Protalix BioTherapeutics, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This annual filing reports full-year results; it does not provide a clear standalone fourth-quarter income statement. Unless noted, amounts are U.S. dollars.
Business context
Protalix is a commercial-stage biopharmaceutical company developing and manufacturing recombinant proteins using its ProCellEx plant-cell expression platform. Its marketed products are Elfabrio for adult Fabry disease and Elelyso for Gaucher disease. Chiesi commercializes Elfabrio; Pfizer commercializes Elelyso outside Brazil, where Fiocruz distributes it. The pipeline includes PRX-115, a Phase I candidate for severe gout, and preclinical PRX-119 for NET-related diseases.
Elfabrio received U.S. FDA and European Commission approval in May 2023 at 1 mg/kg every two weeks; approvals also cover Great Britain, Switzerland and Israel. Commercial sales began in 2023.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $65.5 million | $47.6 million |
| Revenue from product sales | $40.4 million | $25.3 million |
| License and R&D services revenue | $25.1 million | $22.3 million |
| Gross profit / gross margin | $42.5 million / 64.9% | $28.0 million / 58.9% |
| Operating income (loss) | $10.5 million | ($13.0 million) |
| Net income (loss) | $8.3 million | ($14.9 million) |
| Operating cash flow | ($1.3 million) | ($25.0 million) |
2023 basic and diluted earnings per share were $0.12 and $0.09, respectively. Research and development expense was $17.1 million, down 42% from $29.3 million, mainly reflecting lower PRX-102 clinical-trial subcontractor costs. Selling, general and administrative expense rose 28% to $15.0 million. Net income included a $20.0 million FDA-approval milestone from Chiesi and a $3.1 million deferred-tax benefit from releasing a valuation allowance; these items affect comparability and do not represent recurring product sales.
By customer, 2023 product sales were $17.5 million to Chiesi, $12.5 million to Pfizer and $10.4 million to Brazil. Product-sales revenue increased 60%, primarily due to Elfabrio sales to Chiesi following regulatory approvals. Total revenue increased 37% year over year.
Liquidity, debt and capital
At December 31, 2023, cash and cash equivalents were $23.6 million and short-term bank deposits were $20.9 million, or $44.6 million combined. Current assets were $69.9 million and current liabilities $45.5 million. Net cash used in operations was $1.3 million; investing activities used $16.7 million, mainly for bank deposits; financing activities provided $24.7 million, mainly from equity sales.
Outstanding 7.50% senior secured convertible notes had $20.4 million principal outstanding and mature September 1, 2024, unless earlier converted, purchased, exchanged or redeemed. The notes are secured by liens on substantially all company and subsidiary assets, including intellectual property. Covenants require at least $7.5 million in cash; the company reported compliance at year-end. Management stated that available cash and deposits were sufficient for at least 12 months from issuance of the financial statements, but also said additional financing may be needed.
ATM equity sales generated approximately $24.9 million gross proceeds in 2023 through issuance of 12.56 million shares. Approximately $6.4 million of capacity remained under the 2023 ATM agreement at year-end. Shares outstanding increased from 53.8 million at year-end 2022 to 73.0 million at year-end 2023. The company does not expect to pay dividends in the foreseeable future.
Outlook, commentary and material risks
- Management expects PRX-115 Phase I preliminary results in the second quarter of 2024. It anticipates continued R&D spending and increasing development costs for PRX-115, PRX-119 and other pipeline programs, but did not provide numerical earnings or revenue guidance.
- Elfabrio carries an FDA boxed warning for hypersensitivity reactions, including anaphylaxis, and warnings regarding infusion reactions and possible membranoproliferative glomerulonephritis. The FDA found the benefit-risk favorable, but concluded the BALANCE trial did not support a non-inferiority claim to the comparator because data did not support the non-inferiority margin.
- Commercial performance depends substantially on partners: Chiesi’s launch, pricing and reimbursement efforts for Elfabrio; Pfizer’s Elelyso activity; and Fiocruz’s Brazilian purchases. Fiocruz has not met certain purchase commitments, and Protalix retains a right to terminate the Brazil agreement.
- The company’s manufacturing facility and principal operations are in Israel. Management reported no material adverse operational effect from the Israel-Hamas war as of the financial-statement issuance date, but warned that conflict, supply interruptions, employee reserve duty and regional escalation could disrupt operations. Insurance does not cover certain war-related losses or resulting disruption.
- Other significant risks include the near-term note maturity and refinancing needs, dependence on third-party fill-and-finish services and suppliers, reimbursement and market uptake, competition, regulatory and clinical uncertainty, and potential dilution from equity issuance or note conversion.
- The independent auditor issued an unqualified opinion on the financial statements. It identified sales-reserve estimation as a critical audit matter; the year-end reserve for potential discounts, rebates and allowances was $2.861 million. Management reported effective internal control over financial reporting; the auditor was not required to attest to that assessment.
Important facts for investors to verify
- Subsequent Elfabrio sales, Chiesi commercialization progress and the resulting supply revenue or milestone payments.
- Available liquidity and the company’s repayment, conversion or refinancing plan for the $20.4 million notes due September 2024, including compliance with the $7.5 million minimum-cash covenant.
- PRX-115 Phase I results and the timing, cost and funding plan for further development of PRX-115 and PRX-119.
- Fiocruz purchase performance, Brazil agreement status and any resulting impact on Elelyso revenue.
- Ongoing safety reporting for Elfabrio, including hypersensitivity and kidney-related risks, and whether additional clinical or regulatory requirements affect commercialization.
- Share-count changes and potential dilution from future ATM sales, outstanding warrants, options and convertible notes.