Palatin Technologies, Inc. (NYSEMKT: PTN) ("Palatin"), the biopharmaceutical company developing receptor-specific peptide therapeutics for the treatment of diseases, has been widely analyzed by relevant analyst reports lately. Investment research companies, namely Roth Capital, Zacks Investment Research, and Canaccord Genuity, set the price target well above the actual share price. Do you want to know why? This is what you will find in this piece.
First of all, take a look at the recent collapse in the share price:
Products under development
Palatin Technologies, Inc. was founded in 1986 and headquartered in Cranbury, New Jersey. In the most recent 10-k, I could find that Palatin develops products based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. The most relevant development is bremelanotide "for the treatment of premenopausal women with hypoactive sexual desire disorder, or HSDD, which is a type of female sexual dysfunction, or FSD, defined as low desire with associated distress". In addition, they have some other interesting products that the company has summarized in the following picture:
Financial figures
As of December 31, 2016, the most important assets of the balance sheet are the following:
- Cash and cash equivalents: $12,114,581
- Available-for-sale investments: $1,375,959
- Total current assets: $14,328,800
- Total assets: $14,468,256
On the other side of the balance sheet, the most important liabilities are:
- Total current liabilities: $19,608,498
- Notes payable, net of discount and debt issuance costs: $10,210,275
- Total liabilities: $30,426,261
The Insider Financial team was much interested in the liabilities of the company. Thus, we checked in the annual report the terms of the agreements that the company signed. Here is an example:
"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." Source
The fact that the company is finding lenders and these lenders are also willing to acquire securities that may be convertible to shares may have been seen by some debt analysts as a sign that the company is trusted by the debt capital markets. We encourage you to check the terms of the agreements with your financial advisor if you do not fully understand them or if you are interested in investing in this company.
In addition, the company reported an accumulated deficit of $366,494,441. Given that the market cap as of April 6, 2017 is $44 million, this company looks like a very interesting target for a bigger competitor, which could make very good use of these NOLs (they are tax deductive).
Our vision
We believe that this company may be very interesting for investors looking for high risk investments. The company is highly leveraged. Thus, if everything works well and the company is able to finally commercialize its products, some traders will make tons of money. We believe that the analysts, who reported that this company is a buy, may be discounting this option. Otherwise, the company will need to be restructured.
Insider transactions and funds inside this company
The following officers bought shares in February 2, 2017:
- SPANA CARL (Co-Founder, Chief Executive Officer, President and Director,)
- WILLS STEPHEN T (Chief Financial Officer, Chief Operating Officer, Executive Vice President, Treasurer and Secretary)
We noted that there were acquisitions at $0 (non open market), which means that they were maybe granted to the officers. These officers did not sell them automatically, thus the transaction may be seen by some analysts as a legit purchase.
It is always very important to follow what the big boys are doing. So, here you have the most relevant mutual funds and hedge funds inside the company:
- QVT Financial LP (4.61%)
- Broadfin Capital, LLC (2.79%)
- Vanguard Group, Inc. (2.69%)
- Alyeska Investment Group, L.P. (2.51%)
- Sphera Funds Management Ltd (2.11%)
- Baker Brothers Advisors, LLC (1.49%)
Conclusion
This is definitely a company that we should follow closely. The debt holders invested here massively, so the company is highly leveraged. Thus, the potential returns of the stock are much higher as well as the investment risk. In addition, some institutional and insiders joined the party long time ago. Let's see what happens! We will be updating our subscribers as soon as we know more. For the latest updates on PTN, sign up below!
Disclosure: We have no position in PTN and have not been compensated for this article.
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