ALTERITY THERAPEUTICS LTD current report, Q3 FY2016

Business Context and Reporting Period

Company: Prana Biotechnology Limited (Note: Metadata listed "Alterity Therapeutics" but filing text confirms Prana Biotechnology Limited).

Filing Type: Form 6-K (Preliminary Final Report under ASX Listing Rule 4.2A).

Reporting Period: Financial year ended 30 June 2016.

Principal Activities: Commercialization of research into Alzheimer's disease, Huntington disease, and other neurodegenerative disorders. The Group operates primarily in Australia.

Key Financial Metrics

Metric2016 (A$)2015 (A$)
Revenue142,657176,842
Other Income (R&D Tax Incentive)4,753,6976,317,438
Net Loss(7,729,551)(5,885,069)
Operating Cash Flow(7,418,526)(10,871,074)
Cash and Cash Equivalents28,593,53834,909,574
Total Assets33,725,02041,834,382
Total Liabilities2,357,8072,721,118
Net Tangible Assets per Share5.88 cents7.33 cents
Loss per Share (Basic)(1.45) cents(1.17) cents

Debt and Liquidity: The company reported no borrowings or interest-bearing debt. Total liabilities consist primarily of trade payables and provisions. Cash reserves decreased by approximately A$6.3 million year-over-year.

Material Changes vs. Prior Period

  • Revenue: Decreased 19.33% to A$142,657. Revenue consists solely of interest income on bank accounts.
  • Net Loss: Increased 31.34% to A$7.73 million. The increase is attributed to lower foreign exchange gains and a decrease in R&D tax incentive income, partially offset by reduced R&D expenditure.
  • R&D Expenses: Decreased 22.03% to A$9.59 million (from A$12.30 million). This reduction is primarily due to the FDA placing the lead candidate PBT2 on a partial clinical hold.
  • Other Income: Decreased to A$4.75 million, driven by a lower R&D tax incentive rebate compared to the prior year.
  • Foreign Exchange: Significant decrease in foreign exchange gains from A$4.72 million in 2015 to A$0.86 million in 2016.

Outlook, Risks, and Management Commentary

Clinical Development Status

  • PBT2 (Huntington's Disease): Development is ongoing to address a Partial Clinical Hold issued by the US FDA. The company is preparing a Phase 3 protocol for FDA submission and compiling data for European authorities (EMA). Recent patient-reported outcomes from the Reach2HD trial indicated 90% of improvements in "problems with thinking" were achieved with PBT2-treated patients.
  • PBT434 (Parkinsonian Movement Disorders): Progressed through mouse models showing decreased toxic protein levels and improved motor/cognitive performance. Non-clinical toxicity studies are complete, and a Phase 1 program plan is being compiled for FDA submission.
  • Pipeline: Additional candidates are being profiled through the Translational Biology Program to diversify the pipeline for neurodegenerative disorders.

Risks and Contingencies

  • Regulatory Risk: The partial clinical hold on PBT2 by the FDA limits dosing in future US trials and has directly impacted R&D spending and cash flow.
  • Liquidity Risk: The company is pre-revenue (operating revenue is negligible interest income) and relies on cash reserves and R&D tax incentives. Cash burn was A$7.42 million for the year.
  • Audit Status: As of the filing date (August 26, 2016), the accounts were in the process of being audited.

Investor Verification Checklist

  • Regulatory Resolution: Verify the status of the FDA Partial Clinical Hold on PBT2 and the timeline for lifting the hold or approval of the Phase 3 protocol.
  • Cash Runway: Assess the remaining cash reserves (A$28.6 million) against the current burn rate to determine the need for future capital raises.
  • R&D Tax Incentive: Confirm the eligibility and timing of the A$4.8 million R&D tax incentive receivable, which is a material component of the company's income.
  • Audit Completion: Review the final audited Annual Report once issued to confirm the preliminary figures presented in this 6-K.
  • PBT434 Progress: Monitor the submission and acceptance of the Phase 1 IND application for PBT434.