Business Context and Reporting Period
Prothena Corporation plc is an Ireland-based late-stage clinical biotechnology company developing therapies for neurodegenerative and rare amyloid diseases. Its wholly owned pipeline includes birtamimab for AL amyloidosis and PRX012 and PRX123 for Alzheimer’s disease. Partnered programs include prasinezumab with Roche and PRX005, PRX019 and TDP-43 programs with Bristol Myers Squibb. The company sold its ATTR amyloidosis business to Novo Nordisk in 2021 but remains eligible for contingent milestones.
This unaudited Form 10-Q covers the three and nine months ended September 30, 2022, with comparisons to the corresponding 2021 periods. The company had 48.4 million ordinary shares outstanding as of October 26, 2022.
Key Financial Metrics
| Metric | Q3 2022 | Q3 2021 | 9M 2022 | 9M 2021 |
|---|---|---|---|---|
| Total revenue | $1.5 million | $139.2 million | $4.0 million | $199.4 million |
| Research and development | $39.9 million | $18.0 million | $98.7 million | $60.2 million |
| General and administrative | $12.0 million | $12.0 million | $36.8 million | $34.1 million |
| Loss from operations | $(50.3) million | $109.2 million | $(131.5) million | $105.1 million |
| Net income (loss) | $(45.8) million | $109.2 million | $(123.3) million | $100.2 million |
| Basic loss per share | $(0.97) | $2.39 income | $(2.63) | $2.31 income |
| Net cash from operating activities | Not separately reported for the quarter | $(103.8) million | $115.1 million |
There is no product cost-of-revenue disclosure; therefore, a gross margin cannot be determined. Operating margin was approximately negative 3,320% in Q3 2022 and negative 3,302% for the first nine months of 2022, reflecting very low revenue relative to operating expenses.
Cash and cash equivalents were $495.6 million at September 30, 2022, compared with $579.1 million at December 31, 2021. Including restricted cash, total cash, cash equivalents and restricted cash were $497.0 million. Working capital was $474.0 million, down from $551.4 million at year-end 2021.
Total liabilities were $149.8 million and shareholders’ equity was $404.6 million at September 30, 2022. The filing does not report funded debt; liabilities primarily consisted of deferred revenue, lease liabilities, accounts payable and accrued obligations. Deferred revenue totaled $106.7 million, including $85.3 million related to outstanding BMS rights and $21.4 million for unsatisfied PRX005 development services.
Material Changes Versus the Prior Comparable Period
- Revenue declined 99% in Q3 and 98% for the nine-month period, primarily because 2021 included significant nonrecurring collaboration and intellectual-property revenue.
- Q3 2021 included $77.5 million of BMS license revenue and $60.7 million of Novo Nordisk transaction revenue. The first nine months of 2021 also included a $60.0 million Roche milestone payment related to the PADOVA study.
- 2022 collaboration revenue consisted primarily of BMS development-service revenue: $1.5 million in Q3 and $3.9 million for nine months. No Roche milestone or Novo Nordisk transaction revenue was recognized in 2022.
- R&D expense increased 122% in Q3 and 64% for nine months, driven mainly by higher manufacturing, personnel, clinical-trial and consulting costs for birtamimab, PRX012, PRX005 and other programs.
- Interest income increased to $1.9 million in Q3 and $2.6 million for nine months because of higher interest rates and cash balances.
- Net cash used in operating activities shifted from $115.1 million provided in the first nine months of 2021 to $103.8 million used in the first nine months of 2022.
- Financing provided $20.7 million in 2022, including $14.5 million of net at-the-market offering proceeds and $6.2 million from option exercises, versus $188.6 million in 2021.
- Ordinary shares outstanding increased to 47.9 million at September 30, 2022, from 46.7 million at December 31, 2021, reflecting equity issuance and option exercises.
Guidance, Outlook, Risks and Unusual Items
- Management believes existing cash and cash equivalents are sufficient to fund obligations for at least the next twelve months, but expects additional capital will be required to continue development and potential commercialization activities.
- The company expects full-year 2022 net cash used in operating and investing activities to be approximately $108 million to $120 million.
- Management expects full-year 2022 R&D and G&A expenses to increase from 2021, including higher personnel and share-based compensation costs.
- There are no approved commercial products, and the company expects operating losses for the foreseeable future. Future profitability depends on successful clinical development, regulatory approval and commercialization of drug candidates or receipt of collaboration and milestone payments.
- Key clinical programs include the Phase 3 AFFIRM-AL study of birtamimab, Phase 1 studies of PRX005 and PRX012, and partner-led development of prasinezumab and NNC6019. An FDA Special Protocol Assessment for AFFIRM-AL does not guarantee approval.
- The company remains exposed to clinical, regulatory, manufacturing, intellectual-property, collaboration, financing, reimbursement, cybersecurity, foreign exchange, COVID-19 and geopolitical risks, including the Russian invasion of Ukraine.
- As of September 30, 2022, contractual obligations included $8.3 million of operating-lease payments, $12.4 million of purchase commitments and $0.5 million of license obligations. A new Brisbane facility sublease entered into on October 28, 2022 requires approximately $14.9 million of payments through September 2028 and was not recorded on the September 30 balance sheet.
- Share-based compensation was $8.0 million in Q3 and $23.9 million for nine months. Unrecognized compensation expense was estimated at $74.1 million at September 30, 2022.
- The company reported no material legal proceedings and stated that disclosure controls and procedures were effective as of September 30, 2022.
Most Important Facts to Verify
- Whether cash burn remains within the projected 2022 range and how long the $495.6 million cash balance can fund planned clinical and R&D activities.
- Progress, enrollment, interim analysis timing and results for the AFFIRM-AL Phase 3 study of birtamimab.
- Clinical progress and safety data for PRX012 and PRX005, including the remaining $21.4 million BMS development-service obligation.
- Roche’s progress with prasinezumab and the likelihood and timing of future milestones or royalties.
- Whether Novo Nordisk achieves the development or commercial milestones that could generate up to $1.17 billion of additional payments.
- Potential dilution from the at-the-market program, option exercises and approximately 10.0 million outstanding stock options.
- Impact of supply-chain, third-party manufacturing, COVID-19 and regulatory delays on clinical timelines and cash requirements.