Quoin Pharmaceuticals Ltd. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Quoin is a clinical-stage pharmaceutical company developing treatments for rare diseases. It has not commercialized a product and reported no product revenue.
Financial results and liquidity
| Metric | Q1 2024 | Q1 2023 or prior period |
|---|---|---|
| Revenue | None | None reported |
| Operating expenses | $2.46 million | $2.78 million |
| Research and development | $843,000 | $1.09 million |
| General and administrative | $1.62 million | $1.68 million |
| Net loss | $2.33 million | $2.60 million |
| Net cash used in operating activities | $1.43 million | $1.75 million |
| Cash and cash equivalents | $1.83 million at March 31 | $2.40 million at December 31, 2023 |
| Investments | $12.86 million at March 31 | $8.29 million at December 31, 2023 |
| Total liabilities | $7.00 million at March 31 | $6.51 million at December 31, 2023 |
Gross profit and operating margins are not meaningful because the company reported no revenue. The company had approximately $14.69 million in cash, cash equivalents, and short-term U.S. Treasury investments at quarter-end. It reported $4.22 million of current liabilities, including $600,000 due to officers in the short term, $1.15 million of accrued interest and financing expense, and $2.12 million of accrued expenses. An additional $2.77 million was due to officers long term. The filing does not report conventional bank borrowings.
Changes and financing
- Net loss narrowed by approximately $276,000 year over year. Operating expenses fell by $317,000, primarily due to lower R&D spending; interest income was also lower and investments recorded an unrealized loss rather than a gain.
- On March 7, 2024, Quoin completed an offering that generated approximately $6.5 million gross and $5.5 million net proceeds. The offering included ADSs, pre-funded warrants, and Series D and E warrants. It also modified certain existing warrants, reducing their exercise price to $1.60 and extending their expiration to 2029.
- Shares outstanding increased to 3,795,970 ADSs at March 31, from 987,220 at December 31, 2023. The company also reported 10.24 million outstanding warrants at quarter-end, creating potential dilution.
- Cash used in investing activities was $4.47 million, mainly reflecting net purchases of short-term Treasury securities. Financing cash flow was positive $5.33 million, mainly from the offering, partly offset by $150,000 of repayments to officers.
Business outlook, risks, and contingencies
- QRX003, the lead candidate for Netherton Syndrome, is being studied in two U.S. clinical trials. Following FDA-cleared protocol amendments, both studies use twice-daily dosing; the blinded study compares 4% QRX003 with placebo, and the open-label study uses QRX003. The company reported positive initial results from six evaluable open-label subjects in October 2023; the filing provides no new trial results for Q1 2024.
- The company stated that its resources were sufficient to fund its business plan for at least one year from issuance of the financial statements. It nevertheless expects to need additional financing to complete development and meet operating requirements; funding may not be available on acceptable terms. Failure to obtain funding could force delays, reductions, or termination of programs.
- Management expects R&D spending to be significant in coming years as clinical development advances. No quantified revenue, profit, or cash-flow guidance was provided.
- Key risks include clinical and regulatory uncertainty, lack of revenue, financing needs and dilution, and reliance on third parties, including single-source suppliers and the CRO managing both current studies.
- On April 29, 2024, Nasdaq notified Quoin that its ADS bid price had been below $1.00 for 31 consecutive business days. The company has until October 28, 2024 to regain compliance, with possible additional time subject to conditions. Delisting could impair trading liquidity and future fundraising.
- Under its Skinvisible license, Quoin may owe a $5 million payment upon the first relevant U.S. or EU product approval, plus royalties on licensed product sales and a share of sublicensing royalties. No such milestone or royalty was due at March 31, 2024. Management reported no material legal proceedings or losses requiring accrual.
Important facts for investors to verify
- Current cash runway, actual spending, and financing needs against management’s stated one-year liquidity assessment.
- Enrollment, safety, efficacy, and timing of results from both QRX003 studies, and any subsequent FDA interactions.
- Potential dilution from outstanding warrants, the terms and use of the March offering proceeds, and availability of the separate Alumni equity facility.
- Whether Quoin regains Nasdaq’s $1.00 minimum bid-price compliance by the stated deadline.
- Any changes in supplier or CRO arrangements, clinical program costs, or the company’s ability to fund development without materially reducing its programs.