S-1/A: Palisade Bio, Inc. Announces Public Offering of Common Stock and Pre-Funded Warrants

Clinical-stage biopharmaceutical company Palisade Bio, Inc. is offering 2,427,184 shares of common stock and pre-funded warrants to purchase up to 2,427,184 shares, alongside representative warrants for up to 145,631 shares, to raise capital for clinical trials and operations.

Summary

• Palisade Bio, Inc. is a clinical-stage biopharmaceutical company focused on developing treatments for autoimmune, inflammatory, and fibrotic diseases.
• Its lead product candidate, PALI-2108, is being developed for inflammatory bowel disease (IBD), including ulcerative colitis (UC) and Crohn's disease (CD).
• The company is offering 2,427,184 shares of common stock at an assumed price of $2.06 per share.
• Pre-funded warrants to purchase up to 2,427,184 shares of common stock are also being offered to certain purchasers.
• The underwriters have an option to purchase up to 364,077 additional shares of common stock to cover over-allotments.
• 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.
• The company has a limited operating history and has never generated revenue from product sales.
• Palisade Bio's business model assumes revenue from marketing or out-licensing the products it develops.
• The company depends on a license agreement with Giiant Pharma Inc. for rights to PALI-2108.
• Palisade Bio has expressed substantial doubt about its ability to continue as a going concern and has a history of net operating losses.

Sentiment

Score: 3

Explanation: The document presents a mixed picture. While the company is advancing its lead product candidate in clinical trials and addressing a significant market, it also faces substantial financial challenges and uncertainties. The going concern warning, history of losses, and need for additional capital raise concerns.

Positives

• Palisade Bio has commenced a Phase 1 clinical trial for PALI-2108 in Canada, with topline data expected in Q2 2025.
• The company has a license agreement with Giiant Pharma Inc., providing rights to develop and commercialize PALI-2108.
• Palisade Bio is developing a biomarker-based patient selection approach that could improve clinical response rates.
• The markets for ulcerative colitis and Crohn's disease treatments are large and growing.

Negatives

• The company has a limited operating history and has never generated revenue from product sales.
• Palisade Bio has expressed substantial doubt about its ability to continue as a going concern.
• The company has a history of net operating losses and may never achieve profitability.
• There is no guarantee that PALI-2108 will be successful in clinical trials or receive regulatory approval.
• The company may face difficulty enrolling patients in clinical trials.
• Palisade Bio is dependent on third-party CROs and contract manufacturers.
• The company's stock price has been highly volatile.

Risks

• The company's business depends on the successful clinical development, regulatory approval, and commercialization of PALI-2108.
• There are substantial risks in drug development, and PALI-2108 may not be successful.
• The company may not be able to obtain regulatory approval in the United States even if clinical trials in Canada are successful.
• Palisade Bio may face difficulty enrolling patients in clinical trials.
• The company will require substantial additional capital to fund operations and development, which may not be available on favorable terms or at all.
• PALI-2108 may cause undesirable side effects or have other unexpected properties.
• The company may not be able to obtain, maintain, or enforce global patent rights or other intellectual property rights.
• Palisade Bio faces potential product liability exposure.
• The company's stock price may be highly volatile.
• The company may be delisted from the Nasdaq Stock Market if it fails to maintain compliance with listing standards.

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. They anticipate filing an IND with the FDA in 2025 and commencing clinical trials in the United States during the second half of 2025. Topline data from the Phase 1 study is expected in the second quarter of 2025, and if successful, a Phase 1b/2a study in UC patients is planned for the second half of 2025.

Industry Context

Palisade Bio is developing PALI-2108 for the treatment of inflammatory bowel disease, a growing market with significant unmet medical need. The company's approach of using a colon-activated PDE4 inhibitor could offer a differentiated treatment option compared to existing therapies.

Comparison to Industry Standards

• The 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 comparable to other companies developing treatments for IBD, such as Pfizer, AbbVie, and Johnson & Johnson, which are also investing heavily in this space.
• The global market for Crohn's disease treatments was valued at $13.3 billion in 2023 and is projected to grow at a CAGR of 4% from 2024 to 2032. This growth rate is in line with industry trends, as the prevalence of Crohn's disease is increasing globally.
• Palisade Bio's focus on developing a biomarker-based patient selection approach is similar to efforts by other companies in the IBD space, such as Prometheus Biosciences (acquired by Merck) and Landos Biopharma, which are also working on precision medicine approaches to improve treatment outcomes.

Management Changes

Corporate Governance

Related Party Transactions

• In April 2021, Dr. Kenneth Carter, Dr. Matthew Kalnik, and Mr. Dane Saglio agreed to the cancellation of their respective outstanding options to purchase common stock in Seneca immediately prior to the closing of our merger with Seneca in exchange for aggregate consideration of $1,423,012.
• In July 2021, Altium Growth Fund, LP (Altium), a then holder of more than five percent of our common stock, entered into a Waiver and Amendment Agreement with the Company.
• In August 2021, we and Yuma Regional Medical Center (Yuma), a then holder of more than five percent of our common stock, entered into a Securities Purchase Agreement pursuant to which Yuma purchased 2,013 shares of our common stock and a warrant to purchase up to 503 shares of our common stock for a total purchase price of $5.2 million.
• On August 16, 2022, J.D. Finley, our current Chief Executive Officer and Chief Financial Officer, participated in the Companys underwritten offering.
• On August 16, 2022, Thomas Hallam, PhD, our former Chief Executive Officer and former member of our Board, participated in the Companys underwritten offering.
• On October 11, 2022, we entered into a separation agreement with Thomas Hallam, Ph.D., our former chief executive officer and member of its Board.
• On February 6, 2023, we granted J.D. Finley, our Chief Executive Officer and Chief Financial Officer: (i) an option to purchase 3,813 shares of our common stock valued at approximately $87,853, (ii) 2,780 restricted stock units valued at approximately $100,080, and (iii) 2,166 performance restricted stock units valued at approximately $78,000.
• On February 6, 2023, we granted Robert McRae, our former Chief Operating Officer: (i) an option to purchase 800 shares of common stock valued at approximately $18,431, (ii) 533 restricted stock units valued at approximately $21,120, and (iii) 1,193 performance restricted stock units valued at approximately $42,960.
• Effective May 15, 2023, Robert McRae, our then Chief Operating Officer (COO) transitioned to an executive strategic consultant.
• Effective June 1, 2023, we increased J.D. Finleys base salary from $490,000 to $542,000 contemporaneous with his appointment from interim CEO to CEO.
• On June 11, 2023, we granted Mr. Finley: (i) options to purchase 9,900 shares of our common stock with a term of ten (10) years and an exercise price of $24.00 per share, valued at $151,978 on the grant date and (ii) 4,446 restricted stock units valued at $106,720.
• On June 11, 2023, the Company granted to the non-employee members of the Board of Directors, as supplemental grants, an aggregate of: (i) options to purchase 5,158 shares of common stock with a term of ten (10) years and an exercise price of $24.00 per share and (ii) 2,756 restricted stock units.
• On September 5, 2023, pursuant to his appointment as Chief Medical Officer, the Company issued Mitchell Jones, M.D., Ph.D. (i) options to purchase 5,000 shares of common stock with a term of ten (10) years and an exercise price of $10.35 per share and (ii) 3,646 restricted stock units.
• On November 21, 2023, we granted J.D. Finley, our CEO and CFO, on a conditional basis until such time as there are sufficient shares available under the 2021 Plan, which occurred upon the annual evergreen share increase on January 1, 2024: (i) options to purchase 3,000 shares of common stock with a term of ten (10) years and an exercise price of $8.85 per share, valued at $22,114 on the grant date and (ii) 2,533 restricted stock units valued at $22,420.
• On November 21, 2023, we granted Mitchell Jones, M.D., Ph.D., our Chief Medical Officer, on a conditional basis until such time as there are sufficient shares available under the 2021 Plan, which occurred upon the annual evergreen share increase on January 1, 2024: (i) options to purchase 2,210 shares of common stock with a term of ten (10) years and an exercise price of $8.85 per share, valued at $16,296 on the grant date and (ii) 1,866 restricted stock units valued at $16,520.
• On November 21, 2023, the Company granted to each of the non-employee members of the Board of Directors, as supplemental grants: (i) options to purchase 458 shares of common stock with a term of ten (10) years and an exercise price of $8.85 per share and (ii)388 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 our Board. Pursuant to their resignation, we agreed to fully vest all of their outstanding equity awards issued on June 11, 2023 and November 21, 2023 and to extend the exercise period of their outstanding options until the expiration of each option.
• On May 7, 2024, we granted Margery Fischbein, upon her appointment to serve on the Board, options to purchase 1,000 shares of common stock with a term of ten (10) years and an exercise price of $7.90 per share.
• On July 11, 2024, we granted each of our three (3) non-employee Board members, pursuant to our non-employee director compensation plan, options to purchase 2,100 shares of common stock with a term of ten (10) years and an exercise price of $4.49 per share.
• On May 28, 2024, we fully accelerated the vesting of an aggregate of (i) 7,068 restricted stock units held by J.D. Finley, our Chief Executive Officer and Chief Financial Officer and (ii) 4,290 restricted stock units held by Dr. Mitchell Jones, our Chief Medical Officer.
• On September 25, 2024, we entered into a revised employment agreement with J.D. Finley, our chief executive and chief financial officer.

Stakeholder Impact

• Shareholders: Potential dilution from the issuance of new shares and warrants. The company's stock price may be negatively impacted by the offering and the company's financial condition.
• Employees: The company's ability to continue operations and fund development programs depends on the success of the offering and future fundraising efforts.
• Customers: The company's ability to develop and commercialize PALI-2108 will impact the availability of new treatment options for patients with IBD.
• Suppliers: The company's financial condition and ability to continue operations may impact its relationships with suppliers.
• Creditors: The company's ability to repay its debts depends on its financial performance and ability to raise additional capital.

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 United States in the second half of 2025, assuming the Phase 1 trial meets its primary objectives.

Key Dates

Keywords

Palisade Bio, PALI-2108, Inflammatory Bowel Disease, IBD, Ulcerative Colitis, UC, Crohn's Disease, CD, PDE4 Inhibitor, Clinical Trial, Biopharmaceutical, Pre-Funded Warrants, Common Stock, Public Offering, Capital Raise, Giiant License Agreement, Biomarker, FDA, Health Canada