NRx Pharmaceuticals, Inc. (NRXP) Earnings Call Transcript & Summary

Good morning, and welcome to the NRx Pharmaceuticals Third Quarter 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Suzanne Messere, with third Investor Relations. Please go ahead.

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 the U.S. Federal securities slides. 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 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 filed today as well, which may be accessed from the Investors page on 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. Steven will provide a summary of the company's progress. Seth will review the company's financial results, and then Stephen will review upcoming milestones before making closing comments and opening up for questions. During the prepared -- during the Q&A session, Stephen and Seth will be joined by 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.

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 5 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 II study specifically enrolled patients with high levels of suicide risk and showed that NRX-101 has the potential to provide improved clinical items in such patients whose 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 III 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 III trial under the FDA special protocol agreement in 72 patients as prespecified 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 provides us with adequate capital to support this Phase III program. NRX-101 is a fixed-dose combination of D-cycloserine, an NMDA receptor motivator and lurasidone, a drug commonly used for bipolar detected. To our knowledge, NRX-101 is the only oral antidepressant either approved or in development that targets patients with buy-forward depression and active suicidality, which typically is an exclusive criteria in clinical studies of depression in PTSD. The traffic reality of bio depression is that if you know 2 people with this condition, the odds are that one were a temp suicide. And if you know 5 people with this condition, the ads are that one will die from seaside. Our Phase II and nonclinical 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 solution actions. Ketamine is also well known to be neurotoxic, and shown to care brain cells in both animal models and in human clinical reports. FDA 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 for neurotoxicity, even at 10x the expected dose. We have released preclinical findings demonstrating that unlike the NMDA component in NRX-101 is nonaddictive. Our stable B Phase II 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 scale and who were initially stabilized with Ketene. To our knowledge, no oral drug therapy has ever been able to demonstrate a reduction in both depression and seriatedencies in this patient population. This is clinically relevant because nateresente to carry black box forming labels regarding the potential for increased risk of suicide and vulnerable populations. Based on NRX-101's 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 milestones established a strong foundation that enables us to embark on a highly efficient registrational Phase III program with FDA's advanced commitment to access the regulatory findings from us should we successfully determine safety and efficacy and demonstrate the 2. This foundation also allows us to significantly expand the addressable population of patients with bipolar depression and subacute suicidality to patients who are treated in an outpatient setting and for those with PTSD. Now I would like to cover some of our achievements from the third quarter. We are on track to report top line clinical data for our ongoing Phase II clinical trial of NRX-101 in patients with bipolar depression and subacute 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 the correction and suicidality over 6 weeks when taken twice daily. The study involves statements with bipolar depression and subacute 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 a registrational Phase III clinical trial with NRX-101 by year-end in patients with severe bipolar depression and acute suicidal aviation. This trial will be a randomized double-blind trial of NRX-101 versus lurasidone alone in 72 patients. We expect to confirm our Phase II filings that following the successful response to a single infusion of ketamine, treatment with NRX-101 will be superior to lurasidone, the current standard of care in the placing population. We will do this by showing improvement in symptoms of depression as measured by the MADRS-10 depression rating scale. Because of the acute nature of these patients, we agreed with the FDA to compare our drug to lorasidan a standard of care medication rather than to placebo. If successful, this would provide clear commercial differentiation. In December, we announced plans for an additional indication in PTSD, approximately 9 million individuals in our country experienced PTSD, 1/3 of whom had severe PTSD. Between 17 and 22 members of our armed forces who are veterans are lost every day to suicide. We view this as another area of very high unmet medical need. We expect that our medicines will show antidepressive effects in PTSD. However, we are also hopeful that our medicine will demonstrate specific effects of the fear memory components of PTSD and directly reduced symptoms of PTSD beyond depression. Today, there is no approved medicine for these specific PTSD symptoms and our preclinical study sector a reduction in peer memory associated with piece. 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 III trial. We are 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 without the need for bridging studies. Yesterday, we announced with Release Therapeutics holdings 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 can be found in the joint release published on November 13, 2022 and will be in a future 8-K filing with the SEC time settlement. We believe that this settlement is in our shareholders' interest for the following reasons. We have committed to focusing on our core CNS franchise and Abitibi 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 brands. Under the terms of the settlement, the leaf has committed to all further costs of the visible development while paying us up to $43 million in milestones and royalties should use. The failure of iptadil in both the NIH and BARDA trials indicate limited potential for visible in widespread use. So it's a deal that I think is a real benefit for NRx shareholders. Finally, we announced the debt financing with net proceeds of $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?

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 quarter financial results. For the 3-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 ZIA. As announced in March of this year, we are focusing most of our R&D expenditures on our psychiatry franchise going forward. For the 9-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 XYSAMI, 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 9-month period includes R&D costs related to both to ZYESAMI and [ BriLife ] vaccine development, costs that we do not anticipate to incur going forward. For the 3-month period ended September 30, 2022, G&A expenses totaled $5.0 million as compared to $13.8 million for the same period in 2021. The decrease in G&A expenses was partially related to a reduction in consulting fees in 2022. For the 9-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 in legal, professional and accounting fees and an increase of $3.7 million insurance expenses. The 9-month period also includes G&A costs related to DISA and Tacole vaccine development, which are costs that we do not expect to incur going forward. For the 3-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 3-month period ended September 30, 2021. For the 9-month period ended September 30, 2022, our net loss was $29.5 million as compared with a net loss of $62.7 million for the same period in 2021. In the first quarter of 2021, the company recorded a noncash settlement expense of $21.4 million to reflect the increased fair value of the Gem Warrant on its grant date. We had no settlement expenses for the 9-month period ended September 30, 2022. I 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 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 noncore G&A expenses, if necessary. With that, I will turn it back to Steven for closing remarks.

Thanks, Jeff. 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 that are also experiencing suicidality. This is a driving force behind our mission of meeting the needs of underserved patients with serious CNS divided. 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 to the approval be granted for NRX-101. A -- 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 agree. In addition, our team includes professionals who have managed major drug launches to some of the world's largest pharmaceutical entity. We plan to carefully evaluate all available options and make the decision that best meets the need that patients, shareholders and NFX. 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 in safety or met in our Phase III clinical trial, we plan to initiate the going submission of a new drug application to the FDA by the end of next year. Operator, we are ready to take questions.

[Operator Instructions] The first question comes from Vernon Bernardino of H.C. Wainwright.

Steve, congrats on the progress you've 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 II with NRS101 in BD with FSIV of acute societal ideation behavior? And what end points are you considering for the Phase II study with NRx in PTSD...

Could I turn that to one of my experts...

Thank you, Vernon. On the Phase II 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 as measured by the MADRS scale and suicidality is measured by the CGIS scale. Those are the scale where superiority was demonstrated in the Phase II stable B trial. With regard to PTSD, again, the MADRS-10 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 the scale that directly measures symptoms of PTSD in terms of per memory, what people commonly call flashbacks and other debilitating symptoms of PTSD.

Terrific. And I have 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?

Well, the press release that was issued announced that the supplies for the Phase III clinical trial has been released and the module free 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 III use was manufactured using commercial processes so that we hope when -- should we demonstrate safety and efficacy that would be able to move directly to distribution and plant inspection with a fine for additional bridging studies.

The next question comes from Ed Woo of Ascendiant Capital.

Yes. Also, congratulations on the progress. For PST, do you guys have a specific time line when you guys would initiate for that indication?

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 time line for it.

Great. And my last question is, have you guys thought about the international opportunity for NRX-101?

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 and international potential of NRX-101 to a great deal.

And 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.

This concludes our question-and-answer session. I would like to turn the conference back over to Suzanne Messere for any closing remarks.

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 III study and potential NDA submission in 2023?

Well, as we've said in this call, we are planning to initiate the Phase III targeting bipolar with acute suicidality by year-end, we have identified a 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 for our update was submitted to the FDA. So those are some of the things, but not all by any means that we're doing as we prepare for our Phase III...

Thank you, Stephen. And then we have one additional question. The health care environment is increasingly cost constraints. What feedback have you gotten from payers regarding the use of your investigational medicine.

In today's reality, the only approved therapy patients with suicidal bipolar depression have as electroshock therapy. Our analysis of payer data suggests that such patients incur more than $40,000 in annual health care costs, experienced multiple hospitalizations and tragically harm themselves all to welcome. Our 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 medication. Payers are aware of the high cost of hospitalization that can go up to 2 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.

Thank you, Stephen. And actually, one last question. If you're drive ingredients have previously been used for other reasons, why do you have composition of matter patent protection?

Well 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 a composition of MediaTek 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. Lorezidone 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 case acesthesia and suicidal ideation. Our co-founder professor, Daniel Jeet, who is one of the world's 1,000 most quoted scientists discovered the unique synergy between NMDA antagonists, such as D-cycloserine and 5-HT2A antagonist such as lurasidone. When these classes of drugs are administered together, the 5-HT2A component is shown to block the hallucinations that would otherwise be caused by the NMDA drug. And the NMDA component has shown to block the apothesia that would otherwise be caused 5-HT2A drugs. Prior to this discovery by Dan Java, the synergy had never been identified and is now deemed by patented examiners all over the world to constitute a novel composition of matter.

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 2020 Results Conference Call. And again, thank you all for participating...

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.