Quoin Pharmaceuticals Ltd. — Q1 2023 Form 10-Q
Business context and period. This unaudited quarterly report covers the three months ended March 31, 2023. Quoin is a clinical-stage pharmaceutical company developing treatments for rare diseases. Its lead candidate, QRX003 for Netherton Syndrome, was being studied in two U.S. clinical trials, with patient dosing underway. The company had no commercialized products and generated no revenue.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.092 million | $0.588 million |
| General and administrative expense | $1.684 million | $1.588 million |
| Total operating expenses | $2.776 million | $2.176 million |
| Net loss | $2.603 million | $1.683 million |
| Net cash used in operating activities | $1.747 million | $2.094 million |
| Cash and cash equivalents | $3.372 million | $2.861 million at Dec. 31, 2022 |
| Investments, primarily U.S. Treasury bills | $13.618 million | $9.993 million at Dec. 31, 2022 |
Gross profit and operating margins are not applicable because the company had no product revenue. Cash plus investments totaled approximately $16.990 million at March 31, 2023. Total assets were $18.451 million; total liabilities were $7.536 million. Liabilities included $4.024 million due to officers and $1.146 million of accrued interest and financing expense. The company reported an accumulated deficit of $40.1 million.
Material changes and financing
- Operating expenses rose 27.6% year over year. R&D expense increased 85.8%, primarily reflecting increased QRX003 clinical-development and research-collaboration spending; G&A increased 6.0%.
- Net loss increased by $0.920 million. Q1 2022 included $416,000 of income from a trade-payable settlement and a $77,000 warrant fair-value gain; Q1 2023 instead included $152,000 interest income and a $20,000 unrealized investment gain.
- The February 2023 offering generated $7.0 million gross and approximately $5.8 million net proceeds. It included ADSs and warrants; the pre-funded warrant was exercised at closing. Certain August 2022 warrants were repriced to $1.10 per ADS and extended to 2028. The offering increased shares outstanding and created potential further dilution from warrants.
- Investing cash outflow was $3.492 million, mainly reflecting net purchases of short-maturity U.S. Treasury bills. Financing cash inflow was $5.749 million, principally the offering proceeds, partly offset by $100,000 of repayments to officers.
Outlook, risks, and unusual items
Management stated that available cash and liquidity were sufficient to fund 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 fund operations; financing may not be available on acceptable terms or at all. Management expects expenses, particularly R&D, to increase in 2023 as QRX003 development advances. No specific financial or clinical guidance targets were provided.
- On April 5, 2023, Nasdaq notified the company that its ADS bid price had been below $1.00 for 30 consecutive business days. The compliance period ran through October 2, 2023; failure to regain compliance could threaten listing, liquidity, and access to capital.
- QRX003 development, clinical-trial results, regulatory approval, manufacturing, market acceptance, and dependence on third-party suppliers are significant risks. The company noted single-source suppliers for some development needs.
- The Skinvisible license provides for a $5 million payment upon the first U.S. or EU approval of a covered drug, plus royalties and potential sublicense-related payments.
- The company reported no material legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective as of March 31, 2023.
Important facts for investors to verify
- Current cash runway and expected timing and terms of additional financing.
- QRX003 trial enrollment, progress, endpoints, and the timing and outcome of clinical and regulatory milestones.
- Nasdaq bid-price compliance status and any resulting listing or capital-raising consequences.
- Potential dilution from outstanding warrants and options, and the company’s outstanding share and ADS counts; the filing reports differing counts by date and context.
- Future costs and obligations under clinical-service agreements, officer balances, and the Skinvisible license.