Dermata Therapeutics, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021; compared with fiscal 2020. The filing was signed March 28, 2022. Dermata is a clinical-stage dermatology company with no approved products and no product revenue.
Business context and development
The company’s lead candidate, DMT310, is a once-weekly topical product derived from freshwater sponge technology. It is being developed for acne, psoriasis and rosacea. DMT410 combines the sponge powder with topical botulinum toxin and is under early investigation for hyperhidrosis and aesthetic skin conditions. Dermata relies on external manufacturers, clinical research organizations and a Russian supplier for its sponge raw material.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $3.46 million | $1.61 million |
| General and administrative expense | $4.40 million | $1.57 million |
| Total operating expenses | $7.86 million | $3.17 million |
| Net loss | $7.90 million | $3.24 million |
| Cash used in operating activities | $5.69 million | $4.03 million |
| Cash at year-end | $10.80 million | $0.53 million |
Net loss per share was $2.43 in 2021 versus $1.69 in 2020. The 2021 loss attributable to common stockholders included $2.56 million in deemed dividends related to preferred-stock transactions; these were not operating expenses. The company reported no product revenue, so operating margins are not meaningful. It had $1.52 million of total liabilities at year-end, no promissory notes outstanding and no long-term debt outstanding.
Financing activities provided $15.96 million in 2021, principally from the IPO, which generated approximately $15.4 million net proceeds. The company stated that existing cash was expected to fund operations into the fourth quarter of 2022, but cautioned that estimates could prove wrong and additional capital would be required. Auditors included a going-concern explanatory paragraph, citing recurring losses, negative operating cash flows and dependence on additional financing; substantial doubt was not alleviated by management’s plans.
Material changes versus 2020
- Net loss increased by $4.67 million, while total operating expenses rose by $4.68 million.
- R&D expense rose by $1.85 million, reflecting higher personnel and stock-based compensation, clinical-trial and manufacturing costs. G&A rose by $2.83 million, including public-company, legal, professional and insurance costs.
- Operating cash use increased by $1.66 million. Year-end cash rose substantially following the August 2021 IPO.
- Dermata converted from an LLC to a Delaware corporation in March 2021 and completed its IPO in August. It had 8,328,629 common shares outstanding at December 31, 2021.
Outlook, commentary and key risks
- DMT310—acne: The company reported statistically significant Phase 2b results across inflammatory lesions, non-inflammatory lesions and investigator assessment. It planned an FDA End-of-Phase-2 meeting in the first half of 2023, followed by two Phase 3 trials, with top-line results targeted for 2024 and an NDA thereafter, assuming positive results and adequate financing.
- DMT310—psoriasis: After a 30-patient Phase 1b proof-of-concept study, the company planned a placebo-controlled Phase 2 trial in 2022, with top-line results expected in 2023. Additional nonclinical and pharmacokinetic work is needed.
- DMT310—rosacea: A Phase 2 trial began enrolling in November 2021; top-line results were expected in the second half of 2022. These timelines are estimates and are not assurances.
- DMT410: Small, open-label Phase 1b studies reported positive signals, including reduced sweat production in hyperhidrosis and improvements on selected aesthetic measures. Dermata was seeking a botulinum-toxin partner to support larger trials; no partnership was assured.
- Funding and development: The company expects continued losses and needs additional capital. Financing may dilute shareholders, restrict operations or require licensing valuable rights. Trials, FDA feedback, manufacturing scale-up and development of suitable quality-control and pharmacokinetic methods may delay or prevent progress.
- Supply and geopolitical exposure: A single Russian supplier provides the natural sponge raw material. Harvest conditions, supply-chain disruptions and potential sanctions or export controls related to Russia’s invasion of Ukraine could impair supply or payments. The filing said sanctions had not affected performance under the supply agreement to date.
- Other risks and contingencies: COVID-19 had caused some minor clinical, preclinical and supply-chain disruptions, with further effects uncertain. The company reported no material pending litigation. It has no sales organization and faces regulatory, reimbursement, competition, intellectual-property and product-safety risks.
Most important facts for investors to verify
- Whether financing was secured after the filing and whether the disclosed cash runway and going-concern assessment changed.
- Actual cash burn, current cash and liabilities, and the extent of any dilution from subsequent financing.
- FDA feedback and completion of required nonclinical, pharmacokinetic and manufacturing-quality work for DMT310.
- Enrollment, results and timing of the planned or ongoing DMT310 trials, and whether the stated milestones remain achievable.
- Availability of Russian sponge supply, alternative sourcing progress and any effects from sanctions, export controls or other disruptions.
- Whether Dermata secured a partner and botulinum-toxin supply for further DMT410 development.