Palatin Technologies, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended June 30, 2022; audited financial statements compare FY2022 with FY2021. Although the request identifies “2021 Q4,” this filing covers FY2022, not a standalone quarter. Share and per-share amounts reflect the 1-for-25 reverse split effective August 30, 2022.
Business context
Palatin is a clinical-stage biopharmaceutical company developing melanocortin-receptor medicines. Its commercial product, Vyleesi, is FDA-approved for acquired, generalized hypoactive sexual desire disorder in premenopausal women. Its main development programs include PL9643 for dry eye disease and PL8177 for ulcerative colitis.
Financial performance and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $1.47 million | $(0.19) million |
| Vyleesi net product revenue | $1.22 million | $(0.28) million |
| Vyleesi gross product sales | $5.82 million | $4.75 million |
| Research and development expense | $21.33 million | $12.93 million |
| Selling, general and administrative expense | $16.51 million | $17.34 million |
| Net loss | $(36.20) million | $(33.60) million |
| Net loss per share | $(3.79) | $(3.55) |
| Cash used in operating activities | $29.92 million | $22.65 million |
- FY2022 net product revenue improved as sales volume rose 22% and product allowances declined. Gross Vyleesi sales increased about 23%; allowances remained substantial at $4.60 million, versus $5.03 million in FY2021.
- R&D expense increased about 65%, primarily from higher melanocortin-receptor program spending. SG&A declined about 5%, mainly due to lower Vyleesi selling expenses, partly offset by costs associated with preferred stock and warrants.
- At June 30, 2022, cash and cash equivalents were $29.94 million, current assets $34.60 million, and current liabilities $16.26 million (working capital of approximately $18.34 million). Cash fell $30.17 million during the year.
- Total liabilities were $19.80 million. The balance sheet reports lease liabilities and other liabilities, but no conventional funded debt balance is clearly identified. Lease obligations totaled approximately $1.15 million; inventory purchase commitments totaled $9.52 million, with $5.75 million accrued as a current liability and $2.86 million as a long-term liability.
- Management and the auditor cited substantial doubt about the company’s ability to continue as a going concern. Management said existing cash, absent additional funding, was expected to fund operations into the second half of FY2023. No financing commitment was in place.
Material changes, outlook and risks
- Development outlook: The Phase 3 MELODY-1 trial of PL9643 continued after an interim Data Monitoring Committee review; topline results were expected in the second quarter of calendar 2023. A second Phase 3 trial was conditional on positive results. PL8177’s Phase 2 ulcerative-colitis study began enrolling in September 2022, after fiscal year-end.
- Manufacturing risk: Lonza advised it would not renew the Vyleesi active-ingredient manufacturing agreement, which expires December 31, 2022. Palatin was evaluating replacement manufacturers; qualification and validation could be costly and time-consuming. The company said existing ingredient supplies were expected to cover forecast demand for at least several years.
- Funding and dilution: In May 2022, Palatin issued $15 million of Series B and C redeemable convertible preferred stock and warrants. The proceeds were held in escrow at June 30 pending investors’ election to convert, redeem for cash, or convert to notes; the filing does not establish the eventual election. Equity financing, debt, cost reductions, licensing or a strategic transaction were under consideration.
- Other material risks: Vyleesi sales remain modest and subject to significant rebates, limited Tier 3 insurance coverage, competition and discretionary consumer spending. The FDA requires two postmarketing studies and a clinical trial for Vyleesi. Clinical, regulatory, manufacturing, third-party contractor, COVID-19, foreign-exchange and capital-market risks could delay programs or adversely affect liquidity.
- Unusual prior-period item: FY2021 included a $2.78 million loss related to termination of the AMAG license agreement; Palatin regained North American Vyleesi rights and received $12.0 million at closing and $4.3 million in March 2021.
- Guidance: The filing provides no formal revenue or earnings guidance. Management expects continued losses and significant development expenses; profitability is uncertain.
- Audit and controls: KPMG issued an unqualified opinion on the financial statements with a going-concern explanatory paragraph. Management reported effective disclosure controls and internal control over financial reporting; the auditor was not engaged to opine on internal-control effectiveness.
Important facts for investors to verify
- Cash runway and the timing, availability and terms of any additional financing or strategic transaction.
- How holders elected to settle the $15 million preferred-stock financing and the resulting cash, debt and dilution implications.
- Replacement-source qualification for Vyleesi active ingredient and the status of supply commitments and accrued losses.
- PL9643 MELODY-1 results and subsequent Phase 3 plans; PL8177 Phase 2 enrollment, interim review and results.
- Vyleesi net sales, gross-to-net allowances, reimbursement access and commercial spending relative to revenue.
- Completion and outcomes of FDA-required Vyleesi postmarketing studies and lactation trial.