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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
______________________________________ 
FORM 10-Q
 _____________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,2021
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-35676
______________________________________ 
PROTHENA CORPORATION PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
______________________________________ 
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 VK60,Ireland
(Address of principal executive offices including Zip Code)
Registrant’s telephone number, including area code: 011-353-1-236-2500
 ______________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Ordinary Shares, par value $0.01 per sharePRTAThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of ordinary shares outstanding was 46,593,782 as of October 28, 2021.




PROTHENA CORPORATION PLC
Form 10-Q – QUARTERLY REPORT
For the Quarter Ended September 30, 2021
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020
Condensed Consolidated Statements of Shareholders' Equity for the three and nine months ended September 30, 2021 and 2020
Notes to Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
SIGNATURES
EXHIBIT INDEX




Note Regarding Forward-Looking Statements
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may include words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements.
These forward-looking statements, which reflect our beliefs, assumptions, expectations, estimates, forecasts, and projections about our business and the industry in which we operated as of the date hereof, are estimates based on our best judgment. These statements relate to, among other things, our goal of building a protein dysregulation platform; the treatment potential and proposed mechanisms of action of drug candidates; plans for future clinical studies of our drug candidates; our collaborations with Roche and Bristol Myers Squibb and amounts we may receive under such collaborations; the sufficiency of our cash position to fund advancement of a broad pipeline; and our anticipated need for additional capital.
These forward-looking statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this Quarterly Report on Form 10-Q may turn out to be inaccurate. Factors that could cause our actual results to differ materially include, but are not limited to, the risks and uncertainties set forth below, those discussed under Part II Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, and in our other filings with the U.S. Securities and Exchange Commission:
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 and other agreements with third parties, including Roche, Bristol Myers Squibb, and Novo Nordisk;
our ability to protect our patents and other intellectual property;
our ability to hire and retain key employees;
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;
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, including any milestone payments pursuant to our agreement with Novo Nordisk;
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 the emergence of variant strains; and
business disruptions.
Except as required by law or by the rules and regulations of the U.S. Securities and Exchange Commission, we undertake no obligation to revise or update any forward-looking statements to reflect any event or circumstance that arises after the date of this Quarterly Report on Form 10-Q.

Summary of Risks Affecting Our Business
Our business is subject to numerous risks and uncertainties. The following summary highlights some of the risks you should consider with respect to our business and prospects. These risks are described more fully in Part II Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q which includes a more complete discussion of the risks summarized below as well as a discussion of other risks related to our business, our prospects, and your investment in our ordinary shares.
i


We anticipate that we will incur losses for the foreseeable future and we may never sustain profitability.
We will require additional capital to fund our operations, and if we are unable to obtain such capital, we will be unable to successfully develop and commercialize drug candidates.
The COVID-19 pandemic has adversely affected our business and could have a material adverse effect on our liquidity, results of operations, financial condition, or business, including our nonclinical and clinical development programs.
Our success is largely dependent on the success of our research and development programs; our drug candidates are in various stages of development and we may not be able to successfully discover, develop, obtain regulatory approval for, or commercialize any drug candidates.
We have entered into collaborations with Roche and Bristol Myers Squibb and may enter into additional collaborations in the future, and we might not realize the anticipated benefits of such collaborations or other agreements involving milestone payments, such as our agreement with Novo Nordisk.
If clinical trials of our drug candidates are prolonged, delayed, suspended, or terminated, we may be unable to commercialize our drug candidates on a timely basis, which would require us to incur additional costs and delay our receipt of any revenue from potential product sales.
Even if any of our drug candidates receives regulatory approval, if such approved product does not achieve broad market acceptance, the revenues that we generate from sales of the product will be limited.
If we are unable to adequately protect or enforce the intellectual property relating to our drug candidates our ability to successfully commercialize our drug candidates will be harmed.
Our future success depends on our ability to retain key personnel and to attract, retain, and motivate qualified personnel.
ii


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Prothena Corporation plc and Subsidiaries
Condensed Consolidated Balance Sheets (unaudited)
(in thousands, except share and per share data)

September 30,December 31,
20212020
Assets
Current assets:
Cash and cash equivalents$600,098 $295,380 
Accounts receivable79 15 
Prepaid expenses and other current assets7,353 2,537 
Restricted cash, current 1,352 
Total current assets607,530 299,284 
Non-current assets:
Property and equipment, net1,944 2,551 
Operating lease right-of-use assets13,567 17,811 
Deferred tax assets6,503 11,644 
Restricted cash, non-current1,352 1,352 
Other non-current assets1,808 333 
Total non-current assets25,174 33,691 
Total assets$632,704 $332,975 
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable$3,483 $4,117 
Accrued research and development5,315 9,044 
Income taxes payable, current 36 
Deferred revenue, current7,205  
Lease liability, current5,831 5,512 
Other current liabilities7,367 7,139 
Total current liabilities29,201 25,848 
Non-current liabilities:
Deferred revenue, non-current104,557 110,242 
Lease liability, non-current7,922 12,326 
Other liabilities553 553 
Total non-current liabilities113,032 123,121 
Total liabilities142,233 148,969 
Commitments and contingencies (Note 6)
Shareholders’ equity:
Euro deferred shares, €22 nominal value:
  
Authorized shares — 10,000 at September 30, 2021 and December 31, 2020
Issued and outstanding shares — none at September 30, 2021 and December 31, 2020
Ordinary shares, $0.01 par value:
465 399 
Authorized shares — 100,000,000 at September 30, 2021 and December 31, 2020
Issued and outstanding shares — 46,533,247 and 39,921,413 at September 30, 2021 and December 31, 2020, respectively
Additional paid-in capital1,172,881 966,636 
Accumulated deficit(682,875)(783,029)
Total shareholders’ equity490,471 184,006 
Total liabilities and shareholders’ equity$632,704 $332,975 

 See accompanying Notes to Condensed Consolidated Financial Statements.
1


Prothena Corporation plc and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
 (unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Collaboration revenue78,480 $157 $138,661 $443 
Revenue from license and intellectual property60,694  60,744 50 
Total revenue139,174 157 199,405 493 
Operating expenses:
Research and development17,992 21,605 60,226 54,124 
General and administrative11,955 9,398 34,112 28,795 
Total operating expenses29,947 31,003 94,338 82,919 
Income (loss) from operations109,227 (30,846)105,067 (82,426)
Other income (expense):
Interest income11 43 30 1,359 
Other income (expense), net(42)11 (80)3 
Total other income (expense), net(31)54 (50)1,362 
Income (loss) before income taxes109,196 (30,792)105,017 (81,064)
Provision for (benefit from) income taxes(51)(215)4,863 (636)
Net income (loss)$109,247 $(30,577)$100,154 $(80,428)
Basic net income (loss) per ordinary share $2.39 $(0.77)$2.31 ($2.02)
Diluted net income (loss) per ordinary share$2.13 $(0.77)$2.12 ($2.02)
Shares used to compute basic net income (loss) per share 45,626 39,917 43,422 39,912 
Shares used to compute diluted net income (loss) per share 51,205 39,917 47,196 39,912 
See accompanying Notes to Condensed Consolidated Financial Statements.


2


Prothena Corporation plc and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Nine Months Ended
September 30,
20212020
Operating activities
Net income (loss)$100,154 $(80,428)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization875 1,152 
Share-based compensation17,771 16,806 
Deferred income taxes5,141 (1,568)
Amortization of right-of-use assets4,244 4,077 
Changes in operating assets and liabilities:
Accounts receivable(64)46 
Prepaid and other assets(6,291)(1,244)
Accounts payable, accruals and other liabilities(4,202)3,669 
Operating lease liabilities(4,085)(3,778)
Deferred revenues1,520  
Net cash provided by (used in) operating activities115,063 (61,268)
Investing activities
Purchases of property and equipment(256)(145)
Net cash used in investing activities(256)(145)
Financing activities
Proceeds from issuance of ordinary shares in public offering, net78,049  
Proceeds from issuance of ordinary shares in at-the market offering, net96,816  
Proceeds from issuance of ordinary shares upon exercise of stock options13,694 215 
Net cash provided by financing activities188,559 215 
Net increase (decrease) in cash, cash equivalents and restricted cash303,366 (61,198)
Cash, cash equivalents and restricted cash, beginning of the year298,084 378,427 
Cash, cash equivalents and restricted cash, end of the period$601,450 $317,229 
Supplemental disclosures of cash flow information
Cash paid for income taxes, net$568 $672 
Supplemental disclosures of non-cash investing and financing activities
Acquisition of property and equipment included in accounts payable and accrued liabilities
$11 $37 
At-the market offering costs included in accounts payable and accrued liabilities$19 $ 
 See accompanying Notes to Condensed Consolidated Financial Statements.
3


The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.
Nine Months Ended September 30,
20212020
Cash and cash equivalents$600,098 $314,525 
Restricted cash, current 1,352 
Restricted cash, non-current1,352 1,352 
Total cash, cash equivalents and restricted cash, end of the period$601,450 $317,229 
4


Prothena Corporation plc and Subsidiaries
Condensed Consolidated Statements of Shareholders' Equity
(in thousands, except share data)
(unaudited)

Three Months Ended September 30, 2021
Ordinary SharesAdditional Paid-in CapitalAccumulated DeficitTotal Shareholders' Equity
SharesAmount
Balances at June 30, 202144,913,024 $449 $1,079,880 $(792,122)$288,207 
Share-based compensation6,055 6,055 
Issuance of ordinary shares upon exercise of stock options292,045 3 4,129 4,132 
Issuance of ordinary shares in at-the-market offering, net of issuance costs of $2.7 million.
1,328,178 13 82,817 82,830 
Net income109,247 109,247 
Balances at September 30, 202146,533,247 $465 $1,172,881 $(682,875)$490,471 

Three Months Ended September 30, 2020
Ordinary SharesAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Shareholders' Equity
SharesAmount
Balances at June 30, 202039,911,413 399 955,781 (721,736)234,444 
Share-based compensation
5,583 5,583 
Issuance of ordinary shares upon exercise of stock options10,000  64 64 
Net loss
(30,577)(30,577)
Balances at September 30, 202039,921,413 $399 $961,428 $(752,313)$209,514 

Nine Months Ended September 30, 2021
Ordinary SharesAdditional Paid-in CapitalAccumulated DeficitTotal Shareholders' Equity
SharesAmount
Balances at December 31, 202039,921,413 $399 $966,636 $(783,029)$184,006 
Share-based compensation17,771 17,771 
Issuance of ordinary shares upon exercise of stock options946,660 10 13,684 13,694 
Issuance of ordinary shares in public offering, net of issuance costs of $5.5 million
4,025,000 40 78,009 78,049 
Issuance of ordinary shares under the at-the-market offering program, net of issuance costs of $3.2 million
1,640,174 16 96,781 96,797 
Net income100,154 100,154 
Balances at September 30, 202146,533,247 $465 $1,172,881 $(682,875)$490,471 
5


Nine Months Ended September 30, 2020
Ordinary SharesAdditional
Paid-in
Capital
Accumulated
Deficit
Total
Shareholders' Equity
SharesAmount
Balances at December 31, 201939,898,561 399 944,407 (671,885)272,921 
Share-based compensation
16,806 16,806 
Issuance of ordinary shares upon exercise of stock options22,852 215 215 
Net loss
(80,428)(80,428)
Balances at September 30, 202039,921,413 $399 $961,428 $(752,313)$209,514 
See accompanying Notes to Consolidated Financial Statements.
6


Notes to the Condensed Consolidated Financial Statements
(unaudited)
1.Organization
Description of Business

Prothena Corporation plc (“Prothena” or the “Company”) is a late-stage clinical company with a robust pipeline of novel investigational therapeutics built on protein dysregulation expertise with the potential to change the course of devastating rare peripheral amyloid and neurodegenerative diseases.
Fueled by its deep scientific expertise built over decades of research, the Company is advancing a pipeline of therapeutic candidates for a number of indications and novel targets for which its ability to integrate scientific insights around neurological dysfunction and the biology of misfolded proteins can be leveraged. The Company’s wholly-owned programs include birtamimab for the potential treatment of AL amyloidosis, and a portfolio of programs for the potential treatment of Alzheimer’s disease including PRX012 which targets Aβ (Amyloid beta) and a novel dual Aβ-Tau vaccine. The Company’s partnered programs include prasinezumab, in collaboration with Roche for the potential treatment of Parkinson’s disease and other related synucleinopathies, and programs that target tau (PRX005), TDP-43 and an undisclosed target in collaboration with Bristol Myers Squibb for the potential treatment of Alzheimer’s disease, amyotrophic lateral sclerosis (ALS).
The Company was formed on September 26, 2012, under the laws of Ireland and re-registered as an Irish public limited company on October 25, 2012. The Company's ordinary shares began trading on The Nasdaq Global Market under the symbol “PRTA” on December 21, 2012, and currently trade on The Nasdaq Global Select Market.
Liquidity and Business Risks
As of September 30, 2021, the Company had an accumulated deficit of $682.9 million and cash and cash equivalents of $600.1 million.
In March 2021, the Company sold an aggregate of 4,025,000 ordinary shares for net proceeds of approximately $78.0 million, after deducting the underwriting discount and estimated offering expenses, in an underwritten public offering. In May 2021, the Company initiated an at-the-market offering program ("ATM"), which allows the Company to sell and issue shares of the Company's ordinary shares from time-to-time. The Company has issued 1,640,174 ordinary shares, for net proceeds of approximately $96.8 million through September 30, 2021.
Based on the Company's business plans, management believes that the Company’s cash and cash equivalents at September 30, 2021, are sufficient to meet its obligations for at least the next twelve months. To operate beyond such period, or if the Company elects to increase its spending on research and development programs significantly above current long-term plans or enters into potential licenses and or other acquisitions of complementary technologies, products or companies, the Company may need additional capital. The Company expects to continue to finance future cash needs that exceed its cash from operating activities primarily through its current cash and cash equivalents, its collaborations with Roche and Bristol Myers Squibb, its agreement with Novo Nordisk, and, to the extent necessary, through proceeds from public or private equity or debt financings, loans and other collaborative agreements with corporate partners or other arrangements.
2.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 February 26, 2021 (the “2020 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.

7


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 nine months ended September 30, 2021, from the significant accounting policies described in Note 2 of the Notes to Consolidated Financial Statements in the 2020 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 as of September 30, 2021 include amounts due from a Novo Nordisk entity located in Denmark. The Company's credit risk exposure is up to the extent recorded on the Company's Condensed Consolidated Balance Sheet.
As of September 30, 2021, $1.9 million of the Company’s property and equipment, net were held in the U.S. and a nominal amount were in Ireland. As of December 31, 2020, $2.6 million of the Company's property and equipment, net were held in the U.S. and nominal 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
There were no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 30, 2021 that are of significance or potential significance to the Company.

8



3.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.
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.
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 $510.9 million and $226.1 million in money market funds included in cash and cash equivalents at September 30, 2021, and December 31, 2020, respectively.
4.Composition of Certain Balance Sheet Items
Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
September 30,December 31,
20212020
Machinery and equipment$9,464 $9,343 
Leasehold improvements1,394 1,278 
Purchased computer software1,454 1,423 
12,312 12,044 
Less: accumulated depreciation and amortization(10,368)(9,493)
Property and equipment, net$1,944 $2,551 

Depreciation expense was $0.3 million and $0.9 million for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $1.2 million for the three and nine months ended September 30, 2020, respectively.
Other Current Liabilities
Other current liabilities consisted of the following (in thousands):
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September 30,December 31
20212020
Payroll and related expenses$6,246 $5,927 
Professional services693 696 
Other428 516 
Other current liabilities$7,367 $7,139 

5.Net Income (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 and nine months ended September 30, 2020, and therefore diluted net loss per share is equal to basic net loss per share. During the three and nine months ended September 30, 2021, diluted net income per ordinary share is computed by giving effect to all dilutive potential ordinary shares including options.
Net income (loss) per ordinary share was determined as follows (in thousands, except per share amounts):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Numerator:
Net income ( loss)$109,247 $(30,577)$100,154 $(80,428)
Denominator:
Weighted-average ordinary shares outstanding used in per share calculations - basic45,626 39,917 43,422 39,912 
Dilutive stock options outstanding5,5793,774
Weighted-average ordinary shares outstanding used in per share calculations - diluted51,20539,91747,19639,912
Net income (loss) per ordinary share:
Basic $2.39 $(0.77)$2.31 $(2.02)
Diluted$2.13 $(0.77)$2.12 $(2.02)
The equivalent ordinary shares not included in diluted net income (loss) per share because their effect would be anti-dilutive are as follows (in thousands):
 Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Stock options to purchase ordinary shares70 8,795 602 8,795 

6. Commitments and Contingencies
Lease Commitments

The Company currently has three leases relating to its facilities in South San Francisco and Dublin, Ireland.

Current SSF Facility

The Company has a noncancelable operating sublease (the “Lease”) covering 128,751 square feet of office and laboratory space in South San Francisco, California, U.S. (the “Current SSF Facility”). The Lease includes a free rent period and escalating rent payments and has a remaining lease term of 2.25 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.

10


The Company’s 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 $4.8 million for the three and nine months ended September 30, 2021, respectively, and $1.6 million and $4.8 million for the three and nine months ended September 30, 2020, respectively. Total cash paid against the operating lease liability was $1.5 million and $4.6 million for the three and nine months ended September 30, 2021, respectively, and $1.5 million and $4.5 million for the three and nine months ended September 30, 2020, respectively.

The discount rate used to determine the lease liability was 4.25%. To estimate the Company's collateralized incremental borrowing rate, the Company inquired with banks that had a business relationship with the Company. 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 September 30, 2021, 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 and a nominal operating lease for office equipment, none of the Company’s contracts contain a 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, which was received in September 2021. 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 September 30, 2021, none of the remaining standby letter of credit amount of $1.4 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. For the three and nine months ended September 30, 2021, the Company recorded $0.7 million and $2.2 million, respectively, and $0.7 million and $2.2 million for the three and nine months ended September 30, 2020, respectively, of 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.


11


Dublin

The Company has an existing office space in Dublin, Ireland which expires on November 30, 2021. In June 2021, the Company entered into a new lease agreement for new office space in Dublin, Ireland, which commenced in August 2021 and has a term of one year. This new lease has an automatic renewal clause, pursuant to which the agreement will be extended automatically for successive periods equal to the current term, unless the agreement is cancelled by the Company. These operating leases are not included in the lease liability and operating lease right-of-use asset recorded due to their nominal amounts.
As of September 30, 2021, the Company is obligated to make lease payments over the remaining terms of both Dublin leases of approximately €95,000, or $110,096 as converted using an exchange rate as of September 30, 2021.

Future minimum payments under the above-described noncancelable operating leases, including a reconciliation to the lease liabilities recognized in the Condensed Consolidated Balance Sheets, and future minimum rentals to be received under the Sub-Sublease as of September 30, 2021, are as follows (in thousands):

Year Ended December 31,Operating LeasesSub-Sublease Rental
2021 (3 months)1,604 752 
20226,424 3,047 
20236,535 3,019 
2024  
Total 14,563 $6,818 
Less: Present value adjustment(700)
Nominal lease payments(110)
Lease liability$13,753 

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 September 30, 2021, and 2020.
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 September 30, 2021, the Company had non-cancelable purchase commitments to suppliers for $10.8 million of which $2.1 million is included in accrued current liabilities, and contractual obligations under license agreements of $0.5 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 September 30, 2021 (in thousands):
Total20212022202320242025Thereafter
Purchase Obligations (1)
$10,823 $10,823 $ $ $ $ $ 
Contractual obligations under license agreements490 110 55 55 45 45 180 
Total$11,313 $10,933 $55 $55 $45 $45 $180 
________________
(1) Purchase obligations consist of non-cancelable purchase commitments to suppliers and contract research organizations.


12


7. 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; 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; and making a clinical milestone payment of $60.0 million upon dosing of the first patient in the global Phase 2b PADOVA study for prasinezumab, which was achieved in May 2021.
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 May 2021, the Company exercised its rights under the terms of License Agreement to receive potential U.S. commercial sales milestone and royalties, in lieu of a U.S. profit and loss share for prasinezumab in Parkinson’s disease. Thus in the U.S., through May 28, 2021, the parties shared all development costs, all of which were allocated 70% to Roche and 30% to the Company, for prasinezumab in the Parkinson’s disease indication. If the Company opts in to participate in co-development and co-funding for any other Licensed Products and/or indications, the parties will 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, Roche is obligated to pay:
up to $290.0 million upon the achievement of development, regulatory and various first commercial sales milestones;
up to $155.0 million upon achievement of U.S. commercial sales milestones;
up to $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 based on U.S. and ex-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.
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
13


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.

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 September 30, 2021, and December 31, 2020, 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.


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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 September 30, 2021, 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.


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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 September 30, 2021, and December 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 the Company recognizes the reimbursements for Additional Development Services as collaboration revenue as earned.

Revenue and Expense Recognition

The Company recognized nil and $60.2 million as collaboration revenue from Roche for the three and nine months ended September 30, 2021, respectively, as compared to $0.2 million and $0.4 million for the three and nine months ended September 30, 2020, respectively. For the nine months ended September 30, 2021 collaboration revenue from Roche included a $60.0 million clinical milestone recognized upon first patient dosed in the PADOVA study. Through May 28, 2021, cost sharing payments to Roche were recorded as R&D expenses. The Company recognized nil and $7.2 million in R&D expenses for payments made to Roche during the three and nine months ended September 30, 2021 respectively, as compared to $3.8 million and $12.3 million for the three and nine months ended September 30, 2020, respectively. The Company had accounts receivable from Roche of nil and $3,000 at September 30, 2021 and December 31, 2020, 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.
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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 (“PBL”), 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. As discussed below, BMS exercised its US Rights for the Tau/PRX005 Collaboration Target and on July 30, 2021, PBL entered into a U.S. License Agreement granting BMS the exclusive license to develop, manufacture and commercialize antibody products in the United States targeting Tau (the “Tau US License Agreement”).
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 the Company 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.
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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 the Company, in its entirety, if BMS challenges a patent licensed by the Company 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.
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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 the Company 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 the Company, 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.

US License Agreement for the Tau/PRX005 Collaboration Target

On July 30, 2021, the Company entered into the Tau US License Agreement. The Tau US License Agreement includes an upfront payment of $80.0 million and the Company will be eligible to receive regulatory and sales milestones up to $465.0 million upon achievement of certain developmental events, including regulatory approval, of a Tau Collaboration Product, and on BMS achieving certain annual net sales thresholds in the United States. The Company also will be eligible to receive tiered royalties on net sales of Tau Collaboration Products, ranging from high single digit to high teen percentages, on a weighted average basis depending on the achieving of certain net sales thresholds. Such exercise fees, milestones and royalty payments are subject to certain reductions as specified in the agreement.
The Tau US License Agreement includes the following distinct performance obligations: (1) the delivery of the US License for Tau/PRX005 Collaboration Target (“Tau US License Obligation”); and (2) the Company’s obligation to provide development activities under the development plan during Phase 1 clinical trials (the “Tau US Development Services Obligation”). Revenue allocated to the Tau US License Obligation is recognized when the Company has satisfied its obligation at a point in time, while the revenue allocated to the Tau US Development Services Obligation are recognized when the Company has satisfied its obligations ratably over the service period.
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.
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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 the Company 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 the Company 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.
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 and the Company transfers control of the goods and services to BMS. 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.
Upon entering into the Tau US License Agreement, the Company granted BMS a US License for the Tau/PRX005 Collaboration Target, which transferred control of such underlying US License to BMS. Following execution of the Tau US License Agreement, BMS paid the Company an $80.0 million option exercise fee. Under the continuation of the original contract method, the Company computed the relative sales price after the Company transferred control of the US License for Tau/PRX005. The Company used the original allocated consideration for the US Right for Tau/PRX005 of $24.9 million (computed at the inception of the contract) plus the $80.0 million option exercise fee to arrive at the total transaction price of approximately $104.9 million. This total transaction price was further allocated using the relative sales price method between the Tau US License Obligation and the Tau US Development Services Obligation.

The best estimate of selling price for the US License for Tau/PRX005 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 license included the market opportunity for commercialization of Tau/PRX005, the probability of successfully developing/commercializing PRX005, the remaining development costs for Tau/PRX005, and the estimated time to commercialization of Tau/PRX005. Based on the relative selling price method, the amount that the Company allocated to the performance obligations is as follows: $77.5 million to the license to be recognized concurrent with the delivery of the license; and $27.5 million as development services to be recognized based on percentage completion over the service period estimated to be from 2021-2024.

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
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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.

Revenue and Expense Recognition

For the three and nine months ended September 30, 2021, collaboration revenue from BMS that was recognized based on the relative sales price method included $77.5 million in US License revenue and $1.0 million for US development services, for a total of $78.5 million in collaboration revenue related to the Tau/PRX005 program. No collaboration revenue related to the Tau/PRX005 program was recognized during the comparable periods in 2020. As of September 30, 2021, the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied was $26.5 million. The Company had no accounts receivable from BMS at September 30, 2021 and December 31, 2020, respectively.
Deferred Revenue

Of the original deferred revenue balance of $110.2 million at the beginning of the quarter ended September 30, 2021, $24.9 million was recognized as revenue in the quarter ended September 30, 2021 related to the US Right for the Tau/PRX005 program. Of the $80.0 million option exercise fee, $53.6 million was recognized as revenue related to the US License transferred and US Development Services performed in the third quarter and the balance was deferred to future periods and will be recognized as revenue over the remaining service period.

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 nine months ended September 30, 2021 and 2020.
Novo Nordisk Share Purchase Agreement
On July 8, 2021, the Company together with its wholly owned subsidiary, Prothena Biosciences Limited (“PBL”), entered into a definitive share purchase agreement with Novo Nordisk A/S and Novo Nordisk Region Europe A/S (each an unrelated party). Under the terms of such agreement, Novo Nordisk acquired PBL’s wholly-owned subsidiary, Neotope Neuroscience Limited (“NNL”) and gained full worldwide rights to the intellectual property and related rights to the Company’s ATTR amyloidosis business and pipeline. Upon consummation of the transaction, NNL ceased to be a related party of PBL. The aggregate purchase price consists of an upfront payment of $60.0 million in cash, subject to customary purchase price adjustments. In addition, the Company is eligible to receive additional development and sales milestone payments totaling up to $1.17 billion, including a $40.0 million near-term clinical milestone payment.
Should Novo Nordisk achieve certain stages of development or commercialization for products or product candidates containing PRX004 or a derivative thereof in ATTR amyloidosis, PBL is entitled to receive certain milestone payments based on specified development and commercial milestones. The development and commercialization milestone payments will be discounted if the milestone events are achieved with respect to other indications. Should Novo Nordisk achieve specified thresholds of worldwide, annual net sales of the milestone products, regardless of indication, PBL will also be entitled to
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receive specified one-time net sales milestone payments. All milestone payments attributable to an achieved milestone will be paid to PBL, subject to Novo Nordisk’s offset right for indemnity claims or unpaid amounts in respect of any purchase price adjustment.
The upfront payment of $60.0 million was accounted for as revenue for the three and nine months ended September 30, 2021. In addition to the upfront payment, Novo Nordisk agreed to pay for certain out of pocket expenses under the Transition Services Agreement, which netted to $0.7 million after closing adjustments related to the sale of the ATTR amyloidosis program. The total revenue recognized for the three and nine months ended September 30, 2021, related to the transaction was $60.7 million. The Company had accounts receivable of $79,000 and nil from Novo Nordisk as of September 30, 2021 and December 31, 2020, respectively.

Contingent Consideration /Milestone Accounting

The Company is eligible to receive additional development and sales milestone payments from Novo Nordisk totaling up to $1.17 billion upon achievement of certain specified development and commercial sales milestones under the share purchase agreement, including $40.0 million near-term milestone payment.
The Company excluded the milestone payments in the initial transaction price because such payments are considered to be variable considerations with constraint. Such milestone payments 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 development and sales milestones under the share purchase agreement during the three and nine months ended September 30, 2021.
8. Shareholders' Equity
Ordinary Shares
As of September 30, 2021, the Company had 100,000,000 ordinary shares authorized for issuance with a par value of $0.01 per ordinary share and 46,533,247 ordinary shares issued and outstanding. Each ordinary share is entitled to one vote and, on a pro rata basis, to dividends when declared and the remaining assets of the Company in the event of a winding up.
Euro Deferred Shares
As of September 30, 2021, the Company had 10,000 Euro Deferred Shares authorized for issuance with a nominal value of €22 per share. No Euro Deferred Shares are outstanding at September 30, 2021. The rights and restrictions attaching to the Euro Deferred Shares rank pari passu with the ordinary shares and are treated as a single class in all respects.
March 2021 Offering
In March 2021, the Company completed an underwritten public offering of an aggregate of 4,025,000 of its ordinary shares at a public offering price of $20.75 per ordinary share. The Company received aggregate net proceeds of approximately $78.0 million, after deducting the underwriting discount and offering costs.
At-the-Market Offering
In May 2021, the Company initiated an at-the-market offering program ("ATM"), which allows the Company to sell and issue its ordinary shares from time-to-time for aggregate gross proceeds of up to $100.0 million. For the three and nine months ended September 30, 2021, the Company has sold and issued 1,328,178 and 1,640,174 ordinary shares, respectively, pursuant to the ATM. For the nine months ended September 30, 2021, total gross proceeds was approximately $100.0 million before deducting underwriting discounts, commissions, and other offering expenses payable by the Company of $3.2 million.

9. Share-Based Compensation
2018 Long Term Incentive Plan
In May 2018, the Company’s shareholders approved the 2018 Long Term Incentive Plan. In May 2020 and May 2021, the Company's shareholders approved amendments to the 2018 Long Term Incentive Plan (as amended, the “2018 LTIP”) to increase the number of ordinary shares available for issuance under that Plan by 1,500,000 and 1,800,000 ordinary shares, respectively. Under the 2018 LTIP, the number of ordinary shares authorized for issuance under the 2018 LTIP is equal to the sum of (a) 5,100,000 ordinary shares, (b) 1,177,933 ordinary 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 ordinary shares subject to issued and outstanding awards under
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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 ordinary shares may be issued pursuant to the exercise of ISOs. The 2018 LTIP 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 granted to date, with the exception of options granted pursuant to the Option Exchange (as discussed below), have had a ten year life.
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. All options under the 2012 LTIP were granted for periods of ten years.
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 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 December 31, 2020, the number of ordinary shares authorized for issuance under the 2020 EIIP was 710,000. During the nine months ended September 30, 2021, the 2020 EIIP was further amended to increase the ordinary shares available for issuance under that Plan by 535,000 ordinary shares in aggregate. As of September 30, 2021, the number of ordinary shares authorized for issuance under the 2020 EIIP was 1,245,000 and zero 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 176,000 and 147,000 options during the three months ended September 30, 2021 and 2020, respectively, and 3,323,477 (1,372,587 of which were replacement options granted pursuant to the Option Exchange as discussed below) and 1,865,950 options during nine months ended September 30, 2021, and 2020, respectively, in aggregate under its equity plans. The Company’s option awards generally vest over four years. As of September 30, 2021, 3,152,827 ordinary shares remained available for grant under its equity plans and options to purchase 8,649,897 ordinary shares in aggregate under the Company's equity plans were outstanding with a weighted-average exercise price of approximately $17.97 per share.
2020 Option Exchange Program
On May 19, 2020, the Company's shareholders approved a proposal to allow for a one-time option exchange program (the "Option Exchange") designed to give its employees, including our named executive officers, and non-employee directors of the Company, who are employed by or providing services to the Company through the completion of the Option Exchange, the opportunity to exchange eligible options for new replacement options with an exercise price equal to the fair market value of the Company’s ordinary shares on the date the replacement options are granted. Any new replacement options would be subject to a new initial one-year vesting period from the replacement option grant date and after such initial one-year vesting period would vest in substantially equal installments on the remaining original vesting dates of each exchanged option. Additionally, any new replacement options would have a term equal to the remaining term of the applicable exchanged option.
On November 9, 2020, the Company commenced the Option Exchange which closed on February 12, 2021. Options to purchase approximately 2.1 million ordinary shares were exchanged for options to purchase approximately 1.4 million ordinary shares with an exercise price of $22.85 per share. Options were eligible to exchange if they had an exercise price equal to or greater than $17.63 per share, were granted prior to April 23, 2018, under the 2012 LTIP, and were held by an eligible participant. No incremental share-based compensation expense was recognized for the Option Exchange.

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
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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 2025 related to unvested share-based payment awards at September 30, 2021, is $49.3 million. The weighted-average period over which the unearned share-based compensation is expected to be recognized is 2.05 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 and nine months ended September 30, 2021, and 2020 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):

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Research and development$2,450 $2,088 $6,622 $6,163 
General and administrative 3,605 3,495 11,149 10,643 
Total share-based compensation expense$6,055 $5,583 $17,771 $16,806 
The Company recognized tax benefits from share-based awards of $1.1 million and $1.1 million for the three months ended September 30, 2021 and 2020, and $3.4 million and $3.3 million for the nine months ended September 30, 2021, and 2020 respectively.
With the exception of options granted pursuant to the Option Exchange, the fair value of the options granted to employees and non-employee directors during the three and nine months ended September 30, 2021, and 2020 was estimated as of the grant date using the Black-Scholes option-pricing model assuming the weighted-average assumptions listed in the following table:

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Expected volatility82.8 %79.6 %81.6 %81.1 %
Risk-free interest rate0.9 %0.3 %1.0 %1.0 %
Expected dividend yield  % % %
Expected life (in years)6.06.06.06.0
Weighted average grant date fair value$45.53 $8.56 $18.60 $8.22 
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.

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The following table summarizes the Company’s stock option activity during the nine months ended September 30, 2021:
OptionsWeighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term (years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 20208,744,765 $20.42 7.19$4,656 
Granted (1)
3,323,477 25.19 
Exercised(946,660)14.46 
Forfeited(2)
(467,697)23.62 
Expired(3)
(2,003,988)40.98 
Outstanding at September 30, 20218,649,897 $17.97 7.18$460,683 
Vested and expected to vest at September 30, 20218,228,512 $17.77 7.11$439,882 
Vested at September 30, 20213,433,364 $14.23 6.25$195,691 
________________
(1)Includes replacement options to purchase 1,372,587 ordinary shares granted pursuant to the Option Exchange.
(2)Includes unvested options to purchase 179,959 ordinary shares that were exchanged pursuant to the Option Exchange.
(3)Includes vested options to purchase 1,934,446 ordinary shares that were exchanged pursuant to the Option Exchange.
The total intrinsic value of options exercised was approximately $14.6 million and $59,000 during the three months ended September 30, 2021, and 2020, respectively, and $28.2 million and $94,000 during the nine months ended September 30, 2021, and 2020, respectively, determined as of the date of exercise.
10. Income Taxes
The major taxing jurisdictions for the Company are Ireland and the U.S. The Company recorded an income tax (benefit) /provision of ($51,000) and $4.9 million for the three and nine months ended September 30, 2021, as compared to an income tax benefit of $215,000 and $636,000 for the three and nine months ended September 30, 2020, 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, exempt Irish income, U.S. income taxed at different rates, and adjustments to deferred taxes for the deductibility of stock compensation. 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.
On January 1, 2021, the Company adopted the Accounting Standards Update 2019-12 ("ASU 2019-12"), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. There were no impacts from the provisions of ASU 2019-12 on the Company’s tax provision for the nine months ended September 30, 2021.
Pursuant to ASU 2016-09, the Company recorded a net tax benefit of $0.4 million and net tax shortfall of $37,000 for the three and nine months ended September 30, 2021, respectively, and a net tax shortfall of a nominal amount and $0.1 million for the three and nine months ended September 30, 2020, all of which were recorded as part of its income tax provision in the Condensed Consolidated Statements of Operations.
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 (“DTA”) are composed primarily of its Irish subsidiaries' net operating loss carryforwards, 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.
For the nine months ended September 30, 2021, the Company recorded a reduction in DTA of $5.1 million, primarily due to changes in the Company’s 162(m) limitations of $3.5 million as a result of the Company’s option exchange program that
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closed on February 12, 2021, which was considered a material modification from a tax perspective and a $0.7 million DTA reduction related to the newly issued American Rescue Plan Act, which expanded the list of covered employees.
No provision for income tax in Ireland has been recognized on undistributed earnings of the Company’s U.S. subsidiaries as the Company considers the U.S. earnings to be indefinitely reinvested.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In addition to historical information, this Quarterly Report on Form 10-Q contains forward-looking statements which may cause our actual results to differ materially from expectations, plans and anticipated results discussed in forward-looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, the risks and uncertainties set forth in the “Summary of Risks Affecting Our Business” at the beginning of this Quarterly Report on Form 10-Q, Part II Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q, and in our other filings with the U.S. Securities and Exchange Commission.
This discussion should be read in conjunction with the Condensed Consolidated Financial Statements and Notes presented in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and Notes contained in our Annual Report on Form 10-K filed with the SEC on February 26, 2021 (the “2020 Form 10-K”).

Overview
Prothena is a late-stage clinical company with a robust pipeline of novel investigational therapeutics built on protein dysregulation expertise with the potential to change the course of devastating rare peripheral amyloid and neurodegenerative diseases. Fueled by our deep scientific expertise built over decades of research, we are advancing a pipeline of therapeutic candidates for a number of indications and novel targets for which our ability to integrate scientific insights around neurological dysfunction and the biology of misfolded proteins can be leveraged.

Our wholly-owned programs include birtamimab for the potential treatment of AL amyloidosis, and a portfolio of programs for the potential treatment of Alzheimer’s disease including PRX012 which targets Aβ (Amyloid beta) and a novel dual Aβ-Tau vaccine. Our partnered programs include prasinezumab, in collaboration with Roche for the potential treatment of Parkinson’s disease and other related synucleinopathies, and programs that target tau (PRX005), TDP-43, and an undisclosed target in collaboration with Bristol Myers Squibb for the potential treatment of Alzheimer’s disease, amyotrophic lateral sclerosis (ALS), or other neurodegenerative diseases. We are also entitled to certain potential milestone payments pursuant to the Company’s share purchase agreement with Novo Nordisk pertaining to the investigational humanized monoclonal antibody known as PRX004, which has completed Phase 1 studies for the treatment of hereditary ATTR amyloidosis.

We were formed on September 26, 2012, under the laws of Ireland and re-registered as an Irish public limited company on October 25, 2012. Our ordinary shares began trading on The Nasdaq Global Market under the symbol “PRTA” on December 21, 2012, and currently trade on The Nasdaq Global Select Market.

Birtamimab for the Potential Treatment of AL Amyloidosis

Birtamimab is an investigational humanized antibody that targets toxic misfolded light chain that causes organ dysfunction and failure in patients with AL amyloidosis. AL amyloidosis is a rare, progressive, and fatal disease where immunoglobulin light chain proteins produced by clonal plasma cells misfold, aggregate, and deposit as amyloid in vital organs. These toxic aggregates and amyloid deposits cause progressive damage and failure of vital organs, including the heart.

Birtamimab binds to both soluble and insoluble amyloid aggregates in multiple organs and promotes the clearance of amyloid deposits via phagocytosis. This depleter mechanism of action broadly targets misfolded kappa and lambda light chain to clear deposited amyloid that causes organ dysfunction and failure in patients with AL amyloidosis. Birtamimab has been granted Fast Track Designation by the U.S. Food and Drug Administration (FDA) for the treatment of Mayo Stage IV patients with AL amyloidosis to reduce the risk of mortality and has been granted Orphan Drug Designation by both the FDA and European Medicines Agency (EMA).

It is estimated that 200,000 to 400,000 patients globally suffer from this rare disease, with approximately 60,000 to 120,000 (or 30%) of those patients being categorized as Mayo Stage IV. Patients categorized at diagnosis as Mayo Stage IV have poor outcomes with current standard-of-care that aims to reduce the production of new protein but does not directly target and clear the toxic amyloid that deposits in organs. There are currently no approved treatments for AL amyloidosis and there is
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an urgent unmet medical need for therapies that improve survival in patients at risk for early mortality due to amyloid deposition.

Confirmatory Phase 3 AFFIRM-AL Study Design under SPA Agreement with FDA

Based on further analyses regarding data from the VITAL study and multiple in-depth discussions with the FDA, we announced plans on February 1, 2021, to advance birtamimab into the confirmatory Phase 3 AFFIRM-AL study in Mayo Stage IV patients with AL amyloidosis. AFFIRM-AL is a registration-enabling Phase 3 study that will be conducted with a primary endpoint of all-cause mortality at p≤0.10 under a Special Protocol Assessment (SPA) agreement with the FDA.

AFFIRM-AL is a global, multi-center, double-blind, placebo-controlled, 2:1 randomized, time-to-event study expected to enroll approximately 150 newly diagnosed, treatment naïve patients with AL amyloidosis categorized as Mayo Stage IV. It has been designed to evaluate the primary endpoint of all-cause mortality with a significance level of p≤0.10. Secondary endpoints will assess change from baseline to month 9 in quality of life as measured by SF-36v2 PCS and functional capacity as measured by 6MWT distance.

An interim analysis will be conducted when approximately 50% of the events have occurred, allowing the independent data monitoring committee to recommend either continuing the study or stopping early for overwhelming efficacy. Patients will receive 24 mg/kg of birtamimab or placebo by intravenous infusion every 28 days, with all patients receiving concurrent standard of care therapy consisting of a first line bortezomib-containing regimen.

Prasinezumab for the Potential Treatment of Parkinson’s Disease and Other Synucleinopathies

Prasinezumab is an investigational monoclonal antibody targeting alpha-synuclein designed to slow the progressive neurodegeneration associated with synuclein misfolding and/or the cell-to-cell transmission of the pathogenic, aggregated forms of synuclein in Parkinson’s disease and other synucleinopathies. Prasinezumab is the focus of a worldwide collaboration between Prothena and Roche. Parkinson’s disease is a progressive degenerative disorder of the central nervous system (CNS) that affects approximately one in 100 people over the age of 60, with incidence increasing based on an aging population. With an estimated seven to 10 million people living with Parkinson’s disease worldwide today, it is the most common neurodegenerative movement disorder and fastest growing neurological disorder. There are currently no disease-modifying treatments available that target the underlying cause of Parkinson’s disease and can slow its progression.

Phase 2b PADOVA Study

A Phase 2b study (PADOVA) to further assess the efficacy of prasinezumab in an expanded patient population is being conducted by Roche. PADOVA is a Phase 2b, randomized, double-blind, placebo-controlled, multicenter study to evaluate the efficacy and safety of prasinezumab in patients with early Parkinson’s disease who are on stable symptomatic (levodopa) medication. The study will enroll 575 patients randomized to receive either prasinezumab or placebo via intravenous infusion every 4 weeks. The primary endpoint is time to meaningful progression on motor signs of the disease, as assessed by ≥5 point increase in Movement Disorder Society – Unified Parkinson’s Disease Rating Scale (MDS-UPDRS) Part III score from baseline.

Prasinezumab is the first anti-alpha synuclein antibody to advance into late-stage development. Prothena earned a $60 million clinical milestone payment upon first patient dosed in the PADOVA study announced in May 2021.

PRX004 for the Potential Treatment of ATTR Amyloidosis

PRX004 is an investigational antibody designed to deplete amyloid associated with disease pathology in hereditary and wild type ATTR amyloidosis without affecting the native tetrameric form of the protein. PRX004’s proposed mechanism of action is to deplete both circulating non-native TTR to prevent further deposition and deposited amyloid to improve organ function. PRX004 has been shown in preclinical studies to inhibit amyloid fibril formation, neutralize soluble aggregate forms of non-native TTR, and promote clearance of insoluble amyloid fibrils through antibody-mediated phagocytosis. This differentiated depleter mechanism of action could be developed as a monotherapy approach to ATTR amyloidosis and might also complement existing therapeutic approaches which either stabilize or reduce production of the native TTR tetramer. It is estimated that between 400,000 to 1.4 million patients suffer from ATTR-cardiomyopathy (ATTR-CM). Within this population, between 130,000 to 490,000 patients are estimated to be moderate-to-advanced and categorized as New York Heart Association Class III and IV. Prothena has completed a Phase 1 study with PRX004 in patients with hereditary forms of ATTR, in which PRX004 was found to be safe and well tolerated.

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On July 12, 2021, we announced that Prothena and Novo Nordisk entered into a definitive purchase agreement under which Novo Nordisk acquired Prothena’s clinical stage antibody PRX004 and broader ATTR amyloidosis business.

Under the terms of the definitive purchase agreement, Novo Nordisk acquires Prothena’s wholly-owned subsidiary and gains full worldwide rights to the intellectual property and related rights of Prothena’s ATTR amyloidosis business and pipeline. The aggregate purchase price consists of an upfront payment of $60 million in cash, subject to customary purchase price adjustments. In addition, we are eligible to receive development and sales milestone payments totaling up to $1.17 billion, including $40 million in near-term clinical milestone payments.

PRX005 for the Potential Treatment of Alzheimer’s Disease

PRX005 is designed to be a best-in-class anti-tau antibody that specifically targets a key region within the microtubule binding region (“MTBR”), which has been shown in preclinical studies to be involved in the pathological spread of tau. Neurofibrillary tangles composed of misfolded tau proteins, along with amyloid beta plaques, are pathological hallmarks of Alzheimer’s disease. Cell-to-cell transmission of pathogenic extracellular tau and the accumulation of pathogenic tau also correlate with the progression of symptomatology and clinical decline in patients with Alzheimer’s disease. Recent publications suggest that during the course of Alzheimer’s disease progression, tau appears to spread throughout the brain via synaptically-connected pathways; this propagation of pathology is thought to be mediated by tau “seeds” containing the MTBR of tau. Additionally, it has been recently reported that the presence of MTBR fragments in cerebrospinal fluid correlate with dementia stages in Alzheimer’s disease to a higher degree than fragments of other tau regions. In preclinical research, antibodies targeting this region of tau were superior in blocking tau uptake and neurotoxicity, which has been associated with efficacy in Alzheimer’s disease animal models. In these preclinical models, PRX005 demonstrated significant inhibition of cell-to-cell transmission and neuronal internalization in vitro and in vivo and slowed pathological progression in a tau transgenic mouse model. A Phase 1 study of PRX005 has been initiated.

Global Neuroscience Research and Development Collaboration with Bristol Myers Squibb
In June 2021, we announced that Bristol Myers Squibb exercised its option under the global neuroscience research and development collaboration to enter into an exclusive U.S. license for PRX005. BMS paid Prothena $80.0 million following the execution of a US License Agreement for PRX005 and transfer of the underlying license.

This global neuroscience research and development collaboration is focused on three proteins implicated in the pathogenesis of several neurodegenerative diseases, including tau, TDP-43 and an undisclosed target. PRX005 is designed to be a best-in-class anti-tau, MTBR-specific antibody for the potential treatment of Alzheimer’s disease and is the first program to advance to the clinic from this collaboration, where the Phase 1 study has initiated. After receiving the $80 million payment described above, Prothena has received a total of $230 million pursuant to the collaboration and is eligible to receive up to an additional $160 million for U.S. rights, up to $165 million for global rights, and up to $1.7 billion for regulatory and commercial milestone payments for a total of up to $2.2 billion plus potential tiered commercial sales royalties across multiple programs.

PRX012 for the Potential Treatment of Alzheimer’s Disease

PRX012 is a high affinity monoclonal antibody targeting a key epitope within the N-terminus of Aβ. We are developing PRX012 as a next generation, high potency, anti-abeta antibody with best-in-class potential. Monoclonal antibodies targeting key epitopes within the N-terminus of Aβ have demonstrated that reducing amyloid plaque burden is associated with the slowing of clinical decline in Alzheimer’s disease. To address the growing prevalence of Alzheimer’s disease with a therapeutic that can be made widely accessible to patients, we have developed highly potent anti-Aβ antibodies that retain or improve key attributes that are thought to underlie the observed efficacy of N-terminally directed therapeutics such as aducanumab, with the aim of offering similar or improved efficacy with convenient subcutaneous dosing regimens.

Prothena antibodies demonstrated a higher binding strength to amyloid than aducanumab; specifically, antibodies with as much as an 11-fold greater affinity/avidity for fibrillar Aβ than aducanumab that also neutralized soluble, toxic (i.e., oligomeric) Aβ species. Prothena antibodies were also shown to recognize Aβ pathology to a greater extent than aducanumab, demonstrating more extensive plaque area binding at lower antibody concentrations, which are estimated to be clinically relevant exposures in the central nervous system following systemic dosing.

In July 2021, we presented a poster at the Alzheimer’s Association International Conference (AAIC) in Denver highlighting the ability of PRX012 to mediate microglial phagocytic clearance of both unmodified Aβ and pyroglutamate-modified AβpE3-42, in plaques of human Alzheimer’s brain tissue ex vivo.

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Dual Aβ-Tau Vaccine for the Potential Treatment and Prevention of Alzheimer’s Disease

We are developing a dual vaccine, which concomitantly targets key epitopes within both the Aβ and tau proteins. Preclinical models suggest that Aβ and tau act synergistically in the development of Alzheimer’s disease; however, the majority of vaccines and passive immunotherapies under development today target only one of these two pathological features.
Our dual Aβ-Tau vaccine is being developed for the potential prevention and treatment of Alzheimer’s disease. In preclinical studies, the Aβ-tau vaccine has generated polyclonal responses against key epitopes within the N-terminal of Aβ and a key region of tau to promote amyloid clearance and blockade of tau transmission. Immunohistochemistry using sera from immunized animals demonstrated an appropriate and balanced immune response with antibodies that react to both Aβ plaques and tau tangles at concentrations expected to be reached in CNS following immunization and resultant titer generation.
In July 2021, we presented a poster at AAIC highlighting the generation of appropriate antibody quantities, phagocytosis of Aβ, and blockade of tau binding to heparan-sulfate analog, a surrogate endpoint for neuronal uptake of tau by various vaccine constructs.

At-the-Market Offering Program

In May 2021, the Company initiated an at-the-market offering program ("ATM"), which allows the Company to sell and issue shares of the Company's ordinary shares from time-to-time for an aggregate gross proceeds of up to $100.0 million. As of September 30, 2021, the Company has issued 1,640,174 ordinary shares pursuant to the ATM, with total gross proceeds of $100.0 million before deducting underwriting discounts, commissions, and other offering expenses payable by the Company of $3.2 million.

Critical Accounting Policies and Estimates
Management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures.

There were no significant changes to our critical accounting policies and estimates during the nine months ended September 30, 2021, from the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Form 10-K.

Recent Accounting Pronouncements

There have been no new accounting pronouncements or changes to accounting pronouncements during the nine months ended September 30, 2021, as compared to the recent accounting pronouncements described in our 2020 Form 10-K, that are of significance or potential significance to us.


Results of Operations
Comparison of Three and Nine Months Ended September 30, 2021 and 2020
Revenue
Three Months Ended September 30,Percentage Change
20212020
(Dollars in thousands)
Collaboration revenue78,480 157 49,887 %
Revenue from license an