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Presentation

NRx Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $-0.12 EPS, expectations were $0.14.

Operator: Good day and welcome to the NRX Pharmaceuticals Incorporated Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Matthew Duffy, the company’s Chief Business Officer. Please go ahead, sir.

Matthew Duffy: Thank you, Joe. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under US 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 the company’s Form 10-Q filed today, which may be accessed from the Investor page of the NRX Pharmaceuticals, Inc.

website. Joining me on the call are Stephen Willard, our Chief Executive Officer; Jonathan Javitt, our Chief Scientist; and Seth Voorhees, our Chief Financial Officer and Treasurer. Stephen and Jonathan 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, we will address investor questions. I’ll now turn the call over to Stephen.

Steve Willard: Thank you, Matt. Good afternoon, everyone, and thank you for joining us. Our second quarter reflects an important inflection point for the company as we advance our novel NMDA platform. This expansion of our pipeline is driven by our signed partnership agreement with Alvogen and Lotus Pharmaceuticals related to the use of NRX-101, our breakthrough investigational medicine in bipolar depression with suicidality. The milestones and commitments within that partnership, as disclosed in our filings and described in the press release, provide the extensive financial resources needed to fund Phase 3 and commercialization of NRX-101 in this indication without additional dilution to our shareholders, should we deliver a statistically significant data readout.

When we met with FDA last January, and FDA guided us to broaden our clinical indication and to develop a 1,500 person safety database, investors asked how we were going to fund this program. The Alvogen deal answers this question. In our previous calls, we have explained the urgent unmet need for a medicine to treat this group of patients who have a 50% lifetime risk of suicide attempts and who have been excluded from trials of all previous antidepressants. The urgent need is detailed on our website and validated by FDA and an award of breakthrough therapy designation and a special protocol agreement. As further validation of the life-saving applications of this therapy, this week, we published the previously announced results of STABIL-B in the International Journal of Bipolar Disorders, a peer-reviewed, high-impact journal published by Springer Nature.

The lead author is Professor Andrew Nierenberg who leads bipolar research at Mass General Hospital. The article documents a nearly 8-point difference on the MADRS depression scale when NRX is tested against lurasidone, a difference approximately twofold greater than the difference seen when typical antidepressants are tested against placebo. Moreover, to our knowledge, this is the first oral drug to demonstrate a statistically significant reduction in suicidality, the benefits seen only previously with IV ketamine. Now we are engaged in the Phase 2b/3 trial that seeks to document the benefits of NRX-101 in suicidal patients without prior IV ketamine. We have formed a joint steering committee with our partner. Our scientific and management teams are now working regularly in partnership with teams from Alvogen and Lotus in order to collaboratively bring a life-saving drug to market.

I am pleased to announce that our clinical trial is now within 20 patients, have an anticipated data readout. We are now establishing a broad base of study sites in anticipation of a substantially larger Phase 3 initiatives funded by our partners. And more importantly, we are seeing promising indications of quality, with 90% medication compliance and 94% concurrent of depression scores measured at the study site with the scores measured by our central master psychometric raters. Dr. Javitt will provide some insights into the quality metrics we are observing. The Alvogen partnership affords us an opportunity to explore new and broader indications for NRX-101. Because we completed our Phase 3 commercial manufacturing program in Q1, we are able to seamlessly introduce these indications to FDA and have more than 1 million doses of medicine in the warehouse with which to initiate new programs.

Specifically, we are exploring the use of NRX-101 in chronic pain and post-traumatic stress disorder. Jonathan, would you review the science results achieved during Q2 and reflect on our near-term goals?

Jonathan Javitt: Thank you, Steve. So as Steve shared with all of you on the phone, our near term priority remains the delivery of data for NRX-101 in bipolar depression with suicidality, sufficient to trigger the first $10 million milestone payment in our partnership agreement. As you know, we’re the first pharmaceutical company to enroll patients with suicidal bipolar depression in a clinical trial of a potentially life-saving oral medicine. These are patients who have been excluded from the clinical trials of all previous anti-depressant drugs. The high-risk nature of this population has required us to take a high level of caution in recruiting, selecting, and monitoring the care of these vulnerable patients. In March, we advised you that the Independent Data Safety Monitoring Board identified no safety concerns and no futility.

And now we’re pleased to share with you that no unexpected serious adverse events have occurred in this high-risk population since that time. More importantly, clinical trials in psychiatry succeed or fail based on patient compliance with study medicine and the consistency with which depression and other key endpoints are measured from one study to another. And that the things I’m about to talk about are scientifically complex. We’ve posted a paper to the free-print service, which are free to read and reflect on what I’m about to say. So the quality metrics we’re seeing in terms of study retention, safety, medication compliance, and rating reliability give us added confidence that the trial in which we are engaged has the potential to be submitted for drug registration should we prove efficacy.

In other words, we don’t know that the drug is going to work, but we do have increased confidence that we’re measuring the results of the trial in such a way that we will be able to identify efficacy if it’s there. We track the execution of this trial in a number of ways on a daily and weekly basis. Today, I’d like to share the results to date from three of the key metrics we evaluate namely compliance with the prescribed treatment; concordance of efficacy evaluations, otherwise known as inter-rater reliability conducted at the study sites compared to those conducted by the central raters at our company; and lastly, patient enrollment. So first, treatment compliance. So far in our trials, we’ve seen greater than 90% compliance with patients prescribed regimen as measured by pill counts at patient visits.

We’re encouraged by the high level of compliance as we believe this is key to patients experiencing relief from their symptoms. Now let’s talk about concordance or inter-rater reliability. Psychiatry trial is it’s either fail based on their ability to control the accuracy with which the endpoints of the trial are measured. In our case, those endpoints are relief from depression and relief from suicidality. During the first quarter of 2023, we refined our ability to validate the psychometric ratings that are used to assess those efficacy endpoints. We rely on a team of veteran psychometric graders, master’s level or PhD, who both train the raters at the independent study sites and rate and monitor the technical quality of each rating. In other words, we get an audio file of each and every psychometric rating from the study sites and our in-house raters.

We review that information to see whether they agree with the information obtained by the study site. We set a standard that requires the measurements reported from study sites on a patient-by-patient basis to be within 3 points of the master raters score on the standard 60-point Montgomery-Åsberg Depression Rating Scale or MADRS. This rating scale is the primary efficacy endpoints that FDA has required for all recently approved antidepressant drugs. Now the 3-point standard we prespecified in our protocol is substantially stricter than the looser 6-point standard recommended in the literature. But we felt it was essential to reducing site-to-site variables that diminishes the statistical reliability of psychiatry studies. In fact, people have often asked how can we obtain a statistically significant endpoint in the STABIL-B study with such a small population?

And we attribute that to really tight measurements around those endpoints with very low variance to be accounted for. So we also set a standard of 90% or better inter-rater reliability, which is the measure of what percent of ratings meet that 3-point standard. Today, we’ve posted a research report or blinded results from the first 50 patients enrolled in our clinical trial and interviewed in their primary spoken language, documenting 94% inter-rater reliability across study sites. In other words, we have no idea who is on drug and who’s on lurasidone. All we know is how the ratings obtained in the study site stacks up against the ratings obtained from the same patients, same audio files, by our master raters. This finding substantially exceeds their pre-specified baseline requirements and also exceeds the inter-rater reliability that’s routinely published in the literature of the trials.

We believe that this rigorous approach to measuring our primary endpoints is key to being able to successfully prove efficacy in our clinical trials should there be efficacy to prove. In order to meet our safety objectives, we need the ability to recruit substantial number of patients over a short period of time. As we previously noted in April 2023, we contracted with 1nHealth to initiate a recruitment campaign that may cover up to 45 states in the US to recruit sufficient patients for our Phase 3 program. The company has similarly broadened its previously announced relationship with Science 37, a CRO that’s conducting decentralized clinical trials to enroll participants identified by the 1nHealth initiatives and to randomize them to be treated within the broadened clinical trials.

So let me explain that process. In most clinical trials, you set up study sites in particular locations. Those study sites recruit patients. They treat patients. They measure the results. But somebody who lives to 100 miles or 50 miles away from those study sites is really unable to participate. Science 37 has the ability to recruit patients nearly anywhere in the country and send a team of nurses to their door in order to administer the investigational medicine, in order to measure the endpoints of the study. So that our dependence on brick-and-mortar study sites is substantially diminished. And now, 1nHealth has additionally engaged The Mighty, a voice-of-a-patient organization with national reach to publicize the clinical trial to their 800,000-plus subscribers, who’ve indicated a personal focus on bipolar depression and suicidality.

And all of you on the phone are welcome to read the latest press articles that The Mighty is sharing with the bipolar community. Based on these broad coordinated efforts, we expect that data will be available near year end of 2023 to meet the Alvogen milestone. As you know, we began talking to public investors about NRX-101 in March 2022 on the tail of the COVID pandemic. And what we’ve explained the potential impact of our combined formulation of D-cycloserine and lurasidone for bipolar depression, it’s also important to recognize the broader applications of this drug class combination. At NRX-101, we discover the unique synergies between NMDA and 5-HT2A-targeted drugs, those being two different chemical receptors in the brain. Specifically that each component effectively block the potential adverse events effect of the other, creating a potent new therapy with an advantageous safety profile.

Additionally, we’ve identified and patented the critical doses at which D-cycloserine may be effective in various conditions. These discoveries are at the core of our company and at the core of our NMDA platform. These discoveries have resulted in a portfolio of 90 patents around the world, 48 of which have now been issued related to the treatment of bipolar depression, major depressive disorder, PTSD, and other central nervous system conditions. Now the Alvogen agreement anticipates that NRx will develop additional products containing D-cycloserine or other NMDA antagonists in combination with one or more antidepressants or anti-psychotic ingredients for use outside the field of bipolar depression with suicidality, such as chronic pain with or without depression and post-traumatic stress disorder or PTSD.

Last week, we announced the licensure of Professor Apkarian, carrying patent, for the use of D-cycloserine in the treatment of chronic pain therapy. There are approximately 7 million Americans who live with bipolar disorder and episodes of depression. In contrast, more than 50 million Americans live with chronic pain. Just as those with bipolar depression, suicidality have no approved treatments other than electric shock therapy. Those who live with chronic pain are frequently dependent on opioid-based medications; the risks of which have become tragically visible to all over the past few years. Just a few weeks ago, the White House announced that 165,000 Americans died from opioids annually. We’ve now posted a paper to the scientific literature, which you can see on our website, documenting more than 20 years of research, which demonstrates the extensive nonclinical and early clinical evidence that D-cycloserine interrupts the pain pathway at each step between the peripheral pain sensors and the central nervous system while potentially decreasing craving for opioids and those who are afflicted with chronic pain.

We’ve recently published peer-reviewed studies documenting that NRX-101 is not neurotoxic and is not addictive. We believe that chronic pain affords a unique opportunity for NRX-101 and for our shareholders. When we began our work in bipolar depression, opioids were a predominant and widely accepted treatment for chronic pain. At that time, market wisdom suggested that non-addictive, innovative, analgesic drugs could not compete effectively with generic opioids. Today, the situation is quite different. Today, an overwhelming shift in public health policy and public awareness, as reflected in the popular press, recent television series, and multi-jurisdictional litigation, documents a widespread movement against the use of opioids and creates a unique opportunity for non-addictive, non-neurotoxic treatments for chronic pain, an established $72 billion market that is expected to grow to more than $100 billion by 2030.

Of key importance is the recognition by the US Department of Defense of the 2016 study published by Northwestern University Research Group that identified a statistically significant reduction in pain scores at a 400-milligram daily dose of D-cycloserine. That’s the threshold dose that also predicted in our patent portfolio. The DOD acted on this finding by funding a $5 million congressionally directed medical research program award to Northwestern University to study D-cycloserine in several hundred patients with chronic pain. As shown on clinicaltrials.gov, patient recruitment in this trial is complete and study results are anticipated in the near future. Thus, a large public investment in chronic pain therapy, completely non-dilutive to our shareholders, using the key ingredients of our drug, namely D-cycloserine, already has the potential to provide a rapid path to drug approval for the efficacy be shown.

The lurasidone component of our drug may also independently treat chronic pain. As previously announced, we’ve completed our Phase 3 and commercial manufacturing program for NRX-101. This week, we’re opening an investigational new drug file with the FDA for use of NRX-101 to treat chronic pain. The rationale for treatments of chronic pain with D-cycloserine is outlined in the review article that we’ve recently posted and is on our website and in the 2016 scientific paper published by Professor Schnitzer of carrying on their cohorts. In brief, D-cycloserine, which act in NMDA antagonist drug above threshold doses, has demonstrated extensive nonclinical and early clinical efficacy in: one, decreasing the response to no susceptible pain, that is the pain that’s triggered by pain receptors in the body; and two, decreasing craving for opioid drugs with evidence that DCS is both non-addictive and non-neurotoxic.

Regarding post-traumatic stress disorder or PTSD, we’ve previously identified the rationale for treating PTSD with NMDA antagonist drug and shared with you evidence that DCS decreases that pure memory associated with PTSD in nonclinical studies. We plan to investigate NRX-101 in PTSD as an additional indication and to commence planning for that Phase 2 clinical trial in 2023. In summary, I believe our progress this quarter solidifies our ability to reach patients with suicidal bipolar depression. While the results of our ongoing trial remain blinded, we’ve shown scientific evidence that the trial is being effectively executed and rigorously monitored. Additionally, our chronic pain program has expanded the company’s market opportunity tenfold and positions the company for future growth with near-term data readouts.

Our programs address more than $100 billion in market opportunity while serving patients with significant unmet medical needs. As always, I’d like to express my gratitude to the patients, the NRX team, the clinical trial investigators, and most importantly, you, our shareholders for your continued support. Seth Voorhees will now discuss our financial performance.

Seth Voorhees: Thank you, Jonathan, and good afternoon, everyone. I will now review the highlights from our second-quarter 2023 financial results. In June, the company raised $6.3 million in a registered direct offering and negotiated an amendment with Streeterville Capital, the company’s current debt holder, to address the company’s current debt facility to best support the ongoing needs of the clinical trial. The amendment targets reduced monthly redemptions of the loan to $400,000 per month through year-end 2023. For the three months ended June 30, 2023, NRX recorded $3.9 million of R&D expenses compared to $3 million for the three months ended June 30, 2022. The increase is related primarily to an increased clinical trial enrollment in our ongoing Phase 2b/3 trial.

For the same three-month period, we recorded a 38% reduction in general and administrative expenses from $6.6 million in the second quarter of 2022 to $4.1 million for the three months ended June 30, 2023. The decrease of $2.5 million is related primarily to decrease in legal, insurance, and accounting costs. The six-month period from January through June of 2023 similarly shows decreased expenditures as reflected in our financial statement compared to the prior year. As of June 30, 2023, we had $15 million in cash and cash equivalents. These working capital assets are expected to fund the company’s operations through the fourth quarter of this year, which is the expected delivery of data for our Phase 2b/3 trial. Additionally, we are evaluating operational efficiencies to extend this runway.

With that, I’ll turn it back to Steve for closing remarks. Steve?

Steve Willard: Thanks, Seth. 2023 has been incredibly productive so far and we look forward to advancing our NMDA platform in general and specifically our NRX-101 program in suicidal bipolar depression with our partners at Alvogen, as well as our very exciting chronic pain program all in the near term. We believe that NRX-101 is a potentially life-saving medicine that could change the treatment paradigm for a wide range of serious and life-threatening conditions, which is the driving force behind our mission of meeting the needs of these underserved patients. With the shared commitment of our investors, our team, and our researchers, we aim to bring hope to life for the millions of patients who may benefit from our unique products. Operator, we are ready to take questions from the audience.

Operator: [Operator Instructions].

Matthew Duffy: Operator, we’ve received a couple of written questions that I’ll proceed with now. This one is for the company. How is the partnership with Alvogen going so far?

Steve Willard: I think it is going very well. We had a joint executive meeting in person last week. The teams are melding well. I think it’s going very well.

Matthew Duffy: Thanks. This one is for Dr. Javitt. How potent do you believe D-cycloserine in NRX-101 may be in treatment of chronic pain?

Jonathan Javitt: Please let me hear the question again. I didn’t read the second word.

Matthew Duffy: Sorry. How potent do you believe D-cycloserine in NRX-101 may be in chronic pain?

Jonathan Javitt: Well, if you look at the 2016 publication by Schnitzer and of carrying on their coworkers, the reduction seen in treating chronic pain was certainly deemed clinically meaningful. It’s a reduction that is probably larger than what you can obtain from non-opioid pain medicine and may even be comparable to what you can obtain from safe doses of opioid medicines. We’re going to know an awful lot more when the DOD trial reads out because that’s a couple of hundred patients treated over 12 weeks. But there’s reason to hope that NMDA antagonist drug may be quite potent. And in fact, anesthesiologists already treat chronic pain with IV ketamine. But of course, recognize that to get IV ketamine, you’ve got to be in a hospital environment.

It’s not a simple process. But there’s no question that an NMDA antagonist drug block the pain pathway at each step. There are three nerve cells that go between your fingertip and your frontal cortex. And at each step, the connection between nerve cells is regulated by the NMDA receptor.

Matthew Duffy: Another question. Can you talk a little bit about the patients who are going into the Phase 3 study? How they’re doing? And are they continuing through the trial and how that’s going sort of in the big picture?

Jonathan Javitt: Well, I think we shared just about everything we can in the context of a randomized double-blind trial. We’re steadily enrolling patients. We’re doing it with a great degree of caution. So for instance, a study site will identify if patient is potentially eligible. They’ll review the eligibility criteria with us ahead of enrolling the patient. And then they’ll submit the audio files of the MADRS score, rating session, the suicidality rating sessions. And our in-house master raters will validate those floors before somebody gets into the clinical trial. So I think we’re being as careful as we can possibly be about who gets them and how the primary and secondary endpoints are ascertained once they’re in the trial.

Matthew Duffy: Very good. Last written question that we’ve received. Can you talk about the genesis of the Department of Defense study in their — with D-cycloserine and the genesis of a larger trial, the bigger picture around that?

Jonathan Javitt: Well, we had nothing to do with the Department of Defense study. So Dan Javitt, the Co-Founder of this company, began engaging with D-cycloserine as a potential anti-depressant drug around 2004, professor of carrying and his coworkers, similarly, began studying the potential for D-cycloserine to be used to treat chronic pain. They’ve developed a substantial basic science base, which is cited in the review paper that we’ve posted for you. And they perform that first 40 person trial, which yielded the positive results. The trial itself was not deemed to have met its primary endpoint because they studied patients at 50 milligrams, 100 milligrams, 200 milligrams, and 400 milligrams of D-cycloserine, and they didn’t see a benefit across all of those doses.

They saw statistically significant benefit only at the highest dose. They reported that out in 2016. And they applied to the Department of Defense who responded with a $5 million grant to do a larger confirmatory trial. And we don’t know any more about that trial. It’s available to the public; you can read about it on clinicaltrials.gov. But we do know that data collection is complete and the study is anticipating a readout this year. So we’re very excited that the study happened. And we’re making plans to initiate registration study should that study yield a positive readout.

Matthew Duffy: Thank you.

Operator: The next question will come from Ed Woo with Ascendiant Capital.

Ed Woo: Yeah. Congratulations on the progress. My question is on the partnership that you guys found recently with Lotus and Alvogen. A lot of this obviously very strong in Asia. How much efforts are you going to be doing to expand these drugs into Asia? Or is it pretty much just focused on US approval first before you move into Asia? Thank you.

Steve Willard: Thanks for that question, Ed. I think it’s significant that Lotus is a full partner in this because they are very strong on in Asia. I think as we go through into the Phase 3 trial and get closer to commercialization, some of those decisions will be made. But I know that, for example, in our meetings on the commercial side, Lotus is always present at the table. And I think that bodes well for a major effort in Asia as well as in the US. That said, of course, the US is a much larger market for the product.

Ed Woo: Great. Well, thank you for answering my questions, and I wish you guys good luck. Thank you.

Steve Willard: Thank you.

Operator: [Operator Instructions]. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Steve Willard for any closing remarks. Please go ahead, sir.

Steve Willard: Thank you very much and we very much appreciate your interest in NRX Pharmaceuticals. We thank you for listening to our presentation on this very exciting quarter. And we hope that you will follow us closely in the weeks and months to come. Thank you very much.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.