NRx Pharmaceuticals, Inc. — Q3 2023 Form 10-Q Summary
Business context and reporting period
NRx Pharmaceuticals is a clinical-stage pharmaceutical company focused on NRX-101, a fixed-dose combination of D-cycloserine and lurasidone, and NRX-100, an intravenous ketamine program. The company is also evaluating NRX-101 for chronic pain and complicated urinary tract infection. This quarterly report covers the three and nine months ended September 30, 2023. The financial statements are unaudited and prepared under U.S. GAAP.
NRX-101 has received FDA Fast Track, Breakthrough Therapy, Special Protocol Agreement and Biomarker Letter of Support designations for certain bipolar-depression indications. The company had 83.9 million common shares outstanding as of November 13, 2023.
Financial condition and key metrics
| Metric | Q3 2023 | Q3 2022 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No revenue in either period |
| Research and development expense | $3.3 million | $4.1 million | Down $0.8 million |
| General and administrative expense | $2.5 million | $5.0 million | Down $2.5 million |
| Total operating expenses | $5.8 million | $9.1 million | Down $3.3 million |
| Net loss | $6.1 million | $9.1 million | Loss decreased $3.0 million |
| Basic and diluted loss per share | $0.07 loss | $0.14 loss | Improved |
| Metric | Nine months ended September 30, 2023 | Nine months ended September 30, 2022 |
|---|---|---|
| Research and development expense | $10.8 million | $12.6 million |
| General and administrative expense | $12.3 million | $21.9 million |
| Settlement expense | $0.3 million | $0 |
| Total operating expenses | $23.4 million | $34.4 million |
| Net loss | $25.8 million | $29.5 million |
| Net cash used in operating activities | $18.5 million | $31.4 million |
Because the company has no revenue, gross margin and operating margin are not meaningful. The nine-month loss included a $2.8 million loss from the change in fair value of the convertible note payable, while the prior-year period included a $4.6 million gain from the change in fair value of an earnout cash liability.
Cash and cash equivalents were $8.9 million at September 30, 2023, compared with $20.1 million at December 31, 2022. Total assets were $13.1 million, total liabilities were $19.3 million, and stockholders’ deficit was $6.2 million, compared with positive equity of $7.4 million at year-end 2022.
The company used $18.5 million in operating activities and $4 thousand in investing activities during the first nine months. Financing activities provided $7.3 million, including $8.1 million from common stock and warrant offerings and $1.2 million from Series A preferred stock and warrant issuance, partially offset by $2.3 million of convertible-note repayments.
The Streeterville convertible note had a carrying value of $10.1 million at September 30, 2023 and was classified as current. The note bears a 9% stated interest rate, includes monthly redemption provisions, and may be settled in cash, common stock or a combination. The company paid approximately $1.8 million in cash principal repayments and issued approximately $0.9 million of common stock for principal repayment during the nine-month period.
Material changes versus the prior comparable period
- Quarterly net loss improved by $3.0 million, primarily because research and development and general and administrative expenses declined.
- Nine-month operating expenses fell by $11.0 million, reflecting lower clinical, professional, insurance, legal and stock-based compensation costs. The 2023 period included a $0.3 million settlement expense.
- Operating cash burn declined to $18.5 million from $31.4 million, but cash still decreased by $11.2 million during the first nine months.
- Shares outstanding increased from 66.4 million at December 31, 2022 to 83.9 million at September 30, 2023, with additional dilution possible from approximately 33.0 million outstanding common-stock warrants, preferred-stock conversion and other equity awards.
- The company issued 3.9 million common shares and warrants in March, 9.7 million common shares and warrants in June, and 3.0 million Series A convertible preferred shares with warrants in August.
- In June 2023, NRx granted Alvogen an exclusive worldwide license for NRX-101 in bipolar depression with suicidality. No milestone had been achieved and no licensing revenue had been recognized as of September 30, 2023.
- The company settled the GEM arbitration in July 2023 by issuing 675,676 common shares, satisfying an accrued obligation of approximately $0.3 million.
Guidance, outlook, risks and unusual items
- Management expected to complete enrollment in the NRX-101 Phase 2b/3 treatment-resistant bipolar depression trial during November 2023 and expected top-line data in early 2024. Enrollment was being expanded beyond the original target of 70 participants to increase study power.
- The company was evaluating consolidation of planned acute-suicidality and treatment-resistant bipolar-depression development programs based on FDA guidance. The resulting broader indication could reduce the need for a separate ketamine-related NDA for stabilization.
- NRX-101 development was expanded to chronic pain and complicated urinary tract infection. The company reported in vitro activity against certain antibiotic-resistant pathogens and submitted an IND requesting QIDP, Fast Track and Priority Review designations; regulatory designations and approval remain uncertain.
- For NRX-100 ketamine, management targeted FDA submission of an NDA in the first quarter of 2024 and a potential PDUFA date in the fourth quarter of 2024. The filing states that this timeline depends on clinical data, manufacturing documentation and FDA review.
- The company reported a non-binding November 2023 term sheet for $30 million to support a proposed separate publicly traded entity for certain development programs. The proposed transaction was not completed as of the filing date.
- The company stated that substantial doubt exists about its ability to continue as a going concern for at least twelve months after issuance of the financial statements. It expects to require additional equity or debt financing, licensing proceeds or other strategic funding. Failure to obtain financing could require reduced or discontinued operations, asset sales or bankruptcy protection.
- Nasdaq notified the company in July 2023 that it was below the $50 million minimum market value of listed securities requirement, with an initial compliance deadline of January 22, 2024. In October 2023, Nasdaq also cited noncompliance with the $1.00 minimum bid-price requirement. A hearing was scheduled for January 4, 2024, and delisting remained possible.
- The Alvogen license provides for a potential $10 million first milestone, a $5 million approval milestone, additional sales-based milestones of up to $330 million and tiered royalties generally in the low-to-mid teens. These payments are contingent on clinical, regulatory and commercial achievements.
- Key unusual or non-cash items included fair-value changes on the convertible note, stock-based compensation of $1.6 million for the first nine months, stock issued for debt repayment and settlement obligations, and warrant-related fair-value changes.
- Management stated that disclosure controls and procedures were effective as of September 30, 2023, and that no material changes in internal control over financial reporting occurred during the quarter.
Most important facts for investors to verify
- Whether the company secures sufficient financing to fund operations and satisfy Streeterville note redemptions through the next twelve months.
- The status, enrollment completion, safety profile and early-2024 readout of the NRX-101 Phase 2b/3 trial.
- Whether Alvogen’s conditions for the $10 million first milestone are met by the applicable March 31, 2024 deadlines and whether the license remains in force.
- FDA acceptance and review status for the NRX-100 ketamine NDA and the NRX-101 chronic-pain and cUTI programs.
- Nasdaq’s decision regarding minimum bid price and market-value compliance, and the resulting risk of delisting.
- Potential dilution from the 33.0 million warrants, Series A preferred stock conversion, debt repayments in common stock and other equity awards.
- The company’s cash runway, monthly cash burn and actual reductions in spending following completion or scaling of the NRX-101 trial.
- Whether the proposed $30 million financing and separate publicly traded entity for additional programs are completed on the described terms.