NRX Pharmaceuticals, Inc. Q1 FY2023 Earnings Call

Good day, everyone, and welcome to NRx Pharmaceuticals’ First Quarter 2023 Earnings Conference Call. All participants will be in a 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, Vashnavi. 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-K, which was re-filed on May 1, which may be accessed from the Investors page of the NRx Pharmaceuticals Inc. 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. Following their prepared remarks, Stephen and Seth will be joined by Jonathan Javitt, the Company's Chief Scientist, and Matthew Duffy, the Company's Chief Business Officer, to address your questions. I will now turn the call over to Stephen.

Thank you, Suzanne. Good morning everyone and thank you for joining us to discuss our continued success as we advance our pipeline of innovative therapeutics for patients facing psychiatric disorders with great unmet need, including treatment-resistant suicidal bipolar depression, post-traumatic stress disorder, and potentially chronic pain related to depression. Today, we will discuss first quarter 2023 results and provide a business update. 2023 is off to a great start as we continue to build our leading brain health franchise, advancing our compelling science and building long-term value for our shareholders. In recent months, we've made great strides in our clinical trials for our lead product candidate, NRX-101, while continuing to execute on our corporate strategy. To summarize, we aligned with the FDA on the chemistry manufacturing and controls of NRX-101, as well as a path to commercial stage product, and we continue to align with the FDA on a potential path for approval of NRX-101 in a Type B meeting. We announced encouraging findings from our independent Data Safety and Monitoring Board (DSMB), whose first evaluation of unblinded data identified no safety concerns, and the subsequent evaluation indicated that no safety or futility signals were reported in the first 50 patients treated, providing a positive recommendation to continue enrollment. Based on FDA interactions and DSMB findings, we are consolidating our two clinical trials of NRX-101 in suicidal bipolar depression into one study for patients with Suicidal Treatment-Resistant Bipolar Depression. I'll begin by reviewing recent progress made for NRX-101 in Suicidal Treatment-Resistant Bipolar Depression, PTSD, and chronic pain. NRX-101 is a fixed dose combination of D-cycloserine, an NMDA receptor regulator, and lurasidone, a standard-of-care medicine for use in treatment-resistant bipolar depression. There are approximately 7 million people living with bipolar depression in the U.S., and the risk of suicide is very high within this population. Data indicates that 50% or more of these patients will attempt suicide in their lifetime. However, there are currently no approved medicines for people with suicidal bipolar depression. To our knowledge, NRx is the first company to attempt to bring a medicine to people whose only FDA approved treatment alternative is electroconvulsive therapy. This is a potentially life-saving advance because antidepressants carry black box warning labels regarding the potential for increased risk of suicide in vulnerable populations. Based on NRx's differentiated therapeutic profile, we believe that we have the potential to address a significant unmet need for patients who are currently underserved by available treatment options. Turning to the science behind NRX-101, NMDA antagonist drugs have been shown to reduce symptoms of depression and suicidal ideation, and neither D-cycloserine nor lurasidone has shown potential for abuse, which is an important consideration when treating psychiatric disorders with suicidal thoughts. At NRx, we discovered the unique synergy between NMDA and 5-HT2A targeted drugs, as well as the critical dosages at which D-cycloserine may be effective in these conditions. These discoveries have resulted in a portfolio of 90 patents around the world, 48 of which have now been issued, relating to the treatment of bipolar depression, major depressive disorder, PTSD, and other central nervous system conditions. We initially introduced NRX-101 as a drug that showed benefit in conjunction with ketamine in acute care patients. Proof-of-concept data from the Phase 2 STABIL-B clinical trial, which administered NRX-101 following stabilization of hospitalized bipolar patients with acute suicidal ideation after treatment with ketamine, demonstrated a highly differentiated therapeutic profile in a patient population with no drug therapy options. Based on this data, the FDA granted breakthrough therapy designation and a Special Protocol Agreement (SPA) for NRX-101 and bipolar depression with acute suicidality. In January 2023, the Company initiated a Phase 3 registrational clinical trial of NRX-101 for the treatment of severe bipolar depression with acute suicidal ideation and behavior. Based on recent comments from the FDA at a Type B meeting of NRX-101 for hospitalized patients with acute suicidality, this study has been converged with our Phase 2 clinical trial of NRX-101 and bipolar depression with sub-acute suicidal ideation. A study initiated in 2022 for a much broader potential patient population. This decision was made in March of this year, when we announced encouraging findings from our outpatient trial of NRX-101 in the sub-acute population versus lurasidone. Our independent DSMB examined unblinded data from the first 50 patients and found no futility signal at this time in the trial. Similarly, no safety signals were identified in association with NRX-101, and the DSMB recommended that enrollment in the trial continue as planned. According to the study statistical analysis plan, the failure to identify futility requires that an advantage, though not yet a statistically significant advantage, of the investigational drug relative to the comparator treatment must be observed by the DSMB. The newly converged and upgraded Phase 2b/3 clinical trial includes patients with a suicidal bipolar patient population, which represents a broader indication. We believe the results of this study could be used in a future registrational filing should the trial prove successful. In this trial, we have focused our outpatient clinical trial first on those with the greatest unmet medical needs, specifically those patients who are under the care of a physician for bipolar depression and who have ongoing depressive symptoms and active thoughts of self-harm despite treatment with available medicines. The objective of this multicenter randomized double-blind controlled potentially registrational study is to demonstrate NRx's ability to significantly improve symptoms of depression and suicidality over six weeks when taken twice a day on a home use basis. This study has the potential to expand the use of our medicine to nearly 1 million people who currently suffer from severe depression and suicidal ideation despite expert medical care with currently available medicines. We anticipate that this is a market of approximately $2.2 billion a year. The Company believes that this strategy to converge the ongoing clinical trials and broaden the indication could enable more patients with suicidal bipolar depression the option of an outpatient therapy in the coming years. Data from the ongoing Phase 2b/3 clinical trials are expected in the fourth quarter of 2023. This broader indication may also provide significant advantages in commercialization in a manner consistent with the FDA's recommendations. Importantly, in January 2023, we also reached alignment with the FDA on our proposed manufacturing plan based on a Type C meeting to review our chemistry manufacturing and controls. As a result, NRx is now positioned to conduct registrational trials of NRX-101 and to make NRX-101 available through expanded access and Right to Try programs for patients who have exhausted approved treatment options. We are excited about this milestone, in particular, as we believe that adopting a commercial-ready manufacturing process at this stage of our development can lead to a more seamless NDA submission, review, and approval process under the potential breakthrough therapy designation, without the need for bridging studies. During the first quarter of 2023, the Company refined its ability to validate the psychometric ratings that are used to assess the efficacy endpoints for the clinical trial. The Company relies upon a team of veteran raters who both train independent site raters and monitor the technical quality of each rating. A standard was set of 90% or better concordance between the Company's veteran rating team and site raters. This standard was met for all study participants whose ratings were obtained in their primary language, and management believes that this standard can be maintained for the duration of the trial. In April 2023, the Company contracted with 1nHealth to initiate a recruitment campaign that may cover up to 45 states in the U.S. to recruit sufficient participants for this enlarged trial. The Company has similarly broadened its previously disclosed relationship with Science 37, a contract research organization that conducts decentralized clinical trials, to enroll participants identified by the 1nHealth recruitment initiative and to randomize them to be treated within the broadened clinical trial. 1nHealth has additionally engaged a voice-of-the-patient organization with national reach to publicize the clinical trial to the 800,000 plus subscribers who have indicated a focus on bipolar depression and suicidality. Additionally, last quarter, we continued to work to advance our development plans for NRX-101 in post-traumatic stress disorder (PTSD), another area of high unmet medical need that is also associated with suicidality. Approximately 9 million individuals in our country experienced PTSD, and one-third have severe PTSD, with 10% experiencing suicidality. Between 17 and 22 members of our Armed Forces or veterans are lost every day to suicide. Depression in PTSD may be driven by pathways that are similar to those that drive depression and other conditions. However, NMDA antagonists as a class and D-cycloserine, in particular, may have a more specific effect in the treatment of PTSD. In a preclinical PTSD study, D-cycloserine demonstrated the ability to extinguish recurring images of traumatic events, also known as fear memory, in a validated WKY model of PTSD. This model has similarly been used by others to document a PTSD-specific effect of ketamine. Repeated IV ketamine has also been demonstrated to improve PTSD scores in a randomized controlled trial. Unlike ketamine, however, NRX-101 is not neurotoxic and not addictive, and has not caused psychedelic side effects in clinical trials. We anticipate that our investigational drug will show an antidepressant effect in PTSD compared to placebo, and we hope that it will demonstrate a specific effect on the fear memory component of PTSD and directly reduce symptoms of PTSD itself. Today, there is no approved medicine for these specific PTSD symptoms. We are on track to initiate a study of NRX-101 and PTSD in 2023. We are incredibly excited about the potential life-saving effect of NRX-101, and in order to support the continued clinical development of these programs, we announced the closure of a $2.9 million registered direct offering to support our pipeline efforts and, more specifically, the initiation of an expanded access protocol and safety database for NRX-101 studying treatment-resistant bipolar depression with risk of self-harm. This database allows us to investigate the expanded indication put forward by the FDA's psychiatric division in our Type B meeting for our registrational trial. We look forward to providing you all with an update on our clinical activity in the months to come. The continued financial support from our existing shareholders, based on our existing data and ongoing trials, demonstrates their commitment to people living with serious CNS disorders and the potential of NRX-101 to become commercially successful. We have achieved a number of significant corporate milestones in recent months. In February, we received notice of the issuance of the U.S. patent for NRX-101, which covers the use of NRX-101 to treat patients suffering from depression, including bipolar depression or major depression with or without suicidality. This patent strengthens the Company's intellectual property position until at least 2033. We also strengthened our deep bench of healthcare executives and world-class psychiatrists in recent months. We announced the appointment of Professor Andrew Nierenberg and Professor Marion Leboyer to our advisory board in March. Professor Nierenberg is a Chair, Professor of Psychiatry at Harvard Medical School, and is the Director of the Dauten Family Center for Bipolar Research at Massachusetts General Hospital. He is one of the world's most published scientists in the area of psychiatric research, particularly as it relates to bipolar disease. We are honored to have him as the principal investigator of our ongoing clinical trial in suicidal bipolar depression. Professor Leboyer is one of France's leading psychiatrists, an extensively published researcher in the field of neuropsychiatry, particularly as it relates to bipolar disease and autism. In addition to her academic achievements, Professor Leboyer chairs the Fondation Fundamental and has facilitated an important collaboration between NRx and French psychiatry researchers studying ketamine for the treatment of acute suicidality among hospital patients, particularly patients with bipolar depression. Please see their biographies on our website. The Company has continued to engage in strategic conversations focused on funding the drug approval and commercialization of our product. In parallel, the Company has established an ongoing dialogue with Streeterville Capital LLC, the Company's current debt lender, to address the Company's current debt facility to best support the ongoing needs of the clinical trial. We are confident that we have achieved a strong foundation for NRx that enables us to efficiently advance our clinical trials and make a difference in the lives of patients with life-threatening psychiatric disorders. I would like to express my gratitude to the patients, the NRx team, clinical trial investigators, and shareholders for their continued support. With that, I'll turn it over to Seth for a brief overview of our financial results.

Good morning, everyone. Thank you, Stephen. I will now review the highlights for first quarter 2023 financial results. For the three months ended March 31, 2023, NRx Pharmaceuticals recorded $3.7 million of R&D expenses compared to $5.5 million for the quarter ended March 31, 2022. The decrease of $1.8 million is related primarily to a reduction in clinical trials and development expense related to our discontinued activities related to ZYESAMI. For the three months ended March 31, 2023, NRx Pharmaceuticals recorded $5.8 million of G&A expenses compared to $10.2 million for the three months ended March 31, 2022. The decrease of $4.4 million was primarily related to a decrease in legal, professional, and accounting fees. Our net loss for the quarter was $11 million, an improvement of $2.4 million compared to the net loss of $13.4 million for the comparable quarter in 2022. On the financial side, our cash resources were enhanced in March when we entered into a securities purchase agreement with accredited investors who had previously established positions in the Company. This transaction involved the sale of approximately 3.9 million shares of the Company's common stock and a five-year warrant in a registered direct offering priced slightly above the market at $0.75 per unit for the securities. The investors agreed not to sell these shares of common stock or exercise the warrants for six months following the issuance date. The aggregate gross proceeds for the Company from the offering was approximately $2.9 million. As of March 31, 2023, we had approximately $16.5 million in cash. Assuming future debt payments can continue to be made in stock, the $16.5 million of cash and cash equivalents at the end of the first quarter of 2023 is expected to fund the Company's operations through the expected delivery of data in the fourth quarter of this year from our Phase 2b/3 trial. Additionally, we are evaluating operational efficiencies associated with the completion of our manufacturing activities, as well as considering capital raising activities to extend this runway. With that, I'll turn it back to Steve for closing remarks.

Thanks, Seth. The past quarter has been incredibly productive, and we look forward to advancing our NRX-101 program in suicidal bipolar depression, PTSD, and chronic pain in the months to come. Based on the experience we have as a clinical trial Company working in CNS, NRx is uniquely positioned for success in future growth. We plan to build on momentum in the remainder of 2023 as we continue to execute on multiple regulatory and clinical catalysts. We believe that NRX-101 is a potentially life-saving medicine that could change the treatment paradigm for life-threatening psychiatric conditions, which is the driving force behind our mission to meet the needs of underserved patients with serious CNS disorders. We look forward to updating you on near-term milestones, which are on track for the coming year. This includes the initiation of our study of NRX-101 and PTSD, the advancement of NRX-101 and chronic pain associated with depression, as well as future updates on breakthrough therapy designation meeting for NRX-101 in treatment-resistant suicidal bipolar depression, and data from our Phase 2b/3 study in the fourth quarter. With the shared commitment of our investors, our team, and our researchers we aim to bring hope to the millions of patients with suicidal bipolar depression and PTSD who have been systematically excluded from trials of previous antidepressants. Operator, we are ready to take questions from the call.

Alright. Then we will begin the question-and-answer session. Our first question comes from Ed Woo with Ascendiant Capital. Please go ahead.

Yes, thank you for taking my question. My question is on PTSD additional indication. Do you anticipate starting filing the IND this quarter or the next quarter in order to start a trial by the fourth quarter?

Thank you, Ed. Yes, we do anticipate filing that IND.

Great. And then in terms of how large the possible trial can be. Do you have any indications of how big it may be?

Well, I think from a registration perspective, there were some precedents from the antidepressants' recent approvals. But until there's a formal meeting with the FDA, it's not possible to know exactly what the sample size would be. But I think there's some good precedents in recent approvals of antidepressants.

Great. And then my last question is in terms of what you guys have learned with your current study. Do you think that you'll be able to use any of that data in order to facilitate the trial possibly being easier or being able to go faster?

Well, certainly, a trial for any indication adds to the safety database for all indications, and clinical experience with a drug is always helpful. But the endpoints in PTSD are a little different than the endpoints in depression because, in PTSD, you're primarily relying on the CAPS-5 scale looking at symptoms of flashbacks and recurring memory. Some of that has been demonstrated with ketamine, which, as you know, is a very potent NMDA antagonist. So there's reason to be optimistic that a more controllable NMDA antagonist might also relieve symptoms of PTSD.

Great. Well, thanks for giving me the answer, and I wish you guys good luck. Thank you.

Thank you, Ed.

The next question comes from Jason Kolbert with Dawson James. Please go ahead.

Hi, guys. Congratulations on the progress.

Good morning, Jason. Thank you.

Good morning. Can you talk a little bit about the dynamics of actually enrolling these bipolar depressed patients with suicide ideation? How do they come to you? How do they end up being referred into the trial? What's the entry criteria on these patients? And then I want to talk a little bit about what are the endpoints of the trial?

Thank you, Jason. As you know, we put the protocol for the trial on clinicaltrials.gov, so people are free to read it. The trial enrolls patients who have severe depression as measured by a score of 30 or higher on the MADRS scale, and also have suicidal ideation to the extent that they have a score of 3 or higher on the Columbia suicide severity rating scale. Historically, we've relied on traditional study sites to recruit these patients, either from the patients that they already know in their clinical treatment programs or patients that they're able to reach out to in the community. As Steve discussed earlier in the call, we've decided to go broader than that. We've engaged 1nHealth to set up a recruitment effort licensed in 45 states so far, in conjunction with a decentralized clinical trials organization called Science 37, such that we're able to recruit patients in most of the country. We're in the process of reaching out to a very large pool of people who have identified themselves as having bipolar depression. Rather than require that those patients come to a study site that could be some distance away from them, we have teams of nurses who are able to do the initial screening at a location convenient to the potential participant, including their home to draw blood as needed by the protocol. Furthermore, we have psychometric raters who are able to do the assessments associated with the primary and secondary endpoints for the study on a remote basis. We anticipate that by opening up our recruitment in this manner, we can recruit patients much more efficiently into the study, make it easier for them to stay in the study, and at the same time be able to control the quality of the data through a very small pool of highly experienced raters.

Yeah. I mean, I can appreciate the infrastructure required to accomplish all of that. And given where you are, how confident are you in the velocity of enrollment that supports that statement that you're funded through kind of the data read at the end of the year?

Well, prediction is challenging, especially as Yogi Berra once said when you're talking about the future. What we can tell you is that in the first week of the 1nHealth initiative, there were 150 inbound inquiries, of which 75 were patients who were deemed to potentially meet the study criteria. So the interest in this study is very palpable, and by the time we speak again, I think we'll have a very good handle on the velocity with which enrollment can be achieved.

Okay. Thank you. And can you break down for me just review with me the primary endpoint and what exactly the components of it are that are measured?

So the primary endpoint is very clear-cut. It's the same primary endpoint that was used to approve lurasidone. It's the same primary endpoint that was used to improve ability, which is change in the MADRS depression score at the Montgomery Asberg Depression Rating Scale over 42 days using what's called a mixed model repeated measures regression. All of that is described in detail in our protocol, which people are free to read. The secondary endpoint, the key secondaries include measurement of time to treatment failure. In other words, how long it is between the time you start the study and the time that the treating physicians determine that the medicine you were randomized to isn't working. That's one secondary endpoint. The other secondary endpoint is change in the clinical global impression suicidality severity scale, which is a scale that we saw significant change in the STABIL-B study in the Phase 2 studies that are in this breakthrough therapy designation. So the endpoints are quite transparent in that regard.

Really appreciate the update. Thank you. We'll be watching the progress.

Thank you.

As we have no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Suzanne for any closing remarks.

Thank you, everyone. That is all the time we have for questions. Thank you for joining us this morning. This concludes the NRx Pharmaceuticals first quarter 2023 financial results conference call. Have a great day.

The conference is now concluded. Thank you for your participation; you may now disconnect.