Prothena Corporation plc — Q1 2016 Form 10-Q Summary
Business Context and Reporting Period
Prothena is an Ireland-incorporated, clinical-stage biotechnology company developing antibody-based therapies for AL amyloidosis, Parkinson’s disease and related synucleinopathies, inflammatory diseases, and transthyretin amyloidosis. This unaudited Form 10-Q covers the three months ended March 31, 2016, compared with the same period in 2015. The company had 34.3 million ordinary shares outstanding as of April 22, 2016.
Financial Performance and Position
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Total revenue | $0.3 million | $0.6 million |
| Research and development expense | $20.5 million | $10.6 million |
| General and administrative expense | $7.2 million | $5.0 million |
| Total operating expenses | $27.7 million | $15.6 million |
| Loss from operations | $27.4 million | $15.0 million |
| Net loss | $27.5 million | $15.2 million |
| Basic and diluted loss per share | $0.81 | $0.55 |
| Net cash used in operating activities | $25.2 million | $14.7 million |
- Cash and cash equivalents were $474.3 million at March 31, 2016, including $425.6 million in money market funds.
- Working capital was $458.9 million, versus $355.2 million at December 31, 2015.
- Total liabilities were $25.5 million and shareholders’ equity was $465.8 million. The filing reports no debt financing or material borrowings.
- Cash increased by $103.7 million during the quarter, primarily due to $128.8 million of net proceeds from a January public offering, offset by operating cash use of $25.2 million.
- Collaboration revenue consisted primarily of Roche reimbursements and declined 55% year over year. Roche also reimbursed $1.2 million of development costs, recorded as an offset to R&D expense rather than revenue.
- Share-based compensation expense was $3.7 million, compared with $1.7 million in Q1 2015.
Material Changes Versus the Prior Comparable Period
- R&D expense increased 94% to $20.5 million, primarily because of higher clinical trial costs for NEOD001 and increased spending on PRX003, PRX002, manufacturing, and personnel.
- G&A expense increased 42% to $7.2 million, principally due to higher personnel and share-based compensation costs.
- Net loss increased 81% to $27.5 million, and loss per share increased from $0.55 to $0.81.
- Operating cash burn increased from $14.7 million to $25.2 million.
- The January 2016 equity offering issued 2.6 million ordinary shares at $53.00 per share and materially strengthened liquidity while diluting existing shareholders.
- The company entered into a South San Francisco facility sublease with approximately $39.2 million of rent payments over the lease term, expiring December 31, 2023. Including other leases, total future operating lease commitments were $51.0 million at quarter-end.
Guidance, Outlook, Commentary, and Risks
- Management expects R&D expense to increase during 2016, driven principally by the NEOD001 VITAL Phase 3 and PRONTO Phase 2b programs and, to a lesser extent, the ATTR preclinical program. G&A expense is also expected to increase.
- Management believes cash on hand is sufficient to fund obligations for at least the next twelve months, but expects to require additional capital to continue development and eventual commercialization of its candidates.
- NEOD001 PRONTO, a Phase 2b registration-directed trial, was initiated for previously treated AL amyloidosis patients with persistent cardiac dysfunction. PRX002’s Phase 1 study added a 60 mg/kg cohort, and a Phase 1b multiple-ascending-dose study of PRX003 in psoriasis was initiated.
- Under the Roche arrangement, Roche has responsibility for development and commercialization of PRX002 outside the United States. In the United States, Prothena generally bears 30% of development and commercialization costs if it participates in profit and loss sharing.
- Material risks include continued operating losses, uncertain clinical and regulatory outcomes, potential need for additional and dilutive financing, dependence on Roche, reliance on third-party manufacturers and clinical research organizations, single-source clinical supplies, intellectual-property uncertainty, competition, and reimbursement risk.
- The company has no approved products and has not generated product sales. Revenue is dependent on collaborations and reimbursements, and future product revenue is uncertain.
- The company reported no material legal proceedings and no off-balance-sheet arrangements. Disclosure controls and procedures were assessed as effective, with no material changes in internal control reported.
Important Facts for Investors to Verify
- Progress, enrollment, safety, efficacy, and timing of the NEOD001 VITAL and PRONTO trials and the PRX002 and PRX003 studies.
- Expected duration of the $25 million-plus quarterly operating cash burn and the timing and terms of any future financing.
- Roche’s continuing commitment, cost-sharing obligations, reimbursement estimates, and termination rights under the PRX002 license agreement.
- Clinical supply availability and manufacturing-transfer progress, particularly for NEOD001 and PRX003.
- Financial impact of the new facility lease, improvement allowance, and the $4.1 million standby letter of credit obtained after quarter-end.
- Potential dilution from outstanding options, future equity awards, and additional capital raises; 4.1 million options were outstanding at March 31, 2016.