Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Sep. 30, 2016 | Nov. 10, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | PALATIN TECHNOLOGIES INC | |
Entity Central Index Key | 911,216 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 108,039,221 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 8,867,930 | $ 8,002,668 |
Available-for-sale investments | 1,377,714 | 1,380,556 |
Prepaid expenses and other current assets | 1,007,978 | 1,313,841 |
Total current assets | 11,253,622 | 10,697,065 |
Property and equipment, net | 90,171 | 97,801 |
Other assets | 56,916 | 63,213 |
Total assets | 11,400,709 | 10,858,079 |
Current liabilities: | ||
Accounts payable | 1,159,427 | 713,890 |
Accrued expenses | 12,884,590 | 7,767,733 |
Notes payable, net of discount | 6,399,075 | 5,374,951 |
Capital lease obligations | 27,827 | 27,424 |
Total current liabilities | 20,470,919 | 13,883,998 |
Notes payable, net of discount, net of current portion | 12,162,471 | 14,106,594 |
Capital lease obligations | 7,214 | 14,324 |
Other non-current liabilities | 525,314 | 439,130 |
Total liabilities | 33,165,918 | 28,444,046 |
Stockholders' (deficiency) equity: | ||
Preferred stock of $0.01 par value - authorized 10,000,000 shares; Series A Convertible: issued and outstanding 4,030 shares as of September 30, 2016 and June 30, 2016 | 40 | 40 |
Common stock of $0.01 par value - authorized 300,000,000 shares; issued and outstanding 92,806,710 shares as of September 30, 2016 and 68,568,055 shares as of June 30, 2016, respectively | 928,067 | 685,680 |
Additional paid-in capital | 333,774,227 | 325,142,509 |
Accumulated other comprehensive loss | (2,521) | (1,944) |
Accumulated deficit | (356,465,022) | (343,412,252) |
Total stockholders' (deficiency) equity | (21,765,209) | (17,585,967) |
Total liabilities and stockholders' (deficiency) equity | $ 11,400,709 | $ 10,858,079 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) (Unaudited) - $ / shares | Sep. 30, 2016 | Jun. 30, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, Series A Convertible, shares issued | 4,030 | 4,030 |
Preferred stock, Series A Convertible, shares outstanding | 4,030 | 4,030 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 92,806,710 | 68,568,055 |
Common stock, shares outstanding | 92,806,710 | 68,568,055 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
REVENUES: | ||
License revenue | $ 0 | $ 0 |
OPERATING EXPENSES: | ||
Research and development | 11,226,084 | 10,597,714 |
General and administrative | 1,209,346 | 1,199,937 |
Total operating expenses | 12,435,430 | 11,797,651 |
Loss from operations | (12,435,430) | (11,797,651) |
OTHER (EXPENSE) INCOME: | ||
Interest income | 6,645 | 15,740 |
Interest expense | (623,985) | (628,008) |
Total other income (expense), net | (617,340) | (612,268) |
NET LOSS | $ (13,052,770) | $ (12,409,919) |
Basic and diluted net loss per common share | $ (.08) | $ (.08) |
Weighted average number of common shares outstanding used in computing basic and diluted net loss per common share | 165,848,269 | 156,176,618 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Consolidated Statements Of Comprehensive Loss | ||
Net loss | $ (13,052,770) | $ (12,409,919) |
Other comprehensive income (loss): | ||
Unrealized gain (loss) on available-for-sale investments | (577) | 0 |
Total comprehensive loss | $ (13,053,347) | $ (12,409,919) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (13,052,770) | $ (12,409,919) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 7,630 | 10,654 |
Non-cash interest expense | 82,266 | 80,739 |
Stock-based compensation | 403,208 | 300,394 |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other assets | 312,160 | 137,095 |
Accounts payable | 445,537 | 2,239,604 |
Accrued expenses | 5,116,857 | 156,062 |
Other non-current liabilities | 86,184 | 86,957 |
Net cash used in operating activities | (6,598,928) | (9,398,414) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | 0 | (17,695) |
Net cash used in investing activities | 0 | (17,695) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on capital lease obligations | (6,707) | (6,328) |
Payment of withholding taxes related to restricted stock units | 0 | (131,959) |
Payments on notes payable obligations | (1,000,000) | 0 |
Proceeds from the sale of warrants, net of costs | 8,470,897 | 19,919,883 |
Proceeds from the issuance of notes payable and warrants | 0 | 10,000,000 |
Payment of debt issuance costs | 0 | (140,964) |
Net cash provided by financing activities | 7,464,190 | 29,640,632 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 865,262 | 20,224,523 |
CASH AND CASH EQUIVALENTS, beginning of period | 8,002,668 | 27,299,268 |
CASH AND CASH EQUIVALENTS, end of period | 8,867,930 | 47,523,791 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 457,800 | 460,313 |
Issuance of warrants in connection with debt financing | 0 | 305,196 |
Unrealized loss on available-for-sale investments | 577 | 0 |
Non-cash equity financing costs in accounts payable | 21,029 | 85,605 |
Non-cash equity financing costs in accrued expenses | 65,000 | 0 |
Non-cash debt financing costs in accounts payable | $ 0 | $ 5,151 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | Nature of Business The Company’s primary product in development is bremelanotide for the treatment of hypoactive sexual desire disorder (HSDD), which is a type of female sexual dysfunction (FSD). The Company also has drug candidates or development programs for obesity, erectile dysfunction, cardiovascular diseases, pulmonary diseases, inflammatory diseases and dermatologic diseases. Key elements of the Company’s business strategy include using its technology and expertise to develop and commercialize therapeutic products; entering into alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale and distribution of product candidates that the Company is developing; and partially funding its product candidate development programs with the cash flow generated from third parties. Going Concern – As discussed in Note 11, on August 4, 2016, the Company closed on an underwritten offering of units resulting in gross proceeds of $9,225,000, with net proceeds, after deducting estimated offering expenses, of $8,470,897. As of September 30, 2016, the Company’s cash, cash equivalents and investments were $10,245,644 and current liabilities were $20,470,919. The Company intends to utilize existing capital resources for general corporate purposes and working capital, including the Phase 3 clinical trial program with bremelanotide for HSDD and preclinical and clinical development of our other product candidates and programs, including PL-3994 and melanocortin receptor-1 and melanocortin receptor-4 programs. Management believes that the Phase 3 clinical trial program with bremelanotide for HSDD, including regulatory filings for product approval, but excluding required ancillary studies and clinical trials and launch readiness commercialization efforts, will cost at least $87,000,000. Management believes that the Company’s existing capital resources will be adequate to fund its planned operations through the quarter ending December 31, 2016. The Company will need additional funding to complete required ancillary studies and clinical trials of bremelanotide for HSDD, prepare and submit regulatory filings for product approval, and establish commercial scale manufacturing capability. The Company will also need additional funding to complete required clinical trials for its other product candidates and, assuming those clinical trials are successful, as to which there can be no assurance, to complete submission of required applications to the FDA. If the Company is unable to obtain approval or otherwise advance in the FDA approval process, the Company’s ability to sustain its operations would be materially adversely affected. The Company may seek the additional capital necessary to fund its operations through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements. Additional capital that is required by the Company may not be available on reasonable terms, or at all. Concentrations – |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION | The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnote disclosures required to be presented for complete financial statements. In the opinion of management, these consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary for fair presentation. The results of operations for the three months ended September 30, 2016 may not necessarily be indicative of the results of operations expected for the full year, except that the Company expects to incur a significant loss for the fiscal year ending June 30, 2017. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2016, filed with the Securities and Exchange Commission (SEC), which includes consolidated financial statements as of June 30, 2016 and 2015 and for each of the fiscal years in the three-year period ended June 30, 2016. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation Use of Estimates Cash and Cash Equivalents Investments The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market. Fair Value of Financial Instruments Credit Risk Property and Equipment Impairment of Long-Lived Assets Revenue Recognition Revenue resulting from license fees is recognized upon delivery of the license for the portion of the license fee payment that is non-contingent and non-refundable, if the license has standalone value. Revenue resulting from the achievement of development milestones is recorded in accordance with the accounting guidance for the milestone method of revenue recognition. Research and Development Costs Accrued Expenses – Stock-Based Compensation – Income Taxes Net Loss per Common Share The Series B 2012 warrants issued on July 3, 2012 to purchase up to 35,488,380 shares of common stock are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share for all periods presented in the consolidated statements of operations. The Series C 2014 warrants to purchase up to 24,949,325 shares of common stock were exercisable starting at December 23, 2014 and, therefore are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on December 23, 2014. The Series E 2015 warrants to purchase up to 21,917,808 shares of common stock were exercisable starting at July 2, 2015 and, therefore are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on July 2, 2015. The Series I 2016 warrants to purchase up to 2,218,045 shares of common stock were exercisable starting at August 4, 2016 and, therefore are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on August 4, 2016 (Note 11). As of September 30, 2016 and 2015, common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the Series A 2012, Series B 2012, Series C 2014, Series E 2015 and Series I 2016 warrants issued in connection with the July 3, 2012, December 23, 2014, and July 2, 2015 private placement offerings and the August 4, 2016 underwritten offering), and the vesting of restricted stock units amounted to an aggregate of 44,479,663, and 32,908,798 shares, respectively. These share amounts have been excluded from the calculation of net loss per share as the impact would be antidilutive. |
NEW AND RECENTLY ADOPTED ACCOUN
NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments, In March 2016, the FASB issued ASU No. 2016-09, Compensation – Improvement to Employee ShareBased Payment Accounting In February 2016, the FASB issued ASU No. 2016-02, Leases, Related to the Recognition of Lease Assets and Lease Liabilities In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities In November 2015, the FASB issued ASU No. 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes, In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements-Going Concern: Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers |
AGREEMENT WITH GEDEON RICHTER
AGREEMENT WITH GEDEON RICHTER | 3 Months Ended |
Sep. 30, 2016 | |
Notes to Financial Statements | |
AGREEMENT WITH GEDEON RICHTER | In August 2014, the Company entered into a license, co-development and commercialization agreement with Gedeon Richter on bremelanotide for FSD in Europe and selected countries. On September 16, 2015, the Company and Gedeon Richter mutually and amicably agreed to terminate the license, co-development and commercialization agreement. In connection with the termination of the license agreement, all rights and licenses to co-develop and commercialize bremelanotide for FSD indications granted by the Company under the license agreement to Gedeon Richter terminated and reverted to the Company, and neither party is expected to have any future material obligations under the license agreement. Neither the Company nor Gedeon Richter incurred any early termination penalties or other payment or reimbursement obligations as a result of the termination of the license agreement. The Company viewed the delivery of the license for bremelanotide as a revenue generating activity that is part of its ongoing and central operations. The other elements of the agreement with Gedeon Richter were considered non-revenue activities associated with the collaborative arrangement. The Company believes the license had standalone value from the other elements of the collaborative arrangement because it conveyed all of the rights necessary to develop and commercialize bremelanotide in the licensed territory. For the three months ended September 30, 2016, and 2015, the Company had no revenues reported. |
PREPAID EXPENSES AND OTHER CURR
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 3 Months Ended |
Sep. 30, 2016 | |
Prepaid Expenses And Other Current Assets | |
PREPAID EXPENSES AND OTHER CURRENT ASSETS | Prepaid expenses and other current assets consist of the following: September 30, 2016 June 30, 2016 Clinical study costs $ 860,440 $ 1,146,975 Insurance premiums 25,764 23,010 Other 121,774 143,856 $ 1,007,978 $ 1,313,841 |
INVESTMENTS
INVESTMENTS | 3 Months Ended |
Sep. 30, 2016 | |
Investments | |
INVESTMENTS | The following summarizes the carrying value of our availableforsale investments, which consist of corporate debt securities: September 30, 2016 June 30, 2016 Cost $ 1,387,022 $ 1,387,022 Amortization of premium (6,787 ) (4,522 ) Gross unrealized loss (2,521 ) (1,944 ) Fair value $ 1,377,714 $ 1,380,556 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | The fair value of cash equivalents is classified using a hierarchy prioritized based on inputs. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The following table provides the assets carried at fair value: Carrying Value Quoted prices in active markets (Level 1) Other quoted/observable inputs (Level 2) Significant unobservable inputs (Level 3) September 30, 2016: Money market account 8,687,904 8,687,904 - - TOTAL $ 8,687,904 $ 8,687,904 $ - $ - June 30, 2016: Money market account 7,782,243 7,782,243 - - TOTAL $ 7,782,243 $ 7,782,243 $ - $ - |
ACCRUED EXPENSES
ACCRUED EXPENSES | 3 Months Ended |
Sep. 30, 2016 | |
Accrued Expenses | |
ACCRUED EXPENSES | Accrued expenses consist of the following: September 30, 2016 June 30, 2016 Bremelanotide program costs $ 12,379,580 $ 6,983,581 Other research related expenses 311,178 69,609 Professional services 40,235 231,482 Other 153,597 483,061 $ 12,884,590 $ 7,767,733 |
NOTES PAYABLE
NOTES PAYABLE | 3 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | Notes payable consist of the following: September 30, 2016 June 30, 2016 Notes payable under venture loan $ 19,000,000 $ 20,000,000 Unamortized related debt discount $ (275,386 ) $ (324,800 ) Unamortized debt issuance costs (163,068 ) (193,655 ) Notes payable $ 18,561,546 $ 19,481,545 Less: current portion 6,399,075 5,374,951 Long-term portion $ 12,162,471 $ 14,106,594 On July 2, 2015, the Company closed on a $10,000,000 venture loan led by Horizon Technology Finance Corporation (Horizon). The debt facility is a four-year senior secured term loan that bears interest at a floating coupon rate of one-month LIBOR (floor of 0.50%) plus 8.50% and provides for interest-only payments for the first eighteen months followed by monthly payments of principal payments of $333,333 plus accrued interest through August 1, 2019. The lenders also received five-year immediately exercisable Series G warrants to purchase 549,450 shares of Palatin common stock exercisable at an exercise price of $0.91 per share. The Company has recorded a debt discount of $305,196 equal to the fair value of these warrants at issuance, which is being amortized to interest expense over the term of the related debt. This debt discount will offset against the note payable balance and is included in additional paid-in capital on the Company’s balance sheet at September 30, 2016 and June 30, 2016. In addition, a final incremental payment of $500,000 is due on August 1, 2019, or upon early repayment of the loan. This final incremental payment is being accreted to interest expense over the term of the related debt. The Company incurred approximately $146,000 of costs in connection with the loan agreement. These costs were capitalized as deferred financing costs and are offset against the note payable balance. These debt issuance costs are being amortized to interest expense over the term of the related debt. In addition, if the Company repays all or a portion of the loan prior to the applicable maturity date, it will pay the lenders a prepayment penalty fee, based on a percentage of the then outstanding principal balance, equal to 3% if the prepayment occurs on or before 18 months after the funding date thereof or 1% if the prepayment occurs more than 18 months after, but on or before 30 months after, the funding date. On December 23, 2014, the Company closed on a $10,000,000 venture loan which was led by Horizon. The debt facility is a four year senior secured term loan that bears interest at a floating coupon rate of one-month LIBOR (floor of 0.50%) plus 8.50%, and provides for interest-only payments for the first eighteen months followed by monthly payments of principal payments of $333,333 plus accrued interest through January 1, 2019. The lenders also received five-year immediately exercisable Series D 2014 warrants to purchase 666,666 shares of common stock exercisable at an exercise price of $0.75 per share. The Company recorded a debt discount of $267,820 equal to the fair value of these warrants at issuance, which is being amortized to interest expense over the term of the related debt. This debt discount is offset against the note payable balance and included in additional paid-in capital on the Company’s balance sheet at September 30, 2016, and June 30, 2016. In addition, a final incremental payment of $500,000 is due on January 1, 2019, or upon early repayment of the loan. This final incremental payment is being accreted to interest expense over the term of the related debt. The Company incurred $209,000 of costs in connection with the loan agreement These costs were capitalized as deferred financing costs and are offset against the note payable balance. These debt issuance costs are being amortized to interest expense over the term of the related debt. In addition, if the Company repays all or a portion of the loan prior to the applicable maturity date, it will pay the lenders a prepayment penalty fee, based on a percentage of the then outstanding principal balance, equal to 3% if the prepayment occurs on or before 18 months after the funding date thereof or 1% if the prepayment occurs more than 18 months after, but on or before 30 months after, the funding date. The Company’s obligations under the 2015 amended and restated loan agreement, which includes the 2014 venture loan, are secured by a first priority security interest in substantially all of its assets other than its intellectual property. The Company also has agreed to specified limitations on pledging or otherwise encumbering its intellectual property assets. The 2015 amended and restated loan agreement include customary affirmative and restrictive covenants, but does not include any covenants to attain or maintain specified financial metrics. The loan agreement includes customary events of default, including payment defaults, breaches of covenants, change of control and a material adverse change default. Upon the occurrence of an event of default and following any applicable cure periods, a default interest rate of an additional 5% may be applied to the outstanding loan balances, and the lenders may declare all outstanding obligations immediately due and payable and take such other actions as set forth in the loan agreement. As of September 30, 2016, the Company was in compliance with all of its loan covenants. |
STOCKHOLDERS' (DEFICIENCY) EQUI
STOCKHOLDERS' (DEFICIENCY) EQUITY | 3 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
STOCKHOLDERS' (DEFICIENCY) EQUITY | Financing Transactions – The Series I warrants are exercisable at an initial exercise price of $0.01 per share, exercisable immediately upon issuance and expire on the tenth anniversary of the date of issuance. The Series I warrants are subject to limitation on exercise if the holder and its affiliates would beneficially own more than 9.99% of the total number of the Company’s shares of common stock following such exercise. The Series H warrants are exercisable at an initial exercise price of $0.70 per share, are exercisable commencing six months following the date of issuance and expire on the fifth anniversary of the date of issuance. The Series H warrants are subject to the same beneficial ownership limitation as the Series I warrants. On July 2, 2015, the Company closed on a private placement of Series E warrants to purchase 21,917,808 shares of Palatin common stock and Series F warrants to purchase 2,191,781 shares of the Company’s common stock. Certain funds managed by QVT Financial LP (QVT) invested $5,000,000 and another accredited investment fund invested $15,000,000. The funds paid $0.90 for each Series E warrant and $0.125 for each Series F warrant, resulting in gross proceeds to the Company of $20,000,000, with net proceeds, after deducting estimated offering expenses, of $19,834,278. The Series E warrants, which may be exercised on a cashless basis, are exercisable immediately upon issuance at an initial exercise price of $0.01 per share and expire on the tenth anniversary of the date of issuance. The Series E warrants are subject to limitation on exercise if QVT and its affiliates would beneficially own more than 9.99% (4.99% for the other accredited investment fund holder) of the total number of the Company's shares of common stock following such exercise. The Series F warrants are exercisable at an initial exercise price of $0.91 per share, exercisable immediately upon issuance and expire on the fifth anniversary of the date of issuance. The Series F warrants are subject to the same beneficial ownership limitation as the Series E warrants. The purchase agreement for the private placement provides that the purchasers have certain rights until the earlier of approval of bremelanotide for FSD by the U.S. Food and Drug Administration and July 3, 2018, including rights of first refusal and participation in any subsequent equity or debt financing. The purchase agreement also contains certain restrictive covenants so long as the funds continue to hold specified amounts of warrants or beneficially own specified amounts of the outstanding shares of common stock. During the three months ended September 30, 2016, and 2015 the Company issued 12,757,174 shares and 10,890,889 shares, respectively, of common stock pursuant to the cashless exercise provisions of warrants at an exercise price of $0.01 per share. As of September 30, 2016, there were 77,546,764 warrants outstanding at an exercise price of $0.01 per share. Stock Options In June 2016, the Company granted 262,500 options to its nonemployee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these options of $81,435 over the vesting period. The Company recognized $20,359 of stock-based compensation expense related to these options during the three months ended September 30, 2016. In June 2015, the Company granted 570,000 options to its executive officers, 185,800 options to its employees and 160,000 options to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these options of $446,748, $145,439 and $111,876, respectively, over the vesting period. The Company recognized $32,293, and $57,577, respectively, of stock-based compensation expense related to these options during the three months ended September 30, 2016 and 2015. Unless otherwise stated, stock options granted to the Company’s executive officers and employees vest over a 48 month period, while stock options granted to its non-employee directors vest over a 12 month period. Restricted Stock Units In June 2016, the Company granted 262,500 restricted stock units to its nonemployee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $131,250 over the vesting period. The Company recognized $32,812 of stock-based compensation expense related to these restricted stock units during the three months ended September 30, 2016. In December 2015, the Company granted 625,000 performance-based restricted stock units to its executive officers and 200,000 performance-based restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan, which vest during the performance period, ending December 31, 2017, if and upon the earlier of: i) achievement of a closing price for the Company’s common stock equal to or greater than $1.20 per share for 20 consecutive trading days, which is considered a market condition, or ii) entering into a collaboration agreement (U.S. or global) of bremelanotide for FSD, which is considered a performance condition. The Company determined that the performance condition was not probable of achievement on the date of grant since such condition is outside the control of the Company. The fair value of these awards, as calculated under a multifactor Monte Carlo simulation, was $338,250. The Company is amortizing the fair value over the derived service period of 0.96 years. The Company recognized $86,879 of stock-based compensation expense related to these restricted stock units during the three ended September 30, 2016. Also, in December 2015, the Company granted 625,000 restricted stock units to its executive officers, 340,000 restricted stock units to its non-employee directors and 200,000 restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan. For executive officers and employees, the restricted stock units vest 25% on the date of grant and 25% on the first, second and third anniversary dates from the date of grant. For non-employee directors, the restricted stock units vest 50% on the first and second anniversary dates from the date of grant. The fair value of these restricted stock units is $425,000, $231,200 and $136,000, respectively. The Company recognized $101,256 of stock-based compensation expense related to these restricted stock units during the three months ended September 30, 2016. In June 2015, the Company granted 400,000 restricted stock units to its executive officers, 185,800 restricted stock units to its employees and 160,000 restricted stock units to its non-employee directors under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $432,000, $200,664, and $172,800, respectively, over the vesting period. The Company recognized $40,429 and $150,328, respectively, of stock-based compensation expense related to these restricted stock units during the three months ended September 30, 2016 and 2015. Unless otherwise stated, restricted stock units granted to the Company’s executive officers, employees and non-employee directors vest over 24 months, 48 months and 12 months, respectively. Stock-based compensation cost for the three months ended September 30, 2016 for stock options and equity-based instruments issued other than the stock options and restricted stock units described above was $58,703, and $92,489 for the three months ended September 30, 2015. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | Bremelanotide Phase 3 HSDD Topline Results – Outstanding Common Stock – |
ORGANIZATION (Policies)
ORGANIZATION (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Organization Policies | |
Nature of Business | Palatin Technologies, Inc. (Palatin or the Company) is a biopharmaceutical company developing targeted, receptor-specific peptide therapeutics for the treatment of diseases with significant unmet medical need and commercial potential. Palatin’s programs are based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. The melanocortin system is involved in a large and diverse number of physiologic functions, and therapeutic agents modulating this system may have the potential to treat a variety of conditions and diseases, including sexual dysfunction, obesity and related disorders, cachexia (wasting syndrome) and inflammation-related diseases. The natriuretic peptide receptor system has numerous cardiovascular functions, and therapeutic agents modulating this system may be useful in treatment of acute asthma, heart failure, hypertension and other cardiovascular diseases. The Company’s primary product in development is bremelanotide for the treatment of hypoactive sexual desire disorder (HSDD), which is a type of female sexual dysfunction (FSD). The Company also has drug candidates or development programs for obesity, erectile dysfunction, cardiovascular diseases, pulmonary diseases, inflammatory diseases and dermatologic diseases. Key elements of the Company’s business strategy include using its technology and expertise to develop and commercialize therapeutic products; entering into alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale and distribution of product candidates that the Company is developing; and partially funding its product candidate development programs with the cash flow generated from third parties. |
Business Risk and Liquidity | There is substantial doubt about the Company’s ability to continue as a going concern. Since inception, the Company has incurred negative cash flows from operations, and has expended, and expects to continue to expend, substantial funds to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company had an accumulated deficit as of September 30, 2016 of $356,465,022 and incurred a net loss for the three months ended September 30, 2016 of $13,052,770. The Company anticipates incurring additional losses in the future as a result of spending on its development programs and will require substantial additional financing to continue to fund its planned developmental activities. To achieve profitability, if ever, the Company, alone or with others, must successfully develop and commercialize its technologies and proposed products, conduct successful preclinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market such technologies and proposed products. The time required to reach profitability is highly uncertain, and the Company may never be able to achieve profitability on a sustained basis, if at all. The accompanying consolidated financial statements have been prepared assuming that the Company continues as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount or classification of liabilities that might result from the outcome of this uncertainty. As discussed in Note 11, on August 4, 2016, the Company closed on an underwritten offering of units resulting in gross proceeds of $9,225,000, with net proceeds, after deducting estimated offering expenses, of $8,470,897. As of September 30, 2016, the Company’s cash, cash equivalents and investments were $10,245,644 and current liabilities were $20,470,919. The Company intends to utilize existing capital resources for general corporate purposes and working capital, including the Phase 3 clinical trial program with bremelanotide for HSDD and preclinical and clinical development of our other product candidates and programs, including PL-3994 and melanocortin receptor-1 and melanocortin receptor-4 programs. Management believes that the Phase 3 clinical trial program with bremelanotide for HSDD, including regulatory filings for product approval, but excluding required ancillary studies and clinical trials and launch readiness commercialization efforts, will cost at least $87,000,000. Management believes that the Company’s existing capital resources will be adequate to fund its planned operations through the quarter ending December 31, 2016. The Company will need additional funding to complete required ancillary studies and clinical trials of bremelanotide for HSDD, prepare and submit regulatory filings for product approval, and establish commercial scale manufacturing capability. The Company will also need additional funding to complete required clinical trials for its other product candidates and, assuming those clinical trials are successful, as to which there can be no assurance, to complete submission of required applications to the FDA. If the Company is unable to obtain approval or otherwise advance in the FDA approval process, the Company’s ability to sustain its operations would be materially adversely affected. The Company may seek the additional capital necessary to fund its operations through public or private equity offerings, collaboration agreements, debt financings or licensing arrangements. Additional capital that is required by the Company may not be available on reasonable terms, or at all. |
Concentrations | Concentrations in the Company’s assets and operations subject it to certain related risks. Financial instruments that subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents and availableforsale investments. The Company’s cash and cash equivalents are primarily invested in one money market account sponsored by a large financial institution. For the three months ended September 30, 2016, and 2015, the Company had no revenues reported. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Sep. 30, 2016 | |
Summary Of Significant Accounting Policies Policies | |
Principles of Consolidation | The consolidated financial statements include the accounts of Palatin and its wholly-owned inactive subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and cash equivalents include cash on hand, cash in banks and all highly liquid investments with a purchased maturity of less than three months. Cash equivalents consist of $8,687,904 and $7,782,243 in a money market account at September 30, 2016 and June 30, 2016, respectively. |
Investments | The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and reevaluates such determinations at each balance sheet date. Debt securities are classified as heldtomaturity when the Company has the intent and ability to hold the securities to maturity. Debt securities for which the Company does not have the intent or ability to hold to maturity are classified as availableforsale. Heldtomaturity securities are recorded as either shortterm or longterm on the balance sheet, based on the contractual maturity date and are stated at amortized cost. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses recognized in earnings. Debt and marketable equity securities not classified as heldtomaturity or as trading are classified as availableforsale and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of other comprehensive (loss) income. The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market. |
Fair Value of Financial Instruments | The Company’s financial instruments consist primarily of cash equivalents, available-for-sale investments, accounts payable and notes payable. Management believes that the carrying values of cash equivalents, available-for-sale investments and accounts payable are representative of their respective fair values based on the short-term nature of these instruments. Management believes that the carrying amount of its notes payable approximates fair value based on the terms of the notes. |
Credit Risk | Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. Total cash and cash equivalent balances have exceeded insured balances by the Federal Depository Insurance Company (FDIC). |
Property and Equipment | Property and equipment consists of office and laboratory equipment, office furniture and leasehold improvements and includes assets acquired under capital leases. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets, generally five years for laboratory and computer equipment, seven years for office furniture and equipment and the lesser of the term of the lease or the useful life for leasehold improvements. Amortization of assets acquired under capital leases is included in depreciation expense. Maintenance and repairs are expensed as incurred while expenditures that extend the useful life of an asset are capitalized. |
Impairment of Long-Lived Assets | The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information at which assets could be bought or sold, including quoted market prices, if available, or the present value of the estimated future cash flows based on reasonable and supportable assumptions. |
Revenue Recognition | Under our license, co-development and commercialization agreement with Gedeon Richter (Note 5), we received consideration in the form of a license fee and development milestone payment. Revenue resulting from license fees is recognized upon delivery of the license for the portion of the license fee payment that is non-contingent and non-refundable, if the license has standalone value. Revenue resulting from the achievement of development milestones is recorded in accordance with the accounting guidance for the milestone method of revenue recognition. |
Research and Development Costs | The costs of research and development activities are charged to expense as incurred, including the cost of equipment for which there is no alternative future use. |
Accrued Expenses | Third parties perform a significant portion of our development activities. We review the activities performed under significant contracts each quarter and accrue expenses and the amount of any reimbursement to be received from our collaborators based upon the estimated amount of work completed. Estimating the value or stage of completion of certain services requires judgment based on available information. If we do not identify services performed for us but not billed by the service-provider, or if we underestimate or overestimate the value of services performed as of a given date, reported expenses will be understated or overstated. |
Stock-Based Compensation | The Company charges to expense the fair value of stock options and other equity awards granted. The Company determines the value of stock options utilizing the Black-Scholes option pricing model. Compensation costs for share-based awards with pro-rata vesting are determined using the quoted market price of the Company’s common stock on the date of grant and allocated to periods on a straightline basis, while awards containing a market condition are valued using multifactor Monte Carlo simulations. |
Income Taxes | The Company and its subsidiary file consolidated federal and separate-company state income tax returns. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences or operating loss and tax credit carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. The Company has recorded a valuation allowance against its deferred tax assets based on the history of losses incurred. |
Net Loss per Common Share | Basic and diluted earnings per common share (EPS) are calculated in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 260, “Earnings per Share,” which includes guidance pertaining to the warrants, issued in connection with the July 3, 2012, December 23, 2014, and July 2, 2015 private placement offerings and the August 4, 2016 underwritten offering, that are exercisable for nominal consideration and, therefore, are to be considered in the computation of basic and diluted net loss per common share. The Series A 2012 warrants issued on July 3, 2012 to purchase up to 31,988,151 shares of common stock are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share for all periods presented in the consolidated statements of operations. The Series B 2012 warrants issued on July 3, 2012 to purchase up to 35,488,380 shares of common stock are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share for all periods presented in the consolidated statements of operations. The Series C 2014 warrants to purchase up to 24,949,325 shares of common stock were exercisable starting at December 23, 2014 and, therefore are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on December 23, 2014. The Series E 2015 warrants to purchase up to 21,917,808 shares of common stock were exercisable starting at July 2, 2015 and, therefore are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on July 2, 2015. The Series I 2016 warrants to purchase up to 2,218,045 shares of common stock were exercisable starting at August 4, 2016 and, therefore are included in the weighted average number of common shares outstanding used in computing basic and diluted net loss per common share starting on August 4, 2016 (Note 11). As of September 30, 2016 and 2015, common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the Series A 2012, Series B 2012, Series C 2014, Series E 2015 and Series I 2016 warrants issued in connection with the July 3, 2012, December 23, 2014, and July 2, 2015 private placement offerings and the August 4, 2016 underwritten offering), and the vesting of restricted stock units amounted to an aggregate of 44,479,663, and 32,908,798 shares, respectively. These share amounts have been excluded from the calculation of net loss per share as the impact would be antidilutive. |
PREPAID EXPENSES AND OTHER CU21
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Prepaid Expenses And Other Current Assets Tables | |
Schedule of prepaid expenses and other current assets | September 30, 2016 June 30, 2016 Clinical study costs $ 860,440 $ 1,146,975 Insurance premiums 25,764 23,010 Other 121,774 143,856 $ 1,007,978 $ 1,313,841 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Investments Tables | |
Carrying value of our available-for-sale investments | September 30, 2016 June 30, 2016 Cost $ 1,387,022 $ 1,387,022 Amortization of premium (6,787 ) (4,522 ) Gross unrealized loss (2,521 ) (1,944 ) Fair value $ 1,377,714 $ 1,380,556 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Fair value of restricted stock units granted, amortized over 24 month vesting period | |
Schedule of assets at fair value | Carrying Value Quoted prices in active markets (Level 1) Other quoted/observable inputs (Level 2) Significant unobservable inputs (Level 3) September 30, 2016: Money market account 8,687,904 8,687,904 - - TOTAL $ 8,687,904 $ 8,687,904 $ - $ - June 30, 2016: Money market account 7,782,243 7,782,243 - - TOTAL $ 7,782,243 $ 7,782,243 $ - $ - |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Accrued Expenses | |
Accrued Expenses | September 30, 2016 June 30, 2016 Bremelanotide program costs $ 12,379,580 $ 6,983,581 Other research related expenses 311,178 69,609 Professional services 40,235 231,482 Other 153,597 483,061 $ 12,884,590 $ 7,767,733 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 3 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | September 30, 2016 June 30, 2016 Notes payable under venture loan $ 19,000,000 $ 20,000,000 Unamortized related debt discount $ (275,386 ) $ (324,800 ) Unamortized debt issuance costs (163,068 ) (193,655 ) Notes payable $ 18,561,546 $ 19,481,545 Less: current portion 6,399,075 5,374,951 Long-term portion $ 12,162,471 $ 14,106,594 |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | 3 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Jun. 30, 2016 | |
Accumulated deficit | $ 356,465,022 | $ 343,412,252 | |
Net loss | $ 13,052,770 | $ 12,409,919 | |
Concentration risk revenue | 0.00% | ||
Cash, cash equivalents and investments | $ 10,245,644 |
SUMMARY OF SIGNIFICANT ACCOUN27
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Range 6 | ||
Cash equivalents | $ 8,687,904 | $ 7,782,243 |
Antidilutive Securities Excluded from Computation of Earnings Per Share | 44,479,663 | 32,908,798 |
PREPAID EXPENSES AND OTHER CU28
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Prepaid Expenses And Other Current Assets Details | ||
Clinical study costs | $ 860,440 | $ 1,146,975 |
Deferred financing costs | 25,764 | 23,010 |
Other | 121,774 | 143,856 |
Total prepaid expenses and other current assets | $ 1,007,978 | $ 1,313,841 |
INVESTMENTS (Details)
INVESTMENTS (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Investments Details | ||
Cost | $ 1,387,022 | $ 1,387,022 |
Amortization of premium | (6,787) | (4,522) |
Gross unrealized loss | (2,521) | (1,944) |
Fair value | $ 1,377,714 | $ 1,380,556 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Money Market Account | $ 8,687,904 | $ 7,782,243 |
Total | 8,687,904 | 7,782,243 |
Level 1 | ||
Money Market Account | 8,687,904 | 7,782,243 |
Total | 8,687,904 | 7,782,243 |
Level 2 | ||
Money Market Account | 0 | 0 |
Total | 0 | 0 |
Level 3 | ||
Money Market Account | 0 | 0 |
Total | $ 0 | $ 0 |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Accrued Expenses | ||
Accrued Bremelanotide Program costs | $ 12,379,580 | $ 6,983,581 |
Other research related expenses | 311,178 | 69,609 |
Professional services | 40,235 | 231,482 |
Other | 153,597 | 483,061 |
Accrued expenses | $ 12,884,590 | $ 7,767,733 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Sep. 30, 2016 | Jun. 30, 2016 |
Notes Payable Details | ||
Notes payable under venture loan | $ 19,000,000 | $ 20,000,000 |
Unamortized related debt discountUnamortized related debt discount | (275,386) | (324,800) |
Unamortized debt issuance costs | (163,068) | (193,655) |
Notes payable | 18,561,546 | 19,481,545 |
Less: current portion | 6,399,075 | 5,374,951 |
Long-term portion | $ 12,162,471 | $ 14,106,594 |