x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Ireland | 98-1111119 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
77 Sir John Rogerson’s Quay, Block C Grand Canal Docklands Dublin 2, D02 T804, Ireland |
(Address of principal executive offices including Zip Code) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Ordinary Shares, par value $0.01 per share | PRTA | The Nasdaq Global Select Market |
Large accelerated filer | o | Accelerated filer | x |
Non-accelerated filer | o | Smaller reporting company | x |
Emerging growth company | o | ||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Page | |
Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 | |
Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 | |
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 | |
Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2020 and 2019 | |
March 31, | December 31, | ||||||
2020 | 2019 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 352,685 | $ | 375,723 | |||
Accounts receivable | 174 | 68 | |||||
Prepaid expenses and other current assets | 6,832 | 2,584 | |||||
Total current assets | 359,691 | 378,375 | |||||
Non-current assets: | |||||||
Property and equipment, net | 3,531 | 3,874 | |||||
Operating lease right-of-use assets | 21,929 | 23,274 | |||||
Deferred tax assets | 10,451 | 9,956 | |||||
Restricted cash, non-current | 2,704 | 2,704 | |||||
Other non-current assets | 1,115 | 1,085 | |||||
Total non-current assets | 39,730 | 40,893 | |||||
Total assets | $ | 399,421 | $ | 419,268 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,297 | $ | 1,242 | |||
Accrued research and development | 5,223 | 5,826 | |||||
Income taxes payable, current | — | 5 | |||||
Lease liability, current | 5,202 | 5,101 | |||||
Other current liabilities | 3,364 | 5,540 | |||||
Total current liabilities | 17,086 | 17,714 | |||||
Non-current liabilities: | |||||||
Deferred revenue, non-current | 110,242 | 110,242 | |||||
Lease liability, non-current | 16,501 | 17,838 | |||||
Other liabilities | 553 | 553 | |||||
Total non-current liabilities | 127,296 | 128,633 | |||||
Total liabilities | 144,382 | 146,347 | |||||
Commitments and contingencies (Note 6) | |||||||
Shareholders’ equity: | |||||||
Euro deferred shares, €22 nominal value: | — | — | |||||
Authorized shares — 10,000 at March 31, 2020 and December 31, 2019 | |||||||
Issued and outstanding shares — none at March 31, 2020 and December 31, 2019 | |||||||
Ordinary shares, $0.01 par value: | 399 | 399 | |||||
Authorized shares — 100,000,000 at March 31, 2020 and December 31, 2019 | |||||||
Issued and outstanding shares — 39,911,413 and 39,898,561 at March 31, 2020 and December 31, 2019, respectively | |||||||
Additional paid-in capital | 950,094 | 944,407 | |||||
Accumulated deficit | (695,454 | ) | (671,885 | ) | |||
Total shareholders’ equity | 255,039 | 272,921 | |||||
Total liabilities and shareholders’ equity | $ | 399,421 | $ | 419,268 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Collaboration revenue | $ | 141 | $ | 186 | ||||
Total revenue | 141 | 186 | ||||||
Operating expenses: | ||||||||
Research and development | 15,248 | 13,296 | ||||||
General and administrative | 9,741 | 9,905 | ||||||
Restructuring credits | — | (61 | ) | |||||
Total operating expenses | 24,989 | 23,140 | ||||||
Loss from operations | (24,848 | ) | (22,954 | ) | ||||
Other income (expense): | ||||||||
Interest income | 1,137 | 2,304 | ||||||
Other expense, net | (24 | ) | (17 | ) | ||||
Total other income, net | 1,113 | 2,287 | ||||||
Loss before income taxes | (23,735 | ) | (20,667 | ) | ||||
Provision for (benefit from) income taxes | (166 | ) | 198 | |||||
Net loss | $ | (23,569 | ) | $ | (20,865 | ) | ||
Basic and diluted net loss per share | $ | (0.59 | ) | $ | (0.52 | ) | ||
Shares used to compute basic and diluted net loss per share | 39,909 | 39,864 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Operating activities | |||||||
Net loss | $ | (23,569 | ) | $ | (20,865 | ) | |
Adjustments to reconcile net loss to cash used in operating activities: | |||||||
Depreciation and amortization | 384 | 385 | |||||
Share-based compensation | 5,536 | 6,205 | |||||
Deferred income taxes | (495 | ) | (195 | ) | |||
Amortization of right-of-use assets | 1,345 | 1,296 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (106 | ) | (5 | ) | |||
Prepaid and other assets | (4,278 | ) | (54 | ) | |||
Accounts payable, accruals and other liabilities | (748 | ) | (2,598 | ) | |||
Restructuring liability | — | (461 | ) | ||||
Operating lease liabilities | (1,236 | ) | (1,143 | ) | |||
Net cash used in operating activities | (23,167 | ) | (17,435 | ) | |||
Investing activities | |||||||
Purchases of property and equipment | (22 | ) | (131 | ) | |||
Proceeds from disposal of fixed assets | — | 8 | |||||
Net cash used in investing activities | (22 | ) | (123 | ) | |||
Financing activities | |||||||
Proceeds from issuance of ordinary shares upon exercise of stock options | 151 | 5 | |||||
Net cash provided by financing activities | 151 | 5 | |||||
Net decrease in cash, cash equivalents and restricted cash | (23,038 | ) | (17,553 | ) | |||
Cash, cash equivalents and restricted cash, beginning of the year | 378,427 | 431,715 | |||||
Cash, cash equivalents and restricted cash, end of the period | $ | 355,389 | $ | 414,162 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for income taxes, net | $ | 417 | $ | 54 | |||
Supplemental disclosures of non-cash investing and financing activities | |||||||
Acquisition of property and equipment included in accounts payable and accrued liabilities | $ | 24 | $ | 8 | |||
Right-of-use assets recorded upon adoption of ASC 842 | $ | — | $ | 28,530 | |||
Reduction of build-to-suit lease obligation upon adoption of ASC 842 | $ | — | $ | (51,546 | ) | ||
Reduction of amounts capitalized under build-to-suit lease upon adoption of ASC 842 | $ | — | $ | (46,760 | ) | ||
Reduction of capitalized interest under build-to-suit lease upon adoption of ASC 842 | $ | — | $ | (1,099 | ) |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Cash and cash equivalents | $ | 352,685 | $ | 410,106 | |||
Restricted cash, current | — | 1,352 | |||||
Restricted cash, non-current | 2,704 | 2,704 | |||||
Total cash, cash equivalents and restricted cash, end of the period | $ | 355,389 | $ | 414,162 |
Three Months Ended March 31, 2020 | ||||||||||||||||||
Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders' Equity | |||||||||||||||
Shares | Amount | |||||||||||||||||
Balances at December 31, 2019 | 39,898,561 | $ | 399 | $ | 944,407 | $ | (671,885 | ) | $ | 272,921 | ||||||||
Share-based compensation | — | — | 5,536 | — | 5,536 | |||||||||||||
Issuance of ordinary shares upon exercise of stock options | 12,852 | — | 151 | — | 151 | |||||||||||||
Net loss | — | — | — | (23,569 | ) | (23,569 | ) | |||||||||||
Balances at March 31, 2020 | 39,911,413 | $ | 399 | $ | 950,094 | $ | (695,454 | ) | $ | 255,039 |
Three Months Ended March 31, 2019 | ||||||||||||||||||
Ordinary Shares | Additional Paid-in Capital | Accumulated Deficit | Total Shareholders' Equity | |||||||||||||||
Shares | Amount | |||||||||||||||||
Balances at December 31, 2018 | 39,863,711 | $ | 399 | $ | 920,594 | $ | (597,995 | ) | $ | 322,998 | ||||||||
Cumulative adjustment to accumulated deficit upon adoption of ASC 842 | — | — | — | 3,787 | 3,787 | |||||||||||||
Share-based compensation | — | — | 6,205 | — | 6,205 | |||||||||||||
Issuance of ordinary shares upon exercise of stock options | 850 | — | 5 | — | 5 | |||||||||||||
Net loss | — | — | — | (20,865 | ) | (20,865 | ) | |||||||||||
Balances at March 31, 2019 | 39,864,561 | $ | 399 | $ | 926,804 | $ | (615,073 | ) | $ | 312,130 |
1. | Organization |
2. | Summary of Significant Accounting Policies |
3. | Fair Value Measurements |
Level 2 — | Include other inputs that are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market or can be derived from observable market data. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, foreign exchange rates, and credit ratings. |
Level 3 — | Unobservable inputs that are supported by little or no market activities, which would require the Company to develop its own assumptions. |
4. | Composition of Certain Balance Sheet Items |
March 31, | December 31, | ||||||
2020 | 2019 | ||||||
Machinery and equipment | $ | 9,334 | $ | 9,312 | |||
Leasehold improvements | 1,261 | 1,261 | |||||
Purchased computer software | 1,327 | 1,308 | |||||
11,922 | 11,881 | ||||||
Less: accumulated depreciation and amortization | (8,391 | ) | (8,007 | ) | |||
Property and equipment, net | $ | 3,531 | $ | 3,874 |
March 31, | December 31, | ||||||
2020 | 2019 | ||||||
Payroll and related expenses | $ | 2,434 | $ | 4,818 | |||
Professional services | 372 | 400 | |||||
Other | 558 | 322 | |||||
Other current liabilities | $ | 3,364 | $ | 5,540 |
5. | Net Loss Per Ordinary Share |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Numerator: | |||||||
Net loss | $ | (23,569 | ) | $ | (20,865 | ) | |
Denominator: | |||||||
Weighted-average ordinary shares outstanding | 39,909 | 39,864 | |||||
Net loss per share: | |||||||
Basic and diluted net loss per share | $ | (0.59 | ) | $ | (0.52 | ) |
Three Months Ended March 31, | |||||
2020 | 2019 | ||||
Stock options to purchase ordinary shares | 8,412 | 7,253 |
Year Ended December 31, | Operating Leases | Sub-Sublease Rental | ||||||
2020 (9 months) | 4,522 | 2,140 | ||||||
2021 | 6,165 | 2,944 | ||||||
2022 | 6,350 | 3,047 | ||||||
2023 | 6,535 | 3,019 | ||||||
Total | 23,572 | $ | 11,150 | |||||
Less: Present value adjustment | (1,851 | ) | ||||||
Nominal lease payments | (18 | ) | ||||||
Lease liability | $ | 21,703 |
Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||||||||
Purchase Obligations (1) | $ | 4,459 | $ | 4,459 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Contractual obligations under license agreements (2) | 955 | 165 | 95 | 80 | 80 | 70 | 465 | |||||||||||||||||||||
Total | $ | 5,414 | $ | 4,624 | $ | 95 | $ | 80 | $ | 80 | $ | 70 | $ | 465 |
• | up to $350.0 million upon the achievement of development, regulatory and various first commercial sales milestones; |
• | up to an additional $175.0 million upon achievement of ex-U.S. commercial sales milestones; and |
• | tiered, high single-digit to high double-digit royalties in the teens on ex-U.S. annual net sales, subject to certain adjustments. |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Research and development | $ | 2,017 | $ | 2,099 | ||||
General and administrative | 3,519 | 4,106 | ||||||
Total share-based compensation expense | $ | 5,536 | $ | 6,205 |
Three Months Ended March 31, | |||
2020 | 2019 | ||
Expected volatility | 81.5% | 81.5% | |
Risk-free interest rate | 1.2% | 2.5% | |
Expected dividend yield | —% | —% | |
Expected life (in years) | 6.0 | 6.0 | |
Weighted average grant date fair value | $8.32 | $9.48 |
Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Outstanding at December 31, 2019 | 7,008,403 | $ | 23.34 | 7.24 | $ | 11,901 | ||||||
Granted | 1,455,450 | 12.00 | ||||||||||
Exercised | (12,852 | ) | 11.76 | |||||||||
Forfeited | (20,960 | ) | 11.44 | |||||||||
Expired | (17,629 | ) | 34.36 | |||||||||
Outstanding at March 31, 2020 | 8,412,412 | $ | 21.41 | 7.54 | $ | 2,666 | ||||||
Vested and expected to vest at March 31, 2020 | 7,882,058 | $ | 21.87 | 7.43 | $ | 2,631 | ||||||
Vested at March 31, 2020 | 4,106,979 | $ | 27.03 | 6.08 | $ | 2,246 |
• | our ability to obtain additional financing in future offerings and/or obtain funding from future collaborations; |
• | our operating losses; |
• | our ability to successfully complete research and development of our drug candidates; |
• | our ability to develop, manufacture and commercialize products; |
• | our collaborations with third parties, including Roche and Bristol-Myers Squibb; |
• | our ability to protect our patents and other intellectual property; |
• | our ability to hire and retain key employees; |
• | tax treatment of our separation from Elan and subsequent distribution of our ordinary shares; |
• | our ability to maintain financial flexibility and sufficient cash, cash equivalents and investments and other assets capable of being monetized to meet our liquidity requirements; |
• | potential disruptions in the U.S. and global capital and credit markets; |
• | government regulation of our industry; |
• | the volatility of the market price of our ordinary shares; |
• | the outbreak of the novel strain of coronavirus SARS-CoV-2; and |
• | business disruptions. |
Three Months Ended March 31, | Percentage Change | |||||||||
2020 | 2019 | |||||||||
(Dollars in thousands) | ||||||||||
Collaboration revenue | $ | 141 | $ | 186 | (24 | )% | ||||
Total revenue | $ | 141 | $ | 186 | (24 | )% |
Three Months Ended March 31, | Percentage Change | |||||||
2020 | 2019 | |||||||
(Dollars in thousands) | ||||||||
Research and development | 15,248 | 13,296 | 15 | % | ||||
General and administrative | 9,741 | 9,905 | (2 | )% | ||||
Restructuring credits | — | (61 | ) | (100 | )% | |||
Total operating expenses | 24,989 | 23,140 | 8 | % |
Three Months Ended March 31, | Cumulative to Date | |||||||||||
2020 | 2019 | |||||||||||
NEOD001 (1) | $ | 1,060 | $ | 619 | $ | 311,336 | ||||||
Prasinezumab (PRX002/RG7935)(2) | 4,344 | 3,415 | 83,746 | |||||||||
PRX003 (3) | (288 | ) | 64 | 58,879 | ||||||||
PRX004 (4) | 3,828 | 4,345 | 67,436 | |||||||||
Other R&D (5) | 6,304 | 4,853 | ||||||||||
$ | 15,248 | $ | 13,296 |
(1) | Cumulative R&D costs to date for NEOD001 include the costs incurred from the date when the program was separately tracked in preclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. In April 2018, we announced that we were discontinuing development of |
(2) | Cumulative R&D costs to date for prasinezumab and related antibodies include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. Prasinezumab costs include payments to Roche for our share of the development expenses incurred by Roche related to prasinezumab programs and, through December 31, 2017, is net of reimbursements from Roche for development and supply services recorded as an offset to R&D expense. For the three months ended March 31, 2020 and 2019, $0.1 million and $0.2 million of reimbursements from Roche for development services were recorded as part of collaboration revenue as a result of the adoption of new revenue standard. |
(3) | Cumulative R&D costs to date for PRX003 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. Based on the Phase 1b multiple ascending dose study results announced in September 2017, we announced that we will not advance PRX003 into mid-stage clinical development for psoriasis or psoriatic arthritis as previously planned. |
(4) | Cumulative R&D costs to date for PRX004 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. |
(5) | Other R&D is comprised of preclinical development and discovery programs that have not progressed to first patient dosing in a Phase 1 clinical trial. |
Three Months Ended March 31, | Percentage Change | |||||||||
2020 | 2019 | |||||||||
(Dollars in thousands) | ||||||||||
Interest income | $ | 1,137 | $ | 2,304 | (51 | )% | ||||
Other expense, net | (24 | ) | (17 | ) | 41 | % | ||||
Total other income, net | $ | 1,113 | $ | 2,287 | (51 | )% |
Three Months Ended March 31, | Percentage Change | |||||||||
2020 | 2019 | |||||||||
(Dollars in thousands) | ||||||||||
Provision for (benefit from) income taxes | $ | (166 | ) | $ | 198 | (184 | )% |
March 31, | December 31, | ||||||
2020 | 2019 | ||||||
Working capital | $ | 342,605 | $ | 360,661 | |||
Cash and cash equivalents | 352,685 | 375,723 | |||||
Total assets | 399,421 | 419,268 | |||||
Total liabilities | 144,382 | 146,347 | |||||
Total shareholders’ equity | 255,039 | 272,921 |
Three Months Ended March 31, | |||||||
2020 | 2019 | ||||||
Net cash used in operating activities | $ | (23,167 | ) | $ | (17,435 | ) | |
Net cash used in operating activities | (22 | ) | (123 | ) | |||
Net cash provided by financing activities | 151 | 5 | |||||
Net decrease in cash, cash equivalents and restricted cash | $ | (23,038 | ) | $ | (17,553 | ) |
Total | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | ||||||||||||||||||||||
Operating leases (1) | $ | 23,572 | $ | 4,522 | $ | 6,165 | $ | 6,350 | $ | 6,535 | $ | — | $ | — | ||||||||||||||
Purchase obligations | 4,459 | 4,459 | — | — | — | — | — | |||||||||||||||||||||
Contractual obligations under license agreements (2) | 955 | 165 | 95 | 80 | 80 | 70 | 465 | |||||||||||||||||||||
Total | $ | 28,986 | $ | 9,146 | $ | 6,260 | $ | 6,430 | $ | 6,615 | $ | 70 | $ | 465 |
• | support completion of the Phase 2 PASADENA clinical trial for prasinezumab (PRX002/RG7935) being conducted by Roche, conduct our Phase 1 clinical trial for PRX004, and possibly initiate additional clinical trials for these and other programs; |
• | develop and possibly commercialize our product candidates, including prasinezumab and PRX004; |
• | undertake nonclinical development of other product candidates and initiate clinical trials, if supported by nonclinical data; and |
• | pursue our early stage research and seek to identify additional drug candidates; and |
• | potentially acquire rights from third parties to drug candidates or technologies through licenses, acquisitions or other means. |
• | the timing of progress, results and costs of our clinical trials, including the Phase 2 clinical trial for prasinezumab and our Phase 1 clinical trial for PRX004; |
• | the timing, initiation, progress, results and costs of these and our other research, development and possible commercialization activities; |
• | the results of our research, nonclinical and clinical studies; |
• | the costs of manufacturing our drug candidates for clinical development as well as for future commercialization needs; |
• | if and when appropriate, the costs of preparing for commercialization of our drug candidates; |
• | the costs of preparing, filing, and prosecuting patent applications, and maintaining, enforcing, and defending intellectual property-related claims; |
• | our ability to establish research, development, commercialization and/or strategic collaborations, licensing or other arrangements; |
• | the timing, receipt and amount of any capital investments, cost-sharing contributions or reimbursements, milestone payments or royalties that we might receive under current or potential future collaborations; |
• | the costs to satisfy our obligations under current and potential future collaborations; and |
• | the timing, receipt and amount of revenues or royalties, if any, from any approved drug candidates. |
• | terminate or delay clinical trials or other development activities for one or more of our drug candidates; |
• | delay arrangements for activities that may be necessary to commercialize our drug candidates; |
• | curtail or eliminate our drug research and development programs that are designed to identify new drug candidates; or |
• | cease operations. |
• | we experience delays or interruptions in our business operations due to our key personnel, or a significant number of our personnel, becoming infected with COVID-19 and therefore being unable to work, even remotely, for an extended period of time; |
• | the clinical development programs pursued by us and our collaboration partners (including the development of PRX004 and prasinezumab) are delayed or interrupted, including as a result of (1) interruptions of supply to clinical study sites of drug candidate or other equipment or materials, (2) inability or unwillingness of site investigators or other study personnel to travel to study sites, dispense drug candidate, or otherwise treat or monitor study participants or follow study protocols, or conduct necessary data collection or verification, (3) inability or unwillingness of study participants to travel to clinical study sites, receive infusions, or otherwise continue to participate in the study or (4) diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials; |
• | we, or our collaboration partners, are delayed in or prevented from initiating new clinical studies of current or prospective drug candidates because of (1) delays or difficulties contracting with essential third-party vendors (such as contract research organizations), (2) delays or difficulties enlisting site investigators or initiating clinical study sites, (3) delays or difficulties recruiting or enrolling study participants, or (4) delays or difficulties supplying drug candidate to clinical study sites; |
• | interruption or delays in the operations of the U.S. Food and Drug Administration (the “FDA”) and comparable foreign regulatory agencies which impact review, inspection, and approval timelines for any of our development programs; |
• | the pandemic adversely affects our collaboration partners, Roche and/or Celgene (now part of Bristol-Myers Squibb (“BMS”)), in way that adversely impacts our collaborations with them; |
• | business development opportunities become more limited or difficult to undertake; |
• | our costs significantly increase to manage impacts to our business to complete our planned operations within our projected timelines; |
• | changes in local regulations as part of a response to COVID-19 which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or discontinuation of the clinical trials altogether; |
• | we experience delays in necessary interactions with local regulators, ethics committees, and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; or |
• | our liquidity needs are adversely impacted by the economic effects of the pandemic on financial markets. |
• | offer improvement over existing treatment options; |
• | be proven safe and effective in clinical trials; or |
• | meet applicable regulatory standards. |
• | obtaining and maintaining commercial manufacturing arrangements with third-party manufacturers; |
• | developing the marketing and sales capabilities, internal and/or in collaboration with pharmaceutical companies or contract sales organizations, to market and sell any approved drug; and |
• | acceptance of any approved drug in the medical community and by patients and third-party payers. |
• | collaborators may have significant control or discretion in determining the efforts and resources that they will apply to a collaboration, and might not commit sufficient efforts and resources or might misapply those efforts and resources; |
• | we may have limited influence or control over the approaches to research, development and/or commercialization of products candidates in the territories in which our collaboration partners lead research, development and/or commercialization; |
• | collaborators might not pursue research, development and/or commercialization of collaboration product candidates or might elect not to continue or renew research, development and/or commercialization programs based on nonclinical and/or clinical trial results, changes in their strategic focus due to the acquisition of competing products, availability of funding or other factors, such as a business combination that diverts resources or creates competing priorities; |
• | collaborators might delay, provide insufficient resources to, or modify or stop research or clinical development for collaboration product candidates or require a new formulation of a product candidate for clinical testing; |
• | collaborators could develop or acquire products outside of the collaboration that compete directly or indirectly with our product candidates or require a new formulation of a product candidate for nonclinical and/or clinical testing; |
• | collaborators with sales, marketing and distribution rights to one or more product candidates might not commit sufficient resources to sales, marketing and distribution or might otherwise fail to successfully commercialize those product candidates; |
• | collaborators might not properly maintain or defend our intellectual property rights or might use our intellectual property improperly or in a way that jeopardizes our intellectual property or exposes us to potential liability; |
• | collaboration activities might result in the collaborator having intellectual property covering our activities or product candidates, which could limit our rights or ability to research, develop and/or commercialize our product candidates; |
• | collaborators might not be in compliance with laws applicable to their activities under the collaboration, which could impact the collaboration or us; |
• | disputes might arise between us and a collaborator that could cause a delay or termination of the collaboration or result in costly litigation that diverts management attention and resources; and |
• | collaborations might be terminated, which could result in a need for additional capital to pursue further research, development and/or commercialization of our product candidates. |
• | conditions imposed on us by the FDA, the EMA or other comparable regulatory authorities regarding the scope or design of our clinical trials; |
• | delays in obtaining, or our inability to obtain, required approvals from institutional review boards (“IRBs”) or other reviewing entities at clinical sites selected for participation in our clinical trials; |
• | insufficient supply or deficient quality of our drug candidates or other materials necessary to conduct our clinical trials; |
• | delays in obtaining regulatory authority agreement for the conduct of our clinical trials; |
• | lower than anticipated enrollment and/or retention rate of subjects in our clinical trials, which can be impacted by a number of factors, including size of patient population, design of trial protocol, trial length, eligibility criteria, perceived risks and benefits of the drug candidate, patient proximity to trial sites, patient referral practices of physicians, availability of other treatments for the relevant disease and competition from other clinical trials; |
• | slower than expected rates of events in trials with a composite primary endpoint that is event-based; |
• | serious and unexpected drug-related side effects experienced by subjects in clinical trials; or |
• | failure of our third-party contractors and collaborators to meet their contractual obligations to us or otherwise meet their development or other objectives in a timely manner. |
• | failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols; |
• | inspection of the clinical trial operations or trial sites by the FDA, the EMA or other regulatory authorities resulting in the imposition of a clinical hold on or imposition of additional conditions for the conduct of the trial; |
• | interpretation of data by the FDA, the EMA or other regulatory authorities; |
• | requirement by the FDA, the EMA or other regulatory authorities to perform additional studies; |
• | failure to achieve primary or secondary endpoints or other failure to demonstrate efficacy or adequate safety; |
• | unforeseen safety issues; or |
• | lack of adequate funding to continue the clinical trial. |
• | the FDA, the EMA or comparable regulatory authorities may disagree with the design, implementation or conduct of our clinical trials; |
• | we may be unable to demonstrate to the satisfaction of the FDA, the EMA or comparable regulatory authorities that a drug candidate is safe and effective for its proposed indication; |
• | the results of clinical trials may not meet the level of statistical significance required by the FDA, the EMA or comparable regulatory authorities for approval; |
• | we may be unable to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks; |
• | the FDA, the EMA or comparable regulatory authorities may disagree with our interpretation of data from nonclinical studies or clinical trials; |
• | the data collected from clinical trials of our drug candidates may not be sufficient to support the submission of a Biologic License Application (“BLA”) to the FDA, a Marketing Authorization Application (“MAA”) to the EMA or similar applications to comparable regulatory authorities; |
• | the FDA, the EMA or comparable regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; or |
• | the approval policies or regulations of the FDA, the EMA or comparable regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval. |
• | restrictions on the marketing of our products or their manufacturing processes; |
• | warning letters; |
• | civil or criminal penalties; |
• | fines; |
• | injunctions; |
• | product seizures or detentions; |
• | import or export bans; |
• | voluntary or mandatory product recalls and related publicity requirements; |
• | suspension or withdrawal of regulatory approvals; |
• | total or partial suspension of production; and |
• | refusal to approve pending applications for marketing approval of new products or supplements to approved applications. |
• | regulatory authorities may withdraw their approval of the product; |
• | regulatory authorities may require the addition of labeling statements, such as contraindications, warnings or precautions, or impose additional safety monitoring or reporting requirements; |
• | we may be required to change the way the product is administered, conduct additional clinical trials; |
• | we could be sued and held liable for harm caused to patients; and |
• | our reputation may suffer. |
• | the indication and label for the product and the timing of introduction of competitive products; |
• | demonstration of clinical safety and efficacy compared to other products; |
• | prevalence, frequency and severity of adverse side effects; |
• | availability of coverage and adequate reimbursement from managed care plans and other third-party payers; |
• | convenience and ease of administration; |
• | cost-effectiveness; |
• | other potential advantages of alternative treatment methods; and |
• | the effectiveness of marketing and distribution support of the product. |
• | an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs; |
• | an increase in the minimum rebates a manufacturer must pay under the U.S. Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively; |
• | expansion of healthcare fraud and abuse laws, including the U.S. False Claims Act and the U.S. Anti-Kickback Statute, new government investigative powers and enhanced penalties for non-compliance; |
• | a new Medicare Part D coverage gap discount program, under which manufacturers must agree to offer 50 percent point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; |
• | extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations; |
• | expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability; |
• | a licensure framework for follow-on biologic products; |
• | expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program; |
• | new requirements under the federal Open Payments program and its implementing regulations; |
• | a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and |
• | a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. |
• | significantly greater financial, technical and human resources than we have and may be better equipped to discover, develop, manufacture and commercialize drug candidates; |
• | more extensive experience in nonclinical testing and clinical trials, obtaining regulatory approvals and manufacturing and marketing pharmaceutical products; |
• | drug candidates that have been approved or are in late-stage clinical development; and/or |
• | collaborative arrangements in our target markets with leading companies and research institutions. |
• | the U.S. Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs; |
• | U.S. federal and state false claims laws, including the False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; |
• | the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and making false statements in connection with the delivery of or payment for healthcare benefits, items or services, and under the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) imposes obligations, including mandatory contractual terms, on certain types of individuals and entities with respect to safeguarding the privacy, security and transmission of individually identifiable health information and places restrictions on the use of such information for marketing communications; |
• | the U.S. Physician Payment Sunshine Act, which requires applicable manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services (“CMS”) information related to “payments or other transfers of value” made to physicians and teaching hospitals and applicable manufacturers and applicable group purchasing organizations to report annually to CMS ownership and investment interests held by the physicians and their immediate family members; |
• | laws and regulations that apply to sales or marketing arrangements; apply to healthcare items or services reimbursed by non-governmental third-party payers, including private insurers; require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines; that restrict payments that may be made to healthcare providers; require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and |
• | similar and other laws and regulations in the U.S. (federal, state and local), in the EU (including member countries) and other countries and jurisdictions. |
• | decreased demand for any approved drug candidates; |
• | impairment of our business reputation; |
• | withdrawal of clinical trial participants; |
• | costs of related litigation; |
• | distraction of management’s attention; |
• | substantial monetary awards to patients or other claimants; and |
• | loss of revenues; and the inability to successfully commercialize any approved drug candidates. |
• | the patentability of our inventions relating to our drug candidates; and/or |
• | the enforceability, validity or scope of protection offered by our patents relating to our drug candidates. |
• | incur substantial monetary damages; |
• | encounter significant delays in bringing our drug candidates to market; and/or |
• | be precluded from participating in the manufacture, use or sale of our drug candidates or methods of treatment requiring licenses. |
• | our ability to obtain financing as needed; |
• | progress in and results from our ongoing or future nonclinical research and clinical trials; |
• | our collaborations with third parties, including with Roche and BMS; |
• | failure or delays in advancing our nonclinical drug candidates or other drug candidates we may develop in the future into clinical trials; |
• | results of clinical trials conducted by others, including on drugs that would compete with our drug candidates; |
• | issues in manufacturing our drug candidates; |
• | regulatory developments or enforcement in the U.S. and other countries; |
• | developments or disputes concerning patents or other proprietary rights; |
• | introduction of technological innovations or new commercial products by our competitors; |
• | changes in estimates or recommendations by securities analysts, if any, who cover our company; |
• | public concern over our drug candidates; |
• | litigation; |
• | future sales of our ordinary shares by us or by existing shareholders; |
• | general market conditions; |
• | changes in the structure of healthcare payment systems; |
• | failure of any of our drug candidates, if approved, to achieve commercial success; |
• | economic and other external factors or other disasters or crises; |
• | period-to-period fluctuations in our financial results; |
• | overall fluctuations in U.S. equity markets; |
• | our quarterly or annual results, or those of other companies in our industry; |
• | announcements by us or our competitors of significant acquisitions or dispositions; |
• | the operating and ordinary share price performance of other comparable companies; |
• | investor perception of our company and the drug development industry; |
• | natural or environmental disasters that investors believe may affect us; |
• | changes in tax laws or regulations applicable to our business or the interpretations of those tax laws and regulations by taxing authorities; or |
• | fluctuations in the budgets of federal, state and local governmental entities around the world. |
Previously Filed | |||||||||
Exhibit No. | Description | Form | File No. | Filing Date | Exhibit | Filed Herewith | |||
10.1# | X | ||||||||
10.2# | X | ||||||||
10.3# | X | ||||||||
10.4(a) | X | ||||||||
10.4(b)† | X | ||||||||
31.1 | X | ||||||||
31.2 | X | ||||||||
32.1* | X | ||||||||
101.INS | XBRL Instance Document | X | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document | X | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | X | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X |
# | Indicates management contract or compensatory plan or arrangement. |
* | Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
† | Certain information in this exhibit (indicated by asterisks) has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed. |
Dated: | May 6, 2020 | Prothena Corporation plc (Registrant) | ||
/s/ Gene G. Kinney | ||||
Gene G. Kinney | ||||
President and Chief Executive Officer | ||||
/s/ Tran B. Nguyen | ||||
Tran B. Nguyen | ||||
Chief Operating Officer and Chief Financial Officer |
Brandon Smith [Address Redacted] | February 14, 2020 |
Granted to: | Brandon Smith | |
Grant Date: | March 2, 2020 | |
Shares subject to the Option: | 240,000 | |
Exercise Price per Share: | $11.12 | |
Expiration Date: | March 2, 2030 | |
Vesting Start Date: | March 2, 2020 | |
Vesting Schedule: | 25% on the first anniversary of the Vesting Start Date, and 1/36 of the remaining grant will vest on each monthly anniversary thereafter for 36 months |
Inducement Award | You acknowledge that the Plan and any Awards granted thereunder are intended to conform with the requirements of the rules promulgated by The Nasdaq Stock Market, including without limitation, Nasdaq Listing Rule 5635(c)(4). Accordingly, you acknowledge that you have not been previously employed in any capacity by the Company or any Subsidiary, or if previously employed, are commencing employment following a bona-fide period of non-employment with the Company and its Subsidiaries, and that the grant of this Option is an inducement material to your agreement to enter into employment with the Company or a Subsidiary. | ||
Nonqualified Stock Option | This Option is intended to be a Nonqualified Stock Option and not an Incentive Stock Option (ISO), and will be interpreted accordingly. |
Vesting | Your right to exercise this Option vests in increments over the four-year (4-year) period, commencing on the Vesting Start Date, as shown on the cover sheet. The percentage of the total number of Shares for which this Option will vest and become exercisable is as follows: • 25% on the first anniversary of the Vesting Start Date, and • 1/36 of the remaining grant will vest on each monthly anniversary thereafter for 36 months The vesting will be cumulative and will not exceed 100% of the Shares subject to the Option. If the vesting results in fractional Shares, the number of Shares that vests on the relevant vesting date will be rounded down to the nearest whole number. Except as otherwise provided in the Plan, the entire Option vests and becomes exercisable if (i) within twenty-four (24) months following a Change in Control, your employment with the Company or one of its Subsidiaries is terminated for any reason other than Cause (as defined below) or you resign for Good Reason (as defined below) (such a resignation or termination being hereinafter referred to as an “Involuntary Termination”); (ii) you die while you are still an employee of the Company or a Subsidiary, as applicable; or (iii) your service as an employee of the Company or a Subsidiary, as applicable, terminates because of your Total and Permanent Disability (as defined below). In addition, except as otherwise provided above or in the Plan, the number of Shares subject to the Option that would have vested and become exercisable had you remained employed for the twelve-month (12) period following an Involuntary Termination shall become vested and exercisable as of the date of your Involuntary Termination. As used herein, and except as otherwise defined in an employment agreement between you and the Company or one of its Subsidiaries to the extent applicable, “Cause” shall mean any of the following: (a) your willful breach, habitual neglect, or poor performance of your job duties and responsibilities, as determined by the Company in its sole discretion; (b) your conviction (or the entry of a guilty plea or plea of nolo contendre) of any crime, excluding minor traffic offenses; (c) your commission of an act of dishonesty or breach of fiduciary duty; (d) your commission of a material violation of any of the personnel policies of the Company or a Subsidiary, as applicable, including but not limited to, violations of the Company’s confidentiality or stock trading policies or its policies against any form of harassment; or (e) any action or omission by you, which, as reasonably determined by the Company, is contrary to the business interest, reputation or goodwill of the Company or a Subsidiary. As used herein, and except as otherwise defined in an employment agreement between you and the Company or one of its Subsidiaries to the extent applicable, “Good Reason” means (a) a material diminution in your authority, duties or responsibilities or a material diminution in your total base compensation (in each case, as determined by the Company in its sole discretion), or (b) that your primary job site is relocated and your new location increases your commute between home and work by at least thirty (30) miles (however, this does not apply to field-based sales representatives or similar field-based positions) or in the Company’s reasonable opinion, the new location requires that you move your home to a new location at least thirty (30) miles away from your home immediately prior to the change. In order to receive the benefits of a resignation for “Good Reason”, you must provide your employer with written notice within ninety (90) days after the occurrence of such event and the employer shall then have thirty (30) days to cure such event. If the employer does not cure the event giving rise to Good Reason, your employment will terminate on the first day immediately following the end of thirty (30) day cure period. Except as provided above or as otherwise provided in a written employment agreement between you and the Company or one of its Subsidiaries, all Shares will cease vesting as of the date your service with the Company or a Subsidiary, as applicable, has terminated for any reason. |
Term | Your Option will expire in any event at the close of business at the Company’s registered office on the tenth anniversary of the Grant Date, as shown on the cover sheet. (It will expire earlier if your service with the Company or a Subsidiary, as applicable, terminates – as described below.) | ||
Death | If you die prior to expiration of this Option, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date that is twelve (12) months after the date of death (or on the tenth anniversary of the Grant Date, if earlier). During that twelve-month (12) period, your estate or heirs may exercise this Option. | ||
Disability | If your service as an employee of the Company or a Subsidiary, as applicable, terminates because of your Total and Permanent Disability, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date that is twelve (12) months after your termination date (or on the tenth anniversary of the Grant Date, if earlier). “Total and Permanent Disability” means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of not less than one year. | ||
Involuntary Termination | If your service as an employee of the Company or a Subsidiary, as applicable, terminates by reason of an Involuntary Termination, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the date that is twelve (12) months after your termination date (or on the tenth anniversary of the Grant Date, if earlier). | ||
Other Termination | If your service as an employee of the Company or a Subsidiary, as applicable, terminates for any reason other than those set forth in the immediately preceding three paragraphs, then your right to purchase vested Shares under this Option will expire at the close of business at the Company’s registered office on the 90th day after your termination date (or on the tenth anniversary of the Grant Date, if earlier). The Company determines when your service with the Company or a Subsidiary, as applicable, terminates for this purpose. | ||
Leaves of Absence | For purposes of this Option, your service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing. But your service will be treated as terminating ninety (90) days after you went on leave, unless your right to return to active work is guaranteed by law or by a contract. Your service terminates, in any event, when the approved leave ends, unless you immediately return to active work. The Company determines which leaves count for this purpose. | ||
Restrictions on Exercise | The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law, regulation or Company policy. | ||
Notice of Exercise | When you wish to exercise this Option, you must complete and execute such documents, if any, and complete such processes, that the Company or a securities broker approved by the Company may require to accomplish the Option exercise (“Notice of Exercise”). If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so. | ||
Form of Payment | When you submit your Notice of Exercise, you must include payment of the exercise price for the Shares you are purchasing. Payment may be made in one (or a combination of both) of the following forms: | ||
• Your personal check, a cashier’s check or a money order. • Irrevocable directions to a securities broker approved by the Company to sell your Shares subject to the Option and to deliver all or a portion of the sale proceeds to the Company in payment of the exercise price. (The balance of the sale proceeds, if any, less withholding taxes, will be delivered to you.) The directions must be given by signing forms, if any, provided by the Company or the securities broker. | |||
With the consent of the Administrator, payment may also be made by any other method set forth in Section 6.5 of the Plan. | |||
Taxes | You will not be allowed to exercise this Option unless you make acceptable arrangements to pay any taxes that may be due as a result of the Option exercise. | ||
Restrictions on Resale | By signing this Agreement, you agree not to sell any Shares received upon exercise of the Option at a time when applicable laws, regulations or Company policies prohibit a sale. | ||
Transfer of Option | Prior to your death, only you may exercise this Option. You cannot transfer or assign this Option. For instance, you may not sell this Option or use it as security for a loan. If you attempt to do any of these things, this Option will immediately become invalid. You may, however, dispose of this Option in your will. Regardless of any marital property settlement agreement, the Company or a securities broker, as applicable, is not obligated to honor a Notice of Exercise from your former spouse, nor is the Company or the securities broker obligated to recognize your former spouse’s interest in your Option in any other way. | ||
Retention Rights | Neither your Option nor this Agreement gives you the right to be retained by the Company or any Subsidiary in any capacity. The Company and its Subsidiaries reserve the right to terminate your service at any time, with or without Cause. | ||
Shareholder Rights | You, or your estate or heirs, have no rights as a shareholder of the Company with respect to any Shares subject to the Option until a proper Notice of Exercise has been submitted, the exercise price has been tendered and you, or your estate or heirs, become a holder of such Shares. No adjustments are made for dividends or other rights if the applicable record date occurs before a proper Notice of Exercise has been submitted and the exercise price has been tendered, except as described in the Plan. | ||
Adjustments | In the event of a stock split, a stock dividend or a similar change in Company stock, the number of Shares covered by this Option and the exercise price per Share may be adjusted pursuant to the Plan. In the event where the Company is a party to a merger, this Option will be handled in accordance with the Plan. | ||
Electronic Communications | You agree to contract electronically regarding your participation in the Plan and to the receipt of electronic notifications, documents, payments or other communications from the Company in connection with the Plan, to the normal electronic mail address used by you for the purposes of your employment or such other address as may be from time to time notified for that purpose by you to the Company. | ||
Severability | All the terms and provisions of this Agreement are distinct and severable, and if any term or provision is held unenforceable, illegal or void in whole or in part by any court, regulatory authority or other competent authority it shall to that extent be deemed not to form part of this Agreement, and the enforceability, legality and validity of the remainder of this Agreement will not be affected; if any invalid, unenforceable or illegal provision would be valid, enforceable or legal if some part of it were deleted, the provision shall apply with whatever modification is necessary to make it valid, enforceable and legal. | ||
Applicable Law | This Agreement will be interpreted and enforced under the laws of Ireland. | ||
The Plan and Other Agreements | The text of the Plan and any amendments thereto are incorporated in this Agreement by reference. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded. |
1. | DEFINITIONS. |
2. | LICENSE GRANT |
4. | MATERIAL TRANSFER |
5. | CONFIDENTIALITY |
1. | MISCELLANEOUS |
If to Prothena: | Prothena Biosciences Limited |
with a copy to: | Prothena Biosciences Inc. |
If to Roche: | F. Hoffmann-La Roche Ltd Licensing Department Diagnostics Grenzacherstrasse 124 4070 Basel |
with a copy to: | Roche Diagnostics International Ltd Legal Department Forrenstrasse 2, 6343 Rotkreuz |
1. | I have reviewed this Quarterly Report on Form 10-Q of Prothena Corporation plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 6, 2020 | /s/ Gene G. Kinney |
Gene G. Kinney | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Prothena Corporation plc; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 6, 2020 | /s/ Tran B. Nguyen |
Tran B. Nguyen | ||
Chief Financial Officer | ||
(Principal Financial Officer) |
1. | The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, to which this Certification is attached as Exhibit 32.1 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | May 6, 2020 | /s/ Gene G. Kinney |
Gene G. Kinney | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) | ||
/s/ Tran B. Nguyen | ||
Tran B. Nguyen | ||
Chief Financial Officer | ||
(Principal Financial Officer) | ||
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M&H?Y"/2\G:3K%"GBZ4SE5+)"G@Z52E5++'&+MRLB4IV1_P#0?T_C"& J]
Income Taxes |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The major taxing jurisdictions for the Company are Ireland and the U.S. The Company recorded an income tax benefit of $166,000 and an income tax provision of $198,000 for the three months ended March 31, 2020, and 2019, respectively. The provision for income taxes differs from the statutory tax rate of 12.5% applicable to Ireland primarily due to Irish net operating losses for which a tax provision benefit is not recognized, U.S. income taxed at different rates, and net tax shortfall from cancellations of stock options. The income tax provision reflects the estimate of the effective tax rate expected to be applicable for the full year and the Company re-evaluates this estimate each quarter based on its forecasted tax expense for the full year. Jurisdictions with a projected loss for the year where no tax benefit can be recognized are excluded from the estimated annual effective tax rate. Pursuant to ASU 2016-09, the Company recorded a net tax shortfall of $0.1 million and $0.7 million for the three months ended March 31, 2020, and 2019, respectively, all of which were recorded as part of its income tax provision in the Condensed Consolidated Statements of Operations. The Company’s income tax expense will continue to be impacted by fluctuations in stock price between the grant dates and the exercise dates of its option awards. On January 1, 2019, the Company adopted ASC 842, and it recorded a reduction in deferred tax assets of $1.0 million as part of the $3.8 million change in the opening balance of the accumulated deficit for the cumulative effect of applying ASC 842. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company's deferred tax assets are composed primarily of its Irish subsidiaries' net operating loss carryovers, state net operating loss carryforwards available to reduce future taxable income of the Company's U.S. subsidiaries, federal and California tax credit carryforwards, share-based compensation and other temporary differences. The Company maintains a valuation allowance against certain U.S. federal and state and Irish deferred tax assets. Each reporting period, the Company evaluates the need for a valuation allowance on its deferred tax assets by jurisdiction. No provision for income tax in Ireland has been recognized on undistributed earnings of the Company’s U.S. and Swiss subsidiaries. The Company considers the U.S. earnings to be indefinitely reinvested. The Company's Swiss subsidiary, Prothena Switzerland GmbH ("PSG") has ceased operations and the Company expects to finalize the liquidation of PSG in 2020. Upon such a liquidation, the Company expects no incremental taxes to be due. Unremitted earnings may be subject to withholding taxes (potentially at 5% in the U.S.) and Irish taxes (potentially at a rate of 12.5%) if they were to be distributed as dividends. However, Ireland allows a credit against Irish taxes for U.S. taxes withheld, and as of March 31, 2020, the Company's current year net operating losses in Ireland are sufficient to offset any potential dividend income received from its overseas subsidiaries. |
Commitment and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitment and Contingencies | Commitments and Contingencies Lease Commitments The Company adopted ASC 842, Leases effective January 1, 2019. Prior period amounts have not been adjusted and continued to be reported in accordance with the Company’s historical accounting under ASC 840. For lease arrangements entered prior to the adoption of ASC 842, right-of-use asset and lease liability are determined based on the present value of minimum lease payments over the remaining lease term and the Company’s incremental borrowing rate based on information available as of January 1, 2019. The right-of-use asset also includes any lease prepayments made and excludes unamortized lease incentives including rent abatements and/or concessions and rent holidays. Tenant improvements made by the Company as a lessee, in which such improvements are deemed to be owned by the lessor, are viewed as lease prepayments by the Company and are included in the right-of-use asset. Lease expense is recognized on a straight-line basis over the expected lease term. Total operating lease cost was $1.6 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively. Total cash paid against the operating lease liability was $1.5 million and $1.4 million for the three months ended March 31, 2020 and 2019, respectively. For the purpose of estimating the incremental borrowing rate in the adoption of ASC 842, the Company inquired with banks that had a business relationship with the Company to determine the Company's collateralized incremental borrowing rate. The discount rate used to determine the lease liability was 4.25%. There was no change in the accounting of the Sub-Sublease (as defined below) of the Current SSF Facility (as defined below) upon adoption of ASC 842. Furthermore, the Company's operating lease in Dublin is not included in the lease liability and right-of-use asset recorded due to its nominal amount. As of March 31, 2020, the Company performed an evaluation of its other contracts with customers and suppliers in accordance with ASC 842 and have determined that, except for the leases described below, a nominal operating lease for medical monitoring equipment and a nominal operating lease for office equipment, none of the Company’s contracts contain a lease. Current SSF Facility In March 2016, the Company entered into a noncancelable operating sublease (the “Lease”) to lease 128,751 square feet of office and laboratory space in South San Francisco, California, U.S. (the “Current SSF Facility”). Subsequently, in April 2016, the Company took possession of the Current SSF Facility. The Lease includes a free rent period and escalating rent payments and has a remaining lease term of 3.75 years that expires on December 31, 2023, unless terminated earlier. The Company's obligation to pay rent commenced on August 1, 2016. The Company is obligated to make lease payments totaling approximately $39.2 million over the lease term. The Lease further provides that the Company is obligated to pay to the sublandlord and master landlord certain costs, including taxes and operating expenses. The Lease is considered an operating lease under ASC 842. Prior to the Company's adoption of ASC 842, this Lease was considered a build-to-suit lease. In connection with this Lease, the Company received a tenant improvement allowance of $14.2 million from the sublandlord and the master landlord, for the costs associated with the design, development and construction of tenant improvements for the Current SSF Facility. The Company is obligated to fund all costs incurred in excess of the tenant improvement allowance. The initial measurement of right-of-use asset for the Lease includes the tenant improvement added by the Company wherein the lessor was deemed the accounting owner, net of the tenant improvement allowance received from the sublandlord and the master landlord. The Company obtained a standby letter of credit in April 2016 in the initial amount of $4.1 million, which may be drawn down by the sublandlord in the event the Company fails to fully and faithfully perform all of its obligations under the Lease and to compensate the sublandlord for all losses and damages the sublandlord may suffer as a result of the occurrence of any default on the part of Company not cured within the applicable cure period. This standby letter of credit is collateralized by a certificate of deposit of the same amount which is classified as restricted cash. The Company was entitled to a $1.4 million reduction in the face amount of the standby letter of credit on the third anniversary of the contractual rent commencement, which was received in 2019, and another $1.4 million on the fifth anniversary of the contractual rent commencement. As a condition to the reduction of the standby letter of credit amount, no uncured default by the Company shall then exist under the Lease. As of March 31, 2020, none of the remaining standby letter of credit amount of $2.7 million has been used. Sub-Sublease of Current SSF Facility On July 18, 2018, the Company entered into a Sub-Sublease Agreement (the “Sub-Sublease”) with Assembly Biosciences, Inc. (the “Sub-Subtenant”) to sub-sublease approximately 46,641 square feet of office and laboratory space of the Current SSF Facility to the Sub-Subtenant. The Sub-Sublease is considered an operating lease under ASC 842. There was no change in the accounting of the Sub-Sublease of the Current SSF Facility upon the Company's adoption of ASC 842. For the three months ended March 31, 2020 and 2019, the Company recorded $0.7 million and $0.7 million, respectively, for sub-lease rental income as an offset to its operating expenses. The Sub-Sublease provides for initial annual base rent for the complete Sub-Subleased Premises of approximately $2.7 million, with increases of approximately 3.5% in annual base rent on September 1, 2019 and each anniversary thereof. The Sub-Sublease rental income excludes reimbursements for executory costs received from the Sub-Subtenant. The Sub-Sublease became effective on September 24, 2018, and has a term of 5.2 years which terminates on December 15, 2023. The Sub-Sublease will terminate if the Lease or the corresponding master lease terminates. The Company or the Sub-Subtenant may elect, subject to limitations set forth in the Sub-Sublease, to terminate the Sub-Sublease following a material casualty or condemnation affecting the Subleased Premises. The Company may terminate the Sub-Sublease following an event of default, which is defined in the Sub-Sublease to include, among other things, non-payment of amounts owing by the Sub-Subtenant under the Sub-Sublease. The Company is required under the Lease to pay to the sublandlord 50% of that portion of the cash sums and other economic consideration received from the Sub-Subtenant that exceeds the base rent paid by the Company to the sublandlord after deducting certain of the Company’s costs. Dublin The Company entered into an agreement to lease 133 square feet of office space in Dublin, Ireland (the "Dublin Lease"). The current one year lease term expires on November 30, 2020. The Dublin Lease also has an automatic renewal clause, pursuant to which the agreement will be extended automatically for successive periods equal to the current term but no less than three months, unless the agreement is cancelled by the Company. This operating lease is not included in the lease liability and operating lease right-of-use asset recorded due to its nominal amount. As of March 31, 2020, the Company is obligated to make lease payments over the remaining term of the Dublin Lease of approximately €16,000, or $18,000 as converted using an exchange rate as of March 31, 2020. Future minimum payments under the above-described noncancelable operating leases, including a reconciliation to the lease liabilities recognized in the Consolidated Balance Sheets, and future minimum rentals to be received under the Sub-Sublease as of March 31, 2020, are as follows (in thousands):
Indemnity Obligations The Company has entered into indemnification agreements with its current and former directors and officers and certain key employees. These agreements contain provisions that may require the Company, among other things, to indemnify such persons against certain liabilities that may arise because of their status or service and advance their expenses incurred as a result of any indemnifiable proceedings brought against them. The obligations of the Company pursuant to the indemnification agreements continue during such time as the indemnified person serves the Company and continues thereafter until such time as a claim can be brought. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer liability insurance policy that limits its exposure and enables the Company to recover a portion of any future amounts paid. As a result of its insurance policy coverage, the Company believes the estimated fair value of these indemnification agreements is minimal. Accordingly, the Company had no liabilities recorded for these agreements as of March 31, 2020 and 2019. Other Commitments In the normal course of business, the Company enters into various firm purchase commitments primarily related to research and development activities. As of March 31, 2020, the Company had non-cancelable purchase commitments to suppliers for $4.5 million of which $0.4 million is included in accrued current liabilities, and contractual obligations under license agreements of $1.0 million of which $0.1 million is included in accrued current liabilities. The following is a summary of the Company's non-cancelable purchase commitments and contractual obligations as of March 31, 2020 (in thousands):
________________ (1) Purchase obligations consist of non-cancelable purchase commitments to suppliers. (2) Excludes future obligations pursuant to the cost-sharing arrangement under the Company's License Agreement with Roche. Amounts of such obligations, if any, cannot be determined at this time. |
Share-Based Compensation - Summary of Share-Based Compensation Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 5,536 | $ 6,205 |
Research and development [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | 2,017 | 2,099 |
General and administrative [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Share-based compensation expense | $ 3,519 | $ 4,106 |
Commitment and Contingencies - Dublin Lease (Details) |
1 Months Ended | |||
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Sep. 30, 2018
ft²
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Mar. 31, 2020
EUR (€)
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Mar. 31, 2020
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Sep. 27, 2018 |
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Lease Description [Line Items] | ||||
Operating lease, future minimum payments due | $ | $ 23,572,000 | |||
Dublin, Ireland [Member] | ||||
Lease Description [Line Items] | ||||
Operating lease, Dublin, area of office space (in sq ft) | ft² | 133 | |||
Operating lease, Dublin, term of contract (in years) | 1 year | 1 year | ||
Operating lease, Dublin, renewal term | 3 months | |||
Operating lease, future minimum payments due | € 16,000 | $ 18,000 |
Fair Value Measurements |
3 Months Ended | ||||||||
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Mar. 31, 2020 | |||||||||
Fair Value Disclosures [Abstract] | |||||||||
Fair Value Measurements | Fair Value Measurements The Company measures certain financial assets and liabilities at fair value on a recurring basis, including cash equivalents. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value: Level 1 — Observable inputs such as quoted prices (unadjusted) for identical assets or liabilities in active markets.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities, and low market interest rates, if applicable. Based on the fair value hierarchy, the Company classifies its cash equivalents within Level 1. This is because the Company values its cash equivalents using quoted market prices. The Company’s Level 1 securities consisted of $312.8 million and $338.2 million in money market funds included in cash and cash equivalents at March 31, 2020, and December 31, 2019, respectively. |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2020 |
May 01, 2020 |
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Document Document And Entity Information [Abstract] | ||
Entity Current Reporting Status | Yes | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | Prothena Corp plc | |
Entity Central Index Key | 0001559053 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Ordinary Shares Outstanding | 39,911,413 |
Fair Value Measurements - Additional Information (Detail) - USD ($) $ in Millions |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Level 1 [Member] | ||
Fair Value Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Money market funds at carrying value | $ 312.8 | $ 338.2 |
Commitments and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of lease liability maturity analysis and future minimum rentals to be received | Future minimum payments under the above-described noncancelable operating leases, including a reconciliation to the lease liabilities recognized in the Consolidated Balance Sheets, and future minimum rentals to be received under the Sub-Sublease as of March 31, 2020, are as follows (in thousands):
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Schedule of Contractual Obligations by Fiscal Year Maturity | The following is a summary of the Company's non-cancelable purchase commitments and contractual obligations as of March 31, 2020 (in thousands):
________________ (1) Purchase obligations consist of non-cancelable purchase commitments to suppliers. (2) Excludes future obligations pursuant to the cost-sharing arrangement under the Company's License Agreement with Roche. Amounts of such obligations, if any, cannot be determined at this time. |
Net Loss Per Ordinary Share - Calculation of Basic and Diluted Net Loss Per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Net Income (Loss) Attributable to Parent [Abstract] | ||
Net loss | $ (23,569) | $ (20,865) |
Weighted Average Number of Shares Outstanding, Basic [Abstract] | ||
Weighted-average ordinary shares outstanding (in shares) | 39,909 | 39,864 |
Earnings Per Share, Basic and Diluted [Abstract] | ||
Basic and diluted net loss per share (in dollars per share) | $ (0.59) | $ (0.52) |
Share-Based Compensation - Fair Value of Options Granted (Detail) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
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Share-based Payment Arrangement [Abstract] | ||
Expected volatility | 81.50% | 81.50% |
Risk-free interest rate | 1.20% | 2.50% |
Expected dividend yield | 0.00% | 0.00% |
Expected life (in years) | 6 years | 6 years |
Weighted average grant date fair value (in dollars per share) | $ 8.32 | $ 9.48 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
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Income Statement [Abstract] | ||
Collaboration revenue | $ 141,000 | $ 186,000 |
Total revenue | 141,000 | 186,000 |
Operating expenses: | ||
Research and development | 15,248,000 | 13,296,000 |
General and administrative | 9,741,000 | 9,905,000 |
Restructuring credits | 0 | (61,000) |
Total operating expenses | 24,989,000 | 23,140,000 |
Loss from operations | (24,848,000) | (22,954,000) |
Other income (expense): | ||
Interest income | 1,137,000 | 2,304,000 |
Other expense, net | (24,000) | (17,000) |
Total other income, net | 1,113,000 | 2,287,000 |
Loss before income taxes | (23,735,000) | (20,667,000) |
Provision for (benefit from) income taxes | (166,000) | 198,000 |
Net loss | $ (23,569,000) | $ (20,865,000) |
Basic and diluted net loss per share (in dollars per share) | $ (0.59) | $ (0.52) |
Shares used to compute basic and diluted net loss per share (in shares) | 39,909 | 39,864 |
Summary of Significant Accounting Policies |
3 Months Ended |
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Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Preparation and Presentation of Financial Information These accompanying Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions for Form 10-Q and Regulation S-X statements. Accordingly, they do not include all of the information and notes required for complete financial statements. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 3, 2020 (the “2019 Form 10-K”). These Unaudited Interim Condensed Consolidated Financial Statements are presented in U.S. dollars, which is the functional currency of the Company and its consolidated subsidiaries. These Unaudited Interim Condensed Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current year presentation. Unaudited Interim Financial Information The accompanying Unaudited Interim Condensed Consolidated Financial Statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the results of operations for the periods presented. The year-end condensed consolidated balance sheet data was derived from audited financial statements, however certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The condensed consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period. Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to revenue recognition, share-based compensation, research and development expenses and leases. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because of the uncertainties inherent in such estimates, actual results may differ materially from these estimates. Significant Accounting Policies There were no significant changes to the accounting policies during the three months ended March 31, 2020, from the significant accounting policies described in Note 2 of the Notes to Consolidated Financial Statements in the 2019 Form 10-K. Segment and Concentration of Risks The Company operates in one segment. The Company’s chief operating decision maker (the “CODM”), its Chief Executive Officer, manages the Company’s operations on a consolidated basis for purposes of allocating resources. When evaluating the Company’s financial performance, the CODM reviews all financial information on a consolidated basis. Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company places its cash equivalents with high credit quality financial institutions and, by policy, limits the amount of credit exposure with any one financial institution. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents and its credit risk exposure is up to the extent recorded on the Company's Consolidated Balance Sheet. The receivables recorded in the Condensed Consolidated Balance Sheet include amounts due from a Roche entity located in Switzerland. Revenue recorded in the Condensed Consolidated Statements of Operations consists of reimbursement from Roche for research and development services. The Company's credit risk exposure is up to the extent recorded on the Company's Condensed Consolidated Balance Sheet. As of March 31, 2020, $3.5 million of the Company’s property and equipment, net were held in the U.S. and none were in Ireland. As of December 31, 2019, $3.9 million of the Company's property and equipment, net were held in the U.S. and none were in Ireland. The Company does not own or operate facilities for the manufacture, packaging, labeling, storage, testing or distribution of nonclinical or clinical supplies of any of its drug candidates. The Company instead contracts with and relies on third-parties to manufacture, package, label, store, test and distribute all preclinical development and clinical supplies of our drug candidates, and it plans to continue to do so for the foreseeable future. The Company also relies on third-party consultants to assist in managing these third-parties and assist with its manufacturing strategy. Recent Accounting Pronouncements On December 18, 2019, the Finance Accounting Standards Board ("FASB") issued Accounting Standards Update 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards. Amendments include removal of certain exceptions to the general principles of ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. While not required to be adopted until 2021 for most calendar year public business entities (and 2022 for other entities), early adoption is permitted for any financial statements. The Company does not expect the adoption of ASU 2019-12 to have a significant impact on its consolidated financial statements. The Company will continue to evaluate the impact of ASU 2019-12 on its consolidated financial statements. |
Net Loss Per Ordinary Share - Ordinary Shares Equivalent Not Included in Diluted Net Loss Per Share (Detail) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
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Options to purchase ordinary shares [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Stock options to purchase ordinary shares not included in diluted net loss per share (in shares) | 8,412 | 7,253 |
Composition of Certain Balance Sheet Items - Schedule of Property and Equipment (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Composition of Certain Balance Sheet Items [Abstract] | ||
Machinery and equipment | $ 9,334 | $ 9,312 |
Leasehold improvements | 1,261 | 1,261 |
Purchased computer software | 1,327 | 1,308 |
Property and equipment, gross | 11,922 | 11,881 |
Less: accumulated depreciation and amortization | (8,391) | (8,007) |
Property and equipment, net | $ 3,531 | $ 3,874 |
Share-Based Compensation (Tables) |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Share-Based Compensation Expense | The following table summarizes share-based compensation expense for the periods presented (in thousands):
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Fair Value of Options Granted | The fair value of the options granted to employees and non-employee directors during the three months ended March 31, 2020, and 2019 was estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:
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Summary of Company's Share Option Activity | The following table summarizes the Company’s stock option activity during the three months ended March 31, 2020:
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |
Basis of Preparation and Presentation of Financial Information | Basis of Preparation and Presentation of Financial Information These accompanying Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”) and with the instructions for Form 10-Q and Regulation S-X statements. Accordingly, they do not include all of the information and notes required for complete financial statements. These interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 3, 2020 (the “2019 Form 10-K”). These Unaudited Interim Condensed Consolidated Financial Statements are presented in U.S. dollars, which is the functional currency of the Company and its consolidated subsidiaries. These Unaudited Interim Condensed Consolidated Financial Statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current year presentation. Unaudited Interim Financial Information The accompanying Unaudited Interim Condensed Consolidated Financial Statements and related disclosures are unaudited, have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the results of operations for the periods presented. The year-end condensed consolidated balance sheet data was derived from audited financial statements, however certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The condensed consolidated results of operations for any interim period are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period. |
Use of Estimates | Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to revenue recognition, share-based compensation, research and development expenses and leases. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Because of the uncertainties inherent in such estimates, actual results may differ materially from these estimates. |
Segment and Concentration of Risk | Segment and Concentration of Risks The Company operates in one segment. The Company’s chief operating decision maker (the “CODM”), its Chief Executive Officer, manages the Company’s operations on a consolidated basis for purposes of allocating resources. When evaluating the Company’s financial performance, the CODM reviews all financial information on a consolidated basis. Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company places its cash equivalents with high credit quality financial institutions and, by policy, limits the amount of credit exposure with any one financial institution. Deposits held with banks may exceed the amount of insurance provided on such deposits. The Company has not experienced any losses on its deposits of cash and cash equivalents and its credit risk exposure is up to the extent recorded on the Company's Consolidated Balance Sheet. The receivables recorded in the Condensed Consolidated Balance Sheet include amounts due from a Roche entity located in Switzerland. Revenue recorded in the Condensed Consolidated Statements of Operations consists of reimbursement from Roche for research and development services. The Company's credit risk exposure is up to the extent recorded on the Company's Condensed Consolidated Balance Sheet. As of March 31, 2020, $3.5 million of the Company’s property and equipment, net were held in the U.S. and none were in Ireland. As of December 31, 2019, $3.9 million of the Company's property and equipment, net were held in the U.S. and none were in Ireland. The Company does not own or operate facilities for the manufacture, packaging, labeling, storage, testing or distribution of nonclinical or clinical supplies of any of its drug candidates. The Company instead contracts with and relies on third-parties to manufacture, package, label, store, test and distribute all preclinical development and clinical supplies of our drug candidates, and it plans to continue to do so for the foreseeable future. The Company also relies on third-party consultants to assist in managing these third-parties and assist with its manufacturing strategy. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On December 18, 2019, the Finance Accounting Standards Board ("FASB") issued Accounting Standards Update 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes as part of the FASB’s overall initiative to reduce complexity in accounting standards. Amendments include removal of certain exceptions to the general principles of ASC 740, Income Taxes, and simplification in several other areas such as accounting for a franchise tax (or similar tax) that is partially based on income. While not required to be adopted until 2021 for most calendar year public business entities (and 2022 for other entities), early adoption is permitted for any financial statements. The Company does not expect the adoption of ASU 2019-12 to have a significant impact on its consolidated financial statements. The Company will continue to evaluate the impact of ASU 2019-12 on its consolidated financial statements. |
Significant Agreements |
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License Agreements | Significant Agreements Roche License Agreement In December 2013, the Company through its wholly owned subsidiary Prothena Biosciences Limited and Prothena Biosciences Inc entered into a License, Development, and Commercialization Agreement (the “License Agreement”) with F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc. (together, “Roche”) to develop and commercialize certain antibodies that target α-synuclein, including prasinezumab, which are referred to collectively as “Licensed Products.” Upon the effectiveness of the License Agreement in January 2014, the Company granted to Roche an exclusive, worldwide license to develop, make, have made, use, sell, offer to sell, import and export the Licensed Products. The Company retained certain rights to conduct development of the Licensed Products and an option to co-promote prasinezumab in the U.S. During the term of the License Agreement, the Company and Roche will work exclusively with each other to research and develop antibody products targeting alpha-synuclein (or α-synuclein) potentially including incorporation of Roche’s proprietary Brain Shuttle™ technology to potentially increase delivery of therapeutic antibodies to the brain. The License Agreement provided for Roche making an upfront payment to the Company of $30.0 million, which was received in February 2014; making a clinical milestone payment of $15.0 million upon initiation of the Phase 1 study for prasinezumab, which was received in May 2014; and making a clinical milestone payment of $30.0 million upon dosing of the first patient in the Phase 2 study for prasinezumab, which was achieved in June 2017. For prasinezumab, Roche is also obligated to pay:
Roche bore 100% of the cost of conducting the research collaboration under the License Agreement during the research term, which expired December 31, 2017. In the U.S., the parties share all development and commercialization costs, as well as profits, all of which will be allocated 70% to Roche and 30% to the Company, for prasinezumab in the Parkinson’s disease indication, as well as any other Licensed Products and/or indications for which the Company opts in to participate in co-development and co-funding. After the completion of specific clinical trial activities, the Company may opt out of the co-development and cost and profit sharing on any co-developed Licensed Products and instead receive U.S. commercial sales milestones totaling up to $155.0 million and tiered, single-digit to high double-digit royalties in the teens based on U.S. annual net sales, subject to certain adjustments, with respect to the applicable Licensed Product. The Company filed an Investigational New Drug Application (“IND”) with the FDA for prasinezumab and subsequently initiated a Phase 1 study in 2014. Following the Phase 1 studies, Roche became primarily responsible for developing, obtaining and maintaining regulatory approval for and commercializing Licensed Products. Roche also became responsible for the clinical and commercial manufacture and supply of Licensed Products. In addition, the Company has an option under the License Agreement to co-promote prasinezumab in the U.S. in the Parkinson’s disease indication. If the Company exercises such option, it may also elect to co-promote additional Licensed Products in the U.S. approved for Parkinson’s disease. Outside the U.S., Roche will have responsibility for developing and commercializing the Licensed Products. Roche bears all costs that are specifically related to obtaining or maintaining regulatory approval outside the U.S. and will pay the Company a variable royalty based on annual net sales of the Licensed Products outside the U.S. While Roche will record product revenue from sales of the Licensed Products, the Company and Roche will share in the net profits and losses of sales of the prasinezumab for the Parkinson's disease indication in the U.S. on a 70%/30% basis with the Company receiving 30% of the profit and losses provided that the Company has not exercised its opt-out right. The License Agreement continues on a country-by-country basis until the expiration of all payment obligations under the License Agreement. The License Agreement may also be terminated (i) by Roche at will after the first anniversary of the effective date of the License Agreement, either in its entirety or on a Licensed Product-by-Licensed Product basis, upon 90 days’ prior written notice to the Company prior to first commercial sale and 180 days’ prior written notice to Prothena after first commercial sale, (ii) by either party, either in its entirety or on a Licensed Product-by-Licensed Product or region-by-region basis, upon written notice in connection with a material breach uncured 90 days after initial written notice, and (iii) by either party, in its entirety, upon insolvency of the other party. The License Agreement may be terminated by either party on a patent-by-patent and country-by-country basis if the other party challenges a given patent in a given country. The Company’s rights to co-develop Licensed Products under the License Agreement will terminate if the Company commences certain studies for certain types of competitive products. The Company’s rights to co-promote Licensed Products under the License Agreement will terminate if the Company commences a Phase 3 study for such competitive products. The License Agreement cannot be assigned by either party without the prior written consent of the other party, except to an affiliate of such party or in the event of a merger or acquisition of such party, subject to certain conditions. The License Agreement also includes customary provisions regarding, among other things, confidentiality, intellectual property ownership, patent prosecution, enforcement and defense, representations and warranties, indemnification, insurance, and arbitration and dispute resolution. Collaboration Accounting The License Agreement was evaluated under ASC 808, Collaborative Agreements. At the outset of the License Agreement, the Company concluded that it did not qualify as collaboration under ASC 808 because the Company does not share significant risks due to the net profit and loss split (under which Roche incurs substantially more of the costs of the collaboration) and because of the Company’s opt-out provision. The Company believes that Roche will be the principal in future sales transactions with third parties as Roche will be the primary obligor bearing inventory and credit risk. The Company will record its share of pre-tax commercial profit generated from the collaboration as collaboration revenue once the Company can conclude it is probable that a significant revenue reversal will not occur in future periods. Prior to commercialization of a Licensed Product, the Company’s portion of the expenses related to the License Agreement reflected on its income statement will be limited to R&D expenses. After commercialization, if the Company opts-in to co-detail commercialization, expenses related to commercial capabilities, including expenses related to the establishment of a field sales force and other activities to support the Company’s commercialization efforts, will be recorded as sales, general and administrative (“SG&A”) expense and will be factored into the computation of the profit and loss share. The Company will record the receivable related to commercialization activities as collaboration revenue once the Company can conclude it is probable that a significant revenue reversal will not occur in future periods. Adoption of ASC 606, Revenue from Contracts with Customers The Company adopted ASC 606, Revenue from Contracts with Customers, as of January 1, 2018, using the modified retrospective transition method. The Company recognized the cumulative effect of applying the new revenue standard as an adjustment to the opening balance of the accumulated deficit as of January 1, 2018. As of January 1, 2018, the Company did not record any changes to the opening balance of the accumulated deficit since the cumulative effect of applying the new revenue standard was the same as applying ASC 605. The impact of the adoption of ASC 606 to revenues for the year ended December 31, 2018, was an increase of $1.0 million, which represents the revenue recognized for the development services provided by the Company during the period that is reimbursable by Roche. Historically, the Company recorded such reimbursement as an offset against its R&D expenses under ASC 605. Upon the adoption of ASC 606, the reimbursement for development services is now included as part of the Company’s collaboration revenue. Performance Obligations The License Agreement was evaluated under ASC 606. The License Agreement includes the following distinct performance obligations: (1) the Company’s grant of an exclusive royalty bearing license, with the right to sublicense to develop and commercialize certain antibodies that target α-synuclein, including prasinezumab, and the initial know how transfer which was delivered at the effective date (the “Royalty Bearing License”); (2) the Company’s obligation to supply clinical material as requested by Roche for a period up to twelve months (the “Clinical Product Supply Obligation”); (3) the Company’s obligation to provide manufacturing related services to Roche for a period up to twelve months (the “Supply Services Obligation”); (4) the Company’s obligation to prepare and file the IND (the “IND Obligation”); and (5) the Company’s obligation to provide development activities under the development plan during Phase 1 clinical trials (the “Development Services Obligation”). Revenue allocated to the above performance obligations under the License Agreement are recognized when the Company has satisfied its obligations either at a point in time or over a period of time. The Company concluded that the Royalty Bearing License and the Clinical Product Supply Obligation were satisfied at a point in time. The Royalty Bearing License is considered to be a functional intellectual property, in which the revenue would be recognized at the point in time since (a) the Company concluded that the license to Roche has a significant stand-alone functionality, (b) the Company does not expect the functionality of the intellectual property to be substantially changed during the license period as a result of activities of Prothena, and (c) Prothena’s activities transfer a good or service to Roche. The Clinical Product Supply Obligation does not meet criteria for over time recognition; as such, the revenue related to such performance obligation was recognized the point in time at which Roche obtained control of manufactured supplies, which occurred during the first quarter of 2014. The Company concluded that the Supply Services Obligation, the IND Obligation and the Development Services Obligation were satisfied over time. The Company utilized an input method measure of progress by basing the recognition period on the efforts or inputs towards satisfying the performance obligation (i.e. costs incurred and the time elapsed to complete the related performance obligations). The Company determined that such input method provides an appropriate measure of progress toward complete satisfaction of such performance obligations. As of March 31, 2020, and December 31, 2019, there were no remaining performance obligations under License Agreement since the obligations related to research and development activities were only for the Phase 1 clinical trial and the remaining obligations were delivered or performed. Transaction Price According to ASC 606-10-32-2, the transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Factors considered in the determination of the transaction price include, among other things, estimated selling price of the license and costs for clinical supply and development costs. The initial transaction price under the License Agreement, pursuant to ASC 606, was $55.1 million, including $45.0 million for the Royalty Bearing License, $9.1 million for the IND and Development Services Obligations, and $1.1 million for the Supply Services Obligation. The $45.0 million for the Royalty Bearing License included the upfront payment of $30.0 million and the clinical milestone payment of $15.0 million upon initiation of the Phase 1 clinical trial of prasinezumab, both of which were made in 2014. The remaining transaction price amounts the Company expected to receive as reimbursements were based on costs expected to be paid to third parties and other costs to be incurred by the Company in order to satisfy its performance obligations. They are considered to be variable considerations not subject to constraint. The Company did not incur any incremental costs, such as commissions, to obtain or fulfill the License Agreement. Under ASC 606, the transaction price was allocated to the performance obligations as follows: $48.9 million to the Royalty Bearing License; $4.6 million to the IND and Development Services Obligations; $1.1 million to the Clinical Product Supply Obligation; and $0.6 million to the Supply Services Obligation. As of March 31, 2020, the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied is $nil. Prior to the adoption of ASC 606, the transaction price was allocated to the deliverables as follows: $35.6 million to the Royalty Bearing License; $3.3 million to the IND and Development Services Obligations; $0.8 million to the Clinical Product Supply Obligation; and $0.4 million to the Supply Services Obligation. The Company allocated the initial transaction price to the Royalty Bearing License and other performance obligations using the relative selling price method based on its best estimate of selling price for the Royalty Bearing License and third party evidence for the remaining performance obligations. The best estimate of selling price for the Royalty Bearing License was based on a discounted cash flow model. The key assumptions used in the discounted cash flow model used to determine the best estimate of selling price for the Royalty Bearing License included the market opportunity for commercialization of prasinezumab in the U.S. and the royalty territory (for licensed products that are jointly funded the royalty territory is worldwide except for the U.S., and for all licensed products that are not jointly funded the Royalty Territory is worldwide), the probability of successfully developing and commercializing prasinezumab, the estimated remaining development costs for prasinezumab, and the estimated time to commercialization of prasinezumab. The Company concluded that a change in the assumptions used to determine the best estimate of selling price (“BESP”) of the license deliverable would not have a significant effect on the allocation of arrangement consideration. The Company’s discounted cash flow model included several market conditions and entity-specific inputs, including the likelihood that clinical trials for prasinezumab will be successful, the likelihood that regulatory approval will be obtained and the product commercialized, the appropriate discount rate, the market locations, size and potential market share of the product, the expected life of the product, and the competitive environment for the product. The market assumptions were generated using a patient-based forecasting approach, with key epidemiological, market penetration, dosing, compliance, length of treatment and pricing assumptions derived from primary and secondary market research, referenced from third-party sources. Significant Payment Terms Payments for development services are due within 45 days after receiving an invoice from the Company. Variable considerations related to clinical and regulatory milestone payments are constrained due to high likelihood of a revenue reversal. The payment term for all milestone payments are due within 45 days after the achievement of the relevant milestone and receipt by Roche of an invoice for such an amount from the Company. According to ASC 606-10-32-17, a significant financing component does not exist if a substantial amount of the consideration promised by the customer is variable, and the amount or timing of that consideration varies on the basis of the occurrence or nonoccurrence of a future event that is not substantially within the control of the customer or the entity. Since a “substantial amount of the consideration” promised by Roche to the Company is variable (i.e., is in the form of either milestone payments or sales-based royalties) and the amount of such variable consideration varies based upon the occurrence or nonoccurrence of future events that are not within the control of either Roche or the Company (i.e., are largely subject to regulatory approval), the License Agreement does not have a significant financing component. Optional Goods and Services An option for additional goods or services exists when a customer has a present contractual right that allows it to choose the amount of additional distinct goods or services that are purchased. Prior to the customer’s exercise of that right, the vendor is not presently obligated to provide those goods or services. ASC 606-10-25-18(j) requires recognition of an option as a distinct performance obligation when the option provides a customer with a material right. In addition to the distinct performance obligations noted above, the Company was obligated to provide indeterminate research services for up to three years ending in 2017 at rates that were not significantly discounted and fully reimbursable by Roche (the “Research Services”). The amount for any such Research Services was not fixed and determinable and was not at a significant incremental discount. There were no refund rights, concessions or performance bonuses to consider. The Company evaluated the obligation to perform Research Services under ASC 606-10-55-42 and 55-43 to determine whether it gave Roche a “material right”. According to ASC 606-10-55-43, if a customer has the option to acquire an additional good or services at a price that would reflect the standalone selling price for that good or service, that option does not provide the customer with a material right even if the option can be exercised only by entering into a previous contract. The Company concluded that Roche’s option to have the Company perform Research Services did not represent a “material right” to Roche that it would not have received without entering into the License Agreement. As a result, Roche’s option to acquire additional Research Services was not considered a performance obligation at the outset of the License Agreement under ASC 606. Accordingly, this deliverable will become new performance obligation for Prothena when Roche asks Prothena to conduct such Research Services. As of March 31, 2020, there were no remaining Research Services performance obligations. Post Contract Deliverables Any development services provided by the Company after performance of the Development Service Obligation are not considered a contractual performance obligation under the License Agreement, since the License Agreement does not require the Company to provide any development services after completion of the Development Service Obligation. However, the collaboration’s Joint Steering Committee approved continued funding for additional development services to be provided by the Company (the “Additional Development Services”). Under the License Agreement and upon the adoption of ASC 606, the Company recognizes the reimbursements for Additional Development Services as collaboration revenue as earned. Revenue and Expense Recognition The Company recognized $0.1 million and $0.2 million as collaboration revenue from Roche for the three months ended March 31, 2020 and 2019, respectively. Cost sharing payments to Roche are recorded as R&D expenses. The Company recognized $3.9 million and $2.8 million in R&D expenses for payments made to Roche during the three months ended March 31, 2020 and 2019, respectively. The Company had accounts receivable from Roche of $2,000 and $2,000 at March 31, 2020 and December 31, 2019, respectively. Milestone Accounting Under the License Agreement, only if the U.S. and or global options are exercised, the Company is eligible to receive milestone payments upon the achievement of development, regulatory and various first commercial sales milestones. Milestone payments are evaluated under ASC Topic 606. Factors considered in this determination included scientific and regulatory risk that must be overcome to achieve each milestone, the level of effort and investment required to achieve the milestone, and the monetary value attributed to the milestone. Accordingly, the Company estimates payments in the transaction price based on the most likely approach, which considers the single most likely amount in a range of possible amounts related to the achievement of these milestones. Additionally, milestone payments are included in the transaction price only when the Company can conclude it is probable that a significant revenue reversal will not occur in future periods when the milestone is achieved. The Company excludes the milestone payments and royalties in the initial transaction price calculation because such payments are considered to be variable considerations with constraint. Such milestone payments and royalties will be recognized as revenue once the Company can conclude it is probable that a significant revenue reversal will not occur in future periods. The clinical and regulatory milestones under the License Agreement after the point at which the Company could opt-out are considered to be variable considerations with constraint due to the fact that active participation in the development activities that generate the milestones is not required under the License Agreement, and the Company can opt-out of these activities. There are no refunds or claw-back provisions and the milestones are uncertain of occurrence even after the Company has opted out. Based on this determination, these milestones will be recognized when the Company can conclude it is probable that a significant revenue reversal will not occur in future periods. Collaboration Agreement with Bristol-Myers Squibb Overview On March 20, 2018, the Company, through its wholly owned subsidiary Prothena Biosciences Limited, entered into a Master Collaboration Agreement (the “Collaboration Agreement”) with Celgene Switzerland LLC (“Celgene”), a subsidiary of Celgene Corporation (which was acquired by Bristol-Myers Squibb ("BMS") in November 2019), pursuant to which Prothena granted to Celgene a right to elect in its sole discretion to exclusively license rights both in the U.S. (the “US Rights”) and on a global basis (the “Global Rights”), with respect to the Company’s programs to develop and commercialize antibodies targeting Tau, TDP-43 and an undisclosed target (the “Collaboration Targets”). For each such program, BMS may exercise its US Rights at the IND filing, and if it so exercises such US Rights would also have a right to expand the license to Global Rights. If BMS exercises its US Rights for a program, then following the first to occur of (a) completion by the Company, in its discretion and at its cost, of Phase 1 clinical trials for such program or (b) the date on which BMS elects to assume responsibility for completing such Phase 1 clinical trials (at its cost), BMS would have decision making authority over development activities and all regulatory, manufacturing and commercialization activities in the U.S. The Collaboration Agreement provided for Celgene making an upfront payment to the Company of $100.0 million, which was received in April 2018, plus future potential license exercise payments and regulatory and commercial milestones for each program under the Collaboration Agreement, as well as royalties on net sales of any resulting marketed products. In connection with the Collaboration Agreement, the Company and Celgene entered into a Share Subscription Agreement on March 20, 2018, under which Celgene subscribed to 1,174,536 of the Company’s ordinary shares for a price of $42.57 per share, for a total of approximately $50.0 million. BMS US and Global Rights and Licenses On a program-by-program basis, beginning on the effective date of the Collaboration Agreement and ending on the date that the IND Option term expires for such program (which generally occurs sixty days after the date on which Prothena delivers to BMS the first complete data package for an IND that was filed for a lead candidate from the relevant program), BMS may elect in its sole discretion to exercise its US Rights to receive an exclusive license to develop, manufacture and commercialize antibodies targeting the applicable Collaboration Target in the U.S. (the “US License”). If BMS exercises its US Rights for a collaboration program, it is obligated to pay the Company an exercise fee of approximately $80.0 million per program. Thereafter, following the first to occur of (a) completion by the Company, in its discretion and at its cost, of Phase 1 clinical trials for such program or (b) BMS’s election to assume responsibility to complete such Phase 1 clinical trials (at its cost), BMS would have the sole right to develop, manufacture and commercialize antibody products targeting the relevant Collaboration Target for such program (the “Collaboration Products”) in the U.S. On a program-by-program basis, following completion of a Phase 1 clinical trial for a collaboration program for which BMS has previously exercised its US Rights, BMS may elect in its sole discretion to exercise its Global Rights with respect to such collaboration program to receive a worldwide, exclusive license to develop, manufacture and commercialize antibodies targeting the applicable Collaboration Target (the “Global License”). If BMS exercises its Global Rights, BMS would be obligated to pay the Company an additional exercise fee of $55.0 million for such collaboration program. The Global Rights would then replace the US Rights for that collaboration program, and BMS would have decision making authority over developing, obtaining and maintaining regulatory approval for, manufacturing and commercializing the Collaboration Products worldwide. After BMS’s exercise of Global Rights for a collaboration program, the Company is eligible to receive up to $562.5 million in regulatory and commercial milestones per program. Following an exercise by BMS of either US Rights or Global Rights for such collaboration program, the Company will also be eligible to receive tiered royalties on net sales of Collaboration Products ranging from high single digit to high teen percentages, on a weighted average basis depending on the achievement of certain net sales thresholds. Such exercise fees, milestones and royalty payments are subject to certain reductions as specified in the Collaboration Agreement, the agreement for US Rights and the agreement for Global Rights. BMS will continue to pay royalties on a Collaboration Product-by-Collaboration Product and country-by-country basis, until the latest of (i) expiration of certain patents covering the Collaboration Product, (ii) expiration of all regulatory exclusivity for the Collaboration Product, and (iii) an agreed period of time after the first commercial sale of the Collaboration Product in the applicable country (the “Royalty Term”). Term and Termination The research term under the Collaboration Agreement continues for a period of six years, which BMS may extend for up to two additional 12-month periods by paying an extension fee of $10.0 million per extension period. The term of the Collaboration Agreement continues until the last to occur of the following: (i) expiration of the research term; (ii) expiration of all US Rights terms; and (iii) expiration of all Global Rights terms. The term of any US License or Global License would continue on a Licensed Product-by-Licensed Product and country-by-country basis until the expiration of all Royalty Terms under such agreement. The Collaboration Agreement may be terminated (i) by either party on a program-by-program basis if the other party remains in material breach of the Collaboration Agreement following a cure period to remedy the material breach, (ii) by BMS at will on a program-by-program basis or in its entirety, (iii) by either party, in its entirety, upon insolvency of the other party, or (iv) by Prothena, in its entirety, if BMS challenges a patent licensed by Prothena to BMS under the Collaboration Agreement. Share Subscription Agreement Pursuant to the terms of the Collaboration Agreement, the Company entered into a Share Subscription Agreement (the “SSA”) with Celgene, pursuant to which the Company issued, and Celgene subscribed for, 1,174,536 of the Company’s ordinary shares (the “Shares”) for an aggregate subscription price of approximately $50.0 million, pursuant to the terms and conditions thereof. Under the SSA, BMS (formerly Celgene) is subject to certain transfer restrictions. In addition, BMS will be entitled to request the registration of the Shares with the U.S. Securities and Exchange Commission on Form S-3ASR or Form S-3 following termination of the transfer restrictions if the Shares cannot be resold without restriction pursuant to Rule 144 promulgated under the U.S. Securities Act of 1933, as amended. Collaboration Accounting The Collaboration Agreement was evaluated under ASC 808, Collaborative Agreements. At the outset of the Collaboration Agreement, the Company concluded that it does not qualify as collaboration under ASC 808 because the Company does not share significant risks due to economics of the collaboration. Performance Obligations The Company assessed the Collaboration Agreement and concluded that it represented a contract with a customer within the scope of ASC 606. Per ASC 606, a performance obligation is defined as a promise to transfer a good or service or a series of distinct goods or services. At inception of the Collaboration Agreement, the Company is not obligated to transfer the US License or Global License to BMS unless BMS exercises its US Rights or Global Rights, respectively, and the Company is not obligated to perform development activities under the development plan during preclinical and Phase 1 clinical trials including the regulatory filing of the IND. The discovery, preclinical and clinical development activities performed by the Company are to be performed at the Company’s discretion and are not promised goods or services and therefore are not considered performance obligations under ASC 606, unless and until the Company agrees to perform the Phase 1 clinical studies (after the IND option exercise) that are determined to be performance obligations at the time the option is exercised. Per the terms of the Collaboration Agreement, the Company may conduct discovery activities to characterize, identify and generate antibodies to become collaboration candidates that target such Collaboration Target, and thereafter may pre-clinically develop collaboration candidates to identify lead candidates that target such Collaboration Target and file an IND with the U.S. Food and Drug Administration (the “FDA”) for a Phase 1 clinical trial for such lead candidates. In the event the Company agrees to be involved in a Phase 1 clinical study, the Company will further evaluate whether any such promise represents a performance obligation at the time the option is exercised. If it is concluded that the Company has obligated itself to an additional performance obligation besides the license granted at IND option exercise, then the effects of the changes in the arrangement will be evaluated under the modification guidance of ASC 606. The Company is not obligated to perform manufacturing activities. Per the terms of the Collaboration Agreement, to the extent that the Company, at its discretion, conducts a program, the Company shall be responsible for the manufacture of collaboration candidates and collaboration products for use in such program, as well as the associated costs. Delivery of manufactured compound (clinical product supply) is not deemed a performance obligation under ASC 606 as the Company is not obligated to transfer supply of collaboration product to BMS unless BMS exercises its right to participate in the Phase 1 development. Compensation for the Company’s provision of inventory supply, to the extent requested by BMS would be paid to Prothena by BMS at a reasonable stand-alone selling price for such supply. Given that (i) there is substantial uncertainty about the development of the programs, (ii) the pricing for the inventory is at its standalone selling price and (iii) the manufacturing services require the entity to transfer additional goods or services that are incremental to the goods and services provided prior to the resolution of the contingency, the Company’s supply of product is not a material right. Therefore, the inventory supply is not considered a performance obligation unless and until, requested by BMS. In addition to the grant of the US License after BMS exercises its US Rights for a program, BMS is entitled to receive certain ancillary development services from the Company, such as technology transfer assistance, regulatory support, safety data reporting activities and transition supply, if requested by BMS. In addition to the grant of the Global License after BMS exercises the Global Rights for a program, BMS is entitled to receive certain ancillary development services from Prothena, such as ongoing clinical trial support upon request by BMS, transition supply, if requested by BMS, and regulatory support for coordination of pharmacovigilance matters. The Company evaluated the potential obligations to transfer the US Licenses and Global Licenses and performance of the ancillary development services subsequent to exercise of the US Rights and Global Rights, if the options are exercised by BMS, under ASC 606-10-55-42 and 55-43 to determine whether the US Rights or the Global Rights provided BMS a “material right” and concluded that BMS’s options to exercise its US Rights and Global Rights represented “material rights” to BMS that it would not have received without entering into the Agreement. There are a total of six options including US Rights and Global Rights to acquire a US License and a Global License, respectively, and rights to request certain development services (following exercise of the US Rights and Global Rights, respectively) for each of the three programs. Per ASC 606, the US Rights and Global Rights are material rights and therefore are performance obligations. The goods and services underlying the options are not accounted for as separate performance obligations, but rather become performance obligations, if and when, an option is exercised. Transaction Price According to ASC 606-10-32-2, the transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Factors considered in the determination of the transaction price included, among other things, estimated selling price of the license and costs for clinical supply and development costs. The initial transaction price under the Collaboration Agreement, pursuant to ASC 606, was $110.2 million, including the $100.0 million upfront payment and $10.2 million premium on the ordinary shares purchased under the SSA. The Company expects that the initial transaction price will be allocated across the US Rights and Global Rights for each program in a range of approximately $15-$25 million and $10-$18 million, respectively. The Company did not include the option fees in the initial transaction price because such fees are contingent on the options to the US Rights and the Global Rights being exercised. Upon the exercise of the US Rights and the Global Rights for a program, the Company will have the obligation to deliver the US License and Global License and provide certain ancillary development services if requested by BMS, subsequent to its exercise of the US Rights and Global Rights, respectively, for such program. The Company will include the option fees in the transaction price at the point in time a material right is exercised. In addition, the Company did not include in the initial transaction price certain clinical and regulatory milestone payments since they relate to licenses for which BMS has not yet exercised its option to obtain and these variable considerations are constrained due to the likelihood of a significant revenue reversal. At the inception of the Collaboration Agreement, the Company did not transfer any goods or services to BMS (formerly Celgene) that are material. Accordingly, the Company has concluded that the initial transaction price will be recognized as contract liability and will be deferred until the Company transfers control of goods or services to BMS (which would be when BMS exercises the US Right or Global Right and receives control of the US License or Global License for at least one of the programs), or when the IND Option term expires if BMS does not exercise the US Right (which is generally sixty days after the date on which Prothena delivers to BMS the first complete data package for an IND that was filed for a lead candidate from the relevant program), or when the Phase 1 Option term expires if BMS does not exercise the Global Right (which is generally ninety days after the date on which Prothena delivers to BMS the first complete data package for a Phase 1 clinical trial for a lead candidate from the relevant program) or at the termination of the Collaboration Agreement, whichever occurs first. At such point that the Company transfers control of goods or services to BMS, or when the option expires, the Company will recognize revenue as a continuation of the original contract. Under this approach, the Company will treat the consideration allocated to the material right as an addition to the consideration for the goods or services underlying the contract option. At inception of the Collaboration Agreement, the Company estimated the standalone selling price for each performance obligation (i.e., the US Rights and Global Rights by program). The estimate of standalone selling price for the US Rights and Global Rights by program was based on the adjusted market assessment approach using a discounted cash flow model. The key assumptions used in the discounted cash flow model included the market opportunity for commercialization of each program in the U.S. or globally depending on the license, the probability of successfully developing and commercializing a given program target, the estimated remaining development costs for the respective program, the estimated time to commercialization of the drug for that program and a discount rate. Significant Payment Terms The upfront payment of $100.0 million was due within ten business days after the effective date of the Collaboration Agreement and was received in April 2018, while all option fees and milestone payments are due within 30 days after the achievement of the relevant milestone by BMS or receipt by BMS of an invoice for such an amount from the Company. The Collaboration Agreement does not have a significant financing component since a substantial amount of consideration promised by BMS to the Company is variable and the amount of such variable consideration varies based upon the occurrence or non-occurrence of future events that are not within the control of either BMS or the Company. Variable considerations related to clinical and regulatory milestone payments and option fees are constrained due to the likelihood of a significant revenue reversal. Milestone and Royalties Accounting The Company is eligible to receive milestone payments of up to $90.0 million per program upon the achievement of certain specified regulatory milestones and milestone payments of up to $375.0 million per program upon the achievement of certain specified commercial sales milestones under the US License for such program. The Company is also eligible to receive milestone payments of up to $187.5 million per program upon the achievement of certain specified regulatory milestones and milestone payments of up $375.0 million per program upon the achievement of certain specified commercial sale milestones under the Global License for such program. Milestone payments are evaluated under ASC Topic 606. Factors considered in this determination included scientific and regulatory risk that must be overcome to achieve each milestone, the level of effort and investment required to achieve the milestone, and the monetary value attributed to the milestone. Accordingly, the Company estimates payments in the transaction price based on the most likely approach, which considers the single most likely amount in a range of possible amounts related to the achievement of these milestones. Additionally, milestone payments are included in the transaction price only when the Company can conclude it is probable that a significant revenue reversal will not occur in future periods. The Company excluded the milestone payments and royalties in the initial transaction price because such payments are considered to be variable considerations with constraint. Such milestone payments and royalties will be recognized as revenue at a point in time when the Company can conclude it is probable that a significant revenue reversal will not occur in future periods. The Company did not achieve any clinical and regulatory milestones under the Collaboration Agreement during the three months ended March 31, 2020, and 2019. |
Commitment and Contingencies - Contractual Obligations (Details) $ in Thousands |
Mar. 31, 2020
USD ($)
|
|||||
---|---|---|---|---|---|---|
Purchase Obligations | ||||||
Total | $ 4,459 | [1] | ||||
2020 | 4,459 | [1] | ||||
2021 | 0 | [1] | ||||
2022 | 0 | [1] | ||||
2023 | 0 | [1] | ||||
2024 | 0 | [1] | ||||
Thereafter | 0 | [1] | ||||
Total | ||||||
Total | 5,414 | |||||
2020 | 4,624 | |||||
2021 | 95 | |||||
2022 | 80 | |||||
2023 | 80 | |||||
2024 | 70 | |||||
Thereafter | 465 | |||||
License Agreements [Member] | ||||||
Contractual obligations, Fiscal Year Maturity | ||||||
Total | 955 | [2] | ||||
2020 | 165 | [2] | ||||
2021 | 95 | [2] | ||||
2022 | 80 | [2] | ||||
2023 | 80 | [2] | ||||
2024 | 70 | [2] | ||||
Thereafter | $ 465 | [2] | ||||
|
Income Taxes - Additional Information (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
Jan. 01, 2019 |
|
Income Taxes [Line Items] | ||||
Income tax expense (benefit) | $ (166,000) | $ 198,000 | ||
Net tax shortfall (excess tax benefit) booked to income tax provision, amount | 100,000 | $ 700,000 | ||
Accumulated deficit | $ (695,454,000) | $ (671,885,000) | ||
Revenue Commissioners, Ireland | ||||
Income Taxes [Line Items] | ||||
Effective income tax rate, percent | 12.50% | |||
Swiss Federal Tax Administration (FTA) [Member] | ||||
Income Taxes [Line Items] | ||||
Potential withholding tax rate | 5.00% | |||
ASC-842 [Member] | ||||
Income Taxes [Line Items] | ||||
Cumulative effect of new accounting pronouncement | $ (994,000) | |||
Accumulated deficit | $ 3,786,000 |
Composition of Certain Balance Sheet Items - Schedule of Other Current Liabilities (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Composition of Certain Balance Sheet Items [Abstract] | ||
Payroll and related expenses | $ 2,434 | $ 4,818 |
Professional services | 372 | 400 |
Other | 558 | 322 |
Other current liabilities | $ 3,364 | $ 5,540 |
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Significant accounting policies [line item] | ||
Property and equipment, net | $ 3,531 | $ 3,874 |
UNITED STATES | ||
Significant accounting policies [line item] | ||
Property and equipment, net | 3,500 | 3,900 |
IRELAND | ||
Significant accounting policies [line item] | ||
Property and equipment, net | $ 0 | $ 0 |
Commitment and Contingencies - Schedule of Lease Liability Maturity Analysis and Future Minimum Rentals to be Received - (Details) $ in Thousands |
Mar. 31, 2020
USD ($)
|
---|---|
Operating Lease | |
2020 (9 months) | $ 4,522 |
2021 | 6,165 |
2022 | 6,350 |
2023 | 6,535 |
Total | 23,572 |
Less: Present value adjustment | (1,851) |
Nominal lease payments | (18) |
Lease liability | 21,703 |
Sub-Sublease Rental | |
2020 (9 months) | 2,140 |
2021 | 2,944 |
2022 | 3,047 |
2023 | 3,019 |
Total | $ 11,150 |
Share-Based Compensation |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation 2018 Long Term Incentive Plan In May 2018, the Company’s shareholders approved the 2018 Long Term Incentive Plan (the “2018 LTIP”), which provides for the grant of ISOs, NQSOs, SARs, restricted shares, RSUs, performance bonus awards, performance share units awards, dividend equivalents and other share or cash-based awards to eligible individuals. Options under the 2018 LTIP may be granted for periods up to ten years. All options issued to date have had a ten year life. Under the 2018 LTIP, the number of ordinary shares authorized for issuance under the 2018 LTIP is equal to the sum of (a) 1,800,000 shares, (b) 1,177,933 shares that were available for issuance under the 2012 LTIP as of the May 15, 2018, effective date of the 2018 LTIP, and (c) any shares subject to issued and outstanding awards under the 2012 Long Term Incentive Plan (the “2012 LTIP”) that expire, are cancelled or otherwise terminate following the effective date of the 2018 LTIP; provided, that no more than 2,500,000 shares may be issued pursuant to the exercise of ISOs. Amended and Restated 2012 Long Term Incentive Plan Prior to the effective date of the 2018 LTIP, employees and consultants of the Company, its subsidiaries and affiliates, as well as members of the Company’s Board of Directors, received equity awards under the 2012 LTIP. Options under the 2012 LTIP were granted for periods up to ten years. All options issued to date have had a ten year life. 2020 Employment Inducement Incentive Plan On February 25, 2020, the Company's Board of Directors approved the 2020 Employment Inducement Incentive Plan (the ‘‘2020 EIIP’’). The 2020 EIIP provides for the grant of NQSOs, SARs, restricted shares, RSUs, performance bonus awards, performance share units awards, or other share or cash-based awards to eligible individuals. Options under the 2020 EIIP may be granted for periods up to ten years. All options issued to date have had a ten year life. As of March 31, 2020, the number of ordinary shares authorized for issuance under the 2020 EIIP was 240,000 and no ordinary shares remained available for future awards under the 2020 EIIP, although the Company's Board of Directors reserves the right to amend the 2020 EIIP to increase the number of ordinary shares available and to make additional awards to key new hires. Shares Available for Grant The Company granted 1,455,450 and 852,975 options during the three months ended March 31, 2020, and 2019, respectively, in aggregate under its equity plans. The Company’s option awards generally vest over four years. As of March 31, 2020, 41,972 ordinary shares remained available for grant under the 2018 LTIP, and options to purchase 8,412,412 ordinary shares in aggregate under the Company's equity plans were outstanding with a weighted-average exercise price of approximately $21.41 per share. Share-based Compensation Expense The Company estimates the fair value of share-based compensation on the date of grant using an option-pricing model. The Company uses the Black-Scholes model to value share-based compensation, excluding RSUs, which the Company values using the fair market value of its ordinary shares on the date of grant. The Black-Scholes option-pricing model determines the fair value of share-based payment awards based on the share price on the date of grant and is affected by assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, the Company’s share price, volatility over the expected life of the awards and actual and projected employee stock option exercise behaviors. Since the Company does not have sufficient historical employee share option exercise data, the simplified method has been used to estimate the expected life of all options. The Company uses its historical volatility for the Company’s stock to estimate expected volatility starting January 1, 2018. Although the fair value of share options granted by the Company is estimated by the Black-Scholes model, the estimated fair value may not be indicative of the fair value observed in a willing buyer and seller market transaction. As share-based compensation expense recognized in the Condensed Consolidated Financial Statements is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. Forfeitures were estimated based on estimated future turnover and historical experience. Share-based compensation expense will continue to have an adverse impact on the Company’s results of operations, although it will have no impact on its overall financial position. The amount of unearned share-based compensation currently estimated to be expensed from now through the year 2024 related to unvested share-based payment awards at March 31, 2020, is $45.6 million. The weighted-average period over which the unearned share-based compensation is expected to be recognized is 2.77 years. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate and/or increase any remaining unearned share-based compensation expense. Future share-based compensation expense and unearned share-based compensation will increase to the extent that the Company grants additional equity awards. Share-based compensation expense recorded in these Condensed Consolidated Financial Statements for the three months ended March 31, 2020, and 2019 was based on awards granted under the 2012 LTIP, the 2018 LTIP, and the 2020 EIIP. The following table summarizes share-based compensation expense for the periods presented (in thousands):
The Company recognized tax benefits from share-based awards of $1.1 million and $1.2 million for the three months ended March 31, 2020, and 2019, respectively. The fair value of the options granted to employees and non-employee directors during the three months ended March 31, 2020, and 2019 was estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:
The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period for each award. Each of the inputs discussed above is subjective and generally requires significant management judgment to determine. The following table summarizes the Company’s stock option activity during the three months ended March 31, 2020:
The total intrinsic value of options exercised was approximately $35,000 and $6,100 during the three months ended March 31, 2020, and 2019, respectively, determined as of the date of exercise. |
Net Loss Per Ordinary Share |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Income (Loss) Per Ordinary Share | Net Loss Per Ordinary Share Basic net income (loss) per ordinary share is calculated by dividing net income (loss) by the weighted-average number of ordinary shares outstanding during the period. Shares used in diluted net income per ordinary share would include the dilutive effect of ordinary shares potentially issuable upon the exercise of stock options outstanding. However, potentially issuable ordinary shares are not used in computing diluted net loss per ordinary share as their effect would be anti-dilutive due to the loss recorded during the three months ended March 31, 2020, and 2019, and therefore diluted net loss per share is equal to basic net loss per share. Net loss per ordinary share was determined as follows (in thousands, except per share amounts):
The equivalent ordinary shares not included in diluted net loss per share because their effect would be anti-dilutive are as follows (in thousands):
|
Net Loss Per Ordinary Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Calculation of Basic and Diluted Net Income or Loss Per Ordinary Share | Net loss per ordinary share was determined as follows (in thousands, except per share amounts):
|
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Ordinary Shares Equivalent Not Included in Diluted Net Loss Per Share | The equivalent ordinary shares not included in diluted net loss per share because their effect would be anti-dilutive are as follows (in thousands):
|
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