NRx Pharmaceuticals, Inc. — Q2 2023 Form 10-Q Summary
Business context and reporting period
NRx Pharmaceuticals is a clinical-stage pharmaceutical company developing NRX-101, a fixed-dose combination of D-cycloserine and lurasidone for treatment-resistant bipolar depression with suicidality. The company also conducts development activities involving ketamine (NRX-100), chronic pain, PTSD and urinary tract infection indications. This report covers the three and six months ended June 30, 2023; financial statements are unaudited.
Following FDA discussions in January 2023, the company broadened its target population and upgraded its ongoing NRX-101 study to a Phase 2b/3 trial. Management expects the trial to potentially support future registrational filings.
Financial condition and key metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | No revenue reported | No revenue reported |
| Research and development expense | $3.9 million vs. $3.0 million | $7.5 million vs. $8.4 million |
| General and administrative expense | $4.1 million vs. $6.6 million | $9.9 million vs. $16.9 million |
| Total operating expenses | $8.2 million vs. $9.6 million | $17.6 million vs. $25.3 million |
| Net loss | $8.7 million vs. $7.0 million | $19.8 million vs. $20.4 million |
| Net loss per share | $0.12 vs. $0.11 | $0.28 vs. $0.32 |
| Net cash used in operating activities | Not separately provided | $13.9 million vs. $25.2 million |
At June 30, 2023, cash and cash equivalents were $15.0 million, down from $20.1 million at December 31, 2022. Total assets were $19.8 million, total liabilities were $22.6 million, and stockholders’ deficit was $2.8 million, compared with stockholders’ equity of $7.4 million at year-end 2022. The company had an accumulated deficit of $242.8 million.
The convertible note payable was carried at $12.7 million, entirely classified as current, compared with $10.5 million at December 31, 2022. The company recognized a $2.4 million non-cash loss from the change in the note’s fair value during the first six months. No meaningful profit margin exists because the company has no revenue and remains loss-making.
Investing activities used $0.002 million during the first six months. Financing activities provided $8.8 million, including $8.1 million from equity and warrant issuances and $0.8 million from an insurance loan. The resulting net decrease in cash was $5.1 million.
Material changes versus the prior comparable period
- Second-quarter net loss increased by $1.7 million, primarily because the prior-year period included a $2.5 million gain from the change in fair value of the earnout cash liability.
- Six-month net loss improved by $0.7 million as operating expense reductions more than offset the absence of the prior-year $4.6 million earnout liability gain and the 2023 $2.4 million convertible-note fair-value loss.
- Six-month research and development expense declined by $0.9 million, while second-quarter research and development expense increased by $0.9 million due primarily to higher NRX-101 clinical trial and development costs.
- Six-month general and administrative expense declined by $7.0 million, reflecting lower legal, professional, accounting, insurance, consulting and stock-based compensation costs.
- Common shares outstanding increased to 80.4 million at June 30, 2023 from 66.4 million at December 31, 2022. The company also had approximately 30.0 million warrants outstanding, creating substantial potential dilution.
- In March and June 2023, the company issued common stock and warrants in offerings that generated approximately $8.1 million of net proceeds in total. The filing gives different June Offering net-proceeds figures in different sections: approximately $5.71 million in the liquidity note and approximately $6.28 million in the MD&A.
Guidance, outlook, risks and unusual items
Management expects top-line data from the ongoing NRX-101 Phase 2b/3 trial in the fourth quarter of 2023. The filing states that the independent Data Safety Monitoring Board identified no safety concerns and no futility signal in its review of the first 50 patients and recommended continued enrollment. The company has completed manufacturing of clinical supplies and expanded recruitment activities.
On June 2, 2023, NRx entered into an exclusive worldwide license agreement with Alvogen for NRX-101 in bipolar depression with suicidality. The agreement provides for a $10 million initial milestone upon specified clinical and FDA meeting conditions, a $5 million approval milestone, additional sales-based milestones of up to $330 million, and tiered royalties generally ranging from the low to mid-teens. No milestones had been achieved and no licensing revenue had been recognized as of June 30, 2023. Alvogen may terminate under specified conditions, including failure to complete the Phase 2 study or an FDA Type B meeting by March 31, 2024.
The company states that substantial doubt exists about its ability to continue as a going concern. Management said cash was expected to support operations through the fourth quarter of 2023, while the MD&A states that existing funds are insufficient to support operations for at least the next twelve months from the report date. Additional equity or debt financing, licensing transactions or other funding will be required, and financing may be unavailable or unfavorable.
After quarter-end, the company paid $1.8 million to the convertible-note lender on July 10, 2023 and agreed to monthly minimum cash payments of $0.4 million through December 2023, subject to specified reductions for stock-based redemptions. On July 17, 2023, the company settled its GEM arbitration by agreeing to issue restricted shares; the filing contains inconsistent figures of 678,676 and 675,676 shares.
On July 20, 2023, Nasdaq notified the company that it failed to maintain the required $50 million market value of listed securities. The company received until January 22, 2024 to regain compliance. Failure could result in delisting and impair access to capital markets.
Key risks include continuing losses and negative operating cash flow, dependence on additional financing, mandatory debt redemptions, possible equity dilution, clinical and regulatory uncertainty, reliance on third parties, potential termination of the Alvogen agreement, Nasdaq delisting risk and unpredictable litigation outcomes. The filing states that no material changes occurred to previously disclosed risk factors other than the additional risks described.
Most important facts for investors to verify
- Reconcile the conflicting June Offering net-proceeds disclosures of approximately $5.71 million and $6.28 million.
- Confirm available cash after the July 10, 2023 $1.8 million debt payment and assess the cash runway against required monthly note payments.
- Monitor additional financing needs, potential dilution and the company’s ability to satisfy convertible-note redemption obligations.
- Track Phase 2b/3 enrollment and fourth-quarter 2023 top-line data for NRX-101, as well as the required FDA Type B meeting and Alvogen milestone conditions.
- Verify whether the Alvogen license remains active and whether any milestone or reimbursable development revenue becomes recognizable.
- Monitor Nasdaq market-value compliance through January 22, 2024 and the risk of delisting.
- Clarify the inconsistent GEM settlement share count reported in the subsequent-events disclosures.