compete in the highly competitive pharmaceutical, biotechnology and medical device industries
depends upon our ability to attract and retain highly qualified managerial and key personnel. We depend highly on our
senior management. Losing the services of our senior management could impede, delay or prevent the development
and commercialization of our product candidates, hurt our ability to raise additional funds and negatively impact our
ability to implement our business plan. If we lose the services of any of our senior management team, we might not
find suitable replacements on a timely basis or at all, and our business could be materially harmed. We do not
maintain “key man” insurance policies on the lives of any of our senior management employees.
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We might not attract or retain qualified management and other key personnel in the future due to the intense
competition for qualified personnel among biopharmaceutical and biotechnology companies and other life sciences
R&D organizations, particularly in the San Diego area where we are headquartered. In addition, our limited personnel
and financial resources may result in greater workloads for our employees compared to those at companies with
which we compete for personnel, which may lead to higher levels of employee burnout and turnover. As a result, we
may have to expend significant financial resources in our employee recruitment and retention efforts. Many of the
other companies within the women’s health products industry with whom we compete for qualified personnel have
greater financial and other resources, different risk profiles and longer histories in the industry than we do. They also
may provide more diverse opportunities and better opportunities for career advancement. If we cannot attract and
retain the necessary personnel to accomplish our business objectives, we may experience constraints that will harm
our ability to implement our business strategy and achieve our business objectives.
New legal precedent, laws and regulations could make it costlier or more difficult for us to obtain certain types
of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the coverage that is the same or similar to our current
coverage. The impact of these events could also make it more difficult for us to attract or retain qualified persons to
serve as our senior management or on our board of directors.
We may not be successful in our efforts to identify and acquire or in-license additional product candidates or
technologies, which may limit our growth potential.
Our business development strategy involves identifying and acquiring or in-licensing potential product
candidates or technologies. We assembled our current portfolio of product candidates through the acquisition of
companies and assets and in-licensing transactions beginning in 2017. We may engage in strategic transactions that
could cause us to incur additional liabilities, commitments or significant expense.
These efforts may not be successful, including for reasons discussed in elsewhere in these risk factors and
also:
• we may fail to appropriately evaluate the potential risks and uncertainties associated with a transaction;
•
there may be intense competition to acquire or in-license promising product candidates and technologies
and many of our competitors have considerably more financial, development and commercialization
resources than we have;
• we may not effectively integrate the acquired or in-licensed assets, businesses, personnel, intellectual
property or business relationships; and
• we may underestimate the development costs, timelines, regulatory approval challenges and
•
overestimate the market opportunity for the potential product candidates and technologies; and
the acquired or in-licensed product candidates may prove during development to be unsafe or not
effective in their targeted indications.
We may fail to realize the anticipated value of any strategic transaction and the costs of a transaction may
outweigh the benefits we realize from it. Any strategic transaction we pursue may not produce the outcomes and
benefits we originally anticipated and may adversely impact our financial condition and be detrimental to our company
in general.
Risks Related to Our Intellectual Property
Our failure to adequately protect or enforce our and our licensors’ intellectual property rights could materially
harm our proprietary position in the marketplace or prevent or impede the commercialization of our current
and potential future products.
Our success depends in part on our ability, and the ability of our licensors, to obtain and maintain protection in
the United States and other countries for the intellectual property covering or incorporated into our technologies and
products. Many of the patents and patent applications relied upon by us are licensed to us by third parties. Our ability,
or the ability of our licensors, to protect our product candidates from unauthorized use or infringement by third parties
depends substantially on our abilities and the abilities of such licensors to obtain and maintain, or license, valid and
enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents
covering pharmaceutical inventions and the scope of claims made under these patents, our ability, and that of our
licensors, to obtain or enforce patents is uncertain and involves complex legal and factual questions for which
important legal principles are unresolved. As a result, the validity and enforceability of patents cannot be predicted
with certainty. In addition, we do not know whether we or our licensors were the first to make the inventions covered
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by each of our issued patents and pending patent applications. We or our licensors may not have been the first to file
patent applications for these inventions.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent
agencies in several stages over the lifetime of the patent. The USPTO and various foreign governmental patent
agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions
during the patent application process. While an inadvertent lapse can in many cases be cured by payment of a late
fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result
in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the
relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or patent
application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-
payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might
be able to enter the market, which would have a material adverse effect on our business.
We cannot be certain if any of the patents that cover our product candidates will be eligible to be listed in the
Orange Book following a drug product marketing approval. The advantage of being listed in the Orange Book is that,
under the Hatch-Waxman Act, any future generic applicant for any of our approved products needs to include a patent
certification in their generic application with respect to each patent listed in the Orange Book for an approved product
(referred to as the “listed drug”) for which they are seeking approval. If the generic applicant believes that any of the
patents in the Orange Book on the listed drug is invalid, unenforceable, or not infringed by their product, the generic
applicant usually will file a “Paragraph IV” certification on that patent if they plan to challenge the patent. When a
generic applicant files a Paragraph IV certification, they must provide the listed drug applicant (and the patent owner if
different) a notice that they filed a generic application with the Paragraph IV certification. If, in reply to that notice, the
listed drug holder files a patent lawsuit against the generic applicant within 45 days of the Paragraph IV notice, a 30-
month automatic stay is imposed by the Hatch-Waxman Act on FDA during which FDA may not approve the generic
application (unless the patent litigation is resolved in the generic applicant’s favor). These 30-month stays are major
protection available in the Hatch-Waxman Act for innovative drug makers. However, if our products are approved, but
one or more of our patents are not listed in the Orange Book, generic firms that might seek approval of a generic
version of our product would not have to “certify” in their generic drug applications as to any such unlisted patent. This
could result in the absence of a 30-month stay and thus faster approval of some generic applications for our products.
Other companies or individuals may independently develop similar or alternative technologies or duplicate our
technologies. This could enable our competitors to develop a competing product that avoids infringing our patents. In
such an event, our competitors might be able to enter the market, which could significantly harm the commercial
opportunity for our product candidates.
The laws of some foreign countries do not protect our proprietary rights to the same extent or in the same
manner as U.S. laws, and we may encounter significant problems in protecting and defending our proprietary rights in
these countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the
extent that our proprietary technologies, products and product candidates are covered by valid and enforceable
patents or are effectively maintained as trade secrets.
Our patent strategy for protecting Ovaprene includes in-licensing a patent family from ADVA-Tec, whose last
claim expires in August 2028, but which could be extended to August 2033 in the United States and Europe. Patent
prosecution for the intellectual property incorporated into Ovaprene is entirely controlled by ADVA-Tec and we have
little, if any, influence or control over such patent prosecution.
Our patent strategy for protecting Sildenafil Cream, 3.6% includes in-licensing a patent family from SST,
whose last U.S. claim expires in June 2029, but which could be eligible for three-year market exclusivity under the
Hatch-Waxman Act in the United States. However, if granted 3-year exclusivity, generic applicants can still submit an
abbreviated application during the 3-year period and the FDA is required to review the application, but will defer any
approval until the end of the 3-year period. Three-year exclusivity differs from 5-year exclusivity under the Hatch-
Waxman Act, which bars the submission of a generic application during the 5-year period, with the exception that a
generic application can be filed after 4 years if it contains a Paragraph IV certification challenging an Orange Book-
listed patent for the brand drug.
With respect to patents related to Sildenafil Cream, 3.6%, SST has the sole right, but not the obligation, to
prepare, file, prosecute and maintain such patents. We will be responsible for the costs incurred to maintain and
prosecute all such patents and we will be kept informed of all strategies. However, we will have little if any, influence
or control over implementing the patent strategy.
With respect to patent rights related to our IVR product candidates, including DARE-HRT1 and DARE-FRT1,
The General Hospital Corporation (also known as Massachusetts General Hospital or MGH) has the sole right to
prosecute and maintain its patent rights, and we have the right to prosecute and maintain Catalent's patent rights. We
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will be responsible for the costs incurred by MGH to maintain and prosecute such patents and we will be kept
informed of all strategies. However, we will have little, if any, influence or control over MGH’s implementation of the
patent strategy.
With respect to patents related to DARE-VVA1, we have the right and obligation, at our expense, to prosecute
and maintain the in-licensed patent rights in certain major markets, if possible.
There is a substantial backlog of patent applications at the USPTO that may lead to delays in having patent
applications examined by the USPTO. There can be no assurance that any patent applications relating to our
products or methods will be issued as patents or, if issued, that the patents will not be challenged, invalidated or
circumvented or that the rights granted thereunder will provide a competitive advantage. We and our licensors may
not obtain patent rights on products, treatment methods or manufacturing processes that we may develop or to which
we may obtain license or other rights. Even if patents are issued to us and our licensors, rights under any issued
patents may not provide us with sufficient protection for our product candidates or provide sufficient protection to
afford us a commercial advantage against our competitors or their competitive products or processes. It is possible
that no patents will be issued from any pending or future patent applications owned by us or licensed to us. Others
may challenge, seek to invalidate, infringe or circumvent any patents we own or license, including the patents we
have licensed to date and any other patents we may license in the future. Conversely, in the future we may have to
initiate litigation against third parties to enforce our intellectual property rights. The defense and enforcement of patent
and intellectual property claims are both costly and time consuming, even if the outcome is favorable to us. Any
adverse outcome could subject us to significant liabilities, require us to license disputed rights from others or require
us to cease selling our future products.
In addition, many other organizations are engaged in research and product development efforts that may
overlap with our products. Such organizations may currently have, or may obtain in the future, legally blocking
proprietary rights, including patent rights, in one or more products or methods we are developing or considering for
development. These rights may prevent us from commercializing technology, or they may require us to obtain a
license from the organizations to use the technology. We may not obtain any such licenses that may be required on
reasonable financial terms, if at all, and there can be no assurance that the patents underlying any such licenses will
be valid or enforceable. As with other companies in the pharmaceutical industry, we are subject to the risks that
persons located in other countries will engage in development, marketing or sales activities of products that would
infringe our intellectual property rights if such activities were conducted in the United States and enforcing our
intellectual property rights against such persons may be difficult or not possible.
Our patents and other intellectual property also may not afford protection against competitors with similar
technology. We may not have identified all patents, published applications or published literature that affect our
business either by blocking our ability to commercialize our product candidates, by preventing the patentability of our
products or by covering the same or similar technologies that may affect our ability to market or license our product
candidates. Many companies have encountered difficulties in protecting and defending their intellectual property rights
in foreign jurisdictions. If we encounter such difficulties or are otherwise precluded from effectively protecting our
intellectual property rights in either the United States or foreign jurisdictions, our business prospects could be
substantially harmed.
In addition, because of funding limitations and our limited cash resources, we may not be able to devote the
resources that we might otherwise desire to prepare or pursue patent applications, either at all or in all jurisdictions in
which we might desire to obtain patents, or to maintain already-issued patents.
The patents and the patent applications covering Sildenafil Cream, 3.6% and XACIATO are limited to specific
formulations, processes and uses of sildenafil and clindamycin, and our market opportunity may be limited
by the lack of patent protection for the active ingredient itself and other formulations and delivery technology
and systems that may be developed by competitors.
The active ingredient in our product candidate for FSAD, Sildenafil Cream, 3.6%, is sildenafil and the active
ingredient in our FDA-approved product for the treatment of bacterial vaginosis, XACIATO, is clindamycin. Patent
protection for these ingredients has expired and generic products are available. As a result, a competitor that obtains
the requisite regulatory approvals could offer products with the same active ingredient in a different formulation so
long as the competitor does not infringe any process, use or formulation patents that we have developed, or that may
not be barred by any three-year Waxman-Hatch Act exclusivity, or any GAIN Act extension thereof, we might enjoy
upon approval of our products.
Competitors may seek to develop and market competing formulations that may not be covered by our patents
and patent applications. The commercial opportunity for Sildenafil Cream, 3.6% and XACIATO could be significantly
harmed if competitors are able to develop and commercialize alternative formulations using these ingredients.
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The patents and the patent applications covering our IVR product candidates cover the method of delivery
and the device and our market opportunity may be limited by the lack of patent protection for the active
ingredients themselves and other formulations, delivery technology and systems that may be developed by
competitors.
The active ingredients in our IVR product candidates include bio-identical progesterone, estrogen and
oxybutynin, and none of those ingredients are proprietary to us. As a result, we must compete with currently available
products and any future products developed by competitors using same active ingredients in a different formulation or
via a different delivery system. The commercial opportunity for our IVR product candidates, including DARE-HRT1 for
hormone therapy, could be significantly harmed if competitors develop and commercialize alternative formulations or
better delivery approaches.
The patents and the patent applications covering the use and delivery of DARE-VVA1 and our market
opportunity may be limited by the lack of patent protection for the active ingredient itself and other
formulations, delivery technology and systems that may be developed by competitors.
The active ingredient in DARE-VVA1, tamoxifen, is not proprietary to us. As a result, we must compete with
currently available products and any future products developed by competitors using the same active ingredient in a
different formulation or via a different delivery system. The commercial opportunity for our product candidate for the
treatment of vulvar and vaginal atrophy could be significantly harmed if competitors develop and commercialize
alternative formulations or better delivery approaches.
We may become involved in patent litigation or other intellectual property proceedings relating to our future
product approvals, which could result in liability for damages or delay or stop our development and
commercialization efforts.
The pharmaceutical industry has been characterized by significant litigation and other proceedings regarding
patents, patent applications, trademarks and other intellectual property rights. The situations in which we may become
party to such litigation or proceedings may include any third parties initiating litigation claiming that our products
infringe their patent or other intellectual property rights, or that one of our trademarks or trade names infringes the
third party’s trademark rights; in such case, we would need to defend against such proceedings. The costs of
resolving any patent litigation or other intellectual property proceeding, even if resolved in our favor, could be
substantial. Many of our potential competitors will be able to sustain the cost of such litigation and proceedings more
effectively than us because of their substantially greater resources. Uncertainties resulting from the initiation and
continuation of patent litigation or other intellectual property proceedings could have a material adverse effect on our
ability to compete in the marketplace, our financial condition and our stock price. Patent litigation and other intellectual
property proceedings may also consume significant management time.
If a competitor infringes upon our patent or other intellectual property rights, including any rights licensed by
us, enforcing those rights may be costly, difficult and time-consuming. Even if successful, litigation to enforce our
intellectual property rights or to defend our patents against challenge could be expensive and time-consuming and
could divert our management’s attention. We may not have sufficient resources to enforce our intellectual property
rights or to defend our patent or other intellectual property rights against a challenge. If we were unsuccessful in
enforcing and protecting our intellectual property rights and protecting our products, it could materially harm our
business.
With respect to XACIATO, we have the initial right to enforce patents we license from TriLogic and
MilanaPharm against third parties whose activities infringe such patents in a manner that could affect our exercise of
the licenses granted to us, and TriLogic and MilanaPharm must reasonably cooperate with in any such suit, including,
if necessary, by being joined as a party to any such suit. In some cases, MilanaPharm may assume the defense of a
claim initiated by a third-party alleging infringement of a third party’s intellectual property rights as a result of the
manufacture or sale of a product we develop under our license agreement with TriLogic/MilanaPharm. While our
license agreement would require MilanaPharm to indemnify us for certain losses arising from these third-party claims,
this indemnification may not be sufficient to adequately compensate us for any related losses or the potential loss of
our ability to manufacture and sell XACIATO.
With respect to Ovaprene, ADVA-Tec has the right, in certain instances, to control the defense against any
infringement litigation arising from the manufacture or development (but not the sale) of Ovaprene. While our license
agreement with ADVA-Tec requires ADVA-Tec to indemnify us for certain losses arising from these claims, this
indemnification may not be sufficient to adequately compensate us for any related losses or the potential loss of our
ability to manufacture and develop Ovaprene. Additionally, our license agreement with Bayer requires that we
indemnify Bayer from and against all liabilities, damages, losses and expenses arising from or occurring as a result of
development, manufacture, use or commercialization of Ovaprene by us or any licensee of ours, including without
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limitation, product liability claims, except in limited circumstances. As a result of our indemnification obligations to
Bayer and limitations on ADVA-Tec’s obligations to indemnify us, any patent infringement litigation relating to
Ovaprene could subject us to significant liabilities that may have a material adverse effect on our business, results of
operations and financial condition.
With respect to Sildenafil Cream, 3.6%, we have the initial right to enforce the applicable licensed patents
against infringers in the field of use where a third party is exploiting a topically applied pharmaceutical product that
contains at least one of the same active pharmaceutical ingredients as a licensed product, and SST will provide us
with reasonable assistance (excluding financial assistance), at our expense. We also have the initial right to defend
any claim initiated by any third-party alleging that a licensed product developed or commercialized under the SST
license agreement has infringed any third-party intellectual property rights. While the SST license agreement requires
SST to indemnify us for certain losses arising from these claims, this indemnification may not be sufficient to
adequately compensate us for any related losses or the potential loss of our ability to manufacture and develop
Sildenafil Cream, 3.6%.
With respect to our IVR product candidates, including DARE-HRT1, DARE-FRT1, and DARE-PTB1 we have
the first right to enforce the applicable licensed patents against third party infringers in the fields of pharmaceutical,
therapeutic, preventative, diagnostic and palliative uses.
With respect to DARE-VVA1, we have the first right to enforce the applicable licensed patents against third-
party infringers in all fields.
We cannot guarantee that we or any of our licensors’ patent searches or analyses, including but not limited to
the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or
thorough, nor can we be certain that we have identified each and every third-party patent and pending application in
the United States, Europe and elsewhere that is relevant to or necessary for the commercialization of our product
candidates in any jurisdiction. For example, in the United States, applications filed before November 29, 2000 and
certain applications filed after that date that will not be filed outside the United States remain confidential until patents
issue. Patent applications in the United States, EU and elsewhere are published approximately 18 months after the
earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date.
Therefore, patent applications covering our future product candidates, or their manufacture or use may currently be
unpublished. Additionally, pending patent applications that have been published can, subject to certain limitations, be
later amended in a manner that could cover our product candidates or the use of our product candidates. The scope
of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s
prosecution history. Our or our licensors’ interpretation of the relevance or the scope of a patent or a pending
application may be incorrect, which may negatively impact our ability to market our product candidates. We our
licensors may incorrectly determine that our product candidates are not covered by a third-party patent or may
incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. Our or our
licensors’ determination of the expiration date of any patent in the United States, the EU or elsewhere that we
consider relevant may be incorrect, which may negatively impact our ability to develop and market our product
candidates. Our licensors’ failure to identify and correctly interpret relevant patents may negatively impact our ability to
develop and market our product candidates.
From time to time, we or our licensors may identify patents or applications in the same general area as our
products and product candidates. We or our licensors may determine these third-party patents are irrelevant to our
business based on various factors including our or our licensors’ interpretation of the scope of the patent claims and
our or our licensors’ interpretation of when the patent expires. If the patents are asserted against us, however, a court
may disagree with our or our licensors’ determinations. Further, while we or our licensors’ may determine that the
scope of claims that will issue from a patent application does not present a risk, it is difficult to accurately predict the
scope of claims that will issue from a patent application, our determination may be incorrect, and the issuing patent
may be asserted against us or our licensors. We cannot guarantee that we or our licensors will be able to successfully
settle or otherwise resolve such infringement claims. If we or our licensors fail in any such dispute, in addition to being
forced to pay monetary damages, we may be temporarily or permanently prohibited from commercializing our product
candidates. We or our licensors’ might, if possible, also be forced to redesign our product candidates so that we or our
licensors’ no longer infringe on the third-party intellectual property rights. Any of these events, even if we or our
licensors’ were ultimately to prevail, could require us to divert substantial financial and management resources that we
would otherwise be able to devote to our business.
We also rely upon trade secrets to protect our technology, product and product candidates, and trade secrets
can be difficult to maintain and enforce.
In addition to patent and trademark protection, we also rely on trade secrets, including unpatented know-how,
technology and other proprietary information, to derive a competitive advantage for products we develop, especially
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where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to maintain.
While we use reasonable efforts to protect our trade secrets, monitoring unauthorized uses and disclosures of our
intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual
property will be effective. Moreover, we or any of our collaborators’ employees, consultants, contractors or scientific
and other advisors may unintentionally or willfully disclose our proprietary information to competitors and we may not
have adequate remedies in respect of that disclosure. Enforcement of claims that a party illegally disclosed or
obtained and is using trade secrets is difficult, expensive and time consuming and the outcome is unpredictable. In
addition, foreign courts are sometimes less willing than U.S. courts to protect trade secrets. If our competitors
independently develop equivalent knowledge, methods and know-how, we would not be able to assert our trade
secrets against them and our business could be harmed.
Our competitors may independently develop knowledge, methods and know-how equivalent to our trade
secrets. Competitors may be able to legally obtain products of ours and replicate some or all of the competitive
advantages we derive from our development efforts for technologies on which we do not have patent protection. If any
of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right
to prevent them, or those to whom they communicate it, from using that technology or information to compete with us.
If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive
position could be harmed.
Confidentiality agreements with employees and others may not adequately prevent disclosure of our know-
how, trade secrets and other proprietary information and may not adequately protect our intellectual
property, which could limit our ability to compete.
We enter into confidentiality, nondisclosure, and intellectual property assignment agreements with our
employees, consultants, collaborators, sponsored researchers, and scientific and other advisors. These agreements
generally require that the other party keep confidential and not disclose to third parties all confidential information
developed by the party on our behalf or made known to the party by us during the course of the party’s relationship
with us. These agreements also generally provide that inventions conceived by the party in the course of rendering
services to us will be our exclusive property. However, these agreements may not be honored and may not effectively
assign intellectual property rights to us. We also have not entered into any non-compete agreements with any of our
employees. We cannot guarantee that the confidential nature of our proprietary information will be maintained by our
employees and others in the course of their future employment with or provision of services to a competitor. Enforcing
a claim that a party illegally disclosed or obtained and is using our know-how, trade secrets or other proprietary
information is difficult, expensive and time consuming and the outcome is unpredictable. If we are unable to prevent
unauthorized material disclosure of our intellectual property to third parties, we will not be able to establish or maintain
a competitive advantage for the products we develop, which could materially adversely affect our business, operating
results and financial condition.
Provisions in our agreements with governmental agencies and non-profit organizations may affect our
intellectual property rights and the value of our development programs to our company.
Certain of our product development activities have been funded, are being funded and may in the future be
funded, by the U.S. government and not-for-profit organizations. Our agreements for these sources of funding include,
and may in the future include, terms and conditions that affect our intellectual property rights. For example, under our
CRADA with NICHD for the Phase 3 clinical study of Ovaprene, the U.S. government has a nonexclusive,
nontransferable, irrevocable, paid-up right to practice for research or other government purposes any invention of
either party conceived or first actually reduced to practice in the party’s performance of the CRADA and both parties
will jointly own inventions jointly invented by their employees in performing the research plan. Under the CRADA, we
were granted an exclusive option to negotiate an exclusive or nonexclusive development and commercialization
license with a field of use that does not exceed the scope of the research plan to rights that the U.S. government may
have in inventions jointly or independently invented by NICHD employees for which a patent application is filed.
Under the grant agreement supporting development of DARE-LARC1, we agreed to make DARE-LARC1, and
any other products, services, processes, technologies, materials, software, data, other innovations, and intellectual
property resulting from the project funded by the grant (referred to as Funded Developments), available and
accessible at an affordable price to people most in need within developing countries, and to promptly and broadly
disseminate the knowledge and information gained from the project funded by the grant (referred to as the Global
Access Commitment). In connection with the Global Access Commitment, under the agreement, we also granted the
foundation that awarded the grant a nonexclusive, perpetual, irrevocable, worldwide, royalty-free, fully paid up,
sublicensable license to make, use, sell, offer to sell, import, distribute, copy, create derivative works, publicly perform,
and display Funded Developments and essential background technology (referred to as the Humanitarian License).
We are required to ensure that the Humanitarian License survives the assignment or transfer of Funded
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Developments and essential background technology. Our obligations under the Global Access Commitment and the
Humanitarian License may limit the value of our rights in DARE-LARC1 and other Funded Developments.
Risks Related to Our Business Operations and Industry
The COVID-19 pandemic has negatively impacted our business and, in the future, may materially and
adversely affect our business, financial condition and results and stock price, including by increasing the
cost and timelines for our clinical development programs.
The ultimate impact of the COVID-19 pandemic on our operations and, financial condition is unknown and will
depend on future developments that are highly uncertain, beyond our control and cannot be predicted with
confidence, including, but not limited to, the duration and severity of the pandemic, governmental and individual
organization actions and policies implemented to reduce transmission of the disease, governmental actions and
programs implemented to mitigate and alleviate the economic impact of the pandemic, and the speed with which and
degree to which normal economic and operating conditions resume.
The longer the pandemic persists, the greater the potential for significant adverse impact to our business
operations and those of the CROs, CMOs, commercial collaborators, and other third-party service providers and
vendors on which we depend to, among other things, conduct our clinical and nonclinical studies, supply our clinical
trial materials, assist with regulatory affairs necessary to advance and seek regulatory approval for our programs, and
market, sell and distribute our products, if approved. Employee and family member illness, increased childcare and
elder care responsibilities, and quarantines, travel restrictions, prohibitions on non-essential gatherings, shelter-in-
place orders and other similar directives and policies intended to reduce the spread of the disease, may reduce our
productivity and that of the third parties on which we rely and may disrupt and delay many aspects of our business,
including R&D activities, production and supply of clinical trial materials and commercial product, and regulatory
affairs activities. As a result of resource constraints, third parties on which we rely may not meet their contractual
obligations to us or may allocate constrained resources to projects other than ours, any of which could significantly
increase the cost and timelines for our development programs. In addition, the significant amount of personnel
continuing to work remotely, both ours and those of the third parties on which we rely, could increase our
cybersecurity risk, create data accessibility concerns, and make us more susceptible to communication disruptions,
any of which could significantly adversely impact our business operations or significantly delay necessary interactions
with the FDA and other regulatory agencies, our CROs and CMOs, clinical trial sites, current and potential
collaborators, and other third parties. Conversely, as more personnel return to work, travel and non-essential
gatherings, there is increased risk of transmission of the disease and other communicable illnesses, potentially
leading to resource constraints while personnel are unable to work due to illness and caring for family members who
become ill. In addition, vaccination mandates may lead to human resource constraints at our strategic collaborators,
CROs, CMOs and other third parties on which we rely if substantial proportions of their workforce quit or are
terminated for refusing to comply with vaccine mandates.
The COVID-19 pandemic could cause delays in the current timelines for our ongoing and planned clinical
studies, our regulatory submissions, potential marketing approvals and, ultimately, commercial launch of any
approved product, including XACIATO. The clinical and regulatory milestones we are targeting to occur in 2022 and
2023 may be delayed or otherwise adversely impacted as a result of the pandemic. For example, clinical trial site
initiation and/or patient enrollment may be significantly delayed or suspended as a result of personnel and other
resource constraints of health care providers, as well as adherence to governmental orders and internal policies
intended to reduce the spread of COVID-19. In addition, we may experience lower than anticipated subject enrollment
and completion rates, including because individuals may avoid medical settings, particularly for non-critical conditions,
due to concerns of contracting COVID-19 or due to shelter-in-place and social distancing orders, or conversely, as
pandemic-related restrictions ease and there are increased opportunities to travel and participate in other activities
again, individuals may be less inclined to participate in or complete clinical trials such as ours that require multiple
clinic visits. Commencement and completion of our clinical trials may also be significantly delayed by disruptions to
production by our contract manufacturers of clinical supplies needed for those studies. The COVID-19 pandemic
contributed to a slower than anticipated pace of enrollment of participants in our Phase 2b clinical study of Sildenafil
Cream, 3.6% as a result of operational restrictions or closure of certain study sites due to their adherence to
governmental guidelines intended to reduce the spread of COVID-19. The commencement of clinical trials and
nonclinical testing for our programs may be delayed due to the failure to obtain clinical and other supplies on a timely
basis as a result of supply chain disruptions and human resources constraints.
In addition, the pandemic has resulted in disruption and volatility in the global capital markets, and while the
longer-term economic impact is difficult to assess and predict at this time, it could negatively impact our ability to
access additional capital when needed or on terms favorable to us and our stockholders. If we cannot raise capital
when needed on acceptable terms, or at all, we may not be able to continue development of our product candidates
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as currently planned or at all, 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 or cease operations, any of which could have a
significant negative impact on our prospects and financial condition, as well as the trading price of our common stock.
A key aspect of our business strategy is to seek collaborations with third parties, such as large
pharmaceutical companies, that are willing to conduct later-stage clinical trials and further develop and commercialize
our product candidates. As a result of the pandemic, potential and current collaborators may experience operational
disruptions and financial and other resource constraints and implement new strategic plans that delay or reduce their
efforts in the women’s health in general or in our programs in particular, which could adversely affect our ability to
enter into or maintain collaborations, strategic alliances or other similar types of arrangements and may result in or
contribute to disruption and delays in later-stage clinical development and, if approved, commercial launch of our
product candidates.
The plans we implement to help mitigate negative impacts on our business from the COVID-19 pandemic,
including those designed to protect the safety, health and well-being of our employees while maintaining employee
productivity, may not be effective.
The extent to which the pandemic, efforts to reduce the spread of COVID-19 and efforts to return to pre-
pandemic economic conditions impact our business, financial condition and results of operations is uncertain and
cannot be predicted with reasonable accuracy at this time and will depend on future developments that are also
uncertain and cannot be predicted with reasonable accuracy at this time including emergence of new and more
contagious or deadly variants of the virus that causes COVID-19, new information regarding the long-term health
impacts of COVID-19, the rate and efficacy of vaccinations against COVID-19, the effect of actions taken in the United
States and other countries to contain and treat COVID-19 and to address the pandemic's impact on economic health,
and further actions implemented to contain and treat the disease and its impact, among others.
The COVID-19 pandemic may also have the effect of heightening many of the other risks and uncertainties
described in this “Risk Factors” section.
Product liability lawsuits against us could cause us to incur substantial liabilities.
We face an inherent risk of product liability exposure as a result of testing of our product candidates in human
clinical trials and will face an even greater risk following commercial launch of XACIATO and any future product we
develop. If we cannot successfully defend ourselves against claims that our products or product candidates caused
injuries, we will incur substantial liabilities or be required to limit commercialization of our products. Regardless of
merit or eventual outcome, liability claims may result in:
decreased demand for any marketed product;
product recalls, withdrawals or labeling, marketing or promotional restrictions;
termination of product development or commercial collaborations;
loss of revenue;
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• withdrawal of clinical study participants and delays in commencement or completion of clinical studies;
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injury to our reputation and significant negative media attention;
significant costs to defend the related litigation;
substantial monetary awards to patients or clinical study participants;
diversion of our management’s time and other resources from pursuing our business strategy; and
a decline in our stock price.
We carry product liability insurance that we believe to be adequate for our clinical testing and product
development programs and in connection with our commercial-stage asset, XACIATO. However, insurance coverage
is increasingly expensive, and it may be difficult to obtain adequate product liability insurance in the future. Our
inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential
product liability claims could prevent or inhibit the commercialization of XACIATO or any of our product candidates, if
approved. We also have indemnification obligations to our commercial and other collaborators. Although we will
endeavor to obtain and maintain such insurance in coverage amounts we deem adequate, any claim that may be
brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part,
by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various
exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay
any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not
covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.
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Our current or future employees, clinical investigators, consultants and commercial collaborators may
engage in misconduct or other improper activities, including non-compliance with regulatory standards.
We may become exposed to the risk of employees, independent contractors, clinical investigators,
consultants, suppliers, commercial collaborators or vendors engaging in fraud or other misconduct. Misconduct by
employees, independent contractors, clinical investigators, consultants, suppliers, commercial collaborators and
vendors could include intentional failures, such as failures to: (1) comply with FDA or other regulators’ requirements,
(2) provide accurate information to such regulators, (3) comply with clinical and nonclinical research standards and
manufacturing standards established by us and/or required by law, or (4) comply with SEC rules and regulations. In
particular, sales, marketing and business arrangements in the health care industry are subject to extensive laws,
regulations and industry guidance intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive
practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and
promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by current
or future employees, independent contractors, clinical investigators, consultants, suppliers, commercial collaborators
and vendors could also involve the improper use of information obtained in the course of clinical trials, which could
result in regulatory or civil sanctions and serious harm to our reputation. It is not always possible to identify and deter
misconduct by employees, independent contractors, clinical investigators, consultants, suppliers, commercial
collaborators and vendors, and the precautions we take to detect and prevent this activity may not be effective in
controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other
actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted
against us, and we are not successful in defending or asserting our rights, those actions could have a significant
adverse effect on our business, including the imposition of significant fines or other sanctions, and our reputation.
The pharmaceutical and medical device industries are highly regulated and subject to various fraud and
abuse laws, including, without limitation, the U.S. federal Anti-Kickback Statute, the U.S. federal False Claims
Act and the U.S. Foreign Corrupt Practices Act.
Health care providers and third-party payors play a primary role in the recommendation and prescription of
drug products and medical devices that are granted marketing approval. Our arrangements with health care providers,
commercial collaborators, principal investigators, consultants, third-party payors, customers and other organizations
may expose us to broadly applicable fraud and abuse and other health care laws and regulations in the United States.
Health care fraud and abuse regulations are complex, and even minor irregularities can give rise to claims that a
statute or prohibition has been violated. The laws that may affect our operations include:
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the federal Anti-Kickback Statute (and comparable state laws), which prohibits, among other things, any
person from knowingly and willfully offering, providing, soliciting or receiving remuneration, directly or
indirectly, overtly or covertly, in cash or in kind, to induce either the referral of an individual, for an item or
service or the purchasing or ordering of a good or service, for which payment may be made under federal
health care programs such as the Medicare and Medicaid programs. The federal Anti-Kickback Statute is
subject to evolving interpretations. In the past, the government has enforced the federal Anti-Kickback
Statute to reach large settlements with health care companies based on sham consulting and other
financial arrangements with physicians. A person or entity does not need to have actual knowledge of the
statute or specific intent to violate it in order to have committed a violation. In addition, the government
may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback
Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;
federal and state civil and criminal false claims laws, including the civil False Claims Act which prohibit,
among other things, any person or entity from knowingly presenting, or causing to be presented, a false,
fictitious or fraudulent claim for payment to the U.S. government, knowingly making, using, or causing to
be made or used, a false record or statement material to a false or fraudulent claim to the U.S.
government, or from knowingly making a false statement to avoid, decrease or conceal an obligation to
pay money to the U.S. government. Actions under these laws may be brought by the U.S. Attorney
General or as a qui tam action by a private individual in the name of the government. The federal
government uses these laws, and the accompanying threat of significant liability, in its investigation and
prosecution of pharmaceutical and biotechnology companies throughout the U.S., for example, in
connection with the promotion of products for unapproved uses and other allegedly unlawful sales and
marketing practices;
federal, civil and criminal statues created under HIPAA (and similar state laws), which prohibit, among
other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any health
care benefit program, including private third-party payors, knowingly and willfully embezzling or stealing
from a health care benefit program, willfully obstructing a criminal investigation of a health care offense,
and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially
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false, fictitious or fraudulent statement in connection with the delivery of or payment for health care
benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need
to have actual knowledge of the statute or specific intent to violate it in order to have committed a
violation;
the Physician Payments Sunshine Act, enacted as part of the ACA, which, among other things, imposes
reporting requirements on manufacturers of FDA-approved drugs, devices, biologics and medical supplies
covered by Medicare or Medicaid to report to CMS, on an annual basis, information related to payments
and other transfers of value to physicians (defined broadly to include doctors, dentists, optometrists,
podiatrists, chiropractors, and certain advanced non-physician health care practitioners) and teaching
hospitals, as well as ownership and investment interests held by physicians and their immediate family
members in such manufacturers;
HIPAA, as amended by HITECH, and their respective implementing regulations, which impose specified
requirements relating to the privacy, security and transmission of individually identifiable health
information. Among other things, HITECH makes HIPAA’s privacy and security standards directly
applicable to “business associates,” defined as independent contractors or agents of covered entities,
which include certain health care providers, health plans, and health care clearinghouses, that create,
receive, maintain or transmit protected health information in connection with providing a service for or on
behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed
against covered entities, business associates and possibly other persons, and gave state attorneys
general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA
and seek attorney’s fees and costs associated with pursuing federal civil actions; and
the U.S. Foreign Corrupt Practices Act, which prohibits U.S. organizations and their representatives from
offering, promising, authorizing or making corrupt payments, gifts or transfers of value to non-U.S.
officials, which in many countries, could include interactions with certain health care professionals.
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The scope and enforcement of these laws is uncertain and subject to rapid change in the current environment
of health care reform, especially in light of the lack of applicable precedent and regulations.
The risk of violation of, and subsequent investigation and prosecution for violations of, the laws described
above may be mitigated through the implementation and maintenance of compliance programs by us and our
commercial collaborators and other third parties on which we rely for important aspects of development or
commercialization of our products and product candidates, but these risks cannot be eliminated entirely. Ensuring that
our current and future business operations and arrangements with third parties comply with applicable health care
laws and regulations could involve substantial costs. It is possible that governmental authorities will conclude that our
business practices do not comply with current or future statutes, regulations, agency guidance or case law involving
applicable fraud and abuse or other health care laws and regulations. If we or our operations, or those of a
commercial collaborator or other third party on which we rely for development or commercialization of our products
and product candidates, are found to be in violation of any of the laws described above or any other governmental
regulations that apply to us or that third party, we may be subject to significant civil, criminal and administrative
penalties, including monetary damages, fines, individual imprisonment, disgorgement, loss of eligibility to obtain
approvals from the FDA, exclusion from participation in government contracting, health care reimbursement or other
government programs, including Medicare and Medicaid, contractual damages, reputational harm, administrative
burdens, diminished profits and future earnings, additional reporting requirements if we become subject to a corporate
integrity agreement or other agreement to resolve allegations of non-compliance with any of these laws, and/or the
curtailment or restructuring of our operations. If any of the physicians or other health care providers or entities with
whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to criminal,
civil or administrative sanctions, including exclusions from government funded health care programs.
If regulatory authorities challenge our activities, or those of a commercial collaborator or other third party on
which we rely, under these laws, any such challenge could have a material adverse effect on our reputation, business,
results of operations and financial condition. Any investigation of us or the third parties with whom we contract,
including a commercial collaborator, regardless of the outcome, would be costly and time consuming, and may
negatively affect our results of operations and financial condition.
Cyber-attacks, security breaches, loss of data and other disruptions to our information technology systems
or those of our collaborators and third-party service providers could compromise sensitive information
related to our business, delay or prevent us from accessing critical information or expose us to liability, any
of which could adversely affect our business and our reputation.
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We utilize information technology systems and networks to process, transmit and store electronic information
in connection with our business activities. As the use of digital technologies has increased, cyber incidents, including
deliberate attacks, the deployment of harmful malware or ransomware, denial of service, and attempts to gain
unauthorized access to computer systems and networks, have increased in frequency and sophistication. These
threats pose a risk to the security of our systems and networks and those of our collaborators and third-party service
providers, and could compromise the confidentiality, availability and integrity of our data, confidential information, or
other intellectual property, all of which are vital to our operations and business strategy. Organizations and
governmental bodies with far greater resources than ours dedicated to cyber security have proven vulnerable to
cyber-attacks. There can be no assurance we will succeed in preventing cyber security breaches or successfully
mitigate their effects.
Despite implementing security measures, any of the computer systems belonging to us or our collaborators
and third-party service providers are vulnerable to damage from computer viruses, unauthorized access, natural
disasters, terrorism, war, and telecommunication and electrical failure. Moreover, the prevalent use of mobile devices
that access confidential information increases the risk of data security breaches. Any system failure, accident, security
breach or data breach that causes interruptions in our own or in third-party service vendors’ operations could result in
a material disruption of our product development programs. For example, losing clinical study data from future clinical
studies could result in delays in our or our collaborators’ regulatory approval efforts and significantly increase our
costs in order to recover or reproduce the lost data. In addition, a security breach or privacy violation that leads to
disclosure of personally identifiable information or protected health information could harm our reputation, compel us
to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory
corrective action, require us to verify the correctness of database contents and subject us to litigation or other liability
under laws and regulations that protect personal data. Further, our information technology and other internal
infrastructure systems, including firewalls, servers, leased lines and connection to the Internet, face the risk of
systemic failure, which could disrupt our operations. If any disruption or security breach results in a loss or damage to
our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur resulting
liability, our product development programs and competitive position may be adversely affected, the further
development of our product candidates may be delayed, and the manufacture and sale of any approved products may
be impaired. Furthermore, we may incur additional costs to remedy the damage caused by these disruptions or
security breaches.
Our business may be adversely affected by unfavorable or unanticipated macroeconomic conditions and
geopolitical events.
Various macroeconomic factors could adversely affect our business, our results of operations and financial
condition, including changes in inflation, interest rates and overall economic conditions and uncertainties, including
those resulting from geopolitical events, international economic sanctions or a global health emergency.
Interest rates and the ability to access credit markets could also adversely affect the ability of patients, payors
and distributors to purchase, pay for and effectively distribute our products, if and when approved. Similarly, these
macroeconomic factors could affect the ability of our current or potential future third-party manufacturers, sole source
or single source suppliers, licensors or licensees to remain in business, or otherwise manufacture or supply our
clinical trial material and products or commercialize our products, if and when approved. Failure by any of them to
remain in business could have a material adverse effect on our ability to develop and obtain regulatory approvals for
our product candidates, and, if approved, market and sell our products or provide sufficient quantities of our products
to meet market demand.
We expect to continue to incur increased costs as a result of operating as a public company, and our
management will have to devote substantial time to compliance initiatives and corporate governance
practices.
We incur and expect to continue to incur significant legal, accounting and other expenses as a public
reporting company. We expect that these expenses will increase if and when we become an “accelerated filer,” as
defined in rules adopted by the SEC under the Securities Exchange Act of 1934. Generally, we will become an
accelerated filer if our public float as of the last business day of June is $75 million or more and we reported annual
revenues of $100 million or more for our most recently completed fiscal year. Regardless of whether we become an
accelerated filer, we may need to hire additional accounting, finance and other personnel in connection with our
continuing efforts to comply with the requirements of being a public company. Even while we have non-accelerated
filer status, our management and other personnel will need to continue to devote substantial time towards maintaining
compliance with the requirements of being a public company. The Sarbanes-Oxley Act of 2002 and rules and
regulations subsequently implemented by the SEC and Nasdaq imposed various requirements on public companies,
including establishment and maintenance of effective disclosure and financial controls and corporate governance
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practices. Our management and other personnel, of whom we have a small number, devote substantial time to these
compliance initiatives. Moreover, if and when we become an accelerated filer, our compliance costs will increase.
For example, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we must furnish a report annually
by our management on the effectiveness of our internal control over financial reporting, and performing the system
and process documentation and evaluation necessary to issue that report requires us to incur substantial expense
and expend significant management time. If and when we are an accelerated filer, we will also have to obtain an
attestation report on our internal control over financial reporting by our independent registered public accounting firm,
which may substantially increase compliance costs.
We are a smaller reporting company and a non-accelerated filer and the reduced disclosure requirements
available to us may make our common stock less attractive to investors.
The SEC established the smaller reporting company, or SRC, category of companies in 2008, and expanded
it in 2018, in an effort to provide general regulatory relief for smaller companies. SRCs may choose to comply with
scaled financial and non-financial disclosure requirements in their annual and quarterly reports and registration
statements relative to non-SRCs. In addition, companies that are not “accelerated filers” can take advantage of
additional regulatory relief. Whether a company is an accelerated filer or a SRC is determined on an annual basis.
For so long as we qualify as a non-accelerated filer and/or a SRC, we will be permitted to and we intend to rely on
some or all of the accommodations available to such companies. These accommodations include:
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not being required to provide an auditor’s attestation of management’s assessment of internal control over
financial reporting required by Section 404(b) of the Sarbanes-Oxley Act of 2002;
reduced financial disclosure obligations, including that SRCs need only provide two years of financial
statements rather than three years; a maximum of two years of acquiree financial statements are required
rather than three years; fewer circumstances under which pro forma financial statements are required;
and less stringent age of financial statements requirements;
reduced non-financial disclosure obligations, including regarding the description of their business,
management’s discussion and analysis of financial condition and results of operations, market risk,
executive compensation, transactions with related persons, and corporate governance; and
later deadlines for the filing of annual and quarterly reports compared to accelerated filers.
We will continue to qualify as a SRC and non-accelerated filer for so long as (a) our public float is less than
$75 million as of the last day of our most recently completed second fiscal quarter or (b) our public float is $75 million
or more but less than $700 million and we reported annual revenues of less than $100 million for our most recently
completed fiscal year.
We may choose to take advantage of some, but not all, of the available accommodations. We cannot predict
whether investors will find our common stock less attractive if we rely on these accommodations. If some investors
find our common stock less attractive as a result, there may be a less active trading market for our common stock and
the price of our common stock may be more volatile.
Risks Related to Ownership of Our Common Stock
The price of our common stock may rise and fall rapidly, substantial price fluctuations may occur regardless
of developments in our business or our operating performance, and you could lose all or part of your
investment as a result.
The stock market in general, and the market for biopharmaceutical companies in particular, have experienced
volatility that has often been unrelated to the operating performance of particular companies. The stocks of small cap
and microcap companies in the life sciences sector like ours tend to be highly volatile. Our common stock has
experienced extreme trading price and volume fluctuations in the past, including fluctuations that have been unrelated
or disproportionate to developments in our business and our operating performance, and we expect that our stock
price will continue to experience high volatility. The market price for our common stock may be influenced by a variety
of factors, some of which are beyond our control or are related in complex ways, including:
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failure or discontinuation of any of our product development programs;
actual or anticipated changes to our product development and approval timelines, results from any clinical
trial, and communications or decisions from regulatory authorities relating to a review of or decisions on
applications we submit for our product candidates, in each case particularly those related to our clinical-
stage product candidates;
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announcements of capital raising transactions, including sales of our common stock or securities
convertible into or exercisable for shares of our common stock by us, or expectation of additional
financing efforts;
the amount of our unrestricted cash;
the level of expenses related to development of product candidates we develop, and in particular our
clinical-stage development programs;
commencement or termination of any collaboration or licensing arrangement;
the results of our efforts to discover, develop, acquire or in-license product candidates or products, if any;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our
ability to obtain patent protection for our technologies;
announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures
and capital commitments;
additions or departures of key management or scientific personnel;
variations in our financial results or those of companies perceived to be similar to us;
new products, product candidates or new uses for existing products introduced or announced by our
competitors, and the timing of these introductions or announcements;
results of clinical trials of product candidates of our competitors;
general economic and market conditions and other factors that may be unrelated to our operating
performance or the operating performance of our competitors, including changes in market valuations of
similar companies and effects from geopolitical events, including military conflicts, war, terrorism and
economic conflicts, or natural disasters such as earthquakes, typhoons, floods and fires or public health
emergencies or pandemics, such as the COVID-19 pandemic;
regulatory or legal developments in the United States and other countries;
changes in the structure of health care payment systems;
conditions or trends in the biotechnology and biopharmaceutical industries;
recommendations or reports issued by securities research analysts;
sales of common stock by our stockholders, as well as the overall trading volume of our common stock;
and
the other factors described in this “Risk Factors” section.
In the past, following periods of volatility in companies’ stock prices, securities class-action litigation has often
been instituted against such companies. Such litigation, if instituted against us, could result in substantial costs and
diversion of management’s attention and resources, which could materially and adversely affect our business and
financial condition.
There is no assurance that we will continue satisfying the listing requirements of the Nasdaq Capital Market.
Our common stock is listed on the Nasdaq Capital Market. To maintain our listing we are required to satisfy
continued listing requirements, including the requirements commonly referred to as the minimum bid price rule and
with either the stockholders’ equity rule or the market value of listed securities rule. The minimum bid price rule
requires that the closing bid price of our common stock be at least $1.00 per share, and the stockholders’ equity rule
requires that our stockholders' equity be at least $2.5 million, or, alternatively, that the market value of our listed
securities be at least $35 million or that we have net income from continuing operations of $500,000 in the most
recently completed fiscal year or in two of the three most recently completed fiscal years. There can be no assurance
we will continue to satisfy applicable continued listing requirements. For example, in 2018 and 2019, we were not in
compliance with the minimum bid price rule and the stockholders' equity rule. We subsequently regained compliance
with both rules, but there can be no assurance that we will continue to satisfy these or other continued listing
standards and maintain the listing of our common stock with Nasdaq.
The suspension or delisting of our common stock, or the commencement of delisting proceedings, for
whatever 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 such breaches, with or without merit, could result in costly litigation, significant liabilities and
diversion of our management’s time and attention and could have a material adverse effect on our financial condition,
business and results of operations. In addition, the suspension or delisting of our common stock, or the
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commencement of delisting proceedings, for whatever reason may materially impair our stockholders’ ability to buy
and 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.
A significant portion of our total outstanding shares of common stock may be sold into the public market at
any point, which could cause the market price of our common stock to drop significantly, even if our
business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time,
either by us or our stockholders. For example, in 2021, we sold an aggregate of 41.1 million shares of our common
stock in at-the-market, or ATM offerings and under our equity line arrangement. Actual sales of our common stock, or
the perception in the market that we or holders of a large number of shares intend to sell shares, could reduce the
market price of our common stock. Our outstanding shares of common stock may be freely sold in the public market
at any time to the extent permitted by Rules 144 and 701 under the Securities Act or to the extent such shares have
already been registered under the Securities Act and are held by non-affiliates.
As of December 31, 2021, there were 4.7 million shares of our common stock subject to outstanding options,
almost all of which have been registered under the Securities Act on Form S-8. The shares so registered can be freely
sold in the public market after being issued to the option holder upon exercise, except to the extent they are held by
an affiliate of ours, in which case such shares will become eligible for sale in the public market as permitted by Rule
144 under the Securities Act. Furthermore, as of March 30, 2022, there were approximately 1.4 million shares of our
common stock subject to outstanding warrants to purchase common stock, virtually all of which currently have an
exercise price of $0.96 per share. To the extent these warrants are exercised, the shares underlying these warrants
may be immediately sold in the public market.
The sale of our common stock in ATM offerings may cause substantial dilution to our existing stockholders,
and such sales, or the anticipation of such sales, may cause the price of our common stock to decline.
Since 2020, we have used ATM offerings to fund a significant portion of our operations, and we may continue
to use ATM offerings to fund our operations in the future. While sales of shares of our common stock in ATM offerings
may enable us to raise capital at a lower cost compared with other types of equity financing transactions; such sales
may result in substantial dilution to our existing stockholders, and such sales, or the anticipation of such sales, may
cause the trading price of our common stock to decline.
The exercise of our outstanding options and warrants may result in significant dilution to our stockholders.
As of December 31, 2021, we had outstanding options to purchase up to 4.7 million shares of our common
stock and, and as of March 30, 2022, we had outstanding warrants to purchase up to approximately 1.4 million shares
of our common stock. The exercise of a significant portion of our outstanding options and warrants may result in
significant dilution to our stockholders.
We may issue preferred stock with terms that could dilute the voting power or reduce the value of our
common stock.
Our certificate of incorporation authorizes us to issue, without stockholder approval, one or more series of
preferred stock having such designation, powers, privileges, preferences, including preferences over our common
stock respecting dividends and distributions, terms of redemption and relative participation, optional, or other rights, if
any, of the shares of each such series of preferred stock and any qualifications, limitations or restrictions thereof, as
our board of directors may determine. The terms of one or more series of preferred stock could dilute the voting power
or reduce the value of our common stock. For example, the repurchase or redemption rights or liquidation preferences
we could assign to holders of preferred stock could affect the residual value of our common stock.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future; capital
appreciation, if any, will be your sole source of gain as a holder of our shares.
We have never declared or paid cash dividends on any shares of our capital stock. We currently plan to retain
all of our future earnings, if any, and all cash received from the sale of securities, the sale of assets or a strategic
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transaction to finance the growth and development of our business. Accordingly, capital appreciation, if any, of our
common stock will be the sole source of gain for our common stockholders for the foreseeable future.
Provisions in our certificate of incorporation, our by-laws or Delaware law might discourage, delay or prevent
a change in control of our company or changes in our management and, therefore, depress the trading price
of our common stock.
Provisions in our Restated Certificate of Incorporation, as amended, our Second Amended and Restated By-
Laws, as amended, or Delaware law may discourage, delay or prevent a merger, acquisition or other change in
control that our stockholders may consider favorable, including transactions in which our stockholders might otherwise
receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in
the future for shares of our common stock, thereby depressing the market price of our common stock. In addition,
because our board of directors is responsible for appointing the members of our management team, these provisions
might frustrate or prevent any attempts by our stockholders to replace or remove the current management by making
it more difficult for stockholders to replace members of our board of directors. Among other things, these provisions:
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establish a classified board of directors such that all members of the board are not elected at one time;
allow the authorized number of directors to be changed only by resolution of the board of directors;
limit the manner in which stockholders can remove directors from the board;
establish advance notice requirements for nominations for election to the board or for proposing matters
that can be acted on at stockholder meetings;
require that stockholder actions must be effected at a duly called stockholder meeting and prohibit actions
by stockholders by written consent;
limit who may call a special meeting of stockholders;
authorize the board to issue preferred stock without stockholder approval, which could be used to institute
a “poison pill” that would work to dilute the stock ownership of a potential hostile acquirer, effectively
preventing acquisitions that have not been approved by the board; and
require the approval of the holders of at least 75% of the votes that all stockholders would be entitled to
cast to amend or repeal certain provisions of the charter or bylaws.
In addition, we are governed by Section 203 of the Delaware General Corporate Law, which prohibits a
publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally
a person which together with its affiliates owns, or within the last three years has owned, 15% of its voting stock, for a
period of three years after the date of the transaction in which the person became an interested stockholder, unless
the business combination is approved in a prescribed manner. This could discourage, delay or prevent someone from
acquiring or merging with us, whether or not it is desired by, or beneficial to, our stockholders.
Provisions in our by-laws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes
with us or our directors, officers or employees.
Our Second Amended and Restated By-Laws, as amended, provide that, unless we consent in writing to the
selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware
will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders;
provided that, the exclusive forum provision will not apply to actions or suits brought to enforce any liability or duty
created by the Securities Act, the Exchange Act, or any other claim for which the federal courts have exclusive
jurisdiction. In addition, our by-laws provide that, unless we consent in writing to the selection of an alternative forum,
to the fullest extent permitted by law, the federal district courts of the United States of America shall be the sole and
exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any
person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice
of and to have consented to these provisions.
Under the Securities Act, federal and state courts have concurrent jurisdiction over all suits brought to enforce
any duty or liability created by the Securities Act. There is uncertainty as to whether a court (other than state courts in
the State of Delaware, where the Supreme Court of the State of Delaware recently decided that exclusive forum
provisions for causes of action arising under the Securities Act are facially valid under Delaware law) would enforce
forum selection provisions and whether investors can waive compliance with the federal securities laws and the rules
and regulations thereunder. We believe the forum selection provisions in our by-laws may benefit us by providing
increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as
applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more
expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However,
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these provisions may have the effect of discouraging lawsuits against us and/or our directors, officers and employees
as it may limit any stockholder’s ability to bring a claim in a judicial forum that such stockholder finds favorable for
disputes with us or our directors, officers or employees. The enforceability of similar choice of forum provisions in
other companies’ charter documents has been challenged in legal proceedings, and it is possible that, in connection
with any applicable action brought against us, a future court could find the choice of forum provisions contained in our
by-laws to be inapplicable or unenforceable in such action. If a court were to find the choice of forum provision
contained in our by-laws to be inapplicable or unenforceable in an action, we may incur additional costs associated
with resolving such action in other jurisdictions, which could adversely affect our business, financial condition or
results of operations.
If we fail to attract or maintain securities analysts to publish research on our business or if they publish or
convey negative evaluations of our business, the price of our stock could decline.
The trading market for our common stock relies in part on the research and reports that industry or financial
analysts publish about us or our business. We do not have any control over these analysts. If one or more of the
analysts covering our business downgrade their evaluations of our stock, the price of our common stock could
decline. As of the date of this report, to our knowledge, six analysts cover our company. If one or more of these
analysts cease coverage or fail to regularly publish reports on our business, we could lose visibility in the financial
markets, which in turn could cause our common stock price or trading volume to decline.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We lease real property to support our business. The office space for our corporate headquarters, which is in
good operating condition, is in San Diego, California. We believe that the real property we lease meets our current
needs and that we will be able to renew our lease when needed on acceptable terms or find alternative facilities.
ITEM 3. 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,
diversions 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 4. MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
PART II
Market Information
Our common stock is listed on the Nasdaq Capital Market under the symbol “DARE.”
Holders of Common Stock
As of March 30, 2022, we had approximately 35 stockholders of record.
The number of stockholders of record is based upon the actual number of holders registered on our books at
such date. A substantially greater number of holders of our common stock are "street name" or beneficial holders,
whose shares are held by banks, brokers and other financial institutions.
Dividend Policy
We have never declared or paid cash dividends on our common stock. We currently do not anticipate paying
any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the
discretion of our board of directors, subject to applicable laws and contractual limitations, and will depend on our
financial condition, results of operations, capital requirements, general business conditions and other factors that our
board of directors may deem relevant.
Recent Sales of Unregistered Securities
We did not sell any unregistered securities during the period covered by this report that were not previously
reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Issuer Purchases of Equity Securities
None.
ITEM 6. [REMOVED AND RESERVED.]
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements
and the notes thereto included in Part II, Item 8 of this report. This following discussion includes forward-
looking statements. See PART I "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 of this report under the heading “Risk
Factors,” which are incorporated herein by reference.
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, fertility and vaginal and sexual health. 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, which was approved by the FDA in December 2021, is a single-dose vaginal gel
prescription product for the treatment of bacterial vaginosis in females 12 years of age and older. In March 2022, we
entered into an exclusive global license agreement with Organon to commercialize XACIATO. XACIATO is expected
to be available commercially in the United States in the fourth quarter of 2022.
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Our product pipeline includes diverse programs that target unmet needs in women's health in the areas of
contraception, fertility and vaginal and sexual health and aim to expand treatment options, enhance outcomes and
improve ease of use for women. Our portfolio includes two product candidates in advanced clinical development:
• Ovaprene®, a hormone-free, monthly contraceptive; and
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Sildenafil Cream, 3.6%, a proprietary cream formulation of sildenafil for topical administration to the
vulva and vagina for treatment of female sexual arousal disorder.
Our portfolio also includes four product candidates in Phase 1 clinical development or that we believe are
Phase 1-ready:
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DARE-HRT1, a combination bio-identical estradiol and progesterone intravaginal ring, for the
treatment of menopausal symptoms, including vasomotor symptoms, as part of hormone therapy
following menopause;
DARE-VVA1, a vaginally delivered formulation of tamoxifen to treat vulvar vaginal atrophy as an
option for women with hormone-receptor positive breast cancer;
DARE-FRT1, an intravaginal ring containing bio-identical progesterone for broader luteal phase
support as part of an in vitro fertilization treatment plan; and
DARE-PTB1, an intravaginal ring containing bio-identical progesterone for the prevention of preterm
birth.
In addition, our portfolio includes these pre-clinical stage potential product candidates:
• 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;
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ADARE-204 and ADARE-214,
contraception over 6-month and 12-month periods, respectively; and
injectable
formulations of etonogestrel designed
to provide
DARE-RH1, a novel approach to non-hormonal contraception for both men and women by targeting
the CatSper ion channel.
See ITEM 1. "BUSINESS," in Part I of this report 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 clinical development and 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. In
2022, we expect to focus our resources on advancement of Ovaprene and Sildenafil Cream, 3.6%, 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.
To date, we have not generated any revenue. We are subject to several risks common to biopharmaceutical
companies, including dependence on key employees, dependence on third-party collaborators and service providers,
competition from other companies, the need to develop commercially viable products in a timely and cost-effective
manner, 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, uncertainty of market acceptance of products, success of third parties in the
marketing, sale and distribution of our products, competition from substitute products and larger companies,
compliance with government regulations, protection 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 this report
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titled, The COVID-19 pandemic has negatively impacted our business and, in the future, may materially and adversely
affect our business, financial condition and results and stock price, including by increasing the cost and timelines for
our clinical development programs.
Recent Events
Global License Agreement with Organon to Commercialize XACIATO
On March 31, 2022, we entered into an exclusive license agreement with Organon, pursuant to which
Organon will obtain exclusive worldwide rights to develop, manufacture and commercialize XACIATO. See ITEM 1.
"BUSINESS," in Part I of this report under “Strategic Agreements for Product Commercialization – Organon License
Agreement,” for a description of the terms of the license agreement.
We will receive a $10.0 million non-refundable and non-creditable payment from Organon following the
effective date of the agreement, which is expected in the second quarter of 2022, and we are entitled to receive a $2.5
million milestone payment following the first commercial sale of a licensed product in the United States, which is
expected to occur in the fourth quarter of 2022. We currently cannot predict with any reasonable certainty the timing or
amount of other potential payments from Organon under the license agreement in future periods.
Under the license agreement, we 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 us at a transfer price equal to our manufacturing costs plus a single-digit
percentage markup. We will not be responsible for other costs of commercializing XACIATO.
FDA Approval of XACIATO
On December 7, 2021, the FDA approved our new drug application for XACIATO for the treatment of bacterial
vaginosis in female patients 12 years of age and older.
October 2021 ATM Sales Agreement
On October 13, 2021, we entered into a new sales agreement with SVB Leerink LLC to sell shares of our
common stock from time to time through an “at-the-market,” or ATM, equity offering program under which SVB Leerink
acts as our agent. SVB Leerink also acts as our sales agent under an ATM sales agreement we entered into in April
2021. As with the April 2021 sales agreement with SVB Leerink, under the October 2021 sales agreement, we set the
parameters for the sale of shares of our common stock, including the maximum number or amount of shares to be
sold, the time period during which sales may be made, any limitation on the number or amount of shares that may be
sold in any one trading day, and any minimum price below which sales may not be made. Subject to the terms and
conditions of the October 2021 sales agreement, the sales agent could sell shares of our common stock by any
method permitted by law deemed to be an "at the market offering” as defined in Rule 415 promulgated under the
Securities Act of 1933, as amended, or the Securities Act, including, without limitation, including sales made directly
on or through the Nasdaq Capital Market, on or through any other existing trading market for our common stock or to
or through a market maker. The sales agent must use commercially reasonable efforts in conducting such sales
activities consistent with its normal trading and sales practices and applicable state and federal laws, rules and
regulations and applicable Nasdaq rules. If expressly authorized by us, the sales agent could also sell shares in
privately negotiated transactions. We made certain customary representations, warranties and covenants to the sales
agent in the October 2021 sales agreement, and we agreed to customary indemnification and contribution obligations,
including with respect to liabilities under the Securities Act and the Securities Exchange Act of 1934, as amended, or
the Exchange Act. The October 2021 sales agreement may be terminated by us for any or no reason at any time upon
five days' prior notice to the sales agent or by the sales agent for any or no reason at any time upon five days' prior
notice to us. We have no obligation to sell any shares under the October 2021 sales agreement, and we may suspend
solicitation and offers under the agreement for any reason in our sole discretion. We agreed to pay the sales agent a
commission equal to 3.0% of the gross proceeds from the sales of shares pursuant to the agreement. Shares of our
common stock sold under the October 2021 sales agreement will be issued pursuant to our 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 by the SEC 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 our common stock under the October 2021
sales agreement and any subsequent prospectus supplement related to the offering of shares of our common stock
under the October 2021 sales agreement.
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Financial Overview
Revenue
To date we have not generated any revenue. 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, research and development payments in connection with strategic
collaborations. 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 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
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 under our in-licensing arrangements and under our merger agreement with MBI that
we incur, or the incurrence of which we deem probable; and
internal costs that are 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%. We expect research and development expenses to
increase in the future as we continue to invest in the development of and seek regulatory approval for our clinical-
stage and Phase 1-ready product candidates and as any other potential product candidates we may develop are
advanced into and through clinical trials in the pursuit of regulatory approvals. Such activities 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.
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 Fees
License fees consist of up-front license fees and annual license fees due under our in-licensing
arrangements.
General and Administrative Expense
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.
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Recently Issued Accounting Standards
From time to time, the Financial Accounting Standards board, or FASB, or other standard setting bodies issue
new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated
through issuance of an Accounting Standards Update. We have implemented all new accounting pronouncements
that are in effect and that may impact our financial statements. We have evaluated recently issued accounting
pronouncements and determined that there is no material impact on our financial position or results of operations.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of financial condition and results of operations is based on our
financial statements that we prepared in accordance with accounting principles generally accepted in the United
States. 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. Historically, revisions to our estimates have
not resulted in a material change to the financial statements. While our significant account policies are described in
more detail in Note 2 to our consolidated financial statements included herein, we believe that the following
accounting policies are most important to the portrayal of our financial condition and results of operations and require
management's most difficult, subjective and complex judgments.
Stock-Based Compensation
The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of
the award (determined using a Black-Scholes option pricing model), and is recognized as an expense over the
requisite service period (generally the vesting period of the award). Determining the fair value of stock-based awards
at the grant date requires significant estimates and judgments, including estimating the market price volatility of our
common stock, future stock option exercise behavior and requisite service periods. Due to our limited history of stock
option exercises we applied the simplified method prescribed by SEC Staff Accounting Bulletin 110, Share-Based
Payment: Certain Assumptions Used in Valuation Methods - Expected Term, to estimate expected life.
The fair value of non-employee stock options or stock awards are remeasured as the awards vest, and the
resulting increase or decrease in fair value, if any, is recognized as an increase or decrease to compensation expense
in the period the related services are rendered. Stock options or stock awards with performance conditions issued to
non-employees who are not directors are measured and recognized when the performance is complete or is expected
to be met. Refer to Note 10 to our consolidated financial statements included in this report for more information.
Grant Funding
We receive certain research and development funding from the U.S. government and not-for-profit
organizations. In accordance with a policy we adopted in 2018, we recognize grant funding in the statements of
operations as a reduction to research and development expense as the related costs are incurred to meet those
obligations over the grant period. Grant funding payments received in advance of research and development
expenses incurred are recorded as deferred grant funding liability in our consolidated balance sheets. For the years
ended December 31, 2021 and December 31, 2020, there were no material adjustments to our prior period estimates
of grant funded research and development expenses. Refer to Note 13 to our consolidated financial statements
included in this report for more information.
Clinical Trial Expense Accruals
We estimate expenses resulting from our obligations under contracts with vendors, CROs and consultants
and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts
vary and may result in payment flows that do not match the periods over which materials or services are provided.
We record clinical trial expenses in the period in which services are performed and efforts are expended. We
accrue for these expenses according to the progress of the trial as measured by patient progression and the timing of
various aspects of the trial. We estimate accruals through financial models taking into account discussion with
applicable personnel and outside service providers as to the progress of trials. During the course of a clinical trial, we
may adjust our clinical accruals if actual results differ from our estimates. We estimate accrued expenses as of each
balance sheet date based on the facts and circumstances known at that time. Our clinical trial accruals are dependent
97
upon accurate reporting by CROs and other third-party vendors. Although we do not expect our estimates to differ
materially from amounts actually incurred, our understanding of the status and timing of services performed relative to
the actual status and timing of services performed may vary and may result in reporting amounts that are too high or
too low for any particular period. For the years ended December 31, 2021 and 2020 there were no material
adjustments to our prior period estimates of accrued expenses for clinical trials.
Results of Operations
Comparison of the Years ended December 31, 2021 and 2020
The following table summarizes our consolidated results of operations for the years ended December 31,
2021 and 2020, and the change in the applicable category in terms of dollars and percentage:
Operating expenses:
General and administrative
Research and development
License fees
Loss from operations
Other income
Gain on extinguishment of note payable
Net loss
Revenues
Years Ended
December 31,
Change
2021
2020
$
%
$
8,350,945 $ 6,549,508 $ 1,801,437
30,617,567
20,769,416
9,848,151
100,000
(39,068,512)
83,333
16,667
(27,402,257) (11,666,255)
2,520
369,887
1,514
—
1,006
369,887
$ (38,696,105) $ (27,400,743) $ (11,295,362)
28 %
47 %
20 %
(43) %
66 %
—
41 %
We did not recognize any revenue for the years ended December 31, 2021 or 2020.
General and administrative expenses
The increase of approximately $1.8 million in general and administrative expenses from 2020 to 2021 was
primarily attributable to increases in (i) personnel costs of approximately $688,000, (ii) commercial-readiness
expenses of approximately $635,000, (iii) stock-based compensation expense of approximately $559,000, and (iv)
expenses for legal, professional, and accounting services of approximately $112,000. Such increases were partially
offset by a decrease in rent and facilities expenses of approximately $264,000 attributable to the allocation of a portion
of rent and facilities expense included in general and administrative expenses in 2020 to research and development in
2021.
We expect an increase in general and administrative expenses of approximately 15% to 20% in 2022
compared to 2021 primarily due to increased personnel expenses and other general corporate overhead. Our 2022
general and administrative expenses will include costs related to commercial-readiness activities and obtaining
commercial supplies of XACIATO from our contract manufacturer. Following commercial launch of XACIATO, we
expect our general and administrative expenses will include payments by us to a third-party licensor, including royalty
payments at rates in the high single-digit to low double-digits based on annual net sales of XACIATO. In 2022, in
connection with commercialization of XACIATO in the U.S., these payments may include a milestone payment in the
mid six-figures and royalty payments on net sales at a high single digit royalty rate.
Research and development expenses
The increase of approximately $9.8 million in research and development expenses from 2020 to 2021 was
primarily attributable to increased research and development spend for Sildenafil Cream, 3.6% related to the ongoing
Sildenafil Cream, 3.6% Phase 2b RESPOND clinical trial of approximately $7.7 million. Also contributing to the
increase were increases in (a) costs related to manufacturing and regulatory affairs activities for Ovaprene and
development activities for our Phase 1 and Phase 1-ready programs of approximately $5.6 million, (b) personnel costs
of approximately $553,000, and (c) stock-based compensation expense of approximately $298,000. Such increases
were partially offset by a decrease in development costs of approximately $5.0 million as a result of the completion of
the Phase 3 clinical trial for XACIATO in December 2020.
98
We expect research and development expenses to increase significantly in 2022 as we continue to develop
our product candidates. If we advance our programs as currently planned, our research and development expenses
for 2022 could be more than double our research and development expenses for 2021. Our 2022 research and
development expenses could include up to $4.0 million in milestone payments due under license agreements related
to certain of our product candidates payable by us to our third-party licensors. As discussed below in the section titled
“Liquidity and Capital Resources,” we will need to raise substantial additional capital to continue to fund our
operations and successfully execute our current operating plan. The pace and extent of our research and
development activities and, therefore, our research and development spend, will depend on our cash resources. We
expect our research and development spend to vary across our fiscal quarters. In regard to Sildenafil Cream, 3.6%,
we anticipate that the costs of the Phase 2b RESPOND clinical trial will be approximately $20.0 million, approximately
$8.8 million of which was recorded in fiscal 2021 and approximately $0.7 million of which was recorded in fiscal 2020.
License fees
The $16,667 increase in license expenses from 2020 to 2021 was attributable to an increase in license fees
accrued or paid under our license agreement related to DARE-HRT1. During 2020 and 2021, we accrued or paid
$83,333 and $100,000, respectively, of license fees under such license agreement.
See Note 3 "Strategic Agreements— Strategic Agreements for Pipeline Development" to the accompanying
consolidated financial statements for more information about our license agreements.
Other income and gain on extinguishment of note payable
The increase of $1,006 in other income from 2020 to 2021 was primarily due to an increase in interest earned
on cash balances in 2021.
The $369,887 recorded as a gain on extinguishment of note payable and debt forgiveness income represents
the forgiveness of all the principal and accrued interest of the loan we obtained under the Paycheck Protection
Program, or the PPP, of the Coronavirus Aid, Relief, and Economic Security Act, administered by the U.S. Small
Business Administration, which forgiveness occurred during the first quarter of 2021.
Liquidity and Capital Resources
Plan of Operations and Future Funding Requirements
We prepared the accompanying 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. 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 potentially acquire, license and develop additional product candidates. These
circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying 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.
At December 31, 2021, our accumulated deficit was approximately $110.1 million, our cash and cash
equivalents were approximately $51.7 million, and our working capital was approximately $39.2 million. For the year
ended December 31, 2021, we incurred a net loss of $38.7 million and had negative cash flow from operations of
approximately $28.8 million.
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, 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.
As discussed above, we expect our expenses, and in particular our research and development expenses, to
increase significantly in 2022 compared to 2021 as we continue to develop and seek to bring to market our product
candidates, with a focus on our product candidates that have reached the human clinical study development phase.
Under the terms of our license agreement, Organon will purchase all of its product requirements of XACIATO from us
99
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 financial statements. Historically, the cash used to fund our operations has come from a variety of
sources and predominantly from sales of our common stock. During 2021, we received (1) approximately $68.5
million in net proceeds from ATM sales of shares of our common stock; (2) approximately $11.5 million in non-dilutive
grant funding to advance DARE-LARC1 in non-clinical proof of principle studies; (3) approximately $6.8 million in net
proceeds from sales of shares of our common stock under our equity line; and (4) approximately $0.5 million upon the
exercise of warrants.
We will need to raise substantial additional capital to continue to fund our operations and to successfully
execute our current business strategy. During 2022, we may receive up to $12.5 million under our license agreement
for XACIATO, and 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 can effect such sales and the amount of shares we can sell depends on a
variety of factors to be determined by us from time to time, 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 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, strategic alliances or other similar types of arrangements, we may have
to relinquish, on terms that are not favorable to us, rights to some of our technologies or product candidates we would
otherwise seek to develop or commercialize. 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. 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 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 ITEM 1A. "RISK FACTORS—Risks Related to Our Financial Position and
Capital Needs —We will need to raise additional capital to continue our operations and execute our business
strategy,” above.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash
Net cash used in operating activities
Years Ended
December 31,
2021
2020
$ (28,764,037) $ (25,234,924)
(14,524)
(17,625)
75,846,766
25,130,672
(63,585)
11,237
$ 47,004,620 $
(110,640)
Cash used in operating activities during the year ended December 31, 2021 included the net loss of $38.7
million, decreased by non-cash stock-based compensation expense of approximately $1.6 million, and increased by
the non-cash gain on extinguishment of the note payable and accrued interest of approximately $370,000 related to
our PPP loan. Components providing operating cash were an increase in deferred grant funding of approximately $9.0
million, and an increase in accounts payable of approximately $1.1 million. Components reducing operating cash were
100
an increase in other receivables of approximately $685,000, an increase in prepaid expenses of approximately
$622,000, and a decrease in accrued expenses of approximately $46,000.
Cash used in operating activities during the year ended December 31, 2020 included the net loss of $27.4
million, decreased by non-cash stock-based compensation expense of approximately $742,000. Components
providing operating cash were an increase in accrued expenses of approximately $1.3 million, an increase in deferred
license revenue of $1.0 million, an increase in other non-current assets and deferred charges of approximately
$158,000, and an increase in other receivables of approximately $95,000. Components reducing operating cash were
an increase in prepaid expenses of approximately $454,000, a decrease in deferred grant funding of approximately
$455,000, and a decrease in accounts payable of approximately $62,000.
Net cash used in investing activities
Cash used in investing activities during the years ended December 31, 2021 and December 31, 2020 was
related to purchases of property and equipment of approximately $15,000 and $18,000, respectively.
Net cash provided by financing activities
Net cash provided by financing activities during the years ended December 31, 2021 and December 31, 2020
was approximately $75.8 million and $25.1 million, respectively, consisting primarily of net proceeds from sales of our
common stock under our ATM sales agreements and our equity line.
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. For further discussion of these potential payments, see Note 3 "Strategic Agreements—
Strategic Agreements for Pipeline Development" to the accompanying consolidated financial statements for more
information about our license agreements.
Other Contracts
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 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements required to be included in this Item 8 are set forth in a separate section
of this report commencing on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. 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
101
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 December 31, 2021 at the
reasonable assurance level.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act). Our internal control over financial reporting
is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements in accordance with generally accepted accounting principles. Because of its inherent limitations,
internal controls over financial reporting may not prevent or detect misstatements. In addition, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting
based on the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework). Based on our assessment, management has
concluded that our internal control over financial reporting was effective as of December 31, 2021 to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with generally accepted accounting principles in the United States.
Under SEC rules, because we are a non-accelerated filer, we are not required to provide an auditor
attestation report on internal control over financial reporting, nor did we engage our independent registered public
accounting firm to perform an audit of our internal control over financial reporting.
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 fourth quarter
ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
102
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
PART III
The information required by this item will be included in the Company's 2022 Proxy Statement and is
incorporated in this report by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be included in the Company's 2022 Proxy Statement and is
incorporated in this report by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this item will be included in the Company's 2022 Proxy Statement and is
incorporated in this report by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item will be included in the Company's 2022 Proxy Statement and is
incorporated in this report by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item will be included in the Company's 2022 Proxy Statement and is
incorporated in this report by reference.
103
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this annual report on Form 10-K:
PART IV
(1) Financial Statements
See “Index to Consolidated Financial Statements” on page F-1.
(2) Financial Statement Schedules
All financial statement schedules have been omitted, since the required information is not applicable or is not
present in amounts sufficient to require submission of the schedule, or because the information required is included in
the consolidated financial statements and notes thereto included in this report.
(3) Exhibits
Exhibits not filed or furnished herewith are incorporated by reference to exhibits previously filed with the SEC,
as reflected in the table below. We will furnish a copy of any exhibit to stockholders, without charge upon written
request to Daré Bioscience, Inc., 3655 Nobel Drive, Suite 260, San Diego, CA 92122, or by calling 858-926-7655.
Exhibit
Number
2.1§
Δ
2.2+
3.1
3.2
4.1
4.2
Description of Exhibit
Agreement and Plan of Merger,
dated as of April 30, 2018, by and
among Daré Bioscience, Inc.,
Daré Merger Sub, Inc., Pear Tree
Pharmaceuticals, Inc., and Fred
Mermelstein and Stephen C.
Rocamboli, as Holders'
Representatives
Agreement and Plan of Merger,
dated November 10, 2019, Dare
Bioscience, Inc., MC Merger Sub,
Inc., Microchips Biotech, Inc., and
Shareholder Representative
Services LLC, as the stockholders'
representative
Restated Certificate of
Incorporation, as amended by
Certificate of Amendment dated
July 19, 2017 to effect the
Reverse Stock Split effective July
20, 2017, and by Certificate of
Amendment dated July 19, 2017
stating the name change effective
July 20, 2017
Second Amended and Restated
By-Laws (as amended through
June 1, 2020)
Specimen stock certificate
evidencing the shares of common
stock
Warrant Agreement to purchase
shares of common stock of the
registrant with Aquilo Partners,
L.P., entered into as of October
16, 2016.
Incorporated by Reference
Form
10-Q 001-36395
File No.
Filing Date
8/13/2018
Exhibit
No.
10.10
Filed
Herewith
8-K
001-36395
11/12/2019
2.1
10-Q 001-36395
08/14/2017
3.1
8-K
001-36395
6/3/2020
3.1
10-K
001-36395
03/28/2018
4.1
X
104
4.3(a)
Form of Warrant to Purchase
Shares of Common Stock
(February 2018 Underwritten
Offering)
8-K
001-36395
02/13/2018
4.1
4.3(b)
Form of Amendment to Warrant to
Purchase Common Stock entered
into as of June 27, 2018
10-Q 001-36395-
181175221
11/13/2018
4.1
4.4
Description of securities of the
registrant
10-K
001-36395
03/27/2020
4.6
10.1Δ
10.2Δ
10.3(a)*
10.3(b)*
10.3(c)*
10.4
10.5*
10.6Δ
License and Collaboration
Agreement dated February 11,
2018 between Daré Bioscience,
Inc., Strategic Science and
Technologies-D, LLC and
Strategic Science Technologies,
LLC
License Agreement dated March
19, 2017, between Daré
Bioscience Operations, Inc. and
ADVA-Tec, Inc.
Daré Bioscience, Inc. Amended
and Restated 2014 Stock
Incentive Plan
Form of Incentive Stock Option
Agreement for grants under the
Daré Bioscience, Inc. Amended
and Restated 2014 Stock
Incentive Plan
Form of Nonstatutory Stock
Option Agreement for grants
under the Daré Bioscience, Inc.
Amended and Restated 2014
Stock Incentive Plan
Form of indemnification
agreement between the registrant
and each of its executive officers
and directors
Non-Employee Director
Compensation Policy (as
amended through April 9, 2018)
Exclusive License Agreement
made as April 24, 2018 by and
between Catalent JNP, Inc. (fka
Juniper Pharmaceuticals, Inc.),
and Daré Bioscience, Inc.
10.7(a)Δ
Amended and Restated Exclusive
License Agreement, dated as of
July 14, 2006, by and between
Fred Mermelstein, Ph.D. and
Janet Chollet, M.D., and Pear
Tree Women’s Health Care, Inc.
10-K/
A
001-36395
04/30/2018
10.1
10-Q 001-36395
11/13/2017
10.1
8-K
001-36395-
18949535
7/12/2018
10.1
10-Q 001-36395
08/13/2018
10.3
10-Q 001-36395
08/13/2018
10.4
S-1
333-194442
03/10/2014
10.16
10-Q 001-36395
8/13/2018
10.2
10-Q 001-36395
8/13/2018
10.1
10-Q 001-36395
8/13/2018
10.5
105
10.7(b)Δ
10.7(c)Δ
10.7(d)Δ
10.7(e)Δ
Amendment No. 1 to the Amended
and Restated Exclusive License
Agreement, dated as of October
10, 2007, by and among Fred
Mermelstein, Ph.D. and Janet
Chollet, M.D., and Pear Tree
Pharmaceuticals, Inc.
Amendment No. 2 to the Amended
and Restated Exclusive License
Agreement, dated as of February
13, 2017, by and among Fred
Mermelstein, Ph.D., and Janet
Chollet, M.D., Pear Tree
Pharmaceuticals, Inc. and
Bernadette Klamerus
Exclusive License Agreement,
dated as of February 13, 2017, by
and between GYN Holdings, Inc.,
a wholly owned subsidiary of Pear
Tree Pharmaceuticals, Inc. and
Bernadette Klamerus
Exclusive License Agreement,
dated as of September 15, 2017,
by and between Fred
Mermelstein, Ph.D., Janet Chollet,
M.D., Pear Tree Pharmaceuticals,
Inc., and Stephen C. Rocamboli
10-Q 001-36395
8/13/2018
10.6
10-Q 001-36395
8/13/2018
10.7
10-Q 001-36395
8/13/2018
10.8
10-Q 001-36395
8/13/2018
10.9
10.8
2014 Employee Stock Purchase
Plan
S-1/A 333-194442
03/31/2014
10.26
10.9(a)Δ
10.9(b)Δ
10.9(c)
10.9(d)
10.9(e)
Assignment Agreement by and
between Daré Bioscience, Inc.
and Hammock Pharmaceuticals,
Inc. effective as of December 5,
2018
First Amendment to the License
Agreement effective as of
December 5, 2018 by and among
Daré Bioscience, Inc., TriLogic
Pharma, LLC and MilanaPharm
LLC
Amendment No. 1 to Assignment
Agreement entered into as of
December 4, 2019 between Daré
Bioscience, Inc. and Hammock
Pharmaceuticals, Inc.
Amendment No. 2 to the License
Agreement entered into as of
December 3, 2019 between Daré
Bioscience, Inc., TriLogic Pharma,
LLC and MilanaPharm LLC
Amendment to License Agreement
effective as of September 21,
2021 by and among Daré
Bioscience, Inc., TriLogic Pharma,
LLC and MilanaPharm LLC
10-K
001-36395
04/01/2019
10.10(a)
10-K
001-36395
04/01/2019
10.10(b)
10-K
001-36395
03/27/2020
10.10(c)
10-K
001-36395
03/27/2020
10.10(d)
10-Q 001-36395
11/10/2021
10.1
106
10.10(a)*
2007 Stock Incentive Plan
S-1
333-194442
03/10/2014
10.1
10.10(b)
Form of Incentive Stock Option
Agreement under 2007 Stock
Incentive Plan
10.10(c)*
Form of Nonstatutory Stock
Option Agreement under 2007
Stock Incentive Plan
S-1
333-194442
03/10/2014
10.2
S-1
333-194442
03/10/2014
10.3
10.10(d)
10.10(e)
10.11(a)*
10.11(b)*
10.12(a)*
10.12(b)*
10.13*
10.14+
10.15*
10.16*
10.17+
Stock Option Agreement and
Contingent Consideration Award
Agreement, dated March 31,
2013, between Cerulean Pharma,
Inc. and Alan Crane
Amendment to the Stock Option
Agreement and Termination of
Contingent Consideration Award
dated September 16, 2014, by
and between Cerulean Pharma,
Inc. and Alan Crane
Employment Agreement by and
between Daré Bioscience, Inc.
and Sabrina Martucci Johnson
dated as of August 15, 2017
Amendment No. 1 to Employment
Agreement between Daré
Bioscience, Inc. and Sabrina
Martucci Johnson dated as of
March 9, 2020
Employment Agreement by and
between Daré Bioscience, Inc.
and Lisa Walters-Hoffert dated as
of August 15, 2017
Amendment No. 1 to Employment
Agreement between Daré
Bioscience, Inc. and Lisa Walters-
Hoffert dated as of March 9, 2020
Daré Bioscience, Inc.
Performance Bonus Plan
License Agreement dated as of
January 10, 2020 between Bayer
HealthCare LLC and Daré
Bioscience, Inc.
Daré Bioscience, Inc. Employment
Offer Letter to John Fair, dated
April 24, 2018
Daré Bioscience, Inc. Change in
Control Policy (effective October
15, 2019)
Grant Agreement between Daré
Bioscience, Inc. and the Bill &
Melinda Gates Foundation
effective as of June 30, 2021
S-1
333-194442
03/10/2014
10.24
10-Q 001-36395
11/13/2014
10.4
8-K
001-36395
08/18/2017
10.1
10-Q 001-36395
05/14/2020
10.13(b)
8-K
001-36395
08/18/2017
10.2
10-Q 001-36395
05/14/2020
10.14(b)
10-Q 001-36395
11/12/2019
10.1
10-K
001-36395
03/27/2020
10.16
S-1
333-251599
01/05/2021
10.19
S-1
333-251599
01/05/2021
10.20
10-Q 001-36395
08/12/2021
10.1
107
10-Q 001-36395
11/10/2021
10.2
10.18+
Cooperative Research and
Development Agreement entered
into as of July 8, 2021 between
Daré Bioscience, Inc. and the
Eunice Kennedy Shriver National
Institutes of Child Health and
Human Development Institute
21.1
Subsidiaries of the registrant
23.1
31.1
31.2
32.1#
32.2#
Consent of Mayer Hoffman
McCann P.C.
Certification of principal executive
officer pursuant to
Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934,
as amended
Certification of principal financial
officer pursuant to
Rule 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934,
as amended
Certification of principal executive
officer pursuant to 18 U.S.C.
§1350, as adopted pursuant to
Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of principal financial
officer pursuant to 18 U.S.C.
§1350, as adopted pursuant to
Section 906 of the Sarbanes-
Oxley Act of 2002
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension
Schema Document
101.CAL
XBRL Taxonomy Calculation
Linkbase Document
101.DEF
XBRL Taxonomy Extension
Definition Linkbase Document
101.LAB
XBRL Taxonomy Label Linkbase
Document
101.PRE
XBRL Taxonomy Presentation
Linkbase Document
X
X
X
X
X
X
X
X
X
X
X
X
X
Cover Page Interactive Data File
(formatted as inline XBRL and
contained in Exhibit 101)
104
§
Δ
All schedules (or similar attachments) have been omitted from this filing pursuant to Item 601(b)(2) of
Regulation S-K. The registrant will furnish copies of any schedules to the Securities and Exchange
Commission upon request.
Confidential treatment has been requested or granted to certain confidential information contained in
this exhibit.
108
+
*
#
Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10). The
omitted information is not material and would likely cause competitive harm to the Company if publicly
disclosed.
Management contract or compensatory plan or arrangement
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.
ITEM 16. FORM 10-K SUMMARY
None.
109
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2022
Daré Bioscience, Inc.
By:
/s/ SABRINA MARTUCCI JOHNSON
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ SABRINA MARTUCCI JOHNSON
Sabrina Martucci Johnson
President and Chief Executive Officer
(Principal Executive Officer) and Director
March 31, 2022
/s/ LISA WALTERS-HOFFERT
Lisa Walters-Hoffert
/s/ WILLIAM H. RASTETTER
William H. Rastetter, Ph.D.
/s/ CHERYL R. BLANCHARD
Cheryl R. Blanchard, Ph.D.
/s/ JESSICA D. GROSSMAN
Jessica D. Grossman, M.D.
/s/ SUSAN L. KELLEY
Susan L. Kelley, M.D.
/s/ GREGORY W. MATZ
Gregory W. Matz, CPA
/s/ SOPHIA ONONYE-ONYIA
Sophia Ononye-Onyia, Ph.D.
/s/ ROBIN STEELE
Robin Steele, J.D., L.L.M.
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
March 31, 2022
Chairman of the Board and Director
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
March 31, 2022
Director
Director
Director
Director
Director
Director
110
DARÉ BIOSCIENCE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 199)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31,
2021 and 2020
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2021 and
2020
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
Page
F-2
F-3
F-4
F-5
F-6
F-7
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
of Daré Bioscience, Inc. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Daré Bioscience, Inc. and Subsidiaries
(“the Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and
comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended
December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2021 and 2020, and the results of their operations and their cash flows for each of the two years in the period ended
December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
The Company's Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a
going concern. As discussed in Note 1 to the financial statements, the Company had recurring losses from operations,
negative cash flow from operations and is dependent on additional financing to fund operations. These conditions
raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to
these matters are described in Note 2 to the financial statements. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures
that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. We determined that there were no critical audit matters.
We have served as the Company's auditor since 2017.
/s/ Mayer Hoffman McCann P.C.
March 31, 2022
San Diego, California
F-2
Daré Bioscience, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
Current Assets
Cash and cash equivalents
Other receivables
Prepaid expenses
Total current assets
Property and equipment, net
Other non-current assets
Total assets
Liabilities and stockholders’ equity (deficit)
Current Liabilities
Accounts payable
Accrued expenses
Deferred grant funding
Note payable
Contingent consideration
Current portion of lease liabilities
Total current liabilities
Deferred license revenue
Lease liabilities long-term
Total liabilities
Commitments and contingencies (Note 12)
Stockholders' equity (deficit)
Preferred stock, $0.01 par value, 5,000,000 shares authorized
None issued and outstanding
Common stock: $0.0001 par value, 120,000,000 shares authorized, 83,944,119
and 41,596,253 shares issued and outstanding at December 31, 2021 and
December 31, 2020, respectively
Accumulated other comprehensive loss
Additional paid-in capital
Accumulated deficit
Total stockholders' equity (deficit)
Total liabilities and stockholders' equity (deficit)
See accompanying notes.
December 31,
2021
2020
$ 51,674,087 $ 4,669,467
1,145,317
460,168
2,476,612
1,854,277
55,296,016
6,983,912
26,041
485,120
37,930
528,870
$ 55,807,177 $ 7,550,712
$ 2,103,083 $ 1,021,333
3,359,718
3,136,244
10,542,983
1,564,553
—
—
367,285
1,000,000
270,546
347,712
16,052,856
7,660,601
1,000,000
1,000,000
—
41,844
17,052,856
8,702,445
—
—
8,394
4,159
(154,973)
(91,388)
149,027,802
70,366,293
(110,126,902) (71,430,797)
38,754,321
(1,151,733)
$ 55,807,177 $ 7,550,712
F-3
Daré Bioscience, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
Operating expenses
General and administrative
Research and development
License fees
Total operating expenses
Loss from operations
Other income
Gain on extinguishment of note payable
Net loss
Deemed dividend from trigger of round down provision feature
Net loss to common shareholders
Foreign currency translation adjustments
Comprehensive loss
Loss per common share - basic and diluted
Weighted average number of common shares outstanding:
Basic and diluted
See accompanying notes.
Years Ended December 31,
2021
2020
$ 8,350,945 $ 6,549,508
30,617,567
20,769,416
100,000
83,333
39,068,512
27,402,257
(39,068,512) (27,402,257)
2,520
369,887
1,514
—
$ (38,696,105) $ (27,400,743)
—
(6,863)
$ (38,696,105) $ (27,407,606)
(63,585)
11,237
$ (38,759,690) $ (27,396,369)
$
(0.63) $
(0.91)
61,154,157
30,091,469
F-4
Daré Bioscience, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity (Deficit)
Additional
Accumulated
other
Total
Common stock
paid-in
comprehensive
Accumulated
stockholders'
Shares
Amount
capital
loss
deficit
equity (deficit)
Balance at December 31, 2019
19,683,401 $ 1,968 $ 44,564,674 $
(102,625) $ (44,023,191) $
440,826
Stock-based compensation
—
—
742,031
Issuance of common stock, net
of issuance costs
Issuance of common stock from
the exercise of warrants
Issuance cost on equity paid in
common stock
Stock options exercised
Deemed dividend from trigger of
down round provision
Net loss
Foreign currency translation
adjustments
19,791,989
1,979
22,975,428
1,825,000
182
1,785,797
285,714
10,149
—
—
—
29
1
—
—
—
291,500
—
6,863
—
—
—
—
—
—
—
—
—
742,031
—
22,977,407
—
—
—
(6,863)
1,785,979
291,529
1
—
—
(27,400,743)
(27,400,743)
11,237
—
11,237
Balance at December 31, 2020 41,596,253 $ 4,159 $ 70,366,293 $
(91,388) $ (71,430,797) $
(1,151,733)
Stock-based compensation
Issuance of common stock, net
of issuance costs
Issuance of common stock from
the exercise of warrants
Stock options exercised
Issuance of common stock in
connection with milestone
payment
Net loss
Foreign currency translation
adjustments
—
—
1,599,692
41,094,657
4,109
75,309,982
520,985
35,500
52
4
500,094
32,525
696,724
70
1,219,216
—
—
—
—
—
—
1,599,692
—
75,314,091
—
—
—
500,146
32,529
1,219,286
—
—
—
—
—
—
—
(38,696,105)
(38,696,105)
(63,585)
—
(63,585)
Balance at December 31, 2021 83,944,119 $ 8,394 $ 149,027,802 $
(154,973) $ (110,126,902) $ 38,754,321
See accompanying notes.
F-5
Daré Bioscience, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
Stock-based compensation
Non-cash operating lease cost
Non-cash loss on settlement of contingent liability
Gain on extinguishment of note payable and accrued interest
Changes in operating assets and liabilities:
Other receivables
Prepaid expenses
Other non-current assets
Accounts payable
Accrued expenses
Deferred grant funding
Deferred license revenue
Net cash used in operating activities
Investing activities:
Purchases of property and equipment
Net cash used in investing activities
Financing activities:
Net proceeds from issuance of common stock
Proceeds from the exercise of common stock warrants
Proceeds from the exercise of stock options
Proceeds from issuance of note payable
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of non-cash investing and financing activities:
Operating right-of-use assets obtained in exchange for new operating lease
liabilities
Settlement of contingent closing consideration liability with stock issuance in
connection with acquisition of business
Milestone payment paid in common stock
Issuance cost on equity paid in common stock
Deemed dividend from trigger of down round provision
See accompanying notes.
Years Ended December 31,
2021
2020
$ (38,696,105) $ (27,400,743)
26,413
1,599,692
43,227
742,031
(96,132)
(162,167)
44,286
(369,887)
—
—
(685,149)
95,042
(622,336)
(454,133)
20,873
1,081,749
157,725
(61,850)
(45,871)
1,261,065
8,978,430
(455,121)
—
1,000,000
(28,764,037) (25,234,924)
(14,524)
(14,524)
(17,625)
(17,625)
75,314,091
22,977,407
500,146
1,785,979
32,529
1
—
367,285
75,846,766
25,130,672
(63,585)
11,237
47,004,620
(110,640)
4,669,467
4,780,107
$ 51,674,087 $ 4,669,467
$
$
$
$
$
308,533 $
—
925,000 $
250,000 $
— $
— $
—
—
291,428
6,863
F-6
Daré Bioscience, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1.
ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization and 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 is 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, fertility, and vaginal and sexual health. The Company's business
strategy is to in-license or otherwise acquire the rights to differentiated product candidates in the Company's areas of
focus, some of which have existing clinical proof-of-concept data, to take those candidates through mid to late-stage
clinical development, and to establish and leverage strategic collaborations to achieve commercialization.
The Company's first product, XACIATO™, which was approved by the FDA in December 2021, is a single-
dose vaginal gel prescription product for the treatment of bacterial vaginosis in females 12 years of age and older. In
March 2022, the Company entered into an exclusive global license agreement with an affiliate of Organon & Co.,
Organon International GmbH, or Organon, to commercialize XACIATO. XACIATO is expected to be available
commercially in the United States in the fourth quarter of 2022.
The Company began assembling its diverse portfolio of clinical-stage product candidates and pre-clinical
programs 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, and vaginal and sexual health, and aim to
expand treatment options, enhance outcomes and improve ease of use for women.
The Company's portfolio includes two product candidates in advanced clinical development:
• Ovaprene®, a hormone-free, monthly contraceptive; and
•
Sildenafil Cream, 3.6%, a proprietary cream formulation of sildenafil for topical administration to the
vulva and vagina for treatment of female sexual arousal disorder.
The Company's portfolio also includes four product candidates in Phase 1 clinical development or that the
Company believes are Phase 1-ready:
•
•
•
•
DARE-HRT1, a combination bio-identical estradiol and progesterone intravaginal ring for the
treatment of menopausal symptoms, including vasomotor symptoms, as part of hormone therapy
following menopause;
DARE-VVA1, a vaginally delivered formulation of tamoxifen to treat vulvar vaginal atrophy as an
option for women with hormone- receptor positive breast cancer;
DARE-FRT1, an intravaginal ring containing bio-identical progesterone for broader luteal phase
support as part of an in vitro fertilization treatment plan; and
DARE-PTB1, an intravaginal ring containing bio-identical progesterone for the prevention of preterm
birth;
In addition, the Company's portfolio includes these pre-clinical stage potential product candidates:
•
•
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;
ADARE-204 and ADARE-214,
contraception over 6-month and 12-month periods, respectively; and
injectable
formulations of etonogestrel designed
to provide
F-7
•
DARE-RH1, a novel approach to non-hormonal contraception for both men and women by targeting
the CatSper ion channel.
The Company’s primary operations have consisted of, and are expected to continue to consist primarily of,
research and development activities to advance its portfolio of product candidates through clinical development and
regulatory approval.
The Company has one FDA-approved product, XACIATO, which has not yet been commercially launched. To
date, the Company has not obtained any other regulatory approvals for any of its product candidates, commercialized
any of its product candidates or generated any revenue.
The Company is subject to several risks common to biopharmaceutical companies, including dependence on
key employees, dependence on third-party collaborators and service providers, competition from other companies,
the need to develop commercially viable products in a timely and cost-effective manner, and the need to obtain
adequate additional capital to fund the development of product candidates. The Company is also subject to several
risks common to other companies in the industry, including rapid technology change, regulatory approval of products,
uncertainty of market acceptance of products, success of third parties in the marketing, sale and distribution of the
Company's products, competition from substitute products and larger companies, compliance with government
regulations, protection of proprietary technology, and product liability.
The COVID-19 pandemic remains an evolving and uncertain risk to the Company’s business, operating
results, financial condition and stock price. To date, the Company believes the pandemic contributed to a slower than
expected initial pace of enrollment in its Phase 2b clinical study of Sildenafil Cream, 3.6% and delays in
commencement of clinical studies and nonclinical testing for more than one of its earlier stage clinical programs, but
has not had a material adverse effect on its 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 the Company’s business. For further
discussion of risks and uncertainties related to the pandemic, see the risk factor in Part I, Item 1A of this report titled,
The COVID-19 pandemic has negatively impacted our business and, in the future, may materially and adversely affect
our business, financial condition and results and stock price, including by increasing the cost and timelines for our
clinical development programs.
2.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements have been prepared in conformity with accounting principles generally
accepted in the United States, or U.S. GAAP, as defined by the Financial Accounting Standards Board, or FASB.
Going Concern
The Company prepared its 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. The 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 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 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.
At December 31, 2021, the Company had an accumulated deficit of approximately $110.1 million, cash and
cash equivalents of approximately $51.7 million, and working capital of approximately $39.2 million. For the year
ended December 31, 2021, the Company incurred a net loss of $38.7 million and had negative cash flow from
operations of approximately $28.8 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-party licensors 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
F-8
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 expects its expenses, and in particular its research and development expenses, to increase
significantly in 2022 compared to 2021 as the Company continues to develop and seek to bring to market its product
candidates, with a focus on its product candidates that have reached the human clinical study development phase.
To date, the Company has one FDA-approved product, XACIATO, which has not yet been commercially
launched. The Company has not obtained any other regulatory approvals for any of its product candidates,
commercialized any of its product candidates or generated any revenue. Commercial launch of XACIATO in the U.S.
by the Company's licensee, Organon, is expected in the fourth quarter of 2022. Under the terms of its license
agreement with Organon, the Company will receive a $10.0 million non-refundable and non-creditable payment
following the effective date of the license agreement and 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. 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 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 will continue to seek to
raise capital through the sale of shares of its common stock under its ATM sales agreements, however, when the
Company can effect such sales and the amount of shares the Company can sell depends on a variety of factors to be
determined by the Company from time to time, including, among others, market conditions, the trading price of its
common stock and its determination as to the appropriate sources of funding for its operations. 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 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 depend highly 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 expansion of its product
candidate portfolio, if any. If the Company raises capital through collaborations, strategic alliances or other similar
types of arrangements, it may have to relinquish, on terms that are not favorable to the Company, rights to some of its
technologies or product candidates the Company would otherwise seek to develop or commercialize.
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.
Principles of Consolidation
The consolidated financial statements of the Company are stated in U.S. dollars. These consolidated financial
statements include the accounts of the Company and its wholly owned subsidiaries. One wholly owned subsidiary,
Daré Bioscience Australia Pty LTD, operates primarily in Australia. The financial statements of the Company’s wholly
owned subsidiaries are recorded in their functional currency and translated into the reporting currency. The cumulative
effect of changes in exchange rates between the foreign entity’s functional currency and the reporting currency is
F-9
reported in Accumulated Other Comprehensive Loss. All intercompany transactions and accounts have been
eliminated in consolidation.
Grant Funding
The Company receives certain research and development funding through grants issued by a division of the
National Institutes of Health and the Bill & Melinda Gates Foundation, or the Foundation. Under the Foundation grant,
which the Company considers to be a research and development contract under FASB Accounting Standards
Codification, or ASC, Topic 730 Research and Development, the Company granted the Foundation a Humanitarian
License which gives the Foundation the right to make the funded developments accessible at an affordable price to
people within developing countries. The Company recognizes grant funding in the statements of operations as a
reduction to research and development expense as the related costs are incurred to meet those obligations over the
grant period. The Company adopted this policy in 2018. For the years ended December 31, 2021 and December 31,
2020, the Company recognized approximately $2.5 million and $3.7 million, respectively, in the statements of
operations as a reduction to research and development expense. Grant funding payments received in advance of
research and development expenses incurred are recorded as deferred grant funding liability in the Company's
consolidated balance sheets.
Use of Estimates
The preparation of the consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include the fair value of stock-based compensation. Actual results could differ
from those estimates and could materially affect the reported amounts of assets, liabilities and future operating
results.
Risks and Uncertainties
The Company will require approvals from the U.S. Food and Drug Administration, or FDA, or foreign
regulatory agencies prior to being able to sell any products. The Company received approval from the FDA for its first
product, XACIATO™, in December 2021. There can be no assurance that the Company’s current or future product
candidates will receive the necessary approvals. If the Company is denied regulatory approval of its product
candidates, or if approval is delayed, it may have a material adverse impact on the Company’s business, results of
operations and its financial position.
The Company is subject to a number of risks similar to other life science companies, including, but not limited
to, risks related to the ability to license product candidates, successfully develop product candidates, successfully
commercialize approved products or enter into strategic relationships with third parties who are able to successfully
commercialize approved products, raise additional capital, compete with other products, and protect proprietary
technology. As a result of these and other factors and the related uncertainties, there can be no assurance of the
Company’s future success.
Cash and Cash Equivalents
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’s wholly owned subsidiary, Dare MB Inc., has a $35,903 letter of
credit related to the lease of real property that serves as security for future default of lease payments. The letter of
credit is collateralized by cash which is unavailable for withdrawal or for usage for general obligations and is included
in cash and cash equivalents on the Company's consolidated balance sheets.
Concentration of Credit Risk
The Company maintains cash balances at various financial institutions and such balances commonly exceed
the $250,000 amount insured by the Federal Deposit Insurance Corporation. The Company also maintains money
market funds at various financial institutions which are not federally insured although are invested primarily in the U.S.
The Company has not experienced any losses in such accounts and management believes that the Company does
not have significant risk with respect to such cash and cash equivalents.
F-10
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 December 31, 2021 and December 31, 2020. There were no financial
assets or liabilities that were remeasured using a quoted price in active markets for identical assets (Level 2) as of
December 31, 2021.
Balance at December 31, 2021
Current assets:
Cash equivalents (1)
Balance at December 31, 2020
Current assets:
Cash equivalents (1)
Other non-current liabilities:
Fair Value Measurements
Level 1
Level 2
Level 3
Total
$ 49,666,064 $
— $
— $ 49,666,064
$ 2,823,099 $
— $
— $ 2,823,099
Current portion of contingent consideration (2)
$
— $
— $ 1,000,000 $ 1,000,000
(1) Represents cash held in money market funds.
(2) Represented the estimated fair value of the contingent consideration payable by the Company related to an acquisition
completed in November 2019, and which was paid in September 2021, as described in Note 3.
The following table presents a reconciliation of contingent consideration, which was measured at fair value on
a recurring basis using significant unobservable inputs (Level 3):
Year Ended December 31,
2021
2020
Balance at beginning of period
Satisfaction of contingent consideration (1)
Balance at end of period
$
$
1,000,000 $
1,000,000
(1,000,000)
—
— $
1,000,000
(1) In June 2021, the contingent consideration payable by the Company related to an acquisition completed in November
2019 became due. In September 2021, the Company issued approximately 700,000 shares of its common stock in
satisfaction of the milestone payments associated with milestones achieved, as described in Note 3.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC Topic 606, Revenue from Contracts with
Customers, which applies to all contracts with customers, except for contracts that are within the scope of other
standards, such as leases, insurance, collaboration arrangements and financial instruments.
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
F-11
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 and 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 that is 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.
License Fees. 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 that are 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 not recognized any license fee revenue resulting from any of its collaborative arrangements.
Royalties and Commercial Milestones. For arrangements that include sales-based royalties and milestone
payments based on the level of sales, and for which the license is deemed to be the predominant item to which the
royalties and milestones 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, the Company has not recognized any royalty revenue or any commercial milestones resulting from
any of its collaborative arrangements.
Bayer License. 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. Upon execution of the
agreement, the Company received a $1.0 million upfront non-refundable license fee payment from Bayer. Bayer, in its
sole discretion, has the right to make the license effective by paying the Company an additional $20.0 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 December 31, 2021, 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 December 31,
2021 and December 31, 2020.
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.)
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in other
non-current assets as right-of-use, or ROU, lease assets, current portion of lease liabilities, and long-term lease
liabilities on the Company's consolidated balance sheets.
F-12
ROU lease assets represent the Company's right to use an underlying asset for the lease term and lease
obligations represent the Company's obligation to make lease payments arising from the lease. Operating ROU lease
assets and obligations are recognized at the commencement date based on the present value of lease payments over
the lease term. If the lease does not provide an implicit rate, the Company uses its incremental borrowing rate based
on the information available at the commencement date in determining the present value of lease payments. The
ROU lease asset also includes any lease payments made and excludes lease incentives. The Company's lease terms
may include options to extend or terminate the lease and the related payments are only included in the lease liability
when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is
recognized on a straight-line basis over the lease term. (See Note 11, Leased Properties.)
Segment Reporting
Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision maker, or decision-making group, in making
decisions on how to allocate resources and assess performance. Its chief operating decision maker is the chief
executive officer. The Company has one operating segment, women’s health.
Research and Development Costs
Research and development expenses consist of expenses incurred in performing research and development
activities, including compensation and benefits for full-time research and development employees, an allocation of
facilities expenses, overhead expenses, manufacturing process-development and scale-up activities, fees paid to
clinical and regulatory consultants, clinical trial and related clinical trial manufacturing expenses, fees paid to contract
research organizations, or CROs, and investigative sites, transaction expenses incurred in connection with the
expansion of the product portfolio through acquisitions and license and option agreements, milestone payments
incurred or probable to be incurred for the Company's in-licensing arrangements, payments to universities under the
Company’s license agreements and other outside expenses. Research and development costs are expensed as
incurred. Nonrefundable advance payments, if any, for goods and services used in research and development are
recognized as an expense as the related goods are delivered or services are performed.
Net Loss Per Share
Basic net loss attributable to common stockholders per share is calculated by dividing the net loss by the
weighted average number of shares of common stock outstanding during the period without consideration of common
stock equivalents. Since the Company was in a loss position for all periods presented, diluted net loss per share is the
same as basic net loss per share for all periods presented as the inclusion of all potential dilutive securities would
have been antidilutive.
There were stock options exercisable into 4,717,602 and 2,786,591 shares of common stock outstanding at
December 31, 2021 and 2020, respectively. There were warrants exercisable into 1,381,015 and 1,908,643 shares of
common stock outstanding at December 31, 2021 and 2020, respectively. These securities were not included in the
computation of diluted loss per share because they are antidilutive, but they could potentially dilute earnings (loss) per
share in future years.
Stock-Based Compensation
The Company records compensation expense for all stock-based awards granted based on the fair value of
the award at the time of grant. The Company uses the Black-Scholes Pricing Model to determine the fair value of each
of the awards which considers factors such as expected term, volatility, risk free interest rate and dividend yield. Due
to the limited history of the Company, the simplified method was utilized in order to determine the expected term of the
awards. Additionally, the Company considered comparable companies in the industry which have available share
price history to calculate the volatility. The Company compared U.S. Treasury Bills in determining the risk-free interest
rate appropriate given the expected term. The Company has not established and has no plans to establish, a dividend
policy, and the Company has not declared, and has no plans to declare dividends in the foreseeable future and thus
no dividend yield was determined necessary in the calculation of fair value.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with FASB ASC
740, Income Taxes. Under this method deferred income taxes are provided to reflect the tax consequences in future
years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on
enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect
F-13
taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount
expected to be realized.
The Company follows the two-step approach to recognizing and measuring uncertain tax positions. The first
step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is
more likely than not, that the position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount, which is more than 50% likely
of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating the
Company's tax positions and tax benefits, which may require periodic adjustments. At December 31, 2021, the
Company did not record any liabilities for uncertain tax positions.
During each of 2021 and 2020, the Company recorded no provision for income taxes. Management evaluated
the Company’s tax positions and, as of December 31, 2021, the Company had approximately $1.9 million of
unrecognized benefits. The tax years 2017 to 2021 remain open to examination by federal and state taxing authorities
while the statute of limitations for U.S. net operating losses generated remain open beginning in the year of utilization.
Indemnification Obligations
As permitted under Delaware law, the Company has entered into indemnification agreements with its officers
and directors that provide that the Company will indemnify its directors and officers for certain expenses, including
attorneys’ fees, judgments, fines and settlement amounts incurred by such director or officer in any action or
proceeding arising out of their service as a director and/or officer. The term of the indemnification is for the officer’s or
director’s lifetime. During the year ended December 31, 2021, the Company did not experience any losses related to
those indemnification obligations. The Company does not expect significant claims related to these indemnification
obligations, and consequently, has concluded the fair value of the obligations is not material. Accordingly, as of
December 31, 2021 and 2020, no amounts have been accrued related to such indemnification provisions.
3.
STRATEGIC AGREEMENTS
Strategic Agreement for Product Commercialization
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. 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.
The following is a summary of the 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 if and when due.
F-14
Strategic Agreements for Pipeline Development
Hammock/MilanaPharm Assignment and License Agreement
In December 2018, the Company entered into (a) an Assignment Agreement with Hammock Pharmaceuticals,
Inc., or the Assignment Agreement, and (b) a First Amendment to License Agreement with TriLogic Pharma, LLC and
MilanaPharm LLC, or the License Amendment. Both agreements relate to the Exclusive 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. In December 2019, the Company entered into
amendments to each of the Assignment Agreement and License Amendment. In September 2021, the Company and
Trilogic and MilanaPharm entered into another amendment to the License Agreement.
The following is a summary of other terms of the License Amendment, as amended:
License Fees. A total of $235,000 in license fees were payable to MilanaPharm, 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; $50,000 of which was paid in 2020 and $250,000 of which
was paid in 2021. The Company may also pay MilanaPharm up to $1.75 million in the aggregate upon achieving
certain commercial sales milestones.
Foreign Sublicense Income. The Company will pay MilanaPharm 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 MilanaPharm 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
F-15
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 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 plan 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 Hammock up to $1.1 million in the aggregate upon achievement
of certain clinical and regulatory development milestones, $100,000 of which was paid in 2020 and $750,000 of which
was paid in 2021. The remaining milestone does not relate 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.
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 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. The Company will pay to ADVA-Tec: (1) up to $14.6 million in the aggregate based on
the achievement of specified development and regulatory milestones, $200,000 of which was paid in 2021; and (2) 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.
Royalty Payments. After the commercial launch of Ovaprene, the Company will pay to ADVA-Tec 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.
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;
F-16
(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 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 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 in the single digits to the mid double digits, subject to customary royalty reductions and offsets, and
a percentage of sublicense revenue.
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 million in the aggregate upon achieving certain commercial sales milestones. If the Company
enters into strategic development or distribution partnerships related to the Licensed Products, additional milestone
payments would be due to SST.
Term. The Company’s license continues on a country-by-country basis until the later of 10 years from the date
of the first commercial sale of such Licensed Product or the expiration of the last valid claim of patent rights covering
the Licensed Product in the Field of Use. Upon expiration (but not termination) of the agreement 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 days of receipt of SST's notice thereof.
F-17
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), 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. 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 Company will pay an 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 which 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) up to $13.5 million in the aggregate upon achieving certain clinical and regulatory milestones, $1.0 million of
which became payable in the third quarter of 2021, and in accordance with the license agreement, the amount 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) up to $30.3 million in the aggregate upon achieving certain 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 Catalent 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
Pharmaceuticals (formerly known as Orbis Biosciences, and which the Company refers to as Adare), for the
development of long-acting injectable etonogestrel contraceptive with 6- and 12-month durations (now known as
F-18
ADARE-204 and ADARE-214, respectively). The agreement provides the Company with an option to negotiate an
exclusive license agreement for the programs if the Company funds the conduct of specified development work by
Adare.
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.
At the closing of the 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. The transaction was valued at $2.4 million, based on the fair value of the approximately 3.0 million shares
issued at $0.79 per share, which was the closing price per share of the Company's common stock on the date of
closing. The shares were issued in exchange for MBI's cash and cash equivalents of $6.1 million, less net liabilities of
$3.5 million and transaction costs of $202,000, which was allocated based on the relative fair value of the assets
acquired and the liabilities assumed.
The Company also agreed to pay the following additional consideration to 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 annual net sales of such products, 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 that potential additional
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 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 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 12.
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 the Pear Tree former stockholders or
their representatives, or the Holders, 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. The Holders will be eligible to receive, subject to certain offsets, tiered royalties, including
customary provisions permitting royalty reductions and offset, based on percentages of annual net sales of certain
products subject to license agreements the Company assumed and a percentage of sublicense revenue.
4.
PREPAID EXPENSES
Prepaid expenses consisted of the following:
Prepaid clinical expense
Prepaid insurance expense
Prepaid legal and professional expenses
Total prepaid expenses
F-19
As of December 31,
2021
2020
$ 1,728,421 $ 1,288,341
552,354
195,837
227,298
338,638
$ 2,476,612 $ 1,854,277
5.
OTHER NON-CURRENT ASSETS
Other non-current assets consisted of the following:
Prepaid insurance, long-term portion
Deferred financing costs
Deposits
Operating lease assets
Total other non-current assets
6.
ACCRUED EXPENSES
Accrued expenses consisted of the following:
Accrued compensation and benefits expenses
Accrued legal and professional expenses
Accrued license expense
Accrued clinical and related expenses
Total accrued expenses
7.
VENDOR CONCENTRATION
As of December 31,
2021
2020
$
87,891 $
246,016
143,002
37,554
216,673
—
43,304
239,550
$
485,120 $
528,870
As of December 31,
2021
2020
$ 1,533,475 $ 1,157,074
293,688
66,667
297,395
66,667
1,242,414
1,838,582
$ 3,136,244 $ 3,359,718
The Company had a major vendor that accounted for approximately 23% and 20% of the research and
development expenditures for one of the Company's late-stage product candidates for the years ended December 31,
2021 and 2020, respectively. The same vendor also accounted for approximately 4% and 23% of the total accounts
payable and vendor-related accrued expenses as of December 31, 2021 and 2020, respectively. The Company
continues to maintain this vendor relationship and anticipates incurring significant expenses with this vendor over the
next 12 months.
8.
INCOME TAXES
The components of loss from continuing operations before provision for income taxes consists of the following
(in thousands):
Domestic
Foreign
Loss before taxes
Years Ended December 31,
2021
2020
$
$
37,083 $
27,249
1,613
152
38,696 $
27,401
F-20
The difference between the provision for income taxes (benefit) and the amount computed by applying the
U.S. federal income tax rate for the years ended December 31, 2021 and 2020 are as follows:
Federal statutory rate
State income tax, net of federal benefit
Permanent differences
Research and development credit
Stock compensation
Other
Change in valuation allowance
Effective income tax rate
Years Ended December 31,
2021
2020
21.0 %
9.64 %
0.19 %
2.70 %
(0.41) %
0.25 %
(33.38) %
(0.01) %
21.0 %
8.86 %
— %
1.80 %
(0.34) %
(0.4) %
(30.93) %
(0.01) %
The major components of the Company’s deferred tax assets as of December 31, 2021 and 2020 are shown
below (in thousands).
Net operating loss carryforwards
Research and development credit carryforwards
Capitalized research and development costs
Other
Stock compensation
Total deferred tax assets
Valuation allowance
Net deferred tax assets
2021
2020
$
81,817 $
7,186
7,417
801
2,540
68,437
4,903
9,398
376
2,183
99,761
85,297
(99,761)
(85,297)
$
— $
—
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred
tax assets. Under applicable accounting standards, management has considered the Company’s history of losses and
concluded that it is more likely than not the Company will not recognize the benefits of federal and state deferred tax
assets. Accordingly, a valuation allowance of $99.8 million and $85.3 million was established at December 31, 2021
and 2020, respectively, to offset the net deferred tax assets. When and if management determines that it is more likely
than not that the Company will be able to utilize the deferred tax assets prior to their expiration, the valuation
allowance may be reduced or eliminated.
The increase in valuation allowance of approximately $14.5 million and $22.1 million for the years ending
December 31, 2021 and 2020, respectively, is primarily related to an increase in net operating losses generated
during the year.
The Company has U.S. federal net operating loss, or NOL, carryforwards available at December 31, 2021 of
approximately $295.2 million of which $0.2 million begin expiring in 2022 unless previously utilized and $117.6 million
that do not expire. The Company has state NOL carryforwards of $292.6 million that begin expiring in 2031 unless
previously utilized. The Company has U.S. federal research credit carryforwards available at December 31, 2021 of
approximately $6.9 million that begin expiring in 2027 unless previously utilized. The Company has state research
credit carryforwards of $2.7 million of which $0.1 million begin expiring in 2022 unless previously utilized. These
federal and state research and development credits are subject to a 20% reserve under FASB ASC 740. The
difference between federal and state NOL carryforwards is primarily due to previously expired state NOL
carryforwards.
Utilization of the NOL and research and development credit carryforwards may be subject to a substantial
annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986 due to ownership change
limitations that have occurred previously or that could occur in the future. These ownership changes may limit the
amount of NOL and research and development credit carryforwards that can be utilized annually to offset future
taxable income and tax, respectively. The Company has not yet completed an evaluation of ownership changes. To
the extent an ownership change occurs, the NOL and credit carryforwards and other deferred tax assets may be
subject to limitations.
F-21
A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows (in thousands):
Beginning uncertain tax benefits
Current year - increases
Prior year - additions (reductions)
Ending uncertain tax benefits
Years Ended December 31,
2021
2020
$
$
$
$
1,341 $
426 $
142 $
935
237
169
1,909 $
1,341
Included in the balance of uncertain tax benefits at December 31, 2021 are $1.9 million of tax benefits that, if
recognized, would impact the effective tax rate. The Company anticipates that no material amounts of unrecognized
tax benefits will be settled within 12 months of the reporting date.
The Company's policy is to record estimated interest and penalties related to uncertain tax benefits as income
tax expense. As of December 31, 2021 and 2020, the Company had no accrued interest or penalties recorded related
to uncertain tax positions.
The tax years 2017 through 2021 remain open to examination by major taxing jurisdictions to which the
Company is subject, which are primarily in the U.S. The statute of limitations for U.S. net operating losses utilized in
future years will remain open beginning in the year of utilization.
No additional provision has been made for U.S. income taxes related to undistributed foreign earnings of the
Company’s wholly owned Australian subsidiary or for unrecognized deferred tax liabilities for temporary differences
related to investments in subsidiaries. As such, earnings are expected to be permanently reinvested, the investments
are permanent in duration, or the Company has estimated that no additional tax liability will arise as a result of the
distribution of such earnings. A liability could arise if amounts are distributed by the subsidiary or if the subsidiary is
ultimately disposed. It is not practical to estimate the additional income taxes, if any, related to permanently reinvested
earnings. There are no unremitted earnings as of December 31, 2021.
9.
STOCKHOLDERS’ EQUITY
October 2021 ATM Sales Agreement
In October 2021, the Company entered into a sales agreement with 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
acts 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, 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) 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 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 2021, the Company sold approximately 7.1 million shares of common stock under this agreement for
gross proceeds of approximately $16.3 million and incurred offering expenses of approximately $537,000.
April 2021 ATM Sales Agreement
In April 2021, the Company entered into a sales agreement with SVB Leerink to sell shares of its common
stock from time to time through an ATM equity offering program under which SVB Leerink acts 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 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.
F-22
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. In March 2021, the Company provided notice to
Wainwright to terminate the agreement, and the agreement terminated in April 2021. Under the agreement,
Wainwright was entitled to a commission at a fixed commission rate equal to 3% of the gross proceeds per share sold
under the agreement.
During 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. During 2020,
the Company sold approximately 12.6 million shares of common stock under this agreement for gross proceeds of
approximately $15.8 million and incurred offering expenses of approximately $594,000.
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. Those costs were amortized and expensed as shares were sold under the Purchase Agreement, and as of
December 31, 2021 there were no unamortized costs. During 2021, the Company sold, and Lincoln Park purchased,
approximately 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 $175,000. During 2020, the Company sold, and
Lincoln Park purchased, approximately 7.2 million shares under the Purchase Agreement for gross proceeds to the
Company of approximately $8.0 million and recognized offering expenses of approximately $236,000. As of
December 31, 2021, the Company had sold and Lincoln Park had purchased a total of $15.0 million of the Company's
common stock under the Purchase Agreement, and no more shares of common stock may be sold by the Company to
Lincoln Park under the Purchase Agreement.
Common Stock Warrants
In February 2018, the Company closed an underwritten public offering in connection with which the Company
issued to the investors in that offering warrants exercisable through February 2023 that initially had an exercise price
of $3.00 per share. The warrants include a price-based anti-dilution provision, which provides that, subject to certain
limited exceptions, the exercise price of the warrants will be reduced each time the Company issues or sells (or is
deemed to issue or sell) 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,
sells or enters into any agreement to issue or sell securities at a price which varies or may vary with the market price
of the shares of the Company’s common stock, the warrant holders have 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.
During 2021, warrants to purchase an aggregate of 520,985 shares of common stock were exercised for
gross proceeds of approximately $0.5 million. During 2020, warrants to purchase an aggregate of 1,825,000 shares of
common stock were exercised for gross proceeds of approximately $1.8 million. As of December 31, 2021, the
Company had the following warrants outstanding:
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Shares Underlying
Outstanding Warrants
6,500
1,374,515
1,381,015
Common Stock
Exercise Price
10.00
0.96
$
$
Expiration Date
04/04/2026
02/15/2023
The authorized capital of the Company consists of 120,000,000 shares of common stock with a par value of
$0.0001 and 5,000,000 shares of preferred stock with a par value of $0.01 per share. The issued and outstanding
common stock of the Company consisted of 83,944,119 and 41,596,253 shares of common stock as of December 31,
2021 and 2020, respectively. There were no shares of preferred stock outstanding as of December 31, 2021 or 2020.
Common Stock Reserved for Future Issuance
The following table summarizes common stock reserved for future issuance at December 31, 2021:
Common stock reserved for issuance upon exercise of warrants outstanding
Common stock reserved for issuance upon exercise of options outstanding
Common stock reserved for future equity awards (under the Amended 2014 Plan)
Total
1,381,015
4,717,602
201,855
6,300,472
10.
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 and there was no stock-based compensation related
to the ESPP for the years ended December 31, 2021 or December 31, 2020.
Amended and Restated 2014 Stock Incentive Plan
The Company maintains the Amended and Restated 2014 Stock Incentive Plan, or the Amended 2014 Plan.
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 increases annually on the
first day of each fiscal year until, and including, the fiscal year ending December 31, 2024 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. As a result of the foregoing, the number of shares available under the Amended 2014
Plan increased by 1,663,850 to 2,168,366 on January 1, 2021, which increase represented 4% of the number of
outstanding shares of common stock on such date.
Summary of Stock Option Activity
The table below summarizes stock option activity under the Amended 2014 Plan and related information for
the years ended December 31, 2021 and 2020. The exercise price of all options granted during the years ended
December 31, 2021 and 2020 was equal to the market value of the Company’s common stock on the date of grant. As
of December 31, 2021, unamortized stock-based compensation expense of approximately $3.7 million will be
amortized over the weighted average period of 2.7 years. As of December 31, 2021, 201,855 shares of common stock
were available for future award grants under the Amended 2014 Plan.
F-24
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (Years)
Aggregate
Intrinsic
Value
Number of
Shares
Outstanding at December 31, 2019 (1)
Granted
Exercised
Canceled/forfeited
Expired
Outstanding at December 31, 2020
Granted
Exercised
Canceled/forfeited
Expired
1,889,775 $
906,965
(10,149)
—
—
2,786,591 $
2,052,075
(35,500)
(85,564)
—
4,717,602 $
Outstanding at December 31, 2021
Options exercisable at December 31, 2021
2,319,775 $
Options vested and expected to vest at December 31, 2021 4,717,602 $
1.21
1.06
—
—
—
1.16
2.31
0.92
1.82
—
1.65
1.43
1.65
8.11 $ 2,998,680
7.49 $ 1,993,377
8.11 $ 2,998,680
(1)
an acquisition.
Includes 10,149 shares subject to options granted under an equity incentive plan assumed in connection with
Compensation Expense
Total stock-based compensation expense related to stock options granted to employees and directors
recognized in the consolidated statements of operations is as follows:
Research and development
General and administrative
Total
Years Ended December 31,
2021
2020
$
524,071 $
225,579
1,075,621
516,452
$ 1,599,692 $
742,031
The assumptions used in the Black-Scholes option-pricing model for stock options granted to employees and
to directors in respect of board services during the years ended December 31, 2021 and 2020 is as follows:
Expected life in years
Risk-free interest rate
Expected volatility
Forfeiture rate
Dividend yield
2021
2020
6.0
0.67 %
122 %
0.0 %
0.0 %
10.0
0.82 %
120 %
0.0 %
0.0 %
Weighted-average fair value of options granted
$
2.01
$
1.00
11.
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. (See Note 14, Subsequent Events.)
MBI, a wholly owned subsidiary the Company acquired in November 2019, leases general office space in
Lexington, Massachusetts and warehouse space in Billerica, Massachusetts. The Lexington lease commenced on
July 1, 2013. In February 2022, the Company entered into an amendment to extend the term of the lease for three
years such that the term now expires on December 31, 2025. (See Note 14, Subsequent Events.) The Billerica lease
commenced on October 1, 2016 and terminates 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.
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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 of 7% 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 December 31, 2021, the Company reported operating lease right of use assets of approximately $216,700
in other non-current assets and approximately $270,500 in current liabilities on the consolidated balance sheet.
Total operating lease costs were approximately $561,000 and $435,000 for the years ended December 31,
2021 and 2020, 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
consolidated statements of operations.
Cash paid for amounts included in the measurement of operating lease liabilities was approximately $462,000
for the year ended December 31, 2021, and these amounts are included in operating activities in the consolidated
statements of cash flows. Further, at December 31, 2021, operating leases had a weighted average remaining lease
term of 0.56 years.
At December 31, 2021, future minimum lease payments under the Company's operating leases are as
follows:
Year ending December 31,
2022
Total future minimum lease payments
Less: accreted interest
Total operating lease liabilities
12.
COMMITMENTS AND CONTINGENCIES
CRADA with NICHD for the Pivotal Phase 3 Study of Ovaprene
$
$
277,700
277,700
7,200
270,500
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 contractor Health Decisions Inc., a
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 be responsible for the other
costs related to the conduct of the Ovaprene Phase 3. In 2021, in accordance with the payment schedule under the
CRADA, the Company made aggregate payments of $1.5 million of the total amount payable to NICHD. The
Company's remaining obligation under the CRADA at December 31, 2021 is $4.0 million.
Contingent Consideration
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, a total of $1.25 million of that
potential 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
F-26
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.
Legal Proceedings
From time to time, the Company may be involved in various claims arising in the normal course of business.
Management is not aware of any material claims, disputes or unsettled matters that would have a material adverse
effect on the Company’s results of operations, liquidity or financial position that the Company has not adequately
provided for in the accompanying consolidated financial statements.
Employment Agreements
Certain executive officers of the Company are entitled to payments if their employment is terminated by the
Company without cause, if they resign for good reason, if their employment agreements are not renewed, or if their
employment is terminated by the Company without cause or if they resign for good reason, in each case, within three
months prior to or 12 months following a change in control of the Company. Upon termination by the Company without
cause, if they resign for good reason, if their employment agreements are not renewed, such executives are entitled
to receive a payment of an amount equal to either nine or twelve months of base salary and to receive continuing
health benefits coverage for periods equal to either nine or twelve months following the termination of employment or
until such officer is covered under a separate plan from another employer. If their employment is terminated by the
Company without cause or if they resign for good reason, in each case, within three months prior to or 12 months
following a change in control of the Company, such executives will be entitled to receive a payment of an amount
equal to either twelve or eighteen months of base salary and target bonus and to receive continuing health benefits
coverage for periods ranging between twelve and eighteen months following the termination of employment. In
addition, upon a change in control of the Company, each officer’s outstanding unvested options will fully vest and
accelerate subject to the conditions outlined in such officer’s employment agreement.
Employee Benefit – 401(k) Plan
The Company has a 401(k) retirement plan, or the 401(k) Plan, covering all qualified employees. The 401(k)
Plan allows each participant to contribute a portion of their base wages up to an amount not to exceed an annual
statutory maximum. The 401(k) Plan includes a Safe Harbor Plan that provides a Company match up to 4% of salary.
The Company made matching contributions of approximately $160,000 and $136,000 during the years ended
December 31, 2021 and 2020, respectively.
13.
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 and DARE-LARC1. 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
F-27
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
Since 2018, the Company has received approximately $1.9 million of non-dilutive grant funding from NICHD
for clinical development efforts supporting Ovaprene. The final notice of award the Company received was for
approximately $731,000 in April 2020, all of which has been funded to date.
The Company recorded credits to research and development expense for costs related to the NICHD award
of an immaterial amount the year ended December 31, 2021, and approximately $595,000 for the year ended
December 31, 2020.
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 $65,000 for the year ended December 31, 2021. At December 31, 2021, the Company recorded a
receivable of approximately $9,600 for expenses incurred through such date that it believes are eligible for
reimbursement under the grant.
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 is to be used to explore device
insertion and removal in nonclinical studies, which is to occur during the period of September 2021 through August
2022.
The Company recorded credits to research and development expense of approximately $7,400 for costs
related to the NICHD award during the year ended December 31, 2021. At December 31, 2021, the Company
recorded a receivable of approximately $7,400 for expenses incurred through such date that it believes is eligible for
reimbursement under the grant.
DARE-LARC1 Non-Dilutive Grant Funding
MBI Grant Agreement
The Company's wholly-owned subsidiary, MBI, was awarded $5.4 million to support the development of
DARE-LARC1 under a grant agreement with the Bill & Melinda Gates Foundation, or the Foundation. The funding
period under this agreement ended June 30, 2021. Expenses eligible for funding were incurred, tracked and reported
to the Foundation. MBI received payments under this agreement of approximately $2.5 million in 2020. At
December 31, 2021, all payments under this agreement associated with research and development expenses for
DARE-LARC1 had been incurred and reported to the Foundation and no future funding will be received under this
agreement.
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 million to support the development of DARE-
LARC1. The 2021 DARE-LARC1 Grant Agreement will support technology development and preclinical activities over
the period of June 30, 2021 to November 1, 2026, to advance DARE-LARC1 in nonclinical proof of principle studies.
The Company received an initial payment of $11.45 million in July 2021. Additional payments are contingent upon the
DARE-LARC1 program’s achievement of specified development and reporting milestones. At December 31, 2021,
approximately $10.5 million of deferred grant funding liability under this agreement was recorded in the Company's
consolidated balance sheet.
F-28
14.
SUBSEQUENT EVENTS
Exclusive License Agreement with Organon to Commercialize XACIATO
On March 31, 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. Under the agreement, the Company will receive a $10.0 million non-refundable and non-
creditable payment following the effective date of the agreement and 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.
Under the agreement, 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.
The effective date of the agreement will occur following the satisfaction of closing conditions that include
receipt of all applicable approvals, or the expiration or termination of all applicable waiting periods, required under
applicable antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 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.
The agreement includes customary representations and warranties, covenants and indemnification
obligations of each party.
In addition, the terms of the agreement provide Organon exclusive worldwide rights of first negotiation for
specified potential future products of the Company.
Leased Properties
On February 4, 2022, the Company entered into an amendment to extend the term of the lease for its
corporate headquarters in San Diego, California for two years. The extended term begins August 1, 2022 and expires
August 31, 2024.
On February 14, 2022, the Company entered into an amendment to extend the term of the lease for its office
space in Lexington, Massachusetts for three years. The extended term begins October 1, 2022 and expires
December 31, 2025.
F-29