DERMATA THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly those under "Risk Factors."
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties, and other factors, which may be beyond our control, and which may cause our actual results, performance, or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future.
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
· our lack of operating history;
· the expectation that we will incur significant operating losses for the
foreseeable future and will need significant additional capital;
· our current and future capital requirements to support our development and
commercialization efforts for our product candidates and our ability to
satisfy our capital needs;
· our dependence on our product candidates, which are still in various
stages of clinical development;
· our ability to acquire sufficient quantities of raw material needed to
manufacture our drug product;
· our, or that of our third-party manufacturers, ability to manufacture cGMP
quantities of our product candidates as required for pre-clinical and
clinical trials and, subsequently, our ability to manufacture commercial
quantities of our product candidates;
· our ability to complete required clinical trials for our product
candidates and obtain approval from the FDA or other regulatory agencies
in different jurisdictions;
· our lack of a sales and marketing organization and our ability to
commercialize our product candidates if we obtain regulatory approval;
· our dependence on third parties to manufacture our product candidates;
· our reliance on third-party CROs to conduct our clinical trials;
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· our ability to maintain or protect the validity of our intellectual
property;
· our ability to internally develop new inventions and intellectual
property;
· interpretations of current laws and the passages of future laws;
· acceptance of our business model by investors;
· the accuracy of our estimates regarding expenses and capital requirements;
· our ability to adequately support organizational and business growth; and
· the continued spread of COVID-19 and the resulting global pandemic and its
impact on our preclinical studies and clinical studies.
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipate in our forward-looking statements. Please see "Risk Factors" for additional risks which could adversely impact our business and financial performance.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs, or projections will result or be achieved or accomplished.
Overview
We are a clinical stage medical dermatology company focused on identifying, developing, and commercializing innovative pharmaceutical product candidates for the treatment of medical and aesthetic skin conditions and diseases we believe have significant unmet needs.
Dermatological diseases such as acne vulgaris (or acne), psoriasis vulgaris (or psoriasis), papulopustular rosacea (or rosacea), hyperhidrosis, and various aesthetic indications affect millions of people worldwide each year and may negatively impact their quality of life and emotional well-being. While there are multiple current treatment options for these indications on the market, we believe that most have significant drawbacks, including underwhelming treatment results, cumbersome application regimens and varying negative side effects leading to a lack of patient compliance. While a majority of these indications are first treated with topical products, many patients frequently switch treatments or discontinue treatment altogether due to patient dissatisfaction with slow and modest response rates, early onset of negative side effects, onerous application schedules and typically long duration of therapy. Given the limitations with current topical therapies and the restricted usability of systemic therapies, we believe there is a significant opportunity to address the needs of frustrated patients searching for effective topical products that satisfy their dermatological and lifestyle needs.
Our two product candidates, DMT310 and DMT410, incorporate our proprietary, multifaceted, Spongilla technology to topically treat a variety of dermatological conditions. Our Spongilla technology is a multifactorial, naturally derived product that is processed from a wholly naturally grown freshwater sponge, Spongilla lacustris or Spongilla, which is processed into a powder and is mixed with a fluidizing agent immediately prior to application by the patient to form an easily applicable paste. Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental conditions, all of which give it its distinctive anti-microbial, anti-inflammatory, and mechanical properties. The combination of these ideal environmental conditions, the proprietary harvesting protocols developed with our supplier, and our post-harvest processing procedures optimize the mechanical component as well as the chemical components of Spongilla for product candidates with multiple mechanisms of action for the treatment of inflammatory skin conditions.
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Our lead product candidate DMT310, utilizes our Spongilla technology for a
once-weekly treatment of a variety of skin diseases. Our initial focus is the
treatment of acne vulgaris. However, due to the multiple mechanisms of action
and anti-inflammatory effect seen with DMT310, we have moved into clinical
trials of two additional indications, psoriasis and rosacea. In
Our second product candidate utilizing our Spongilla technology is our
combination treatment, DMT410. DMT410 consists of one treatment of our
proprietary sponge powder followed by topical application of botulinum toxin for
delivery into the dermis. We first tested this program in a Phase 1 POC trial of
axillary hyperhidrosis patients, which was completed in
We believe our Spongilla technology platform will enable us to develop and formulate singular and combination products that are able to target topical delivery of chemical compounds into the dermis for maximum treatment effect for a variety of inflammatory skin diseases. One mechanism of our technology is its mechanical ability to allow for the intradermal delivery of a variety of large and small molecules through microchannels to a targeted treatment site via topical application. In addition to its mechanical components, the Spongilla technology also utilizes multiple naturally occurring chemical compounds that we believe have demonstrated in-vitro anti-microbial, and anti-inflammatory properties. We believe the combination of these mechanical and chemical components make our platform versatile for the treatment of a wide variety of medical and aesthetic skin conditions and diseases.
We have a limited operating history. Since our inception, our operations have
focused on developing DMT310 and DMT410, organizing and staffing our company,
raising capital, establishing our supply chain and manufacturing processes,
further characterizing the multiple mechanisms of action of our Spongilla
technology, building an intellectual property portfolio, and conducting
non-clinical and clinical trials. We do not have any product candidates approved
for marketing and have not generated any revenue from product sales. We have
funded our operations primarily through the sale of our equity securities and
debt securities. Since inception, we have raised an aggregate of approximately
We have not generated any revenue to date and have incurred significant
operating losses. Our net losses were
· complete development of DMT310 for the treatment of acne, including
non-clinical studies and Phase 3 clinical trials?
· prepare and file for regulatory approval of DMT310 for the treatment of
moderate-to-severe acne?
· continue development of DMT310 for the treatment of rosacea, including a
Phase 2 clinical trial and Phase 3 clinical trials?
· continue development of DMT310 for the treatment of psoriasis, including a
Phase 2 clinical trial and Phase 3 clinical trials?
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· identify a botulinum toxin partner for DMT410 for the treatment of
aesthetic and medical skin conditions?
· prepare for commercialization of DMT310, if approved, including the hiring
of sales and marketing personnel?
· begin to manufacture our product candidates for Phase 2 and Phase 3 trials
and commercial sale?
· hire additional research and development and selling, general and
administrative personnel?
· maintain, expand, and protect our intellectual property portfolio? and
· incur additional costs associated with operating as a public company.
We will need additional financing to support our operations. We may seek to fund our operations through public or private equity or debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital when needed or on favorable terms would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.
COVID-19 Update
The COVID-19 pandemic continues to have a major impact in the US and around the world. The availability of vaccines holds promise for the future, though new variants of the virus and potential waning immunity from vaccines may result in continued impact from this pandemic in the future, which could adversely impact our operations. To date, we have managed delays and disruptions without significant impact in planned and ongoing preclinical trials, manufacturing or shipping. Potential impacts to our business include delays in planned and ongoing preclinical and clinical trials including enrollment of patients, disruptions in time and resources provided by independent clinical investigators, CROs, and other third-party service providers, temporary closures of our facilities, disruptions or restrictions on our employees' ability to travel, and delays in manufacturing and/or shipments to and from third-party suppliers and contract manufacturers for APIs and drug product, including Spongilla.
We have taken temporary precautionary measures intended to help minimize the
risk of the virus to our employees, including having all of our employees to
work remotely, suspending all non-essential travel worldwide for our employees
and discouraging employee attendance at industry events and in-person
work-related meetings, which could negatively affect our business. We cannot
presently predict the scope and severity of the planned and potential shutdowns
or disruptions of businesses and government agencies, such as the
Critical Accounting Policies and Use of Estimates
We have based our management's discussion and analysis of financial condition
and results of operations on our financial statements, which have been prepared
in accordance with accounting principles generally accepted in
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While our significant accounting policies are more fully discussed in Note 2 - Summary of Significant Accounting Policies to our unaudited financial statements contained within this Form 10-Q, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.
Research and Development Expenses
We rely on third parties to conduct our clinical studies and to provide services, including data management, statistical analysis, and electronic compilation. Once our clinical trials begin, at the end of each reporting period, we will compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we will consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved, and other criteria related to the efforts of our vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we will record net prepaid or accrued expenses related to these costs.
Fair Value of Common Stock and Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The Company's policy permits the valuation of stock-based awards granted to non-employees to be measured at fair value at the grant date.
Determining the appropriate fair value of share-based awards requires the use of subjective assumptions, including the fair value of our common shares for awards prior to our IPO, and for options, the expected life of the option and expected share price volatility. We use the Black-Scholes option pricing model to value our option awards. The assumptions used in calculating the fair value of share-based awards represents our best estimates and involve inherent uncertainties and the application of judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.
Fluctuations in Operating Results
Our results of operations have fluctuated significantly from period to period in the past and are likely to continue to do so in the future. We anticipate that our quarterly and annual results of operations will be impacted for the foreseeable future by several factors, including the progress and timing of expenditures related to the development of our product candidates. We cannot predict with certainty what the full impact of the COVID-19 pandemic may have on our business, results of operations, financial condition, and prospects. Due to these fluctuations, we believe that the period-to-period comparisons of our operating results are not a good indication of our future performance.
Results of Operations
Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended June 30,
2022 2021 Difference
Operating expenses:
Research and development $ 1,612,552 $ 867,197 $ 745,355
General and administrative 1,118,021 462,772 655,249
Total operating expenses 2,730,573 1,329,969 1,400,604
Losses from operations (2,730,573 ) (1,329,969 ) (1,400,604 )
Other income and expenses:
Interest expense, net - 1,823 (1,823 )
Net loss $ (2,730,573 ) $ (1,331,792 ) $ (1,398,781 )
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Research and Development Expenses
Research and development expenses increased by
General and Administrative Expenses
General and administrative expenses increased by approximately
Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30,
2022 2021 Difference
Operating expenses:
Research and development $ 3,208,391 $ 1,547,785 $ 1,660,606
General and administrative 2,308,334 2,043,957 264,377
Total operating expenses 5,516,725 3,591,742 1,924,983
Loss from operations (5,516,725 ) (3,591,742 ) (1,924,983 )
Other income and expenses:
Interest expense, net - 44,958 (44,958 )
Net loss $ (5,516,725 ) $ (3,636,700 ) $ (1,880,025 ) Research and Development Expenses
Research and development expenses increased by
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General and Administrative Expenses
General and administrative expenses increased by
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