Relmada Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Filed August 12, 2020. Relmada is a clinical-stage biotechnology company developing REL-1017 (d-methadone) for major depressive disorder (MDD) and other potential central nervous system indications. It had no approved products or revenue.
Financial results and liquidity
| Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $5.32 million | $3.07 million | $9.83 million | $4.35 million |
| General and administrative expense | $7.43 million | $1.07 million | $12.90 million | $2.49 million |
| Total operating expenses | $12.76 million | $4.14 million | $22.73 million | $6.84 million |
| Net loss | $11.12 million | $4.12 million | $21.79 million | $6.81 million |
| Basic and diluted loss per share | $0.73 | $0.50 | $1.45 | $0.86 |
Margins: Not meaningful; the company reported no revenue. Interest and investment income and gains on short-term investments partly offset operating losses. For Q2 2020, other income was $1.64 million, including a $1.22 million unrealized investment gain.
Balance sheet at June 30, 2020: Cash and cash equivalents were $13.82 million and short-term investments were $120.26 million, or approximately $134.09 million combined. Total assets were $134.56 million; current liabilities were $2.33 million, including $0.97 million accounts payable and $1.36 million accrued expenses. Notes payable were zero, compared with $0.11 million at December 31, 2019. Accumulated deficit was $141.65 million.
Cash flows for the six months: Operating activities used $8.38 million, investing activities used $39.97 million (net purchases of short-term investments), and financing activities provided $25.89 million. Cash and cash equivalents declined by $22.45 million to $13.82 million. Financing included $19.86 million net proceeds from common stock sales, $5.62 million from warrant exercises, and $0.53 million from option exercises.
Changes versus prior comparable periods
- Six-month operating expenses increased $15.89 million year over year; net loss widened by $14.98 million. Q2 operating expenses increased $8.62 million and net loss widened by $7.00 million.
- Management attributed higher R&D costs to Phase 2 study completion, manufacturing, hiring, and compensation. Higher G&A was driven substantially by stock-based compensation, including consultant warrant expense and employee awards.
- Stock-based compensation was $12.34 million for the first half of 2020 versus $0.80 million in the prior-year period. It was a significant noncash expense. The company reported $69.79 million of unrecognized compensation expense related to unvested options.
- The company raised equity through an at-the-market (ATM) agreement entered into in May 2020, which permits up to $75 million in offerings. It sold 427,700 shares for approximately $19.86 million net proceeds during the first half.
- Cash used in operating activities increased from $5.68 million to $8.38 million. The company also repaid its remaining $0.11 million note payable.
Business outlook, risks, and unusual items
- Management said cash, cash equivalents, and investments were sufficient to fund operations for at least 12 months from issuance of the statements, based on its budget. It reported approximately $131.55 million in these assets as of August 5, 2020, including approximately $1.23 million of post-quarter warrant proceeds. The filing does not provide a quantified longer-term funding runway; future trials may require additional financing or collaboration.
- Management expected to present full Phase 2 data and planned to start additional REL-1017 MDD studies in the second half of 2020, subject to FDA feedback and other factors. The filing refers both to “pivotal studies” and a “Phase 2 study”; the precise development plan is not clear from the text.
- The company reported positive top-line results from its 62-subject Phase 2 study: both dose groups showed statistically significant improvements versus placebo on reported efficacy measures at specified time points. Management also reported no serious adverse events in the study. These are company-reported findings; the filing notes that full data presentation was still expected.
- COVID-19 created potential operational and economic disruption. Management did not expect a material impact on long-term development timelines or liquidity based on its then-current assessment, but said it was monitoring effects on operations, suppliers, and workforce.
- As a clinical-stage company with no products approved for sale, Relmada faces clinical-development, FDA approval, financing, intellectual-property, and commercialization risks. The filing states there is no assurance development will succeed or any product will be approved or commercially viable.
- A former employee filed a gender-pay and other employment-related complaint on July 15, 2020. The company said it intended to defend the lawsuit and did not expect a material financial effect. It also disclosed ongoing license-related royalty, milestone, and periodic payment obligations; no revenue had been generated under the referenced license agreement.
- Other notable items include a $1.22 million unrealized investment gain in Q2 and accelerated option vesting associated with the separation agreement of former officer Dr. Vitolo. The filing reported no known legal proceeding expected to have a material adverse effect at the filing date.
Important facts for investors to verify
- Whether subsequent clinical-study starts and timelines matched management’s second-half 2020 plans, and whether FDA feedback changed the program.
- The full Phase 2 dataset, including statistical methods, clinical relevance, safety, and durability of the reported results.
- Actual cash burn and the basis for the stated 12-month runway, including the reported change from approximately $134.09 million in cash and investments at June 30 to approximately $131.55 million at August 5.
- Future dilution from the ATM program, outstanding options and warrants, and substantial unrecognized stock-based compensation.
- Developments in the employment lawsuit, COVID-19-related operational effects, and the company’s license and royalty obligations.