Daré Bioscience, Inc. (DARE) CEO Sabrina Martucci Johnson on Q4 2021 Results – Earnings Call Transcript

Daré Bioscience, Inc. (NASDAQ:DARE) Q4 2021 Earnings Conference Call March 31, 2022 4:30 PM ET

Company Participants

Sabrina Martucci Johnson – President and Chief Executive Officer

Lisa Walters-Hoffert – Chief Financial Officer

John Fair – Chief Strategy Officer

Conference Call Participants

Zegbah Jallah – ROTH Capital Partners, LLC

Douglas Tsao – H.C. Wainwright & Co.

Kumaraguru Raja – Brookline Capital Markets

Operator

Welcome to the conference call hosted by Daré Bioscience to review the company’s financial results for the year ended December 31, 2021, and to provide a general business update. This call is being recorded. My name is Catherine, and I’ll be your Operator today. With us today are Sabrina Martucci Johnson, Dare’s President and Chief Executive Officer, John Fair, Dare’s Chief Strategy Officer, and Lisa Walters-Hoffert, Dare’s Chief Financial Officer. Ms. Johnson, please proceed.

Sabrina Martucci Johnson

Thank you. Good afternoon, and welcome to our full-year 2021 financial results and business update call for Daré Bioscience. Our plan today is to review last year’s results, discuss developments since our last call in November, and use the time to highlight objectives and milestones anticipated for 2022 as well as other insights for the year. Before we begin, I’d like to remind you that today’s discussion will include forward-looking statements within the meaning of Federal Securities Laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact should be considered forward-looking statements. Actual results or events could differ materially from those anticipated or implied by these statements due to known and unknown risks and uncertainties, you should not place undue reliance on forward-looking statements. Forward-looking statements are qualified in their entirety by the cautionary statements in the company’s SEC filings, including our annual report on Form 10-K for the year ended December 31st, 2021, which is filed today.

I would also like to point out that the content of this call includes time-sensitive information that is current only as of today, March 31, 2022. Dare undertakes no obligation to update any forward-looking statements to reflect new information or developments after this call, except as required by law. Dare solely and squarely focused in women’s health. It is our belief that prioritizing women’s health is not only good for the many women lacking effective or convenient therapeutic choices, but also for a broad set of stakeholders, including their families, partners, and of course our shareholders. Our strategy involves identifying areas of high unmet need, selecting promising candidates to address such needs, conducting research and development activities in a thoughtful and capital efficient manner, and is approved, developing an appropriate commercialization strategy for each candidate with the goal of reaching as many potential users as quickly as possible.

With our diverse portfolio, we seek to bring to market differentiated prescription therapies that prioritize women’s health and well-being, expand treatment options, and improve the outcomes, primarily in the areas of contraception, fertility, and vaginal and sexual health. Today, we have seven candidates in various stages of development and one product that has received FDA approval last December. We’re going to spend much of our time today providing an update on our late-stage development candidates and our FDA approved product. As it pertains to that FDA approved product, XACIATO, we look forward to reviewing the announcement we made today regarding the global license agreement we entered into with Organon to commercialize XACIATO, which is Clindamycin Phosphate vaginal gel, 2%, our FDA approved treatment for females 12 and older with Bacterial Vaginosis. Before we discuss XACIATO in our late-stage program such as Ovaprene, I want to first review the many factors we consider when evaluating new potential candidates for our portfolio.

Since those factors ultimately impact the commercialization strategies for those products and opportunities to enter into collaboration such as those that we have established to-date with Organon for XACIATO and Bayer for Ovaprene. Key considerations include the following, candidates must have the potential to be a first line or first in category option. Candidates much represent a meaningful commercial revenue opportunity. We ideally seek product candidates to utilize differentiated and different API’s and target different indications or drug delivery modes that are personalized for her. And finally, we are particularly fond of candidates that can be developed via a 505B2 regulatory path, or have existing proof-of-concept allowing us to move quickly to later stages of clinical development and potentially shortening the overall development time and cost to obtain a marketing approval in the U.S., as was the case with XACIATO where we achieved FDA approval of XACIATO just three years after acquiring rights to the program.

Now, before we look forward to what is ahead in 2022, I’d like to take a moment to highlight a few important achievements during 2021, since those achievements set us up for where we are today and what is yet to come. We were awarded a grant for up to $48.9 million over approximately five years to support our pre -clinical DARE-LARC1 contraceptive program. The FDA accepted our NDA for DARE-BV1 which is now referred to as XACIATO, and the FDA subsequently approved our application on scheduled PDUFA date of December 7, 2021. We entered into a collaborative research and development agreement, or CRADA, under which a pivotal Phase III clinical study of Ovaprene will be supported financially by NICHD’s Contraceptive Development Program and conducted within its contraceptive clinical trial network. And we continued our collaboration with Bayer, who has the commercialization rights for Ovaprene. We initiated the Phase 2b RESPOND study evaluating Sildenafil Cream 3.6% as a treatment for Female Sexual Arousal Disorder, her version of erectile dysfunction, for which there are no current FDA approved treatments.

We initiated a Phase 1/2 clinical study of DARE-VVA1, our proprietary investigational formulation of tamoxifen for intravaginal administration to treat vulvar and vaginal atrophy in women with risk or at risk for hormone receptor positive breast cancer. And finally, we generated positive Phase 1 clinical data for DARE-HRT1. Our investigational hormone therapy, vaginal ring for the treatment of both the vasomotor as well as the vaginal symptoms associated with menopause. First now, let’s talk about Bacterial Vaginosis, our FDA approved treatment, XACIATO, and our global license agreement with Organon to commercialize XACIATO. First the unmet need. Bacterial Vaginosis is the most common vaginal condition and the most common cause of vaginitis worldwide and is estimated to affect approximately 21 million women in the United States. The condition results from an overgrowth of bacteria which upsets the balance of the natural vaginal microbiome and can lead to symptoms of odor and discharge. XACIATO, we see both qualified infectious disease product or QIDP, and fast track designations from the FDA for the treatment of Bacterial Vaginosis. Organon, shares our commitment, to advance critically muted innovation in women’s health.

We are excited to be collaborating with one of the premier companies in women’s health, as we believe that organized commercial capabilities will ensure that XACIATO reaches the women most impacted by this condition. Through Organon’s strong commercial capabilities and expertise in women’s health, Organon is a unique position to bring XACIATO to market and enable women across the U.S. to access this important option. Under the terms of the agreement, we’ll receive a $10 million upfront payment from Organon, we’re eligible to receive potential milestone payments of up to $182.5 million, and tiered double-digit royalties based on net sales. XACIATO is expected to be available commercially in the U.S. in the fourth quarter of this year. Completion of the transaction is subject to review under the Hart-Scott-Rodino Antitrust Improvements Act and other customary conditions, and the transaction is expected to close in the second quarter of 2022.

I will shortly turn the call over to John to share some additional insights regarding our collaboration strategy and objectives in selecting Organon as our commercialization collaborator for XACIATO. But before doing so, I’ll briefly provide updates on certain of the development milestones and objectives this year for our other programs. Ovaprene is our potential first in category option in the over $7 billion contraceptive category. It is our novel hormone-free monthly contraceptive candidate, whose U.S. commercial rights are under a licensed agreement with Bayer. In the third quarter of 2021, we announced the CRADA that I mentioned with the Eunice Kennedy Shriver National Institute of Child Health and Human Development, or NICHD, which is part of the NIH, the National Institutes of Health, for a pivotal Phase III study of Ovaprene. The CRADA reflects the NICHD’s continued support for the development of Ovaprene and will allow us to leverage the tremendous development expertise of the NIH in contraceptive clinical studies and to share the cost of the pivotal Phase III study with the NIH, so that next stage of clinical development for Ovaprene is that pivotal Phase III contraceptive study that we will be conducting with them.

In order to initiate the pivotal Phase III study, we must have an FDA approved IDE in place, and so we initiated that IDE process for Ovaprene early this year. And pending the FDA’s review and approval of the IDE, we ceased to initiate the pivotal study this year. Under the license with Bayer, Dare received access to Bayer’s extensive clinical and market expertise through and up to approximately 80 hours per week in advisory support, while retaining control over Ovaprene’s development and regulatory approval process. Bayer has the right to obtain exclusive rights to commercialize the product in the U.S. following completion of the pivotal trial, the one that is being planned to be undertaken by Dare and the NICHD by making to Dare $20 million payment. We will also be entitled to receive commercial milestone payments, potentially totaling $310 million in addition to double digit tiered royalties on net sales. Sildenafil Cream is our investigational product to address her version of erectile dysfunction, as I mentioned.

In March of last year, we commenced our Phase 2b study evaluating Sildenafil Cream 3.6%, our investigational cream formulation of Sildenafil, which as you know is the active ingredient in Viagra, for topical administration to treat Female Sexual Arousal Disorder, FSAD. FSAD is a physiological condition characterized by the inability to attain or maintain sufficient general arousal during sexual activity. Sound familiar? Of the various types of female sexual dysfunction disorders, it is the most analogous erectile dysfunction in men and yet there is no FDA approved product that exists today to treat FSAD. If our clinical development is successful, Sildenafil Cream has the potential to be the first FDA -approved FSAD treatment option. We continue to enroll women in the Phase 2b RESPOND clinical study evaluating Sildenafil Cream as a potential treatment for FSAD at sites located across the United States. Our study protocol does have a planned interim analysis, it’s to evaluate the power calculations and trial sizing. So once we conduct that analysis which is planned this year, we will provide guidance on anticipated timing for the top line data. Next DARE-HRT1.

The results of the completed Phase 1 study of our investigational hormone therapy product or DARE-HRT1, last year demonstrated its potential as an effective hormone therapy for both the vasomotor and the vaginal symptoms associated with menopause. DARE-HRT1 is a unique vaginal ring, it’s designed to deliver bio-identical estradiol and bio-identical progesterone together continuously over a 28 day period as part of a hormone therapy regimen. As the next step in the development program, we are now commencing a Phase 1/2 clinical study of DARE-HRT1 in Australia in the second quarter of this year. This open-label study will evaluate the PK of the lower-end high-dose versions that we had study previously of DARE-HRT1 in approximately 20 healthy post-menopausal women over now approximately three consecutive months of use. The study will also collect safety, usability, acceptability and symptom relief data. There are currently no FDA -approved IVRs that deliver bio-identical progesterone in combination with bio-identical estradiol.

As such, DARE-HRT1 has the potential to be a first in category product that offers monthly convenience for women. And the last portfolio candidate I will discuss today is DARE-VVA1. More than 3.8 million women in the U.S.. have a history of breast cancer. Hormone receptor positive is the most common type of breast cancer, and the prevalence of vulvar and vaginal atrophy in postmenopausal breast cancer survivor is estimated to be 40% to 70%. We would like to provide an option to those women. DARE-VVA1 is our proprietary investigational formulation of tamoxifen for vaginal administration to treat VVA. As a non-hormonal approach to addressing vaginal atrophy, it could be an important option for women with a history of or at risk for hormone receptor positive breast cancer. VVA is often also the outcome of effective breast cancer treatments. And as I mentioned, it can lead to vaginal discomfort, including painful intercourse, which as you can imagine causes significant distress.

For many women, an appropriate treatment for vaginal atrophy is supplemental estrogen. However, estrogen may pose a risk to women at risk for hormone receptor positive breast cancer and hence DARE-VVA1 may offer a solution for these women and others for whom hormonal treatment is not an option. As I mentioned in my opening remarks, we initiated that Phase 1/2 clinical study in Australia in the third quarter of last year for what we referred to as this breast cancer survivorship vaginal atrophy treatment program, DARE-VVA1, and we expect to report top-line data from the DARE-VVA1 Phase 1/2 study during the second half of this year. Now you’ve been waiting to hear more about XACIATO, I’m going to turn the call over to John to provide our perspective on commercialization and collaboration strategies in women’s health.

John Fair

Thank you, Sabrina. As Sabrina noted at the start of the call, we closed 2021 by achieving a number of important milestones for Dare. Chief among them was the FDA approval of XACIATO in December of 2021. As we communicated on our last call, we are a company focused on providing better therapeutic options for women and collaboration’s are core to our business model. In the context of XACIATO, our objective was to identify the right commercial collaborator for the product, specifically one with strong commercial capabilities and expertise in women’s health, that would be in a unique position to bring XACIATO to market and leverage the clinical outcomes achieved in the Phase III clinical study.

XACIATO uses a novel thermal setting gel formulation containing Clindamycin at a concentration of 2% present as Clindamycin Phosphate with one time dosing. In the Phase III trial, XACIATO demonstrated a clinical cure rate of 70% at the test of cure visit the day 21 to 30 visit as compared to 36% for Placebo. The potential to offer women a new option for treating Bacterial Vaginosis enabled us to engage with the most capable potential partners in the women’s health landscape, and we are excited that Organon will be leveraging its strong commercial capabilities and expertise in women’s health to bring XACIATO to market. Organon’s goal to deliver innovation, improve access, and expand choice to help address therapeutic gaps in women’s health is clearly aligned with our mission and what we wanted to accomplish with XACIATO.

Transitioning to Ovaprene. Our Ovaprene collaboration with Bayer has remained focused on activities to support the IDE process with the FDA, including manufacturing activities and importantly pre -commercialization activities that inform the design of the pivotal study targeted to commence later this year, and ultimately, the launch strategy for this potential first in category contraceptive candidate. We are fortunate to work with collaborators that share our vision to deliver innovation in women’s health and have the access and expertise and sales capabilities to enhance our impact. I will now turn the call over to Lisa who will give you a financial update.

Lisa Walters-Hoffert

Thank you, John, and thanks to all of you for joining us today. I would now like to summarize, Dare’s financial results for the year ended December 31, 2021, which I will refer to as fiscal 2021 or 2021. Dare’s business model is to assemble, advance, and monetize a portfolio of novel product candidates in women’s health. As a result, our expenses consist of corporate overhead, portfolio, acquisition, and maintenance costs, and research and development, or R&D activities. While our generally administrative expenses tend to be somewhat predictable throughout the year, our R&D expenses will vary with our clinical pre -clinical manufacturing, regulatory, and other activities related to advancing our portfolio candidates. For fiscal 2021, Dare’s G&A expenses were approximately $8.4 million and our R&D expenses were approximately $30.6 million.

The $9.8 million increase in R&D in 2021 compared with 2020 is primarily attributable to the cost of the ongoing Sildenafil Cream seems to be RESPOND clinical trial for Female Sexual Arousal Disorder, manufacturing and regulatory affairs activities related to Ovaprene and development activities for our Phase 1 and Phase 1 ready programs. Our comprehensive loss for the year was approximately $38.8 million. During fiscal 2021, net cash proceeds from financing activities were approximately $75.8 million and primarily reflected sales of stock under our ATM program. We ended 2021 with approximately $51.7 million in cash and cash equivalents. I’d like to take a moment to highlight two interesting financing developments that occurred during 2021. In June, we entered into a grant agreement making us eligible to receive up to $48.9 million to support the pre -clinical development of DARE-LARC1 of roughly the next five years.

We received an initial payment of $11.5 million in July, and any future payments will be contingent upon DARE-LARC1, the program achieving specified development and reporting milestones. At year-end December 31, 2021, approximately $10.5 million was recorded as deferred grant funding liability under this grant agreement in our balance sheet. We are truly grateful to have been selected for a grant of this magnitude that covers multiple years of development work to advance this truly innovative technology. Second, in July, as Sabrina had mentioned, we entered into the Cooperative Research and Development Agreement or CRADA with NICHD for the conduct of the Phase III study of Ovaprene. Dare agreed to contribute $5.5 million towards the total estimated cost of the pivotal study and we paid about $5 million to date. Dare will also be responsible for providing the clinical supplies of Ovaprene for this study.

For its part, NICHD will be responsible for the other costs related to the conduct of the pivotal study and will manage the payment of expenses to third parties. We truly believe NICHD’s contraceptive trial experience and financial support should elaborate the completion of the Ovaprene pivotal study in an efficient and cost-effective manner. In terms of developments during the first quarter of 2022, as Sabrina and John just discussed, we were thrilled to announce a global license agreement with the Organon for the commercialization of XACIATO. Again, Dare will receive a $10 million upfront payment from Organon, and Dare will be eligible to receive potential future milestones of up to $182.5 million as well as tiered double-digit royalties based on net sales. XACIATO is expected to be available commercially in the U.S. in the fourth quarter of 2022. Completion of the transaction is subject to the review under Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.

The transaction is, however, expected to close in the second quarter of 2022. As of March 30, 2022, Dare had approximately $83.9 million shares of common stock outstanding. So in closing, we will endeavor to be creative, collaborative, and opportunistic in seeking the capital that we need to advance our candidates and build shareholder value. As Sabrina had noted at the beginning of the call, we encourage investors to review the more detailed discussion of our financials and financial condition, our liquidity and capital resources, and our risk factors in our annual report on Form 10-K for the year ended December 31, 2021, that was filed today. I would now like to turn the call over to the Operator.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Zegbeh Jallah with ROTH Capital Partners. Your line is open.

Zegbeh Jallah

Hello, thanks for taking my questions, and congrats on the progress as well as the recently signed deal with Organon. I think everything looks like is on track, so I’m just going to ask questions that a lot of folks have been wondering. I think the first is just about your decision to have Organon fully take over the commercialization as opposed to partnering with them on the commercialization, and then also your decision around perhaps giving them right of first negotiation to some specified products.

Sabrina Martucci Johnson

Great questions, and thank you for asking about Organon and the decision. First of all, just taking a step back, it’s always wonderful when you have developed a product and you have a vision of selecting product candidates that truly address persistent unmet needs that therefore have an opportunity to be first in line or first in category, and have meaningful commercial potential thus they should be partnerable to actually when you get to the finish line of an FDA approval, you have interest right from parties in that product candidate. And really what that does is provide a lot of optionality. And as we have talked about prior to today, and being able to disclose our selected partner for this program, we certainly looked at a variety of different structures and options. And fortunately, we’re in a position where those were possibilities and opportunities, including opportunities to co-promote.

However, as we’ve also said several times, we really tried to be disciplined and look at each product on its individual basis and merits and really also try to be very, very focused on what is the best way to ensure that product has the access to the most women as quickly as possible. Because what that does is it maximizes access that’s good socially, that’s good for women, that’s also good financially, and it can also impact your time to peak sales. So we really tried to look at it from that perspective. And clearly, I think, entering into a partnership collaborating with one of the premier companies in women’s health as we believe that Organon is obviously and with their commercial capabilities, will ensure that XACIATO reaches the most impacted women from this condition as quickly as possible.

And so while we’d love to think that Dare can add a lot of value commercially, I think that it’s very clear that obviously an organization like Organon, with their global footprint and with their strong, strong commitment in women’s health, and their very, very mission that is so unified with what our mission is is clearly a great partner for this program, and best for Dare to do what we do well and continue innovating. And that is a great transition to your question about what you noted in the transaction which it does include an opportunity for Organon to have exclusive worldwide rights at first negotiation for specified potential future Dare products. And I think that’s just representative of the kind of work that Dare does.

Organon’s commitment to the category, our commitment to continuing to enhance and build our portfolio again with products that address persistent unmet need that have a potential to be first line or first in category products and have the potential to address and really be meaningful commercial opportunities. And so that’s really what that represents, it’s our alignment and our vision of the kind of work they are going to be doing, and that we want to be doing and it really just gives an opportunity for us to chat and talk about those potential future products.

Zegbeh Jallah

Thanks, Sabrina. And then I just have two quick ones and I’ll get back in the queue. The first one here is just about the broad reach of Organon. I imagine that the XE opportunity is important. So just wanted to get some commentary around what that market opportunity could be since it’s primarily been talking about the U.S. market, and then how quickly could that be leveraged in terms of the market?

Sabrina Martucci Johnson

Yes, definitely. Obviously, they are a global organization, so they have that global footprint. In terms of the focus right now, obviously we have the U.S. approval, so that is clearly a focus, and I think growth outside of the U.S. is an ongoing consideration. There’s no confirmed plans that we’re going to talk about right now, but obviously it is a global transaction, women around the world experience Bacterial Vaginosis, it’s not focused in the U.S., but the current approval today is in the United States. So obviously that’s a clear priority right now.

Zegbeh Jallah

Thanks, good for modeling. And then the last here is just about some clarification for Ovaprene. I know after the IDE is removed, you can move into a Phase III study, but I was just wondering if there is anything that we need to know that can take place between the IDE approval and when you can start the Phase III just so we can guesstimate as to when that Phase III for Ovaprene can get underway.

Sabrina Martucci Johnson

Yes, that’s a great question and I’ll try to provide as much clarity as I can. But basically, as I mentioned, we have initiated the IDE process with the FDA, which really allows us to have that collaborative discussion around the IDE and the clearance of the IDE. And importantly, one of the reasons that we started, obviously, that process, is really so that we can make sure that we are aligned on the protocol for the pivotal study. Because really one of the longest lead time items when you’re preparing for a trial of any kind is that pivotal study, your protocol, the design of the study. And because Ovaprene is so unique as a development candidate in the contraceptive category, it’s the first product that has the potential to be the first monthly hormone-free vaginal contraceptive method, having an understanding of some of those requirements is really one of the important steps because there’s work that we have to do along with the NIH to prepare for that pivotal study, so that we can initiate this year.

So by starting those discussions with the FDA, we do have an understanding of some key pivotal study requirements, 200 women completing 12 months. And that really allows us to do the work to prepare from a manufacturing perspective, to prepare product supply to support the study, to prepare and site selection and all of that work. And then, from an FDA perspective, it’s really just completing the IDE process, and obviously as we have updates on that, we’ll provide them. But right now, we’re really working towards this big picture, which is this year, and importantly got some great clarification on the protocol that’s allowing us to start some of those planning activities.

Zegbeh Jallah

Thanks, and congrats again on the partnership.

Sabrina Martucci Johnson

Thank you, thank you so much.

Operator

Thank you. [Operator Instructions] And our next question comes from Douglas Tsao with H.C. Wainwright. Your line is open.

Douglas Tsao

Thanks for taking the questions, and congrats on the deal. Just as a starting point, Sabrina, you’ve obviously successfully partnered, there’s XACIATO as well as Ovaprene, two of the premier women’s health organizations in the world. Just curious how you’re now thinking about the pipeline and at what point is it right for you to become a commercial organization and to begin to build out that capability.

Sabrina Martucci Johnson

Thank you for your question. So first of all, thank you for recognizing what we’ve achieved to-date in terms of partnering with, and we’re not just seeing it because there are partners, but partnering with organizations like Bayer and Organon that have really prioritized women’s health. That’s important to us to partner with organizations. When we partner for commercializations that are truly aligned and have the kind of capability, as John mentioned, capability around access, capability around commercial sales infrastructure to ensure that the women impacted most by the conditions are really going to have an opportunity to be served, like I said. So that’s definitely critical. And as we think about commercialization strategy, big picture, one, we always want to do the best thing for that product, and how do we achieve that for that product? And two, to your question of — obvious question, we have a whole portfolio of women’s health products. I talked about we have seven other programs in development and I only talked about a few of them today. So at what point might it become interesting for Dare to participate? Obviously, we have a portfolio to support it. Often that’s the challenge, you might have one approved product and what do you do next?

We clearly have a portfolio to support it and that gives us true optionality. And at some point where products start to have approvals that are becoming more aligned from a timing perspective such that one would not be in a position with one individual product where you’re trying to build all that infrastructure and be successful around one product, it can start to become more interesting. Having said that, if we continue to deliver the way we have to date on these first — furthest along — these two furthest along programs, to develop products that truly address a persistent unmet need that have that first line and first-in-category opportunity that have that commercial potential. That is what truly is going to mean we have real optionality, where we can partner if it makes sense to partner and collaborate in the way we have with these two collaborations that we’ve already done with Organon and Bayer or participate at some level in commercialization.

If and when we make a decision to participate, it will be because we believe that we can add value to the brand and importantly to our shareholders by doing so, to our shareholders by doing so because ultimately you build value when you’re launching a product. Like I said, fundamentally, by making sure that it’s getting to all of the women who need it as quickly as it can and in the most efficient way possible. And to-date we strongly believe that through these partnerships that we’ve entered into, these collaborations that we have entered into with organizations that have that clear capacity and have demonstrated, importantly, demonstrated success in building very important and very commercially successful brands in women’s health, specifically. So hopefully that answers your question.

Douglas Tsao

That’s really helpful. And just as a quick follow-up on the XACIATO deal, with Organon specifically, just it’s a global deal. Are any of the milestone payments tied to ex-U.S. commercialization?

Sabrina Martucci Johnson

Great, great question. Really, what we’ve disclosed right about the transaction is the big picture, right on the milestones that are forthcoming. So obviously there’s the $10 million, which is really the upfront consideration. And then there’s $2.5 million at first commercial sale. And then there’s a $180 million in additional milestone payments. And of course, that’s on top of the double-digit tiered royalties. And that $180 million, the clarity that I can give you on that is it’s tiered commercial sales milestones and regulatory milestones.

Douglas Tsao

Okay. Great. Thank you very much.

Sabrina Martucci Johnson

Thank you.

Operator

Thank you. And our next question comes from Kumar Raja with Brookline Capital. Your line is open.

Kumaraguru Raja

Thanks for taking my questions and I will also add my congratulations for the partnership. With regard with regard to drug supply. In terms of manufacturing and how is it going to work? Is Organon going to take over all of that?

Sabrina Martucci Johnson

Yeah, great question. So as, as we had guided previously. In terms of supply, we are in the supply chain. Were again supply and we have guided previously that because of supply chain, the earliest that commercial supply was anticipated to be available is summer of this year. And that really ties into obviously the anticipated right timing around the commercial launch that we’ve been talking about, which is that we expect it to be commercially available in the fourth quarter. So that really ties into that in terms of your question on who’s doing that? How does that work? Under the agreement, we’re going to be responsible for a couple of things actually, regulatory interactions and for providing that product supply on an interim basis, really until Organon assumes those responsibility. Until that time that Organon assumes those responsibilities which is the intent. Until that time, they would purchase all the product supply, basically requirements, XACIATO, from us, and we would oversee that manufacturing activity. And it’s with — and obviously we’ve been doing that already. As we were been preparing for launch, but obviously for all of the clinical supply that supported the successful Phase 3 study.

Kumaraguru Raja

So I assume that would be like a little bit mark up compared to whatever it’s going to cost you guys?

Sabrina Martucci Johnson

Yes. Basically, there’s a transfer price which will be equal to our manufacturing costs plus the single-digit percentage mark up.

Kumaraguru Raja

Okay. And now there’s a timeline when it will switch complete to Organon?

Sabrina Martucci Johnson

Yes, that’s not really something that we’re discussing yet, but that’s the intent that over time that these are responsibilities that they would take over when it makes sense. But right now obviously we had these processes underway and we’re all working towards an opportunity, a potential to launch this year and obviously this is a nice, efficient way to get there.

Kumaraguru Raja

Okay. And with regard to Ovaprene, you touched on it a little bit with regard to the IDE. So where are you in the process with regard to the interactions like anything additional you can share, especially where you are, how long it will take to get the clearance.

Sabrina Martucci Johnson

Yes. Really no more color than what I’ve shared to date other than we started that process in — earlier this year, the beginning of this year, with the IDE submission, which we converted to a presubmission. And that really allows us to have a collaborative discussion that isn’t as time-limited around things such as the pivotal protocol, which we very importantly wanted to have an opportunity to have conversations around. As I mentioned in my comments and John also alluded to in his comments, one of the [Indiscernible] behind the comment was, one of the reasons to partner with Bayer, to collaborate with Bayer when we did on the Ovaprene program before the pivotal study, is to get all of Bayer’s input for a product like Ovaprene that is so different from other contraceptive products, has such a product candidate opportunity to be unique in the category, we wanted to make sure that we got a lot of commercialization insights from Bayer that could translate into things we wanted to do in the pivotal study to really ensure the product is best situated for success.

And so as we do the IDE process, we really wanted to make sure we had an opportunity in the process to engage and interact with the FDA on certainly addressing any other questions they have about Ovaprene because it is unique, but importantly, also to it do you have an opportunity to engage with them in a more collaborative dialogue process so that we can make sure that for instance, things that Dare has learned about the marketplace and that we want to incorporate in the pivotal study to ensure that it is really positioned nicely for commercial success that we could do that. And so we have initiated that process, but because of how we’re running the process and collaborating with the FDA and the process, I can’t give you an end date on the process other than to say the whole process is geared towards allowing us to get into the clinic this year, which is the objective, to get into the clinical study this year and similarly, that’s what we’ve been working on with the NIH in terms of all the so, preparatory activities.

And based on a lot of the feedback that we’ve already received, that’s really allowed us to start planning with the NIH around sites, activities, things like that so that we can be ready. And importantly, knowing that we need to be looking at 200 women completing 12 months of use, that helps us considerably in planning while we’re working through other things. So I know I gave you a very long answer that didn’t give you an exact timeline, I can’t do that quite yet, but hopefully now it makes a little more sense why we’re in the process we are with the FDA on the IDE, and that overall what we’re working towards is that pivotal study start this year. And there’s a lot of activity underway to support that

Kumaraguru Raja

Yes, that’s very helpful. So basically the understanding is that it’s going to be a seamless process once the pre -submission is gone, once we accomplish submission they have about 30 days, that duration is okay.

Sabrina Martucci Johnson

Thank you. Yes. Thank you for saying that. Yes.

Kumaraguru Raja

Thanks so much. Congratulations, again.

Sabrina Martucci Johnson

Thank you.

Operator

Thank you. And I’m showing no further questions in the queue. I would like to turn the call back to Sabrina for closing remarks.

Sabrina Martucci Johnson

Great. Well, thank you all for taking the time this afternoon to hear about our recent updates and our ongoing commitment to really drive value for all of our stakeholders, women, healthcare providers, and our shareholders. And in closing, 2021 was a year of very meaningful developments for Dare and really positioned us for this strong first quarter in 2022, and we absolutely look forward to keeping you updated on our progress against the important 22 objectives and milestones, including activities of the next several months with Organon regarding XACIATO, preparations we just talked about for the Ovaprene Phase III study with the NIH and Bayer, and our ongoing Sildenafil Cream Phase 2b study for Female Sexual Arousal Disorder her version of erectile dysfunction. So thank you all so much for taking the time, thank you for supporting our work, and thank you for really being aligned with our ongoing commitment to drive value for all of our stakeholders. Thank you.

Operator

This concludes today’s conference call. Thank you for participating. You may now disconnect.

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