NRX Pharmaceuticals, Inc.

Good morning and welcome to the NRX Pharmaceuticals Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by a hey-row. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Suzanne Massari with CERN Investor Relations. Please go ahead.

Thank you, Andrea. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under the U.S. Federal Securities Law. These statements are subject to risk 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 10Q being filed today as well, which may be accessed from the investor page on the NRX Pharmaceuticals website. Joining me on today's call from NRX Pharmaceuticals are Stephen Willard, Chief Executive Officer, and Seth Van Voorhees, Chief Financial Officer and Treasurer. Stephen will provide a summary of the company's progress. Seth will review the company's financial results. And then Stephen will review upcoming milestones before making closing comments and opening up for questions. During the Q&A session, Stephen and Seth will be joined by Robert Bestow, Head of Operations and Chief Commercial Officer, and Jonathan Javits, the company's Chief Scientific Officer, to address investor questions. I will now turn the call over to Stephen.

Thank you, Suzanne. Good morning, everyone, and thank you for joining us. Today, we will discuss the third quarter results for our company and provide a business update. In March, we announced that our primary strategic focus going forward is on our psychiatry franchise and the late stage development of NRX 101, our lead investigational compound. Today, we estimate the US annual peak sales potential for bipolar depression with suicidality to be around $2 billion. there are only five drugs currently approved for bipolar depression, none of which is indicated for patients with suicidality. In fact, such patients were excluded from their clinical trials. Our Phase II study specifically enrolled patients with high levels of suicide risk and showed that NRX-101 has the potential to provide improved clinical outcomes in such patients whose only currently approved therapeutical alternative is electroshock therapy. That is why the FDA gave us breakthrough therapy designation and a special protocol agreement allowing for registrational study with 72 patients. In recent months, we have made substantial progress in advancing our development of NRX-101 for the treatment of bipolar depression with suicidality and PTSD, while also exploring other psychiatric indications. In March, we announced the strategic decision to initiate our phase three trial following the release of NRX-101 using processes suitable for ultimate commercial sale of our medicine should we demonstrate safety and efficacy. That milestone was completed and announced last week. Thus, we anticipate initiating our phase three trial under the FDA special protocol agreement in 72 patients as pre-specified with the FDA by the end of this year. We expect to report top line data in the second half of 2023 with initiation of a potential NDA submission by year end 2023, assuming efficacy and safety has been met. Last week, we also announced a debt financing that we project provides us with adequate capital to support this phase three program. NRX-101 is a fixed-dose combination of d-cycloserine, an MMDA receptor modulator, and lorazodone, a drug commonly used for bipolar depression. To our knowledge, NRX-101 is the only oral antidepressant, either approved or in development, that targets patients with bipolar depression and active suicidality, which typically is an exclusion criteria in clinical studies of depression and PTSD. The tragic reality of bipolar depression is that if you know two people with this condition, the odds are that one will attempt suicide. And if you know five people with this condition, the odds are that one will die from suicide. Our phase two and non-clinical evidence suggests that NRX 101 may achieve many of the therapeutic benefits seen with ketamine, which is increasingly used to treat patients with depression and suicidality. Ketamine is known to induce hallucinations. Ketamine is also well known to be neurotoxic and shown to kill brain cells in both animal models and in human clinical reports. FDA has issued warnings about repeated use of ketamine in anesthesia for this reason. We have demonstrated that the ingredients of NRX-101 have not shown potential for neurotoxicity, even at 10 times the expected dose. we have released preclinical findings demonstrating that, unlike ketamine, the NMDA component in NRX101 is non-addictive. Our stable B phase two proof of concept study showed a statistically significant reduction in both depression and suicidality compared to standard therapy in patients with bipolar depression who were acutely suicidal and who were initially stabilized with ketamine. To our knowledge, no oral drug therapy has ever been able to demonstrate a reduction in both depression and suicidal tendencies in this patient population. This is clinically relevant because antidepressants carry black box warning labels regarding potential for increased risk of suicide in vulnerable populations. Based on NRX 101's differentiated therapeutic profile, we believe that we have the potential to address a significant unmet medical need for patients who are currently underserved by available treatment options. Please see our press release today, issued earlier, for our NRX 101 clinical and regulatory milestones achieved to date. These previous milestones established a strong foundation that enabled us to embark on a highly efficient Registrational Phase III program with FDA's advanced commitment to accept regulatory findings from us should we successfully determine safety and efficacy and demonstrate the two. This foundation also allows us to significantly expand the addressable population of patients with bipolar depression and subacute suicidality to patients who are treated in an outpatient setting and to those with PTSD. Now I would like to cover some of our achievements from the third quarter. We are on track to report top-line clinical data for our ongoing Phase II clinical trial of NRX101 in patients with bipolar depression and subacute suicidal ideation in the first quarter of 2023. The objective of the double-blind study is to demonstrate NRX101's ability to significantly improve both depression and suicidality over six weeks when taken twice daily. The study involves patients with bipolar depression and subacute suicidality and does not require the use of ketamine. As mentioned previously, this is one of the studies that could enable us to expand the potential indication for NRX-101, as well as offer a more convenient treatment option on an outpatient setting. We are also on track with plans to initiate a registrational Phase III clinical trial of NRX-101 by year-end, in patients with severe bipolar depression and acute suicidal ideation. This trial will be randomized double-blind trial of NRX-101 versus lorazodone alone in 72 patients. We expect to confirm our Phase II findings that following a successful response to a single infusion of ketamine, treatment with NRX-101 will be superior to lorazodone, the current standard of care in the patient population. We will do this by showing improvement in symptoms of depression as measured by the Montgomery Asperger Depression Rating Scale. Because of the acute nature of these patients, we agreed with the FDA to compare our drug to lorazodone, a standard of care medication, rather than to placebo. If successful, this would provide clear commercial differentiation. In September, we announced plans for an additional indication in PTSD. Approximately 9 million individuals in our country experienced PTSD, one-third of whom had severe PTSD. Between 17 and 22 members of our armed forces of veterans are lost every day to suicide. We view this as another area of very high unmet medical needs. We expect that our medicine will show antidepressant effects in PTSD. However, we are also hopeful that our medicine will demonstrate specific effects on the fear memory components of PTSD and directly reduce symptoms of PTSD beyond depression. Today, there is no approved medicine for these specific PTSD symptoms, and our preclinical studies have shown a reduction in fear memory associated with T-cyclic series. As announced last week, we submitted our expected commercial stage manufacturing process to the FDA so that we can include this drug product in our upcoming registrational phase three trial. We are excited about this milestone in particular, as we believe that adopting a commercial-ready manufacturing process now could lead to a more seamless NDA submission, review, and approval process without the need for bridging studies. Yesterday we announced with release therapeutics holding that we have entered into a definitive settlement agreement to resolve pending litigation at a closing to be held within the next 30 days. More details on the settlement terms can be found in the joint release published on November 13th, 2022 and will be in a future 8K filing with the SEC upon settlement. We believe that this settlement is in our shareholders' interest for the following reasons. We have committed to focusing on our core CNS franchise and Avif to Build is not part of that franchise. The institutional investors who have capitalized our company and the analysts who evaluate our company advise us to focus on our CNS franchise. Under the terms of the settlement, Avif has committed to all further costs of Avif to Build development while paying us up to 43 million in milestones and royalties should they succeed. The failure of Aviptadil in both the NIH and BARDA trials indicate limited potential for Aviptadil in widespread use. So it's a deal that I think is a real benefit for NRX shareholders. Finally, we announced the debt financing with net proceeds of $10 million on November 7th, 2022. that is expected to support our clinical development activities for NRX 101. With that, I will turn it over to Seth for a brief overview of our financial results. Seth?

Thank you, Stephen, and good morning, everyone. It's a pleasure to speak with you again today, and I would now like to review the highlights of our third quarter financial results. For the three-month period ended September 30, 2022, R&D expenses totaled $4.1 million. compared to 6.3 million for the same period in 2021. The decrease in R&D expenses related primarily to a decrease in clinical trials and development expenses related to Zysami. As announced in March of this year, we are focusing most of our R&D expenditures on our psychiatry franchise going forward. For the nine-month period ended September 30th, 2022, R&D expenses totaled 12.6 million as compared to 13.8 million for the same period in 2021. The net increase of 1.3 million is related to a decrease of 1.5 million in clinical trials and development expenses related to Zysami, a decrease of 0.5 million in fees paid to regulatory and process development consultants, partially offset by an increase of 0.7 million in regulatory and process development costs. The nine-month period includes R&D costs related to both to Zysami and to COVID vaccine development, costs that we do not anticipate to incur going forward. For the three-month period ended September 30, 2022, G&A expenses totaled $5.0 million as compared to $13.8 million for the same period in 2021. The decrease in G&A expenses was partially related to a reduction in consulting fees in 2022. For the nine-month period ended September 30, 2022, G&A expenses totaled $21.9 million as compared to $28.4 million for the same period in 2021. The decrease of $6.6 million was primarily related to a decrease of $12.3 million in consulting fees a decrease of $3.4 million in stock-based compensation expense, partially offset by an increase of $4.1 million in legal, professional, and accounting fees, and an increase of $3.7 million insurance expenses. The nine-month period also includes G&A costs related to ZySAMI and to COVID vaccine development, which are costs that we do not expect to incur going forward. For the three-month period ended September 30th, 2022, our net loss was $9.1 million as compared to a net loss of $37.0 million for the three-month period ended September 30th, 2021. For the nine-month period ended September 30th, 2022, our net loss was $29.5 million as compared with a net loss of $62.7 million for the same period in 2021. In the first quarter of 2021, the company recorded a non-cash settlement expense of $21.4 million to reflect the increased fair value of the GEM Warrant on its grant date. We had no settlement expenses for the nine-month period ended September 30, 2022. Now I'd like to comment on our cash resources. As of September 30, 2022, we reported a cash balance of $18.2 million. Last week, we announced the debt financing that added net proceeds of $10 million to our balance sheet that will support our clinical trials and other operational activities. This note has an interest rate of 9% per annum and has a maturity date of 18 months. Additional details regarding the note may be found in the company's form 8K, which was filed on November 9th with the Securities and Exchange Commission. With this financing, we believe that we have sufficient funds to support our clinical development plans for at least the next 12 months, and if necessary, the ability to reduce non-core gene expenses if necessary. With that, I will turn it back to Stephen for closing remarks.

Thanks, Jeff. This is an exciting time for NRX. We believe that NRX 101 is a potentially life-saving medicine that could change the treatment paradigm for individuals with bipolar depression that are also experiencing suicidality. This is a driving force behind our mission of meeting the needs of underserved patients with serious CNS disorders. We have a variety of options with regard to commercial development. Our technology and robust IP portfolio have attracted strong interest and we have been approached by a number of potential partners regarding commercial partnerships for NRX 101. However, we are also prepared to support the commercial launch of this product should approval be granted for NRX 101. We believe that due to the relatively small number of specialized psychiatric facilities in the U.S., a small company such as ours is capable of marketing a first-in-class medicine to support this very high unmet medical need. should our drug be approved. In addition, our team includes professionals who have managed major drug launches for some of the world's largest pharmaceutical companies. We plan to carefully evaluate all available options and make the decision that best meets the needs of patients, shareholders, and NRF. We continue to execute across our portfolio with multiple near-term catalysts on track for the fourth quarter and next year. Assuming the efficacy endpoints in Phase II or Med in our Phase III clinical trial, we plan to initiate the rolling submission of a new drug application to the FDA by the end of next year. Operator, we are ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up the handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster.

The first question comes from Vernon Bernardino of HC Wainwright.

Please go ahead.

Hi. Thanks for taking my question. And Steve, congrats on the progress you've made since coming on board. Just a few questions regarding the clinical trials. What type of data could we expect in first quarter from the ongoing Phase II with NRS101 and BD with SSIB? of acute suicidal ideation behavior, and what endpoints are you considering for the Phase II study with anorexia in PTSD?

Could I turn that to one of my experts? Yeah, let me.

Go ahead, Jonathan. Go ahead.

Thank you, Vernon. On the Phase II trial that's currently underway, the trials actively enrolling and We expect that by the end of the first quarter. We'll be able to talk about top-line data where the endpoint is depression is measured by the mattress scale and suicidality is measured by the CGI SS scale those are the scales Where superiority was demonstrated in the phase 2 stable B trial with regard to PTSD Again, the magic depression scale will be a primary endpoint. However, in that case, we're also hoping to see a difference on the CAPS-5, which is a scale that directly measures symptoms of PTSD in terms of, you know, fear memory, what people commonly call flashbacks, and other debilitating symptoms of PTSD.

Terrific. And as one follow-up regarding the manufacturing that you mentioned, what if any activities are needed to fully establish such as testing runs, the manufacturing capability or process in the US? And when do you expect to have supplies from that process for your clinical trials? Thank you.

Well, the press release that was issued announced that the supplies for the Phase III clinical trial have been released, and the Module III manufacturing file has been filed with FDA. So there will be additional replication runs in order to demonstrate the replicability of the manufacturing practice. And of course, we're sure FDA will have some comments around the manufacturing file. But as Steve emphasized, material that's now been released for phase three use was manufactured using commercial processes so that we hope when, should we demonstrate safety and efficacy, that we'd be able to move directly to distribution and plant inspection without the need for additional bridging studies.

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

Thank you for your question, Vernon.

The next question comes from Ed Wu of Ascendant Capital. Please go ahead.

Yeah, also congratulations on the progress. For PSTD, do you guys have a specific timeline when you guys would initiate for that indication?

No, I think it's too early. Our work with PTSD is in its developing stages. So once we've got some work under our belt, we'll be able to give you more of a timeline for it.

Great. And my last question is, have you guys thought about the international opportunity for NRX 101?

Yes. We have, as I mentioned, we have interest from people who would like to partner with us, and they have appreciated the international interest and international potential of NRX 101 to a great deal.

And those who follow the literature closely will note that France has actually published perhaps the most extensive trial of ketamine for treatment of suicidal depression, both in the context of major depressive disorder and bipolar depression. And in fact, that trial showed that bipolar depression was much more susceptible to effective treatment with an NMDA antagonist than major depressive disorder. So there is considerable interest being demonstrated in our pipeline if you follow the published literature.

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

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

This concludes our question and answer session. I would like to turn the conference back over to Suzanne Massari for any closing remarks.

Thank you, Andrea. We would also like to address a couple of questions that we have received. And this question will go to our management team. And it is, how is NRX Pharmaceuticals preparing for the Phase III study and potential NDA submission in 2023?

Well, as we've said in the call, we are planning to initiate the phase three targeting bipolar with acute suicidality by year end. We have identified a CRO. We are working with our principal investigator. We have several confirmed clinical sites for our trial. Further information will be on the website clinicaltrials.gov. We've invested in developing commercial manufacturing processes. Full tech transfer was recently completed and corresponding manufacturing file update was submitted to the FDA. So those are some of the things, but not all by any means, that we're doing as we prepare for our phase three.

Thank you, Steven. And then we have one additional question.

The healthcare environment is increasingly cost constrained. What feedback have you gotten from payers regarding the use of your investigational medicine?

In today's reality, the only approved therapy patients with suicidal bipolar depression have is electroshock therapy. Analysis of payer data suggests that such patients incur more than $40,000 in annual healthcare costs, experience multiple hospitalizations, and tragically harm themselves all too often. Our research with payers and prescribers regarding the likely marketplace acceptance of an oral medication that could benefit patients with suicidal ideation and behavior showed a high interest. The feedback we received demonstrated strong support for such a medication Payers are aware of the high cost of hospitalization that can go up to two weeks and indicated that costs of less than 10,000 per patient for therapy should we experience no formulary restrictions for treating patients might be a positive development.

Thank you, Steven. And actually one last question.

If your drug ingredients have previously been used for other reasons, why do you have composition of matter patent protection?

Oh, it's terrific. And I'm glad we got to have this question because it is so important that we have composition of matter protection with regard to our drug. clears the field of competitors quite nicely. D-cycloserine has been used worldwide to treat tuberculosis, but it has largely been replaced by newer anti-infectives, in part because of its propensity to cause hallucinations. Lorazodone has been used to treat schizophrenia and bipolar depression, but bears a black box warning because of its propensity, one shared with all drugs of its class, to cause akathisia and suicidal ideations. Our co-founder, Professor Daniel Javid, who is one of the world's 1,000 most quoted scientists, discovered the unique synergy between NMDA antagonists, such as d-cyclotherium, and 5-HT2A antagonists, such as the risodone. When these classes of drugs are administered together, the 5-HT2A component is shown to block the hallucinations that would otherwise be caused by the NMDA drug. And the NMDA component is shown to block the akathisia that would otherwise be caused by 5-HT2A drugs. Prior to this discovery by Dan Javits, the synergy had never been identified, and it's now deemed by patented examiners all over the world to constitute a novel composition of matter.

Thank you once again.

And thank you to everyone for participating today. That is all the time we have for questions. And this concludes the NRX Pharmaceuticals third quarter 2022 results conference call.

And again, thank you all for participating.

Andrea, we're ready to close the call. The conference is now concluded.

Thank you for attending today's presentation