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

Good morning, ladies and gentlemen, and welcome to the Annual Meeting of Stockholders of NRx Pharmaceuticals, Inc. I'm Stephen Willard, Chief Executive Officer of NRx. And I'm very happy to be with you today. Thank you for joining us. I will be assisted in today's meeting by our Chief Financial Officer, Richard Narido, and by Dr. Jonathan Javitt, Founder of our company. We will begin today with the formal part of the program, during which we will ask the shareholders to, one, electing Janet Rehnquist as a Class II member of the company's Board of Directors; two, approve a proposed amendment to the company's 2021 Omnibus Incentive Plan to increase the maximum number of shares of common stock available for issuance under the plan; three, ratify the selection of Salberg & Company, P.A. as the company's independent auditors for the fiscal year ended December 31, 2023; four, approve on an advisory basis the compensation of our named executive officers as set forth in the company's proxy statement; and five, approve on an advisory basis the frequency of holding an advisory vote on executive compensation. Following consideration of these proposals, I will make a few brief remarks regarding the company progress, relying very much on Dr. Javitt, who has some important things to talk about, and we're glad that this public forum to speak directly to our shareholders who are the bedrock of our company. We will proceed to a Q&A. If you wish to submit any questions for consideration in the Q&A portion of the meeting, please do so on the meeting website. The meeting is now called to order. The close of business on November 14, 2023, was set as the record date for stockholders entitled to notice of and to vote at this meeting. The certified list of stockholders entitled to vote at the meeting is available on our meeting website and may be inspected by any stockholder. As of the record date, 85,167,479 shares of common stock, we're extending and entitled to one vote each and all matters properly [indiscernible]. Also available for inspection by the stockholders is the affidavit [indiscernible] prepared by Continental Stock Transfer & Trust Company, our Transfer Agent, certifying to the timely mailing on or about November 27, 2023, of the notice of meeting and proxy statement to all stockholders of record on the record date. Under the company's bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or our remote communication constitutes a quorum. At this time, the inspector of elections indicates that a quorum is not present. We are at about 46%, and we require 50.01%. We will pause the meeting to allow additional shareholders during the meeting. We will reconvene in 5 minutes. Are there any shareholders on the phone who have not voted by proxy? Hearing none, we will continue. Well -- we convene in 4 minutes. Okay. The inspector of election indicates that a quorum is still not present. We will adjourn the meeting to December 28, on 11 a.m. We will be -- as I said, we're quite close to a quorum, and I'm sure at December 28, at 11 a.m. we'll be able to complete this process. We're aware of the vote totals for the proxies, there is very strong support for the resolutions [ that have been tabled ] before you, the shareholders, particularly for Ms. Rehnquist, who receive no negative votes. I turn the program over now to Dr. Jonathan Javitt, Founder and Chief Scientific Officer of the company to make some comments about what we are doing some of our recent developments, and to offer an opportunity for questions. Jonathan?

Thank you, Steve. So this is a chance to sit with our shareholders, talk about how we got to where we are and where we see ourselves going as a company. And I prepared 4 slides, that may be a bit of a dive, recognize these are work in progress, recognize that these are forward-looking statements. And our objective is to tell you what we see and what we're thinking. That doesn't mean that everything we're thinking is going to happen, just that we're going to try to make it happen. So this is a company that began in 2015 as a privately funded company, focused on the recognition that the NMDA receptor in the brain was critical to addressing suicidality as a condition. At a time when the world knew about -- the world knew primarily about SSRI antidepressants, [indiscernible] SSRI antidepressant had a suicide warning on the label, and suicidality is a distinct condition for treatment was really not part of anybody's scientific conversation. And that's why the original tagline for the company, with suicide is a druggable target. So we began with the development of NRX-101 following stabilization with ketamine. And as can happen with any startup company, unexpected events can occur. In the case of our company, we probably had more unexpected events than some. When I first began talking with investors, they asked me the standard question, well, what keeps you awake at night? And typically, I'd say, well, the trade war with China could be problematic because we're making our Phase II drug supplies in China. And of course, the global pandemic would be disastrous for our business. And of course, investors laughed and we went on to talk about the company. Well, we actually got both. And NRX-101 development, as you know, was halted in early 2020 because of the COVID pandemic. We were able to initiate work on Aviptadil. And even though the confirmatory clinical trial on Aviptadil didn't succeed. That was really what sustained our company through the pandemic and provided us with the resources to reopen our psychiatry initiative. In the process, we were able to form a partnership with Alvogen to out-license NRX-101 for treatment of Suicidal Bipolar Depression. And that created other room and opportunities within the company, for us to start focusing more broadly. And as you know, we began focusing on chronic pain. Now at the time, we assume ketamine was going to be developed by others. And we were as surprised as anybody when the major nasal ketamine initiatives failed in September. And that, combined with FDA's ongoing encouragement for us to develop -- for us to develop ketamine as an IV infusion is what's led to some of the activity that you've seen over the last few months. Now that was enabled by the fact that while the U.S. had not done definitive clinical trials on ketamine, there's never been a multicenter, randomized, placebo-controlled trial definitively showing that ketamine reduces depression and suicidality in the United States, the government of France did support such a trial. And through our partnerships with the Foundation FundaMental and the assistance of our partners in France, we were able to sign the data sharing agreement that you saw over the summer. Now as you know, FDA requires at least 2 well-controlled, as the law says, adequately controlled clinical trials in order to see drug approval. And this morning, we announced a partnership with Columbia University to provide us with data for that second clinical trial. And if you look at our corporate debt, which is on our web page, you've seen it at investor conferences, you'll see side-by-side the French ketamine study with the Columbia study. And each of those studies demonstrates a dramatic and highly statistically significant reduction in suicidal ideation with short-term infusion of Racemic Ketamine. So that's what's led to the ketamine spin-off, that I'll talk about momentarily. The other unexpected result is, the data that we obtained over the summer, showing that the cycloserine remains a potent anti-depressant -- anti-infective post antibiotic. Even though it's a 70-year-old drug against the most resistant bacteria that put Americans in the hospital and kill Americans [indiscernible]. It's not very hard to find information on the internet, showing that the antibiotics that we all grew up with are increasingly failing to treat common conditions that nobody took very seriously 10 years ago. 10 years ago, you said, you had a urinary tract infection, you say, well, you take some pills and you'll be fine. And all of a sudden we live in the world where 20% of people who have urinary tract infections are not getting relief from standard antibiotics and Congress and the FDA have initiated major programs to encourage companies to bring effective antibiotics into this space. So when we asked Charles River Labs to look at our drug against the bad bugs that are putting people in the hospital today. We were pleasantly surprised to see that NRX-101 is efficacious on a laboratory level, and that's led to the announcement yesterday that the FDA gave us permission to proceed with an investigational new drug file for our drug against complicated UTI. Now that may sound like a niche indication until you realize the 20% and growing of the people -- of the 15 million people who get UTIs every year in the United States have complicated UTI. So you're talking about a condition that affects 3 million Americans every year. And sadly, kills more than 15,000 Americans every year from urinary sepsis. In the last 10 years, I've actually lost 2 close friends to this condition. And lastly, as we've developed these programs, we've had unexpected but welcome approaches from overseas partners with exciting clinical stage CNS drugs who've recognized that we've built a company with core capabilities to develop innovative drugs, capabilities that are not widely available in the marketplace. And that's begun to focus our thinking as you'll see in the coming slides. So let's go to Slide 2, the second slide. We have some key challenges that not only do you or shareholders know about, but you remind management through various communication channels on a regular basis about our key channels -- key challenges. Clearly, completing our clinical trial in bipolar depression has taken a little longer than we'd like. And we ask you to recognize that this is an indication that big pharmas never been willing to tackle. These are difficult patients to recruit. They are difficult patients to keep in a clinical trial because they have a condition that's very difficult for them to live with, and it affects their day-to-day behavior. Suicidal Bipolar Depression is a lethal condition, and we're the first company that's ever addressed it. At this moment, we think we're about 4 or 5 patients away from full randomization in the clinical trial. We thought we were there before Thanksgiving, lost some people over the holidays because the holidays are known to be a complicating factor for people with Bipolar Depression, but we're as eager to finish this trial as our shareholders are. As you know, we've had capital constraints with the collapse of the biotech investment market that began in late 2020. And at the same time, we've continued to have investors who believe in us, who continue to support our programs, and we're confident that we'll continue to have that support because we're out there addressing conditions that other people aren't willing to address. Just this week, people saw the death of Matthew Perry. Over the years we've been in business. We've actually lost 2 founding investors and the son of a third founding investor from this condition. The lethal condition -- and we hope other people will begin to address it. But right now, we have the only clinical program going, and we intend to bring it to success. At a time when we've been working to bring a life-saving drug to market, others have seen an opportunity to make money by aggressively and illegally, using naked shorts to attack our shares. And it's -- if somebody wants to borrow a share of stock and sell it in the hopes that it will go down and they'll buy it back at a lower price, that's called commerce. If somebody wants to sell a share of stock that they haven't borrowed that's called a criminal offense. And we are in the process of asking prime brokers who have now been identified as having naked shorts on their books to close out those positions. And the courts have now started to recognize that naked shorting is a process that needs to be ended, very important decision in the Southern District of New York in September. So although this has been a challenge for our company, I think you've seen that we've been addressing it aggressively and with some degree of effectiveness. As I said, we've continued to have support, both from debt investors and from retail investors and keeping our programs going, and we're excited about that, during a time that's been more challenging for the biotechnology industry than at any time since the word biotechnology has been invented. So one of our responses is to focus on the fact that this is your company. You're our shareholders, you own this company. And one of the things we're doing is a spin-out program, where as we have opportunities ripen, such as the ketamine opportunity, such as the antibiotic opportunity, we're going to be directly dividending parts of those opportunities to our shareholders. First of all, because we want you to own them. And as a shareholder, I share in that desire, and I know that our other major shareholders support that objective. But the other effect of that is if people do have naked short positions in the company, and haven't borrowed the underlying shares associated with that short position, they're going to have a little bit of trouble redeeming those dividends. So we hope that we can shift our share base to people who are actually serious long-term investments, investors in our company. We also intend to do that through the establishment of royalty trusts, so that as these opportunities begin to yield revenue, that revenue will at least in part, go directly to our shareholders because we've all seen too many instances in which biotech companies that generate a lot of revenue from biotech products go on various adventures with that revenue rather than returning it to their shareholders. And we don't intend to be that kind of company. We intend to be a company that rewards our shareholders for the risks that they've taken in our enterprise. So the third slide begins to show the structure that we envision for our company going forward, where NRx remains a company with core capabilities and unique capabilities in identifying drug candidates in navigating the regulatory process in highly efficient approaches to get manufacturing established and shelf stability established. You've seen that we got more than 5 years of shelf stability out of our Phase II NRX-101 pills, and we've already passed one year of shelf stability on the commercial version of NRX-101. Over and over again, we intend to show you that we're a biotech company that not only knows how to invent drugs and prove that they work, but how to manufacture those drugs, which has been one of the problems of biotech for decades now. And some people have said that biotech products are more likely to be delayed on their path to market, over manufacturing and CMC problems, and over efficacy problems. We intend to be a company that has expertise in clinical trial design and implementation and scientific leadership. And that's led to a number of endeavors that are in the process of being stood up, where we already have investors coming to us saying, yes, we want to be part of that spin-out. The first is our ketamine initiative, which has now been named Hope Therapeutics. You'll be learning more about the share dividend of Hope Therapeutics over the coming weeks. And our intention is to take Hope Therapeutics public during 2024. As we've shared with you previously, we already have a term sheet for up to $30 million in public funding, and we're in active conversation with seed stage investors who are eager to support us in getting to that public launch. And we're in the process of attracting the commercial expertise for that launch. We've talked to you probably more than anything else about NRX-101 for depression and suicidality and our partnership with Alvogen. And as I said yesterday, we told you about the FDA's embrace of NRX-101 for complicated UTI. FDA allowed the IND to go forward on the first pass. And the comments that they've offered us on improving the program were both welcomed and not at all burdensome to us. And if this product is successful, we believe it's one that can yield $300 million to $500 million of sales in the antibiotic world, in an era where patients are increasingly going to the hospital or being treated with [indiscernible] IV infusions for what used to be simple urinary tract infections. Now we've had 2 very early-stage opportunities come along that we're certainly not telling you or going to work, but we're sharing them with you to give you an example of the sorts of approaches that are coming to our company on a daily basis that we're sifting through, where people are coming to us with drugs that have been brought to the clinic because we're not a preclinical company. We're not a scientific laboratory discovery company. But we're a company that has the ability to take things from Phase I to Phase III. So in one case, we've been approached by a highly reputable company in a foreign jurisdiction that's known for integrity and known for very strict regulation of drugs with a candidate for Parkinson's disease that could be the first drug to modify Parkinson's disease. Those of you who know about Parkinson's disease know, it's a condition where the body does not make enough L-dopa, and that results in all the symptoms you know about. But right now, the treatment for Parkinson's are largely associated with replacing L-dopa in one way or another. This is one of the first candidates we've seen that has the potential to rescue the cells that are supposed to make L-dopa but are not functioning properly in Parkinson's, and it's a partner who has said please consider working with us on developing the drug, and we will bring in capital that's needed. What we need is NRx's expertise. And we can't tell you that that's going to happen, but we can tell you that it's one of our active conversations, and we wanted to share it with you as an example of how we see ourselves as a company and how we'd like you to see us as a company. A similar opportunity is what may be the first disease-modifying drug for schizophrenia. If you haven't seen a movie or read a book called Brain on Fire, please do. Please start to think of schizophrenia as an inflammatory condition of the brain, because much more in Europe than in the U.S., people hospitalized with schizophrenia are now getting full medical evaluations, including spinal taps, and schizophrenia is being thought of in many quarters as an acute inflammatory disease of the brain, just as Crohn's disease and inflammatory bowel disease or inflammatory diseases of the intestinal tract. And that new thinking is leading to highly innovative approaches not to try to tranquilize the brain that has schizophrenia, not to try to treat the hallucinations by slowing down the thought process and anybody who's watched Russel Crowe in A Beautiful Mind, understands how difficult it can be to live with schizophrenia and take those drugs, but rather to bring drugs to market that will, and pardon me for this layman's term, but put out the fire in the brain. And we've been approached by a company, again, from a highly reputable highly credible regulatory and scientific jurisdiction that's offering us the opportunity to take this drug into the clinic in the United States. I don't want to, again for the third time, I don't want to tell you that these things will happen, but I want you to understand the kinds of conversations that we're having on a daily basis because we think it's important for our shareholders to understand who we think we are as a company and what we think we're becoming.

And I think it's helpful to have the context of, if you remember, with our Alvogen deal, we have $330 million of milestones. We have a mid-teen royalty rate. That's just for one product, our lead product. Those are the kinds of returns that we think are possible across the spectrum of things that Dr. Javitt is speaking about.

So, if you go to the fourth slide, I wanted to articulate our key principles. And the most important one is that we put patients first. You'll see us try, sometimes you'll see us fail. But what you'll never see us do is develop a me-too drug. You'll never see us chase a market that already exists where patients are being well served simply to eke out some additional profit. That's not us. You'll see us going after targets that others are not going after where we have the chance to change people's lives in a meaningful way. Our second principle is to put our investors at the top of our consideration and to structure our company in a way that rewards long-term investors and ensures that should we have success, our investors will share in that success. By returning as much of the cash income that we may generate to shareholders via dividends, via royalty trusts, and we want to invite our investors to know us and be known by us. Please reach out, please introduce yourselves. Please ask us your questions. we will always respond. So you'll see us shifting our company from a traditional biotech model to one where new opportunities as they emerge will consistently be shared with our investors through dividends so that the people who are taking risk on our company today are the people who will gain in that success if we have success to market. We're going to focus on asking prime brokers to assist from supporting naked short positions and other illegal manipulations of our stock. And we're going to structure our company in such a way that those who maintain naked short positions are ultimately going to find themselves needing to redeem dividends and royalty allocations that may be difficult for them to redeem. So we hope that we've given you a sense of who we think we're becoming, and we hope that who we think we're becoming is a company that you want to be part of. We've got some questions, and we'll look forward to more. Matt?

Our first question came from an investor requesting your views on how an approval of our IV Ketamine, NRX-100 might impact the existing generics and compounded pharmacy ketamines that are available.

Well, right now, ketamine is approved by the FDA only for use as an anesthetic. And there is an op-ed piece in today's Washington Post written by the former Health Commissioner Health of Baltimore, a very articulate piece, that talk both about the importance of ketamine as the first drug for treating acute suicidality, but also the risks of unlicensed and irresponsible use of ketamine. FDA -- and I encourage everybody to read at Washington Post op-ed. If you're a hospital and the hospital pharmacy wants to mix up ketamine for infusion, that's something that's within the purview of a hospital pharmacy. But if you're in a doctor's office, you have to go to a compounding pharmacy to do it, and the FDA has now written 2 letters to the community, pointing out the compounding is not a preferred way to go that there's really a need for a labeled form of ketamine. But the other thing to recognize is that compounding under state pharmacy laws is only legal in settings where there's not an approved version of that drug for sale. So a good example of compounding is nebulizer products that are used by people with end-stage pulmonary disease where doctors will specify a cocktail of bronchodilators and steroids that are uniquely needed by those patients, but no pharmaceutical company could ever manufacture because the patient niche is too small. That's where compounding is important. But compounding in the face of a legally labeled form of ketamine, compounding -- continued compounding of ketamine would be flat out illegal. So we hope to move ketamine from a situation where, yes, it's compounded responsibly by some pharmacies, but the world just saw a very high profile debt, from ketamine that was somehow sourced in a less responsible way. We hope to move from that to an FDA regulated labeled form of ketamine that's offered under risk management plan that maximizes patient safety while at the same time, provides the first relief from acute suicidal ideation, which all of us know is a highly lethal condition that today is treated with hospitalization with electroshock therapy but has no FDA-approved pharmacologic intervention. If there are other shareholders with questions, please send them to us by e-mail and in the meantime, I'm going to turn the meeting back over to -- well, actually, before I turn the meeting over to Steve, Janet Rehnquist is with us today, and has offered to say a few words about why she's accepted our invitation to join our Board.

Good morning, everyone, and thank you for being on this call. And Dr. J, thank you for giving me the opportunity to speak. I am very honored to be considered to be a Board member. I have the utmost respect for Jonathan's work over the years and his endeavors and his commitment to not only ketamine, but to the company. And when he approached me about being on the board, it was partially as a result of -- I think some of my background, but also my personal story that I was catapulted into confronting the necessity for more treatments for bipolar disorder and suicidality by my family, my daughter was suddenly kind of injected into this world when she was in college. And she's doing very well now, but it was apparent as we were trying to identify and find resources that even people with great access to health care and who have resources to try to find best treatments available for either bipolar disorders, suicidality, depression, it is a very difficult terrain out there from the consumer side. And there just are not enough treatments available, the scarcity of the providers to provide the services, the scarcity of the drug, the black-box warning on every drug treatment. So I started researching ketamine many years ago to find infusion clinics, so that my daughter would have possibilities and options in her toolkit. And so when Jonathan approached me about the possibilities of NRx, I was tremendously excited. And willing and really wanted to put a lot of effort into doing this. So I appreciate and I'm very honored again to be considered for a board position.

Thank you, Jan. So with that, let me turn the meeting back over to Steve.

Sure. Well, we look forward to your joining the Board as soon as we can put a quorum together. We're very close. So we're going to put it off this meeting -- suspend the meeting, and we will reopen the meeting at 11:00 on December 28, when we will complete the business of your company. We thank you very much for your interest in NRx and all that we're doing. Please, Jonathan is very serious in his statements that we do work for our shareholders, and we are very eager to have feedback and advice as we pursue the many opportunities that we have in front of us today. Thank you for your time today, and we look forward to your attendance on the 28th of December at 11:00. Thank you very much.