Praxis Precision Medicines, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Financial statements are unaudited. Praxis is a clinical-stage biopharmaceutical company developing treatments for central nervous system disorders; it has no product revenue and does not expect sales revenue for several years, if ever.
Financial results and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $33.1 million | $12.8 million | $76.7 million | $28.7 million |
| General and administrative expense | $11.6 million | $3.4 million | $31.9 million | $7.6 million |
| Net loss | $44.7 million | $16.2 million | $108.5 million | $36.1 million |
| Net loss per common share, diluted | $1.00 | $12.10 | $2.61 | $26.53 |
At September 30, 2021, cash and cash equivalents were $165.7 million and marketable securities were $148.7 million, totaling $314.4 million. Current assets were $319.3 million and current liabilities were $24.8 million. Total liabilities were $28.5 million, including operating lease liabilities; the filing reports no borrowings or other debt. Stockholders’ equity was $295.9 million. No operating margin is meaningful because the company had no revenue and reported operating losses.
For the first nine months, operating cash use was $79.7 million, versus $32.4 million in 2020. Investing cash use was $150.7 million, primarily reflecting purchases of marketable securities, net of maturities. Financing provided $99.9 million, mainly from the May follow-on offering. The company raised approximately $98.5 million net from that offering. Management estimated existing cash, equivalents and marketable securities would fund operations and capital needs into Q2 2023; the notes also state they were expected to be sufficient for at least one year from issuance of the statements. Both are management estimates subject to assumptions.
Changes versus prior comparable periods
- Q3 operating expenses rose $28.6 million year over year, and nine-month expenses rose $72.4 million; increased R&D activity, staffing and stock-based compensation were major drivers.
- Nine-month R&D expense increased across PRAX-114, PRAX-944, PRAX-562 and discovery programs. Nine-month G&A expense rose $24.4 million, including higher personnel, professional, public-company insurance and related costs.
- Cash, cash equivalents and restricted cash declined by $130.5 million during the first nine months. The company held $148.7 million in marketable securities at quarter-end, compared with none at December 31, 2020.
- Common shares outstanding increased from 38.3 million at year-end 2020 to 44.8 million at September 30, 2021, primarily reflecting the follow-on offering and option exercises.
Outlook, developments and risks
Praxis expected multiple clinical readouts across its three clinical programs over the following year and anticipated launching another clinical program. Planned or expected milestones included PRAX-114 trials in PTSD and essential tremor in Q4 2021 and disclosure of a Phase 2b plan for menopausal and mood symptoms; PRAX-944 Phase 2 Parkinson’s disease trial initiation in the first half of 2022 and Essential1 topline results in the second half of 2022; and PRAX-562 rare-adult-cephalgia trial initiation in Q4 2021 and a developmental epileptic encephalopathy trial in the first half of 2022. The company also planned a Phase 1/2 PRAX-222 study following regulatory submissions in the first half of 2022. These are forward-looking plans, not assured outcomes.
Management expects significant ongoing losses and rising development costs, and states substantial additional funding will be needed. It cautions that capital may not be available on acceptable terms or at all; additional equity could dilute shareholders, while collaborations could require surrendering rights. Clinical development, regulatory approval, manufacturing, intellectual property protection and eventual commercialization remain uncertain. Patient-enrollment challenges and COVID-19-related disruption could delay trials, sites, suppliers or clinical supply, although the company reported no significant business impact at the time of filing. It had previously experienced enrollment delays in an Australian PRAX-944 trial. Management reported no material legal proceedings and no off-balance-sheet arrangements.
A Boston headquarters sublease began October 1, 2021 and expires January 31, 2026. Future payments were estimated at $5.2 million, with no early termination option. Praxis also expected to lose emerging-growth-company status in December 2021 and smaller-reporting-company status in January 2022, increasing reporting and compliance requirements.
Important facts for investors to verify
- Whether clinical trials meet enrollment, safety, efficacy and timing targets, and whether planned readouts and launches occur.
- Whether the stated Q2 2023 cash runway remains valid as spending rises; monitor operating cash use, financing needs and potential dilution.
- Whether COVID-19, trial-site capacity, third-party vendors or manufacturing constraints affect development schedules or supply.
- Whether marketable securities remain liquid and recoverable; the company reported unrealized losses it considered temporary and recorded no impairment.
- Whether increased public-company compliance costs and lease commitments affect projected expenses.