Quoin Pharmaceuticals Ltd. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Quoin is a clinical-stage pharmaceutical company developing treatments for rare diseases; it has not commercialized products and reported no revenue.
Financial performance and liquidity
Amounts are in U.S. dollars. Operating margins are not meaningful because the company has no product revenue.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| General and administrative expense | $1.366 million | $1.582 million | $4.685 million | $5.112 million |
| Research and development expense | $0.759 million | $0.746 million | $2.476 million | $2.060 million |
| Total operating expenses | $2.125 million | $2.328 million | $7.161 million | $7.172 million |
| Net loss | $1.927 million | $3.030 million | $6.637 million | $7.381 million |
| Basic and diluted loss per ADS | $1.95 | $11.28 | $7.61 | $55.79 |
| Net cash used in operations | Not stated separately | Not stated separately | $4.641 million | $6.538 million |
- At September 30, 2023, cash and cash equivalents were $3.163 million and U.S. Treasury investments were $10.818 million, for combined cash and investments of about $13.981 million.
- Total assets were $15.068 million; total liabilities were $7.654 million; shareholders’ equity was $7.414 million. Current assets were $14.141 million and current liabilities $4.580 million.
- Liabilities included $3.674 million due to officers/founders ($0.600 million current and $3.074 million long-term) and $1.146 million of accrued interest and financing expense related to 2020 notes. The notes had converted; the interest amount remained accrued. Officer indebtedness is described as non-interest-bearing.
- Nine-month cash flows: $4.641 million used in operations, $0.456 million used in investing, and $5.399 million provided by financing. Cash increased $0.303 million from year-end 2022.
Material changes versus comparable periods
- Q3 net loss narrowed by about $1.103 million year over year, principally because 2022 included $0.714 million of interest expense on 2020 notes; Q3 2023 also had higher interest income. Operating expenses declined about $0.202 million.
- Nine-month net loss improved by about $0.744 million. Operating expenses were nearly flat: lower G&A, including reduced legal and public-company costs, largely offset higher R&D spending.
- Nine-month R&D rose about 20% to $2.476 million as clinical and research program activity increased. A $0.278 million credit for prior-period costs partially offset spending in Q3.
- Interest income increased to $0.536 million for the nine months from $0.015 million in 2022, reflecting returns on cash and investments. The prior-year period also included $0.416 million income from settlement of an investor-relations payable and a $0.077 million warrant-liability gain.
- The February 2023 offering generated approximately $5.849 million in net proceeds. It included ADSs and warrants; the company also reduced the exercise price and extended the term of certain 2022 warrants.
Outlook, developments, and risks
- Management stated that available cash and investments were sufficient to fund its business plan for at least one year from issuance of the financial statements. Further financing will be needed to complete development and meet other operating needs; availability and terms are uncertain. The company may have to delay, reduce, or terminate programs if it cannot raise funds.
- Management expected R&D spending to increase as QRX003 development advances, and anticipated higher G&A during the remainder of 2023. No quantified financial or product-sales guidance was provided.
- QRX003 is being studied in two U.S. clinical studies for Netherton Syndrome. One is a randomized, double-blind study of two doses versus placebo; dosing began in December 2022. A separate open-label study began dosing in March 2023. The company reported initial positive data from six evaluable subjects in the open-label study, while cautioning that final results are uncertain.
- Quoin is also developing QRX004 for Recessive Dystrophic Epidermolysis Bullosa and has research arrangements and options relating to QRX007 and QRX008. Development, regulatory approval, clinical outcomes, commercialization, and additional financing remain uncertain.
- The company relies on third parties, including a CRO managing both current clinical studies, an active pharmaceutical ingredient supplier, and a drug-substance manufacturer; some are single-source providers.
- Nasdaq notified the company of a minimum-bid-price deficiency in April 2023. Quoin regained compliance on August 1, 2023; continued compliance is not assured. Delisting could impair trading liquidity and access to capital.
- Effective July 18, 2023, the ADS ratio changed, and a 1-for-60,000 ordinary-share reverse split became effective November 8, 2023. Share and per-ADS data in the filing are retroactively adjusted. The company reported 987,220 ordinary shares and ADSs outstanding as of November 8, 2023.
- Management reported no material legal proceedings, no matters requiring loss accrual, and no material changes to previously disclosed risk factors. Disclosure controls were assessed as effective at September 30, 2023.
Important facts for investors to verify
- Whether the stated one-year liquidity runway remains adequate as clinical-trial costs and other spending evolve, and when additional financing may be required.
- Enrollment, safety, efficacy, timing, and regulatory expectations for both QRX003 studies; the reported six-subject open-label data are preliminary.
- The terms, potential dilution, and exercise status of outstanding warrants, and the effect of future equity or debt financing on existing holders.
- Continued Nasdaq listing compliance and the effects of the reverse splits and ADS ratio changes on trading and share-count comparisons.
- Outstanding related-party balances, accrued noteholder interest, and future obligations under clinical research and licensing arrangements, including the $5 million Skinvisible payment triggered by qualifying product approval.