Palatin Technologies, Inc. — Form 10-Q Summary
Reporting period: Three months ended September 30, 2018 (fiscal first quarter); unaudited. Palatin is a development-stage biopharmaceutical company. Its lead candidate, Vyleesi (bremelanotide) for HSDD in premenopausal women, was licensed to AMAG for North America; AMAG’s NDA had been accepted for FDA review.
Financial performance and position
| Metric | Quarter ended Sept. 30, 2018 | Prior-year quarter |
|---|---|---|
| Revenue | $34,505 | $26.94 million |
| Research and development expense | $3.62 million | $14.16 million |
| General and administrative expense | $2.04 million | $1.54 million |
| Net income (loss) | $(5.68) million | $10.60 million |
| Basic and diluted EPS | $(0.03) | $0.05 |
| Operating cash flow | $(5.54) million | $1.43 million |
- Cash and cash equivalents were $32.62 million at quarter-end, down $5.38 million from June 30, 2018. Current liabilities were $8.46 million against current assets of $33.14 million.
- Notes payable, net of discounts, totaled $4.31 million, all classified as current. The underlying venture loans bear interest at one-month LIBOR plus 8.50%; scheduled principal payments and incremental payments remain due. Palatin reported covenant compliance.
- Net cash from financing was $156,455, including $2.22 million of net at-the-market stock proceeds and $2.00 million of debt payments. Common shares outstanding increased to 203.03 million from 200.55 million at June 30.
- Operating margin is not a useful measure for this quarter given minimal licensing revenue and the company’s development-stage operations.
Material changes versus the prior-year quarter
- Revenue fell from $26.94 million to $34,505. The prior-year period included AMAG license-related revenue and a $5.0 million Fosun upfront license payment; current-quarter revenue consisted of additional AMAG cost billings.
- R&D expense declined by $10.54 million, primarily because Palatin completed its Vyleesi Phase 3 program and related NDA-support work in March 2018. G&A expense rose by about $496,000, mainly due to employee-related costs.
- Palatin moved from net income to a net loss and from positive to negative operating cash flow, reflecting the prior period’s unusually high license revenue and cash receipts.
- Interest expense decreased to $206,871 from $456,677 as venture debt was paid down; investment income increased to $153,583 from $51,726.
Outlook, commentary, and risks
- Management expected existing capital resources, together with any proceeds from its at-the-market program, to fund planned operations through at least December 31, 2019. Palatin said additional funding would be needed for clinical trials and regulatory submissions for other candidates; access to financing on acceptable terms is not assured.
- The FDA’s PDUFA date for AMAG’s Vyleesi NDA was March 23, 2019. Palatin was seeking partners for Vyleesi outside its licensed territories. Potential AMAG consideration includes up to $60 million upon FDA approval, up to $300 million in sales milestones, and tiered royalties; these are contingent, not guaranteed receipts.
- Pipeline plans included reporting Phase 1 subcutaneous PL-8177 data in Q4 2018 and expected oral-dosing data in the first half of 2019; possible PL-8331 IND filing and dry-eye clinical start in the second half of 2019, subject to favorable results; and continued early-stage MC4r and natriuretic peptide programs. These are forward-looking expectations.
- Key risks include clinical and regulatory uncertainty, commercialization and partner performance, manufacturing and reimbursement challenges, competition, and the need for additional capital. Palatin reported an accumulated deficit of $337.23 million and stated it had never achieved sustained profitability. No material changes to the prior annual report’s risk factors were reported; no current legal proceedings were disclosed.
- Palatin adopted ASC Topic 606 on July 1, 2018, recording a $500,000 transition adjustment related to the Kwangdong agreement. Management said adoption did not affect the quarter’s statements of operations or cash flows.
Investor verification points
- Verify FDA review progress and outcome for Vyleesi, as well as any resulting approval milestone or commercialization timing.
- Assess the assumptions behind management’s cash runway estimate, future development spending, and financing needs.
- Review the venture-loan repayment schedule, interest exposure, security and covenant terms.
- Track clinical and regulatory milestones for PL-8177, PL-8331, and other pipeline programs, including whether stated timelines were achieved.
- Reconcile the at-the-market proceeds: the cash-flow statement and equity statement report $2,222,447 net proceeds, while the MD&A states $2,222,247.