Promis Neurosciences Inc. — Q2 2023 Form 10-Q Summary
Business context and reporting period
ProMIS Neurosciences is a pre-revenue biotechnology company developing antibody therapies, vaccines and other antibody-based therapies for neurodegenerative and protein-misfolding diseases, primarily Alzheimer’s disease, multiple system atrophy and ALS. Its principal candidates are PMN310, PMN267 and PMN442. This unaudited Form 10-Q covers the three and six months ended June 30, 2023, with U.S. dollar financial statements.
Financial condition and key metrics
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $1.0 million | $4.5 million |
| General and administrative expense | $1.9 million | $3.4 million |
| Total operating expenses | $2.9 million | $7.9 million |
| Loss from operations | $2.9 million | $7.9 million |
| Net loss | $2.3 million | $7.3 million |
| Loss per common share, basic and diluted | $0.27 | $0.85 |
At June 30, 2023, cash was $1.2 million, short-term investments were $31,825 and total current assets were $1.5 million. Current liabilities were $8.7 million, including $8.0 million of accounts payable, and total liabilities were $10.0 million. Shareholders’ deficit was $8.5 million, compared with a deficit of $1.3 million at December 31, 2022. The company had an accumulated deficit of $87.5 million.
Cash used in operating activities was $4.7 million for the six months ended June 30, 2023, compared with $7.8 million in the prior-year period. Cash declined by $4.7 million during the first six months, from $5.9 million at December 31, 2022 to $1.2 million at June 30, 2023. No cash was used in investing activities during the period. Operating margins and gross margins are not meaningful because the company has no revenue and incurred only operating losses.
Material changes versus the prior comparable period
- Six-month net loss increased to $7.3 million from $4.8 million, despite lower operating expenses, primarily because 2022 included greater non-cash gains from changes in financial instrument fair values and a $1.3 million gain on extinguishment of convertible debt and derivative liability.
- Six-month research and development expense decreased 12% to $4.5 million from $5.1 million. PMN310 spending decreased by approximately $0.2 million, ALS program spending decreased by approximately $0.4 million, and resources were focused on the PMN310 IND submission.
- Six-month general and administrative expense decreased 9% to $3.4 million from $3.7 million. The 2023 period included approximately $0.8 million of costs from abandoned financing offerings; the 2022 period included approximately $1.1 million of one-time Nasdaq listing costs.
- Second-quarter R&D expense declined 69% to $1.0 million from $3.2 million as the company conserved resources after submitting the PMN310 IND application.
- The warrant liability declined from $1.9 million at December 31, 2022 to $1.3 million at June 30, 2023, producing a $564,549 non-cash gain from the change in fair value.
- Outstanding common shares were 8,579,284 at June 30, 2023, compared with 7,195,529 at June 30, 2022. Potential common share equivalents totaled approximately 4.0 million, including preferred-share conversion rights, options, warrants and deferred share units.
Guidance, outlook, risks and unusual items
- The FDA cleared the PMN310 Investigational New Drug application on May 5, 2023. Management plans to initiate a Phase 1a trial, subject to sufficient resources. PMN310 expenditures were approximately $0.2 million in the second quarter, excluding senior management allocations.
- PMN267 and PMN442 are prepared to advance to IND-enabling studies, but progression depends on available financing. Additional preclinical vaccine and machine-learning discovery programs are also underway.
- Management states that the $1.2 million of cash at June 30, 2023 is not sufficient to fund operating expenses for at least 12 months from issuance of the financial statements. The filing says substantial doubt exists regarding the company’s ability to continue as a going concern.
- The company expects continued losses and requires additional funding through equity or debt financings, collaborations, strategic alliances or licensing arrangements. Failure to obtain financing could delay, reduce or eliminate development and commercialization activities.
- In May 2023, a vendor agreement allowed deferral of approximately $5.3 million of accounts payable and accrued liabilities until March 31, 2024. Deferred amounts accrue interest at 5.5% annually, payable monthly.
- The company reported negative working capital of approximately $7.3 million at June 30, 2023. Foreign exchange exposure increased; management estimates that a 10% change in the U.S. dollar exchange rate on June 30 balances would affect net loss by approximately $0.8 million.
- On July 13, 2023, the company completed its continuance from a Canadian federal corporation to an Ontario corporation. In July 2023, it voluntarily delisted from the TSX to consolidate trading on Nasdaq.
- No material litigation was reported. Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting.
Most important facts for investors to verify
- Availability, timing and terms of the financing required to address the going-concern uncertainty and fund PMN310’s planned Phase 1a trial.
- Payment status and maturity of the approximately $5.3 million of vendor obligations deferred to March 31, 2024, including accrued interest.
- Actual timing, enrollment plans and cash requirements for the PMN310 clinical program following FDA IND clearance.
- Potential dilution from 70 million Series 1 Convertible Preferred Shares, 1.8 million warrants, 1.0 million options and other reserved common-share equivalents.
- Whether PMN267 and PMN442 can advance to IND-enabling studies and whether additional partnerships or licensing transactions are secured.
- Changes in cash burn, accounts payable, warrant fair value and foreign exchange exposure in subsequent filings.