NRX Pharmaceuticals, Inc.

Good afternoon, everyone, and welcome to the NRX Pharmaceuticals Inc. first quarter of 2024 results conference call. Currently, all participants are in a listen-only mode. As a reminder, this conference call is being recorded. I will now turn the call over to Matthew Duffy, the company's chief business officer. Please go ahead.

Thank you, Jonah, and welcome, everyone. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under U.S. federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise the forward-looking statements. Information presented on this call is contained in the press release issued earlier today and in the company's Form 10-Q filed today, which may be accessed from the Investors page of the NRX Pharmaceuticals, Inc. website. Joining us today on the call are Stephen Willard, our Chief Executive Officer, Dr. Jonathan Javitt, our founder, chairman, and chief scientist, and Richard Norito, our chief financial officer and treasurer. Stephen and Jonathan will provide a summary of our company's progress. Rich will review the company's financial results, and then Stephen will review upcoming milestones before making quick comments. Following their prepared remarks, we will address investor questions. Now I'll turn the call over to Stephen. Steve?

Thank you, Matt. Good afternoon, everyone, and thank you for joining us. NRX has had an incredibly productive and eventful start to 2024, with a great deal more to come through the remainder of the year. We are accelerating our work to bring hope to life. The past quarter, culminating with our clinical trial results last week, has been enormously productive. Jonathan will be discussing our scientific progress. Let me begin by addressing our progress as a company. You will notice that at the end of March, we had a lower cash balance than had been typical for us because we used available cash to pay down debt to Street Available LLC. During the quarter, we signed and announced a $5.1 million advance against milestones from Alvagen and Lotus Pharmaceuticals and have used those funds to support our clinical operations. Those funds do not appear on our balance sheet because they are paid directly to clinical trial partners. As you saw last week, our corporate debt was accelerated by Streeterville, whose principal is publicly charged by the SEC on various matters. That development, combined with our recent clinical developments, generated enthusiasm from a number of well-regarded funding sources. In addition to the support of EF Hutton on the equity side, we have now signed a $30 million non-binding term sheet that will eliminate our current corporate debt and provide growth capital for revenue-generating approved drugs to add to our pipeline, while substantially lowering our borrowing costs. We anticipate that separating ourselves completely from a lender who has not been supportive of our growth will be beneficial to shareholders and will substantially reduce our cost of debt service. Jonathan will talk more about the science behind NRX 101 in a moment, but I'm also excited to point out that our new clinical data for NRX 101 support a product profile that could potentially be superior to the current standard of care in bipolar depression. We and our regulatory council believe that these data support the filing of a new drug application for NRX 101 in bipolar depression, a market of more than $20 billion. Investors have approximately and appropriately asked us about the planned Hope Therapeutics dividend that we anticipate to achieve in March. We have been advised that the HOPE shares are best distributed after they are already registered in compliance with the 1934 Securities Act, and we are in the process of effecting that registration. The required audits on HOPE are near completion, and we expect to file the required SEC registration this quarter. We appreciate our investors' patience as we work through these processes. I'm incredibly proud of the progress our team has made this year and I'm grateful to our partners and investors, as well as to all of the patients who have participated in our clinical trials. We look forward to continuing to build value for our shareholders and delivering life-saving treatment to patients. Most importantly, we continue to believe that 2024 will represent our transition from a purely research and development company to a revenue-generating pharmaceutical company. Now I would like to invite Dr. Jonathan Javid, our chief scientist, to review our clinical development program.

Thank you, Steve. As Steve noted, we've made important progress with our clinical development pipeline over the past few months. Our lead drug candidate, NRX101, has delivered unprecedented data in suicidal bipolar depression. Based on these data, NRX101 has demonstrated comparable antidepressant efficacy to the current standard of care, lorazodone, while significantly reducing what is perhaps the most dangerous side effect of this class of drugs, akathisia, a side effect considered by many to be a precursor to suicide. Indeed, reductions in suicidality and akathisia have been seen previously with NRX101 in our stable B trial, which is published in the peer-reviewed literature. So, this is the second time we found this result. Akathisia is consistently seen in 10% to 15% of people who take the lorazodone class of drugs, and no prior antidepressant has ever demonstrated a reduction in akathisia. Together, these studies, along with others in the literature, provide strong support for filing a new drug application with the FDA for patients with bipolar depression who are at risk of akathisia. The FDA is well aware of the potential risks associated with today's antidepressants and currently requires that a suicide warning be placed on the label of all current antidepressants. There is existing FDA precedent for approval of novel antidepressants that have comparable antidepressant effect combined with reduced side effects. So far, the key opinion leaders with whom we have spoken have been unambiguous in identifying akathisia as the most troubling side effect of the lorazodone class of drugs. Those are the drugs that are used to treat bipolar depression. And they've told us that they would welcome a new drug that reduces this potentially lethal side effect. We've been invited to present these data later this month at the American Society of Clinical Psychopharmacology meeting in Miami, together with Professor Andrew Nirenberg, the study's principal investigator, and the head of bipolar research at Harvard Mass General Hospital. We aim to host a key opinion leader discussion of akathisia and bipolar depression at that conference, and please look for details. The second new drug application we're planning is for HTX100, our form of IV ketamine for the treatment of suicidal depression. The efficacy of this product is well established, but it's never been presented to the FDA in the data format and detail that's required for a drug approval. Therefore, we've licensed patient-level data from the government of France, from Columbia University and Harvard University to support this application. The data are further supported by additional findings in the medical literature, including dose ranging data, which is always important to the FDA. Now, a limitation of ketamine is that the old generic formulation dates back to the Korean War. It's highly acidic, and it can be used for intravenous infusion, but not for subcutaneous treatment. It hurts. It causes skin ulcers. Last month, We announced the formulation of a patentable pH-neutral form of ketamine that we've designated HTX100. We anticipate that this will be the commercial product we bring to market to support Hope Therapeutics. While IV ketamine offers numerous benefits to patients, it's cumbersome for administration in the clinical setting. Intranasal ketamine, on the other hand, has failed to demonstrate anti-suicidal properties. We are going to start with IV ketamine but aim to augment it with a far more convenient form of administration that has equal efficacy. So the studies we've presented demonstrate an exceptional degree of efficacy really in a matter of hours in suicidally depressed patients when treated with ketamine. This is vitally important in our country. We're the only approved treatment for suicidality. is electroconvulsive therapy. The CDC states that approximately 3.4 million Americans make an active plan to commit suicide each year. By all measures, this is a national epidemic. We plan to bring this lifesaving product to market as soon as possible. The current market for intranasal ketamine is already $750 million, and that's a product that doesn't have anti-suicidal properties. we expect our market to be much larger. To continue to build value for NRX shareholders, we intend to distribute shares of Hope Therapeutics to existing shareholders in the near term and to seek a public listing for that company on a national exchange. We're actively building out our team, our partners, and our network with a goal of launching the product in early 2025 to augment and extend the efficacy of IV ketamine, we're planning development of a companion digital therapeutic. I previously participated in developing a digital therapeutic for the U.S. Navy to reduce combat stress in special forces operators, a product whose development was funded by the Defense Advanced Research Projects Agency, known to many as DARPA, and it's still in use. Today, I'm delighted to announce that our former Chief Strategy Officer, Dennis McBride, who's just completed his tour of duty, will be leading this project on behalf of our company. You'll be hearing more from Dennis in coming weeks. His biography, which includes 20 years in the Navy, three tours of duty as a DARPA program officer, and most recently an appointee in the Office of the Undersecretary of Defense, is on our website. Ultimately, We expect the digital therapeutic will be part of our FDA label and that it will further enhance our exclusivity. We'll build on these learnings and technologic advances to help suicidal patients stay on track. The addition of digital therapeutics to our ketamine product is expected to extend its effect and to build our market exclusivity. Obtaining FDA approval will enhance our ability to approach insurers to cover the cost of ketamine therapy, which so many people need for the treatment of suicidal depression. Our discussions with clinics to date have indicated that the lack of reimbursement is one of the key impediments to patients being able to get the treatment that they need. We aim to solve this problem and to bring hope to life. In order to gain approval for a drug, you have to manufacture a drug to FDA standards. In other words, you can't get approval for a drug you haven't made. This month, we're in a nine-month stability endpoint in our manufacturing partnership with Nefron Pharmaceuticals. Ketamine is publicly identified by the FDA as being on drug shortage in the United States. And together with Nefron, we're already able to distribute ketamine under a 503B pharmacy license. We anticipate reporting first commercial revenues in the near future. We currently await the results of a 200-patient Department of Defense-sponsored study in chronic pain being conducted at Northwestern University with d-cycloserine, the key component of NRX101. We're as eager as you are to see those results. Our colleagues at Northwestern have advised us that the database is now locked, and the Northwestern Institutional Review Board, the IRB, has approved the statistical analysis plan and given clearance for the data analysis. NRX 101 for chronic pain would offer a treatment beyond those treatments that are currently available to patients. Of course, in today's world, you have a choice between the, you know, Tylenol Advil class of drugs that may lack efficacy and the opioid class of drugs that may be highly addictive but not much in the middle. NRX 101 offers the possibility of a highly effective but non-addictive treatment option. As you know, in January, we opened an IND for NRX 101 in complicated urinary tract infection and pyelonephritis. Now, the reasons this drug affects bacteria are completely different from the reasons it affects the brain But in fact, D-cycloserine began its life as an antibiotic. So that IND was based on data from a study we recently sponsored at Charles River Labs, a highly respected contract research organization, that demonstrated significant antibacterial effect of NRX-101 against the worst resistant urinary pathogens, the pathogens that are on the congressionally mandated list of dangerous pathogens and can qualify you. what's called QIDP or Qualified Infectious Disease Product status. And in fact, these data motivated the FDA to grant us QIDP status along with fast track and priority review designations. Several weeks ago, we reported data demonstrating that NRX101 does not damage the normal bacteria in the intestine known as the microbiome. Well, the reason that's critically important is all other antibiotics for complicated UTI disrupt the intestinal microbiome, and they're well known to result in an infection called C. difficile. Some people call it C. diff. Now, at best, C. diff causes several weeks of horrible intractable diarrhea. However, C. diff is lethal in 10% of those over the age of 65 who are infected. Therefore, an antibiotic for complicated UTI that does not cause C. diff is likely to have considerable market appeal. Finally, we're working with our partners at the Fundacion Fundamental in Paris on an early stage opportunity that may represent the world's first disease modifying drug for schizophrenia. Everybody knows of the devastating effect of schizophrenia on patients and their families. 1% of the population has this lifelong debilitating disease. The medicines used to treat schizophrenia may diminish its symptoms, especially the hallucinations, to varying degrees. However, there's never been a medicine that has potential to reverse the disease in some patients. We anticipate providing our investors with a complete presentation on what may be the first disease modifying that is the first potentially curative drug for schizophrenia by the end of this quarter. As you can see, we have a robust clinical development plan with multi-billion dollar potential. We work our hardest every day to bring this plan to reality and to bring hope to life. I'll now ask Rich Narito, our CFO, to review the first quarter financials. Rich?

Thank you, Jonathan, and good afternoon, everyone. I will now review the highlights of our first quarter 2024 financial results. For the first three months ended March 31st, 2024, we at NRX Pharmaceuticals reduced our net loss from operations by 41% compared to the prior year from $11 million in the first quarter of 2023 to $6.5 million in 2024. For that same period, we reduced research and development expenses from $3.7 million in 2023 to $1.7 million in 2024 as we finalized our clinical trial enrollment. The $2 million decrease is related primarily to a decrease of $1.6 million in clinical trial expenses, $0.2 million in regulatory and process development costs, and $0.1 million in stock-based compensation. Also in that three month period, we recorded a 26% reduction in general and administrative expenses from $5.8 million in 2023 to $4.3 million in 2024. The decrease of 1.5 million is related primarily to a decrease of 1.2 million in insurance expenses, 0.4 million in employee expenses, slightly offset by other general administrative expenses. As of March 31st, 2024, We had $1.3 million in cash and cash equivalents. However, this does not tell the whole story because of the clinical expenses that are now being paid directly by our partners. Over the first three months of 2024, we improved our access to working capital by $8 million in total, representing $2.9 million from equity sales and $5.1 million from the Alvagen milestone advance, while reducing our corporate indebtedness to Streeterville LLC by $2.2 million. Subsequent to March 31st, 2024, we continue to increase our working capital by $3.3 million from equity sales. We continue to implement operational efficiencies to extend runway and focus on our path to generating revenue and value for our shareholders. With that, I will turn it back to Steve for closing remarks. Steve?

Thanks, Rich. With two NDAs planned for the coming months, a hope shared distribution plan, two out licensing opportunities, and an improved cash position, we are well positioned for the future. Addressing a range of unmet medical needs and suicidal bipolar depression, chronic pain, suicidality, and complicated urinary tract infections, we have an opportunity to create a highly successful and vibrant biotechnology company. I'm incredibly proud of our team, our collaborators and partners, and most of all, the patients. who have made such an important contribution to these efforts. Together, we are pursuing NRX's goal of bringing hope to life on a daily basis. We couldn't have gotten to this point without you, our investors. If you would like to help spread the hope, please go to the Contact Us page on our website and ask us to send you a hope lapel pin. Operator, we are ready to take questions from the audience.

Thank you. We will now begin the question and answer session. Should you have a question, please press star followed by one on your touchdown phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment, please. Your first question comes from the line of Tim Moore. Your line is open.

Thanks, and great update. For NRX 101, you've got to maybe just give a rough timing frame on the 300-person registrational trial enrollment and sites being lined up for that more statistical significant sample size.

Well, you know, as you know, Tim, the phase, if that trial is needed, the trial is one that would be undertaken by our partner, Alvagen, at their expense. And they'd be laying out a timeline. But we're also exploring whether the data that we already have in hand may give us a path to accelerated approval of NRX 101. for a narrower segment of patients, those patients who can't tolerate the lorazodone class of drugs because of the akathisia, who are at risk of suicide, and really who have no therapeutic alternatives. So, it's really a question of, you know, can we help some patients in urgent need right away while Alvagen gears up to do the much larger trials.

That makes sense. That's really helpful. I know that you had three manufacturing lots initiated. I know the press release I think mentioned July. Is it still maybe a realistic goal for the NDA? That seems like it's still on track?

As you pointed out, we've said in the past there's a million pills of what's called GMP or good manufacturing practices drug in our warehouse at Alchemy in North Carolina. And really by the end of the summer, we should be able to submit what's called the module three of our new drug application for NRX 101. It's a drug that's been granted breakthrough therapy designation by the FDA And therefore, we're entitled to submit the NDA in parts that's called rolling review. So, we expect to kick off that process in the fall. And at this point, we've got two years of real-time stability. We expect that, you know, this is a stable oral form drug that will have five years of room temperature shelf stability.

That's terrific. That's really good to hear. And my last question is, you know, data is coming soon from that 200-person DOD-funded trial of DCS. What are you kind of looking for to see the most in that data from Northwestern, without getting too specific yet, but just in general?

Well, you know, if we knew the answer, it wouldn't be a trial. But what we do know is what they published in 2016. And in 2016, They showed, you know, the way they reported the data, it was, you know, by week of treatment. But they did a trial where each week they escalated the amount of d-cycloserine the patient was getting. And once they reached 400 milligrams a day of d-cycloserine, they saw an analgesic effect, which in plain English is a pain-relieving effect, That was really as good as the effect that you'd expect to see with an oral opioid. But, of course, D-cycloserine is completely non-addictive. It doesn't have any of the opioid side effects. Even if an opioid doesn't addict you, the constipation is intolerable to some people. The clouding of your mental judgment is intolerable to some people. D-cycloserine doesn't do any of that. So our view is, is that if a 200-person trial simply replicates the findings of their 2016 Phase IIa trial, that's an approvable kind of effect. That's the kind of effect that would make people want to use D-cycloserine in preference to the opioid drugs and certainly in preference to the, you know, sort of Tylenol Advil class of drugs. Now, 400 milligrams a day is really at the low end of the therapeutic range for D-cycloserine. The original, the patents that we stand on filed by Dan Javitt show that D-cycloserine doesn't even become an NMDA antagonist until you cross that 400 milligram a day threshold. But we can take this drug up to 1,000 milligrams a day. So, there's ample reason to believe that if the Northwestern trial shows, you know, any meaningful benefit at the 400 milligram a day dosage, that there's room for substantially more efficacy were we to take it to higher doses. So, you know, we can't wait to see the data and from talking to the investigators at Northwestern, they can't wait to see it either.

Good. Now, that's really helpful, Collin. I appreciate the elaboration on that, and I'll save my remaining questions for our conference tomorrow. Thanks a lot.

Your next question comes from the line of Ed Wu. Your line is open.

Yeah, thank you for taking my question, and congratulations on all the progress. My question is specifically on the UTI indication. You mentioned that you guys are looking for partnerships. What is a market like that? Is it pretty receptive? Has it slowed down? And, you know, is there any timeline that you could possibly share with us? Thank you.

Well, you know, in talking to investors, I have yet to be in a room full of investors where somebody doesn't have a friend or a relative who, you know, went to the doctor with a urinary tract infection, the first-line drugs, you know, Motrin, sorry, Bactrim, amoxicillin, those drugs didn't work. They wound up on an expensive antibiotic and an antibiotic that caused them problems, and frequently they wind up on IV antibiotics. We have an investor whose wife started out with what should have been a fairly straightforward UTI, wound up in the hospital for three weeks with C. difficile. So there's enormous receptivity among urologists, among gynecologists for antibiotics that can treat these more aggressive urinary tract infections. And we're talking 3 million infections a year. There's 15 million people each year get urinary tract infection. And at this point, one-fifth of those, 3 million a year, have these complicated UTIs that can go in some very ugly directions. I'd like to take a moment to acknowledge the really terrible loss we suffered last week. Professor Michael Manyak, who was the head of urology at George Washington University, head of urology for GlaxoSmithKline, and became our guiding light on urology, passed away last week. But the people he brought to us on our urology advisory board are some of the top people in the country. And they all tell us that there's enormous need for a safe oral antibiotic, because too many of the CTI drugs are intravenous, a safe oral antibiotic that patients can take for urinary infection without a likelihood of getting C. difficile, without a likelihood of getting a vaginal yeast infection, without the kind of unpleasant symptoms that these ultra-strong antibiotics cause people that all of us know about. So that's where we're pointing to. But at the same time, unlike suicidal depression, where there are really only 1,600 psychiatrists in the United States who treat those patients. And there are people that we're increasingly getting to know and people whom we can reach out and talk to. A much, much broader range of doctors treat patients with complicated UTI. And therefore, we really need a partner who already talks to those doctors. Because for a company our size to spin up a sales force and try to address you know, 30 or 40,000 doctors or more, you know, wouldn't be feasible. So that's why we're actively looking for a partner who's already, you know, in that business, who already knows the doctors, because we know that the doctors and the patients are looking for the treatment.

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

Thanks, Ed.

Your next question comes from the line of David . Your line is open.

Hi. Thanks for taking my question and congratulations on the remarkable progress. Back in November, you shared that you had a problem with substantial unreported naked short interest. The number you gave then was a minimum of one to one and a half million shares. You also described the upcoming dividend as, among other things, one of the tools you'll be using to dislodge those naked short positions. And you recently announced that you have former SEC enforcement leadership working to get brokerages to forcibly close those positions. Can you give a current estimate of actual short interest? And can you say anything about any progress we're having with the brokerages?

So, I'm going to ask Matt to present some of the numbers. But, you know, the thumbnail answer is, you know, one to one and a half million shares is really just the tip of the iceberg. Matt, why don't you talk about the research we've done?

Sure. Thanks, Jonathan. So, David, thanks for the question. It's a very good one. So, if you look at the bare, you're asking about the bare minimum. The bare minimum would be what NASDAQ reports on a biweekly basis, and that's about 500,000 right now. That's only what's short through NASDAQ and recorded appropriately. As some of the work we've done with Share and Tell and others has indicated, there is very likely perhaps even as much as an order of magnitude more short than that, but multiple, multiple multiples, actually multiples of that. There's another set of data that are interesting as well that are available through certain channels. And that is the intraday shorting. Because every time a trader, whether they're a computer or a person, enters a trade, they have to enter whether it's a buy, a sell, a sell short, or a cover. They're just the four categories. And a time ago, there were some lawsuits and some requests to the SEC to make these short sales information available for intraday trading. And we've tracked that we've been tracking that and gotten that from some, some folks that have attracted that have approached us and something in the vicinity of 46% of the time period they shared, which was, I think the middle of March through the end of April or short sales intraday. Now market makers are allowed to do that. If as long as they cover during the day, uh, and not report it and not borrow, but they have to cover by the end of the day. whether they do or not, is a subject of a lot of speculation, and that probably can fuel a good deal of unreported short interest. I'll hand it back to Jonathan for comment.

So the question you asked, David, is important, and the short interest is impressive. But it's important to recognize that somebody selling our stock short is essentially betting that we're going to fail to get to data and go out of business. And therefore, you know, they'll be able to, you know, buy back their short position for almost nothing. And the best way to really disappoint a short seller is to succeed. And A, that's what we aim to do. And I think over the last quarter, we've turned some corners. that may start to help our shareholders recognize that not only do we aim to succeed, but we're in the process of succeeding. And if people want to invest their hard-earned money in betting against us and shorting our stock, we aim to help them lose their money.

Thanks for those answers.

There are no further questions at this time. I will turn the call back to you, Matt.

Thank you, Jonah, and thank you, everyone, for joining us today for the conference call. We appreciate your support, your interest, and are always interested in hearing questions and feedback through our website as well. Have a good evening.

Thank you, everyone, for participating. You may now disconnect.