Praxis Precision Medicines, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Filed August 16, 2021. Praxis is a clinical-stage biopharmaceutical company developing CNS therapies; it reported no product revenue.
Financial results and liquidity
Amounts below are in millions of dollars, except per-share data.
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $25.7 | $9.1 | $43.6 | $15.9 |
| General and administrative expense | $10.8 | $2.5 | $20.3 | $4.1 |
| Total operating expenses | $36.5 | $11.6 | $63.9 | $20.0 |
| Net loss | $36.4 | $11.6 | $63.8 | $19.9 |
| Basic and diluted loss per share | $0.88 | $8.28 | $1.59 | $14.37 |
As a pre-revenue company, operating and net margins are not meaningful. Losses increased as development activity, headcount, stock-based compensation and public-company costs rose. Q2 stock-based compensation was $5.4 million, versus $0.3 million a year earlier; six-month expense was $10.1 million, versus $0.4 million.
- Cash and investments: $339.2 million at June 30, 2021, comprising $175.9 million of cash and cash equivalents and $163.3 million of marketable securities. Current assets were $348.4 million and current liabilities $15.8 million.
- Cash flows, six months: $55.7 million used in operating activities, $164.2 million used in investing activities (primarily marketable-security purchases), and $99.7 million provided by financing. Cash, cash equivalents and restricted cash decreased $120.3 million.
- Financing: May follow-on offering of 5.75 million shares at $18.25 per share generated approximately $98.4 million net proceeds. Shares outstanding were 44.7 million at quarter-end, up from 38.3 million at year-end 2020.
- Debt and other obligations: No borrowing debt is reported. Operating lease liabilities totaled approximately $4.5 million, including the new Boston headquarters sublease; future payments under that sublease totaled $5.2 million.
Changes and management outlook
For the first half, R&D expense increased $27.7 million year over year and G&A expense increased $16.2 million. Management attributed the increases to expanded clinical and preclinical work, increased personnel and stock compensation, consulting and commercial assessments, and public-company insurance and infrastructure costs. No material changes to previously disclosed risk factors were reported.
- Management expects multiple topline clinical readouts across its three clinical-stage programs in the next year and anticipates launching a new clinical development program in that period.
- PRAX-114 was in Phase 2/3 development for major depressive disorder and perimenopausal depression. Planned for the second half of 2021 were Phase 2 trials in PTSD and essential tremor, and disclosure of plans for a Phase 2b study in women with menopausal and mood symptoms.
- PRAX-944 was in Phase 2 development for essential tremor; a Phase 2 Parkinson’s disease trial was planned for the first half of 2022.
- After completing a Phase 1 trial of PRAX-562, the company planned to start a first-in-patient trial in rare adult cephalgias in Q4 2021.
- Management expects substantial future operating losses and additional funding needs. The MD&A estimates existing cash and investments can fund operations into Q2 2023; the liquidity note says they are expected to suffice for at least one year from issuance of the statements. These are different runway descriptions and should be reconciled.
Risks, contingencies and notable items
- Clinical development, patient enrollment, regulatory approval, manufacturing, intellectual-property protection and access to future capital are major risks. There is no assurance additional financing will be available on acceptable terms.
- COVID-19 could disrupt enrollment, clinical sites, healthcare resources, supply chains and third-party research support; the company reported limited financial impact at the time but continued to monitor potential effects.
- The company had recurring losses, a $213.3 million accumulated deficit and no product-sales revenue. It expects losses to continue for the foreseeable future.
- A Boston headquarters sublease signed in May runs through January 2026, with no early termination option. No material legal proceedings or subsequent events requiring disclosure were reported.
Important facts for investors to verify
- Reconcile the stated cash runway: “at least one year” in the liquidity note versus into Q2 2023 in MD&A, and review the assumptions underlying the estimate.
- Track clinical trial starts, enrollment, readouts and safety or efficacy results against the stated timelines, particularly for PRAX-114, PRAX-944 and PRAX-562.
- Monitor operating cash use, rising development costs and the timing and terms of any additional financing, including potential dilution.
- Assess the effects of COVID-19 and third-party dependence on trial execution and supply availability.