Dermata Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 10, 2023. Dermata is a clinical-stage dermatology biotechnology company developing DMT310 and DMT410. It has not generated product revenue or commercialized a product.
Financial results and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $0.84 million | $1.61 million | $2.03 million | $3.21 million |
| General and administrative expense | $0.89 million | $1.12 million | $1.98 million | $2.31 million |
| Net loss | $1.70 million | $2.73 million | $3.94 million | $5.52 million |
| Basic and diluted loss per share | $0.63 | $3.90 | $2.13 | $9.02 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $3.49 million | $4.45 million |
At June 30, 2023, cash and cash equivalents were $8.44 million, total assets $8.71 million, total liabilities $0.68 million, and stockholders’ equity $8.03 million. The filing reports no debt balance. Gross margin is not applicable because there was no revenue. Net interest income was $31,050 for Q2 and $68,590 for the first half.
Six-month financing activities provided $5.69 million, primarily from the March public offering ($4.2 million net) and May private placement ($1.5 million net). Cash increased by $2.20 million from year-end 2022. Shares outstanding rose from 770,115 at December 31, 2022 to 3,189,034 at June 30, 2023, following offerings and pre-funded warrant exercises; the company also had 4,643,555 common warrants outstanding.
Changes and business developments
- Q2 operating expenses decreased by about $1.00 million year over year, mainly because the DMT310 rosacea study had been completed in late 2022. Lower research and development spending was partly offset by increased manufacturing and controls preparation for Phase 3.
- First-half operating expenses decreased by $1.51 million year over year, with lower clinical costs partly offset by higher DMT310 manufacturing preparation costs. Net loss narrowed by $1.58 million.
- The company effected a 1-for-16 reverse stock split in March 2023; share and per-share amounts in the financial statements are retroactively adjusted.
- Following FDA feedback received in late June, Dermata amended DMT310 acne Phase 3 protocols and submitted them to the FDA in July. It planned to begin the Phase 3 program in the second half of 2023, subject to final FDA approval.
- DMT310 showed encouraging results in a Phase 1b psoriasis proof-of-concept trial. Dermata was seeking a botulinum-toxin partner to advance DMT410, following earlier proof-of-concept studies.
Outlook, risks, and contingencies
- Management estimated existing cash would fund operations into Q2 2024, but stated that substantial doubt remained about the company’s ability to continue as a going concern for the year following issuance of the financial statements. Additional capital is expected to be needed; no assurance was given it would be available on acceptable terms or at all.
- The company expects continued losses and increased costs, particularly for DMT310 acne Phase 3 trials and development work. Clinical success, FDA approval, commercialization, and future financing remain uncertain.
- DMT310 and DMT410 rely on Spongilla raw material supplied under an exclusive agreement by a Russian entity. Existing inventory was said to be sufficient for two acne Phase 3 studies and an NDA filing if those studies succeed, but sanctions or export controls could disrupt future supply.
- Dermata’s license agreement includes up to $40.5 million in future development and sales milestone payments, plus single-digit royalties on net sales. No material legal proceedings were reported.
- Stockholders approved an increase of 513,150 shares available under the 2021 equity incentive plan on August 3, 2023. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the FDA grants final approval for the amended DMT310 Phase 3 protocols and whether trials start on the anticipated schedule.
- Cash burn, financing needs, and the assumptions underlying the stated runway into Q2 2024, given the disclosed going-concern uncertainty.
- Clinical-trial outcomes and the development and partnering status of DMT310 and DMT410.
- Potential dilution from outstanding warrants and equity-plan capacity, and the terms of any future financing.
- Availability of Spongilla supply and any effects of Russia-related sanctions or export controls.