PRINCIPIA BIOPHARMA INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and the notes thereto included in Part I, Item 1, of this
Quarterly Report on Form 10-Q and with our audited financial statements and
notes thereto for the year ended
Overview
We are a late-stage biopharmaceutical company dedicated to bringing transformative therapies to patients with significant unmet medical needs in immune mediated diseases. Our proprietary Tailored Covalency® platform enables us to design and develop reversible covalent and irreversible covalent, small molecule inhibitors with potencies and selectivities that we believe will rival those of injectable biologics, but with the convenience of an oral or topical treatment. We retain full, worldwide rights to rilzabrutinib, PRN473 Topical, PRN1371 and our oral immunoproteasome inhibitor program, and have established an ongoing collaboration with Sanofi for PRN2246/SAR442168.
Since commencing operations in 2011, we have devoted substantially all our
resources to identifying and developing our drug candidates, including
conducting preclinical studies and clinical trials and providing general and
administrative support for these operations. Our clinical pipeline programs
include rilzabrutinib for the treatment of pemphigus (pemphigus vulgaris (PV)
and pemphigus foliaceus (PF)); rilzabrutinib for the treatment of immune
thrombocytopenia (ITP); rilzabrutinib for the treatment of IgG4-Related Disease
(RD); PRN473 Topical, a reversible covalent Bruton Tyrosine Kinase (BTK)
inhibitor being developed for immune mediated diseases that could benefit from
localized application to the skin; and PRN2246/SAR442168, an irreversible BTK
inhibitor which crosses the blood-brain barrier, for the treatment of multiple
sclerosis (MS) and other central nervous system (CNS) diseases. In
• We are conducting a global Phase 3 pivotal clinical trial of
rilzabrutinib in pemphigus, evaluating rilzabrutinib in PV patients and a
smaller number of PF patients. We anticipate Phase 3 data in the second
half of 2021. In December 2019 , we announced control of disease activity
and complete response rates from our Phase 2 Part B trial. Positive data
from the full data set of the Phase 2 Part B trial was presented at the
American Academy of Dermatology meeting in June 2020 .
In parallel, we are evaluating rilzabrutinib in a Phase 1/2 clinical trial in
ITP and presented positive interim data from this trial at the 61st ASH Annual
Meeting in
In
Beyond pemphigus, ITP, and IgG4-RD, we believe there are numerous immune
mediated diseases for which rilzabrutinib may have therapeutic benefit. We
anticipate commercializing rilzabrutinib, if approved, by developing our own
sales organization targeting dermatologists, hematologists, and rheumatologists
at specialized centers in
• In November 2017 , we entered an exclusive licensing agreement with
Sanofi. We believe that this collaboration maximizes the potential of
PRN2246/SAR442168 to address target indications affecting larger
populations of patients with CNS diseases. We have completed our
development efforts under the early development plan and Sanofi is
responsible for further clinical development of this compound for the
treatment of patients suffering from MS. In April 2020 , Sanofi announced
data from its Phase 2b clinical trial in relapsing MS. Specifically,
Sanofi announced that PRN2246/SAR442168 achieved both its primary and
secondary endpoints, significantly reduced disease activity associated
with MS as measured by MRI and was well tolerated in the Phase 2b trial
with no new safety findings. In April 2020 , Sanofi also announced that it
anticipated initiating four Phase 3 clinical trials in relapsing and
progressive forms of MS in the middle of 2020. In June 2020 , the first
patient in Sanofi's Phase 3 clinical trial in relapsing MS was dosed,
which triggered a milestone payment of $50.0 million that was paid to us
in August 2020 . We hold an option to fund a portion of Phase 3
development costs in return for, at our discretion, either a profit and
loss sharing arrangement within the United States , or an additional
worldwide royalty that would result in rates up to the high-teens.
• In January 2020 , we announced an expansion of our BTK franchise with
PRN473 Topical, which is being developed for immune mediated
diseases that could benefit from localized application to the skin. In
March 2020 , we initiated a Phase 1 clinical trial of PRN473 Topical,
which is anticipated to be completed in 2020. We have also initiated an
open-label, placebo-controlled Phase 1 trial to evaluate the
pharmacologic activity on skin reactions induced by challenge agents.
PRN473 Topical is our third BTK inhibitor in the clinic, joining
rilzabrutinib and PRN2246/SAR442168.
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• We are expanding our wholly owned pipeline by continuing to innovate and
discover differentiated oral or topical small molecules with the
potential to be best-in-class, and we intend to keep our programs at the
forefront of covalent inhibitor drug discovery by investing in new
technologies that will broaden the target space of our Tailored Covalency
platform. In addition, we plan to explore the new biology discovered with
our oral immunoproteasome inhibitors and to select the optimal
development path for these highly differentiated assets. We have selected
a candidate molecule, for our immunoproteasome program, to move forward
into the preclinical development phase.
• As we have done with our collaboration with Sanofi, we plan to
selectively use collaborations and partnerships as strategic tools to
maximize the value of our drug candidates, particularly in indications
with large target patient populations.
Since inception and through
As of
COVID-19 Business Update
With the global spread of the ongoing COVID-19 pandemic, in the first quarter of
2020, we established a cross-functional task force and implemented certain
measures across our business designed to address and mitigate the impact of the
effects of the COVID-19 pandemic on our employees, clinical trial participants,
clinical investigators, third-party vendors, partners and our business. In
addition, we continue to engage with our Board of Directors to monitor the
impact of the effects of the COVID-19 pandemic on our business and to assess our
related risks and mitigation efforts. Given the global economic slowdown, the
overall disruption of global healthcare systems and the other risks and
uncertainties associated with the evolving effects of the pandemic, our
business, financial condition, results of operations and growth prospects could
be materially adversely affected. We continue to closely monitor the COVID-19
situation as we evolve our response strategy. We began responding to the risks
and uncertainties relating to the COVID-19 pandemic at the end of
Supply Chain
We are working closely with our third-party manufacturers, distributors and other partners, to manage our supply chain activities and mitigate potential disruptions to our drug candidate supplies as a result of the COVID-19 pandemic. At this point we expect to have adequate global supply of clinical trial material to meet the needs of our current clinical trials. However, if the evolving effects of the COVID-19 pandemic persist for an extended period of time or become more severe and further impact essential distribution systems and delivery services, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our drug candidates, which would adversely impact our ability to complete our clinical trials and advance our drug candidates through regulatory approval.
Clinical Development
With respect to clinical development, we have implemented telemedicine approaches to maintain clinical trial participation, investigator safety and trial continuity, and to collect participant data and preserve data integrity of our trials. The effects of the
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COVID-19 pandemic have caused slowdowns in clinical trial enrollment and a re-allocation of healthcare resources. In this regard, as announced in May, the initiation of our planned Phase 2 clinical trial of rilzabrutinib in IgG4-RD has been delayed from the first half of 2020 to the second half of 2020 due to the prioritization of healthcare resources for COVID-19 patients at our clinical trial sites. As the COVID-19 pandemic continues to evolve, we could see an impact on our ability to maintain participant enrollment in several additional or all of our trials due to, for example, increased COVID-19 positivity or infection rates, or other related health complications. We could also see an impact on the ability to supply sufficient drug candidate for our trials, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. If the evolving effects of the COVID-19 pandemic become more severe, we could experience significant disruptions to other clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.
Research and Development Pipeline
Our research and development pipeline depends on our ability to continue to identify compounds that may be viable product candidates for future clinical development. The effects of the COVID-19 pandemic may materially impact or delay these research and development activities. We currently have a small number of research and development employees working in our facility to perform critical tasks related to the supply of drug candidates for our clinical trials. As we phase in an eventual return to our usual operations, we expect that more employees will return to laboratories to resume research efforts. However, the effects of the COVID-19 pandemic continue to rapidly evolve and even if our employees more broadly return to laboratories to resume research efforts, we may be subsequently forced to, or subsequently determine that we should, resume a more restrictive remote work model, whether as a result of spikes or surges in COVID-19 positivity or infection rates or otherwise. We cannot know what the impact of limiting the number of employees in our labs will be, but we anticipate that such limitations may result in delays in our earlier stage research programs.
Regulatory Activities
With respect to regulatory activities, it is possible that we could experience delays in the timing of our interactions with FDA or other regulatory authorities due to, for example, inability to conduct planned physical inspections related to regulatory approval, the diversion of efforts and attention to approval of other therapeutics or other activities related to COVID-19, or absenteeism by governmental employees, which could delay approval decisions and otherwise delay or limit our ability to make planned regulatory submissions or obtain new product approvals. In addition, while we have followed regulatory guidance regarding changes made to the conduct of our ongoing clinical trials, particularly related to changes in our collection of patient data, it is possible that those changes could in the future impact the timing of, or our ability to, obtain new product approvals.
Corporate Development
With our strong cash balance, including the proceeds of our 2018 initial public
offering, 2019 subsequent equity offering, and upfront and milestone payments
received pursuant to our licensing agreements, we anticipate having sufficient
liquidity to make planned investments in our business this year in support of
our long-term growth strategy. We believe that our cash, cash equivalents and
marketable securities as of
Other Financial and Corporate Impacts
While we expect the effects of the COVID-19 pandemic may adversely affect our
business operations and financial results, the extent of the impact on our
clinical development and regulatory efforts, and the value of and market for our
common stock, will depend on future developments that are highly uncertain and
cannot be predicted with confidence at this time, such as the ultimate duration
and severity of the pandemic, travel restrictions, quarantines, social
distancing and business closure requirements in
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In addition, while we continue to maintain our efforts to protect data and ensure appropriate cybersecurity, our temporary transition to a remote workforce model may increase the risk of cybersecurity incidents or other data breaches. We cannot be certain that our cybersecurity and data privacy efforts will be unaffected by the effects of the COVID-19 pandemic.
Sanofi Agreement
In
Sanofi has an exclusive license for PRN2246/SAR442168 and its backups for the CNS field, which includes indications of the central nervous system, retina and ophthalmic nerve. We have agreed not to develop other BTK inhibitors within the CNS field, and Sanofi has agreed not to develop PRN2246/SAR442168 or its backups for any indications outside the CNS field. In the event we cease all development and commercialization of our other BTK inhibitors or unilaterally decide to offer Sanofi a field expansion, Sanofi could expand its field upon a field expansion payment to us, as well as potential milestone payments and royalties within the expanded field.
Under the amended Sanofi Agreement, we may receive development, regulatory and
commercial milestone payments of up to an aggregate of
AbbVie Agreement
In
In
We have paid the Regents license fees of
Under the UC Agreements, we are required to diligently proceed with the development, manufacture, regulatory approval, and sale of licensed products which include obligations to meet certain development-stage milestones within specified periods of time and to market the resulting licensed products in sufficient quantity to meet market demand. We have the right and option to extend the date by which we must meet any milestone in one year extensions by paying an extension fee for second and subsequent extension, provided we can demonstrate we made diligent efforts to meet the milestone.
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Components of Operating Results
Revenue
To date, all our revenue has been generated from payments pursuant to our collaboration arrangements with Sanofi and AbbVie.
In connection with the Sanofi Agreement, we received a
On
In connection with the AbbVie Agreement, we received a
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Operating Expenses
We classify our operating expenses into two categories: research and development and general and administrative.
Research and Development
Our research and development expenses account for a significant portion of our operating expenses and relate to expenses incurred in connection with research and development activities, including the preclinical and clinical development of our drug candidates. These expenses primarily consist of preclinical and clinical expenses; payroll and personnel expenses, including stock-based compensation, for our research and development employees; consulting costs, laboratory supplies and facilities costs. We expense both internal and external research and development costs as they are incurred. Non-refundable advance payments for services that will be used or rendered for future research and development activities are recorded as prepaid expenses and recognized as an expense as the related services are performed.
Our external research and development expenses consist primarily of:
• expenses incurred with contract research organizations, investigative
clinical trial sites and other vendors involved in conducting our
clinical trials;
• expenses incurred with contract manufacturing organizations for process
development, scale up, as well as manufacturing of drug substance and
drug candidates;
• expenses incurred with third party vendors for performing preclinical
testing on our behalf; and
• consulting fees and certain laboratory supply costs related to the
execution of preclinical studies and clinical trials.
With respect to internal costs, several of our departments support multiple clinical programs, and we do not allocate those costs by clinical program. Internal research and development expenses consist primarily of personnel related costs, facilities and infrastructure costs, certain laboratory supplies and non-capitalized equipment used for internal research and development activities.
We expect our research and development expenses to increase over the next several years as we continue to execute on our business strategy, advance our current programs and expand our research and development efforts, and pursue regulatory approvals of any of our drug candidates that successfully complete clinical trials.
General and Administrative
General and administrative expenses consist primarily of payroll and personnel related expenses, including stock-based compensation, for our personnel in finance, legal, human resources, business and corporate development and other administrative functions, professional consulting fees for legal and accounting services, costs related to our intellectual property and other allocated costs, such as facility expenses not otherwise allocated to research and development, and infrastructure costs.
We expect our general and administrative expenses to increase as a result of
operating as a public company. Additional expenses include those related to
compliance with the rules and regulations of the
Other Income (Expense), Net
Other income (expense), net, consists primarily of realized gains and losses from sales of marketable securities.
Interest Income
Interest income is primarily related to interest earned on our marketable securities.
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Results of Operations
Comparison of the Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended June 30, Change
2020 2019 $ %
Revenue $ 50,000 $ 30,000 $ 20,000 67 %
Operating expenses:
Research and development 30,888 18,718 12,170 65 %
General and administrative 9,231 5,233 3,998 76 %
Total operating expenses 40,119 23,951 16,168 68 %
Income from operations 9,881 6,049 3,832 63 %
Other income (expense), net 199 (42 ) 241 *
Interest income 730 1,108 (378 ) (34 )%
Net income $ 10,810 $ 7,115 $ 3,695 52 %
* Percentage not meaningful
Revenue
We recorded
Research and Development Expenses
Research and development expenses were
The following table summarizes research and development expenses (in thousands):
Three Months Ended June 30,
2020 2019
Rilzabrutinib program external expenses $ 13,627 $ 7,854
PRN1371 program external expenses 499 1,234
PRN2246/SAR442168 program external expenses - -
PRN473 Topical program external expenses 2,271 500
Preclinical external expenses(1) 1,413 577
Personnel related expenses(2) 10,570 6,087
Other unallocated research and development expenses 2,508 2,466
Total research and development expenses $ 30,888 $ 18,718 (1) Preclinical external expenses include external research and development
expenses for all of our preclinical programs. This includes the oral
immunoproteasome program we reacquired from AbbVie in
(2) Personnel related expenses include stock-based compensation expense of
million and $1.8 million for the three months ended June 30, 2020 and 2019,
respectively. As our research and development personnel generally support
several of our programs and a significant amount of our internal development
activities broadly support all of our programs, we do not separately track or
allocate our personnel related expenses by program.
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General and Administrative Expenses
General and administrative expenses were
Other Income (Expense), Net
Other income, net, was
Interest Income
Interest income for the three months ended
Comparison of the Six Months Ended
The following table summarizes our results of operations for the six months
ended
Six Months Ended June 30, Change
2020 2019 $ %
Revenue $ 50,000 $ 35,160 $ 14,840 42 %
Operating expenses:
Research and development 57,630 34,241 23,389 68 %
General and administrative 16,600 9,740 6,860 70 %
Total operating expenses 74,230 43,981 30,249 69 %
Loss from operations (24,230 ) (8,821 ) (15,409 ) *
Other income (expense), net 199 (41 ) 240 *
Interest income 2,342 2,290 52 2 %
Net loss $ (21,689 ) $ (6,572 ) $ (15,117 ) *
* Percentage not meaningful
Revenue
We recorded
Research and Development Expenses
Research and development expenses were
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The following table summarizes research and development expenses (in thousands):
Six Months Ended June 30,
2020 2019
Rilzabrutinib program external expenses $ 27,328 $ 14,959
PRN1371 program external expenses 744 1,881
PRN2246/SAR442168 program external expenses - 8
PRN473 Topical program external expenses 3,844 966
Preclinical external expenses(1) 2,145 1,069
Personnel related expenses(2) 18,758 10,993
Other unallocated research and development expenses 4,811 4,365
Total research and development expenses $ 57,630 $ 34,241 (1) Preclinical external expenses include external research and development
expenses for all of our preclinical programs. This includes the oral
immunoproteasome program we reacquired from AbbVie in
(2) Personnel related expenses include stock-based compensation expense of
million and $2.9 million for the six months ended June 30, 2020 and 2019,
respectively. As our research and development personnel generally support
several of our programs and a significant amount of our internal development
activities broadly support all of our programs, we do not separately track or
allocate our personnel related expenses by program.
General and Administrative Expenses
General and administrative expenses were
Other Income (Expense), Net
Other income, net, was
Interest Income
Interest income for the six months ended
Liquidity and Capital Resources
Since inception and through
We do not have any products for sale and have not generated any product revenue
since our inception. As of
Based on our planned operations, we believe our cash, cash equivalents and
marketable securities at
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We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Additionally, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists or becomes more severe, we could experience an inability to access additional capital on acceptable terms, if at all, which could in the future negatively affect our operations. Our future funding requirements will depend on many factors, including, but not limited to:
• the scope, rate of progress, results and costs of research and
development activities, conducting preclinical studies, laboratory
testing and clinical trials for our drug candidates;
• the number and scope of clinical programs we decide to pursue;
• the cost, timing and outcome of regulatory review of our drug candidates;
• the scope and cost of manufacturing development and commercial
manufacturing activities;
• the timing and amount of milestone payments, if any, we receive under the
license agreement that we entered into with Genzyme Corporation , a wholly
owned subsidiary of Sanofi (the "Sanofi Agreement");
• our ability to maintain existing and establish new, strategic
collaborations, licensing or other arrangements on favorable terms, if at
all;
• the costs of preparing, filing, prosecuting, maintaining, defending and
enforcing our intellectual property portfolio;
• our efforts to enhance operational systems and our ability to attract,
hire and retain qualified personnel, including personnel to support the
development of our drug candidates;
• maintaining an active trading market for our common stock;
• the costs associated with being a public company; and
• the costs associated with commercialization activities if any of our drug
candidates are approved for sale.
See our "Risk Factors" elsewhere in this quarterly report for a description of additional risks associated with our substantial capital requirements, including risks related to the evolving effects of the COVID-19 pandemic.
Cash Flows
The following table summarizes cash flows for each of the periods presented below (in thousands):
Six Months Ended June 30,
2020 2019
Net cash used in operating activities $ (54,426 ) $ (2,484 )
Net cash provided by investing activities 182,882 7,972
Net cash provided by financing activities 2,493 1,014
Net increase in cash, cash equivalents and
restricted cash $ 130,949 $ 6,502 Net cash used in operating activities
During the six months ended
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During the six months ended
Net cash provided by investing activities
During the six months ended
During the six months ended
Net cash provided by financing activities
During the six months ended
During the six months ended
Off-Balance Sheet Arrangements
We currently do not have, and did not have during the periods presented, any
off-balance sheet arrangements, as defined under
JOBS Act
The JOBS Act permits an "emerging growth company" such as ours to take advantage
of an extended transition time to comply with new or revised accounting
standards applicable to public companies. We have elected the extended
transition period for complying with new or revised accounting standards
pursuant to Section 107(b) of the JOBS Act, which extension runs until the
earlier of the date we (i) are no longer an emerging growth company or
(ii) affirmatively and irrevocably opt out of the extended transition period
provided in the JOBS Act. As a result, our financial statements may not be
comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates. We will remain an emerging
growth company until
Critical Accounting Policies, Significant Judgments and Use of Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with generally accepted accounting principles in
A summary of our critical accounting policies, significant judgments and use of
estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for
the year ended
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Recent Accounting Pronouncements
See Note 2, Significant Accounting Policies, to our condensed consolidated financial statements for recently issued accounting pronouncements, including the respective effective dates of adoption and effects on our results of operations and financial condition.
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