AzurRx BioPharma, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. The filing identifies the registrant as AzurRx BioPharma, Inc. (Nasdaq: AZRX), which does not match the request metadata naming Gridai Technologies Corp.; verify the intended company and filing.
Business context
AzurRx is a clinical-stage biotechnology company developing non-systemic gastrointestinal therapies. Its lead candidate, MS1819, is being studied for exocrine pancreatic insufficiency in cystic fibrosis. The company also licensed niclosamide formulations for COVID-19 gastrointestinal infections and immune checkpoint inhibitor-associated colitis. It reported no product revenue.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 or prior period |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.52 million | $1.55 million |
| General and administrative expense | $5.70 million | $1.38 million |
| Net loss | $7.69 million | $5.26 million |
| Net cash used in operating activities | $5.07 million | $1.29 million |
| Cash and cash equivalents | $12.03 million | $6.06 million at Dec. 31, 2020 |
| Total assets / total liabilities | $17.98 million / $3.58 million | $12.92 million / $15.56 million at Dec. 31, 2020 |
Current assets were $13.17 million and current liabilities were $3.57 million at quarter-end. The balance sheet included a $347,000 insurance financing note and a $1.25 million payable under the First Wave license agreement. The company reported no meaningful operating margin because it had no revenue. It stated that recurring losses and negative operating cash flows raise substantial doubt about its ability to continue as a going concern without additional capital.
Changes and financing
- Operating expenses increased substantially year over year: R&D rose 62%, while G&A rose 309%. Management attributed the R&D increase mainly to additional clinical-trial and manufacturing work and noncash option expense; G&A growth reflected public-company, investor-relations, legal, business-development, and settlement costs.
- Net loss increased 45%, but Q1 2020 included $2.33 million of interest expense on convertible debt; Q1 2021 instead included $533,000 of income from a change in fair value related to the First Wave license liability.
- Financing activities provided $11.05 million, including net proceeds from the January preferred-stock and March common-stock offerings and warrant exercises. These inflows were partly offset by a $9.53 million license-agreement payment.
- Common shares outstanding increased from 31.15 million at Dec. 31, 2020 to 74.93 million at Mar. 31, 2021. The company reported 49.39 million warrants outstanding at quarter-end, in addition to options and potential preferred-stock conversions, indicating substantial potential dilution.
Outlook, commentary, and risks
- Management expected higher cash R&D and G&A spending for the rest of 2021, including two niclosamide trials, MS1819 formulation work, and added personnel. No revenue or profitability guidance was provided.
- The Phase 2 RESERVOIR trial of niclosamide for COVID-19 GI infections began in April 2021; topline results were expected in the first half of 2022. The company planned to start its PASSPORT trial for ICI-associated colitis in the first half of 2021.
- In May 2021, the company reported positive interim results in the first 18 patients of the MS1819 Combination Trial; complete topline results were expected in Q2 2021. These are post-quarter developments, not Q1 financial results.
- The First Wave license requires a further $1.25 million payment by June 30, 2021, potential milestone payments of up to $37 million per indication, and mid-single-digit royalties on net sales, subject to specified reductions.
- Key risks include clinical and regulatory uncertainty, manufacturing and supply challenges, dependence on future equity or debt financing, dilution, and possible disruption from COVID-19. Management also disclosed that the 10-Q was filed within the five-day extension after a late-filing notice.
Important facts for investors to verify
- Confirm the intended registrant: the supplied filing is for AzurRx BioPharma, not Gridai Technologies Corp.
- Review the going-concern disclosure and assess whether cash, subsequent receipts, and available financing sources are sufficient for planned operations; the filing does not provide a clear cash-runway estimate.
- Reconcile apparent figures in the filing: the statements report Q1 operating expenses of $8.21 million, while the MD&A table shows $8.12 million; reported net loss applicable to common stockholders of $29.98 million and weighted-average shares of 55.35 million do not arithmetically reconcile to reported loss per share of $0.14.
- Assess the potential dilution from outstanding warrants, preferred-stock exchange rights, options, and subsequent issuances, and confirm subsequent share counts and financing terms.
- Track the required First Wave payment, clinical-trial timelines and results, and any changes to the company’s capital-raising needs or risk disclosures.