Palisade Bio, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2023. Palisade Bio is a development-stage biopharmaceutical company focused on therapeutics intended to protect intestinal-barrier integrity. The company operates as one research and development segment and has no approved products or product-sale revenue.
Financial position and results
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| License revenue | $0 | $0 | $0.25 million | $0 |
| Research and development expense | $2.18 million | $1.32 million | $3.42 million | $2.28 million |
| General and administrative expense | $1.43 million | $2.26 million | $2.97 million | $5.18 million |
| Total operating expenses | $3.61 million | $3.57 million | $6.39 million | $7.46 million |
| Loss from operations | $3.61 million | $3.57 million | $6.14 million | $7.46 million |
| Net loss | $3.39 million | $2.34 million | $5.73 million | $6.55 million |
| Basic and diluted loss per share | $0.53 loss | $5.77 loss | $1.07 loss | $17.91 loss |
Q2 2023 operating expenses increased 1% year over year. Research and development expense increased 65%, primarily due to higher clinical-trial, translational-research and investigator-site costs. General and administrative expense declined 36% following the 2022 cost-reduction plan. The six-month operating loss improved 18%, largely because of lower general and administrative costs and the $0.25 million license milestone payment.
Other income was $0.22 million in Q2 and $0.41 million for the six-month period, primarily reflecting income from money-market investments and changes in the fair value of liability-classified warrants. The prior-year periods benefited from substantially larger noncash warrant revaluation gains, and the six months ended June 30, 2022 also included a $1.11 million noncash loss on warrant issuance.
Cash flow and liquidity: Cash, cash equivalents and restricted cash totaled $16.43 million at June 30, 2023, including $16.40 million of cash and cash equivalents. Six-month operating cash use was $5.73 million, compared with $7.01 million in the prior-year period. Financing activities provided $9.75 million, including approximately $2.2 million net from the January offering, $5.3 million net from the April offering and $2.8 million from warrant exercises. Investing cash use was $4,000.
Debt and obligations: Current debt was $0.41 million at June 30, 2023. Insurance-financing obligations totaled approximately $0.4 million and were payable over nine months. Remaining minimum office-lease payments were approximately $0.30 million through August 2025, with lease liabilities of $0.27 million after imputed interest.
The company reported an accumulated deficit of $114.9 million and stated that it expects continuing losses and negative operating cash flows. Although management believes existing cash can fund currently planned operations through the end of 2024, the financial statements state that substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance.
Material developments and outlook
- After quarter-end, on August 9, 2023, the company announced that the Phase 2 PROFILE trial of LB1148 did not meet its primary endpoint for reducing post-surgical abdominal adhesions. Management stated that the safety and efficacy results did not support further development of LB1148 for that indication.
- The company indicated that it intends to terminate its U.S. Phase 3 return-of-bowel-function study based on the PROFILE results.
- Following the PROFILE outcome, the company reported that it had no product candidates in preclinical or clinical studies and was prioritizing in-licensing or acquiring novel gastrointestinal therapeutics.
- The company completed January and April 2023 equity offerings and issued substantial warrants. Outstanding warrants increased to approximately 4.01 million at June 30, 2023, creating potential future dilution.
- In June 2023, stockholders approved increases to the 2021 Equity Incentive Plan and Employee Stock Purchase Plan. On August 7, 2023, the board increased shares available under the Inducement Plan from 15,000 to 1,000,000 without stockholder approval under the applicable Nasdaq exemption.
- The company’s disclosure controls and procedures were not effective as of June 30, 2023 because a previously identified material weakness in financial close and reporting controls remained outstanding. Remediation efforts are ongoing.
- Management disclosed risks related to additional financing, dilution, Nasdaq continued-listing compliance, clinical and regulatory uncertainty, intellectual property, third-party dependencies, cybersecurity and the ability to identify and acquire new product candidates.
Most important facts to verify
- Cash runway after the PROFILE trial failure, the planned termination of the Phase 3 study and any changes to operating plans.
- Whether the company can successfully in-license or acquire a new product candidate and the cost and timing of that strategy.
- Future financing requirements, potential equity dilution and the exercise or repricing terms of outstanding warrants.
- Status of the going-concern uncertainty and whether additional capital is available on acceptable terms.
- Remediation and testing of the material weakness in internal control over financial reporting.
- Nasdaq listing compliance, including the minimum bid-price requirement following the PROFILE announcement.
- Milestone and royalty obligations under the Newsoara and University of California license arrangements.