Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: The filing covers the three and nine months ended March 31, 2017, filed May 15, 2017. This is fiscal 2017’s third quarter; the supplied “2016 Q3” period metadata does not match the filing. Financial statements are unaudited.
Business context and development
Relmada is a clinical-stage biotechnology company with no product revenue, developing CNS treatments, primarily for depression and chronic pain. Its pipeline includes d-Methadone (REL-1017), LevoCap ER (REL-1015), BuTab (REL-1028), and MepiGel (REL-1021).
- The FDA accepted Relmada’s IND for a planned d-Methadone Phase II program in January 2017. After quarter-end, on April 13, 2017, the FDA granted the candidate Fast Track designation for adjunctive treatment of major depressive disorder.
- Following discussions with the FDA in January 2017, the company said it had defined a path forward for LevoCap ER’s Phase III plan and NDA filing.
Financial performance and position
| Metric | Three months ended March 31, 2017 | Nine months ended March 31, 2017 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development | $490,691 | $1,108,948 |
| General and administrative | $1,792,261 | $4,327,001 |
| Total operating expenses / operating loss | $2,282,952 | $5,435,949 |
| Net loss | $1,981,494 | $4,652,904 |
| Loss per basic and diluted share | $0.16 | $0.39 |
For the nine months, operating cash used was $5,450,024, investing cash used was $47,488, and financing cash used was $246,087. Cash and cash equivalents fell to $2,756,608 at March 31, 2017 from $8,500,207 at June 30, 2016. The company reported no meaningful product-sales margin information; the filing does not provide a clear gross-margin value.
At March 31, 2017, total assets were $4,170,339, current liabilities were $1,228,886, total liabilities were $1,368,307, and stockholders’ equity was $2,802,032. Notes payable were $27,583. Contractual obligations included $2,018,808 of office lease payments, including $344,434 due in less than one year. A $392,600 letter of credit is secured by a restricted certificate of deposit.
Changes versus comparable periods
- Quarterly operating expenses decreased $464,136 year over year; quarterly net loss increased from $1,859,780 to $1,981,494. Management attributed lower G&A largely to reduced wages and benefits and marketing/investor-relations spending, and lower R&D to reduced outsourced services and payroll, partly offset by a prior-year R&D tax credit that did not recur.
- Nine-month operating expenses declined $7,677,151 year over year, including a $4,483,963 reduction in R&D and a $3,193,188 reduction in G&A. Management cited reduced R&D project expense, legal and litigation costs, staffing costs, and stock-based compensation.
- Nine-month results shifted from $342,700 net income in 2016 to a $4,652,904 net loss in 2017. The prior-year result included a $13,387,290 non-cash gain from changes in derivative fair value; the 2017 period included a $613,073 non-cash gain. These gains materially affect period comparisons.
- Operating cash use improved from $10,318,235 to $5,450,024 year over year, while ending cash was lower than at the prior fiscal year-end.
Outlook, risks and unusual items
- Management stated that additional funding is needed to continue clinical trials. It plans to seek capital through equity or debt offerings, borrowing, collaborations, or licensing, but financing may not be available on acceptable terms or at all and equity funding may dilute shareholders.
- The filing states that operating cash outflows and accumulated losses of $83,749,838 raise substantial doubt about the company’s ability to continue as a going concern. The company has not generated product revenue and does not anticipate revenue for the foreseeable future; trials or development programs may be delayed, reduced, or eliminated if funds are insufficient.
- The company’s proposed S-3 shelf registration was not effective, and management said it could not access those funds until it was uplisted to a national exchange.
- A litigation reserve of approximately $275,000 was recorded in the quarter in connection with the Laidlaw litigation. The filing also describes ongoing claims by a former officer; management said it believed it had defenses, while noting litigation outcomes are uncertain.
- Derivative liabilities are Level 3 fair-value estimates based on a model with significant unobservable inputs. Their non-cash remeasurement can cause substantial earnings volatility. The filing reports no material change in previously disclosed risk factors.
- No formal financial guidance was provided. Management’s development and financing statements are forward-looking and subject to regulatory, clinical, funding, and other risks.
Important facts for investors to verify
- Whether and when the company can secure financing, and how long available cash can support operations and planned trials.
- The status, design, funding, and timing of the d-Methadone Phase II program and the LevoCap ER Phase III plan, including any subsequent FDA communications.
- The outcome and potential financial impact of the Laidlaw and former-officer litigation, including the adequacy of recorded reserves.
- Changes in warrant-related derivative valuations and the assumptions underlying those Level 3 estimates.
- Whether the S-3 registration or other financing sources become available, including any uplisting requirements and potential shareholder dilution.