Prothena Corporation plc — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2016. Prothena is an Ireland-based late-stage clinical biotechnology company developing antibody candidates for AL amyloidosis, Parkinson’s disease and other synucleinopathies, inflammatory diseases, and TTR amyloidosis. The filing is unaudited and reports in U.S. dollars.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Collaboration revenue | $0.3 million, versus $0.3 million | $0.6 million, versus $0.9 million |
| Research and development expense | $32.4 million, up 153% | $52.9 million, up 126% |
| General and administrative expense | $8.1 million, up 47% | $15.3 million, up 45% |
| Loss from operations | $40.2 million, versus $18.0 million | $67.6 million, versus $33.1 million |
| Net loss | $40.4 million, versus $18.3 million | $68.0 million, versus $33.5 million |
| Basic and diluted loss per share | $1.18, versus $0.59 | $1.99, versus $1.15 |
| Net cash used in operating activities | Not separately presented | $52.7 million, versus $25.9 million |
Revenue consisted of Roche collaboration reimbursements. The company had no commercial product revenue. Operating and net margins were deeply negative because revenue was nominal relative to development spending.
- Cash and cash equivalents were $442.9 million at June 30, 2016, compared with $370.6 million at December 31, 2015.
- Working capital was $417.1 million, compared with $355.2 million at year-end 2015.
- Total assets were $502.6 million and total liabilities were $71.7 million. Shareholders’ equity was $430.9 million.
- The company had an accumulated deficit of $197.1 million.
- Net cash provided by financing activities was $130.0 million, primarily from the January 2016 public offering. Net cash increased by $72.4 million during the first six months.
- The company reported no senior debt, but recorded a $35.9 million non-current build-to-suit lease obligation.
Material changes versus the prior comparable period
- Six-month R&D expense increased $29.5 million, driven primarily by higher manufacturing costs, clinical trial costs, and personnel and share-based compensation expense, particularly for NEOD001 and, to a lesser extent, PRX003 and PRX004.
- Six-month G&A expense increased $4.7 million, primarily from higher personnel costs and share-based compensation.
- Six-month collaboration revenue declined 31% because prior-year revenue included development-cost reimbursement; in 2016, Roche development reimbursements were recorded as reductions of R&D expense after the allocated license consideration had been fully recognized as revenue.
- In January 2016, Prothena issued 2,587,500 ordinary shares at $53 per share and received approximately $128.6 million of net proceeds.
- Property and equipment increased to $41.9 million from $3.9 million, largely reflecting construction of the new South San Francisco facility.
- Shares outstanding increased to 34.4 million as of July 22, 2016, compared with 31.7 million at December 31, 2015.
Guidance, outlook, risks and unusual items
- Management expects R&D expenses to increase in 2016, primarily because of the NEOD001 VITAL Phase 3 and PRONTO Phase 2b programs and additional PRX004 spending. G&A expenses are also expected to increase in the second half of 2016.
- Management believes cash and cash equivalents at June 30, 2016 are sufficient to meet obligations for at least the next twelve months, but expects to require additional capital to continue development and eventual commercialization. Future financing may dilute shareholders or may not be available on acceptable terms.
- NEOD001 interim Phase 1/2 data presented in July 2016 showed reported cardiac, renal, and peripheral-neuropathy responses; these were interim results and do not establish regulatory approval or commercial success.
- PRX003 Phase 1 data indicated safety and target engagement at tested doses, and a Phase 1b psoriasis study had recently begun. PRX004 remained in preclinical development, with plans to advance it into clinical testing.
- The Roche collaboration remains strategically important for PRX002. Roche and Prothena share development and commercialization costs and profits in specified arrangements, with Prothena generally responsible for 30% of shared costs in the United States unless it opts out.
- In March 2016, the company entered a lease for approximately 128,751 square feet of new office and laboratory space through 2023. Expected lease payments were approximately $39.2 million, with a $4.1 million standby letter of credit collateralized by restricted cash.
- As of June 30, 2016, contractual obligations totaled approximately $69.0 million, including $39.0 million of build-to-suit lease payments, $11.4 million of operating leases, $17.2 million of purchase commitments, and $1.4 million under license agreements. Future Roche cost-sharing obligations were not determinable.
- Subsequent to quarter-end, Prothena agreed to assign its current facility lease to Merck. Merck agreed to pay $0.5 million for the lease assignment and $0.1 million for certain furniture, fixtures, and equipment, subject to completion of the assignment conditions.
- Key risks include continued losses, clinical and regulatory failure, dependence on third-party manufacturers and clinical research organizations, reliance on Roche, intellectual-property uncertainty, reimbursement pressure, supply concentration, personnel dependence, and potential need for additional financing.
Most important facts for investors to verify
- Whether the NEOD001 Phase 3 and Phase 2b programs meet enrollment, safety, efficacy, and regulatory milestones.
- The pace and cost of development for PRX003, PRX004, and Roche-supported PRX002.
- Cash-burn trends and the expected duration of the $442.9 million cash balance under revised clinical-development plans.
- Whether additional equity or debt financing will be required and the potential dilution or contractual restrictions involved.
- The terms and financial effects of the new facility lease and the completed or pending assignment of the current facility lease to Merck.
- Roche’s ongoing financial and operational commitment to PRX002, including cost-sharing estimates, termination rights, and potential milestones or royalties.
- Third-party manufacturing capacity, technology transfers, supply continuity, and regulatory compliance for clinical and potential commercial production.