GRI Bio, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. GRI Bio is a clinical-stage biopharmaceutical company developing therapies for inflammatory, fibrotic, and autoimmune diseases. The April 21, 2023 merger with Vallon Pharmaceuticals was accounted for as a reverse recapitalization; prior-period results reflect Private GRI, the accounting acquirer. The company reported no significant operating revenue.
Financial highlights
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 |
|---|---|---|
| Research and development expense | $0.9 million | $1.0 million |
| General and administrative expense | $5.1 million | $5.9 million |
| Total operating expenses | $5.9 million | $6.9 million |
| Net loss | $6.7 million | $8.9 million |
| Net loss per share, basic and diluted | $2.79 | $5.23 |
| Operating cash used | Not separately presented | $2.1 million |
- Cash and cash equivalents were $4.8 million at June 30, 2023, versus $9,000 at December 31, 2022. Total assets were $5.6 million and total liabilities were $1.6 million.
- Financing activities provided $6.9 million for the first half, while investing activities used $8,000. Ending stockholders’ equity was $4.0 million, compared with a $1.6 million deficit at year-end 2022.
- The $3.3 million bridge-note principal and accrued interest were canceled in connection with the merger financing; no promissory note balance remained at June 30. Net interest expense was $2.1 million for the first half, including $2.1 million of amortized debt discounts and issuance costs.
- Gross margin is not applicable to the reported results because the company had no significant operating revenue.
Changes versus the prior comparable period
- First-half net loss increased to $8.9 million from $0.6 million in 2022. Operating expenses rose to $6.9 million from $0.4 million.
- First-half R&D expense increased by approximately $0.9 million, primarily from GRI-0621 development, consulting, and personnel costs. G&A expense increased by approximately $5.6 million; management attributed much of the increase to merger-related professional fees, higher personnel costs, and public-company expenses.
- Interest expense rose to $2.1 million from $0.2 million, mainly due to the bridge financing and related discount and issuance-cost amortization.
- The merger and related Equity SPA materially changed the capital structure. The company reported 2,956,354 shares outstanding at June 30, 2023, versus 999,748 at December 31, 2022. Multiple warrant series were outstanding.
Outlook, risks, and unusual items
- Management expected cash on hand, including Equity SPA proceeds, to fund operating and capital expenditure needs for twelve months from the April 21 merger date, excluding any Series T warrant exercises. The filing nevertheless states that substantial additional funding is required and that substantial doubt exists about the company’s ability to continue as a going concern.
- GRI-0621 is being developed for idiopathic pulmonary fibrosis. Management planned to initiate a 36-patient Phase 2a trial in the second half of 2023 and expected topline results in the second half of 2024. For GRI-0803, management expected to file an IND in the first half of 2024, subject to clearance.
- Management expects operating losses and R&D expenses to increase. If financing is unavailable, the company may reduce spending, delay or scale back development, or discontinue programs. The company reported $27.4 million of accumulated deficit at quarter-end and no expectation of product revenue until development, regulatory approval, and commercialization succeed.
- Merger-related costs were significant; the filing identifies $2.984 million of transaction costs in the merger accounting and attributes much of the period’s higher G&A to merger-related professional fees. The former CEO’s separation agreement included 18 months of salary and certain benefits plus a lump-sum bonus payment.
- At June 30, $4.302 million of cash balances were uninsured. The filing reported no legal proceedings and no material changes to previously disclosed risk factors.
Key facts for investors to verify
- Whether the planned GRI-0621 trial began on schedule and whether the disclosed 2024 topline-results timing remains achievable.
- Current cash runway, subsequent financing, and any Series T warrant exercises, given the going-concern warning and stated funding needs.
- The potential dilution from outstanding warrants and other equity awards relative to common shares outstanding.
- Whether merger-related and other public-company costs materially affect future expense levels, and how much of the reported first-half cash flow reflects working-capital changes.