Palisade Bio, Inc. — Fiscal 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023; filed March 26, 2024. The filing presents full-year results rather than a standalone fourth-quarter report. Palisade is a preclinical biotechnology company focused on autoimmune, inflammatory and fibrotic diseases.
Business context
- In September 2023, Palisade entered an exclusive worldwide research collaboration and license agreement with Giiant Pharma for PALI-2108, PALI-1908 and related assets.
- PALI-2108, a locally acting PDE4 inhibitor prodrug, is the lead program for ulcerative colitis and other inflammatory bowel disease indications. PALI-1908 remains in the research stage for Crohn’s disease.
- The company terminated development of LB1148 after its Phase 2 PROFILE study failed to meet its primary endpoint and reported more adverse events and serious adverse events in the treatment group than in the placebo group.
- As of December 31, 2023, Palisade had nine full-time employees and relied on third-party CROs, CDMOs and CMOs for development and manufacturing activities.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| License revenue | $0.25 million | None | New milestone revenue |
| Research and development expense | $6.893 million | $6.547 million | +5% |
| General and administrative expense | $6.202 million | $8.764 million | -29% |
| Restructuring costs | $0.225 million | $0.410 million | -45% |
| Loss from operations | $13.070 million | $15.721 million | Improved by $2.651 million |
| Net loss | $12.300 million | $14.260 million | Improved by $1.960 million |
| Net loss available to common stockholders | $12.316 million | $14.548 million | Improved by $2.232 million |
| Basic and diluted loss per share | $1.80 | $16.53 | Improved |
| Net cash used in operating activities | $11.133 million | $13.360 million | Improved by $2.227 million |
| Net cash provided by financing activities | $11.186 million | $15.258 million | Down $4.072 million |
- There were no product sales or product-related revenues. The $0.25 million of revenue represented a milestone under the Newsoara agreement related to LB1148.
- Cash and cash equivalents were $12.432 million at year-end; cash, cash equivalents and restricted cash totaled $12.458 million.
- Total assets were $14.052 million and total liabilities were $2.739 million. Stockholders’ equity was $11.313 million.
- Outstanding debt was limited primarily to $0.158 million of insurance financing. Remaining operating lease payments were approximately $0.229 million through August 2025, including $0.136 million due in 2024.
- Management stated that year-end cash, together with approximately $2.2 million of net proceeds from a February 2024 warrant inducement transaction, was expected to fund currently planned operations into the first quarter of 2025. The company nevertheless reported substantial doubt about its ability to continue as a going concern.
Material changes versus the prior comparable period
- Strategy shifted from clinical development of LB1148 to preclinical development of PALI-2108 and research on PALI-1908.
- Research and development expense increased modestly because of the Giiant transaction and PALI-2108 activities, despite reductions in LB1148 clinical, manufacturing and regulatory spending.
- General and administrative expense fell by $2.562 million due primarily to prior cost-reduction initiatives, including lower compensation, professional fees, investor relations costs, recruiting expenses and insurance costs.
- Operating cash burn declined by approximately $2.2 million, but financing remained the principal source of liquidity. The company raised approximately $9.4 million net from 2023 equity offerings and received approximately $2.8 million from warrant exercises.
- Common shares outstanding increased from 2.944 million at December 31, 2022 to 9.271 million at December 31, 2023, before the issuance of 3.422 million additional shares in the February 2024 warrant inducement transaction.
- In October 2023, Palisade implemented a reduction in force affecting approximately 25% of its workforce and recorded approximately $0.225 million of restructuring costs.
Guidance, outlook and unusual items
- Palisade expected to complete pivotal IND/CTA-enabling preclinical studies for PALI-2108 by the end of the third quarter of 2024, submit an IND or CTA in the third quarter, and initiate a Phase 1a SAD/MAD study by year-end 2024.
- Topline Phase 1a data were expected late in the first half of 2025, followed by a planned Phase 1b/2 proof-of-concept study in ulcerative colitis in the second half of 2025.
- The company planned to begin preclinical development of PALI-1908 in the first half of 2025.
- The Giiant agreement requires joint preclinical development, milestone payments potentially payable in cash or stock, and a 5% royalty on adjusted gross proceeds from sales or sublicensing of licensed products. A contingent consideration liability of approximately $0.204 million was recorded at year-end.
- Management identified a material weakness in internal control over financial reporting relating to financial close and reporting controls, segregation of duties, journal entries and account reconciliations. The weakness remained unremediated as of December 31, 2023.
- Nasdaq notified the company regarding noncompliance with the $1.00 minimum bid-price requirement and, after director resignations, the requirement for at least three independent audit committee members. Failure to regain compliance could result in delisting.
- The auditor issued an unqualified opinion but included an emphasis regarding substantial doubt about the company’s ability to continue as a going concern.
- No material legal proceedings were reported. The filing states that no material cybersecurity incident was identified during the fiscal year, although material cybersecurity risks remain.
Most important facts for investors to verify
- Available cash, monthly operating burn and the timing, size and terms of the next financing required after the first quarter of 2025.
- Progress toward PALI-2108 IND/CTA submission, completion of toxicology and other enabling studies, and the actual start of Phase 1 trials.
- Whether preclinical findings for PALI-2108 translate into acceptable human safety, pharmacokinetics and pharmacodynamic results.
- Current Nasdaq compliance status, including minimum bid price and audit committee composition.
- Remediation and independent testing of the material weakness in internal control over financial reporting.
- Potential dilution from the February 2024 warrant exercise, replacement warrants, outstanding warrants, stock options and restricted stock units.
- Milestone, royalty and termination obligations under the Giiant license, as well as the prospects for future Newsoara milestone or royalty payments.
- The filing’s internal consistency regarding share counts and post-year-end capitalization, including the 12.771 million shares reported outstanding as of March 21, 2024.