Executive Summary / Key Takeaways

• Quoin Pharmaceuticals is a late-stage clinical biotech focused on developing treatments for rare and orphan diseases with high unmet needs, led by its lead candidate, QRX003, for Netherton Syndrome (NS).
• QRX003 leverages proprietary Invisicare technology and a broad-spectrum serine protease inhibitor, demonstrating encouraging initial clinical data in ongoing late-stage trials, including positive results on pruritus and skin healing in NS patients.
• The company is actively expanding its clinical program for QRX003, including increasing study sizes, implementing twice-daily dosing, and notably, enrolling pediatric patients aged 14 and older, aiming for a robust data set to support potential regulatory approval targeted for early 2025.
• Quoin is pursuing a dual commercial strategy of establishing its own sales infrastructure in the U.S. and Europe while building a global network of distribution partnerships, positioning for a potential global launch upon approval.
• Despite recent financing activities, including a $6.8 million public offering and an $8 million equity line of credit, the company's Q1 2025 financials show continued losses and negative cash flow, leading management to conclude there is substantial doubt about its ability to continue as a going concern for at least one year without securing additional capital.

Quoin Pharmaceuticals: Advancing a Differentiated Topical Technology Towards a First Netherton Syndrome Approval

Quoin Pharmaceuticals Ltd. (NASDAQ: QNRX) is a specialty pharmaceutical company strategically positioned at the late clinical stage, dedicated to addressing the significant unmet medical needs of patients suffering from rare and orphan diseases. The company's core focus lies in developing and commercializing therapeutic products for conditions where approved treatments are severely limited or non-existent. This mission is particularly evident in its lead program targeting Netherton Syndrome (NS), a devastating rare hereditary genetic disorder.

Quoin's journey in its current form began with the business combination of Cellect Biotechnology and Quoin Inc. in late 2021. This merger established a foundation focused on rare diseases, building upon earlier strategic moves like the 2019 licensing agreement with Skinvisible Pharmaceuticals (SKVI) for its Invisicare technology, which underpins key product candidates. The company's strategy is multi-faceted: aggressively advance its lead candidate through clinical development, build a commercial framework for potential market entry, and strategically expand its pipeline through business development, including M&A and licensing opportunities. This approach is designed to leverage its expertise in rare diseases and create long-term value, although it operates within a challenging financial landscape common to development-stage biotechs.

Technological Foundation and Expanding Pipeline

Central to Quoin's approach is its differentiated technology platform, particularly the proprietary Invisicare delivery technology. This technology is utilized in the company's lead candidate, QRX003, a topical lotion containing a broad-spectrum serine protease inhibitor. The mechanism of action for QRX003 is designed to compensate for the deficiency of the LEKTI protein in Netherton Syndrome patients, which leads to excessive skin shedding and a compromised skin barrier. By inhibiting the overactive kallikreins in the skin, QRX003 aims to promote a more normalized skin shedding process and the formation of a stronger, more effective skin barrier.

The tangible benefits of this topical approach are significant for patients with severe skin conditions like NS. A topical formulation offers ease of application and is user-friendly for both patients and caregivers. Initial clinical data from the open-label study has been encouraging, showing improvements in key symptoms. For instance, positive data indicated that pruritus (itch) was either absent or negligible in five out of six evaluable subjects after treatment, a critical outcome given that itch is a major debilitating symptom. Improvements in skin appearance were also observed. The first patient to complete the open-label study demonstrated a "fully clear" treatment area according to investigator and scoring assessments, with pruritus reduced to a negligible level. More recently, highly positive "whole body" clinical data from an ongoing pediatric NS study showed dramatic improvement and clear visual evidence of skin healing after just two weeks of whole-body application, with the patient remaining almost completely healed after six weeks of continued treatment and experiencing zero nightly sleep disturbances without sedating medication. These results suggest the potential for significant symptomatic relief and skin barrier restoration, offering a potential advantage over systemic therapies that may carry broader side effect profiles.

Beyond QRX003, Quoin is leveraging its technological base and pursuing pipeline expansion. It holds options for global licenses to QRX007, another potential NS treatment with a different mechanism of action, and QRX008 for Scleroderma, both stemming from research agreements with Queensland University of Technology (QUT). Furthermore, a research agreement with University College Cork (UCC) is focused on developing novel topical formulations of rapamycin (sirolimus), also utilizing the Invisicare technology, for other rare and orphan diseases like microcystic lymphatic malformations, venous malformations, and angiofibromas. While earlier stage, these programs demonstrate the potential of the Invisicare platform across multiple indications and therapeutic targets. The company also has QRX004 in development for Recessive Dystrophic Epidermolysis Bullosa (RDEB), though progress here is being evaluated based on the evolving competitive landscape in that specific indication.

Clinical Advancement and Strategic Adjustments

Quoin's primary operational focus is the advancement of QRX003 through late-stage clinical trials under an open IND with the FDA. The company is currently conducting three regulatory clinical studies for NS. Significant progress has been made in opening clinical sites, with five active in the US and plans for a sixth at Northwestern University. International expansion is also underway, with trials extending into the Middle East, the United Kingdom, and additional European countries like Spain and Germany. A pediatric study is active in Dublin, Ireland, with intentions to expand enrollment to other countries.

Based on the initial positive data and favorable safety profile observed, Quoin has strategically implemented several protocol amendments to its ongoing trials. These include increasing the size of both the open-label and blinded studies, changing the dosing frequency from once daily to twice daily to potentially maximize clinical performance, and eliminating the lower 2% dose from the blinded study to focus on the 4% dose. Crucially, the eligibility age for recruitment has been lowered to 14 years and older, marking the first time non-adults are being tested under this IND. This is expected to increase the pool of eligible subjects and potentially accelerate recruitment. The studies are also designed to accommodate patients currently on off-label systemic therapy, aiming for a broad-based data set that reflects real-world treatment scenarios.

The company has provided guidance on upcoming clinical milestones. Further readouts from the open-label study are anticipated throughout 2024, with a specific target for a first readout this summer from patients receiving twice-daily dosing. Top-line results from the blinded study, which now includes patients aged 14 and older, are expected early in 2025. Quoin is targeting potential regulatory approval for QRX003 in Netherton Syndrome in the early part of 2025, a timeline that hinges on the successful execution and outcomes of these ongoing trials.

Beyond NS, QRX003 is also being developed for Peeling Skin Syndrome, with the first subject already being treated in New Zealand. The company plans to discuss the future direction of its QRX007 and QRX008 programs with QUT and continues work on the rapamycin formulations with UCC.

Competitive Landscape and Positioning

The rare and orphan disease space, while offering high potential rewards, is intensely competitive. Quoin operates within this environment, facing both direct and indirect competition across its pipeline. For Netherton Syndrome, Quoin currently holds a significant competitive advantage as it remains the only pharmaceutical company actively conducting clinical studies under an open IND with the FDA. While another company has filed an IND and received a "Study May Proceed" letter, their program appears to be at a much earlier stage (Phase 1b), with shorter dosing durations and potentially different endpoints compared to Quoin's late-stage, 12-week dosing trials. Quoin believes its advanced clinical stage, coupled with a successfully developed and scaled-up GMP manufacturing process for the QRX003 active ingredient (an exclusive source), provides a substantial first-mover advantage in the race for the first approved NS treatment.

In the broader rare skin disease market, particularly for conditions like Epidermolysis Bullosa (EB), the competitive landscape is more crowded, with companies like Krystal Biotech (KRYS), Amicus Therapeutics (FOLD), and PTC Therapeutics (PTCT) active in related areas. These companies employ diverse technological approaches, including gene therapy (KRYS), enzyme replacement therapies (FOLD), and RNA-based therapies (PTCT). While direct, quantifiable market share comparisons across all niche indications are challenging to ascertain, companies like KRYS have established a market presence with approved products for certain rare dermatological conditions, demonstrating significant revenue growth and strong gross margins (KRYS TTM Gross Profit Margin: 93%). In contrast, Quoin, as a pre-revenue company focused on development, has TTM Gross Profit, Operating Profit, and Net Profit Margins of 0.00%, reflecting its stage.

Quoin's competitive positioning relies on the potential efficacy and favorable safety profile of its lead candidate, QRX003, and the patient-friendly nature of its topical Invisicare delivery technology. While competitors like KRYS and FOLD have established revenue streams and often better financial metrics (e.g., KRYS TTM Current Ratio: 7.28, FOLD TTM Current Ratio: 3.39 vs. QNRX TTM Current Ratio: 2.57), Quoin is targeting a specific, underserved niche in NS where it aims to be the first approved therapy. The company's strategy to establish its own commercial infrastructure in key markets (US/Europe) while partnering globally (9 partners covering 61 countries) is designed to maximize market access upon approval, a network potentially unprecedented for a company of its size and seen as a significant, potentially underappreciated advantage for future profitability.

The M&A strategy to acquire later-stage orphan assets is also a competitive response, aiming to diversify the pipeline and reduce reliance on a single program, positioning Quoin to compete across a broader spectrum of rare diseases. However, executing this strategy is contingent on securing additional funding.

Financial Performance and Liquidity

As a development-stage biopharmaceutical company, Quoin has a limited operating history and has consistently incurred net losses since inception, resulting in an accumulated deficit of approximately $59.00 million as of March 31, 2025. The company does not expect to generate revenue from product sales unless and until it successfully completes development and obtains marketing approval, which is subject to significant uncertainty and expected to take years.

For the three months ended March 31, 2025, Quoin reported a net loss of approximately $3.81 million, an increase from the $2.33 million net loss for the same period in 2024. This increase was primarily driven by a significant rise in research and development expenses, which increased by approximately $1.49 million, or 168.2%, in Q1 2025 compared to Q1 2024. This surge in R&D spending reflects increased external expenditures on the QRX003 clinical programs and higher personnel/stock-based compensation allocated to R&D activities as the trials advance. General and administrative expenses remained relatively stable period-over-period. The company did benefit from approximately $145,000 in realized and accrued interest income in Q1 2025 from its cash and investments.

Liquidity remains a critical factor for Quoin. As of March 31, 2025, the company had cash and cash equivalents totaling $3.82 million and investments of $7.73 million, amounting to approximately $11.55 million in total liquid assets.

However, the company's operations consumed cash, with negative cash flows from operating activities totaling $2.59 million for the three months ended March 31, 2025. While investing activities provided $2.77 million from the net sale of investments, and financing activities provided approximately $23,000 (primarily from warrant exercises offset by officer repayments), the overall cash position reflects ongoing burn from R&D activities.

Despite recent financing efforts, including a $6.8 million public offering completed in December 2024 (which management stated in Q4 2023 transcript was expected to fund operations into the second half of 2025) and an $8 million equity line of credit arrangement (expected to extend the cash runway into the second half of 2026 with its completion), management has concluded that based on current business plans and cash/investments on hand as of March 31, 2025, there is substantial doubt about the company's ability to continue as a going concern for a period of at least one year from the filing date of the Q1 2025 report (May 13, 2025). This highlights the ongoing need for additional capital.

Outlook and Key Considerations

Quoin's outlook is centered on the successful execution of its QRX003 clinical program and securing the necessary funding to support its operations and strategic initiatives. The company is actively working towards generating the clinical data required for potential regulatory approval of QRX003 in Netherton Syndrome, targeting early 2025 for submission. Key data readouts from the open-label study are expected throughout 2024, with top-line data from the blinded study anticipated in early 2025.

Looking ahead, the company expects research and development expenses to remain significant and likely increase as the late-stage clinical trials progress and preparations for potential regulatory filing and commercial launch commence. General and administrative expenses are also anticipated to rise to support these activities.

The company's ability to achieve its strategic goals, including completing the QRX003 development, pursuing pipeline expansion through M&A, and establishing commercial capabilities, is directly contingent on its ability to raise additional capital. Management is exploring various financing alternatives, including equity and debt offerings, as well as collaborative or licensing transactions. The success and timing of these efforts will be critical determinants of the company's future trajectory.

Risks inherent in Quoin's business include the uncertainty of obtaining regulatory approvals, the possibility of unfavorable clinical trial results, potential delays or increased costs in development programs, dependence on third-party manufacturers and CROs (including single-source suppliers), and the challenges of commercializing a product in a rare disease market. While the company recently regained compliance with Nasdaq's minimum bid price requirement through a reverse stock split, the risk of future non-compliance with listing standards remains. Dilution from future equity financings is also a significant consideration for investors. The substantial doubt about the company's ability to continue as a going concern underscores the paramount importance of securing additional funding.

Conclusion

Quoin Pharmaceuticals presents an investment case built around the potential of QRX003 to become the first approved treatment for Netherton Syndrome, a rare disease with a high unmet need. The company's differentiated topical technology, encouraging initial clinical data, expanding clinical program (including pediatric enrollment), and strategic global commercialization plan offer potential upside. Furthermore, the stated intent to leverage market conditions for pipeline expansion through M&A could diversify its long-term growth prospects.

However, these opportunities are shadowed by significant financial challenges. The company's history of losses, negative cash flow from operations, and the explicit going concern warning highlight the critical need for substantial additional capital. The success of Quoin's investment thesis hinges on its ability to not only deliver positive clinical trial results and secure regulatory approval but also to effectively address its funding requirements in a timely manner. Investors should closely monitor clinical trial progress, regulatory interactions, and, most importantly, the company's ability to secure the financing necessary to execute its strategy and bridge the path to potential commercialization.

Executive Summary / Key Takeaways

• Quoin Pharmaceuticals is a late-stage clinical biotech focused on developing treatments for rare and orphan diseases with high unmet needs, led by its lead candidate, QRX003, for Netherton Syndrome (NS).
• QRX003 leverages proprietary Invisicare technology and a broad-spectrum serine protease inhibitor, demonstrating encouraging initial clinical data in ongoing late-stage trials, including positive results on pruritus and skin healing in NS patients.
• The company is actively expanding its clinical program for QRX003, including increasing study sizes, implementing twice-daily dosing, and notably, enrolling pediatric patients aged 14 and older, aiming for a robust data set to support potential regulatory approval targeted for early 2025.
• Quoin is pursuing a dual commercial strategy of establishing its own sales infrastructure in the U.S. and Europe while building a global network of distribution partnerships, positioning for a potential global launch upon approval.
• Despite recent financing activities, including a $6.8 million public offering and an $8 million equity line of credit, the company's Q1 2025 financials show continued losses and negative cash flow, leading management to conclude there is substantial doubt about its ability to continue as a going concern for at least one year without securing additional capital.

Conclusion

Quoin Pharmaceuticals presents an investment case built around the potential of QRX003 to become the first approved treatment for Netherton Syndrome, a rare disease with a high unmet need. The company's differentiated topical technology, encouraging initial clinical data, expanding clinical program (including pediatric enrollment), and strategic global commercialization plan offer potential upside. Furthermore, the stated intent to leverage market conditions for pipeline expansion through M&A could diversify its long-term growth prospects.

However, these opportunities are shadowed by significant financial challenges. The company's history of losses, negative cash flow from operations, and the explicit going concern warning highlight the critical need for substantial additional capital. The success of Quoin's investment thesis hinges on its ability to not only deliver positive clinical trial results and secure regulatory approval but also to effectively address its funding requirements in a timely manner. Investors should closely monitor clinical trial progress, regulatory interactions, and, most importantly, the company's ability to secure the financing necessary to execute its strategy and bridge the path to potential commercialization.