PROTHENA CORP PUBLIC LTD CO annual report, FY2023

Prothena Corporation plc — Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023. The filing is an annual report, not a standalone fourth-quarter filing. Prothena is an Ireland-based, late-stage clinical biotechnology company focused on therapeutics for diseases caused by protein dysregulation. Its pipeline includes wholly owned programs in AL amyloidosis and Alzheimer’s disease, and partnered programs with Roche, Bristol Myers Squibb and Novo Nordisk.

Financial Performance and Position

Metric	2023	2022	Change
Total revenue	$91.4 million	$53.9 million	+70%
Collaboration revenue	$91.3 million	$13.9 million	+559%
License and intellectual property revenue	$0.05 million	$40.1 million	-100%
Research and development expense	$220.6 million	$135.6 million	+63%
General and administrative expense	$61.8 million	$49.9 million	+24%
Total operating expenses	$282.4 million	$185.5 million	+52%
Net loss	$147.0 million	$116.9 million	Loss increased 26%
Net loss per share	$2.76	$2.47	Loss increased
Operating cash flow	$(133.9) million	$(108.8) million	Higher cash use

Calculated margins were approximately -209% operating margin and -161% net margin. The 2023 revenue base was largely nonrecurring and therefore is not indicative of product sales or a recurring revenue stream.

• Interest income was $31.0 million, compared with $6.3 million in 2022, primarily due to higher cash balances and interest rates.
• Cash and cash equivalents were $618.8 million at year-end, compared with $710.4 million in 2022. Including restricted cash, total cash, cash equivalents and restricted cash were $621.0 million.
• Working capital was $582.4 million, down from $669.0 million.
• Total assets were $696.4 million; total liabilities were $135.0 million; shareholders’ equity was $561.4 million.
• The filing does not disclose traditional funded debt. Liabilities primarily consisted of deferred revenue, accounts payable, accrued research and development costs, and operating lease liabilities.
• Net cash used in investing activities was $2.8 million, principally for property and equipment. Net cash provided by financing activities was $45.1 million, including equity issuance proceeds and stock-option exercises.
• Share-based compensation was $40.9 million. The accumulated deficit was $980.0 million at December 31, 2023.

Material Changes Versus the Prior Comparable Period

• Revenue increased by $37.5 million, primarily because BMS collaboration revenue included $72.9 million related to the Tau Global License Agreement and $4.7 million under a supply agreement.
• Revenue from license and intellectual property declined by $40.0 million because the 2022 period included a $40.0 million Novo Nordisk milestone payment that did not recur in 2023.
• R&D spending increased by $85.0 million, driven primarily by higher clinical-trial spending for PRX012 and birtamimab, increased personnel costs, and higher consulting expenses.
• R&D spending included $102.8 million for PRX012 and $68.8 million for birtamimab, compared with $42.0 million and $49.3 million, respectively, in 2022.
• Net cash decreased by $91.6 million, compared with a $132.2 million increase in 2022, reflecting operating cash use despite BMS proceeds, interest income and equity financing.
• Shares outstanding increased to 53.7 million at year-end from 52.1 million, reflecting equity issuance and option exercises.

Pipeline, Outlook and Management Commentary

• Birtamimab: The Phase 3 AFFIRM-AL trial in newly diagnosed Mayo Stage IV AL amyloidosis was progressing under an FDA Special Protocol Assessment. Full topline results were expected between the fourth quarter of 2024 and the second quarter of 2025. The trial uses all-cause mortality as its primary endpoint with a significance level of p<0.10.
• Management cited post hoc VITAL results showing 74% nine-month survival for birtamimab plus standard of care versus 49% for placebo plus standard of care in Mayo Stage IV patients, with hazard ratio 0.413 and p=0.021. These results are not confirmatory AFFIRM-AL results.
• PRX012: The Phase 1 program continued. January 2024 data supported once-monthly subcutaneous dosing and dose escalation. PRX012 has FDA Fast Track designation.
• PRX123: The FDA cleared the IND and granted Fast Track designation in January 2024 for the dual amyloid-beta/tau vaccine program.
• PRX019: The FDA cleared the IND in December 2023 for this BMS-partnered program targeting an undisclosed neurodegenerative disease target.
• Prasinezumab: Roche completed enrollment of 586 patients in the Phase 2b PADOVA trial in early Parkinson’s disease. Prothena is entitled to potential development, regulatory and commercial milestones and royalties, but Roche controls primary development and commercialization activities.
• BMS-986446: BMS exercised global rights in 2023 and paid a $55.0 million option exercise fee. BMS reported that Phase 1 data supported advancement into Phase 2; future program updates are expected to be reported by BMS.
• NNC6019: Novo Nordisk is conducting a Phase 2 trial in ATTR cardiomyopathy. Prothena has earned approximately $100 million under the ATTR transaction and remains eligible for up to $1.13 billion in additional development and sales milestones, subject to achievement.
• Management expects 2024 revenue to decline from 2023 because 2023 revenue was primarily nonrecurring. R&D expense is expected to be relatively flat, G&A expense is expected to increase, and full-year 2024 net cash used in operating and investing activities is expected to be approximately $208 million to $225 million.
• Management believes existing cash and cash equivalents are sufficient to meet obligations for at least the next twelve months, but expects to require additional capital to continue development and potential commercialization activities.

Risks, Contingencies and Unusual Items

• Prothena has no approved products and expects continuing operating losses; it may never achieve or sustain profitability.
• Additional financing will likely be required. Equity or debt financing may be unavailable or dilutive, and collaboration or milestone proceeds are uncertain.
• Clinical, regulatory and manufacturing outcomes remain uncertain. An SPA does not guarantee AFFIRM-AL success or FDA approval.
• The company depends substantially on Roche, BMS, Novo Nordisk and third-party manufacturers. Collaborations may be delayed, modified or terminated, and partners generally control significant development activities.
• Clinical supplies are manufactured by third parties, including Rentschler, Catalent, Berkshire, Roche and BMS. Manufacturing failures, supply interruptions or regulatory deficiencies could delay trials.
• Contractual obligations totaled $27.7 million at year-end, including $14.8 million of operating leases, $12.4 million of purchase obligations and $0.4 million under license agreements.
• There were no material legal proceedings and no off-balance-sheet arrangements reported.
• Cash deposits may exceed federal insurance limits, creating exposure to financial-institution credit risk. Foreign-exchange losses were $0.5 million in 2023.
• The audit identified accrued research and development costs as a critical audit matter because estimating third-party costs and trial completion required significant judgment. KPMG nevertheless reported an unqualified audit opinion and effective internal control over financial reporting.

Facts Investors Should Verify

• Timing, enrollment, interim analysis and topline results for the AFFIRM-AL Phase 3 trial.
• Whether 2024 collaboration, milestone and royalty revenue is substantially lower than 2023 as management expects.
• Cash burn relative to the projected $208 million to $225 million of 2024 operating and investing cash use, and the timing and terms of any required financing.
• Clinical and regulatory progress for PRX012, PRX123, BMS-986446, prasinezumab and NNC6019, including partner-reported results.
• The probability and timing of potential milestone payments from Roche, BMS and Novo Nordisk; none should be treated as assured.
• Changes in deferred revenue, particularly the $67.4 million balance associated with outstanding BMS rights and options.
• Third-party manufacturing capacity and compliance for birtamimab and PRX012, and partner manufacturing arrangements for partnered programs.
• Potential dilution from future equity offerings, stock options and the remaining capacity under the company’s equity distribution arrangements.