Filing identity and period
Important discrepancy: The supplied filing is Vallon Pharmaceuticals, Inc.’s Form 10-Q for the quarter ended June 30, 2021, not a filing for GRI Bio, Inc. The figures below are for Vallon. Financial amounts are in thousands of dollars unless otherwise noted.
Vallon is a clinical-stage biopharmaceutical company developing abuse-deterrent CNS medicines. Its lead candidate, ADAIR, is an abuse-deterrent formulation of immediate-release dextroamphetamine for ADHD and narcolepsy; it is also developing ADMIR, an abuse-deterrent formulation of methylphenidate.
Financial performance and position
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $100 |
| Research and development expense | $1,202 | $808 | $2,974 | $1,694 |
| General and administrative expense | $1,108 | $327 | $1,938 | $701 |
| Net loss | $(2,312) | $(1,147) | $(4,950) | $(2,308) |
| Cash used in operating activities | Not separately provided for the quarter | $(5,440) | $(1,834) |
At June 30, 2021, cash and cash equivalents were $10,460, current assets $11,404, current liabilities $1,671, total liabilities $1,794, and stockholders’ equity $9,853. The company reported no note payable at quarter-end. No gross margin is presented; product sales revenue had not begun.
Changes and financing
Year-to-date operating expenses more than doubled versus the prior-year period, while the company recorded no licensing revenue compared with $100 in the first half of 2020. Management attributed higher R&D costs primarily to ADAIR’s registration-development program and higher G&A costs to directors’ and officers’ insurance, personnel and public-company expenses. The first-half 2021 net loss also included $61 of PPP loan forgiveness income and an $89 expense from remeasurement of an embedded derivative.
In February 2021, Vallon completed an IPO of 2.25 million shares at $8.00 per share, receiving approximately $15,500 in net proceeds. The $350 of January convertible notes converted into 54,906 common shares at the IPO. Financing activities provided $15,791 in the first half of 2021; cash rose from $109 at year-end 2020 to $10,460.
Outlook, risks and notable items
Management expected available cash to fund ongoing business activities into the third quarter of 2022, but cautioned that this estimate depends on assumptions and stated that there was substantial doubt about the company’s ability to continue as a going concern within one year of issuance of the financial statements. Additional capital is required; failure to obtain financing could force reduced or discontinued operations. Management expected continued significant losses and increasing expenses and did not expect product revenue until successful development, regulatory approval and commercialization.
Management expected the pivotal intranasal abuse study of ADAIR to be completed by year-end 2021. This is a stated expectation, not financial guidance. Medice holds an exclusive European license for ADAIR; Vallon may receive regulatory and sales milestones and low-double-digit tiered royalties, but did not expect near-term additional license revenue.
COVID-19 could disrupt trial enrollment and conduct, third-party manufacturing, regulatory review and access to capital. The company reported no material legal proceedings. Management said disclosure controls were effective as of June 30, 2021, while remediation actions for previously disclosed material weaknesses in internal control over financial reporting were ongoing.
Important facts for investors to verify
- Confirm the intended issuer: the provided document identifies Vallon Pharmaceuticals, Inc. (ticker VLON), not GRI Bio, Inc.
- Check subsequent cash burn, financing activity and whether the projected runway into Q3 2022 was achieved.
- Verify the timing and outcome of the ADAIR pivotal intranasal abuse study and subsequent regulatory plans.
- Assess the assumptions behind the going-concern disclosure and the company’s ability to raise additional capital.
- Review subsequent updates on COVID-19 impacts, Medice milestones or royalties, and remediation of internal-control weaknesses.