AzurRx BioPharma, Inc. — Q2 2021 Form 10-Q
Company identification: The supplied metadata names Gridai Technologies Corp., but the filing identifies the registrant as AzurRx BioPharma, Inc. (Nasdaq: AZRX). This summary covers the filing’s stated reporting period, the quarter and six months ended June 30, 2021. Financial statements are unaudited.
Business context
AzurRx is a clinical-stage biotechnology company developing gut-restricted therapies for gastrointestinal diseases. Its lead candidate, MS1819, was in two Phase 2 cystic fibrosis trials. The company also began a Phase 2 trial of niclosamide for COVID-19 gastrointestinal infections; it planned a Phase 1b/2a trial for immune-checkpoint-inhibitor-associated colitis in the second half of 2021. The company reported no revenue.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Research and development expense | $5.65 million (2020: $1.09 million) | $8.16 million (2020: $2.64 million) |
| General and administrative expense | $3.63 million (2020: $1.30 million) | $9.33 million (2020: $2.68 million) |
| Net loss | $9.28 million (2020: $4.70 million) | $16.96 million (2020: $9.96 million) |
| Loss per share, basic and diluted | $0.16 (2020: $0.17) | $0.64 (2020: $0.36) |
| Net loss applicable to common shareholders | $12.73 million | $42.71 million |
There was no revenue, so revenue growth and gross or operating margins are not applicable. Six-month net loss included a $0.53 million other-income benefit, while prior-year results included $4.64 million of interest expense. Common-shareholder loss also reflects noncash deemed dividends: $3.42 million in Q2 and $25.52 million for the six months, including a $21.01 million charge related to preferred-stock exchanges.
- Cash and liquidity: Cash and cash equivalents were $8.07 million at June 30, 2021, compared with $6.06 million at December 31, 2020. Current assets were $8.62 million and current liabilities $6.45 million, implying working capital of approximately $2.16 million.
- Cash flows, six months: $10.70 million used in operations and $9.07 million used in investing, including the $9.0 million First Wave license payment; $21.83 million provided by financing. Ending cash was $8.07 million.
- Debt and liabilities: Note payable was $0.14 million; the filing reports no convertible debt outstanding. Total liabilities were $6.74 million, down from $15.56 million at year-end, largely as the license-agreement payable declined from $13.25 million to $1.25 million. Accounts payable and accrued expenses rose to $4.64 million from $1.69 million.
- Equity and potential dilution: Stockholders’ equity was $7.04 million, versus a $2.64 million deficit at year-end. Common shares outstanding increased from 31.15 million to 82.59 million by June 30; 93.26 million were outstanding on August 13. At June 30, 54.56 million warrants and 4.30 million options were outstanding, in addition to potential shares from preferred stock and exchange rights.
Material changes versus the prior comparable period
- Q2 operating expenses increased $6.88 million year over year. Management attributed higher R&D costs to additional clinical trials, a $1.0 million niclosamide development milestone, and MS1819 manufacturing and formulation work. Higher G&A reflected public-company, investor-relations, legal, financing, and governance costs.
- Six-month operating expenses increased $12.17 million and net loss increased $7.01 million year over year. The expansion of clinical activity and public-company costs were key drivers.
- Financing activity substantially expanded the share count. January and March offerings, at-the-market sales, and warrant exercises provided financing proceeds; the company also issued shares upon conversion of preferred stock.
Outlook, risks, and unusual items
- Going concern: The filing states that recurring losses and negative operating cash flows, together with reliance on additional equity or debt funding, raise substantial doubt about the company’s ability to continue as a going concern. Management expects continued losses and rising expenses and provided no revenue or earnings guidance.
- Spending outlook: Management expected R&D and G&A cash expenses to increase during the remainder of 2021, driven by niclosamide trials and milestones, MS1819 development, and operating needs.
- Subsequent financing: A July 2021 common-stock offering, including the exercised over-allotment, generated approximately $5.1 million in net proceeds. The company said proceeds would support license milestones and general corporate purposes.
- Clinical and operating risks: Drug candidates remain under clinical development and require further clinical and regulatory success. The filing also cites funding needs, manufacturing and supply risks, competition, intellectual-property protection, and possible COVID-19-related clinical or operational disruption.
- License obligations: The First Wave niclosamide license includes potential milestone payments of up to $37 million for each indication and mid-single-digit royalties on net sales. The filing records a $1.0 million clinical-development milestone expense.
- Other matters: The company reported no material change to risk factors from its 2020 Form 10-K and no legal proceedings in this filing. Management concluded disclosure controls were effective. A July offering and remaining Series B exchange rights may further dilute shareholders.
Important facts for investors to verify
- Confirm the registrant identity: the filing is for AzurRx BioPharma, Inc., not Gridai Technologies Corp.
- Assess the going-concern warning, cash runway, and ability to obtain additional financing relative to planned clinical spending and license obligations.
- Review clinical-trial progress and results for MS1819 and niclosamide, including whether planned trial timing and milestones were achieved.
- Reconcile post-quarter financing, share counts, preferred-stock exchange rights, warrants, and other potential dilution.
- Check the timing and potential amount of First Wave milestone and royalty obligations, and the company’s ability to fund them.