MyMD Pharmaceuticals, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. MyMD is a clinical-stage biopharmaceutical company developing MYMD-1 and Supera-CBD. It reported no product revenue; the business remains dependent on financing while pursuing clinical development.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $0.77 million | $2.63 million |
| Administrative expense | $0.99 million | $1.40 million |
| Warrant issuance expense | $0.76 million | None reported |
| Operating loss | $2.59 million | $4.12 million |
| Net loss | $1.51 million | $4.12 million |
| Net loss attributable to common stockholders | $1.67 million, or $0.04 per share | $4.12 million, or $0.11 per share |
| Cash used in operating activities | $3.97 million | $2.37 million |
There is no meaningful product gross margin because the company had no product revenue. Operating expenses fell year over year, mainly as development-program and regulatory costs declined; the operating loss also benefited from lower administrative costs. Net loss was further reduced by a $1.18 million noncash gain from revaluing warrants, partly offset by a $0.12 million derivative revaluation loss. Thus, the narrower net loss does not indicate revenue growth.
At March 31, 2023, cash was $0.19 million and marketable securities were $15.36 million, totaling approximately $15.55 million in these liquid resources. Working capital was $14.66 million; total assets were $28.41 million, total liabilities $14.40 million, and stockholders’ equity $13.09 million. Cash and cash equivalents declined from $0.75 million at year-end 2022. Investing cash outflow was $11.27 million, principally reflecting purchases of marketable securities; financing provided $14.69 million of net proceeds from the Series F offering. The filing reports no conventional interest-bearing debt; operating lease liabilities totaled about $0.13 million.
Material changes and financing
- In February 2023, MyMD issued 15,000 Series F convertible preferred shares with a $15 million stated value and warrants for up to 6.65 million common shares. The preferred stock is convertible at an initial $2.255 per share; warrants have a $2.255 exercise price and five-year term.
- Series F carries a 10% annual dividend, compounded monthly, rising to 15% during specified triggering events. Twelve monthly redemption installments begin July 1, 2023. The company may generally settle payments in cash or, subject to restrictions, common stock. Management estimated potential cash payments of up to $12.75 million over the twelve months following March 31, 2023, or up to 5.7 million shares using the then-current conversion price; actual amounts or shares may be higher if terms adjust.
- The offering created $9.45 million of warrant liabilities and $3.27 million of derivative liabilities at quarter-end, both valued using Level 3 models. The preferred stock’s recorded carrying amount was $0.91 million, distinct from its $15 million liquidation preference. Potential common-share dilution is substantial: 27.19 million potentially dilutive shares were excluded from diluted EPS as anti-dilutive.
- Common-stock issuance for conversions and payments is subject to limits pending Nasdaq stockholder approval. The company agreed to seek approval; certain holders representing approximately 44% of common shares agreed to vote in favor.
Outlook, commentary, and risks
- MYMD-1 is being evaluated in an ongoing Phase 2, multicenter trial for chronic inflammation associated with sarcopenia/frailty in patients aged 65 or older. Supera-CBD remains in development; the filing reports no product commercialization or near-term product revenue.
- Management expects expenses to increase as development advances and says substantial additional funding will be needed. It nevertheless believes available resources will fund the current operating budget and contractual obligations for twelve months from issuance of the financial statements.
- Key risks include clinical-trial outcomes and timing, regulatory approval, dependence on third-party research and manufacturing providers, future financing needs, dilution and potential cash redemption obligations, share-price volatility, Nasdaq listing/approval requirements, and protection of intellectual property. The filing lists 16 issued U.S. patents and 50 foreign patents, with additional applications pending.
- A whistleblower-related lawsuit brought by Raymond Akers remained in discovery; the company says it believes the action is without merit. No quantified litigation contingency is provided in the supplied filing text.
- After quarter-end, the board approved a $500,000 reimbursement to stockholder Jonnie Williams for expenses related to strategic-partner and investor outreach; payment was made April 14, 2023. The filing also reports approval of 750,000 stock options on April 4.
- Management reported disclosure controls and procedures were effective. No change in internal control was reported as materially affecting, or reasonably likely to affect, financial reporting.
Important facts for investors to verify
- Whether Nasdaq stockholder approval is obtained and how the Series F conversion, installment-redemption, dividend, and triggering-event terms affect cash needs and dilution.
- How the reported $12.75 million potential cash payments compare with available liquid resources and future operating cash burn.
- Reconcile Series F proceeds: the cash flow statement reports $14.69 million net financing proceeds, while MD&A describes approximately $13.9 million net offering proceeds.
- Track Phase 2 MYMD-1 progress, enrollment, results, and funding requirements, as well as Supera-CBD development plans.
- Assess the noncash warrant and derivative fair-value estimates, which materially affected reported Q1 net loss, and follow the Akers litigation and post-quarter $500,000 reimbursement.