Palisade Bio, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Palisade Bio is a clinical-stage biopharmaceutical company developing oral therapies for gastrointestinal complications associated with disruption of the intestinal mucosal barrier. Its lead candidate, LB1148, is being developed to accelerate return of bowel function after surgery and potentially reduce post-surgical abdominal adhesions. The filing covers the unaudited quarter ended March 31, 2022. The company reported no product revenue and operates as a single research and development segment.
Key Financial Metrics
| Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $0.96 million | $0.69 million |
| General and administrative expense | $2.93 million | $1.26 million |
| Total operating expenses | $3.89 million | $1.95 million |
| Loss from operations | $3.89 million | $1.95 million |
| Net loss | $4.21 million | $4.03 million |
| Basic and diluted loss per share | $0.26 | $1.45 |
| Net cash used in operating activities | $3.76 million | $1.25 million |
| Cash, cash equivalents and restricted cash at period end | $6.67 million | $0.64 million |
Cash and cash equivalents were $6.64 million at March 31, 2022, down from $10.50 million at December 31, 2021. Total assets were $8.35 million, compared with $12.51 million at year-end 2021. Total liabilities were $3.56 million, including a $1.69 million warrant liability. No principal debt was outstanding at March 31, 2022; the current portion of debt was $87,000 at December 31, 2021. Accumulated deficit was $98.85 million.
Operating and net profit margins are not meaningful because the company has no revenue. The company continues to report substantial operating losses and negative operating cash flow.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 39% to $0.96 million, primarily because clinical trial activity, regulatory work, and LB1148 manufacturing increased as the company advanced toward Phase 3 studies.
- General and administrative expense increased 132% to $2.93 million, driven by public-company accounting, legal, compliance, insurance, staffing, investor relations, recruiting, and other professional costs.
- Total operating expenses nearly doubled, increasing 99% to $3.89 million.
- Net loss increased modestly by $175,000, or 4%, because the higher operating loss was partly offset by lower prior-year debt-related interest and issuance charges and a $793,000 gain from warrant revaluation.
- Cash used in operations increased to $3.76 million from $1.25 million, while financing activities used $87,000 compared with providing $1.15 million in the prior-year period.
- The company issued 2.25 million warrants in January 2022 as consideration for an investor waiver, recording a $1.11 million non-cash loss. It also completed cashless exercises of 3.99 million May 2021 warrants, increasing common shares outstanding to 18.23 million at March 31, 2022.
Guidance, Outlook, Commentary, Risks and Unusual Items
- Management expects research and development expense to increase during 2022 as clinical development of LB1148 advances, while it expects quarterly general and administrative expense to be lower than the unusually high first-quarter level.
- The FDA issued a “Study May Proceed” letter for a planned approximately 600-subject Phase 3 trial of LB1148 in patients undergoing bowel or abdominal surgery. The company intended to initiate the trial in the second quarter of 2022. Newsoara also received Chinese regulatory clearance to begin a Phase 3 trial; Newsoara is responsible for development costs in China.
- Management stated that existing cash would not fund anticipated operations for at least the next 12 months and that additional financing would be required during the second half of 2022. The financial statements therefore disclose substantial doubt about the company’s ability to continue as a going concern.
- Subsequent to quarter-end, on May 6, 2022, the company agreed to sell 3,646,690 common shares at $0.55 per share and issue warrants for an additional 3,646,690 shares at an exercise price of $0.7105. The filing does not state the net proceeds.
- On May 9, 2022, the company entered into approximately $0.8 million of secured insurance financing at 3.82%, payable over nine months.
- On May 12, 2022, the company entered into a smaller headquarters lease commencing in June 2022 and expiring in August 2025, replacing the lease expiring July 31, 2022.
- COVID-19 continued to cause clinical-site activation, patient-enrollment, and LB1148 supply-chain delays, although the company stated it expected sufficient supply for clinical and nonclinical needs through the remainder of 2022.
- Disclosure controls and procedures were not effective as of March 31, 2022 because of a material weakness involving financial close and reporting controls, segregation of duties, journal-entry procedures, and account reconciliations. Management also continued remediation of a prior material weakness related to fair-value calculations for stock options.
- The company has no approved products, no product-sale revenue, and depends on successful clinical development, regulatory approval, financing, manufacturing, and commercialization of LB1148. The stock price had remained below Nasdaq’s $1.00 minimum bid-price requirement since April 7, 2022, creating a potential delisting risk.
Most Important Facts for Investors to Verify
- Whether the May 2022 registered direct offering and concurrent warrant issuance provided sufficient liquidity to fund operations and Phase 3 development.
- The company’s projected cash runway, expected financing needs, and any updated going-concern disclosure in subsequent filings.
- Actual initiation, enrollment, costs, timing, and results of the U.S. and Chinese Phase 3 LB1148 trials.
- Whether COVID-19, manufacturing constraints, clinical-site activation, or patient enrollment cause further delays.
- Progress in remediating the material weaknesses in internal control over financial reporting.
- Compliance with Nasdaq’s minimum bid-price and other continued-listing requirements.
- The dilution and potential overhang from outstanding options and 5.35 million warrants at March 31, 2022, plus the warrants issued in May 2022.
- Whether LB1148 can obtain regulatory approval and achieve commercial adoption despite competition, reimbursement uncertainty, and reliance on third-party manufacturers, CROs, and partners.