Prothena Corporation plc — Q2 2021 Form 10-Q Summary
Business context and reporting period
Prothena is an Irish late-stage clinical biotechnology company focused on investigational therapies for amyloidosis and neurodegenerative diseases. Its pipeline included birtamimab, PRX012, a dual Aβ-Tau vaccine, prasinezumab with Roche, and PRX005 and other programs with Bristol Myers Squibb (BMS). The filing covers the three and six months ended June 30, 2021; financial statements are unaudited and presented in U.S. dollars.
Financial performance and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Total revenue | $60.1 million, versus $0.2 million | $60.2 million, versus $0.3 million |
| Operating expenses | $32.1 million, versus $26.9 million | $64.4 million, versus $51.9 million |
| Income (loss) from operations | $27.9 million, versus $(26.7) million | $(4.2) million, versus $(51.6) million |
| Net income (loss) | $27.6 million, versus $(26.3) million | $(9.1) million, versus $(49.9) million |
| Net income (loss) per share | $0.62 basic; $0.58 diluted | $(0.21) basic and diluted |
| Net cash from operating activities | Not separately disclosed | $3.0 million, versus $(41.9) million |
Second-quarter operating and net margins were approximately 46.5% and 46.0%, respectively, primarily because of the Roche milestone. Six-month operating and net margins were approximately negative 6.9% and negative 15.1%.
- Second-quarter collaboration revenue included a $60.0 million Roche clinical milestone triggered by first patient dosing in the Phase 2b PADOVA study. Six-month collaboration revenue was $60.2 million; license revenue was $0.1 million.
- Research and development expense increased 22% in the quarter and 30% for the six months, to $21.1 million and $42.2 million, respectively. General and administrative expense increased 14% in both periods, to $11.0 million and $22.2 million.
- Cash, cash equivalents and restricted cash totaled $402.5 million at June 30, 2021, including $399.8 million of cash and cash equivalents, compared with $298.1 million at December 31, 2020.
- Working capital was $356.6 million, versus $273.4 million at year-end 2020. Total liabilities were $148.2 million and shareholders’ equity was $288.2 million.
- The filing does not disclose traditional funded debt. Lease liabilities totaled $15.2 million, and the company had $12.0 million of non-cancelable purchase commitments and $0.7 million of license-related contractual obligations.
Material changes versus the prior comparable period
- Revenue increased sharply because of the $60.0 million Roche milestone; the comparable 2020 periods had only nominal collaboration and license revenue.
- Operating cash flow improved to $3.0 million from a $41.9 million use, but the improvement was largely milestone-related rather than evidence of recurring profitability.
- Financing activities generated $101.5 million, including $78.0 million of net proceeds from a March public offering, $13.9 million from the ATM program, and $9.6 million from stock-option exercises. Shares outstanding increased to 44.9 million from 39.9 million at December 31, 2020.
- In May 2021, Prothena elected to receive potential U.S. commercial milestones and tiered royalties from Roche for prasinezumab in Parkinson’s disease instead of sharing U.S. profit and loss.
- In June 2021, BMS exercised its U.S. option for PRX005. The related $80.0 million exercise payment was subject to execution of the definitive U.S. license agreement and transfer of the license.
- R&D spending shifted toward the late-stage birtamimab program and other development activities. Management expected R&D and G&A expenses to increase in 2021.
Guidance, outlook, risks, contingencies, and unusual items
- Management believed cash and cash equivalents at June 30, 2021 were sufficient to fund obligations for at least the next twelve months. The company nevertheless expects to require additional capital for continued development and potential commercialization.
- Management expected continued operating losses for the foreseeable future. Future funding may come from cash, collaborations, milestone payments, the ATM program, or equity or debt financings; additional financings may be unavailable or dilutive.
- Birtamimab was being advanced into the Phase 3 AFFIRM-AL study under an FDA Special Protocol Assessment. The planned study targeted approximately 150 newly diagnosed Mayo Stage IV AL amyloidosis patients, but the SPA does not guarantee regulatory approval.
- COVID-19 could delay or disrupt clinical trials, manufacturing, enrollment, regulatory activities, operations, and liquidity. The company relies extensively on third parties for clinical research, manufacturing, supply, and commercialization.
- Subsequent to quarter-end, on July 8, 2021, Novo Nordisk acquired Prothena’s ATTR amyloidosis business, including PRX004, for $60.0 million upfront and potential development and sales milestones of up to $1.17 billion, including a $40.0 million clinical milestone. On July 30, 2021, Prothena executed the BMS U.S. license for PRX005, providing for an $80.0 million upfront payment, up to $465.0 million of regulatory and sales milestones, and tiered royalties.
- As of the filing, the company reported no material legal proceedings and no off-balance-sheet arrangements. A prior Department of Justice subpoena concerning the NEOD001 program remained an uncertainty; the company had completed document production in 2019 and could not predict whether further action would occur.
Important facts for investors to verify
- Whether the $60.0 million Roche milestone and subsequent BMS and Novo Nordisk transactions are nonrecurring and how future milestone and royalty payments should be modeled.
- The definitive timing, accounting treatment, and cash receipt of the $80.0 million BMS PRX005 payment and the $60.0 million Novo Nordisk upfront payment.
- Cash runway under planned spending for AFFIRM-AL, PRX005, PRX012, and other programs, and the likely need for additional financing.
- Clinical progress, enrollment, safety, and efficacy results for AFFIRM-AL, PADOVA, PRX005, PRX012, and other partnered programs.
- Potential dilution from the remaining $100.0 million ATM authorization, outstanding options, and future capital raises.
- Impact of COVID-19, third-party manufacturing dependence, intellectual-property risks, regulatory uncertainty, and collaboration termination provisions.