NRx Pharmaceuticals, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Quarterly report for the three and six months ended June 30, 2021, filed August 16, 2021. NRx Pharmaceuticals is a clinical-stage pharmaceutical company developing NRX-101 for bipolar depression with acute suicidal ideation, ZYESAMI (aviptadil) for COVID-19-related respiratory failure, and the BriLife COVID-19 vaccine candidate.
On May 24, 2021, the company completed its merger with NeuroRx through a reverse recapitalization and changed its name from Big Rock Partners Acquisition Corp. Historical financial statements are primarily those of NeuroRx. The company reported that it had not filed all Exchange Act reports required during the preceding 12 months.
Key Financial Metrics
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 | Comparable period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Research and development expense | $4.7 million | $7.6 million | $1.4 million and $2.0 million |
| General and administrative expense | $12.5 million | $14.6 million | $0.5 million and $1.1 million |
| Settlement expense | $0 | $21.4 million | $0 |
| Net loss | $16.0 million | $41.5 million | $0.1 million income and $1.5 million loss |
| Net loss attributable to common stockholders | $271.8 million | $297.3 million | $0.1 million income and $1.5 million loss |
| Basic loss per share | $0.38 | $1.07 | Nominal and $0.04 |
| Operating cash flow | Not separately reported | $(14.4) million | $(0.7) million |
The exceptionally large loss attributable to common stockholders included deemed dividends of $253.1 million related to contingent Earnout Shares and $2.7 million related to warrant modifications; these were non-cash equity charges and did not represent operating revenue or cash expense.
At June 30, 2021, cash was $13.4 million, compared with $1.9 million at December 31, 2020. Total assets were $18.5 million, total liabilities were $36.0 million, and stockholders’ deficit was $17.4 million. Current liabilities included a $25.9 million Earnout Cash liability and $0.5 million of warrant liabilities. Notes payable and accrued interest totaled $0.7 million.
Net cash provided by financing activities was $25.9 million, including $11.0 million from the merger, $8.5 million from common-stock issuances, and $7.5 million from partial exercise of the GEM warrant. The company subsequently received $9.2 million from exercise of the remaining GEM warrant for 1.8 million shares.
Material Changes Versus Prior Comparable Period
- Research and development expense increased 235% in the quarter and 279% year to date, primarily due to ZYESAMI clinical development and related regulatory activities.
- General and administrative expense increased 2,270% in the quarter and 1,176% year to date, driven by stock-based compensation, consulting fees, insurance, payroll, and merger-related costs.
- The company recorded $21.4 million of non-cash settlement expense related to the GEM warrant in the six-month period.
- Operating cash use increased to $14.4 million from $0.7 million in the prior-year period.
- Relief Therapeutics reimbursements declined to $0.8 million from $2.0 million year to date. The company fully reserved approximately $5.5 million of receivables from Relief and stated that approximately $6 million of invoiced costs remained unpaid.
- Common shares outstanding increased to 48.6 million at June 30, 2021 from 43.0 million at December 31, 2020, before considering subsequent warrant exercises and potential dilution.
- The PPP loan and accrued interest were forgiven, producing a $0.1 million gain on extinguishment of debt.
Guidance, Outlook, Risks, and Unusual Items
Management expects continued operating losses and negative operating cash flows until product sales or licensing revenues are established. The company has no revenues and expects to fund operations through additional equity or debt financing. Management stated that available funds, including the subsequent GEM warrant proceeds, were expected to support operations for the next twelve months from issuance of the financial statements, but cautioned that additional financing may not be available or may not be available on acceptable terms.
The company had submitted an FDA Emergency Use Authorization application for intravenous ZYESAMI and was awaiting a response. Georgia granted an EUA in July 2021. An inhaled ZYESAMI Phase 2/3 trial was ongoing and expected to conclude by October 2021. The company also planned a BriLife vaccine Phase 2b/3 trial in Georgia, subject to definitive licensing arrangements.
- Regulatory approval and commercialization of ZYESAMI, NRX-101, and BriLife remain uncertain; the company has no approved commercial products or product revenue.
- Relief has declined to fund certain ZYESAMI costs, including approximately $6 million of invoiced costs and costs of the inhaled trial, shifting funding requirements to NRx.
- The merger created potential obligations of up to $100 million in Earnout Cash and 25 million Earnout Shares if specified FDA milestones are achieved by December 31, 2022. The Earnout Cash liability was carried at $25.9 million at quarter-end.
- Clinical, manufacturing, supply-chain, intellectual-property, third-party-provider, COVID-19, and regulatory risks could materially affect operations and liquidity.
- Substantial stock options, warrants, rights, and contingent Earnout Shares could materially dilute existing holders. The filing reported 8.5 million outstanding warrants and 2.9 million outstanding options at June 30, 2021, in addition to other potentially dilutive instruments.
- Management disclosed related-party transactions, including payments to the CEO, family members, Glytech, and Pill Tracker.
- Disclosure controls were assessed as effective at a reasonable assurance level, and management reported added accounting resources and process changes following the merger.
Investor Verification Checklist
- Verify the company’s filing status and the reasons it indicated that all required prior-period reports had not been filed.
- Confirm FDA status and subsequent regulatory developments for intravenous and inhaled ZYESAMI and NRX-101.
- Assess the collectability and contractual dispute with Relief Therapeutics, including the reserved receivable and unpaid development costs.
- Reconcile post-quarter-end warrant exercises, share issuance, current shares outstanding, and the full dilution impact of warrants, options, rights, and Earnout Shares.
- Evaluate whether cash resources and subsequent financing proceeds are sufficient relative to projected clinical, manufacturing, regulatory, and corporate expenditures.
- Review the $100 million Earnout Cash obligation, milestone conditions, valuation assumptions, and potential payment timing.
- Review related-party agreements and payments, particularly those involving Pill Tracker, Glytech, and members of management’s families.