Palatin Technologies Inc

F:PTN

Greetings. Welcome to Palatin's Second Quarter Fiscal Year 2025 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 our host, Dr. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead.

Thank you. Good morning, and welcome to the Palatin second quarter fiscal year 2025 call. I'm Dr. Carl Spana, CEO and President of Palatin. With me on the call today is Steve Wills, Palatin's Chief Financial Officer and Chief Operating Officer.

I'll now turn the call over to Steve, and he will give the financial update.

Thank you, Carl, and welcome, everyone. Regarding our financial results, starting with revenue. Pursuant to the completion of the sale of Vyleesi's worldwide rights for female sexual dysfunction to Cosette Pharmaceuticals for up to $171 million in December of 2023, Palatin did not record any product sales to pharmacy distributors for the second quarter ended December 31, 2024. For the second quarter ended December 31, 2023, gross product sales were $4.3 million and net product revenue was $2 million.

Regarding operating expenses. Total operating expenses were $2.6 million net of a $2.5 million gain on the sale of Vyleesi for the second quarter ended December 31, 2024, compared to $0.9 million net of a $7.8 million gain on the sale of Vyleesi for the comparable quarter in 2023. The increase was mainly the result of the decrease in gain on the sale of Vyleesi to Cosette for the second quarter ended December 31, 2024.

Regarding other income and expense. Total other income/expense net consists mainly of foreign currency transaction gains and losses and the change in fair value of warrant liabilities, which Palatin had recorded as a liability on the consolidated financial statements. For the quarter ended December 31, 2023, Palatin recorded a fair value adjustment loss of $8.1 million and offering expenses of $0.7 million.

Regarding cash flows. Palatin's net cash used in operations for the quarter ended December 31, 2024 was $4.8 million, compared to net cash used in operations of $10.5 million for the same period in 2023. The decrease in net cash used in operations is mainly due to the decrease on the gain on the sale of Vyleesi during the period and secondarily to working capital changes.

Regarding net loss. Palatin's net loss for the quarter ended December 31, 2024 was $2.4 million, compared to a net loss of $7.8 million for the same period in 2023. The decrease in net loss for the 2024 quarter over the quarter ended -- comparable quarter ended in 2023 was driven primarily by the change in fair values of the warrant liability and the elimination of Vyleesi net product revenue and selling expenses, offset by the decrease on the gain of the sale of Vyleesi.

Regarding cash position. As of December 31, 2024, Palatin's cash and cash equivalents were $3.4 million, compared to cash and cash equivalents of $2.4 million at September 30, 2024 and $9.5 million as of June 30, 2024. This $3.4 million of cash and cash equivalents as of December 31, 2024 does not include the $4.3 million of net proceeds that we raised in an equity offering, which closed in February of 2025. We are in active -- we are actively engaged with multiple potential funding sources for future operating cash requirements.

I'll now turn the call back over to Carl.

Thank you, Steve. I'll now go over some of the operating highlights for the quarter.

Starting with our Phase II signal detection study, BMT-801, evaluating the safety and efficacy of the co-administration of the melanocortin 4 receptor agonist bremelanotide with tirzepatide, a GLP-1/GIP-1 (sic) [ GLP-1/GIP ] dual agonist. This is being done in patients with generalized obesity. This study has been completed and the database has been locked. Top line data from the study will be available later this month.

The study was designed to evaluate 2 primary research questions: Does co-administration result in increased weight loss? And can treatment with a melanocortin 4 receptor agonist be used for weight loss maintenance by blunting the weight regain seen post incretin treatment?

In addition to safety, the study's primary efficacy endpoint is percent weight loss of the combined treatment compared to placebo controlled at the end of the treatment. A variety of secondary endpoints such as satiety and preservation of lean body mass were also evaluated.

Our obesity and weight loss management portfolio includes both long-acting melanocortin 4 receptor selective peptide agonist and the orally active melanocortin 4 receptor selective small molecule PL7737. We are on track to move both programs into IND-enabling activities and clinical studies in calendar 2025.

Our novel next-generation selective melanocortin 4 receptor compounds have reduced activity at the melanocortin 1 receptor, and therefore, have reduced potential to cause skin darkening. The lack of MCR1 activity with once-weekly dosing, oral dosing, represent significant improvements over current FDA-approved melanocortin treatments.

You can find additional information on our clinical trial at clinicaltrials.gov and our website has recent presentations on our novel next-generation melanocortin 4 receptor selective compounds.

For our PL8177 orally selective melanocortin 1 receptor treatment for ulcerative colitis, the Phase II study remains on track for release of top line data in the first quarter of calendar 2025. In anticipation of the data, there has been a significant increase in business development discussions with potential partners, which is in line with our current strategy to out-license this exciting program.

In December of 2024, we released the top line data from our Phase II BREAKOUT study evaluating bremelanotide as a treatment for patients with diabetic kidney disease. Key results from the study are that 71% of the patients in the study achieved a greater than 30% reduction in their urinary protein-to-creatinine ratio and 71% of the patients had an improved or stabilized estimated glomerular filtration rate.

The results validate that a modulated melanocortin system could potentially be a new therapeutic strategy and possibly disease-modifying treatment option for people living with progressive kidney disease. The detailed results of the BREAKOUT study have been accepted for presentation at upcoming medical meetings. Based on the successful outcome of the study, we have initiated discussions with potential partners for out-licensing this program, which is in line with our current strategy.

We previously announced that we are taking a multipronged approach to realizing the value of our ocular melanocortin program. In support of this, we are actively engaged in discussions with larger potential strategic partners for out-licensing, investors interested in funding further development and with peer companies concerning potential business combinations.

Before moving on to take questions, I would like to comment on our strategy. We are focusing our research and development efforts on our melanocortin 4 receptor obesity asset. We believe that the pharmacological treatment of obesity in the early stages of a multiyear cycle of innovation will have a market value in excess of $100 billion per year.

The melanocortin system plays a critical role in regulating stored energy and food intake. We strongly believe that the melanocortin 4 receptor agonist will be an important part of the future of obesity treatment and weight loss management. Palatin has a long-standing research effort to develop melanocortin therapeutics that selectively activate melanocortin 4 receptor as treatments for obesity and weight loss maintenance.

With our extensive experience in the design and development of melanocortin agonists for treating obesity, including 2 clinical studies previously completed and published, we are well positioned to be a leader in the development of melanocortin-based therapeutics for weight loss and, importantly, weight loss maintenance.

Thank you for your time. We will now open the call to questions.

[Operator Instructions] And the first question today is coming from Joe Pantginis from H.C. Wainwright.

So I wanted to focus on the upcoming obesity data. I know you can't say much right now after the database lock. First, I wanted to just discuss the benchmark, and you can correct me if my numbers are wrong. So if you look at the tirzepatide data alone, after 8 weeks, we're looking at about a 6% weight loss and maybe around 4% for placebo adjusted. So with that benchmark in mind, what would you consider a win your study with regard to weight loss at 8 weeks and whether it's the same or not? What would you consider to be enough percentage weight loss to move the program forward?

That's a good question. But maybe we think about it slightly differently. So the answer to your question is this is a signal detection study, so we don't a priori -- are not a priori going in with some frequency number, right? What we're really looking for is a very clear signal.

So what we'd like to see in the study is that the combined arm is a higher percentage of weight loss. And then in addition to that, we're looking at some other key metrics. For example, the percentage of patients that are achieving either 4%, 5%, 6%, 7% or 8% weight loss in that 8-week period combined versus tirzepatide alone. Because that's what will be more important. It's more important from a clinical question, right? If you put somebody on this, how many of them are going to get 5% weight loss, which is really clinically meaningful and the FDA level of approval? So that's one of the measures we're looking at.

And the second way of looking at it also is, tirzepatide is -- if you think about things in 4-week increments, right, tirzepatide monotherapy is going to probably have its maximum effect in the first 4 weeks, and then it's going to start to slow down as you go forward from there. So can we reverse that slowdown, right? Can we see more patients losing more weight with the second 4 weeks, say, versus the first of 4 weeks when we compare the co-administration versus the monotherapy arm?

So those are the 3 things that we're looking for. We are looking for an increase in the absolute weight on a percentage basis. There's no number for -- magical number. And what I mean by that is this is not an optimized study. This is very low dose of bremelanotide, so we're not optimized for necessarily to see some big jump. But I think we are certainly dosing high enough to get a nice clear signal.

The other point that I do want to bring up though is really we talked about combination versus the monotherapy arm, but let's think about the bremelanotide alone arm versus the placebo arm. I expect after placebo -- patients that are going on to placebo, they will have weight loss in their first treatment period on tirzepatide, they should regain weight. And we'd really like to see if this low dose can blunt that weight regain, really speaking to the concept of weight loss maintenance. So those are kind of the 3 major concepts that we're looking for a signal on.

No, I understand totally about how you're looking at it, and it makes sense. I guess the reason for my question is, when you look at, I guess, the analysts' viewpoint and investment community viewpoint, I think they're going to be automatically comparing, right or wrong, having -- comparing against the benchmark. So I think that's what's driving the -- what would be expected a win from a percentage standpoint. But I understand your approaches here and it makes sense.

I guess when you look forward for the program, are there additional indications you might consider beyond sort of the broader weight loss community, any sort of orphan indications that you might consider from an MCR4 standpoint?

Sure. Certainly. Listen, there is, I think, a growing opportunity to think about the use of melanocortin 4 receptor agonist in rare and orphan syndromic diseases. There are a number of mutations in the leptin melanocortin system. There's Prader-Willi Syndrome, there's Bardet-Biedl. And these are things though, this is not unknown. I mean Rhythm is out there, they have their product setmelanotide focusing there.

But hypothalamic obesity is a very key one because that's probably the largest market opportunity, and it's one where we think we -- our new compounds coming through will be very competitive. And that gives us a, in a nice way, there's 2 of us in melanocortin 4 receptor agonism looking at that orphan rare space, when you go through the general obesity side, although I believe this is the best mechanism, we're going to get moved into a bunch of other mechanisms that are out there. So I think we'll be focusing -- likely be focusing in that rare space.

No, it makes sense. And good luck for the upcoming data. Thanks a lot for the details.

Thank you. And there were no other questions at this time. I would now like to hand the call back to Dr. Carl Spana for closing remarks.

So thank you, Joe. Thank you for your questions. And everybody, thank you for your time. Steve and I are always grateful that you give us your time and you take meetings with us talking about the company. We'd like you to have a great day.

It's going to be an exciting quarter for us and we're really looking forward to -- it's actually going to be an exciting 2025 for us. So we really can't be more excited in what we're doing here, and look forward to reporting our results out. So from Steve and I, thank you, everybody, and have a great day and great quarter. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.