NRX Pharmaceuticals, Inc. Q3 FY2022 Earnings Call

Good morning, and welcome to the NRx Pharmaceuticals Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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.

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 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 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 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 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 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, whose only currently approved therapeutic alternative is electroshock therapy. That is why the FDA gave us breakthrough therapy designation and a special protocol agreement allowing for a 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 have been met. Last week, we also announced a debt financing that we project will provide us with adequate capital to support this Phase 3 program. NRX-101 is a fixed dose combination of 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 criterion 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 by 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 hallucinations. Ketamine is also well known to be neurotoxic, leading to the death of brain cells in both animal models and in human clinical reports. The FDA has issued warnings about repeated use of ketamine and anesthesia for this reason. We have demonstrated that the ingredients of NRX-101 do not show potential generic toxicity even at ten times the expected doses. We have released preclinical findings demonstrating that unlike ketamine, the NMDA component in NRX-101 is non-addictive. Our 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 initially stabilized with ketamine. 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 the potential for increased risk of suicide in 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 issued earlier today 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 the FDA's advanced commitment to accept our regulatory findings. 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, including those treated in an outpatient setting and 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 in an outpatient setting. We are also on track with plans to initiate a 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 a 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 this patient population. We will do this by showing improvement in symptoms of depression as measured by the Montgomery-Åsberg 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 experience PTSD, with one-third of them suffering from severe PTSD. Between 17 and 22 million individuals are affected by this condition and tragically, many of these individuals may die from 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 fear 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 a 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 commercially ready manufacturing process now could lead to a more seamless NDA submission, review, and approval process without the need for additional studies. Yesterday, we announced with Relief Therapeutics Holding that we have entered into a definitive settlement agreement to resolve pending litigation, with 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 shareholders' interest for the following reasons: we have committed to focusing on our core CNS franchise, and the book-to-bill aspect 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 covering 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 Book-to-Bill in both the NIH and BARDA trial indicates limited potential for widespread use. So it's a deal that I think is a real benefit for NRX shareholders. Finally, we announced 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.

Thank you, Stephen, and good morning, everyone. It's a pleasure to speak with you again today. 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, compared to $13.8 million for the same period in 2021. The net decrease 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. This nine-month period includes R&D costs related to both 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 in 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, 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 in 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. For the three-month period ended September 30, 2022, our net loss was $9.1 million, compared to a net loss of $37.0 million for the same three-month period ended September 30, 2021. For the nine-month period ended September 30, 2022, our net loss was $29.5 million, compared to a 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, which 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 needed. With that, I will turn it back to Stephen for closing remarks.

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 should approval 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 ours 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 drug launches at some of the world's largest pharmaceutical companies. 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 in the 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.

We will now begin the question-and-answer session. Our first question comes from Vernon Bernadino of H.C. Wainwright. Please go ahead.

Hi. Thanks for taking my question. And Steve, congrats on the progress made since coming on board. Just a few questions regarding the clinical trials; what type of data could we expect in the first quarter from the ongoing Phase 2 with NRX-101 regarding sub-acute suicidal ideation behavior? And what endpoints are you considering for the Phase 2 study with NRX in PTSD?

Could I pass that to one of my experts? Yes, go ahead, Jonathan.

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 measured by the Montgomery-Åsberg scale and suicidality measured by the C-SSRS 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.

Terrific and as one follow-up regarding the manufacturing that you mentioned, what, if any, activities are needed to fully establish testing runs of 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.

Well, the press release that was issued announced that the supplies for the Phase 3 clinical trial have been released and the module three manufacturing file has been filed with the FDA. So there will be additional replication runs in order to demonstrate the replicability of the manufacturing practice. And of course, we're sure the 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 the FDA for additional bridging studies.

Perfect. That's all of the questions I had today. Thank you.

Thank you for your question, Vernon.

The next question comes from Ed Woo of Ascendiant Capital. Please go ahead.

Yes. Also congratulations on the progress. For PTSD, do you guys have a specific timeline 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 timeline 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 would like to partner with us and they have appreciated the international interest and potential of NRX-101 to a great deal.

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. In fact, that trial showed that bipolar depression was much more susceptible to effective treatment with an NMDA antagonist than major depressive disorder. So there is considerable interest being demonstrated in our pipeline if you follow the published literature.

Great. Well, thanks for answering my question and I wish you guys good luck. Thank you.

Thank you, Ed. We appreciate your being with us.

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. 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?

Well, as we've said in the call, we are planning to initiate the Phase 3 targeting bipolar with acute suicidality by year-end. We have identified a CRO, we are working with our principal investigator, and we have several confirmed clinical sites for our trial. Further information will be available on the website clinicaltrials.gov. We've invested in developing commercial manufacturing processes; full tech transfer was recently completed and the corresponding manufacturing file 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 3.

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?

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, experience multiple hospitalizations, and tragically harm 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 shows high interest. The feedback we received demonstrated strong support for such a mitigation; payers are aware of the high costs 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.

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?

It's great to have this question, as discussing the composition of medical effects related to our drug is essential for eliminating competitors. D-cycloserine has been utilized globally for treating tuberculosis, but it has been largely replaced by newer anti-infectives due to its tendency to cause hallucinations. Lurasidone has been prescribed for schizophrenia and bipolar depression, but it carries a black box warning because, like all drugs in its class, it can lead to Akathisia and suicidal thoughts. Our Co-Founder, Professor Daniel Javitt, who is among the top 1,000 most cited scientists globally, uncovered the unique synergy between NMDA antagonists like D-cycloserine and 5HT2a antagonists like lurasidone. When these drug classes are combined, the 5HT2 component helps prevent the hallucinations that NMDA drugs might induce, while the NMDA component can counteract the active seizures that 5HT2a drugs may cause. Before Dan Javitt's discovery, this synergy had not been recognized, and it is now considered by patent examiners worldwide to be 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 2022 results conference call. And again, thank you all for participating. Andrea, we're ready to close the call.

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