Protalix BioTherapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. The company develops and commercializes plant-cell-produced therapeutic proteins. Its lead candidate, PRX-102, is in Phase III development for Fabry disease; taliglucerase alfa is its marketed product.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $12.1 | $10.8 | $29.8 | $43.4 |
| Operating loss | $1.9 | $2.6 | $14.8 | $0.1 |
| Net loss | $4.2 | $4.4 | $20.9 | $6.9 |
| Basic and diluted loss per share | $0.09 | $0.14 | $0.48 | $0.25 |
| Cash used in operating activities | Not separately reported for quarter | $5.2 | $18.6 |
- Revenue mix: Q3 product sales were $4.5 million and license/R&D services revenue was $7.5 million. Nine-month amounts were $12.3 million and $17.5 million, respectively.
- Margins: Cost of goods sold was $3.7 million in Q3 and $13.2 million for nine months. Approximate product gross margin, calculated as product sales less cost of goods sold, was 17.8% in Q3 2021 versus 13.0% in Q3 2020; for nine months it was negative 7.7% versus 32.2%. The filing attributes higher 2021 costs partly to one-time manufacturing costs in preparation for anticipated PRX-102 approval.
- Expenses: R&D was $7.3 million in Q3 and $22.1 million year to date, down 5% and 19%, respectively, as two PRX-102 Phase III studies were completed and BALANCE costs declined. SG&A was $3.0 million in Q3 and $9.3 million year to date.
- Liquidity at September 30: Cash and cash equivalents were $10.6 million and short-term bank deposits were $38.0 million, totaling $48.7 million. Current assets were $71.2 million and current liabilities $42.8 million. Operating cash outflow for nine months was $5.2 million; investing outflow was $18.5 million and financing inflow was $16.1 million.
- Debt: The balance sheet reported $3.2 million of current convertible notes and $27.8 million long-term. In August, $54.65 million principal of 7.5% notes due 2021 was exchanged for $28.75 million principal of 7.5% notes due 2024 plus $25.9 million cash and accrued interest. The new notes are secured by liens on company assets and mature in August 2024. The remaining 2021 notes were effectively discharged on November 9, 2021.
Changes versus prior period
- Nine-month revenue declined 31%, primarily because license/R&D revenue fell $13.9 million, reflecting completed clinical-trial work and a $4.1 million reduction in previously recognized revenue after an updated estimate of remaining costs under the Chiesi agreements. Product sales rose slightly overall, with timing shifts between Pfizer and Brazil.
- Nine-month operating loss widened substantially as lower license/R&D revenue and higher cost of goods sold outweighed reduced R&D expense. Q3 net loss improved modestly year over year.
- Operating cash use improved to $5.2 million from $18.6 million, helped by a $13.9 million increase in contract liabilities. Cash and cash equivalents declined by $7.6 million from year-end, while short-term deposits increased.
- Common shares outstanding increased to 45.6 million at September 30 from 34.8 million at year-end, including an underwritten offering and ATM sales that generated approximately $46.2 million net proceeds combined.
Outlook, developments and risks
- Management said available cash and deposits were sufficient for at least 12 months from issuance of the financial statements. The company also has a $7.5 million minimum-cash covenant under its note indentures and may need additional capital to fund development and operations.
- FDA issued a Complete Response Letter for the PRX-102 BLA in April 2021. The filing says the letter identified no safety or efficacy concerns in the submitted data package, but FDA required inspection of the Carmiel manufacturing facility and raised matters for the European fill-and-finish facility. The FDA also noted Fabrazyme’s full approval as a therapy that must be addressed in any resubmission.
- After a September FDA meeting, the agency agreed in principle that the proposed data package could potentially support traditional approval. The company planned to include final two-year BALANCE results in a resubmission. The last patient completed BALANCE dosing in October; final data were anticipated in Q2 2022. The company and Chiesi expected to submit an EMA marketing application in Q1 2022. These are company expectations, not guaranteed outcomes.
- PRX-102 regulatory approval, clinical results, manufacturing inspections, funding needs and competition remain material uncertainties. The filing also identifies COVID-19 disruption, partner and supplier dependence, Fiocruz purchase obligations, and currency exposure as risks.
- The 2024 note indenture requires stockholder approval before issuing 20% or more of specified outstanding shares. Until approval, conversions may require substantial or entirely cash settlement, potentially limiting financial flexibility.
- The SarcoMed license for PRX-110 expired during Q3; the company said it was evaluating other partnerships. Management reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls.
Investor verification priorities
- Track timing and requirements for the PRX-102 FDA resubmission, facility inspections, and EMA application; verify subsequent regulatory updates.
- Review final BALANCE results and how they compare with the interim analysis, including efficacy, safety and the FDA’s requested evidence.
- Assess cash runway against the $7.5 million covenant, ongoing R&D and manufacturing needs, and the 2024 notes’ secured status and potential cash-conversion obligations.
- Check whether product sales, especially Brazil and Pfizer shipments, are recurring or reflect timing differences, and whether manufacturing costs normalize.
- Monitor Chiesi collaboration revenue estimates and milestones, Fiocruz purchase performance, and any further equity issuance or dilution.