Palatin Technologies, Inc. — Form 10-Q Summary
Reporting period: The filing covers the three months ended September 30, 2022, Palatin’s fiscal 2023 first quarter (not calendar 2022 Q1). Filed November 14, 2022. Palatin is a biopharmaceutical company that markets Vyleesi in the U.S. and develops receptor-targeted drug candidates.
Financial performance
| Metric | Quarter ended Sep. 30, 2022 | Prior-year quarter |
|---|---|---|
| Net product revenue | $869,654 | $159,482 |
| Cost of products sold | $86,496 | $53,933 |
| Gross profit / margin | $783,158 / approximately 90% | $105,549 / approximately 66% |
| Research and development | $6.03 million | $3.48 million |
| Selling, general and administrative | $3.51 million | $3.84 million |
| Operating loss | $8.75 million | $7.22 million |
| Net loss | $8.26 million | $7.11 million |
| Net loss per share | $0.86 | $0.75 |
| Cash used in operating activities | $8.58 million | $6.42 million |
Revenue increased about 445% year over year. Management attributed the increase to 60% higher sales volume and lower product allowances as a percentage of gross sales. R&D spending rose primarily with increased melanocortin receptor program activity. SG&A declined mainly because Vyleesi selling expenses were lower.
Liquidity, capital and obligations
- Cash and cash equivalents were $21.19 million at September 30, down from $29.94 million at June 30, 2022. Current liabilities were $15.86 million; current assets were $26.18 million.
- Total liabilities were $19.19 million. The filing reports lease liabilities and other obligations, but no conventional borrowing balance is clearly identified. Separately, $15 million of redeemable preferred stock proceeds remained in escrow, offsetting the preferred-stock balance on the balance sheet.
- After quarter-end, the company completed a registered offering on November 2, 2022, raising approximately $9.1 million net through common stock and warrants. Including this financing, management expected available cash to fund operations into the second half of calendar 2023, based on current plans.
- Management nevertheless concluded that substantial doubt exists about the company’s ability to continue as a going concern for one year from issuance of the financial statements. Additional financing, expense reductions, or other strategic actions may be required.
- Vyleesi manufacturing commitments totaled $9.13 million, including $5.92 million current. The company had accrued $8.26 million in estimated losses related to firm purchase commitments.
Material developments, outlook and risks
- Palatin’s U.S. Vyleesi revenue remained modest relative to operating costs. Vyleesi is FDA-approved for HSDD in premenopausal women; the company also has licensees in China and Korea, with future royalties and milestones dependent on approvals and commercialization.
- PL9643, an ophthalmic candidate for dry eye disease, was in Phase 3; PL8177, an oral candidate for ulcerative colitis, entered Phase 2 in the third quarter of calendar 2022. The filing does not provide specific clinical outcome data or financial guidance.
- The 1-for-25 reverse stock split became effective August 30, 2022. The company cautioned that it may not sustainably increase the share price, improve liquidity, or ensure continued NYSE American listing.
- The Lonza active ingredient supply agreement ran through December 31, 2022; Palatin was discussing an extension and evaluating alternative manufacturers. Qualifying a new manufacturer could be time-consuming and costly.
- Other key risks include recurring losses, dependence on additional financing, clinical and regulatory uncertainty, manufacturing and supply risks, Vyleesi commercialization, and possible COVID-19-related disruption. The company reported no material legal proceedings and no material changes to other previously disclosed risk factors.
Most important facts for investors to verify
- Whether Vyleesi sales growth continues and translates into improved cash generation after allowances and selling costs.
- Cash burn, remaining runway, financing needs, and any effect of the November offering and related warrant dilution.
- The status and cost of Lonza supply arrangements or replacement manufacturing, and the recoverability of inventory commitments.
- Clinical progress and timelines for PL9643 and PL8177, plus regulatory and commercial progress by China and Korea licensees.
- Resolution of the $15 million escrowed preferred financing and its potential cash, debt, conversion, or dilution consequences.