Relmada Therapeutics, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended June 30, 2018; filed September 28, 2018. The request metadata says “2017 Q4,” but the filing is an annual report for FY2018, not a quarterly filing.
Business context and pipeline
Relmada is a clinical-stage biotechnology company with no approved products, commercial sales, or product revenue. Its lead candidate, oral dextromethadone (d-methadone, REL-1017), is an NMDA receptor antagonist being developed primarily for major depressive disorder. The company prioritized this program; its three other candidates—LevoCap ER, BuTab, and MepiGel—were not in active development or had investment limited.
A Phase II study in major depressive disorder was underway, with the first patient dosed in June 2018. Management expected topline results in the first half of 2019. The filing also describes early exploration of other indications, including Rett syndrome; these are not established clinical outcomes.
Financial performance and position
| Metric | FY2018 | FY2017 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $2.943 million | $1.293 million |
| General and administrative expense | $3.975 million | $5.925 million |
| Operating loss | $6.917 million | $7.219 million |
| Net loss | $8.961 million | $6.287 million |
| Net loss per share, basic and diluted | $0.71 | $0.52 |
| Cash used in operating activities | $6.002 million | $6.466 million |
Gross margin is not applicable because the company had no product sales. R&D increased mainly with the Phase II program. Lower G&A, including lower professional fees, compensation, litigation, and rent, helped reduce operating loss; however, net loss rose due to higher interest expense and an unfavorable noncash change in derivative fair value.
At June 30, 2018, cash and cash equivalents were $2.239 million; total assets were $3.048 million, total liabilities $8.561 million, and stockholders’ deficit $5.513 million. Current liabilities were $5.905 million, including $4.195 million of derivative liabilities. The company reported $7.205 million in face amount of two-year convertible notes, due within one to two years; their balance-sheet carrying value was $2.656 million after discount. It also had $285,170 of notes payable due in less than one year. The filing identifies substantial doubt about the company’s ability to continue as a going concern.
FY2018 financing provided $6.543 million, primarily through convertible notes and warrants. The notes are convertible at the holder’s option at $0.75 per share, with automatic conversion at a discount under specified equity-financing conditions; related warrants and potential share issuance create dilution risk. Cash increased by $528,431 during the year.
Material changes versus FY2017
- R&D expense rose about $1.649 million, reflecting initiation of the Phase II study; G&A expense fell about $1.950 million.
- Net loss increased about $2.674 million. Net interest expense rose to $1.337 million from approximately $550, primarily because of the new convertible notes.
- The derivative fair-value impact shifted from a $716,650 gain in FY2017 to a $708,901 loss in FY2018, both noncash. Derivative liabilities increased to $4.195 million from $176,000, principally due to embedded redemption features on the new notes.
- Operating cash use improved by about $464,000, but the company remained dependent on external financing. Cash rose from $1.711 million to $2.239 million following financing proceeds.
- Relmada entered a license arrangement for d-methadone psychiatric and other uses. It disclosed an upfront nonrefundable fee of $180,000, recurring payments of $45,000 every three months subject to specified termination events, royalties of up to 2% on covered net sales, and specified sublicense payments.
Outlook, risks, and contingencies
Management’s principal near-term catalyst was Phase II topline data expected in the first half of 2019. The company stated it needed substantial additional capital, expected to seek funding in or before the end of calendar 2018, and warned that unavailable or unfavorable financing could delay, reduce, or end development. The filing gives no quantified revenue forecast or earnings guidance.
- Clinical and regulatory risk is high: the lead candidate remained in Phase II, and success in early studies or animal models does not establish later-stage efficacy, safety, or approval. The company noted potential need for a QTc study given the racemic methadone warning, as well as possible DEA scheduling and quota constraints.
- Relmada depends on contract research and manufacturing organizations and has no in-house manufacturing, sales, or marketing capability. It disclosed a single research-and-development supply source for levorphanol and the need to move Schedule II manufacturing to the United States for U.S. marketing.
- Competition, controlled-substance regulation, reimbursement, patent protection, and securing partners could materially affect development and commercialization. A shareholder agreement gives a right of first refusal for certain Asian commercialization rights; the company warned that arbitration could affect terms.
- A former officer’s lawsuit remained pending in part: claims for defamation and wrongful use of civil process survived a motion to dismiss. The company recorded no litigation contingency liability for FY2018; the outcome was described as uncertain.
- Management reported effective disclosure controls and internal control over financial reporting as of June 30, 2018; the auditor did not provide an opinion on internal-control effectiveness. The auditor’s financial-statement opinion included a going-concern explanatory paragraph.
Key facts investors should verify
- Current cash, financing completed after June 30, 2018, and whether funding covers the clinical plan; the filing’s going-concern warning is central.
- Phase II trial status, protocol and enrollment progress, and whether the stated first-half 2019 topline timetable was achieved.
- Convertible-note terms, redemption provisions, accrued interest, warrant overhang, and potential dilution from conversion and equity financing.
- DEA scheduling, supply arrangements, and manufacturing readiness for d-methadone and other controlled-substance candidates.
- Current status and potential exposure from the former officer litigation, the d-methadone license obligations, and the Asian shareholder’s rights.
- The filing contains apparent date inconsistencies in its OTCQB quarterly price table (including quarters dated after the June 30, 2018 fiscal year-end); confirm market-price data against the original filing or exchange records.