Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Fourth Quarter Fiscal Year 2017 Conference Call. As a reminder, this conference is being recorded. And before we begin our remarks, I would like to remind you that statements made by Palatin are not historical facts and maybe forward-looking statements. These statements based on assumptions that may or may not prove to be accurate and actual results could for materially from those anticipated due to a 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 and Palatin's prospects. Now I would like to introduce you to your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Thank you. Good morning and welcome to the Palatin Technologies fourth quarter fiscal year end 2017 call. I am Dr. Carl Spana, CEO and President of Palatin, and with me on the call today, is Steve Wills, Palatin's Executive Vice President, Chief Financial Officer, and Chief Operating Officer. On today's call, we will provide financial and operating updates. I am now going to turn the call over to Steve, who will provide financial update.

Thank you, Carl. Good morning everyone. For the fourth quarter and fiscal year ended June 30, 2017, I will cover significant and recent operational highlights. Regarding our Bremelanotide development program for hypoactive sexual desire disorder or HSDD. In February 2017, we closed on an exclusive North American license agreement with AMAG Pharmaceuticals to develop and commercialize Bremelanotide. Pursuant to the terms of the license agreement, we received an upfront payment of $60 million. AMAG is required to pay up to an aggregate amount of $25 million in reimbursement for all reasonable, direct, out-of-pocket expenses incurred by us, following the closing date, in connection with certain continued development and regulatory activities, necessary to file a new drug application or NDA with the Food and Drug Administration or FDA. For accounting purposes, we have determined, that the $60 million upfront payment and the $25 million in reimbursable, direct, out of pocket expenses, represent a combined unit of accounting, totaling $85 million, that should be deferred and recognized as revenue, as we complete our development obligations, related to certain activities necessary to file an NDA with the FDA. We estimate that the $85 million will be recognized over the four quarters ending first quarter of calendar 2018. In addition, AMAG is also required to pay us up to $80 million upon achievement of certain development and regulatory milestones. Up to $300 million upon achievement of certain sales milestones, and AMAG is also obligated to pay us tiered royalties on annual net sales, ranging from high single digits to low double digits. On September 6, 2017, we announced the signing of a collaboration and license agreement with Fosun Pharma for exclusive rights to develop and commercialize Bremelanotide in the territories of Mainland China, Taiwan, Hong Kong and Macau. Under the terms of this agreement,…

Thank you, Steve. I see you had some fun with that presentation. I will start our fourth quarter fiscal year end 2017 operational update with Bremelanotide and then cover our pipeline programs. Concerning Bremelanotide, as Steve mentioned, we are working with AMAG Pharmaceuticals, our North American licensing partner, really to complete all the activities that are required to file a new drug application with the FDA. These activities include, various clinical pharmacology studies, certain manufacturing activities and the preparation of the NDA. We anticipate that the Bremelanotide NDA will be filed in the first quarter of calendar 2018. Our development of Bremelanotide outside of the North American market will be done only in the context of a partnership. To this end, we are focusing our business development efforts on a Bremelanotide partnership for the European Union, as well as other regions of the world. As Steve also reported, our business development efforts have resulted in a licensing deal with Fosun Pharma, granting them the exclusive rights to Bremelanotide in China, Taiwan, Hong Kong and Macau. I won't go into the financial details [indiscernible] recovered. Fosun is a leading Chinese pharmaceutical company and we do believe, that they will be an excellent partner for Bremelanotide in the territories that they have. Moving on, Palatin's drug development efforts are focused in two areas; our natriuretic peptide program for cardiovascular diseases, and our melanocortin programs for autoimmune and anti-inflammatory diseases. Regarding our melanocortin obesity and diabetes program, we will not progress this program on our own, we are working to find partners to work with us to bring this program forward. I will provide a little more detail on our pipeline program, starting with our natriuretic peptide. PL-3994 is our lead candidate and it's a selective agonist at the natriuretic peptide A receptor…

[Operator Instructions]. And we will take our first question from John Newman from Canaccord. Please go ahead.

Hey good morning guys. Congrats on all the progress, especially with the pipeline. Just curious if you have had your pre-NDA meeting with the agency, with regard to Bremelanotide?

John, that's a good question. We actually have had our pre-NDA meeting with the division. It went very well. We feel that we are in a very strong position, that we will have all the components necessary to file a really top notch NDA. So we are quite excited about the meeting and where we are and we are working real hard. Really no surprises in the meeting. It went as we expected and as it should have.

Okay. And with regard to 3994, I know that you have been working on this in the background for some time, and now that you have some additional funding, you are pushing it forward. Just wondering what you can tell us about the Phase-I study at this point, in terms of design and sort of, what you are looking to learn at this point in the clinical development there?

Sure. So it will be more of a Phase-II study. This study is designed to really look at a natriuretic peptide mechanism in patients that have heart failure with preserved ejection fraction. And a patient with preserved ejection fraction are -- about 50% of heart failure patients have preserved ejection fraction, and there are currently no FDA approved treatments for them. So what we are doing in this study is, we will be actually -- these patients very commonly come in, and they get, which is known as a right heart work-up, so they have a catheter that's put in and the function of the right heart is monitored. So while they are going through that procedure, we will be introducing PL-3994. We will be looking at its effects on pulmonary arterial blood pressure. In particular, pulmonary capillary wedge pressure in particular, and we will also be taking a biopsy of the heart, and the goal of that biopsy is actually to look at the signaling pathways that are activated by PL-3994, making sure that they are functioning in these types of patients. If that's the case, that will be a major step forward for us, that really gives us a key indication that the product of the drug will work in these patients, or there is a chance that it will work in these patients, and we could think about how we go forward and design trials that actually show benefits in a more natural setting. So it's a pretty important study. It will be done in conjunction with two academic centers, and we will talk a little bit more about that, when we announce the start of the study, a little bit later this year.

Okay, great. Thanks.

And we will take our next question from Michael Higgins from Roth Capital Partners.

Good morning guys. Thanks for taking the questions. Congrats on the completion of a very positive year. Hoping to get an update from you on the Bremelanotide's pre-NDA trials. You had some small PK trials that you have been running, and I think you may actually have some coming up as well -- as well, abuse-liability in drug interaction studies. Any update for us on those?

Sure. I mean, these are -- a lot of these studies are -- they are important to be able to meet regulatory requirements. They are all fully enrolled in almost all of them, I think except for one, to have actually completed the in-patient part, and we are just waiting for study reports. We don't really have much in the way. They are fairly benign. As far as outcome, there is no negative results that we report. As far as we can tell, the drug looks quite clean, as far as its drug interactions. The abuse-liability, from a preclinical standpoint, there are a number of studies that we have done, doesn't appear to be any interaction there. The clinical component is, again, fully enrolled, and we haven't yet received the clinical study results, but my suspicion is that we won't see any effect there either. So really overall, these are -- they are either complete or they are at the tail end of being completed, and they will be incorporated into the NDA, as we get study reports and submit it into the FDA, but there is nothing here that will have a negative impact on the label, which is what we are most concerned about.

Great. Appreciate that. Steve, any update for us on the penny warrant conversions and how that has been going?

Sure. The penny warrants are what we call the pre-funded warrants, I mean, that's the size of a penny. In the last four months, June, July, August and September, we have actually experienced approximately $32 million of exercises from the pre-funded warrants, and which we believe all those pre-funded warrants or the vast majority were sold into the marketplace. In the month of September alone, we received $16 million of exercises related to the pre-funded warrants. So as of chatting today, we have approximately $11.5 million pre-funded or penny warrants outstanding and our expectation is that these will be down to zero within the next 30 to 60 days.

Great. Thanks for the update on that. Any update for us on the discussions with European partners for Bremelanotide and what you are looking for in partnership agreements if it's region-wide or country-wide? Thanks.

Sure Michael. As I mentioned and I think most people are aware, we had licensed the North American rights and the Mainland China and a few surrounding territories already. We are in discussions with multiple parties for multiple regions. Some of those discussions are for the rest of the world, under one umbrella. The rest of the world again sans North America and China, and some of those discussions also include European-based companies and some other companies in select territories, i.e. Japan, Latin America is separate, then Europe. So as of right now, we are moving forward with these advanced discussions and similar to what we have done with the partner, with AMAG, as a collaboration partner, and also with Fosun Pharma as a collaboration partner. We are not necessarily -- upfront payments are nice and we want a competitive number. But our A item is finding the right collaboration partner. We think AMAG fits that profile perfectly. We think Fosun Pharma is going to be an excellent collaboration partner in that territory. And as we advance these discussions, we could very well do a rest of the world territory deal or some additional territories, i.e. European and some surrounding countries separately, Latin America separately, some of the other territories separately. But we are very pleased with the amount of activity and enthusiasm we are receiving in the marketplace, and we anticipate that that's going to even increase now, that we have done another deal, i.e. China, with Fosun Pharma.

Great. I appreciate it. Just a follow-up on 3994 follow-up on an earlier question; what biomarker data would you be looking for from your biopsy data?

Sure. It's a -- [indiscernible] to AMP is the common downstream modulator, looking for other types of things like phosphorylation, protein kinase A activation. So there are a number of downstream biomarkers or intercellular biomarkers that we will be looking for. The main number of genes that we would be looking for as well. [indiscernible] 9 will be another that we are looking at. So we have a whole panel of things that we will look at intercellularly. What we'd also like to see from a physiological standpoint though is, we'd like to see how much of an impact we have on the pulmonary cap wedge pressure, which is -- it can be an important component in these patients that have heart failure.

Thanks. That's helpful. And then one last if I could, I know the Q4 R&D spend is higher than the previous quarters of fiscal 2017. What drove that and might that continue into 2018? Thanks.

It won't continue into 2018, Michael. The way you have to account for this, per generally accepted accounting principles, the cost reimbursement we received from AMAG is actually counted as contract revenue above the line, so that's under the revenue. So we anticipate a significant drop-off in the R&D spend, which is primarily Bremelanotide after the fourth quarter of this year, because as we mentioned, our target is to file the NDA early in calendar 2018, and the R&D spend post, if you will, the fourth quarter of this year, maybe a little bit into the first month or two in calendar 2018, will be primarily, and vast majority primarily on our MCR-1, MCR-1-5, the inflammatory targets and also our heart failure targets.

Makes sense. Appreciate it. Thanks guys.

And this concludes today's question-and-answer session. Dr. Carl Spana, I would like to turn the call back to you for any closing or additional remarks.

Thank you for the good questions. We appreciate it here at Palatin. As you can hear, we are quite excited about what we have accomplished in the last year, and what we intend to accomplish in the upcoming year. It's a good time to be here. We really have a lot of potential, and as I said, there is a lot of enthusiasm around the employees and our partners, and really, we are just excited to be coming in everyday and look forward to updating you, as we go forward over the next four quarters. So have a great day and we will talk to you next quarter.

And this concludes today's conference. Thank you for your participation and you may now disconnect.