Why NRx Pharmaceuticals’ stock is plummeting today

What happened

Actions of NRx Pharmaceuticals (NASDAQ: NRXP) were trading down 7.2% at 11:25 am EDT Friday. The drop came after the drugmaker submitted prospectus supplements to the Securities and Exchange Commission on Thursday.

These documents indicated that NRx sent a letter to shareholders on Wednesday regarding a recent legal action initiated by Relief therapy (OTC: RLFT.F) in New York State court. Relief alleges that NRx “failed to honor its obligations” under a collaboration agreement between the two companies related to the development of Zyesami (aviptadil).

Image source: Getty Images.

So what

Relief Therapeutics’ lawsuit seeks damages for alleged violations of the collaboration agreement. The Swiss drug maker is also claiming the rights to Zyesami. NRx rejects the allegations. His position is that Relief Therapeutics stopped funding Zyesami’s development in January because the company believed the drug had failed and “missed the pandemic.”

Meanwhile, NRx plans to continue development of Zyesami and pursue regulatory approvals and clearances for the drug COVID-19. The company also intends to defend itself in the lawsuit and “assert significant counterclaims against Relief.”

Many lawsuits like this result in a settlement. Both parties have a vested interest in seeing Zyesami become a commercial success. This is probably the most important thing for investors to remember right now.

Now what

Earlier this week, NRx Pharmaceuticals submitted revised documents to the Food and Drug Administration that pursue its goal of obtaining approval for Zyesami. If the drug gets FDA approval, the biotech stock will rise again despite its legal battle with Relief Therapeutics.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Catherine Sherrill

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