GRI Bio, Inc. — Q3 2023 Form 10-Q
Business context and reporting period. This quarterly report covers the three and nine months ended September 30, 2023. GRI Bio is a clinical-stage biopharmaceutical company with no significant operating revenue. Its lead candidate, GRI-0621, is being developed for idiopathic pulmonary fibrosis (IPF); GRI-0803 is an earlier-stage candidate focused initially on lupus. The April 2023 merger with Vallon Pharmaceuticals was accounted for as a reverse recapitalization, with Private GRI as the accounting acquirer; prior-period comparisons therefore reflect Private GRI’s historical results.
Financial performance and condition
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | No significant operating revenue | No significant operating revenue | No significant operating revenue | No significant operating revenue |
| Research and development | $1.189 million | $0.063 million | $2.186 million | $0.181 million |
| General and administrative | $1.250 million | $0.123 million | $7.175 million | $0.391 million |
| Total operating expenses | $2.439 million | $0.186 million | $9.361 million | $0.572 million |
| Net loss | $2.137 million | $0.351 million | $11.033 million | $0.948 million |
| Net loss per share | $0.52 | $0.39 | $3.83 | $1.06 |
Margins are not meaningful because the company reported no significant operating revenue. At September 30, cash and cash equivalents were $3.488 million, total assets $4.404 million, total liabilities $2.177 million and stockholders’ equity $2.227 million. The company reported no debt balance at quarter-end. Nine-month operating cash use was $3.430 million, investing cash use $0.008 million, and financing cash provided $6.917 million; cash increased by $3.479 million from year-end 2022. Accumulated deficit was $29.529 million.
Material changes and unusual items
- Operating expenses and net loss increased substantially year over year. Management attributed the nine-month R&D increase primarily to GRI-0621 development, consulting and personnel costs. The G&A increase primarily reflected $4.9 million of merger-related professional fees, higher personnel costs and public-company expenses.
- Interest expense, net, was $2.089 million for the first nine months, largely reflecting amortization of bridge-note discounts and issuance costs. The notes were settled in connection with the April merger and equity financing.
- The company received a $250,000 upfront payment under its August 2023 sale of ADAIR-related assets and a license to Aardvark Therapeutics; it recognized the payment as other income. Additional regulatory and sales milestone payments are contingent, and management does not anticipate them in the near term.
- The April merger and associated financing materially changed the capital structure. The company issued shares and multiple warrant series; 2.956 million common shares were outstanding at September 30, and 3.246 million were outstanding as of November 13. Potential dilution from outstanding warrants and options is significant.
Outlook, risks and contingencies
Management expected to initiate a 36-patient Phase 2a trial of GRI-0621 in IPF in the second half of 2023 and anticipated topline results in the second half of 2024. It expected to file an IND for GRI-0803 in the first half of 2024, subject to IND clearance. The company expects R&D and public-company costs to rise and does not expect product revenue until a candidate is developed, approved and commercialized. The filing provides no quantified financial guidance.
Management said existing cash was expected to fund operations and capital expenditures into the first quarter of 2024. The company needs substantial additional financing, and the filing states there is substantial doubt about its ability to continue as a going concern for one year from issuance of the financial statements. Financing may not be available on acceptable terms; absent funding, the company may reduce, delay or discontinue development programs or cease operations. About $2.988 million of cash at September 30 was uninsured.
The company disclosed Nasdaq listing risk: as of the report date, its market value of listed securities was below $35 million, stockholders’ equity below $2.5 million, and it had not met the stated net-income alternative. Delisting could impair liquidity and access to capital and may affect its ability to force exercise of Series T warrants. Those warrants were not then eligible for forced exercise because specified equity conditions were unmet. The report disclosed no legal proceedings; management concluded disclosure controls were effective.
Most important facts for investors to verify
- Whether the company raised sufficient additional capital to extend runway beyond the projected first-quarter 2024 period, and the effect on going-concern risk.
- Nasdaq listing status, applicable compliance deadlines and any consequences for financing or warrant terms.
- Progress and timing of the GRI-0621 IPF trial and GRI-0803 IND plans, including any changes to expected milestones.
- Potential dilution from warrants, options and future equity financing; verify current shares outstanding and warrant exercise conditions.
- Whether any Aardvark milestone payments become achievable or are received; the filing states these payments are contingent and not expected in the near term.