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 endedDecember 31, 2021 included in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , or our 2021 10-K, filed with theSecurities and Exchange Commission , orSEC , onMarch 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 theSEC , including any discussed in Part II, Item 1A of this report under the heading "Risk Factors," which are incorporated herein by reference. In this report, "we," "us," "our," "Daré" or the "Company" refer collectively to DaréBioscience, 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 endingDecember 31 and the associated quarters, months and periods of those fiscal years. Daré Bioscience® is a registered trademark of DaréBioscience, Inc. and XACIATO™ is a trademark of DaréBioscience, Inc. with registration pending. Ovaprene® is a registered trademark licensed to DaréBioscience, 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 inDecember 2021 , as a single-dose prescription medication for the treatment of bacterial vaginosis in female patients 12 years of age and older. InMarch 2022 , we entered into an exclusive global license agreement with an affiliate of Organon & Co.,Organon International GmbH , or Organon, to commercialize XACIATO. We anticipate the first commercial sale of XACIATO in theU.S. in the first half of 2023. Our product pipeline includes diverse programs that target unmet needs in women's health in the areas of contraception, 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 intravaginal 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;
24 -------------------------------------------------------------------------------- •DARE-VVA1, a vaginally delivered formulation of tamoxifen to treat vulvar vaginal atrophy, or VVA, 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:
•ADARE-204 and ADARE-214, injectable formulations of etonogestrel designed to provide contraceptive protection over 6-month and 12-month periods, respectively
•DARE-LARC1, a contraceptive implant delivering levonorgestrel with a woman-centered design that has the potential to be a long-acting, yet convenient and user-controlled contraceptive option;
•DARE-GML, an intravaginally-delivered potential multi-target antimicrobial agent formulated with glycerol monolaurate (GML), which has shown broad antimicrobial activity, killing bacteria and viruses; and
•DARE-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 inJune 2021 . To date we have generated$10.0 million in revenue, all of which represents the upfront payment under our license agreement with Organon to commercialize XACIATO. 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 theU.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. 25 --------------------------------------------------------------------------------
XACIATO
InMarch 2022 , we entered into an exclusive license agreement with Organon to develop, manufacture and commercialize XACIATO. The agreement became effective onJune 30, 2022 following the satisfaction of closing conditions, and inJuly 2022 , we received the$10.0 million non-refundable and non-creditable payment from Organon. We are entitled to receive a$2.5 million milestone payment following the first commercial sale of a licensed product inthe United States . XACIATO launch preparation activities, including validation of the manufacturing process, are ongoing and will continue into 2023, and the first commercial sale in theU.S. is expected in the first half of 2023. 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 all regulatory interactions and for providing commercial 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
InOctober 2022 , we announced that the FDA approved an Investigational Device Exemption, or IDE, application allowing us to conduct a single arm, open-label pivotal contraceptive efficacy study of Ovaprene. The multi-center, non-comparative pivotal Phase 3 clinical study will evaluate Ovaprene's effectiveness as a contraceptive device along with its safety and usability over a 12-month (13 menstrual cycles) duration. If successful, the study is expected to support a premarket approval, or PMA, application to the FDA, as well as regulatory filings inEurope and other countries worldwide, to allow for marketing approvals of Ovaprene. Initiation of recruitment for the study is targeted for mid-2023. There is no predicate device for Ovaprene (i.e., there is no existing FDA-approved product that the FDA can use to compare with Ovaprene). As such, Ovaprene will be reviewed via a PMA and not a 510(k) premarket submission. While the regulatory process for such a novel product can require more interactions and research to support FDA approval, the benefit is a clearly differentiated product. In order for the planned study to serve as the primary clinical support for a future marketing approval or clearance, the FDA provided additional study design considerations with the IDE approval letter. Implementing such study design considerations will further position the study to collect safety and effectiveness data to enable the preparation of, and to support the submission of, a PMA application. We are working with our collaborators at theNational Institutes of Health , orNIH , and at Bayer to review and implement theFDA's study design considerations. The Phase 3 study will be conducted under ourCooperative Research and Development Agreement, or CRADA, with theU.S. Department of Health and Human Services , as represented by theEunice Kennedy Shriver National Institute of Child Health and Human Development , or the NICHD, part of theNIH , and within NICHD's Contraceptive Clinical Trial Network. We and NICHD will each provide medical oversight and final data review and analysis for the study and will work together to prepare the final report of the results of the study. We are responsible for providing clinical supplies of Ovaprene, coordinating interactions with the FDA, preparing and submitting supportive regulatory documentation, and providing a total of$5.5 million to NICHD to be applied toward the costs of conducting the Phase 3 study,$5.0 million of which has been paid and the remaining amount is due in the second quarter of 2023. NICHD will be responsible for the other costs related to the conduct of the Phase 3 study and will manage the payment of expenses to the contract research organization for the study, the clinical sites, and other parties involved with the study.
Sildenafil Cream, 3.6%
In
26 -------------------------------------------------------------------------------- The Phase 2b RESPOND study is a multi-center, double-blind, placebo-controlled clinical study to evaluate the efficacy and safety of Sildenafil Cream, 3.6% in premenopausal patients with female sexual arousal disorder, or FSAD. The primary efficacy endpoint of the study is a composite endpoint that includes patient-reported improvement in genital sensations of arousal and reduction in distress associated with FSAD. The study is designed to evaluate Sildenafil Cream, 3.6% compared to placebo cream over 12 weeks of dosing following both a non-drug and placebo run-in period. InAugust 2022 , we announced that, based on the results of an interim analysis to evaluate the relative magnitude of the treatment effect, we expected to complete enrollment in the Phase 2b RESPOND study with a revised projected number of subjects in the fourth quarter of 2022. The interim analysis was conducted by an independent third-party statistical resource and we, as well as our collaborator,Strategic Science & Technologies, LLC , continue to remain blinded to results of the study by treatment group. While the study was originally expected to randomize a minimum of 400 subjects into the double-blind dosing period from 40 to 50 sites in theU.S. to achieve 150 subjects per arm completing the 12-week double-blind dosing period, based on the analysis of unblinded data by the independent third-party statistical resource to evaluate the relative magnitude of the treatment effect, approximately 160 to 170 subjects are expected to complete the 12-week double-blind dosing period (approximately 80 to 85 subjects per arm). The reduction in the number of subjects should not be viewed as indicative of the magnitude of the treatment effect. The relative magnitude of the treatment effect seen in the interim analysis should not be viewed as predictive that topline data will show Sildenafil Cream, 3.6% achieved the efficacy endpoints of the Phase 2b RESPOND study. DARE-HRT1 InOctober 2022 , we announced topline results of our Phase 1/2 clinical study of DARE-HRT1 conducted by our wholly owned subsidiary inAustralia . The randomized, open-label, two arm, parallel group study was designed to evaluate the pharmacokinetics (PK) of two versions of DARE-HRT1 (estradiol 80 µg/progesterone 4 mg IVR and estradiol 160 µg/progesterone 8 mg IVR) in approximately 20 healthy, post-menopausal women over approximately three consecutive months of use. The study also collected safety, usability, acceptability and symptom-relief data including the vasomotor symptoms (VMS) as well as the vaginal symptoms of menopause. The levels of estradiol released from both the lower and higher dose formulation of DARE-HRT1 evaluated in the study achieved statistically significant improvement in VMS as well as the genitourinary symptoms of menopause, and vaginal pH and maturation index. Menopausal symptoms, including hot flashes and night sweats, were reduced compared with baseline in both DARE-HRT1 dose groups (p<0.01). Participants also showed significant improvement from baseline in all measures surveyed on The Menopausal Quality ofLife Survey (MENQOL), which surveys not only parameters of VMS, but also physical, psychosocial and sexual symptoms (p<0.01 on all domains). With DARE-HRT1 use, vaginal pH significantly decreased compared to baseline (p<0.01) and cytologic tests of the vaginal epithelium (vaginal maturation index) showed significant normalization (all p values <0.01 for increases in superficial cells, increases in intermediate cells and decreases in parabasal cells from baseline) among all participants. The most common genitourinary symptom, vaginal dryness, which was reported by 70% of participants at baseline, showed significant improvement in both DARE-HRT1 groups (p<0.01) and this subset also experienced significant decreases in vaginal pain with DARE-HRT1 use (p<0.01). The study treatment was well tolerated with the types of most common adverse events consistent with other vaginal products. There were only two early discontinuations due to an adverse event, and no serious adverse events were reported. DARE-HRT1 had a high level of acceptability in the study, with 100% of subjects reporting that the IVR was comfortable to wear, and there were no reports of the IVR being expelled from the vagina during use. Additionally, over 95% of subjects stated they would be either somewhat or very likely to use the IVR for a women's health condition or unrelated disease if needed. We anticipate that the topline PK data from the Phase 1/2 study will be available and reported later in the fourth quarter of 2022. 27 --------------------------------------------------------------------------------
DARE-VVA1
InSeptember 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 will evaluate the safety, tolerability, PK, and pharmacodynamics (PD) of DARE-VVA1 in postmenopausal participants with moderate to severe VVA in 15 to 20 postmenopausal women, including a cohort of women with a history of hormone-receptor positive breast cancer, at three study sites. The study is being conducted by our wholly owned subsidiary inAustralia . Eligible participants will be randomly allocated to one of five treatment groups (approximately five participants per group) that will evaluate four dose levels (1 mg, 5 mg, 10 mg, and 20 mg) and 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 Phase 1/2 clinical study later in the fourth quarter 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 activities of these product candidates in 2022.
ADARE-204 and ADARE-214
We are conducting development activities in preparation for Phase 1 clinical studies of ADARE-204 and ADARE-214. We do not expect to commence clinical development activities of these product candidates in 2022. We anticipate a Phase 1 clinical study of ADARE-204 and ADARE-214 by our wholly owned subsidiary inAustralia in 2023. 28 --------------------------------------------------------------------------------
Recent Events
Ovaprene IDE Application Approval for Phase 3 Clinical Study
As discussed above, in
Positive Topline Data from DARE-HRT1 Phase 1/2 Clinical Study
As discussed above, in
Receipt of
InOctober 2022 , we received a research and development rebate from the government ofAustralia in the amount of approximately$786,000 for clinical work performed inAustralia in 2021. The rebate is accounted for as an offset to research and development expense.
License Agreement with Hennepin Life Sciences to Expand Product Candidate Pipeline
InAugust 2022 , we entered into a license agreement withHennepin Life Sciences LLC , or Hennepin, under which we acquired the exclusive global rights to develop and commercialize treatments delivering the novel antimicrobial glycerol monolaurate (GML) intravaginally for a variety of health conditions including bacterial, fungal, and viral infections. Under the agreement, we received an exclusive, worldwide, royalty-bearing license to research, develop and commercialize the licensed technology. We agreed to make potential future milestone payments through the term of the license based on clinical, regulatory, and commercial events, and to pay royalties based on commercial sales. We are entitled to sublicense the rights granted to us under this agreement.
Receipt of Payment Under XACIATO License Agreement
As discussed above, in
Receipt of Payment Under 2021 DARE-LARC1 Grant Agreement
In
Increase in Authorized Shares of Common Stock
In
Financial Overview
Revenue
To date we have generated$10.0 million in revenue, all of which represents the upfront payment under our license agreement with Organon to commercialize XACIATO, which is recognized as license fee 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. 29 --------------------------------------------------------------------------------
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 three quarters of 2022, our research and development expenses consisted primarily of costs associated with the continued development of Ovaprene and Sildenafil Cream 3.6%. We expect research and development expenses to increase in the future as we continue to 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 Fee Expense
License fee expense consists 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. 30 --------------------------------------------------------------------------------
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 inthe 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 2 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
The following table summarizes our condensed consolidated results of operations for the periods indicated, together with the changes in those items in terms of dollars and percentage: Three Months Ended September 30, Change 2022 2021 $ % Revenues: License fee revenue $ - $ - $ - - % Total revenue - - - - % Operating expenses: General and administrative 2,651,543 2,211,334 440,209 20 % Research and development 4,462,250 10,432,603 (5,970,353) (57) % License fee expense 25,000 25,000 - - % Total operating expenses 7,138,793 12,668,937 (5,530,144) (44) % Loss from operations (7,138,793) (12,668,937) 5,530,144 (44) % Other income 118,950 1,508 117,442 7788 % Net loss$ (7,019,843) $ (12,667,429) $ 5,647,586 (45) % Other comprehensive loss:
Foreign currency translation
adjustments (230,748) (63,281) (167,467) 265 % Comprehensive loss$ (7,250,591) $ (12,730,710) $ 5,480,119 (43) %
General and administrative expenses
The increase of approximately$0.4 million in general and administrative expenses for the three months endedSeptember 30, 2022 as compared to the three months endedSeptember 30, 2021 was primarily attributable to an increase in professional services expense of approximately$339,000 . Also contributing to the increases were increases in (i) general corporate overhead of approximately$129,000 , (ii) stock-based compensation expense of approximately$94,000 , and (iii) personnel costs of approximately$36,000 . These increases were partially offset by decreases in (a) commercial-readiness expenses of approximately$140,000 , and (b) rent and facilities expenses of$38,000 . 31 -------------------------------------------------------------------------------- We expect an increase in general and administrative expenses of approximately 25% 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 under our in-license agreement for XACIATO, including a$500,000 milestone payment upon first commercial sale of XACIATO in theU.S. , which is expected to occur in the first half of 2023, and royalty payments at rates in the high single-digit to low double-digits based on annual net sales of XACIATO.
Research and development expenses
The decrease of approximately$6.0 million in research and development expenses for the three months endedSeptember 30, 2022 as compared to the three months endedSeptember 30, 2021 was attributable to decreases in (i) costs for two of our clinical-stage product candidates, Sildenafil Cream 3.6% and Ovaprene, of approximately$4.8 million related to the ongoing Sildenafil Cream, 3.6% Phase 2b RESPOND clinical trial and manufacturing and regulatory affairs activities for Ovaprene, (ii) costs related to development activities for XACIATO of approximately$823,000 as a result of the completion of the Phase 3 clinical trial for XACIATO inDecember 2020 , (iii) costs related to development activities for our preclinical programs of approximately$388,000 , (iv) costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately$277,000 , and (v) rent and facilities expenses of approximately$54,000 . These decreases were partially offset by increases in (a) personnel costs of approximately$358,000 , and (b) stock-based compensation expense of approximately$23,000 . We expect our research and development expenses to remain approximately flat in 2022 compared to 2021. Our research and development expenses in 2021 were approximately$30.6 million . We expect the pace and extent of our research and development activities and, therefore, our research and development spend, to vary across fiscal quarters, making them difficult to predict. We expect our research and development spend for 2022 to be less than previously anticipated due to changes in the pace and extent of research and development activities related to our clinical-stage and Phase 1-ready product candidates. Factors that impact the pace and extent of our research and development activities and spend include, without limitation, our cash resources, reprioritization of development programs and activities, the scope, timing of commencement, and rate of progress of our clinical trials and preclinical studies, the cost and timing of manufacture and receipt of clinical supplies, timing of regulatory approval of a clinical study or alignment on study design, the results of our clinical trials and preclinical studies, and the extent to which we establish strategic collaborations or other arrangements and the terms of such arrangements. In regard to Sildenafil Cream, 3.6%, we anticipate that the total cost of the Phase 2b RESPOND clinical trial will be approximately$20.0 million , approximately$9.5 million of which was recorded in prior fiscal years.
License fee expense
For each of the three months endedSeptember 30, 2022 andSeptember 30, 2021 , we accrued$25,000 of the$100,000 annual license maintenance fee payable under our license agreement related to DARE-HRT1.
For further discussion of these license fees, see Note 3 to our unaudited condensed consolidated financial statements contained in this report.
Other income
The increase of$117,442 in other income for the three months endedSeptember 30, 2022 as compared to the three months endedSeptember 30, 2021 was primarily due to an increase in interest earned on cash balances in the current period. 32 --------------------------------------------------------------------------------
Comparison of Nine Months Ended
The following table summarizes our condensed consolidated results of operations for the periods indicated, together with the changes in those items in terms of dollars and percentage: Nine months ended September 30, Change 2022 2021 $ % Revenues: License fee revenue$ 10,000,000 $ -$ 10,000,000 100 % Total revenue 10,000,000 - 10,000,000 100 % Operating expenses: General and administrative 8,014,424 5,949,299 2,065,125 35 % Research and development 17,065,497 23,501,098 (6,435,601) (27) % License fee expense 75,000 75,000 - - % Total operating expenses 25,154,921 29,525,397 (4,370,476) (15) % Loss from operations (15,154,921) (29,525,397) 14,370,476 (49) % Other income 150,406 1,686 148,720 8821 % Gain on extinguishment of note payable - 369,887 (369,887) (100) % Net loss$ (15,004,515) $ (29,153,824) $ 14,149,309 (49) % Other comprehensive loss: Foreign currency translation adjustments (375,767) (79,002) (296,765) 376 % Comprehensive loss$ (15,380,282) $ (29,232,826) $ 13,852,544 (47) % Revenues License fee revenue relates to our license agreement with Organon to commercialize XACIATO. We earned$10.0 million in revenue during the nine months endedSeptember 30, 2022 , related to the transfer of the license and related know-how to Organon upon effectiveness of the agreement onJune 30, 2022 . We do not expect to receive additional revenue under this agreement in 2022. If the first commercial sale of XACIATO in theU.S. occurs in the first half of 2023 as expected, we should receive an additional$2.5 million under this agreement as a milestone payment following such first sale.
We did not recognize any revenue for the nine months ended
General and administrative expenses
The increase of approximately$2.1 million in general and administrative expenses for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was primarily attributable to increases in (i) professional services expense of approximately$1.2 million , (ii) general corporate overhead expenses of$316,000 , (iii) stock-based compensation expense of approximately$291,000 , (iv) personnel costs of approximately$189,000 , and (v) commercial-readiness expenses of approximately$73,000 . 33 --------------------------------------------------------------------------------
Research and development expenses
The decrease of approximately$6.4 million in research and development expenses for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was attributable to decreases in (i) costs related to manufacturing and regulatory affairs activities for Ovaprene of approximately$3.1 million , (ii) costs related to development activities for XACIATO of approximately$2.5 million as a result of the completion of the Phase 3 clinical trial for XACIATO inDecember 2020 , (iii) costs related to development activities for our Phase 1 and Phase 1-ready programs of approximately$1.1 million , and (iv) costs related to development activities for our preclinical programs of approximately$712,000 . Such decreases were partially offset by increases in (a) personnel costs of approximately$689,000 , (b) stock-based compensation expense of approximately$125,000 , and (c) rent and facilities expenses of$107,000 attributable to the allocation of a portion of rent and facilities expense included in general and administrative in 2021 to research and development in 2022. License fee expense For each of the nine months endedSeptember 30, 2022 andSeptember 30, 2021 , we accrued$75,000 of the$100,000 annual license maintenance fee payable under our license agreement related to DARE-HRT1.
For further discussion of these license fees, see Note 3 to our unaudited condensed consolidated financial statements contained in this report.
Other income
The increase of$148,720 in other income for the nine months endedSeptember 30, 2022 as compared to the nine months endedSeptember 30, 2021 was primarily due to an increase in interest earned on cash balances in the current period.
Gain on extinguishment of note payable
The$369,887 recorded as a gain on extinguishment of note payable and debt forgiveness income in 2021 represents the forgiveness of all the principal and accrued interest of the loan we obtained under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act.
Liquidity and Capital Resources
Plan of Operations and Future Funding Requirements
We prepared the accompanying condensed consolidated financial statements on a going concern basis, which 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 as we seek to potentially acquire, license and develop additional product candidates. These circumstances raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and reclassification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty of our ability to remain a going concern. AtSeptember 30, 2022 , our accumulated deficit was approximately$125.1 million , our cash and cash equivalents were approximately$40.4 million , our deferred grant funding liability under our grant agreement related to DARE-LARC1 was$14.8 million (representing grant funds received that may be applied solely for the development of DARE-LARC1 and which are included in cash and cash equivalents), and our working capital was approximately$26.7 million . We incurred a loss from operations of approximately$15.0 million and had negative cash flow from operations of approximately$12.2 million during the nine months endedSeptember 30, 2022 . We expect our primary uses of capital to be staff-related expenses, the cost of clinical trials and regulatory activities related to our product candidates, costs associated with contract manufacturing services and third-party clinical research and development services, payments to third-parties upon the occurrence of commercial milestones for XACIATO and development milestones for our product candidates pursuant to terms of the agreements under which we acquired or in-licensed rights to those programs, legal expenses, other regulatory expenses and general overhead costs. Our future funding requirements could also include significant costs related to commercialization of our product candidates, if approved, depending on the type, nature and terms of commercial collaborations we establish. 34 -------------------------------------------------------------------------------- We expect to incur significant losses from operations and negative cash flows from operations in 2022 and 2023, driven by our research and development expenses. We anticipate our expenses, and in particular our research and development expenses, to be significant in 2023 as they were in 2022 as we continue to develop our product candidates, with a focus on our candidates that have reached the human clinical study development phase. Under the terms of our license agreement with Organon, Organon will purchase all of its product requirements of XACIATO from us at a price equal to our manufacturing costs plus a single digit percentage markup. As a result, we do not anticipate our costs of providing XACIATO commercial supplies will have a material impact on our cash resources and requirements. Based on our current operating plan estimates, we do not have sufficient cash to satisfy our working capital needs and other liquidity requirements over at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements. Historically, the cash used to fund our operations has come from a variety of sources and predominantly from sales of shares of our common stock. During the nine months endedSeptember 30, 2022 , we received$10.0 million in license fee revenue under our license agreement for XACIATO, approximately$8.0 million under our grant agreement for pre-clinical development of DARE-LARC1, and we generated approximately$1.2 million in net proceeds from sales of our common stock. Subsequent toSeptember 30, 2022 , we received a research and development rebate from the government ofAustralia in the amount of approximately$786,000 for clinical work performed inAustralia in 2021. We will need to raise substantial additional capital to continue to fund our operations and to successfully execute our current business strategy. We will continue to seek to raise capital through the sale of shares of our common stock under our ATM sales agreements, however, when we effect such sales and the amount of shares we can sell depends on a variety of factors including, among others, market conditions, the trading price of our common stock, and our determination as to the appropriate sources of funding for our operations. For the foreseeable future, we will evaluate and may pursue a variety of capital raising options on an on-going basis, including equity and debt financings, government or other grant funding, collaborations, structured financings, and strategic alliances, or other similar types of arrangements, to cover our operating expenses, and the cost of any license or other acquisition of new product candidates or technologies. The amount and timing of our capital needs have been and will continue to depend highly on many factors, including the product development programs we choose to pursue, the pace and results of our clinical development efforts, and the nature and extent of expansion of our product candidate portfolio, if any. If we raise capital through collaborations, structured financings, strategic alliances or other similar types of arrangements, we may be required to relinquish some or all of our rights to potential revenue or to intellectual property rights for our product candidates on terms that are not favorable to us. 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 the risk factor in Part I, Item 1A of our 2021 10-K titled We will need to raise additional capital to continue our operations and execute our business strategy. 35 --------------------------------------------------------------------------------
Cash Flows
The following table shows a summary of our cash flows for the periods indicated: Nine months endedSeptember 30, 2022 2021
Net cash used in operating activities
(60,372)
(14,524)
Net cash provided by financing activities 1,343,355
59,842,978
Effect of exchange rate changes on cash and cash equivalents (375,767)
(79,002)
Net increase (decrease) in cash and cash equivalents$ (11,284,541)
Net cash used in operating activities
Cash used in operating activities for the nine months endedSeptember 30, 2022 included the net loss of$15.0 million , decreased by non-cash stock-based compensation expense of approximately$1.6 million . Components providing operating cash were an increase in deferred grant funding of approximately$4.3 million , an increase in accounts payable of approximately$1.4 million , and an increase in accrued expenses of approximately$1.0 million . Components reducing operating cash were an increase in prepaid expenses of approximately$4.4 million and an increase in other receivables of approximately$1.1 million . Cash used in operating activities for the nine months endedSeptember 30, 2021 included the net loss of$29.2 million , decreased by non-cash stock-based compensation expense of approximately$1.2 million and increased by the non-cash gain on the extinguishment of the note payable and accrued interest of approximately$370,000 . Components providing operating cash were an increase in deferred grant funding of approximately$9.6 million , an increase in accrued expenses of approximately$0.6 million , and a decrease in other receivables of approximately$0.3 million related to the receipt of the 2020 Australian cash research and development tax credit inApril 2021 . Components reducing operating cash were an increase in prepaid expenses of approximately$662,000 and a decrease in accounts payable of approximately$416,000 .
Net cash used in investing activities
Net cash used in investing activities for the nine months ended
Net cash provided by financing activities
Cash provided by financing activities for the nine months endedSeptember 30, 2022 andSeptember 30, 2021 consisted of approximately$1.3 million and$59.8 million in the aggregate, respectively, primarily from sales of our common stock under our ATM sales agreement.
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 to our unaudited condensed consolidated financial statements contained in this report.
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
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