Relmada Therapeutics, Inc. — Form 10-Q
Reporting period: Quarter and six months ended December 31, 2018; comparative periods ended December 31, 2017. Financial statements are unaudited. Relmada is a clinical-stage biotechnology company with no product revenue.
Business context and outlook
The company’s lead program, REL-1017 (dextromethadone), was in a Phase 2 study for major depressive disorder. The first patient was dosed in June 2018, and management expected top-line results in the first half of 2019. Three legacy candidates—LevoCap ER, BuTab, and MepiGel—were not in active development or were receiving limited investment.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2018 | Six months ended Dec. 31, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Research and development expense | $1.26 million | $2.68 million | $0.15 million and $0.32 million, respectively |
| General and administrative expense | $2.22 million | $3.21 million | $1.31 million and $2.12 million, respectively |
| Operating loss | $3.48 million | $5.89 million | $1.46 million and $2.44 million, respectively |
| Net loss | $7.13 million | $10.51 million | $1.43 million and $2.41 million, respectively |
| Loss per share, basic and diluted | $0.28 | $0.55 | $0.11 and $0.19, respectively |
| Operating cash used | Not presented by quarter | $4.82 million | $2.11 million |
Product margins are not applicable because the company reported no product revenue. Cash and cash equivalents were $2.43 million at December 31, 2018, up from $2.24 million at June 30, 2018. Financing provided $5.01 million in the six-month period, principally from unit sales, while operating activities used $4.82 million. Current assets were $3.03 million and current liabilities $1.86 million, giving working capital of approximately $1.17 million.
At December 31, 2018, total liabilities were $1.86 million. Convertible promissory notes had converted to common stock; remaining notes payable were $114,738, due April 9, 2019. The filing reported a $104.85 million accumulated deficit and stated that recurring losses and negative operating cash flow raised substantial doubt about the company’s ability to continue as a going concern. Additional funding is required to continue development.
Material changes and unusual items
- Six-month R&D expense increased $2.36 million year over year, primarily due to Phase 2a study costs, which accounted for $2.16 million of the increase.
- Six-month G&A expense increased $1.09 million, largely reflecting legal and settlement costs related to the Babul litigation and higher stock-based compensation.
- The company recorded a non-cash $3.77 million loss on extinguishment of debt when convertible notes and accrued interest converted into 10,731,669 common shares. The conversion eliminated the convertible notes and related embedded derivative liability.
- Six-month net loss included a $54,634 loss from the change in derivative fair value. The company early adopted ASU 2017-11 and reclassified a $59,397 warrant derivative liability to equity.
- Common shares outstanding rose from 12.55 million at June 30 to 29.76 million at December 31, reflecting note conversion and private placements. Private placements during the period issued 6,482,671 shares for net proceeds of $5.18 million.
Risks, contingencies, and subsequent events
- Funding and going concern: Management said additional capital is necessary; financing may be unavailable or dilutive, and insufficient funds could delay, reduce, or terminate development programs.
- Clinical and regulatory risk: REL-1017 remains investigational. Clinical results, regulatory approval, and commercial viability are uncertain. Management’s expected timing for Phase 2 results was an outlook, not a guarantee.
- Babul settlement: On February 6, 2019, after quarter-end, the parties settled the litigation. Babul relinquished 303,392 shares and entered a consulting agreement; Relmada committed to $1.5 million in payments. The company recorded a $1.106 million liability at December 31, 2018, net of the fair value attributed to the relinquished shares.
- Subsequent financing: On February 12, 2019, the company reported a private placement raising $725,000 through units containing common shares and five-year warrants. The filing’s share and warrant counts differ slightly between disclosures.
- The company reported no material change to previously disclosed risk factors. Management concluded disclosure controls were effective as of December 31, 2018, with no material change in internal control over financial reporting during the six months.
Important facts for investors to verify
- Whether REL-1017 Phase 2 results were delivered on the expected schedule and what the data showed.
- Cash runway, projected trial spending, and the amount and terms of any additional financing required.
- Payment timing and remaining obligations under the Babul settlement and consulting arrangement.
- The exact February 2019 placement proceeds, share and warrant counts, and resulting dilution; the filing gives inconsistent warrant counts.
- The potential dilution from outstanding options and warrants, including 14.98 million warrants and 5.74 million options reported at December 31, 2018.