Business Context and Reporting Period
ProMIS Neurosciences Inc. is a pre-revenue Canadian biotechnology company developing antibody therapies, therapeutic vaccines and other antibody-based products for neurodegenerative and misfolded-protein diseases. Lead programs include PMN310 for Alzheimer’s disease, PMN442 for synucleinopathies and PMN267 for ALS. This unaudited Form 10-Q covers the three and nine months ended September 30, 2022, compared with the same periods in 2021. The company’s common shares trade on the TSX and Nasdaq under PMN.
Key Financial Metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.6 million vs. $0.8 million | $9.7 million vs. $1.8 million |
| General and administrative expense | $1.5 million vs. $1.3 million | $5.2 million vs. $2.0 million |
| Total operating expenses | $6.1 million vs. $2.1 million | $14.9 million vs. $3.7 million |
| Net loss | $6.0 million vs. $1.2 million | $10.8 million vs. $7.5 million |
| Loss per common share | $0.85 vs. $0.20 | $1.51 vs. $1.44 |
| Cash used in operating activities | Not separately provided | $12.5 million vs. $5.3 million |
| Cash and short-term investments at period end | $4.0 million at September 30, 2022, including $3.9 million of cash |
Operating and net margins are not meaningful because the company has no revenue. Comprehensive loss was $6.1 million for the quarter and $10.9 million for the nine months. Working capital was approximately $2.3 million. Total liabilities were $4.7 million, including a $1.6 million warrant liability; convertible debt and the related derivative liability were eliminated through conversion during June 2022.
Material Changes Versus Prior Comparable Period
- Research and development expense increased 467% in the third quarter and 445% for the nine months, primarily from PMN310 preclinical preparation, external research, personnel and consulting costs.
- General and administrative expense increased 17% for the quarter and 162% for the nine months. Increases included Nasdaq listing costs, investor relations, legal, insurance, recruiting and other professional fees; some 2022 costs were nonrecurring.
- Nine-month net loss increased by $3.3 million despite $4.1 million of net other income, largely reflecting fair-value changes in financial instruments and a $1.3 million gain on extinguishment of convertible debt and the related derivative liability.
- Cash declined by $13.0 million during the first nine months, compared with a $20.1 million increase in the prior-year period, when the company received $25.5 million of financing proceeds.
- In June 2022, holders converted the entire $7.0 million convertible debenture balance into 70 million Series 1 Convertible Preferred Shares. The preferred shares are initially convertible into approximately 1.17 million common shares and automatically convert upon qualifying equity financings of at least $30 million.
- The company listed its common shares on Nasdaq in July 2022 and appointed Gail Farfel, Ph.D. as CEO effective September 19, 2022. Former CEO Eugene Williams became a strategic consultant and Board Chairman.
Guidance, Outlook, Risks and Unusual Items
- Management expected to enroll the first subject in a PMN310 Phase 1a trial in the first half of 2023, subject to FDA acceptance of the IND. Formal GLP toxicology, pharmacokinetics and tissue cross-reactivity studies were underway or completed to support the IND.
- PMN310 spending was approximately $3.0 million in the third quarter, excluding senior management allocations. PMN267 was being humanized for future clinical testing, while PMN442 and vaccine programs remained in preclinical development.
- The company has not generated revenue and expects continued losses for the foreseeable future. It stated that additional financing is required for future clinical activities.
- Management concluded that substantial doubt exists regarding the company’s ability to continue as a going concern within the next twelve months. The filing states that September 30 cash of $3.9 million plus estimated net proceeds from the October financing would not fund operating expenses for at least twelve months from issuance of the financial statements.
- In October 2022, the company completed a private offering for gross proceeds of approximately $7.5 million and estimated net proceeds of approximately $6.4 million. The financing issued 1,383,755 common share units and warrants.
- Key risks include failure to obtain additional capital, delays or failures in preclinical and clinical development, regulatory uncertainty, inability to commercialize product candidates, dependence on key personnel, foreign-currency exposure and volatility in warrant liability valuations.
- No material litigation was reported. Potential future milestone, royalty and indemnification obligations exist under research and license agreements, but no milestone or royalty amounts required accrual through September 30, 2022.
Important Facts for Investors to Verify
- Confirm the timing and terms of the October 2022 financing, including net proceeds, warrant dilution and any subsequent capital raises.
- Verify FDA acceptance of the PMN310 IND and whether the planned Phase 1a enrollment occurred in the first half of 2023.
- Assess cash burn, working capital and financing runway relative to the company’s going-concern disclosure.
- Review the conversion, liquidation preference and potential dilution associated with the 70 million Series 1 Convertible Preferred Shares.
- Monitor PMN310, PMN442 and PMN267 preclinical and clinical data, regulatory milestones and development spending.
- Reconcile non-cash fair-value gains, warrant liabilities and debt-extinguishment gains when evaluating underlying operating performance.