Prothena Corporation plc — Q2 2022 Form 10-Q Summary
Business Context and Reporting Period
Prothena is an Ireland-incorporated, late-stage clinical biotechnology company focused on protein dysregulation and investigational therapies for neurodegenerative and amyloid diseases. Key programs include birtamimab for AL amyloidosis, PRX012 and PRX123 for Alzheimer’s disease, Roche-partnered prasinezumab for Parkinson’s disease, and BMS-partnered PRX005, TDP-43 and PRX019 programs.
This unaudited Form 10-Q covers the three and six months ended June 30, 2022. The company had 46.9 million ordinary shares outstanding as of July 29, 2022, and operates as a single reportable segment.
Financial Performance and Liquidity
| Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 |
|---|---|---|---|---|
| Total revenue | $1.3 million | $60.1 million | $2.5 million | $60.2 million |
| Research and development expense | $31.6 million | $21.1 million | $58.8 million | $42.2 million |
| General and administrative expense | $13.0 million | $11.0 million | $24.8 million | $22.2 million |
| Loss from operations | $43.2 million | Income of $27.9 million | $81.2 million | $4.2 million |
| Net income (loss) | $(41.2) million | $27.6 million | $(77.5) million | $(9.1) million |
| Basic loss per share | $(0.88) | $0.62 income | $(1.66) | $(0.21) |
Revenue declined primarily because Q2 2021 included a $60.0 million Roche milestone related to the PADOVA study. Q2 2022 collaboration revenue consisted of $1.3 million from BMS for PRX005 development services. Six-month 2022 revenue also included $50,000 of license and intellectual-property revenue.
Research and development expense increased 50% year over year in Q2 and 39% for the six-month period, driven by higher personnel, clinical-trial, manufacturing and development costs, particularly for birtamimab and PRX012. General and administrative expense increased 17% in Q2 and 12% year to date. Share-based compensation was $8.3 million in Q2 and $15.9 million for the six months.
Cash and cash equivalents were $508.8 million at June 30, 2022, compared with $579.1 million at December 31, 2021. Total cash, cash equivalents and restricted cash were $510.1 million. Working capital was $481.2 million, and accumulated deficit was $793.6 million.
Net cash used in operating activities was $72.7 million for the six months, compared with $3.0 million of cash provided in the prior-year period. Financing activities provided $2.6 million, primarily from stock-option exercises. Capital expenditures were $183,000. Management expects full-year 2022 net cash used in operating and investing activities of approximately $120 million to $132 million.
The filing discloses no outstanding debt financing. Liabilities included $108.2 million of deferred revenue and $9.6 million of operating lease liabilities. The company had $12.8 million of non-cancelable purchase commitments and $0.5 million of license-related contractual obligations.
Material Changes Versus the Prior Comparable Period
- Revenue fell 98% in Q2 and 96% for the six months because the prior-year period included the $60.0 million Roche milestone.
- The company shifted from Q2 2021 operating income of $27.9 million to Q2 2022 operating loss of $43.2 million.
- R&D spending increased substantially as clinical and manufacturing activities expanded, while Roche-related cost sharing declined after Prothena opted out of U.S. profit-and-loss sharing for prasinezumab in May 2021.
- Interest income increased to $639,000 in Q2 and $692,000 year to date because of higher interest rates and cash balances.
- Deferred revenue declined from $109.5 million at the beginning of Q2 to $108.2 million at quarter-end as BMS-related development services were recognized.
- Shareholders approved an amendment increasing the 2018 Long Term Incentive Plan reserve by 2.0 million shares. Options outstanding totaled 10.6 million at June 30, 2022.
Guidance, Outlook, Risks and Unusual Items
Management believes existing cash and cash equivalents are sufficient to meet obligations for at least the next twelve months, but expects to require additional capital to continue research, development and potential commercialization. Potential funding sources include cash on hand, collaboration payments, equity or debt financings, and additional partnering transactions. Future equity financing could dilute shareholders, and financing may not be available on acceptable terms.
The company expects 2022 R&D and G&A expenses to increase from 2021 levels. It has not provided product-sales guidance and has no approved commercial products. All drug candidates remain subject to clinical, regulatory, manufacturing, reimbursement and commercialization uncertainty.
- Birtamimab is being evaluated in the Phase 3 AFFIRM-AL study under an FDA Special Protocol Assessment. The SPA does not guarantee regulatory approval.
- PRX012 entered Phase 1 development, and the FDA granted Fast Track designation in April 2022.
- Roche is responsible for further development of prasinezumab, including the Phase 2b PADOVA study. Prothena remains dependent on Roche’s execution and future milestone or royalty-generating events.
- Novo Nordisk acquired Prothena’s ATTR amyloidosis business. Prothena may receive up to $1.17 billion in additional development and sales milestones, but none were achieved in the first six months of 2022.
- COVID-19, supply-chain disruption, geopolitical conditions including the Russian invasion of Ukraine, clinical-trial delays, third-party manufacturer dependence and capital-market volatility may adversely affect operations and liquidity.
- The company relies entirely on third-party manufacturers for clinical supplies and has no manufacturing capacity of its own.
- No material legal proceedings were reported. A prior Department of Justice subpoena concerning the NEOD001 program remains a disclosed uncertainty, although no additional information had been requested since July 2019.
Important Facts for Investors to Verify
- Whether the AFFIRM-AL study enrolls and reaches its event milestones on schedule and supports a future regulatory filing.
- Clinical and safety progress for PRX012, PRX005 and other pipeline programs, including the extent of COVID-19 or supply-related delays.
- Roche’s progress with prasinezumab and the likelihood and timing of future milestones, royalties or commercial revenue.
- Whether Novo Nordisk achieves the development and commercial milestones underlying the potential $1.17 billion of contingent consideration.
- Cash-burn trends relative to the $120 million–$132 million full-year 2022 operating and investing cash-use forecast.
- The timing, terms and potential dilution of future equity, debt or collaboration financing.
- Deferred-revenue recognition, remaining BMS performance obligations and the timing of future collaboration revenue.
- Exposure to third-party manufacturing capacity, clinical-trial execution, intellectual-property challenges and regulatory approval risk.