Palatin Technologies Inc

F:PTN

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Greetings. Welcome to Palatin's First Quarter Fiscal Year 2024 Operating Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that statements made by Palatin are not historical facts and may be forward-looking statements. These statements are based on assumptions that may or may not prove to be accurate and that the actual results may differ materially from those anticipated due to the variety of risks and uncertainties discussed in the company's most recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements by Palatin's prospects. Now I would like to turn the call over to our host, Dr. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead.

[Carl Spana, executive]

Thank you. Good morning, and welcome to the Palatin First Quarter Fiscal Year 2024 Call. I'm Dr. Carl Spana, the CEO and President of Palatin. With me on the call today is Steve Wills, Palatin's Executive Vice President, Chief Financial Officer and Chief Operating Officer. I'll now turn the call over to Steve, and he'll give the financial and operating updates. Steve?

[Steve Wills, executive]

Thank you, Carl. Welcome, everyone. Regarding nonfinancial highlights for our commercial product, Vyleesi, which is approved for pre-menopausal women for the treatment of HSDD which stands for hypoactive sexual desire disorder. As we've mentioned prior, the goal is to demonstrate commercial product value in the marketplace with an objective of relicensing the U.S. possibly even the global rights to a committed women's health care company. Palatin's license of Vyleesi in China, Fosun Pharma, reported its first sale in the Hainan province of China. Palatin's licensee, of Vyleesi in South Korea, Kwangdong Pharmaceuticals completed enrollment in its Phase III clinical trial, evaluating the efficacy and safety of Vyleesi and premenopausal women with HSDD. Data is currently anticipated by calendar year-end 2023 with a potential regulatory submission in the first half of calendar 2024. Palatin entered a strategic partnership with UpScriptHealth a leading direct-to-consumer telemedicine company, providing telemedicine services to pharmaceutical and medical technology companies. Regarding operations specific to Vyleesi. For the fiscal first quarter ended September 30, 2023, gross product sales of $4.6 million increased 11% over the prior quarter had increased 100% over the comparable quarter last year. Net product revenue of $2.1 million increased 20% over the prior quarter and increased 142% on over the comparable quarter last year. Total prescriptions dispensed increased 14% over the prior quarter and increased 88% over the comparable quarter last year. Refill rates commercial insurance reimbursement and net revenue per prescription dispense continued with positive and impactful results and trends versus the prior quarter and comparable quarter last year. Vyleesi reported its seventh consecutive quarter of double-digit growth across all metrics, both significant and some not as significant.

Importantly, Vyleesi's quarterly net product revenue continues to exceed Vyleesi quarterly operating expenses. Moving over to overall operations for the fiscal -- for the first quarter ended September 30, 2023. Regarding revenue, total revenue consists of gross product sales of Vyleesi, net of expenses, allowances and accruals and license and contract revenue. As I mentioned by Vyleesi Grow product sales to pharmacy distributors for the quarter ended September 30, 2023, were $4.6 million with net product revenue of $2.1 million. This compared to gross product sales of $2.3 million it looks like it was a double and net product revenue of a little under $1 million for the comparable quarter last year.

Gross product sales increased 100%, yes, that would be a double, and net product revenue increased 142% over the comparable quarter of last year. Regarding operating expenses, Total operating expenses were $8.2 million for the quarter ended September 30, 2023, compared to $9.6 million for the comparable quarter last year. The decrease in operating expenses was mainly related to the overall decrease in expenses on our MC stands from monocortin programs and secondarily, to the overall decrease in selling expenses related to Vyleesi and, to a certain extent, the reduction in cost of products sold due to the sale of fully reserved Vyleesi inventory.

Regarding cash flows, Palatin's net cash used in operations for the quarter ended September 30, 2023, was $5.9 million compared to net cash used in operations of $8.6 million for the same period in 2022. The decrease in net cash used in operations is mainly due to a decrease in net loss, offset by working capital changes. Regarding net loss, Palatin's net loss for the quarter ended September 30, 2023, was $5.9 million or $0.48 per basic and diluted common share compared to a net loss of $8.3 million or $0.86 in per basic and diluted common share for the same quarter in 2022.

We have a little bit of a lingering cough -- regarding cash position. As of September 30, 2023, Palatin's cash, cash equivalents and marketable securities were approximately $5.5 million, plus $1.3 million of accounts receivables compared to $11 million plus $2.9 million of accounts receivables as of June 30, 2023. This $5.5 million of cash, cash equivalents and marketable securities as of September 30, 2023, does not include $4.5 million of net proceeds from the registered direct offering, which closed in October 2023.

We believe that existing cash, cash equivalents, marketable securities and accounts receivables will be sufficient to fund currently anticipated operating expenses and disbursements into the first half of calendar year 2024. Now I'll turn it back over to Carl.

[Carl Spana, executive]

Thank you, Steve. As you know, our focus is on establishing the melanocortin system as a target for safe and effective medicines to treat inflammatory and autoimmune diseases and to develop a pipeline of highly effective drugs with unparallel safety. We have 3 active clinical programs based on melanocortin agonist with multiple new programs ready to advance into clinical development pending resources, all of these coming from our highly productive research activities.

As you previously reported, we have completed patient enrollment in the PL-9643 MELODY 1 Phase III study for dry eye disease. As a reminder, PL-9643 is a topically delivered melanocortin agonist that works by resolving inflammation on the ocular surface that is the cause for a key cause of dry eye disease. We've also conducted an interim analysis of initial 120 patients enrolled in MELODY-1, which show statistical separation for clinical efficacy across multiple signs and symptoms of dry eye disease. Importantly, PL9643 has excellent ocular safety and tolerability. With the last patient about to complete randomized treatment, we are working to have the top line data by year-end.

We believe the emerging efficacy and tolerability profile of PL-9643 given the potential to be a leading treatment for dry eye disease. Moving on. Our Phase II study evaluating oral PL8177 and a selective melanocortin- receptor agonist and also supply this patient is on track for an interim assessment of the clinical data in the first quarter of 2024. Supporting oral PL8177 development, our preclinical studies demonstrating that treatment with oral PL8177 and disease model clauses disease [indiscernible] to improve to a healthy state and to resolve pathological inflammation. Dissolving inflammation rather than blocking it provides the possibility of efficacy coupled with safety in treating colitis and inflammatory bowel disease. Finally, our breakout study, which is a Phase II open-label study in diabetic patients with kidney disease is on track for top line data in the first part of 2024 as well.

I'd like to take a minute to highlight 2 new clinical studies that we are anticipating starting in the first quarter of calendar 2024. The first is a Phase II study evaluating a novel formulation combining bremelanotide, a melanocortin agonist with a phosphodiesterase-5 inhibitor, and these are drugs such as Vyleesi I'm sorry, such as Cialis and Viagra. This is an extension of our commercial efforts and sexual dysfunction. Approximately 35% of men with erectile dysfunction fail or have an inadequate response to PD5 inhibitor treatment and represent a large underserved market.

The only treatment options for these failure patients are highly invasive such as penile injections or penile implants. We have previously conducted clinical trials showing the synergistic effects of combining bremelanotide with a PD-5 inhibitor as a treatment for erectile dysfunction. The same clinical study will evaluate a melanocortin 4 receptor agonist in obese patients taking GLP-1 agonists. And the GLP-1 agonist for things such as Ozempic or Wegovy. These are drugs that are being used to hear them on the news all the time.

These are the drugs that are the current standard of care for treating obese patients. As drug treatment for obesity is now established and growing rapidly, we believe the treatment goal will switch from driving weight loss to overall weight management. This will require a variety of drugs with different mechanisms of action that affect not only weight loss but importantly, weight loss maintenance. We strongly believe that drugs targeting melanocortin system will be an important part of the future of obesity treatment and overall weight management.

With our extensive experience in the design and development of melanocortin agonist for treating obesity, including 2 clinical studies, we are well positioned to be a leader in the development of melanorcortin-based therapeutics. Just a few operating highlights before we move on to questions. Listen, I just want to just reiterate again, we are so pleased with Vyleesi, 7 consecutive quarters as double-digit growth across all value metrics. Notably, net product revenue increased 20% over the previous quarter. Prescriptions dispensed another 14% over the prior quarter. Listen, we are also very excited that Vyleesi quarterly net product revenue continues to exceed by leasing quarterly operating expenses.

As we stated, we're planning to initiating 2 new corn programs with Phase II clinical studies starting in the first quarter of calendar '24 with the data readout in '24 as well. The 2 studies are, as we just said, one, we'll evaluate the co-formulation of bremelanotide with a PD5 inhibitor in patients with erectile dysfunction that have failed first-line therapy. So in other words, Viagra or Cialis isn't working for them, and they need to move on to more aggressive therapy. The second, we'll evaluate the addition of the melanocortin-4 agonist bremelanotide to obese patients taking a GLP-1 agonist. Our ocular programs continue to make impressive advances. Our MELODY-1 Phase III DED study, our dry eye study is fully enrolled data coming at the end of the year. We remain very excited about the emerging product profile for PL-9643, highly differentiated from current treatments.

We've got excellent tolerability, and we think we're going to have broad efficacy across multiple signs and symptoms. And I think we're really excited this can become a leading treatment for dry eye disease as well. And finally, PL-9588. We've talked about it in the past, but it's a novel melanocortin agonist for glaucoma. We are now on track to file an IND sometime in the -- around the end of the first half of 2024 and then move on to Phase II clinical studies. I'd like to thank you for listening to the Palatin in the first quarter fiscal year 2024 call.

You can find additional information on our science and clinical programs on our website, www.palatin.com. You can also find additional information on Vyleesi at the Vyleesi website, vyleesi.com. And Steve and I would certainly like to thank you for your support, your interest, and we'll now open up the call to questions.

[Operator]

[Operator Instructions] Your first question for today is coming from Joe Pantginis with H.C. Wainright.

[Joseph Pantginis, analyst]

So first, Carl, I wanted to ask about the logistics around the news flow for MELODY-1 coming up. So when you say top line data in the late this year and final data in the first quarter, I guess I wanted to get a sense of what you're expecting to show for the top line data aspect.

[Carl Spana, executive]

We're just really focused on the primary endpoints of the study and overall safety. So I mean, there'll be a sign in a symptom. They most likely will be tier from breakup time inferior corneal fluorine staining. Those types of things will be 4 years signed. And then for your symptom and most like the ocular pain.

[Joseph Pantginis, analyst]

I'm sorry, like we'll be getting like numbers on top line or just more of like you either met those endpoints and then we'll get them at the top line or we're actually looking towards numbers at the top line aspect.

[Carl Spana, executive]

Well, I like numbers, so we put numbers out. There'll be numbers. If we hit it, we're going to be -- if we hit it which I think we will, we're going to be pushing it promoting.

[Joseph Pantginis, analyst]

Got it. Got it. And then the data you put out recently on the preclinical front regarding the combination of bremelanotide and the GLP-1 for obesity is exciting. And like you said, this is all that we're seeing in the news here. So I'm hoping to get a little more color on the clinical and regulatory path for this combination, what the studies are going to look like initially? And where do you think you can fit as the competitive landscape continues to evolve.

Any particular patients you might be targeting? And then maybe any additional color when you say about the maintenance of the weight loss because as it stands right now, these GLP-1s, you need to be on them essentially for life. So I want to get a sense of how BMT might contribute to that.

[Carl Spana, executive]

So like take step back just a second, maybe more -- maybe a little more globally in a sense that this is a 20-year process. I mean, not for us, but I mean weight loss management treatment, this is going to roll out similar to hypertension. You're going to have multiple classes of therapeutics enter into the marketplace each with their own niche and providing their own risk-reward benefit. The overall goal here now is going to be how do we get most of the patients that are coming in to really reach their weight loss goals and maintain that because we as a society, we're going to pay for this, we're not going to get the benefits if you lose weight over 6 or 10 months and say, you get that 50 pounds off.

If it comes back on in 6 months, that's not good, right? We pay a lot of money and we don't get the overall long-term benefits, all those beautiful things that Novo is reporting about their work on reducing cardiovascular risk over on mortality, those occur because you keep way off. It's not just the weight loss process itself. So in that context, looking at bremelanotide, for example, which is what the study we're going to be doing. In the context of the backdrop of a GLP-1 is really there as a first step, right? We have preclinical data. There are -- there were just some recent case studies reported on the use of melanocortin-4 agonist added on to ozempic type or Wegovy treatment showing that you can really enhance weight loss with the 2 mechanisms together without having to elevate that GLP-1 dose. And that's an important point because we hear all about these GLP-1s, but what we don't really hear about it is really starts talking to the patients. A lot of them are taking because they want to lose weight. They're not taking them because they have a great experience on them.

And so combining mechanisms allows a clinician to have the opportunity to essentially modulate the side effect, making sure that each patient gets the treatment that they need that they reach their goals. Now let's switch to the other side, maintenance. Now probably you guys are probably aware, but we had a collaboration with AstraZeneca a while back, looking at melanocortin for weight loss and then particularly weight loss maintenance. But as part of that, we actually have pallet compounds that were evaluated and weight loss models. And very interestingly there, what we were able to show is that melanocortin, you don't need to give a tremendous amount of melanocortin to actually maintain weight loss.

So if you take an animal that's obese, you bring them through the weight loss process and now they're in a state where they're in a weight loss state. One of the things that whether it's an animal or a human you're fighting is that your body wants to go back, right? You've got you want to consume more calories, your skeletal muscles don't work as well, you're using less calories. So you have to fight that process. It turns out that the melanocortin mechanism may be very, very well suited there. We noticed that it was the dose required to maintain versus cause weight loss.

So we think there's a very, very good opportunity there, and that's going to be very key to the overall success of weight management. So we think about it more globally and where we can play, they're going in multiple pockets where we can play from being addition to maybe GLP-1 therapy so that patients reduce more weight without having to go up in dose or have more tolerable effects. Wait less maintenance, patients that aren't tolerating the GLP-1s are contraindicated. So there are a lot of places where a lot of carton can play. And I think it's probably one of the best mechanisms because it's one of the first mechanism that really evolved? Or was the genesis of thinking about treating weight loss or a pharmaceutical perspective.

[Joseph Pantginis, analyst]

Very helpful color. Carl, thanks.

[Operator]

Next question is coming from Michael Higgins with Ladenburg Thalmann.

[Farhana Sakloth, analyst]

This is Farhana on behalf of Michael. Congrats on the continued progress this quarter, and we're really looking forward to the MELODY data. Just wanted to follow up on your question earlier regarding the MELODY readout. So I got that the data in the fourth quarter have the primary endpoint and safety. But could you provide some more specifics on what can we see in the final data readout that's going to be in the first quarter next year?

[Carl Spana, executive]

Sure. Look, I mean there are -- there are probably 20 different endpoints that we look at and in addition to all the safety endpoints as well. so you'll see the full data set as quickly as we can get it done and out. That can be -- I mean, it's not appropriate for a press release, so that would not be found a publication or presentation but or maybe we'll have a conference call to go over it.

You also look at any of the sub analyses that we may do on various types of patients. These are very data-rich studies. So I mean, I'm sure we'll be analyzing this data for the next 6 months. To see what comes out. But in general, we will try to get out as quickly as we can. The full data set all of the endpoints that are there both the primary key secondaries and then the corresponding secondaries and an exploratory endpoints as well. And there'll be a variety of signs and symptoms, everything from all of the different staining using either force or listening green that we're using or the various symptom endpoints, ocular pain, dryness, stinging, burning, all those types of standard types of things that are evaluated in dry eye studies.

So we will try to be as transparent as we can be. The only caveat I will put there is reasonable to assume on a positive study that we may be involved in certain discussions. And maybe as part of that, we may not want to disclose certain things. But otherwise, we will try to be as transparent as we can.

[Farhana Sakloth, analyst]

Okay. Great. And then on Vyleesi. So on out-licensing of the sale in the U.S., how confident are you that you can complete this maybe by this spring?

[Steve Wills, executive]

Well, when we were 3 consecutive quarters of double-digit growth, we were pretty confident at 7, that confidence has just enhanced and expanded. We don't anticipate. Well, actually, we do anticipate 8 consecutive quarters of double-digit growth, but we are advancing discussions and we're reasonably confident that we will transact on Vyleesi in the very near future.

[Farhana Sakloth, analyst]

All right. And then one follow-up on the GLP-1 program. Could you give us any feedback on the trial design? And in particular, are you looking for any particular type of obese patients to target such as like those are minimum BMI or who are refractory to GLPs?

[Carl Spana, executive]

Sure. So these are patients that will already be on GLP treatment and most likely tirzepatide so which is the mix of GLP. You're looking for BMI is probably in excess of 35. So these are going to be pretty of these patients. We certainly will genetically profile the patients, so we'll get a full understanding of any mutations they have in the lept [indiscernible] pathways as well.

But we're not stratifying on that. We're really looking for more general obesity. I think one of the things that we really are looking for is mainly the transition of melanocortis now for more specialized treatment to specific populations with get a mutation into the more general obese population. And so this is really just the first look at really confirming the interaction between the 2 because I think it will be important for the good ones to really reach their maximum potential, right?

And not that Lilly or Novo need any help from little Palatin. But really for them to reach a maximum potential, you're going to have to add them -- you're going to have to add other mechanisms to them because not every patient can tolerate. You can't -- not every patient can move up and the dosing for those treatments.

And if you talk to a lot of patients, the side effects that deadening some of the pleasure of not just food intake, but other things that people do can be troublesome. And a lot of patients do experience the GI side effects and so being able to minimize those and keep people on so that they really do lose the weight that they need to lose is going to be key.

[Farhana Sakloth, analyst]

Okay. I'm going to ask one more and then I'll hop back in the queue. With regards to bremelanotide in the breakout study, is the primary goal to out-license this as well? Or do you see yourselves developing it?

[Carl Spana, executive]

There were 2 objectives. One was to -- we believe that from an autoimmune anti-inflammatory type of diseases that melanocortin system will play a key role there. So this is one that show how broad it can be. So that we have a UC study, we have kidneys. You have the ocular studies that are going on. And it is also to support out-licensing. I don't see us necessarily moving forward as a kidney company.

It's really to support our licensing or continued use. Keep in mind behind bremelanotide in any of our programs, we have an extensive portfolio of selective compounds through the various melanocortin receptors. So this is -- we're using bremelanotide in many cases, such as a potential for obesity and kidney studies, for example, as a proof of concept, proof of mechanism. And then if there are opportunities for bremelanotide itself, great, we'll try to pursue those or bring in third parties to help us. If not, does provide the evidentiary basis for earlier compounds to move in to development and also be part of collaborations with larger companies.

And we're seeing that in other indications where we've gotten previous data and now the fact that we have novel compounds with -- is attracting larger pump companies.

[Farhana Sakloth, analyst]

Okay. Great. I'm going to hop back in the queue.

[Operator]

[Operator Instructions] You do have a follow-up question coming from Michael Higgins.

[Farhana Sakloth, analyst]

[indiscernible] PL8177 in ulcerative colitis, are you seeing the data in real time? And if so, any feedback for us.

[Carl Spana, executive]

There's a blinded study is an open label study. So I don't like to really speak out of school on it. Let's just say we are optimistic that there will be a signal. Let's leave it at.

[Farhana Sakloth, analyst]

All right. And then last one from me. With regards to the erectile dysfunction study, can you share with us your regulated plans for this combination? Like how many patients in Phase II and III have been? Any specifics regarding the number of refractory attempts with a single PD-5 inhibitor.

[Carl Spana, executive]

Sure. So in general, we would stick with general guidance on that. So you'd like to see the patient to be a PD-5 inhibitor failure should be on a maximum dose of the PD-5 inhibitor with correct instructions and then would have a -- we would probably use the international erectile function, the erectile function subdomain score. So we would look -- we would characterize them based on the cutoff on that domain.

Blanking on the exact numbers, but they're established and well published. But you've hit on a key thing, one of the things that we will as a regulatory process as we advance from a study that we're doing now to more of a formal registration study, we will have to reach final consensus with the agency on the exact definition of a failure. But that should be pretty easy to do, as I said, based on your guidance that's already out there, publications that are already out there using the international indifferent rectal function and making sure that patients have been on a maximal dose with appropriate education.

[Operator]

We have reached the end of the question-and-answer session, and I will now turn the call over to Carl for closing remarks.

[Carl Spana, executive]

Steve and I would like to thank you for your participation. Obviously, the great questions from our analysts. We appreciate their support as well. We look forward to keeping you updated. Obviously, Q4 for us, a big quarter. As everyone is, but we're really looking forward to what we're going to deliver over the next couple of quarters. So Steven I'd like to thank you. Have a great day, and happy holidays.

[Operator]

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.