Pliant Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020. Pliant is a clinical-stage biopharmaceutical company developing therapies for fibrotic diseases; it had no approved products or product-sale revenue.
Financial performance and position
| Metric | Q2 2020 | Six months 2020 | Comparable 2019 |
|---|---|---|---|
| Revenue, all from Novartis | $3.6 million | $32.5 million | None |
| Research and development expense | $17.5 million | $31.5 million | $13.1 million / $24.8 million |
| General and administrative expense | $3.0 million | $7.1 million | $2.6 million / $5.2 million |
| Net loss | $17.0 million | $6.0 million | $15.5 million / $29.5 million |
| Net loss per share, basic and diluted | $1.39 | $0.85 | $10.82 / $21.70 |
Dollar amounts are in millions; comparable-period figures are Q2 2019 / first half 2019. The six-month 2020 result included $25.0 million of Novartis milestone revenue for first-patient dosing and $7.5 million for research services; Q2 revenue was $3.6 million for services. The company remains loss-making, and product-level margins are not meaningful because it has no product sales.
- Cash and liquidity: Cash and cash equivalents were $178.5 million and short-term investments were $134.0 million at June 30, totaling $312.5 million, versus $102.8 million at December 31, 2019. Current assets were $324.3 million; current liabilities were $12.0 million.
- Cash flows, first half: $5.0 million used in operations, $117.7 million used in investing (primarily purchases of short-term investments), and $215.3 million provided by financing. Cash increased by $92.7 million.
- Debt: No outstanding debt was reported. Total liabilities were $13.0 million.
Material changes and notable transactions
- R&D expense rose 33.9% in Q2 and 26.6% in the first half, reflecting increased clinical activity, personnel and outside services. The first-half increase also included a $2.4 million UC Regents milestone payment triggered by the IPO.
- G&A expense increased 15.0% in Q2 and 34.5% in the first half, including higher staffing and public-company professional costs.
- The June IPO sold 10.35 million shares at $16 per share and generated $148.4 million in net proceeds, according to the filing; a concurrent Novartis private placement added $10.0 million. Series C preferred shares also generated $52.0 million net in the first half. Preferred stock converted to common stock at the IPO, and the company had 35.4 million common shares outstanding at June 30.
- Lower interest rates reduced interest income: $0.1 million in Q2 and $0.2 million in the first half versus the respective 2019 periods.
Outlook, risks and contingencies
- Management expects continued significant operating losses and increased R&D spending. It estimates existing cash, cash equivalents and short-term investments will fund operating expenses and capital expenditures into 2023, but says additional funding will be needed to complete development programs. The estimate depends on trial progress, costs and other assumptions.
- PLN-74809: Phase 2a IPF trials were enrolling; a Phase 2a PSC trial was planned for the second half of 2020, subject to COVID-19 effects. The FDA issued a “safe to proceed” letter for a planned Phase 2 trial in COVID-19-associated ARDS, also targeted for the second half of 2020.
- PLN-1474, partnered with Novartis, was in Phase 1. Remaining cohorts were expected to continue dosing, with topline data anticipated in Q1 2021, subject to pandemic impacts.
- COVID-19 had disrupted trial enrollment and site activity and constrained laboratory research; delays could increase costs and affect timelines, data quality and enrollment. Management reported enrollment had resumed at Phase 2a IPF and PSC sites.
- Novartis is the sole revenue source and a related party; future research funding, milestones and royalties depend on contract performance and development or commercial success. The agreement provides up to $416 million in potential milestones and tiered royalties, none of which are assured.
- The filing reports no material pending legal proceedings. It identifies substantial clinical, regulatory, financing, intellectual-property, manufacturing and collaboration risks. Management reported disclosure controls were effective at a reasonable assurance level.
Investor verification points
- Confirm the $312.5 million liquidity total and management’s “into 2023” runway estimate against the expected trial spending and COVID-19 assumptions.
- Track enrollment, safety and data milestones for PLN-74809 trials, including the planned PSC and COVID-19 ARDS studies, and PLN-1474 Phase 1 results.
- Review the Novartis agreement’s remaining research funding, milestone conditions, termination provisions and the company’s dependence on this single revenue source.
- Reconcile the IPO proceeds presentation: the filing cites $148.4 million net proceeds in its IPO discussion, while the cash-flow statement reports $153.1 million of IPO proceeds net of issuance costs.
- Monitor trial delays, R&D spending, future capital needs and dilution from equity compensation or additional financing.