Praxis Precision Medicines, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Praxis is a clinical-stage CNS biopharmaceutical company developing therapies for movement disorders and epilepsy. It had no product revenue and reported no debt; its liabilities principally include accounts payable, accrued expenses, and operating leases.
Financial performance and liquidity
| Metric | Q3 2022 / September 30, 2022 | Comparable period / prior balance |
|---|---|---|
| Revenue | None | None |
| Operating expenses | $44.3 million for Q3; $173.5 million for nine months | $44.8 million and $108.7 million, respectively, in 2021 |
| Net loss | $43.9 million for Q3; $172.9 million for nine months | $44.7 million and $108.5 million, respectively, in 2021 |
| Basic and diluted loss per share | $0.96 for Q3; $3.79 for nine months | $1.00 and $2.61, respectively, in 2021 |
| Cash, cash equivalents and marketable securities | $123.7 million | $275.9 million at December 31, 2021 |
| Operating cash flow | -$156.2 million for nine months | -$79.7 million in 2021 |
Gross margin and other revenue-based margins are not applicable because the company has not generated revenue. At September 30, total assets were $136.9 million, total liabilities $31.7 million, and stockholders’ equity $105.2 million. Cash and marketable securities declined substantially during the period. The company reported $74.3 million of investing cash inflow, primarily from marketable-security maturities, and $5.1 million of financing cash inflow, including $4.3 million net proceeds from at-the-market (ATM) stock sales.
Material changes and business developments
- Nine-month R&D expense rose $50.0 million year over year to $126.7 million, reflecting increased activity in epilepsy and movement disorders, PRAX-222 license costs, and higher personnel expense. General and administrative expense increased $14.9 million to $46.8 million.
- Q3 R&D expense decreased $2.7 million year over year to $30.4 million, mainly because psychiatry spending declined after PRAX-114 trial activity wound down; spending increased in epilepsy and movement disorders. Q3 net loss was modestly lower than in 2021.
- In June, Praxis realigned operations to focus on movement disorders and epilepsy, reducing its workforce. It recognized and paid $1.0 million of severance and related costs and did not expect significant additional realignment costs.
- Common shares outstanding increased from 45.3 million at December 31, 2021 to 46.9 million at September 30, 2022. Nine-month ATM sales generated $4.3 million net proceeds.
Outlook, risks and contingencies
- Management expected cash, cash equivalents and marketable securities at quarter-end to fund prioritized operations and capital expenditures into Q1 2024. This estimate assumes cost savings and limits development to advancing candidates through their then-current clinical phases. Management cautioned that actual cash use could be higher and additional financing may be unavailable or unfavorable. The company concluded there was no substantial doubt about its ability to continue as a going concern within one year of issuance.
- Pipeline milestones included PRAX-944 essential tremor Phase 2b topline results in Q1 2023, a planned Parkinson’s disease Phase 2 trial in Q1 2023, and a planned PRAX-222 first-in-patient study in Q4 2022. Praxis also planned PRAX-562 Phase 2 work and PRAX-628 clinical studies; timelines remain subject to development and regulatory risks.
- In October 2022, Praxis received further FDA feedback on the PRAX-562 clinical hold and expected no new preclinical or clinical studies would be needed to clear it; this was management’s expectation, not confirmation that the hold had been cleared.
- After PRAX-114’s Phase 2 Acapella study in major depressive disorder, topline results showed a dose-response trend on the primary endpoint that was not statistically significant. Praxis said it did not plan further psychiatric development of PRAX-114.
- COVID-19 had affected enrollment and treatment in some trials, though the company said it had not significantly affected overall timelines to date. Risks include trial outcomes and delays, regulatory decisions, reliance on third parties, competition, intellectual-property protection, and the need for substantial future funding. The filing reported no material legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the stated Q1 2024 cash runway remains achievable, given the $156.2 million nine-month operating cash outflow and assumptions about cost reductions and trial spending.
- Actual timing and results for PRAX-944 and the planned epilepsy trials, including FDA status of the PRAX-562 hold.
- Whether the company secures additional financing, and the potential dilution or other terms if it raises capital.
- Progress in reallocating resources after the strategic realignment and discontinuation of PRAX-114 psychiatric development.