Protalix BioTherapeutics, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; amounts below are U.S. dollars unless noted. The company develops and manufactures recombinant therapeutic proteins using its plant-cell ProCellEx platform. Its lead candidate, PRX-102, is being developed for Fabry disease; marketed products include taliglucerase alfa.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $9.6 million | $16.1 million |
| Operating loss | $2.5 million | $1.9 million |
| Net loss | $3.1 million | $2.3 million |
| Basic and diluted loss per share | $0.05 | $0.05 |
| Cash used in operations | $3.0 million | $5.8 million |
- Revenue mix: Product sales were $5.1 million, including $2.3 million from Pfizer and $2.8 million from Brazil. License and R&D services revenue, primarily related to Chiesi, was $4.5 million.
- Costs and margins: Cost of goods sold was $3.1 million, producing approximately $2.0 million of gross profit on product sales (about 39% product gross margin). The filing does not present a consolidated gross-margin figure. R&D expense was $5.8 million and SG&A was $3.1 million.
- Liquidity: Cash and cash equivalents were $33.0 million at March 31, versus $17.1 million at year-end 2022; short-term bank deposits were zero, down from $5.1 million. Current assets were $55.4 million and current liabilities $31.5 million, for working capital of $23.9 million.
- Cash flows and financing: Investing activities provided $4.7 million, mainly from deposit withdrawals. Financing provided $14.2 million net from ATM share sales. The company sold 8.2 million shares in Q1 for approximately $14.9 million gross proceeds.
- Debt: The 7.50% senior secured convertible notes due September 2024 had $28.75 million principal outstanding and a $28.3 million balance-sheet carrying amount. Their disclosed estimated fair value was $41.4 million. The notes are secured by company assets; the company reported compliance with the $7.5 million minimum-cash covenant.
Changes versus the prior year
- Total revenue declined about 40% year over year. Product sales fell 44%, mainly because of timing-related decreases in Brazil and Pfizer sales; license and R&D revenue decreased 36%.
- Cost of goods sold decreased 49%, broadly reflecting lower product sales. R&D expense declined 34%, primarily following completion of the PRX-102 Phase III program and substantial completion of related regulatory work.
- Despite lower expenses, operating loss widened by $0.6 million and net loss increased by $0.8 million. Operating cash use improved by $2.8 million.
- Inventory increased to $20.3 million from $16.8 million at December 31, 2022, while contract liabilities decreased to $11.8 million from $13.2 million.
Outlook, developments, and risks
- The FDA had set May 9, 2023 as the action date for the resubmitted PRX-102 BLA. The EMA’s CHMP issued a positive opinion recommending authorization on February 24; a final European Commission decision was expected in early May. The filing cautions that approval, timing, labeling, dosing and commercial success are uncertain. The EMA recommendation did not include the every-four-weeks dosing regimen.
- The first patient in the PRX-115 Phase I trial was dosed March 21, 2023. Management expects continued significant R&D spending and says R&D will remain its primary expense.
- Management said cash at March 31, together with ATM proceeds raised after quarter-end, was expected to fund capital needs for at least 12 months from issuance of the financial statements. The company reported approximately $16.5 million of gross capacity remaining under its 2023 ATM agreement at March 31; during April it sold 3.4 million shares for approximately $7.9 million gross proceeds.
- Key risks include the need for additional capital, ongoing operating losses, secured notes and refinancing or repayment needs, regulatory and clinical uncertainty, dependence on Chiesi and Pfizer, and Fiocruz’s purchase performance in Brazil. The company reported no material legal proceedings, no material changes to previously disclosed risk factors, and no off-balance-sheet arrangements. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Subsequent FDA and European Commission decisions on PRX-102, including approved indication, dosing and any restrictions.
- Commercial launch timing, Chiesi’s sales and supply arrangements, and whether anticipated milestone or royalty-related cash flows materialize.
- Cash burn, ATM share issuance and dilution, and management’s runway estimate against continued R&D and operating requirements.
- 2024 Notes repayment or refinancing plans, covenant compliance, and the distinction between principal, carrying amount and disclosed fair value.
- Brazil and Pfizer product-sales timing, Fiocruz purchase obligations, and inventory levels relative to future demand.