Palisade Bio, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2022. Palisade Bio is a clinical-stage biopharmaceutical company developing oral gastrointestinal therapies, led by LB1148. The company has no approved products and no product revenue.
Financial Position and Key Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1.3 million | $2.3 million |
| General and administrative expense | $2.3 million | $5.2 million |
| Total operating expenses | $3.6 million | $7.5 million |
| Loss from operations | $3.6 million | $7.5 million |
| Net loss | $2.3 million | $6.5 million |
| Basic loss per share | $0.12 | $0.36 |
| Net cash used in operating activities | Not separately provided | $7.0 million |
- No meaningful revenue or profit margins were reported because the company has no product sales; operating and net margins are therefore not meaningful.
- Cash and cash equivalents were $5.0 million at June 30, 2022, compared with $10.5 million at December 31, 2021. Including restricted cash, total cash was $5.0 million.
- Total assets were $7.8 million and total liabilities were $3.6 million at June 30, 2022. Stockholders’ equity was $4.2 million.
- Current liabilities included $611,000 of current debt, $98,000 of current lease liabilities, and $1.0 million of accrued liabilities. Insurance financing balances totaled approximately $0.6 million.
- Accumulated deficit was $101.2 million at June 30, 2022.
- Liability-classified warrant liabilities declined to $469,000 from $2.7 million at December 31, 2021, producing a $2.0 million noncash gain in the first half of 2022.
Material Changes Versus Prior Comparable Period
- Second-quarter net loss improved to $2.3 million from $31.7 million, primarily because the prior-year period included a $30.1 million in-process research and development charge related to the Merger.
- First-half net loss improved to $6.5 million from $35.8 million for the same reason, although current-period clinical development and corporate costs increased.
- Research and development expense increased 319% in the quarter and 126% for the first half, reflecting restarted clinical activities, initiation of Phase 3 development, manufacturing scale-up, and higher personnel and contractor costs.
- General and administrative expense decreased 7% in the quarter but increased 41% for the first half, reflecting a full period of public-company costs, higher legal, accounting, insurance, investor-relations, recruiting, and staffing expenses.
- Net cash used in operating activities improved to $7.0 million from $9.0 million, but cash and cash equivalents declined by $5.5 million during the first half.
- In May 2022, the company issued 3.65 million common shares and warrants for net proceeds of approximately $1.4 million. The transaction increased the outstanding common shares to 21.9 million at June 30, 2022.
Business, Clinical Progress, and Outlook
- LB1148 clinical trials restarted in February 2022. The company initiated a U.S. Phase 3 study in June 2022 targeting return of bowel function after gastrointestinal surgery; the planned enrollment is approximately 600 subjects.
- The company expects research and development expense to increase in the second half of 2022 as clinical sites, enrollment, trial vendors, and manufacturing activities expand.
- Management expects general and administrative expense in the second half of 2022 to be lower than in the first half, although public-company and operating costs will continue.
- Newsoara received Chinese regulatory clearance to begin a Phase 3 LB1148 trial and is responsible for development costs in China under the collaboration agreement.
- The company expects to continue incurring operating losses and does not provide a revenue or profitability forecast.
- Management states that existing cash will not fund operations for at least 12 months from issuance of the financial statements and that additional financing will be required during the first half of 2023. The filing expresses substantial doubt about the company’s ability to continue as a going concern.
- After quarter-end, on August 12, 2022, the company announced an intended public offering with gross proceeds of approximately $12.0 million and estimated net proceeds of approximately $10.5 million, subject to closing conditions. The offering included common stock, Series B convertible preferred stock, and Series 1 and Series 2 warrants.
Risks, Contingencies, and Unusual Items
- Clinical, regulatory, manufacturing, patient enrollment, and commercialization risks could delay or prevent approval of LB1148. Prior clinical results may not predict future Phase 3 results.
- COVID-19-related supply-chain constraints have affected LB1148 manufacturing components and could delay clinical or commercial-scale production.
- The company relies on third-party contract research organizations, manufacturers, suppliers, and Newsoara, limiting direct control over clinical execution and supply.
- Liability-classified warrants are remeasured each reporting period, creating potentially significant noncash earnings volatility based on the company’s share price and valuation assumptions.
- The company reported a material weakness in internal control over financial reporting involving financial close processes, segregation of duties, journal entries, account reconciliations, and prior-period option fair-value calculations. Disclosure controls were concluded to be ineffective as of June 30, 2022; remediation was ongoing and had not been tested for effectiveness.
- Nasdaq notified the company that its stock price had remained below the $1.00 minimum bid requirement for 30 consecutive trading days, creating a potential delisting risk.
- The company has no material legal proceedings reported as of June 30, 2022.
Important Facts for Investors to Verify
- Closing, timing, and actual net proceeds of the August 2022 public offering, including dilution from the securities and warrants issued.
- Current cash runway after the August financing and the timing and terms of any further capital raise.
- Enrollment progress, timelines, endpoints, and interim or final results for the U.S. Phase 3 and Phase 2 LB1148 trials.
- Status of the Nasdaq minimum-bid-price deficiency and any reverse split or other compliance action.
- Progress in remediating the material weaknesses in internal control over financial reporting.
- Impact of supply-chain constraints and third-party manufacturing capacity on LB1148 clinical execution.
- Potential dilution from approximately 9.2 million outstanding warrants and 2.7 million stock options at June 30, 2022.