Palatin Technologies, Inc. — Form 10-Q
Reporting period: Fiscal second quarter and six months ended December 31, 2018. Comparisons are to the periods ended December 31, 2017; balance-sheet comparisons are to June 30, 2018.
Business context and reporting period
Palatin is a development-stage biopharmaceutical company focused on melanocortin and natriuretic peptide receptor medicines. Its lead candidate, Vyleesi (bremelanotide), is licensed to AMAG in North America, Fosun in the Chinese Territories, and Kwangdong in Korea. The company is developing additional MC1r, MC4r, and natriuretic peptide candidates.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2018 | Six months ended Dec. 31, 2018 | Prior-year comparable |
|---|---|---|---|
| Revenue | $0 | $34,505 | $10.6 million; $37.6 million |
| Research and development | $3.0 million | $6.6 million | $6.0 million; $20.2 million |
| General and administrative | $2.1 million | $4.1 million | $1.6 million; $3.2 million |
| Operating loss | $5.1 million | $10.7 million | Operating income of $2.9 million; $14.2 million |
| Net loss | $5.0 million | $10.7 million | Net income of $3.0 million; $13.6 million |
| Net loss per share | $0.02 | $0.05 | Net income per share of $0.02; $0.07 |
Revenue was almost entirely license and collaboration-related, not recurring product sales. The large prior-year revenue reflected recognition of AMAG license-related amounts and a $5.0 million Fosun upfront payment. No gross margin is reported.
For the six months, operating cash use was $11.0 million, versus $1.6 million in the prior-year period, primarily because AMAG-related cash receipts were lower. Financing cash use was $2.3 million, including $4.5 million of debt repayments, partly offset by $2.25 million of ATM stock-sale proceeds. Cash and cash equivalents were $24.7 million at December 31, down from $38.0 million at June 30. Current assets were $25.2 million and current liabilities $4.5 million.
Notes payable, net, totaled $2.32 million, all classified as current. The 2014 venture loan matured and was paid at December 31, 2018; the remaining 2015 loan was scheduled for principal payments through August 2019 and had a $500,000 final payment due then. The company reported compliance with loan covenants. Outstanding common shares increased to 203.1 million from 200.6 million at June 30.
Changes, outlook, risks, and unusual items
- R&D expense declined year over year as Vyleesi Phase 3 trials and related NDA-enabling work concluded; G&A expense rose, primarily due to employee-related costs.
- AMAG’s Vyleesi NDA was accepted for FDA review. The FDA requested additional data on 24-hour ambulatory blood pressure with short-term daily use; the study was ongoing and the PDUFA date was extended to June 23, 2019. Approval was not assured.
- Management expected existing resources, together with any ATM proceeds, to fund planned operations through at least March 31, 2020. Additional funding will be needed for clinical trials and regulatory submissions for candidates other than Vyleesi. The company warned that financing may not be available on acceptable terms, or at all, and sustained profitability remains uncertain.
- PL-8177 oral-dose study data were expected in the first quarter of calendar 2019. If preclinical results were favorable, Palatin anticipated an IND and dry-eye clinical trial for PL-8331 in the second half of calendar 2019, and further MC4r candidate-selection and IND-enabling work during 2019. Palatin also sought a PL-5028 development partner by year-end 2019. These are expectations, not guarantees.
- Palatin may receive future approval, sales-milestone, and royalty payments under its Vyleesi licenses, but the amounts depend on regulatory approval and commercial performance. It retained rights outside the licensed territories and was seeking additional partners.
- Adoption of ASC 606 on July 1, 2018 resulted in a one-time $500,000 transition adjustment related to Kwangdong deferred revenue; the filing says adoption did not affect reported operations or cash flows. No income tax expense was recorded in the current-year periods.
- The company reported no off-balance-sheet arrangements and no current legal proceedings. Management concluded disclosure controls were effective; no material change in internal control was reported.
Important facts for investors to verify
- Whether the requested blood-pressure study supports FDA review and whether Vyleesi receives approval by the stated June 23, 2019 PDUFA date.
- Actual cash burn, remaining ATM capacity and dilution, and whether the March 31, 2020 funding estimate remains supportable.
- Repayment and final-payment status for the remaining venture loan, including the $500,000 payment scheduled for August 2019.
- Clinical progress and data for PL-8177, PL-8331, and other pipeline programs, and the timing and cost of future trials.
- Whether licensees advance Vyleesi in their territories and whether milestone or royalty revenue is achieved.