Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Sep. 30, 2014 | Nov. 13, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'PALATIN TECHNOLOGIES INC | ' |
Entity Central Index Key | '0000911216 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
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 | ' | 39,490,161 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2015 | ' |
Consolidated_Balance_Sheets_Un
Consolidated Balance Sheets (Unuadited) (USD $) | Sep. 30, 2014 | Jun. 30, 2014 |
Current assets: | ' | ' |
Cash and cash equivalents | $17,787,720 | $12,184,605 |
Prepaid expenses and other current assets | 473,643 | 156,393 |
Total current assets | 18,261,363 | 12,340,998 |
Property and equipment, net | 133,155 | 160,748 |
Other assets | 57,088 | 57,308 |
Total assets | 18,451,606 | 12,559,054 |
Current liabilities: | ' | ' |
Accounts payable | 561,361 | 261,280 |
Accrued expenses | 2,160,407 | 1,508,958 |
Deferred revenue | 4,932,315 | 1,000,000 |
Total current liabilities | 7,654,083 | 2,770,238 |
Total liabilities | 7,654,083 | 2,770,238 |
Stockholders' equity: | ' | ' |
Preferred stock of $.01 par value - authorized 10,000,000 shares; Series A Convertible; issued and outstanding 4,697 shares as of September 30, 2014 and June 30, 2014, respectively | 47 | 47 |
Common stock of $.01 par value - authorized 300,000,000 shares; issued and outstanding 39,490,161 shares as of September 30, 2014 and 39,416,595 as of June 30, 2014, respectively | 394,901 | 394,166 |
Additional paid-in capital | 283,641,654 | 283,428,356 |
Accumulated deficit | -273,239,079 | -274,033,753 |
Total stockholders' equity | 10,797,523 | 9,788,816 |
Total liabilities and stockholders' equity | $18,451,606 | $12,559,054 |
Consolidated_Balance_Sheets_Un1
Consolidated Balance Sheets (Unuadited) (Parenthetical) (USD $) | Sep. 30, 2014 | Jun. 30, 2014 |
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 | 4,697 | 4,697 |
Preferred stock, Series A Convertible, shares outstanding | 4,697 | 4,697 |
Common stock, par value | $0.01 | $0.01 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 39,490,161 | 39,416,595 |
Common stock, shares outstanding | 39,490,161 | 39,416,595 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Income Statement [Abstract] | ' | ' |
REVENUES: | $4,932,315 | $0 |
OPERATING EXPENSES: | ' | ' |
Research and development | 2,923,966 | 3,449,140 |
General and administrative | 1,114,461 | 1,043,510 |
Total operating expenses | 4,038,427 | 4,492,650 |
Income (loss) from operations | 893,888 | -4,492,650 |
OTHER INCOME (EXPENSE): | ' | ' |
Investment income | 3,799 | 5,319 |
Interest expense | -1,730 | -1,851 |
Foreign exchange transaction loss | -101,283 | 0 |
Total other (expense) income, net | -99,214 | 3,468 |
NET INCOME (LOSS) | $794,674 | ($4,489,182) |
Basic net income (loss) per common share | $0.01 | ($0.04) |
Diluted net income (loss) per common share | $0.01 | ($0.04) |
Weighted average number of common shares outstanding used in computing basic net income (loss) per common share | 106,953,898 | 106,609,720 |
Weighted average number of common shares outstanding used in computing diluted net income (loss) per common share | 107,946,021 | 106,609,720 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 3 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net loss | $794,674 | ($4,489,182) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 27,593 | 27,242 |
Accrued interest and amortization on premium/discount | 0 | -272 |
Stock-based compensation | 252,471 | 203,636 |
Changes in operating assets and liabilities: | ' | ' |
Prepaid expenses, restricted cash and other assets | -9,285 | 80,770 |
Accounts payable | 300,081 | 652,172 |
Accrued expenses | 427,334 | 480,390 |
Deferred revenue | 3,932,315 | 1,000,000 |
Net cash provided by (used in) operating activities | 5,725,183 | -2,045,244 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Proceeds from maturity of investments | 0 | 1,500,000 |
Purchases of property and equipment | 0 | -6,239 |
Net cash provided by investing activities | 0 | 1,493,761 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ' | ' |
Payments on capital lease obligations | 0 | -5,841 |
Payment of withholding taxes related to restricted stock units | -122,068 | -25,215 |
Net cash used in financing activities | -122,068 | -31,056 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | 5,603,115 | -582,539 |
CASH AND CASH EQUIVALENTS, beginning of period | 12,184,605 | 19,167,632 |
CASH AND CASH EQUIVALENTS, end of period | 17,787,720 | 18,585,093 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ' | ' |
Cash paid for interest | $1,730 | $1,851 |
ORGANIZATION
ORGANIZATION | 3 Months Ended |
Sep. 30, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
ORGANIZATION | ' |
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 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. The Company has a license, co-development and commercialization agreement with Gedeon Richter Plc. (Gedeon Richter) to commercialize bremelanotide for FSD in Europe and selected countries, and an exclusive global research collaboration and license agreement with AstraZeneca AB (AstraZeneca) to commercialize compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome. | |
Key elements of the Company’s business strategy include using its technology and expertise to develop and commercialize innovative 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 research collaboration and license agreements and any potential future agreements with third parties. | |
Business Risk and Liquidity – The Company has incurred negative cash flows from operations since its inception, and has expended, and expects to continue to expend in the future, substantial funds to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company has an accumulated deficit as of September 30, 2014 of $273.2 million and despite reporting net income the three months ended September 30, 2014 of $0.8 million, the Company anticipates incurring additional losses in the future as a result of spending on its development programs. 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 there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all. | |
As of September 30, 2014, the Company’s cash and cash equivalents were $17.8 million. The Company intends to utilize existing capital resources for general corporate purposes and working capital, including advancing the Phase 3 clinical trial program with bremelanotide for FSD 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, including regulatory filings for product approval, will cost at least $80.0 million. The Company is preparing to initiate patient enrollment in the Phase 3 program in the fourth quarter of calendar 2014, but may curtail or delay clinical trial initiation unless the Company has adequate funds, or commitments for adequate funds, to complete the Phase 3 clinical trials. The Company intends to seek additional capital to support the Phase 3 program through collaborative arrangements on bremelanotide, in addition to the Company’s agreement with Gedeon Richter, public or private equity or debt financings, or other sources. | |
Management believes that the Company’s existing capital resources will be adequate to fund its planned operations through the quarter ending December 31, 2015, not including initiation of its pivotal Phase 3 clinical trials for bremelanotide for FSD or other planned clinical trials. | |
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. The Company’s cash and cash equivalents are primarily invested in one money market fund sponsored by a large financial institution. For the three months ended September 30, 2014, 100% of revenues were from Gedeon Richter. For the three months ended September 30, 2013, the Company had no revenues. |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Sep. 30, 2014 | |
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, 2014 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, 2015. | |
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, 2014, filed with the Securities and Exchange Commission (SEC), which includes consolidated financial statements as of June 30, 2014 and 2013 and for each of the fiscal years in the three-year period ended June 30, 2014. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Accounting Policies [Abstract] | ' | ||||||||
SUMMARY OF SIGNIFICANT ACCOUNTING 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 U.S. generally accepted accounting principles 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 $15,103,388 and $9,495,656 in a money market fund at September 30, 2014 and June 30, 2014, respectively. | |||||||||
Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents and accounts payable. Management believes that the carrying value of these assets and liabilities are representative of their respective fair values based on quoted market prices for investments and the short-term nature of the other instruments. | |||||||||
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. | |||||||||
Deferred Rent – The Company’s operating leases provide for rent increases over the terms of the leases. Deferred rent consists of the difference between periodic rent payments and the amount recognized as rent expense on a straight-line basis, as well as tenant allowances for leasehold improvements. Rent expenses are being recognized ratably over the terms of the leases. | |||||||||
Revenue Recognition – Under our license, co-development and commercialization agreement with Gedeon Richter (note 6), we may be entitled to receive consideration in the form of license fees, regulatory milestone payments, sales milestone payments, and royalties. | |||||||||
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 are recorded in accordance with the accounting guidance for the milestone method of revenue recognition. Revenue resulting from the achievement of sales milestone events is recognized when the milestone is achieved. Revenue from royalties is recorded when earned. | |||||||||
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. | |||||||||
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 allocated to periods on a straight-line basis. | |||||||||
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 Income (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 private placement 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 to purchase up to 31,988,151 shares of common stock were exercisable starting at July 3, 2012 and, therefore, are included in the weighted average number of common shares outstanding used in computing basic and diluted net income (loss) per common share starting on July 3, 2012. | |||||||||
The Series B 2012 warrants to purchase up to 35,488,380 shares of common stock were considered contingently issuable shares and were not included in computing basic net loss per common share until the Company received stockholder approval for the increase in authorized underlying common stock on September 27, 2012. For diluted EPS, contingently issuable shares are to be included in the calculation as of the beginning of the period in which the conditions were satisfied, unless the effect would be anti-dilutive. The Series B 2012 warrants have been excluded from the calculation of diluted net loss per common share during the period from July 3, 2012 until September 27, 2012 as the impact would be anti-dilutive. | |||||||||
The following table is a reconciliation of net income (loss) and the shares used in calculating basic and diluted net income (loss) per common share for the three months ended September 30, 2014 and 2013: | |||||||||
Three Months Ended September 30, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net income (loss) | $ | 794,674 | $ | (4,489,182 | ) | ||||
Denominator: | |||||||||
Weighted average common shares outstanding - Basic | 106,953,898 | $ | 106,609,720 | ||||||
Effect of dilutive shares: | |||||||||
Common stock equivalents arising from stock options and warrants | 799,139 | - | |||||||
Restricted stock units | 192,984 | - | |||||||
Weighted average common shares outstanding - Diluted | 107,946,021 | 106,609,720 | |||||||
Net income (loss) per common share: | |||||||||
Basic | $ | 0.01 | $ | (0.04 | ) | ||||
Diluted | $ | 0.01 | $ | (0.04 | ) | ||||
As of September 30, 2014 and 2013, common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the warrants issued in connection with the July 3, 2012 private placement offering), and the vesting of restricted stock units amounted to an aggregate of 28,903,674 and 28,677,356 shares, respectively, and are excluded in the weighted average number of common shares outstanding used in computing basic net income (loss) per common share. For the three months ended September 30, 2014, an additional 992,123 of common shares have been included in the computation of diluted EPS. However, for the three months ended September 30, 2013, no additional common shares were added in the computation of diluted EPS because to do so would have been anti-dilutive for this period. | |||||||||
NEW_AND_RECENTLY_ADOPTED_ACCOU
NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Sep. 30, 2014 | |
Notes to Financial Statements | ' |
NEW AND RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS | ' |
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.” The amendments in this update provide guidance in GAAP about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The new standard is effective for the Company for its fiscal year ending June 30, 2017. The Company is evaluating the effect of the standard, if any, on its financial statements. | |
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for the Company on July 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet determined the effect of the standard on its ongoing financial reporting. |
AGREEMENT_WITH_ASTRAZENECA
AGREEMENT WITH ASTRAZENECA | 3 Months Ended |
Sep. 30, 2014 | |
Agreement With Astrazeneca | ' |
AGREEMENT WITH ASTRAZENECA | ' |
In January 2007, the Company entered into an exclusive global research collaboration and license agreement with AstraZeneca to discover, develop and commercialize compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome. In June 2008, the license agreement was amended to include additional compounds and associated intellectual property developed by the Company. In December 2008, the license agreement was further amended to include additional compounds and associated intellectual property developed by the Company and extended the research collaboration for an additional year through January 2010. In September 2009, the license agreement was further amended to modify royalty rates and milestone payments. The collaboration is based on the Company’s melanocortin receptor obesity program and includes access to compound libraries, core technologies and expertise in melanocortin receptor drug discovery and development. As part of the September 2009 amendment to the research collaboration and license agreement, the Company agreed to conduct additional studies on the effects of melanocortin receptor specific compounds on food intake, obesity and other metabolic parameters. | |
In December 2009 and 2008, the Company also entered into clinical trial sponsored research agreements with AstraZeneca, under which the Company agreed to conduct studies of the effects of melanocortin receptor specific compounds on food intake, obesity and other metabolic parameters. Under the terms of these clinical trial agreements, AstraZeneca paid $5,000,000 as of March 31, 2009 upon achieving certain objectives and paid all costs associated with these studies. | |
The Company received an up-front payment of $10,000,000 from AstraZeneca on execution of the research collaboration and license agreement. Under the September 2009 amendment the Company was paid an additional $5,000,000 in consideration of reduction of future milestones and royalties and providing specific materials to AstraZeneca. The Company is now eligible for milestone payments totaling up to $145,250,000, with up to $85,250,000 contingent on development and regulatory milestones and the balance contingent on achievement of sales targets. In addition, the Company is eligible to receive mid to high single digit royalties on sales of any approved products. AstraZeneca assumed responsibility for product commercialization, product discovery and development costs, with both companies contributing scientific expertise in the research collaboration. The Company provided research services to AstraZeneca through January 2010, the expiration of the research collaboration portion of the research collaboration and license agreement, at a contractual rate per full-time-equivalent employee. | |
AstraZeneca is evaluating its program and next steps. No assurance can be given that AstraZeneca will continue to develop compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome, or that AstraZeneca will be successful in developing any such compound. |
AGREEMENT_WITH_GEDEON_RICHTER
AGREEMENT WITH GEDEON RICHTER | 3 Months Ended |
Sep. 30, 2014 | |
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. In August 2013, the Company received an initial payment of $1.0 million from Gedeon Richter as a non-refundable option fee on the license, co-development and commercialization agreement, and in September 2014, the Company received €6.7 ($8.8 million) on execution of the definitive agreement. Under the agreement, Gedeon Richter will pay the Company a milestone payment of €2.5 million ($3.2 million as of September 30, 2014) upon the initiation of the Company’s Phase 3 clinical trial program in the United States. The Company has the potential to receive up to €80 million ($101.2 million as of September 30, 2014) in regulatory and sales related milestones, and will receive low double-digit royalties on net sales in the licensed territory. Under the agreement the Company will contribute, with Gedeon Richter, to the costs of co-development activities for obtaining regulatory approval in Europe. Gedeon Richter will exclusively market bremelanotide for FSD in the licensed territory, and will be responsible for all sales, marketing and commercial activities, including associated costs, in the licensed territory. The agreement remains in effect as long as Gedeon Richter is selling bremelanotide on which a royalty is owed. The agreement may be terminated by either party upon notice in the event of a material breach or insolvency. In the event Gedeon Richter terminates the agreement because the Company breached the agreement or is insolvent, Gedeon Richter’s license becomes fully paid-up, royalty free, perpetual and irrevocable. If the Company fails to initiate its Phase 3 program on or before December 31, 2014, Gedeon Richter at its option may elect to terminate the license and receive a payment equal to one-half of the total upfront payments of €7.5 million ($9.8 million). | |
We view the delivery of the license for bremelanotide as a revenue generating activity that is part of our ongoing and central operations. The other elements of the agreement with Gedeon Richter are considered non-revenue activities associated with the collaborative arrangement. We believe the license has standalone value from the other elements of the collaborative arrangement because it conveys all of the rights necessary to develop and commercialize the bremelanotide compound. As of September 30, 2014, the portion of the license payment that is contingent and refundable was recorded as deferred revenue in the consolidated balance sheet. During the three months ended September 30, 2014, the portion of the license payment that is non-contingent and non-refundable was recorded as license revenue in the consolidated statements of operations. In the event that we terminate the agreement because Gedeon Richter breached the agreement or is insolvent, upon timely request all regulatory approvals for bremelanotide in the licensed territory will be transferred to us or our designee. | |
As a result of fluctuations in the conversion rates between the Euro and the U.S. Dollar between the transaction date and the settlement date, the Company has recorded a foreign exchange transaction loss of $101,283 for the three months ended September 30, 2014. | |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||
The fair value of cash equivalents are 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 | Other quoted/observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||
active markets | (Level 3) | ||||||||||||||||
(Level 1) | |||||||||||||||||
September 30, 2014: | |||||||||||||||||
Money Market Fund | $ | 15,103,388 | $ | 15,103,388 | $ | - | $ | - | |||||||||
June 30, 2014: | |||||||||||||||||
Money Market Fund | $ | 9,495,656 | $ | 9,495,656 | $ | - | $ | - | |||||||||
STOCKHOLDERS_EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Sep. 30, 2014 | |
Equity [Abstract] | ' |
STOCKHOLDERS' EQUITY | ' |
Stock Options – In June 2014, the Company granted 325,000 options to its executive officers, 143,400 options to its employees and 135,000 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 $265,726, $117,247 and $97,530, respectively, over the vesting period. The Company recognized $45,219 of stock-based compensation expense related to these options during the three months ended September 30, 2014. | |
In June 2013, the Company granted 525,000 options to its executive officers, 394,300 options to its employees and 270,000 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 $287,000, $204,000 and $148,000, respectively, over the vesting period. The Company recognized $22,471 and $66,198, respectively, of stock-based compensation expense related to these options during the three months ended September 30, 2014 and 2013. | |
In July 2012, the Company granted 285,000 options to its executive officers, 182,500 options to its employees and 112,500 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 $182,000, $108,000 and $72,000, respectively, over the vesting period. The Company recognized $14,358 and $17,140, respectively, of stock-based compensation expense related to these options during the three months ended September 30, 2014 and 2013, respectively. | |
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 2014, the Company granted 325,000 restricted stock units to its executive officers, 143,400 restricted stock units to its employees and 135,000 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 $331,500, $146,268 and $137,700, respectively, over the vesting period. Restricted stock units granted to the Company’s executive officers, employees and non-employee directors in 2014 vest over 24 months, 48 months and 12 months, respectively. The Company recognized $115,627 of stock-based compensation expense related to these restricted stock units during the three months ended September 30, 2014. | |
In June 2013, the Company granted 420,000 restricted stock units to its executive officers and 115,000 restricted stock units to its employees under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $260,000 and $71,000, respectively, over the 24 month vesting period ending June 2015. The Company recognized $18,794 and $62,194, respectively, of stock-based compensation expense related to these restricted stock units during the three months ended September 30, 2014 and 2013. | |
In July 2012, the Company granted 222,500 restricted stock units to its executive officers under the Company’s 2011 Stock Incentive Plan. The Company is amortizing the fair value of these restricted stock units of $160,000 over the 24 months ending July 2014. The Company recognized $1,830 and $13,673, respectively, of stock-based compensation expense related to these restricted stock units during the three months ended September 30, 2014 and 2013, respectively. | |
Stock-based compensation cost for the three months ended September 30, 2014 for stock options and equity-based instruments issued other than the stock options and restricted stock units described above was $34,172, and $44,431 for the three months ended September 30, 2013. | |
ORGANIZATION_Policies
ORGANIZATION (Policies) | 3 Months Ended |
Sep. 30, 2014 | |
Organization Policies | ' |
Nature of Business | ' |
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 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. The Company has a license, co-development and commercialization agreement with Gedeon Richter Plc. (Gedeon Richter) to commercialize bremelanotide for FSD in Europe and selected countries, and an exclusive global research collaboration and license agreement with AstraZeneca AB (AstraZeneca) to commercialize compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome. | |
Key elements of the Company’s business strategy include using its technology and expertise to develop and commercialize innovative 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 research collaboration and license agreements and any potential future agreements with third parties. | |
Business Risk and Liquidity | ' |
Business Risk and Liquidity – The Company has incurred negative cash flows from operations since its inception, and has expended, and expects to continue to expend in the future, substantial funds to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company has an accumulated deficit as of September 30, 2014 of $273.2 million and despite reporting net income the three months ended September 30, 2014 of $0.8 million, the Company anticipates incurring additional losses in the future as a result of spending on its development programs. 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 there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all. | |
As of September 30, 2014, the Company’s cash and cash equivalents were $17.8 million. The Company intends to utilize existing capital resources for general corporate purposes and working capital, including advancing the Phase 3 clinical trial program with bremelanotide for FSD 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, including regulatory filings for product approval, will cost at least $80.0 million. The Company is preparing to initiate patient enrollment in the Phase 3 program in the fourth quarter of calendar 2014, but may curtail or delay clinical trial initiation unless the Company has adequate funds, or commitments for adequate funds, to complete the Phase 3 clinical trials. The Company intends to seek additional capital to support the Phase 3 program through collaborative arrangements on bremelanotide, in addition to the Company’s agreement with Gedeon Richter, public or private equity or debt financings, or other sources. | |
Management believes that the Company’s existing capital resources will be adequate to fund its planned operations through the quarter ending December 31, 2015, not including initiation of its pivotal Phase 3 clinical trials for bremelanotide for FSD or other planned clinical trials. | |
Concentrations | ' |
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. The Company’s cash and cash equivalents are primarily invested in one money market fund sponsored by a large financial institution. For the three months ended September 30, 2014, 100% of revenues were from Gedeon Richter. For the three months ended September 30, 2013, the Company had no revenues. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Summary Of Significant Accounting Policies Policies | ' | ||||||||
Principles of Consolidation | ' | ||||||||
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 | ' | ||||||||
Use of Estimates – The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles 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 – 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 $15,103,388 and $9,495,656 in a money market fund at September 30, 2014 and June 30, 2014, respectively. | |||||||||
Fair Value of Financial Instruments | ' | ||||||||
Fair Value of Financial Instruments – The Company’s financial instruments consist primarily of cash equivalents and accounts payable. Management believes that the carrying value of these assets and liabilities are representative of their respective fair values based on quoted market prices for investments and the short-term nature of the other instruments. | |||||||||
Property and Equipment | ' | ||||||||
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 | ' | ||||||||
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. | |||||||||
Deferred Rent | ' | ||||||||
Deferred Rent – The Company’s operating leases provide for rent increases over the terms of the leases. Deferred rent consists of the difference between periodic rent payments and the amount recognized as rent expense on a straight-line basis, as well as tenant allowances for leasehold improvements. Rent expenses are being recognized ratably over the terms of the leases. | |||||||||
Revenue Recognition | ' | ||||||||
Revenue Recognition – Under our license, co-development and commercialization agreement with Gedeon Richter (note 6), we may be entitled to receive consideration in the form of license fees, regulatory milestone payments, sales milestone payments, and royalties. | |||||||||
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 are recorded in accordance with the accounting guidance for the milestone method of revenue recognition. Revenue resulting from the achievement of sales milestone events is recognized when the milestone is achieved. Revenue from royalties is recorded when earned. | |||||||||
Research and Development Costs | ' | ||||||||
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 | ' | ||||||||
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. | |||||||||
Stock-Based Compensation | ' | ||||||||
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 allocated to periods on a straight-line basis. | |||||||||
Income Taxes | ' | ||||||||
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 | ' | ||||||||
Net Income (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 private placement 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 to purchase up to 31,988,151 shares of common stock were exercisable starting at July 3, 2012 and, therefore, are included in the weighted average number of common shares outstanding used in computing basic and diluted net income (loss) per common share starting on July 3, 2012. | |||||||||
The Series B 2012 warrants to purchase up to 35,488,380 shares of common stock were considered contingently issuable shares and were not included in computing basic net loss per common share until the Company received stockholder approval for the increase in authorized underlying common stock on September 27, 2012. For diluted EPS, contingently issuable shares are to be included in the calculation as of the beginning of the period in which the conditions were satisfied, unless the effect would be anti-dilutive. The Series B 2012 warrants have been excluded from the calculation of diluted net loss per common share during the period from July 3, 2012 until September 27, 2012 as the impact would be anti-dilutive. | |||||||||
The following table is a reconciliation of net income (loss) and the shares used in calculating basic and diluted net income (loss) per common share for the three months ended September 30, 2014 and 2013: | |||||||||
Three Months Ended September 30, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net income (loss) | $ | 794,674 | $ | (4,489,182 | ) | ||||
Denominator: | |||||||||
Weighted average common shares outstanding - Basic | 106,953,898 | $ | 106,609,720 | ||||||
Effect of dilutive shares: | |||||||||
Common stock equivalents arising from stock options and warrants | 799,139 | - | |||||||
Restricted stock units | 192,984 | - | |||||||
Weighted average common shares outstanding - Diluted | 107,946,021 | 106,609,720 | |||||||
Net income (loss) per common share: | |||||||||
Basic | $ | 0.01 | $ | (0.04 | ) | ||||
Diluted | $ | 0.01 | $ | (0.04 | ) | ||||
As of September 30, 2014 and 2013, common shares issuable upon conversion of Series A Convertible Preferred Stock, the exercise of outstanding options and warrants (excluding the warrants issued in connection with the July 3, 2012 private placement offering), and the vesting of restricted stock units amounted to an aggregate of 28,903,674 and 28,677,356 shares, respectively, and are excluded in the weighted average number of common shares outstanding used in computing basic net income (loss) per common share. For the three months ended September 30, 2014, an additional 992,123 of common shares have been included in the computation of diluted EPS. However, for the three months ended September 30, 2013, no additional common shares were added in the computation of diluted EPS because to do so would have been anti-dilutive for this period. | |||||||||
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Summary Of Significant Accounting Policies Tables | ' | ||||||||
Schedule of earnings per share | ' | ||||||||
Three Months Ended September 30, | |||||||||
2014 | 2013 | ||||||||
Numerator: | |||||||||
Net income (loss) | $ | 794,674 | $ | (4,489,182 | ) | ||||
Denominator: | |||||||||
Weighted average common shares outstanding - Basic | 106,953,898 | $ | 106,609,720 | ||||||
Effect of dilutive shares: | |||||||||
Common stock equivalents arising from stock options and warrants | 799,139 | - | |||||||
Restricted stock units | 192,984 | - | |||||||
Weighted average common shares outstanding - Diluted | 107,946,021 | 106,609,720 | |||||||
Net income (loss) per common share: | |||||||||
Basic | $ | 0.01 | $ | (0.04 | ) | ||||
Diluted | $ | 0.01 | $ | (0.04 | ) |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Fair value of restricted stock units granted, amortized over 24 month vesting period | ' | ||||||||||||||||
Schedule of assets at fair value | ' | ||||||||||||||||
Carrying Value | Quoted prices in | Other quoted/observable inputs (Level 2) | Significant unobservable inputs | ||||||||||||||
active markets | (Level 3) | ||||||||||||||||
(Level 1) | |||||||||||||||||
September 30, 2014: | |||||||||||||||||
Money Market Fund | $ | 15,103,388 | $ | 15,103,388 | $ | - | $ | - | |||||||||
June 30, 2014: | |||||||||||||||||
Money Market Fund | $ | 9,495,656 | $ | 9,495,656 | $ | - | $ | - |
SUMMARY_OF_SIGNIFICANT_ACCOUNT3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $) | 3 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Numerator: | ' | ' |
Net income (loss) | $794,674 | ($4,489,182) |
Denominator: | ' | ' |
Weighted average common shares outstanding - Basic | 106,953,898 | 106,609,720 |
Effect of dilutive shares: | ' | ' |
Common stock equivalents arising from stock options and warrants | 799,139 | 0 |
Restricted stock units | 192,984 | 0 |
Weighted average common shares outstanding - Diluted | 107,946,021 | 106,609,720 |
Net income (loss) per common share: | ' | ' |
Basic | $0.01 | ($0.04) |
Diluted | $0.01 | ($0.04) |
SUMMARY_OF_SIGNIFICANT_ACCOUNT4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | Sep. 30, 2014 | Jun. 30, 2014 |
Summary Of Significant Accounting Policies Details Narrative | ' | ' |
Cash equivalents | $15,103,388 | $9,495,656 |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Sep. 30, 2014 | Jun. 30, 2014 |
Money Market Fund | $15,103,388 | $9,495,656 |
Level 1 | ' | ' |
Money Market Fund | 15,103,388 | 9,495,656 |
Level 2 | ' | ' |
Money Market Fund | 0 | 0 |
Level 3 | ' | ' |
Money Market Fund | $0 | $0 |