Relmada Therapeutics, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2016, compared with the year ended June 30, 2015. Although the request metadata says “2015 Q4,” this filing covers fiscal 2016. The company is a clinical-stage biotechnology developer and has no approved products or product revenue.
Key financial results
| Metric | FY2016 | FY2015 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $6.21 million | $7.87 million |
| General and administrative expense | $10.01 million | $9.23 million |
| Operating loss | $16.22 million | $17.10 million |
| Net loss | $2.97 million | $20.80 million |
| Net loss per share, basic and diluted | $0.26 | $2.09 |
| Cash used in operating activities | $13.14 million | $16.23 million |
| Cash and cash equivalents, at year-end | $8.50 million | $22.47 million |
Operating expenses exceeded any operating revenue; consequently, operating margins are not meaningful. The much smaller reported net loss primarily reflected a $13.11 million noncash gain from revaluing warrant derivative liabilities, versus a $3.71 million noncash loss in FY2015. G&A increased $0.78 million, including higher professional fees, salaries, rent and litigation costs; R&D declined $1.67 million.
Total assets were $10.24 million and total liabilities were $3.20 million at June 30, 2016. Current assets were $9.30 million against current liabilities of $3.06 million. Current liabilities included $0.89 million of derivative liabilities and $0.27 million of notes payable; the company also reported $0.14 million of long-term liabilities. Contractual obligations included $2.28 million of future office lease payments. Accumulated deficit was approximately $79.10 million.
Business, pipeline and period developments
- d-Methadone (REL-1017): The lead candidate for depression and other CNS indications. The company completed Phase I single- and multiple-ascending-dose studies and reported favorable safety and tolerability at tested doses. A Phase II proof-of-concept study for treatment-resistant depression was planned; no Phase II results are reported here.
- LevoCap ER (REL-1015): Extended-release, abuse-deterrent levorphanol formulation. The company had requested an FDA meeting to discuss a Phase III plan; it remained subject to regulatory and development requirements.
- BuTab (REL-1028): Oral modified-release buprenorphine. A Phase I pharmacokinetic study was completed in 2015; the filing says results would guide formulation optimization and further study design.
- MepiGel (REL-1021): Topical mepivacaine for peripheral neuropathic pain. The company reported two FDA orphan-drug designations and completed multiple toxicology studies in 2015; clinical studies were still prospective.
- The company reported four candidates at different development stages, but none was approved or generating product sales. R&D spending was $6.21 million, down from $7.87 million.
Liquidity, outlook and key risks
Management estimated that the $8.50 million of cash at June 30, 2016 would fund operations through the end of calendar 2017, but also said substantial additional capital would be needed, potentially in or before the first half of 2017. The company had no product revenue, expected continuing losses, and stated that financing might not be available on acceptable terms. Additional equity could dilute shareholders; insufficient funding could delay, reduce or end development programs. The filing gives no specific revenue or earnings guidance.
- Development and approval remain uncertain: candidates were early-stage, trials may fail or be delayed, and further clinical work and regulatory review would require substantial time and resources.
- Controlled-substance regulation, DEA quotas, manufacturing requirements and opioid-related public or regulatory scrutiny may affect development and commercialization. The company relied on contract manufacturers and reported a single research-and-development source for levorphanol, with no material commercial supply agreement then in place.
- The company had no commercial products, sales infrastructure or manufacturing capability and expected to rely on partners for later development, manufacturing or commercialization.
- Derivative-liability valuations relied on Level 3, unobservable inputs and caused substantial noncash earnings volatility. Warrants and options also represent potential dilution.
- Litigation included claims by a former officer and a dispute with Laidlaw & Company and its principals. Management said it had defenses and did not expect the matters to materially affect operations or financial position; no litigation liability or expense was recorded for FY2016.
- Related-party item: Relmada licensed office space to Actinium Pharmaceuticals, with which it shared two board members, and recorded license fees as other income. Total FY2016 other income was $130,269, attributed to two sublease arrangements.
- The company reported effective disclosure controls and internal control over financial reporting at June 30, 2016. The independent auditor issued an unqualified opinion on the financial statements, but did not audit or opine on internal-control effectiveness.
Most important facts for investors to verify
- Current cash runway, actual financing needs and any subsequent capital raises; the filing’s runway estimate only extended to the end of 2017.
- Whether and when the planned d-Methadone Phase II study began, and whether later clinical data support the company’s early safety and preclinical claims.
- Regulatory feedback and clinical plans for LevoCap ER, and the next development steps for BuTab and MepiGel.
- Supply continuity, U.S. manufacturing readiness and applicable DEA quotas for controlled-substance candidates.
- The status and potential financial impact of the Babul and Laidlaw litigation, neither of which had a recorded contingency accrual.
- Potential dilution from outstanding warrants and equity awards, and the effect of warrant remeasurement on reported earnings.
- The terms, ongoing payments and governance oversight associated with related-party arrangements, including the Actinium space license and consulting agreement with the board chair.