Protalix BioTherapeutics, Inc. — FY2011 Form 10-K
Reporting period: Fiscal year ended December 31, 2011. The filing also reports unaudited fourth-quarter results and subsequent events through its February 27, 2012 filing date. Protalix is a development-stage biopharmaceutical company using its plant-cell ProCellEx platform. Its lead candidate, taliglucerase alfa, targets Gaucher disease; no product had received marketing approval as of the filing.
Financial results and liquidity
| Metric (US$ millions, except per-share data) | 2011 | 2010 |
|---|---|---|
| Revenue | 8.386 | 6.642 |
| Gross profit | 1.443 | 6.861 |
| Net research and development expense | 31.043 | 29.951 |
| General and administrative expense | 6.931 | 6.876 |
| Operating loss | 36.531 | 29.966 |
| Net loss | 36.529 | 28.998 |
| Net loss per share, basic and diluted | $0.43 | $0.36 |
| Cash and cash equivalents at year-end | 27.001 | 35.900 |
| Total assets | 51.805 | 64.729 |
| Total liabilities | 77.882 | 76.052 |
- Revenue rose 26%, primarily from increased taliglucerase alfa vial supplies to Pfizer and amortization of Pfizer’s upfront and milestone payments. The $65 million received from Pfizer is deferred and amortized over an estimated 14-year performance period.
- The collaboration line changed from $4.602 million income in 2010 to a $5.418 million loss in 2011. This reflected Protalix’s share of Pfizer’s Brazil sales-return allowance, partly offset by France access-program income. Reported gross profit consequently fell substantially.
- Net cash used in operations was $23.570 million, versus $38.464 million in 2010. Investing activities used $5.868 million, mainly for property and equipment; financing provided $20.927 million, principally from the March 2011 stock offering.
- Shareholders’ equity was a capital deficiency of $26.077 million. The balance sheet reports no conventional interest-bearing borrowings; liabilities include deferred revenue and a $7.888 million accrued liability for collaboration losses, of which $6.566 million was long term.
- After year-end, the February 2012 stock offering generated approximately $25.389 million net proceeds from 5.175 million shares. Management said cash resources, including that offering, were expected to fund planned operations for at least 12 months.
- Fourth-quarter 2011 revenue was $2.362 million and net loss was $8.913 million.
Material changes and operating developments
- Net loss increased by $7.531 million year over year, while net R&D expense and G&A were broadly stable. Financial income declined to $2,000 from $968,000.
- Year-end cash declined by $8.899 million. The company raised $22 million gross in a March 2011 equity offering and issued additional shares in February 2012, diluting existing shareholders.
- The FDA had issued a Complete Response Letter for taliglucerase alfa in February 2011, citing clinical-data presentation and chemistry, manufacturing and controls questions; it did not request additional clinical studies. The FDA accepted the resubmission, then extended the action date to May 1, 2012 after receiving requested clinical information.
- Pfizer holds exclusive worldwide commercialization rights to taliglucerase alfa except in Israel. Protalix is entitled to 40% of collaboration profits or losses and manufactures product for Pfizer. The company completed the Brazil short-term supply deliveries in early 2011; potential vial replacements generated the sales-return allowance.
- Manufacturing facility inspections by the FDA, Israeli MOH, ANVISA and Irish Medicines Board were reported acceptable or GMP-compliant. Planned facility expansion was estimated at approximately $25 million, with completion expected during 2013.
Outlook, risks and contingencies
- Management expected at least approximately $30 million of spending over the next 12 months for Israel commercialization preparation and pipeline development. It also anticipated continued operating losses and significant R&D and capital spending; further financing could be needed if plans or assumptions change.
- The company planned to pursue taliglucerase alfa approvals in the United States, Europe, Israel, Brazil and Australia. The EMA review had outstanding points, including a challenge to VPRIV’s EU orphan exclusivity, which could impede taliglucerase alfa authorization for up to the relevant 10-year exclusivity period.
- Pipeline plans included an IND for Fabry candidate PRX-102 in Q2 2012 and an IND for PRX-106 around year-end 2012; these were management expectations, not assured milestones. Other candidates remained primarily preclinical or research-stage.
- Key risks include regulatory delay or rejection, clinical and manufacturing uncertainty, dependence on Pfizer and other partners, limited commercial infrastructure, reimbursement and pricing uncertainty, competition, financing needs, intellectual-property disputes, and operating exposure to Israel’s political, security and currency conditions.
- OCS grants carry royalty and technology/manufacturing-transfer restrictions. At December 31, 2011, the reported contingent OCS liability was approximately $19.8 million, subject to applicable project revenues and terms. Contractual obligations totaled $10.325 million, excluding certain contingent milestone and royalty payments.
- Management reported effective disclosure controls and internal control over financial reporting; the independent auditor gave an unqualified opinion on the financial statements and internal controls. No material legal proceedings were reported.
Investor verification priorities
- Check the subsequent FDA decision on taliglucerase alfa and the status and terms of applications outside the United States, particularly the EU orphan-exclusivity challenge.
- Reconcile the Brazil sales-return allowance and the $5.418 million collaboration loss with Pfizer’s underlying sales, expenses and any vial replacements or allowance reversals.
- Assess cash burn, the effect of the February 2012 offering, the stated 12-month runway, and funding needs for the planned $25 million facility expansion and commercial launch.
- Verify production capacity, manufacturing scale-up and supply arrangements, including fill-and-finish responsibilities and the timing and cost of expansion.
- Review clinical safety and efficacy evidence and development timelines for taliglucerase alfa and pipeline candidates, distinguishing reported trial findings from management projections.