Dermata Therapeutics, Inc. is a late-stage biotechnology company focused on developing innovative pharmaceutical products for the treatment of medical and aesthetic skin conditions. The company’s unique approach leverages its proprietary Spongilla technology platform to address a wide range of dermatological issues.
Business Overview and History
Dermata was founded in 2014 as Dermata Therapeutics, LLC, initially as a Delaware limited liability company. In 2021, the company converted to a Delaware C-corporation and changed its name to Dermata Therapeutics, Inc. The company’s mission is to develop and commercialize novel treatments that improve the lives of patients suffering from various skin diseases and conditions.
Dermata’s lead product candidate, DMT310, is a once-weekly topical treatment for moderate-to-severe acne vulgaris, a skin condition that affects approximately 50 million patients in the United States annually. DMT310 utilizes the company’s proprietary Spongilla technology, which is derived from a naturally grown freshwater sponge, Spongilla lacustris. The sponge’s unique mechanical and chemical properties are believed to possess anti-microbial, anti-inflammatory, and skin rejuvenation effects, making it a promising candidate for the treatment of acne.
DMT310 consists of two grams of powder processed from Spongilla lacustris. The unique combination of DMT310’s mechanical and chemical components is believed to target the multiple causes of acne through different mechanisms of action. In a previous Phase 2b study, DMT310 showed a 45% reduction in inflammatory lesions after four treatments and achieved statistically significant improvements across all three primary endpoints – reduction in inflammatory lesions, reduction in non-inflammatory lesions, and improvement in Investigator’s Global Assessment (IGA) of acne.
In December 2023, Dermata initiated the first of two pivotal Phase 3 clinical trials for DMT310, known as the Spongilla Treatment of Acne Research (STAR-1) study. The STAR-1 trial is expected to enroll up to 550 patients and evaluate the safety and efficacy of DMT310 compared to placebo for the treatment of moderate-to-severe acne. As of July 2024, 50 of the total expected 550 patients had been enrolled. Top-line results from the STAR-1 study are anticipated in the first quarter of 2025.
In addition to DMT310, Dermata is developing DMT410, a combination treatment that incorporates the Spongilla technology to topically deliver botulinum toxin for the treatment of various aesthetic and medical skin conditions, including hyperhidrosis (excessive sweating). DMT410 aims to provide similar efficacy to intradermal injections of botulinum toxin, but with fewer tolerability issues and a quicker application time. In 2022, Dermata received a Japanese patent for the use of DMT410 in the treatment of hyperhidrosis, a condition that affects approximately 10% of the Japanese population.
Dermata has conducted a Phase 1 proof-of-concept trial of DMT410 with BOTOX for the treatment of axillary hyperhidrosis, where 80% of patients achieved a reduction in sweat production greater than 50% four weeks after a single treatment. The company has also investigated the use of DMT410 for the treatment of various aesthetic skin conditions, including reduction of pore size, sebum production, and fine lines, and believes the results warrant further clinical development.
Dermata has faced several challenges in its history, including the COVID-19 pandemic, which impacted enrollment in its clinical trials. However, the company has demonstrated resilience and managed to advance its pipeline, including the initiation of the pivotal STAR-1 study for DMT310.
In 2017, Dermata entered into a license agreement with Villani, Inc. to obtain exclusive rights to formulate, develop, seek regulatory approval for, and sell products containing Spongilla lacustris for the treatment of various skin conditions. This licensed technology formed the foundation of Dermata’s product pipeline.
Financial Overview
Dermata is a clinical-stage company and has not yet generated any revenue from product sales. The company has relied on equity and debt financings to fund its operations, which have included research and development expenses, as well as general and administrative costs.
For the full year ended December 31, 2023, Dermata reported a net loss of $7.79 million, compared to a net loss of $9.61 million in the prior year. The company’s annual operating cash flow was $(6.41) million, and its annual free cash flow was $(6.41) million.
For the nine months ended September 30, 2024, the company reported a net loss of $9.14 million, compared to a net loss of $5.66 million for the same period in 2023. The increase in net loss was primarily due to higher research and development expenses related to the DMT310 STAR-1 acne study initiated in late 2023.
In the most recent quarter (Q3 2024), Dermata reported a net loss of $3.17 million, an increase of $1.45 million compared to Q3 2023. This increase was primarily due to a $1.5 million rise in research and development expenses related to the DMT310 STAR-1 acne study. The operating cash flow for Q3 2024 was $(3.42) million, and the free cash flow was also $(3.42) million.
Financials
As of September 30, 2024, Dermata had cash and cash equivalents of $6.14 million, which the company believes will be sufficient to fund its operations into the second quarter of 2025. The company has been actively raising capital through various financing activities, including a $3.5 million private placement in September 2024 and the utilization of an at-the-market (ATM) offering program, which generated $1.50 million in net proceeds during the third quarter of 2024.
Dermata’s accumulated deficit as of September 30, 2024, was $62.52 million. The company’s debt-to-equity ratio is 0, as it does not have any outstanding debt. The current ratio and quick ratio are both 3.44, indicating a strong short-term liquidity position.
Liquidity
Dermata’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its operations and research and development activities. The company’s current cash position and ongoing financing efforts are crucial to supporting its clinical development programs and advancing its product candidates.
To continue the development of its product candidates and support potential commercialization efforts, Dermata will need to raise additional capital through equity or debt financing, or through strategic collaborations or partnerships.
Risks and Challenges
Dermata faces several risks and challenges common to clinical-stage biotechnology companies, including the uncertainty of successful drug development, regulatory approvals, and commercialization. The company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its operations and research and development activities.
Additionally, Dermata’s reliance on its Spongilla technology platform and the potential for supply chain disruptions, such as those caused by the Russia-Ukraine conflict, could impact the company’s ability to obtain the necessary raw materials for its product candidates.
Outlook and Potential Catalysts
Dermata’s primary focus in the near term is the successful completion of the STAR-1 Phase 3 clinical trial for DMT310 in moderate-to-severe acne. The company is also continuing discussions with potential partners to advance the development of DMT410 for the treatment of aesthetic and medical skin conditions.
If the STAR-1 study for DMT310 is positive, the company plans to use the results to support the filing of a new drug application (NDA) with the U.S. Food and Drug Administration (FDA) for the treatment of acne. The potential approval and commercialization of DMT310 could be a significant catalyst for Dermata, as the acne market in the United States represents a sizable opportunity.
Additionally, the issuance of the Japanese patent for DMT410 in the treatment of hyperhidrosis highlights the potential of Dermata’s Spongilla technology platform to address unmet needs in various dermatological indications. The company’s ability to secure a partnership for the further development of DMT410 could also be a key catalyst going forward.
Conclusion
Dermata Therapeutics is a late-stage biotechnology company that is leveraging its proprietary Spongilla technology to develop innovative treatments for medical and aesthetic skin conditions. The company’s lead product candidate, DMT310, is currently in pivotal Phase 3 clinical trials for the treatment of moderate-to-severe acne, a large and underserved market. Additionally, the company’s DMT410 program, which utilizes the Spongilla technology to topically deliver botulinum toxin, has shown promise in the treatment of hyperhidrosis and other aesthetic skin conditions.
Despite the challenges faced by Dermata, including the impact of the COVID-19 pandemic, the company has demonstrated its ability to navigate the drug development landscape and advance its pipeline. The upcoming readout of the STAR-1 Phase 3 study for DMT310 and the potential for a partnership for DMT410 could be significant catalysts for the company in the near future.
Dermata’s focus on developing innovative dermatological treatments using its proprietary Spongilla technology platform, along with the ongoing clinical progress of its lead candidate DMT310 for acne and the potential of DMT410 for both medical and aesthetic skin conditions, represents a promising approach in the medical dermatology space. However, the company’s reliance on external funding and the inherent risks associated with drug development will be key factors in determining its long-term success.
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