Business Context and Reporting Period
Prothena Corporation plc is an Ireland-incorporated late-stage clinical biotechnology company focused on therapeutics for neurodegenerative and rare amyloid diseases. Its pipeline includes wholly owned programs such as birtamimab, PRX012, and a dual Aβ-tau vaccine, along with partnered programs with Roche and Bristol Myers Squibb. The company is also eligible for contingent milestones from Novo Nordisk following the sale of its ATTR amyloidosis business.
This unaudited Form 10-Q covers the three months ended March 31, 2022, with comparisons to the three months ended March 31, 2021. Prothena reported 46.8 million ordinary shares outstanding as of April 28, 2022.
Financial Highlights
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $1.2 million | $0.2 million | Up 621% |
| Collaboration revenue | $1.1 million | $0.1 million | Up 903% |
| Operating expenses | $39.1 million | $32.3 million | Up 21% |
| Research and development | $27.3 million | $21.1 million | Up 29% |
| General and administrative | $11.8 million | $11.1 million | Up 6% |
| Loss from operations | $(37.9) million | $(32.1) million | Higher loss |
| Net loss | $(36.3) million | $(36.7) million | Loss slightly reduced |
| Basic and diluted loss per share | $(0.78) | $(0.91) | Improved |
| Cash used in operating activities | $(37.4) million | $(33.7) million | Higher use |
Approximate operating and net margins were negative 3,290% and negative 3,148%, respectively, reflecting minimal revenue relative to clinical development and corporate costs.
Cash and cash equivalents were $543.0 million at March 31, 2022, down from $579.1 million at December 31, 2021. Total cash, cash equivalents, and restricted cash were $544.3 million. Working capital was $519.1 million, compared with $551.4 million at year-end 2021.
Total assets were $581.4 million and total liabilities were $142.5 million. The balance sheet does not report senior debt; liabilities primarily comprised deferred revenue, lease liabilities, accounts payable, accrued expenses, and other operating liabilities. Deferred revenue totaled $109.5 million, including $8.8 million current and $100.6 million non-current.
Material Changes Versus the Prior Comparable Period
- Revenue increased primarily because Prothena recognized $1.1 million of BMS collaboration revenue for development services related to the Tau/PRX005 program. Q1 2021 collaboration revenue primarily reflected Roche reimbursements.
- Research and development expense increased $6.1 million, driven mainly by higher birtamimab manufacturing and clinical costs, higher PRX012 and PRX005 clinical spending, higher personnel costs, and other research expenses. These increases were partly offset by lower Roche-related prasinezumab cost-sharing expense following Prothena’s 2021 opt-out of profit and loss sharing for Parkinson’s disease.
- Cash used in operating activities increased $3.7 million year over year. Financing cash inflow fell sharply because Q1 2021 included approximately $78.4 million of net proceeds from a public offering; Q1 2022 financing cash inflow was $1.3 million, primarily from stock-option exercises.
- Share-based compensation increased to $7.7 million from $6.2 million and represented a significant non-cash operating expense. Approximately $83.6 million of unearned share-based compensation remained to be recognized through 2026.
- The company recorded a $1.7 million income tax benefit in Q1 2022 versus a $4.7 million tax provision in Q1 2021, primarily reflecting deferred tax assets associated with Section 174 research-and-development capitalization requirements.
Guidance, Outlook, Commentary, and Risks
- Management expects 2022 research and development expense to increase from 2021, primarily because of higher personnel and share-based compensation costs, increased birtamimab spending, and higher manufacturing expense for preclinical programs.
- Management also expects 2022 general and administrative expense to increase, primarily due to higher personnel costs and share-based compensation.
- The company expects full-year 2022 net cash used in operating and investing activities of approximately $120 million to $132 million.
- Management believes existing cash and cash equivalents are sufficient to fund obligations for at least the next twelve months. However, additional capital will be required in the future to continue research, development, and potential commercialization activities. Potential sources include equity or debt financings, collaborations, licensing arrangements, and milestone payments.
- Key clinical programs include the Phase 3 AFFIRM-AL study of birtamimab, Roche’s Phase 2b PADOVA study of prasinezumab, the Phase 1 study of PRX005, and the newly initiated Phase 1 study of PRX012. The FDA cleared the PRX012 IND in March 2022 and granted Fast Track designation in April 2022.
- Potential future collaboration and milestone proceeds are uncertain. Prothena is eligible for up to $1.17 billion in development and sales milestones from Novo Nordisk, additional Roche milestones and royalties, and substantial potential BMS exercise fees, milestones, and royalties, but none are assured.
- Material risks include continued operating losses, dependence on successful clinical trials and regulatory approvals, clinical delays or failures, COVID-19 and geopolitical disruption, reliance on third-party manufacturers and clinical research organizations, intellectual-property challenges, dependence on Roche, BMS, and Novo Nordisk, foreign-exchange exposure, and possible shareholder dilution from future capital raises.
- Outstanding commitments included $11.4 million of operating lease payments, $16.8 million of non-cancelable purchase obligations, and $0.4 million of license-related contractual obligations. No material legal proceedings or off-balance-sheet arrangements were reported.
Investor Verification Priorities
- Verify the timing, enrollment, interim analysis, and outcomes of the AFFIRM-AL, PADOVA, PRX005, and PRX012 clinical programs.
- Assess whether the projected 2022 net cash use of $120 million to $132 million remains achievable as clinical and manufacturing spending increases.
- Reconcile the $109.5 million deferred revenue balance and confirm the expected timing of recognition for BMS-related development services and remaining rights.
- Monitor whether Roche, BMS, or Novo Nordisk achieve milestones that could materially affect liquidity and revenue, recognizing that the filing does not provide a clear probability or timing for these payments.
- Evaluate future financing needs, potential dilution under the $250 million at-the-market facility, and the renewal of Irish shareholder authorizations required for share issuance.
- Review the effect of COVID-19, supply-chain constraints, third-party manufacturing capacity, regulatory decisions, and intellectual-property developments on trial timelines and cash requirements.