On March 15, 2017 Pfenex Inc. (NYSE MKT: PFNX), a clinical-stage biotechnology company engaged in the development of biosimilar therapeutics, including high value and difficult to manufacture proteins, reported financial results for the fourth quarter and full year ended December 31, 2016 and provided a business update (Press release, Pfenex, MAR 15, 2017, View Source [SID1234518198]).
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Business Review and Update
PF708 is the Pfenex product candidate that is being developed as a therapeutic equivalent to Forteo (teriparatide), marketed by Eli Lilly for the treatment of osteoporosis patients at high risk of fracture. The PF708 bioequivalence study, conducted in 70 healthy subjects, was completed in the second quarter of 2016 and met its primary objectives. We initiated an immunogenicity/pharmacokinetics clinical study in osteoporosis patients in the fourth quarter of 2016. The interim pharmacokinetic data from this study is expected in the second half of 2017 and the immunogenicity data is expected in the first half of 2018. Pfenex believes this study, along with the positive bioequivalence study, is anticipated to satisfy the filing requirements for PF708 through the 505(b)(2) regulatory pathway.
In August 2016, Pfenex regained full rights from Pfizer to PF582, our biosimilar candidate to Lucentis (ranibizumab) for the treatment of retinal diseases, and announced positive results from the phase 1/2 trial, which showed that PF582 was pharmacologically active and with a safety profile that was consistent with that of Lucentis. We are continuing to explore strategic options for PF582.
Px563L, a novel anthrax vaccine candidate, is being developed by Pfenex in response to the United States government’s unmet demand for increased quantity, stability and dose sparing regimens of anthrax vaccine. We initiated a randomized, placebo-controlled Phase 1a trial in healthy subjects in the second half of 2015 to investigate the safety and immunogenicity of Px563L, and we announced the interim analysis results in the second half of 2016. Findings indicated that the vaccine was well-tolerated, with the potential to afford immunogenicity protection against anthrax infection with fewer injections. The development of Px563L is funded by the U.S. Department of Health and Human Services, through the Biomedical Advanced Research and Development Authority, or BARDA, in accordance with a cost plus fixed fee advanced development contract valued at up to approximately $143.5 million. In addition to the base period, BARDA has now exercised additional phases of the development contract effective January 2017, allowing for the continuing development of Px563L. The phase 2 study could initiate in 2018, provided the program continues to successfully advance with the support of BARDA. Pfenex believes the successful completion of the activities under this contract could lead to a procurement contract for supply of Px563L to the Strategic National Stockpile.
Regulatory feedback for PF529, our biosimilar candidate to Neulasta (pegfilgrastim), was received in 2016 and supported the feasibility of development under the 351(k) biosimilar pathway. Pfenex continues to evaluate the potential resource requirements and timeline for development.
In January 2017, Pfenex announced that Dr. Bertrand C. Liang resigned his position as Chief Executive Officer, President, Secretary and as a member of the Board of Directors of the Company following the completion of an independent investigation overseen by the Audit Committee that revealed Dr. Liang had not acted in accordance with the Company’s Board Approval Process Policy and Code of Ethics and Conduct. The misconduct did not impact the operating results for Pfenex. Patrick K. Lucy, the Company’s Chief Business Officer, was appointed to serve as Interim Chief Executive Officer, President, and Secretary. The Board of Directors has formed a search committee consisting of select independent directors to initiate an executive search for a replacement CEO.
Financial Highlights for the Fourth Quarter and Full Year 2016
Total Revenue increased by $50.6 million, or 528%, from $9.6 million in 2015 to $60.2 million in 2016. The increase in revenue was primarily due to the termination of our development and license agreement with Pfizer. As a result of the termination in August 2016, the estimated performance period was accelerated resulting in the recognition of $45.8 million of revenue that had been previously deferred. As a result of the termination, we will not recognize any additional future revenue under the Pfizer development and license agreement. Revenue increased by $2.2 million, or 68%, to $5.5 million in the three month period ended December 31, 2016 compared to $3.3 million in the same period in 2015. The increase in the three month period was due primarily to one-time milestone payments which contributed approximately $2 million to license fee revenue for the quarter ended December 31, 2016.
Cost of revenue increased by $0.7 million, or 15%, to $5.3 million in 2016 compared to $4.6 million in 2015. The change was due primarily to a net increase of $0.7 million in costs for our proprietary novel vaccine program Px563L, which is funded by a government agency. Cost of revenue decreased by approximately $0.4 million, or 24%, to $1.3 million in the three month period ending December 31, 2016 compared to $1.7 million in the same period in 2015 due primarily to timing of costs related to the development of our Px563L product candidate. Given the nature of the novel vaccine development process, cost of revenue will fluctuate depending on stage of development.
Research and development expenses increased by approximately $14.2 million, or 78%, to $32.4 million in 2016 compared to $18.2 million in 2015. The increase in research and development expenses in 2016 compared to 2015 was due to manufacturing and development activities of PF708, which is being developed as a therapeutically equivalent candidate Forteo, and our other biosimilar product candidates. R&D expenses increased by approximately $4.6 million, or 75%, to $10.7 million in the three months ended December 31, 2016 compared to the same period in 2015. The increase in the three month period was due primarily to manufacturing and development costs associated with our product candidates.
Selling, general and administrative expenses increased by $2.7 million, or 19% to $17.3 million in 2016 compared to $14.6 million in 2015 and increased by $0.7 million, or 18%, to $4.4 million in the three month period ended December 31, 2016 from $3.7 million in the same period in 2015. The increases in selling, general and administrative expenses were primarily due to higher personnel-related expenses.
Cash and cash equivalents as of December 31, 2016 was $81.5 million.