Business Context and Reporting Period
This Form 10-Q is for NeuroBo Pharmaceuticals, Inc., not Metavia Inc., and covers the quarter ended March 31, 2020. NeuroBo is a clinical-stage biotechnology company developing NB-01, NB-02 and Gemcabene for neurodegenerative, neuropathic and cardiometabolic indications. The December 2019 merger with Gemphire was accounted for as a reverse asset acquisition.
The company had no product revenue and reported that its operations consist principally of research and development, clinical development and capital raising.
Financial Highlights
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $2.152 million | $1.800 million | +$0.352 million |
| General and administrative expense | $2.597 million | $0.651 million | +$1.946 million |
| Total operating expenses | $4.749 million | $2.451 million | +$2.298 million |
| Net loss | $4.730 million | $2.464 million | Loss increased by $2.266 million |
| Net loss per share | $0.30 | $0.48 | Improved, partly due to higher share count |
| Net cash used in operating activities | $4.138 million | $1.224 million | Use increased by $2.914 million |
There was no meaningful revenue or profit margin to report. The operating loss was $4.749 million, representing the full amount of operating expenses. Comprehensive loss was $4.764 million, including a $34,000 foreign currency translation loss.
Cash and restricted cash totaled $9.814 million at March 31, 2020, including $9.799 million of cash. Cash declined from $13.923 million at December 31, 2019. Current assets were $11.211 million versus current liabilities of $3.706 million, implying a current ratio of approximately 3.0x.
Total liabilities were $3.795 million and consisted primarily of accounts payable, accrued liabilities and lease liabilities. The company reported no debt outstanding during the quarter because its convertible notes converted into common stock upon the merger.
Stockholders’ equity declined to $7.740 million from $12.292 million at December 31, 2019, primarily due to the quarterly net loss. The company had 15.677 million common shares outstanding at March 31, 2020 and 16.427 million outstanding as of May 14, 2020.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 20%, primarily due to approximately $675,000 of NB-01 clinical-trial termination costs and approximately $400,000 of Gemcabene development activity, partly offset by lower clinical-trial activity.
- General and administrative expense increased substantially due to public-company and post-merger costs, including legal, audit and accounting, director and officer insurance, board and consulting expenses.
- Operating cash burn increased to $4.138 million from $1.224 million, while cash and restricted cash at period-end increased substantially from $1.618 million at March 31, 2019 but declined from year-end 2019.
- Weighted-average shares outstanding increased to 15.671 million from 5.167 million, reflecting the merger and related capitalization changes.
- The company recorded a $186,000 increase to Q1 2020 net loss for clinical-trial expenses incorrectly recorded in prior periods; management considered the adjustment immaterial to all periods.
Guidance, Outlook, Risks and Unusual Items
- Because of COVID-19 and resource-conservation efforts, the company stopped work on NB-01 Phase 3 trials and terminated related CRO and vendor arrangements. It is evaluating alternative pathways, including orphan-drug development and a nutraceutical product, but provided no assurance that these alternatives will succeed.
- NB-02’s first human clinical trials were postponed, with a target to begin in the first quarter of 2021 if health and macroeconomic conditions improve.
- Gemcabene remains subject to an FDA partial clinical hold. The company is supporting efforts to lift the hold and its collaboration with Beijing SL, which may support development in China. No Beijing SL revenue had been recognized through March 31, 2020.
- Management stated that existing cash, together with proceeds from the April 2020 financing, is expected to fund operations through the first quarter of 2021 at the reduced level of scientific activity. The filing also states that additional financing is required thereafter and that further cost reductions could potentially extend the operating window to the second quarter of 2021.
- On April 16, 2020, the company completed a registered direct offering of 750,000 shares for gross proceeds of $7.5 million, before fees and expenses, and issued placement-agent warrants for 37,500 shares at an exercise price of $12.50.
- The financial statements contain substantial doubt regarding the company’s ability to continue as a going concern. The company expects continuing losses and negative operating cash flow and has no established revenue source.
- A 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.
- Management concluded that disclosure controls were not effective at March 31, 2020 because of an unresolved material weakness involving accounting for clinical-trial costs and related supplies. Remediation was underway.
- Future potential obligations include up to $37 million of Gemcabene milestones and royalties under the Pfizer license, although no milestones or royalties had been triggered through March 31, 2020.
Most Important Facts for Investors to Verify
- Confirm the issuer identity: the supplied filing is NeuroBo Pharmaceuticals, Inc. and uses ticker NRBO, despite the request identifying Metavia Inc.
- Verify cash runway assumptions through the first quarter of 2021, including the net—not gross—proceeds from the April financing.
- Monitor the company’s ability to raise additional capital and the potential dilution or restrictions associated with future equity or debt financing.
- Assess the effect of COVID-19 on NB-02 trial timing, NB-01’s revised development strategy and Gemcabene’s FDA partial clinical hold.
- Track resolution of the disputed CRO termination charges and any resulting liability within the disclosed $0 to $1.1 million range.
- Confirm remediation of the material weakness in clinical-trial cost accounting and assess whether future financial statements require additional adjustments.