Protalix BioTherapeutics, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results are in U.S. dollars; financial statement amounts below are in millions unless stated otherwise. Protalix develops and commercializes recombinant therapeutic proteins using its ProCellEx plant-cell platform. Its lead candidate, PRX-102, is being developed with Chiesi for Fabry disease; the company also sells taliglucerase alfa products.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $14.2 | $12.1 | $39.0 | $29.8 |
| Goods revenue | $8.8 | $4.5 | $21.2 | $12.3 |
| License and R&D services revenue | $5.4 | $7.5 | $17.8 | $17.5 |
| Operating loss | $(3.1) | $(1.9) | $(10.5) | $(14.8) |
| Net loss | $(3.6) | $(4.2) | $(11.2) | $(20.9) |
| Loss per share, basic and diluted | $(0.07) | $(0.09) | $(0.24) | $(0.48) |
- Q3 goods revenue rose 96%, with higher Pfizer and Chiesi sales partly offset by lower Brazil sales; license and R&D revenue fell 28%. Management attributed some sales changes to timing.
- Nine-month goods revenue increased 72%, with growth from Pfizer, Brazil and Chiesi. Gross profit on goods was approximately $4.0 million, or 19% of goods revenue, versus a goods gross loss of approximately $0.9 million in the prior-year period.
- Q3 operating loss widened despite higher revenue, as cost of goods sold increased with goods sales. Nine-month operating loss narrowed; lower net loss also reflected net financial expense falling to $0.7 million from $6.2 million, principally due to reduced debt-related costs and foreign-exchange effects.
- Research and development expense was $7.4 million in Q3 and $23.7 million for nine months, up 1% and 7%, respectively. The nine-month increase primarily reflected subcontractor costs associated with PRX-102 regulatory submissions and higher materials costs. SG&A declined 7% in Q3 and 8% for nine months.
- Cash and cash equivalents were $10.7 million and short-term bank deposits were $10.1 million at September 30, 2022, for combined liquidity of $20.8 million, down from $39.0 million of cash at December 31, 2021. Current assets were $45.8 million and current liabilities $34.3 million.
- Nine-month operating cash use was $22.4 million, investing cash use $10.0 million and financing cash inflow $4.2 million. Operating cash use increased from $5.2 million in the prior-year period, affected by lower contract liabilities, lower payables, higher receivables and other assets, and working-capital movements. Ending cash was $10.7 million.
- At September 30, total liabilities were $68.2 million, including $28.1 million carrying value of convertible notes; capital deficiency was $11.5 million. The 7.50% secured convertible notes have $28.75 million principal outstanding and mature September 1, 2024. The company must maintain at least $7.5 million cash and reported covenant compliance.
Material developments, outlook and risks
- On November 9, 2022, after quarter-end, Protalix and Chiesi resubmitted the PRX-102 BLA to the FDA. The initial application received a Complete Response Letter in April 2021, which cited the need for a manufacturing-facility inspection and addressed the regulatory context for the application. The resubmission includes final two-year BALANCE study analyses and long-term extension data. FDA acceptance, review timing and approval remain uncertain.
- The EMA review of the PRX-102 marketing application continued: responses to the Day 120 questions, including final BALANCE data, were submitted in September 2022. No approval outcome is provided in this filing.
- The completed BALANCE Phase III study met its prespecified non-inferiority endpoint versus agalsidase beta. The filing reports favorable tolerability observations, but regulatory approval and commercial success are not assured.
- A new Chiesi fill/finish agreement, signed August 29, 2022, provides for commercial fill/finish services for PRX-102 following technology transfer and is intended to support a potential global launch. The initial term runs through December 31, 2025, with a possible seven-year extension by mutual agreement.
- Management stated that cash and short-term deposits should fund capital needs for at least 12 months from issuance of the financial statements. It also expects significant ongoing R&D and other expenditures, says additional capital may be needed, and identifies no committed external funding beyond potential Chiesi development and milestone payments. Up to approximately $15.6 million of gross ATM capacity remained available at September 30, 2022.
- Other risks include clinical and regulatory uncertainty, financing and dilution needs, reliance on Chiesi, Pfizer and Fiocruz, competition, product pricing and reimbursement changes, currency exposure, and potential disruption from COVID-19. Management reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls; no material internal-control changes occurred during the quarter.
Important facts for investors to verify
- FDA acceptance and review timetable for the PRX-102 resubmission, including the status of required manufacturing inspections and any further information requests.
- EMA review progress and whether either regulator ultimately approves PRX-102, including the proposed dosing regimens and commercial launch timing.
- Cash runway against actual operating cash use, the $7.5 million minimum-cash covenant, and the company’s ability to fund operations without further financing.
- Convertible-note repayment or refinancing plans before September 2024 and the impact of interest, conversion and potential equity issuance.
- Revenue timing and collection trends across Pfizer, Brazil and Chiesi, plus the effect of contract-liability changes on operating cash flow.
- Potential dilution from ATM sales and equity awards, and the terms and economics of Chiesi’s fill/finish arrangement and any future milestone payments.