Protalix BioTherapeutics, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. Protalix is a biopharmaceutical company developing plant-cell-produced therapeutic proteins using its ProCellEx platform. Elelyso is marketed for Gaucher disease; its lead candidate, PRX-102, is in regulatory review for Fabry disease.
Financial results and liquidity
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Total revenue | $47.6 million | $38.4 million |
| Revenue from goods | $25.3 million | $16.7 million |
| License and R&D services revenue | $22.3 million | $21.6 million |
| Cost of goods sold | $19.6 million | $16.3 million |
| Research and development | $29.3 million | $29.7 million |
| Selling, general and administrative | $11.7 million | $12.7 million |
| Operating loss | $13.0 million | $20.5 million |
| Net loss | $14.9 million | $27.6 million |
| Basic and diluted loss per share | $0.31 | $0.62 |
| Net cash used in operating activities | $25.0 million | $10.3 million |
Goods revenue rose 51%, including increases in sales to Pfizer, Brazil and Chiesi. Gross profit on goods was approximately $5.7 million, versus $0.4 million in 2021; the corresponding gross margin was approximately 22.5% versus 2.4%. These goods margins do not reflect the separate license and R&D services revenue. Total revenue increased approximately 24%; the net loss narrowed approximately 46%, helped in part by lower financing expense.
At year-end, cash and cash equivalents were $17.1 million and short-term bank deposits were $5.1 million, or approximately $22.2 million combined. Current assets were $44.9 million and current liabilities $32.4 million, implying working capital of approximately $12.5 million and a current ratio of 1.38. Total assets were $55.8 million, total liabilities $66.4 million, and capital deficiency $10.6 million.
Cash used in investing activities was $5.0 million, principally reflecting net investment in bank deposits; financing activities provided $8.2 million, principally from ATM share sales. The company issued 7.47 million shares through its ATM program in 2022 for approximately $8.7 million gross proceeds. Its $28.75 million principal amount of 7.50% secured convertible notes is due September 2024; the notes are secured by liens on company and subsidiary assets and require a minimum cash balance of $7.5 million. The company reported covenant compliance at year-end.
Material developments and outlook
- PRX-102’s Phase III BALANCE, BRIDGE and BRIGHT studies were completed. BALANCE met its prespecified non-inferiority endpoint versus agalsidase beta; the filing also reports broadly comparable efficacy measures and potentially favorable infusion-reaction and antibody findings. These are trial results, not proof of regulatory approval or commercial success.
- The PRX-102 BLA was resubmitted in November 2022 and accepted by the FDA as a complete Class 2 response, with a May 9, 2023 PDUFA action date. The original BLA received a Complete Response Letter in 2021; the FDA cited the need to inspect the Carmiel manufacturing facility and address other matters, and did not identify safety or efficacy concerns in the submitted package.
- After year-end, on February 24, 2023, the EMA’s CHMP issued a positive opinion recommending PRX-102 marketing authorization. Final European Commission action was expected in early May 2023; the opinion was not itself final authorization.
- PRX-115, a candidate for severe gout, remained preclinical; management planned to begin a Phase I trial in the first half of 2023. PRX-119, for NETs-related diseases, was also preclinical.
- Management said available funds, including subsequent ATM proceeds, were expected to fund operations for at least 12 months from issuance of the financial statements. The filing also says additional capital may be needed; funding availability and terms are uncertain. In January and February 2023, the company raised approximately $5.5 million gross through ATM sales.
Risks, contingencies and other notable items
- Protalix depends substantially on PRX-102’s regulatory outcome and on Chiesi for development and commercialization. Approval, labeling, launch, uptake, reimbursement and milestone receipts remain uncertain.
- The company reported $25.0 million of operating cash outflow in 2022, ongoing losses, secured debt and possible future financing needs. ATM or other equity issuance could dilute stockholders; conversion of the 2024 Notes could also dilute ownership.
- Fiocruz has purchased below certain agreed purchase milestones under the Brazil Agreement. Protalix has a termination right but continued supplying the Brazilian market; 2022 Brazilian sales were $9.5 million.
- Other material exposures include manufacturing and fill/finish reliability, reliance on certain suppliers, competition, intellectual-property challenges, regulatory inspections, and political, security and currency risks relating to Israel.
- Section 174 tax changes required capitalization and 15-year amortization of qualifying foreign R&D costs; Protalix recorded approximately $530,000 of income tax expense in 2022. It reported approximately $247.4 million in tax-loss carryforwards, subject to applicable limitations and a full valuation allowance on deferred tax assets.
- The independent auditor issued an unqualified opinion on the financial statements and identified liquidity and capital resources as a critical audit matter. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal-control effectiveness.
Important facts for investors to verify
- Subsequent FDA action on the May 9, 2023 PRX-102 PDUFA date and final European Commission action following the CHMP opinion.
- Actual cash burn, receipts and financing after year-end, and whether liquidity remains adequate while maintaining the notes’ $7.5 million minimum cash covenant.
- 2024 Notes repayment, refinancing or conversion plans, including collateral and potential dilution.
- Progress toward PRX-102 commercialization, manufacturing readiness, Chiesi’s responsibilities and economics, and any regulatory conditions or launch milestones.
- Fiocruz purchase performance and the effect of any changes to the Brazil Agreement on sales and supply.