UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
Commission file number: 000-55347
Relmada Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of
incorporation or organization)
45-5401931
(I.R.S. Employer
Identification No.)
2222 Ponce de Leon Blvd., Floor 3
Coral Gables, FL 33134
(Address of principal executive offices) (Zip Code)
(786) 629 1376
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock ($.001 par value)
Trading Symbol(s)
RLMD
Name of each exchange on which registered
The NASDAQ Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to section 12(g) of the Act:
None
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer
Non-accelerated filer
Emerging Growth Company
☐
☒
☐
Accelerated filer
Smaller reporting company
☐
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 30, 2021 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the registrant’s common stock held
by non-affiliates of the registrant was $547,451,729, based on the closing price on that date as reported on the NASDAQ.
As of March 21, 2022, there were 29,369,490 shares of common stock, $0.001 par value per share, outstanding.
Documents Incorporated by Reference
Portions of the registrant's definitive proxy statement for its 2022 Annual Meeting of Stockholders (the "Proxy Statement"), to be filed within 120 days of the registrant's fiscal
year ended December 31, 2021, are incorporated by reference in Part III of this Annual Report on Form 10-K. Except with respect to information specifically incorporated by
reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part of this Annual Report on Form 10-K.
Item Number and Caption
Forward-Looking Statements
TABLE OF CONTENTS
PART I
1.
1A.
1B.
2.
3.
4.
PART II
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
PART III
10.
11.
12.
13.
14.
PART IV
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting, and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers, and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
15.0
Exhibits, Financial Statement Schedules
i
Page
ii
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13
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32
32
32
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34
34
38
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38
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39
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this Report) contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of
Business,” “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 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
Report, which may cause our or our industry’s actual results, levels of activity, performance or achievements to differ materially from those 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 Report on Form-10-K. 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 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 Report on Form-10-K to conform our statements to actual results or changed expectations.
ii
All brand names or trademarks appearing in this report are the property of their respective holders. Unless the context requires otherwise, references in this report to
“Relmada,” the “Company,” “we,” “us,” and “our” refer to Relmada Therapeutics, Inc., a Nevada corporation.
PART I
ITEM 1. BUSINESS
Business Overview
Relmada Therapeutics, Inc. (Relmada, 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 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. This was a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability and efficacy of two oral
doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with major depressive disorder (MDD), who experienced an inadequate
response to 1 to 3 adequate antidepressant treatments with an antidepressant medication.
In the REL-1017-202 study, 62 subjects, average age 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.
Key findings:
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: the Montgomery-Asberg Depression Rating Scale (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.
MADRS: Analysis of Change from Baseline to Day 7 and to Day 14 ITT Population
Day 2
Day 4
Day 7
Day 14
LS Means
Difference P-value
d
LS Means
Difference P-value
d
LS Means
Difference P-value
D
LS Means
Difference P-value
d
REL-1017 25mg
vs Placebo
REL-1017 50mg
vs Placebo
-1.9
0.4340
0.3
-7.9
0.0087
0.9
-8.7
0.0122
0.8
-9.4
0.0103
-0.3
0.9092
0.0
-7.6
0.0096
0.8
-7.2
0.0308
0.7
-10.4
0.0039
0.9
1.0
LS = Least Squares; d = Cohen’s effect size
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 in d-Methadone, and there was no evidence of either treatment induced psychotomimetic and dissociative AEs or withdrawal
signs and symptoms upon treatment discontinuation.
1
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 major depressive disorder MDD.
Following discussions with the Food and Drug Administration (FDA), Relmada’s adjunctive MDD Phase 3 program includes the following key attributes:
● The Phase 3 program consists of two sister, two-arm, placebo-controlled clinical trials. Each trial is conducted in 55 clinical sites in the United States with planned
enrollment of 364 MDD patients with inadequate response to standard antidepressants in their current depression episode. Patients will add either a 25 mg oral dose of
REL-1017 once per day or placebo to their ongoing antidepressant treatment.
● The primary endpoint to be evaluated will be the change from baseline on the MADRS score at day-28 for REL-1017 compared to placebo. Success on this endpoint
with the collection of sufficient safety data would support the use of REL-1017 for chronic treatment, if approved.
● The change from baseline and the 7-day MADRS score will serve as a key secondary endpoint and will provide information on the time to treatment effect.
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 MDD. Patients who complete RELIANCE I and RELIANCE II are eligible to rollover into the
long-term, open-label study, which also includes subjects who had not previously participated in a REL-1017 clinical trial.
On October 4, 2021, Relmada announced the initiation of RELIANCE III study, the ongoing monotherapy trial for the Company’s lead product candidate, REL-1017, which
aims to randomize 364 patients and it is expected to be completed in mid-2022.
In addition, in order to support potential regulatory submissions seeking approval for REL-1017 as monotherapy and adjunctive treatment, the FDA confirmed that, based on
what is known at this time, Relmada will not be required to conduct a two-year carcinogenicity study of REL-1017, as sufficient clinical data have been generated to date. The
FDA also confirmed that Relmada does not need to conduct a Thorough QT analysis (TQT) cardiac study in humans to support cardiac safety in potential regulatory
submissions for REL-1017, as the data provided so far and the data generated by the Phase 3 program will be adequate to evaluate the cardiac safety profile of REL-1017.
Human Abuse Potential (HAP) Study top-line results - Oxycodone:
On July 27, 2021, we 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, 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 maximum tolerated dose, showed a highly statistically significant difference in abuse potential versus oxycodone with p-values less than 0.001.
Results are detailed in the table below:
Mean Emax for Drug Liking
P-value for Difference vs. oxycodone 40 mg
P-value for REL-1017 vs. Placebo
Placebo
52.7
<0.001
-
REL-1017
25 mg
REL-1017
75 mg
REL-1017
150 mg
Oxycodone
40 mg
54.2
<0.001
<0.001
58.7
<0.001
<0.001
64.9
<0.001
<0.05
83.2
-
-
These statistically significant data clearly demonstrate a very meaningful difference between REL-1017 and oxycodone at all three tested doses. These results, along with
previously published literature, support the lack of opioid effects of REL-1017.
Human Abuse Potential (HAP) Study top-line results - Ketamine:
On February 23, 2022, we 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, 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 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.
Results of the primary endpoint are summarized in the table below.
Mean Emax for Drug Liking
P-value for Difference vs. ketamine 0.5mg/Kg over 40 minutes
P-value for REL-1017 vs. placebo
Placebo
50.9
<0.05
-
REL-1017
25 mg
REL-1017
75 mg
REL-1017
150 mg
Ketamine
0.5 mg/kg
51.4
<0.05
<0.05
54.9
<0.05
<0.05
59.2
<0.05
<0.05
90.0
-
-
These statistically significant data clearly demonstrate a very meaningful difference between REL-1017 and ketamine at all three tested doses. The REL-1017 results were also
statistically equivalent to placebo.
2
Key Upcoming Anticipated Milestones
We expect multiple key milestones over the next 12-18 months. These include:
● Results of RELIANCE III monotherapy MDD trial in mid-2022.
● Results of RELIANCE I and RELIANCE II adjunctive MDD trials in the second half of 2022.
● Results of RELIANCE – OLS (Long-term, Open-label) study in MDD in the second half of 2022.
Our Development Program
Esmethadone (d-Methadone, dextromethadone, REL-1017) as a treatment for MDD
Background
In 2014, the National Institute of Mental Health (NIMH) estimated that 15.7 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, only about half of Americans diagnosed with major depression in a given year receive
treatment. 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 one of the marketed products for depression, esketamine (marketed by Johnson and Johnson as Spravato), an in-clinic nasal spray
treatment 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 its 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.
Esmethadone (d-methadone, dextromethadone, REL-1017) in other indications
In addition to developing esmethadone as an adjunctive treatment of MDD, we are evaluating the utility of esmethadone as a frontline monotherapy treatment for MDD.
Additionally, other indications that Relmada may explore in the future, include, restless leg syndrome and other glutamatergic system activation related diseases.
3
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.
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 net loss of approximately $125,751,800 and $59,456,400 for the
years ended December 31, 2021 and 2020, respectively. At December 31, 2021, we have an accumulated deficit of approximately $305,067,100.
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, 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 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 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), Zulresso (Sage) and Spravato (Johnson &
Johnson).
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. We have also
secured an Orphan Drug Designation from the FDA for d-methadone for “the treatment of postherpetic neuralgia,” which, upon NDA approval, carries 7-year FDA Orphan
Drug marketing exclusivity. In the European Union, some of our actual and 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) plus additional 6 month of pediatric exclusivity and up to 10 years in the E.U. We believe an extensive intellectual property
estate of US and foreign patents and applications, will protect our technology and products.
Esmethadone License Agreement
As a result of a prior acquisition, the Company assumed an obligation to pay third parties (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi – see below): (A) royalty payments
up to 2% on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty payment received by licensee from its
sublicensee on sales of license product by sublicensee, the higher of (i) 20% of the royalties received by licensee; or (ii) up to 2% of net sales of sublicensee. The Company will
also make milestone payments of up to $4 or $2 million, for the first commercial sale of product in the field that has a single active pharmaceutical ingredient, and for the first
commercial sale of product in the field of product that has more than one active pharmaceutical ingredient, respectively. As of December 31, 2021, the Company has not
generated any revenue related to this license agreement.
4
Inturrisi / Manfredi
In January 2018, we entered into an Intellectual Property Assignment Agreement (the Assignment Agreement) and License Agreement (the License Agreement and together
with the Assignment Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant to the Agreements, Relmada
assigned its existing rights, including patents and patent applications, to esmethadone in the context of psychiatric use (the Existing Invention) to Licensor. Licensor then
granted Relmada under the License Agreement a perpetual, worldwide, and exclusive license to commercialize the Existing Invention and certain further inventions regarding
esmethadone. In consideration of the rights granted to Relmada under the License Agreement, Relmada paid the Licensor an upfront, non-refundable license fee of $180,000.
Additionally, Relmada will pay Licensor $45,000 every three months until the earliest to occur of the following events: (i) the first commercial sale of a licensed product
anywhere in the world, (ii) the expiration or invalidation of the last to expire or be invalidated of the patent rights anywhere in the world, or (iii) the termination of the License
Agreement. Relmada will also pay Licensor tiered royalties with a maximum rate of 2%, decreasing to 1.75%, and 1.5% in certain circumstances, on net sales of licensed
products covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a maximum of 20%, and decreasing to 17.5%, and 15% in certain
circumstances, of all consideration received by Relmada for sublicenses granted under the License Agreement. As of December 31, 2021, no events have occurred, and the
Company continues to pay Licensor $45,000 every three months.
The License Agreement includes standard termination rights for Licensor in the event of our insolvency, challenge of the licensed patents and uncured material breach of our
obligations under the License Agreement. In addition, the License Agreement contains certain “Key Man” provisions such that Licensor may terminate the License Agreement
if we terminate the employment of our Chief Executive Officer, Dr Sergio Traversa, for any reason other than for specified causes determined by a majority of our Board of
Directors (including fraud, gross negligence, unauthorized use of our confidential information, conduct including harassment or discrimination, breach of fiduciary duty or
uncured material breach), or if we (a) substantially modify Dr. Traversa’s job responsibilities or decision-making rights in connection with the development and
commercialization of esmethadone, (b) remove him from the role of Chief Executive Officer other than in connection with a permitted change-of-control transaction, (c)
materially reduce his compensation, or (d) assign or transfer our rights under the License Agreement or the esmethadone intellectual property without Dr. Traversa’s consent, in
each case (termination or the events in (a) through (d)) during the period commencing on the effective date and ending on the later of five years from the original effective date
of the License Agreement or December 31, 2022. The December 2019 amendment to the License Agreement made certain clarifications to the nature of a termination for
Cause, including to clarify that termination due to Dr. Traversa’s death or disability does not give Licensor the right to terminate the License Agreement.
Wonpung License Agreement
In 2007, the Company entered into a License Development and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company. Wonpung has
exclusive territorial rights in countries it selects in Asia to market up to two drugs the Company is currently developing and a right of first refusal (“ROFR”) for up to an
additional five drugs that the Company may develop in the future as defined in more detail in the license agreement. If the parties cannot agree to terms of a license agreement
then the Company shall be able to engage in discussions with other potential licensors. As of March 23, 2022, no discussions are active between the Company and Wonpung.
The Company received an upfront license fee of $1,500,000 and will earn royalties of up to 12% of net sales for up to two licensed products it is currently developing. The
licensing terms for the ROFR products are subject to future negotiations and binding arbitration. The terms of each licensing agreement will expire on the earlier of any time
from 15 years to 20 years after licensing or on the date of commercial availability of a generic product to such licensed product in the licensed territory.
Psilocybin License Agreement
In July 2021, we executed a License Agreement with Arbomentis, LLC which gives us the development and commercial rights to a novel psilocybin and derivate program.
Under the terms of the agreement, we paid Arbormentis, LLC an up-front fee of $12.7 million consisting of a mix of cash and warrants to purchase the Company’s common
stock, in addition to potential milestone payments totaling up to approximately $160 million related to pre-specified development and commercialization milestones.
Arbormentis, LLC is also eligible to receive a low single digit percentage royalty on net sales of any commercialized therapy resulting from this agreement. The license
agreement is terminable by us but is perpetual and not terminable by the licensor absent material breach of its terms by us. We will collaborate with Arbormentis, LLC on the
development of new therapies targeting neurological and psychiatric disorders, leveraging its understanding of neuroplasticity, and focusing on this emerging new class of drugs
targeting the neuroplastogen mechanism of action. Importantly, neuroplasticity also plays a key role in the activity of REL-1017, Relmada’s lead program. Dr. Paolo Manfredi,
our Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr. Marco Pappagallo, our Acting Chief Medical Officer, are among the scientists affiliated with
Arbormentis, LLC.
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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 Phase 3 trials for the adjunctive and monotherapy treatment of MDD.
● Robust, and highly statistically significant, efficacy seen with esmethadone in a randomized Phase 2 trial, 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).
● Completed 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.
● 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.
● Substantial IP portfolio and market protection: approved and filed patent applications provide coverage beyond 2033.
Competition
The pharmaceutical and biotechnology industry is characterized by intense competition, rapid product development and technological change. Competition is intense among
manufacturers of prescription pharmaceuticals and other product areas where we may develop and market products in the future. Most of our competitors are large, well-
established pharmaceutical or healthcare companies with considerably more financial, marketing, sales and technical resources than are available to us. Additionally, many of
our competitors have research and development capabilities that may allow such competitors to develop new or improved products that may compete with our products. Our
products could be rendered obsolete or made uneconomical by the development of new products.
Regarding our competitive position in the industry, we currently have no products approved for sale.
Government Regulation
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions extensively regulate, among other things, the research,
development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, post-approval
monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and
jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and
financial resources.
FDA Approval Process
In the United States, pharmaceutical products are subject to extensive regulation by the FDA. The Federal Food, Drug, and Cosmetic Act (FD&C Act) and other federal and
state statutes and regulations govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing,
distribution, post-approval monitoring and reporting, sampling and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may
subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending NDAs, warning or untitled letters, product recalls, product
seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties and criminal prosecution.
Pharmaceutical product development for a new product or certain changes to an approved product in the U.S. typically involves preclinical laboratory and animal tests, the
submission to FDA of an investigational new drug application (IND) which must become effective before clinical testing may commence, and adequate and well-controlled
clinical trials to establish the safety and effectiveness of the drug for each indication for which FDA approval is sought. Satisfaction of FDA pre-market approval requirements
typically takes many years and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.
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Preclinical tests include laboratory evaluation of product chemistry, formulation and toxicity, as well as animal trials to assess the characteristics and potential safety and
efficacy of the product. The conduct of the preclinical tests must comply with federal regulations and requirements, including good laboratory practices. The results of
preclinical testing are submitted to FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a
proposed clinical trial protocol. Long-term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted. A 30-day
waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If FDA has neither commented on nor questioned the IND
within this 30-day period, the clinical trial proposed in the IND may begin. Clinical trials involve the administration of the investigational new drug to healthy volunteers or
patients under the supervision of a qualified investigator. Clinical trials must be conducted: (i) in compliance with federal regulations; (ii) in compliance with good clinical
practice, or GCP, an international standard meant to protect the rights and health of patients and to define the roles of clinical trial sponsors, administrators and monitors; as
well as (iii) under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol
involving testing on U.S. patients and subsequent protocol amendments must be submitted to FDA as part of the IND.
FDA may order the temporary, or permanent, discontinuation of a clinical trial at any time, or impose other sanctions, if it believes that the clinical trial either is not being
conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The study protocol and informed consent information for patients
in clinical trials must also be submitted to an institutional review board (IRB) for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily
or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.
Clinical trials to support NDAs for marketing approval are typically conducted in three sequential phases, but the phases may overlap. In Phase 1, the initial introduction of the
drug into healthy human subjects or patients, the drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses,
and, if possible, early evidence of effectiveness. Phase 2 usually involves trials in a limited patient population to determine the effectiveness of the drug for a particular
indication, dosage tolerance and optimum dosage, and to identify common adverse effects and safety risks. If a drug demonstrates evidence of effectiveness and an acceptable
safety profile in Phase 2 evaluations, Phase 3 trials are undertaken to obtain the additional information about clinical efficacy and safety in a larger number of patients, typically
at geographically dispersed clinical trial sites, to permit FDA to evaluate the overall benefit-risk relationship of the drug and to provide adequate information for the labeling of
the drug. In most cases, FDA requires two adequate and well-controlled Phase 3 clinical trials to demonstrate the efficacy of the drug. A single Phase 3 trial with other
confirmatory evidence may be sufficient in rare instances, such as where the study is a large multicenter trial demonstrating internal consistency and a statistically very
persuasive finding of a clinically meaningful effect on mortality, irreversible morbidity or prevention of a disease with a potentially serious outcome and confirmation of the
result in a second trial would be practically or ethically impossible.
After completion of the required clinical testing, an NDA is prepared and submitted to FDA. FDA approval of the NDA is required before marketing of the product may begin
in the U.S. The NDA must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry,
manufacture and controls. The cost of preparing and submitting an NDA is substantial. The submission of most NDAs is additionally subject to a substantial application user
fee, and the applicant under an approved NDA is also subject to an annual program fee for each prescription product. These fees are typically increased annually. Sponsors of
applications for drugs granted Orphan Drug Designation are exempt from these user fees.
FDA has 60 days from its receipt of an NDA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently
complete to permit substantive review. Once the submission is accepted for filing, FDA begins an in-depth review. FDA has agreed to certain performance goals in the review
of NDAs to encourage timeliness. Applications for most standard review drug products are reviewed within twelve months from submission of NDAs for new molecular
entities (NMEs) and ten months from submission of NDAs for non-NMEs. Priority review can be applied to drugs that FDA determines offer major advances in treatment or
provide a treatment where no adequate therapy exists. The review process for both standard and priority review may be extended by FDA for three additional months to
consider certain late-submitted information or information intended to clarify information already provided in the submission.
FDA may also refer applications for novel drug products, or drug products that present difficult questions of safety or efficacy, to an outside advisory committee – typically a
panel that includes clinicians and other experts – for review, evaluation and a recommendation as to whether the application should be approved. FDA is not bound by the
recommendation of an advisory committee, but it generally follows such recommendations.
Before approving an NDA, FDA will typically inspect one or more clinical sites to assure compliance with GCP. Additionally, FDA will inspect the facility or the facilities at
which the drug is manufactured. FDA will not approve the product unless compliance with current good manufacturing practices (cGMPs) is satisfactory and the NDA contains
data that provide substantial evidence that the drug is safe and effective in the indication studied.
After FDA evaluates the NDA and the manufacturing facilities, it issues either an approval letter or a complete response letter. A complete response letter generally outlines the
deficiencies in the submission and may require substantial additional testing, or information, in order for FDA to reconsider the application. If, or when, those deficiencies have
been addressed to FDA’s satisfaction in a resubmission of the NDA, FDA will issue an approval letter. FDA has committed to reviewing such resubmissions in two or six
months depending on the type of information included. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific
indications. As a condition of NDA approval, FDA may require a risk evaluation and mitigation strategy (REMS) to help ensure that the benefits of the drug outweigh the
potential risks. REMS can include medication guides, communication plans for healthcare professionals, and elements to assure safe use (ETASU). ETASU can include, but are
not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring and the use of patient registries.
The requirement for a REMS can materially affect the potential market and profitability of the drug. Moreover, product approval may require substantial post-approval testing
and surveillance to monitor the drug’s safety or efficacy. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or
problems are identified following initial marketing.
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Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require
submission and FDA approval of a new NDA or NDA supplement before the change can be implemented. An NDA supplement for a new indication typically requires clinical
data similar to that in the original application, and FDA uses the same procedures and actions in reviewing NDA supplements as it does in reviewing NDAs.
Fast Track Designation
FDA is required to facilitate the development, and expedite the review, of drugs that are intended for the treatment of a serious or life-threatening disease or condition for which
there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Under the Fast Track program, the sponsor of a new drug
candidate may request that FDA designate the drug candidate for a specific indication as a Fast Track drug concurrent with, or after, the filing of the IND for the drug candidate.
FDA must determine if the drug candidate qualifies for Fast Track Designation within 60 days of receipt of the sponsor’s request.
If a submission is granted Fast Track Designation, the sponsor may engage in more frequent interactions with FDA, and FDA may review sections of the NDA before the
application is complete. This rolling review is available if the applicant provides, and FDA approves, a schedule for the submission of the remaining information and the
applicant pays applicable user fees. However, FDA’s time period goal for reviewing an application does not begin until the last section of the NDA is submitted. Additionally,
Fast Track Designation may be withdrawn by FDA if FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Orphan Drugs
Under the Orphan Drug Act, FDA may grant Orphan Drug Designation to drugs intended to treat a rare disease or condition – generally a disease or condition that affects fewer
than 200,000 individuals in the U.S. Orphan Drug designation must be requested before submitting an NDA. After FDA grants Orphan Drug Designation, the generic identity
of the drug and its potential orphan use are disclosed publicly by FDA. Orphan Drug Designation does not convey any advantage in, or shorten the duration of, the regulatory
review and approval process. The first NDA applicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA Orphan Drug
Designation is entitled to a seven-year exclusive marketing period in the U.S. for that product, for that indication. During the seven-year exclusivity period, FDA may not
approve any other applications to market the same drug for the same disease, except in limited circumstances, such as a showing of clinical superiority to the product with
orphan drug exclusivity. Orphan drug exclusivity does not prevent FDA from approving a different drug for the same disease or condition, or the same drug for a different
disease or condition. Among the other benefits of Orphan Drug Designation are tax credits for certain research and an exemption from the NDA application user fee.
Disclosure of Clinical Trial Information
Sponsors of clinical trials of FDA regulated products, including drugs, are required to register and disclose certain clinical trial information. Information related to the product,
patient population, phase of investigation, study sites and investigators, and other aspects of the clinical trial is then made public as part of the registration. Sponsors are also
obligated to discuss the results of their clinical trials after completion. Disclosure of the results of these trials can be delayed in certain circumstances for up to two years after
the date of completion of the trial. Competitors may use this publicly available information to gain knowledge regarding the progress of development programs.
Pediatric Information
Under the Pediatric Research Equity Act (PREA), NDAs or supplements to NDAs must contain data to assess the safety and effectiveness of the drug for the claimed
indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatric subpopulation for which the drug is safe and effective. FDA may
grant full or partial waivers, or deferrals, for submission of data. With certain exceptions, PREA does not apply to any drug for an indication for which orphan designation has
been granted.
The Best Pharmaceuticals for Children Act (BPCA) provides NDA holders a six-month extension of any exclusivity – patent or nonpatent – for a drug if certain conditions are
met. Conditions for exclusivity include FDA’s determination that information relating to the use of a new drug in the pediatric population may produce health benefits in that
population, FDA making a written request for pediatric studies, and the applicant agreeing to perform, and reporting on, the requested studies within the statutory timeframe.
Applications under the BPCA are treated as priority applications, with all of the benefits that designation confers.
Post-Approval Requirements
Once an NDA is approved, a product will be subject to certain post-approval requirements. For instance, FDA closely regulates the post-approval marketing and promotion of
drugs, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional
activities involving the internet. Drugs may be marketed only for the approved indications and in accordance with the provisions of the approved labeling.
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Adverse event reporting and submission of periodic reports are required following FDA approval of an NDA. FDA also may require post-marketing testing, known as Phase 4
testing, REMS and surveillance to monitor the effects of an approved product, or FDA may place conditions on an approval that could restrict the distribution or use of the
product. In addition, quality control, drug manufacture, packaging and labeling procedures must continue to conform to cGMPs after approval. Drug manufacturers and certain
of their subcontractors are required to register their establishments with FDA and certain state agencies. Registration with FDA subjects entities to periodic unannounced
inspections by FDA, during which the Agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time,
money and effort in the areas of production and quality-control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product
recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently
discovered.
Generic Competition
In seeking approval for a drug through an NDA, applicants are required to list with the FDA each patent whose claims cover the applicant’s product. Upon approval of a drug,
each of the patents listed in the application for the drug is then published in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known
as the Orange Book. Drugs listed in the Orange Book can, in turn, be cited by potential generic competitors in support of approval of an abbreviated new drug application
(ANDA). An ANDA provides for marketing of a drug product that has the same active ingredients in the same strengths and dosage form as the listed drug and has been shown
through bioequivalence testing to be therapeutically equivalent to the listed drug. Other than the requirement for bioequivalence testing, ANDA applicants are not required to
conduct, or submit results of, preclinical or clinical tests to prove the safety or effectiveness of their drug product. Drugs approved in this way are commonly referred to as
“generic equivalents” to the listed drug and can often be substituted by pharmacists under prescriptions written for the original listed drug.
The ANDA applicant is required to certify to the FDA concerning any patents listed for the approved product in the FDA’s Orange Book. Specifically, the applicant must
certify that (i) the required patent information has not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired but will expire on a particular date and
approval is sought after patent expiration; or (iv) the listed patent is invalid or will not be infringed by the new product (a Paragraph IV certification). The ANDA applicant may
also elect to submit a section viii statement certifying that its proposed ANDA label doe s not contain (or carve out) any language regarding the patented method-of-use rather
than certify to a listed method-of-use patent. If the applicant does not challenge the listed patents or certifies that the listed patents will not be infringed by the new product, the
ANDA application will not be approved until all the listed patents claiming the referenced product have expired. If the ANDA applicant has provided a Paragraph IV
certification, the NDA and patent holders may then initiate a patent infringement lawsuit in response. The filing of a patent infringement lawsuit within 45 days of the receipt of
a such certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months, expiration of the patent, settlement of the lawsuit, or a decision in
the infringement case that is favorable to the ANDA applicant.
Exclusivity
Upon NDA approval of a new chemical entity (NCE) such as esmethadone, which is a drug that contains no active moiety that has been approved by FDA in any other NDA,
that drug receives five years of marketing exclusivity during which FDA cannot receive any ANDA seeking approval of a generic version of that drug. An ANDA may be
submitted one year before NCE exclusivity expires if a Paragraph IV certification is filed. If there is no listed patent in the Orange Book, there may not be a Paragraph IV
certification, and, thus, no ANDA may be filed before the expiration of the exclusivity period. Certain changes to a drug, such as the addition of a new indication to the package
insert, can be the subject of a three-year period of exclusivity if the application contains reports of new clinical investigations (other than bioavailability studies) conducted or
sponsored by the sponsor that were essential to approval of the application. FDA cannot approve an ANDA for a generic drug that includes the change during the period of
exclusivity.
In the case of a non-racemic drug containing as an active ingredient a single enantiomer that is contained in a racemic drug approved in another NDA, the NDA for the non-
racemic drug may elect to have the single enantiomer not be considered the same active ingredient as that contained in the approved racemic drug and therefore eligible for
NCE exclusivity, if certain conditions are met. These conditions include: (1) the single enantiomer has not been previously approved except in the approved racemic drug, (2)
the NDA for the non-racemic drug includes full reports of new clinical investigations necessary for the approval of the product conducted or sponsored by the applicant and not
submitted for approval of the racemic drug, and (3) the NDA for the non-racemic drug is not submitted for approval of a condition of use in a therapeutic category in which the
approved racemic drug has been approved or for which any other enantiomer of the racemic drug has been approved. In addition, FDA will not approve the non-racemic drug
for any condition of use in the therapeutic category in which the racemic drug has been approved for a period of 10 years after approval of the non-racemic drug, and the
labeling of the non-racemic drug will include a statement in the indication that the non-racemic drug is not approved, and has not been shown to be safe and effective, for any
condition of use of the racemic drug. The applicant for the non-racemic drug may make this election only in an application submitted before October 1, 2022.
Patent Term Extension
After NDA approval, owners of relevant drug patents may apply for up to a five-year patent extension. The allowable patent term extension is calculated as half of the drug’s
testing phase (the time between IND application and NDA submission) and all of the review phase (the time between NDA submission and approval up to a maximum of five
years). The time can be shortened if FDA determines that the applicant did not pursue approval with due diligence. The total patent term after the extension may not exceed 14
years, and only one patent can be extended. For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim
patent extension increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent extension is
reduced by one year. The director of the United States Patent and Trademark Office must determine that approval of the drug covered by the patent for which a patent extension
is being sought is likely. Interim patent extensions are not available for a drug for which an NDA has not been submitted.
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Controlled Substances
The active ingredients in esmethadone are listed in the Comprehensive Drug Abuse Prevention and Control Act of 1970 (CSA) and regulations promulgated by the United
States Drug Enforcement Administration (DEA) as controlled substances. The CSA and its implementing regulations establish a closed chain of distribution for entities
handling controlled substances. The DEA is responsible for enforcing the law and regulations that impose registration, security, inventory, recordkeeping, reporting and storage
requirements on entities that manufacture, distribute, import and export, and other entities handling controlled substances. The law and regulations require those individuals or
entities that handle controlled substances to comply with these requirements in order to ensure legitimate use and prevent the diversion of controlled substances to illicit
channels of commerce.
Facilities that manufacture, distribute, import or export any controlled substance must register annually with the DEA. The DEA registration is specific to a particular location,
activity, and controlled substance schedule. For example, separate registrations are required for importation and manufacturing activities, and the authority granted under each
registration determines which schedules of controlled substances the registrant may handle. However, certain DEA registrations permit coincident activities without obtaining a
separate DEA registration, such as authorizing a manufacturer to also distribute controlled substances produced by that registrant.
The CSA classifies controlled substances into one of five schedules – Schedule I, II, III, IV, or V – depending on the potential for abuse and physical or psychological
dependence. Schedule I substances by definition have a high potential for abuse, have no currently accepted medical use in treatment in the U.S. and lack accepted safety for
use under medical supervision. They may not be marketed or sold for dispensing to patients in the U.S. Pharmaceutical products having a currently accepted medical use and
that are otherwise approved for marketing may be listed as Schedule II, III, IV, or V substances depending on the comparative abuse potential of the drug or substance, with
Schedule II substances presenting the highest potential for abuse and physical or psychological dependence, and Schedule V substances presenting the lowest relative potential
for abuse and dependence. Schedule II substances are subject to the strictest regulatory requirements involving registration, storage, recordkeeping, reporting and security. In
particular, distribution and dispensing of Schedule II drugs are strictly controlled. For example, all Schedule II drug prescriptions cannot be refilled and must contain a written
or electronic signature of a practitioner when presented to a pharmacy. Schedules III, IV and V controlled substances are subject to recordkeeping, reporting and security
requirements, but these requirements are less restrictive than Schedule II drugs.
The DEA inspects manufacturers, distributors, importers, and exporters to review compliance with the CSA and DEA regulations including security, record keeping and
reporting prior to issuing a controlled substance registration. The specific security requirements vary by the type of business activity and the schedule and quantity of controlled
substances handled by the registrant. The most stringent requirements apply to manufacturers of Schedule I and Schedule II substances. For example, manufacturers and
distributors must store Schedule I and II drugs in secure vault with specific structural requirements. Other physical security requirements that apply to all controlled substances
include safes and cages, and the use of alarm systems and surveillance cameras. Regulations also require that registrants restrict employee access to controlled substances. Once
registered, manufacturing, distribution, exporting or importing facilities must maintain records documenting the manufacture, receipt, distribution, import, or export of all
controlled substances. Manufacturers and distributors must also submit regular reports to the DEA of the distribution of Schedule I and II controlled substances, Schedule III
narcotic substances, and certain other designated substances. All DEA registrants must report any controlled substance thefts or significant losses and must obtain authorization
to destroy or dispose of controlled substances. In addition to maintaining an importer and/or exporter registration, importers and exporters of controlled substances must obtain
a permit for every import or export of a Schedule I or II substance and a narcotic substance in Schedule III, IV and V. For all other drugs in Schedule III, IV and V, importers
and exporters must submit an import or export declaration. DEA conducts cyclic inspections to determine whether registrants are complying with these requirements.
Practitioners such as pharmacies and physicians, as well as other types of entities that handle controlled substances, such as researchers and analytical laboratories, are also
subject to DEA registration, recordkeeping, reporting, and security requirements on the receipt, storage, and dispensing of controlled substances.
The CSA also imposes quota requirements on certain controlled substances. The DEA establishes annually an aggregate production quota for the amount of substances within
Schedules I and II and certain Schedule III substances, that may be produced in the U.S. based on the DEA’s estimate of the quantity needed to meet legitimate medical,
scientific, research and industrial needs. The aggregate quota for each controlled substance is allocated among the various individual bulk manufacturers through an application
process. Manufacturers of dosage forms are also subject to procurement quotas to obtain the bulk active pharmaceutical ingredients to make finished drugs. Manufacturers may
not exceed the manufacturing or procurement quota granted in a given year. The quotas apply equally to the manufacturing of the active pharmaceutical ingredient and
production of dosage forms. The DEA may adjust aggregate production quotas and individual manufacturing or procurement quotas from time to time during the year, although
the DEA has substantial discretion concerning whether or not to make such adjustments.
Failure to maintain compliance with applicable DEA requirements, particularly as manifested in the loss or diversion of controlled substances, can result in an enforcement
action. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate administrative proceedings to revoke those registrations. In certain circumstances,
violations of the CSA and DEA regulations could lead to criminal prosecution.
The various states, commonwealths, and the District of Columbia, also regulate controlled substances and impose similar licensing, recordkeeping, and reporting requirements
on entities that handle controlled substances. Entities must independently comply with the various state requirements in addition to the federal controlled substance
requirements.
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Other Healthcare Laws
In the United States, biotechnology company activities are subject to regulation by various federal, state and local authorities in addition to the FDA, including but not limited
to, the Centers for Medicare & Medicaid Services (CMS), other divisions of the U.S. Department of Health and Human Services (e.g., the Office of Inspector General and the
Office for Civil Rights), the U.S. Department of Justice (DOJ) and individual U.S. Attorney offices within the DOJ, and state and local governments.
The federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully offering, soliciting or receiving or providing remuneration,
directly or indirectly, in cash or in kind, to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service
reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical
manufacturers on the one hand and prescribers, purchasers and formulary managers, among others, on the other. Although there are a number of statutory exceptions and
regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exceptions and safe harbors are drawn narrowly, and practices
that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exception or safe harbor. In
addition, a person or entity does not need to have actual knowledge of the Anti-Kickback Statute or specific intent to violate it in order to commit a violation.
Federal civil and criminal false claims laws, including the federal civil False Claims Act, prohibit any person or entity from knowingly presenting, or causing to be presented, a
false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to have a false claim paid. This includes claims made to
programs where the federal government reimburses, such as Medicare and Medicaid, as well as programs where the federal government is a direct purchaser, such as when it
purchases off the Federal Supply Schedule. Recently, several pharmaceutical and other healthcare companies have been prosecuted under these laws for allegedly inflating drug
prices they report to pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to
customers with the expectation that the customers would bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also
violate false claims laws. Additionally, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Most states also have statutes or regulations similar to the federal Anti-Kickback
Statute and civil False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.
Other federal statutes pertaining to healthcare fraud and abuse include the civil monetary penalties statute, which prohibits, among other things, the offer or payment of
remuneration to a Medicaid or Medicare beneficiary that the offeror or payor knows or should know is likely to influence the beneficiary to order a receive a reimbursable item
or service from a particular supplier, and the additional federal criminal statutes created by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which
prohibits, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or obtain by means of false or
fraudulent pretenses, representations or promises of any money or property owned by or under the control of any healthcare benefit program in connection with the delivery of
or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or
specific intent to violate it in order to commit a violation.
Further, pursuant to the Patient Protection and Affordable Care Act (ACA), the Centers for Medicare & Medicaid Services, or CMS, has issued a final rule that requires
manufacturers of prescription drugs to collect and report information on certain payments or transfers of value to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors), physician assistants, certain types of advance practice nurses and teaching hospitals, as well as ownership and investment interests held by
physicians and their immediate family members. The reported data is made available in searchable form on a public website on an annual basis. Failure to submit required
information may result in civil monetary penalties.
In addition, several states now require prescription drug companies to report certain expenses relating to the marketing and promotion of drug products and to report gifts and
payments to individual healthcare practitioners in these states. Other states prohibit various marketing-related activities, such as the provision of certain kinds of gifts or meals.
Still other states require the posting of information relating to clinical studies and their outcomes. Some states require the reporting of certain drug pricing information,
including information pertaining to and justifying price increases. In addition, certain states require pharmaceutical companies to implement compliance programs and/or
marketing codes. Certain states and local jurisdictions also require the registration of pharmaceutical sales and medical representatives. Compliance with these laws is difficult
and time consuming, and companies that do not comply with these state laws face civil penalties.
Efforts to ensure that business arrangements with third parties comply with applicable healthcare laws and regulations involve substantial costs. If a drug company’s operations
are found to be in violation of any such requirements, it may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines,
disgorgement, imprisonment, the curtailment or restructuring of its operations, loss of eligibility to obtain approvals from the FDA, exclusion from participation in government
contracting, healthcare reimbursement or other federal or state government healthcare programs, including Medicare and Medicaid, integrity oversight and reporting
obligations, imprisonment, and reputational harm. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws,
these risks cannot be entirely eliminated. Any action for an alleged or suspected violation can cause a drug company to incur significant legal expenses and divert
management’s attention from the operation of the business, even if such action is successfully defended.
Data privacy and security regulations by both the federal government and the states in which business is conducted may also be applicable. HIPAA, as amended by the Health
Information Technology for Economic and Clinical Health Act (HITECH), and its implementing regulations, imposes requirements relating to the privacy, security and
transmission of individually identifiable health information. HIPAA requires covered entities to limit the use and disclosure of protected health information to specifically
authorized situations and requires covered entities to implement security measures to protect health information that they maintain in electronic form. Among other things,
HITECH made HIPAA’s security standards directly applicable to business associates, independent contractors or agents of covered entities that receive or obtain protected
health information in connection with providing a service on behalf of a covered entity. HITECH also created four new tiers of civil monetary penalties, amended HIPAA to
make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in
federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and
security of health information in specified circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts.
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Healthcare Reform
Healthcare reforms that have been adopted, and that may be adopted in the future, could result in further reductions in coverage and levels of reimbursement for pharmaceutical
products, increases in rebates payable under U.S. government rebate programs and additional downward pressure on pharmaceutical product prices. On September 9, 2021, the
Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment. The
Department of Health and Human Services (HHS) plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to
negotiate prices and disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price
transparency. Many similar proposals, including the plans to give Medicare Part D authority to negotiate drug prices, require drug manufacturers to pay rebates on drugs whose
prices increase greater than the rate of inflation, and cap out-of-pocket costs, have already been included in policy statements and legislation currently being considered by
Congress. It is unclear to what extent these and other statutory, regulatory, and administrative initiatives will be enacted and implemented.
Insurance Coverage and Reimbursement
Significant uncertainty exists as to the insurance coverage and reimbursement status of any products for which we may obtain regulatory approval. In the United States, sales of
any product candidates for which regulatory approval for commercial sale is obtained will depend in part on the availability of coverage and adequate reimbursement from
third-party payors. Third-party payors include government authorities and health programs in the United States such as Medicare and Medicaid, managed care providers,
private health insurers and other organizations. These third-party payors are increasingly reducing reimbursements for medical products and services. The process for
determining whether a payor will provide coverage for a drug product may be separate from the process for setting the reimbursement rate that the payor will pay for the drug
product. Third-party payors may limit coverage to specific drug products on an approved list, or formulary, which might not include all of FDA-approved drugs for a particular
indication. A payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further, coverage and
reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that
will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate reimbursement will
be applied consistently or obtained in the first instance.
Corporate Information
Our principal executive offices are located at 2222 Ponce de Leon Blvd., Floor 3, Coral Gables, Florida 33134 and our telephone number is (786) 629-1376. Our website
address is www.relmada.com. The information contained in, or that can be accessed through, our website is not part of, and is not incorporated in, this Report.
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.
Human Capital
As of December 31, 2021, we had a total of 10 employees. We understand people are our greatest asset and that our innovation and operational excellence are ultimately noted
in our human capital. Our success depends in large part on our ability to recruit, develop and retain a qualified, productive, and engaged workforce.
Inclusion & Diversity
Inclusion and diversity is a focus of our corporate human capital strategy. By embracing inclusion and diversity, we enhance our work environment and drive business success.
We endeavor to create a culture of inclusion in which our employees feel empowered to bring their full, authentic selves to work and pursue their professional goals in a setting
of equality. Fostering such a culture welcomes different perspectives and generates innovation and growth. We honor the diversity of our employees—in gender, race/ethnicity,
age, gender identity, sexual orientation, socio-economic status, language, nationality, abilities and life experiences. As of December 31, 2021, our employee population was
approximately 60% female.
Total Rewards and Employee Engagement
We maintain a competitive compensation and benefits package including incentive compensation tied to both company and individual performance, and retirement benefits.
Our performance-based compensation strategy is designed to recognize and reward employees for their contribution to our success, and we strive to provide strong, equitable
incentives for performance. Compensation is comprised of two elements: base compensation, which is determined based upon a number of factors, including size, scope and
impact of the employee’s role, the market value associated with the employee’s role, leadership skills, length of service and individual performance; and an annual bonus,
which is a cash award determined based on a combination of individual and company performance during the period to which the bonus relates. We seek to determine
compensation on the basis of merit and without regard to demographic characteristics. During 2021, we employed a third-party consultant to assist us in evaluating our pay
practices. In conducting this exercise, we found no meaningful difference in compensation based upon gender, race or any other defining characteristic examined.
COVID-19 Response
We moved swiftly in our response to the COVID-19 pandemic to promote the safety of our associates and best serve our members and communities. In March of 2020, we
transitioned our workforce to remote work environments, while maintaining service operations. We continued to pay employees who missed work for COVID-19 related
reasons and avoided role reductions as a direct result of COVID-19.
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ITEM 1A. RISK FACTORS
Our business faces significant risks. You should carefully consider the risks described below, together with all of the other information included in our filings with the United
States Securities and Exchange Commission (SEC) when evaluating our business. If any of the following risks actually occurs, our business, financial condition or results of
operations could be materially adversely affected and the trading price of shares of our common stock could decline. The occurrence of any of the following risks could cause
our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time.
Summary of Risks
This section provides a summary of the risks that may impact our performance in the future. For details of our various risk factors and their impacts, see “Risk Factors
Discussion.”
Our risk factors are organized into the following categories: 1) Risks related to our business, 2) Risks related to clinical and regulatory matters, 3) Risks related to our
intellectual property, 4) Risks related to government regulations, 5) Risks related to our reliance on third parties, and 6) Risks related to ownership of our common stock.
Risks related to our business
Business risks include risks associated with our products and regulatory approval, licensing agreements, historical losses, managing growth, acquisitions, the COVID-19
pandemic, and Russia’s Invasion of Ukraine. In general, the risks related to our business can cause variability in the future profits of the Company.
Risks related to clinical and regulatory matters
Clinical and regulatory matters include risks associated with clinical trials and the future ability to commercially market the product. In order for any of our products to be
commercialized and produce future profits, successful trials need to be completed with supporting data to receive regulatory approval. Failing to complete the trial will
significantly increase our cost of doing business. In addition, the active ingredient in our products is a controlled substance which can affect the supply available for clinical
trials, as well as commercial sales. A limited supply could increase the time needed to complete clinical trials and overall costs including product liability claims. We could also
face potential fines or reputational risk if we do not comply. Developments from competitors and the ability to obtain market exclusivity could also negatively impact future
profits.
Risks related to our intellectual property
Our products depend upon securing and protecting critical intellectual property. Patent positions are highly uncertain and involve complex legal and factual questions.
Infringing upon patents or trade secrets could force us to cease or alter our product development efforts or obtain a license to continue to develop or sale our products. These
risks could not only impact the future profits of the company but also create adverse publicity for us.
Risks related to government regulations
We are required to comply with various federal and state pharmaceutical and healthcare laws and regulations, and to maintain secure systems to protect sensitive confidential
information. Complying with the various regulations can increase our cost of doing business. We could also face potential fines or reputational risk if we do not comply.
Litigation or investigations can increase costs, negatively affect our operating results and create adverse publicity for us.
Risks related to our reliance on third parties
The Company relies on third parties to conduct preclinical and clinical studies, as well as to manufacture our product candidates. Third parties’ failure to perform the trials as
contractually required could impact our ability to obtain regulatory approval. If our third-party manufacturers fail to meet our requirements and strict regulatory requirements,
our product development and commercialization efforts may be materially harmed.
Risks related to ownership of our common stock
Common stocks risks include risks associated with the limited market for our common stock, a potential issuance of a substantial number of additional shares, stock price
volatility, and reporting requirements of federal securities laws. The net effect of these risks can include reductions in future profits, additional operating expenses, inability to
meet liquidity needs, inability to access capital and increased cost of capital.
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Risk Factors Discussion
Risks Related to Our Business
Our business depends on the success of esmethadone (d-methadone, dextromethadone, REL-1017), our only product candidate currently in clinical development, which is
in pivotal clinical trials for the adjunctive treatment of MDD. If we are unable to obtain regulatory approval for and successfully commercialize REL-1017 or other future
product candidates, or we experience significant delays in doing so, our business will be materially harmed.
To date, the primary focus of our product development has been esmethadone (d-methadone, dextromethadone, REL-1017) for the adjunctive and monotherapy treatment of
patients with MDD. Currently, esmethadone is our only product candidate under clinical development. This may make an investment in our Company riskier than similar
companies that have multiple product candidates in active development and that therefore may be able to better sustain a setback of a lead candidate. Successful continued
development and ultimate regulatory approval of esmethadone for the adjunctive treatment of MDD, and potentially as a monotherapy for MDD, or other indications is critical
to the future success of our business. We have invested, and will continue to invest, a significant portion of our time and financial resources in the clinical development of
esmethadone. If we cannot successfully develop, obtain regulatory approval for and commercialize esmethadone, we may not be able to continue our operations. The future
regulatory and commercial success of esmethadone is subject to a number of risks, including the following:
● we may not be able to obtain adequate evidence from clinical trials of efficacy and safety for esmethadone for the adjunctive treatment of MDD, monotherapy for
MDD or other indications;
● we may not be able to demonstrate that the benefits of esmethadone for the adjunctive treatment of MDD, monotherapy for MDD or other indications outweigh the
risks;
● in our clinical trials for esmethadone, enrollment may be slower than anticipated and we may need additional clinical trial sites than originally planned, which could
delay our clinical trial progress;
● the results of our clinical trials may not meet the level of statistical or clinical significance required by the FDA or comparable foreign regulatory authorities for
marketing approval;
● patients in our clinical trials may suffer serious adverse effects for reasons that may or may not be related to esmethadone, which could delay or prevent further clinical
development;
● the standards implemented by clinical or regulatory agencies may change at any time and we cannot be certain what efficacy endpoints the FDA or foreign clinical or
regulatory agencies may require in pivotal clinical trials with respect to the adjunctive treatment of MDD, monotherapy for MDD or any other indication for the
approval of esmethadone;
● the results of later stage clinical trials may not be as favorable as the results we have observed to date in our preclinical studies and Phase 1 and 2 clinical trials;
● we cannot be certain of the number and type of clinical trials and preclinical or toxicology studies that the FDA or other regulatory agencies will require in order to
approve esmethadone for the adjunctive treatment of MDD, monotherapy for MDD or any other indication;
● we may not have sufficient financial and other resources to complete the necessary clinical trials for esmethadone, including, but not limited to, the clinical trials
needed to obtain drug approval;
● if approved for the adjunctive treatment of MDD or as a monotherapy for MDD, esmethadone will likely compete with products that may reach approval prior to
esmethadone, products that are currently approved for the adjunctive treatment of MDD or as a monotherapy for MDD and the off-label use of currently marketed
products for MDD; and
● we may not be able to obtain, maintain or enforce our patents and other intellectual property rights.
Esmethadone and any future product candidates will be subject to rigorous and extensive clinical trials and extensive regulatory approval processes implemented by the FDA
and comparable foreign regulatory authorities before obtaining marketing approval from these regulatory authorities, if at all. The drug development and approval process is
lengthy and expensive, and approval is never certain. Investigational new drugs, such as esmethadone, may not prove to be safe and effective in clinical trials. We have no
direct experience as a company in conducting later stage clinical trials required to obtain regulatory approval. We may be unable to conduct clinical trials at preferred sites,
enlist clinical investigators, enroll sufficient numbers of participants or begin or successfully complete clinical trials in a timely fashion, if at all. In addition, the design of a
clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is
well advanced. Because we have limited experience as a company designing clinical trials, we may be unable to design and execute a clinical trial to support regulatory
approval.
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There is a high failure rate for drugs and biological products proceeding through clinical trials. Failure can occur at any time during the clinical trial process. The results of
preclinical studies and early clinical trials of esmethadone or any future product candidate may not be predictive of the results of later-stage clinical studies or trials and the
results of studies or trials in one set of patients or line of treatment may not be predictive of those obtained in another. In fact, many companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in late stage clinical trials even after achieving promising results in preclinical studies and earlier stage clinical
trials. In addition, data obtained from preclinical and clinical activities are subject to varying interpretations, which may delay, limit or prevent regulatory approval. Owing in
part to the complexity of biological pathways, esmethadone or any future product candidate may not demonstrate in patients the biochemical and pharmacological properties we
anticipate based on laboratory studies or earlier stage clinical trials, and they may interact with human biological systems or other drugs in unforeseen, ineffective or harmful
ways. The number of patients exposed to product candidates and the average exposure time in the clinical development programs may be inadequate to detect rare adverse
events or findings that may only be detected once a product candidate is administered to more patients and for greater periods of time. To date, our Phase 2 clinical study has
involved a small population of subjects with MDD, and, because of the small sample size in such trial, the results of this clinical trial may be subject to substantial variability
and may not be indicative of either future top-line results or final results. If we are unable to successfully demonstrate the safety and efficacy of esmethadone or other future
product candidates and receive the necessary regulatory approvals, our business will be materially harmed.
Even if we do receive regulatory approval to market esmethadone, any such approval may be subject to limitations on the indicated uses or patient populations for which we
may market the products. Accordingly, even if we are able to obtain the requisite financing to continue to fund our development programs, we may be unable to successfully
develop or commercialize esmethadone. If we or any of our future development collaborators are unable to develop, or obtain regulatory approval for, or, if approved,
successfully commercialize esmethadone, we may not be able to generate sufficient revenue to continue our business.
Top-line results may not accurately reflect the complete results of the clinical study.
Preliminary data remains subject to audit and verification procedures that may result in the final data being materially different from the preliminary data. As a result,
preliminary data should be viewed with caution until the final data are available.
Our license agreement for esmethadone, our only product candidate currently under clinical development, could terminate under certain circumstances, including if we
terminate our Chief Executive Officer except for cause, and we would be unable to conduct our business as planned.
In January 2018, we entered into an Intellectual Property Assignment Agreement (the “Assignment Agreement”) and License Agreement (the License Agreement and together
with the Assignment Agreement, the Agreements), with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the “Licensor”). Pursuant to the Assignment Agreement,
we assigned our existing rights, including patents and patent applications, to esmethadone in the context of psychiatric use to Licensor, and pursuant to the License Agreement,
Licensor then granted us an exclusive perpetual, worldwide license under the assigned intellectual property rights as well as patents and know-how covering certain new
inventions developed by Licensor and relating to esmethadone in neurological and other uses, to develop and commercialize esmethadone in all fields of use. The License
Agreement also grants to us rights in all future inventions developed by Licensor, whether or not in collaboration with us that relate in any way to esmethadone or the use
thereof. The License Agreement was amended in December 2019 to modify certain termination rights relating to the Chief Executive Officer, which are described further
below.
If we develop any new inventions relating to esmethadone, we are required to do so in collaboration with Licensor, and to file patents covering such inventions jointly in the
name of the Company and Licensor. All such future inventions or patents shall be jointly owned by us and Licensor and, will be included in and subject to the financial and
other terms of the License Agreement.
The License Agreement includes standard termination rights for Licensor in the event of our insolvency, challenge of the licensed patents and uncured material breach of our
obligations under the License Agreement. In addition, the License Agreement contains certain “Key Man” provisions such that the Licensor may terminate the License
Agreement if we terminate the employment of our Chief Executive Officer, Mr. Sergio Traversa, for any reason other than for specified causes determined by a majority of our
Board of Directors (including fraud, gross negligence, unauthorized use of our confidential information, conduct including harassment or discrimination, breach of fiduciary
duty or uncured material breach), or if we (a) substantially modify Mr. Traversa’s job responsibilities or decision-making rights in connection with the development and
commercialization of esmethadone, (b) remove him from the role of Chief Executive Officer other than in connection with a permitted change-of-control transaction, (c)
materially reduce his compensation, or (d) assign or transfer our rights under the License Agreement or the esmethadone intellectual property without Mr. Traversa’s consent, in
each case (termination or the events in (a) through (d) during the period commencing on the effective date and ending on the later of five years from the original effective date
of the License Agreement on December 31, 2022. The December 2019 amendment to the License Agreement made certain clarifications to the nature of a termination for
Cause, including to clarify that termination due to Mr. Traversa’s death or disability does not give Licensor the right to terminate the License Agreement.
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As a result of the provisions described above, we are limited in our ability to terminate, as well as to decrease the salary or authority of, our Chief Executive Officer until
December 31, 2022. In addition, the agreement provides that any assignor that we assign the agreement to must agree in writing to all terms of the license, including the key
man provisions, and as noted above, our Chief Executive Officer has the right to consent to any such assignment of the agreement unless previously terminated for cause or due
to death. As the license agreement relates to our only product candidate currently under clinical development, these provisions may be deemed to have an anti-takeover effect
and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including attempts that might result in a premium
being paid over the market price for the shares held by stockholders. If we fail to comply with the terms of the License Agreement, our rights to those patents may be
terminated, and we will be unable to conduct our business.
We have generated no revenue from commercial sales to date and our future profitability is uncertain.
We have a limited operating history and our business is subject to all of the risks inherent in the establishment of a new business enterprise. Our likelihood of success must be
considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with this. Since we began our business, we have
focused on research, development and clinical trials of product candidates, and have incurred significant losses since inception and generated no product revenues. If we
continue to incur operating losses and fail to become a profitable company, we may be unable to continue our operations. We expect to continue to operate at a net loss for at
least the next several years as we continue our research and development efforts, continue to conduct clinical trials and develop manufacturing, sales, marketing and distribution
capabilities. There can be no assurance that the products under development by us will be approved for sales in the US or elsewhere. Furthermore, there can be no assurance
that if such products are approved they will be successfully commercialized, and the extent of our future losses and the timing of our profitability are highly uncertain.
International commercialization of our product candidates faces significant obstacles.
We may plan to commercialize some of our products internationally through collaborative relationships with foreign partners. We have limited foreign regulatory, clinical and
commercial resources. Future partners are critical to our international success. We may not be able to enter into collaboration agreements with appropriate partners for
important foreign markets on acceptable terms, or at all. Future collaborations with foreign partners may not be effective or profitable for us. We will need to obtain approvals
from the appropriate regulatory, pricing and reimbursement authorities to market any of our proposed products internationally, and we may be unable to obtain foreign
regulatory approvals. Pursuing foreign regulatory approvals will be time-consuming and expensive. The regulations can vary among countries and foreign regulatory authorities
may require different or additional clinical trials than we conducted to obtain FDA approval for our product candidates. In addition, adverse clinical trial results, such as death
or injury due to side effects, could jeopardize not only regulatory approval, but if approval is granted, may also lead to marketing restrictions. Our product candidates may also
face foreign regulatory requirements applicable to controlled substances.
We have a history of losses and we may never achieve or sustain profitability.
We have incurred substantial losses since our inception, and we may not achieve profitability for the foreseeable future, if at all. Since inception, we have an accumulated
deficit of approximately $305.1 million at December 31, 2021. The Company had cash, cash equivalents and short term investments of approximately $211.9 million at
December 31, 2021. Even if we succeed in developing and commercializing one or more of our product candidates, we expect to incur substantial net losses and negative cash
flows for the foreseeable future due in part to increasing research and development expenses, including clinical trials, and increasing expenses from leasing additional facilities
and hiring additional personnel. As a result, we will need to generate significant revenues in order to achieve and maintain profitability. We may not be able to generate these
revenues or achieve profitability in the future. Even if we do achieve profitability, we may not be able to sustain or increase profitability.
We have a limited operating history upon which to base an investment decision.
Our limited operating history may limit your ability to evaluate our prospects due to our limited historical financial data and our unproven potential to generate profits. You
should evaluate the likelihood of financial and operational success in light of the risks, uncertainties, expenses and difficulties associated with an early-stage business, many of
which may be beyond our control, including:
● our potential inability to continue to undertake preclinical studies, pharmaceutical development and clinical trials,
● our potential inability to obtain regulatory approvals, and
● our potential inability to manufacture, sell and market our products.
Our operations have been limited to organizing and staffing, on a limited basis, our company, acquiring, developing and securing our proprietary technology and undertaking
preclinical studies and clinical trials of our principal product candidates. These operations provide a limited basis for you to assess our ability to commercialize our product
candidates and the advisability of investing in our common stock.
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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2021, we had Federal, New York State and New York City net operating loss (NOL) carryforwards of approximately $92,543,000, $91,755,000 and
$91,371,000, respectively, which begin expiring in 2027, 2032 and 2032, respectively. Under U.S. federal tax legislation enacted in 2017, informally titled the Tax Cuts and
Jobs Act, or Tax Act, federal NOLs incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of
taxable income in the year. It is uncertain if and to what extent various states will conform to the Tax Act. Under Sections 382 and 383 of the U.S. Internal Revenue Code of
1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50 percentage-point cumulative change (by value) in the equity
ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use its pre-change NOLs and other pre-change tax attributes to offset its post-
change taxable income or taxes may be limited. We may also experience ownership changes as a result of stock offerings or as a result of subsequent shifts in our stock
ownership, some of which are outside our control. We have not completed an analysis to determine whether any such limitations have been triggered. If any were determined to
be triggered, our ability to use our current NOLs and other pre-change tax attributes to offset post-change taxable income or taxes would be subject to limitation. We will be
unable to use our NOLs if we do not attain profitability sufficient to offset our available NOLs prior to their expiration.
We may not be successful in hiring and retaining key employees.
Our future operations and successes depend in large part upon the continued service of key members of our senior management team whom we are highly dependent upon to
manage our business, specifically Dr. Sergio Traversa, our Chief Executive Officer and Dr. Paolo Manfredi, Acting Chief Scientific Officer. If either terminates employment
with us, such a departure would have a material adverse effect on our business.
Our future success also depends on our ability to identify, attract, hire or engage, retain and motivate other well-qualified managerial, technical, clinical and regulatory
personnel. We currently only have 10 full time employees and are likely to hire additional qualified personnel with expertise in nonclinical pharmacology and toxicology,
pharmaceutical development, clinical research, regulatory affairs, manufacturing, sales and marketing. We compete for qualified individuals with numerous biopharmaceutical
companies, universities and other research institutions. Competition for such individuals, particularly in the United States, is intense, and we may not be able to hire sufficient
personnel to support our efforts. There can be no assurance that these professionals will be available in the market, or that we will be able to retain existing professionals or to
meet or to continue to meet their compensation requirements. Furthermore, the cost base in relation to such compensation, which may include equity compensation, may
increase significantly, which could have a material adverse effect on us. Failure to establish and maintain an effective management team and work force could adversely affect
our ability to operate, grow and manage our business.
Managing our growth as we expand operations may strain our resources.
We expect to need to grow rapidly in order to support ongoing and additional, larger, and potentially international, pivotal clinical trials of our drug candidates, which will place
a significant strain on our financial, managerial and operational resources. In order to achieve and manage growth effectively, we must continue to improve and expand our
operational and financial management capabilities. Moreover, we will need to increase staffing and to train, motivate and manage our employees.
We may expand our business through the acquisition of rights to new drug candidates that could disrupt our business, harm our financial condition and may also dilute
current stockholders’ ownership interests in our company.
Our business strategy includes expanding our products and capabilities, and we may seek acquisitions of drug candidates or technologies to do so. Acquisitions involve
numerous risks, including substantial cash expenditures; potentially dilutive issuance of equity securities; incurrence of debt and contingent liabilities, some of which may be
difficult or impossible to identify at the time of acquisition; difficulties in assimilating the acquired technologies or the operations of the acquired companies; diverting our
management’s attention away from other business concerns; risks of entering markets in which we have limited or no direct experience; and the potential loss of our key
employees or key employees of the acquired companies.
We cannot assure you that any acquisition will result in short-term or long-term benefits to us. We may incorrectly judge the value or worth of an acquired product, company or
business. In addition, our future success would depend in part on our ability to manage the rapid growth associated with some of these acquisitions. We cannot assure you that
we will be able to make the combination of our business with that of acquired products, businesses or companies work or be successful. Furthermore, the development or
expansion of our business or any acquired products, business or companies may require a substantial capital investment by us. We may not have these necessary funds or they
might not be available to us on acceptable terms or at all. We may also seek to raise funds by selling shares of our preferred or common stock, which could dilute each current
stockholder’s ownership interest in us.
Business interruptions could limit our ability to operate our business.
Our operations as well as those of our collaborators on which we depend are vulnerable to damage or interruption from computer viruses, human error, natural disasters,
electrical and telecommunication failures, international acts of terror and similar events. We have not established a formal disaster recovery plan and our back-up operations
and our business interruption insurance may not be adequate to compensate us for losses we may suffer. A significant business interruption could result in losses or damages
incurred by us and require us to cease or curtail our operations.
Our business could be adversely affected by the effects of health epidemics, including the global COVID-19 pandemic.
In December 2019, a novel strain of COVID-19 was reported in China. Since then, COVID-19 has spread globally, to include the United States. The spread of COVID-19 has
resulted in the World Health Organization (WHO) declaring the outbreak of COVID-19 as a “pandemic,” or a worldwide spread of a new disease, on March 11, 2020. Many
countries around the world have imposed quarantines, travel restrictions, limitations on gatherings, closures of businesses and other social distancing measures.
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As local jurisdictions put restrictions in place, our ability to continue to operate our business may also be limited. Such events may result in a period of business and
manufacturing disruption, and in reduced operations, any of which could materially affect our business, financial condition and results of operations.
The COVID-19 pandemic and efforts to contain the outbreak have led to economic disruption, including declines in interest rates, extreme volatility in financial markets,
fluctuations in foreign currency exchange rates, reduced economic activity and a sharp increase in unemployment claims. While the potential economic impact brought by
COVID-19 may be difficult to assess or predict, a more protracted pandemic could result in significant disruption of global financial markets, reducing our ability to access
capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our
business and the value of our common shares.
The continued spread of COVID-19 globally could also adversely affect our planned clinical trial operations, including our ability to initiate trials on expected timelines and
recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19 if an outbreak occurs in their
geography. Further, the COVID-19 outbreak could result in delays in our clinical trials due to prioritization of hospital resources toward the outbreak, restrictions in travel,
potential unwillingness of patients to enroll in trials at this time, or the inability of patients to comply with clinical trial protocols if quarantines or travel restrictions impede
patient movement or interrupt healthcare services. In addition, we rely on independent clinical investigators, contract research organizations and other third-party service
providers to assist us in managing, monitoring and otherwise carrying out our preclinical studies and clinical trials, and the outbreak may affect their ability to devote sufficient
time and resources to our programs or to travel to sites to perform work for us.
Additionally, COVID-19 may also result in delays in receiving approvals from local and foreign regulatory authorities, delays in necessary interactions with local and foreign
regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees.
The global outbreak of COVID-19 continues to evolve. The ultimate long-term impact of COVID-19 is highly uncertain and cannot be predicted with confidence. In addition,
since COVID-19 is a pandemic, it could materially affect our operations globally, including at our headquarters and at our future clinical trial sites throughout the globe.
Our business could be adversely affected by health epidemics in regions where we have significant manufacturing and distribution facilities, concentrations of clinical trial sites
or other business operations.
The ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or
impacts on our business, our supply chain, clinical trials, healthcare systems or the global economy as a whole. However, these effects could have a material impact on our
operations, and, therefore, we will continue to monitor the COVID-19 situation closely and implement risk mitigation as needed.
Risks Related to Russia’s Invasion of Ukraine.
On February 24, 2022, Russia launched a large-scale invasion of Ukraine. The United States and other countries and certain international organizations have imposed broad-
ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response, and additional sanctions may be imposed in the future.
The extent and duration of the military action or future escalation of such hostilities, resulting sanctions and future market disruptions and volatility are impossible to predict,
but could be significant and could have a severe adverse effect on the regional and global economies. The ramifications of the hostilities and sanctions may not be limited to
Russia, Ukraine and Russian and Ukrainian companies but may spill over to and negatively impact other regional and global economic markets (including Europe and the
United States), companies in other countries (particularly those that have done business with Russia and Ukraine) and on various sectors, industries and the markets for credit,
securities and commodities globally. In addition, Russia may take retaliatory actions and other countermeasures, including cyberattacks and espionage against other countries
and companies around the world, including attacks on key infrastructure such as the power grid and the internet. The potential for a wider conflict could further increase
financial market volatility and could negatively affect our ability to raise additional capital when required. While we do not currently conduct any business in Russia or
Ukraine, the conflict and its effects could adversely affect our planned clinical trial operations, including our ability to recruit and retain patients.
Risks Related to Clinical and Regulatory Matters
If we or our potential collaborators fail to obtain the necessary regulatory approvals, or if such approvals are limited, we and our potential collaborators will not be allowed
to commercialize our drug candidates, and we will not generate product revenues.
Satisfaction of all regulatory requirements for commercialization of a drug candidate typically takes many years, is dependent upon the type, complexity and novelty of the
drug candidate, and requires the expenditure of substantial resources for research and development. Our research and clinical approaches may not lead to drugs that the FDA
considers safe for humans and effective for indicated uses we are studying. The FDA may require studies in addition to those we are conducting, in which case we or our
collaborators would have to expend additional time and resources and would likely delay the date of potentially receiving regulatory approval. The approval process may also
be delayed by changes in government regulation, future legislation or administrative action or changes in FDA policy that occur prior to or during our regulatory review. Delays
in obtaining regulatory approvals would:
● delay commercialization of, and product revenues from, our drug candidates; and
● diminish the competitive advantages that we may have otherwise enjoyed, which would have an adverse effect on our operating results and financial condition.
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Even if we or our collaborators comply with all FDA regulatory requirements, our drug candidates may never obtain regulatory approval. If we or our collaborators fail to
obtain regulatory approval for any of our drug candidates we will have fewer commercial products, if any, and corresponding lower product revenues, if any. Even if our drug
candidates receive regulatory approval, such approval may involve limitations on the indications and conditions of use or marketing claims for our products. Further, later
discovery of previously unknown problems or adverse events could result in additional regulatory restrictions, including withdrawal of products. The FDA may also require us
or our collaborators to commit to perform lengthy Phase 4 post-approval clinical efficacy or safety studies. Our expending additional resources on such trials would have an
adverse effect on our operating results and financial condition.
In jurisdictions outside the United States, we or our collaborators must receive marketing authorizations from the appropriate regulatory authorities before commercializing our
drugs. Regulatory approval processes outside the United States generally include all of the aforementioned requirements and risks associated with FDA approval.
If we or our collaborators are unable to design, conduct and complete successful clinical trials, our drug candidates will not be able to receive regulatory approval.
Before obtaining regulatory approvals for the commercial sale of any of our product candidates, we must demonstrate through lengthy, complex and expensive nonclinical
testing and clinical trials that the product is both safe and effective for use in each target indication.
Results from early clinical trials may not support moving a drug candidate to later-stage clinical trials. Phase 3 clinical trials may not demonstrate the safety or efficacy of our
drug candidates. Success in preclinical studies and early clinical trials does not ensure that later clinical trials will be successful. Results of later clinical trials may not replicate
the results of prior clinical trials and preclinical studies. Even if the results of Phase 3 clinical trials are positive, we or our collaborators may have to commit substantial time
and additional resources to conducting further preclinical studies and clinical trials before obtaining FDA approval for any of our drug candidates.
Clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous requirements. The clinical trial process also consumes a
significant amount of time. Furthermore, if participating patients in clinical trials suffer drug-related adverse reactions during the course of such clinical trials, or if we, our
collaborators or the FDA believe that participating patients are being exposed to unacceptable health risks, such clinical trials will have to be suspended or terminated. Failure
can occur at any stage of the clinical trials, and we or our collaborators could encounter problems that cause abandonment or repetition of clinical trials.
Our clinical trials and our future clinical trials for esmethadone measure clinical symptoms, such as depression that are not biologically measurable. The primary measure of
depression is subjective and can be influenced by factors outside of our control, and can vary widely from day to day for a particular patient, and from patient to patient and site
to site within a clinical study. The results we have obtained in completed animal studies or we have observed in our clinical trials conducted to date may not be predictive of
results from our future clinical trials. In addition, clinical trial results from the study of depression are inherently difficult to predict.
We have a limited history of developing drug candidates. We do not know whether any of our ongoing or planned clinical trials will result in marketable drugs.
In addition, completion of clinical trials can be delayed by numerous factors, including:
● delays in identifying and agreeing on acceptable terms with prospective clinical trial sites;
● slower than expected rates of patient recruitment and enrollment;
● unanticipated patient dropout rates; and
● increases in time required to complete monitoring of patients during or after participation in a clinical trial.
Any of these delays could significantly impact the timing, approval and commercialization of our drug candidates and could significantly increase our overall costs of drug
development.
We cannot predict whether regulatory agencies will determine that the data from our clinical trials support marketing approval.
The FDA’s and other regulatory agencies’ decision to approve our depression product candidate will depend on our ability to demonstrate with substantial clinical evidence
through adequate well-controlled clinical trials, that the product candidate is effective, as measured statistically by comparing the overall improvement in depression in
actively-treated patients against improvement in depression in the control group (a placebo control). However, there is a possibility that our data may fail to show a statistically
significant difference from the placebo control or the active control. Alternatively, there is a possibility that our data may be statistically significant, but that the actual clinical
benefit of the product candidates may not be considered to be clinically significant, clinically relevant or clinically meaningful. Even if we believe that the data from our trials
will support marketing approval in the United States or in Europe, we cannot predict whether the agencies will agree with our analysis and approve our applications.
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Developments by competitors may establish standards of care that affect our ability to conduct our clinical trials as planned.
Changes in standards related to clinical trial design could affect our ability to design and conduct clinical trials as planned. In that case, both the cost and the amount of time
required to conduct a clinical trial could increase.
The DEA through its quota system limits the availability of the active ingredients in certain of our current drug candidates and, as a result, the Company’s quotas for these
ingredients may not be sufficient to complete clinical trials, or to meet commercial demand or may result in clinical delays.
The DEA regulates certain controlled substance chemical compounds as Schedule I, II, III, IV or V substances, with Schedule I substances considered to present the highest
risk of abuse and Schedule V substances the lowest risk. Esmethadone is the single isomer of methadone, a Schedule II compound, and its handling (including manufacture,
research, shipment, storage, sale and use) is subject to a high degree of federal and state oversight and regulation. Furthermore, the amount of Schedule II substances that can be
obtained for clinical trials and commercial distribution is limited by the DEA through its quota system. Quotas may not be sufficient to complete clinical trials or meet
commercial demand. There is a risk that federal statutes and DEA regulations concerning applicable quotas may interfere with the supply of the drugs used in clinical trials for
our product candidates, and, in the future, the ability to manufacture and distribute esmethadone in the volume needed to meet commercial demand.
Conducting clinical trials of our drug candidates or commercial sales of a drug candidate may expose us to expensive product liability claims and we may not be able to
maintain product liability insurance on reasonable terms or at all.
The risk of product liability is inherent in the testing of pharmaceutical products. If we cannot successfully defend ourselves against product liability claims, we may incur
substantial liabilities or be required to limit or terminate testing of one or more of our drug candidates. Our inability to obtain sufficient product liability insurance at an
acceptable cost to protect against product liability claims could prevent or inhibit the commercialization of our drug candidates. We currently carry clinical trial insurance but
do not carry product liability insurance. If we successfully commercialize our drug candidates, we may face product liability claims, regardless of FDA approval for
commercial manufacturing and sale. We may not be able to obtain such insurance at a reasonable cost, if at all. Even if our agreements with any current or future corporate
collaborators entitle us to indemnification against product liability losses, such indemnification may not be available or adequate should any claim arise.
If our drug candidates receive regulatory approval, we and our collaborators will also be subject to ongoing FDA obligations and continued regulatory review, such as
continued safety reporting requirements, and we and our collaborators may also be subject to additional FDA post-marketing obligations or new regulations, all of which
may result in significant expense and limit our and our collaborators’ ability to commercialize our drugs.
Any regulatory approvals that our drug candidates receive may also be subject to limitations on the indicated uses for which the drug may be marketed or contain requirements
for costly post-marketing follow-up studies. In addition, if the FDA approves any of our drug candidates, the manufacturing processes, labeling, packaging, distribution, post-
approval monitoring and adverse event reporting, storage, import, export, advertising, promotion and record keeping for the drug will be subject to extensive and ongoing
regulatory requirements. The FDA has significant post-market authority, including the authority to require labeling changes based on new safety information and to require
post-market studies or clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of the product from the market. The manufacturing facilities
used to manufacture our product candidates will also be subject to periodic review and inspection by the FDA and other regulatory agencies, including for continued
compliance with current good manufacturing practices (cGMPs) requirements. The discovery of any new or previously unknown problems with our third-party manufacturers,
manufacturing processes or facilities may result in restrictions on the product, manufacturer or facility, including withdrawal of the product from the market. Any product
promotion and advertising will also be subject to regulatory requirements and continuing regulatory review. The FDA imposes stringent restrictions on manufacturers’
communications regarding use of their products. If we promote our product candidates in a manner inconsistent with FDA-approved labeling or otherwise not in compliance
with FDA regulations, we may be subject to enforcement action. If we or our collaborators, manufacturers or service providers fail to comply with applicable continuing
regulatory requirements in the United States or foreign jurisdictions in which we seek to market our products, we or they may be subject to, among other things, fines, warning
or untitled letters, holds on clinical trials, suspension or withdrawal of regulatory approval, product recalls and seizures, administrative detention of products, refusal to permit
the import or export of products, operating restrictions, injunction, civil penalties and criminal prosecution.
The FDA’s policies may change and additional government regulations may be enacted that could prevent or delay regulatory approval of our drug candidates. We cannot
predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad.
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Fast Track Designation may not lead to a faster development or regulatory review or approval process.
We have obtained Fast Track Designation for esmethadone for the adjunctive treatment of MDD. Fast Track Designation is granted if a drug is intended for the treatment of a
serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition. Fast Track Designation does not guarantee a
faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is
no longer supported by data from our clinical development program.
Even though we have obtained orphan drug designation in the United States for esmethadone for the treatment of postherpetic neuralgia, we may not obtain or maintain
orphan drug exclusivity for that product candidate, and we may not obtain orphan drug designation or exclusivity for any of our other product candidates or indications.
The FDA may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is
a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals in the United States.
Generally, if a product with an orphan drug designation subsequently receives the first marketing approval for the indication for which it has such designation, the product is
entitled to a period of marketing exclusivity, which precludes the FDA from approving another marketing application for the same drug for the same disease for seven years.
Orphan drug exclusivity may be lost if the FDA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity
of the drug to meet the needs of patients with the rare disease or condition.
We have obtained orphan drug designation for esmethadone for the treatment of postherpetic neuralgia. If the product candidate were to obtain orphan drug exclusivity upon
approval, such exclusivity would prevent the FDA from approving another application to market a drug containing the same active moiety for the same orphan indication,
except in very limited circumstances, including when the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. In addition, a
designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.
Even though we have received orphan drug designation for esmethadone for the treatment of postherpetic neuralgia, we may not be the first to obtain marketing approval for
this active moiety for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical product candidates. Further, even if we obtain orphan
drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved
for the same condition or a drug with the same active moiety can be approved for a different indication. Orphan drug designation by the FDA neither shortens the development
time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, even if we intend to seek orphan drug
designation for other product candidates or indications, we may never receive such designations or obtain orphan drug exclusivity.
We may not be able to obtain marketing exclusivity under the Hatch-Waxman Amendments or equivalent regulatory data exclusivity protection in other jurisdictions for
our products.
We intend to rely, in part, on Hatch-Waxman exclusivity for the commercialization of our products in the United States, if approved. The Hatch-Waxman Amendments provide
marketing exclusivity to the first applicant to gain approval of an NDA under specific provisions of the Federal Food, Drug, and Cosmetic Act. For esmethadone, which we
intend to elect to have not be considered the same active ingredient as methadone and therefore an NCE, we anticipate obtaining 5-year exclusivity. If FDA were to determine
that we do not meet the requirements to make the election, we may not be able to obtain 5-year exclusivity for the product. In addition, under the statute, this election currently
may only be made in an NDA submitted before October 1, 2022. As we do not expect to submit an NDA before that date, if the statute is not amended to extend the election,
we would not obtain 5-year exclusivity for esmethadone, if approved.
There can be no assurance that European authorities will grant data exclusivity for esmethadone, because it does not contain a new active molecule. Even if European data
exclusivity is granted for esmethadone, this may not protect us from direct competition. A competitor(s) with a generic version of our product may be able to obtain approval
of its product during our product’s period of data exclusivity, by submitting a marketing authorization application (MAA) with a less than full package of nonclinical and
clinical data.
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We may need to focus our future efforts in new therapeutic areas where we have little or no experience.
Although our primary strategic interest is in the areas of depression, esmethadone has potential benefits in other therapeutic areas. If our drug development efforts in depression
fail, or if the competitive landscape or investment climate for antidepressant drug development is less attractive, we may need to change the company’s strategic focus to
include development of our product candidates, or of newly acquired product candidates, for therapeutic areas other than depression. We have very limited drug development
experience in other therapeutic areas and we may be unsuccessful in making this change from a depression company to a company with a focus in areas other than depression
or a company with a focus in multiple therapeutic areas including depression.
Our product candidates contain controlled substances, the supply of which may be limited by U.S. statutes and regulations, and the use of which may generate public
controversy.
The active ingredients in esmethadone are listed by the CSA and regulations promulgated by the DEA as controlled substances. The CSA and regulations promulgated by the
DEA regulate certain drug substances in Schedule I, II, III, IV or V, with Schedule I substances considered to present the highest risk of substance abuse and Schedule V
substances the lowest risk. These product candidates are also subject to the CSA and DEA regulations relating to their handling (i.e., manufacturing, storage, distribution,
prescribing and dispensing procedures).
Products containing controlled substances may generate public controversy. Opponents of these products may seek restrictions on marketing and withdrawal of any regulatory
approvals. In addition, these opponents may seek to generate negative publicity in an effort to persuade the medical community to reject these products. Political pressures and
adverse publicity could lead to delays in, and increased expenses for, and limit or restrict the introduction and marketing of our product candidates.
Failure to comply with the CSA or DEA regulations, or the cost of compliance with these regulations, may adversely affect our business.
Esmethadone is subject to extensive regulation by the DEA. Although esmethadone is substantially devoid of opioid activity, and psychotomimetic effects, it is currently
classified as a Schedule II drug. Upon approval, the DEA may continue to designate it as a controlled substance falling under a DEA controlled substance schedule.
Esmethadone is produced by separation from racemic methadone, a scheduled drug subject to extensive regulation by the DEA.
The manufacture, shipment, storage, sale and use of controlled substances are subject to a high degree of regulation, including security, recordkeeping and reporting obligations
enforced by the DEA. Schedule II substances (as well as substances defined as narcotics in any Schedule) are subject to the strictest regulatory requirements and restrictions
involving registration, storage, security, recordkeeping and reporting. In particular, distribution and dispensing of Schedule II drugs are strictly controlled. For example, all
Schedule II drug prescriptions cannot be refilled and must contain a written or electronic signature of a practitioner when presented to a pharmacy. This high degree of
regulation can result in significant costs in order to comply with the required regulations, which may have an adverse effect on the development and commercialization of our
product candidates.
The DEA limits the availability and production of all scheduled substances, including esmethadone, through a quota system. The DEA requires substantial evidence and
documentation of expected legitimate medical and scientific needs before assigning quotas to manufacturers. In future years, we may need greater amounts of controlled
substances to sustain our development program, and we will need significantly greater amounts to implement our commercialization plans if the FDA approves our proposed
formulations. Any delay or refusal by the DEA in establishing the procurement quota or a reduction in our quota for scheduled controlled substances or a failure to increase it
over time as we anticipate could delay or stop the clinical development or commercial sale of some of our products or product candidates. This could have a material adverse
effect on our business, results of operations, financial condition and prospects.
If a supplier of an active pharmaceutical ingredient (API) or a pharmaceutical excipient fails to provide us sufficient quantities, we may not be able to obtain an alternative
supply on a timely or acceptable basis.
Our pharmaceutical excipients and other APIs are multisource, although not all sources have an active Drug Master File (DMF) with the FDA. (A DMF is a submission to the
FDA used to provide confidential detailed information about facilities, processes, or articles used in the manufacturing, processing, packaging, and storing of drugs to support
drug development and approval). In addition, some of the countries for our multisource APIs may not be same as our drug manufacturing locations. Thus, any disruption in
supply from our preferred vendors could result in significant delays with our pharmaceutical development, clinical trials, NDA submission, NDA approval or commercial sale
of the finished product due to contract delays, the need to manufacture a new batch of API, out of specification API, the need for import and export permits, and the failure of
the newly sourced API to perform to the standards of the previously sourced API.
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Modifications to our products may require new NDA approvals.
After a product candidate receives FDA approval, expanded uses or uses in new indications of our products may require additional clinical trials and new regulatory approvals,
including additional IND submissions before we can begin clinical development and supplemental NDA approval prior to marketing and sales. If we are required to conduct
additional clinical studies, it would require additional expenditures and impact our operating results. Delays in obtaining required future approvals could adversely affect our
ability to introduce new or enhanced products in a timely manner, which in turn would harm our future growth.
Delays in the commencement or completion of pharmaceutical development, manufacturing or clinical testing could result in increased costs to us and delay our ability to
generate revenues.
We do not know whether our pharmaceutical development, manufacturing or clinical testing will be on time or be completed on schedule, if at all. For example, we may
encounter delays during the manufacture of pilot scale batches including delays with our contract development or manufacturing organization, sourcing satisfactory quantities
of APIs, narcotic import and export permits, sourcing of excipients, contract disputes with our third party vendors and manufacturers, or failure of the product to meet
specification. Similar delays may occur a during our cGMP manufacture of the product.
The commencement and completion of clinical trials can be disrupted for a variety of reasons, including difficulties in:
● recruiting and enrolling patients to participate in a clinical trial;
● obtaining regulatory approval to commence a clinical trial;
● reaching agreement on acceptable terms with prospective clinical research organizations and trial sites;
● obtaining approval of the institutional review board (IRB) at each site selected for participation in our clinical trials;
● manufacturing sufficient quantities of a product candidate;
● investigator fraud, including data fabrication by clinical trial personnel; and
● diversion of controlled substances by clinical trial personnel.
A clinical trial may also be suspended or terminated by us, the FDA or other regulatory authorities due to a number of factors, including:
● failure to conduct the clinical trial in accordance with regulatory requirements or in accordance with our clinical protocols;
● inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;
● unforeseen safety issues; or
● inadequate patient enrollment or lack of adequate funding to continue the clinical trial.
In addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes, which could impact the
cost, timing or successful completion of a clinical trial. If we experience delays in the commencement or completion of our clinical trials, the commercial prospects for our
product candidates will be harmed, and our ability to generate product revenues will be delayed. Many of the factors that cause, or lead to, a delay in the commencement or
completion of clinical trials may also lead to the denial of regulatory approval of a product candidate.
Conducting successful clinical studies may require the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit.
Patient enrollment in clinical trials and completion of patient participation and follow-up depends on many factors, including the size of the patient population; the nature of the
trial protocol; the attractiveness of, or the discomforts and risks associated with, the treatments received by enrolled subjects; the availability of appropriate clinical trial
investigators; support staff; the number of ongoing clinical trials in the same indication that compete for the same patients; and proximity of patients to clinical sites and ability
to comply with the eligibility and exclusion criteria for participation in the clinical trial and patient compliance. For example, patients may be discouraged from enrolling in our
clinical trials if the trial protocol requires them to undergo extensive post-treatment procedures or follow-up to assess the safety and effectiveness of our products or if they
determine that the treatments received under the trial protocols are not attractive or involve unacceptable risks or discomforts. Patients may also not participate in our clinical
trials if they choose to participate in contemporaneous clinical trials of competitive products.
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Adverse safety outcomes could affect our ability to conduct our clinical trials or obtain approval of our product candidates.
Serious injury or death resulting from a failure of one of our drug candidates during current or future clinical trials could result in the FDA delaying our clinical trials or
denying or delaying clearance or approval of a product. Even though an adverse event may not be the result of the failure of our drug candidate, FDA or an IRB could delay or
halt a clinical trial for an indefinite period of time while an adverse event is reviewed, and likely would do so in the event of multiple such events. Any delay or termination of
our current or future clinical trials as a result of the risks summarized above, including delays in obtaining or maintaining required approvals from IRBs, delays in patient
enrollment, the failure of patients to continue to participate in a clinical trial, and delays or termination of clinical trials as a result of protocol modifications or adverse events
during the trials, may cause an increase in costs and delays in the submission of any NDAs to the FDA, delay the approval and commercialization of our products or result in
the failure of the clinical trial, which could adversely affect our business, operating results and prospects. Lengthy delays in the completion of clinical trials of our products
would adversely affect our business and prospects and could cause us to cease operations.
On November 29, 2006, the FDA required a boxed warning to be added to the Prescribing Information for racemic methadone, a parent compound to our esmethadone related
to cardiac death. Although the decision was based on case reports and not on a controlled clinical trial, as part of the development of esmethadone we are actively assessing the
cardiac safety profile of esmethadone in our Phase 3 clinical trials. There is no assurance that the results of our clinical studies will demonstrate an absence of cardiac adverse
events with esmethadone. An adverse safety outcome could result in a similar bolded warning on the label of esmethadone or in a decision not to approve esmethadone, either
one of which could have serious consequences for our continued operation.
Esmethadone may require Risk Evaluation and Mitigation Strategies (REMS).
Esmethadone, may require REMS. The REMS may include requirements for special labeling or medication guides for patients, special communication plans to health care
professionals and restrictions on distribution and use. We cannot predict the specific REMS to be required as part of the FDA’s approval of any of our products. Depending on
the extent of the REMS requirements, our costs to commercialize our products may increase significantly. Furthermore, controlled substances risks that are not adequately
addressed through proposed REMS for our product candidates may also prevent or delay their approval for commercialization.
Our products will face significant competition in the markets for such products, and if they are unable to compete successfully, our business will suffer.
Our products candidates face, and will continue to face, intense competition from large pharmaceutical companies, specialty pharmaceutical and biotechnology companies as
well as academic and research institutions. We compete in an industry that is characterized by: (i) rapid technological change, (ii) evolving industry standards, (iii) emerging
competition and (iv) new product introductions. Our competitors have existing products and technologies that will compete with our products and technologies and may
develop and commercialize additional products and technologies that will compete with our products and technologies. Because several competing companies and institutions
have greater financial resources than us, they may be able to: (i) provide broader services and product lines, (ii) make greater investments in research and development, (R&D),
and (iii) carry on larger R&D initiatives. Our competitors also have greater development capabilities than we do and have substantially greater experience in undertaking
nonclinical and clinical testing of products, obtaining regulatory approvals, and manufacturing and marketing pharmaceutical products. They also have greater name
recognition and better access to customers than us. Our chief competitors include companies such as Johnson and Johnson, Abbvie, Pfizer, Eli Lilly, Sage Therapeutics, and
Axsome Therapeutics among others.
We may be exposed to liability claims associated with the use of hazardous materials and chemicals.
Our research and development activities involve the controlled use of hazardous materials and chemicals. Although we believe that our safety procedures for using, storing,
handling and disposing of these materials comply with federal, state and local laws and regulations, we cannot completely eliminate the risk of accidental injury or
contamination from these materials. In the event of such an accident, we could be held liable for any resulting damages and any liability could materially adversely affect our
business, financial condition and results of operations. In addition, the federal, state and local laws and regulations governing the use, manufacture, storage, handling and
disposal of hazardous or radioactive materials and waste products may require us to incur substantial compliance costs that could materially adversely affect our business and
financial condition.
We may incur substantial liabilities and may be required to limit commercialization of our products in response to product liability lawsuits.
The testing and marketing of medical products entail an inherent risk of product liability. We may be held liable if serious adverse reactions from the use of our product
candidates occur. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of
our product candidates. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or
inhibit the commercialization of pharmaceutical products we develop, alone or with corporate collaborators. We currently do not carry product liability insurance. We, or any
corporate collaborators, may not be able to obtain insurance at a reasonable cost, if at all. Even if our agreements with any future corporate collaborators entitle us to
indemnification against losses, such indemnification may not be available or adequate if any claim arises.
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Risks Related to Our Intellectual Property
Our business depends upon securing and protecting critical intellectual property.
Our commercial success will depend in part on our obtaining and maintaining patent, trade secret, copyright and trademark protection of our technologies in the United States
and other jurisdictions as well as successfully enforcing this intellectual property and defending this intellectual property against third-party challenges. We will only be able to
protect our technologies from unauthorized use by third parties to the extent that valid and enforceable intellectual property protection, such as patents or trade secrets, cover
them. In particular, we place considerable emphasis on obtaining patent and trade secret protection for significant new technologies, products and processes. Furthermore, the
degree of future protection of our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to
gain or keep our competitive advantage. Moreover, the degree of future protection of our proprietary rights is uncertain for products that are currently in the early stages of
development because we cannot predict which of these products will ultimately reach the commercial market or whether the commercial versions of these products will
incorporate proprietary technologies.
Our patent position is highly uncertain and involves complex legal and factual questions.
Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents. For example, we or our licensors might not have
been the first to make the inventions covered by each of our pending patent applications and issued patents; we or our licensors might not have been the first to file patent
applications for these inventions; others may independently develop similar or alternative technologies or duplicate any of our technologies; it is possible that none of our
pending patent applications or the pending patent applications of our licensors will result in issued patents; our issued patents and issued patents of our licensors may not
provide a basis for commercially viable technologies, or may not provide us with any competitive advantages, or may be challenged and invalidated by third parties; and, we
may not develop additional proprietary technologies that are patentable.
As a result, our owned and licensed patents may not be valid and we may not be able to obtain and enforce patents and to maintain trade secret protection for the full
commercial extent of our technology. The extent to which we are unable to do so could materially harm our business.
Unpatented trade secrets, improvements, confidential know-how and continuing technological innovation are important to our scientific and commercial success. Although we
attempt to and will continue to attempt to protect our proprietary information through reliance on trade secret laws and the use of confidentiality agreements with our corporate
partners, collaborators, employees and consultants and other appropriate means, these measures may not effectively prevent disclosure of our proprietary information, and, in
any event, others may develop independently, or obtain access to, the same or similar information.
Certain of our patent rights are licensed to us by third parties. If we fail to comply with the terms of these license agreements, our rights to those patents may be terminated, and
we will be unable to conduct our business.
If we are found to be infringing on patents or trade secrets owned by others, we may be forced to cease or alter our product development efforts, obtain a license to
continue the development or sale of our products, and/or pay damages.
Our manufacturing processes and potential products may violate proprietary rights of patents that have been or may be granted to competitors, universities or others, or the
trade secrets of those persons and entities. As the pharmaceutical industry expands and more patents are issued, the risk increases that our processes and potential products may
give rise to claims that they infringe the patents or trade secrets of others. These other persons could bring legal actions against us claiming damages and seeking to enjoin
clinical testing, manufacturing and marketing of the affected product or process. If any of these actions are successful, in addition to any potential liability for damages, we
could be required to obtain a license in order to continue to conduct clinical tests, manufacture or market the affected product or use the affected process. Required licenses may
not be available on acceptable terms, if at all, and the results of litigation are uncertain. If we become involved in litigation or other proceedings, it could consume a substantial
portion of our financial resources and the efforts of our personnel.
Our ability to protect and enforce our patents does not guaranty that we will secure the right to commercialize our patents.
A patent is a limited monopoly right conferred upon an inventor, and his successors in title, in return for the making and disclosing of a new and non-obvious invention. This
monopoly is of limited duration but, while in force, allows the patent holder to prevent others from making and/or using his invention. While a patent gives the holder this right
to exclude others, it is not a license to commercialize the invention, where other permissions may be required for permissible commercialization to occur. For example, a drug
cannot be marketed without the appropriate authorization from the FDA, regardless of the existence of a patent covering the product. Further, the invention, even if patented
itself, cannot be commercialized if it infringes the valid patent rights of another party.
25
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our
business, or permit us to maintain our competitive advantage. The following examples are illustrative:
● others may be able to make product that is similar to our current and future product candidates we intend to commercialize that is not covered by the patents that we
own or license and have the right to enforce;
● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
● it is possible that our current and future patent applications will not lead to issued patents;
● issued patents that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; and
● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims
for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to
develop competitive products for sale in our major commercial markets; and we may not develop additional proprietary technologies that are patentable.
Risks Related to Government Regulation
We may undertake international operations, which will subject us to risks inherent with operations outside of the United States.
Although we do not have any foreign operations at this time, we intend to seek to obtain market clearances in foreign markets that we deem to generate significant
opportunities. However, even with the cooperating of a commercialization partner, conducting drug development in foreign countries involves inherent risks, including, but not
limited to: difficulties in staffing, funding and managing foreign operations; unexpected changes in regulatory requirements; export restrictions; tariffs and other trade barriers;
difficulties in protecting, acquiring, enforcing and litigating intellectual property rights; fluctuations in currency exchange rates; and potentially adverse tax consequences.
If we were to experience any of the difficulties listed above, or any other difficulties, any international development activities and our overall financial condition may suffer and
cause us to reduce or discontinue our international development and registration efforts.
We depend on our information technology systems and those of our third-party collaborators, service providers, contractors or consultants. Our internal computer systems,
or those of our third-party collaborators, service providers, contractors or consultants, may fail or suffer security breaches, disruptions, or incidents, which could result in
a material disruption of our development programs or loss of data or compromise the privacy, security, integrity or confidentiality of sensitive information related to our
business and have a material adverse effect on our reputation, business, financial condition or results of operations.
In the ordinary course of our business, we collect, store and transmit large amounts of confidential information, including intellectual property, proprietary business information
and personal information. Our internal technology systems and infrastructure, and those of our current or future third-party collaborators, service providers, contractors and
consultants are vulnerable to damage from computer viruses, unauthorized access or use resulting from malware, natural disasters, terrorism, war and telecommunication and
electrical failures, denial-of-service attacks, cyber-attacks or cyber-intrusions over the internet, hacking, phishing and other social engineering attacks, persons inside our
organizations (including employees or contractors), loss or theft, or persons with access to systems inside our organization. Attacks on information technology systems are
increasing in their frequency, levels of persistence, sophistication and intensity, and they are being conducted by increasingly sophisticated and organized foreign governments,
groups and individuals with a wide range of motives and expertise. In addition to extracting or accessing sensitive information, such attacks could include the deployment of
harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the security, confidentiality, integrity and
availability of information. The prevalent use of mobile devices that access sensitive information also increases the risk of data security incidents which could lead to the loss of
confidential information or other intellectual property. While to our knowledge we have not experienced any material system failure, accident or security breach to date, if such
an event were to occur and cause interruptions in our operations or the operations of third-party collaborators, service providers, contractors and consultants, it could result in a
material disruption of our development programs and significant reputational, financial, legal, regulatory, business or operational harm. The costs to us to mitigate, investigate
and respond to potential security incidents, breaches, disruptions, network security problems, bugs, viruses, worms, malicious software programs and security vulnerabilities
could be significant, and while we have implemented security measures to protect our data security and information technology systems, our efforts to address these problems
may not be successful, and these problems could result in unexpected interruptions, delays, cessation of service and other harm to our business and our competitive position.
26
Failure to comply with existing or future laws and regulations related to privacy or data security could lead to government enforcement actions (which could include civil
or criminal fines or penalties), private litigation, other liabilities, and/or adverse publicity. Compliance or the failure to comply with such laws could increase the costs of
our products and services, could limit their use or adoption, and could otherwise negatively affect our operating results and business.
Regulation of data processing is evolving, as federal, state, and foreign governments continue to adopt new, or modify existing, laws and regulations addressing data privacy
and security, and the collection, processing, storage, transfer, and use of data. We and our partners may be subject to current, new, or modified federal, state, and foreign data
privacy and protection laws and regulations (e.g., laws and regulations that address data privacy and data security including, without limitation, health data). These new or
proposed laws and regulations are subject to differing interpretations and may be inconsistent among jurisdictions, and guidance on implementation and compliance practices
are often updated or otherwise revised, which adds to the complexity of processing personal data. These and other requirements could require us or our partners to incur
additional costs to achieve compliance, limit our competitiveness, necessitate the acceptance of more onerous obligations in our contracts, restrict our ability to use, store,
transfer, and process data, impact our or our partners’ ability to process or use data in order to support the provision of our products or services, affect our or our partners’
ability to offer our products and services in certain locations, or cause regulators to reject, limit or disrupt our clinical trial activities.
Failure to comply with U.S. and international data privacy and protection laws and regulations could result in government enforcement actions (which could include civil or
criminal penalties, fines or sanctions), private litigation, and/or adverse publicity and could negatively affect our operating results and business. Moreover, patients about whom
we or our partners obtain information, as well as the providers who share this information with us, may contractually limit our ability to use and disclose the information.
Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations related to security or privacy, even
if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business. Compliance with data
protection laws may be time-consuming, require additional resources and could result in increased expenses, reduce overall demand for our products and services and make it
more difficult to meet expectations of or commitments to customers or partners.
Our operations and relationships with future customers, providers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare
laws and regulations, which could expose us to penalties including criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and
future earnings.
Healthcare providers and third-party payors will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval.
Our future arrangements with providers, third-party payors and customers will subject us to broadly applicable fraud and abuse and other healthcare laws and regulations that
may constrain the business or financial arrangements and relationships through which we market, sell and distribute any product candidates for which we obtain marketing
approval.
Restrictions under applicable U.S. federal and state healthcare laws and regulations include the following:
● the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing
remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any
good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to have actual
knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;
● federal false claims laws, including the federal False Claims Act, imposes criminal and civil penalties, including through civil whistleblower or qui tam actions,
against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or
making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, the government may assert that a claim
including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False
Claims Act;
● HIPAA imposes criminal and civil liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare
benefit program or making false statements relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual
knowledge of the statute or specific intent to violate it in order to have committed a violation;
● the federal Physician Payment Sunshine Act requires applicable manufacturers of covered drugs, devices, biologics, and medical supplies for which payment is
available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report payments and other transfers of value provided
during the previous year to physicians, as defined by such law, physician assistants, certain types of advance practice nurses, and teaching hospitals, as well as certain
ownership and investment interests held by such physicians and their immediate family, which includes annual data collection and reporting obligations;
● analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements and claims involving
healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; and some state laws require pharmaceutical companies to
comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government and may
require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing
expenditures; and
● some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance
guidance promulgated by the federal government and may require drug manufacturers to report information related to payments and other transfers of value to
physicians and other healthcare providers or marketing expenditures.
27
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that
governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse
or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may
be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of product candidates from government-funded healthcare
programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, and the curtailment or restructuring
of our operations. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws,
they may be subject to criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.
Risks Related to Our Reliance on Third Parties
We have no manufacturing capabilities and depend on other parties for our manufacturing operations. If these manufacturers fail to meet our requirements and strict
regulatory requirements, our product development and commercialization efforts may be materially harmed.
We do not own or operate facilities for drug manufacturing, storage, distribution or quality testing. We currently rely, and may continue to rely, on third-party contract
manufacturers to manufacture APIs, drug products and other components of our product candidates. Reliance on third-party manufacturers may expose us to different risks than
if we were to manufacture product candidates ourselves.
The manufacturing process for a product candidate is subject to FDA and foreign regulatory authority review. We, and our suppliers and manufacturers, must meet applicable
manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory standards, such as
cGMPs. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the
FDA and foreign regulatory authorities. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory
requirements of the FDA or comparable foreign regulatory authorities, we may not be able to rely on their manufacturing facilities for the manufacture of our product
candidates. Moreover, we do not control the manufacturing process at our contract manufacturers and are completely dependent on them for compliance with current regulatory
requirements. In the event that any of our manufacturers fails to comply with such requirements or to perform its obligations in relation to quality, timing or otherwise, or if our
supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to enter into an agreement with another third party, which we may
not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to
the original manufacturer and we may have difficulty transferring such to another third party. These factors would increase our reliance on such manufacturer or require us to
obtain a license from such manufacturer in order to enable us, or to have another third party, manufacture our product candidates.
28
We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing, or enter into future,
manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory
requirements, including those related to quality control and assurance. Any manufacturing facilities used to produce our products will be subject to periodic review and
inspection by the FDA and foreign regulatory authorities, including for continued compliance with cGMP requirements, quality control, quality assurance and corresponding
maintenance of records and documents. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms,
we may not be able to develop and commercialize our product candidates successfully. Our or a third party’s failure to execute on our manufacturing requirements, comply with
cGMPs or maintain a compliance status acceptable to the FDA or foreign regulatory authorities could adversely affect our business in a number of ways, including:
● an inability to initiate or continue clinical trials of product candidates under development;
● delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates;
● loss of the cooperation of existing or future collaborators;
● subjecting third-party manufacturing facilities to additional inspections by regulatory authorities;
● requirements to cease distribution or to recall batches of our product candidates; and
● in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.
Our contract manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our
contract manufacturers were to encounter difficulties, our ability to provide our product candidates to patients in preclinical and clinical trials, or to provide product for
treatment of patients once approved, would be jeopardized.
We intend to rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not perform as contractually required or otherwise expected,
we may not be able to obtain regulatory approval for our product candidates.
We do not currently, or in the future, intend to conduct preclinical studies or clinical trials on our own, and instead will rely on third parties, such as contract research
organizations (CROs), medical institutions, clinical investigators and contract laboratories, to assist us with our preclinical studies and clinical trials. Accordingly, we will have
less control over the timing, quality and other aspects of preclinical studies and clinical trials than we would have had we conducted them on our own. These investigators,
CROs and consultants are not our employees and we will have limited control over the amount of time and resources that they dedicate to our programs. These third parties
may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources from our programs. The third parties with
which we may contract might not be diligent, careful or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being
delayed or unsuccessful.
If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and
regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise
adversely affected. In all events, we will be responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the general
investigational plan and protocols for the trial as well as applicable legal and regulatory requirements. The FDA generally requires preclinical studies to be conducted in
accordance with good laboratory practices and clinical trials to be conducted in accordance with good clinical practices, including for designing, conducting, recording and
reporting the results of preclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of
clinical trial participants are protected. Our reliance on third parties that we do not control will not relieve us of these responsibilities and requirements. Any adverse
development or delay in our preclinical studies or clinical trials as a result of our reliance on third parties could have a material and adverse effect on our business, financial
condition, results of operations and prospects.
Risks Related to Ownership of Our Common Stock
There is a limited market for our common stock that may make it more difficult to dispose of your stock.
Our common stock is currently listed on the Nasdaq Global Select Market under the symbol “RLMD”. There is a limited trading market for our common stock. Accordingly,
there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell shares of our common
stock, or the prices at which holders may be able to sell their common stock.
A sale of a substantial number of shares of our common stock may cause the price of the common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall. These sales also may make it more
difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. Stockholders who have held their shares for at
least six months are able to sell their shares pursuant to Rule 144 under the Securities Act of 1933, as amended (the Securities Act). We have registered under separate
registration statements in aggregate up to 21,041,717 shares of our common stock for sale into the public market by certain selling stockholders named therein. These shares
represent a large number of shares of our common stock, and if sold in the market all at once or at about the same time, could depress the market price of our common stock
during the period the registration statement remains effective and could also affect our ability to raise equity capital.
29
We are subject to the reporting requirements of federal securities laws, which can be expensive and may divert resources from other projects, thus impairing our ability
grow.
We are a public reporting company and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including
compliance with the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act). The costs of preparing and filing annual and quarterly reports, proxy statements and other
information with the SEC and furnishing audited reports to stockholders cause our expenses to be higher than they would be if we remained privately held.
It may be time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may
need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting
procedures. If we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act, then we may not be able to obtain the independent accountant
certifications required by such act, which may preclude us from keeping our filings with the SEC current.
If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to
report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.
Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not
be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a
result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not
performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need
improvement. In addition, as a smaller reporting company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our
internal control over financial reporting so long as we remain a smaller reporting company, which could increase the likelihood of undiscovered errors in our internal controls
or reported financial statements as compared to issuers whose independent registered public accounting firms have provided such attestations.
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control,
including the following:
● changes in our industry;
● competitive pricing pressures;
● our ability to obtain working capital financing;
● additions or departures of key personnel;
● limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for
our common stock;
● sales of our common stock;
● our ability to execute our business plan;
● operating results that fall below expectations;
● regulatory developments;
● economic and other external factors;
● period-to-period fluctuations in our financial results; and
● inability to develop or acquire new or needed technology or products.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular
companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
30
The Nevada Revised Statutes and our articles of incorporation and bylaws contain provisions that could discourage, delay or prevent a change in control of our Company,
prevent attempts to replace or remove current management and reduce the market price of our stock.
Provisions in our articles of incorporation and bylaws may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable. For
example, our articles of incorporation authorize our board of directors to issue up to 200,000,000 shares of “blank check” preferred stock. As a result, without further
stockholder approval, the board of directors has the authority to attach special rights, including voting and dividend rights, to this preferred stock. With these rights, preferred
stockholders could make it more difficult for a third party to acquire us.
We are also subject to the anti-takeover provisions of the Nevada Revised Statutes (NRS). Depending on the number of residents in the state of Nevada who own our shares, we
could be subject to the provisions of Sections 78.378 et seq. of the Nevada Revised Statutes, which, unless otherwise provided in the Company’s articles of incorporation or by-
laws, restricts the ability of an acquiring person to obtain a controlling interest of 20% or more of our voting shares. Our articles of incorporation and by-laws do not contain
any provision which would currently keep the change of control restrictions of Section 78.378 from applying to us.
In addition, our articles of incorporation and amended and restated bylaws provide that our board of directors is classified into three classes of directors with staggered three-
year terms. Only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-
year terms. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for
stockholders to replace a majority of the directors on a classified board of directors.
Our bylaws provides that a Nevada court and the federal district courts of the United States will be the exclusive forum for substantially all disputes between us and our
stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Pursuant to our bylaws, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Eighth Judicial District Court of
Clark County, Nevada, is the sole and exclusive forum for any stockholder (including a beneficial owner of stock) to bring (a) any derivative action or proceeding brought in
the name or right of the Company or on our behalf, (b) any action asserting a claim of, or a claim based on, breach of any fiduciary duty owed by any current or former director,
officer, employee, agent or stockholder of the Company to the Company or the Company’s stockholders, (c) any action arising or asserting a claim arising pursuant to any
provision of NRS Chapters 78 or 92A or any provision of the articles of incorporation or our bylaws or (d) any action asserting a claim against us or any current or former
director, officer, employee or stockholder (including a beneficial owner of stock) governed by the internal affairs doctrine, including, without limitation, any action to interpret,
apply, enforce or determine the validity of our articles of incorporation or bylaws. By its terms, to the fullest extent permitted by law, our forum selection provision applies to
actions arising under the Securities Act or Exchange Act. (However, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any
duty or liability created by the Exchange Act or the rules and regulations thereunder, and the Company does not intend for its exclusive forum jurisdiction provision to apply to
Exchange Act claims.) These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our
directors, officers or other employees. If a court were to find the choice of forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may
incur additional costs associated with resolving such action in other jurisdictions, which could harm our business.
31
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We do not own any property.
On August 1, 2021, the Company changed its corporate headquarters to 2222 Ponce de Leon Blvd., Floor 3, Coral Gables, Florida 33134.
Pursuant to a lease agreement, dated August 1, 2021, and renewed in 2022, the Company leased the space for a total average monthly cost of $11,000. For 2022, the lease
agreement was renewed at an average monthly rent rate of approximately $6,400.
Effective July 31, 2021, the Company terminated its prior lease agreement, dated January 1, 2021 for space at 880 Third Avenue, 12th Floor, New York, NY 10022, its former
corporate headquarters.
On June 8, 2017, the Company entered into an Amended and Restated License Agreement (the Actinium License) with Actinium Pharmaceuticals, Inc. (Actinium) for office
space located at 275 Madison Avenue, 7th Floor, New York, New York 10016, our former corporate headquarters. This agreement amends and restates the license agreement
entered into between the parties on March 10, 2016 (the Lease Agreement). Pursuant to the terms of the Actinium License, Actinium will continue to license the furniture,
fixtures, equipment and tenant improvements located in its office (the FFE) for a license fee of $7,529 per month until December 8, 2022. Actinium shall have at any time
during the term of this Lease Agreement the right to purchase the FFE for $496,914, less any previously paid license fees. The license of FFE qualifies as a sales-type lease. At
inception, the Company derecognized the underlying assets of $493,452, recognized discounted lease payments receivable of $397,049 using the discount rate of 8.38% and
recognized loss on sales-type lease of fixed assets of $96,403. The term of the Actinium License is contemporaneous with the Lease Agreement.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent
uncertainties, and it is not possible to predict the outcome of litigation with total confidence. Except as disclosed below, the Company is currently not aware of any legal
proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business,
financial condition, operating results, or cash flows.
Lawsuit Brought by Current Employee
On July 15, 2020, an employee of the Company filed a Complaint alleging unequal pay based on gender and other employment-based claims. On April 9, 2021, the Company
settled this Complaint for an immaterial amount.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
32
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
PART II
Market Information
Our common stock is listed on Nasdaq Global Select Market, under the symbol “RLMD”.
Holders
As of March 21, 2022, 29,369,490 shares of common stock were issued and outstanding, which were held by 154 holders of record. These stockholders held their stock either
individually or in nominee or “street” names through various brokerage firms. There are no shares of our Class A convertible preferred stock outstanding. Our transfer agent is:
Empire Stock Transfer
1859 Whitney Mesa Drive
Henderson, NV 89014
Telephone (702) 818-5898
www.empirestock.com
Inquiries regarding stock transfers, lost certificates or address changes should be directed to the above address.
Dividends
We plan to retain any earnings for the foreseeable future for our operations. We have never paid any cash dividends on our stock and do not anticipate paying any cash
dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will depend on our financial
condition, operating results, capital requirements and such other factors as our Board of Directors deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
Relmada has a 2014 Option and Equity Incentive Plan, as amended (the Plan) in which its directors, officers, employees and consultants shall be eligible to participate. The
Plan allows for the granting of common stock awards, stock appreciation rights, and incentive and nonqualified stock options to purchase shares of the Company. On May 20,
2021, at the annual shareholders meeting, our shareholders approved our 2021 Equity Incentive Plan (the 2021 Plan) which allows for the granting of incentive and
nonqualified stock options, stock appreciation rights, restricted stock awards, performance share awards and other equity-based awards for up to 1,500,000 shares of our
common stock to directors, officers, employees and consultants. At the annual shareholders meeting (currently anticipated for mid-May, 2022), our shareholders will vote on a
management proposal to increase the shares authorized for awards under the 2021 Plan by 3,900,000 shares but there can be no assurance such amendment will be approved.
With these grants and approvals, as of December 31, 2021, the Company had 222,320 awards available to be issued.
The following table summarizes our equity compensation plan information as of December 31, 2021:
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by security holders
Number of
securities to be
issued upon
exercise of
outstanding
options and stock
appreciation
rights
(a)
10,330,622 $
Weighted-
average
exercise price
of outstanding
options and
stock
appreciation
rights
(b)
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans (excluding
securities
reflected in
column (a))
(c)
22.52
222,320
Equity compensation plans not approved by security holders
-
-
-
Total
10,330,622 $
22.52
222,320
33
ITEM 6. [RESERVED]
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, 2021 and 2020. 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 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. is a clinical-stage, publicly traded biotechnology company developing NCEs that potentially address areas of high unmet medical need in the
treatment of depression and other CNS diseases.
The Company’s 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. This was a a double-blind, placebo-controlled Phase 2 clinical trial evaluating the safety, tolerability
and efficacy of two doses of REL-1017, 25 mg once a day and 50 mg once a day, as an adjunctive treatment in patients with MDD, who experienced an inadequate response to
1 to 3 treatments with an antidepressant medication.
On December 20, 2020, the Company announced that the first patient had been enrolled in the first Phase 3 clinical trial (RELIANCE I) of 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) of REL-1017,
as an adjunctive treatment for MDD. Patients who complete RELIANCE I and RELIANCE II are eligible to rollover into the long-term, open-label study, which also includes
subjects who had not previously participated in a REL-1017 clinical trial.
On October 4, 2021, Relmada announced the initiation of RELIANCE III, the ongoing monotherapy trial for REL-1017, which aims to randomize 364 patients and it is
expected to be completed in mid-2022.
Following discussion with the FDA, Relmada’s MDD Phase 3 program includes the following key attributes:
● The Phase 3 program consists of two sister, two-arm, placebo-controlled clinical trials. Each trial will be conducted in 55 clinical sites in the United States and will
include planned enrollment of 364 MDD patients with inadequate response to standard antidepressants in their current depression episode. In the studies, patients will
add either a 25 mg oral dose of REL-1017 once per day or placebo to their ongoing antidepressant treatment.
● The primary endpoint to be evaluated is the change from baseline on the Montgomery and Asberg Depression Rating Scale (MADRS) score at day-28 for REL-1017
compared to placebo. Success on this endpoint with the collection of sufficient safety data would support the use of REL-1017 for chronic treatment, if approved.
● The change from baseline and the 7-day MADRS score serves as a key secondary endpoint and will provide data on the rapid onset of treatment effect.
In addition, in order to support potential regulatory submissions seeking approval for REL-1017 as adjunctive and monotherapy treatment, the FDA confirmed that, based on
what is known at this time, Relmada will not be required to conduct a two-year carcinogenicity study of REL-1017, as sufficient clinical data have been generated to date. The
FDA also confirmed that Relmada does 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 will be adequate to evaluate the cardiac safety profile of REL-1017.
We have not generated revenues and do not anticipate generating revenues for the foreseeable future. We had a net loss of approximately $125,751,800 and $59,456,400 for the
years ended December 31, 2021 and 2020, respectively. At December 31, 2021, we have an accumulated deficit of approximately $305,067,100.
34
Results of Operations
For the Year Ended December 31, 2021 vs the Year Ended December 31, 2020
Research and Development Expense
Total research and development expense for the year ended December 31, 2021 was approximately $90,621,600, as compared to $35,972,700 for the same period of 2020, an
increase of $54,648,900. The increase in research and development expense was primarily due to:
● Increase in study costs of $31,673,300 associated with the execution of three Phase 3 trials and open label extension safety study;
● Increase in manufacturing and drug storage costs of $3,823,100 related to materials needed to complete the Phase 3 program;
● Decrease in pre-clinical and toxicology expenses of $2,501,900;
● Decrease in compensation expense of $955,500 due to lower employee-related costs;
● Increase in stock-based compensation expense of $11,787,400 of stock-based compensation expense related to the options granted to employees and the issuance of
warrants to consultants during 2021; and
● Increase in other research expenses of $10,822,500 primarily associated with additional consultants contracted to assist in the execution of our Phase 3 trials.
General and Administrative Expense
Total general and administrative expense for the year ended December 31, 2021 was approximately $35,081,900, as compared to 24,865,900 for the same period of 2020, an
increase of $10,216,000. The increase in general and administrative expenses was primarily due to:
● Increase in compensation expense of $439,000 due to higher employee-related costs;
● Increase in stock-based compensation expense of $7,919,800 primarily related to options granted to employees and the board of directors during 2021;
● Increase in other G&A expenses of $1,857,200 due to increases in professional fees and consulting expenses during 2021.
Other Income, Net
Interest income was approximately $1,199,100 for the year ended December 31, 2021 compared to approximately $1,399,200 for the same period of 2020, a decrease of
$200,100. The decrease was primarily related to a lower average investment balance during 2021 as compared to 2020.
Realized loss on short-term investments was approximately $636,000 compared to approximately $156,200 for the same period of 2020, an increase of $479,800. The increase
was related to the timing of the sales of short-term investments along with market conditions.
Unrealized loss on short-term investments was approximately $611,400 compared to an unrealized gain on short-term investments of approximately $139,300 for the same
period of 2020, an increase of $750,700. The increase was related to the timing of the sales of short-term investments along with market conditions.
Income Taxes
The Company did not provide for income taxes for the years ended December 31, 2021 and 2020, 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 $125,751,800 and 59,456,400 or $7.16 and $3.81 per common share, basic and diluted, during the years ended December
31, 2021 and 2020, respectively, based on the factors described above.
35
Liquidity
As shown in the accompanying financial statements, the Company incurred negative operating cash flows of $91,873,395 for the year ended December 31, 2021 and has an
accumulated deficit of $305,067,112 from inception through December 31, 2021.
Relmada has funded its past operations through equity raises and most recently in the year ended December 31, 2021, Relmada raised $184,642,981 in net proceeds from the
sale of common stock, $2,628,061 through the exercise of warrants, and $668,431 through the exercise of options.
Management believes that due to the recent equity raises completed and exercises of options and warrants and the resulting cash position on its balance sheet, it has obtained
sufficient funding, based on its budgeted cash flow requirements, to continue ongoing operations for at least 12 months from the filing of this annual report.
The following table sets forth selected cash flow information for the periods indicated below:
Cash used in operating activities
Cash used in investing activities
Cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents
For the
For the
Year Ended
Year Ended
December 31,
December 31,
2021
(91,873,395) $
(54,118,036)
187,939,473
41,948,042 $
2020
(27,808,801)
(34,447,648)
28,473,327
(33,783,122)
$
$
For the year ended December 31, 2021, cash used in operating activities was $91,873,395 primarily due to the net loss of $125,751,809. This was offset by non-cash expenses
which primarily consisted of stock-based compensation of $40,494,476 and depreciation expense of $1,258. There were realized and unrealized losses on short term
investments of $636,012 and $611,382, respectively. In addition, there were increases in operating assets and liabilities for the year ended December 31, 2021 of $7,864,714.
For the year ended December 31, 2020, cash used in operating activities was $27,808,801 primarily due to the net loss of $59,456,394. This was offset by non-cash expenses
which primarily consisted of stock-based compensation of $20,777,272. There were realized losses and unrealized gains on short term investments of $156,213 and $139,267,
respectively. In addition, there were decreases in operating assets and liabilities for the year ended December 31, 2020 of $10,849,623.
For the year ended December 31, 2021, cash used in investing activities was $54,118,036, due to $222,981,675 of purchases of short term investments offset by $168,863,639
of sales of short term investments.
For the year ended December 31, 2020, cash used in investing activities was $34,447,648, due to $182,051,630 of purchases of short term investments offset by $147,603,982
of sales of short term investments.
Net cash provided by financing activities for the year ended December 31, 2021, was $187,939,473 due to proceeds from issuance of common stock of $184,642,981, proceeds
from warrants exercised for common stock of $2,628,061, proceeds from options exercised for common stock of $668,431.
Net cash provided by financing activities for the year ended December 31, 2020, was $28,473,327 due to proceeds from issuance of common stock of $19,791,644, proceeds
from warrants exercised for common stock of $8,056,416, proceeds from options exercised for common stock of $735,514 partially offset by payments of notes payable of
$110,247.
Effects of Inflation
Our assets are primarily monetary, consisting of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Because we intend to
retain and continue to use our equipment, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. 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 $78,550 under an office operative lease over the next year.
36
Seasonality
We do not have a seasonal business cycle.
Critical Accounting Policies and Use of Estimates
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 2 to the Company’s
consolidated financial statements included in this report.
Recent Accounting Pronouncements
The Company lists material recent accounting pronouncements in Note 2 of the consolidated financial statements.
37
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk
Our cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. Our cash equivalents are in a money market account.
Because of the short-term maturities of our cash and cash equivalents, we do not believe that an increase in market rates would have a significant impact on the realized value
of our investments. We place our cash and cash equivalents on deposit with financial institutions in the United States. The Federal Deposit Insurance Corporation limits
coverage for all depository accounts. Our cash and cash equivalents at times may exceed covered limits.
Foreign currency exchange risk
We currently have limited, but may in the future have increased, clinical and commercial manufacturing agreements which are denominated in Euros or other foreign
currencies. As a result, our financial results could be affected by factors such as a change in the foreign currency exchange rate between the U.S. dollar and the Euro or other
applicable currencies, or by weak economic conditions in Europe or elsewhere in the world. We are not currently engaged in any foreign currency hedging activities.
Market indexed security risk
We have issued warrants to various holders underlying shares of our common stock. These warrants are re-measured to their fair value at each reporting period with changes in
their fair value recorded as derivative gain (loss) in the accompanying consolidated statement of operations. We use the Black-Scholes model for valuation of the warrants.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited consolidated financial statements as of December 31, 2021 and 2020 for the years then ended are included beginning on Page F-1 immediately following the
signature page to this report. See Item 15 for a list of the financial statements included herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the
effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, at December 31, 2021, such disclosure controls and procedures were effective.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure.
This Annual Report on Form 10-K does not include an attestation report from our registered public accounting firm regarding internal control over financial reporting. Our
internal control over financial reporting was not subject to such attestation as we are a non-accelerated filer.
Limitations on the Effectiveness of Controls
Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Our
Chief Executive Officer and Chief Financial Officer have concluded, based on his evaluation as of the end of the period covered by this Report that our disclosure controls and
procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.
Changes in Internal Control Over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting that occurred during the fourth quarter of the fiscal year covered by this Annual Report on
Form 10-K that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
38
Management’s Report on Internal Control Over Financial Reporting
As required by the SEC rules and regulations for the implementation of Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting
includes those policies and procedures that:
(1)
(2)
(3)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,
provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors, and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material
effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2021. In
making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission COSO (2013 framework).
Based on our assessments and those criteria, management determined that we did maintain effective internal control over financial reporting at December 31, 2021.
ITEM 9B. OTHER INFORMATION
On March 18, 2022, our Board of Directors unanimously approved, subject to stockholder approval, an amendment to the Company’s 2021 Equity Incentive Plan (the “2021
Plan”), increasing by 3,900,000 shares the number of shares of our common stock that will be available for issuance of awards under the 2021 Plan. The 2021 Plan as originally
adopted and approved by our shareholders authorized awards for up to 1,500,000 shares of our common stock.
The purpose of the 2021 Plan is to (a) enable the Company and its affiliates to attract and retain the types of employees, directors and consultants who will contribute to the
Company’s long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of the stockholders of the Company; and (c)
promote the success of the Company’s business, thus enhancing the value of the Company for the benefit of its stockholders.
Administration. The 2021 Plan will be administered by a committee (the “Committee”), or in the Board’s sole discretion by the Board. In case no Committee has been
appointed, the Board may appoint one or more members of the Board appointed by the Board to administer the 2021 Plan in accordance with the terms of the 2021 Plan. The
Board has appointed the Compensation Committee of the Board to administer the 2021 Plan.
Shares Available for Awards. Subject to adjustment in certain circumstances in accordance with the terms of the 2021 Plan, we will reserve for issuance under the 2021 Plan
no more than 5,400,000 shares of common stock (subject to adjustment in certain circumstances as provided in the Plan). Shares of Common Stock available for distribution
under the 2021 Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. Shares of
Common Stock subject to an award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common Stock to which the award
related, as well as any shares of common stock subject to an award that are (a) tendered in payment of an option, (b) delivered or withheld by the company to satisfy any tax
withholding obligation, or (c) covered by a stock-settled stock appreciation right or other awards that were not issued upon the settlement of the award, shall be added back to
the shares of common stock available for issuance of awards or delivery under the 2021 Plan.
Available Awards. Awards that may be granted under the 2021 plan include: (a) incentive stock options, (b) non-qualified stock options, (c) stock appreciation rights, (d)
restricted awards, (e) performance share awards, (f) cash awards, and (g) other equity-based awards.
Recipients of Grants. Incentive stock options may be granted only to employees. Awards other than incentive stock options may be granted to employees, consultants and
directors and those individuals whom the Committee or the Board determines are reasonably expected to become employees, consultants and directors following the grant date.
Our principal executive officer, principal financial officer and other named executive officers are eligible to participate in and receive awards under the 2021 Plan.
Term.
The 2021 Plan has a term of ten years.
This summary of the 2021 Plan is qualified in its entirety by the full text of the 2021 Plan, which is filed as Exhibit 10.33 to this Report and is incorporated by reference herein.
The proposed amendment to the 2021 Plan will be submitted for the approval of our shareholders at our 2022 Annual Meeting of Stockholders. If the proposed amendment is
not approved by the shareholders, the 2021 Plan will remain effective with respect to the number of shares of common stock originally authorized. Options for 3,821,118 shares
of commons stock were issued subject to approval by the shareholders of this amendment. If the amendment is not approved, such options will be void.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
39
The information required for the Items contained in Part III is incorporated herein by reference from our definitive proxy statement for our 2022 Annual Meeting of
Stockholders (the “Proxy Statement”), which will be filed with the SEC no later than 120 days after December 31, 2021.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
40
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules
PART IV
Our consolidated financial statements are listed on the Index to Financial Statements on this annual report on Form 10-K beginning on page F-1.
All financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Our independent registered public accounting firm is Marcum LLP (PCAOB ID #688) of Houston, Texas.
41
RELMADA THERAPEUTICS, INC.
(INDEX TO FINANCIAL STATEMENTS)
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Relmada Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Relmada Therapeutics, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated
statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting
principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We
believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. We determined that there are no critical audit matters.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2014.
Houston, Texas
March 25, 2022
F-2
Relmada Therapeutics, Inc.
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Lease payments receivable – short term
Prepaid expenses
Total current assets
Fixed assets, net of accumulated depreciation
Other assets
Lease payments receivable – long term
Total assets
Commitments and Contingencies (Note 9)
Current liabilities:
Accounts payable
Accrued expenses
Total current liabilities
Total liabilities
Liabilities and Stockholders’ Equity
Stockholders’ Equity:
Class A convertible preferred stock, $0.001 par value, 3,500,000 shares authorized, none issued and outstanding
Common stock, $0.001 par value, 50,000,000 shares authorized, 27,740,147 and 16,332,939 shares issued and outstanding,
respectively
Additional paid-in capital
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
F-3
As of
As of
December 31,
December 31,
2021
2020
$
$
$
44,443,439 $
167,466,167
86,377
11,301,535
223,297,518
-
28,293
-
223,325,811 $
2,495,397
114,595,525
79,457
903,190
118,073,569
1,258
25,000
86,377
118,186,204
11,192,502 $
3,868,423
15,060,925
15,060,925
8,346,475
4,256,983
12,603,458
12,603,458
-
-
27,740
513,304,258
(305,067,112)
208,264,886
223,325,811 $
16,333
284,881,716
(179,315,303)
105,582,746
118,186,204
$
Relmada Therapeutics, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2021 and 2020
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expenses):
Interest/investment income, net
Realized loss on short-term investments
Unrealized (loss) gain on short-term investments
Total other (expenses) income, net
Net loss
Net loss per common share – basic and diluted
Weighted average number of common shares outstanding – basic and diluted
The accompanying notes are an integral part of these consolidated financial statements.
F-4
2021
2020
$
90,621,570 $
35,081,922
125,703,492
35,972,731
24,865,942
60,838,673
(125,703,492)
(60,838,673)
1,199,077
(636,012)
(611,382)
(48,317)
1,399,225
(156,213)
139,267
1,382,279
$
(125,751,809) $
(59,456,394)
$
(7.16) $
(3.81)
17,552,738
15,594,228
Balance – December 31, 2019
Stock-based compensation expense
Equity offering, net
Warrants exercised
Cashless exercise of warrants
Options exercised
Cashless exercise of options
Net loss
Balance – December 31, 2020
Stock-based compensation expense
Equity offering, net
ATM offering, net
Warrants exercised
Options exercised
Net loss
Balance – December 31, 2021
Relmada Therapeutics, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
Common Stock
Shares
Par Value
14,457,013
-
427,700
1,159,989
42,475
155,558
90,204
-
16,332,939
-
10,147,059
651,674
433,856
174,619
-
27,740,147
$
$
$
14,457
-
428
1,160
42
156
90
-
16,333
-
10,147
652
433
175
-
27,740
$
$
$
Additional
Paid-in
Accumulated
Capital
235,522,746 $
20,777,272
19,791,216
8,055,256
(42)
735,358
(90)
-
284,881,716 $
40,494,476
161,216,798
23,415,384
2,627,628
668,256
-
513,304,258 $
Deficit
(119,858,909) $
-
-
-
-
-
-
(59,456,394)
(179,315,303) $
-
-
-
-
-
(125,751,809)
(305,067,112) $
Total
115,678,294
20,777,272
19,791,644
8,056,416
-
735,514
-
(59,456,394)
105,582,746
40,494,476
161,226,945
23,416,036
2,628,061
668,431
(125,751,809)
208,264,886
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Relmada Therapeutics, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2021 and 2020
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
Stock-based compensation
Realized loss on short-term investments
Unrealized loss (gain) on short-term investments
Change in operating assets and liabilities:
Lease payment receivable
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Net cash used in operating activities
Cash flows from investing activities
Purchase of short-term investments
Sale of short-term investments
Net cash used in investing activities
Cash flows from financing activities
Principal payments of notes payable
Proceeds from issuance of common stock
Proceeds from options exercised for common stock
Proceeds from warrants exercised for common stock
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
F-6
2021
2020
$
(125,751,809) $ (59,456,394.00)
1,258
40,494,476
636,012
611,382
79,457
(10,401,638)
2,846,027
(388,560)
(91,873,395)
3,752
20,777,272
156,213
(139,267)
73,091
(479,327)
7,823,812
3,432,047
(27,808,801)
(222,981,675)
168,863,639
(54,118,036)
(182,051,630)
147,603,982
(34,447,648)
-
184,642,981
668,431
2,628,061
187,939,473
41,948,042
2,495,397
(110,247)
19,791,644
735,514
8,056,416
28,473,327
(33,783,122)
36,278,519
$
44,443,439 $
2,495,397
Relmada Therapeutics, Inc.
Consolidated Statements of Cash Flows (continued)
For the Years Ended December 31, 2021 and 2020
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
Non-cash investing and financing transactions:
Cashless exercise of warrants for common stock
Cashless exercise of options for common stock
2021
2020
$
$
$
- $
- $
- $
2,415
42
90
The accompanying notes are an integral part of these consolidated financial statements.
F-7
NOTE 1 - BUSINESS
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
Relmada Therapeutics Inc. (Relmada or the Company) (a Nevada corporation) is a clinical-stage, publicly traded biotechnology company focused on the development of
esmethadone (d-methadone, dextromethadone, REL-1017), an N-methyl-D-aspartate (NMDA) receptor antagonist. Esmethadone 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.
In addition to the normal risks associated with a new business venture, there can be no assurance that the Company’s research and development will be successfully completed
or that any product will be approved or commercially viable. The Company is subject to risks common to companies in the biotechnology industry including, but not limited to,
dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of
proprietary technology, and compliance with the Food and Drug Administration (FDA) and other governmental regulations and approval requirements.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). The consolidated financial statements include the Company’s accounts and those of the Company’s wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Liquidity
As shown in the accompanying consolidated financial statements, the Company incurred negative operating cash flows of $91,873,395 for the year ended December 31, 2021
and has an accumulated deficit of $305,067,112 from inception through December 31, 2021.
Relmada has funded its past operations through equity raises and most recently in the year ended December 31, 2021, the Company raised net proceeds of $184,642,981 from
the sale of common stock through an underwritten equity and an ATM offering, $2,628,061 through the exercise of warrants and $668,431 through the exercise of options.
Management believes that the Company’s existing cash and cash equivalents will enable them to fund operating expenses and capital expenditure requirements for at least 12
months from the issuance of these consolidated financial statements. Beyond that point management will evaluate the size and scope of any subsequent operations and clinical
trials that will affect the timing of additional financings through public or private sales of equity or debt securities or from bank or other loans or through strategic collaboration
and/or licensing agreements. Any such expenditures related to any subsequent clinical trials will not be incurred until such additional financing is raised. Further, additional
financing related to subsequent trials does not affect the Company’s conclusion that based on the cash on hand and the budgeted cash flow requirements, the Company has
sufficient funds to maintain operations for at least 12 months from the issuance of these consolidated financial statements.
F-8
Use of Estimates
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
The preparation of financial statements in conformity with U.S. GAAP 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.
Actual results could differ from those estimates. The significant estimates are stock-based compensation expenses, and recorded amounts related to income taxes.
Cash and Cash Equivalents
The Company considers cash deposits and all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company’s cash
deposits are held at two high-credit-quality financial institutions. The Company’s cash balance of $44,443,439 at December 31, 2021 at these institutions exceed federally
insured limits.
Short-term Investments
The Company’s investments consist entirely of mutual funds. The securities are measured at fair value based on the net asset value (“NAV”). The Company has adopted FASB
ASU 2016-01, Financial Instruments, for the year ended December 31, 2021 which requires substantially all equity investments in nonconsolidated entities to be measured at
fair value with recurring changes recognized in earnings, except for those accounted for using equity method accounting. Changes in fair value of the securities are recorded as
part of other income on the consolidated statement of operations. Short term investment activity is presented in the investing activities section on the consolidated statement of
cash flows.
Short-term investments at December 31, 2021 consisted of mutual funds with a fair value of $167,466,167.
Patents
Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred since recoverability of such expenditures is
uncertain.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Fixed assets are comprised of computers and software. Depreciation is calculated using the straight-line method
over the estimated useful life of the assets. Computers and software have an estimated useful life of three years.
Leases
The Company recognizes their leases with a term of greater than a year on the balance sheet by recording right-of-use assets and lease liabilities. Leases can be classified as
either operating leases or finance leases. Operating leases will result in straight-line lease expense, while finance leases will result in front-loaded expense. The Company’s
lease consists of an operating leases for office space. The Company does not recognize a lease liability or right-of-use asset on the balance sheet for short-term leases. Instead,
the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement
date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
F-9
Fair Value of Financial Instruments
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
The Company’s financial instruments primarily include cash, short term investments derivative liabilities and accounts payable. Due to the short-term nature of cash and
accounts payable the carrying amounts of these assets and liabilities approximate their fair value. Derivatives are recorded at fair value at each period end.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the
reporting date. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices
for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are
observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market
data by correlation or other means.
Level 3 Inputs - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market
activity).
The Company’s short-term investment instruments of $167,466,167 at December 31, 2021 are classified using Level 1 inputs within the fair value hierarchy because they are
valued using NAV. Unrealized gains and losses are recorded in the consolidated statement of operations as unrealized gain on short-term investments. The Company recorded
an unrealized loss of $611,382 and an unrealized gain of $139,267, included in other income (expense) for the years ended December 31, 2021 and 2020, respectively.
Fair Value on a Recurring Basis
As required by Accounting Standard Codification (ASC) Topic No. 820 - 10 Fair Value Measurement, financial assets and liabilities are classified based on the lowest level of
input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and
may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
F-10
Income Taxes
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Tax benefits are recognized when it is
probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire
before the Company is able to realize the benefit, or that future deductibility is uncertain. At December 31, 2021 and 2020, the Company had recorded a valuation allowance to
the full extent of the Company’s net deferred tax assets since the likelihood of realization of the benefit does not meet the more likely than not threshold.
The Company files a U.S. Federal income tax return and various state returns. Uncertain tax positions taken on our tax returns will be accounted for as liabilities for
unrecognized tax benefits. The Company will recognize interest and penalties, if any, related to unrecognized tax benefits in general and administrative expenses in the
statements of operations. There were no liabilities recorded for uncertain tax positions at December 31, 2021 and 2020. The open tax years, subject to potential examination by
the applicable taxing authority, for the Company are from June 30, 2018 forward.
Research and Development
Research and development costs primarily consist of research contracts for the advancement of product development, salaries and benefits, stock-based compensation, and
consultants. The Company expenses all research and development costs in the period incurred. The Company makes an estimate of costs in relation to clinical study contracts.
The Company analyzes the progress of studies, including the progress of clinical studies and phases, invoices received and contracted costs when evaluating the adequacy of
the amount expensed and the related prepaid asset and accrued liability.
Stock-Based Compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is
recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period. The grant-date fair value of
employee share options is estimated using the Black-Scholes option pricing model adjusted for the unique characteristics of those instruments.
Net Loss per Common Share
Basic net loss per common share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average
number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per common share attributable to common
stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the
period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of Class A convertible preferred stock, Series A preferred stock, options
and warrants to purchase common stock. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to
the Company’s net losses in each period.
F-11
The potentially dilutive securities that would be anti-dilutive due to the Company’s net loss are not included in the calculation of diluted net loss per share attributable to
common stockholders. The anti-dilutive securities are as follows (in common stock equivalent shares):
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
Common stock warrants
Common stock options
Total
Subsequent Events
Year ended
December 31,
2021
3,208,777
10,330,622
13,539,399
Year ended
December 31,
2020
2,670,633
3,905,737
6,576,370
The Company’s management reviewed all material events through the date the financial statements were issued for subsequent event disclosure consideration.
Recent Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance”. The amendments in
this ASU require annual disclosures to increase the transparency of government assistance received by a business entity including information about the nature of the
government transactions, related accounting policy, the line items on the balance sheet and income statement that are affected, amounts applicable to each financial statement
line item, and significant terms and conditions of the transactions, including commitments and contingencies. The amendments in this ASU are effective for annual periods
beginning after December 15, 2021. Early adoption is permitted. The Company does not expect this standard to have a material impact on its financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers”. The amendments in this ASU require that an entity (acquirer) recognize, and measure contract assets and contract liabilities acquired in a business combination,
including contract assets and contract liabilities arising from revenue contracts with customers, as if it had originated the contracts as of the acquisition date. The amendments
in this ASU are effective for annual and interim periods beginning after December 15, 2022. Early adoption is permitted. The Company does not expect this standard to have a
material impact on the consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock
Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 outlines how an entity should account for
modifications made to equity-classified written call options, including stock options and warrants to purchase the entity’s own common stock. The guidance in the ASU
requires an entity to treat a modification of an equity-classified written call options that does not cause the option to become liability-classified as an exchange of the original
option for a new option. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the equity-classified written call option or
as termination of the original option and issuance of a new option. The guidance is effective prospectively for fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted, including in an interim period as of the beginning of the fiscal year that includes that interim period. The
Company is currently in the process of evaluating the impact of this new guidance on the consolidated financial statements and the related disclosures.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects
related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to
improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company
adopted this standard effective January 1, 2021 and the standard did not have a significant impact on our consolidated financial statements.
COVID-19
During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19).
The COVID-19 pandemic did not significantly impact the Company. The Company continues to monitor the COVID-19 related concerns and the related economic impacts.
NOTE 3 - PREPAID EXPENSES
Prepaid expenses consisted of the following (rounded to nearest $00):
Insurance
Research and Development
Legal
Other
Total
F-12
December 31,
2021
December 31,
2020
$
$
353,300 $
10,708,800
11,000
228,400
11,301,500 $
527,600
291,800
11,000
72,800
903,200
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
NOTE 4 - FIXED ASSETS
Fixed assets consisted of the following (rounded to nearest $00):
Computer and software
Less: accumulated depreciation
Fixed assets, net
Useful lives
3 years
December 31,
2021
December 31,
2020
$
$
16,700 $
(16,700)
- $
16,700
(15,400)
1,300
For the years ended December 31, 2021 and 2020, the Company recognized depreciation expense of $1,258 and $3,752, respectively.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consisted of the following (rounded to nearest $00):
Research and development
Professional fees
Accrued bonus
Accrued vacation
Other
Total
F-13
December 31,
2021
$
$
1,928,000 $
168,000
1,191,000
450,400
131,000
3,868,400 $
December 31,
2020
2,183,800
150,900
1,444,900
351,200
126,200
4,257,000
NOTE 6 - STOCKHOLDERS’ EQUITY
Common Stock
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
During the years ended December 31, 2021 and 2020, the Company issued 0 and 42,475 shares of common stock for cashless exercise of 0 and 60,513 warrants, respectively.
During the years ended December 31, 2021 and 2020, the Company issued 433,856 and 1,159,989 shares of common stock for the exercise of warrants for proceeds of
$2,628,061 and $8,056,416, respectively.
During the year ended December 31, 2021 and 2020, the Company issued 0 and 90,204 shares of common stock for cashless exercise of 0 and 98,370 options, respectively.
During the year ended December 31, 2021 and 2020, the Company issued 174,619 and 155,558 shares of common stock for the exercise of options for proceeds of $668,431
and 735,514, respectively.
On May 15, 2020, the Company entered into an Open Market Sale Agreement with Jefferies LLC, as sales agent (“Jefferies”), pursuant to which the Company may offer and
sell, from time to time, through Jefferies, shares of the Company’s common stock, having an aggregate offering price of up to $75,000,000. The Company is not obligated to
sell any shares under the agreement. During the years ended December 31, 2021 and 2020, the Company issued 651,674 and 427,700 shares of common stock for net cash
proceeds of $23,416,036 and $19,791,644 under the agreement, respectively.
On December 8, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC and Jefferies LLC, as
representatives of the several underwriters, in connection with an underwritten public offering (the “Offering”) of 8,823,530 shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”) issued and sold by the Company at a price to the public of $17.00 per share (with a price to the Underwriters of $15.98 per share).
Pursuant to the Underwriting Agreement, the Underwriters were granted an option for a period of 30 days to purchase from the Company up to an additional 1,323,529 shares
of Common Stock, at the same price per share, which was exercised in full on December 9, 2021. The Offering, including the issuance and sale of shares pursuant to the
Underwriters’ exercise in full of their option to purchase additional shares, closed on December 13, 2021. Net proceeds from the offering totaled $161,226,945.
During the years ended December 31, 2021 and 2020, there were no common stock shares issued for issuances of restricted common stock.
Stock-based compensation - options
In December 2014, the Board of Directors adopted and the shareholders approved Relmada’s 2014 Stock Option and Equity Incentive Plan, as amended (the “2014 Plan”),
which allows for the granting of 5,152,942 common stock awards, stock appreciation rights, and incentive and nonqualified stock options to purchase shares of the Company’s
common stock to designated employees, non-employee directors, and consultants and advisors.
In May 2021, the Company’s Board of Directors adopted and shareholders approved the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), which allowed for the
granting of 1,500,000 options or other stock awards.
These combined plans allowed for the granting of up to 6,652,942 options or other stock awards.
Stock options are exercisable generally for a period of 10 years from the date of grant and generally vest either over four years or upon achievement of certain specified
corporate or other milestones. As of December 31, 2021, there were no shares available to be granted under either the 2014 or 2021 Plan. The shareholders will vote at their
annual meeting in 2022 on a management proposal to increase the shares available to be issued under the 2021 Plan by 3,900,000 shares; there can be no assurance such
amendment will be approved. As of December 31, 2021, options for 3,821,118 shares of common stock had been issued subject to approval by the shareholders of this
amendment. If the amendment is not approved, such options will be void.
F-14
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
The Company uses the simplified method for share-based compensation to estimate the expected term for employee option awards for share-based compensation in its option-
pricing model.
On December 22, 2021, the Company awarded a total of 65,000 options to various consultants with an exercise price of $21.11 and a 10-year term, vesting over a 1 to 4-year
period. The options have an aggregate fair value of approximately $1.1 million, calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes
option-pricing model include: (1) discount rate of 1.23 – 1.31% (2) expected life of 5.5 – 6.25 years, (3) expected volatility of 96 – 98%, and (4) zero expected dividends. These
awards are subject to shareholder approval of the above-described amendment to the 2021 Plan.
On December 17, 2021, the Company awarded a total of 5,477,004 options to the board or directors, various employees, and consultants with an exercise price of $19.03 and a
10-year term, vesting over a 1 to 4-year period. The options have an aggregate fair value of approximately $81.6 million, calculated using the Black-Scholes option-pricing
model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 1.18 - 1.26% (2) expected life of 5.2 - 5.00 years, (3) expected volatility of 97 -
99%, and (4) zero expected dividends. 3,821,118 of the awards are subject to shareholder approval of the above-described amendment to the 2021 Plan.
On February 18, 2021, the Company awarded a total of 25,000 options to an employee with an exercise price of $35.15 and a 10-year term, vesting over a 4-year period. The
options have an aggregate fair value of $701,000 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include:
(1) discount rate of 0.75% (2) expected life of 6.25 years, (3) expected volatility of 101%, and (4) zero expected dividends.
On January 6, 2021, the Company awarded a total of 1,490,000 options to employees and directors with an exercise price of $33.43 and a 10-year term vesting over a 4-year
period. The options granted include time based vesting grants and performance vesting based on the Company’s achievement of performance metrics. The options have an
aggregate fair value of $39.7 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount
rate of 0.59% (2) expected life of 6.25 years, (3) expected volatility of 101%, and (4) zero expected dividends. As of December 31, 2021, six performance metrics for 520,000
options were met. Vesting of such options is subject to the passage of time. At December 31, 2021, the Company incurred expense of $3,392,419 related to these options.
During the year ended December 31, 2020, the Company awarded a total of 1,000,000 options to employees with exercise prices ranging from $28.00- $45.61 and a 10-year
term vesting over 4-year period. The options have an aggregate fair value of $32.4 million calculated using the Black-Scholes option-pricing model. Variables used in the
Black-Scholes option-pricing model include: (1) discount rate of 0.36%-0.83% (2) expected life of 6.25 years, (3) expected volatility of 101%-108%, and (4) zero expected
dividends.
During the year ended December 31, 2020, the Company recognized additional compensation expense of approximately $1,500,000 related to acceleration of vesting and a
nominal amount related to the modification of certain options in connection with the separation and settlement agreement with Dr. Ottavio Vitolo (see note 10).
During the year ended December 31, 2020, the Company recognized compensation expense of approximately $484,000 related to the extended period of time to allow for some
options to vest under the separation and settlement agreement with Dr. Thomas Wessel. This was considered a Type III modification and as a result the total expense of $1.8
million previously recognized was reversed as the options would not have vested prior to the modification (see note 10).
F-15
A summary of the changes in options outstanding for the years ended December 31, 2021 and 2020 is as follows:
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
Number of
Shares
Weighted
Average
Exercise Price
Per Share
Weighted
Average
Remaining
Contractual
Term
(Years)
Outstanding and expected to vest at December 31, 2019
Granted
Exercised
Forfeited
Outstanding and expected to vest at December 31, 2020
Granted
Exercised
Forfeited
$
$
3,615,602
1,000,000
(253,927)
(455,938)
3,905,737
7,057,004
(174,619)
(457,500)
Outstanding and expected to vest at December 31, 2021
Options exercisable at December 31, 2021
10,330,622
2,140,490
$
$
19.96
39.50
-
-
24.32
21.15
-
-
22.52
20.99
9.2 $
9.3
-
-
8.4 $
9.8
-
-
9.0 $
7.3 $
Aggregate
Intrinsic
Value
74,837,043
-
-
-
48,952,339
-
-
-
46,088,534
19,511,463
At December 31, 2021, the Company has unrecognized stock-based compensation expense of approximately $143,200,000 related to unvested stock options over the weighted
average remaining service period of 2.94 years. The weighted average fair value of options granted during the years ended December 31, 2021 and 2020 was approximately
$22.15 and $32.45 per share, respectively, on the date of grant using the Black-Scholes option pricing model with the following assumptions:
Risk free interest rate
Dividend yield
Volatility
Expected term (in years)
Warrants
A summary of the changes in outstanding warrants during the years ended December 31, 2021 and 2020 is as follows:
Outstanding at December 31, 2019
Issued
Exercised
Forfeited/Expired
Outstanding at December 31, 2020
Issued
Exercised
Outstanding at December 31, 2021
Warrants exercisable at December 31, 2021
F-16
Years Ended
December 31,
Years Ended
December 31,
2021
0.59 to 1.31%
0%
97-101%
5 to 6.25
2020
0.36 to 0.83%
0%
101-108%
6.25
Number of
Shares
Weighted
Average
Exercise Price
Per Share
3,646,870 $
250,000 $
(1,211,199) $
(15,040) $
2,670,633 $
972,000 $
(433,856) $
3,208,777 $
2,767,246 $
6.83
33.32
7.27
16.80
9.11
31.98
6.06
16.45
13.92
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
On October 1, 2021, the Company awarded a total of 42,000 warrants to a consultant with an exercise price of $26.74 and a 10-year term, vesting 25% after year one and
6.25% quarterly there after until 100% vested. The warrants have an aggregate fair value of $891,265 calculated using the Black-Scholes option-pricing model. Variables used
in the Black-Scholes option-pricing model include: (1) discount rate of 1.10% (2) expected life of 6.25 years, (3) expected volatility of 99%, and (4) zero expected dividends.
On July 16, 2021, the Company awarded a total of 500,000 warrants to Arbormentis, LLC with an exercise price of $31.17 and a 7-year term, vesting immediately. The
warrants have an aggregate fair value of $10,241,599 calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model
include: (1) discount rate of 0.48% (2) expected life of 3.50 years, (3) expected volatility of 101%, and (4) zero expected dividends.
On July 12, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $34.77 and a 5-year term, vesting over a 1-year period. The
warrants granted are time-based vesting. The warrants have an aggregate fair value of $212,219 calculated using the Black-Scholes option-pricing model. Variables used in the
Black-Scholes option-pricing model include: (1) discount rate of 0.43% (2) expected life of 3.00 years, (3) expected volatility of 99%, and (4) zero expected dividends.
On June 25, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $34.35 and a 5-year term, vesting over a 1-year period. The
warrants granted are time-based vesting. The warrants have an aggregate fair value of $211,653 calculated using the Black-Scholes option-pricing model. Variables used in the
Black-Scholes option-pricing model include: (1) discount rate of 0.43% (2) expected life of 3.00 years, (3) expected volatility of 100%, and (4) zero expected dividends.
On June 18, 2021, the Company awarded a total of 10,000 warrants to a consultant with an exercise price of $30.90 and a 5-year term, vesting over a 1-year period. The
warrants granted are time-based vesting. The warrants have an aggregate fair value of $190,401 calculated using the Black-Scholes option-pricing model. Variables used in the
Black-Scholes option-pricing model include: (1) discount rate of 0.47% (2) expected life of 3.00 years, (3) expected volatility of 100%, and (4) zero expected dividends.
On January 6, 2021, the Company awarded a total of 400,000 warrants to consultants with an exercise price of $33.43 and a 10-year term, vesting over 4-year period. The
warrants granted include time-based vesting grants and performance vesting based on the Company’s achievement of performance metrics. The warrants have an aggregate fair
value of $10.6 million calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of 0.59%
(2) expected life of 6.25 years, (3) expected volatility of 101%, and (4) zero expected dividends. As of December 31, 2021, six performance metrics for 200,000 warrants were
met. Vesting of such options is subject to the passage of time. At December 31, 2021, the Company incurred expense of $1,304,776 related to these warrants.
On December 16, 2020, the Company granted 20,000 warrants to a consultant with an exercise price of $34.87, a 5-year term and vesting over 4 years. The warrants have an
aggregated fair value of $479 thousand using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount rate of
0.37% (2) expected life of 3.75 years, (3) expected volatility of 105%, and (4) zero expected dividends
On December 16, 2020, the Company granted 108,000 warrants to consultants with an exercise price of $34.87, a 5-year term and vesting based on future events. The warrants
have an aggregated fair value of $2.86 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model
include: (1) discount rate of 0.37% (2) expected life of 5 years, (3) expected volatility of 105%, and (4) zero expected dividends
On April 27, 2020, the Company granted 2,000 warrants to a consultant with an exercise price of $37.67, a 5-year term and immediate vesting. The warrants have an aggregated
fair value of $48 thousand that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1) discount
rate of 0.27% (2) expected life of 2.5 years, (3) expected volatility of 116%, and (4) zero expected dividends.
On April 1, 2020, the Company granted 120,000 warrants to consultants with an exercise price of $31.59, a 5-year term and immediate vesting. The warrants have an
aggregated fair value of $2.5 million that was calculated using the Black-Scholes option-pricing model. Variables used in the Black-Scholes option-pricing model include: (1)
discount rate of 0.26% (2) expected life of 2.5 years, (3) expected volatility of 118%, and (4) zero expected dividends.
F-17
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
At December 31, 2021, the Company had $12.4 million of unrecognized stock-based compensation expense related to outstanding warrants. At December 31, 2021, the
aggregate intrinsic value of warrants vested and outstanding was $31.3 million.
Stock-based compensation by class of expense
The following summarizes the components of stock-based compensation expense which includes common stock, stock options, warrants and restricted stock in the consolidated
statements of operations (rounded to nearest $00):
Research and development
General and administrative
Total
NOTE 8 - INCOME TAXES
Year Ended Year Ended
December 31,
December 31,
2021
15,835,900 $
24,658,600
40,494,500 $
2020
4,038,500
16,738,800
20,777,300
$
$
No provision or benefit for federal or state income taxes has been recorded because the Company has incurred net losses for all periods presented and has recorded a valuation
allowance against its deferred tax assets.
The components of the Company’s deferred tax assets are as follows at:
Deferred tax assets:
Federal net operating loss
State net operating loss
Research and development tax credits
Capitalized R&D
Nonqualified Stock Options
Accruals
Intangibles and Fixed Assets
Less: valuation allowance
Total
December 31,
2021
December 31,
2020
$
$
19,434,000 $
12,508,000
5,333,000
38,360,000
15,511,000
655,000
4,394,000
(96,195,000)
- $
15,227,000
9,361,000
3,407,000
14,387,000
7,352,000
645,000
41,000
(50,420,000)
-
On March 27, 2020, the Coronavirus Aid Relief and Economic Security (“CARES”) Act was signed into law. The Act contains several new or changed income tax provisions,
including but not limited to the following: increased limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general,
from 39 years to 15 years) and the ability to carry back net operating losses (“NOLs”) incurred from tax years 2018 through 2020 up to the five preceding tax years. Most of
these provisions are either not applicable or have no material effect on the Company.
The Company has maintained a full valuation allowance against its deferred tax assets at December 31, 2021 and 2020. A valuation allowance is required to be recorded when
it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Since the Company cannot be assured of realizing the net deferred tax asset,
a full valuation allowance has been provided. The valuation allowance increased/(decreased) for the years ended December 31, 2021 and 2020 by approximately $45,775,000
and $24,469,000, respectively. Deferred tax asset for net operating loss carryforwards at December 31, 2021 was adjusted with the corresponding offset to valuation allowance.
F-18
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
At December 31, 2021, the Company had federal, New York State and New York City net operating loss (NOL) carryforwards of approximately $92,543,000, $91,755,000 and
$91,371,000 respectively, which begin expiring in 2027, 2032 and 2032 respectively. Approximately $47,072,000 federal NOL can be carried forward indefinitely but it is
limited to 80% of future taxable income. The Company also has federal research and development tax credit carryforwards of approximately $5,308,000 that will begin to
expire in 2028. The Company's ability to use its NOL carryforwards may be limited if it experiences an "ownership change" as defined in Section 382 ("Section 382") of the
Internal Revenue Code of 1986, as amended. An ownership change generally occurs if certain stockholders increase their aggregate percentage ownership of a corporation's
stock by more than 50 percentage points over their lowest percentage ownership at any time during the testing period, which is generally the three-year period preceding any
potential ownership change. The Company has not completed an analysis to determine whether any such limitations have been triggered as of December 31, 2021.
A reconciliation of the statutory tax rate to the effective tax rate is as follows:
Statutory federal income tax rate
State (net of federal benefit)
Non-deductible expenses
R&D Credit
Other
Change in valuation allowance
Effective income tax rate
Year Ended
December 31,
2021
Year Ended
December 31,
2020
21.00%
14.22%
(0.38)%
1.53%
0.02%
(36.41)%
0%
21.00%
15.50%
0.42%
3.21%
1.01%
(41.15)%
0%
The Company does not have any uncertain tax positions at December 31, 2021 and 2020, that would affect its effective tax rate. The Company does not anticipate a significant
change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to
US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize
interest and penalties as part of income tax expense.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
License Agreements
Wonpung
On August 20, 2007, the Company entered into a License Development and Commercialization Agreement with Wonpung Mulsan Co, a shareholder of the Company.
Wonpung has exclusive territorial rights in countries it selects in Asia to market up to two drugs the Company is currently developing and a right of first refusal (ROFR) for up
to an additional five drugs that the Company may develop in the future as defined in more detail in the license agreement. If the parties cannot agree to terms of a license
agreement then the Company shall be able to engage in discussions with other potential licensors. As of March 23, 2022, no discussions are active between the Company and
Wonpung.
The Company received an upfront license fee of $1,500,000 and will earn royalties of up to 12% of net sales for up to two licensed products it is currently developing. The
licensing terms for the ROFR products are subject to future negotiations and binding arbitration. The terms of each licensing agreement will expire on the earlier of any time
from 15 years to 20 years after licensing or on the date of commercial availability of a generic product to such licensed product in the licensed territory.
Third Party Licensor
Based upon a prior acquisition, the Company assumed an obligation to pay a third party (Dr. Charles E. Inturrisi and Dr. Paolo Manfredi - see below): (A) royalty payments up
to 2% on net sales of licensed products that are not sold by sublicensee and (B) on each and every sublicense earned royalty payment received by licensee from its sublicensee
on sales of license product by sublicensee, the higher of (i) 20% of the royalties received by licensee; or (ii) up to 2% of net sales of sublicensee. The Company will also make
milestone payments of up to $4 or $2 million, for the first commercial sale of product in the field that has a single active pharmaceutical ingredient, and for the first commercial
sale of product in the field of product that has more than one active pharmaceutical ingredient, respectively. As of December 31, 2020, the Company has not generated any
revenue related to this license agreement.
F-19
Inturrisi / Manfredi
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
In January 2018, we entered into an Intellectual Property Assignment Agreement (the Assignment Agreement) and License Agreement (the “License Agreement” and together
with the Assignment Agreement, the Agreements) with Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (collectively, the Licensor). Pursuant to the Agreements, Relmada
assigned its existing rights, including patents and patent applications, to esmethadone in the context of psychiatric use (the Existing Invention) to Licensor. Licensor then
granted Relmada under the License Agreement a perpetual, worldwide, and exclusive license to commercialize the Existing Invention and certain further inventions regarding
esmethadone in the context of other indications such as those contemplated above. In consideration of the rights granted to Relmada under the License Agreement, Relmada
paid the Licensor an upfront, non-refundable license fee of $180,000. Additionally, Relmada will pay Licensor $45,000 every three months until the earliest to occur of the
following events: (i) the first commercial sale of a licensed product anywhere in the world, (ii) the expiration or invalidation of the last to expire or be invalidated of the patent
rights anywhere in the world, or (iii) the termination of the License Agreement. Relmada will also pay Licensor tiered royalties with a maximum rate of 2%, decreasing to
1.75%, and 1.5% in certain circumstances, on net sales of licensed products covered under the License Agreement. Relmada will also pay Licensor tiered payments up to a
maximum of 20%, and decreasing to 17.5%, and 15% in certain circumstances, of all consideration received by Relmada for sublicenses granted under the License Agreement.
As of December 31, 2021, no events have occurred, and the Company continues to pay Licensor $45,000 every three months.
Arbormentis, LLC
On July 16, 2021, the Company entered into a License Agreement with Arbormentis, LLC, a privately held Delaware limited liability company, by which the Company
acquired development and commercial rights to a novel psilocybin and derivate program from Arbormentis, LLC, worldwide excluding the countries of Asia. The Company
will collaborate with Arbormentis, LLC on the development of new therapies targeting neurological and psychiatric disorders, leveraging its understanding of neuroplasticity,
and focusing on this emerging new class of drugs targeting the neuroplastogen mechanism of action. Under the terms of the License Agreement, the Company paid
Arbormentis, LLC an upfront fee of $12.7 million, consisting of a mix of cash and warrants to purchase the Company’s common stock, in addition to potential milestone
payments totaling up to approximately $160 million related to pre-specified development and commercialization milestones. Arbormentis, LLC is also eligible to receive a low
single digit royalty on net sales of any commercialized therapy resulting from this agreement. The license agreement is terminable by the Company but is perpetual and not
terminable by the licensor absent material breach of its terms by the Company.
The new licensed program stems from an international collaboration among U.S., European and Swiss scientists that has focused on the discovery and development of
compounds that may promote neural plasticity. Dr. Paolo Manfredi, Relmada’s Acting Chief Scientific Officer and co-inventor of REL-1017, and Dr. Marco Pappagallo,
Relmada’ s Acting Chief Medical Officer, are among the scientists affiliated with Arbormentis, LLC.
Leases and Subleases
On August 1, 2021, the Company relocated its corporate headquarters to 2222 Ponce de Leon Blvd., Floor 3 Coral Gables, Florida 33134 pursuant to a lease agreement with
monthly rent of approximately $11,000. The lease period was for five months. The lease agreement expired on December 31, 2021 and was renewed for the calendar year 2022.
As the Company’s leases consist of one lease for their corporate headquarters, which is for a period of 12 months or less. The Company has elected the practical expedient and
recognizes rent expense evenly over the 12 months.
The Company incurred rent expense of approximately $111,800 and $165,900 for the years ended December 31, 2021 and 2020, respectively.
On June 8, 2017, the Company entered into an Amended and Restated License Agreement with Actinium. Pursuant to the terms of the agreement, Actinium will continue to
license the furniture, fixtures, equipment and tenant improvements located in the office (FFE) for a license fee of $7,529 per month until December 8, 2022. Actinium shall
have at any time during the term of this agreement the right to purchase the FFE for $496,914, less any previously paid license fees. The license of FFE qualifies as a sales-type
lease. On June 8, 2017 the Company derecognized the underlying assets of $493,452, recognized discounted lease payments receivable of $397,049 using the discount rate of
8.38% and recognized loss on sales-type lease of fixed assets of $96,403. As of December 31, 2021 and 2020, the balance of unearned interest income was approximately
$4,000 and $14,900, respectively.
The future minimum lease payments to be received under the lease for each year as of December 31, 2021 are as follows:
2022
Total
$
$
90,348
90,348
F-20
Legal
Relmada Therapeutics, Inc.
Notes to Consolidated Financial Statements
From time to time, the Company may become involved in lawsuits and other legal proceedings that arise in the course of business. Litigation is subject to inherent
uncertainties, and it is not possible to predict the outcome of litigation with total confidence. Except as disclosed below, the Company is currently not aware of any legal
proceedings or potential claims against it whose outcome would be likely, individually or in the aggregate, to have a material adverse effect on the Company’s business,
financial condition, operating results, or cash flows.
Lawsuit Brought by Current Employee
On July 15, 2020, an employee of the Company filed a Complaint alleging unequal pay based on gender and other employment-based claims. On April 9, 2021, the Company
settled this Complaint for an immaterial amount.
NOTE 10 - RELATED PARTY TRANSACTIONS
Effective March 6, 2020, Dr. Vitolo entered into a Separation and Severance Agreement with the Company. Pursuant to the terms of the agreement, the Company paid Dr.
Vitolo a severance of $200,000 in accordance with his employment contract. In addition, Dr. Vitolo’s options granted under the Company’s 2014 Stock Option and Equity
Incentive Plan continued to vest until September 6, 2020. Dr. Vitolo had until March 6, 2021 to exercise his vested options and was allowed to use a cashless exercise provision
to exercise his vested options. Dr. Vitolo exercised 126,562 during 2020 and the remaining options expired on March 6, 2021. The agreement also contains customary
confidentiality, release, and non-disparagement provisions, and the Company paid accrued and unpaid salary, vacation time and attorney’s fees totaling approximately $45,000.
Effective December 31, 2020, Dr. Wessel entered into a Separation and Severance Agreement with the Company. Pursuant to the terms of the agreement, the Company paid Dr.
Wessel a severance of $237,500 in accordance with his employment contract. In addition, Dr. Wessel’s options granted under the Company’s 2014 Stock Option and Equity
Incentive Plan continued to vest until June 30, 2021. Dr. Wessel had until December 31, 2021 to exercise his vested options and was allowed to use a cashless exercise
provision to exercise his vested options. All of Dr. Wessel’s options expired on December 31, 2021. The agreement also contains customary confidentiality, release, and non-
disparagement provisions, and the Company paid accrued vacation time totaling approximately $28,940.
NOTE 11 - OTHER POSTRETIREMENT BENEFIT PLAN
Relmada participates in a multiemployer 401(k) plan that permits eligible employees to contribute funds on a pretax basis subject to maximum allowed under federal tax
provisions. The Company matches 100% of the first 3% of employee contributions, plus 50% of employee contributions that exceed 3% but do not exceed 5%.
The employees choose an amount from various investment options for both their contributions and the Company’s matching contribution. The Company’s contribution expense
was $112,910 and $90,692 for the years ended December 31, 2021 and 2020, respectively.
NOTE 12 - SUBSEQUENT EVENTS
From January 1st through March 23, 2022, 20,000 options with an exercise price of $3.24 were exercised, for net proceeds of $64,800.
On February 7, 2022, the Company issued a total of 655,593 common shares through its ATM equity offering facility for net proceeds of $10,994,486.
On March 7, 2022, the Company issued a total of 953,750 common shares through its ATM equity offering facility for net proceeds of $18,604,055.
From January 1st through March 14, 2022, 160,000 options were issued to various consultants with an exercise price ranging from $ 18.00 to $22.53. These awards are subject
to shareholder approval of the amendment to the 2021 Plan described in Note 6 above.
The Company’s lease agreement at 2222 Ponce de Leon Blvd expired on December 31, 2021 and has been renewed for calendar year 2022 for an average monthly cost of
approximately $6,550.
F-21
Exhibits
Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of
the parties to the agreement. These representations and warranties:
● may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily
reflected in the agreements;
● may apply standards of materiality that differ from those of a reasonable investor; and
● were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other
time. Investors should not rely on them as statements of fact.
Exhibit
Number
Description
2.1
3.1
Share Exchange Agreement, dated May 20, 2014, by and among Camp Nine, Inc., Relmada Therapeutics, Inc., and the stockholders of Relmada Therapeutics,
Inc. (incorporated by reference to Exhibit 2.1 of Relmada’s Form 8-K filed with the SEC on May 27, 2014).
(i) Articles of Incorporation of Camp Nine, Inc. (incorporated by reference to Exhibit 3.1 of Relmada’s Registration Statement on Form S-1 filed with the
SEC on November 13, 2012).
(ii) Certificate of Designation dated May 13, 2014 (incorporated by reference to Exhibit 4.1 to Relmada’s Report on Form 8-K filed with the SEC on May 19,
2014).
(iii) Nevada Certificate of Amendment to Articles of Incorporation of Camp Nine, Inc., effective May 30, 2014 (incorporated by reference to Exhibit 3.1 of
Relmada’s Form 8-K filed with the SEC on June 2, 2014).
(iv) Nevada Certificate of Amendment to Articles of Incorporation of Camp Nine, Inc., effective July 8, 2014 (incorporated by reference to Exhibit 3.1 of
Relmada’s Form 8-K filed with the SEC on July 14, 2014).
(v) Certificate of Change of Relmada Therapeutics, Inc. dated September 26, 2019 (incorporated by reference to Exhibit 3.1 of Relmada’s Form 8-K filed
with the SEC on September 27, 2019).
3.2
Second Amended and Restated Bylaws of Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 3.2 of Relmada’s Form 8-K filed with the SEC on
November 25, 2015).
42
Exhibit
Number
Description
4.5
4.6
4.7
4.8
4.9
10.1
10.2
10.3
10.4
10.5
10.6
Form of Convertible Promissory Note (incorporated by reference to Exhibit 4.1 of Relmada’s Form 10-Q filed with the SEC on February 12, 2018).
Form of Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.2 of Relmada’s Form 10-Q filed with the SEC on February 12, 2018).
Form of 2018 Warrant (incorporated by reference to Exhibit 4.1 of Relmada’s Form 10-Q filed with the SEC on November 13, 2018).
Form of 2019 Warrant (incorporated by reference to Exhibit 4.1 of Relmada’s Form 10-Q filed with the SEC on May 15, 2019).
Description of Securities (incorporated by reference to the description of the Company’s common stock, par value $0.001 per share, under the heading
“Description of Securities We May Offer—Authorized Capital Stock; Issued and Outstanding Capital Stock,” “—Common Stock,” “—Forum for
Adjudication of Disputes, “—Anti-takeover Effects of Our Articles of Incorporation and By-laws, and “—Anti-takeover Effects of Nevada Law” in the
Company’s Registration Statement on Form S-3 (File No. 333-245054), filed with the Securities and Exchange Commission on August 12, 2020)
Agreement and Plan of Merger dated as of December 31, 2013 between Relmada Therapeutics, Inc. and Medeor, Inc. (incorporated by reference to Exhibit
10.1 of Relmada’s Form 8-K filed with the SEC on May 27, 2014).
2014 Stock Option and Equity Incentive Plan (incorporated by reference to Exhibit 10.14 of Relmada’s Form S-1/A filed with the SEC on December 9, 2014)
Director Agreement, dated July 14, 2015, by and between Charles J. Casamento and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.1 of
Relmada’s Form 8-K filed with the SEC on July 16, 2015)
Director Indemnity Agreement, dated July 14, 2015, by and between Charles J. Casamento and Relmada Therapeutics, Inc. (incorporated by reference to
Exhibit 10.2 of Relmada’s Form 8-K filed with the SEC on July 16, 2015)
Amended 2014 Stock Option and Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of Relmada’s Form 8-K filed with the SEC on August 7,
2015).
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 of Relmada’s Form 8-K filed with the SEC on August 7, 2015).
43
Exhibit
Number
Description
10.7
10.8
10.9
Assignment and Consent Agreement, dated June 6, 2017, among 275 Madison Avenue RPW 1 LLC, 275 Madison Avenue RPW 2, LLC, Actinium
Pharmaceuticals, Inc. and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.21 of Relmada’s Form 10-K filed with the SEC on September
28, 2017).
Lease Agreement, dated May 2, 2017, between Relmada Therapeutics, Inc. and Regus Management Group, LLC. (incorporated by reference to Exhibit 10.22
of Relmada’s Form 10-K filed with the SEC on September 28, 2017).
Amended and Restated License Agreement, dated June 8, 2017, between Actinium Pharmaceuticals, Inc. and Relmada Therapeutics, Inc. (incorporated by
reference to Exhibit 10.23 of Relmada’s Form 10-K filed with the SEC on September 28, 2017).
10.10
License Agreement, dated January 16, 2018, between Relmada Therapeutics, Inc. Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (incorporated by reference
to Exhibit 10.1 of Relmada’s Form 8-K filed with the SEC on January 19, 2018).
10.11
Intellectual Property Assignment Agreement, dated January 16, 2018, between Relmada Therapeutics, Inc. Dr. Charles E. Inturrisi and Dr. Paolo Manfredi
(incorporated by reference to Exhibit 10.2 of Relmada’s Form 8-K filed with the SEC on January 19, 2018).
10.12
Form of Note and Warrant Purchase Agreement (incorporated by reference to Exhibit 10.1 of Relmada’s Form 10-Q filed with the SEC on February 12,
2018).
10.13
Third Amendment to the 2014 Stock Option and Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.3 of Relmada’s Form 10-Q filed
with the SEC on May 14, 2018).
10.14
Form of Unit Purchase Agreement among Relmada Therapeutics, Inc. and certain accredited investors (incorporated by reference to Exhibit 10.1 of
Relmada’s Form 10-Q filed with the SEC on November 13, 2018).
44
Exhibit
Number
Description
10.15
Lease Agreement, effective January 1, 2019, between Relmada Therapeutics, Inc. and 880 Third Avenue Tenant LLC (incorporated by reference to Exhibit
10.1 of Relmada’s Form 10-Q filed with the SEC on February 13, 2019).
10.16
Settlement Agreement, dated February 6, 2019, among Najib Babul, Laidlaw & Company (UK) Ltd., Sandesh Seth, and Sergio Traversa (incorporated by
reference to Exhibit 10.2 of Relmada’s Form 10-Q filed with the SEC on February 13, 2019).
10.17
Consulting Agreement, effective March 25, 2019, between Relmada Therapeutics, Inc. and Najib Babul (incorporated by reference to Exhibit 10.3 of
Relmada’s Form 10-Q filed with the SEC on February 13, 2019).
10.18
Amendment No. 4 to the Relmada Therapeutics, Inc. 2014 Stock Option and Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 of
Relmada’s Form 10-Q filed with the SEC on May 15, 2019).
10.19
Form of Share Purchase Agreement, dated September 23, 2019 and September 26, 2019, among Relmada Therapeutics, Inc. and certain accredited investors
named therein (incorporated by reference to Exhibit 10.4 of Relmada’s Form 10-Q filed with the SEC on November 13, 2019).
10.20
Form of Registration Rights Agreement, dated September 23, 2019 and September 26, 2019, among Relmada Therapeutics, Inc. and certain accredited
investors named therein (incorporated by reference to Exhibit 10.5 of Relmada’s Form 10-Q filed with the SEC on November 13, 2019).
10.21
Amended and Restated Unit Purchase Agreement dated November 27, 2019, between Relmada Therapeutics, Inc., and certain accredited investors
(incorporated by reference to Exhibit 10.1 of Relmada’s Form 8-K filed with the SEC on December 3, 2019).
10.22
Amendment No.1 To License Agreement dated December 2, 2019, to the License Agreement dated January 16, 2018 between Relmada Therapeutics, Inc.,
and Dr. Charles E. Inturrisi and Dr. Paolo Manfredi (incorporated by reference to Exhibit 10.2 of Relmada’s Form 8-K filed with the SEC on December 3,
2019).
10.23
Director Agreement, effective December 19, 2019, by and between Eric Schmidt and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.1
of Relmada’s Form 8-K filed with the SEC on December 26, 2019).
45
Exhibit
Number
Description
10.24
Indemnity Agreement, effective December 19, 2019, by and between Eric Schmidt and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.2
of Relmada’s Form 8-K filed with the SEC on December 26, 2019).
10.25
Director Agreement, effective December 19, 2019, by and between John Glasspool and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.3
of Relmada’s Form 8-K filed with the SEC on December 26, 2019).
10.26
Indemnity Agreement, effective December 19, 2019, by and between John Glasspool and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit
10.4 of Relmada’s Form 8-K filed with the SEC on December 26, 2019).
10.27
Employment Agreement, dated January 9, 2020, by and between Maged Shenouda and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.1
of Relmada’s Form 8-K filed with the SEC on January 10, 2020).
10.28
Employment Agreement, dated January 9, 2020, by and between Charles Ence and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.2 of
Relmada’s Form 8-K filed with the SEC on January 10, 2020).
10.29
Amended and Restated Employment Agreement, dated January 9, 2020, by and between Sergio Traversa and Relmada Therapeutics, Inc. (incorporated by
reference to Exhibit 10.3 of Relmada’s Form 8-K filed with the SEC on January 10, 2020).
10.30
Amendment No. 5 to Stock Option and Equity incentive Plan (incorporated by reference to Exhibit 10.1 of Relmada’s Form 8-K filed with the SEC on March
9, 2020).
10.31
Severance and Separation Agreement, dated April 1, 2020, by and between Ottavio Vitolo and Relmada Therapeutics, Inc. (incorporated by reference to
Exhibit 10.6 of Relmada’s Form 10-Q filed with the SEC on May 15, 2020).
10.32
Open Market Sale AgreementSM dated as of May 15, 2020 by and between Relmada Therapeutics, Inc. and Jefferies LLC. (incorporated by reference to
Exhibit 10.7 of Relmada’s Form 10-Q filed with the SEC on May 15, 2020).
10.33*
Relmada Therapeutics, Inc., 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.61 of Relmada’s Form 10-K filed with the SEC on March
24, 2021).
10.34
License Agreement dated as of July 16, 2021, between Arbormentis, LLC and Relmada Therapeutics, Inc. (incorporated by reference to Exhibit 10.2 of
Relmada’s Form 10-Q filed with the SEC on August 10, 2021).
21.1
23.1
31.1*
31.2*
32.1*
32.2*
List of Subsidiaries (incorporated by reference to Exhibit 21.1 of Relmada’s Form 10-K filed with the SEC on September 9, 2014).
Consent of Marcum LLP
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial and Accounting Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Taxonomy Extension Schema Document.
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
Filed herewith
46
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant.
Dated: March 25, 2022
RELMADA THERAPEUTICS, INC.
SIGNATURES
By:
By:
/s/ Sergio Traversa
Sergio Traversa
Chief Executive Officer
(Duly Authorized Officer and
Principal Executive Officer)
/s/ Maged Shenouda
Maged Shenouda
Chief Financial Officer
(Duly Authorized Officer and
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities
and on the dates indicated.
Signature
/s/ Sergio Traversa
Sergio Traversa
/s/ Maged Shenouda
Maged Shenouda
/s/ Charles J. Casamento
Charles J. Casamento
/s/ Paul Kelly
Paul Kelly
/s/ Eric Schmidt
Eric Schmidt
/s/ John Glasspool
John Glasspool
Title
Chief Executive Officer, and Director
Chief Financial Officer
Chairman of the Board
Director
Director
Director
47
Date
March 25, 2022
March 25, 2022
March 25, 2022
March 25, 2022
March 25, 2022
March 25, 2022
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM’S CONSENT
We consent to the incorporation by reference in the Registration Statement of Relmada Therapeutics, Inc. on Form S-3 (File No. 333-245054, 333-234262), on post-effective
Amendment No. 1 to Form S-1 (File No. 333-229258, 333-233228), on Form S-8 (File No. 333-257723), and on post-effective Amendment No. 1 to Form S-8 (File No. 333-
231477, 333-224920, 333-207253) of our report dated March 25, 2022, with respect to our audits of the consolidated financial statements of Relmada Therapeutics, Inc. as of
December 31, 2021 and 2020 and for the years ended December 31, 2021 and 2020, which report is included in this Annual Report on Form 10-K of Relmada Therapeutics,
Inc. for the year ended December 31, 2021.
Exhibit 23.1
/s/ Marcum LLP
Marcum LLP
Houston, Texas
March 25, 2022
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18U.S.C SECTION
1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXELY ACT OF 2002
I, Sergio Traversa, certify that:
1. I have reviewed this report on Form 10-K of Relmada Therapeutics, Inc. for the year ended December 31, 2021.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Sergio Traversa
Sergio Traversa
Chief Executive Officer
(Principal Executive Officer)
Date: March 25, 2022
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER PURSUANT TO 18U.S.C SECTION
1350 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXELY ACT OF 2002
I, Maged Shenouda, certify that:
1. I have reviewed this report on Form 10-K of Relmada Therapeutics, Inc. for the year ended December 31, 2021.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
/s/ Maged Shenouda
Maged Shenouda
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 25, 2022
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER, PURSUANT TO
18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Relmada Therapeutics, Inc. a Nevada corporation (the “Company”), on Form 10-K for the year ended December 31, 2021 as filed with
the Securities and Exchange Commission (the “Report”), I, Sergio Traversa, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350), that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Sergio Traversa
Sergio Traversa
Chief Executive Officer
(Principal Executive Officer)
Date: March 25, 2022
CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER,
PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Relmada Therapeutics, Inc. a Nevada corporation (the “Company”), on Form 10-K for the year ended December 31, 2021 as filed with
the Securities and Exchange Commission (the “Report”), I, Maged Shenouda, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350), that to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Maged Shenouda
Maged Shenouda
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: March 25, 2022