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, 2022


☐		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, 2022, there were 20,003,745 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	32

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42

	Item 4.	Controls and Procedures	43

PART II. OTHER INFORMATION			44

	Item 1.	Legal Proceedings	44

	Item 1A.	Risk Factors	44

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

	Item 3.	Defaults Upon Senior Securities	45

	Item 4.	Mine Safety Disclosures	45

	Item 5.	Other Information	45

	Item 6.	Exhibits	46

SIGNATURES			48

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are 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 twelve 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 maintaining an acceptable price for and 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 and grow market demand;

•

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 trials and preclinical studies;

•

our ability to source materials needed for our drug candidates, optimize formulations for stability and other characteristics;

•

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

•

potential indemnification liabilities we may owe to Societal CDMO, Inc., or Societal CDMO, formerly Recro Pharma, Inc., after the separation of Societal CDMO’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 Societal CDMO 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, supply chain 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 Societal CDMO for which we have agreed to indemnify Societal CDMO;

•

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 or other monetization 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;

•

the volatility of capital markets and other macroeconomic factors, including inflation, geopolitical tensions or the outbreak or escalation of hostilities or war;

•

our ability to operate under increased leverage and comply with 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 COVID-19 pandemic including, but not limited to, the emergence of variants of the virus, the availability and efficacy 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, including but not limited to manufacturing components and raw materials, 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, 2021 filed with the SEC on March 16, 2022, or the 2021 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


(amounts in thousands, except share and per share data)	September 30, 2022			December 31, 2021
	Unaudited
Assets
Current assets:
Cash and cash equivalents	$	5,647		$	15,891
Accounts receivable, net		313			542
Inventory		4,477			5,002
Prepaid expenses and other current assets		832			2,059
Total current assets		11,269			23,494
Property and equipment, net		1,239			5,015
Intangible assets, net		2,000			21,678
Goodwill		2,127			2,127
Other long-term assets		875			963
Total assets	$	17,510		$	53,277
Liabilities and Shareholders' (Deficit) Equity
Current liabilities:
Accounts payable	$	3,609		$	1,468
Accrued expenses and other current liabilities		3,319			5,540
Current portion of long-term debt, net		5,911			2,222
Current portion of contingent consideration		8,436			6,416
Total current liabilities		21,275			15,646
Long-term debt, net		2,175			6,309
Long-term portion of contingent consideration		12,972			17,446
Other long-term liabilities		628			650
Total liabilities		37,050			40,051
Commitments and contingencies (Note 12)
Shareholders’ (deficit) equity:
Preferred stock, $0.01 par value. Authorized, 10,000,000 shares; issued and outstanding, 20,003.745 shares at September 30, 2022 (all of which shares were issued on October 3, 2022 pursuant to a stock dividend) and 8,289 shares at December 31, 2021		—			—
Common stock, $0.01 par value. Authorized, 190,000,000 shares; issued and outstanding, 20,003,745 shares at September 30, 2022 and 2,807,239 shares at December 31, 2021		200			28
Additional paid-in capital		161,914			145,287
Accumulated deficit		(181,654	)		(132,089	)
Total shareholders’ (deficit) equity		(19,540	)		13,226
Total liabilities and shareholders’ (deficit) equity	$	17,510		$	53,277

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)	2022			2021			2022			2021
Revenue, net	$	238		$	281		$	959		$	680

Operating expenses:
Cost of sales		1,208			462			2,217			1,869
Research and development		645			658			2,850			2,623
Selling, general and administrative		3,808			11,074			22,027			33,770
Amortization of intangible assets		644			644			1,932			1,932
Change in warrant valuation		(1	)		(6	)		(7	)		(47	)
Change in contingent consideration valuation		1,222			3,829			(1,254	)		9,551
Loss on impairment of property and equipment		3,662			—			3,662			—
Loss on impairment of intangible asset		17,746			—			17,746			—
Total operating expenses		28,934			16,661			49,173			49,698
Operating loss		(28,696	)		(16,380	)		(48,214	)		(49,018	)
Other expense:
Other expense, net		(509	)		(582	)		(1,331	)		(185	)
Net loss	$	(29,205	)	$	(16,962	)	$	(49,545	)	$	(49,203	)

Per share information:
Net loss per share of common stock, basic and diluted	$	(2.47	)	$	(7.03	)	$	(6.45	)	$	(23.29	)
Weighted average common shares outstanding, basic and diluted		11,836,122			2,411,433			7,685,398			2,112,247

See accompanying notes to consolidated financial statements.

BAUDAX BIO, INC.

Consolidated Statements of Shareholders’ (Deficit) Equity

(Unaudited)


For the Nine Months Ended September 30, 2022
	Preferred Stock					Common Stock				Additional
(amounts in thousands, except share data)	Shares			Amount		Shares		Amount		paid-in capital			Accumulated Deficit			Total
Balance, December 31, 2021		8,289		$	—		2,807,239	$	28	$	145,287		$	(132,089	)	$	13,226
Stock-based compensation expense		—			—		—		—		521			—			521
Issuance of common stock and warrants for public offering, net		—			—		3,508,772		35		8,784			—			8,819
Issuance of common stock and warrants for registered direct offerings, net		—			—		—		—		(13	)		—			(13	)
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		—			—		2,234		—		(1	)		—			(1	)
Conversion of preferred stock		(8,289	)		—		94,734		1		(1	)		—			—
Net loss		—			—		—		—		—			(12,809	)		(12,809	)
Balance, March 31, 2022		—		$	—		6,412,979	$	64	$	154,577		$	(144,898	)	$	9,743
Stock-based compensation expense		—			—		—		—		325			—			325
Issuance of common stock and warrants for public offering, net		—			—		—		—		(28	)		—			(28	)
Issuance of common stock and warrants for registered direct offerings and private placements, net		—			—		1,646,091		16		1,704			—			1,720
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		—			—		9,783		1		—			—			1
Net loss		—			—		—		—		—			(7,531	)		(7,531	)
Balance, June 30, 2022		—		$	—		8,068,853	$	81	$	156,578		$	(152,429	)	$	4,230
Stock-based compensation expense		—			—		—		—		301			—			301
Issuance of common stock and warrants for public offering, net		—			—		11,819,172		118		4,947			—			5,065
Exercise of warrants		—			—		115,000		1		68			—			69
Issuance of shares pursuant to vesting of restricted stock units, net of shares withheld for income taxes		—			—		720		—		—			—			—
Stock dividend		20,003.745			—		—		—		20			(20	)		—
Net loss		—			—		—		—		—			(29,205	)		(29,205	)
Balance, September 30, 2022		20,003.745		$	—		20,003,745	$	200	$	161,914		$	(181,654	)	$	(19,540	)

See accompanying notes to consolidated financial statements.

BAUDAX BIO, INC.

Consolidated Statements of Shareholders’ (Deficit) Equity

(Unaudited)


For the Nine Months Ended September 30, 2021
	Preferred Stock				Common Stock				Additional
(amounts in thousands, except share data)	Shares		Amount		Shares		Amount		paid-in capital		Accumulated Deficit			Total
Balance, December 31, 2020		—	$	—		1,391,099	$	14	$	97,507	$	(112,320	)	$	(14,799	)
Recro Pharma allocation - stock-based compensation		—		—