Quoin Pharmaceuticals Ltd. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Quoin is a clinical-stage biopharmaceutical company developing treatments for rare diseases; it has no commercialized products and has generated no revenue.
Financial results and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| R&D expense | $0.63 million | $0.73 million | $1.72 million | $1.31 million |
| G&A expense | $1.63 million | $1.94 million | $3.32 million | $3.53 million |
| Total operating expenses | $2.26 million | $2.67 million | $5.04 million | $4.84 million |
| Net loss | $2.11 million | $2.67 million | $4.71 million | $4.35 million |
| Operating cash used | Not separately provided for the quarter | Not separately provided for the quarter | $3.32 million | $4.24 million |
- At June 30, 2023, cash and cash equivalents were $4.76 million and U.S. Treasury bill investments were $10.68 million; total current assets were $15.67 million.
- Total liabilities were $7.64 million, including $3.95 million due to officers and $1.15 million in accrued interest and financing expense. The filing reports no conventional bank debt balance.
- Six-month cash flow included $5.85 million net proceeds from the February equity offering, partly offset by $0.18 million repaid to officers. Cash increased $1.90 million to $4.76 million.
- The company reported an accumulated deficit of $42.23 million and shareholders’ equity of $9.07 million. Operating margins are not meaningful because the company has no revenue.
Changes versus comparable periods
- Q2 net loss improved by $0.56 million year over year. Operating expenses fell $0.41 million, primarily from lower legal and public-company costs and lower R&D spending; $0.19 million of interest income also helped.
- First-half net loss increased by $0.36 million. R&D expense rose $0.40 million as development activity increased, while the 2022 comparison benefited from $0.42 million of forgiven trade payable and a $0.08 million warrant fair-value gain. First-half 2023 interest income of $0.34 million partly offset expenses.
- February 2023 financing generated approximately $7.0 million gross and $5.8 million net proceeds. The offering included ordinary shares and warrants; outstanding shares increased to 59.23 billion ordinary shares by June 30.
Business, outlook and risks
- Lead candidate QRX003 is being studied in two U.S. clinical studies for Netherton Syndrome. Dosing began in December 2022 in a randomized, double-blind study and in March 2023 in a separate open-label study. QRX004 is in development for recessive dystrophic epidermolysis bullosa; the company also has research options relating to QRX007 and QRX008.
- Management stated liquidity was sufficient to execute its business plan for at least one year from issuance of the financial statements. It also expects additional financing will be needed to complete development and support operations; financing may not be available on acceptable terms. Management expects expenses, particularly R&D, to increase as QRX003 advances. No quantified earnings or revenue guidance was provided.
- Key risks include clinical-trial results and timing, regulatory approval, future financing and potential dilution, dependence on third-party suppliers and a clinical research organization, and the possibility of delaying, reducing, or terminating programs if funding is unavailable.
- Skinvisible is entitled to a $5 million milestone payment upon the first applicable U.S. or EU product approval, plus sales royalties and a share of certain sublicense royalties. The company also disclosed research commitments for QRX003 studies estimated at $4.4 million and $0.83 million through 2024.
- Nasdaq notified the company in April 2023 that its ADS price was below the minimum bid requirement. The company regained compliance on August 1, 2023; continued compliance is not assured. The ADS-to-ordinary-share ratio changed effective July 18, 2023, resulting in a 1-for-12 reverse split of ADSs; reported ADS data are retroactively adjusted.
- The filing states there were no material legal proceedings, no material changes to previously reported risk factors, and no material changes in internal control over financial reporting. Disclosure controls were assessed as effective at June 30, 2023.
Important facts for investors to verify
- Clinical-trial enrollment, progress, costs, and future milestones for both QRX003 studies.
- Cash runway assumptions and timing, terms, and dilution of any future financing or warrant exercises.
- The status and potential financial impact of the $1.15 million accrued interest obligation and $3.95 million due to officers.
- Whether the company maintains Nasdaq minimum-bid compliance and meets its research commitments within available liquidity.
- Potential milestone and royalty obligations under the Skinvisible license if a product is approved or sublicensed.