S-1/A: Palisade Bio, Inc. Announces Public Offering of Class A and Class B Units

Clinical-stage biopharmaceutical company Palisade Bio, Inc. is offering up to 2,857,142 Class A Units and Class B Units to raise capital for its Phase 1 clinical trial and other development activities.

Summary

• Palisade Bio, Inc. is a clinical-stage biopharmaceutical company focused on developing therapeutics for autoimmune, inflammatory, and fibrotic diseases.
• The company's lead product candidate, PALI-2108, is being developed for inflammatory bowel disease (IBD), including ulcerative colitis (UC) and Crohn's disease (CD).
• Palisade Bio is conducting a public offering of up to 2,857,142 Class A Units and Class B Units.
• Each Class A Unit consists of one share of common stock and one Common Warrant to purchase one share of common stock.
• Each Class B Unit consists of one Pre-Funded Warrant to purchase one share of common stock and one Common Warrant to purchase one share of common stock.
• The assumed public offering price is $1.75 per Class A Unit and $1.7499 per Class B Unit.
• The Common Warrants have an exercise price of $2.8875 per share and a five-year term.
• The Pre-Funded Warrants have an exercise price of $0.0001 per share and are exercisable immediately with no expiration.
• The underwriters have a 45-day over-allotment option to purchase up to 428,571 additional shares of common stock and/or Common Warrants.
• The company estimates net proceeds of approximately $4.18 million from the offering, or $4.87 million if the over-allotment option is fully exercised.
• Proceeds will be used to fund the Phase 1 clinical trial of PALI-2108, pre-clinical studies, research and development, and working capital.

Sentiment

Score: 3

Explanation: The document has a negative sentiment due to the company's going concern statement, history of losses, and the need for additional capital. The offering at a discount to the market price and the risks associated with drug development further contribute to the negative sentiment.

Positives

• Palisade Bio has a novel approach to treating IBD with its lead product candidate, PALI-2108, which is designed for localized bioactivation in the colon.
• The company has demonstrated dose-dependent efficacy of PALI-2108 in UC mouse models.
• The company has a biomarker-based patient selection approach that could improve clinical response rates.
• The company has a research collaboration and license agreement with Giiant Pharma Inc., providing access to a pipeline of compounds.
• The company has commenced a Phase 1 clinical trial in Canada and plans to file an IND with the FDA in 2025.
• The market for UC treatments is large and growing, valued at approximately $7.3 billion in 2021.
• The company's common stock is listed on The Nasdaq Capital Market.

Negatives

• The company has a limited operating history and has never generated revenue from product sales.
• The company has a history of net operating losses and may never achieve profitability.
• The company's business depends on the successful clinical development, regulatory approval, and commercialization of PALI-2108, which is in the early stages of development.
• There are substantial risks in drug development, and the company may not be able to successfully develop PALI-2108.
• The company is dependent on third-party CROs and contract manufacturers.
• The company's stock price has been highly volatile.
• The company's common stock could be delisted from the Nasdaq Stock Market if it fails to maintain compliance with continued listing standards.

Risks

• The company has expressed substantial doubt about its ability to continue as a going concern.
• The company will need to raise additional capital in the future, which may not be available on favorable terms or at all.
• Clinical trials may be delayed or unsuccessful.
• Regulatory approval may not be obtained or may be delayed.
• PALI-2108 may cause undesirable side effects.
• The company may face product liability claims.
• The company may not be able to obtain, maintain, or enforce intellectual property rights.
• The company may be subject to patent infringement claims.
• The company's operations could be adversely affected by health pandemics or epidemics.
• Unstable economic and market conditions may have serious adverse consequences on the company's business.
• The company's information systems or data could be compromised.
• The company may not be able to attract and retain key personnel.

Future Outlook

The company plans to use the net proceeds from the offering to fund the Phase 1 clinical trial of PALI-2108, pre-clinical studies, research and development, and working capital. The company anticipates announcing topline data from the Phase 1 study in the second quarter of 2025 and initiating a Phase 1b/2a clinical study in UC patients in the second half of 2025, assuming the trial meets its primary objectives. The company also plans to file an IND with the FDA in 2025 and commence clinical trials in the United States in the second half of 2025.

Industry Context

Palisade Bio is developing a PDE4 inhibitor for IBD, a growing market with unmet medical needs. The company's approach of localized bioactivation in the colon could differentiate PALI-2108 from other PDE4 inhibitors and potentially offer a better safety and tolerability profile. The company's biomarker-based patient selection approach could also improve clinical response rates.

Comparison to Industry Standards

• The global market for ulcerative colitis treatments was valued at approximately $7.3 billion in 2021 and is expected to grow at a compound annual growth rate (CAGR) of approximately 2.78% from 2021 to 2031. This is in line with industry standards for markets with unmet medical needs and new drug development.
• Pfizer's Xeljanz (tofacitinib) is an oral JAK inhibitor approved for moderate to severe ulcerative colitis. In clinical trials, Xeljanz demonstrated remission rates of approximately 17-18% at 8 weeks. Palisade Bio's PALI-2108, while still in early development, aims to improve upon these results through its targeted approach.
• AbbVie's Humira (adalimumab) and Johnson & Johnson's Remicade (infliximab) are TNF inhibitors commonly used to treat ulcerative colitis. These biologics have shown remission rates of around 16-20% at 8 weeks in clinical trials. However, they are associated with systemic side effects. PALI-2108's localized delivery could potentially offer a better safety profile.
• Gilead's filgotinib, another JAK inhibitor, was projected to be a significant player in the ulcerative colitis market, but its development was discontinued in the US due to safety concerns. This highlights the need for safer oral therapies, which PALI-2108 aims to address.
• Arena Pharmaceuticals, which was acquired by Pfizer, had etrasimod in development for ulcerative colitis. Etrasimod is an S1P receptor modulator that demonstrated promising results in Phase 3 trials. This further validates the market potential for novel oral therapies in ulcerative colitis.

Management Changes

Corporate Governance

Related Party Transactions

• In April 2021, Dr. Kenneth Carter, Dr. Matthew Kalnik, and Mr. Dane Saglio, former executives of Seneca, agreed to the cancellation of their outstanding options in exchange for aggregate consideration of $1,423,012.
• In July 2021, Altium Growth Fund, LP, a then holder of more than five percent of the company's common stock, entered into a Waiver and Amendment Agreement with the company, resulting in the issuance of an additional warrant to purchase up to 1,466 shares of common stock.
• In August 2021, the company entered into a Securities Purchase Agreement with Yuma Regional Medical Center, a then holder of more than five percent of the company's common stock, resulting in the purchase of 2,013 shares of common stock and a warrant to purchase up to 503 shares of common stock for a total purchase price of $5.2 million.
• In October 2020, the company issued an unsecured promissory note and warrants to Yuma Regional Medical Center. The note was amended in May 2021 to extend the maturity date, and new warrants were issued.
• On November 18, 2021, the Compensation Committee amended Underwater Options for Dr. Hallam, Mr. Finley, and Dr. Dawson to reduce the exercise price per share to $1,740.00.
• On August 16, 2022, J.D. Finley and Thomas Hallam, Ph.D. participated in the company's underwritten offering.
• On October 11, 2022, the company entered into a separation agreement with Thomas Hallam, Ph.D., the former chief executive officer.
• On January 3, 2023, the company granted J.D. Finley 349 restricted stock units.
• On February 6, 2023, the company granted J.D. Finley and Robert McRae options, restricted stock units, and performance restricted stock units.
• In April 2023, Armistice Capital LLC, a then holder of greater than 5% of the company's outstanding common stock, participated in the company's registered offering and concurrent private placement.
• Effective May 15, 2023, Robert McRae transitioned to an executive strategic consultant.
• Effective June 1, 2023, the company increased J.D. Finley's base salary and target cash bonus.
• On June 11, 2023, the company granted J.D. Finley options and restricted stock units.
• On June 11, 2023, the company granted non-employee members of the Board of Directors options and restricted stock units.
• On September 5, 2023, the company issued options and restricted stock units to Mitchell Jones, M.D., Ph.D.
• On November 21, 2023, the company granted J.D. Finley and Mitchell Jones, M.D., Ph.D. options and restricted stock units.
• On November 21, 2023, the company granted non-employee members of the Board of Directors options and restricted stock units.
• Between February 8, 2024 and February 9, 2024, James Neal, Stephanie Diaz, Dr. Cristina Csimma, and Dr. Robert Trenschel resigned as members of the Board, and their outstanding equity awards were fully accelerated.
• On May 7, 2024, the company granted Margery Fischbein options upon her appointment to the Board.
• On July 11, 2024, the company granted each of its three (3) non-employee Board members options.
• On May 28, 2024, the company fully accelerated the vesting of restricted stock units held by J.D. Finley and Dr. Mitchell Jones.
• On September 25, 2024, the company entered into a revised employment agreement with J.D. Finley.

Stakeholder Impact

• Shareholders: Potential dilution from the issuance of new shares and exercise of warrants. The offering may impact the market price of the common stock.
• Employees: The company's ability to fund operations and continue development programs is crucial for job security and potential future opportunities.
• Customers: The successful development and commercialization of PALI-2108 could provide a new treatment option for patients with IBD.
• Suppliers: The company's continued operations and development activities will impact demand for goods and services from suppliers.
• Creditors: The company's ability to raise capital and manage its financial resources will affect its ability to meet its obligations to creditors.

Next Steps

• Complete the Phase 1 clinical trial of PALI-2108 in Canada.
• Announce topline data from the Phase 1 study in the second quarter of 2025.
• File an Investigational New Drug Application (IND) with the FDA in 2025.
• Initiate a Phase 1b/2a clinical study in UC patients in the second half of 2025.
• Commence clinical trials of PALI-2108 in the United States in the second half of 2025.

Key Dates

Keywords

Palisade Bio, PALI-2108, ulcerative colitis, inflammatory bowel disease, IBD, clinical trial, Phase 1, biopharmaceutical, autoimmune, inflammatory, fibrotic, PDE4 inhibitor, Giiant Pharma, precision medicine, biomarker, Health Canada, FDA, IND, public offering, underwriting, capital raise