Business context and reporting period
Relmada Therapeutics, Inc. is a clinical-stage biotechnology company with no approved products, product sales, or sales and marketing infrastructure. This Form 10-K covers the fiscal year ended June 30, 2017, with comparisons to fiscal 2016; it is not a report for calendar-year 2016 or a standalone fourth quarter.
After a pipeline review, management prioritized d-methadone (REL-1017) for treatment-resistant depression and said it would receive most development resources. The other programs are LevoCap ER (REL-1015), BuTab (REL-1028), and MepiGel (REL-1021).
Financial results and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $1.29 million | $6.21 million |
| General and administrative expense | $5.93 million | $10.01 million |
| Operating loss | $7.22 million | $16.22 million |
| Net loss | $6.29 million | $2.97 million |
| Net loss per share, basic and diluted | $0.52 | $0.26 |
| Cash used in operating activities | $6.47 million | $13.14 million |
| Cash and cash equivalents at year-end | $1.71 million | $8.50 million |
There is no meaningful revenue margin to assess because the company had no product revenue. Other income included $211,000 of sublease income in FY 2017. At June 30, 2017, current assets were $2.47 million, current liabilities $1.38 million, total assets $2.84 million, total liabilities $1.38 million, and stockholders’ equity $1.46 million. Notes payable were $276,670, due in April 2018, at 2.05% interest; the filing reports no long-term liabilities at year-end. Accumulated deficit was $85.38 million.
Cash used in investing activities was $49,690 and cash used in financing activities was $273,670 in FY 2017. The company reported no material off-balance-sheet arrangements. The auditor issued an unqualified opinion on the financial statements but highlighted substantial doubt about the company’s ability to continue as a going concern.
Material changes versus FY 2016
- R&D expense fell by $4.91 million, primarily because research-project spending declined; G&A expense fell by $4.08 million, including lower litigation and business-development costs.
- Despite lower operating expenses, net loss increased to $6.29 million from $2.97 million. A major factor was the much smaller noncash gain on derivative liabilities: $717,000 versus $13.11 million in FY 2016.
- Operating cash use improved to $6.47 million from $13.14 million, but year-end cash fell by $6.79 million to $1.71 million.
- The company reported a $101,597 gain on assignment of its former office lease and a $96,403 loss on a sales-type lease of office furniture, fixtures, and equipment.
Outlook, development, and risks
Management said existing cash was expected to fund operations only through the end of calendar 2017 and that additional financing would be needed. It may seek equity or debt financing, loans, collaborations, or licensing; financing may be unavailable or dilutive. The filing provides no revenue or earnings guidance. Management expects continued losses while developing products.
- d-Methadone: The company completed three Phase I studies and reported an FDA-accepted IND for Phase II on January 25, 2017, plus Fast Track designation for adjunctive major depressive disorder treatment in April 2017. The filing also states there were no ongoing clinical trials at the time described.
- LevoCap ER: Following FDA discussions, a Phase III and NDA path had been defined, but management said it did not plan further clinical studies at that time because of budget and pipeline priorities.
- BuTab: A Phase I pharmacokinetic study was completed in 2015; further development and partnering remained uncertain.
- MepiGel: Formulation selection and toxicology work were reported, but the candidate remained preclinical.
Key risks include dependence on external financing, early-stage clinical and regulatory uncertainty, reliance on contract manufacturers and research partners, controlled-substance regulation and supply quotas, dependence on a single levorphanol API source, competition, and the need for commercial partners. The company has no product-liability insurance. A former officer’s lawsuit retains defamation and wrongful-use-of-civil-process claims; management believes an unfavorable outcome would not be material, but litigation outcomes are uncertain.
Management reported that disclosure controls and internal control over financial reporting were ineffective at June 30, 2017. It said a document-management system was instituted after year-end and expected controls to be effective going forward; this is management’s assessment, not an auditor opinion on control effectiveness.
Important facts for investors to verify
- Whether the company raised sufficient capital after the stated year-end cash runway, and the resulting dilution, debt, or licensing terms.
- Current status, timing, funding, and results of the d-methadone Phase II program, including any updates to the filing’s statement that no trials were ongoing.
- Whether management’s post-year-end remediation resolved the disclosed control weaknesses.
- Any subsequent developments in the Babul litigation, manufacturing arrangements, and controlled-substance supply or scheduling.
- The filing contains apparent date inconsistencies in its stock-price table; verify the quoted periods against the original filing.