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LPCN: Turning the Tables

04/18/2019
By John Vandermosten, CFA

NASDAQ:LPCN

On March 27, 2019, the FDA approved Clarus Therapeutics’ Jatenzo, the first oral testosterone replacement therapy (TRT) product available on the market. We see the approval of both Jatenzo and Xyosted by Antares Pharma (ATRS) as positive indicators for eventual approval of Tlando as it demonstrates that the FDA is feeling more confident about the use of TRT in appropriate populations. Oral TRT has been seen as an improvement over injected and topical administration due to its ease of use and ability to avoid transference. During the approval of these competitors, Lipocine Inc. (NASDAQ:LPCN) has been completing its blood pressure and ex vivo conversion studies in support of a 2Q:19 resubmission of its new drug application (NDA) so it can obtain approval and launch its own oral formulation of TRT.

Clarus and Lipocine have been competing for the same market and also battling it out in the courts over patent conflicts. After the recent grant of Lipocine’s Priority Motion by the Patent Trial and Appeal Board (PTAB) and the adverse judgment against Clarus regarding the interference case, we see a low likelihood of a successful appeal by Clarus. This opens the way for an unfettered launch of Tlando assuming a favorable response to the anticipated NDA resubmission.

Shortly after the FDA’s approval of Jatenzo, Lipocine filed suit against Clarus alleging that Jatenzo infringes on six of Lipocine’s patents. The effect of the injunction filing may be to slow down commercialization of the product and force Clarus to come to the table to negotiate a settlement. While the cost of pursuing such legal action could be high, we anticipate by the time the case works its way through the courts, cash flow from Tlando could be sufficient to support the legal efforts. In any case, with the filing of the injunction, Lipocine has turned the tables on Clarus and emerged in a stronger position.

Some investors have voiced concerns that the FDA approval of Jatenzo will afford it exclusivity that will prevent Tlando from coming to market. Jatenzo has been granted New Clinical Investigation Exclusivity, which requires that three years pass before a generic competitor can compete. A generic competitor will be able to use the same label as it has the same dose and dosing regimen as the approved product.

This does not apply to Tlando. Tlando will be a branded product with its own unique label and dosing regimen based clinical studies conducted on its behalf. We anticipate the resubmission of the NDA to occur in the next few weeks, then a six month review and a PDUFA date prior to year-end 2019.

While the TRT market is large and there is plenty of market share for both oral competitors, we see Tlando as the superior product and a greater opportunity for market share with successful marketing.

Tlando characteristics that support our favorable thesis and market penetration estimates include:

‣ Ease of use that avoids inconvenient application and painful injection
‣ Fixed dose product that does not require titration
     ◦ Eliminates additional doctor visits
     ◦ Most TRT products require titration including Jatenzo
     ◦ Fixed predictable cost and dosing is attractive to patients and payors
‣ Less impact on hypertension and increase in systolic blood pressure (DBP)
     ◦ Tlando +3.8 mm Hg SBP
     ◦ Xyosted +4.0 mm Hg SBP
     ◦ Jatenzo + 4.9 mm Hg SBP
‣ No IP encumbrances (Clarus’ patent was nullified)
‣ Once per day follow-on product in development

Over the last years, Lipocine has fought hard on the regulatory and legal side to clear the path for Tlando approval. Now that Lipocine has completed the required studies and there is increased willingness by the FDA to approve new TRT therapies, we are confident that Tlando will also obtain approval. After being on the defensive for many years with the Clarus litigation, Lipocine received a favorable ruling by the PTAB. Now with the recent filing, Lipocine has turned the tables on Clarus. We see Lipocine’s oral formulation as a marked improvement over TRT now available and with a successful commercialization program, we also anticipate material penetration into the TRT market.

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