Dermata Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; filed August 15, 2022. Dermata is a clinical-stage biotechnology company developing topical skin treatments using its Spongilla technology. It has no approved products and has generated no product revenue.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.61 million for Q2; $3.21 million for six months | $0.87 million and $1.55 million, respectively |
| General and administrative expense | $1.12 million for Q2; $2.31 million for six months | $0.46 million and $2.04 million, respectively |
| Total operating expenses / net loss | $2.73 million for Q2; $5.52 million for six months | $1.33 million / $1.33 million for Q2; $3.59 million / $3.64 million for six months |
| Basic and diluted loss per share | $(0.24) for Q2; $(0.56) for six months | $(0.70) and $(1.90), respectively |
| Cash and total assets | $10.63 million cash; $11.03 million total assets | $10.80 million and $11.62 million at December 31, 2021 |
| Total liabilities / stockholders’ equity | $1.37 million / $9.66 million | $1.52 million / $10.11 million at December 31, 2021 |
| Cash flow | $4.45 million used in operations; $4.28 million provided by financing over six months | $1.68 million used in operations; $1.58 million provided by financing |
| Debt | No outstanding debt | No outstanding debt at December 31, 2021 |
Margins are not meaningful because the company reported no revenue. Q2 loss per share was less negative despite a larger net loss, reflecting a substantially higher weighted-average share count; per-share comparisons should therefore be interpreted in light of the changed capital base.
Material changes and financing
- Q2 research and development expense rose $0.75 million year over year, mainly from the DMT310 rosacea trial, nonclinical work, and personnel costs. Six-month R&D increased $1.66 million, primarily from the rosacea study.
- Q2 general and administrative expense rose $0.66 million, principally due to insurance and public-company costs and personnel. Six-month G&A rose $0.26 million overall, as higher insurance, public-company and personnel costs were partly offset by lower stock compensation and legal costs.
- Operating cash use increased to $4.45 million for the first half, from $1.68 million a year earlier. The April private placement generated approximately $4.3 million net proceeds; the company reported a $171,000 net decrease in cash for the six-month period.
- The placement included 898,585 common shares, 2.875 million pre-funded warrants, and 3.774 million common warrants. By June 30, 875,000 pre-funded warrants had been exercised; 2.0 million remained outstanding. The company reported 10,102,214 common shares outstanding at June 30 and August 12.
Outlook, risks and unusual items
- Management estimated existing cash would fund operations into the third quarter of 2023, but stated that substantial doubt about the company’s ability to continue as a going concern remained for the one-year period following issuance of the financial statements. Additional financing will be needed; availability and terms are not assured.
- The near-term development focus is DMT310 for acne, psoriasis and rosacea. A rosacea Phase 2 trial was ongoing, with results expected in the second half of 2022. Patient enrollment in a clinical trial initiated in 2021 was completed in June, but treatment was ongoing; the company anticipated a further $0.5 million of R&D expense in the second half of 2022 for that trial.
- Management said recently received Spongilla raw material should support two planned Phase 3 acne studies and an NDA filing if those studies are successful. The supplier is a Russian entity, creating potential exposure to sanctions, export controls and disruption to future supply.
- Other stated risks include clinical-trial and regulatory uncertainty, reliance on third-party manufacturers and CROs, further capital needs, and potential COVID-19 effects on trials, suppliers and operations. No material changes to the risk factors in the 2021 Form 10-K were reported.
- Under the Villani license amendment, future development and sales milestone payments may total up to $40.5 million, plus single-digit royalties on net sales. These are contingent obligations; no product sales were reported.
- Subsequent to quarter-end, the company increased authorized common shares from 90 million to 250 million. Management reported effective disclosure controls and no material change in internal control over financial reporting; no material legal proceedings were reported.
Important facts for investors to verify
- Cash runway assumptions, quarterly burn rate and timing and terms of any additional financing, given the explicit going-concern uncertainty.
- Progress and results of DMT310 trials, including the expected rosacea readout and plans, funding and timing for the two Phase 3 acne studies.
- Whether Russian-sourced Spongilla can be replenished and whether sanctions or export controls could disrupt supply beyond the inventory described.
- Potential dilution from outstanding pre-funded and common warrants, options, and the increased authorized share count; the filing lists 7.995 million potentially dilutive securities at June 30.
- Contingent Villani milestone and royalty exposure, as well as the timing and costs of clinical development and any future commercialization preparation.