Palisade Bio, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 22, 2023. Although the request references 2022 Q4, this filing is an annual report covering the full fiscal year. Palisade is a clinical-stage biopharmaceutical company developing LB1148, an oral liquid formulation of tranexamic acid intended to protect intestinal-barrier integrity, reduce postoperative adhesions, and accelerate return of bowel function. The company has no approved products or product-sales revenue.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue in either period |
| Research and development expense | $6.5 million | $2.4 million | Up 169% |
| General and administrative expense | $8.8 million | $9.3 million | Down 6% |
| Restructuring costs | $0.4 million | $0 | New in 2022 |
| Total operating expenses | $15.7 million | $41.9 million | Down 62% |
| Net loss | $14.3 million | $26.6 million | Improved by $12.4 million |
| Net loss per common share | $16.53 | $142.95 | Loss per share improved; amounts reflect reverse split |
| Net cash used in operating activities | $13.4 million | $14.8 million | Improved by $1.4 million |
| Cash, cash equivalents and restricted cash at year-end | $12.4 million | $10.5 million | Up $1.9 million |
Operating results do not support meaningful revenue or operating-margin analysis because the company has no product revenue. The 2021 results included a $30.1 million in-process research and development charge related to the 2021 merger, which did not recur in 2022. Other income in 2022 included a $2.4 million non-cash gain from the change in fair value of warrant liabilities and a $1.1 million non-cash loss on warrant issuance.
At December 31, 2022, total assets were $15.8 million, total liabilities were $3.3 million, stockholders’ equity was $12.5 million, and accumulated deficit was $109.2 million. Debt was $88,000, consisting of insurance-financing obligations; the company reported no other material debt maturities after the remaining insurance-financing payments. The company had a $61,000 warrant liability and approximately $316,000 of remaining office-lease payments, before imputed interest.
Material changes versus the prior comparable period
- Clinical activity resumed and expanded, driving research and development expense up $4.1 million. The increase reflected higher trial-site activity, clinical vendors, consultants, regulatory costs, and LB1148 manufacturing.
- The U.S. Phase 2 adhesions study enrolled 35 of 70 planned patients by December 2022. Enrollment was voluntarily ceased, and topline data from the enrolled patients was expected in the second quarter of 2023.
- The U.S. Phase 3 return-of-bowel-function study enrolled 23 patients before enrollment was paused in November 2022. The pause followed a review that identified prior receipt of unblinded bowel-function data by a former management member and determined that the protocol required additional site standardization and endpoint clarification.
- A September 2022 cost-reduction plan reduced the workforce by approximately 20% and produced $0.4 million of restructuring costs. The former CEO and chief medical officer departed in October 2022; the CFO became interim CEO.
- The company completed equity financings producing net proceeds of approximately $1.4 million in May and $11.5 million in August 2022. It also received approximately $3.7 million from warrant exercises during 2022, including $1.4 million receivable at year-end.
- The company effected a 1-for-50 reverse stock split in November 2022. Shares, options, warrants and per-share amounts in the financial statements were retrospectively adjusted.
- The company’s material weakness in financial-close and reporting controls remained outstanding at December 31, 2022. A separate weakness involving fair-value calculations for options was reported as remediated.
Clinical outlook, management commentary and risks
Management is prioritizing the U.S. Phase 2 adhesions program and planning a dose-optimization pharmacokinetic and pharmacodynamic study, with enrollment expected to begin in the second quarter of 2023. Newsoara received Chinese regulatory clearance to proceed with a Phase 3 trial for return of bowel function, which the company anticipated initiating in 2023. LB1148 has FDA Fast Track designation for postoperative adhesions, certain pediatric postoperative gastrointestinal dysfunction, and accelerated return of bowel function in adults.
Earlier Phase 2 data from China showed a 1.1-day improvement in median return of bowel function versus placebo, with no drug-related serious adverse events reported. A small pooled analysis of adhesion data showed adhesions in 25% of LB1148-treated subjects versus 89% of placebo subjects; however, the analysis included only 17 subjects with second-surgery assessments and may not be predictive of later results.
Management expects continued operating losses and negative operating cash flow. The filing states that available cash at the filing date is insufficient to fund the anticipated level of operations for the next 12 months and that additional financing will be required by mid-2024. The company believes its year-end cash, subsequent financing and warrant-exercise proceeds will fund operations beyond the expected second-quarter 2023 Phase 2 data readout and into mid-2024, but the auditors and management reported substantial doubt about the company’s ability to continue as a going concern.
- LB1148 remains unapproved, and clinical results may not demonstrate safety or efficacy or satisfy FDA requirements.
- The prior unblinded-data issue, protocol deficiencies, and paused U.S. Phase 3 trial could lead to delays, additional costs, revised trial requirements, or termination.
- Regulatory authorities may classify polyethylene glycol in LB1148 as an active ingredient or deem LB1148 a fixed-combination product, potentially requiring additional studies.
- The company depends on contract research organizations, clinical sites, contract manufacturers, suppliers, and Newsoara; failures by these parties could delay development.
- The company will need additional capital and may issue equity or equity-linked securities, creating substantial dilution. It also faces Nasdaq continued-listing requirements.
- There are no approved products, sales infrastructure, or established commercialization capabilities. Pricing, reimbursement, competition and physician adoption remain uncertain.
- Intellectual-property licenses require milestone, royalty, diligence and minimum-spend obligations; failure to comply could result in loss of key rights.
Important facts for investors to verify
- Confirm the final topline results and statistical significance of the 35-patient U.S. Phase 2 adhesions study.
- Determine whether the U.S. Phase 3 return-of-bowel-function program resumes, is redesigned, or is discontinued, and assess the impact of the unblinded-data review.
- Reconcile cash runway assumptions with the company’s $13.4 million annual operating cash burn, subsequent financing, warrant exercises, and expected clinical spending.
- Monitor the going-concern disclosure and the timing, terms, and dilution associated with required future financing.
- Assess remediation of the remaining material weakness in financial-close, journal-entry, account-reconciliation, and segregation-of-duties controls.
- Track regulatory feedback on the 505(b)(2) pathway, tranexamic-acid bridging strategy, and polyethylene glycol/fixed-combination classification.
- Review warrant terms, including down-round provisions and approximately 1.1 million warrants outstanding at December 31, 2022, for potential dilution.