Dermata Therapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Dermata is a clinical-stage biotechnology company developing topical treatments for skin conditions. It has no approved products, has not generated revenue, and reports one operating segment.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.19 million | $1.60 million |
| General and administrative expense | $1.09 million | $1.19 million |
| Total operating expenses | $2.28 million | $2.79 million |
| Net loss | $2.24 million | $2.79 million |
| Basic and diluted loss per share | $2.27 | $5.35 |
| Net cash used in operating activities | $1.65 million | $2.61 million |
| Cash and cash equivalents | $8.77 million | $6.24 million at Dec. 31, 2022 |
| Total assets | $9.30 million | $6.94 million at Dec. 31, 2022 |
| Total liabilities | $1.21 million | $0.92 million at Dec. 31, 2022 |
There is no product revenue or gross margin to report. The company reported no debt on its balance sheet. Current assets were $9.30 million and current liabilities were $1.21 million at March 31. Financing activities provided $4.18 million net during the quarter, primarily from the March public offering. The filing reports an accumulated deficit of $47.83 million.
Changes versus the prior comparable period
- Net loss narrowed by $546,010, or about 19.6%. Operating expenses fell by $508,470, or about 18.3%.
- R&D expense declined $403,206, mainly because the DMT310 rosacea study was completed in late 2022; lower clinical costs were partly offset by higher nonclinical and CMC expenses.
- G&A expense declined $105,264, primarily due to lower insurance costs. Q1 2023 included $37,540 of interest income, versus none in Q1 2022.
- Operating cash use decreased by about $958,000. Cash increased during Q1 after the March financing.
- On March 13, the company effected a 1-for-16 reverse stock split. Its March offering included common stock and warrants; the pre-funded warrants were exercised by quarter-end. Outstanding warrants rose to 3,786,617 from 437,102 at December 31, 2022.
Outlook, risks and contingencies
- Management estimates cash will fund operations into the first quarter of 2024, but states that the estimate relies on assumptions that may prove incorrect. The filing says substantial doubt exists about the company’s ability to continue as a going concern for the year following issuance of the financial statements; additional capital will be needed, and financing may not be available on acceptable terms or at all.
- Dermata expected FDA feedback by the end of June 2023 on its DMT310 acne Phase 3 development package and planned, subject to acceptable feedback, to begin a Phase 3 program in the second half of 2023. These are forward-looking expectations, not reported outcomes.
- The company is exploring a botulinum-toxin partner to advance DMT410. It also plans continued development of DMT310 for acne and psoriasis and expects ongoing losses and increased development costs.
- A Russian supplier provides the Spongilla raw material used in DMT310 and DMT410. The company said inventory received in 2022 was sufficient for two planned acne Phase 3 studies and a potential DMT310 acne filing, but sanctions, export controls, or other supply disruptions could impede future supply.
- Other material risks include clinical-trial and regulatory uncertainty, dependence on contract manufacturers and research organizations, intellectual-property risks, and difficulty raising capital amid volatile financial markets. The company reported no material legal proceedings and said disclosure controls were effective.
- The Villani license provides for up to $40.5 million in future development and sales milestone payments, payable in cash or equity at Villani’s option, plus single-digit royalties on net sales.
Important facts for investors to verify
- Whether the stated cash runway remains achievable and what financing would be required to fund planned studies.
- FDA feedback and the timing, design, cost, and funding of the proposed DMT310 acne Phase 3 program.
- Availability of Spongilla supply, including exposure to Russian-related sanctions and export restrictions.
- Potential dilution from the 3.79 million outstanding warrants, including the March offering warrants and amended PIPE warrant terms.
- The filing gives 2,388,157 shares outstanding at March 31, 2023, but reports 2,338,157 shares outstanding as of May 10, 2023. Investors should verify the later share count and the 50,000-share difference.