MyMD Pharmaceuticals, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2023. Filed August 14, 2023. MyMD is a clinical-stage biopharmaceutical company developing MYMD-1 and Supera-CBD; it reported no product revenue.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 in 2023 and 2022 | $0 in 2023 and 2022 |
| Operating loss | $5.78 million in 2023; $3.64 million in 2022 | $8.37 million in 2023; $7.76 million in 2022 |
| Net loss | $4.17 million in 2023; $3.64 million in 2022 | $5.68 million in 2023; $7.76 million in 2022 |
| Net loss attributable to common stockholders | $4.54 million; $0.11 per share in 2023 | $6.21 million; $0.16 per share in 2023 |
| Operating cash flow | Not presented separately for the quarter | Cash used: $7.89 million in 2023; $5.93 million in 2022 |
Second-quarter operating expenses increased to $5.78 million from $3.64 million. The increase included stock-based compensation of $1.68 million, versus $0.13 million a year earlier. First-half operating expenses rose to $8.37 million from $7.76 million; lower R&D spending was outweighed by higher stock compensation and warrant issuance expenses. First-half net loss improved year over year, substantially reflecting $2.81 million of noncash warrant-liability fair-value gains and reduced R&D spending; results also included a $0.32 million noncash derivative-liability fair-value loss. These valuation changes make reported earnings sensitive to model assumptions.
At June 30, cash was $93,823 and marketable securities were $11.53 million, compared with $749,090 and $4.09 million, respectively, at year-end 2022. Working capital was $10.71 million; total assets were $25.25 million, total liabilities $13.75 million, and stockholders’ equity $10.74 million. The company reported no product gross margin because it had no revenue. It reported no conventional borrowings; however, Series F preferred shares carry substantial redemption, dividend and dilution obligations.
Financing, material changes and unusual items
- In February 2023, MyMD issued Series F convertible preferred stock and warrants, generating approximately $13.9 million in net proceeds. First-half net financing cash flow was $14.69 million.
- Series F preferred shares carry a 10% annual dividend, compounded monthly, and are redeemable in 12 monthly installments beginning July 1, 2023. MyMD estimated payments due over the following 12 months could total up to $14.3 million if paid in cash, or up to 6.3 million common shares at the then-current conversion price; actual amounts or shares may be higher as terms adjust. Triggering events can raise the dividend rate to 15% and permit cash redemption at a premium.
- During Q2, the company converted $2.5 million of preferred shares and $359,742 of accrued make-whole dividends into 2.37 million common shares. Stockholder approval to issue shares above the financing’s initial issuance cap was obtained July 31, 2023.
- Common shares outstanding were reported as 42.03 million at June 30; the cover page reports 44.93 million as of August 14. Options, warrants, preferred shares and future installment payments create further potential dilution.
- Cash and marketable securities together were approximately $11.63 million at quarter-end, while first-half operating cash use was $7.89 million. Management believes resources available at the financial-statement issuance date are sufficient for the operating budget and contractual obligations for the next 12 months. It also states that substantial additional funding will be needed to support continued operations and development.
Business outlook, developments and risks
- MYMD-1 is being developed for inflammatory and age-related conditions; the Phase 2 sarcopenia/frailty study was completed. After quarter-end, the company announced statistically significant reductions in three inflammatory biomarkers and reported that the study met its safety and tolerability endpoints. It plans discussions with the FDA about a Phase 3 sarcopenia study; full results were not yet presented in the filing.
- After quarter-end, the FDA accepted an IND for a Phase 2 MYMD-1 rheumatoid arthritis study. The company planned to discuss study timing with its CRO; no start date or quantified development guidance was provided.
- Supera-CBD remains a development-stage candidate. The company expects expenses to increase as it advances clinical and preclinical programs, protects intellectual property, and prepares manufacturing and commercialization capabilities. No revenue or product-sales guidance was provided.
- Key risks include clinical and regulatory uncertainty, reliance on third-party research and manufacturing providers, need for future financing, potential dilution, stock-price volatility and intellectual-property protection. The company disclosed a whistleblower-related lawsuit in discovery and a related-party reimbursement authorized by the board. It also disclosed a license arrangement with MIRA Pharmaceuticals involving overlapping senior executives.
- Management reported effective disclosure controls. The filing states that no material changes to internal control over financial reporting occurred, though its text refers to the quarter ended June 30, 2022.
Important facts for investors to verify
- Confirm the company’s cash runway against the Series F installment and dividend schedule, including whether payments are made in cash or shares and the effect of price-adjustment terms.
- Review subsequent clinical disclosures, complete Phase 2 sarcopenia results, and the timing, cost and regulatory path for planned studies.
- Assess dilution from the preferred stock, warrants, options and post-quarter share issuances; reconcile the 42.03 million June 30 share count with the 44.93 million August 14 cover-page count.
- Review the assumptions and sensitivity of the Level 3 warrant and derivative valuations, which materially affected reported earnings.
- Reconcile isolated inconsistencies in the filing text, including differing share-count figures and descriptions of certain cash-flow and other-income amounts; where the text is unclear, it does not provide a reliable alternative value.