NRX Pharmaceuticals, Inc.

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. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Eric Goldstein, Managing Director of LifeSci Advisors. Thank you. You may begin.

Thank you, operator. 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 Securities and 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 Jammett, Chairman and Chief Executive Officer, Randy Guggenheimer, Chief Business Officer, and Robert Bestoff, 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 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.

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 in recent weeks, advancing our pipeline of three late-stage programs with significant potential in COVID and other respiratory illnesses, a 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 potentially 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 to the second quarter of 2021. In 2020, we were a clinical stage biotech company with a single asset in CNS psychiatry. Over the subsequent 12 months, we brought a dormant drug, of this bill from warehouse boxes to a candidate for emergency use authorization, COVID-19, that has now completed its first phase 2B slash 3 clinical trial. Last month, we were awarded worldwide rights to develop and market a second asset, the pre-life vaccine, in a competitive bidding process organized by Israel government and their 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 program, Zysamin, or vitil acetate, for the treatment of patients with acute respiratory failure in critical COVID-19 and potentially in other respiratory conditions. Zysami is our proprietary formulation of Aviptadil acetate, which in turn is the generic term for synthetic, that means manufactured, basal active intestinal peptide, or VIP. Aviptadil is a drug ingredient, not a drug, that is manufactured and sold by multiple suppliers around the world. Zysami, 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 drug based on its commitments to fund 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 that it binds specifically to the alveolar type 2 cell that's part of the lining of the air sacs of the lung. 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 2 cells to make the surfactant 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 causes 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 two cells. So VIP's action in protecting the lung aside from the direct antiviral action is not COVID specific. It was previously shown in phase one to have a striking effect on treating acute respiratory distress syndrome and has shown suggestions of efficacy in treating sarcoidosis and other chronic lung disease. 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 to ISAMI for a robust clinical development plan consisting of one recently completed and three ongoing clinical trials. Data from a phase 2B slash 3 randomized controlled trial studying intravenous ISAMI 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 two-fold 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 cytokines. That's the inflammatory cytokine that we discussed earlier by day seven, compared to only a twofold increase in IL-6 cytokines among those who were treated with Zysamin, irrespective of the site of care or the patient's baseline severity. Those who suffered this cytokine storm, as it's commonly known, were more likely to die from COVID in the ICU than those who did not suffer the cytokine storm. Thus, the EOA 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 endpoint of whether patients have both survived and recovered by day 60 requires controlling for whether patients were hospitalized in tertiary care or community hospitals. The data has been submitted for peer-reviewed publication. The findings in tertiary care hospitals with Dysamy mirror 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 Zysamin in its active freebie critical care clinical trial, also called TESACO. 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 drug. The trial randomly assigned patients with respiratory failure and critical COVID-19 to Zysami, to Vekluri or Remdesivir from Gilead, to Zysami plus Vekluri, or to placebo. FDA has designated this as a phase three trial which, if successful, may be used in support of new drug approval for Zysamin. 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 began in April, and as of today, we're advised by NIH that 140 patients have been enrolled in the test co-trials. So far, the Trial Data Safety Monitoring Board has reported no unexpected safety issues. A second U.S. government-supported trial with ISAMI is being conducted by the QuantumLeap Healthcare Collaborative. This trial, called I-SPI, 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 Zysamin in non-ICU patients. The data readouts from these trials are expected in early 2022, and we're hoping to have a readout from the INHALE trial by the end of 2021. NRX is sponsoring a trial of inhaled Zysami 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 Zysami in the United States. and we hope for an FDA decision in current, within coming weeks. We've signed a logistics partnership with Cardinal Health in order that Zysami, 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 Zysamine, with its unique target in protecting the AT2 cell, the alveolar type 2 cell 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. Investors have asked us why Aviptadil was not previously developed as a drug, given the encouraging results seen by its discoverer, Professor Sami Saeed, 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 methods and packaging processes. Professor Said's original work was conducted with small amounts of custom synthesized drugs that was formulated and sterilized on the day of use in a hospital pharmacy. That was possible under the pharmacy laws of those years, but is 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, though still experimental, COVID-19 vaccine, called Brie Life. For those of you who don't speak Hebrew, the Brie stands for Brie, the Hebrew word for health. The emergence of the COVID Delta variant 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 Brie Life vaccine is is developed by Israel's Institute for Biological Research. That's an institution whose roots go back to the early collaboration with Dr. Jonas Salk, who developed the polio vaccine. The Bre-Life 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. Freelife vaccine differs from other COVID vaccines in that it presents the entire spike protein of the COVID virus to the body's immune system, rather than merely a small segment of that spike protein. We believe this may be the reason Freelife shows 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 Brie Life vaccine, thereby expanding the spectrum of coverage and its adaptability to future variants. Because Brie Life 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 Greelife 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 variant prior to initiating a phase 3 trial in multiple nations. Originally, we planned to proceed with the placebo control 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 protocol accordingly. Our Zysami 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 human beings, even though it can infect, but it doesn't kill other mammals. Because of the spike protein on the surface of relife, It binds to ACE2 cells in the skin or ACE2 receptor-containing cells in the skin, in the nose, and in the lung. There are some early indications that it may be even more effective when delivered by intradermal or intranasal vaccination than by traditional intramuscular injection. We expect to test these hypotheses in the coming year. We will also be observing the effects of relife in protecting against the Delta variant and even newer variants that have proven so challenging for first-generation vaccines. Georgia is a particularly promising location for clinical development because of the Richard Lugar Center for Public Health Research, named for 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 free life against the original COVID virus and against its newer 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 NRX101 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. In awarding us breakthrough therapy designation, 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 receptor in order to treat depression, but does not cause hallucinations, is not neurotoxic, and especially is not addictive. The development of Benarex 101 is based on Dan Javits' 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 a 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 high 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 ideations. We have a special protocol agreement 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 three pivotal trial results replicate those observed in our phase two study, we'll meet FDA criteria for approval. and have a path for NDA submission, new drug application submission, to the FDA in 2022. This drug potentially represents an important breakthrough for patients who have few 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 patents 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'd encourage you to notice that the uptake in quarterly loss between 2020 and second quarter 2021 has a substantial non-cash component associated with restructuring our employee stock option plan 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. Thus, although we anticipate raising additional investment capital going forward, we've consistently maintained ourselves as a going concern, according to U.S. accounting books. Randy?

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 program 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 Zysami. General and administrative expenses were $12.5 million for the second quarter compared to half a 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 30th, 2021, cash and crash 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 10Q, our core expenses are funded through the next 12 months. Our two major clinical trials are primarily funded by the US government, and we anticipate that the vaccine program will be co-funded by one or more commercial partners. 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 in 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 look forward to updating you on our continued progress. John, we're ready to take questions.

We have a question from Kevin DeGeter at Oppenheimer. What is the target population of Zysami for EUA? The phase 2b3 suggests patients on high-flow nasal cannula had better primary outcome. How does that impact on the patient enrollment criteria and subgroup analysis of the ongoing active study?

Thank you, Kevin. It's a great question. So, the phase 2B3 trial that we conducted enrolled patients who had critical COVID-19 and respiratory failure. That included patients who were in the ICU or the step-down unit, some of whom were still able to be maintained on high-flow nasal oxygen. and some of whom had progressed to the point where they needed either mechanical ventilation, that is a tube down your throat, or non-invasive ventilation. So the latter patients were obviously far more acutely ill than the former patients. This is something we recognized was going to happen when we developed the protocol with the FDA. So we said from the outset, that we would stratify patients by their baseline severity of illness. Initially, we said we'd use the NIAT score, and subsequently we discovered that simply using the baseline level of ventilation was a better way of controlling for baseline severity. Now, the data are a little complicated and are best read rather than recited, but across the board, patients on high-flow nasal cannula, really no matter what kind of hospital they were in, did better on Zysami than on placebo. And we showed substantial differences both in survival and recovery from respiratory failure. Now, it shouldn't be a surprise to anybody that the people who were less acutely ill going into the study, the people on high-flow nasal cannula, did better. than the people who were more acutely ill, who had already progressed to being on ventilation. In the tertiary care hospitals, the people on ventilation also did better on Zysami than on placebo. But once we got to the community hospitals who were in the midst of that horrible surge between December and January, there was very little survival of patients either on drugs or placebo once they had progressed to intubation. So, I think we can say from the clinical trial results alone that, you know, old patients in the tertiary care hospitals, which is about three-quarters of the sample, did substantially better on drugs and on placebo. everybody on hyponasal cannula, if you catch those patients early, if you can catch patients before they get to needing intubation, they're going to do better on drugs than placebo in this trial. Now, if you look at the cytokine data, everybody on drugs, or I should say the mean value of cytokine level on drugs was substantially lower, five-fold lower, than on placebo. You saw that tenfold increase in cytokine across the placebo group versus a twofold increase across the drug-treated group. And that was regardless of site of care or baseline severity. So I think it's fair to say that we saw the biologic effect pretty much across all patients. But how patients ultimately did in terms of survival and recovery was affected by whether they were in a leading tertiary care hospital versus community hospitals that may have been less well-equipped to deal with this absolutely lethal disease. Does that get your question?

Yes, thank you, Saul. Another follow-up question from Kevin at Oppenheimer. What is the development plan of inhaled Zysami? Should we expect it to replace the IV formulation, or will the two formulations target different patient populations?

Well, initially, the two formulations will target different populations because the inhaled formulation is targeted for patients who can hold a nebulizer and actively inhale the drug. And we expect that the drug will be effective there because it's shown promise in other respiratory conditions. And treating the lung directly through an inhaled form of the drug is likely to actually be a more direct form of treatment than giving the drug intravenously. Now, some of the hospitals we talked to want to give the inhaled form of the drug through a ventilator. That's not something, you know, with nebulizers, those are FDA-approved devices. We know that they create the proper dispersion of aerosolized drugs in the lung. Hooking a nebulizer to a ventilator is a little bit of homemade medicine, and we don't know whether inhaled drug will ever be a good approach for somebody who's already intubated. If it turns out to be a good approach for somebody who's already intubated, that would be a major breakthrough.

Okay, great. Thank you. Now some questions from investors. When will you get FUA?

Well, as biotech investors know, The approval conversation with FDA is a dynamic scientific interaction. And we're far from the only company in this EUA dialogue with FDA, but we're encouraged that FDA asks its first questions of us within a few weeks of our EUA submission. We continue to engage with FDA in providing additional statistical analyses in order to support their 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 2B3 study demonstrate clear and statistically significant improvement in patient survival and warrant a grant of emergency use.

Okay, thank you. Next question, why is the FDA taking so long?

Well, you know, as we said, we're in a continual dynamic dialogue with 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 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 FDA recognizes that. We know FDA recognizes that and is moving uncharacteristically quickly towards approving new treatments.

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

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 to VUA. Other medical societies in other countries have approached us and are in the process of conducting their own independent reviews.

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

Well, investors have frequently asked us whether our drug is generic, given that we have no patent protection on Aviptadil itself. just like there's no patent on insulin or other natural peptides that are highly successful drugs today, such as human growth hormone. There is a current patent on specific formulations of Aviptadil using certain buffers at specific acidity ranges. However, one of the inventors on that patent advised us that use of buffers with Aviptadil can inactivate the peptide and must be avoided. We've discussed that in our security filings. Because of this advice, we formulated Zyfami without using any buffers. Aviptidil 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 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 Zysami, which is our proprietary stable form of Avicodil, will yield patents that provide additional protection. Lastly, we've announced partnerships with two companies, TFF and Mankind, who have extensive experience in turning peptides such as ours into dry powder, room temperature stable products that have long-term patent protection.

What is happening in your partnership with Relief Therapeutics?

Well, we've 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 TANQ 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.

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

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 that free life vaccine has potential to demonstrate more robust immunity against new variants of the disease. And we expect that the data in support of this view will be released to the public in the near future. Moreover, the free life vaccine is unique in that it binds to ACE2 receptor in the nose and in the lung.

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 revaccinated 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.

Thank you, Randy. Thank you. Thanks for picking that up.

No problem.

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.