Lipocine: An Undervalued Biotech With An Approaching Catalyst

| About: Lipocine Inc. (LPCN)


Lipocine's Phase III results for its lead compound LPCN-1021 are expected to be announced in the third quarter of 2014.

LPCN-1021 could be the first and only oral testosterone replacement therapy indicated for low testosterone in the U.S.

LPCN-1021 has the potential to address a large testosterone replacement market, which exceeded $2 billion in 2013.

LPCN-1021 has distinct advantages over currently approved products addressing the testosterone replacement therapy market.

At a market cap slightly in excess of $100 million, the company is trading at a low valuation given its potential to take significant market share from competitors.

Developmental Pipeline Summary

Lipocine (NASDAQ: LPCN) is a developmental stage pharmaceutical company developing orally available treatments in the area of men's and women's health. Lipocine's lead compound LPCN-1021 (Testosterone Undecanoate) is an orally administered twice daily testosterone replacement therapy for the treatment of low testosterone (Low T) levels in men. Lipocine has completed enrollment in its Phase III trial of LPCN-1021 and results are expected to be announced during the third quarter of 2014.

In addition, the company has a next-generation once daily orally administered testosterone replacement compound in Phase II a clinical testing (LPCN-1111), with top-line data expected to be announced during the second half of 2014. The company's third product in development is LPCN-1107, which has the potential to be the first oral hydroxyprogesterone caproate used for pre-term birth, and it is in Phase I pharmacokinetic testing. This article will focus on the company's lead candidate LPCN-1021, since it is closest to commercialization and is the primary value driver for the company in the short term.

Overview of Low Testosterone Replacement Therapy Market

The Low-T market generated over $2.3 billion in sales in 2013. Topical products dominate the market with injectable and intranasal versions recently introduced. Abbvie's (NYSE: ABBV) Androgel is the market leader in sales, generating $254 million for Abbvie during the first quarter of 2014 as per a Motley Fool article published this past April. That makes it a blockbuster product for Abbvie. The next biggest selling testosterone replacement drugs on the market by sales in 2013 are Auxilium Pharmaceutical's (NASDAQ: AUXL) Testim generating $211 million in sales, Eli Lilly's (NYSE: LLY) Axiron generating $179 million in sales, and Endo International's (NASDAQ: ENDP) Fortesta generating $65 million in sales. However, all of the available treatment options have drawbacks, which I will go into further later in this article. Generic versions of Androgel are expected to enter the market beginning next year, with Watson Pharmaceuticals' generic version coming in August 2015 and Par Pharmaceuticals' generic version coming in February 2016.

There have been concerns raised recently about cardiovascular risks associated with testosterone replacement therapy. Despite these concerns, the FDA has not concluded that FDA approved testosterone treatments increase the risk of stroke, heart attack, and death. The FDA advised that patients should not stop using prescribed testosterone products. Cardiovascular concerns over testosterone replacement therapy have not kept the FDA from approving new products. In March 2014, the FDA approved Aveed, an injectable version of testosterone manufactured by Endo International. In May 2014, the FDA approved Natesto, an intranasal version of testosterone administered three times per day and manufactured by Canadian pharmaceutical company Trimel Pharmaceuticals (OTCPK:TRLPF).

Differentiation of LPCN-1021 Compared to Approved Products

Advantages of an oral version of testosterone include the following:

  • No skin irritation as seen with topical products
  • No transference risk (potentially no black box warning)
  • Discrete and convenient twice daily oral dosing
  • Improved compliance

Long Thesis

As per the corporate presentation posted on Lipocine's website, 28 leading endocrinologists and urologists were polled about oral testosterone compliance compared to existing testosterone replacement products on the market. Out of those polled 94% had the opinion that an oral version of testosterone would improve patient compliance over existing therapies. In addition, the company has already announced positive Phase II results for its lead compound LPCN-1021, which enrolled 84 patients and met all primary and secondary endpoints without dose titration. The current Phase III trial enrolled 315 patients. The Phase III trial design has two dose titrations built into the study at week three and week seven, with efficacy assessment at week 13 and a safety assessment at week 52. Though the outcome of the trial may be negative, the built-in dose titrations de-risk the outcome of the trial, in my opinion.

Lipocine has a low share count with slightly over 14 million shares outstanding and a float of slightly over 7 million shares, as per Yahoo Finance. With roughly $40 million in cash on hand and a market cap of approximately $110 million as of Aug. 12, 2014, the enterprise value of the company is about $70 million. Lipocine is also an under-followed company with an average daily trading volume around 33,000 shares, as per Yahoo Finance. This presents Lipocine as an undervalued equity considering that, if approved, LPCN-1021 could be the first and only oral testosterone replacement therapy in a billion-dollar-plus market.

The company's intellectual property estate is robust with six issued patents and 14 patent applications pending approval in the U.S., which the company projects will protect LPCN-1021 from generic competition into January 2029. In addition, the company has 31 issued and pending patents outside of the U.S. Considering that Abbvie will be facing generic competition for its blockbuster Androgel next year, that makes Lipocine a potentially attractive takeover target by Abbvie or another large pharmaceutical company.

Potential Risks

Despite having a potentially lucrative drug on its hands, Lipocine faces developmental and commercialization uncertainties. These include the risk of its Phase III trial for LPCN-1021 not meeting its primary and/or secondary endpoints. In addition, the company will likely have to raise cash to commercialize the product if it is ultimately approved. These are challenges faced by most micro-cap biotech companies, and Lipocine is no different.

Potential competitors currently developing an oral testosterone product are Clarus Therapeutics and Repros Therapeutics. Clarus Therapeutics' drug Rextoro did not meet FDA targets in two Phase III trials. Repros Therapeutics' (NASDAQ: RPRX) drug Androxal is seeking a secondary hypogonadism indication and is not classified as a testosterone replacement therapy.


I believe that Lipocine is an undervalued and under-followed company with the potential to appreciate in value once the market recognizes its potential. Considering Lipocine has a product in late-stage clinical development, which, if approved, would be the only oral testosterone replacement therapy on the market, it could take significant market share from current FDA approved therapies. It could also expand the overall market by bringing in new patients who aren't comfortable with current treatment options.

Disclosure: The author is long LPCN. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This article represents my own personal opinion on the companies mentioned. Opinions stated are derived from public information. This article is not a recommendation to purchase or sell any securities. You must conduct your own due diligence when making investment decisions.