Palatin Technologies, Inc. — Form 10-Q Summary
Reporting period: Fiscal third quarter and nine months ended March 31, 2019. The supplied filing covers 2019 Q3, notwithstanding the request metadata’s “2018 Q3” label. Financial statements are unaudited.
Business context
Palatin is a clinical-stage biopharmaceutical company developing medicines targeting melanocortin and natriuretic peptide receptors. Its lead candidate, Vyleesi (bremelanotide), is licensed to AMAG for North America and to partners for China and Korea. The FDA was reviewing AMAG’s Vyleesi application for premenopausal women with hypoactive sexual desire disorder (HSDD); the filing reported a PDUFA date of June 23, 2019. Palatin’s other programs include PL-8177, PL-9643, MC4r candidates and natriuretic peptide candidates.
Key financial metrics
| Metric | Three months ended March 31, 2019 | Nine months ended March 31, 2019 | Comparable 2018 period |
|---|---|---|---|
| Revenue | $0 | $34,505 | $8.96 million and $46.52 million |
| Research and development | $3.94 million | $10.53 million | $7.07 million and $27.28 million |
| General and administrative | $1.82 million | $5.95 million | $2.41 million and $5.58 million |
| Net loss (income) | $5.73 million loss | $16.45 million loss | $0.74 million loss and $12.89 million income |
| Operating cash flow | Not separately reported for the quarter | $14.84 million cash used | $8.79 million cash used |
At March 31, 2019, cash and cash equivalents were $19.81 million, current assets $20.51 million, current liabilities $4.94 million, and working capital approximately $15.57 million. Total liabilities were $4.94 million. Notes payable, net, were $1.33 million, all classified as current; the remaining venture loan was scheduled to mature August 1, 2019, with a $500,000 final incremental payment also due. Accumulated deficit was $348.00 million. The filing does not provide a meaningful product gross margin; reported revenue was primarily license and contract revenue.
Changes versus the prior comparable periods
- Revenue fell sharply because most AMAG license revenue had been recognized as Palatin completed its development obligations, and the prior-year nine-month period also included a $5 million Fosun upfront license payment. Current-period revenue was limited to $34,505 of AMAG-related billings.
- R&D expense declined, primarily because Vyleesi Phase 3 trials and related NDA work were completed in March 2018. Nine-month G&A expense rose, mainly due to higher stock-based compensation.
- Nine-month net results shifted from $12.89 million income to a $16.45 million loss, reflecting the absence of prior-year license revenue. Operating cash use increased by about $6.05 million, primarily because of lower AMAG-related cash receipts.
- Cash declined $18.19 million from June 30, 2018. Financing included $5.50 million of note repayments and $2.25 million of net proceeds from at-the-market stock sales. Shares outstanding increased to 203.06 million from 200.55 million at June 30, 2018.
Outlook, risks and notable items
- Management expected existing resources, together with any proceeds from the at-the-market program, to fund planned operations through at least May 31, 2020. Palatin said it would need additional funding for clinical trials and regulatory submissions for candidates other than Vyleesi; additional financing may not be available on acceptable terms.
- AMAG had completed and submitted additional data requested by the FDA concerning 24-hour ambulatory blood pressure with short-term daily Vyleesi use. The FDA review timeline had been extended, with a June 23, 2019 PDUFA date. Approval and commercial success were not assured.
- Management anticipated starting Phase 2 studies of oral PL-8177 in ulcerative colitis and systemic PL-8177 in non-infectious uveitis in calendar Q4 2019. It expected to select an MC4r development candidate and complete related IND-enabling work during 2019, subject to favorable results. Palatin sought a development partner for PL-5028 by year-end 2019.
- Vyleesi’s Phase 3 trials met their stated co-primary efficacy endpoints; common adverse events included nausea, flushing, injection-site reactions and headache, generally described as mild to moderate and transient. Development, regulatory, manufacturing, market-acceptance and financing risks remain material.
- Adoption of ASC Topic 606 resulted in a one-time $500,000 opening accumulated-deficit adjustment for the Kwangdong agreement; it did not affect reported operations or cash flows. The company reported no current legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls. It was in compliance with loan covenants.
Important facts for investors to verify
- Whether the FDA acted on Vyleesi by the stated June 23, 2019 date, and any resulting approval conditions, milestone payments or commercialization plans.
- Whether the stated cash runway remains achievable, given operating cash use, the August 2019 loan maturity and potential need for further equity or other financing.
- Progress and actual timing for planned PL-8177 trials, MC4r candidate selection and a PL-5028 partnership.
- Future dilution and available capacity under the at-the-market equity program; the filing reported 203.06 million shares outstanding and substantial potential equity awards.
- The terms and timing of potential license milestones and royalties, which depend on regulatory approval, partner activity and future sales and are not assured.