Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended December 31, 2015 (fiscal second quarter); unaudited. Relmada is a clinical-stage biopharmaceutical company developing four pain-treatment candidates: LevoCap ER, d-Methadone (REL-1017), BuTab, and MepiGel. It had no approved products, product revenue, or sales infrastructure.
Financial performance and position
| Metric | Three months ended Dec. 31, 2015 | Six months ended Dec. 31, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Research and development expense | $2.12 million | $4.98 million | $2.09 million and $2.81 million |
| General and administrative expense | $3.60 million | $5.37 million | $2.29 million and $5.30 million |
| Operating loss | $5.72 million | $10.35 million | $4.38 million and $8.11 million |
| Net income (loss) | $(2.46) million | $2.20 million | $5.46 million and $(24.38) million |
| Basic / diluted EPS | $(0.22) / $(0.22) | $0.20 / $0.19 | $0.55 / $0.40 and $(2.66) / $(2.66) |
The six-month 2015 net income largely reflects a $12.56 million noncash gain from the change in fair value of derivative liabilities; it should not be read as operating profitability. No meaningful gross margin is reported because the company had no product revenue.
- Cash and liquidity: Cash and cash equivalents were $15.13 million at December 31, 2015, down from $22.47 million at June 30, 2015. Management estimated funds would support operations through the end of calendar Q1 2017.
- Cash flows, six months: $6.69 million used in operations, $0.48 million used in investing, and $0.18 million used in financing; cash decreased $7.34 million. Prior-year operating cash use was $7.31 million, while financing provided $13.18 million, primarily from warrant exercises.
- Debt and liabilities: Current liabilities totaled $4.78 million, including $1.45 million of derivative liabilities and an $88,533 insurance-premium note payable. Total liabilities were $4.84 million. The derivative valuation is Level 3 and depends on model assumptions.
- Equity and dilution: Common shares outstanding were 11,999,122 as of February 5, 2016. At December 31, 2015, 4.22 million warrants and 804,675 options were outstanding; the filing also lists 82,000 restricted shares.
Material changes versus prior periods
- Six-month R&D expense increased $2.17 million year over year, reflecting development spending across the four programs. For the six months, the largest program expenses were $1.89 million for d-Methadone and $1.56 million for LevoCap ER.
- Quarterly G&A increased $1.31 million, primarily because of approximately $1.54 million in Laidlaw litigation costs. For the six-month comparison, lower professional fees partly offset those litigation and higher office costs.
- The six-month derivative-liability change shifted from a $16.28 million noncash loss in 2014 to a $12.56 million noncash gain in 2015. The filing says warrant valuations can fluctuate substantially with stock price and other assumptions.
- Cash fell by $7.34 million over the six months. Fixed assets rose to $535,740, largely in connection with the company’s new office lease.
Outlook, risks, and unusual items
- Management expected ongoing and increasing development costs and stated additional funding would be needed to continue clinical trials. The company warned that financing may not be available on acceptable terms, or at all, and equity financing could dilute shareholders.
- A Form S-3 shelf registration filed October 2, 2015, covering up to $200 million of securities and a $75 million sales-agreement offering, had not been declared effective. The company stated it could not access funds under the sales agreement until uplisting to a national exchange.
- Pipeline updates: d-Methadone completed Phase I SAD and MAD studies, with data intended to inform a Phase II proof-of-concept study; BuTab completed a Phase I pharmacokinetic study in Q4 2015; LevoCap ER was being prepared for Phase III planning and an FDA discussion; MepiGel Phase I studies were planned after formulation selection and toxicology work.
- Relmada’s lawsuit against Laidlaw and its principals included a preliminary injunction concerning proxy materials; Laidlaw filed counterclaims. The company also disclosed ongoing litigation brought by former officer Najib Babul. Management recorded no litigation contingency liability or expense and cautioned that outcomes are uncertain.
- The company entered a seven-year, three-month New York City office lease beginning October 2015, with minimum future payments totaling approximately $2.46 million. A $390,800 letter of credit is secured by a restricted certificate of deposit.
- Management reported disclosure controls were effective as of December 31, 2015. The principal financial officer changed on December 31 following the CFO’s departure. No material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether cash burn and clinical-development spending remain consistent with management’s stated runway through Q1 2017, and when new financing may be required.
- Clinical milestones, regulatory plans, and funding needs for each candidate, particularly LevoCap ER’s proposed Phase III path and d-Methadone’s planned proof-of-concept study.
- The sensitivity and future accounting impact of Level 3 warrant derivative valuations, which materially affected reported net income.
- Progress and potential financial consequences of the Laidlaw and Babul litigation, along with the status of the shelf registration and any exchange-uplisting plans.
- Potential dilution from outstanding warrants, options, restricted stock, and any future equity financing.