Good morning, ladies and gentlemen, and welcome to the Palatin Technologies First Fiscal Quarter 2019 Operating Results Conference Call. As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that the statements made by Palatin, that are not historical facts, may be forward-looking statements. These statements are based on assumptions that may nor may not prove to be accurate and actual results could differ 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'd 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 first quarter fiscal year 2019 call. I'm Dr. Carl Spana, 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. On today's call, we will provide financial and operating updates. Now I'm going to turn the call over to Steve, who will provide financial updates. Steve?

Thank you, Carl. Good morning, everyone. Regarding Palatin's quarter ended September 30, 2018, and recent operational and financial highlights. With respect to Vyleesi, which is under development for female Hypoactive Sexual Desire Disorder, or HSDD, the FDA set the PDUFA action goal date of March 23, 2019, for completion of the review of the NDA for Vyleesi. As reported in our 8-K filed this morning, the FDA has requested additional data. Carl will expand on this during his portion of the presentation. On the Vyleesi business development front, Palatin is in discussions with potential collaboration partners for certain regions outside of the licensed territories of North America, China and South Korea. Regarding the quarter ended September 30, 2018, financial results. Palatin reported a net loss of $5.7 million or $0.03 per basic and diluted share for the quarter ended September 30, 2018 compared to net income of $10.6 million or $0.05 per basic and diluted share for the same period in 2017. The difference in financial results between the 3 months ended September 30, 2018 and 2017 was mainly due to the recognition of $26.9 million in license and contract revenue during the 2017 period pursuant to our license agreements with AMAG and Fosun, that is offset by a decrease in development expenses pursuant to the completion of our Vyleesi Phase III clinical program. Regarding revenue. For the quarter ended September 30, 2018, we recognized as revenue approximately $34,000 in reimbursement of shared Vyleesi cost compared to $21.9 million in license and contract revenue related to our license agreement with AMAG and $5 million in license revenue related to our license agreement with Fosun for the comparable quarter in 2017. Regarding operating expenses. Total operating expenses for the quarter ended September 30, 2018, was $5.7 million compared to $15.7 million for the same period in 2017. The decrease in operating expenses was primarily due to the completion of our Vyleesi Phase III clinical trial program and ancillary studies necessary to file the NDA with the FDA for Vyleesi in March of 2018. Regarding cash position and working capital. Palatin's cash, cash equivalents and accounts receivable were $32.7 million as of September 30, 2018, compared to cash and cash equivalents of $38 million at June 30, 2018. Current liabilities were $8.5 million as of September 30, 2018, compared to $10.8 million as of June 30, 2018. Palatin decreased its debt from $7.2 million at June 30, 2018, to $5.3 million at September 30, 2018. We believe that existing capital resources will be sufficient to fund our planned operations through at least calendar year 2019. Carl?

Thank you, Steve. I will start the operational update with Vyleesi, our lead clinical product. Vyleesi is a first-in-class melanocortin agonist which is the only on-demand drug to complete Phase III clinical trials for Hypoactive Sexual Desire Disorder. The product is formatted as a simple single-use subcutaneous autoinjector, self-administered by the patient approximately 1 hour prior to sexual activity. We have been working with AMAG Pharmaceuticals, our North American licensing partner for Vyleesi, to support Vyleesi New Drug Application, which AMAG submitted to the FDA in March 2018. The NDA was accepted for a review by the FDA in June 2018 and the PDUFA date for Vyleesi NDA is March 23, 2019. As we and AMAG made public earlier today by an 8-K filing, the FDA has requested that AMAG conduct a small Phase I study in premenopausal volunteers taking Vyleesi to characterize any potential effect on blood pressure following short-term daily use of Vyleesi. The data from this study would be utilized in the Vyleesi label. In the 2 large North American Phase III Vyleesi studies, subjects used Vyleesi approximately 3 to 4 times a month or about once per week. However, there was a small subset of subjects that used Vyleesi more frequently with a higher dosing density. The requested study is designed to provide data on the short-term daily dosing of Vyleesi for informed labeling purposes. We will be working with AMAG to conduct a study and submit the data to the FDA prior to the Vyleesi March 23, 2019, PDUFA date. It is anticipated that the FDA review of the additional data will result in a delay of approximately 90 to 180 days in the potential approval of Vyleesi. At this time, the FDA will not be scheduling an advisory meeting to discuss the Vyleesi NDA.…

[Operator Instructions] And our first question will come from Mr. John Newman with Canaccord Genuity.

So Carl, just curious if you could talk just a bit about what you will be looking to measure in the Phase I study that has been requested by the FDA. Also wondering if you could just remind us of the past data that you've collected regarding blood pressure. I know it's been seen in the past, but I also know that you have pretty substantial amount of data that has addressed that.

Thank you, John. We do have a lot of data. So I'll start there first. As we noted, the typical use pattern for Vyleesi is really about once or maybe twice per week. And we in a very comprehensive way using, what's known as, ambulatory blood pressure measurement, characterize the effect of Vyleesi on blood pressure over multiple 24-hour periods post either dosing placebo or Vyleesi in HSDD patients. That data is -- really supports the safety and the profile of -- in the label for the normal use of Vyleesi. And that data actually was very good and was actually published in a peer-reviewed journal not too long ago. What they're really looking at now is as we went through and got closer to labeling discussions with them is that there was a subgroup of patients that just used the drug more intensively. The drug works, and they're using it more frequent basis. So they may have had 6 doses or more available any time in the Phase III trial. And some of the patients use them in a condensed fashion, over a weekend or for one on vacation, used it for multiple days in a row. Although we did submit several studies that evaluated the safety and pharmacodynamics and pharmacokinetics of Vyleesi in patients receiving doses on a daily basis or even multiple doses in a day for a period of time, they were not prospectively designed to give the interrogation of blood pressure over a full 24 hours. So for example, we may have followed them from just before a dosing and then for 8 or 9 hours after dosing or until they go to sleep at night and then we didn't follow them -- we don't wake them up at night to do blood pressure cuff…

Okay. And did the agency -- did they specify or did they have any particular questions regarding any patient that might have a higher baseline risk or high blood pressure or BP risk? Or did they just say, we just like to know a little bit more about patients that take this drug more often?

Sure. So we allowed it in Phase III, we have patients that have controlled hypertension in the study. We didn't exclude diabetics, so we have those types of patients in the Phase III study. John, I could tell you, I've never sat -- whether it's the U.S. or Europe or this division or other division, I've never sat when we've discussed a safety study, particularly in a product that's more advanced where they don't want you to get a diverse population as possible. So for the most part, these will be healthy normal volunteers. If we can find them, we will have -- we can find available controlled hypertensives, we'll have them as well. We studied them in the past. We don't -- there's no concern there that they have a differential signal or anything else.

Our next question comes from Mr. Joe Pantginis with H.C. Wainwright.

So curious, Carl, if you could provide a little more color regarding the potential impact on the label. I mean, this could potentially be a positive result.

Well, Joe, I mean, that's, of course, a way of looking at it. And I think the -- in the absence of the data, it is likely that you would have wound up with more restrictions, right, because you have partial data, you don't know the full profile, we know the profile over 12 hours and over 24. So the product is very consistent. We expect that it will be nothing of concern noted, so we would expect a better label with less restrictions. And I think that's really a key point. As AMAG had to make their decisions on things to do, I'm sure that -- we believe we're going to get this product approved. I'm not sure why you wouldn't want the best label. And if we have to take some time delay to do that, I think it's better to do it now and get a great label that really supports the use of the product versus having restrictions that you then have to try to explain or try to remove at a later date.

No, that's completely fair. And then a logistical question and then maybe a little forward-looking question. Logistically-wise, who's responsible for conducting the trial, you or AMAG? And yes, just curious if there is any numbers that you're willing to share about how big this study will be.

Sure. So -- the New Drug Application -- oh, I'm sorry, the IND was transferred to AMAG last year. The New Drug Application is in AMAG's name. So clearly, they are responsible for running it. We, of course, will have our full team available in supporting their activities. So I think between the 2 groups, we have ample resources to really get the study started quickly and complete it, so that's where we'll sit. With regards to numbers, I won't give you -- I can't, at this moment, give you specific numbers. But what I can tell you what is traditional in these types of studies, they're in the 50 patient range, in that range give or take, up or down a little bit, but that's about the range that you are. It's not a large number of patients. You're not treating them for much more than a week to 2 weeks. So I think these studies go quickly. We've done lots of these in-clinic studies, and we have experience with them, and that's -- once you get them cranking in, you got the right CRO in place, you can get them done pretty quickly.

Got it, got it. And if I could just switch gears really quickly. Since the natriuretic peptide space continues to gain visibility with ENTRESTO as an example, on the 3994 program, first, what are the primary objectives of the trial you're going to be looking at? And secondly, since AHA is sponsoring, Steve, maybe you can share, are you getting any funding from them for the study?

So we can answer both parts. So the objective of the study -- so this was part of the Go Red campaign at American Heart Association, which is a program to increase clinical trials, in particular, in women. And you may see, every once in a while, if you go into a bakery or a restaurant, you may see a little logo, Go Red logo from American Heart Association, and then when you put your money in the basket, it goes to support these types of activities. But the objective is to look at patients that have preserved ejection fraction. So patients that have -- women, in particular, have a higher proportion -- higher amount of preserved ejection fraction. There are no products yet approved to treat that patient population. So this study is really designed to look at -- it's really a proof of mechanism to show that the natriuretic peptide system in these patients is functional, is signaling and there is a chance for it to actually drive a benefit. So it's actually quite an important study. The results from it will be quite interesting. With regards to -- Palatin is -- the -- all the kinds of the trial expenses are covered by the AHA grant. I mean, court -- we have to provide our product to it and regulatory support. But -- so we don't take money out of the grant.

Our next question comes from Mr. Michael Higgins with Ladenburg Thalmann.

A follow-up or 2, if I could on Vyleesi. From your data sets, do you have experience with the -- and it sounds like -- could you -- a woman taking multiple pills per day or several in a row, did they present any cardiovascular problems that were noted in the trial?

The answer is -- we have data, and the answer is no, they did not. And in fact, in the large Phase II and large Phase IIIs, we don't have -- there are no cardiovascular events that are associated with drug use, so it's quite clean. And that in terms of -- not surprisingly, these are premenopausal women. They don't have much in the way of events. But we do have experience. As I said, we have done several studies looking at daily dosing over short periods of time or multiple dosing in a day. They establish a baseline of no over safety concern, but we didn't profile -- we didn't -- we just didn't profile over 24-hour -- we didn't do 24-hour ambulatory blood pressure [ measurements ]. We did blood pressure cuff measurements over shorter periods of time. So it tells you that there is no accumulation, there is no additive effect of multiple doses in a day, but it doesn't tell you -- you still have the full profile of the drug and that's really what you're looking for. They want to know what happens not only when the patient is awake, but what happens when the patient's asleep, what's the effect or is there any effect.

Okay, that's very helpful. So your characterization of what they're asking for is an evidence of safety that has perspectively been studied, but not that they've seen any signals. Is that a fair summary?

It's kind of that. I mean, I think what -- we call it -- it is really a characterization of any potential blood pressure effect. What I mean by that is, you -- long-term cardiovascular safety would come from -- comes from really your Phase III clinical trials. This really is a profile. And what you're looking for is -- if we look at it -- if you look at a baseline measurement, so, [ not ] to say, placebo, and then you give the drug for say 7 days and then you look at the blood pressure and you look at over 24 hours and you compare, are there any differences over the full 24 hours? And if there are, which there may be -- we've seen small changes in the -- when you first dose and they come back to baseline, and then -- and they track very nicely. Are there patients that we don't want to have take this everyday then? It's just a matter of -- it's really to inform the label. How would you -- you're left with -- the absence of this data, they don't feel comfortable, they can inform on how you would use it -- how long could you -- how many days in a row could you take it, or there -- is there patient population that maybe shouldn't take it every day in a row. So you won't [ believe ] is more hypothetical, but the data doesn't exist yet today. We have a lot of data that we say that it is probably not of high concern, but you still don't have all of it. So it's really to collect it all and really to inform the label -- appropriate label.

That's very, very helpful. Just remind us again of the premenopausal women in this study, how many were on blood pressure medications?

I'd ask you -- look, there are not a lot. I mean, hypertension is not a huge problem in the premenopausal population. We'll get you the number in a second, but I'm guessing it's just -- it's a few percent, if I had to take a guess. It's not high. We didn't exclude them. But just -- women are -- these women are really between 18 and 45. So they're really not -- they don't really have much in the way of hypertension. We don't exclude it. We let them in because we want them in, but we don't know -- you're not going to get a lot of them.

Yes, agreed. Understood. Does the -- the news out this morning affects your plans to talk with European regulators. I think you're looking to talk with them before year-end. Any changes to those plan?

No, not at all. I mean, this is a -- this would be additive at the moment. We're really just -- we really -- our discussions are, we have a Phase -- we have initial Phase III protocol submitted and early next year, we'll get our initial feedback on it. So it wouldn't impact that at all.

Okay, appreciate that. And then if I can switch to 8177. Just want to confirm you're still actually looking for oral data by year-end that will help distinguish that product versus subcu, is that right?

That's correct, yes. I've just -- I just got the number for you on antihypertensives. It's relatively -- we had about over 1,000 women take the drug. It's -- I think about 20 or 30 of them were on antihypertensives. They're just not a lot in this population, sorry, 2 points. I got you up asking a question about 8177.

The oral data by year-end.

Yes. The oral program is it's enrolling patients. Actually, I think, if I'm not mistaken, we've actually completed dosing. We're waiting for the data to come in. We're about to complete dosing. So over the next couple of weeks, the data will come in from that study.

Okay. And then from the subcu Phase Is, any adverse events noted? Did you reach the maximum tolerated dose?

We reached -- we didn't really reach what you would call a maximum tolerated dose. We dosed to a level that we believe has a very high multiple over what we would give for a therapeutic dose. It's quite a clean compound. So you've got the standard stuff. You'll see some mild injection site reactions on both placebo and drug. You might see a little bit more on the drug. But really we knew this compound, based on the preclinical profile, would be quite clean and that's exactly what we saw. So we will call it a maximum tolerated dose, but it's really maximum amount of drug that you would ever give -- dose.

Okay. Sounds like the doses tested were higher than what you expect to demonstrate?

Right, right. It's substantially higher. And again, we knew going into the Phase I study that it was not likely that we would hit a tolerability effect or -- with the drug. So we have a rough idea. We know -- we have a range where we want to have exposure for efficacy, and we did a multiple above -- went up to a multiple above that, that provides additional -- that provides a large margin of safety.

Okay, that's helpful. And then a couple questions, if I could on 9610. It looks like you're looking to -- if I have this right, filing IND as well as start Phase I in second half of '19, is that the case?

We're working towards that as long as we don't have any issues, yes. Right now, we're making drug product, we're getting ready -- to have enough product to do our tox studies and file an IND. But that program, we're quite excited about it, it's -- we worked for many years to get in orally active small molecule, so we're quite excited about that program.

Yes. There's big upside in genetical obesity. And the last one here. Do you plan to share the data that you have that shows 9610 has little effect on the blood pressure and why does it involve issues that are common with MC4r agonist?

Sure, sure. I mean, at the appropriate time, as we go through and when we have -- I think, as we get through our tox work with that compound, we will -- we'll do that, we'll share that. I mean, we have preclinical data. When we looked at it, clearly, though, the spread between where you have [ receptor ] where you might -- may -- hypothesizing the signal was quite large. But as we go in and we do it in a more rigorous way in tox studies, we'll certainly share that data. I guess, important point to do that.

Thank you. That concludes our Q&A session. I'll now turn it back to Dr. Spana for closing comments.

Well, I'd like to thank everyone for participating in our first quarter 2019 conference call. We remain very excited about our portfolio, in moving it forward. We'll be working, as we've told you, quite closely with our partner AMAG to really accelerate that trial for Vyleesi and getting it in there. I personally remain quite bullish on the compound and its ultimate success. And we look forward to getting out and speaking with you guys over the course of the next quarter. Thank you very much. Have a great day.

Ladies and gentlemen, that concludes this morning's presentation. You may now disconnect your phone lines. And thank you for joining us this morning.