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March 31, 2022, 4:21 p.m. EDT


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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.

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(R), 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.

Our portfolio also includes four product candidates in Phase 1 clinical development or that we believe 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, 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;

ADARE-204 and ADARE-214, injectable formulations of etonogestrel designed to provide contraception over 6-month and 12-month periods, respectively; and

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

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.

Financial Overview


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.

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

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:
                                                        Years Ended
                                                        December 31,                         Change
                                                  2021               2020                 $              %
         Operating expenses:
         General and administrative          $   8,350,945      $   6,549,508      $   1,801,437        28  %
         Research and development               30,617,567         20,769,416          9,848,151        47  %
         License fees                              100,000             83,333             16,667        20  %
         Loss from operations                  (39,068,512)       (27,402,257)       (11,666,255)      (43) %
         Other income                                2,520              1,514              1,006        66  %
         Gain on extinguishment of note
         payable                                   369,887                  -            369,887         -
         Net loss                            $ (38,696,105)     $ (27,400,743)     $ (11,295,362)       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.

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 . . .

Mar 31, 2022


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