10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended: September 30, 2021


☐		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-39101

Baudax Bio, Inc.

(Exact name of registrant as specified in its charter)


Pennsylvania	47-4639500
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

490 Lapp Road, Malvern, Pennsylvania	19355
(Address of principal executive offices)	(Zip Code)

(484) 395-2440

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Exchange on Which Registered
Common Stock, par value $0.01	BXRX	Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 2, 2021, there were 84,423,699 shares of common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS

Index


			Page

Forward-Looking Statements			3

PART I. FINANCIAL INFORMATION			5

	Item 1.	Consolidated Financial Statements (Unaudited)	5

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

	Item 4.	Controls and Procedures	41

PART II. OTHER INFORMATION			42

	Item 1.	Legal Proceedings	42

	Item 1A.	Risk Factors	42

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

	Item 3.	Defaults Upon Senior Securities	43

	Item 4.	Mine Safety Disclosures	43

	Item 5.	Other Information	43

	Item 6.	Exhibits	43

SIGNATURES			44

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would,” “could,” “should,” “potential,” “seek,” “evaluate,” “pursue,” “continue,” “design,” “impact,” “affect,” “forecast,” “target,” “outlook,” “initiative,” “objective,” “designed,” “priorities,” “goal,” or the negative of such terms and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.

These forward-looking statements in this Quarterly Report include, among other things, statements about:



our estimates regarding expenses, revenue, capital requirements and timing and availability of and the need for additional financing;



our ability to continue as a going concern for the next 12 months;



our ability to operate under significant indebtedness;



our ability to maintain the listing of our common stock on the Nasdaq Capital Market;



our ability to maintain regulatory approval for ANJESO® (meloxicam) injection, or ANJESO, and obtain regulatory approval for any other product candidates that we may develop, and any related restrictions, limitations, or warnings in the label of any approved product candidates;



our ability to successfully manage the timing, costs and other aspects of the commercialization of ANJESO, including setting an acceptable price for and obtaining adequate coverage and reimbursement of ANJESO;



our ability to successfully market, commercialize and achieve broad market acceptance for ANJESO and any of our other product candidates once approved;



the acceptance of ANJESO by the medical community, including physicians, patients, healthcare providers and hospital formularies;



our ability and that of our third-party manufacturers to successfully scale-up our commercial manufacturing process for ANJESO;



the results, timing and outcome of our clinical trials of our product candidates, and any future clinical and preclinical studies;



our relationships with Alkermes plc, or Alkermes, other third parties, licensors, collaborators, and our employees;



our ability to operate as a standalone company and execute our strategic priorities;



potential indemnification liabilities we may owe to Recro Pharma, Inc., or Recro, after the separation of Recro’s acute care business and transfer of such assets to us, or the Separation;



the effects of changes in our effective tax rate due to changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, tax impacts and net operating loss utilization related to the separation from Recro and changes in the tax laws;



our ability to comply with the regulatory schemes applicable to our business and other regulatory developments in the United States and foreign countries;



the performance of third-parties upon which we depend, including third-party contract research organizations, or CROs, and third-party suppliers, manufacturers including Alkermes and Patheon UK Limited, group purchasing organizations, distributors, and logistics providers;



our ability to obtain and maintain patent protection and defend our intellectual property rights against third-parties;



our ability to maintain our relationships, profitability and contracts with our key commercial partners;



our ability to defend any material litigation filed against us and avoid liabilities resulting from any material litigation, including any liabilities associated with the ongoing securities class action filed against Recro for which we have agreed to indemnify Recro;



our ability to recruit or retain key scientific, technical, commercial, and management personnel or to retain our executive officers;



our ability to raise future financing and attain profitability for continued development of our business and commercialization of ANJESO and our product candidates and to meet any required debt payments, and any milestone payments owing to Alkermes, or our other licensing and collaboration partners;



our ability to operate under increased leverage and associated lending covenants; to pay existing required interest and principal amortization payments when due; and/or to obtain acceptable refinancing alternatives; and



our expectations regarding the impact of the ongoing coronavirus 2019, or COVID-19, pandemic including, but not limited to, the availability of vaccines for COVID-19 and peoples’ willingness to avail themselves of such vaccines, the expected duration of disruption and immediate and long-term delays, disruption in the commercialization of ANJESO, our ability to access hospital systems and formulary committees, manufacturing and supply chain interruptions, adverse effects on healthcare systems and disruption of the global economy, and the overall impact of the COVID-19 pandemic on our business, financial condition and results of operations.

Any forward-looking statements that we make in this Quarterly Report speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

You should also read carefully the factors described in the “Risk Factors” included in Part II, Item 1A of this Quarterly Report and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 16, 2021, or the 2020 Annual Report, to better understand significant risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this Quarterly Report and you should not place undue reliance on any forward-looking statements.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BAUDAX BIO, INC.

Consolidated Balance Sheets

(Unaudited)


(amounts in thousands, except share and per share data)	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	14,772		$	30,342
Short-term investments		10,150			—
Accounts receivable, net		422			51
Inventory		4,310			2,978
Prepaid expenses and other current assets		1,484			3,346
Total current assets		31,138			36,717
Property, plant and equipment, net		4,933			5,052
Intangible assets, net		22,322			24,254
Goodwill		2,127			2,127
Other long-term assets		979			583
Total assets	$	61,499		$	68,733
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable	$	1,819		$	3,653
Accrued expenses and other current liabilities		4,568			5,326
Current portion of long-term debt, net		1,389			683
Current portion of contingent consideration		6,666			8,467
Total current liabilities		14,442			18,129
Long-term debt, net		6,913			8,469
Long-term portion of contingent consideration		60,059			56,576
Other long-term liabilities		813			358
Total liabilities		82,227			83,532
Commitments and contingencies (Note 12)
Shareholders’ deficit:
Preferred stock, $0.01 par value. Authorized, 10,000,000 shares; none issued and outstanding		—			—
Common stock, $0.01 par value. Authorized, 190,000,000 shares; issued and outstanding, 84,423,342 shares at September 30, 2021 and 48,688,480 shares at December 31, 2020		844			487
Additional paid-in capital		139,951			97,034
Accumulated deficit		(161,523	)		(112,320	)
Total shareholders’ deficit		(20,728	)		(14,799	)
Total liabilities and shareholders’ deficit	$	61,499		$	68,733

See accompanying notes to consolidated financial statements.

BAUDAX BIO, INC.

Consolidated Statements of Operations

(Unaudited)


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(amounts in thousands, except share and per share data)	2021			2020			2021			2020
Revenue, net	$	281		$	68		$	680		$	417

Operating expenses:
Cost of sales		462			540			1,869			1,190
Research and development		658			1,469			2,623			5,889
Selling, general and administrative		11,074			13,763			33,770			33,026
Amortization of intangible assets		644			643			1,932			1,502
Change in warrant valuation		(6	)		(11,182	)		(47	)		2,863
Change in contingent consideration valuation		3,829			(17,427	)		9,551			14,252
Total operating expenses		16,661			(12,194	)		49,698			58,722
Operating (loss) income		(16,380	)		12,262			(49,018	)		(58,305	)
Other expense:
Other expense, net		(582	)		(577	)		(185	)		(753	)
Net (loss) income	$	(16,962	)	$	11,685		$	(49,203	)	$	(59,058	)

Per share information:
Net (loss) income per share of common stock, basic	$	(0.20	)	$	0.64		$	(0.66	)	$	(3.84	)
Net (loss) income per share of common stock, diluted	$	(0.20	)	$	0.62		$	(0.66	)	$	(3.84	)

Weighted average common shares outstanding, basic		84,400,156			18,374,604			74,008,574			15,366,861
Weighted average common shares outstanding, diluted		84,400,156			18,768,376			74,008,574			15,366,861

See accompanying notes to consolidated financial statements.

BAUDAX BIO, INC.

Consolidated Statements of Shareholders’ Deficit

(Unaudited)


For the Nine Months Ended September 30, 2021
	Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2020		48,688,480	$	487	$	97,034		$	(112,320	)	$	(14,799	)
Recro Pharma allocation - stock-based compensation		—		—		1,201			—			1,201
Stock-based compensation expense		—		—		975			—			975
Issuance of common stock and warrants for registered direct offerings, net		11,000,000		110		16,317			—			16,427
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		42,159		—		(41	)		—			(41	)
Exercise of warrants		10,411,969		104		12,051			—			12,155
Net loss		—		—		—			(16,912	)		(16,912	)
Balance, March 31, 2021		70,142,608	$	701	$	127,537		$	(129,232	)	$	(994	)
Stock-based compensation expense		—		—		854			—			854
Issuance of common stock and warrants for registered direct offerings, net		14,028,520		141		10,760			—			10,901
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		102,094		1		(6	)		—			(5	)
Net loss		—		—		—			(15,329	)		(15,329	)
Balance, June 30, 2021		84,273,222	$	843	$	139,145		$	(144,561	)	$	(4,573	)
Stock-based compensation expense		—		—		874			—			874
Issuance of common stock and warrants for registered direct offerings, net		—		—		(38	)		—			(38	)
Issuance of restricted stock units, net of shares withheld for income taxes		150,120		1		(30	)		—			(29	)
Net loss		—		—		—			(16,962	)		(16,962	)
Balance, September 30, 2021		84,423,342	$	844	$	139,951		$	(161,523	)	$	(20,728	)

See accompanying notes to consolidated financial statements.

BAUDAX BIO, INC.

Consolidated Statements of Shareholders’ Deficit

(Unaudited)


For the Nine Months Ended September 30, 2020
	Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2019		9,350,709	$	94	$	19,405		$	(36,220	)	$	(16,721	)
Recro Pharma allocation - stock-based compensation		—		—		456			—			456
Stock-based compensation expense		—		—		2,177			—			2,177
Issuance of common stock and warrants for public offering, net		7,692,308		77		14,899			—			14,976
Sale of common stock under equity facility, net of transaction costs		441,967		4		3,608			—			3,612
Issuance of common stock upon Separation		45,874		1		—			—			1
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		39,130		—		(95	)		—			(95	)
Net loss		—		—		—			(40,298	)		(40,298	)
Balance, March 31, 2020		17,569,988	$	176	$	40,450		$	(76,518	)	$	(35,892	)
Recro Pharma allocation - stock-based compensation		—		—		445			—			445
Stock-based compensation expense		—		—		1,864			—			1,864
Stock issuance costs		—		—		(3	)		—			(3	)
Warrants issued in connection with financing facility		—		—		1,423			—			1,423
Exercise of warrants		804,616		8		3,196			—			3,204
Net loss		—		—		—			(30,445	)		(30,445	)
Balance, June 30, 2020		18,374,604	$	184	$	47,375		$	(106,963	)	$	(59,404	)
Recro Pharma allocation - stock-based compensation		—		—		444			—			444
Stock-based compensation expense		—		—		2,045			—			2,045
Net income		—		—		—			11,685			11,685
Balance, September 30, 2020		18,374,604	$	184	$	49,864		$	(95,278	)	$	(45,230	)

See accompanying notes to consolidated financial statements.

BAUDAX BIO, INC.

Consolidated Statements of Cash Flows

(Unaudited)


	For the Nine Months Ended September 30,
(amounts in thousands)	2021			2020
Cash flows from operating activities:
Net loss	$	(49,203	)	$	(59,058	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		4,132			7,431
Non-cash interest expense		673			306
Gain on extinguishment of debt		(1,553	)		—
Depreciation expense		195			315
Amortization		1,932			1,502
Change in warrant valuation