Business Context and Reporting Period
Prothena Corporation plc is an Ireland-incorporated, late-stage clinical biotechnology company focused on protein dysregulation, neurodegenerative diseases and rare peripheral amyloid diseases. Its pipeline includes partnered programs with Roche, including prasinezumab for Parkinson’s disease, and programs with Bristol-Myers Squibb targeting tau, TDP-43 and an undisclosed target. Wholly owned programs include PRX004 for ATTR amyloidosis and Alzheimer’s disease programs including PRX012.
This unaudited Form 10-Q covers the three and nine months ended September 30, 2020. The company had 39.9 million ordinary shares outstanding as of October 30, 2020.
Financial Highlights
| Metric | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 |
|---|---|---|---|---|
| Total revenue | $0.2 million | $0.2 million | $0.5 million | $0.6 million |
| Research and development expense | $21.6 million | $12.5 million | $54.1 million | $35.4 million |
| General and administrative expense | $9.4 million | $8.7 million | $28.8 million | $27.7 million |
| Loss from operations | $(30.8) million | $(21.0) million | $(82.4) million | $(62.4) million |
| Net loss | $(30.6) million | $(19.4) million | $(80.4) million | $(56.1) million |
| Net loss per share | $(0.77) | $(0.49) | $(2.02) | $(1.41) |
| Net cash used in operating activities | Not provided quarterly | Not provided quarterly | $(61.3) million | $(38.5) million |
Gross margin is not presented because the company reports primarily collaboration and license revenue rather than product sales. Revenue remained immaterial relative to operating expenses, resulting in substantial operating losses.
- Cash and cash equivalents were $314.5 million at September 30, 2020, compared with $375.7 million at December 31, 2019.
- Total cash, cash equivalents and restricted cash were $317.2 million at September 30, 2020.
- Working capital was $298.8 million, down from $360.7 million at year-end 2019.
- Total liabilities were $146.3 million, including $110.2 million of non-current deferred revenue and $19.2 million of lease liabilities. The filing does not report conventional interest-bearing debt.
- Money market funds represented $254.1 million of cash and cash equivalents at September 30, 2020.
- Share-based compensation expense was $5.6 million in Q3 and $16.8 million for the first nine months of 2020.
Material Changes Versus the Prior Comparable Period
- Q3 revenue decreased 23% to $0.2 million; nine-month revenue decreased 12% to $0.5 million. Nine-month results included $50,000 of license revenue that was not recorded in the prior-year period.
- Q3 R&D expense increased 73%, and nine-month R&D expense increased 53%, primarily because of higher manufacturing costs, increased Roche collaboration costs for prasinezumab and higher consulting expenses.
- Q3 operating loss increased 47% and nine-month operating loss increased 32% compared with the respective 2019 periods.
- Interest income declined 98% in Q3 and 80% for the first nine months, reflecting lower cash balances and substantially lower interest rates.
- Operating cash burn increased to $61.3 million for the first nine months from $38.5 million in the prior-year period. The decrease in cash and restricted cash was $61.2 million.
- Shareholders’ equity declined to $209.5 million from $272.9 million at December 31, 2019, primarily due to the nine-month net loss.
Guidance, Outlook, Risks and Unusual Items
- Management expects 2020 R&D expense to increase from 2019 levels, principally due to continued investment in neuroscience programs. G&A expense is also expected to increase, primarily because of higher directors’ and officers’ insurance premiums.
- Management believes existing cash and cash equivalents are sufficient to meet obligations for at least the next twelve months, but expects additional capital will be required to continue research, development and potential commercialization activities. Future financing may involve equity dilution, debt obligations or less favorable collaboration terms.
- Roche’s Phase 2 PASADENA study of prasinezumab did not meet its primary objective. Management reported signals on several secondary and exploratory endpoints, including motor-function measures, and Roche and Prothena planned to advance the program to a Phase 2b study. The results remain preliminary and do not establish regulatory approval or commercial success.
- The PASADENA blinded extension continued, but COVID-19 caused some participants to miss assessments. The pandemic also presents risks to clinical-trial timelines, manufacturing, regulatory interactions, personnel and liquidity.
- The company depends heavily on Roche and BMS for development, funding and potential future milestone or royalty revenue. No clinical or regulatory milestones were achieved under the BMS collaboration during the reported periods.
- Contractual obligations included $20.6 million of remaining operating lease payments, $10.4 million of purchase obligations according to the MD&A schedule, and $0.8 million of license-related obligations. The filing notes that Roche cost-sharing obligations cannot currently be determined.
- The company had no material legal proceedings and no off-balance-sheet arrangements reported. A $2.7 million standby letter of credit supporting the South San Francisco lease remained unused and was collateralized by restricted cash.
- The company has discontinued development of NEOD001 and is incurring residual close-out and evaluation costs. PRX003 was also not advanced into mid-stage clinical development.
Most Important Facts for Investors to Verify
- Cash runway: Compare ongoing operating cash burn and planned R&D expansion with management’s assertion that cash covers at least twelve months.
- Prasinezumab: Verify the design, timing, enrollment and results of the planned Phase 2b study, particularly in light of the PASADENA primary-endpoint failure.
- Partner dependence: Monitor Roche’s development and commercialization decisions and BMS’s exercise or expiration of program options.
- Financing needs: Assess the timing, size and terms of any future equity, debt or strategic financing and the resulting dilution or obligations.
- Clinical execution and COVID-19 effects: Track missed assessments, trial delays, manufacturing availability and regulatory timelines.
- Cash commitments: Reconcile lease, purchase, license and Roche cost-sharing obligations with available liquidity.
- Non-GAAP interpretation: Consider the effect of $16.8 million of nine-month share-based compensation and other non-cash items when evaluating cash consumption and operating performance.