Dermata Therapeutics, Inc. — Q1 2024 Form 10-Q
Business and period: Clinical-stage biotechnology company developing topical dermatology candidates DMT310 and DMT410. This unaudited report covers the three months ended March 31, 2024. The company has no approved products and has generated no product revenue.
Financial results and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.60 million | $1.19 million; up $0.41 million |
| General and administrative expense | $1.60 million | $1.09 million; up $0.52 million |
| Total operating expenses | $3.20 million | $2.28 million; up $0.93 million |
| Net loss | $3.13 million | $2.24 million |
| Net loss per share | $0.47 | $2.27; weighted-average shares rose from 985,848 to 6,660,840 |
| Net cash used in operations | $2.70 million | $1.65 million |
| Cash and cash equivalents at period end | $4.73 million | $8.77 million at March 31, 2023; $7.44 million at December 31, 2023 |
| Total assets / liabilities | $5.18 million / $1.37 million | At December 31, 2023: $7.98 million / $1.62 million |
There was no financing cash inflow in Q1 2024, compared with $4.18 million of net financing proceeds in Q1 2023. The balance sheet lists current liabilities and no debt balance. Profit margins are not applicable because the company has no revenue. Accumulated deficit was $56.52 million at March 31, 2024.
Changes, outlook, and key risks
- Operating expenses increased, principally reflecting $0.7 million more clinical expense for the DMT310 STAR-1 trial and increased stock-based compensation; lower nonclinical and manufacturing-related costs partly offset R&D growth. G&A growth also reflected higher stock compensation and public-company costs.
- Q1 stock-based compensation was $587,234. The company recognized $568,372 of expense after cancelling 101,831 outstanding out-of-the-money options without replacement awards.
- Management expects existing cash to fund operations into Q3 2024. The filing states there is substantial doubt about the company’s ability to continue as a going concern for one year after issuance; management’s financing plans do not alleviate that doubt. Additional equity, debt, collaboration, or other funding may not be available on acceptable terms.
- The company began enrolling patients in the first of two Phase 3 DMT310 acne studies in December 2023. It expected to complete STAR-1 enrollment by year-end 2024 and report first-trial top-line results in Q1 2025. Each study is planned for about 550 patients. These are expectations, not assured outcomes.
- The STAR-1 CRO contract is approximately $6.9 million, extending from late 2023 through the first half of 2025; $1.4 million had been expensed by March 31, 2024. The contract has a 30-day termination notice period.
- Supply of Spongilla raw material depends on an exclusive Russian supplier. The company reported having received shipments sufficient to support two planned Phase 3 acne studies and a potential DMT310 acne application, but further sanctions or export controls could disrupt future supply.
- Up to $40.5 million of development and sales milestone payments, plus single-digit royalties, may be payable under the Villani license. The milestones were not considered probable and no accrual was recorded.
- After quarter-end, stockholders approved a 1-for-5 to 1-for-30 reverse-split range; the board selected 1-for-15, authorized for May 16, 2024. Nasdaq granted an extension through November 11, 2024 to regain minimum-bid-price compliance. Delisting could impair liquidity and financing access.
- No material legal proceedings were reported. The filing says disclosure controls were effective and there was no material change in internal control over financial reporting.
Important facts for investors to verify
- Cash runway and the timing and terms of any financing, given the Q3 2024 runway estimate and going-concern warning.
- STAR-1 enrollment progress, trial spending, and the Q1 2025 results timetable, along with funding needs for the second Phase 3 study.
- Whether Spongilla supply remains adequate and whether geopolitical restrictions affect the Russian supplier relationship.
- Potential dilution: 8,358,697 warrants were outstanding at March 31, 2024, in addition to 6,660,840 common shares; the warrants’ reported intrinsic value was zero at that date.
- Implementation and market effects of the 1-for-15 reverse split, and progress toward Nasdaq’s minimum-bid-price requirement.