NRx Pharmaceuticals, Inc. (NASDAQ:NRXP) Q3 2022 Earnings Conference Call November 14, 2022 8:00 AM ET
Company Participants
Suzanne Messere – Investor Relations
Stephen Willard – Chief Executive Officer
Seth Van Voorhees – Chief Financial Officer and Treasurer
Jonathan Javitt – Founder and Chief Scientist
Conference Call Participants
Vernon Bernadino – H.C. Wainwright
Ed Woo – Ascendiant Capital
Operator
Good morning, and welcome to the NRx Pharmaceuticals Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Suzanne Messere with Stern Investor Relations. Please, go ahead.
Suzanne Messere
Thank you, Andrea. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under U.S. 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’s speak only as the 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 being filing today as well, which maybe accessed from the investor’s page of the NRx Pharmaceuticals website.
Joining me on today’s call from NRx Pharmaceuticals are Stephen Willard, Chief Executive Officer, and Seth Van Voorhees, Chief Financial Officer and Treasurer. Stephen will provide a summary of the company’s progress; Seth the review of the company’s financial results, and then Stephen will review upcoming milestones before making closing comments and opening up for questions. During the Q&A session, Stephen and Seth will be joined Robert Besthof, Head of Operations and Chief Commercial Officer; and Jonathan Javitt, the Company’s Chief Scientific Officer to address investor questions.
I will now turn the call over to Stephen.
Stephen Willard
Thank you, Suzanne. Good morning, everyone, and thank you for joining us. Today we will discuss the third quarter results for our company and provide a business update. In March, we announced that our primary strategic focus going forward is on our psychiatry franchise and the late-stage development of NRX-101, our lead investigational compound.
Today, we estimate the U.S. annual peak sales potential for bipolar depression with suicidality to be around $2 billion. There are only five drugs currently approved for bipolar depression, none of which is indicated for patients with suicidality. In fact, such patients were excluded from their clinical trials. Our Phase 2 study specifically enrolled patients with high levels of suicide risk and showed that NRX-101 has the potential to provide improved clinical outcomes in such patients, who is only currently approved therapeutical alternative is electroshock therapy. That is why the FDA gave us breakthrough therapy designation and a special protocol agreement allowing for registrational study with 72 patients.
In recent months, we have made substantial progress in advancing our development of NRX-101 for the treatment of bipolar depression with suicidality and PTSD, while also exploring other psychiatric indications. In March, we announced the strategic decision to initiate our Phase 3 trial following the release of NRX-101 using processes suitable for ultimate commercial sale of our medicine should we demonstrate safety and efficacy. That milestone was completed and announced last week.
Thus, we anticipate initiating our Phase 3 trial under the FDA special protocol agreement in 72 patients as pre-specified with the FDA by the end of this year. We expect to report top line data in the second half of 2023 with initiation of a potential NDA submission by year-end 2023, assuming efficacy and safety has been met.
Last week, we also announced a debt financing that we project provide this with adequate capital to support this Phase 3 program. NRX-101 is a fixed dose combination of d D-cycloserine, an NMDA-receptor modulator and lurasidone, the drug commonly used for bipolar disorder. To our knowledge, NRX-101 is the only oral antidepressant either approved or in development that targets patients with bipolar depression and active suicidality, which typically is an exclusion criteria in clinical studies of depression in PTSD.
The tragic reality of bipolar depression is that if you know two people with this condition, the odds are that one will attempt suicide. And if you know five people with this condition, the odds are that one will die from suicide. Our Phase 2 and non-clinical evidence suggests that NRX-101 may achieve many of the therapeutic benefits seen with ketamine, which is increasingly used to treat patients with depression and suicidality. Ketamine is known to induce [hallucinogens] (ph). Ketamine is also well known to be neurotoxic, ensuring to kill brain cells in both animal models and in human and clinical reports.
FCA has issued warnings about repeated use of ketamine and anesthesia for this reason. We have demonstrated that the ingredients of NRX-101 had not shown potential generic toxicity even at 10 times the expected deaths. We have released preclinical findings demonstrating that unlike ketamine, the NMDA component in NRX-101 is non-addictive.
Our stage would be Phase 2 proof-of-concept study showed a statistically significant reduction in both depression and suicidality, compared to standard therapy in patients with bipolar depression, who were acutely suicidal and who were initially stabilized the academy. To our knowledge, no oral drug therapy has ever been able to demonstrate a reduction in both depression and suicidal tendencies in this patient population. This is clinically relevant because antidepressants carry black box warning labels regarding potential for increased risk of suicide in vulnerable populations.
Based on NRX-101 differentiated therapeutic profile, we believe that we have the potential to address a significant unmet medical need for patients, who are currently underserved by available treatment options. Please see our press release today issued earlier for our NRX-101 clinical and regulatory milestones achieved to-date. This previous milestone established a strong foundation that enables us to embark on a highly efficient registrational Phase 3 program with FDA’s advanced commitment to accept the regulatory finding from us. Should we successfully determine safety and efficacy and demonstrate the truth. This foundation also allows us to significantly expand the addressable population of patients with bipolar depression and sub-acute suicidality to patients, who are treated in an outpatient setting enter those with PTSD.
Now I would like to cover some of our achievements in the third quarter. We are on track to report top line clinical data for our ongoing Phase 2 clinical trial of NRX-101 in patients with bipolar depression and sub-acute suicidal ideation in the first quarter of 2023. The objective of the double-blind study is to demonstrate NRX-101’s ability to significantly improve both depression and suicidality over six weeks when taken twice daily.
The study involves patients with bipolar depression and sub-acute suicidality and does not require the use of ketamine. As mentioned previously, this is one of the studies that could enable us to expand the potential indication for NRX-101, as well as offer a more convenient treatment option on an outpatient setting. We are also on track with plans to initiate registrational Phase 3 clinical trial of NRX-101 by year-end in patients with severe bipolar depression and acute suicidal ideation. This trial will be randomized double-blind trial of NRX-101 versus lurasidone alone in 72 patients.
We expect to confirm our Phase 2 trial findings following a successful response to a single infusion of ketamine, treatment with NRX-101 would be superior to lurasidone, the current standard-of-care in the patient population. We will do this by showing improvement in symptoms of depression as measured by the Montgomery and Asberg Depression Rating Scale. Because of the acute nature of these patients, we agreed with the FDA to compare our drug to lurasidone, a standard-of-care medication rather than to placebo and successful this will provide clear commercial differentiation.
In September, we announced plans for an additional indication in PTSD approximately 9 million individuals in our country experienced PTSD, one-third of the room at severe PTSD, between 17 million and 22 million is our [indiscernible] are back in the last every day to suicide. We view this as another area of very high unmet medical need. We expect that our medicine will show antidepressant effects in PTSD. However, we are also hopeful that our medicine will demonstrate specific effects on the peer memory components of PTSD and directly reduce symptoms of PTSD beyond depression. Today, there is no approved medicine for these specific PTSD symptoms and our preclinical studies have shown reduction in fear memory associated with D-cycloserine.
As announced last week, we submitted our expected commercial stage manufacturing process to the FDA, so that we can include this drug product in our upcoming registrational Phase 3 trial. We’re excited about this milestone in particular, as we believe that adopting a commercial ready manufacturing process now could lead to a more seamless NDA submission, review and approval process with net — without the need [to begin] (ph) studies.
Yesterday, we announced with Relief Therapeutics Holding that we have entered into a definitive settlement agreement to resolve pending litigation at closing to be held within the next 30-days. More details on the settlement terms will be found in the unit release published on November 13, 2022 and will be in a future 8-K filing with the SEC upon settlement. We believe that this settlement is in our shareholder’s interest for the following reasons: we have committed to focusing on our core CNS franchise and a book-to-bill is not part of that franchise. The institutional investors, who have capitalized our company and the analysts, who evaluate our company advise us to focus on our CNS franchise.
Under the terms of the settlement Relief is committed to all further costs of the risk to build development, while paying us up to $43 million in milestones and royalties should they succeed. The failure of the — of book-to-bill in both the NIH and BARDA trial indicates limited potential for [indiscernible] in widespread use. So it’s a deal that I think is a real benefit for NRX shareholder.
Finally, we announced debt financing with net proceeds to $10 million on November 7, 2022, that is expected to support our clinical development activities for NRX-101.
With that, I will turn it over to Seth for a brief overview of our financial results. Seth?
Seth Van Voorhees
Thank you, Stephen, and good morning, everyone. It’s a pleasure to speak with you again today. And I would now like to review the highlights of our third financial results.
For the three month period ended September 30, 2022 R&D expenses totaled $4.1 million, compared to $6.3 million for the same period in 2021. The decrease in R&D expenses related primarily to a decrease in clinical trials and development expenses related to ZYESAMI. As announced in March of this year, we are focusing most of our R&D expenditures on our psychiatry franchise going forward.
For the nine month period ended September 30, 2022, R&D expenses totaled $12.6 million, as compared to $13.8 million for the same period in 2021. The net increase of $1.3 million is related to a decrease of $1.5 million in clinical trials and development expenses related to ZYESAMI, a decrease of $0.5 million in fees paid to regulatory and process development consultants, partially offset by an increase of $0.7 million in regulatory and process development costs. The nine month period includes R&D costs related to both to ZYESAMI and to COVID vaccine development, costs that we do not anticipate to incur going forward.
For the three month period ended September 30, 2022, G&A expenses totaled $5.0 million, compared to $13.8 million for the same period in 2021. The decrease from G&A expenses was partially related to a reduction in consulting fees in 2022.
For the nine month period ended September 30, 2022, G&A expenses totaled $21.9 million, as compared to $28.4 million for the same period in 2021. The decrease of $6.6 million was primarily related to a decrease of $12.3 million in consulting fees, a decrease of $3.4 million in stock-based compensation expense, partially offset by an increase of $4.1 million legal, professional and accounting fees and an increase of $3.7 million insurance expenses. The nine month period also includes G&A costs related to ZYESAMI and to COVID vaccine development, which are costs that we do not expect to incur going forward.
With the three month period ended September 30, 2022, our net loss was $9.1 million, as compared to a net loss of $37.0 million for the three month period ended September 30, 2021. For the nine month period ended September 30, 2022, our net loss was $29.5 million, as compared to — with the net loss of $62.7 million for the same period in 2021.
In the first quarter of 2021, the company recorded a non-cash settlement expense of $21.4 million to reflect the increased fair value of the Gen warrant on its grant date. We had no settlement expenses for the nine month period ended September 30, 2022.
Now I’d like to comment on our cash resources. As of September 30, 2022, we reported a cash balance of $18.2 million. Last week, we announced the debt financing that added net proceeds of $10 million to our balance sheet that will support our clinical trials and other operational activities. This note has an interest rate of 9% per annum and has a maturity date of 18-months. Additional details regarding the note may be found in the company’s Form 8-K, which was filed on November 9, with the Securities and Exchange Commission.
With this financing, we believe that we have sufficient funds to support our clinical development plans for at least the next 12-months and if necessary the ability to reduce non-core G&A expenses if necessary.
With that, I will turn it back to Stephen for closing remarks.
Stephen Willard
Thanks, Seth. This is an exciting time for NRX. We believe that NRX-101 is a potentially life saving medicine that could change the treatment paradigm for individuals with bipolar depression, but are also experiencing suicidality. This is a driving force behind our mission of meeting the needs of underserved patients with serious CNS disorders.
We have a variety of options with regard to commercial development. Our technology and robust IP portfolio have attracted strong interest and we have been approached by a number of potential partners regarding commercial partnerships for NRX-101. However, we are also prepared to support the commercial launch of this product still appove will be granted for NRX-101. We believe that due to the relatively small number of specialized psychiatric facilities in the U.S., a small company such as us is capable of marketing a first-in-class medicine to support this very high unmet medical need should our drug be approved.
In addition, our team includes professionals, who have managed major debt launches to some of the world’s largest pharmaceutical company. We plan to carefully evaluate all available options and make the decision that best meets the needs of patients, shareholders and NRX. We continue to execute across our portfolio with multiple near-term catalysts on track for the fourth quarter and next year, assuming the efficacy endpoints and Phase 3 [indiscernible] and Phase 3 clinical trial, we plan to initiate the rolling submission of a new drug application for the FDA by the end of next year.
Operator, we are ready to take questions.
Question-and-Answer Session
Operator
We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Vernon Bernadino of H.C. Wainwright. Please go ahead.
Vernon Bernadino
Hi. Thanks for taking my question. And Steve, congrats on the progresses made since coming on board. Just a few questions regarding the clinical trials, what type of data could we expect in first quarter from the ongoing Phase 2 with NRX-101 [MDB] (ph) with SSIB, sub-acute suicidal ideation behavior? And what end points are you considering for the Phase 2study with NRX in the PTSD?
Stephen Willard
Could I turn that to one of my experts? Yes, let me — go ahead, Jonathan. Go ahead.
Jonathan Javitt
Thank you, Vernon. On the Phase 2 trial that’s currently underway, the trial is actively enrolling and we expect that by the end of the first quarter we’ll be able to talk about top line data, where the endpoint is depression is measured by the mattress scale and suicidality is measured by the CTISS scale. Those are the scales where superiority was demonstrated in the Phase 2b trial.
With regard to PTSD, again, the depression scale will be a primary endpoint. However, in that case, we’re also hoping to see a difference on the CAP-5, which is a scale that directly measures symptoms of PTSD in terms of your memory, what people commonly call flashbacks and other debilitating symptoms of PTSD.
Vernon Bernadino
Terrific and as one follow-up regarding the manufacturing that you mentioned, what if any activities are needed to fully establish such as testing runs, the manufacturing capability or process in the U.S.? And when do you expect to have supplies from that process for your clinical trials? Thank you.
Jonathan Javitt
Well, the press release that was issued announced that the supplies for the Phase 3 clinical trial has been released and the module three manufacturing file has been filed with FDA. So there will be additional replication runs in order to demonstrate the replicability of the manufacturing practice. And of course, we’re sure FDA will have some comments around the manufacturing file. But as Steve emphasized, the material that’s now been released for Phase 3 use was manufactured using commercial processes, so that we hope when should we demonstrate safety and efficacy that we’d be able to move directly to distribution and plant inspection with F&A for additional bridging studies.
Vernon Bernadino
Perfect. That’s all of the questions I had today. Thank you.
Stephen Willard
Thank you for your question, Vernon.
Operator
The next question comes from Ed Woo of Ascendiant Capital. Please go ahead.
Ed Woo
Yes. Also congratulations on the progress. For PSTD, do you guys have a specific timeline when you guys would initiate for that indication?
Stephen Willard
No, I think it’s too early. Our work with PTSD is in its developing stages. So once we’ve got some work under our belt, we’ll be able to give you more of a timeline for it.
Ed Woo
Great. And my last question is, have you guys thought about the international opportunity for NRX-101?
Stephen Willard
Yes. We have, as I mentioned, we have interest from people who are — would like to partner with us and they have appreciated the international interest — an international potential of NRX-101 to a great deal.
Jonathan Javitt
And, you know, those who follow the literature closely will note that France has actually published perhaps the most extensive trial of ketamine for treatment of suicidal depression, both in the context of major depressive disorder and bipolar depression. And in fact, that trial showed that bipolar depression was much more susceptible to effective treatment with an NMDA antagonist, the major depressive disorder. So there is considerable interest being demonstrated in our pipeline if you follow the published literature.
Ed Woo
Great. Well, thanks for answering my question and I wish you guys good luck. Thank you.
Stephen Willard
Thank you, Ed, We appreciate your being with us.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Suzanne Messere for any closing remarks.
Suzanne Messere
Thank you, Andrea. We would also like to address a couple of questions that we have received. And this question will go to our management team, and it is how is NRX Pharmaceuticals preparing for the Phase 3 study and potential NDA submission in 2023?
Stephen Willard
Well, as we’ve said in the call, we are planning to initiate the Phase 3 targeting bipolar with a acute suicidality by year end. We have identified as CRO, we are working with our principal investigator, we have several confirmed clinical sites for our trial. Further information will be on the website clinicaltrials.gov. We’ve invested in developing commercial manufacturing processes, full tech transfer was recently completed and corresponding manufacturing file update was submitted to the FDA. So those are some of the things, but not all by any means than we’re doing as we prepare for our Phase 3.
Suzanne Messere
Thank you, Stephen. And then we have one additional question. The healthcare environment is increasingly cost constrained. What feedback have you gotten from payers regarding the use of your investigational medicine?
Stephen Willard
In today’s reality, the only approved therapy patients with suicidal bipolar depression have is electroshock therapy. Our analysis of payer data suggests that such patients incur more than $40,000 in annual healthcare costs, experienced multiple hospitalizations and tragically harmed themselves all too often. A research with payers and prescribers regarding the likely marketplace acceptance of an oral medication that could benefit patients with suicidal ideation and behavior show the high interest. The feedback we received demonstrated strong support for such a mitigation, payers are aware of the high-class of hospitalization that can go up to two weeks and indicated that costs of less than $10,000 per patient for therapy should we experience no formulary restrictions for treating patients might be a positive development.
Suzanne Messere
Thank you, Stephen. And actually one last question. If your drug ingredients have previously been used for other reasons, why do you have composition of matter patent protection?
Stephen Willard
So, it’s terrific. And I think I’m glad we got to have this question, because we are so — it is so important that we have composition of medical effects with regard to our drug, it clears the field of competitors quite nicely. D-cycloserine has been used worldwide to treat tuberculosis, but it has largely been replaced by newer anti-infectives in part because of its propensity to cause hallucinations. Lurasidone has been used to treat schizophrenia and bipolar depression, but bears a black box warning, because of its propensity when shared with all drugs of its class to cayse Akathisia and suicidal ideation.
Our Co-Founder, Professor Daniel Javitt, who is one of the world’s 1000 most quoted scientists, discovered the unique synergy to between NMDA antagonist, such as D-cycloserine and 5HT2a antagonist, such as lurasidone, when these classes of drugs are administered together, the 5HT2s component is shown to block the hallucinations that would otherwise be caused by the NMDA drug.
And the NMDA component is shown to block the active seizure that would otherwise be caused by 5HT2a drugs prior to this discovery by Dan Jevitt, the synergy had never been identified and it’s now deemed by patent examiners all over the world to constitute a novel composition of matter.
Suzanne Messere
Thank you once again. And thank you to everyone for participating today, that is all the time we have for questions. And this concludes the NRX Pharmaceuticals third quarter 2022 results conference call. And again, thank you all for participating.
Andrea, we’re ready to close the call.
Operator
The conference has now concluded. Thank you for attending today’s presentation and you may now disconnect.
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