Relmada Therapeutics, Inc. — Form 10-Q Summary
Period: The filing covers the quarter and nine months ended March 31, 2016, with comparisons to the periods ended March 31, 2015. This is FY2016’s third quarter; the request metadata’s “2015 Q3” does not match the filing. Financial statements are unaudited.
Business context
Relmada is a clinical-stage biopharmaceutical company developing four pain-treatment candidates: LevoCap ER, d-Methadone (REL-1017), BuTab (REL-1028), and MepiGel (REL-1021). It had no approved or commercial products and generated no product revenue.
Financial performance and position
| Metric | Three months ended March 31, 2016 | Nine months ended March 31, 2016 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $0.61 million | $5.59 million |
| General and administrative expense | $2.14 million | $7.52 million |
| Operating loss | $2.75 million | $13.11 million |
| Net income (loss) | $(1.86) million | $0.34 million |
| Basic and diluted earnings (loss) per share | $(0.15) | $0.03 |
The nine-month net income mainly reflects a $13.39 million non-cash gain from revaluing warrant-related derivative liabilities; it does not indicate operating profitability. No gross margin is applicable because the company had no product revenue.
- Cash and liquidity: Cash and cash equivalents were $11.35 million at March 31, 2016, down from $22.47 million at June 30, 2015. Management estimated cash would fund operations through the end of calendar 2017.
- Cash flow: Nine-month operating cash use was $10.32 million; investing cash use was $0.54 million; financing cash use was $0.26 million. The prior-year period used $11.74 million in operations and included $13.15 million of financing inflows, primarily warrant exercises.
- Debt and liabilities: The insurance-premium note payable was repaid; no balance remained at March 31. Total liabilities were $2.51 million, including $0.61 million of derivative liabilities, versus $15.58 million and $14.00 million, respectively, at June 30, 2015.
- Equity and potential dilution: 12.02 million common shares were outstanding at March 31. The company also reported 4.22 million outstanding warrants and 834,174 outstanding options.
Material changes versus prior periods
- Quarterly operating loss narrowed to $2.75 million from $4.58 million, as R&D expense fell by about $1.67 million, primarily due to lower clinical-trial expenses.
- For the nine months, operating loss widened to $13.11 million from $12.70 million. R&D expense increased about $0.59 million; G&A declined about $0.17 million overall, including approximately $2.02 million in Laidlaw litigation costs.
- Nine-month net results improved sharply from a $26.85 million loss to $0.34 million income, driven primarily by the change from a $14.18 million derivative revaluation loss to a $13.39 million gain.
- Cash declined by $11.12 million during the nine-month period. Fixed assets increased, largely reflecting office improvements and furnishings.
Outlook, risks, and unusual items
- Management said additional funding would be needed to continue clinical trials. Potential sources included equity or debt financing and strategic collaborations or licensing; financing might not be available on acceptable terms or at all, and equity financing could dilute shareholders.
- A filed shelf registration statement covering offerings of up to $200 million, including a sales-agreement prospectus for up to $75 million, had not been declared effective. The company stated it could not access those funds until uplisting to a national securities exchange.
- Development updates: d-Methadone’s Phase I SAD and MAD studies were completed, with management reporting a potentially therapeutic dosing regimen and favorable tolerability; BuTab’s Phase I pharmacokinetic study was completed; LevoCap ER’s final regulatory and clinical plan was still being prepared for FDA discussion. MepiGel formulation selection and toxicology work were described, but no specific next-step schedule was provided.
- Relmada’s litigation with Laidlaw remained active, with motions pending; Laidlaw had also filed counterclaims. A former officer’s lawsuit retained defamation and wrongful-use-of-civil-process claims. The company recorded no litigation contingency or expense, and management said it believed it had defenses; outcomes remain uncertain.
- The company entered a seven-year, three-month New York office lease beginning October 2015, with disclosed future minimum payments of $2.37 million. A related office-space license with Actinium was also disclosed. An approximately $390,800 letter of credit is secured by a restricted certificate of deposit.
- Derivative fair-value changes are non-cash and sensitive to stock price and other assumptions, creating substantial quarter-to-quarter earnings volatility. Management reported disclosure controls as effective and no material changes to internal control over financial reporting.
Key facts for investors to verify
- Whether the reported cash runway through year-end 2017 remains adequate given clinical-trial plans and operating cash use.
- The status and potential dilution implications of the un-effective shelf registration, national-exchange listing plans, outstanding warrants, and options.
- Clinical and regulatory milestones, costs, and timelines for each candidate, particularly the next study plans for d-Methadone and LevoCap ER.
- Developments and potential financial consequences in the Laidlaw and former-officer litigation.
- The assumptions behind the warrant derivative valuation and the effect of future share-price changes on reported earnings.