Business Context and Reporting Period
Company: Protalix Biotherapeutics, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: March 31, 2009
Business Overview: Protalix is a development-stage biopharmaceutical company focused on the ProCellEx protein expression system. Its lead candidate, prGCD, is in Phase III clinical trials for the treatment of Gaucher disease. The company has no approved products and generates no significant product revenue.
Key Financial Metrics
| Metric | Three Months Ended Mar 31, 2009 | Three Months Ended Mar 31, 2008 |
|---|---|---|
| Revenues | $830,000 (Cumulative since inception) | $0 |
| Net Loss | $(5,183,000) | $(5,113,000) |
| Net Loss Per Share (Basic & Diluted) | $(0.07) | $(0.07) |
| Research & Development Expenses | $(5,086,000) | $(5,653,000) |
| General & Administrative Expenses | $(1,241,000) | $(1,976,000) |
| Cash and Cash Equivalents (Ending) | $34,911,000 | $57,782,000 |
| Net Cash Used in Operating Activities | $(5,982,000) | $(3,807,000) |
| Accumulated Deficit | $(80,193,000) | $(75,010,000) |
Material Changes vs. Prior Period
- Expense Reductions: Total operating expenses decreased due to significant reductions in share-based compensation. R&D expenses fell by $567,000 (10%) and G&A expenses fell by $735,000 (37%) compared to the prior year quarter.
- Cash Position: Cash and cash equivalents decreased by approximately $7.7 million from the beginning of the period ($42.6 million) to the end ($34.9 million), driven by operating losses and capital expenditures.
- Financial Income/Expense: The company reported a net financial expense of $148,000, a reversal from the $1.15 million financial income reported in the same period in 2008. This shift was primarily due to the devaluation of the New Israeli Shekel against the U.S. dollar.
- Accounts Receivable: Increased by $1.6 million, primarily due to grants receivable from the OCS (Office of the Chief Scientist).
Outlook, Risks, and Management Commentary
- Liquidity: Management estimates current cash resources are sufficient to fund operations for approximately 21 months. No assurance is given that additional financing will not be required sooner.
- Clinical Progress: Enrollment for the pivotal Phase III trial of prGCD was completed in December 2008. Results are expected in the second half of 2009, with a New Drug Application (NDA) anticipated in the fourth quarter of 2009.
- Future Funding: The company expects to incur substantial losses for the foreseeable future. Future capital requirements will depend on clinical trial results and may be met through equity offerings, debt financing, or collaborations.
- Risks: Key risks include the inherent uncertainty of drug development, potential delays in regulatory approval, the need for additional financing, and currency fluctuations (approx. 35% of costs are in NIS).
- Corporate Changes: On May 10, 2009, Director Sharon Toussia-Cohen resigned from the Board of Directors. Alfred Akirov was appointed to the Audit Committee.
Investor Verification Checklist
- Cash Runway: Verify the 21-month liquidity estimate against current burn rates and potential unexpected cost increases.
- Clinical Timeline: Monitor the expected second-half 2009 reporting of Phase III prGCD trial results and the subsequent NDA filing.
- Capital Needs: Assess the likelihood and terms of future equity or debt financing required to fund commercialization.
- Currency Exposure: Evaluate the impact of NIS devaluation on future operating costs given the 35% cost base in Israel.
- Grant Receivables: Confirm the collectability of the $1.6 million increase in accounts receivable related to government grants.