Palatin Technologies Inc

F:PTN

Earnings Call Analysis

Palatin's Third Quarter FY2024 Highlights Melanocortin-Based Therapeutic Progress

In the third quarter of FY2024, Palatin reported a significant operational shift following the sale of Vyleesi's rights, resulting in zero product sales for the quarter, down from $3.4 million in Q3 FY2023. Operating expenses rose to $9.2 million, primarily due to increased investment in melanocortin receptor programs. The net loss narrowed to $8.4 million from $8.7 million. Key developments included promising Phase III results for PL-9643 in treating dry eye disease, with plans to initiate two new clinical programs by mid-2024. The company's cash position improved to $10 million, projecting sufficient funds into the second half of calendar 2024.

Introduction

Palatin Technologies recently held their earnings call for the third quarter of Fiscal Year 2024, providing significant updates on their financial performance, product developments, and strategic initiatives. The key speakers were Dr. Carl Spana, President and CEO, and Steve Wills, CFO and COO. This summary will highlight the essential points discussed during the call.

Financial Performance

Palatin reported no gross product sales for the quarter ended March 31, 2024, compared to $3.4 million in the same quarter last year. This was due to the sale of worldwide rights for Vyleesi to COSET Pharmaceuticals for up to $171 million in December 2023. Operating expenses increased to $9.2 million from $8.5 million in the prior year, attributable to higher spending on the melanocortin receptor programs. The company recorded a net loss of $8.4 million, slightly improved from $8.7 million in the previous year. Cash and cash equivalents at the end of March 2024 were $10 million, up from $9.5 million at the end of December 2023.

Product Development and Pipeline Progress

Palatin is heavily focused on their melanocortin-based therapeutics, with three clinical programs currently underway. The company reported positive Phase III results for PL-9643 in the treatment of dry eye disease, showcasing excellent ocular tolerability and rapid onset of efficacy. PL-9643 also demonstrated significant improvement in multiple symptom endpoints within two weeks of treatment. Plans are underway to begin the remaining clinical studies necessary for an NDA submission in the latter half of 2024.

Future Clinical Programs

Palatin announced plans to start two new clinical programs in 2024, leveraging their expertise in melanocortin-4 receptor agonists. These programs include a Phase II study on obesity, which will evaluate the safety and efficacy of co-administration of bremelanotide with a GLP-1 receptor agonist for weight loss maintenance. Additionally, Palatin aims to study a combination of bremelanotide with a PD-5 inhibitor to treat erectile dysfunction in patients who have not responded to monotherapy.

Strategic Focus and Outlook

The call highlighted Palatin’s strategic focus on developing highly differentiated treatments based on their understanding of the melanocortin system. The company is optimistic about meeting its clinical milestones and advancing its pipeline therapies. They are committed to continuing their research and development efforts to bring novel treatments to large, underserved markets. Dr. Spana and Steve Wills conveyed confidence in the company’s direction and the potential of their ongoing projects to deliver significant value.

Conclusion

The earnings call outlined a period of significant transition and strategic focus for Palatin Technologies. With a robust pipeline of melanocortin-based therapies and a solid cash position, the company is well-positioned to advance its clinical programs and achieve its long-term objectives. Investors should keep an eye on upcoming clinical trial results and the company’s progress towards regulatory submissions, which are crucial indicators of future growth and market potential.

Earnings Call Transcript 2024-Q3

[Operator]

Greetings. Welcome to Palatin's Third Quarter Fiscal Year 2024 Operating Results Conference Call. [Operator Instructions] As a reminder, this conference call 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 your 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 Third 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 will give the financial and operating update. Steve?

[Steve Wills, executive]

Thank you, Carl, and hello, everyone. Palatin's fiscal third quarter ended March 31, 2024 financial results. Regarding revenue, total revenue consists of gross product sales of Vyleesi net of allowances and accruals. Pursuant to the completion of the sale of Vyleesi's worldwide rights for female sexual dysfunction to COSET Pharmaceuticals, for up to $171 million in December of 2023, Palatin did not record any product sales to pharmacy distributors for the quarter ended March 31, 2024. For the quarter ended March 31, 2023, gross product sales were $3.4 million with net product revenue of $1.2 million.

Regarding operating expenses, Total operating expenses were $9.2 million compared to [ $8.5 ] million in the comparable quarter last year. The increase was related to greater spending on our melanocortin receptor programs offset partially by the elimination of selling expenses related to Vyleesi. Regarding other income and expense. Total other income and expense net consists mainly of the change in fair value of warrant liabilities, which Palatin have recorded as a liability on the consolidated financial statements, including revisions of certain prior period [indiscernible] amounts to correct the mix with respect to classifying warranted equity instead of liability.

To be clear, that's all cleaned up. There is no more liability reflection, and as we go forward, again, that item has been cleaned up. The statement of operations was adjusted each quarter to reflect changes in the fair value of these warrants. For the quarter ended -- quarters ended March [ 31 ], 2024 and 2023, Palatin recorded a fair value adjustment gain of $0.4 million and a loss of $1.5 million, respectively. Regarding cash flows, Palatin's net cash used in operations was $8.6 million compared to $1.4 million for the same period last year. The increase is mainly due to changes in working capital.

Regarding net loss, Palatin's net loss was $8.4 million or $0.53 per common share compared to a net loss of $8.7 million or $0.76 per common share for the comparable period last year. The decrease over the comparable quarter last year was mainly due to a larger operating loss in fiscal 2024, offset by the higher other income, which was primarily from changes in the fair value of the warrant liabilities. Regarding cash position, as of March 31, 2024, Palatin's cash, cash equivalents and marketable securities were $10 million compared to cash, cash equivalents and marketable securities of $9.5 million plus $2.3 million of accounts receivable as of December 31, 2023, and compared to $5.5 million plus $1.3 million of accounts receivable as of September 30, 2023. We believe that existing cash and cash equivalents, marketable securities will be sufficient to fund currently anticipated operating expenses and disbursements well into the second half of calendar year 2024.

Now I'd like to turn the call back over to Carl. Carl?

[Carl Spana, executive]

Thank you, Steve. As you know, our focus has been on understanding the biology and chemistry of the melanocortin system with the goal of developing selective melonocortin agonists for a variety of indications. These research efforts have resulted in a growing portfolio of melanocortin-based therapeutics. We have 3 clinical programs based on melanocortin agonist and are planning to initiate enrollment in 2 new clinical programs by mid-2024 pending resources, all coming from our highly productive research activities.

Now for our PL-9643 dry eye disease program, we reported positive Phase III MELODY-1 results earlier in the quarter. I'd like to highlight some of the key findings that differentiate PL-9643 from current therapies and that have us and potential partners very excited. We see excellent ocular tolerability and safety, essentially similar to a dry [indiscernible] artificial tier. I don't think there's any product out there approved or in development that has the ocular tolerability of PL-9643. We see rapid onset of efficacy for both signs and symptoms dry eye disease with the primary symptom endpoint of pain and 7 of 11 secondary symptom endpoints reaching statistical significance at 2 weeks, which was the earliest time point that we evaluated.

Very importantly, we continue to see improvement of multiple symptom endpoints over the full 12 weeks of treatment. We have not reached maximal efficacy yet, and we believe that as we treat longer in the upcoming Phase III program, we'll continue to see even more efficacy for PL-9643. We are now currently preparing for the remaining clinical study to support a new drug application submission which we anticipate will begin in the second half of the enrollment in the second half of calendar '24 and upcoming Type [ C ] meeting with the FDA to discuss the remaining program studies that we have to do.

Our Phase II study evaluating oral PL-8177 in selective melanocortin-1 receptor agonist and also cites patients is on track for an interim assessment release of data in mid-2024. Supporting oral PL-8177 development or preclinical studies demonstrating that treatment with 8177 causes disease colons to improve toward a healthy state and to resolve inflammation. Resolving inflammation rather than blocking it provides a possibility of efficacy coupled with significantly differentiating safety and treating ulcerative colitis and other types of inflammatory bowel disease. Breakout our Phase II open-label study evaluating melanocortin agonist and diabetic patients with kidney disease is also on track for top line data release in mid-2024 as well.

I'd like to take a minute to highlight 2 new clinical programs that we are planning on starting this year. These 2 programs leverage our extensive expertise in the chemistry and biology of a melanocortin [ 4 ] receptor agonist, both have strong clinical validation and they address large markets in need of new therapeutic options. The first is a Phase II obesity clinical study designed to enroll up to [ 60 ] of these patients that are currently using trusted at 2.5 milligrams weekly. The primary endpoint is to evaluate the safety and increased efficacy of coadministration of bremelanotide, which is appetite in reducing [indiscernible], a secondary endpoint will evaluate the weight loss maintenance effect of bremelanotide in patients that has stopped using tusepatide.

The initial drug application and the protocol for this study has reviewed by the FDA, and we are clear to begin enrolling patients. Supporting this study in our VC program in general, we recently hosted a key opinion leader titled beyond GLPs, the multiple roles for novel melanocortin-4 receptor agonist in treating obesity and weight loss maintenance.

The speaker is Dr. Jesse Richards from the University of Oklahoma, as he discussed coadministration of [ melanocortin ] receptor agonist, which was epatide in obese patients, the continued need for novel obesity treatments and the multiple uses for melanocortin [ 4 ] receptor agonist in treating obesity and weight loss maintenance. You can find the link recording of the event on our website. Drug treatment obesity is now established and growing rapidly. We believe multiple drugs with different mechanisms of actions that affect weight loss and importantly, weight loss maintenance are needed. We strongly believe that drugs targeting melanocortin receptor system will be an important part of the future of obesity treatment and weight loss maintenance.

Our extensive experience in the design and development of melanocortin agonist for treating obesity include 2 clinical studies previously completed and published, and we are well positioned to be a leader in the development of melanocortin-based therapeutics for weight loss and weight loss maintenance. We are also planning a Phase II clinical study evaluating the coadministration of bremelanotide with a PD-5 inhibitor for treating [indiscernible] patients at a failed PD-5 inhibitor monotherapy.

This clinical study will support the development program for a combination product, which is a co-formulation of bremelanotide with a phosphodiesterase-5 inhibitor, and an extension of our commercial efforts in sexual [indiscernible]. Approximately 35% of the men with retile dysfunction fail or have an inadequate response to [ PD1 ] inhibitor treatments, and these are things like [indiscernible] and by agri, represent a large underserved market. The only treatment options for these failure patients are highly invasive such as direct phenol injections or penal implants. We have previously conducted clinical studies showing the synergistic effects of combining bremelanotide with a PD5 inhibitor as a treatment for rectal dysfunction. And feel well positioned for an efficient and successful development ramp of the co formula product.

Key highlights for the third quarter and fiscal year 2024 are as follows: We reported the positive results for PL-9643 Phase III MELODY-1 DRI disease clinical study. And PL-9643 is emerging as a highly differentiated treatment for dry eye disease with excellent ocular tolerability, rapid onset of efficacy and broad relief from multiple symptoms of dry eye disease. We are planning on initiating 2 [indiscernible] with Phase II clinical studies that have data readouts in 2024.

Finally, our clinical programs continue to advance with multiple clinical data milestones from [indiscernible] enable programs and the initiation of the remaining PL-9643 Phase III studies by calendar year end. Steve and I would like to thank you for listening to the Palatin Third Quarter Fiscal Year 2024 Conference Call. You can find additional information on our science and clinical programs on our website, www.palatin.com. And you can find additional information on Vyleesi at vyleesi.com website. We'd like to thank you and now open the call to questions.

[Operator]

[Operator Instructions]

The first question is coming from Joe Pantginis with H.C. Wainwright.

[Joseph Pantginis, analyst]

So Steve and Carl, I wanted to focus on the overall profile for 9643 right now. Post the MELODY-1 data, you had upcoming Type C meeting, what are you looking to clarify or get agreement on with regard to moving forward? And before you get that feedback, have any of the learnings from MELODY-1 impacted how you're going to potentially approach MELODY-2?

[Carl Spana, executive]

Sure. Well, let me take that in reverse order. The answer is yes, I mean, obviously, this MELODY-1 was a very large clinical trial. There was a lot of data. And like most drive programs, you continue to learn as you do these studies. You do not always get what you want. But the way we're thinking about this is we like to do 2 more studies, MELODY-2, MELODY-3 to provide the remaining data that we need. It will give us 3 large Phase III clinical trials to really support the profile of the drug, the safety and the overall efficacy. And we think that's the most prudent course to go forward. It is very atypical for dry eye disease products to be approved for -- on just 2 studies. They generally -- most of these programs have 3, 4, 5 Phase III studies that support their overall approval.

So that's our overall strategy. We've learned, I think, additionally, the endpoint with [indiscernible] symptoms will most likely be the ocular pain. But importantly, we really want to continue to highlight the broad efficacy that we're seeing on symptoms. I mean we're seeing 8 symptoms out of the 11 measured, all reach significance starting at 2 weeks and then moving forward. There's no product out there that has that type of some relief. So we really want to make sure we get these studies to drive that home. In addition to that, we need to get the sign, the sign is more of a regulatory end point.

And I think we figured out how to do that, when to measure, what to measure. It will be very corneal flooring staining. We'll do it at 2 weeks. So it will be a relatively rapid measurement. And so we think we're now really well positioned to deliver the rest of the program and support an NDA submission. With regards to the first part, which is the Type C meeting, there are a number of more technical things there. I don't think there's -- I don't think the agency will have -- and I don't think we're posing any real questions as to the design and overall endpoints that we're using in MELODY-2 and 3 and the open label -- pain, eye dryness, theory corn and flooring staining.

These are all well-known endpoints and well validated endpoints for use in these trials. The analysis we're doing are pretty straightforward through all ITT analysis. So there's no subgroup analysis that we're planning. So I don't think there's anything there. So none of the questions will be around just the efficiency of what we intend to deliver. And I expect that they will agree with that. I think 3 large well-controlled studies will be more than sufficient to support an NDA submission and their evaluation. And then in addition, there were a number of questions around manufacturing and what have you that are more things that we need guidance, what the next step should be or they're not more -- you could do either A or B, we just want to make which 1 do you want, you want A, you want B. So nothing really, I think, significant just more guidance as to what type of data they want there. So overall, I expect a very fruitful meeting on the Type C. And as I said, we're planning now to really move the next set of studies forward and we're quite excited about the product.

[Joseph Pantginis, analyst]

No, I appreciate those comments. And I guess I'll just take it a little further with regard to potential endpoints for the next and you brought up, I guess, 1 of the interesting concepts in the dry eye development and where you said you're looking at 8 different signs and like would you look to keep the same sign? Because I know you basically have to pick one [indiscernible] with the FDA. So how would you look to address that?

[Carl Spana, executive]

So on the site side see staining on the symptom side, we have a -- we have the flexibility there -- both pain and eye dryness, I think actually I dines was the highest degree of significance in MELODY-1. Either 1 is acceptable. I mean 1 of the questions we will ask the agency is that if we elevate eye dryness as opposed to pain. Will that be -- and it should be okay, will they accept that in Melody-1 as well. As we delivered MELODY-2, MELODY-3, will they accept that in the endpoint and MELODY-1 as well. And I think that they will do that. But where you're going is we'll probably have a lot more of the secondary endpoints be symptom-based because -- and 1 of the things we do want to discuss with them is if we hit all these symptoms, again, as we replicate them, can we get some of these on the label? Can we get specific symptoms on the label. And I think that would be another differentiating feature.

[Operator]

[Operator Instructions]

There are no additional questions in queue. At this time, I would like to turn the floor back over to Dr. Spana for any closing remarks.

[Carl Spana, executive]

Great. Thank you. I'd like to thank everyone for participating on the Palatin Technologies Third Quarter Fiscal Year 2024 Conference Call. Have a great day. And Steve and I look forward to updating you on our progress, and we're very excited about where we're going with the company and the milestones that we have coming up throughout the remainder of this year. So have a great day, and thank you.

[Operator]

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

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