Praxis Precision Medicines, Inc. — Q1 2022 Form 10-Q
Business and period: Clinical-stage biopharmaceutical company developing therapies for central nervous system disorders. This unaudited report covers the three months ended March 31, 2022; comparative operating and cash-flow figures are for Q1 2021. Praxis had no product revenue and expects no product sales revenue for several years, if ever.
Financial results and liquidity
| Metric | Q1 2022 / March 31, 2022 | Comparable / prior period |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $52.7 million | $17.9 million in Q1 2021 |
| General and administrative expense | $16.2 million | $9.5 million in Q1 2021 |
| Total operating expenses | $68.8 million | $27.4 million in Q1 2021 |
| Net loss | $68.7 million; $1.51 per share | $27.4 million; $0.71 per share in Q1 2021 |
| Operating cash flow | $(54.1) million | $(25.7) million in Q1 2021 |
| Cash, cash equivalents and marketable securities | $222.5 million | $275.9 million at December 31, 2021 |
| Total liabilities | $48.5 million, including $4.3 million of operating lease liabilities | $41.9 million at December 31, 2021 |
| Stockholders’ equity | $191.0 million | $250.8 million at December 31, 2021 |
There was no material operating margin to assess because the company had no revenue. The company reported $132,000 of other income. Cash, cash equivalents and restricted cash decreased by $61.5 million during the quarter; investing cash use was $8.6 million and financing cash provided was $1.2 million. The filing reports no borrowings; liabilities principally include payables, accruals and operating leases.
Changes and notable items
- Net loss increased by $41.3 million year over year. R&D expense rose $34.7 million, reflecting increased clinical and preclinical activity across psychiatry, epilepsy and movement disorders, higher personnel costs, and a $2.0 million Ionis license fee related to PRAX-222.
- G&A expense increased $6.7 million, primarily due to headcount and stock-based compensation. Stock-based compensation totaled $7.9 million, versus $4.7 million in Q1 2021.
- Cash and marketable securities declined from $275.9 million at year-end. The company raised $1.4 million net from at-the-market (ATM) share sales in Q1; cumulative net ATM proceeds were $8.4 million.
- Available-for-sale securities had $608,000 of gross unrealized losses at March 31, 2022. Management considered these losses temporary and recorded no impairment.
Outlook, development updates and risks
- Management expected existing cash, cash equivalents and marketable securities to fund operations and capital expenditures into the third quarter of 2023, while warning that the estimate depends on assumptions and additional funding will be needed. The liquidity note separately states funds are expected to cover at least one year from issuance of the financial statements.
- Management anticipated multiple clinical topline readouts and two additional clinical development program launches in 2022. At filing, PRAX-114 MDD Aria results were expected in June 2022, Acapella results in Q3, and PTSD results in the second half of 2022. A Phase 3 MDD study was planned for Q4, subject to results and FDA engagement.
- For PRAX-944, a May 2022 update reported positive topline results from the second cohort of its Phase 2a essential tremor trial. Essential1 results were expected in the second half of 2022; the company planned to change its primary endpoint from safety to efficacy. A Parkinson’s disease Phase 2 trial was planned for the second half of 2022.
- PRAX-562 Phase 2 study initiation for rare pediatric developmental and epileptic encephalopathies was expected in the second half of 2022. PRAX-628 Phase 1 was expected in Q4 2022, with a focal epilepsy Phase 2 planned for 2023.
- In April 2022, the FDA placed the PRAX-222 investigational new drug application on clinical hold. The company had not yet received the FDA letter explaining the reasons and said it would assess the impact after receipt.
- Praxis expects continuing operating losses and significant R&D spending. Key risks include clinical failure or delays, patient enrollment, regulatory holds, manufacturing and third-party execution, the need for additional capital and potential dilution or unfavorable financing terms. COVID-19 had slowed enrollment in some studies, though management said it had not significantly affected overall timelines to date. The filing also notes international, sanctions and intellectual-property risks associated with the conflict in Ukraine.
Important facts for investors to verify
- Whether planned clinical readouts and trial starts occurred on schedule, and the efficacy and safety data supporting further development.
- The FDA’s stated reasons for the PRAX-222 hold and the resulting effect on its development timeline and costs.
- Whether the cash runway remains consistent with the stated third-quarter 2023 estimate, given quarterly operating cash use and expected spending growth.
- Future financing needs, ATM usage, share-count changes and dilution; 45,506,482 shares were outstanding at March 31, 2022, and 45,511,773 at May 6, 2022.
- Clinical execution, enrollment, third-party manufacturing and research dependencies, and the effects of COVID-19 and geopolitical developments.