What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-13 compared with 2024-08-07 · 31 added, 34 removed, 221 unchanged (23% of the section changed)

51 unchanged sentences

We recently initiated a Phase 3 program of DMT310 in moderate-to-severe acne.

Both studies will be double-blinded, randomized, placebo-controlled, and enroll about 550 patients, age 9 years or older across sites in the United States and Latin America.

Both studies will be double-blinded, randomized, placebo-controlled, and enroll up to 550 patients, age 9 years or older across sites in the United States and Latin America.

The primary endpoints include absolute reduction in inflammatory and noninflammatory lesions and the improvement in investigators global assessment (“IGA”) of acne, which are the same endpoints used in our Phase 2b study of DMT310 for moderate-to-severe acne.

33 unchanged sentences

We have not generated any revenue to date and have incurred significant operating losses.

Our net losses were $2.8 million and $1.7 million for the three months ended June 30, 2024, and 2023, respectively, and our net losses were $6.0 million and $3.9 million for the six months ended June 30, 2024, and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $59.4 million.

Our net losses were $3.2 million and $1.7 million for the three months ended September 30, 2024, and 2023, respectively, and our net losses were $9.1 million and $5.7 million for the nine months ended September 30, 2024, and 2023, respectively.

As of September 30, 2024, we had an accumulated deficit of $62.5 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable future.

17 unchanged sentences

We expect to receive top-line results from the first Phase 3 trial, referred to as STAR-1, in the first quarter of 2025.

Both Phase 3 studies will be double-blinded, randomized, placebo-controlled, and enroll about 550 patients, age 9 years or older across sites in the United States and Latin America.

Both Phase 3 studies will be double-blinded, randomized, placebo-controlled, and enroll up to 550 patients, age 9 years or older across sites in the United States and Latin America.

The primary endpoints include absolute reduction in inflammatory and noninflammatory lesions and the improvement in investigators global assessment (IGA) of acne.

Patients will be treated once a week for 12 weeks with either DMT310 or placebo and will be evaluated monthly.

ATM Agreement

In June 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright &Co., LLC (“HCW”), as sales agent, pursuant to which we may offer and sell, from time to time through HCW, shares of our common stock for aggregate proceeds of up to $1,662,761 (upon the terms and subject to the conditions and limitations set forth in the ATM Agreement).

In the nine months ended September 30, 2024, we sold 550,024 shares of common stock under the ATM Agreement, for net proceeds of $1.5 million, after deducting $0.1 million of compensation to HCW and other administration fees.

Critical Accounting Policies and Use of Estimates

16 unchanged sentences

Results of Operations

Three Months Ended June 30, 2024, and 2023

Three Months Ended September 30, 2024, and 2023

The following table summarizes our results of operations for the periods presented:

Three Months Ended June 30,

Three Months Ended September 30,

Operating expenses:

9 unchanged sentences

Research and Development Expenses

Research and development expenses increased by $1.2 million from $0.8 million for the three months ended June 30, 2023, to $2.0 million for the three months ended June 30, 2024.

The increase in research and development expenses from the second quarter of 2024 as compared the same period in 2023 resulted from $1.5 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, offset by $0.3 million of decreased chemistry, manufacturing, and controls, or CMC, expenses.

Research and development expenses increased by $1.5 million from $0.9 million for the three months ended September 30, 2023, to $2.4 million for the three months ended September 30, 2024.

The increase in research and development expenses in the third quarter of 2024 as compared to the same period in 2023 resulted from $1.8 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, offset by $0.3 million of decreased chemistry, manufacturing, and controls, or CMC, expenses.

General and Administrative Expenses

General and administrative expenses were $0.9 million for the three months ended June 30, 2024, and 2023.

Decreases in stock-based compensation expense and insurance expenses were offset by increases in public company costs for the three months ended June 30, 2024, as compared to the same period in 2023.

General and administrative expenses decreased by $0.1 million from $0.9 million for the three months ended September 30, 2023, to $0.8 million for the three months ended September 30, 2024.

The decrease in general and administrative expenses in the third quarter of 2024 as compared to the same period of 2023 resulted from $0.1 million in decreased insurance costs.

Other Income and Expenses

Other income and expenses increased by $23,586 from $31,050 for the three months ended June 30, 2023, to $54,634 for the three months ended June 30, 2024.

The increase in interest income resulted from interest rate increases.

Six Months Ended June 30, 2024, and 2023

Other income and expenses decreased by $40,270 from $92,767 for the three months ended September 30, 2023, to $52,497 for the three months ended September 30, 2024.

The decrease in interest income resulted from less cash and cash equivalents available for earning interest income.

Nine Months Ended September 30, 2024, and 2023

The following table summarizes our results of operations for the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

Operating expenses:

9 unchanged sentences

Research and Development Expenses

Research and development expenses increased by $1.6 million from $2.0 million for the six months ended June 30, 2023, to $3.6 million for the six months ended June 30, 2024.

The increase in research and development expenses from the second quarter of 2024 as compared the same period in 2023 resulted from $2.2 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023 as well as $0.2 million of increased employee costs, including stock-based compensation, primarily offset by $0.5 million of decreased chemistry, manufacturing, and controls, or CMC, expenses and $0.3 million of decreased non-clinical expenses.

Research and development expenses increased by $3.1 million from $2.9 million for the nine months ended September 30, 2023, to $6.0 million for the nine months ended September 30, 2024.

The increase in research and development expenses resulted from $4.0 million of increased clinical expenses from the DMT310 STAR-1 acne study initiated in late 2023, offset by $0.7 million of decreased chemistry, manufacturing, and controls, or CMC, expenses and $0.2 million of decreased non-clinical expenses.

General and Administrative Expenses

General and administrative expenses increased by $0.5 million from $2.0 million for the six months ended June 30, 2023, to $2.5 million for the six months ended June 30, 2024.

General and administrative expenses increased by $0.4 million from $2.9 million for the nine months ended September 30, 2023, to $3.3 million for the nine months ended September 30, 2024.

This increase resulted from $0.5 million of increased audit fees as well as $0.1 million of increased stock-based compensation, offset by $0.2 million of decreased insurance costs.

Other Income and Expenses

Other income and expenses increased by $55,344 from $68,590 for the six months ended June 30, 2023, to $123,934 for the six months ended June 30, 2024.

Other income and expenses increased by $15,074 from $161,357 for the nine months ended September 30, 2023, to $176,431 for the nine months ended September 30, 2024.

The increase in interest income resulted from interest rate increases.

The following table summarizes our cash flows from operating and financing activities:

Six Months Ended June 30,

Nine Months Ended September 30,

Statements of cash flows data:

7 unchanged sentences

Operating activities

Cash used in operations of $4.8 million for the six months ended June 30, 2024, was the result of the net loss of $6.0 million and a decrease in accrued and other current liabilities of $0.2 million, offset by increases in non-cash stock-based compensation of $0.6 million, increases in accounts payable of $0.4 million, and a decrease in prepaid expenses and other current assets of $0.4 million.

Cash used in operations of $3.5 million for the six months ended June 30, 2023, was the result of the net loss of $3.9 million and a decrease in accounts payable and other accrued liabilities of $0.2 million, offset by non-cash stock-based compensation of $0.3 million, as well as a decrease in prepaid expenses and other current assets of $0.4 million.

Cash used in operations of $8.2 million for the nine months ended September 30, 2024, was the result of the net loss of $9.1 million, offset by increases in non-cash stock-based compensation of $0.6 million and increases in accrued expenses of $0.3 million.

Cash used in operations of $5.3 million for the nine months ended September 30, 2023, was the result of the net loss of $5.7 million, offset by non-cash stock-based compensation of $0.4 million.

Financing activities

Cash provided by financing activities of $2.3 million for the six months ended June 30, 2024, was the result of the May 2024 Warrant Inducement financing which raised gross process of $2.7 million offset by approximately $0.4 million of financing-related expenses.

Cash provided by financing activities of $5.7 million for the six months ended June 30, 2023, was the result of $4.2 million of net proceeds received from the issuance of Common Stock and warrants issued in the March 2023 Offering, as well as $1.5 million of net proceeds received from the May 2023 Offering.

Cash provided by financing activities of $7.0 million for the nine months ended September 30, 2024, was the result of the September 2024 PIPE financing which raised net proceeds of $3.1 million, sales of the Company’s shares through the ATM Agreement which raised net proceeds of $1.5 million during the third quarter of 2024, and the May 2024 warrant inducement financing which raised net proceeds of $2.3 million.

Cash provided by financing activities of $5.7 million for the nine months ended September 30, 2023, was the result of $4.2 million of net proceeds received from the issuance of Common Stock and warrants issued in the March 2023 Offering, as well as $1.5 million of net proceeds received from the May 2023 Offering.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue or commercialized any products.

As of June 30, 2024, our cash and cash equivalents totaled $4.9 million, and we had an accumulated deficit of $59.4 million.

For the six months ended June 30, 2024, and the year ended December 31, 2023, we used cash of $4.8 million and $6.4 million, respectively, in operations.

We expect our cash resources to fund operations into the fourth quarter of 2024.

As of September 30, 2024, our cash and cash equivalents totaled $6.1 million, and we had an accumulated deficit of $62.5 million.

For the nine months ended September 30, 2024, and the year ended December 31, 2023, we used cash of $8.2 million and $6.4 million, respectively, in operations.

We expect our cash resources to fund operations into the second quarter of 2025.

We anticipate that we will continue to incur net losses for the foreseeable future.

13 unchanged sentences

We expect these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly.

We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2024.

We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

We have based this estimate of cash runway on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

7 unchanged sentences

In such an event, the terms of these securities may include liquidation or other preferences that adversely affect the rights of the holders of our Common Stock.

On June 7, 2024, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC (the “Sales Agent”) providing for the sale of up to $1,157,761 of our shares of common stock as set forth in the ATM Agreement.

The Sales Agent will be entitled to compensation at a fixed commission rate of 3.0% of the gross sales price of the shares of common stock sold pursuant to the ATM Agreement, as well as other transactional fees.

During the quarter ended June 30, 2024, we did not sell any shares under the ATM Agreement.

From July 1, 2024, through the date of this report, we issued 355,806 shares of common stock under the ATM Agreement resulting in net proceeds of $1,120,181 after deducting issuance costs of $37,067.

After issuance of the 355,806 shares during July 2024, $513 remained registered under the ATM Agreement.

On August 2, 2024, we increased the maximum aggregate offering price of the shares of our common stock issuable under the ATM Agreement by $505,000, from $1,157,761 to $1,662,761.

Because of the numerous risks and uncertainties associated with research, development, and commercialization of pharmaceutical drugs, we are unable to estimate the exact amount of our working capital requirements.

27 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis