Palisade Bio, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2023. Palisade Bio is a development-stage biopharmaceutical company focused on gastrointestinal diseases. In August 2023, the Company discontinued development of LB1148 after its Phase 2 PROFILE study failed to meet its primary endpoint. In September 2023, it shifted its focus to PALI-2108, a preclinical, orally administered, colon-specific PDE4 inhibitor licensed from Giiant Pharma for inflammatory bowel disease.
Financial Highlights
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| License revenue | $0 | $0.25 million, versus $0 |
| Research and development | $1.74 million | $5.16 million |
| In-process research and development | $0.36 million | $0.36 million |
| General and administrative | $1.67 million | $4.64 million |
| Total operating expenses | $3.78 million | $10.17 million |
| Loss from operations | $(3.78) million | $(9.92) million |
| Net loss | $(3.60) million | $(9.33) million |
| Basic and diluted loss per share | $(0.49) | $(1.55) |
| Cash used in operating activities | Not separately disclosed | $(8.39) million |
Because revenue was minimal and no product sales were generated, gross and operating margins are not meaningful. The Company has incurred losses and negative operating cash flow since inception.
- Liquidity: Cash and cash equivalents were $15.31 million at September 30, 2023; cash, cash equivalents and restricted cash totaled $15.34 million.
- Debt and obligations: Current debt was $0.26 million. Insurance financing balances were approximately $0.3 million, and total lease liabilities were $0.24 million.
- Equity: Stockholders’ equity was $14.08 million, compared with $12.48 million at December 31, 2022. The accumulated deficit was $118.5 million.
- Warrants and dilution: Approximately 4.08 million common stock warrants were outstanding at September 30, 2023, in addition to 543,188 stock options and 342,970 unvested restricted stock units.
Material Changes Versus Prior Comparable Period
- Third-quarter research and development expense decreased 10% to $1.74 million, primarily because LB1148 trials were being closed rather than actively enrolled. Nine-month research and development expense increased 23% to $5.16 million because of higher clinical-trial and translational research costs earlier in the year.
- Third-quarter general and administrative expense declined 19% to $1.67 million; nine-month expense declined 36% to $4.64 million, reflecting prior cost-reduction initiatives and lower compensation and professional costs.
- Net loss improved from $3.99 million to $3.60 million for the quarter and from $10.54 million to $9.33 million for the nine months. The comparison was affected by non-cash warrant gains and the absence of the $1.11 million warrant-issuance loss recorded in 2022.
- Operating cash burn declined to $8.39 million from $10.05 million in the prior-year nine-month period.
- The Company raised net proceeds of approximately $2.2 million in January, $5.3 million in April and $1.7 million in September 2023. It also received approximately $2.8 million from warrant exercises.
- Shares outstanding increased to 9.21 million at September 30, 2023 from 2.94 million at December 31, 2022, before considering additional dilution from warrants, options and equity awards.
Strategy, Outlook and Risks
- The Giiant license grants exclusive worldwide rights to develop, manufacture and commercialize PALI-2108 and other Giiant technologies. The Company will share certain preclinical development costs and expects to assume all development, manufacturing and commercialization costs after the first IND or CTA approval.
- Management expects to complete nonclinical IND/CTA-enabling activities by the end of the third quarter of 2024 and submit an initial IND or CTA before the end of 2024. These are forward-looking targets and are not assured.
- Management states that existing cash is expected to fund currently planned operations into the first quarter of 2025, but the financial statements contain a substantial-doubt going-concern disclosure. Additional financing will be required beyond 2024 or sooner if spending or plans change.
- The Giiant arrangement includes milestone payments, payable in cash or stock at the Company’s election, a 5% royalty on defined adjusted gross proceeds from sales or sublicensing, and a payment cap. A $0.21 million contingent milestone obligation was recorded as of September 30, 2023.
- On October 27, 2023, the Company announced a 25% workforce reduction related to the PALI-2108 refocus and expects approximately $0.2 million of fourth-quarter severance and benefit costs.
- Nasdaq notified the Company that its bid price had remained below $1.00 for 30 consecutive trading days. The Company had until April 16, 2024 to regain compliance, subject to potential extensions and other Nasdaq requirements.
- Disclosure controls and procedures were deemed ineffective because a material weakness in internal control over financial reporting remained outstanding. The weakness relates to financial close and reporting controls, segregation of duties, journal-entry procedures and account reconciliations.
- Key risks include the preclinical status and uncertain development prospects of PALI-2108, dependence on Giiant and other third parties, regulatory failure, intellectual-property and license risks, continued operating losses, financing and dilution risk, potential Nasdaq delisting, and the inability to remediate internal-control deficiencies.
Investor Verification Items
- Verify the timing, scope and cost of PALI-2108 IND/CTA-enabling work and whether the planned 2024 regulatory submissions remain achievable.
- Assess cash runway against actual quarterly operating burn, Giiant development obligations, milestone payments and the stated need for additional capital.
- Review the full terms and potential dilution from the 4.08 million outstanding warrants, options, RSUs and stock-settlement rights under the Giiant agreement.
- Monitor Nasdaq bid-price compliance and any subsequent reverse split, extension or delisting action.
- Track remediation of the material weakness and whether future filings report effective disclosure controls.
- Confirm the impact of the LB1148 trial termination, workforce reduction and any remaining trial closeout or contractual obligations.