Pliant Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Pliant is a clinical-stage biopharmaceutical company developing therapies for fibrotic diseases; it had no approved products or product-sale revenue. Amounts below are in U.S. dollars.
Financial results
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue, all from Novartis | $4.8m | — | $37.4m | — |
| Research and development expense | $16.9m | $10.8m | $48.3m | $35.6m |
| General and administrative expense | $4.6m | $2.6m | $11.6m | $7.8m |
| Net loss | $16.5m | $13.3m | $22.5m | $42.8m |
| Basic and diluted loss per share | $0.47 | $8.53 | $1.36 | $30.03 |
| Cash used in operating activities | Not separately stated for quarter | $20.8m | $39.5m |
The nine-month revenue included a $25.0m Novartis milestone for first patient dosing in Q1 and $12.4m of research and development services. Q3 revenue was service revenue. As a result, nine-month net loss narrowed year over year despite higher operating expenses; Q3 net loss widened as expenses exceeded revenue. Revenue is concentrated entirely in one related-party agreement, and reported results do not represent product sales. Conventional gross margin is not presented.
Balance sheet and liquidity
- At September 30, cash and cash equivalents were $55.2m and short-term investments were $238.8m, totaling $294.0m. Total assets were $312.3m; current liabilities were $11.0m.
- The company reported no outstanding debt. Accumulated deficit was $98.8m.
- Management said existing cash, cash equivalents and short-term investments were expected to fund operating expenses and capital needs into 2023, while also stating that substantial additional funding will be needed to complete development plans. This runway estimate depends on trial progress, costs and spending.
- Net cash from financing was $213.0m for the nine months, principally reflecting the June IPO ($148.3m net proceeds), a $10.0m Novartis private placement and $52.0m net proceeds from Series C preferred financing. The IPO converted all preferred shares into common stock.
Material changes and business outlook
- Year-to-date R&D expense increased 35.7%, mainly from clinical trial activity, external development services, staffing and a $2.4m UC Regents milestone payment triggered by the IPO. G&A expense rose 48.7%, including higher public-company, professional-services, compensation and insurance costs.
- PLN-74809: the company reported enrollment in Phase 2a studies for IPF and PSC, an enrolling PET imaging study in IPF, and initiation of a Phase 2a study in COVID-19-related ARDS. It expected preliminary PET-study data in the first half of 2021.
- PLN-1474, partnered with Novartis for liver fibrosis associated with NASH, was in Phase 1 testing. Topline data were expected in Q1 2021, subject to COVID-19-related disruption.
- Management expected continued losses and rising expenses as programs advance. Novartis may fund further research and development, and the agreement provides for up to $416m in potential milestones plus royalties, but these amounts depend on future events and are not assured.
Risks, contingencies and unusual items
- COVID-19 had delayed or disrupted clinical-site activity, enrollment and laboratory research; further delays could increase costs and affect trial timelines and data.
- The company depends on clinical success, regulatory approval, external research and manufacturing providers, and a sole supplier for PLN-74809. Failure or delay could materially affect development.
- Novartis accounted for all revenue and accounts receivable, creating customer concentration. The company also depends on collaboration funding and may need additional capital, which could dilute shareholders or require less favorable arrangements.
- No material legal proceedings were reported. Contractual obligations include the South San Francisco facility lease, with $10.2m of future minimum payments disclosed, as well as potential license and collaboration milestones and royalties.
- Management reported disclosure controls were effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Progress, enrollment and safety findings in the PLN-74809 IPF, PSC and ARDS trials, and timing of the expected PET and PLN-1474 data.
- Whether Novartis service funding continues and whether any additional milestones are achieved; distinguish contingent potential payments from recognized revenue and cash received.
- Cash burn, investment balances and the assumptions underlying management’s runway estimate into 2023, including the need for additional financing.
- Clinical and supply-chain effects of COVID-19, including reliance on the sole PLN-74809 supplier.
- Share dilution from equity awards and future financing; the filing reported 35.5m common shares outstanding at September 30, 2020 and 35.5m at November 7, 2020.