Business context and reporting period
This is Pieris Pharmaceuticals, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2020; the request metadata names a different company. Pieris is a clinical-stage biotechnology company developing Anticalin-based drug candidates and relies on collaboration and licensing revenue, with no product sales to date.
Financial performance and position
- Revenue: $13.3 million, up 55% from $8.5 million in Q1 2019. Customer revenue was $8.9 million and collaboration revenue was $4.4 million. No product revenue was reported.
- Profitability: Net loss was $3.6 million, or $0.07 per share, versus a $10.3 million loss, or $0.20 per share, a year earlier. Operating expenses were $17.1 million, down from $19.2 million. R&D was $12.8 million and G&A was $4.4 million. Gross margin is not meaningful for this business model.
- Cash flow: Cash used in operating activities was $15.1 million, essentially unchanged from Q1 2019. Investing activities provided $0.4 million; there was no financing cash flow. Cash and cash equivalents declined $14.8 million in the quarter.
- Liquidity: Cash, cash equivalents and short-term investments totaled $86.8 million at quarter-end. Current assets were $98.4 million and current liabilities $20.5 million. Management expected available cash and investments to fund operations and capital spending for at least 12 months from the filing date.
- Debt and obligations: The balance sheet reports no borrowings; operating lease liabilities totaled $15.8 million. Total liabilities were $74.0 million and stockholders’ equity was $49.8 million.
Material changes versus the prior comparable period
- Revenue increased $4.7 million, principally from revenue recognized after Servier discontinued programs. Pieris recognized $7.1 million of previously deferred revenue when certain license rights lapsed; revenue also reflected lower activity under the AstraZeneca and Seattle Genetics collaborations.
- R&D expense fell $1.5 million, mainly due to lower immuno-oncology manufacturing costs and reduced respiratory-program activity, partly offset by higher personnel and facility costs.
- The smaller net loss did not translate to lower operating cash use, as working-capital movements offset the improvement in earnings.
Outlook, commentary and risks
- Management expects continued substantial losses and rising cash needs as clinical and preclinical programs advance; it gave no specific financial guidance. Funding beyond the stated runway may be needed, and future financing could dilute shareholders or require unfavorable terms.
- Pieris and AstraZeneca were preparing to start a phase 2a study of PRS-060/AZD1402 in moderate-to-severe asthma in the second half of 2020. Pieris planned a phase 2 PRS-343 combination study in gastric cancer in the second half of 2020.
- Following manufacturing scale-up challenges for PRS-344, the partners planned additional CMC work and Pieris anticipated an IND filing in 2021. Servier discontinued co-development of two earlier-stage programs but continued work on PRS-344 and PRS-352.
- COVID-19 could delay trials, patient recruitment, research, manufacturing, supply chains and regulatory review, and could make capital raising more difficult. The extent and duration of disruption were uncertain.
- Disclosure controls were assessed as ineffective because of previously identified material weaknesses in IT general controls and revenue recognition controls. Management reported no related material financial-statement misstatement and was pursuing remediation.
- No material pending legal proceedings were reported. The quarter included adoption of accounting guidance that separately presents customer and collaboration revenue; the adoption had no material effect on the financial statements.
Most important facts for investors to verify
- Whether the stated cash runway remains sufficient given the $15.1 million quarterly operating cash outflow and planned development spending.
- Whether COVID-19 or manufacturing issues changed the expected timing or scope of the PRS-060, PRS-343, PRS-344 or PRS-352 programs.
- How much reported revenue is recurring collaboration work versus one-time recognition of deferred Servier revenue following discontinued programs.
- Progress and effectiveness of remediation for the disclosed internal-control material weaknesses.
- The impact of the April 2020 Series D exchange of 3.0 million common shares and other share-count changes; the filing reports 55.2 million shares at March 31 and 52.3 million outstanding as of May 6.