Commitments and Contingencies
|3 Months Ended|
Mar. 31, 2022
|Commitments and Contingencies|
|Commitments and Contingencies||
8. Commitments and Contingencies
The Company leases office space on a month-to-month basis. The rent expense for the three months ended March 31, 2022 and 2021 was $0.1 million and $0.1 million, respectively.
Sponsored Research Agreement with National Jewish Health
On February 8, 2021, the Company entered into a Sponsored Research Agreement (“Research Agreement”) with National Jewish Health (“NJ Health”), a Colorado not-for-profit institution. Under the terms of the Research Agreement, the Company agreed to sponsor a research study at NJ Health relating to the impact of the Company’s' Aviptadil on propagation of SARS-CoV-2 in alveolar type II cells in vitro (the “Study”). In return for performance of the Study under the Research Agreement, the Company has committed to pay NJ Health approximately $0.4 million. As of March 31, 2022, the Company has paid NJ Health $0.3 million of the total committed amount.
ZYESAMI Manufacturing, Production, Supply and Distribution Agreements
On August 25, 2020, the Company and Nephron Pharmaceuticals Corporation (“Nephron”) signed an agreement for the manufacturing of finished pharmaceutical product of Aviptadil intravenous formulation and the development of an inhaled (nebulizer) formulation of Aviptadil. The Company has agreed to purchase products from Nephron for a fixed price.
On September 29, 2020, the Company and Cardinal Health signed an exclusive distribution agreement, as well as a third-party logistics agreement on October 1, 2020. Cardinal Health will manage warehousing, distribution, and invoicing for the potential sale of Aviptadil in the U.S. and Puerto Rico.
On October 9, 2020, the Company signed an agreement with PolyPeptide Group, North America for the supply of Good Manufacturing Practice Grade Active Pharmaceutical Ingredient (“API”) Aviptadil. This gives NRx Pharmaceuticals a significant reduction in the cost of procuring API. The Company has agreed to purchase a total of $5.3 million worth of product and services, of which $2.4 million has not been paid for as of March 31, 2022.
Relief Therapeutics Collaboration Agreement
On September 18, 2020, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Relief Therapeutics for the clinical development and, if approved, the sale of Aviptadil. The Collaboration Agreement provides for funding by Relief Therapeutics of certain clinical trials, formulation and manufacturing of Aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories for “Product” as defined in the Collaboration Agreement. Relief Therapeutics reimbursed the Company $10.9 million but has subsequently declined to reimburse the Company for additional costs of research and development. The Company advised Relief Therapeutics that the Company is funding those costs with other capital. On October 6, 2021, Relief Therapeutics filed a lawsuit against the Company and its former CEO claiming that the Company failed to honor its obligations under the Collaboration Agreement. Relief Therapeutics’ complaint seeks several remedies, including damages for alleged breaches of the terms of the Collaboration Agreement. The Company believes the lawsuit is baseless and without merit. On January 10, 2022, the Company filed a complaint in New York State Court, claiming Relief Therapeutics breached and repudiated the Collaboration Agreement. The Company’s complaint seeks damages of at least $185.0 million. The parties to the lawsuit have agreed to engage in mediation in an effort to amicably resolve the litigation. If the mediation does not resolve the dispute, the Company intends to defend itself vigorously and to prosecute its claims against Relief Therapeutics.
From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur.
Share Subscription Facility Agreement - GEM
In 2019, NeuroRx entered into a share subscription facility agreement (the “GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term. Subject to the successful listing of the shares of NeuroRx on an exchange (any nationally recognized stock exchange or exchange platform in the world on which the Company will list its shares), GEM granted NeuroRx an option to require GEM to subscribe for shares from the Company for up to an aggregate value of approximately $95.6 million. The agreement also included certain provisions which would not meet the U.S. requirements to issue registered shares. If NeuroRx were listed or completed a private transaction resulting in a change of control of the Company, NeuroRx would be required to issue GEM a warrant and pay a commitment fee of $1.9 million. Absent a listing of NeuroRx shares or a private transaction with a change of control during the three-year term, NeuroRx would have no obligations under the GEM Agreement. The reverse merger contemplated by the Merger Agreement did not result in a listing of NeuroRx shares or a change in control.
In November 2020, GEM introduced NeuroRx to BRPA. To resolve uncertainties around the application of the GEM Agreement post-Merger, NeuroRx and GEM agreed in March 2021 to issue warrants to GEM and for the parties to use their good faith efforts to amend the GEM Agreement to meet U.S. requirements to issue registered shares. The warrants are not conditional upon any further events or completion of the merger.
The warrants were issued March 28, 2021, for 3,329,812 shares of NeuroRx common stock at an exercise price of $3.19 per share (the “GEM Warrants”) and the parties agreed that GEM would immediately exercise a portion of the warrants for the purchase of 1,496,216 shares (“Initial Exercised Shares”) for $7.5 million. The GEM Warrants are valid for a period of three years from the date of the consummation of the reverse merger transaction contemplated by the Merger Agreement, which was May 24, 2021.
This contingent liability at December 31, 2020, represented an obligation that resulted in the issuance of certain equity at a discounted per share price. As the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability of $39.5 million to reflect the fair value of the GEM Warrants. On March 28, 2021, NeuroRx recorded additional settlement liability of $21.4 million to reflect the change in the fair value of the Company’s common stock. On March 28, 2021, NeuroRx reclassed the settlement liability to equity upon the issuance of the GEM Warrants.
On July 27, 2021, GEM exercised the remaining GEM Warrants for the purchase of 1,833,596 shares (adjusted for the Merger, discussed in Note 9) for gross proceeds to the Company of $9.2 million and the GEM Warrants were extinguished.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef