Praxis Precision Medicines, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. Comparative figures are for the three months ended March 31, 2020. Amounts below are in U.S. dollars unless stated otherwise.
Business context
Praxis is a clinical-stage biopharmaceutical company developing therapies for central nervous system disorders. It had no product revenue and reported three clinical-stage candidates: PRAX-114, PRAX-944 and PRAX-562. The company expects no product-sales revenue for several years, if ever.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $17.9 million | $6.9 million |
| General and administrative expense | $9.5 million | $1.6 million |
| Total operating expenses | $27.4 million | $8.5 million |
| Net loss | $27.4 million | $8.3 million |
| Net loss per share, basic and diluted | $0.71 | $6.08 |
| Net cash used in operating activities | $25.7 million | $8.6 million |
At March 31, 2021, cash and cash equivalents were $131.2 million and marketable securities were $139.7 million, or $270.8 million combined. Total current assets were $278.6 million; total current liabilities were $13.7 million; and stockholders’ equity was $265.5 million. The filing reports no financial borrowings; liabilities consisted principally of accounts payable, accrued expenses and operating lease liabilities. Profit margins are not applicable given the absence of revenue.
Cash, cash equivalents and restricted cash declined $165.5 million during the quarter. The main driver was $140.0 million of net purchases of marketable securities, an investing cash outflow that largely reflects moving funds into investments rather than operating consumption. The company recorded $4.7 million of stock-based compensation, compared with $0.1 million a year earlier.
Material changes versus the prior period
- Net loss increased $19.0 million year over year as operating expenses rose $19.0 million. R&D expense increased $11.1 million, including higher spending across discovery programs and PRAX-562, PRAX-114 and PRAX-944, as well as increased personnel costs.
- G&A expense rose $7.9 million, reflecting headcount and stock-based compensation, professional and consulting fees, and higher insurance and other public-company costs.
- Loss per share narrowed from $6.08 to $0.71, while weighted-average common shares increased from approximately 1.6 million to 38.5 million, reflecting the company’s transition to a public-company capital structure. The per-share comparison should therefore be read alongside the share-count change.
- Marketable securities increased from none at December 31, 2020 to $139.7 million at March 31, 2021. Unrealized losses of $0.1 million were recorded in other comprehensive loss; the company considered them temporary and reported no impairment.
Outlook, risks and other items
- Management expected existing cash, cash equivalents and marketable securities to fund operating expenses and capital requirements into the fourth quarter of 2022. The notes separately state that resources should suffice for at least one year after issuance of the statements. Management cautions that estimates depend on assumptions and capital could be exhausted sooner.
- Management expected multiple topline clinical readouts from its three clinical programs within the next year and anticipated launching a new clinical development program in 2021. Planned milestones included Phase 2 trials of PRAX-114 in post-traumatic stress disorder and essential tremor in the second half of 2021, and a PRAX-944 Phase 2 Parkinson’s disease trial in the first half of 2022. These are forward-looking plans, not assured outcomes.
- The company expects continued operating losses and increased R&D and public-company costs, and says it will need substantial additional funding. No committed external funding source was disclosed. Additional financing may dilute shareholders or require unfavorable terms; inability to obtain capital could delay, scale back or stop development programs.
- Key uncertainties include clinical-trial results, patient enrollment, regulatory approval, manufacturing and third-party performance, intellectual-property protection, competition and the effects of COVID-19 on trials and operations. The company reported limited financial impact from COVID-19 at the time but noted potential for material adverse effects.
- No material legal proceedings, material changes to previously disclosed risk factors, or off-balance-sheet arrangements were reported. Disclosure controls were assessed as effective at the reasonable-assurance level.
Important facts for investors to verify
- Whether cash runway and the expected Q4 2022 funding horizon remain consistent with actual trial spending, operating needs and subsequent disclosures.
- Progress, enrollment, timing and topline results for PRAX-114, PRAX-944 and PRAX-562, including whether stated trial-start plans were achieved.
- Drivers of rising R&D and G&A expense, including stock-based compensation and spending by program.
- Future financing requirements, potential dilution, and any changes in collaboration, licensing or capital-raising plans.
- Any COVID-19-related trial delays, safety or regulatory issues, and changes to the company’s previously disclosed risk factors.