Praxis Precision Medicines, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Praxis is a clinical-stage biopharmaceutical company developing therapies for central nervous system disorders. It had no approved products and reported no product revenue.
Financial performance and position
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $43.6 million | $25.7 million | $96.3 million | $43.6 million |
| General and administrative expense | $16.8 million | $10.8 million | $33.0 million | $20.3 million |
| Total operating expenses | $60.4 million | $36.5 million | $129.2 million | $63.9 million |
| Net loss | $60.2 million | $36.4 million | $128.9 million | $63.8 million |
| Net loss per share, basic and diluted | $1.32 | $0.88 | $2.83 | $1.59 |
| Net cash used in operating activities | Not separately stated for the quarter | $111.3 million | $55.7 million |
At June 30, 2022, cash and cash equivalents were $56.0 million and marketable securities were $109.4 million, totaling $165.4 million. Current assets were $175.6 million and current liabilities were $38.5 million. Total liabilities were $41.5 million, including $4.0 million of operating lease liabilities; the filing reports no borrowings. Stockholders’ equity was $138.9 million. Operating margins are not meaningful given the absence of revenue.
Cash, cash equivalents and restricted cash declined by $83.3 million in the first half, to $56.5 million. Investing activities provided $26.3 million, primarily from net maturities of marketable securities; financing activities provided $1.7 million. The company raised $1.4 million net through its at-the-market program during the six months. The filing states cash, cash equivalents and marketable securities are expected to fund operations into the first quarter of 2024, based on current assumptions. It also says those resources are sufficient for at least one year from issuance of the financial statements.
Material changes and operating developments
- Compared with Q2 2021, quarterly R&D expense rose $17.9 million and G&A rose $6.0 million; net loss increased by $23.8 million. For the first half, R&D increased $52.7 million and G&A increased $12.7 million, with net loss up $65.1 million. Management attributed increases principally to clinical and preclinical program activity and higher personnel costs.
- In June, Praxis began a workforce-reducing strategic realignment to concentrate resources on Movement Disorders and Epilepsy following disappointing PRAX-114 results. It recorded $1.0 million of severance and related costs; $0.5 million remained accrued at quarter-end. Management did not expect significant additional realignment costs.
- PRAX-114’s Phase 2/3 Aria Study in major depressive disorder did not meet its primary endpoint or any secondary endpoints. Praxis closed screening and enrollment in the Acapella MDD study, planned to report results in Q3 2022, stopped enrollment in its PTSD study, and discontinued its daytime essential tremor crossover study.
- For PRAX-944, Praxis reported positive topline Phase 2a essential tremor results in May and expected Phase 2b Essential1 topline results in Q4 2022. It revised the primary endpoint and planned to randomize approximately 130 participants. A Phase 2 Parkinson’s disease trial was planned for the second half of 2022, with results expected in 2023.
- PRAX-562 completed a Phase 1 study; Praxis expected to begin a Phase 2 study in developmental and epileptic encephalopathies in the second half of 2022, with topline results expected in mid-2023.
- PRAX-222’s IND was on clinical hold. After FDA communications, Praxis submitted requested documentation regarding a non-human-primate toxicology study and expected a possible first-in-patient start in the second half of 2022, subject to FDA review.
Outlook, risks and contingencies
Management expects substantial operating losses and negative operating cash flow for the foreseeable future, with R&D spending maintained or increasing as programs advance. The company will need additional capital; it had no committed external funding source and warned that inability to raise funds could force delays, reductions or termination of programs. Additional equity financing could dilute shareholders, while collaborations could require granting rights to programs or technology. The stated cash runway is an estimate dependent on assumptions and could be shorter than expected.
Key risks include clinical and regulatory uncertainty, trial enrollment and safety issues, competition, dependence on third-party research and manufacturing, intellectual-property and licensing risks, and the ability to secure funding. Praxis reported that COVID-19 had slowed enrollment or treatment in some studies but had not significantly affected overall clinical timelines; further disruption, inflation and supply-chain impacts remained possible. It reported no material legal proceedings and no subsequent events requiring disclosure. A 100-basis-point immediate interest-rate change was not expected to materially affect the investment portfolio or financial results. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting reported.
Important facts for investors to verify
- Whether the PRAX-944 Essential1 endpoint change and enrollment plan support the expected Q4 2022 readout, and what the final trial results show.
- Whether FDA review clears the PRAX-222 IND and whether PRAX-562 and other planned studies start and report on the stated timelines.
- Whether the PRAX-114 Acapella results support further development after the Aria failure and program changes.
- Whether the $165.4 million liquidity estimate supports the claimed runway into Q1 2024 as trial spending, market conditions and financing needs evolve.
- The effect of ongoing losses, potential future equity issuance and outstanding equity awards on cash runway and shareholder dilution.