Business context and reporting period
Prothena Corporation plc is an Ireland-based, late-stage clinical biotechnology company focused on therapies for diseases involving protein dysregulation. Its pipeline includes wholly owned programs for AL amyloidosis and Alzheimer’s disease, and partnered programs with Roche, Bristol Myers Squibb (BMS), and Novo Nordisk.
This Form 10-K covers the fiscal year ended December 31, 2022, and was filed February 28, 2023. Prothena has no marketed products and remains dependent on clinical development, collaboration payments, milestone receipts, and external financing.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $53.9 million | $200.6 million | Down 73% |
| Collaboration revenue | $13.9 million | $139.8 million | Down 90% |
| License and intellectual property revenue | $40.1 million | $60.7 million | Down 34% |
| Research and development expense | $135.6 million | $82.3 million | Up 65% |
| General and administrative expense | $49.9 million | $46.3 million | Up 8% |
| Operating loss | $131.6 million | Operating income of $72.0 million | Material deterioration |
| Net income (loss) | $(116.9) million | $67.0 million | Returned to loss |
| Basic and diluted loss per share | $(2.47) | Basic $1.51; diluted $1.38 | Material deterioration |
| Net cash used in operating activities | $(108.8) million | $92.6 million provided | Material deterioration |
| Cash and cash equivalents at year-end | $710.4 million | $579.1 million | Up $131.3 million |
Approximate 2022 operating margin was negative 244% and net margin was negative 217%, compared with positive operating and net margins in 2021. The filing does not identify funded debt; total liabilities were $136.0 million, including deferred revenue and lease-related obligations.
Working capital was $669.0 million at December 31, 2022, and total shareholders’ equity was $622.0 million. Year-end cash, cash equivalents, and restricted cash totaled $712.6 million, including $2.2 million of restricted cash. Management believes existing cash and cash equivalents will fund obligations for at least the next twelve months, but expects additional capital will be required for continued development and potential commercialization.
Financing activities provided $241.5 million in 2022, including approximately $172.6 million from a December public offering, $51.0 million from an at-the-market offering, and $17.8 million from option exercises. Share count increased to 52.1 million issued and outstanding shares at year-end from 46.7 million at year-end 2021.
Material changes versus the prior comparable period
- Revenue declined sharply because 2021 included significant nonrecurring payments, including a $60.0 million Roche milestone, $80.0 million from BMS for the PRX005 U.S. license, and $60.0 million from Novo Nordisk. In 2022, revenue included a $40.0 million Novo Nordisk development milestone and $13.9 million of BMS development-services revenue.
- R&D spending increased $53.3 million, driven primarily by higher manufacturing, personnel, and clinical trial costs for birtamimab, PRX012, PRX019, PRX123, and other programs. G&A expense increased $3.6 million.
- Prothena received a $40.0 million Novo Nordisk milestone related to continued Phase 2 development of NNC6019 for ATTR cardiomyopathy. Up to approximately $1.13 billion of additional development and sales milestones remain possible, subject to achievement and other conditions.
- The December 2022 equity offering and at-the-market issuance materially strengthened liquidity but diluted existing shareholders.
- Deferred revenue decreased to $96.7 million from $110.6 million as BMS development services were performed; $11.4 million was current and $85.3 million was non-current at year-end.
- In January 2023, Prothena issued an additional 395,096 shares and received approximately $21.0 million of net proceeds before offering costs from the partial exercise of underwriters’ options.
Pipeline, outlook, commentary, and risks
The principal late-stage programs are birtamimab, prasinezumab, and NNC6019, with additional clinical programs PRX005 and PRX012. Birtamimab is being evaluated in the Phase 3 AFFIRM-AL study under an FDA Special Protocol Assessment; topline data is expected in 2024. Roche is conducting the Phase 2b PADOVA study of prasinezumab, with topline data expected in 2024. Novo Nordisk is conducting a Phase 2 study of NNC6019, also with topline data expected in 2024. Phase 1 data for PRX005 and PRX012 was expected in 2023, and Prothena expected to file an IND for the PRX123 vaccine in 2023.
Management expects 2023 revenue to decline from 2022 because 2022 revenue primarily reflected a nonrecurring Novo Nordisk milestone. Prothena expects R&D and G&A expenses to increase in 2023, and projects full-year 2023 net cash used in operating and investing activities of approximately $213 million to $229 million.
Key risks include continued operating losses, the need for additional capital, clinical-trial failure or delay, regulatory uncertainty, reliance on Roche, BMS, Novo Nordisk, contract manufacturers and clinical vendors, intellectual-property challenges, competition, reimbursement uncertainty, cybersecurity and data-privacy risks, foreign-exchange exposure, and potential effects from COVID-19 and geopolitical disruptions. An SPA does not guarantee FDA approval of birtamimab.
As of December 31, 2022, the company reported no material legal proceedings. A prior Department of Justice subpoena relating to the discontinued NEOD001 program was fully responded to in July 2019; the filing states that no additional information had been requested since then but that further action could not be predicted. KPMG issued an unqualified audit opinion and concluded that internal control over financial reporting was effective.
Contractual obligations totaled approximately $33.2 million, comprising $21.3 million of operating leases, $11.5 million of purchase obligations, and $0.4 million of license obligations. Prothena also expects material future cash requirements for clinical trials, discovery and preclinical programs, personnel, and intellectual property.
Most important facts for investors to verify
- Whether $710.4 million of cash and the projected 2023 cash burn are sufficient under updated clinical-development spending assumptions.
- Progress, enrollment, safety, and efficacy results for AFFIRM-AL, PADOVA, NNC6019, PRX005, and PRX012, including the expected 2024 readouts.
- Whether future Roche, BMS, and Novo Nordisk milestones are achieved and whether any programs are delayed, terminated, or deprioritized by partners.
- The probability and timing of additional financing, and the potential dilution from the remaining at-the-market authorization and equity awards.
- Whether the $1.13 billion of potential Novo Nordisk milestones and other collaboration milestones should be treated as contingent rather than committed funding.
- Manufacturing capacity, supply reliability, and regulatory comparability for third-party manufacturers supporting clinical trials.
- The effect of the 2022 revenue mix, deferred revenue recognition, share-based compensation, and tax-related deferred assets on future reported results.