Edesa Biotech, Inc. — Form 10-Q Summary
Reporting period: Fiscal second quarter and six months ended March 31, 2023; filed May 11, 2023. Amounts are in U.S. dollars unless stated otherwise. Edesa is a clinical-stage biopharmaceutical company focused on inflammatory and immune-related diseases.
Financial performance and liquidity
| Metric | Three months ended Mar. 31, 2023 | Six months ended Mar. 31, 2023 | Comparable 2022 period |
|---|---|---|---|
| Revenue | No revenue reported | No revenue reported | No revenue reported |
| Research and development expense | $1.46 million | $2.82 million | $3.04 million / $6.99 million |
| General and administrative expense | $0.95 million | $1.97 million | $1.53 million / $2.74 million |
| Net loss | $2.33 million | $4.67 million | $4.57 million / $8.95 million |
| Loss per share, basic and diluted | $0.12 | $0.24 | $0.33 / $0.66 |
| Operating cash used | Not presented quarterly | $3.36 million | $3.62 million |
Operating expenses fell year over year, mainly because of lower external clinical research and manufacturing costs and lower personnel and share-based compensation costs. Six-month other income also declined to $0.12 million from $0.79 million, chiefly because the Canadian Strategic Innovation Fund grant program was complete; all grant reimbursements had been received by December 31, 2022. Interest income increased, reflecting higher interest earned on cash balances. Margins are not meaningful given the absence of reported revenue.
At March 31, 2023, cash and cash equivalents were $7.47 million, working capital was $6.56 million, total assets were $10.67 million, total liabilities were $1.67 million, and shareholders’ equity was $9.00 million. Cash was up $0.38 million from September 30, 2022. Financing activities provided $3.68 million during the six months, including $3.03 million from an equity offering and $0.77 million from warrant exercises. No significant capital expenditures were reported. The filing reports lease liabilities and payables; it does not disclose conventional borrowings.
Programs, developments, and outlook
- EB05 (paridiprubart): The FDA and Edesa agreed on the Phase 3 study’s primary endpoint and patient population for COVID-19-related ARDS. The amended study targets approximately 600 evaluable, severely ill patients on invasive mechanical ventilation, with 28-day mortality as the primary endpoint. Recruitment was open in the U.S. and Canada; recruitment at secondary sites in Poland and Colombia was discontinued. The company is also exploring evaluation in general ARDS. The filing says the Phase 3 study was enrolling; it provides no new efficacy results for the period.
- EB01: Edesa reported preliminary Phase 2b results in chronic allergic contact dermatitis: the 1.0% cream showed statistically significant improvement over placebo on the primary endpoint and a key secondary endpoint. The company was preparing for an FDA End-of-Phase-2 meeting after full analysis.
- EB06 and EB07: Health Canada approved a clinical trial application for a future EB06 Phase 2 vitiligo study. Edesa was preparing a U.S. IND for a future EB07 Phase 2 systemic sclerosis study.
- Management plans to fund operations over the next 12 months with cash on hand and ATM equity sales, while also seeking financing through equity, grants, debt, licensing, collaboration, or other strategic arrangements. Management may adjust spending, including clinical-trial and manufacturing plans. It cautioned that adequate financing may not be available or available on favorable terms.
Material changes, commitments, and risks
- Research and development expense for the six months fell 60% year over year, while net loss narrowed to $4.67 million from $8.95 million. The lower loss per share also reflects a higher weighted-average share count.
- On March 27, 2023, Edesa established a Canaccord ATM program of up to $20 million gross, subject to offering limitations that then allowed sales of up to $8.37 million. There were no sales under it by March 31. After quarter-end, the company issued 562,052 shares and received $0.60 million net. Shares outstanding were 20,058,665 at March 31 and 20,587,717 as of May 10.
- Contracted research and other service commitments totaled approximately $2.16 million at March 31, including $1.67 million scheduled for fiscal 2023. Separate contingent license milestones include up to $356 million for one license, up to $18.4 million for another, and up to $68.9 million under a further agreement; these are contingent and primarily tied to future development, approval, or sales milestones. Royalties and sublicensing payments may also be due. No payments were made under the $356 million milestone agreement during the reported periods.
- The company disclosed approximately C$5.2 million in Canadian-dollar-denominated assets and estimated that a 10% annual exchange-rate change would affect loss and other comprehensive loss by about $0.4 million. It had not hedged currency risk.
- Management identified continuing operating losses and dependence on external financing as key liquidity concerns. Clinical-trial recruitment, trial costs, manufacturing, regulatory outcomes, and access to capital may affect spending and plans. The company said there were no material changes to the risk factors in its prior Form 10-K and no material legal proceedings outside the ordinary course of business.
Most important facts for investors to verify
- Cash burn and the adequacy of cash plus available ATM capacity to support the stated 12-month operating plan.
- Actual ATM sales, proceeds, share-count changes, and resulting dilution after May 10, 2023.
- EB05 enrollment progress, study execution and costs, and any future protocol harmonization between U.S. and Canadian studies.
- Full EB01 analysis and FDA meeting outcome, as well as progress on EB06 and EB07 clinical plans.
- Timing and potential scale of contingent license milestones, royalties, and contractual research commitments.