Palatin Technologies, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2021, the company’s fiscal first quarter. Comparative figures are for the three months ended September 30, 2020. Amounts are in U.S. dollars.
Business context
Palatin is a clinical-stage biopharmaceutical company developing therapies targeting melanocortin and natriuretic peptide receptors. Its FDA-approved product, Vyleesi (bremelanotide), is marketed in the United States by Palatin for premenopausal women with hypoactive sexual desire disorder (HSDD). The company also has Vyleesi licensees in China and South Korea. Development programs include MC1r candidates, including PL9643 for dry eye disease, and PL8177 for ulcerative colitis.
Key financial results
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Net product revenue | $159,482 | $(288,560) |
| Research and development expense | $3,484,764 | $2,923,851 |
| Selling, general and administrative expense | $3,836,542 | $2,331,606 |
| Operating loss | $(7,215,757) | $(3,945,422) |
| Net loss | $(7,112,619) | $(3,940,776) |
| Basic and diluted loss per share | $(0.03) | $(0.02) |
- Q1 2021 gross Vyleesi sales were $1.43 million, offset by $1.27 million of sales allowances and accruals, producing $159,482 of net revenue. The prior-year negative net revenue reflected allowances associated with the transition of Vyleesi rights back from AMAG.
- R&D expense increased about 19%, primarily from higher spending on melanocortin receptor programs. SG&A increased about 65%, mainly due to $1.77 million of Vyleesi selling expenses.
- Cash and cash equivalents were $53.42 million at September 30, down from $60.10 million at June 30. Total assets were $59.73 million, total liabilities $16.76 million, and stockholders’ equity $42.97 million. Accumulated deficit was $358.91 million.
- Operating cash flow was a use of $6.42 million in the cash flow statement, compared with $3.81 million provided in the prior-year quarter. Investing cash use was $57,764 and financing cash use was $202,353. Cash declined by $6.68 million during the quarter.
- Current assets were $58.39 million and current liabilities $9.79 million, implying working capital of approximately $48.60 million. The filing does not disclose conventional borrowings; liabilities include operating lease obligations and accrued contractual commitments.
Changes, outlook and risks
- The net loss widened year over year, reflecting higher R&D and SG&A and the absence of the $1.62 million gain on the AMAG license termination recorded in the prior-year quarter. The prior-year quarter also included $10.38 million of cash received in excess of the gain recorded on that termination, affecting the operating cash-flow comparison.
- Management stated that available cash should fund current operating plans through at least December 2022. Additional funding will be needed for clinical trials and, if successful, regulatory submissions. The company may pursue equity or debt financing, collaborations, or licensing arrangements; availability and terms are uncertain. No earnings or revenue guidance was provided.
- The filing described PL9643 as scheduled to enter Phase 3 in calendar Q4 2021 and PL8177 as scheduled to enter Phase 2 in the first half of calendar 2022. These are forward-looking plans, not reported trial outcomes.
- Palatin reported $10.81 million of Vyleesi inventory purchase commitments, including $3.68 million current and $7.13 million due over later periods. Related estimated losses of $3.68 million current and $6.17 million long-term were accrued. Foreign-exchange movements could affect the commitments and future results.
- Risks include uncertain Vyleesi uptake and commercialization costs, clinical and regulatory uncertainty, reliance on contract manufacturers and collaborators, financing needs, and potential COVID-19-related disruption to trials, supply, sales, or operations. The company said no material changes had been made to the risk factors in its latest annual report. No material legal proceedings were reported; management concluded disclosure controls were effective.
Important facts for investors to verify
- Reconcile operating cash use: the cash flow statement reports $6.42 million used, while MD&A reports $6.42 million using a different figure ($6,417,706).
- Track Vyleesi gross sales, rebates and other allowances, net revenue, and the cost of maintaining U.S. commercialization.
- Monitor actual cash burn against management’s stated runway through at least December 2022 and any subsequent financing or collaboration activity.
- Check progress and timing for PL9643 and PL8177 clinical plans, as well as regulatory and commercialization progress by the China and South Korea licensees.
- Assess inventory demand and the $10.81 million of supply commitments, including potential foreign-currency effects.