Protalix BioTherapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Financial amounts below are in U.S. dollars; unless otherwise stated, amounts are in millions. Protalix develops and commercializes recombinant therapeutic proteins using its ProCellEx plant-cell platform. Its lead investigational candidate, PRX-102, is in development for Fabry disease; taliglucerase alfa is commercialized through partners and in Brazil.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $6.4 | $11.0 | $17.7 | $32.6 |
| Revenue from selling goods | $3.2 | $3.6 | $7.8 | $8.7 |
| License and R&D revenue | $3.2 | $7.3 | $10.0 | $23.9 |
| Operating loss | $(9.2) | $(2.2) | $(12.9) | $2.5 income |
| Net loss | $(11.2) | $(4.2) | $(16.7) | $(2.5) |
| Loss per share, basic and diluted | $(0.25) | $(0.13) | $(0.39) | $(0.12) |
- Cost of goods sold was $4.7 million in Q2 and $9.5 million in the first half, including one-time manufacturing costs incurred in preparation for anticipated PRX-102 approval. Research and development expense was $7.7 million and $14.8 million, respectively; SG&A was $3.2 million and $6.3 million.
- Cash from operations was $(3.3) million for the first half, versus $(15.0) million a year earlier. Investing cash use was $23.1 million, primarily for short-term bank deposits; financing provided $42.1 million, principally from equity offerings, net of a promissory-note payment.
- At June 30, cash and cash equivalents were $33.9 million and short-term bank deposits were $43.1 million. Current assets were $95.9 million versus current liabilities of $96.2 million. Total liabilities were $104.4 million; stockholders’ equity was $3.8 million, compared with a $27.0 million capital deficiency at year-end 2020.
- Convertible notes had a $56.4 million carrying amount and $57.9 million aggregate principal outstanding at June 30; the notes were due November 15, 2021. The company reported a required minimum cash balance of $7.5 million under its debt arrangements.
Material changes and notable items
- First-half revenue fell 46% year over year. Goods revenue declined 10%, mainly because Brazil sales were lower due to timing, partly offset by higher Pfizer sales. License and R&D revenue fell 58%, reflecting completed clinical-trial work and a prior change in estimated costs to complete Chiesi-related obligations.
- First-half operating results moved from $2.5 million income to a $12.9 million loss. Higher manufacturing costs, lower collaboration revenue and increased SG&A contributed; lower R&D expense partly offset these effects.
- In June, Chiesi paid $10 million under an amended arrangement in exchange for a $25 million reduction in a longer-term ex-U.S. regulatory milestone. The payment was reflected in the period’s revenue recognition.
- Equity financing during the first half included a February public offering that raised approximately $40.2 million gross and ATM sales that raised approximately $8.8 million gross. Shares outstanding increased from 34.8 million at year-end to 45.6 million at June 30.
Outlook, developments and risks
- The FDA issued a Complete Response Letter for the PRX-102 biologics license application in April. The filing said the CRL raised no concerns about the submitted safety or efficacy data, but approval required inspection of Protalix’s Carmiel manufacturing facility and resolution of remaining matters at a third-party fill-and-finish facility. The FDA also noted that Fabrazyme had become an available therapy. A Type A meeting was scheduled for September 9, 2021; timing and requirements for any resubmission remained uncertain.
- June interim BALANCE trial results did not meet the prespecified non-inferiority boundary in the intention-to-treat analysis, but did in the per-protocol analysis. Two participants discontinued due to treatment-emergent adverse events, one considered related; no deaths were reported. Final 24-month data were expected in Q2 2022. The company and Chiesi intended to pursue an EMA application based on the interim data and other PRX-102 studies.
- Management stated that cash and bank deposits at June 30 were expected to fund capital needs for at least 12 months from issuance of the financial statements. The company also acknowledged potential need for additional capital and uncertainty about the cost and timing of FDA-related work.
- After quarter-end, the company agreed to exchange $54.65 million principal of 2021 Notes for $28.75 million principal of secured 7.5% convertible notes due 2024 and $25.90 million cash, plus accrued interest, subject to closing conditions. It also established a new ATM program permitting up to $20 million in stock sales.
- COVID-19 had not materially affected clinical trials to date, but future effects remained uncertain. Other risks include regulatory and clinical outcomes, financing and debt obligations, partner and supplier performance, competition, and Fiocruz purchase obligations in Brazil. The company reported no material legal proceedings and no material changes to internal control during the quarter.
Investor verification priorities
- Confirm the status and terms of the 2021-note exchange, related cash payment, and remaining debt obligations.
- Track FDA feedback after the Type A meeting, manufacturing-site inspection requirements, and the path and timing for a PRX-102 resubmission.
- Review final BALANCE results against the interim ITT and per-protocol findings, including safety and the non-inferiority analysis.
- Assess cash burn, liquidity runway, use of the new ATM facility, and dilution from financing or convertible securities.
- Monitor revenue variability from Brazil and Pfizer, collaboration revenue recognition, and the effect of one-time manufacturing costs on product economics.