SEC Form 10-Q Summary
Filing entity: NeuroBo Pharmaceuticals, Inc. (the submitted metadata identifies Metavia Inc., which does not match the filing). Reporting period: quarter and six months ended June 30, 2020; filed August 11, 2020. NeuroBo is a clinical-stage biotechnology company developing NB-01, NB-02 and Gemcabene. The December 2019 merger with Gemphire was accounted for as a reverse asset acquisition.
Financial Position and Results
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Research and development expense | $0.7 million, versus $0.9 million | $2.8 million, versus $2.7 million |
| General and administrative expense | $1.7 million, versus $0.9 million | $4.3 million, versus $1.6 million |
| Total operating expenses | $2.4 million, versus $1.9 million | $7.1 million, versus $4.3 million |
| Net loss | $2.4 million, versus $1.9 million | $7.1 million, versus $4.4 million |
| Net loss per share | $0.15 loss, versus $0.37 loss | $0.44 loss, versus $0.84 loss |
| Cash used in operating activities | Not separately provided | $6.5 million, versus $2.4 million |
- No revenue has been generated from product sales, collaborations, grants or other sources, and the company does not expect near-term revenue.
- Cash was $14.3 million at June 30, 2020, compared with $13.9 million at December 31, 2019. Total assets were $15.6 million and total liabilities were $3.2 million.
- Accumulated deficit was $44.0 million at June 30, 2020.
- The company had no debt outstanding during 2020; convertible notes were converted into common stock in connection with the merger.
- Net cash provided by financing activities was $6.9 million, primarily from a $7.5 million registered direct offering, net of issuance costs, plus $53,000 from option exercises.
- Common shares outstanding increased to 16.4 million at June 30, 2020 from 15.6 million at December 31, 2019. The offering also generated 37,500 placement-agent warrants exercisable at $12.50 per share through April 2025.
Material Changes Versus the Prior Comparable Period
- Second-quarter R&D expense decreased by $274,000 because NB-01 Phase 3 clinical activity was reduced or stopped. Six-month R&D expense increased by $78,000, primarily due to approximately $675,000 of CRO termination costs and $800,000 of Gemcabene development activity under the contingent value rights arrangement.
- G&A expense increased by $779,000 in the quarter and $2.7 million for the six-month period, primarily because of public-company and post-merger costs, including legal, audit, insurance, board and stock-based compensation expenses.
- Operating cash use increased by $4.0 million year over year, while financing proceeds declined substantially from $24.2 million in the first six months of 2019 to $6.9 million in 2020.
- Loss per share improved because the weighted-average share count increased materially following the merger and equity issuance, despite higher dollar net losses.
Outlook, Risks and Unusual Items
- Management expects existing cash to fund operations into the second quarter of 2021 at the reduced level of scientific activity. Further cost reductions could potentially extend the operating runway into the third quarter of 2021.
- The company states that substantial additional financing is required and that it has no commitment for additional financing. Failure to raise capital could force it to cease, reduce or delay operations. The financial statements disclose substantial doubt about the company’s ability to continue as a going concern.
- Because of COVID-19 and the operating environment, the company stopped work with CROs and other vendors on NB-01 Phase 3 trials in the first quarter of 2020. It is evaluating alternative regulatory pathways, including a potential orphan-drug strategy, but there is no assurance of success.
- NB-02 development was postponed, with potential first human clinical activity targeted for the first half of 2021, subject to improved health and macroeconomic conditions. The company is preparing an IND and considering a strategic partner.
- The FDA informed the company in May 2020 that Gemcabene remains on partial clinical hold. The company is reviewing its options.
- One CRO dispute creates a reasonably possible loss estimated at $0 to $1.1 million. No liability was accrued because no amount within the range was considered a better estimate.
- The company entered a five-year agreement with Dong-A ST on June 7, 2020 for manufacturing and supply of NB-02 drug product and placebo.
- The company reported an ineffective disclosure-control environment as of June 30, 2020 due to an unremediated material weakness involving accounting for clinical trial costs and related supplies. Management is adding accounting resources, improving clinical-site expense monitoring and using outside technical accounting consultants.
- Other significant contingencies include potential Gemcabene milestone payments of up to $37 million under the Pfizer license agreement and future payments under the Beijing SL agreement; none had been triggered or recognized through June 30, 2020.
Investor Verification Checklist
- Confirm the correct issuer, because the filing is for NeuroBo Pharmaceuticals, Inc., not Metavia Inc.
- Assess the going-concern disclosure, cash runway assumptions and the probability and terms of future equity or debt financing.
- Review the status and regulatory strategy for NB-01, the timing and funding requirements for NB-02, and the FDA partial clinical hold on Gemcabene.
- Investigate the disputed CRO termination charges and the potential $0 to $1.1 million loss range.
- Monitor remediation of the material weakness in clinical-trial cost accounting and any resulting restatements or adjustments.
- Evaluate dilution from the April 2020 equity financing, outstanding warrants and stock options.