Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2016 (fiscal first quarter); filed November 10, 2016. The statements are unaudited. Relmada is a clinical-stage biotechnology company developing four CNS-focused candidates: d-Methadone (REL-1017), LevoCap ER (REL-1015), BuTab (REL-1028) and MepiGel (REL-1021).
Financial results and liquidity
| Metric | Three months ended Sep. 30, 2016 | Three months ended Sep. 30, 2015 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $364,152 | $2,865,586 |
| General and administrative expense | $1,252,444 | $1,764,013 |
| Total operating expenses / operating loss | $1,616,596 | $4,629,599 |
| Net income (loss) | $(1,640,581) | $4,663,142 |
| Operating cash flow | $(2,144,487) | $(3,215,909) |
- Cash and cash equivalents were $6.22 million at September 30, down from $8.50 million at June 30, 2016. Total assets were $7.92 million.
- Current liabilities were $2.21 million, including $164,436 of note payable and $972,546 of derivative liabilities. Total liabilities were $2.35 million; stockholders’ equity was $5.57 million.
- Cash declined by $2.28 million during the quarter. Investing cash outflow was $24,827 and financing cash outflow was $109,234, principally note payments.
- Margins are not meaningful given the absence of product revenue. The filing reports no product revenue since inception and says none is expected for the foreseeable future.
Changes versus prior comparable period
- Operating expenses fell by $3.01 million year over year. R&D expense decreased by approximately $2.50 million, mainly from lower clinical-trial costs; G&A expense declined by approximately $512,000, primarily due to lower legal and investor-relations expenses.
- Net results shifted from $4.66 million income to a $1.64 million loss. The principal factor was a change from a $9.29 million noncash derivative fair-value gain in 2015 to an $80,043 noncash loss in 2016.
- Operating cash use improved by approximately $1.07 million year over year. The company reduced its insurance-related note payable by $109,234 in the quarter.
Outlook, risks and notable items
- Management estimated that September 30 cash would fund operations until the end of calendar 2017. The company expects further development spending and says it will need additional funding to continue clinical trials; financing may be unavailable or dilutive. Its shelf registration statement was not effective, and the company said it could not access those funds until listing on a national exchange.
- Management expected to submit an IND for d-Methadone before the end of December 2016, begin Phase IIa in the first half of 2017 after FDA review, and have topline results by year-end 2017. These are forward-looking expectations, not assurances.
- LevoCap ER development plans included an FDA meeting request regarding Phase III; the filing provides no completed Phase III authorization. BuTab’s Phase I study was completed in 2015, and MepiGel’s candidate formulations and preclinical work were described.
- Warrant derivative liabilities are Level 3 fair-value estimates using a Black-Scholes model and significant unobservable inputs; changes can materially affect reported income or loss without affecting cash. The quarter-end liability was $972,546.
- Approximately $6.0 million of cash deposits exceeded federal insurance limits. A $392,600 letter of credit supporting the office lease was secured by a restricted certificate of deposit.
- Commitments included $2.19 million of office lease payments over the stated contractual schedule. The company also reported a related-party office license with Actinium Pharmaceuticals, which shares two board members; Actinium’s stated license cost was approximately $16,620 per month.
- Litigation remained ongoing with former officer Najib Babul and with Laidlaw and its principals. The Laidlaw case was transferred to the Southern District of New York; management recorded no litigation contingency or expense for the quarter. Outcomes remain uncertain.
- Management stated disclosure controls were effective as of September 30, 2016 and reported no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company obtained additional capital after the filing and whether the estimated cash runway through year-end 2017 remained achievable.
- Actual progress and regulatory status of the d-Methadone IND and Phase IIa program, and the FDA’s feedback on LevoCap ER’s clinical plan.
- Changes in clinical-development spending, cash burn and the timing of any financing or exchange listing.
- Updates to Level 3 warrant valuation assumptions and derivative liabilities, which drove a large portion of the year-over-year earnings swing.
- Subsequent developments, costs or disclosures in the Babul and Laidlaw litigation and the related-party office arrangement.