Prothena(US:PRTA)2022-05-05 20:26PART I. FINANCIAL INFORMATION Financial Statements Prothena reported a net loss of $36.3 million in Q1 2022, with total assets decreasing to $581.4 million primarily due to reduced cash and increased R&D expenses Condensed Consolidated Balance Sheets Total assets decreased to $581.4 million as of March 31, 2022, primarily due to reduced cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $542,994 | $579,094 | | Total current assets | $555,620 | $584,809 | | Total assets | $581,412 | $609,366 | | Total current liabilities | $36,496 | $33,452 | | Total liabilities | $142,525 | $143,324 | | Total shareholders' equity | $438,887 | $466,042 | Condensed Consolidated Statements of Operations Q1 2022 total revenue increased to $1.2 million, operating expenses rose to $39.1 million, resulting in a net loss of $36.3 million Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total revenue | $1,153 | $160 | | Research and development | $27,262 | $21,144 | | General and administrative | $11,835 | $11,125 | | Total operating expenses | $39,097 | $32,269 | | Loss from operations | ($37,944) | ($32,109) | | Net loss | ($36,290) | ($36,735) | | Basic and diluted net loss per share | ($0.78) | ($0.91) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $37.4 million in Q1 2022, leading to a $36.1 million net decrease in cash Q1 2022 vs Q1 2021 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($37,415) | ($33,666) | | Net cash used in investing activities | ($22) | ($48) | | Net cash provided by financing activities | $1,337 | $81,327 | | Net (decrease) increase in cash | ($36,100) | $47,613 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, collaboration agreements, and commitments, with $543.0 million cash deemed sufficient for 12 months - The company believes its cash and cash equivalents of $543.0 million as of March 31, 2022, are sufficient to meet its obligations for at least the next twelve months3435 - As of March 31, 2022, the company had non-cancelable purchase commitments of $16.8 million and contractual obligations under license agreements of $0.4 million69 - Share-based compensation expense was $7.7 million for Q1 2022, up from $6.2 million in Q1 2021. The total unearned share-based compensation to be expensed through 2026 is estimated at $83.6 million156158 - The company recorded an income tax benefit of $1.7 million in Q1 2022, compared to a provision of $4.7 million in Q1 2021, primarily due to an increase in deferred tax assets related to Section 174 R&D Capitalization requirements161213 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights a 29% increase in R&D expenses to $27.3 million in Q1 2022, with $543.0 million cash deemed sufficient for 12 months Overview of Business and Pipeline Prothena, a late-stage biotech, focuses on neurodegenerative and amyloid diseases with wholly-owned and partnered clinical programs - Birtamimab is in a confirmatory Phase 3 AFFIRM-AL study for Mayo Stage IV AL amyloidosis patients, under a Special Protocol Assessment (SPA) with the FDA173 - Prasinezumab, partnered with Roche for Parkinson's disease, is being evaluated in a Phase 2b PADOVA study177 - PRX012, a next-generation antibody for Alzheimer's disease, received FDA clearance for its IND in March 2022, initiating a Phase 1 study, and was granted Fast Track designation in April 2022189 - PRX005, an anti-tau antibody for Alzheimer's, is part of a collaboration with Bristol Myers Squibb (BMS). BMS exercised its U.S. license option in June 2021 for an $80 million payment, and a Phase 1 study is ongoing184185 Results of Operations Q1 2022 total revenue increased to $1.2 million, while R&D expenses rose 29% to $27.3 million due to program advancements Operating Expenses Comparison (in thousands) | Expense Category | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Research and development | $27,262 | $21,144 | 29% | | General and administrative | $11,835 | $11,125 | 6% | | Total operating expenses | $39,097 | $32,269 | 21% | R&D Expenses by Major Program (in thousands) | Program | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Birtamimab (NEOD001) | $12,432 | $6,510 | | Prasinezumab (PRX002/RG7935) | $82 | $4,876 | | PRX005 | $3,048 | $2,602 | | Other R&D | $11,536 | $5,687 | - The increase in R&D expenses was primarily due to higher manufacturing costs for the birtamimab program, increased personnel expenses, and higher clinical trial costs for the PRX012, birtamimab, and PRX005 programs205 - The decrease in prasinezumab program costs was a result of the cost-share opt-out exercised in May 2021 with Roche205 Liquidity and Capital Resources Working capital decreased to $519.1 million, with $543.0 million cash deemed sufficient for 12 months, though future capital needs are anticipated Key Liquidity Metrics (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Working capital | $519,124 | $551,357 | | Cash and cash equivalents | $542,994 | $579,094 | - The company believes its existing cash and cash equivalents are sufficient to meet obligations for at least the next twelve months216 - As of March 31, 2022, the company had contractual obligations totaling $28.6 million, including $11.4 million in operating leases and $16.8 million in purchase obligations228231 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include foreign currency, interest rate, and credit risks, all managed with minimal impact in Q1 2022 - Foreign currency risk arises from agreements with contract manufacturers denominated in Euros and other currencies, resulting in a net loss of approximately $70,000 in Q1 2022232 - Interest rate risk is considered minimal as cash equivalents are held in money market funds, where interest income fluctuates with prevailing rates233 - Credit risk is managed by placing cash with high-credit-quality financial institutions and limiting exposure, although deposits may exceed insured amounts235 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2022, the company's disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported in a timely manner236237 - No material changes to the company's internal control over financial reporting were identified during the first fiscal quarter ended March 31, 2022238 PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings, though routine litigation may occur - Prothena is not currently a party to any material legal proceedings243 Risk Factors The company outlines significant risks including financial sustainability, drug development uncertainty, reliance on third parties, and intellectual property challenges Risks Relating to Financial Position and Business The company faces risks from anticipated losses, the need for additional capital, potential COVID-19 disruptions, and challenges in retaining personnel - The company expects to incur substantial losses for the foreseeable future and may never sustain profitability245 - Additional capital will be required to fund operations; if unavailable, the company may have to delay or terminate clinical trials or cease operations246252 - The COVID-19 pandemic has already disrupted clinical trials and could materially adversely affect liquidity, operations, and development programs253 Risks Related to Discovery, Development, and Regulatory Approval Success depends on R&D programs prone to failure, with clinical trials facing delays and an unpredictable, costly regulatory approval process - The company's success depends on its ability to discover, develop, obtain regulatory approval for, and commercialize its drug candidates, which are in various stages of development and face significant risks of failure270 - Clinical trials can be delayed, suspended, or terminated due to factors like slow enrollment, insufficient drug supply, unexpected side effects, or failure to meet endpoints282285 - Although an SPA agreement is in place with the FDA for the Phase 3 AFFIRM-AL trial of birtamimab, this does not guarantee regulatory approval, as the FDA can revoke or alter the agreement under certain circumstances296298 Risks Related to Commercialization Approved drug candidates may lack market acceptance, success depends on collaborations, and reimbursement uncertainty and intense competition pose risks - Approved products may not gain market acceptance among physicians, payers, and patients, which would limit revenues308 - The success of prasinezumab is highly dependent on the collaboration with Roche, which has significant control over development and commercialization and can terminate the agreement with notice312314 - Sales will depend on the availability of reimbursement from third-party payers, who are increasingly focused on cost containment, creating uncertainty around coverage and pricing326327 Risks Related to Dependence on Third Parties Prothena relies heavily on third-party CROs for clinical trials and manufacturers for supplies, posing risks if they fail to perform or comply with regulations - The company relies on third parties like CROs to conduct clinical trials and may be delayed if these parties do not perform satisfactorily or meet deadlines353 - Prothena has no manufacturing capacity and depends on third-party manufacturers for all nonclinical and clinical trial supplies. Any failure by these manufacturers could delay or suspend production and development358361 Risks Related to Intellectual Property Success depends on uncertain patent enforcement, with risks of costly litigation, difficulty protecting trade secrets, and potential license terminations - The ability to obtain, maintain, and enforce patents is uncertain and involves complex legal and scientific questions; issued patents may not provide sufficient protection368 - The company may face expensive and time-consuming litigation regarding patents and proprietary rights, which could cause delays and harm its ability to operate392 - The company relies on trade secrets and confidentiality agreements, which may not effectively prevent disclosure of proprietary information402 Risks Related to Our Ordinary Shares Ordinary share price may fluctuate due to clinical results and market conditions, with dilution risk and complexities from Irish incorporation and stamp duty - The market price of ordinary shares is subject to wide fluctuation based on clinical trial results, regulatory news, competitor actions, and general market conditions407 - Being an Irish-incorporated company means it is governed by the Irish Companies Act, which differs from U.S. corporate law and may offer less protection to shareholders in areas like director duties and shareholder lawsuits419421 - Transfers of ordinary shares may be subject to Irish stamp duty (currently 1%), which could adversely affect the share price426 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None434 Other Information The company reported no other information for this item - None437 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files - The exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, along with XBRL interactive data files439