Annual report pursuant to Section 13 and 15(d)

Background and Organization

Background and Organization
12 Months Ended
Dec. 31, 2022
Background and Organization  
Background and Organization

1.   Background and Organization

Virios Therapeutics, Inc. (the “Company”) was incorporated under the laws of the State of Delaware on December 16, 2020 through a corporate conversion (the “Corporate Conversion”) just prior to the Company’s initial public offering (“IPO”). The Company was originally formed on February 28, 2012 as a limited liability company (“LLC”) under the laws of the State of Alabama as Innovative Med Concepts, LLC. On July 23, 2020, the Company changed its name from Innovative Med Concepts, LLC to Virios Therapeutics, LLC.

The Company operates in one segment as a pre-revenue, development-stage biotechnology company focused on advancing novel combination antiviral therapies to treat diseases associated with a viral triggered abnormal immune response. The Company is developing its initial product candidate, IMC-1, for people who are suffering from fibromyalgia (“FM”). Research has shown that the herpes virus could be a potential root cause of FM. IMC-1 is a novel, proprietary, fixed dose combination of famciclovir and celecoxib, both of which are drugs approved by the U.S. Food and Drug Administration (“FDA”) for other indications. IMC-1 combines these two specific mechanisms of action purposely designed to inhibit herpes virus activation and replication, thereby converting activated herpes virus back to dormancy and/or by keeping the herpes virus in a latent or dormant state. The famciclovir component of IMC-1 inhibits viral DNA replication, thus inhibiting upregulation of the herpes virus. The celecoxib component of IMC-1 inhibits cyclooxegenase-2 (“COX-2”) enzymes used by the herpes virus to amplify or accelerate its own replication. IMC-1’s synergistic antiviral mechanism represents a first-in-class medicine designed specifically to inhibit both herpes virus activation and subsequent replication, with the goal of keeping tissue resident herpes virus in a latent state.

Public Offering

On September 19, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with ThinkEquity LLC (the “Underwriter”) in connection with the issuance and sale by the Company in a public offering of 10,000,000 shares of its common stock at a public offering price of $0.50 per share (the “Offering”), pursuant to an effective shelf registration statement on Form S-3 (File No. 333-263700). The Offering closed on September 22, 2022 and the gross proceeds from the Offering were $5,000,000. The net proceeds of the Offering were approximately $4,490,605 after deducting underwriting discounts, commissions and offering expenses payable by the Company. In conjunction with the Offering, the Company granted to the Underwriter 500,000 warrants to purchase shares of the Company’s common stock at an exercise price of $0.625 per share, which was 125% of the Offering price.

Material Uncertainty

Since its founding, the Company has been engaged in research and development activities as well as organizational activities, including raising capital. The Company has not generated any revenues to date. As such, the Company is subject to all of the risks associated with any development-stage biotechnology company that has substantial expenditures for research and development. Since inception, the Company has incurred losses and negative cash flows from operating activities. The Company has funded its losses primarily through issuance of members’ interests, convertible debt instruments and issuance of equity securities. For the years ended December 31, 2022 and 2021, the Company incurred net losses of $12,247,834 and $15,960,268, respectively, and had net cash flows used in operating activities of $11,467,797 and $15,689,578, respectively. As of December 31, 2022, the Company had an accumulated deficit of $56,173,207.

As of the date these financial statements are issued, based on reasonable estimates, current cash is sufficient to fund operating expenses and obligations for at least 12 months. Currently, there are no planned research and development activities for 2023 other than minimal carryover costs associated with completing the final reports for the Company’s FORTRESS, (Fibromyalgia Outcome Research Trial Evaluating

Synergistic Suppression of HSV-1), study for the treatment of FM and the chronic toxicology program, regulatory consulting to prepare for the meeting with the FDA, the on-going grant to the Bateman Horne Center for the fully funded investigator-sponsored study in Long-COVID and the purchase of active pharmaceutical ingredients to support the start of a potential Phase 3 program for IMC-1.

Our research and development expenses in 2022 primarily related to our FORTRESS study for IMC-1, the Company’s lead candidate, which was completed in August 2022 and two long-term animal toxicology studies; a 26-week study in rats, which was completed in the first quarter of 2022 and a 39-week study in dogs, which was completed in the second quarter of 2022. Overall, the study for IMC-1, did not achieve statistical significance on the prespecified primary efficacy endpoint of change from baseline to Week 14 in the weekly average of daily self-reported average pain severity scores comparing IMC-1 to placebo (p=0.302). However, management observed a differential response based on the timing of patient enrollment and believe it is highly unlikely due to chance or a random occurrence, thus further analysis of the data was warranted, particularly in the context of the previous IMC-1 Phase 2a study success. Based on the analysis of the data, management believes focusing the forward development of IMC-1 on new fibromyalgia patients remains a viable and manageable path forward.

The Company is scheduled to meet with the FDA in March 2023 to discuss the most appropriate next steps in advancing IMC-1 development as a treatment for FM and hopefully agree on a Phase 3 program. If alignment can be reached, management will consider raising additional capital to fund future research and/or seek a partner to develop or co-develop IMC-1 as a treatment for FM.

The Company will need to raise additional capital within the next 13 to 18 months to complete clinical development of and to commercially develop its product candidates. There is no assurance that such financing will be available when needed or on acceptable terms. The financial statements do not include any adjustments to reflect this uncertainty.