Relmada Therapeutics(RLMD) - 2023 Q4 - Annual Report

Part I Business Relmada Therapeutics is a clinical-stage biotechnology company focused on developing esmethadone for CNS diseases, with a lead program in Major Depressive Disorder - The company's lead product candidate is esmethadone (REL-1017), an NMDA receptor antagonist being developed for depression and other CNS disorders[20] - Two Phase 3 trials for esmethadone, RELIANCE I (adjunctive MDD) and RELIANCE III (monotherapy MDD), did not achieve their primary endpoints in late 2022[21][31][32] - Relmada is continuing development with two ongoing Phase 3 trials, RELIANCE II and RELIGHT, for adjunctive MDD treatment[21][34] - A new program for a modified-release formulation of psilocybin (REL-P11) is planned to enter Phase 1 human studies in the first half of 2024 for metabolic indications[22][37] Financial Performance Summary | Financial Metric | FY 2023 (USD) | FY 2022 (USD) | | :--- | :--- | :--- | | Net Loss | $(98,791,700) | $(157,043,800) | | Accumulated Deficit (as of Dec 31, 2023) | $(560,902,700) | - | Business Overview and Development Program Relmada is a clinical-stage biotech focused on esmethadone (REL-1017) for CNS diseases, primarily MDD, with two pivotal Phase 3 trials failing due to high placebo response, while other trials continue - Phase 2 study (REL-1017-202) showed statistically significant improvement on all efficacy measures (MADRS, CGI-S, CGI-I, SDQ) compared to placebo, with effects appearing on Day 4 and continuing through Day 14[24][25] - RELIANCE III (monotherapy MDD) failed its primary endpoint, with a MADRS reduction of 14.8 points vs. 13.9 for placebo, attributed to a high placebo response[31] - RELIANCE I (adjunctive MDD) also failed its primary endpoint, showing a MADRS reduction of 15.1 points vs. 12.9 for placebo, a clinically meaningful but not statistically significant difference[32] - Human Abuse Potential (HAP) studies showed REL-1017 has a significantly lower likability and abuse potential compared to oxycodone and ketamine, and was statistically equivalent to placebo[35][36] - Key upcoming milestones include completing enrollment for RELIANCE II with data expected in H2 2024, completing enrollment for the RELIGHT study by end of 2024, and initiating a Phase 1 trial for REL-P11 in H1 2024[49] Intellectual Property and Licensing Relmada's intellectual property for REL-1017 includes over 50 patents providing coverage beyond 2033, supplemented by NCE market exclusivity, and the company holds key licensing agreements for esmethadone and psilocybin programs - The company holds over 50 issued and pending patents for REL-1017, with potential coverage extending beyond 2033. REL-1017 is also eligible for 5 years of market exclusivity in the U.S. under the Hatch-Waxman Act[58] - Under the Inturrisi/Manfredi license, Relmada pays $45,000 quarterly until the first commercial sale. The agreement includes a 'Key Man' provision linked to the CEO, which was extended until December 31, 2027[61][62] - The Psilocybin (Arbormentis) license agreement involved a $12.7 million upfront payment (cash and warrants) and includes potential milestone payments up to $160 million plus low single-digit royalties[65] Government Regulation The company's products are subject to extensive FDA and DEA regulations, covering R&D, clinical trials, and post-market surveillance, with esmethadone and psilocybin classified as controlled substances - The FDA approval process involves preclinical testing and three sequential phases of clinical trials to establish safety and effectiveness before an NDA can be submitted[70][75] - Esmethadone received Fast Track Designation from the FDA for the treatment of MDD, which may facilitate development and expedite review[30][83] - Esmethadone is currently a Schedule II controlled substance, and psilocybin is a Schedule I substance. Both are subject to strict regulation by the DEA, including manufacturing quotas, registration, security, and recordkeeping requirements[101][105] - The company's operations will be subject to healthcare fraud and abuse laws, such as the Anti-Kickback Statute and the False Claims Act, and pricing regulations like the Inflation Reduction Act (IRA)[110][111][117] Human Capital As of December 31, 2023, Relmada had 20 employees, with approximately 60% female, and its performance-based compensation strategy showed no meaningful pay disparities in a 2023 review - The company had a total of 20 employees as of December 31, 2023[121] - The employee population was approximately 60% female as of year-end 2023[122] - Compensation includes base pay and performance-based annual bonuses. A 2023 third-party evaluation found no significant pay differences based on gender or race[124] Risk Factors The company faces significant risks from its dependence on esmethadone, which has experienced Phase 3 failures, alongside high clinical, regulatory, intellectual property, third-party reliance, and financial risks due to historical losses - Business Risk: The company's business is highly dependent on the success of esmethadone (REL-1017), its only clinical-stage candidate. The failure of two Phase 3 trials (RELIANCE I and III) significantly increases the risk, and there is no guarantee that ongoing or future trials will succeed[133][138] - Clinical & Regulatory Risk: There is a high failure rate for drugs in clinical trials. Early positive results are not predictive of late-stage success. The active ingredients (esmethadone and psilocybin) are controlled substances, subject to strict DEA quotas and regulations, which could limit supply and increase costs[138][184][186] - Licensing Risk: The exclusive license for esmethadone contains a 'Key Man' provision tied to the CEO, which, if triggered, could lead to termination of the agreement, jeopardizing the company's entire lead program[141][143][144] - Financial Risk: The company has a history of substantial losses ($560.9 million accumulated deficit) and has never generated revenue. Future profitability is uncertain and dependent on successful commercialization and significant revenue generation[148] - Third-Party Reliance Risk: Relmada relies on third parties for manufacturing and conducting clinical trials. Any failure by these parties to perform adequately could delay or derail development programs and regulatory approval[229][234] Unresolved Staff Comments The company reports no unresolved staff comments - There are no unresolved staff comments[249] Cybersecurity Relmada maintains a cybersecurity risk management program led by its CCO with Board oversight, utilizing internal and third-party resources, and has not experienced any material incidents to date - The company has a cybersecurity risk management program overseen by the Chief Compliance Officer (CCO) and the Audit Committee of the Board of Directors[250][251] - Processes are in place to manage risks from third-party service providers, including security reviews and contractual obligations[256] - The company reports that it has not experienced any material cybersecurity incidents that have materially affected its business, operations, or financial condition[257] Properties Relmada Therapeutics does not own any real property, leasing its corporate headquarters in Coral Gables, Florida, and additional office space in New York, NY - The company does not own any property and leases all its office spaces[258] - Corporate headquarters are located at 2222 Ponce de Leon Blvd., Coral Gables, Florida, with a lease renewed for 2024 at approximately $7,000 per month[259] - The company leases office space in New York, NY at 12 E 49 Street for approximately $12,000 per month, with the lease expiring on July 31, 2024[261] Legal Proceedings The company is not currently aware of any legal proceedings or potential claims likely to have a material adverse effect on its business or financial condition - The Company is not currently aware of any legal proceedings or claims that would likely have a material adverse effect on its business[262] Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[263] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Relmada's common stock trades on Nasdaq under 'RLMD', with 30.2 million shares outstanding as of March 2024, and the company has never paid cash dividends, planning to amend its equity incentive plan - As of March 15, 2024, there were 30,174,202 shares of common stock outstanding[267] - The company has never paid cash dividends and does not plan to in the foreseeable future[268] Equity Compensation Plan Information | Plan Category | Securities to be issued upon exercise | Weighted average exercise price (USD) | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 17,416,192 | $12.99 | 136,750 | Management's Discussion and Analysis of Financial Condition and Results of Operations Relmada's net loss decreased to $98.8 million in 2023 due to reduced R&D expenses, ending the year with $96.3 million in cash, sufficient to fund operations for at least 12 months Results of Operations Relmada's net loss decreased to $98.8 million in 2023 from $157.0 million in 2022, primarily driven by a $58.5 million reduction in R&D expenses, while G&A expenses slightly increased Consolidated Statements of Operations Summary | Expense/Income Category | 2023 (in millions USD) | 2022 (in millions USD) | Change (in millions USD) | | :--- | :--- | :--- | :--- | | Research and Development | $54.8 | $113.3 | $(58.5) | | General and Administrative | $48.9 | $47.9 | $1.0 | | Net Loss | $(98.8) | $(157.0) | $58.2 | - The decrease in R&D expense was primarily due to a $45.5 million reduction in study costs associated with the completion of Phase 3 trials and the long-term open-label safety study (Study 310)[291] - The increase in G&A expense was mainly driven by a $2.2 million increase in compensation expense from higher employee-related costs, partially offset by a $1.5 million decrease in professional and consulting fees[291] Liquidity and Capital Resources Relmada's operating cash outflow improved to $51.7 million in 2023, with management believing current cash is sufficient for at least 12 months, despite an accumulated deficit of $560.9 million - Management believes existing cash and equivalents are sufficient to fund operations for at least 12 months from the filing date of this report[294][364] Consolidated Cash Flow Summary | Cash Flow Activity | Year Ended Dec 31, 2023 (USD) | Year Ended Dec 31, 2022 (USD) | | :--- | :--- | :--- | | Cash used in operating activities | $(51,659,206) | $(103,801,617) | | Cash provided by investing activities | $50,453,332 | $19,733,609 | | Cash (used in) provided by financing activities | $(98,463) | $45,020,474 | - Cash used in operations in 2023 was $51.7 million, primarily due to the net loss of $98.8 million, offset by $43.8 million in non-cash stock-based compensation[295] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rate fluctuations, foreign currency exposure in manufacturing agreements, and fair value re-measurement of warrants, though interest rate impact is considered minimal - Interest rate risk is present but considered low impact due to the short-term nature of cash and cash equivalents[306] - The company has foreign currency exchange risk from agreements denominated in Euros or other currencies but does not currently engage in hedging[307] - Warrants issued are re-measured to fair value each reporting period, creating market indexed security risk that affects earnings[308] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2023, with no material changes during the fourth quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2023[311] - Management determined that the company maintained effective internal control over financial reporting as of December 31, 2023, based on the COSO 2013 framework[318] - No material changes were made to internal controls over financial reporting during the fourth quarter of 2023[316] Other Information The Board approved a proposal to increase shares under the 2021 Equity Incentive Plan by 4.5 million, pending shareholder approval, and the Chief Accounting and Compliance Officer terminated a Rule 10b5-1 trading plan - The Board approved a proposal to increase the shares available under the 2021 Equity Incentive Plan by 4,500,000, pending shareholder approval[319] - Options for 4,363,250 shares issued in December 2023 are contingent upon shareholder approval of the plan amendment[327] - The Chief Accounting and Compliance Officer, Charles Ence, adopted a Rule 10b5-1 trading plan on November 15, 2023, and terminated it on November 22, 2023[328] Part III Directors, Executive Officers, Compensation, and Corporate Governance Information for Items 10 through 14 is incorporated by reference from the company's definitive proxy statement for its 2024 Annual Meeting of Stockholders, to be filed within 120 days of the fiscal year-end - The information for Part III (Items 10-14) is incorporated by reference from the company's 2024 Proxy Statement[332] Part IV Exhibits, Financial Statement Schedules This section lists exhibits filed with the Form 10-K, includes consolidated financial statements, omits schedules as not applicable, and identifies Marcum LLP as the independent registered public accounting firm - The company's consolidated financial statements are listed on the Index to Financial Statements[335] - All financial statement schedules have been omitted because they are not applicable or the necessary information is included elsewhere[335] - The company's independent registered public accounting firm is Marcum LLP[336] Financial Statements Report of Independent Registered Public Accounting Firm Marcum LLP issued an unqualified opinion on Relmada Therapeutics' consolidated financial statements for 2023 and 2022, concluding they present fairly in conformity with U.S. GAAP, with no critical audit matters identified - The auditor, Marcum LLP, issued an unqualified opinion on the consolidated financial statements[341] - The financial statements are deemed to be presented fairly in conformity with U.S. GAAP[341] - The audit did not identify any critical audit matters[345] Consolidated Financial Statements Total assets decreased to $97.6 million in 2023 from $152.9 million in 2022, driven by reduced cash, while the net loss improved to $98.8 million, leading to an accumulated deficit of $560.9 million Consolidated Balance Sheet Summary | Balance Sheet (in millions USD) | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and short-term investments | $96.3 | $148.3 | | Total Assets | $97.6 | $152.9 | | Total Liabilities | $12.2 | $12.5 | | Total Stockholders' Equity | $85.4 | $140.4 | Consolidated Statement of Operations Summary | Statement of Operations (in millions USD) | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | | :--- | :--- | :--- | | Research and development | $54.8 | $113.3 | | General and administrative | $48.9 | $47.9 | | Loss from operations | $(103.7) | $(161.2) | | Net loss | $(98.8) | $(157.0) | Notes to Consolidated Financial Statements The notes detail accounting policies, including expensing R&D and using Black-Scholes for stock compensation, disclose $62.4 million in unrecognized stock-based compensation, and explain limitations on NOL utilization due to a full valuation allowance - Stock-Based Compensation: The company granted 5.7 million stock options in 2023. As of Dec 31, 2023, there was approximately $62.4 million of unrecognized stock-based compensation expense to be recognized over a weighted average period of 2.5 years[420][421] - Income Taxes: The company has federal Net Operating Loss (NOL) carryforwards of approximately $100.1 million. However, utilization is significantly limited due to past ownership changes under IRC Section 382. A full valuation allowance is maintained against all deferred tax assets[429][430][431] - Commitments: The company has ongoing financial commitments, including quarterly payments of $45,000 under the Inturrisi/Manfredi license agreement and potential milestone payments up to $160 million under the Arbormentis (psilocybin) license agreement[439][441] - Subsequent Events: Between Jan 1 and Mar 19, 2024, 74,999 outstanding options were exercised for cash proceeds of $246,747. In January 2024, executive officers purchased 171,645 shares of common stock[451][452]