Protalix BioTherapeutics, Inc. — Q1 2012 10-Q
Reporting period: Three months ended March 31, 2012; financial statements are unaudited and amounts are in U.S. dollars unless otherwise noted. Protalix develops recombinant therapeutic proteins using its plant-cell-based ProCellEx platform. Its lead product, taliglucerase alfa for Gaucher disease, received FDA approval on May 1, 2012, after quarter-end.
Financial results and liquidity
| Metric | Q1 2012 | Q1 2011 |
|---|---|---|
| Revenue | $3.861 million | $4.128 million |
| Collaboration agreement share | $(0.133) million | $1.872 million |
| Gross profit | $2.408 million | $5.222 million |
| Net R&D expense | $6.844 million | $8.271 million |
| Operating loss | $(6.065) million | $(5.038) million |
| Net loss | $(5.904) million | $(5.052) million |
| Basic and diluted loss per share | $0.07 | $0.06 |
| Net cash used in operations | $(6.281) million | $(3.988) million |
At March 31, cash and cash equivalents were $45.605 million, versus $27.001 million at year-end 2011. Current assets were $49.837 million and current liabilities $17.724 million, implying working capital of $32.113 million. Total liabilities were $74.921 million, including $54.639 million of deferred revenue; the balance sheet also reports a $5.623 million long-term liability, whose nature is not clearly specified in the presented text. Capital deficiency was $6.457 million. The filing does not identify conventional borrowings as a separate debt balance.
Cash increased by $18.604 million, principally because $25.574 million of net financing cash—mainly proceeds from the February stock offering—more than offset operating and investing outflows. The company issued 5.175 million shares for approximately $25.388 million net proceeds, and spent $0.810 million on property and equipment. Q1 gross profit as a percentage of revenue was about 62%, but comparisons are affected by the collaboration-agreement result, which shifted from income in 2011 to a loss in 2012.
Changes versus prior year
- Revenue declined 6%, while the collaboration line fell by $2.005 million, largely reflecting the prior-year recognition of Pfizer-related revenue from the completed Brazilian supply agreement.
- Gross profit decreased $2.814 million; operating loss widened $1.027 million and net loss widened $0.852 million.
- Net R&D expense declined 17%, primarily due to lower consulting and subcontractor costs; general and administrative expense fell 18% to $1.629 million.
- Operating cash use increased from $3.988 million to $6.281 million, including a $2.405 million decrease in deferred revenue.
Outlook, developments, and risks
- FDA approval of taliglucerase alfa occurred May 1, 2012. Under the Pfizer agreement, a $25 million U.S. approval milestone became payable. Pfizer expected to begin U.S. commercial sales in May 2012; Protalix’s future product-related returns depend on Pfizer’s commercialization and the agreement’s profit-sharing terms.
- Management believed existing resources and the approval milestone would fund planned operations for at least 12 months, while cautioning that assumptions could change and additional financing might be needed. The company expected continuing operating losses and significant R&D spending.
- European approval remained uncertain: the EMA review had outstanding issues, including a challenge to competing VPRIV’s orphan-drug market exclusivity. Applications were also pending in Israel, Brazil, and Australia.
- Pipeline plans included an anticipated PRX-102 IND submission in Q2 2012 and a PRX-106 submission around Q4 2012. These were forward-looking expectations, not completed milestones.
- Key risks include delays or failure in foreign approvals, launch execution and market acceptance, competition and reimbursement, manufacturing/GMP compliance, post-approval safety issues, and the need for additional capital. The filing reported no material legal proceedings and stated disclosure controls were effective.
Important facts for investors to verify
- Whether the $25 million FDA-approval milestone was received, and when; it was payable after quarter-end and is not included in March 31 cash.
- Actual timing, sales, pricing, reimbursement, and profit contribution from Pfizer’s ELELYSO launch.
- Progress and outcome of the EMA review and the VPRIV orphan-exclusivity challenge, as well as decisions by other foreign regulators.
- Cash burn and financing needs against management’s 12-month liquidity estimate, including the impact of continued R&D and commercialization costs.
- Post-quarter option exercises added approximately 1.069 million shares for about $1.017 million; verify subsequent share count and dilution. The filing reported approximately 91.892 million shares outstanding on May 3, 2012.