Prothena Corporation plc — Q1 2021 Form 10-Q Summary
Business context and reporting period
Prothena is an Ireland-incorporated late-stage clinical biotechnology company focused on therapeutics for rare amyloid and neurodegenerative diseases. Its wholly owned programs include birtamimab, PRX004 and PRX012; partnered programs include prasinezumab with Roche and PRX005, TDP-43 and an undisclosed target with Bristol Myers Squibb. The filing covers the unaudited three months ended March 31, 2021, compared with the same period in 2020.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $0.2 million | $0.1 million | 13% |
| Research and development expense | $21.1 million | $15.2 million | 39% |
| General and administrative expense | $11.1 million | $9.7 million | 14% |
| Total operating expenses | $32.3 million | $25.0 million | 29% |
| Loss from operations | $(32.1) million | $(24.8) million | Loss increased |
| Net loss | $(36.7) million | $(23.6) million | Loss increased |
| Basic and diluted loss per share | $(0.91) | $(0.59) | Worsened |
| Net cash used in operating activities | $(33.7) million | $(23.2) million | Use increased |
Revenue consisted of $0.1 million of Roche collaboration revenue and $0.05 million of license revenue. The filing does not provide a meaningful gross margin because Prothena is a clinical-stage company with immaterial revenue and no product sales. Interest income fell to $11,000 from $1.1 million, primarily because of lower interest rates.
Cash and cash equivalents were $343.0 million at March 31, 2021, compared with $295.4 million at December 31, 2020. Including restricted cash, total cash, cash equivalents and restricted cash were $345.7 million. Working capital was $328.8 million. Financing activities provided $81.3 million, including $78.4 million of net proceeds from a March public offering and $3.0 million from stock-option exercises.
Total liabilities were $145.1 million, including $110.2 million of non-current deferred revenue and $16.5 million of lease liabilities. The filing reports no debt financing. Shareholders’ equity increased to $234.6 million from $184.0 million, while ordinary shares outstanding increased to 44.2 million from 39.9 million.
Material changes versus the prior comparable period
- Total revenue increased modestly, but remained immaterial relative to operating costs.
- Research and development expense increased $5.9 million, primarily due to higher consulting, personnel, manufacturing and birtamimab-related clinical expenses, increased Roche collaboration costs and spending on PRX012; lower PRX004 clinical-trial costs partially offset the increase.
- General and administrative expense increased $1.4 million, mainly due to higher personnel costs, share-based compensation and director and officer insurance premiums.
- Net loss increased $13.2 million, reflecting higher operating expenses, sharply lower interest income and a $4.7 million income-tax provision versus a $0.2 million tax benefit in Q1 2020.
- Operating cash burn increased $10.5 million year over year, but was more than offset by the March equity offering and option exercises.
- Share-based compensation expense was $6.2 million, compared with $5.5 million in Q1 2020. Remaining unearned share-based compensation was estimated at $44.8 million at March 31, 2021.
Guidance, outlook, commentary and risks
Management stated that cash and cash equivalents at March 31, 2021 were sufficient to meet obligations for at least the next twelve months based on current plans. Management also expects to require additional capital to continue research and development and potential commercialization activities. The filing does not provide formal full-year revenue or earnings guidance, but it expects 2021 R&D and G&A expenses to increase from 2020 levels.
Planned development activities included the Phase 3 AFFIRM-AL study of birtamimab, a Phase 2b PADOVA study of prasinezumab, a planned late-stage PRX004 study, a planned Phase 1 PRX005 study and a planned Phase 1 PRX012 study. The FDA had agreed to a Special Protocol Assessment for AFFIRM-AL, but the company cautioned that an SPA does not guarantee approval.
As a subsequent event, Prothena announced on May 10, 2021 that the first patient had been dosed in the PADOVA study. The company expects to receive a $60.0 million Roche milestone payment in connection with that dosing.
Key risks include continuing operating losses and additional financing needs; clinical, regulatory and manufacturing failure; delays caused by COVID-19; dependence on Roche and BMS; reliance on third-party manufacturers and clinical research organizations; intellectual-property challenges; foreign-exchange, tax and cybersecurity risks; and potential dilution from future equity issuances. The company has no approved products and has not generated product sales.
Outstanding commitments included $17.5 million of operating-lease payments, $11.9 million of non-cancelable purchase obligations and $0.7 million of license-related contractual obligations at March 31, 2021. The filing states that there were no material legal proceedings and no off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the $60.0 million Roche milestone was received and how it was recognized after March 31, 2021.
- The cash runway under updated clinical-development spending plans, particularly for AFFIRM-AL, PADOVA and PRX004.
- Progress, enrollment, safety and efficacy results for the company’s clinical programs and the impact of COVID-19-related disruptions.
- Whether Roche or BMS exercise, decline or terminate any collaboration rights, and the resulting impact on milestone and royalty potential.
- The company’s future financing requirements and potential dilution, including the effect of outstanding options for approximately 8.8 million shares.
- Changes in deferred revenue, tax assets and the $4.7 million quarterly tax provision.