Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENT NOTICE
This Quarterly Report on Form 10-Q (this Report)
contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than
statements of historical fact contained in this Quarterly Report, including statements regarding future events, our future financial
performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have
attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,”
“continue,” “could,” “estimates,” “expects,” “intends,” “may,”
“plans,” “potential,” “predicts,” “should,” or “will” or the negative of
these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable
basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties
and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Quarterly Report, which may cause
our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking
statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is
not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking
statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and
we assume no obligation to update any such forward-looking statements.
You should not place undue reliance on any forward-looking
statement, each of which applies only as of the date of this Quarterly Report on Form-10-Q. Before you invest in our securities, you
should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this
Quarterly Report could negatively affect our business, operating results, financial condition and stock price. Except as required by
law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Quarterly Report
on Form-10-Q to conform our statements to actual results or changed expectations.
Business Overview
Relmada Therapeutics, Inc. (Relmada or the Company,
we or us) (a Nevada corporation), is a clinical-stage biotechnology company focused on the development of esmethadone (d-methadone, dextromethadone,
REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone, an isomer of methadone, is a new chemical entity (NCE) that
potentially addresses areas of high unmet medical need in the treatment of central nervous system (CNS) diseases and other disorders.
Our lead product candidate, esmethadone, is being
developed as a rapidly acting, oral agent for the treatment of depression and other potential indications. On October 15, 2019, we reported
top-line data from study REL-1017-202. During late 2022, we announced RELIANCE I and III, both Phase 3 trials, did not achieve their primary
endpoints. Relmada has completed its long-term open label study and plans to complete two additional ongoing adjunctive Phase 3 trials
(RELIANCE II and RELIGHT).
Relmada also intends, in 2024, to enter human
studies of its proprietary, modified-release formulation of psilocybin (REL-P11) in doses that we believe are lower than those associated
with psychedelic effects for metabolic indications.
Esmethadone (d-Methadone, dextromethadone,
REL-1017)
Phase 2 Clinical Trial
In the REL-1017-202 study, 62 subjects, with
an average age of 49.2 years, with an average Hamilton Depression Rating Scale score of 25.3 and an average Montgomery-Asberg Depression
Rating Scale (MADRS) score of 34.0 (severe depression), were randomized. Other demographic characteristics were balanced across all arms.
After an initial screening period, subjects were randomized to one of three arms: placebo, REL-1017 25 mg or REL-1017 50 mg, in addition
to stable background antidepressant therapy. Subjects in the REL-1017 treatment arms received one loading dose of either 75 mg (25 mg
arm) or 100 mg (50 mg arm) of REL-1017. Subjects were treated inpatient for 7 days and discharged home at Day 9. They returned for follow-up
visits at Day 14 and Day 21. Efficacy was measured on Days 2, 4 and 7 in the dosing period and on Day 14, one week after treatment discontinuation.
61 subjects received all treatment doses and were included in the per-protocol population (PPP) treatment analysis; 57 subjects completed
all visits. All 62 randomized subjects were part of the intention-to-treat (ITT) analysis. No differences were observed between the ITT
and PPP analyses and results.
14
We observed that subjects in both the REL-1017
25 mg and 50 mg treatment groups experienced statistically significant improvement on all efficacy measures tested as compared to subjects
in the placebo group, including: MADRS; the Clinical Global Impression – Severity (CGI-S) scale; the Clinical Global Impression
– Improvement (CGI-I) scale; and the Symptoms of Depression Questionnaire (SDQ).
Improvements on the MADRS endpoint appeared on
Day 4 in both REL-1017 dose groups and continued through Day 7 and Day 14, seven days after treatment discontinuation, with P values<
0.03 and large effect sizes (a measure of quantifying the difference between two groups), ranging from 0.7 to 1.0. Similar findings emerged
from the CGI-S and CGI-I scales.
The study also confirmed the tolerability profile
of REL-1017, which was observed in the Phase 1 studies. Subjects experienced only mild and moderate adverse events (AEs), and no serious
adverse events, without significant differences between placebo and treatment groups. The AEs observed in the Phase 2a clinical study
were of the same nature as those observed in the Phase 1 clinical studies of d-Methadone, and there was no evidence of either treatment
induced psychotomimetic and dissociative AEs or withdrawal signs and symptoms upon treatment discontinuation.
Phase 3 Program
On December 20, 2020, Relmada announced that
the first patient had been enrolled in the first Phase 3 clinical trial (RELIANCE I) for the Company’s lead product candidate,
REL-1017, as an adjunctive treatment for MDD.
On April 1, 2021, Relmada announced the initiation
of RELIANCE II, the second of two sister pivotal Phase 3 clinical trials (RELIANCE I and RELIANCE II) for the Company’s lead product
candidate, REL-1017, as an adjunctive treatment for Major Depressive Disorder (MDD).
On October 4, 2021, Relmada announced the initiation
of RELIANCE III study, a monotherapy trial for the Company’s lead product candidate, REL-1017.
In addition, on October 4, 2021, Relmada announced
that in order to support potential regulatory submissions seeking approval for REL-1017 as adjunctive and monotherapy treatment, the
Food and Drug Administration (FDA) confirmed that, based on what was known at the time, Relmada would not be required to conduct a two-year
carcinogenicity study of REL-1017, as sufficient clinical data had been generated to date. The FDA also confirmed that Relmada would
not need to conduct a TQT cardiac study in humans to support cardiac safety in potential regulatory submissions for REL-1017, as the
data already provided and the data to be generated by the Phase 3 program would be adequate to evaluate the cardiac safety profile of
REL-1017.
On August 9, 2022, Relmada announced that the
FDA granted Fast Track designation to REL-1017 as a monotherapy for the treatment of MDD.
On October 13, 2022, Relmada announced that its
RELIANCE III study, evaluating REL-1017 in the monotherapy setting for MDD, did not achieve its primary endpoint, which was a statistically
significant improvement in depression symptoms compared to placebo as measured by MADRS on Day 28. In the study, the REL-1017 treatment
arm showed a MADRS reduction of 14.8 points at Day 28 versus 13.9 points for the placebo arm, a higher than expected placebo response.
On December 7, 2022, Relmada announced that its
RELIANCE I study, evaluating REL-1017 as an adjunctive treatment for MDD, did not achieve its primary endpoint, which was a statistically
significant improvement in depression symptoms compared to placebo as measured by MADRS on Day 28. In the study, the REL-1017 treatment
arm (n= 113) showed a MADRS reduction of 15.1 points at Day 28 versus 12.9 points for the placebo arm (n=114), which is a clinically meaningful
difference of 2.3 points on the MADRS. The study also showed a nominally statistically significant difference in the response rate, with
a response rate of 39.8% in the REL-1017 arm vs 27.2% in the placebo arm (p<0.05). Additionally, in a prespecified protocol population
analysis, the REL-1017 treatment arm (n=101) showed a MADRS reduction of 15.6 points at Day 28 versus 12.5 points for the placebo arm
(n=97), a difference of 3.1 points, with nominal p=0.051.
Patients who completed the RELIANCE trials were
eligible to rollover into the long-term, open-label study, Study 310, which also included subjects who had not previously participated
in a REL-1017 clinical trial. This rollover study completed subject visits on July 11, 2023.
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On September 20, 2023, Relmada announced efficacy
results for the de novo (or new to treatment) patients (204 patients) and safety results for all subjects (627 patients) from Study 310
of REL-1017 in patients with MDD. Patients treated daily with REL-1017 for up to one year experienced rapid, clinically meaningful, and
sustained improvements in depressive symptoms and associated functional impairment. REL-1017 was well-tolerated with long-term dosing,
showing low rates of adverse events and discontinuations due to adverse events. The most commonly reported adverse events deemed to be
treatment-related all occurred included headache, nausea and dizziness. No new safety signals were detected.
On August 23, 2023, Relmada announced the dosing
of the first patient in RELIGHT, a Phase 3 clinical trial for REL-1017, as an adjunctive treatment for MDD.
Human Abuse Potential (HAP) Studies
Top-line Results -Oxycodone:
On July 27, 2021, Relmada announced top-line
results that showed that all three doses of REL-1017 (25 mg, 75 mg and 150 mg, the therapeutic, supratherapeutic and maximum tolerated
doses (MTD), respectively) tested in recreational opioid users, demonstrated a highly statistically significant difference vs. the active
control drug, oxycodone 40 mg. The study’s primary endpoint was a measure of “likability” with the subjects rating
the maximum effect (or Emax) for Drug Liking “at the moment”, using a 1=100 bipolar rating scale (known as a visual analog
scale or VAS), with 100 as the highest likability, 50 as neutral (placebo-like), and 0 the highest dislike. In summary, all tested doses
of REL-1017, including the 150 mg MTD, showed a highly statistically significant difference in abuse potential versus oxycodone with
p-values less than 0.05. Consistent results were seen for the secondary endpoints. Additionally, all REL-1017 doses including 150 mg
(6 times the therapeutic dose and MTD) were statistically equivalent to placebo (p<0.05). These results support the lack of opioid
effects of REL-1017.
Top-line Results -Ketamine:
On February 23, 2022, Relmada announced top-line
results that showed that all three doses of REL-1017 (25 mg, 75 mg, and 150 mg, the therapeutic, supratherapeutic and MTD, respectively)
tested in recreational drug users, demonstrated a substantial (30+ points) and statistically significant difference vs. the active control
drug, intravenous ketamine 0.5 mg/kg over 40 minutes, and, importantly, were statistically equivalent to placebo. The study’s primary
endpoint was a measure of “likability” with the subjects rating the maximum effect (or Emax) for Drug Liking “at this
moment”, using a 1-100 bipolar rating scale (known as a visual analog scale or VAS), with 100 as the highest likability, 50 as
neutral (placebo-like), and 0 the highest dislike. Consistent results are seen for the secondary endpoints.
Psilocybin Program (REL-P11):
On October 11, 2023, Relmada announced that it
intends to enter human studies of its proprietary, modified-release formulation of psilocybin (REL-P11) for metabolic indications in
doses that we believe are lower than those associates with psychedelic effects. The Company plans to commence a single-ascending dose
Phase 1 trial in obese subjects in 2024 to define the pharmacokinetic, safety and tolerability profile of Relmada's modified-release
psilocybin formulation (REL-P11) in this population, followed by a Phase 2a trial to establish clinical proof-of-concept.
Pre-clinical data in a rodent model of metabolic
dysfunction-associated steatotic liver disease (MASLD) demonstrated beneficial effects of psilocybin on multiple metabolic parameters,
including reduced hepatic steatosis, reduced body weight gain, and fasting blood glucose levels.
Key Upcoming Anticipated Milestones
We expect multiple key milestones over the next
12 months. These include:
●
Conduct a formal interim analysis, with futility and
sample size re-estimation analyses, of RELIANCE II study by year-end 2024.
●
Outcome of RELIANCE II interim analysis expected before year-end 2024.
●
Initiate Phase 1 trial in obese subjects with the
modified-release formulation of psilocybin (REL-P11) in 2024.
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Our Development Program
Esmethadone (d-Methadone, dextromethadone,
REL-1017) as a treatment for MDD
Background
In 2021, the National Institute of Mental Health
(NIMH) estimated that 21.0 million adults aged 18 or older in the United States had at least one major depressive episode in the past
year. According to data from nationally representative surveys supported by NIMH, about 61% of adult Americans diagnosed with major depression
received treatment in 2021. Of those receiving treatment with as many as four different standard antidepressants, 33% of drug-treated
depression patients do not achieve adequate therapeutic benefits according to the Sequenced Treatment Alternatives to Relieve Depression
(STAR*D) trial published in the American Journal of Psychiatry.
In addition to the high failure rate, only two
of the marketed products for depression, esketamine (marketed by Johnson and Johnson as Spravato®), an in-clinic nasal spray treatment,
and dextromethorphan-bupropion (marketed by Axsome as Auvelity ä ), can demonstrate rapid
antidepressant effects, while the other currently approved products can take two to eight weeks to show activity. The urgent need for
improved, faster acting antidepressant treatments is underscored by the fact that severe depression can be life-threatening, due to heightened
risk of suicide.
Esmethadone Overview and Mechanism of Action
Esmethadone’s mechanism of action, as a
low affinity, non-competitive NMDA channel blocker or antagonist, is fundamentally differentiated from most currently FDA-approved antidepressants,
as well as all atypical antipsychotics used adjunctively with standard, FDA-approved antidepressants. Working through the same brain
mechanisms as ketamine and esketamine but potentially lacking their adverse side effects, esmethadone is being developed as a rapidly
acting, oral agent for the treatment of depression and potentially other CNS conditions.
In chemistry an enantiomer, also known as an
optical isomer, is one of two stereoisomers that are mirror images of each other that are non-superimposable (not identical), much as
one’s left and right hands are the same except for being reversed along one axis. A racemic compound, or racemate, is one that
has equal amounts of left- and right-handed enantiomers of a chiral molecule. For racemic drugs, often only one of a drug’s enantiomers
is responsible for the desired physiologic effects, while the other enantiomer is less active or inactive.
As a single isomer of racemic methadone, esmethadone
has been shown to possess NMDA antagonist properties with virtually no traditional opioid or ketamine-like adverse events at the expected
therapeutic doses. In contrast, racemic methadone is associated with common opioid side effects that include anxiety, nervousness, restlessness,
sleep problems (insomnia), nausea, vomiting, constipation, diarrhea, drowsiness, and others. It has been shown that the left (levo) isomer,
l-methadone, is largely responsible for methadone’s opioid activity, while the right (dextro) isomer, esmethadone, at the currently
therapeutic doses used in development is virtually inactive as an opioid while maintaining affinity for the NMDA receptor.
NMDA receptors are present in many parts of the
CNS and play important roles in regulating neuronal activity and promoting synaptic plasticity in brain areas important for cognitive
functions such as executive function, learning and memory. Based on these premises, esmethadone could show benefits in several different
CNS indications.
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Esmethadone (d-methadone, dextromethadone,
REL-1017) in other indications
While our current strategy is currently to focus
on the further development of esmethadone as an adjunctive treatment for MDD, we are evaluating other indications that Relmada may explore
in the future, including restless leg syndrome and other glutamatergic system activation related diseases.
Psilocybin Program
Relmada acquired the development and commercial
rights to a novel psilocybin and derivative program from Arbormentis LLC in July of 2021. The original focus of the program was limited
to neurodegenerative diseases. Psilocybin has neuroplastogen™ effects that have the potential to ameliorate the consequences of
multiple neurodegenerative conditions. The pleiotropic metabolic effects of low-dose psilocybin were discovered while studying its neuroplastogen™
potential in a rodent model deficient in neurogenesis – obese rodents maintained on a high fructose, high fat diet (HFHFD). Specifically,
in a rodent model of metabolic dysfunction-associated steatotic liver disease (MASLD), beneficial effects of psilocybin were observed
on multiple metabolic parameters, including reduced hepatic steatosis, reduced body weight gain, and fasting blood glucose levels.
Our Corporate History and Background
We are a clinical-stage, publicly traded biotechnology
company developing NCEs and novel versions of drug products that potentially address areas of high unmet medical need in the treatment
of depression and other CNS diseases. We are also developing a novel modified release formulation of psilocybin for the treatment of
metabolic indications.
Currently, none of our product candidates have
been approved for sale in the United States or elsewhere. We have no commercial products nor do we have a sales or marketing infrastructure.
In order to market and sell our products we must conduct clinical trials on patients and obtain regulatory approvals from appropriate
regulatory agencies, like the FDA in the United States, and similar organizations elsewhere in the world.
We have not generated revenues and do not anticipate
generating revenues for the foreseeable future. We had a net loss of $61,322,218 for the nine months ended September 30, 2024. At September
30, 2024, we had an accumulated deficit of $622,224,899.
Business Strategy
Our strategy is to leverage our considerable
industry experience, understanding of CNS markets and development expertise to identify, develop and commercialize product candidates
with significant market potential that can fulfill unmet medical needs in the treatment of CNS diseases. We have assembled a management
team along with both scientific advisors, including recognized experts in the fields of depression, and business advisors with significant
industry and regulatory experience to lead and execute the development and commercialization of esmethadone.
We plan to further develop esmethadone as our
priority program. As the drug esmethadone is an NCE, the regulatory pathway required to support a new drug application (NDA) submission
involves a full clinical development program. We plan to continue to generate intellectual property (IP) that will further protect our
products from competition. We will also continue to prioritize our product development activities after taking into account the resources
we have available, market dynamics and potential for adding value.
Market Opportunity
We believe that the market for addressing areas
of high unmet medical need in the treatment of CNS diseases will continue to be large for the foreseeable future and that it will represent
a sizable revenue opportunity for us. For example, the World Health Organization (WHO) has estimated that CNS diseases affect nearly
2 billion people globally, making up approximately 40% of total disease burden (based on disability adjusted life years), compared with
13% for cancer and 12% for cardiovascular disease.
The depression treatment market is segmented on
the basis of antidepressants drugs, devices, and therapies. Antidepressants are the largest and most popular market segment. The antidepressants
segment consists of large pharmaceutical and generic companies, such as Eli Lilly, Pfizer, GlaxoSmithKline, Allergan, Sage Therapeutics
and Johnson & Johnson. Some of the notable drugs produced by these companies are Cymbalta® (Eli Lilly), Effexor® (Pfizer),
Pristiq® (Pfizer), ZURZUVAE TM (Sage), Spravato® (Johnson & Johnson) and Auvelity™ (Axsome).
Intellectual Property Portfolio and Market
Exclusivity
We have over 50 issued patents and pending patent
applications related to REL-1017 for multiple uses, including psychological and neurological conditions, potentially providing coverage
beyond 2033. We have also secured an Orphan Drug Designation from the FDA for d-methadone for “the treatment of postherpetic neuralgia”
(postherpetic neuralgia is lasting pain in areas of skin affected by previous outbreaks of shingles, caused by the varicella-zoster, or
herpes zoster, virus) which, upon potential NDA approval, carries 7-year FDA Orphan Drug marketing exclusivity. In the European Union,
some of our prospective products may be eligible up to 10 years of market exclusivity, which includes 8 years data exclusivity and 2 years
market exclusivity. In addition to any granted patents, REL-1017 will be eligible for market exclusivity to run concurrently with the
term of the patent for 5 years in the U.S. (Hatch Waxman Act) and may be eligible for an additional 6 months of pediatric exclusivity
and up to 10 years of exclusivity in the European Union. We believe an extensive intellectual property estate of US and foreign patents
and applications, once approved, will protect our technology and products.
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Key Strengths
We believe that the key elements for our market success include:
●
Compelling lead product opportunity, REL-1017 currently in two Phase
3 trials for the adjunctive treatment of MDD (RELIANCE II and RELIGHT) that build on the knowledge obtained from RELIANCE I, which
did not meet its primary endpoint.
●
Robust and highly statistically significant, efficacy seen with esmethadone
in a randomized Phase 2 trial with the primary endpoint at 7 days, with onset of action seen at 4 days, and the effect carrying through
to 14 days (7 days post-treatment).
●
Successful Phase 1 safety studies of esmethadone and strong clinical
activity signal in depression established in three independent animal models in preclinical studies.
●
Potential in additional multiple indications in underserved markets
with large patient population in other affective disorders, and cognitive disorders.
●
Substantial esmethadone IP Portfolio and market protection: approved
and filed patent applications provide coverage beyond 2033.
●
Portfolio diversification with the development of a novel psilocybin (REL-P11) for the treatment of metabolic indications. This program is expected to enter human studies, to define its pharmacokinetic, safety and tolerability profile, in 2024.
● Scientific
support of leading experts: Our scientific advisors include clinicians and scientists who
are affiliated with a number of highly regarded medical institutions such as Harvard, Cornell,
Yale, and University of Pennsylvania.
Available Information
Reports we file with the Securities and Exchange
Commission (SEC) pursuant to the Exchange Act of 1934, as amended (the Exchange Act), including annual and quarterly reports, and other
reports we file, can be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street NE, Washington,
D.C. 20549.
Results of Operations
For the Three Months Ended September 30, 2024 versus September
30, 2023 :
Three Months
Ended
Three Months
Ended
September 30,
2024
September 30,
2023
Increase
(Decrease)
Operating Expenses
Research and development
$ 11,149,136
$ 10,454,072
$ 695,064
General and administrative
11,859,702
12,238,566
(378,864 )
Total
$ 23,008,838
$ 22,692,638
$ 316,200
Research and Development Expense
Research and development expense for the three
months ended September 30, 2024, was approximately $11,149,100 compared to $10,454,100 for the three months ended September 30, 2023,
an increase of approximately $695,000. The increase was due to:
● Decrease in study costs of
$842,900 associated with the completion of the long-term, open-label study, Study 310 in the 3 rd Quarter 2023, as well as
RELIANCE I and III in late 2022;
● Decrease in manufacturing and drug storage costs of $256,900;
● Decrease
in compensation expense of $115,100 due to a decrease in research and development employees and their related bonuses;
● Decrease
in stock-based compensation expense of $18,200 related to options granted to employees;
● Increase in other research
expenses of $1,915,500 primarily associated with the ramp-up of the 302 and 304 studies in 2024; and
● Increase in stock appreciation rights expense of $12,600
related to stock appreciation rights granted to employees.
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General and Administrative Expense
General and administrative expense for the three months ended September
30, 2024, was approximately $11,859,700 compared to $12,238,600 for the three months ended September 30, 2023, a decrease of approximately
$378,900. The decrease was due to:
●
Decrease in stock-based compensation of $3,425,600 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 cash compensation expense of $2,060,100 related to retention bonuses. These bonuses were designed to help offset the absence
of equity-based compensation, ensuring that the Company's leadership remained incentivized and aligned with the organization's long-term
goals; and
●
Increase in other general and administrative expenses of $986,600 primarily due to an increase in consulting services.
Other Income (Expense)
Interest / investment income was approximately
$856,500 and $1,321,400 for the three months ended September 30, 2024 and 2023, respectively. The decrease was due to lower interest
rates and investment yields. Realized gain on short-term investments was approximately $147,800 and realized loss on short-term investments
was approximately $51,700 for the three months ended September 30, 2024 and 2023, respectively. Unrealized gain on short-term investments
was approximately $278,600 and unrealized loss on short-term investments was approximately $579,100 for the three months ended September
30, 2024 and 2023, respectively.
Net Loss
The net loss for the Company for the three months ended September 30,
2024 and 2023 was approximately $21,726,000 and $22,002,100, respectively. The Company had loss per share basic and diluted of $0.72 and
$0.73 for the three months ended September 30, 2024 and 2023, respectively.
Income Taxes
The Company did not provide for income taxes
for the three months ended September 30, 2024 and 2023, since there was a loss and a full valuation allowance against all deferred tax
assets.
Results of Operations
For the Nine Months Ended September 30, 2024 versus September 30,
2023 :
Nine Months
Ended
Nine Months
Ended
September 30,
2024
September 30,
2023
Increase
(Decrease)
Operating Expenses
Research and development
$ 35,175,531
$ 40,055,287
$ (4,879,756 )
General and administrative
29,639,951
36,817,686
(7,177,735 )
Total
$ 64,815,482
$ 76,872,973
$ (12,057,491 )
Research and Development Expense
Research and development expense for the nine
months ended September 30, 2024 was approximately $35,175,500 compared to $40,055,300 for the nine months ended September 30, 2023, a
decrease of approximately $4,879,800. The decrease was due to:
● Decrease
in study costs of $7,925,700 associated with the completion of the long-term, open-label study, Study 310 in the 3 rd Quarter
2023, as well as RELIANCE I and III in late 2022
● Decrease in
stock-based compensation expense of $455,700;
● Decrease
in compensation expense of $261,900 due to a decrease in research and development employees and their related bonuses;
● Increase
in other research expenses of $3,587,500 primarily associated with the ramp-up of the 302 and 304 studies in 2024;
● Increase
in manufacturing and drug storage costs of $129,700;
● Increase
in pre-clinical and toxicology expenses of $33,700; and
● Increase in stock appreciation right expenses of $12,600.
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General and Administrative Expense
General and administrative expense for the nine months ended September
30, 2024 was approximately $29,640,000 compared to $36,817,700 for the nine months ended September 30, 2023, a decrease of approximately
$7,177,700. The decrease was due to:
●
Decrease in stock-based compensation of $10,003,100 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 cash compensation expense of $2,034,700 related to the retention bonuses. These bonuses were designed to help offset the absence
of equity-based compensation, ensuring that the company's leadership remained incentivized and aligned with the organization's long-term
goals; and
● Increase
in other general and administrative expenses of $790,700 primarily due to an increase in consulting services.
Other Income (Expense)
Interest / investment income was approximately $2,875,400 and $3,892,500
for the nine months ended September 30, 2024 and 2023, respectively. The decrease was due to lower interest rates and investment yields.
Realized gain on short-term investments was approximately $334,100 and realized loss on short term investments was approximately $718,400
for the nine months ended September 30, 2024 and 2023, respectively. Unrealized gain on short-term investments was approximately $283,800
and $72,300 for the nine months ended September 30, 2024 and 2023, respectively.
Net Loss
The net loss for the Company for the nine months ended September 30,
2024 and 2023 was approximately $61,322,200 and $73,626,600, respectively. The Company had loss per share basic and diluted of $2.03 and
$2.45 for the nine months ended September 30, 2024 and 2023, respectively.
Income Taxes
The Company did not provide for income taxes
for the nine months ended September 30, 2024 and 2023, since there was a loss and a full valuation allowance against all deferred tax
assets.
Liquidity
As shown in the accompanying unaudited condensed
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 nine months ended September 30, 2024, the Company incurred a net loss of $61,322,218 and had negative operating cash flows
of $42,956,164. 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.
The following table sets forth selected cash flow information for
the periods indicated below:
Nine Months
Ended
September 30,
2024
Nine Months
Ended
September 30,
2023
Cash used in operating activities
$ (42,956,164 )
$ (41,409,492 )
Cash provided by investing activities
40,216,239
42,712,186
Cash provided by financing activities
132,146
-
Net (decrease) increase in cash and cash equivalents
$ (2,607,779 )
$ 1,302,694
For the nine months ended September 30, 2024,
cash used in operating activities was $42,956,164 due to the net loss of $61,322,218 offset by non-cash stock-based compensation charges
of $23,458,012. There were realized and unrealized gains on short-term investments of $334,082 and $283,803, respectively. In addition,
there was a decrease in operating assets and liabilities of $4,474,073.
21
For the nine months ended September 30, 2023,
cash used in operating activities was $41,409,492 due to the net loss of $73,626,588 offset by non-cash stock-based compensation charges
of $33,916,921. There were realized losses and unrealized gains on short-term investments of $718,422 and $72,329, respectively. In addition,
there was a decrease in operating assets and liabilities of $2,345,918.
For the nine months ended September 30, 2024, cash provided by investing
activities was $40,216,239, due to $11,424,986 of purchases of short-term investments offset by $51,641,225 of sales of short-term investments.
For the nine months ended September 30, 2023,
cash provided by investing activities was $42,712,186, due to $57,151,963 of purchases of short-term investments offset by $99,864,149
of sales of short-term investments.
Net cash provided by financing activities for
the nine months ended September 30, 2024 was $132,146, due to proceeds from options exercised for common stock of $246,747 offset by ATM
fees of $114,601.
Net cash provided by financing activities for
the nine months ended September 30, 2023 was $0.
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.
Commitments and Contingencies
Please refer to Note 7 in our Annual Report on
Form 10-K for the year ended December 31, 2023 under the heading Commitments and Contingencies. To our knowledge there have been no material
changes to the risk factors that were previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December
31, 2023. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially
adversely affect our business, financial condition and/or operating results.
Critical Accounting Policies and 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.
Our unaudited condensed consolidated financial
statements are presented in accordance with U.S. GAAP, and all applicable U.S. GAAP accounting standards effective as of September 30,
2024 have been taken into consideration in preparing the unaudited condensed consolidated financial statements. The preparation of unaudited
condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated 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, management’s 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 unaudited condensed 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 unaudited condensed consolidated financial statements included in this report.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.