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DARE: Initiating Coverage of DARE With $6.75/share Price Target

By Brian Marckx, CFA

NASDAQ:DARE

READ THE FULL RESEARCH REPORT

We are initiating coverage of Daré Bioscience, Inc (DARE) with a $6.75/share price target. DARE is a pre-revenue, clinical-stage company engaged in the development of novel therapeutic technologies targeting unmet needs in women’s health. See link above for free access to our initiation report which includes our valuation assumptions and methodology.

Core Programs

In July 2017, DARE obtained worldwide rights (licensed from ADVA-Tec) to Ovaprene, the company’s lead development program. Ovaprene, a monthly non-hormonal intravaginal ring, represents a new class of women’s contraception. Unlike all other current non-coital methods, Ovaprene is hormone-free. Instead of hormones it uses a mesh barrier to physically block sperm while non-hormonal ingredients (ferrous gluconate), which are released from the silicone ring, induce spermiostasis. While certain features of vaginal rings (including effectiveness, reversibility and convenience of monthly use) score high in consumer surveys and studies, hormone-related side-effects (including risk of serious cardiovascular events) are an oft-cited drawback of currently available options, such as NuvaRing (etonogestrel/ethinyl estradiol). Hormonal contraceptive methods, which (in addition to the vaginal ring) also come in the form of the pill, implant, patch, IUD and injection, account for approximately 74% of U.S. contraceptive product use (condoms account for another 25%). But while hormonal contraceptives remain popular, 50% of women that try them discontinue use and of those that do, side effects are the overwhelming reason why.



Approximately 40M women in the U.S. currently use some form of birth control, 23M of which use one or more contraceptive products, including ~17M which use hormonal methods. The unmet need for an effective monthly contraceptive option which is free of hormone-related side effects (and related concerns) has created an opportunity for DARE. Development of new and alternative methods of contraception is also recognized as a means to reduce the number of unintended pregnancies, which account for 45% (or 2.8M) of all pregnancies in the U.S. every year. Of the unintended pregnancies, 41% (~1.2M) are attributed to inconsistent or incorrect use of contraception and 54% (~1.5M) result from the lack of contraceptive use (or month+ gap of use). Reducing unwanted pregnancies and increasing contraceptive access and use are the subject of grants from the National Institute of Health (NIH), the Bill & Melinda Gates Foundation, FHI 360 and other agencies and organizations which have provided funding for the development of novel modes of contraception. In April DARE received (an initial) $225k of an anticipated $1.9M grant from a division of NIH - this provides DARE with non-dilutive funding for development of Ovaprene.

Human proof-of-concept of Ovaprene was demonstrated in a small (n=20) post-coital test (PCT) study which showed no viable sperm in the cervical mucus and that the device was well tolerated. Ovaprene is a combination product (device/drug), U.S. regulatory oversight of which will be the responsibility of FDA’s (CDRH) medical device branch and which will follow a PMA pathway. DARE’s U.S. regulatory strategy and anticipated timelines are similar to that followed by other approved barrier methods including the Caya diaphragm. Specifically, DARE plans to use results (assuming positive) of their recently-initiated post-coital trial (n=25) to petition FDA for IDE approval of a pivotal randomized controlled study. DARE’s anticipated timelines are to complete the PCT and file for IDE approval in 2019 and start/finish a pivotal study (n=~250) in 2020/2021. If all goes well, an FDA PMA filing could happen in 2021/2022 and it is possible that Ovaprene could launch in the U.S. by sometime in 2022/2023.

In February 2018, DARE in-licensed rights to Topical Sildenafil (SST-6007) for any indications related to female sexual dysfunction and female reproductive health. DARE plans to develop Topical Sildenafil for Female Sexual Arousal Disorder (FSAD), a condition characterized by the inability to attain and/or maintain sufficient physical sexual arousal. While FSAD is estimated to affect approximately 13M women in the U.S., no products currently exist that are indicated to treat the condition (importantly, FDA does recognize FSAD as a distinct condition). The safety and tolerability profile of sildenafil, which is the active ingredient in Viagra (pill), has been well-established in men. Topical Sildenafil has already been evaluated in a phase 1 (n=21) and phase 2b study (n=31), which demonstrated that it was well tolerated and resulted in increased blood flow to the vaginal tissue in both pre- and post-menopausal women. IP includes six issued U.S. patents related to topical delivery. Given sildenafil’s (i.e. Viagra’s) known safety profile, it is expected that a 505(b)(2) FDA NDA pathway will apply. Contingent on pathway and trial design-related feedback from FDA (a meeting with which is anticipated in the near-term), DARE’s estimated development timelines include start/complete a phase 2b study in 2018/2020 and commence a phase 3 study in 2H 2020.

Strategic Pipeline: VVA therapy, intravaginal ring technology, longer-acting injectable contraceptive…

In May, DARE announced a merger agreement with (privately-held) Pear Tree Pharmaceuticals that added a novel, vaginally-delivered treatment for VVA in women with hormone-receptor-positive (including ER-positive and PR-positive) breast cancer. PT-101 is a proprietary vaginal formulation of oral tamoxifen, a selective estrogen-receptor modulator (SERM) which, along with aromatase inhibitors (AIs), are the most widely used drugs to treat hormone-receptor-positive (HRP) breast cancer. VVA, characterized by vaginal dryness and pain during intercourse (i.e. dyspareunia), is caused by low estrogen levels associated with menopause. Localized estrogen therapy is typically used to treat VVA but, since it can interfere with action of AIs/oral tamoxifen and increase the risk of cancer recurrence, it is often contraindicated for women with (or at risk of) HRP breast cancer as well as those taking AIs, the use of which has been shown to further exacerbate VVA symptoms. Approximately 600k post-menopausal women in the U.S. take AIs to treat or mitigate risk of HRP breast cancer and an estimated 2M women in the U.S. with breast cancer suffer from VVA, the majority of which do not receive treatment. DARE intends to develop PT-101 for the treatment of VVA in women with (or at risk of recurrence of) hormone-receptor positive breast cancer, including those undergoing therapy – an indication for which there is no currently approved treatment.

A four-subject proof-of-concept study indicated PT-101 was associated with improvement in vaginal dryness and decreased vaginal pH. Interestingly, Ospemifene (marketed as Osphena), also a SERM, acts as an estrogen agonist in the endometrium and works similar to the way that estrogen does in reducing VVA symptoms. Osphena (taken orally) is the only FDA-approved (since February 2013) product for the treatment of VVA that can claim it does not raise estrogen levels. It, however, is not indicated specifically for women with (or at risk of) HRP breast cancer (i.e. the claim that DARE expects to pursue). Presumably the method-of-action of PT-101 would prove similar to that of Osphena. Next steps in development of PT-101, per DARE’s May 7th press release announcing the merger, are to optimize the vaginal formulation before moving to larger clinical trials.

In April, DARE secured exclusive worldwide rights to a novel intravaginal ring (IVR) drug-delivery platform technology from Juniper Pharmaceuticals. DARE obtained rights to three pre-clinical candidates; JNP-101 oxybutynin for overactive bladder, JNP-201 natural progesterone and estradiol hormone replacement therapy (for menopause) and JNP-301 natural progesterone for the prevention of preterm birth. By using a solid ethylene vinyl acetate (EVA) polymer matrix to release drugs, the novel drug-delivery technology is expected to allow for delivery of multiple drugs at multiple release rates and provide longer duration of efficacy as compared to current methods. Initial human proof-of-concept was established in a six-subject clinical trial whereby their IVR delivered leuprolide (a hormone which is used for the treatment of prostate and breast cancers as well as endometriosis and other conditions). Development for all indications is expected to follow 505(b)(2) pathways which would include a phase 2 bioavailability and dose-finding study followed by a pivotal phase 3 clinical trial. Next-steps, per Juniper’s pipeline page, are to conduct definitive sheep studies to test the size and configuration of the rings in an animal model.

In March, DARE announced an agreement with (privately-held) Orbis Biosciences related to the development of two long-acting injectable contraceptives. Development work to-date (pre-clinical) has been through a subcontracted program funded by FHI 360, which was sponsored by the Bill & Melinda Gates Foundation. Built on Orbis’ controlled-release technology, ORB-204 and ORB-214 are pre-clinical stage etonogestrel injectable contraceptives being developed for (relatively long) pregnancy-protection durations of six and twelve months, respectively. Currently available injectables have a duration of only three months. While specifics were not publicly disclosed, per terms of the agreement with Orbis, if “upcoming development efforts [are] successful” DARE has the option to license rights to ORB-204 and ORB-214. Etonogestrel is currently used in FDA-approved contraceptive implants as well as in vaginal rings including NuvaRing. We expect we will hear development-related status updates in the near-future.

P/S Values DARE at $6.75/share

We use 5.0x sales and discount revenue at 20%, 15% and 10% reflecting bear, base and bull cases, respectively. Given assumed commercial acceleration for each of the therapies not occurring until at least 2025, we think 2025, 2026 and 2027 are ‘usable’ out-years in the valuation waterfall (see link below) and still reflect growth potential implied by a 5x sales multiple. Based on a current fully-diluted share count of approximately 15.7M, base case puts fair value of DARE at approximately $6.75/share.

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