NRx Pharmaceuticals, Inc. — Q1 2022 Form 10-Q Summary
Reporting period: Three months ended March 31, 2022; filed May 16, 2022. NRx Pharmaceuticals is a clinical-stage pharmaceutical company with no commercial revenue. Its principal programs are NRX-101/NRX-100 for bipolar depression with suicidal ideation and ZYESAMI (aviptadil) for critical COVID-19 respiratory failure.
Financial Overview
| Metric | Q1 2022 | Q1 2021 | Change or latest balance |
|---|---|---|---|
| Revenue | $0 | $0 | No revenue reported |
| Research and development expense | $5.5 million | $2.9 million | Increase of $2.6 million |
| General and administrative expense | $10.2 million | $2.1 million | Increase of $8.1 million |
| Total operating expenses | $15.7 million | $25.6 million | Decrease of $9.9 million |
| Net loss | $13.4 million | $25.5 million | Loss narrowed by $12.0 million |
| Basic and diluted loss per share | $0.21 loss | $0.71 loss | Weighted-average shares increased to 63.7 million from 35.7 million |
| Net cash used in operating activities | $10.4 million | $3.0 million | Higher operating cash burn |
| Net cash provided by financing activities | $23.0 million | $14.4 million | Primarily the February 2022 private placement |
| Cash at period end | $40.2 million | $13.3 million | $27.6 million at December 31, 2021 |
There are no meaningful operating margins because the Company has no revenue. The accumulated deficit was $196.7 million at March 31, 2022. Total assets were $43.6 million, total liabilities were $11.9 million, and stockholders’ equity was $31.7 million.
Liquidity, Debt and Capitalization
- The Company raised approximately $23.0 million net in a February 2, 2022 private placement of 7,824,727 common shares and options to purchase up to an additional 7,824,727 shares.
- Management stated that available funds, together with potential expenditure reductions, should support operations for at least twelve months from issuance of the financial statements. The Company remains dependent on additional equity or debt financing and may never become profitable.
- Current liabilities included a $0.5 million Relief Therapeutics loan plus accrued interest. The loan matured and was paid in full on April 6, 2022.
- Outstanding warrants totaled 17.5 million at March 31, 2022, with a weighted-average exercise price of $6.29. The substantial warrant and option overhang could create future dilution.
- Common shares outstanding were 66.6 million as of May 11, 2022, compared with 58.8 million at December 31, 2021.
Material Changes Versus Q1 2021
- Research and development expense increased primarily because of higher ZYESAMI clinical-trial and development costs.
- General and administrative expense increased primarily due to higher legal, professional and accounting fees, insurance expense, stock-based compensation, and other administrative costs.
- The prior-year period included a $21.4 million non-cash settlement expense related to the GEM warrants; no comparable expense was recorded in Q1 2022.
- Q1 2022 included non-cash gains of $2.1 million from remeasurement of the Earnout Cash liability and $0.2 million from remeasurement of warrant liabilities.
- Operating cash burn increased to $10.4 million from $3.0 million despite the lower reported net loss, reflecting the non-cash nature of significant prior-year expenses and changes in working capital.
Outlook, Clinical Programs and Risks
- The Company initiated a Phase II study of NRX-101 for sub-acute suicidal ideation in Q2 2022 and planned to initiate a Phase III registrational acute suicidal ideation study in the second half of 2022.
- Approximately 465 patients had been enrolled and treated in the ACTIV-3b/TESICO trial of ZYESAMI as of March 2022. The Data Safety and Monitoring Board had not declared futility for the aviptadil arm and the trial was cleared to continue enrolling.
- The FDA previously declined the Company’s ZYESAMI Emergency Use Authorization request in November 2021 because of insufficient benefit and risk data. A narrower EUA request and a new Breakthrough Therapy designation request remained pending as of the filing date.
- Achievement of merger-related milestones could trigger up to 25.0 million Earnout Shares and $100.0 million of Earnout Cash before December 31, 2022. The Earnout Cash liability was measured at $2.5 million at March 31, 2022.
- The Company is involved in litigation with Relief Therapeutics concerning the collaboration agreement. Relief seeks damages, while NRx’s counterclaim seeks at least $185.0 million. The parties agreed to mediation, but the outcome is uncertain.
- A federal securities class action and related threatened or filed actions allege misleading disclosures regarding the ZYESAMI EUA application. The Company considers the claims meritless but cannot assure a favorable outcome.
- Management reported a material weakness in internal control over financial reporting relating to inadequate segregation of duties in preparing and approving disclosures. A Disclosure Committee was approved and began meeting after quarter-end.
- Other risks include regulatory failure, clinical-trial uncertainty, manufacturing and supply-chain dependence, reliance on third parties, intellectual-property protection, substantial stock-based compensation, and the need for future financing.
Investor Verification Checklist
- Verify the status and results of the ACTIV-3b/TESICO trial, the pending EUA and Breakthrough Therapy requests, and the planned NRX-101 trials.
- Reconcile cash burn with the Company’s stated twelve-month liquidity outlook and assess the timing and terms of any required financing.
- Review potential dilution from 17.5 million warrants, approximately 2.9 million options, and the contingent Earnout Shares.
- Monitor the Relief Therapeutics litigation, the securities class action, and related legal costs or settlements.
- Assess remediation of the material weakness and whether disclosure controls have been determined effective in subsequent filings.
- Review the probability and valuation of the $100.0 million Earnout Cash obligation and the conditions for issuing up to 25.0 million Earnout Shares.