Q1 2024 NRX Pharmaceuticals Inc Earnings Call

Participants

Matthew Duffy; Chief Business Officer; NRx Pharmaceuticals, Inc.

Stephen Willard; CEO; NRx Pharmaceuticals, Inc.

Jonathan Javitt; Chairman and Chief Scientist; NRx Pharmaceuticals, Inc.

Richard Narido; CFO; NRx Pharmaceuticals, Inc.

Tim Warren

Ed Woo; Analyst; Ascendiant Capital Markets LLC

Presentation

Operator

Good afternoon, everyone, and welcome to the NRx Pharmaceuticals, Inc. first quarter of 2024 results conference call. Currently, all participants are on a listen-only mode. As a reminder, this conference call is being recorded. I will not turn the call over to Matthew Duffy, the company's Chief Business Officer. Please go ahead.

Matthew Duffy

Thank you, Jonah, and welcome, everyone. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under US federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC.
The forward-looking statements made during this call speak only as of date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Information presented on this call is contained in the press release issued earlier today and in the company's Form 10-Q filed today, which may be accessed from the investors page of the NRx Pharmaceuticals, Inc. website. Joining today on the call are Stephen Willard, our Chief Executive Officer; Dr. Jonathan Javitt, our Founder, Chairman, and Chief Scientist; and Richard Narido, our Chief Financial Officer and Treasurer.
Steve and Jonathan will provide a summary of our company's progress, Richard will review the company's financial results, and then Steven will review upcoming milestones before making closing comments. Following their prepared remarks, we will address investor questions. Now, I'll turn the call over to Steve. Steve?

Stephen Willard

Thank you, Matt, and good afternoon, everyone, and thank you for joining us. NRx has had an incredibly productive and eventful start to 2024, with a great deal more to come through the remainder of the year. We are accelerating our work to bring hope to life. The past quarter, culminating with our clinical trial results last week, has been enormously productive.
Jonathan will be discussing our scientific progress. Let me begin by addressing our progress as a company. You will notice that at the end of March, we had a lower cash balance than has been typical for us, because we used available cash to pay down debt to Streeterville LLC. During the quarter, we signed and announced a $5.1 million advance against milestones from Alvogen and Lotus Pharmaceuticals and have used those funds to support our clinical operations.
Those funds do not appear on our balance sheet because they are paid directly to clinical trial partners. As you saw last week, our corporate debt was accelerated by Streeterville. This principle is publicly charged by the SEC on various matters. That development, combined with our recent clinical developments, generated enthusiasm from a number of well-regarded funding sources.
In addition to the support of the [heightened] on the equity side, we have now signed a $30 million nonbinding term sheet that will eliminate our current corporate debt and provide growth capital for revenue generating approved drugs to add to our pipeline, while substantially lowering our borrowing costs. We anticipate that separating ourselves completely from a lender who has not been supportive of our growth will be beneficial to shareholders and will substantially reduce our cost of debt service. Jonathan will talk more about the science behind an NRX-101 in a moment, but I'm also excited to point out that our new clinical data for NRX-101 support a product profile that could potentially be superior to the current standard of care in bipolar depression. We and our regulatory counsel believes that these data support the filing of a new drug application for NRX-101 in bipolar depression, a market of more than -- $20 billion rather.
Other investors have approximately and appropriately asked us about the planned HOPE Therapeutics dividend that we anticipate achieving in March. We have been advised that the HOPEe shares are best distributed after they are already registered, in compliance with the 1934 Securities Act, and we are in the process of affecting that registration. The required audits on HOPE are near completion and we expect to file the required SEC registration this quarter. We appreciate our investors' patience as we work through these processes.
I'm incredibly proud of the progress our team has made this year, and I'm grateful to our partners and investors, as well as to all of the patients who have participated in our clinical trials. We look forward to continuing to build value for our shareholders and delivering life-saving treatments to patients. Most importantly, we continue to believe that 2024 will represent our transition from a purely research and development company to a revenue-generating pharmaceutical company. Now, I would like to invite Dr. Jonathan Javitt, our Chief Scientist, to review our clinical development programs.

Jonathan Javitt

Thank you, Steve. And as Steve noted, we've made important progress with our clinical development pipeline over the past few months. Our lead drug candidate, NRX-101, has delivered unprecedented data in suicidal bipolar depression. Based on these data, NRX-101 has demonstrated comparable antidepressant efficacy to the current standard of care lurasidone, while significantly reducing what is perhaps the most dangerous side effects of this class of drugs. Akathisia, a side effect considered by many to be a precursor to suicide. Indeed, reductions in suicidality and Akathisia have been seen previously with NRX-101 and our STABIL-B trial, which was published in the peer-reviewed literature.
So this is the second time we've found this result. Akathisia is consistently seen in 10% to 15% of people who take the lurasidone class of drugs and no prior anti-depressant has ever demonstrated a reduction in Akathisia. Together, these studies, along with others in the literature, provides strong support for filing a new drug application with the FDA for patients with bipolar depression who are at risk of Akathisia. The FDA is well aware of the potential risks associated with today's antidepressants and currently requires that a suicide morning be placed on the label of all current antidepressants.
These existing FDA precedent for approval of novel antidepressants that have comparable antidepressant effects, combined with reduced side effect. So far, the key opinion leaders with whom we've spoken have been unambiguous in identifying Akathisia as the most troubling side effects of the lurasidone class of drugs, those are the drugs that are used to treat bipolar depression. And they've told us that they would welcome a new drug that reduces this potentially lethal side effect. We've been invited to present these data later this month at the American Society of Clinical Psychopharmacology meeting in Miami, together with Professor Andrew Nierenberg, the study's principal investigator and the head of bipolar research at Harvard Mass General Hospital.
We aim to host a key opinion leader discussion of Akathisia in bipolar depression at that conference, and please look for details. The second new drug application we're planning for HTX-100, our form of IV ketamine for the treatment of suicidal depression. The efficacy of this product is well established, but it's never been presented to the FDA in the data format and detail that's required for a drug approval. Therefore, we've licensed patient-level data from the government of France, from Columbia University and Harvard University, to support this application.
The data are further supported by additional findings in the medical literature, including dose-ranging data, which is always important to the FDA. Now, a limitation of ketamine is that the old generic formulation dates back to the Korean War. It's highly acidic and it can be used for intravenous infusion, but not for subcutaneous treatments. It hurts, causes skin ulcers.
Last month, we announced the formulation of a patentable pH neutral form of ketamine that we've designated HTX-100. We anticipate that this will be the commercial product we bring to market to support HOPE Therapeutics. While IV ketamine offers numerous benefits to patients, it's cumbersome for administration in the clinical setting. Intranasal ketamine, on the other hand, has failed to demonstrate anti-suicidal set of properties.
We are going to start with IV ketamine, but aim to augment it with a far more convenient form of administration that has equal efficacy. So the studies we've presented demonstrate an exceptional degree of efficacy, really, in a matter of hours in suicidality depressed patients when treated with ketamine. This is vitally important in our country where the only approved treatment for suicidality is electroconvulsive therapy. The CDC states had approximately 3.4 million Americans make an active plan to commit suicide each year.
By all measures, this is a national epidemic. We plan to bring this life-saving product to market as soon as possible. The current market for intranasal ketamine is already $750 million, and that's a product that doesn't have anti suicidal properties. We expect our market to be much larger.
To continue to build value for NRx shareholders, we intend to distribute shares of HOPE Therapeutics to existing shareholders in the near term and to seek a public listing for that company on a national exchange. We're actively building out our team, our partners, and our network with the goal of launching the product in early 2025. To augment and extend the efficacy of IV ketamine, we're planning the development of a companion digital therapeutic. I previously participated in developing new digital therapeutic for the US Navy to reduce combat stress and Special Forces operators.
Our products in development was funded by the Defense Advanced Research Projects Agency known to many as DARPA and is still in use. Today, I'm delighted to announce that our former Chief Strategy Officer, Dennis McBride, who's just completed his tour of duty, will be leading this project on behalf of our company. You'll be hearing more from Dennis in coming weeks. His biography, which includes 20 years in the Navy, three tours of duty as a DAPRA program officer, and most recently, an appointee in the office of the Undersecretary of Defense, it's on our website.
Ultimately, we expect the digital therapeutics will be part of our FDA label, and that, it will further enhance our exclusivity. We'll build on these learnings and technologic advances to help suicidal patients stay on track. The addition of digital therapeutics for ketamine product is expected to extend this effect and to build our market exclusivity. Obtaining FDA approval will enhance our ability to approach insurers to cover the cost of ketamine therapy, which so many people need for the treatment of suicidal depression.
Our discussions with clinics to date has indicated that the lack of reimbursement is one of the key impediments to patients being able to get the treatment that they need. We aim to solve this problem and to bring HOPE to life. In order to gain approval for a drug, you have to manufacture a drug to FDA standards. In other words, you can't get approval for a drug you haven't made.
This month, we are in the nine months stability endpoints in our manufacturing partnership with Nephron Pharmaceuticals. Ketamine is publicly identified by the FDA as being on drug shortage in the United States. And together with Nephron, we are already able to distribute ketamine under a five O3b pharmacy license. We anticipate reporting first commercial revenues in the near future.
We currently await the results of a 200 patient Department of Defense sponsored study in chronic pain being conducted at Northwestern University with D-cycloserine, the key component of NRX-101. We are as eager as you are to see those results. Our colleagues at Northwestern have advised us that the database is now locked and the Northwestern institutional review board, the IRB, has approved the statistical analysis plan and giving clearance for the data analysis. NRX-101 for chronic pain would offer a treatment beyond those treatments that are currently available to patients.
Of course, in today's world, you have a choice between tylenol, advil class of drugs that may lack efficacy and the opioid class of drugs that may be highly addictive, but not much in the middle. NRX-101 offers the possibility of a highly effective, but nonaddictive treatment options. As you know, in January, we opened an IND for NRX-101 in complicated urinary tract infection and pyelonephritis. Now, the reason this drug affects bacteria are completely different from the reasons it affects the brain, but in fact, the cycloserine began its life as an antibiotic.
So that IND was based on data from a study we recently sponsored a Charles River Labs, a highly respected contract research organization, that demonstrated significant anti-bacterial effective NRX-101 against the worst resistant urinary pathogens. The pathogens that are on the congressionally mandated list of dangerous pathogens and can qualify you for what's called QIBT or qualified infectious disease product status. And in fact, these data motivated the FDA to grant us QIDP status along with Fast Track and priority review designations. Several weeks ago, we reported data demonstrating that NRX-101 does not damage the normal bacteria in the intestine known as the microbiome.
Well, the reason that's critically important is all other antibiotics for complicated UTI disrupt the intestinal microbiome, and they're well known to result in infection called C difficile; some people call it C diffs. Now, at best, C diffs causes several weeks of horrible intractable diarrhea. However, C diffs is lethal and 10% of those over the age of 65 who are infected. Therefore, an antibiotic for complicated UTI that does not cause C diffs is likely to have considerable market appeal.
Finally, we're working with our partners at the foundation fundamental in Paris, an early stage opportunity that may represent the world's first disease-modifying drug for schizophrenia. Everybody knows of the devastating effect of schizophrenia on patients and their families. 1% of the population has this lifelong debilitating disease. The medicines used to treat schizophrenia may diminish its symptoms, especially the hallucinations to varying degrees; however, there's never been a medicine that has potential to reverse the disease in some patients.
We anticipate providing our investors with a complete presentation on what may be the first disease-modifying that is the first potentially curative drug for schizophrenia by the end of this quarter. As you can see, we have a robust clinical development plan with multi-billion dollar potential. We work our hardest every day to bring this plan to reality and to bring HOPEe to life. I'll now ask Rich Narito, our CFO, to review first quarter financials. Rich?

Richard Narido

Thank you, Jonathan, and good afternoon, everyone. I will now review the highlights of our first quarter 2024 financial results. For the first three months ended March 31, 2024, we at NRx Pharmaceuticals, reduced our net loss from operations by 41% compared to the prior year, from $11 million in the first quarter of 2023 to $6.5 million in 2024. For that same period, we reduced research and development expenses were $3.7 million in 2023 to $1.7 million in 2024, as we finalize our clinical trial enrollment.
The $2 million decrease is related primarily to a decrease of $1.6 million in clinical trial expenses, $0.2 million in regulatory and process development costs, and $0.1 million in stock-based compensation. Also in that three-month period, we recorded a 26% reduction in general and administrative expenses from $5.8 million in 2023 to $4.3 million in 2024. The decrease of $1.5 million is related primarily to a decrease of $1.2 million in insurance expenses, $0.4 million in employee expenses, slightly offset by other general administrative expenses. As of March 31, 2024, we had $1.3 million in cash and cash equivalents.
However, this does not tell the whole story because of the clinical expenses that are now being paid directly by our partners. Over the first three months of 2024, we improved our access to working capital by $8 million in total, representing $2.9 million from equity sales and $5.1 million from the Alvogen milestone advance, while reducing our corporate indebtedness to Streeterville LLC by $2.2 million. Subsequent to March 31, 2024, we continue to increase our working capital by $3.3 million from equity sales. We continue to implement operational efficiencies to extend runway and focus on our path to generate revenue and value for our shareholders. With that, I will turn it back to Steve for closing remarks. Steve?

Stephen Willard

Thanks, Rich. With two NDAs planned for the coming months, a HOPE shared distribution plan, two out-licensing opportunities, and an improved cash position, we are well positioned for the future. Addressing a range of unmet medical needs and suicidal bipolar depression, chronic pain suicidality, and complicated urinary tract infections, we have an opportunity to create a highly successful and vibrant biotechnology company. I'm incredibly proud of our team, our collaborators and partners, and most of all the patients who have made such an important contribution to these efforts. Together, we are pursuing NRx's goal of bringing hope to life on a daily basis.
We couldn't have gotten to this point without you, investors. If you would like to help spread the hope, please go to the contact us page on our website and asked us to send you a HOPE lapel pin. Operator, we are ready to take questions from the audience.

Question and Answer Session

Operator

(Operator Instructions) [Tim Warren].

Tim Warren

Thanks, and great update. For NRX-101, can you maybe just give us a rough timing frame on the 300 person registrational trial enrollment and the sites being lined up for that more statistical significant sample size?

Jonathan Javitt

Well, yes, as you know, Tim, if that trial is needed, the trial is one that will be undertaken by our partner, Alvogen at their expense, and they'll be laying out a timeline. But we're also exploring whether the data that we already have in hand may give us a path to accelerated approval of NRX-101 for a narrower segment of patients. Those patients who can't tolerate the lurasidone class of drugs because of the Akathisia who are at risk of suicide and really who have no therapeutic alternative. So it's really a question of can we help some patients in urgent need right away, while Alvogen gears up to do the much larger trial.

Tim Warren

And that makes sense. That's really helpful. And, you know, I know that you've had what three manufacturing lots initiated from. So I know the press release, I think mentioned why is it still maybe a realistic goal for the NDA? That seems like it's still on track?

Jonathan Javitt

So as you as you pointed out, we've said in the past, there's 1 million pills of what's called GMP or good manufacturing practices drug in our warehouse at Alchemy in North Carolina. And really, by the end of the summer, we should be able to submit what's called the module three of our new drug application for NRX-101. It's a drug that's been granted breakthrough therapy designation by the FDA. And therefore, we're entitled to submit the NDA in part that's cold rolling review.
So we expect to kick off that process in the fall. And at this point, we've got two years of real-time stability. We expect that this is a stable oral form drug that we'll have five years of room temperature, shelf stability.

Tim Warren

That's terrific. No, that's really good to hear. And then my last question is, you know, data is coming soon from that 200 person DOD funded trial or VCS on-prem? And what are you looking for to see the most in that data from Northwestern and without getting too specific, but just in general?

Jonathan Javitt

Well, yes, we knew the answer wouldn't be a trial, but what we do know is what they published in 2016. And in 2016, the way they reported the data, it was by week of treatment, but they did a trial where if we say the escalated the amount of these sites necessary and the patient was getting. And once they reach 400 milligrams a day of D-cycloserine, they saw an analgesic effect, which in plain English is a pain relieving effect. And that was really as good as the effect that you'd expect to see with an oral opioid.
But of course, D-cycloserine is completely non-addictive, it doesn't have any of the opioid side effects. Even if even if an LBO adjustment addicts you the constipation is intolerable to some people. The clouding of your mental judgment is intolerable to some people. D-cycloserine doesn't do any of that.
So our view, the 200 person trial simply replicate the findings of their 2016 Phase 2a trial. That's a that's an improbable kind of effect. That's the kind of effect that would make people want to use D-cycloserine in preference to the opioid drugs, and certainly, in preference to the tylenol, advil class of drugs. Now, 400 milligrams a day is really at the low end of the therapeutic range for D-cycloserine.
The original of the patents that we stand on filed by [dianjabit] show that the SEC is saying doesn't even become an NMDA antagonist until you cross that 400 milligram a day threshold. But we can take this drug up to 1,000 milligrams a day. So there's ample reason to believe that, if the Northwestern trial shows your any meaningful benefit at the 400 milligram a day dosage, that there's room for substantially more efficacy, were we to take it to a higher doses. So we can't wait to see the data. And from talking to the investigators at Northwestern, they can't wait to see it either.

Tim Warren

Good. That's really helpful color. I appreciate the elaboration on that, and I'll save my remaining questions for our conference tomorrow. Thanks a lot.

Operator

Ed Woo.

Ed Woo

Yeah, thank you for taking my question and congratulations on all the progress. My question is specifically on the UTI indication. You mentioned that you guys are looking for partnerships. What is the market like that? Is it pretty receptive as a slowdown? And how is there any timeline that you could possibly share with us? Thank you.

Jonathan Javitt

Well, in talking to investors, I have yet to be in a room full of investors where somebody doesn't have a friend or a relative who went to the doctor with a urinary tract infection, that first line drug, say bactrim, amoxicillin, those drugs didn't work, they wound up on an expense of antibiotics and an antibiotic that caused some problems and frequently they wind up on IV antibiotics. We have an investor whose wife started out with what should have been a fairly straightforward UTI. Went up in the hospital for three weeks with D-cycloserine. So there's enormous receptivity among urologistsm among gynecologists for antibiotics, it can treat these more aggressive urinary tract infections.
And we're talking 3 million infectionsa. There's 15 million people each year get urinary tract infection. And at this point, one-fifth of those, 3 million a year, have these complicated UTI eyes that can go in some very ugly directions. I'd like to take a moment to acknowledge the really terrible loss who suffered last week. Professor Michael Manyak, who was the head of Urology at George Washington University, Head of urology for Glaxo Smith Kline, and became our guiding light on urology, passed away last week.
But the people he brought to us on our urology advisory board are some of the top people in the country. And they all tell us there's is enormous need for a safe, oral antibiotic plus too many of the CTI drugs are intravenous, a safe oral antibiotics that patients can take for urinary infection without a likelihood of getting C. difficile, without a likelihood of getting conventional yeast infections, without that kind of unpleasant symptoms that these Ultra Strong antibiotics cause people that all of us know about. So that's what we're pointing to. But, at the same time, you're unlike suicidal depression, where there are really only 1,600 satiety areas in the United States who treat those patients and their people that we're increasingly getting to know and people whom we can reach out and talk to a much, much broader range of doctors treat patients with complicated UTI.
And therefore, we really need a partner who already talks to those doctors. Because for a company, our size to staff the sales force and tried to address the 30,000 or 40,000 doctors or more wouldn't be feasible. So that's why we're actively looking for a partner who's already in that business, who already knows the doctors, because we know that the doctors and the patients are looking for the treatments.

Ed Woo

Great. Thanks for answering my questions. And I wish you guys. Good luck. Thank you.

Stephen Willard

Thanks, Ed.

Operator

[David Bellinger].
Hey, thanks for taking my question and congratulations on the remarkable progress. Back in November, you shared that you had a problem with substantial unreported naked short interest. The number you gave then was a minimum of 1 to 1.5 million shares you also described at the upcoming dividend as, among other things, one of the tools you'll be using to dislodge those naked short positions. And you recently announced that you have for SEC and enforcement leadership working to get the brokerages to first and when we close the positions. Can you give a current estimate of actual short interest and can you say anything about any progress you're having with the brokerages?

Jonathan Javitt

So I'm going to ask Matt to present some of the numbers. But yeah, the thumbnail answer is your 1 to 1.5 million shares is really just the tip of the iceberg. Matt, why don't you talk about the research we've done?

Matthew Duffy

Sure. Thanks, Jonathan. So David, thanks for the questions, it's a very good one. So if you look at the Bear, you're asking about the bare minimum, the bare minimum would be with Nasdaq reports on a biweekly basis. And that's about 500,000 right now. That only was short through Nasdaq and reported appropriately. Some of the work we've done the sharing intel with others has indicated there is very likely perhaps even as much as an order of magnitude more short than -- multiples of that 500,000.
There's another set of data that are interesting as well, and that are available through certain channels. And that is the intraday shorting because every time a trader, whether they're a computer or a person enters a trade, they haven't entered whether it's a buy or sell or sell short or cover, there just the four categories. And a time ago, there were some lawsuits and some requests to the SEC to make the short sales information available for intraday trading. And we tracked that and gotten that from some folks that have attracted that have approached us and something in the vicinity of 46% of the time period they shared, which was, I think, the move March through the end of April or short sales intraday.
Now market makers are allowed to do that as long as they cover during the day and not report it not borrow, but they have to cover by the end of the day, whether they do or not is a subject of a lot of speculation and that probably can fuel the deal of unreported short interest. I'll hand it back to Jonathan for comment.

Jonathan Javitt

So the other question you asked, David, is important and the short interest is impressive. But it's important to recognize that somebody selling our stock short is essentially bidding that we're going to fail to get to data and go out of business, and therefore, they'll be able to up the buyback the short position for almost nothing. And the best way to really disappointed short-sellers to succeed. That's what we aim to do, and I think over the last quarter, we've turned some corners that may start to help our shareholders recognize that not only do we aim to succeed, but we're in the processes of succeeding. And if people want to invest their hard-earned money in betting against us and shorting our stock, we aim to help them lose their money.

Stephen Willard

Thanks for those answers.

Operator

There are no further questions at this time. I will turn the call back to you, Matt.

Matthew Duffy

Thank you. Joanna, and thank you, everyone, for joining us today for the current video conference call. And we appreciate your support your interest and are always interested in hearing your questions and feedback through our website as well. Have a good evening.

Operator

Thank you, everyone, for participating. You may now disconnect.