Palisade Bio, Inc. — Q1 2023 Form 10-Q Summary
Reporting period: Three months ended March 31, 2023; comparative period is the three months ended March 31, 2022. Palisade is a clinical-stage biopharmaceutical company developing LB1148, an oral tranexamic-acid formulation intended to protect intestinal-barrier integrity and reduce postoperative adhesions and gastrointestinal recovery time.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| License revenue | $0.25 million | $0 | New milestone revenue |
| Research and development expense | $1.24 million | $0.96 million | 29% increase |
| General and administrative expense | $1.54 million | $2.93 million | 47% decrease |
| Total operating expenses | $2.78 million | $3.89 million | 29% decrease |
| Loss from operations | $2.53 million | $3.89 million | 35% improvement |
| Net loss | $2.34 million | $4.21 million | 44% improvement |
| Basic and diluted loss per share | $0.54 loss | $12.96 loss | Reverse-split adjusted |
| Cash used in operating activities | $3.53 million | $3.76 million | 6% decrease |
| Cash, cash equivalents and restricted cash at period-end | $13.32 million | $6.67 million | 100% increase |
Operating and net margins were not meaningful because revenue was limited to a one-time licensing milestone and the Company remains loss-making. Other income was $0.19 million, including approximately $0.15 million of money-market dividend income and a $0.04 million gain from warrant revaluation. The prior-year period included a $1.11 million non-cash loss on warrant issuance.
At March 31, 2023, cash and cash equivalents were $13.30 million, total assets were $15.26 million, total liabilities were $1.52 million, and stockholders’ equity was $13.75 million. The Company reported no outstanding debt at quarter-end; lease liabilities totaled approximately $0.29 million. Accumulated deficit was $111.5 million.
Material changes versus Q1 2022 and year-end 2022
- License revenue of $0.25 million was recognized upon achievement of a Newsoara development milestone; the related receivable was paid in early May 2023.
- Research and development spending increased as clinical activity for LB1148 expanded, including the completed Phase 2 adhesions study and a newly initiated dose-optimization study.
- General and administrative spending declined substantially following cost-reduction actions implemented in 2022, including an approximately 20% workforce reduction.
- Financing activities provided $4.44 million of cash during the quarter, comprising approximately $2.23 million from the January 2023 offering and $2.71 million from warrant exercises, partly offset by issuance costs and debt payments.
- Common shares outstanding increased to 4,563,977 at March 31, 2023 from 2,944,306 at December 31, 2022. Warrants outstanding increased to 1,604,421 from 1,055,672, creating substantial potential dilution.
Clinical, outlook and unusual items
- The U.S. Phase 2 adhesions trial enrolled 35 of 70 planned patients before enrollment was voluntarily ceased. As of May 10, 2023, 22 patients had completed the second surgery, the primary endpoint assessment; topline data was expected in Q2 2023.
- A dose-optimization study for LB1148 recently enrolled its first patient to assess whether alternative dosing could improve the risk profile while maintaining efficacy.
- Newsoara initiated a China Phase 3 trial for return of bowel function in March 2023 and is funding and conducting that trial. Palisade’s U.S. Phase 3 return-of-bowel-function trial remains paused.
- On April 3, 2023, the Company completed an offering generating gross proceeds of $6.0 million and approximately $5.4 million of net proceeds. Management stated that, combined with March 31 cash, these proceeds are expected to fund currently planned operations and clinical programs through the end of 2024.
- Despite this outlook, management disclosed substantial doubt about the Company’s ability to continue as a going concern for one year after issuance of the financial statements, citing continuing losses, clinical-trial uncertainty and the need for future financing.
- Disclosure controls and procedures were not effective as of March 31, 2023 because a previously identified material weakness in internal control over financial reporting remained unremediated. Remediation efforts are ongoing.
- Effective May 15, 2023, Robert McRae transitioned from Chief Operating Officer to executive strategic consultant at monthly compensation of $4,000, initially through November 30, 2023.
Key risks and contingencies
- LB1148 remains unapproved, has not generated product sales, and its clinical efficacy, safety, regulatory pathway and commercial prospects remain uncertain.
- Clinical trials may be delayed, paused, terminated or require additional studies because of enrollment, safety, efficacy, manufacturing or regulatory issues.
- The Company expects continuing operating losses and will require additional capital beyond its current runway; future equity financing could materially dilute existing stockholders.
- Newsoara’s clinical results and execution in China could affect Palisade’s regulatory and commercialization prospects.
- The Company relies heavily on contract research organizations, manufacturers, suppliers and license counterparties, including the Regents of the University of California.
- There are significant potential dilution risks from outstanding warrants, stock options, restricted stock units and conditional equity awards.
- Failure to remediate the material weakness could result in financial reporting errors or delayed reporting.
- Nasdaq continued-listing compliance, intellectual-property protection, product liability, cybersecurity, macroeconomic conditions and access to cash are additional disclosed risks.
Investor verification checklist
- Verify the results and safety profile of the U.S. Phase 2 adhesions study and the status of the dose-optimization study.
- Confirm whether the China Phase 3 trial remains active and review Newsoara’s enrollment, efficacy and safety updates.
- Reconcile the Company’s stated cash runway through the end of 2024 with actual quarterly cash burn and future clinical-trial costs.
- Review the April 2023 financing terms, warrant overhang and resulting fully diluted share count.
- Track remediation of the material weakness in internal control over financial reporting.
- Assess the going-concern disclosure and the timing and terms of any future financing.