Palatin Technologies, Inc. — Form 10-Q Summary
Business context and period: Unaudited fiscal 2022 second-quarter report for the three and six months ended December 31, 2021. Palatin is a clinical-stage biopharmaceutical company that also markets Vyleesi in the U.S. for premenopausal women with HSDD; development programs include melanocortin and natriuretic peptide candidates.
Financial performance and liquidity
| Metric | Three months ended Dec. 31, 2021 | Six months ended Dec. 31, 2021 |
|---|---|---|
| Net revenue | $322,140 | $481,622 |
| Operating expenses | $8.77 million | $16.15 million |
| Operating loss | $8.45 million | $15.67 million |
| Net loss | $8.69 million | $15.80 million |
| Net loss per share | $0.04 | $0.07 |
| Cash used in operations | $12.71 million for the six-month period |
- Quarterly revenue included $72,140 of Vyleesi net product revenue and $250,000 of Fosun license and contract revenue. Six-month amounts were $231,622 and $250,000, respectively. Product sales were reported net of substantial allowances.
- Research and development expense was $5.43 million for the quarter and $8.91 million for the half-year. Selling, general and administrative expense was $3.32 million and $7.15 million, respectively.
- Cash and cash equivalents were $47.33 million at December 31, 2021, down from $60.10 million at June 30, 2021. Current assets were $51.37 million and current liabilities $13.86 million.
- The balance sheet reports no conventional borrowings; lease liabilities totaled approximately $1.38 million, including operating and finance leases. Inventory purchase commitments were $11.05 million, with $7.07 million current and $3.98 million due thereafter; related estimated-loss accruals totaled about $10.08 million.
Changes versus prior comparable periods
- Quarterly net loss narrowed from $9.99 million to $8.69 million; for the six-month period it increased from $13.93 million to $15.80 million.
- Six-month R&D expense increased from $6.94 million to $8.91 million, primarily reflecting higher spending on melanocortin receptor programs. Six-month SG&A decreased from $7.38 million to $7.15 million.
- Product revenue was positive in 2021, compared with negative net product revenue in 2020, which Palatin attributed to adjustments following its recovery of Vyleesi rights from AMAG. The prior-year six-month period also included a $1.62 million gain on the termination agreement.
- Operating cash use rose from $10.61 million to $12.71 million year over year. The filing cites increased MCr program spending and prior-period cash received under the Vyleesi termination agreement as factors affecting the comparison.
Outlook, risks and unusual items
- Management said available cash was expected to fund current operating plans through at least March 2023. Additional funding will be needed for later-stage clinical trials and, if successful, regulatory submissions; financing may not be available on acceptable terms.
- PL9643 entered Phase 3 trials in the fourth quarter of calendar 2021; PL8177 was scheduled to enter Phase 2 in calendar 2022. The filing provides no numerical revenue or earnings guidance.
- COVID-19 could delay trials, disrupt suppliers or contractors, and affect Vyleesi manufacturing, sales, licensing approvals, and access to capital. Other key risks include clinical and regulatory uncertainty, commercialization and market acceptance, reimbursement, and foreign-exchange exposure.
- Vyleesi supply commitments and related estimated losses are significant obligations; future sales forecasts and currency movements could affect the accruals. The quarter included a $234,078 foreign-currency loss.
- Palatin reported no current material legal proceedings and no material changes to the risk factors in its latest Form 10-K. Management concluded disclosure controls were effective at December 31, 2021.
Important facts for investors to verify
- Whether Vyleesi sales and net revenue improve, given the low reported net product revenue and sizable sales allowances.
- Whether cash consumption stays consistent with management’s stated runway through March 2023 and what additional financing may be required.
- Progress, timelines, and funding needs for PL9643, PL8177, and other development programs.
- Potential changes to Vyleesi inventory commitments and accrued losses, including effects of demand forecasts and foreign exchange.
- Potential dilution: the filing reports 231,695,273 common shares outstanding at December 31, 2021 and 27,828,623 potential shares excluded from diluted EPS as anti-dilutive.