Dermata Therapeutics, Inc. — FY2022 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2022. Dermata is a pre-revenue, clinical-stage dermatology company developing products based on freshwater sponge technology. Its lead candidate, DMT310, is being developed primarily for acne; DMT410 combines the sponge technology with topical botulinum toxin delivery and is being explored for hyperhidrosis and aesthetic conditions.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $5.65 million | $3.46 million |
| General and administrative expense | $4.02 million | $4.40 million |
| Total operating expenses | $9.67 million | $7.86 million |
| Net loss | $9.61 million | $7.90 million |
| Net loss per share, basic and diluted | $0.87 | $2.43 |
| Cash used in operating activities | $8.83 million | $5.69 million |
| Cash and cash equivalents at year-end | $6.24 million | $10.80 million |
- At December 31, 2022, total assets were $6.94 million, total liabilities were $0.92 million, and stockholders’ equity was $6.02 million. Working capital was approximately $6.02 million. The company reported no debt outstanding at year-end.
- FY2022 financing activities provided $4.28 million, primarily from an April 2022 private placement. Cash declined by $4.56 million during the year. The filing provides no meaningful gross margin or operating margin measure because Dermata has not generated revenue.
- Accumulated deficit was $45.59 million. The company reported no income tax provision and a full valuation allowance against deferred tax assets.
Material changes and business developments
- R&D expense increased by $2.19 million, reflecting higher clinical-trial, nonclinical, manufacturing and personnel costs. General and administrative expense decreased by $0.37 million, mainly due to lower stock-based compensation and legal costs, partly offset by higher insurance and public-company expenses.
- Net loss increased by $1.71 million year over year; operating cash use increased by $3.14 million.
- The April 2022 private placement generated approximately $4.3 million net proceeds and included common shares and warrants. Common shares outstanding increased from 8.33 million at year-end 2021 to 12.32 million at year-end 2022. The filing lists 6.99 million common-stock warrants outstanding at year-end 2022.
- In December 2022, Dermata reported that its Phase 2 DMT310 rosacea trial did not meet its primary endpoints and discontinued development for that indication.
Outlook, risks and contingencies
- Management estimated existing cash would fund operations into the third quarter of 2023. The company expects continued losses and needs additional capital to fund operations and planned DMT310 acne Phase 3 studies. The auditor’s report and management disclosures state that substantial doubt exists about Dermata’s ability to continue as a going concern; management’s plans did not alleviate that doubt.
- Dermata planned an FDA end-of-Phase-2 meeting in the first half of 2023 and intended to start a DMT310 acne Phase 3 program in the second half of 2023, subject to FDA feedback, completion of required studies and financing. These are estimates, not assured milestones.
- Before that FDA meeting, the company cited requirements including a 90-day dermal minipig study and pharmacokinetic work. It disclosed difficulty obtaining minipigs and challenges developing a sufficiently sensitive assay for a DMT310 analyte. FDA feedback could also require further work on whether hydrogen peroxide is only a fluidizing agent.
- DMT310’s Phase 2b acne trial showed statistically significant improvements versus placebo across its reported endpoints; at week 12, inflammatory lesions declined 62% versus 42% for placebo, and 44% versus 17% of patients were IGA responders. These results are from a Phase 2b study and do not establish Phase 3 success or approval.
- The psoriasis program was on hold pending financing or a strategic partner. Dermata was seeking a botulinum-toxin partner to advance DMT410; no partnership was assured. Its small open-label Phase 1 studies reported encouraging signals, but larger controlled studies are needed.
- Dermata depends on a single supplier in Russia for its naturally sourced raw material. It reported two 2022 shipments believed sufficient for two acne Phase 3 studies and an NDA filing, but sanctions, export controls, harvest conditions, shipping or payment disruptions could affect future supply. The company was exploring alternative sources.
- License obligations to Villani include potential milestone payments of up to $3.5 million for development and $37.0 million for sales, plus single-digit royalties on net sales and potential sublicense fees. No material pending litigation was reported.
- Nasdaq had granted an additional compliance period through June 12, 2023 to regain the $1.00 minimum bid-price requirement. The company noted it might consider a reverse stock split; failure to regain compliance could lead to delisting.
Most important facts for investors to verify
- Whether Dermata raised sufficient capital after the filing to fund operations and the planned acne Phase 3 program, and whether its cash runway changed.
- FDA feedback, completion and results of the required nonclinical and pharmacokinetic studies, and the timing and design of the proposed Phase 3 trials.
- Whether the Russian raw-material supply remains accessible and adequate, and whether a qualified alternative supplier is available.
- Any subsequent DMT410 partnership, controlled-trial plans, or further changes to the psoriasis program.
- Nasdaq minimum-bid compliance, any reverse split, and the potential dilution from outstanding warrants or future financing.