Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2016; filed February 10, 2017. The company is a clinical-stage biotechnology developer focused primarily on CNS diseases, including depression and chronic pain. It reported no product revenue.
Financial performance and position
| Metric | Three months ended Dec. 31, 2016 | Six months ended Dec. 31, 2016 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $254,105 | $618,257 |
| General and administrative expense | $1,282,296 | $2,534,740 |
| Net loss (income) | $(1,030,829) | $(2,671,410) |
| Loss per share, basic and diluted | $(0.09) | $(0.22) |
- Cash and liquidity: Cash and cash equivalents were $4.714 million at December 31, 2016, down from $8.500 million at June 30, 2016. Management estimated that available cash would fund operations through the end of calendar 2017.
- Cash flow: Six-month operating cash use was $3.595 million; investing cash use was $27,261 and financing cash use was $163,637. Cash decreased by $3.786 million.
- Balance sheet: Total assets were $6.225 million and total liabilities were $1.550 million. Current liabilities included $110,033 of notes payable and $523,505 of derivative liabilities. Stockholders’ equity was $4.675 million.
- Commitments: Disclosed office lease and note obligations totaled $2.219 million, including $352,172 due in less than one year. A $392,600 letter of credit for the office lease is secured by a restricted certificate of deposit.
- Margins: Not meaningful because the company had no product revenue.
Changes versus prior comparable periods
- Quarterly operating expenses fell $4.186 million year over year. Management attributed the decline mainly to lower Laidlaw-related legal and outside-service costs, salaries and benefits, investor relations, and clinical-trial spending.
- Six-month operating expenses fell $7.199 million year over year, including a $4.366 million reduction in R&D expense, driven primarily by lower clinical-trial costs.
- The company recorded a six-month net loss of $2.671 million versus net income of $2.202 million a year earlier. The prior-period result included a substantially larger noncash gain from remeasurement of derivative liabilities: $12.555 million versus $369,000 in the current period.
- Cash used in operations improved to $3.595 million from $6.691 million in the prior-year six-month period.
Outlook, risks, and unusual items
- The lead candidate, d-Methadone (REL-1017), had completed Phase I studies. The company reported that the FDA accepted its Phase II IND application on January 25, 2017, and expected to start Phase IIa in the first half of 2017, with topline results expected in 2018.
- Following January 2017 discussions with the FDA, management said it had defined a path forward for a Phase III clinical plan and NDA filing for LevoCap ER (REL-1015). BuTab (REL-1028) and MepiGel (REL-1021) were also in development.
- The company expected to need additional financing to continue clinical trials. It warned that funding might not be available on acceptable terms or at all, and that insufficient funds could delay, reduce, or eliminate development programs. Its filed shelf registration statement had not been declared effective; management said it could not access those funds until an up-listing to a national exchange.
- Derivative liabilities are Level 3 fair-value measurements based on a Black-Scholes model and significant unobservable inputs. Their remeasurement creates noncash earnings volatility; management said the anti-dilution feature would be eliminated upon an up-listing to a national exchange.
- Relmada disclosed ongoing litigation involving a former officer and Laidlaw. Management said it believed it had good defenses in the former officer matter and that an unfavorable outcome would not materially affect the company, while acknowledging litigation uncertainty. The Laidlaw defendants’ motion to dismiss was submitted for decision as of January 6, 2017.
- Management identified no material changes to previously disclosed risk factors, assessed disclosure controls as effective, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether cash burn remains consistent with management’s stated runway through year-end 2017 and what financing is available if more capital is needed.
- Whether the Phase IIa study starts on the expected schedule and whether the projected 2018 topline-results timing is maintained.
- Regulatory feedback and milestones for LevoCap ER’s Phase III plan and NDA pathway.
- Changes in clinical-development spending, derivative-liability valuations, and associated noncash earnings effects.
- Developments in the disclosed lawsuits, lease commitments, and the restricted deposit securing the letter of credit.