MyMD Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2021; filed November 12, 2021. MyMD is a clinical-development-stage biopharmaceutical company. The April 16, 2021 merger with MyMD Florida was accounted for as a reverse recapitalization, with MyMD Florida as the accounting acquirer. The company develops MyMD-1 and Supera-CBD and reports no product revenue.
Financial performance and position
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 | Comparable 2020 period |
|---|---|---|---|
| Product revenue | $0 | $0 | $0 |
| Research and development | $2.77 million | $5.44 million | $0.91 million and $1.44 million, respectively |
| Administrative expense | $1.64 million | $4.60 million | $0.88 million and $2.05 million, respectively |
| Net loss | $5.47 million | $26.65 million | $3.12 million and $5.20 million, respectively |
| Loss per share, basic and diluted | $0.15 | $0.78 | $0.11 and $0.19, respectively |
- Margins: Not meaningful; the company had no revenue or gross profit.
- Cash and liquidity at September 30: Cash was $1.38 million and marketable securities were $14.00 million. Working capital was $13.86 million; total assets were $28.01 million and stockholders’ equity was $25.89 million.
- Cash flow, nine months: Operating activities used $14.70 million; investing activities provided $16.85 million, largely reflecting $15.48 million of marketable-security sale proceeds and $1.38 million of cash received in the merger; financing activities used $0.92 million. Ending cash was $1.38 million.
- Debt and obligations: Notes payable, PPP loan payable, and related-party line of credit were zero at quarter-end. Total liabilities were $2.12 million, including trade and other payables and operating lease liabilities.
Material changes and unusual items
- Quarterly R&D expense increased from $0.91 million to $2.77 million; nine-month R&D increased from $1.44 million to $5.44 million. Management attributed the increase to expanded development activity, including clinical-program, preclinical, and regulatory work, following access to merger-related financial resources.
- Nine-month net loss includes $15.04 million of noncash stock-option modification expense related to options assumed in the merger. Nine-month administrative expense also increased, partly due to added personnel and merger, legal, accounting, investor-relations, and listing costs.
- The company recorded a $1.06 million uninsured loss from wire fraud in the quarter. It discovered the compromised email account on October 26, 2021; a further $207,220 loss occurred in October, and the investigation was ongoing, with additional losses possible.
- As part of the merger-related contribution transaction, the company invested $1.50 million in Oravax for a 13% fully diluted interest; Oravax also agreed to pay the company royalties of 2.5% of qualifying net sales.
- The merger created $10.50 million of goodwill. The former MyMD Florida holders received approximately 77.05% of the combined company’s fully diluted equity at closing, subject to the transaction’s stated assumptions.
Outlook, risks, and contingencies
- Management stated that available financial resources were sufficient to fund its current operating budget and contractual obligations for twelve months from issuance of the financial statements. The company continues to incur losses and may need substantial additional capital to advance development; financing may not be available on acceptable terms.
- MyMD-1 had completed a Phase 1 trial; Phase 2 studies were planned. Supera-CBD remained in preclinical development. The filing describes no revenue guidance or quantified financial forecast.
- COVID-19 caused delays in clinical supplies from an Indian manufacturer and patient recruitment. Management also described delays to dosing and study reporting, and warned that pandemic-related disruptions could further affect trials, timelines, and liquidity.
- Key risks include clinical and regulatory uncertainty, dependence on third-party manufacturers and research organizations, financing needs, competition, intellectual-property protection, possible shareholder dilution, and cybersecurity exposure. Supera-CBD may face additional regulatory requirements as a synthetic cannabinoid.
- One merger-related shareholder lawsuit remained pending; the company said it believed the claims were without merit and did not expect a material adverse effect. A separate action by Raymond Akers was dismissed in September 2021; no new complaint had been filed as of the report.
- The company reported disclosure controls and procedures as effective, while noting that it was reviewing cybersecurity-related controls after the wire-fraud incident.
Most important facts for investors to verify
- Whether the wire-fraud investigation identifies further losses, and whether any recovery or insurance proceeds are available.
- Cash burn and marketable-security balances against the stated twelve-month liquidity assessment and future clinical-development spending.
- Clinical supply, recruitment, and study-reporting timelines for MyMD-1, including the status and timing of planned Phase 2 trials.
- Development milestones and regulatory pathway for Supera-CBD, including any controlled-substance requirements.
- Potential dilution from outstanding options, warrants, equity awards, and merger milestone shares, as well as the effect of former-holder share sales.
- Progress and financial implications of the Oravax investment, remaining litigation, and any changes to the company’s stated risks or controls.