Palatin Technologies, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended March 31, 2020 (fiscal 2020 third quarter; not 2019 Q3). Unaudited consolidated results. Palatin is a clinical-stage biopharmaceutical company; its lead product, Vyleesi, is marketed in North America by licensee AMAG.
Financial performance and liquidity
| Metric | Three months ended March 31 | Nine months ended March 31 |
|---|---|---|
| License and contract revenue | $0 in 2020 and 2019 | $117,989 in 2020; $34,505 in 2019 |
| Research and development expense | $3.64 million; prior year $3.94 million | $10.03 million; prior year $10.53 million |
| General and administrative expense | $2.07 million; prior year $1.82 million | $6.31 million; prior year $5.95 million |
| Net loss | $5.38 million; prior year $5.73 million | $15.13 million; prior year $16.45 million |
| Basic and diluted loss per share | $0.02; prior year $0.03 | $0.06; prior year $0.08 |
For the nine-month period, operating expenses were $16.33 million, down from $16.48 million. Investment income helped reduce the net loss; there was no meaningful revenue base from which to assess operating margins. No royalties were earned through March 31 because AMAG had not generated positive net sales.
At March 31, 2020, cash and cash equivalents were $88.95 million, versus $43.51 million at June 30, 2019; current liabilities were $3.36 million and total liabilities $3.37 million. Current assets were $89.62 million, down from $104.41 million, principally as accounts receivable fell from $60.27 million to zero. The company reported no notes payable at quarter-end; its venture debt had been repaid by July 2019.
Nine-month operating cash flow was positive $47.40 million, compared with cash used of $14.84 million in the prior-year period. The filing attributes the change principally to receipt of amounts previously recognized under the AMAG license, including amounts related to Vyleesi’s FDA approval. This cash flow should not be read as recurring operating cash generation. Investing cash use was $0.06 million and financing cash use was $1.90 million; ending cash was $88.95 million.
Material changes and developments
- AMAG announced on January 9, 2020 that it planned to divest Vyleesi and Intrarosa. The filing reported no publicly disclosed North American Vyleesi buyer or sublicensee at the time; AMAG expected to provide further divestiture details by the end of calendar Q2 2020.
- PL9643 Phase 2 dry-eye trial recruitment at additional sites was delayed by COVID-19. Management said that, if enrollment restarted in June 2020, it expected top-line data in calendar Q4 2020.
- Management anticipated at least a six-month COVID-related delay to starting the planned PL8177 Phase 2 ulcerative-colitis study.
- For the nine months, Palatin repurchased and canceled 6.54 million warrants for $2.55 million and raised $1.58 million net through its at-the-market stock offering. Common shares outstanding were 229.24 million at March 31.
Outlook, risks, and other items
Management believed existing capital resources would fund planned operations through at least March 31, 2022. It expects significant further development spending and says additional funding will be needed for clinical trials and potential regulatory submissions. It cautions that financing may not be available on acceptable terms, or at all, and sustained profitability is uncertain.
COVID-19 could disrupt trials, enrollment, clinical sites, regulatory timelines, operations, financing access, and Vyleesi sales and royalties. AMAG’s divestiture creates uncertainty about Vyleesi’s North American marketing and distribution; if Palatin regained the rights, it would need to establish or contract for commercial and related capabilities. International Vyleesi approvals and any resulting royalties also remain uncertain.
The filing identifies no current legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective as of March 31, 2020.
Important facts for investors to verify
- Whether AMAG completed a Vyleesi divestiture or sublicense, and the buyer’s ability and obligation to commercialize the product.
- Whether Vyleesi achieves sales sufficient to generate royalties or sales milestones; reported nine-month revenue was only $117,989 and included no royalties.
- Whether COVID-related trial delays changed PL9643 enrollment or data timing, PL8177’s start date, or other clinical plans.
- Whether cash, spending, and financing plans remain consistent with management’s estimate of funding operations through March 31, 2022.
- The potential effect of equity issuance and outstanding options, restricted stock units, and warrants on dilution.