PALISADE BIO INC
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
PALI$1.13-2.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-12.
0000950170-24-095432
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0000950170-24-124664
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 98 current paragraphs.
52 unchanged; 33 reworded; 13 added; 17 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 3 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
Giiant License Agreement
Current report
On September 1, 2023, we entered into a research collaboration and license agreement (the "Giiant License Agreement") with Giiant Pharma Inc. (“Giiant”). Under the terms of the Giiant License Agreement, we obtained the rights to develop, manufacture, and commercialize all compounds from Giiant, existing now and in the future, and any product containing or delivering any licensed compound, in any formulation or dosage for all human and non-human therapeutic uses for any and all indications worldwide, including those technologies that are the basis of PALI-2108. Pursuant to the terms of the Giiant License Agreement, pre-clinical development of PALI-2108 was jointly undertaken by us and representatives of Giiant. Pursuant to the Giiant License Agreement, we paid, or reimbursed or advanced to Giiant, a portion of the joint development costs. Additionally, per the terms of the Giiant License Agreement, we will pay (i) certain milestone payments (in cash or stock at our sole election) (the "Giiant Milestone Payments) and (ii) royalty payments upon sales or sublicenses to third parties, with such milestone and royalty payments (the "Giiant License Payments") subject to a payment cap (the "Payment Cap").
Current report
On August 2, 2024, we entered into an amendment to the Giiant License Agreement with Giiant (the "Giiant License Agreement Amendment"). Pursuant to the Giiant License Agreement Amendment, we agreed to increase the amount of joint development costs we would reimburse or advance to Giiant pursuant to the Giiant License Agreement. As consideration for the increase, Giiant agreed to (i) a reduction in the Giiant Milestone Payments that would be due to them upon the achievement certain development milestones, and (ii) a decrease to the Payment Cap applied to future Giiant License Payments, as set forth in the original Giiant License Agreement. There were no other changes to the terms of the original Giiant License Agreement as a result of the Giiant License Agreement Amendment that would have a material impact on our results of operations, financial position or future cash flows.
Current report
Approval to Commence Phase I Clinical Study
Current report
On October 9, 2024, Health Canada issued a No Objection Letter (“NOL”) related to our Phase 1 human clinical study of PALI-2108 for the treatment of UC. Following the NOL, we completed our study site initiation visit on October 10, 2024 and we received Institutional Review Board (“IRB”) approval for the study on October 11, 2024. Subsequent to the receipt of the IRB approval, we completed the screening of our first cohort of normal healthy volunteers and we are proceeding with our planned Phase 1 clinical study, which is being conducted in Canada. We have commenced enrollment and on November 6, 2024, we dosed our first subjects in our Phase 1 human clinical study of PALI-2108 for the treatment of UC.
Current report
Planned Clinical Trial in the United States
Current report
In addition to conducting clinical studies in Canada, we anticipate filing an Investigational New Drug Application (“IND”) with the United States Food and Drug Administration (“FDA”) during 2025. If our IND is approved, we anticipate commencing clinical trials of PALI-2108 in the United States during the second half of 2025.
Current report
Phase 1 Clinical Study
Current report
The Phase 1 clinical study of PALI-2108 is a single-center, randomized, double-blinded, placebo-controlled clinical study focused on safety, tolerability, and pharmacokinetics ("PK") in both healthy volunteers and UC patients. The clinical study will include an open-label UC patient cohort multiple dosing arms in which we will evaluate the pharmacodynamics of PALI-2108 in healthy volunteers. We plan to enroll approximately 90 subjects across several arms of this Phase 1 clinical study including, (i) more than five subject cohorts receiving a Single Ascending Dose (“SAD”) with a crossover to evaluate Food Effect (“FE”), (ii) four or more subject cohorts receiving a Multiple Ascending Dose (“MAD”), and (iii) at least one multiple dose in a UC patient cohort. The primary objective of the study is to assess the safety and tolerability of single (healthy subjects) and repeated (healthy subjects and UC patients) oral doses of PALI-2108. Secondary objectives include determining the plasma, urine, colon tissue, and fecal (MAD healthy subjects and UC patients only) as well as the PK and FE of PALI-2108 and its metabolites following a single oral dose in healthy subjects and repeated oral doses in both healthy subjects and UC patients. We have completed screening of our first subject cohort and have commenced enrollment in the study. On November 6, 2024, we dosed our first subjects in our Phase 1 human clinical study of PALI-2108 for the treatment of UC. We anticipate announcing topline data from this study during the second quarter of 2025. Assuming the trial meets its primary objectives, we plan to initiate a Phase 1b/2a clinical study in UC patients in the second half of 2025.
Current report
Research and development expenses of approximately $2.1 million were virtually flat compared to the three months ended September 30, 2023. During the third quarter of 2024, we continued to advance our pre-clinical studies of PALI-2108 and on October 9, 2024, received a NOL from Health Canada, allowing us to proceed with a Phase 1 clinical trial of PALI-2108 for the treatment of UC in Canada, which we have recently commenced with the first dosing of subjects occurring on November 6, 2023. Accordingly, for the three months ended September 30, 2024 we recognized joint development costs of approximately $0.9 million, of which there were virtually none in the three months ended September 30, 2023, and we recognized an approximately $0.8 million increase drug manufacturing costs for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Current report
Offsetting the increases in these costs were (i) lower direct clinical trial-related costs, which decreased by approximately $0.8 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, as a result of our decision to no longer pursue the clinical development of LB1148, which we ceased in August of 2023, (ii) lower employee-related costs, which decreased by approximately $0.3 million as a result of a 25% reduction in our employee workforce in October 2023, specifically research and development employees that were no longer deemed critical for our development of PALI-2108, as well as a decrease in fees associated with the hiring of our Chief Medical Officer ("CMO") in September of 2023, (iii) lower transaction costs of approximately $0.2 million associated with the Giiant License Agreement entered into on September 1, 2023, of which there were none in the three months ended September 30, 2024, and (iv) an approximately $0.4 million non-cash favorable impact associated with a decrease in the fair value of the Giiant Milestone Payments. Pursuant to the Giiant License Agreement Amendment, Giiant agreed to, among other things, a reduction in the Giiant Milestone Payments that would be due to them upon the achievement certain development milestones. As a result, in the three months ended September 30, 2024 we recognized an approximately $0.2 million non-cash gain on the fair value remeasurement of the contingent consideration liability associated with the Giiant Milestone Payment, compared to a non-cash expense of approximately $0.2 million recognized in the three months ended September 30, 2023 that was associated with the initial recording of the contingent consideration liability.
Current report
Comparison of the nine months ended September 30, 2024 and 2023
Current report
Recent Equity Offering
Removed paragraphs (17)
Previous report
We have successfully produced drug substance and engineering batches of the PALI-2108 drug product that are compliant with Good Manufacturing Practice ("GMP"). We have completed rodent and initiated non-rodent, non-pivotal investigational new drug application ("IND") -enabling or a Canadian Clinical Trial Application ("CTA") -enabling pre-clinical studies of PALI-2108 and are currently initiating pivotal IND/CTA-enabling pre-clinical studies, which we expect to be completed by the end of the third quarter of 2024. We plan to submit an IND/CTA in the third quarter of 2024 and initiate clinical trials of PALI-2108 in the fourth quarter of 2024. By the end of 2024, we plan to submit an IND/CTA and initiate a Phase 1 single ascending dose ("SAD") and multiple ascending dose ("MAD") clinical study including food effects in normal healthy volunteers evaluating the safety, tolerability, and pharmacokinetics as well as evaluate a MAD cohort of UC patients with elevated PDE4-associated biomarkers for pharmacodynamic effects. Topline data from the Phase 1 SAD/MAD trial is expected late in the first half of 2025. Following the completion of the Phase 1 SAD/MAD trial, we plan to initiate a Phase 1b/2a proof-of-concept trial in UC patients in the second half of 2025.
Previous report
On September 1, 2023, we entered into a research collaboration and license agreement for substantially all of Giiant Pharma, Inc.'s ("Giiant") current and future proposed products (the “Giiant License Agreement”), including our lead product candidate, PALI-2108. On August 2, 2024, we entered into an amendment to the Giiant License Agreement with Giiant (the "Giiant License Agreement Amendment"). For further details, see Note 9, Subsequent Event, to the notes to the condensed consolidated financial statements for the quarter ended June 30, 2024, included elsewhere in this Quarterly Report on Form 10-Q.
Previous report
Recent Developments in our pre-clinical studies of PALI-2108
Previous report
We continue to execute and provide data from our pre-clinical studies of PALI-2108. Recent key findings in the pre-clinical studies of PALI-2108 include (i) PALI-2108 demonstrates similar target engagement to the PDE4 inhibitor, apremilast, which is approved for use in psoriasis and psoriatic arthritis; (ii) in a DSS colitis mouse model, PALI-2108 significantly prevented colon length reduction in dose dependent manner, and showed dose dependent improvements in body weight score, stool consistency score, fecal blood score, overall disease activity index ("DAI") score, and area under the curve of DAI over the course of the study; and (iii) PALI-2108 exhibited a dose-dependent efficacy response in two DSS colitis mouse models, achieving efficacy comparable to doses of apremilast considered intolerable for human use in UC patients.
Previous report
We continue to prosecute our pre-clinical safety and toxicology studies, including the successful completion of a GI motility and emptying mouse study, cardiovascular and respiratory dog study, central nervous system battery study in mice, pivotal safety and toxicology studies including maximum tolerated dose ("MTD") and dose range finding studies for two species, mouse and dog. Follow up 14-day pivotal studies are completed and pending pathology and draft report, but no-observed-adverse-effect-levels ("NOAEL") have been determined for mice and for dog. Pharmacokinetic and Toxicokinetic analysis was completed for all MTD and pivotal studies. Functional observational battery studies and cardiorespiratory studies show little to no test item impact. GI transit was evaluated due to the mechanism of action and delivery mechanism, though it is not a required pivotal study. In summary, safety and toxicology studies have shown a large safety margin. This cumulative data will be used to estimate the first-in-human dose.
Previous report
We recently received a notice for an intention to grant from the European Patent Office and an allowed Canadian patent from the Canadian Intellectual Property Office, both of which cover the proprietary composition of PALI-2108. We have submitted and plan to submit additional patent applications to continue to strengthen the PALI-2108 intellectual property portfolio.
Previous report
We successfully completed the first GMP batch of PALI-2108. The GMP manufacturing was conducted in partnership with Eurofins, a contract development and manufacturing organization. This partnership included process development and scale-up of PALI-2108 to ensure adherence to regulatory standards. The drug substance produced has been successfully implemented in our completed murine and non-murine GLP toxicology studies and is slated for use in our upcoming Phase 1 clinical study. In addition to the successful production of the drug substance, we have completed manufacturing and performance testing of engineering batches PALI-2108. These batches consist of enteric-coated tablets designed to protect PALI-2108 from upper gut conditions and to be released distally within the small intestine. The drug product batches have consistently demonstrated reliable drug release profiles.
Previous report
We continue to advance our strategic collaboration with Strand Life Sciences, a bioinformatics specialist, which we initiated in April of 2024. Recent key areas of progress include: (i) the identification of candidate PDE4-related biomarkers overlapping with UC pathophysiology, (ii) ongoing research focused on refining patient selection strategies based on PDE4-related biomarkers and disease characteristics to optimize clinical outcomes for patients with UC, and (iii) continued progress in refining our precision medicine approach, integrating clinical biomarkers, disease activity measures, and transcriptomics data, to tailor personalized UC therapies.
Previous report
The increase in research and development expenses from approximately $2.2 million for the three months ended June 30, 2023 to approximately $2.6 million for the three months ended June 30, 2024 is attributable to higher expenses recognized for the three months ended June 30, 2024 that were directly related to the joint development of our lead asset, PALI-2108, and higher share-based compensation expense, partially offset by a decrease in costs directly related to our development of LB1148, which we ceased in August of 2023, and lower other employee-related costs.
Previous report
We continue to rapidly advance our pre-clinical studies of PALI-2108 towards the planned commencement of clinical studies in the fourth quarter of 2024. Accordingly, for the three months ended June 30, 2024 we recognized joint development costs of $1.9 million, of which there were none in the three months ended June 30, 2023. Offsetting these costs, as a result of our decision to no longer pursue the clinical development of LB1148, direct clinical trial-related costs related specifically to the development of that asset, decreased by approximately $1.4 million for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.
Previous report
Comparison of the six months ended June 30, 2024 and 2023
Previous report
Partially offsetting the net increase in our pre-clinical and clinical-related expenses for the six months ended June 30, 2024, compared to the six months ended June 30, 2023 was a decrease of approximately $0.3 million as a result of a 25% reduction in our research and development employee workforce in October 2023, as well as a decrease in fees associated with the hiring of our CMO in September of 2023. Share-based compensation expense increased by $0.1 million for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, as a result of the Accelerated RSU Vesting.
Previous report
Recent Equity Offerings
Previous report
On September 11, 2023, we completed a registered direct offering of common stock pursuant to an effective shelf registration statement on Form S-3 (the "September 2023 Offering"). Gross cash proceeds from the September 2023 Offering were $2.0 million and net cash proceeds were $1.7 million after deducting cash equity issuance costs of approximately $0.3 million.
Previous report
On April 3, 2023, we completed a registered direct offering and concurrent private placement of common stock and warrants to purchase common stock (the "April 2023 Offering"). Gross cash proceeds from the April 2023 Offering were $6.0 million and net cash proceeds were $5.3 million after deducting cash equity issuance costs of approximately $0.7 million.
Previous report
On January 4, 2023, we completed a registered direct offering and concurrent private placement of common stock and warrants to purchase common stock (the "January 2023 Offering"). Gross cash proceeds from the January 2023 Offering were $2.5 million and net cash proceeds were approximately $2.2 million after deducting cash equity issuance costs of approximately $0.3 million.
Previous report
As we prepare to initiate a Phase 1 clinical trial of PALI-2108 expected in the fourth quarter of 2024, we expect our immediate cash usage may increase due to the payment of upfront fees, which may be required by certain vendors. As a result of the Giiant License Agreement Amendment, we expect our near-term cash commitments under the joint development plan for our lead asset, PALI-2108, will increase in consideration for decreasing the milestone payments and maximum royalty payments that may be due to Giiant upon the achievement certain development milestones and sales or sublicenses of any assets licensed from Giiant (as set forth in the Giiant License Agreement Amendment).
Reworded paragraphs (33)
Previous wording
Results of Operations — Analysis of our financial results comparing the three and six months ended June 30, 2024 and 2023.
Current wording
Results of Operations — Analysis of our financial results comparing the three and nine months ended September 30, 2024 and 2023.
Previous wording
We are a pre-clinical stage biotechnology company focused on developing and advancing novel therapeutics for patients living with autoimmune, inflammatory, and fibrotic diseases. Our lead product candidate, PALI-2108, is being developed as a therapeutic for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD").
Current wording
We are a clinical-stage biopharmaceutical company focused on developing and advancing novel therapeutics for patients living with autoimmune, inflammatory, and fibrotic diseases. Our lead product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease ("IBD"), including ulcerative colitis ("UC") and Crohn's disease ("CD").
Previous wording
Our lead product candidate, PALI-2108, is a prodrug inhibitor designed to help treat UC by targeting the key enzyme phosphodiesterase-4 ("PDE4") in colon tissues and preventing it from breaking down inflammation regulating cyclic Adenosine Monophosphate ("cAMP") molecules. By inhibiting PDE4, intracellular cAMP molecule levels become elevated, which leads to a reduction of inflammatory molecules and an increase of anti-inflammatory molecules within tissues of the colon. Additionally, we believe PALI-2108 may help prevent the movement of inflammatory cells from the blood into colon tissues thereby lowering the activity of certain proteins that contribute to fibrosis (a type of tissue scarring).
Current wording
Our lead product candidate, PALI-2108, is a prodrug inhibitor designed to help treat UC by targeting the key enzyme phosphodiesterase-4 ("PDE4") in colon tissues and preventing it from breaking down cyclic Adenosine Monophosphate ("cAMP") molecules which regulate inflammation in the body. By inhibiting PDE4, intracellular cAMP molecule levels become elevated, which may lead to a reduction of inflammatory molecules and an increase of anti-inflammatory molecules within tissues of the colon. Additionally, we believe that PALI-2108 may help prevent the movement of inflammatory cells from the blood into colon tissues, thereby lowering the activity of certain proteins that contribute to fibrosis (a type of tissue scarring).
Previous wording
With a glucuronic-derived sugar moiety, PALI-2108 remains minimally absorbed until activated by the colonic bacterium enzyme β-glucuronidase. The specific localized bioactivation by a bacterial enzyme found in the colon we believe helps focus the effects of PALI-2108 where they are needed the most.
Current wording
With a glucuronic-derived sugar moiety, PALI-2108 remains minimally absorbed until activated by the colonic bacterium enzyme β-glucuronidase. We believe that localized bioactivation may help focus the effects of PALI-2108 where it would be most beneficial to a patient suffering from IBD.
Previous wording
We have demonstrated the dose-dependent efficacy of PALI-2108 as demonstrated in Dextran Sodium Sulfate (“DSS”)-induced UC mouse models and target engagement in an oxazolone (“OXZ”)-induced colitis mouse models. Thus, we have demonstrated PALI-2108 has preferential colon activation, which is a unique approach to delivering this novel PDE4 inhibitor locally within the colon and therefore, we believe, could position it as targeted therapy for moderate-to-severe UC.
Current wording
In UC mouse models, we have demonstrated the dose-dependent efficacy of PALI-2108. Specifically, we utilized Dextran Sodium Sulfate (“DSS”)-induced UC mouse models and target engagement in oxazolone-induced colitis. Thus, based on the research conducted on these mouse models, we demonstrated that PALI-2108 has preferential colon activation. This preferential colon activation offers a unique approach to delivering the PDE4 inhibitor locally within the colon. This local delivery prevents the systemic toxicity inherent with immunosuppression and avoids the known tolerability issues of PDE4 inhibitors.
Previous wording
We are developing a biomarker-based patient selection approach that, if developed, we believe may aid clinicians in identifying patients who may respond to therapy with a locally acting PDE4 inhibitor such as PALI-2108. We are working with our team of precision medicine focused bioinformatics developers to identify biomarkers and develop optimal algorithms to aid in patient selection, which we believe may enrich the responder population and improve the rate of clinical response previously demonstrated with PDE4 inhibitors. This involves the use of clinical and multiomics data from a large patient population that will be used to identify PDE4-related biomarkers that are associated with disease, correlate with severity, correlate with clinical biomarkers, and are modified with local PDE4 inhibitor therapy in the colon. We have curated clinical study data, including longitudinal biomarker and clinical outcome data, to develop a deep understanding of the potential for patient response to PDE4 therapy, and we are in discussions with potential partners to access additional large scale IBD databanks with clinical, patient-reported, and molecular data that will be used to support and further validate the approach. Additionally, we have initiated the development of corresponding biomarker assays for these PDE4-related biomarkers that we expect to use in our planned clinical studies with the aim to develop U.S. Food and Drug Administration ("FDA") approved tests for selecting potential responders to PALI-2108.
Current wording
We are developing a biomarker-based patient selection approach that we believe may aid clinicians in identifying patients who may better respond to PALI-2108, thereby improving the rate of clinical response previously demonstrated with PDE4 inhibitors. Our approach involves the use of clinical and multiomics data from large patient populations to identify PDE4-related biomarkers that are correlated with IBD, its severity, and which are modified with local PDE4-inhibitor therapy in the colon. Based on our research, we have initiated the development of corresponding biomarker assays for these PDE4-related biomarkers that we expect to use in our planned clinical studies with the aim of developing regulatory approved tests for selecting potential responders to PALI-2108.
Previous wording
We intend to use the net proceeds from the recent financings for working capital and general corporate purposes, including the development of PALI-2108. With our cash and cash equivalents balance of $11.4 million as of June 30, 2024, we believe we have sufficient cash to fund our currently planned operations through the first quarter of 2025.
Current wording
We intend to use the net proceeds from the recent financings for working capital and general corporate purposes, including the development of PALI-2108. With our cash and cash equivalents balance of $8.0 million as of September 30, 2024, we believe we have sufficient cash to fund our currently planned operations through the first quarter of 2025.
Previous wording
We generated no revenues from the sale of our product candidates for any of the periods presented. For the six months ended June 30, 2023, we recognized license revenue of approximately $0.3 million from the co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”). For the three and six months ended June 30, 2024 and the three months ended June 30, 2023, we recognized no license revenue.
Current wording
We generated no revenues from the sale of our product candidates for any of the periods presented. For the nine months ended September 30, 2023, we recognized license revenue of approximately $0.3 million from the co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”). For the three and nine months ended September 30, 2024, and the three months ended September 30, 2023, we recognized no license revenue.
Previous wording
Research and development expenses have historically consisted primarily of costs incurred for the clinical development of our product candidate LB1148. On August 9, 2023, based on the results of the efficacy and safety data of the U.S. Phase 2 PROFILE study, we terminated the development of LB1148.
Current wording
Research and development expenses have historically primarily consisted of costs incurred for the clinical development of our product candidate LB1148. On August 9, 2023, based on the results of the efficacy and safety data of the U.S. Phase 2 PROFILE study, we terminated the development of LB1148.
Previous wording
We do not expect to incur any significant costs in 2024 or beyond related to the closing down of the associated clinical trials of LB1148. Through the first six months of 2024, the nature of our research and development expenses incurred related primarily to the pre-clinical activities associated with the development of PALI-2108. As we prepare to initiate a Phase 1 clinical trial of PALI-2108 expected in the fourth quarter of 2024, we expect our clinical research and development costs to increase in the remainder of 2024.
Current wording
Through the first nine months of 2024, the nature of our research and development expenses incurred related primarily to the pre-clinical activities associated with the development of PALI-2108. In the third quarter of 2024, compared to the previous quarters of 2024, we incurred additional clinical research and development costs, regulatory costs, and manufacturing costs as we prepare to initiate clinical trials of PALI-2108. Based on receiving the NOL from Health Canada (see "Approval to Commence Phase 1 Clinical Study" above), we are in the process of assuming all development, manufacturing, regulatory and commercialization activities and costs of PALI-2108 from Giiant. Therefore, we expect our clinical research and development costs to continue to increase for the remainder of 2024 and into the subsequent periods, partially offset by a decrease in research and development costs associated with the Giiant License Agreement.
Previous wording
General and administrative expenses increased by $0.2 million, or 11%, from approximately $1.4 million for the three months ended June 30, 2023 to $1.6 million for the three months ended June 30, 2024. The increase was primarily due to an increase in ongoing consultant and contract labor of $0.3 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023 and a $0.1 million increase in share-based compensation expense due to the Accelerated RSU Vesting in the current quarter. Partially offsetting these increases were lower insurance costs of approximately $0.1 million, due to lower insurance premiums, and lower Board and Board committee fees of approximately $0.1 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023, which were due to the decrease in the size of our Board and Board committee membership in the first quarter of 2024.
Current wording
General and administrative expenses decreased by approximately $0.2 million, or 13%, from approximately $1.7 million for the three months ended September 30, 2023 to approximately $1.5 million for the three months ended September 30, 2024. The decrease was primarily due to (i) an approximately $0.2 million decrease in professional fees, (ii) lower insurance costs of approximately $0.1 million, due to lower insurance premiums in the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and (iii) an approximately $0.1 million decrease in employee-related costs due to lower headcount in the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Partially offsetting these decreases was an increase in ongoing consultant and contract labor of approximately $0.2 million in the three months ended September 30, 2024, compared to the three months ended September 30, 2023.
Previous wording
Other income, net, for the three months ended June 30, 2024 includes dividend income of approximately $0.1 million from our investments in the period of excess cash in money market funds with maturities of three months or less.
Current wording
Other income, net, for the three months ended September 30, 2024 includes dividend income of approximately $0.1 million from our investments of excess cash in money market funds with maturities of three months or less.
Previous wording
The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):
Current wording
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):
Previous wording
During the six months ended June 30, 2023, we recognized license revenue of approximately $0.3 million earned upon the achievement of a milestone under the Newsoara Co-Development Agreement. During the six months ended June 30, 2024, we recognized no license revenue.
Current wording
During the nine months ended September 30, 2023, we recognized license revenue of approximately $0.3 million earned upon the achievement of a milestone under the Newsoara Co-Development Agreement. During the nine months ended September 30, 2024, we recognized no license revenue.
Previous wording
The approximately $1.4 million, or 42%, increase in research and development expenses from approximately $3.4 million for the six months ended June 30, 2023 to approximately $4.8 million for the six months ended June 30, 2024 is primarily attributable to approximately $3.5 million of expenses recognized that were directly related to the joint development of PALI-2108, of which there were none in the prior year period, partially offset by a decrease in expenses of approximately $1.9 million that were directly related to our development of LB1148, which we ceased in August of 2023.
Current wording
The approximately $1.5 million, or 26%, increase in research and development expenses from approximately $5.5 million for the nine months ended September 30, 2023 to approximately $7.0 million for the nine months ended September 30, 2024 is primarily attributable to approximately $4.3 million of expenses recognized that were directly related to the joint development of PALI-2108, of which there were virtually none in the prior year period, and an approximately $0.7 million increase drug manufacturing costs for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, driven by the ramp up for the clinical trials of PALI-2108 for UC.
Previous wording
To reduce the ongoing administrative burden and expense associated with the quarterly vesting of our time-based RSUs, on May 28, 2024, our Board of Directors ("Board") approved the immediate accelerated vesting of all unvested time-based RSUs issued to employees that were outstanding as of that date (the "Accelerated RSU Vesting"). Accordingly, we recognized share-based compensation expense associated with the time-based RSUs subject to immediate vesting of approximately $0.1 million in research and development expenses in the three months ended June 30, 2024. Offsetting this $0.1 million increase in share-based compensation expense for the three months ended June 30, 2024, compared to the three months ended June 30, 2023, were employee-related costs, which decreased by approximately $0.1 million as a result of a 25% reduction in our employee workforce in October 2023, specifically research and development employees that were no longer deemed critical for our development of PALI-2108, as well as a decrease in fees associated with the hiring of our Chief Medical Officer ("CMO") in September of 2023.
Current wording
Partially offsetting these increases was (i) a decrease in clinical trial-related expenses of approximately $2.4 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, (ii) lower employee-related costs, which decreased by approximately $0.5 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023 as a result of a 25% reduction in our employee workforce in October 2023, specifically research and development employees that were no longer deemed critical for our development of PALI-2108, as well as a decrease in fees associated with the hiring of our CMO in September of 2023, (iii) lower transaction costs of approximately $0.2 million associated with the Giiant License Agreement entered into on September 1, 2023, of which there were none in the nine months ended September 30, 2024, and (iv) an approximately $0.4 million non-cash favorable impact associated with a decrease in the fair value of the Giiant Milestone Payment primarily as a result of the Giiant License Agreement Amendment.
Previous wording
General and administrative expenses increased by approximately $0.1 million, or 2%, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily driven by a $0.4 million increase in consultants and contract labor and a $0.1 million increase in share-based compensation expense, which was due to the Accelerated RSU Vesting. The increase was partially offset by (i) a decrease insurance costs of approximately $0.2 million, due to lower insurance premiums, (ii) a decrease in our Board and Board committee fees of approximately $0.1 million, due to reduction in the size of our Board and Board committee membership in the first quarter of 2024, and (iii) a decrease in professional fees, primarily accounting fees, of $0.1 million in the three months ended June 30, 2024, compared to the three months ended June 30, 2023.
Current wording
General and administrative expenses decreased by approximately $0.1 million, or 3%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily driven by (i) a decrease insurance costs of approximately $0.2 million, due to lower insurance premiums, (ii) a decrease in our Board and Board committee fees of approximately $0.1 million, due to reduction in the size of our Board and Board committee membership in the first quarter of 2024, and (iii) a decrease in professional fees, primarily accounting fees, of approximately $0.3 million in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, These increases were partially offset by an approximately $0.5 million increase in consultants and contract labor in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.
Previous wording
Other income, net, for the six months ended June 30, 2024 includes dividend income of approximately $0.3 million from our investments of excess cash in money market funds with maturities of three months or less in the period.
Current wording
Other income, net, for the nine months ended September 30, 2024 includes dividend income of approximately $0.4 million from our investments of excess cash in money market funds with maturities of three months or less in the period.
Previous wording
Other income, net, for the six months ended June 30, 2023 includes dividend income of approximately $0.3 million from our investments of excess cash in money market funds with maturities of three months or less and a non-cash gain of approximately $0.1 million associated with the revaluation of liability-classified warrants in the period.
Current wording
Other income, net, for the nine months ended September 30, 2023 includes primarily dividend income of approximately $0.5 million from our investments of excess cash in money market funds with maturities of three months or less and a non-cash gain of approximately $0.1 million associated with the revaluation of liability-classified warrants in the period.
Previous wording
We expect to incur substantial operating losses for the foreseeable future. We will need to raise additional capital through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. Our ability to raise additional capital may be adversely impacted by: (i) general political or economic conditions, (ii) inflation, (iii) rising interest rates, (iv) ongoing supply chain disruptions, (v) the ongoing global conflicts, including those in the Ukraine and Middle East, and (vi) limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry. In the event that we are unable to access additional capital, we may need to curtail or greatly reduce our operations, which could have a materially adverse impact on our business, financial condition, and results of operations.
Current wording
We expect to incur substantial operating losses for the foreseeable future. We will need to raise additional capital through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. Our ability to raise additional capital may be adversely impacted by: (i) general political or economic conditions, (ii) inflation, (iii) rising interest rates, (iv) ongoing supply chain disruptions, (v) the ongoing global conflicts, including those in the Ukraine and the Middle East, and (vi) limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry. In the event that we are unable to access additional capital, we may need to curtail or greatly reduce our operations, which could have a materially adverse impact on our business, financial condition, and results of operations.
Previous wording
On January 30, 2024, we entered into warrant inducement agreements (the “Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “Warrant Holders”) of certain of our remaining outstanding common stock purchase warrants issued pursuant to: (i) common stock warrants issued on May 10, 2022, (ii) the January 2023 Offering, and (iii) the April 2023 Offering, as well as certain outstanding Series 2 warrants issued on August 16, 2022 (collectively, the “Existing Warrants”). Pursuant to the Warrant Inducement Agreements, the exercise price of each Existing Warrant was reduced to $10.97 per share. Each of the Warrant Holders that exercised their Existing Warrants pursuant to the Warrant Inducement Agreements received one replacement warrant for each Existing Warrant exercised with each such replacement warrant having a term of five years from issuance and an exercise price per share of $10.97 (in its entirety, the "February 2024 Warrant Inducement").
Current wording
On January 30, 2024, we entered into warrant inducement agreements (the “Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “Warrant Holders”) of certain of our remaining outstanding common stock purchase warrants issued pursuant to common stock warrants issued on May 10, 2022, January 4, 2023, and April 5, 2023, as well as certain outstanding Series 2 warrants issued on August 16, 2022 (collectively, the “Existing Warrants”). Pursuant to the Warrant Inducement Agreements, the exercise price of each Existing Warrant was reduced to $10.97 per share. Each of the Warrant Holders that exercised their Existing Warrants pursuant to the Warrant Inducement Agreements received one replacement warrant (the "Replacement Warrants") for each Existing Warrant exercised with each such Replacement Warrant having a term of five years from issuance and an exercise price per share of $10.97 (in its entirety, the "February 2024 Warrant Inducement").
Previous wording
The Warrant Holders collectively exercised an aggregate of 228,162 Existing Warrants. As a result of the exercises of the Existing Warrants, we issued an aggregate of 228,162 shares of our common stock. The February 2024 Warrant Inducement closed on February 1, 2024 net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of $2.5 million, less cash equity issuance costs of approximately $0.3 million.
Current wording
The Warrant Holders collectively exercised an aggregate of 228,162 Existing Warrants. As a result of the exercises of the Existing Warrants, we issued an aggregate of 228,162 shares of our common stock and 228,162 Replacement Warrants. The February 2024 Warrant Inducement closed on February 1, 2024 for net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of $2.5 million, less cash equity issuance costs of approximately $0.3 million.
Previous wording
During the six months ended June 30, 2023 we received gross cash proceeds of approximately $2.7 million from common stock warrant exercises, approximately $1.4 million of which related to common stock warrant exercises on December 30, 2022 for which the related cash was not received by us until January 2023.
Current wording
During the nine months ended September 30, 2023, we received gross cash proceeds of approximately $2.7 million from common stock warrant exercises, approximately $1.4 million of which related to common stock warrant exercises on December 30, 2022 for which the related cash was not received by us until January 2023.
Previous wording
As of June 30, 2024, we had $11.4 million in cash, cash equivalents and restricted cash. The following table shows a summary of our cash flows for the six months ended June 30, 2024 and 2023 (in thousands):
Current wording
As of September 30, 2024, we had $8.1 million in cash, cash equivalents and restricted cash. The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
Previous wording
Cash used in operating activities was approximately $6.7 million for the six months ended June 30, 2024, which reflects an approximately $7.6 million net loss adjusted for (i) approximately $0.3 million of net cash inflows related to changes in operating assets and liabilities and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $0.5 million non-cash expense recognized for stock-based compensation and related charges, and an approximately $0.1 million non-cash expense associated with the issuance of our common stock as payment for vendor services provided. The net cash inflow from operating assets and liabilities was primarily attributable to a net cash outflow of approximately $0.5 million driven by the payment of annual employee cash bonuses in the first quarter of 2024 and a $0.1 million cash outflow related to payments of the our operating lease that was more than offset by a cash inflow of approximately $0.9 million from: (i) a decrease in prepaids and other current assets and other noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of the Company's prepaid insurance policies, and (ii) an increase in accounts payable and accrued liabilities, which was primarily due to an increase in accrued joint development expenses associated with the Giiant License Agreement that were partially offset by a decrease in accrued severance payments, lower accrued Board and Board committee fees, and lower accounts payable due to the timing of payments.
Current wording
Cash used in operating activities was approximately $9.8 million for the nine months ended September 30, 2024, which reflects an approximately $11.1 million net loss adjusted for (i) approximately $0.7 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $0.6 million non-cash expense recognized for stock-based compensation and related charges, an approximately $0.1 million non-cash expense associated with the issuance of our common stock as payment for vendor services provided, and a $0.2 million non-cash gain recognized for the remeasurement of the contingent consideration liability associated with the Giiant Milestone Payments. The net cash inflow from operating assets and liabilities was primarily attributable to a net cash outflow of approximately $0.3 million driven by the payment of annual employee cash bonuses in the first quarter of 2024, and an approximately $0.1 million cash outflow related to payments of the our operating lease that was more than offset by approximately $1.1 million from (i) a decrease in prepaids and other current assets and other noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of the our prepaid insurance policies, and (ii) an increase in accounts payable and accrued liabilities, which was primarily due to an increase in accrued joint development expenses associated with the Giiant License Agreement, and additional drug manufacturing accruals associated with our ramp up for the clinical trials of PALI-2108 for UC. These increases in accounts payable and accrued liabilities were partially offset by a decrease in accrued severance payments, lower accrued Board and Board committee fees, and a decrease in the current portion of the contingent consideration liability associated with the Giiant Milestone Payments, which was zero as of September 30, 2024.
Previous wording
Cash used in operating activities of approximately $5.7 million for the six months ended June 30, 2023 reflects an approximately $5.7 million net loss for the period adjusted for (i) approximately $0.1 million of net cash outflows related to changes in operating assets and liabilities and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $0.2 million non-cash expense recognized for stock-based compensation and related charges. The net cash outflow from operating assets and liabilities was primarily due to (i) the payment of the 2022 annual employee bonuses in the first quarter of 2023, (ii) a $0.4 million cash outflow for accounts payable and accrued liabilities, which was due to the timing of payments, and (iii) a $0.1 million cash outflow related to payments of the our operating lease, partially offset by a cash inflow from the decrease in prepaids and other assets and other noncurrent assets, excluding the reduction in other assets due to cash proceeds of $1.4 million received in the six months ended June 30, 2023 from warrants exercises, which were receivable to us as of December 31, 2022.
Current wording
Cash used in operating activities was approximately $8.4 million for the nine months ended September 30, 2023, which reflects an approximately $9.3 million net loss adjusted for (i) approximately $0.4 million of net cash inflows related to changes in operating assets and liabilities, and (ii) certain non-cash items impacting the net loss, consisting primarily of an approximately $0.4 million non-cash expense recognized for stock-based compensation and related charges, and a non-cash expense of approximately $0.2 million related to the recognition of the fair value of the contingent consideration obligation incurred pursuant to the Giiant Licensing Agreement transaction. The net cash inflow from operating assets and liabilities was driven by a cash inflow from the decrease in prepaids and other assets and others noncurrent assets, which was primarily attributable to the amortization of the current and non-current portions of our prepaid insurance policies, partially offset by an approximately $0.2 million cash outflow for accounts payable and accrued liabilities due to the timing of payments, and an approximately $0.1 million cash outflow related to payments of our operating lease.
Previous wording
Cash used in investing activities for the six months ended June 30, 2023 consists of payments for leasehold improvements. There we no cash proceeds or payments for investing activities for the six months ended June 30, 2024.
Current wording
Cash used in investing activities for the nine months ended September 30, 2023 consists of payments for leasehold improvements. There we no cash proceeds or payments for investing activities for the nine months ended September 30, 2024.
Previous wording
For the six months ended June 30, 2024, cash provided by financing activities of approximately $5.6 million was attributable to net cash proceeds of approximately $2.2 million from the exercise of common stock warrants in conjunction with the February 2024 Warrant Inducement and net cash proceeds of approximately $3.6 million from the May 2024 Offering, partially offset by payments made on the Company's insurance financing arrangements of approximately $0.2 million.
Current wording
For the nine months ended September 30, 2024, cash provided by financing activities of approximately $5.4 million was attributable to net cash proceeds of approximately $2.2 million from the exercise of common stock warrants in conjunction with the February 2024 Warrant Inducement and net cash proceeds of approximately $3.5 million from the May 2024 Offering, partially offset by payments made on our insurance financing arrangements of approximately $0.3 million.
Previous wording
For the six months ended June 30, 2023, cash provided by financing activities of approximately $9.7 million was attributable to cash proceeds of approximately $2.2 million and $5.3 million from the January 2023 Offering and April 2024 Offering, respectively. Also contributing to the cash provided by financing activities in the six months ended June 30, 2023 was $2.8 million from the exercise of common stock purchase warrants, which includes the receipt in early January 2023 of a $1.4 million other receivable from warrant exercises on December 30, 2022, partially offset by payments of equity issuance costs of approximately $0.6 million and payments made on the Company's insurance financing arrangements of approximately $0.1 million.
Current wording
For the nine months ended September 30, 2023, cash provided by financing activities of approximately $11.3 million was primarily attributable to net cash proceeds of approximately $8.8 million from equity offerings in the period. Also contributing to the cash provided by financing activities in the period was approximately $2.8 million from the exercise of common stock purchase warrants, which includes the receipt in early January 2023 of an approximately $1.4 million other receivable from warrant exercises on December 30, 2022, partially offset by payments made for our insurance financing arrangements of approximately $0.3 million.
Previous wording
Commencing on June 1, 2022, we are subject to contractual monthly lease payments of $10,850, plus certain utilities, for the first 12 months with 3 percent escalations at the first, second and third lease commencement anniversaries. As of June 30, 2024, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $163,000, including imputed interest of $9,000 calculated using a discount rate of 10.75%, will be paid over the remaining lease term of approximately 1.2 years.
Current wording
Commencing on June 1, 2022, we are subject to contractual monthly lease payments of $10,850, plus certain utilities, for the first 12 months with 3 percent escalations at the first, second and third lease commencement anniversaries. As of September 30, 2024, the total remaining future minimum lease payments associated with the Corporate Office Lease of approximately $128,000, including imputed interest of approximately $6,000 calculated using a discount rate of 10.75%, will be paid over the remaining lease term of approximately 0.9 years.
Previous wording
Consistent with past practice, in June 2024, we entered into an agreement to finance insurance policies that renewed in May 2024. The insurance financing arrangement is secured by the associated insurance policies. As of June 30, 2024 the aggregate remaining balance under the insurance financing arrangement of $0.3 million is payable over a 9-month period with the first payment having commenced on June 30, 2024.
Current wording
Consistent with past practice, in June 2024, we entered into an agreement to finance insurance policies that renewed in May 2024. The insurance financing arrangement is secured by the associated insurance policies. As of September 30, 2024 the aggregate remaining balance under the insurance financing arrangement of approximately $0.2 million is payable over a 9-month period with the first payment payable on June 30, 2024.
Previous wording
We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $11.4 million as of June 30, 2024, we believe we have sufficient cash to fund our currently planned operations through the first quarter of 2025. Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than the first quarter of 2025. Beyond the first quarter of 2025 we will require additional financing to continue at our expected level of operations. If we fail to obtain the needed capital, we will be forced to delay, scale back, or eliminate some or all of our development activities, or potentially cease our operations.
Current wording
We have incurred significant operating losses and negative cash flows from operations since our inception. To date, we have not been able to generate significant revenues nor achieve operating profitability. Based upon our cash and cash equivalents balance of $8.0 million as of September 30, 2024, we believe we have sufficient cash to fund our currently planned operations through the first quarter of 2025. Notwithstanding, should our anticipated level of operations significantly change, we may require additional financing sooner than the first quarter of 2025. Beyond the first quarter of 2025 we will require additional financing to continue at our expected level of operations. If we fail to obtain the capital needed, we will be forced to delay, scale back, or eliminate some or all of our development activities, or potentially cease our operations.
Previous wording
Our significant accounting policies used in the preparation of the condensed consolidated financial statements are described in more detail in Note 2 to the notes to the condensed consolidated financial statements for the quarter ended June 30, 2024, included elsewhere in this Quarterly Report on Form 10-Q. Our critical accounting estimates are identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recently filed Form 10-K. In the three months ended March 31, 2024, we determined that our accounting policy for Derivative Financial Instruments disclosed in the Form 10-K is no longer a critical accounting policy due to the insignificant impact our liability-classified warrants currently has on our financial statements. Other than the removal of our critical accounting policy for Derivative Financial Instruments, we believe there have been no significant changes in our critical accounting policies and significant judgments and estimates since those disclosed in our most recently filed Form 10-K.
Current wording
Our critical accounting estimates are identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our most recently filed Annual Report on Form 10-K. In the three months ended March 31, 2024, we determined that our accounting policy for Derivative Financial Instruments disclosed in the Form 10-K is no longer a critical accounting policy due to the insignificant impact our liability-classified warrants currently has on our financial statements. Other than the removal of our critical accounting policy for Derivative Financial Instruments, we believe there have been no significant changes in our critical accounting policies and significant judgments and estimates since those disclosed in our most recently filed Form 10-K.