MyMD Pharmaceuticals, Inc. (NASDAQ: MYMD) — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing was signed March 31, 2022. MyMD is a clinical-stage pharmaceutical company with no product-sales revenue. The April 2021 merger with Akers Biosciences was accounted for as a reverse recapitalization, with MyMD Florida treated as the accounting acquirer; this limits comparability with 2020.
Business context and development
- MYMD-1: Clinical-stage oral drug candidate targeting inflammatory and autoimmune conditions and age-related illnesses. The company was enrolling patients in a Phase 2 sarcopenia/frailty study. It also reported Phase 1 work in healthy volunteers and plans to pursue additional indications.
- Supera-CBD: Preclinical synthetic CBD analog being developed for conditions including epilepsy, pain, and anxiety/depression. It had not entered clinical trials.
- Following a contribution of its COVID-19 vaccine assets to Oravax, MyMD held a reported 13% interest in Oravax and rights to a 2.5% royalty on future net sales. MyMD also reported a $1.5 million investment in Oravax.
Financial performance and liquidity
| Metric | 2021 | 2020 | Change or context |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $6.745 million | $2.467 million | Up 173.4% |
| General and administrative expense | $6.420 million | $2.947 million | Up 117.9% |
| Net loss | $29.889 million | $9.488 million | Loss increased 215.0% |
| Net loss per share | $0.85 | $0.34 | Basic and diluted |
| Cash used in operating activities | $19.516 million | $4.664 million | Higher operating cash use |
| Cash and cash equivalents | $0.556 million | $0.148 million | At year-end |
| Marketable securities | $11.003 million | $0 | At year-end |
| Working capital | $11.626 million | Not clearly comparable | At year-end |
| Total liabilities | $1.166 million | $5.934 million | At year-end |
Gross margin is not meaningful because the company reported no revenue or cost of sales. The audited balance sheet reports shareholders’ equity of $23.647 million at year-end, despite an inconsistent “stockholders’ deficit” reference in the MD&A text. Cash flow from investing activities was positive $19.851 million, primarily reflecting sales of marketable securities and cash received in the merger. Financing activities provided $0.074 million. The related-party credit lines were paid off in April 2021; no line-of-credit or note payable remained at year-end.
Material changes and unusual items
- Total operating expenses rose to $28.810 million, principally due to higher development and administrative spending and a $15.036 million noncash charge for modification of assumed pre-merger MyMD Florida options.
- A $1.265 million uninsured loss from wire fraud was recorded in 2021. The company said a compromised email account enabled the fraud; its investigation was ongoing. It reported enhanced email security and payment-verification procedures.
- The merger changed the company’s business focus, ownership, capital structure, and reporting basis. Former MyMD Florida holders owned approximately 77.05% of the combined company on a fully diluted basis at closing. The transaction also included potential market-capitalization-based share payments to former MyMD Florida holders.
- The company reported approximately 37.673 million common shares outstanding at December 31, 2021, and 38.058 million at March 31, 2022. Potentially dilutive securities totaled approximately 12.630 million at year-end, though excluded from diluted loss per share as anti-dilutive.
Outlook, risks, and contingencies
- Management expected final efficacy data from the Phase 2 sarcopenia study in the fourth quarter of 2022, planned an IND submission for rheumatoid arthritis in the third quarter, and expected to present a Hashimoto’s thyroiditis Phase 2 protocol to the FDA in the fourth quarter. These are forward-looking plans, not reported outcomes.
- Management stated that available resources were sufficient for operating needs and contractual obligations for 12 months from issuance of the financial statements. Its contingency plan was to slow clinical work and defer certain costs if financing was not completed by September 30, 2022, extending operations by an estimated six months. Management expected financing before that date.
- The principal risks include continued losses and need for additional capital; clinical and regulatory uncertainty; reliance on third-party trial and manufacturing providers; possible COVID-19-related delays; uncertain reimbursement and market acceptance; competition; and patent, cybersecurity, and dilution risks.
- Supera-CBD faces additional regulatory uncertainty because synthetic cannabinoids may be treated as controlled substances. Neither candidate had FDA marketing approval, and MyMD lacked commercial sales and marketing infrastructure.
- Nine merger-related stockholder complaints were voluntarily dismissed by November 2021. A second whistleblower-retaliation action was filed by Raymond Akers in March 2022; MyMD said it believed the claim was without merit. The filing also describes royalties of 8% on specified product sales and certain milestone or sublicense revenue under agreements with affiliates of founder Jonnie Williams.
- The 2021 financial statements received an unmodified audit opinion. Going-concern assessment was a critical audit matter; management concluded that substantial doubt was alleviated based on its cash-flow projections and financing plans. Management also reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal control effectiveness.
Important facts for investors to verify
- Current cash, marketable securities, spending rate, financing availability, and the assumptions supporting management’s stated 12-month liquidity outlook.
- Actual enrollment, timing, and results of the sarcopenia Phase 2 study, and progress on planned FDA submissions and Supera-CBD preclinical work.
- Current fully diluted share count and potential dilution from outstanding options, warrants, preferred stock, and merger-related milestone shares.
- Final investigation or recovery status of the $1.265 million wire-fraud loss, and any material developments in the Raymond Akers litigation.
- Terms and expected economic impact of related-party royalty obligations, as well as the value and prospects of MyMD’s Oravax interest and royalty rights.