Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2020; filed November 12, 2020. The company changed its fiscal year-end from June 30 to December 31, effective in 2020. The filing compares results with the corresponding 2019 periods.
Business context
Relmada is a clinical-stage biotechnology company developing REL-1017 (d-methadone), primarily for major depressive disorder (MDD). It had no approved products, commercial sales, or revenue and said it did not expect revenue for the foreseeable future.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $11.24 million | $1.89 million | $21.07 million | $6.23 million |
| General and administrative | $5.95 million | $1.82 million | $18.85 million | $4.31 million |
| Net loss | $16.90 million | $3.67 million | $38.69 million | $10.48 million |
| Loss per share, basic and diluted | $1.05 | $0.38 | $2.52 | $1.23 |
At September 30, 2020, cash and cash equivalents were $7.54 million and short-term investments were $115.59 million, totaling $123.14 million. Total current assets were $125.47 million; current liabilities were $3.39 million. Stockholders’ equity was $122.21 million, and accumulated deficit was $158.55 million. The company had no note payable outstanding at quarter-end. Profit margins are not applicable given the absence of revenue.
For the first nine months, operating cash use was $20.88 million, investing cash use was $35.38 million (primarily net purchases of short-term investments), and financing provided $27.53 million. Cash and cash equivalents declined by $28.73 million to $7.54 million; this decline reflects investment activity and should be considered alongside the $115.59 million in short-term investments.
Material changes and notable items
- Operating expenses increased $13.48 million in Q3 and $29.37 million over nine months versus 2019. Management attributed the R&D increase to development work, toxicology and metabolic studies, Phase 2 completion, Phase 3 preparation, and added personnel. G&A growth reflected compensation and substantially higher stock-based compensation.
- Nine-month stock-based compensation was $17.59 million, compared with $1.56 million in 2019. The company reported $67.96 million of unrecognized option compensation expense at quarter-end.
- In 2020, the company received $19.82 million net from common-stock sales under an at-the-market agreement, $7.19 million from warrant exercises, and $0.64 million from option exercises. The sales agreement permits up to $75 million of aggregate offerings; the company was not obligated to sell shares.
- Interest and investment income increased, while realized investment losses were $0.24 million for the nine-month period and unrealized gains were $0.29 million.
Outlook, risks and contingencies
Management said available funds were sufficient to support ongoing operations for at least 12 months from issuance of the statements. It noted that the scope and timing of future trials could affect additional financing needs; spending on subsequent trials would depend on obtaining additional financing. Management reported approximately $121.5 million in cash, cash equivalents and short-term investments as of November 9, 2020, including about $0.44 million of post-quarter warrant-exercise proceeds.
Management’s stated anticipated milestones included starting the first pivotal Phase 3 adjunctive MDD trial in Q4 2020; starting a second Phase 3 adjunctive trial and a Phase 2 MDD monotherapy trial in the first half of 2021; human abuse-potential study results in Q2 2021; monotherapy results in Q4 2021; and Phase 3 results in the first half of 2022. These are forward-looking expectations, not reported outcomes.
The company described its prior Phase 2 adjunctive MDD study as showing statistically significant improvements on tested efficacy measures for both doses versus placebo, with no serious adverse events reported in that study. Results from a small clinical study do not establish future efficacy or regulatory approval. Key risks include clinical and regulatory uncertainty, future financing needs, dependence on intellectual property and key personnel, and possible effects of COVID-19. The company said it did not then expect COVID-19 to materially affect its long-term development timeline or liquidity, but was monitoring the situation.
An employee filed an employment-related lawsuit in July 2020; the company said it intended to defend the case and did not expect a material effect on its financial position. It reported no other known legal proceedings likely to have a material adverse effect. The company also disclosed ongoing license obligations, including quarterly payments to licensors and potential royalties and milestones if products are commercialized. It reported no material changes to previously disclosed risk factors and stated disclosure controls were effective.
Important facts for investors to verify
- Whether the planned Phase 3 and Phase 2 trial starts and data milestones occurred on schedule, and the quality and statistical significance of subsequent results.
- Cash runway assumptions, actual clinical-trial spending, and whether further equity or other financing is needed; include dilution risk from the at-the-market facility and outstanding options and warrants.
- The extent to which recurring stock-based compensation and other non-cash charges affect reported losses and future expense levels.
- Current status and potential exposure from the employee lawsuit, license agreements, and any related-party or other contractual obligations.
- Whether COVID-19 or other operational factors changed trial execution, timelines, or funding requirements after the filing date.