ProMIS Neurosciences Inc. — Form 10-K Summary
Business context and reporting period
ProMIS Neurosciences Inc. is a Canadian, pre-revenue biotechnology company applying a computational protein-misfolding platform to develop antibody therapies and therapeutic vaccines for neurodegenerative diseases. Its primary programs are PMN310 for Alzheimer’s disease, PMN442 for multiple system atrophy and related synucleinopathies, and PMN267 for ALS and related TDP-43 disorders. The filing reports the fiscal year ended December 31, 2022, with comparisons to 2021; it is not a quarterly filing.
The company’s common shares trade on Nasdaq and the TSX under PMN. The company completed a 60-for-1 reverse share split effective June 28, 2022. As of March 8, 2023, 8,579,284 common shares were outstanding.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | None | None | No product revenue in either period |
| Research and development expense | $16.1 million | $4.6 million | +$11.5 million |
| General and administrative expense | $7.3 million | $3.7 million | +$3.6 million |
| Total operating expenses | $23.4 million | $8.3 million | +$15.1 million |
| Loss from operations | $(23.4) million | $(8.3) million | Higher operating loss |
| Net loss | $(18.1) million | $(9.8) million | Loss increased by $8.3 million |
| Net loss per share | $(2.41) | $(1.69) | Loss per share increased |
| Cash used in operating activities | $(17.0) million | $(9.3) million | Cash use increased by $7.7 million |
| Cash and cash equivalents | $5.9 million | $16.9 million | Down $11.1 million |
| Working capital | Approximately $0.5 million | Not clearly stated | Material liquidity constraint |
Research and development spending rose 248%, primarily because of PMN310 manufacturing and preclinical work. PMN310-related direct spending increased by $7.9 million, including approximately $6.6 million for drug-substance manufacturing and $3.8 million for preclinical research. General and administrative expense increased 99%, reflecting additional personnel, Nasdaq listing costs, investor relations, professional fees, insurance and other public-company costs.
Other income was $5.3 million in 2022, compared with other expense of $1.5 million in 2021. The 2022 result included a $4.2 million favorable change in the fair value of financial instruments and a $1.3 million gain on extinguishment of convertible debt and derivative liability. These non-operating items reduced the reported net loss but were not recurring operating revenue.
At December 31, 2022, total assets were $6.9 million, total liabilities were $8.3 million and shareholders’ deficit was $1.3 million. The company had no convertible debt remaining after conversion into Series 1 Convertible Preferred Shares, but reported $1.9 million of warrant liability. The company had $3.0 million of accounts payable and $3.4 million of accrued liabilities, including $3.2 million of accrued research and development costs.
Material changes versus the prior comparable period
- PMN310 advanced through manufacturing and preclinical development, including completion of a GLP toxicology study in cynomolgus monkeys and cGMP manufacturing of drug substance.
- The company amended and converted its $7.0 million convertible debentures into 70.0 million non-voting Series 1 Convertible Preferred Shares in June 2022. The preferred shares are convertible into approximately 1.17 million common shares at the holder’s option and mandatorily convert following qualifying equity financings exceeding $30 million.
- In October 2022, the company completed a private placement of 1,383,755 common-share units for gross proceeds of approximately $7.5 million and net proceeds of approximately $5.0 million.
- Common shares outstanding increased from 7,195,529 at year-end 2021 to 8,579,284 at year-end 2022. Additional dilution may result from 1.87 million outstanding warrants, 1.04 million options and the preferred-share conversion feature.
- The company became a U.S. public reporting company in 2022 and incurred approximately $1.0 million of one-time Nasdaq listing costs.
- The CEO changed from Eugene Williams to Gail Farfel in September 2022. Williams remained chairman and entered into a three-year strategic services arrangement.
Guidance, outlook, commentary and risks
Management’s stated 2023 objectives were to submit a U.S. IND for PMN310 and initiate a first Phase 1 study subject to FDA feedback, advance another proprietary antibody into preclinical development and continue preclinical validation of the Alzheimer’s vaccine program. The planned PMN310 Phase 1a study was designed as a single-ascending-dose trial in healthy volunteers at approximately 2.5 to 60 mg/kg.
The filing emphasizes that PMN310, PMN442 and PMN267 remain early-stage candidates with no human efficacy or safety data disclosed for PMN310 and no products approved for commercial sale. Preclinical findings may not predict clinical outcomes. Regulatory approval, clinical-trial execution, patient enrollment, manufacturing scale-up, third-party performance and intellectual-property protection remain uncertain.
The independent auditor reported substantial doubt about the company’s ability to continue as a going concern for the twelve-month period following issuance of the financial statements. Management stated that the $5.9 million of cash at December 31, 2022 would not be sufficient to fund operating expenses for at least twelve months. Additional equity or debt financing, partnerships, licensing transactions or other strategic funding will be required. Failure to obtain capital could delay, reduce or terminate development programs and other operations.
- Key financial risk: continuing losses, negative operating cash flow, approximately $0.5 million of working capital and a $80.3 million accumulated deficit.
- Financing risk: future equity offerings, warrants, preferred-share conversions and other securities may dilute existing shareholders.
- Development risk: Alzheimer’s drug development has a high historical failure rate, and PMN310 has not yet been tested in clinical trials.
- Regulatory risk: IND clearance, clinical-trial design, safety, efficacy and eventual BLA approval are not assured.
- Manufacturing risk: product candidates have not been manufactured at commercial scale and rely substantially on third-party manufacturers and contractors.
- Competitive risk: approved and pipeline anti-amyloid therapies may reach the market earlier or demonstrate superior safety, efficacy, convenience or reimbursement.
- Intellectual-property risk: key technology is licensed from UBC and UHN; license termination, patent challenges or royalty and milestone obligations could adversely affect the business.
- Market and reimbursement risk: future products may face restrictive coverage, pricing and reimbursement policies, including effects from U.S. healthcare reform.
The filing states that the company is not currently party to litigation that management believes is likely to have a material adverse effect. It also states that disclosure controls and procedures were effective as of December 31, 2022, although the company was not required to provide management’s report or auditor attestation on internal control over financial reporting.
Most important facts for investors to verify
- Confirm the company’s post-filing cash balance, subsequent financings and expected cash runway, given the going-concern uncertainty.
- Verify whether the PMN310 IND was submitted and cleared by the FDA and whether the Phase 1 trial began as planned.
- Review the full terms, conversion mechanics and potential dilution from the 70.0 million Series 1 Convertible Preferred Shares.
- Reconcile outstanding warrants, options and other securities reserved for issuance with the company’s fully diluted share count.
- Assess whether PMN310’s clinical safety and efficacy data support management’s preclinical differentiation claims, including potential reduction of ARIA risk.
- Monitor R&D spending, accrued research liabilities, manufacturing commitments and changes in operating cash burn.
- Review related-party transactions, including payments to Danforth Advisors, UBC-related research activity and investments by Title 19 Promis and Crocker Mountain.
- Verify patent prosecution, license compliance, royalty and milestone obligations, and expiration dates for material intellectual property.