DERMATA THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly those under "Risk Factors."
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future.
There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by us. These factors include, but are not limited to:
? our lack of operating history;
? the expectation that we will incur significant operating losses for the
foreseeable future and will need significant additional capital;
? our current and future capital requirements to support our development and
commercialization efforts for our product candidates and our ability to
satisfy our capital needs;
? our dependence on our product candidates, which are still in preclinical
or early stages of clinical development;
? our, or that of our third-party manufacturers, ability to manufacture cGMP
quantities of our product candidates as required for pre-clinical and
clinical trials and, subsequently, our ability to manufacture commercial
quantities of our product candidates;
? our ability to complete required clinical trials for our product
candidates and obtain approval from the FDA or other regulatory agencies
in different jurisdictions;
? our lack of a sales and marketing organization and our ability to
commercialize our product candidates if we obtain regulatory approval;
? our dependence on third-parties to manufacture our product candidates;
? our reliance on third-party CROs to conduct our clinical trials;
? our ability to maintain or protect the validity of our intellectual property;
? our ability to internally develop new inventions and intellectual property;
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? interpretations of current laws and the passages of future laws;
? acceptance of our business model by investors;
? the accuracy of our estimates regarding expenses and capital requirements;
? our ability to adequately support organizational and business growth; and
? the continued spread of COVID-19 and the resulting global pandemic and its
impact on our preclinical studies and clinical studies.
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipate in our forward-looking statements. Please see "Risk Factors" for additional risks which could adversely impact our business and financial performance.
All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report or the date of the document incorporated by reference into this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.
Overview
We are a clinical-stage medical dermatology company focused on identifying, developing and commercializing innovative pharmaceutical product candidates for the treatment of medical and aesthetic skin diseases and conditions we believe have significant unmet needs.
Dermatological diseases such as acne vulgaris (or acne), psoriasis vulgaris (or psoriasis), papulopustular rosacea (or rosacea), hyperhidrosis and various aesthetic indications affect millions of people worldwide each year, and may negatively impact their quality of life and emotional well-being. While there are multiple current treatment options for these indications on the market, we believe that most have significant drawbacks, including cumbersome application regimens and varying negative side effects. While a majority of these indications are first treated with topical products, many patients frequently switch treatments or discontinue treatment altogether due to patient dissatisfaction with slow and modest response rates, early onset of negative side effects, onerous application schedules and typically long duration of therapy. A small percentage of patients may be candidates for biologic or systemic therapies, but these patients are typically required to try topical or oral treatment options prior to qualifying for these expensive systemic therapies. Given the limitation with current topical therapies and the restricted usability of systemic therapies, we believe there is a significant opportunity to address the needs of frustrated patients searching for effective topical products that satisfy their dermatological and lifestyle needs.
Our lead product candidate, DMT310, incorporates our proprietary, multifaceted, Spongilla technology to topically treat a variety of dermatological conditions with an expected once-weekly treatment application regimen. DMT310 is a multifactorial, naturally-derived product that is applied once-weekly to treat acne. The product consists of two grams of powder processed from a wholly naturally grown freshwater sponge, Spongilla lacustris or Spongilla, which powder is then mixed with a fluidizing agent immediately prior to application by the patient to form an easily applicable paste. Spongilla is a unique freshwater sponge that only grows in commercial quantities in select regions of the world and under specific environmental conditions, all of which give it its distinctive anti-microbial, anti-inflammatory and mechanical properties. The combination of these ideal environmental conditions, the proprietary harvesting protocols developed with our supplier, and our post-harvest processing procedures produce a pharmaceutical product candidate that optimizes the mechanical component as well as the chemical components of the sponge for a product candidate with multiple mechanisms of action for the treatment of inflammatory skin conditions, such as acne.
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We believe our Spongilla technology platform will enable us to develop and formulate singular and combination products that target topical delivery of chemical compounds into the dermis for maximum treatment effect for a variety of indications. One mechanism of our technology is its mechanical ability to allow for the intradermal delivery of a variety of large and small molecules to a targeted treatment site, through topical application. In addition to this mechanical component, the technology also utilizes multiple naturally occurring chemical compounds which we believe have demonstrated in-vitro anti-microbial, and anti-inflammatory properties. We believe the combination of these mechanical and chemical components can make our platform extremely versatile for the treatment of a wide variety of medical and aesthetic skin conditions and diseases, including psoriasis.
Critical Accounting Policies and Use of Estimates
We have based our management's discussion and analysis of financial condition
and results of operations on our financial statements, which have been prepared
in accordance with accounting principles generally accepted in
While our significant accounting policies are more fully discussed in Note 3 - Summary of Significant Accounting Policies to our unaudited financial statements contained within this Form 10-Q, we believe that the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.
Research and Development Expenses
We rely on third parties to conduct our preclinical studies and to provide services, including data management, statistical analysis and electronic compilation. Once our clinical trials begin, at the end of each reporting period, we will compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we will consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of our vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we will record net prepaid or accrued expenses related to these costs.
Fair Value of Common Stock and Stock-Based Compensation
Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is generally the vesting period. The Company's policy permits the valuation of stock-based awards granted to non-employees to be measured at fair value at the grant date rather than on an accelerated attribution basis over the vesting period.
Determining the appropriate fair value of share-based awards requires the use of subjective assumptions, including the fair value of the Company's common shares, and for options, the expected life of the option and expected share price volatility. The Company uses the Black-Scholes option pricing model to value its option awards. The assumptions used in calculating the fair value of share-based awards represents management's best estimates and involve inherent uncertainties and the application of management's judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.
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Results of Operations
Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended
June 30, 2021 June 30, 2020 Difference
Costs and expenses:
Research and development expenses
462,772 380,837 81,935
Total operating expenses 1,329,969 792,786 537,183
Losses from operations (1,329,969 ) (792,786 ) (537,183 )
Other income and expenses:
Interest expense, net 1,823 28,863 (27,040 )
Net loss $ (1,331,792 ) (821,649 ) $ (510,143 ) Research and Development Expenses
Research and development expenses increased
General and Administrative Expenses
General and administrative expenses increased
Other Income and Expenses
Other income and expenses decreased
Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended
June 30, 2021 June 30, 2020 Difference
Costs and expenses:
Research and development expenses $ 1,547,785 $ 1,373,053 $ 174,732
General and administrative
expenses 2,043,957 768,310 1,275,647
Total operating expenses 3,591,742 2,141,363 1,450,379
Loss from operations (3,591,742 ) (2,141,363 ) (1,450,379 )
Other income and expenses:
Interest expense, net 44,958 101,459 (56,501 )
Net loss $ (3,636,700 ) $ (2,242,822 ) $ (1,393,878 )
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Research and Development Expenses
Research and development expenses increased
General and Administrative Expenses
General and administrative expenses increased
Other income and expenses
Other income and expenses decreased
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