Dermata Therapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022; filed November 10, 2022. Dermata is a clinical-stage biotechnology company developing topical treatments for skin conditions. It has no approved products and has generated no revenue.
Financial performance and position
| Metric | Q3 2022 | First nine months 2022 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.55 million | $4.76 million |
| General and administrative expense | $0.89 million | $3.20 million |
| Total operating expenses | $2.45 million | $7.96 million |
| Net loss | $2.42 million | $7.94 million |
| Basic and diluted loss per share | $0.20 | $0.75 |
| Operating cash used | Not stated for quarter | $7.01 million |
At September 30, cash and cash equivalents were $8.07 million, total assets $8.97 million, and total liabilities $1.50 million. The company had no debt outstanding. Current assets were approximately $8.97 million versus current liabilities of $1.50 million. Accumulated deficit was $43.92 million.
Changes versus the prior comparable period
- Q3 operating expenses rose $0.73 million year over year, primarily from higher R&D spending; R&D increased $0.75 million, while G&A was slightly lower.
- For the first nine months, operating expenses rose $2.66 million and net loss widened $2.59 million. Higher clinical-trial, nonclinical, CMC, and personnel costs drove the R&D increase.
- Operating cash use increased from $3.89 million to $7.01 million for the nine-month period. Financing provided $4.28 million in 2022, compared with $15.96 million in 2021, which included IPO proceeds.
- Reported loss per share was lower than in 2021, but the prior-year comparative included $2.56 million in deemed preferred-stock dividends attributable to common stockholders; the share counts also differed substantially.
Outlook, risks, and notable items
- Management estimated existing cash would fund operations into Q3 2023, 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 will be needed; financing may be unavailable or dilutive.
- Near-term development priorities include DMT310 for acne, rosacea, and psoriasis. The rosacea Phase 2 trial had completed enrollment, with results expected in December 2022. The company expects to pursue Phase 3 acne studies, which require additional funding.
- DMT410 development depends on finding a botulinum-toxin partner for further studies. No partnership was reported as secured.
- The exclusive Spongilla raw-material supplier is a Russian entity. Shipments received in 2022 were expected to cover two DMT310 Phase 3 acne studies and support a potential NDA filing if successful; further supply could be affected by sanctions or export controls related to Russia.
- The company anticipated $0.1–$0.2 million of additional R&D expense in Q4 2022 for a clinical trial whose enrollment was complete but whose data analysis was unfinished at quarter-end. COVID-19 could also disrupt trials, suppliers, or operations.
- April 2022 private placement proceeds were approximately $4.3 million net. At quarter-end, 12.10 million common shares were outstanding, alongside 6.99 million warrants and 1.06 million stock options that could contribute to future dilution.
- No material legal proceedings were reported. Management concluded disclosure controls were effective as of September 30, 2022.
Important facts for investors to verify
- Whether the company raises sufficient capital before its projected Q3 2023 cash runway ends, and the resulting financing terms and dilution.
- Timing and outcomes of DMT310 clinical development, including rosacea results and funding and readiness for the planned acne Phase 3 studies.
- Whether Spongilla supply remains available beyond the quantities received in 2022, given the Russian supplier and sanctions risk.
- Whether Dermata secures a partner and advances DMT410, and how outstanding warrants and options may affect the share count.