Business context and reporting period
This is DelMar Pharmaceuticals, Inc.’s unaudited Form 10-Q for the three months ended September 30, 2015 (the first quarter of fiscal 2016), not a filing identifying Tuhura Biosciences, Inc. The company is a clinical-stage cancer drug developer focused on VAL-083, including U.S. clinical development for refractory glioblastoma (GBM) and commercial rights in China for approved indications including lung cancer and chronic myelogenous leukemia.
Financial results and liquidity
| Metric | Quarter ended September 30, 2015 | Comparable 2014 period |
|---|---|---|
| Revenue | No product revenue reported | No revenue value stated |
| Research and development expense | $603,845 | $671,627 |
| General and administrative expense | $474,025 | $445,000 |
| Net loss | $1,621,388 | $1,516,736, as restated |
| Basic loss per share | $0.04 | $0.04, as restated |
| Cash used in operating activities | $1,401,881 | $971,516 |
At September 30, 2015, cash and cash equivalents were $2,804,096, working capital was $2,619,924, and total assets were $3,031,461. Total liabilities were $3,545,968, including a $2,954,986 derivative liability; the balance sheet reports a stockholders’ deficit of $514,507. The filing reports no conventional borrowings outstanding. No meaningful revenue margin is available because the company had not begun generating product revenue.
The company raised $2,566,660 gross through a July/August 2015 public offering of common shares and warrants. It reports net cash proceeds of $1,903,514 after offering costs; the cash-flow statement separately shows $2,453,633 of net proceeds from share and warrant issuance. Cash increased by $1,049,663 during the quarter, primarily reflecting financing proceeds.
Material changes versus the prior comparable period
- Net loss increased by $104,652, about 7%, despite a 10% decrease in R&D expense; G&A expense rose 7%. The loss included $539,446 of non-cash derivative fair-value expense and $21,565 from changes in warrant terms.
- Operating cash use increased by $430,365 year over year, partly reflecting reductions in accounts payable and related-party payables.
- Common shares outstanding rose from 39,455,931 at June 30 to 43,733,598 at September 30 following the offering. Warrants outstanding totaled 17,904,445.
- The derivative liability increased from $2,364,381 at June 30 to $2,954,986 at September 30.
Outlook, risks, contingencies, and unusual items
- Going concern: Management states that additional funding is required, that current offering proceeds are insufficient for all planned activities, and that substantial doubt exists about the company’s ability to continue as a going concern. It plans to seek equity financing and/or strategic partnerships, with no assurance of success. Failure to obtain funding could force delays, reductions, or termination of programs.
- Clinical development: Management reported completion of enrollment in a 14-patient Phase II expansion cohort and selected 40 mg/m² as the MTD for further development. Interim, small-sample results included median survival of approximately nine months in higher-dose cohorts versus approximately five months in lower-dose cohorts. These are preliminary company-reported findings, not established efficacy conclusions. A registration-directed Phase II/III study might begin within 9–12 months, subject to funding, study data, and FDA discussions.
- China plans: The company expected phase IV trials in NSCLC and GBM to begin in China before the end of 2015. Under its collaboration, Guangxi Wuzhou Pharma is responsible for costs of clinical trials conducted in China. Future revenue from China or partnerships is not assured; the filing also flags comparatively weak intellectual-property protection in China.
- Restatement: The company restated prior financial statements after determining that certain placement-agent warrants had been incorrectly accounted for as equity rather than derivative liabilities. It concluded the combined errors were material. The restated 2014 quarter’s loss increased by $194,375 to $1,516,736.
- Accounting volatility and controls: Warrant liabilities are remeasured using valuation models and assumptions, so share-price and estimate changes can materially affect reported earnings. Management identified a material weakness related to complex financial-instrument accounting in its 2015 annual-report amendment and described remediation efforts. It concluded disclosure controls were effective at the end of this quarter.
- The filing reports no legal proceedings and no off-balance-sheet arrangements. It provides no specific full-year financial guidance.
Important facts for investors to verify
- Confirm the issuer and period: the supplied filing names DelMar Pharmaceuticals, Inc. and covers the quarter ended September 30, 2015.
- Review the going-concern disclosure, cash runway assumptions, and status of planned financing or strategic partnerships.
- Check the offering’s gross and net proceeds and reconcile the different financing figures presented in the filing.
- Assess the restatement, derivative-warrant valuation assumptions, and progress in remediating the material weakness.
- Verify subsequent clinical-trial results, regulatory discussions, and whether the proposed registration-directed study and China trials proceeded.
- Check share-count disclosures: the cover reports 39,477,557 shares outstanding as of November 16, 2015, while MD&A reports 39,477,556.