Palisade Bio ( NASDAQ: PALI ) was downgraded by Maxim Group to Hold from Buy citing additional dilution and need for additional funding for clinical programs.
The SA Quant Rating on PALI is Hold , which takes into account factors such as growth and profitability, among others things. The rating is in contrast to the average Wall Street Analysts' Rating of Strong Buy , wherein 1 each tag it as Buy and Strong Buy, respectively.
Palisade ended Q2 with cash and cash equivalents of $5M, which included a $1.4M via equity financing, and earlier in August raised ~$12.2M via a stock/warrants offering .
Maxim analyst said that following financings, the cash balance should provide enough funding into H1 2023, but the firm thinks it is not sufficient to fully finance PALI during the ongoing phase 3 trial enrollment period, and includes additional dilution.
The firm noted that considering the terms of the recent financings, current share price, and need for capital in the future at potentially unfavorable terms it thinks there could likely be more dilution.
In June, Palisade began a phase 3 trial of LB1148 for helping return bowel function in adult patients undergoing gastrointestinal surgery. The company's partner Newsoara expects to begin the Chinese portion in H2 2022.
The firm said that in its view LB1148 remains fundamentally positive and expects expect similar results in the phase study, however, PALI expects it to take 18-24 months to complete enrollment in the study, which exceeds the current cash runway.
Palisade is also conducting an ongoing phase trial in adhesions, and the company still has to raise more capital to get to trial results, the firm added.
Maxim analyst, however, noted that if all warrants and convertibles were exercised, Palisade would receive $30.2M, which would fully finance the phase 3 trials, but the exercise would still be linked with significant dilution, according to the firm.
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Palisade Bio cut to Hold at Maxim on dilution as more capital needed for clinical trials