ProMIS Neurosciences Inc. — Q3 2023 Form 10-Q Summary
Business context and reporting period
ProMIS Neurosciences is a pre-revenue biotechnology company developing antibody therapies, vaccines and other antibody-based products for protein-misfolding diseases, primarily Alzheimer’s disease, ALS and multiple system atrophy. Its lead candidates are PMN310, PMN267 and PMN442. The filing covers the three and nine months ended September 30, 2023, and was filed November 14, 2023. Financial statements are unaudited and presented in U.S. dollars.
- PMN310 targets toxic amyloid-beta oligomers in Alzheimer’s disease. The FDA cleared its IND in May 2023, and first-in-human Phase 1 dosing was expected by the end of November 2023.
- PMN267 and PMN442 remain preclinical and require additional resources for IND-enabling studies.
- The company voluntarily delisted from the TSX in July 2023 and now focuses its listing and trading activity on Nasdaq.
Financial condition and key metrics
| Metric | Three months ended September 30, 2023 | Nine months ended September 30, 2023 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.1 million | $5.7 million |
| General and administrative expense | $1.4 million | $4.7 million |
| Total operating expenses | $2.5 million | $10.4 million |
| Loss from operations | $(2.5) million | $(10.4) million |
| Net loss | $(2.4) million | $(9.6) million |
| Net loss per share, basic and diluted | $(0.19) | $(0.98) |
| Net cash used in operating activities | Not separately provided for the quarter | $(7.1) million |
As a pre-revenue development-stage company, gross and operating margins are not meaningful. The accumulated deficit was $89.9 million at September 30, 2023. Cash was $16.9 million, compared with $5.9 million at December 31, 2022, and total current assets were $17.9 million. Total current liabilities were $9.9 million, producing reported working capital of approximately $8.0 million. The company reported no outstanding debt at September 30, 2023, although it had $11.1 million of total liabilities, including accounts payable, accrued liabilities, share-based compensation liabilities and warrant liabilities.
In August 2023, the company completed a private placement of common shares and pre-funded warrants with accompanying warrants. Gross proceeds were approximately $20.5 million, net proceeds were approximately $18.3 million, and issuance costs were approximately $2.7 million. The financing increased common shares outstanding from 8.6 million at December 31, 2022 to 18.5 million at September 30, 2023. Including options, warrants, convertible preferred shares and deferred share units, reported common share equivalents totaled approximately 34.7 million.
Material changes versus the prior comparable period
- Nine-month research and development expense decreased $4.0 million, or 42%, to $5.7 million. Management attributed the reduction to lower PMN310 manufacturing and preclinical spending after the IND submission, reduced ALS activity and lower consulting costs.
- Third-quarter research and development expense decreased $3.4 million, or 75%, to $1.1 million, reflecting resource conservation after the PMN310 IND submission.
- Nine-month general and administrative expense decreased $0.4 million, or 8%, to $4.7 million, primarily because of lower professional and consulting fees and patent costs.
- Nine-month net loss improved by $1.2 million compared with 2022, despite a $3.3 million decline in other income. The prior-year period benefited from a $1.3 million gain on extinguishment of convertible debt and higher fair-value gains on financial instruments.
- Operating cash use improved from $12.5 million to $7.1 million, primarily due to lower operating expenses and increased accounts payable.
- Foreign currency accounting changed prospectively on July 1, 2023, when the company’s functional currency changed from the Canadian dollar to the U.S. dollar. This resulted in reclassifications of certain warrants and stock options and the recognition of share-based compensation liabilities.
Outlook, liquidity, risks and unusual items
Management expects continued net losses for the foreseeable future and states that additional funding will be required for clinical development and ongoing operations. The filing expressly states that the company’s cash balance is not expected to fund operating expenses for at least 12 months from the issuance of the financial statements, and that substantial doubt exists regarding the company’s ability to continue as a going concern.
- The company intends to seek additional equity or debt financing, collaborations, strategic alliances and licensing arrangements. There is no assurance that financing will be available on acceptable terms or at all.
- Approximately $5.5 million of current accounts payable and accrued liabilities may be deferred under a vendor agreement until March 31, 2024, with interest accruing at 5.5% annually.
- If additional capital is unavailable, management may delay, reduce or eliminate research and development programs, clinical activities, portfolio expansion or commercialization efforts.
- The August 2023 financing included 11.2 million common warrants exercisable at $1.75 and 954,725 pre-funded warrants, creating substantial potential dilution. Total warrants outstanding at September 30, 2023 were approximately 14.0 million.
- The company has not generated revenue and does not expect near-term product revenue unless candidates are successfully developed, approved and commercialized or collaboration arrangements produce payments.
- Key risks include clinical and regulatory failure, inability to raise capital, dilution, dependence on third-party research and manufacturing providers, intellectual property and licensing risks, foreign-exchange exposure, market volatility and the possibility of continued operating losses.
- No material litigation was pending according to management, and no material subsequent events were identified through November 14, 2023.
Important facts for investors to verify
- Whether PMN310 Phase 1a dosing began as expected and the timing and results of initial clinical data.
- The company’s cash runway after September 30, 2023, including subsequent financing, spending and vendor-payment obligations.
- The terms, registration status, exercise activity and potential dilution from the approximately 14.0 million outstanding warrants and other common share equivalents.
- Whether additional financing or partnership transactions were completed and whether their terms materially changed the company’s liquidity or ownership structure.
- The company’s ability to resolve the stated going-concern uncertainty and fund PMN267, PMN442 and other development programs.