Relmada Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
Relmada is a clinical-stage biotechnology company developing REL-1017 (dextromethadone), with a Phase II study underway for major depressive disorder (MDD). Its three other 505(b)(2) candidates—LevoCap ER, BuTab and MepiGel—were not in active development. This report covers the three months ended September 30, 2018, the company’s fiscal first quarter; figures are unaudited.
Financial results and position
| Metric | Three months ended September 30, 2018 | Comparable 2017 period |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $1.42 million | $165,750 |
| General and administrative expense | $989,748 | $815,106 |
| Total operating expenses / operating loss | $2.41 million | $980,856 |
| Net loss | $3.38 million | $981,686 |
| Net loss per share, basic and diluted | $0.27 | $0.08 |
| Operating cash used | $1.67 million | $979,048 |
| Cash at period end | $887,494 | $4.68 million |
No product revenue or operating margin was reported. R&D expense rose primarily because of the ongoing Phase II study, including $1.06 million in study costs. Interest expense was $650,322, versus $2,522 of interest income in 2017; the $318,541 derivative fair-value loss was non-cash. Cash used in investing was zero; financing provided $319,534, including $404,500 received for units not yet issued, partly offset by note principal payments.
At September 30, total assets were $1.56 million, current assets $1.27 million, current liabilities $7.10 million and total liabilities $10.30 million. The company reported a stockholders’ deficit of $8.74 million. Current liabilities included $4.51 million of derivative liabilities. Promissory notes had $7.205 million aggregate principal; the balance-sheet carrying amount was $3.19 million, net of unamortized discount. A separate insurance premium note had a $200,204 balance.
Changes, outlook and risks
- Operating expenses increased $1.43 million year over year, principally from higher Phase II study costs. Net loss increased from $981,686 to $3.38 million.
- Management said top-line results from the ongoing Phase II MDD study were expected in the first half of 2019. The first patient was dosed in June 2018. REL-1017 had FDA Fast Track designation. The filing provides no financial guidance.
- The company reported accumulated losses of $97.72 million and said operating cash outflow and its funding needs raise substantial doubt about its ability to continue as a going concern. It needs additional capital to continue clinical trials; financing may be unavailable or dilutive. Management reported approximately $3.2 million cash on hand as of November 12, 2018.
- After quarter-end, private placements closed on October 12, October 18 and November 2, raising $4.63 million gross. The placement agent received $442,267 in cash fees and warrants. The financings triggered automatic conversion of principal and accrued interest on the 7% convertible notes into 10,731,669 shares at $0.72 per share. Investors received registration rights, with potential monthly payments if registration deadlines are missed.
- A former officer’s lawsuit retains defamation and wrongful-use-of-civil-process claims; trial was scheduled for February 2019. No related contingent liability was recorded. The company said there were no material changes to previously disclosed risk factors and that disclosure controls were effective.
Important facts for investors to verify
- Whether the Phase II MDD trial met its timeline and what the results showed.
- Cash use, financing needs and the company’s ability to continue as a going concern; reconcile the reported November cash balance with subsequent cash burn and financing costs.
- Final share dilution and warrant terms from the post-quarter financings and note conversion, and compliance with registration deadlines.
- Developments and potential financial exposure in the former officer’s litigation.
- Valuation assumptions and subsequent accounting treatment for the significant Level 3 derivative liabilities.