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May 12, 2022, 4:14 p.m. EDT

10-Q: DARE BIOSCIENCE, INC.

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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q and our audited financial statements and notes thereto for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021, or our 2021 10-K, filed with the Securities and Exchange Commission, or SEC, on March 31, 2022. Past operating results are not necessarily indicative of results that may occur in future periods.

The following discussion includes forward-looking statements. See "CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS," above. Forward-looking statements are not guarantees of future performance and our actual results may differ materially from those currently anticipated and from historical results depending upon a variety of factors, including, but not limited to, those discussed in Part I, Item 1A. Risk Factors of our 2021 10-K, and in our subsequent filings with the SEC, including any discussed in Part II, Item 1A of this report under the heading "Risk Factors," which are incorporated herein by reference.

In this report, "we," "us," "our," "Dare" or the "Company" refer collectively to Dare Bioscience, Inc. and its wholly owned subsidiaries, unless otherwise stated or the context otherwise requires. All information presented in this report is based on our fiscal year. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years ending December 31 and the associated quarters, months and periods of those fiscal years.

Dare Bioscience(R) is a registered trademark of Dare Bioscience, Inc. and XACIATO(TM) is a trademark of Dare Bioscience, Inc. with registration pending. Ovaprene(R) is a registered trademark licensed to Dare Bioscience, Inc. All other trademarks, service marks or trade names appearing in this report are the property of their respective owners. Use or display by us of other parties' trademarks, service marks or trade names is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark, service mark or trade name owners.

Business Overview

We are a biopharmaceutical company committed to advancing innovative products for women's health. We are driven by a mission to identify, develop and bring to market a diverse portfolio of differentiated therapies that prioritize women's health and well-being, expand treatment options, and improve outcomes, primarily in the areas of contraception, 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 [zah-she-AH-toe] (clindamycin phosphate vaginal gel, 2%), was approved by the FDA in December 2021, as a single-dose prescription medication for the treatment of bacterial vaginosis in female patients 12 years of age and older. In March 2022, we entered into an exclusive global license agreement with an affiliate of Organon & Co., Organon International GmbH, or Organon, 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. 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. Our current 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, or FSAD.

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, or IVR, 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.

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. For the remainder of 2022, we expect to continue 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 our 2021 10-K 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.

XACIATO

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. 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. 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 to occur 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. XACIATO is expected to be available commercially in the U.S. in the fourth quarter of 2022. We will also be eligible to receive future potential milestone payments of up to $180.0 million and tiered double-digit royalties based on net sales.

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. We will fulfill our commercial supply obligations through the contract manufacturer that provided clinical supplies of XACIATO for our pivotal Phase 3 DARE-BVFREE clinical study of XACIATO. We will not be responsible for other costs of commercializing XACIATO.

Our Pipeline: Clinical-Stage Programs

Ovaprene

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.

The planned Phase 3 clinical study will be conducted under our Cooperative Research and Development Agreement, or CRADA, with the U.S. Department of Health and Human Services, as represented by the Eunice Kennedy Shriver National Institute of Child Health and Human Development, or the NICHD, part of the National Institutes of Health, and within NICHD's Contraceptive Clinical Trial Network. We and NICHD will each provide medical oversight and final data review and analysis for the study and will work together to prepare the final report of the results of the study. We are responsible for providing clinical supplies of Ovaprene, coordinating interactions with the FDA, preparing and submitting supportive regulatory documentation, and providing a total of $5.5 million in payments to NICHD to be applied toward the costs of conducting the Phase 3 study of which a total of $5.0 million has been paid. 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 contract research organization Health Decisions Inc., the clinical sites, and other parties involved with the study. If the Phase 3 study is successful, we expect the data to support a pre-market approval submission to the FDA, as well as regulatory filings in Europe and other countries worldwide, to allow for marketing approvals of Ovaprene.

Sildenafil Cream, 3.6%

Our ongoing Phase 2b RESPOND clinical study of Sildenafil Cream, 3.6% in women with FSAD is designed to evaluate Sildenafil Cream, 3.6% compared to placebo cream over 12 weeks of dosing in the participants' home setting following both a non-drug and placebo run-in period. The primary efficacy endpoint of the study is a composite endpoint that includes patient-reported improvement in genital sensations of arousal and reduction in distress associated with FSAD. The study is 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. We anticipate that the planned interim analysis will be conducted in 2022, after which we should be able to provide an updated timeframe for announcement of topline data from this trial.

DARE-HRT1

In April 2022, we announced initiation of our Phase 1/2 clinical study of DARE-HRT1. The open-label study will evaluate the pharmacokinetics (PK) of two versions of DARE-HRT1 (estradiol 80 �g/progesterone 4 mg IVR and estradiol 160 �g/progesterone 8 mg IVR) in approximately 20 healthy, post-menopausal women over approximately three consecutive months of use. The study will also collect safety, usability, acceptability and symptom-relief data. The study is being conducted by our wholly owned subsidiary in Australia. In 2021, we reported positive topline data from a Phase 1 clinical study that evaluated the PK of the same two versions of DARE-HRT1 over 28 days. We anticipate reporting topline data from the Phase 1/2 study in the fourth quarter of 2022.

DARE-VVA1

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.

DARE-FRT1 and DARE-PTB1

We are conducting development activities in preparation for Phase 1 clinical studies of DARE-FRT1 and DARE-PTB1. We do not expect to commence clinical development of these product candidates in 2022.

Our currently anticipated timelines and aggregate costs for the development of our product candidates could be delayed and could increase as a result of the COVID-19 pandemic, or otherwise. See the risk factor 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, in Part I, Item 1A, Risk Factors of our 2021 10-K.

Recent Events

Global License Agreement with Organon to Commercialize XACIATO

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. See "Strategic Agreements for Product Commercialization - Organon License Agreement" in Part I, Item 1. Business of our 2021 10-K for a description of the terms of the license agreement. As discussed above, 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 to occur 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.

Initiation of Phase 1/2 Clinical Study of DARE-HRT1

As discussed above, in April 2022, we announced initiation of our Phase 1/2 clinical study of DARE-HRT1 in Australia.

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 due to third parties under acquisition and in-licensing arrangements we incur, or the incurrence of which we deem probable; and

internal costs associated with activities performed by our research and development organization and generally benefit multiple programs.

In 2021, our research and development expenses consisted primarily of costs associated with the continued development of XACIATO, Ovaprene and Sildenafil Cream, 3.6% and during the first quarter of 2022, our research and development expenses consisted primarily of costs associated with the continued development of Ovaprene and Sildenafil Cream 3.6%. We expect research and development expenses to increase in the future as we continue to 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.

Critical Accounting Policies and Estimates

Management's discussion and analysis of financial condition and results of operations is based on our interim condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Preparing these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on historical experience and on various assumptions we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially from these estimates. For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our unaudited condensed consolidated interim financial statements, refer to Item 7 in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 1 to our financial statements contained in our 2021 10-K, and Note 2 to our unaudited condensed consolidated financial statements contained in this report.







        Results of Operations
        Comparison of Three Months Ended March 31, 2022 and 2021 (Unaudited)
        The following table summarizes our condensed consolidated results of operations
        for the periods indicated, together with the changes in those items in dollars:
                                            Three Months Ended March 31,                    Change
                                               2022                  2021               $               %
         Operating expenses:
         General and administrative    $     2,569,987          $  1,940,328      $    629,659          32  %
         Research and development            5,805,462             5,728,206            77,256           1  %
         License fees                           25,000                25,000                 -           -  %
         Total operating expenses            8,400,449             7,693,534           706,915           9  %
         Loss from operations               (8,400,449)           (7,693,534)         (706,915)          9  %
         Other income                            1,779                     3             1,776       59200  %
         Gain on extinguishment of
         note payable                                -               369,887          (369,887)       (100) %
         Net loss                      $    (8,398,670)         $ (7,323,644)     $ (1,075,026)         15  %
         Other comprehensive loss:
         Foreign currency translation
         adjustments                            (9,150)               (6,841)           (2,309)         34  %
         Comprehensive loss            $    (8,407,820)         $ (7,330,485)     $ (1,077,335)         15  %
        


Revenues

We did not recognize any revenues for either of the three months ended March 31, 2022 or 2021.

General and administrative expenses

The increase of approximately $0.6 million in general and administrative expenses for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was primarily attributable to increases in (i) professional services expense of approximately $351,000, (ii) stock-based compensation expense of approximately 108,000, (iii) personnel costs of approximately $101,000, and (iv) commercial-readiness expenses of approximately $92,000. Such increases were partially offset by a decrease in rent and facilities expenses of $80,000 attributable to the allocation of a portion of rent and facilities expense included in general and administrative in 2021 to research and development in 2022.

We expect an increase in general and administrative expenses of approximately 20% in 2022 compared to 2021 primarily due to increased personnel expenses and other general corporate overhead. Our general and administrative expenses in 2021 were approximately $8.4 million. 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 . . .

May 12, 2022

COMTEX_407112537/2041/2022-05-12T16:14:22

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