Business Context and Reporting Period
Company: Protalix Biotherapeutics, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: June 30, 2009
Business Overview: Protalix is a biopharmaceutical company in the development stage, focused on creating recombinant therapeutic proteins using its proprietary ProCellEx plant cell-based expression system. The lead product candidate is prGCD for the treatment of Gaucher disease, currently in a pivotal Phase III clinical trial. The company has no approved products and has not generated significant product revenue.
Key Financial Metrics
| Metric (in thousands) | Six Months Ended June 30, 2009 |
Six Months Ended June 30, 2008 |
Three Months Ended June 30, 2009 |
Three Months Ended June 30, 2008 |
|---|---|---|---|---|
| Revenues | $830 | $0 | $0 | $0 |
| Net Loss | $(10,610) | $(9,342) | $(5,427) | $(4,229) |
| Net Loss Per Share (Basic/Diluted) | $0.14 | $0.12 | $0.07 | $0.06 |
| Research & Development Expenses | $11,296 | $9,684 | $6,210 | $4,031 |
| General & Administrative Expenses | $2,412 | $3,992 | $1,171 | $2,016 |
| Cash and Cash Equivalents (Balance Sheet) | $29,132 | $42,596 (Dec 31, 2008) | N/A | |
| Net Cash Used in Operating Activities | $(9,255) | $(7,447) | N/A | |
| Net Cash Used in Investing Activities | $(4,192) | $(1,985) | N/A | |
| Net Cash Provided by Financing Activities | $8 | $(53) | N/A |
Liquidity: As of June 30, 2009, the company held $29.1 million in cash and cash equivalents. Management estimates these resources are sufficient to fund operations for approximately 18 months.
Material Changes vs. Prior Period
- Revenue: The company recorded $830,000 in revenue for the six months ended June 30, 2009, compared to no revenue in the prior year period. This is attributed to non-product sales revenue.
- Net Loss: Net loss increased by approximately 14% to $10.6 million for the six-month period compared to $9.3 million in the prior year.
- R&D Expenses: Increased by 17% ($1.6 million) year-over-year for the six-month period, primarily due to a $1.3 million increase in costs related to consultants and subcontractors for the Phase III clinical trial of prGCD. This was partially offset by an increase in government grants.
- G&A Expenses: Decreased by 40% ($1.6 million) year-over-year for the six-month period, driven mainly by a $1.0 million reduction in share-based compensation expenses.
- Cash Position: Cash and cash equivalents decreased by $13.5 million from the beginning of the period ($42.6 million) to $29.1 million, reflecting net cash outflows from operations and investing activities.
Guidance, Outlook, and Risks
Outlook and Guidance:
- The company expects to report results of its Phase III clinical trial for prGCD in the second half of 2009.
- Submission of a New Drug Application (NDA) to the FDA is anticipated in the fourth quarter of 2009.
- Management expects operating losses to continue and increase as the company advances clinical trials and prepares for potential commercialization.
- Additional financing will likely be required to fund future operations beyond the next 18 months.
Risks and Contingencies:
- Regulatory Risk: No assurance exists that the company will receive regulatory approval for prGCD or other candidates.
- Liquidity Risk: The company has an accumulated deficit of $85.6 million and relies on external financing to continue operations.
- Currency Risk: Approximately 35% of costs are incurred in New Israeli Shekels (NIS); devaluation of the USD against the NIS impacts financial results.
- Development Risk: Delays in clinical trials, patient enrollment, or rejection of applications could materially impact the business.
Key Facts for Investor Verification
- Cash Runway: Verify the 18-month liquidity estimate against current burn rates and potential unexpected cost increases.
- Clinical Trial Status: Confirm the timeline for the Phase III prGCD trial results and the subsequent NDA submission in late 2009.
- Revenue Source: Investigate the nature of the $830,000 revenue recorded, as the company has no approved commercial products.
- Capital Needs: Assess the likelihood and terms of future equity or debt financing required to sustain operations post-2010.
- Share-Based Compensation: Monitor the impact of stock option grants and vesting schedules on future G&A and R&D expenses.