Earnings Call Transcript - NRXP Q2 2021

Operator, Operator

Greetings, and welcome to the NRx Pharma Second Quarter 2021 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your hosts, Eric Goldstein, Managing Director, LifeSci Advisors.

Eric Goldstein, Managing Director

Thank you, operator. Before we proceed with the call, I'd 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 Securities & Exchange Commission. 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 we issued yesterday and in our Form 10-Q, which may be accessed from the Investors page of the NRx website. Joining me on today's call from NRx are Jonathan Javitt, Chairman and Chief Executive Officer, Randy Guggenheimer, Chief Business Officer, and Robert Besthof, Chief Commercial Officer. Jonathan will provide a summary of the company's progress during the quarter and recent weeks, before turning it over to Randy for a review of the company's financial results. Following their prepared remarks, the management team will address investor questions. I will now turn the call over to Jonathan.

Jonathan Javitt, Chairman and CEO

Thank you, Eric. Good morning, everyone. And thank you for joining us on the inaugural NRx quarterly results call. As we move the company forward rapidly on many fronts, we're also formalizing our investor outreach, and we intend to host regular opportunities for interactive dialogue. We appreciate your attendance today. We look forward to answering your questions on this and future quarterly calls. Yesterday, we issued a press release outlining the encouraging progress made during our last quarter, and recently advancing our pipeline three late-stage programs with significant potential in COVID and other respiratory illnesses, in COVID vaccine and a drug for suicidal bipolar depression. I'll spend just a few brief moments summarizing each of these programs and the developments that we've made over the quarter and in recent weeks. I'll then turn the call over to Randy for a review of our second quarter results. Before we conclude the call, I'll be answering the questions some of you have submitted online, as well as potential questions from analysts. Before diving into the specifics of each program, it makes sense to reflect for a moment on the change in our company from Q2 2020 through the second quarter of 2021. In 2020, we were a clinical stage biotech company with a single asset in CNS research. Over the subsequent 12 months, we brought a dormant drug, Aviptadil, from obscurity to a candidate for emergency use authorization for COVID-19 that has now completed its first Phase 2b/3 clinical trial. Last month, we were awarded worldwide rights to develop and market the assets related to BriLife vaccines in a competitive bidding process organized by the Israeli government and our Institute for Biological Research. Along the way, we've developed an executive team and board that has learned how to manage the rapid change that occurs in the midst of an unprecedented public health emergency. So let's begin with an overview of our lead programs ZYESAMI or Aviptadil-acetate for the treatment of patients with acute respiratory failure in critical COVID-19 and potentially in other respiratory conditions. ZYESAMI is our proprietary formulation of Aviptadil-acetate, which in turn is a generic term for synthetic vasoactive intestinal peptide or VIP. Aviptadil is a drug ingredient, not a drug, that is manufactured and sold by multiple suppliers around the world. ZYESAMI, based on its manufacturing methods, is a proprietary product. We have signed a collaboration agreement with Relief Therapeutics, under which, Relief has rights to share in the profits of our drugs based on its commitments to fund the development of our drug, all of which is delineated in our security filings. VIP has a unique mechanism of protecting the drug from injury, and then it binds specifically to the alveolar type II cells as part of the lining the air sacs of the lungs. VIP has long been known to have potent anti-inflammatory and anti-cytokine activity in animal models of respiratory distress of acute lung injury and of inflammation. It stimulates these alveolar type II cells to make the surfactants that must coat the lining of the lungs so that the lungs can exchange oxygen with the blood. Loss of surfactant causes the alveoli or air sacs to collapse and results in respiratory failure, both of which are hallmarks of critical COVID-19. VIP has also been shown in preclinical models to prevent replication of the coronavirus within those type II cells. So VIP's action in protecting the lungs aside from the direct anti-viral action is not COVID specific. It was previously shown in phase 1 to have a striking effect on treating acute respiratory distress syndrome and has shown suggestions of efficacy, including in sarcoidosis and other chronic lung diseases. It may have other uses as a treatment for various forms of lung injury. Given the urgency in finding new therapeutic options for the treatment of severe COVID-19, we have rapidly moved ZYESAMI forward with a robust clinical development plan consisting of one recently completed and three ongoing clinical trials. Data from a phase 2b/3 randomized controlled trial studying intravenous ZYESAMI in patients with critical COVID-19 has shown a statistically significant difference in the primary endpoint of patients being alive and free of respiratory failure at day 60. These are patients who started out in the ICU when controlling for baseline severity and also controlling for whether they were treated in a tertiary versus a regional hospital. Without controlling for the site of care for the type of hospital, we were able to demonstrate a twofold increased odds of survival across all patients and all hospitals in the study at a statistically significant level. Moreover, the patients who received placebo demonstrated a tenfold increase in the level of IL-6 cytokine, that's the inflammatory cytokine that we discussed earlier by day seven, compared to only a twofold increase in IL-6 cytokine among those who are treated with ZYESAMI, irrespective of the site of care or the patient's baseline severity. Those who suffered this cytokine storm, as is commonly known, were more likely to die from COVID in the ICU than those who did not suffer this cytokine storm. This, the EUA submission that's pending before the FDA suggests that a significant biological effect was seen across all patients, a significant effect on survival was seen across all patients without regard to site of care, and the endpoints of whether patients have both survived and recovered by day 60 needs to control for whether patients were hospitalized in tertiary care or community hospitals. The data has been submitted for peer review publication. The findings in tertiary care hospitals with ZYESAMI neared the six-fold difference in mortality and recovery that was observed in a 45 patient administratively controlled open-label study at the Houston Methodist Hospital, one of the nation's top 10 Tertiary Care Hospitals. Based on these encouraging trials, the National Institutes of Health selected ZYESAMI and it's ACTIV-3b Critical Care clinical trial, also called TESICO. NRx has been named an industry partner by the National Institute of Allergy and Infectious Diseases. NIH is funding the costs of the clinical trial with NRx providing the investigational drugs. The trial randomly assigns patients with respiratory failure in critical COVID-19 to ZYESAMI, to Veklury or Remdesivir from Gilead, to ZYESAMI + Veklury or to placebo. FDA has designated this as a Phase III trial, which if successful, may be used in support of new drug approval for ZYESAMI. While we hope that emergency use authorization might be obtained with a single clinical trial, typically a new drug approval will require more than one adequately-controlled trial. Enrollment again in April, and as of today, were advised by NIH, and 140 patients have been enrolled in the TESICO trial. So far, the trial data safety monitoring board has reported no unexpected safety issues. A second U.S. government-supported trial with ZYESAMI is being conducted by the Quantum Leap Healthcare Collaborative. This trial called I-SPY, is supported by the Biomedical Advanced Research Development Authority of the U.S. Department of Health and Human Services. Ongoing studies include a Phase 2b/3 randomized controlled trial of Inhaled ZYESAMI in non-ICU patients. The data readout from these trials are expected in early 2022, and we're hoping to have a readout from the inhaled trial by the end of 2021. NRx is sponsoring a trial of inhaled ZYESAMI for patients with severe, but not critical COVID-19, not only in the U.S. but with study sites soon to open in the Nation of Georgia. We originally hoped to complete enrollment by this quarter, but we were delayed as the pandemic slowed enrollment for several months. Enrollment has now accelerated with the resurgence of the pandemic. We've applied for emergency use authorization for ZYESAMI in the United States, and we hope for an FDA decision in turn within the coming weeks. We've signed a logistics partnership with Cardinal Health in order that ZYESAMI, if it is approved for emergency use, can reach any patients in the U.S. within 24-hours. Our interpretation of our clinical trial results is that time is of the essence when treating COVID. Outside of the U.S., we were recently granted emergency use authorization in the Nation of Georgia, with additional expansion possible throughout the Caucasus region. As the spike in cases this summer has shown, COVID-19 is likely to remain an endemic problem globally with a persistent threat of regional outbreaks. Development of new therapeutic options is an urgent priority as Dr. Anthony Fauci stated during congressional testimony last April. We believe that ZYESAMI with its unique target in protecting the AT II cells, the alveolar type II cells of the lung, and its effect on preventing cytokine rise in clinical trials, occupies a unique niche in the therapeutic spectrum and may ultimately be paired with other drugs that target other mechanisms. The reason why Aviptadil was not previously developed as a drug, given the encouraging results seen discovered by Professor Sami Said in the early 2000s. While we were not involved at the time, a likely answer is that VIP, like many peptides such as insulin and human growth hormone, is unstable at room temperature and is destroyed by many common pharmaceutical manufacturing and packaging processes. Professor Said's original work was conducted with small amounts of custom synthesized drugs that were formulated and sterilized on the day of use in a hospital pharmacy. That was possible under the pharmacy laws of those years, but it's not possible today. Although the public has focused extensively on our clinical trials program, much of our work has been focused on creating a long-term stable form of Aviptadil. And we believe that along the way, we've developed valuable know-how, some of which can become protectable intellectual property. Last month, we announced that the Government of Israel signed a Memorandum of Understanding awarding us worldwide exclusive rights to develop and market its innovative still-experimental COVID-19 vaccine called BriLife. For those of you who don't speak Hebrew, the Bri stands for 'Bri', the Hebrew word for health. The emergence of the COVID Delta variants, and the rapidity with which this and other variants have eroded the immunity generated by first-generation vaccines highlights the ongoing need for continued vaccination innovation, research, and development in addition to therapeutics. The BriLife vaccine is developed by Israel's Institute for Biological Research, an institution whose roots go back to the early collaboration with Dr. Jonas Salk, who developed the polio vaccine. The BriLife vaccine is based on a non-pathogenic altered virus that was previously used to develop a successful FDA-approved vaccine against Ebola. This platform was further optimized by the IIBR and targeted towards COVID-19. The BriLife vaccine differs from other COVID vaccines in that it represents the entire spike protein to the COVID virus through the body's immune system rather than merely a small segment of that spike protein. We believe this may be the reason BriLife showed encouraging protection against Delta and other variants in preclinical studies. Additionally, as new variants are discovered, the spike protein complex of those new variants may be rapidly added to the BriLife vaccine, thereby expanding the spectrum of coverage and its adaptability to future variants. Because BriLife is a self-propagating live virus vaccine, we anticipate rapid and affordable manufacturing scale-up and the ability to deliver to a large population across the world, should the vaccine be successful. Recently, we announced the initiation of a Phase 2b trial of the BriLife vaccine to be conducted in the Nation of Georgia. The purpose of this study was to confirm the dose level, and the vaccine's ability to generate an immune response against the COVID-19 Delta variants prior to initiating a Phase 3 trial in multiple nations. Originally, we planned to proceed with a placebo-controlled design, that is in the final stages of enrollment in Israel. However, just this week, we received indication that the Georgia Ministry of Health would prefer we go straight to a non-inferiority design, an active comparator design against an already approved vaccine, and we're in the process of revising our clinical protocols accordingly. Our ZYESAMI program has taught us a great deal about the interaction between the COVID virus and the H2 receptors in the lung and elsewhere. Those are the angiotensin-converting enzyme receptors that enable the COVID virus to attack and kill humans, even though it can affect but doesn't kill other mammals. Because of the spike protein on the surface of BriLife, it binds to H2 cells in the skin rather than those in the lung. There are some early indications that it may be even more effective when delivered by intradermal or intranasal vaccinations than by traditional intramuscular injection. We expect to test these hypotheses in the coming year. We will also be observing the effects of BriLife in protecting against the Delta variants and even newer variants that have proven so challenging for first-generation vaccines. Georgia is a particularly promising location for clinical development due to the Richard Lugar Center for Public Health Research, named before the late Senator from Indiana and built by the U.S. Government in collaboration with leading scientists in Georgia. We aim to enroll sufficient patients to prove efficacy of BriLife against the original COVID virus and against similar variants by early 2022. We at NRx are honored to have been selected for this project and grateful for the trust placed in us by the Government of Israel, the people of Georgia, and its neighboring countries. As the Delta and subsequent variants continue to threaten the immunity generated by first-generation vaccines, we hope that this new vector-based approach may offer enhanced immunity. Let's turn for a moment to the ongoing development of our drug NRX-101 for the treatment of suicidal bipolar depression, a condition that accounts for a large part of the approximately 50,000 deaths attributed to suicide annually in the United States alone according to the CDC. Awarding us breakthrough therapy designation, the FDA agreed with us that suicidal bipolar depression constitutes a significant unmet medical need. The only currently approved treatment for this condition is electroshock therapy or ECT. Sadly, if you know two people with bipolar depression, chances are one will attempt suicide at some point in his or her life. If you know people with bipolar depression, unfortunately one is likely to succeed. There is a compelling unmet medical need for an orally available drug that treats the NMDA receptors in order to treat depression, but does not cause hallucinations, is not neurotoxic, and especially, is not addictive. The development of NRX-101 is based on Dan Javitt's early discovery of the role of the brain's NMDA receptor in psychiatric disease and his lifetime of research in neurochemistry that led to the award of the Composition of Matter patent that covers NRX-101 in 2020. So NRX-101 is a patented dual targeted mechanism of action, that means it binds to both NMDA and 5-HT2A receptors in the brain, designed to achieve a higher level of NMDA blockade without significant NMDA side effects typically associated with the NMDA mechanism such as the hallucinations that are frequently seen with ketamine. Five human studies have shown a positive effect on depression and/or suicidal ideation. We have a special protocol and agreements in place with the FDA for NRX-101 pivotal trial, and NRX-101 has been granted breakthrough therapy designation, fast track designation, and has received a biomarker letter of support. We believe that if our phase 3 pivotal trial results replicate those observed in our phase 2 study, we'll meet FDA criteria for approval and have a path for NDA submission to the FDA in 2022. This drug potentially represents an important breakthrough for patients who have fewer therapeutic options, and we believe presents a significant commercial opportunity as well in both suicidal depression and post-traumatic stress disorder, which is also associated with suicidality. The Composition of Matter patent awarded for the dual-target mechanism of NRX-101 is extensible to other dual-targeted drugs for major depression and other conditions. We hope to announce a companion drug development program to treat major depression in the near future. With that, I'll turn it over to Randy for a brief overview of our financial results. Before doing so; however, I do encourage you to notice that the uptick in quarterly loss between 2020 and second quarter 2021 has substantial non-cash components associated with restructuring our employee stock option plans, to meet the legal requirements of the merger with BRPA that we conducted in May. There were also substantial one-time costs associated with effecting the merger.

Randy Guggenheimer, Chief Business Officer

Thank you, Jonathan. For our second quarter, we reported a net loss of $16 million, compared to a net loss of $100,000 for the three months ended June 30, 2020. While this may sound like a large number for a small company, two-thirds of the G&A expenses were non-cash adjustments to earnings, associated with reconfiguring our employee option programs to meet the legal requirements of the merger, and with warrants held by the merger partner. The remaining G&A expenses were largely attributable to one-time expenses associated with the merger. Research and development expenses were $4.7 million during the second quarter, compared to $1.4 million for the prior year period. This was primarily due to an increase in clinical trials and development expenses for ZYESAMI. General and administrative expenses were $12.5 million for the second quarter, compared to $0.5 million during the prior year period. This was driven primarily by $5.5 million of consulting fees, of which $4.9 million relates to non-cash consulting fees and $4 million in stock compensation expense, of which $3.3 million relates to modification of stock options and warrants due to the merger with BRPA. As of June 30, 2021, cash and cash equivalents were $13.4 million, compared to $1.9 million as of December 31, 2020. In addition, we received $9.2 million in cash investments subsequent to June 30, 2021, from the exercise of warrants. As stated in our 10-Q, our core expenses are funded through the next 12 months. Our two major clinical trials are primarily funded by the U.S. Government, and we anticipate that the vaccine program will be co-funded by one or more commercial partners.

Jonathan Javitt, Chairman and CEO

With that, I will turn it back to Jonathan for closing remarks. Thank you, Randy. Before taking questions, I just want to emphasize our continued commitment to rapid efficient drug development. We've made tremendous progress in our three lead programs in an incredibly short amount of time and have focused our resources and energies on areas of critical unmet medical needs, where we can have the most impact. We're confident that we can realize the opportunities before us, and I look forward to updating you on our continued progress. John, we're ready to take questions.

Unidentified Company Representative, Analyst

We have a question from Kevin DeGeeter at Oppenheimer. What is the target population of ZYESAMI from EUA? The Phase 2b/3 suggests patients on a high flow nasal cannula better primary outcome. How does that impact on the patient enrollment criteria and subgroup analysis of the ongoing Activ study?

Jonathan Javitt, Chairman and CEO

Thank you, Kevin. It's an excellent question. The Phase 2b/3 trial we conducted included patients suffering from critical COVID-19 and respiratory failure, specifically those in the ICU or step-down unit. Some patients were on high-flow nasal oxygen, while others had deteriorated to needing mechanical or non-invasive ventilation, indicating a greater level of illness in the latter group. We anticipated this variation when we formulated the protocol with the FDA, and stated that we would categorize patients according to their baseline severity of illness. Initially, we planned to use a specific scoring system for this, but later found that basing it on the initial level of ventilation offered a better means of assessing severity. While the data is quite complex and is better understood in written form, it demonstrated that patients using high-flow nasal cannula performed better on ZYESAMI compared to placebo, regardless of their hospital type, showing significant improvements in both survival and recovery from respiratory failure. It's expected that those less severely ill who started on high-flow nasal cannula would fare better than more critically ill patients who needed ventilation. In tertiary care hospitals, those on ventilation also showed better outcomes with ZYESAMI compared to placebo. However, in community hospitals during the severe surge between December and January, survival rates for intubated patients were very low, regardless of treatment. From the clinical trial results, it’s clear that older patients in tertiary care facilities, which comprised about 75% of the sample, benefited significantly from the drug compared to placebo. Furthermore, patients on high-flow nasal cannula, if treated early before requiring intubation, also had better outcomes with the drug. The cytokine analysis revealed that average cytokine levels were substantially lower in the drug group, fivefold lower than in the placebo group. There was a tenfold rise in cytokines among the placebo cohort compared to a twofold increase in the treatment group, and this was consistent across different care sites and baseline severities. Overall, we observed biological effects broadly across all patients, but the outcomes in terms of survival and recovery varied based on whether they were treated in advanced tertiary care hospitals or community hospitals that faced more challenges in managing this severe disease. Does that address your question?

Unidentified Company Representative, Analyst

Yes, thank you. So, another follow-up question from Kevin DeGeeter at Oppenheimer. What is the development plan for Inhaled ZYESAMI? Should we expect it to replace the IV formulation? Or will the two formulations target different patient populations?

Jonathan Javitt, Chairman and CEO

Initially, the two formulations will focus on different patient groups because the inhaled formulation is designed for patients who can use a nebulizer and actively inhale the medication. We anticipate that the drug will be effective in this context as it shows promise in treating other respiratory conditions. Administering the medication directly to the lungs via the inhaled method is expected to be a more direct treatment approach compared to intravenous administration. Some hospitals we consulted are interested in using the inhaled formulation with a ventilator, but nebulizers are FDA-approved devices that ensure proper aerosol drug dispersion in the lungs. Adapting a nebulizer for use with a ventilator resembles a bit of makeshift medicine. We are uncertain whether the inhaled drug will be beneficial for patients who are already intubated. However, if it proves effective for these patients, it would represent a significant advancement.

Unidentified Company Representative, Investor

Now, some questions from investors. When will you get EUA?

Jonathan Javitt, Chairman and CEO

Well, as biotech investors know, the approval conversation with the FDA, it's a dynamic scientific interaction. And we're far from the only company in this EUA dialogue with the FDA. But we're encouraged that the FDA asked its first questions of us within a few weeks of our EUA submission. We continue to engage with the FDA in providing additional statistical analyses in order to support the review, given the limited therapeutic options that are available to patients with critical COVID-19. We remain firm in our belief that the results of our Phase 2b/3 study demonstrate clearer and statistically significant improvement in patient survival and warrant the grant of emergency use.

Unidentified Company Representative, Investor

Next question. Why is the FDA taking so long?

Jonathan Javitt, Chairman and CEO

Well, as we said, we're in a continual dynamic dialogue with the FDA, and we've been responsive to their requests for additional analyses and data. There's no statutory timeline for emergency use reviews. On the other hand, I think we see that the FDA is processing these emergency use reviews actually far more quickly than it processes traditional drug approval reviews. The country urgently needs new treatments for critical COVID-19 as evidenced by the many calls we get from physicians and patients, and we think the FDA recognizes that; we know the FDA recognizes that and is moving uncharacteristically quickly towards approving new treatments.

Unidentified Company Representative, Investor

Next question. What was the process for the grant of EUA in the Caucasus region?

Jonathan Javitt, Chairman and CEO

So, in the Nation of Georgia, the process was a little different from the FDA process in that the National Physicians Society reviewed our clinical trials data and made a formal recommendation to Georgia's Prime Minister and Minister of Health in favor of emergency use authorization. That was the basis of the grant of the EUA. Other medical societies in other countries have approached us and are in the process of conducting their own independent reviews.

Unidentified Company Representative, Investor

Okay, so we have another question here. Who owns the patent for Aviptadil and why won't you face generic competition?

Jonathan Javitt, Chairman and CEO

Well, investors have frequently asked us whether our drug is generic, given that we have no patent protection on aviptadil as such. Just like there's no patent on insulin or other natural peptides that are highly successful drugs today. There is a current patent on specific formulations of aviptadil using certain buffers at specific assisting ranges. However, one of the inventors on that patent advised us that using buffers with aviptadil can inactivate the peptide and must be avoided. We've discussed that in our security filings. Since aviptadil has never been approved as a drug in the United States, or in most other major markets, therefore should our drug succeed in gaining approval, we expect that it will be afforded what's called data exclusivity for some period of time by the FDA and other regulators. During this period of time, the clinical data that we generate in support of approval can't be used by others to file a generic drug application. We also hope that the formulation work we've done to create ZYESAMI, which is our proprietary stable form of aviptadil, will yield patents that provide additional protection. Lastly, we've announced partnerships with two companies TFF and Mannkind, who have extensive experience in training peptides such as ours into dry powder room temperature stable products that have long-term patent protection.

Unidentified Company Representative, Investor

What is happening in your partnership with Relief Therapeutics?

Jonathan Javitt, Chairman and CEO

Well, we signed a collaboration agreement with Relief Therapeutics, under which Relief had the right to fund costs of development, formulation, and clinical trials in return for a predetermined share of profits. All of this is detailed in our public filings, including our 10-Q filed yesterday. As we've disclosed, Relief chose not to fund significant portions of the development program or to fund the inhaled use trial, therefore, NRx funded those activities with other sources of capital. We remain committed to arriving at a mutually agreeable business relationship with Relief going forward.

Unidentified Company Representative, Investor

Now we have a question on the vaccine. Why get involved in a new vaccine, isn't the world already vaccinated?

Jonathan Javitt, Chairman and CEO

Well, unfortunately, only a portion of the world is vaccinated. And we're seeing even vaccinated patients contract, get hospitalized, and die from new variants of COVID, like the Delta variant. We believe the BriLife vaccine has potential to demonstrate more robust immunity against new variants of the disease. We expect that the data in support of this field will be released to the public in the near future. Moreover, the BriLife vaccine is unique in that it binds to H2 receptor in the nose and in the lungs, and that enables it to be delivered by nasal or inhaled dosing, and it may create what is called mucosal immunity. Most vaccines work by creating circulating antibodies and immune cells against the virus; mucosal immunity means that the cells lining the lung and respiratory tract become immune to the virus as well. We're concerned that this virus will continue to mutate and create variants that bypass any vaccine. Just like influenza, we expect that people will need to be re-vaccinated on an ongoing basis and more convenient routes of administration will be important for patients. We look forward to organizing a Science Day for analysts and interested investors in the near future to share the basis of our enthusiasm for this clinical development program, and we thank the IIBR for selecting us as its partner.

Unidentified Company Representative, Investor

Thank you, Randy. Thanks for picking that up.

Randy Guggenheimer, Chief Business Officer

No problem.

Operator, Operator

I'm showing no further questions in the queue at this time. This concludes the NRx second quarter results conference call. Thank you all for participating.