Business context and reporting period
This is an annual Form 20-F for Prana Biotechnology Limited, an Australian development-stage biotechnology company focused on neurodegenerative diseases. The reporting year ended June 30, 2018; the filing is not a 2017 Q4 report. The request identifies Alterity Therapeutics, but the filing itself identifies Prana Biotechnology Limited, so confirm the intended issuer and filing.
Prana had no marketed products or product sales. Its ADSs traded on Nasdaq under PRAN, and each ADS represented 60 ordinary shares. Financial statements are in Australian dollars (A$), prepared under IFRS, and were audited by PricewaterhouseCoopers with an unqualified opinion.
Financial performance and position
| Metric | FY2018 | FY2017 |
|---|---|---|
| Interest revenue | A$201,174 | A$132,396 |
| Other income, principally Australian R&D tax incentive | A$3,125,775 | A$3,022,673 |
| Research and development expense | A$6,698,016 | A$5,700,339 |
| General and administrative expense | A$4,341,058 | A$3,968,630 |
| Net loss | A$8,265,737 | A$7,542,076 |
| Basic and diluted loss per share | 1.55 cents | 1.41 cents |
| Operating cash outflow | A$6,245,188 | A$5,865,080 |
At June 30, 2018, cash and cash equivalents were A$15,235,556, working capital A$16,010,651, total assets A$18,726,013, total liabilities A$2,644,856 and net assets A$16,081,157. Current liabilities were A$2,643,940, including A$2,055,247 in trade and other payables. No borrowings are shown in the balance sheet. Profit margins are not meaningful for this pre-revenue company.
Investing cash outflow was A$18,417 and financing cash outflow A$107,678; cash fell A$6,371,284 during the year. The company reported no material off-balance-sheet arrangements. It had A$227,006 in operating lease commitments and approximately A$1.8 million in R&D termination commitments, which were not recognized as liabilities.
Material changes versus FY2017
- Net loss increased A$723,661, or about 9.6%; loss per share rose from 1.41 to 1.55 cents.
- R&D expense increased A$997,677, or 17.5%, principally due to activity on the PBT434 Phase I study. General and administrative expense rose 9.4%.
- Cash declined A$6.65 million, or about 30.4%; operating cash outflow increased about 6.5%.
- Interest revenue increased 51.9%. Other income rose from A$3.02 million to A$3.13 million, primarily reflecting the refundable Australian R&D tax incentive.
- The company issued no shares through its at-the-market facility during FY2018. Ordinary shares outstanding at year-end remained 533,891,470.
Outlook, commentary and key risks
- Prana said year-end cash was expected to fund forecast cash outflows for at least 12 months from the August 31, 2018 report date. Management also said additional funding would be needed for longer-term plans; no funding commitments were identified. Directors said later-stage R&D commitments would not be made until additional funds were raised. The company could reduce or defer spending if funding were unavailable.
- PBT434 entered a first-in-human Phase I study in June 2018. The filing anticipated completion of the single-ascending-dose portion by the end of calendar 2018 and the multiple-ascending-dose portion in the first half of 2019.
- PBT2 remained subject to an FDA Partial Clinical Hold following dog neurotoxicity findings, restricting doses in future trials. Regulators sought further characterization of the findings and their reversibility. Potential paths included additional toxicology work, lower doses or alternative indications; continued development and timing were uncertain.
- Key risks include continued losses, substantial financing needs and potential shareholder dilution; uncertain clinical results, regulatory approvals, manufacturing and commercialization; reliance on third parties; and foreign-exchange exposure. The company also believed it was a passive foreign investment company (PFIC) for U.S. tax purposes for FY2018.
- No financial guidance or expected date for profitability was provided. The company did not anticipate dividends in the foreseeable future. It reported no material litigation and no significant changes in operations or financial condition after June 30, 2018.
Most important facts for investors to verify
- Confirm issuer identity and period: the supplied request says Alterity Therapeutics and 2017 Q4, while this filing is Prana Biotechnology Limited’s FY ended June 30, 2018.
- Assess cash runway against actual burn and the timing and availability of new financing; ATM capacity is not a committed funding source.
- Track PBT434 Phase I progress and confirm whether the anticipated trial milestones were achieved.
- Review the FDA’s PBT2 hold requirements and whether further toxicology or other work supports resuming development.
- Verify R&D incentive eligibility and collection: the filing records A$3.13 million as FY2018 other income and a receivable, while reporting A$3.02 million of R&D tax refunds in operating cash flows.
- Consider dilution from 25.2 million outstanding options and any subsequent equity issuance; the filing reports 3,083,580 shares issued on July 12, 2018.