Business Context and Reporting Period
Company: Protalix Biotherapeutics, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 2010
Business Overview: Protalix is a biopharmaceutical company developing recombinant therapeutic proteins using its proprietary ProCellEx plant cell expression system. The lead product candidate is taliglucerase alfa for the treatment of Gaucher disease. The company is no longer classified as a development-stage enterprise as of November 30, 2009.
Key Financial Metrics
| Metric (Nine Months Ended Sep 30, 2010) | Value (USD in thousands) |
|---|---|
| Revenues | $5,466 |
| Net Loss | $(20,470) |
| Net Loss Per Share (Basic & Diluted) | $(0.25) |
| Cash and Cash Equivalents (Sep 30, 2010) | $44,401 |
| Total Assets | $75,148 |
| Total Liabilities | $78,689 |
| Shareholders' Equity (Capital Deficiency) | $(3,541) |
| Net Cash Used in Operating Activities | $(30,433) |
| Net Cash Used in Investing Activities | $(6,917) |
Note: The company reported a capital deficiency of $3.5 million as of September 30, 2010, compared to positive equity of $15.9 million at year-end 2009.
Material Changes vs. Prior Period
- Revenue Recognition: The company recorded $5.5 million in revenue for the nine months ended September 30, 2010, compared to zero in the same period in 2009. This revenue stems from the amortization of upfront payments and milestone payments from its Pfizer agreement, plus product sales to Pfizer.
- Collaboration Loss: A loss of $1.9 million was recorded as the company's 40% share of the Pfizer collaboration agreement, driven by initial shipments to France under a Temporary Authorization for Use (ATU). No such share was recorded in 2009.
- Operating Expenses: Research and Development (R&D) expenses increased to $23.0 million (net of grants) from $17.3 million in the prior year, primarily due to increased clinical trial activity and new projects, partially offset by the capitalization of $5.1 million into inventory.
- Liquidity: Cash and cash equivalents decreased by approximately $36.9 million during the period, from $81.3 million to $44.4 million, due to significant operating cash outflows and capital expenditures.
Guidance, Outlook, and Risks
- Regulatory Milestones: The FDA accepted the New Drug Application (NDA) for taliglucerase alfa in July 2010 with a Prescription Drug User Fee Act (PDUFA) action date of February 25, 2011. The French regulatory authority granted a Temporary Authorization for Use (ATU) in July 2010, allowing patient treatment in France prior to full EU approval.
- Commercial Agreements: Pfizer entered a $30 million short-term supply agreement with the Ministry of Health of Brazil in August 2010. The company retains rights to commercialize taliglucerase alfa in Israel.
- Outlook: Management expects to continue generating losses over the next several years due to R&D activities and commercialization costs. They believe current funds and anticipated milestone/profit share payments will satisfy capital needs for the foreseeable future.
- Risks: Key risks include the potential rejection of the NDA by the FDA, delays in regulatory approvals, inability to secure additional financing, and the inherent uncertainties of clinical trials and product development.
Investor Verification Checklist
- FDA Decision Date: Verify the outcome of the FDA review by the PDUFA action date of February 25, 2011.
- Cash Runway: Assess the sufficiency of the $44.4 million cash balance against projected R&D and commercialization burn rates.
- Pfizer Collaboration Performance: Monitor the profitability of the Pfizer collaboration to determine if the company's 40% profit share will offset operating losses.
- Inventory Capitalization: Review the $5.1 million capitalized into inventory and the assumptions regarding its future realization as revenue.
- Capital Deficiency: Investigate the drivers of the shift from positive equity to a capital deficiency of $3.5 million within the nine-month period.