Palatin Technologies, Inc. (PTN) is a biopharmaceutical company that develops first-class medicines based on molecules that modulate the activity of the melanocortin and natriuretic peptide receptor systems. The company’s product candidates are targeted receptor-specific therapeutics for treating diseases with significant unmet medical needs.

The biotech company’s fiscal 2023 third-quarter revenue surpassed analysts’ estimates. It reported quarterly revenue of $1.20 million, compared to analysts’ expectations of $1.11 million. However, it missed the consensus EPS estimate in the last reported quarter. PTN’s loss per share came in at $0.63 versus $0.53, as expected by analysts.

Since its inception, PTN has incurred net operating losses and negative cash flows from operations. It has financed its net operating losses primarily through debt and equity financings and amounts received under collaborative and license agreements.

As of March 31, 2023, PTN had accumulated a deficit of $404 million and a net loss for the three and nine months ended March 31, 2023, of $7.15 million and $16.83 million, respectively.

Further, the company expects to continue to incur additional losses in the future because of spending on its research and development programs. PTN’s product candidates are at several stages of development and will require further research, development, and testing; some may never be successfully developed or commercialized.

PTN may also experience uncertainties, delays, and operating expenses commonly experienced by early-stage biopharmaceutical companies, which may include unanticipated problems and additional costs relating to the development and testing of products in animals and humans, product approval or clearance, regulatory compliance, product introduction, and obtaining sufficient capital.

Furthermore, several macroeconomic headwinds, including high inflation, rising interest rates, geopolitical instability, and economic uncertainty, could impact PTN’s financial condition or results of operations.

PTN is set to release its fourth-quarter and full-year 2023 results on September 21, 2023. Analysts expect the company’s revenue for the fourth quarter and fiscal year (ended June 2023) to increase 76.2% and 204.1% year-over-year to $1.36 million and $4.47 million, respectively.

However, PTN is expected to report a loss per share of $0.56 for the to-be-reported quarter and $2.12 for the full year 2023.

Shares of PTN have declined 24.1% over the past month and 28.5% over the past six months to close the last trading session at $1.86. Also, the stock has plunged 76.6% over the past year.

Here are some factors that could influence PTN’s performance in the upcoming months:

Deteriorating Financials

For the third quarter that ended March 31, 2023, PTN reported a loss from operations of $7.30 million. The company’s loss before income taxes came in at $7.15 million. Also, it incurred a net loss and net loss per common share of $7.15 million and $0.63, respectively.

Furthermore, as of March 31, 2023, the company’s cash and cash equivalents stood at $19.63 million, compared to $29.94 million as of June 30, 2022.

Bleak Historical Growth

PTN’s revenue has decreased at a CAGR of 60% over the past three years. Also, the company’s tangible book value and total assets have declined at CAGRs of 52% and 34.2%, respectively, over the same period.

Unfavorable Analyst Estimates

Analysts expect PTN to report a loss per share of $0.59 for the fiscal 2024 first quarter ending September 2023. Similarly, the company’s loss per share is estimated to widen 107.7% year-over-year to $0.27 for the second quarter (ending December 2023).

In addition, the company is expected to incur massive losses for at least two fiscal years.

Low Profitability

In terms of trailing-12-month Return on Common Equity (ROCE), PTN’s negative 115.1% compares to the industry average of negative 42.72%. Likewise, its trailing-12-month Return on Total Capital (ROTC) of negative 112.50% is lower than the industry average of negative 22.48%.

Also, the stock’s negative 115.57% trailing-12-month Return on Total Assets (ROTA) compares to the negative 31.32% industry average. Its trailing-12-month asset turnover ratio of 0.11x is 70.4 lower than the industry average of 0.38x.

POWR Ratings Show Weakness

PN has an overall D rating, equating to a Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. PTN has an F grade for Quality, consistent with its lower-than-industry profitability.

Also, the stock has a D grade for Stability. Its 24-month beta of 1.32 justifies its Stability grade.

PTN is ranked #163 among 368 stocks in the F-rated Biotech industry.

Beyond what I have stated above, we have also given PTN grades for Sentiment, Value, Growth, and Momentum. Get all PTN ratings here.

Bottom Line

Since its inception, PTN has incurred recurring net losses, primarily related to spending on its research and development programs and negative cash flows from operations. Furthermore, the company is expected to incur considerable expenses and continued losses in the upcoming quarters. It will also require additional financing to continue to fund its planned development.

PTN’s stock is trading below its 50-day and 200-day moving averages of $2.20 and $2.71, respectively, indicating a downtrend.

Given PTN’s disappointing financial performance, poor profitability, and bleak growth prospects, I think avoiding this biotech stock before earnings could be wise.

Stocks to Consider Instead of Palatin Technologies, Inc. (PTN)

The odds of QS outperforming in the weeks and months ahead are significantly compromised. However, there are many industry peers with impressive POWR Ratings. So, consider these three stocks rated A (Strong Buy) from the Biotech industry instead:

Gilead Sciences Inc. (GILD)

Vertex Pharmaceuticals (VRTX)

Jazz Pharmaceuticals plc (JAZZ)

For exploring more A and B-rated biotech stocks, click here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

PTN shares were trading at $1.84 per share on Tuesday morning, down $0.02 (-1.08%). Year-to-date, PTN has declined -28.13%, versus a 16.34% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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