Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2015. Relmada is a clinical-stage biopharmaceutical company developing four pain-treatment candidates: LevoCap ER, d-Methadone (REL-1017), BuTab (REL-1028), and MepiGel (REL-1021). It had no approved products, product revenue, or sales infrastructure.
Financial performance and liquidity
| Metric | Three months ended Sep. 30, 2015 | Three months ended Sep. 30, 2014 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $2.87 million | $0.72 million |
| General and administrative expense | $1.76 million | $3.00 million |
| Operating loss | $4.63 million | $3.72 million |
| Net income (loss) | $4.66 million | $(29.84) million |
| Net cash used in operating activities | $3.22 million | $2.32 million |
| Cash used in investing activities | $0.001 million | $0.011 million |
| Cash from (used in) financing activities | $(0.09) million | $4.16 million |
The 2015 quarter’s net income was driven by a $9.29 million non-cash gain from revaluing warrant-related derivative liabilities, not operating profitability. The prior-year quarter included a $26.11 million non-cash derivative loss. Gross margin is not applicable because the company had no revenue.
At September 30, 2015, cash and cash equivalents were $19.17 million, down from $22.47 million at June 30, 2015. Total current assets were $20.05 million and current liabilities $6.65 million. The company reported total assets of $20.48 million, total liabilities of $6.65 million, and stockholders’ equity of $13.84 million. Current liabilities included a $176,448 insurance-premium note payable; the filing reports no other debt balance. Management estimated available cash could fund operations through the end of calendar 2016.
Material changes and operating developments
- R&D expense increased approximately $2.15 million year over year, primarily due to higher costs for LevoCap ER ($1.10 million), d-Methadone ($0.66 million), BuTab ($0.34 million), and MepiGel ($0.17 million).
- G&A expense decreased approximately $1.24 million, mainly reflecting lower professional fees and stock-based compensation; employee salary costs increased.
- Operating cash use rose from $2.32 million to $3.22 million. The company had no warrant-exercise cash proceeds in the 2015 quarter, compared with approximately $4.31 million in the 2014 quarter.
- The company completed a one-for-five reverse stock split in August 2015, reflected retroactively in the financial statements.
- Common shares outstanding were 11,014,155 at September 30; the filing reports 11,552,071 outstanding as of November 6, 2015.
Outlook, risks, and unusual items
- Management expects expenses to increase as product development advances and says additional funding will be needed to continue clinical trials. It warns that financing may not be available on acceptable terms, and equity financing could dilute shareholders; insufficient funds could delay, reduce, or end development programs.
- On October 2, 2015, Relmada filed an S-3 shelf registration statement covering up to $200 million of securities and a sales-agreement prospectus for up to $75 million of common stock. The registration statement was not yet effective, and the company said it could not access funds until it was uplisted to a national securities exchange. A sales agreement contemplated a 3% fee on gross proceeds.
- Development updates: d-Methadone completed its single-ascending-dose study and received Health Canada clearance for a multiple-ascending-dose study; BuTab’s Phase I pharmacokinetic study was ongoing. Relmada was preparing LevoCap ER manufacturing and a planned Phase III program, including discussions with the FDA; it planned Phase I studies for MepiGel. These are development plans, not approvals or commercial results.
- Warrant liabilities were Level 3 fair-value measurements, totaling $4.71 million at September 30 versus $14.00 million at June 30. Their valuation depends on significant unobservable inputs and can materially affect reported net income or loss.
- A former officer’s lawsuit alleging breach of contract, defamation, emotional distress, and wrongful use of civil process remained pending; a motion to dismiss had been argued but not decided. Management expected the matter would not materially affect the company, while acknowledging litigation uncertainty.
- The filing identifies clinical and regulatory execution, future financing, key personnel, intellectual property, and cybersecurity/data privacy as risks. Management reported disclosure controls effective and no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether cash burn and development spending remain consistent with management’s estimated runway through year-end 2016, and what financing will be required.
- Whether the S-3 becomes effective and whether an exchange uplisting occurs, given that access to the proposed offering funds was conditional on uplisting.
- Clinical-trial progress, results, and regulatory plans for each candidate, particularly the next d-Methadone study and LevoCap ER’s proposed pivotal program.
- The assumptions and sensitivity behind the Level 3 warrant-liability valuation and the impact of stock-price changes on reported earnings.
- The status and potential consequences of the former officer litigation, and the reconciliation of September 30 shares outstanding with the November 6 figure.