Item 7. Management’s Discussion and Analysis
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
information and financial data discussed below is derived from the consolidated financial statements of Relmada for the years ended December
31, 2024 and 2023. The consolidated financial statements of Relmada were prepared and presented in accordance with generally accepted
accounting principles in the United States. The information and financial data discussed below is only a summary and should be read in
conjunction with the historical financial statements and related notes of Relmada contained elsewhere in this Annual Report. The consolidated
financial statements contained elsewhere in this Report fully represent Relmada’s financial condition and operations; however,
they are not indicative of the Company’s future performance. See “Cautionary Note Regarding Forward Looking Statements”
above for a discussion of forward-looking statements and the significance of such statements in the context of this Annual Report.
This
discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results
may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth
in the section entitled “ Risk Factors ” and elsewhere herein. The information and financial data discussed below is
only a summary and should be read in conjunction with the historical financial statements and related notes of Relmada Therapeutics,
Inc. contained elsewhere in this document. Relmada’s current consolidated financial position and consolidated results of operations;
are not necessarily indicative of the Company’s future performance. See “Cautionary Note Regarding Forward Looking Statements”
above for a discussion of forward-looking statements and the significance of such statements in the context of this document.
Our
Corporate History and Background
Relmada Therapeutics, Inc. (Relmada, the Company,
we or us) (a Nevada corporation), is a publicly traded, clinical-stage biotechnology company. We substantially redesigned our development
programs following a comprehensive strategic review occasioned by disappointing interim analysis results in December 2024 indicating that
our then lead development candidate, esmethadone (d-methadone, dextromethadone, or REL-1017) for the adjunctive treatment of Major Depressive
Disorder (MDD), was unlikely to succeed in its pivotal trial. We concluded in our review that the most promising path to create shareholder
value was to lever our extensive drug development expertise and clinical operations capabilities by acquiring new development candidates,
while pausing further work on REL-1017. Hence we accelerated ongoing efforts to augment our development pipeline while diversifying its
risk, which culminated in the recently announced licensing of NDV-01, a novel delivery formulation of a widely used chemotheraphy
regimen used to treat non muscle-invasive bladder cancer (NMIBC) that is currently in Phase 2, and the acquisition of Sepranolone, a Phase
2b-ready neurosteroid with potential applications in Prader-Willi syndrome (PWS), Tourette Syndrome (TS), essential tremor and other diseases
related to excessive GABAergic activity.
We also had been developing REL-P11, a modified-release
formulation of psilocybin, as an investigational agent for the treatment of metabolic disease. The REL-P11 program has successfully completed
a Phase 1 safety study. However, in light of an ongoing strategic review of this business opportunity, the changing regulatory landscape
for psychedelics, its early stage of development and the acquisition of new, more advanced product candidates, this program has also been
paused.
REL-1017 Program Update
Since 2013, we had been developing esmethadone
as our lead product candidate as an oral agent for the treatment of depression and other potential indications. In December 2024,
we reported that the pre-planned interim analysis, conducted by the Independent Data Monitoring Committee (DMC), of Reliance II, our Phase
3 study of esmethadone as a potential adjunctive treatment for MDD, indicated that the study was futile and unlikely to meet the primary
efficacy endpoint with statistical significance, and that we would pause the Reliance II and Relight Phase 3 studies of esmethadone.
Following this 2024 REL-1017 setback, which we believe most likely
resulted from an overwhelming placebo response—a trend that has become more common than exceptional in central nervous system (CNS)
clinical trials—the program has been paused pending a comprehensive data review, after which we will make a decision regarding the
future of this program.
41
Strategic Business Review and New Approach
Following a comprehensive evaluation of the Company’s
business strategy and growth opportunities, management and the Board of Directors have implemented a revised approach aimed at maximizing
shareholder value. This refined strategy remains focused on:
● Innovation
– Advancing novel and differentiated therapeutic solutions
● Addressing
Unmet Medical Needs – Targeting areas with significant gaps in treatment
● Large
Market Opportunities – Prioritizing programs with substantial commercial potential
● Intellectual
Property Protection – Strengthen and extending patent coverage to safeguard long-term value
Key Strategic Priorities
Under this updated approach, we will continue
to emphasize:
● Leveraging
Development Expertise – Focusing on high-value therapeutic areas while rigorously assessing development risks, market viability,
and success probabilities
● Pipeline
Diversification – Expanding and balancing our portfolio to mitigate risk and enhance growth potential
● Prioritizing
Mid- to Late-Stage Programs – Concentrating resources on assets with clear path to commercialization
● Accelerating
Market Entry – Streamline development timelines to bring therapies to patients faster
● Pursuing
Cost-Effective Development Paths – Optimizing resource allocation and strategic partnerships
● Targeted
Commercialization Strategy – Focusing on opportunities that require minimal sales and marketing infrastructure
This strategic framework positions the Company for long-term growth
while maintaining execution and financial prudence.
Progress in Strategic Execution
We commenced a strategic review in December 2024
of our then existing development pipeline and the opportunities open to us given our core strengths in every aspect of drug development,
with particular expertise in CNS. That process recently resulted in a series of transactions that have considerably expanded and strengthened
Relmada’s potential to create shareholder value. Over the past three months, we have successfully closed two important transactions,
NDV-01 in-licensing and Sepranolone acquisition, which align with our new strategy.
On February 6, 2025, Relmada announced the acquisition
from Asarina Pharma AB (Asarina) of Sepranolone, a Phase 2b ready neurosteroid being developed for the potential treatment of PWS, TS,
essential tremor and other diseases related to the excessive GABAergic activity.
On March 25, 2025, Relmada announced the in-license
agreement from Trigone Pharma Ltd. (Trigone) of NDV-01, a novel delivery formulation of a widely used chemotherapeutic regimen used to
treat NMIBC.
We have not generated revenues and do not anticipate
generating revenues for the foreseeable future. We had a net loss of approximately $79,979,400 and $98,791,700 for the years ended December
31, 2024 and 2023, respectively. At December 31, 2024, we have an accumulated deficit of approximately $640,882,000.
42
Results of Operations
For the Year Ended December 31, 2024 vs the Year Ended December
31, 2023
Research and Development Expense
Total research and development expense for the
year ended December 31, 2024 was approximately $46,175,500, as compared to $54,807,400 for the same period of 2023, a decrease of $8,631,900.
The decrease in research and development expense was primarily due to:
●
Decrease in study costs
of $8,667,500 associated with the completion of two Phase 3 trials and the long-term, open-label, safety study (Study 310) during
2023;
●
Decrease in stock-based
compensation expense of $1,286,400;
●
Decrease in compensation
expense of $280,700 due to lower employee-related costs;
●
Increase in other research
expenses of $1,248,700 primarily associated with additional consultants contracted to assist in the execution of our Phase 3 trials;
●
Increase in pre-clinical
and toxicology expenses of $328,900; and
●
Increase in manufacturing
and drug storage costs of $25,100 related to materials needed to complete the Phase 3 program.
General and Administrative Expense
Total general and administrative expense for
the year ended December 31, 2024 was approximately $37,715,500, as compared to $48,894,900 for the same period of 2023, a decrease of
$11,179,400. The decrease in general and administrative expenses was primarily due to:
●
Decrease in stock-based compensation
expense of $12,335,900 which can be attributed to two key factors. First, equity grants from four
years ago have dropped off the amortization schedule, as they reached the end of their vesting period.
Second, the Company granted significantly fewer options this past year due to the lack of shareholder
approval to increase the 2021 Equity Incentive Plan. Without this approval, the company was unable
to issue a substantial number of new stock options, further contributing to the reduction in stock-based
compensation expenses for the current period. These two factors combined have led to the notable
decrease in these expenses;
●
Increase in other general
and administrative expenses of $1,006,000 due to increases in professional fees and consulting expenses during 2024; and
●
Increase in compensation
expense of $150,500 due to higher employee-related costs.
Other Income, Net
Interest/investment income was approximately
$3,530,000 for the year ended December 31, 2024 compared to approximately $5,151,700 for the same period of 2023, a decrease of $1,621,700.
The decrease was primarily related to lower average investment balance during 2024 as compared to 2023.
Realized gain on short-term investments was approximately
$374,900 compared to a realized loss of approximately $4,064,400 for the same period of 2023, an increase of $4,439,300. The increase
was related to the timing of the sales of short-term investments along with market conditions.
Unrealized gain on short-term investments was
approximately $6,700 compared to approximately $3,823,200 for the same period of 2023, a decrease of $3,816,500. The decrease was related
to the market conditions.
43
Income Taxes
The Company did not provide for income taxes
for the years ended December 31, 2024 and 2023, since there was a loss and a full valuation allowance against all deferred tax assets.
Net Loss
The Company recorded a net loss of approximately
$79,979,400 and $98,791,700 or $2.65 and $3.28 per common share, basic and diluted, during the years ended December 31, 2024 and 2023,
respectively, based on the factors described above.
Liquidity
As
shown in the accompanying audited consolidated financial statements, the Company has incurred
losses and negative cash flows from operations since inception and expects to incur additional
losses until such time that it can generate significant revenue from the commercialization
of its product candidates. During the twelve months ended December 31, 2024, the Company
incurred a net loss of $79,979,354 and had negative operating cash flows of $51,755,798.
Given the Company’s projected operating requirements and its existing cash and cash
equivalents and short-term investments, the Company is projecting insufficient liquidity
to sustain its operations through one year following the date that the financial statements
are issued. These conditions and events raise substantial doubt about the Company’s
ability to continue as a going concern.
In response to these conditions, management is
currently evaluating the size and scope of any subsequent operations and clinical trials that will affect the timing to obtain the required
funding of future operations. Financing strategies may include, but are not limited to, the public or private sale of equity or debt
securities or from bank or other loans or through strategic collaboration and/or licensing agreements. There can be no assurances that
the Company will be able to secure additional financing, or if available, that it will be sufficient to meet its needs or on favorable
terms. Because management’s plans have not yet been finalized and are not within the Company’s control, the implementation
of such plans cannot be considered probable. As a result, the Company has concluded that management’s plans do not alleviate substantial
doubt about the Company’s ability to continue as a going concern.
Cash Flows from Operating, Investing and Financing Activities
The following table sets forth selected cash flow information for
the periods indicated below:
For the
Year Ended
For the
Year Ended
December 31,
December 31,
2024
2023
Cash used in operating activities
$ (51,755,798 )
$ (51,659,206 )
Cash provided by investing activities
51,561,597
50,453,332
Cash used in financing activities
(40,341 )
(98,463 )
Net decrease in cash and cash equivalents
$ (234,542 )
$ (1,304,337 )
For the year ended December 31, 2024, net cash
used in operating activities was $51,755,798 primarily due to the net loss of $79,979,354. This was offset by non-cash expenses which
primarily consisted of stock-based compensation of $30,184,414 and stock appreciation rights compensation of $4,467. There were realized
and unrealized gains on short term investments of $374,926 and $6,735, respectively. In addition, there were decreases in operating assets
and liabilities for the year ended December 31, 2024 of $1,583,664.
For the year ended December 31, 2023, net cash
used in operating activities was $51,659,206 primarily due to the net loss of $98,791,746. This was offset by non-cash expenses which
primarily consisted of stock-based compensation of $43,811,149. There were realized losses and unrealized gains on short term investments
of $4,064,391 and $3,823,234, respectively. In addition, there were increases in operating assets and liabilities for the year ended
December 31, 2023 of $3,080,234.
For the year ended December 31, 2024, net cash
provided by investing activities was $51,561,597, due to $12,079,628 of purchases of short term investments offset by $63,641,225 of
sales of short term investments.
For the year ended December 31, 2023, net cash
provided by investing activities was $50,453,332, due to $90,463,532 of purchases of short term investments offset by $140,916,864 of
sales of short term investments.
Net
cash used in financing activities for the year ended December 31, 2024, was $40,341 due to
proceeds from cash exercises of options of $246,747 offset by ATM reactivation fees of $287,088.
Net cash used in financing activities for the
year ended December 31, 2023, was $98,463 due to ATM reactivation fees.
44
Effects of Inflation
Our assets are primarily monetary, consisting
of cash and cash equivalents and short-term investments. Because of their liquidity, these assets are not directly affected by inflation.
However, the rate of inflation affects our expenses, such as those for employee compensation and contract services, which could increase
our level of expenses and the rate at which we use our resources.
Lease Obligations
The
Company is obligated to pay approximately $105,000 under 2 leases for office space over the
next year.
Seasonality
We do not have a seasonal business cycle.
Critical Accounting Policies and Use of Estimates
A critical accounting policy is one that is both
important to the portrayal of a company’s financial condition and results of operations and requires management’s most difficult,
subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses for the reporting period. Management bases its estimates on historical experience
and on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. On a continual basis,
management reviews its estimates utilizing currently available information, changes in facts and circumstances, historical experience,
and reasonable assumptions. After such reviews, and if deemed appropriate, managements estimates are adjusted accordingly. Actual results
could differ from those estimates and assumptions under different and/or future circumstances. Management considers an accounting estimate
to be critical if:
●
it requires assumptions
to be made that were uncertain at the time the estimate was made; and
●
changes in the estimate,
or the use of different estimating methods that could have been selected, could have a material impact on results of operations or
financial condition.
We evaluate our estimates and assumptions on
an ongoing basis and none of the Company’s estimates and assumptions used within the consolidated financial statements involve
a high level of estimation uncertainty. For additional discussion regarding the application of the significant accounting policies, see
Note 3 to the Company’s consolidated financial statements included in this report.
Recent Accounting Pronouncements
The Company lists material recent accounting
pronouncements in Note 3 of the consolidated financial statements.
45