Relmada Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2019. Although the request metadata says “2018 Q3,” the filing is for the quarter ended March 31, 2019 (the company’s fiscal third quarter). Financial statements are unaudited.
Business context
Relmada is a clinical-stage biotechnology company with no product revenue. Its lead candidate, REL-1017 (dextromethadone), was in a Phase 2 study for major depressive disorder; the company said it expected topline results in the first half of 2019. Three legacy candidates—LevoCap ER, BuTab and MepiGel—were not in active development, with investment limited as the company focused on REL-1017.
Key financial metrics
| Metric | Three months ended Mar. 31, 2019 | Three months ended Mar. 31, 2018 | Nine months ended Mar. 31, 2019 | Nine months ended Mar. 31, 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $1.28 million | $1.67 million | $3.95 million | $1.98 million |
| General and administrative expense | $1.43 million | $0.88 million | $4.64 million | $3.00 million |
| Total operating expenses | $2.70 million | $2.55 million | $8.59 million | $4.99 million |
| Net loss | $2.69 million | $3.20 million | $13.20 million | $5.61 million |
| Loss per share, basic and diluted | $0.09 | $0.26 | $0.58 | $0.45 |
| Operating cash used | Not separately stated | Not separately stated | $6.83 million | $3.74 million |
Margins are not meaningful because the company reported no revenue. At March 31, 2019, cash and cash equivalents were $2.05 million; current assets were $2.33 million and current liabilities $2.13 million. Total liabilities were $2.13 million, including $28,769 of notes payable. The company had no promissory notes or derivative liabilities outstanding at quarter-end. Stockholders’ equity was $474,000, versus a $5.51 million deficit at June 30, 2018.
Material changes and unusual items
- Quarterly net loss narrowed year over year, while nine-month net loss increased substantially. Nine-month operating expenses rose $3.60 million, with R&D study costs and legal costs among the stated drivers.
- Quarterly R&D expense decreased $391,000, primarily due to lower study costs. Quarterly G&A expense increased $543,000, including higher litigation and stock-compensation costs.
- In October 2018, convertible notes and accrued interest converted into 10.73 million common shares. The conversion produced a non-cash debt-extinguishment loss of approximately $3.77 million in the nine-month period. The company also raised equity through private placements and reported $6.65 million of financing cash inflows.
- The company recorded a $750,000 net litigation-settlement accrual. Under a February 2019 settlement with former President Najib Babul, he relinquished 303,392 shares and the company committed to an initial $500,000 payment plus four $250,000 payments scheduled from March through December 2019.
- Common shares outstanding were 30.98 million at March 31, 2019; 33,256,987 were outstanding as of May 14, 2019.
Liquidity, outlook and risks
Management disclosed substantial doubt about the company’s ability to continue as a going concern. It had used $6.83 million in operating cash during the nine months and had an accumulated deficit of $107.54 million. The filing says additional financing is needed to continue clinical trials; it does not provide a clear cash-runway estimate. If financing is unavailable or inadequate, the company may delay, reduce or eliminate development programs. Any equity financing may dilute shareholders.
On May 14, 2019, after quarter-end, the company closed a private placement of 2,276,329 shares and warrants for 1,138,161 shares. The filing reports $3.41 million gross proceeds and approximately $3.11 million net proceeds. Investors received registration rights; delayed registration can trigger monthly payments subject to a stated cap. The filing provides no revenue guidance or quantified earnings outlook.
Key risks include clinical-trial execution and results, regulatory approval, dependence on future financing, potential dilution and the possibility that product candidates may never be approved or commercially viable. Management reported disclosure controls were effective as of March 31, 2019 and no material changes in internal control over financial reporting during the nine months.
Important facts for investors to verify
- Whether REL-1017 Phase 2 topline results were delivered on the stated schedule and what the results showed.
- Available cash, subsequent cash burn and financing needs, including the net proceeds and terms of the May 2019 placement.
- Timing and payment status of the Babul settlement obligations and any other material legal developments.
- Fully diluted share count and potential dilution from outstanding options and warrants; the filing listed approximately 5.74 million options and 16.05 million warrants at March 31, 2019.
- Whether the company can maintain funding for its clinical program and address the disclosed going-concern uncertainty.