Hello, ladies and gentlemen, and welcome to Palatin’s Fourth Quarter Fiscal Yearend 2021 Operating Results Conference Call. As a reminder, this conference is being recorded. Before we beginning our remarks, I'd like to remind you that the 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 and Palatin's prospects. Now I'd like to turn today's call over to our host, Dr. Carl Spana, President and Chief Executive Officer of Palatin.

Thank you. Good morning, and welcome to the Palatin Technologies' fourth quarter and fiscal year-end 2021 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 and Chief Financial Officer and Chief Operating Officer. On today's call, we will provide financial and operating updates. I will now turn the call over to Steve, and he'll provide the financial updates. Steve?

Thank you, Carl and good morning, everyone. For framing purposes and as Carl will expand on, Palatin’s strategy is to advance our melanocortin-based anti-inflammatory and autoimmune programs with an ocular focus. Regarding Vyleesi, which is FDA approved for the treatment of hypoactive sexual desire disorder or HSDD in premenopausal women, our goal with this program is to demonstrate value in the marketplace by increasing healthcare provider awareness, patient engagement, and market access with an objective of relicensing the US rights to a committed women's healthcare company. And regarding progress, we are making progress, and this is with a limited and measured investment. For the quarter ended June 30, 2021, gross product sales increased 28%, net revenue increased 149%, and total prescriptions increased 17% over the quarter ended December 31, 2020, which is Palatin's first full quarter of Vyleesi operations. Refill rates increased over the quarters ended December 31, 2020, and March 31, 2021, market access and reimbursement coverage also increased over the quarters ended December 31, 2020 and March 31, 2021. Regarding revenue -- and getting into our fourth quarter and fiscal year ended 2021 financial results; total net revenues consisted of net product revenues of Vyleesi and licensing contract revenue related to Vyleesi. Vyleesi gross sales for the quarter and year ended June 30, 2021 amounted to $1.2 million and $4.7 million respectively with net product revenue, net of allowances and accruals of $80,504 and negative $283,286 respectively. Palatin recognized no product revenues for the quarter and year ended June 30, 2020 because we didn't get the product back until July of 2020. Palatin did recognize $94,689 in license and contract revenues for the quarter and year ended June 30, 2021, and that was related to our license agreement with Kwangdong for the Vyleesi rights to South Korea, and…

Thank you, Steve. We are continuing to operate under the conditions imposed by the ongoing COVID pandemic. To date, the adjustments we have made have allowed us to continue to advance our preclinical, clinical, and commercial programs while maintaining the safety of our employees, patients and healthcare providers and partners. Again, discussing our clinical and development programs, I'd like to emphasize the following concerning our Vyleesi operating activities. Upon return of Vyleesi last year, we undertook an extensive review of the Vyleesi commercial infrastructure and activities. Results clearly indicated that a substantial makeover was needed to support Vyleesi commercialization and relicensing. This was not a trivial or short-term project. Under Steve's leadership, the Vyleesi commercial infrastructure has been redone and the changes that have been put in place have dramatically improved patient experience, patient access, relationship with prescribers, and the profitability of Vyleesi. We are now in a position to relicense Vyleesi to a committed partner, ensuring the continued availability of Vyleesi as a treatment option, premenopausal women with hypoactive sexual desire disorder and a continuing return on our investment. At this time, I would like to present some of the key objectives of our research and development program. Across a multitude of inflammatory and autoimmune diseases, there remains a vital medical need for new treatments to provide patients and conditions with safe and effective options. We are working to advance a new treatment modality for patients suffering with these inflammatory conditions, with a primary focus on abdominal diseases, such as diabetic retinopathy, dry eye, uveitis, all of which utilize our unique understanding and expertise and developing drugs that modulating the melanocortin system. Over the past year, we have put in place the infrastructure scientist in research and clinical development activities that we believe is successful to demonstrate the broad…

Thank you. [Operator instructions] We'll take our first question from Joe Pantginis with H.C. Wainwright.

Hey guys, thanks for taking the question. So, my question wants to focus on 8177 for ulcerative colitis, but I guess the basis also talks to your overall platform and mechanisms of action around the underlying melanocortin system. So I guess first, can we start around the -- when you look at 8177, how can you compare it versus the current commercial treatments? And I think one of the next questions could be, since you have a differentiated mechanism of action, is there any potential for combined ability that could be beneficial for the competitive profile of the asset?

Sure. Thanks, Joe. Let's say, let's see how we can tackle this in a simple way. Certainly I think key points here are you mentioned differentiating mechanism of action. One of things that we like about the melanocortin system is that, we're not blocking some pathway that's causing inflammation. We're fundamentally working to resolve the inflammatory process that's been going on, that's gotten out of control and to bring it back into control. And as part of that, you actually get [most of the] (ph) tissue healing. One thing that we see with this mechanism is that not only you have the potential to generate safety efficacy, but it's quite safe. We're not suppressing the immune system. So breakthrough infection, rare disease, rare inflammatory autoimmune conditions, or rare cancers really are not anticipated to incur with this mechanism. So it's really quite safe. So from a positioning standpoint, look we certainly can't speak to efficacy other than we have to access tremendous potential of course, but do we conduct clinical trials and begin to collect the data, we really can't answer that question in a lot of detail, but we do anticipate that we should see good efficacy based on the preclinical data. We would anticipate it would probably be used before you move to the biologics. So ulcerative colitis is another inflammatory disease today. There isn't an existing armamentarium that can be effective in a number of patients, but they all have their safety conditions and concerns and tolerability concerns. And usually for many patients, at some point, these options begin to stop working. So, we would really anticipate us being somewhere going from the generic treatments, maybe post steroids, before you move on to a biologic. We're quite excited because of the [safety] (ph), this is a peptide that's being given orally. There is no systemic absorption. We know that from the clinical studies that we've already done. So, it's quite safe and there remains a really, really high need in the pediatric population, and we've been dealing with some of the key opinion leaders there. They're quite excited about the potential of how that this drug works. We really do think that in the pediatric population, which we intend to include those patients, as soon as we have enough safety data to do that. We really think it could become potentially almost first-line treatment in these patients because of safety and potential efficacy, so we're quite excited about what we really can do with this.

That's good color. Thanks for that. And I guess it might be too early for this question, but obviously you have a broader pipeline now, one asset that's about to enter Phase 3 and earlier assets that are percolating. So I guess, at this point, what is your goal on the BD front? Are you looking to out-license or keep potential territories or what are your overall goals right now from a high level?

Sure. I think one of the things that I try to emphasize, and Steve and I have been, and Steve started in his part is look, we're not, we have some very exciting programs, but it's also the advancement of that underlying science. What, how does it -- yes, we're focused in the ocular space and we think there's tremendous potential there with multiple opportunities. As you see the beginning to emerge, as you know, 18 months ago, we didn't have an ocular program and we had nothing in clinical trials and now we're getting ready to start the first one on the Phase 3 and it's pretty good. But the goal is like the ulcerative colitis and we have another indication that we'll add on, we'll tell you about that in -- it's a non-orphan indication that we'll be adding on. We'll talk about that on the next call. It is really to show the breadth of this mechanism. If we could put this treatment modality on the map, you're now talking about a brand new treatment modality, inflammatory and autoimmune diseases. That's going to help a lot of patients and it's going to be tremendously valuable for our shareholders. So that's really what the goal is longer term, but ulcerative colitis, we would not go forward. We want to license that program. Dry eye disease and other ocular indications, if conditions are right, data supports and conditions are right, we certainly like to retain those longer if we can, but I think if we hit it out of the park, like I think we will, I'm sure there's going to be a lot of interest and as much as we may want to keep those programs, I think, I don't know that we'll have the opportunity to do that. I think there'll be other larger companies that will want them and will be willing to pay quite a lot for them.

Got it. Got it. Thanks for all that and good luck on the new fiscal year.

We'll take our next question from John Newman with Canaccord.

Hi guys. Thanks for taking my question. Just curious if you could talk a little bit about the design of the Melody 1 study specifically, if you have disclosed which signs and symptoms you would like to look at in that study. Thanks.

We haven't yet, but we will. They're not – they will be posted fairly soon. We'll be finding the protocol with clinicaltrials.gov, but they're pretty standard. So, the design of this study is a pre-typical dry eye disease study. There's a run-in period where we obviously diagnose the patient and we qualify them that they meet all the entry criteria. So if they actually have moderate to severe disease, patients -- studies in the United States in dry eye disease are generally conducted in what's called an adverse environment. So we put them in a chamber that essentially dries out their eyes. And it's a way that that's used commonly to standardize the patient population so that we get a more standardized. It was a highly variable disease. So we want to try and standardize that. And as you pointed out there, there are two types of things that we look at and they are signs and symptoms with signs being evidence of disease, such as inflammation in the front of the eye, redness, tear from breakup times you have film production so on and so forth. So for the study we'll be looking at fluorescing staining of the cornea as well as listening green staining of the conjunctiva. So those will be -- and there'll be totally -- we'll be looking at regional, such as inferior and then total. So there are three staining end points that we'll be looking at. Two will be a primary, and one will be secondary. The primary sign will be ocular discomfort and then key secondaries will be I think we have a burning, I forgot the other one. But there'll be -- there'll be a part of ocular discomfort for the most part. And then we'll articulate those in the protocol and we file it and we'll put that out in the press release when we stated.

And so one other question is we will be looking at patients that have had experience with other agents for dry eye in the study, or only patients that have not yet been treated with other products, thanks?

Yeah. So they have to wash it. We allow, we don't have artificial tears in the study or use it in the study, but as long as they are washed out of the study, they're allowed in, as long as they're currently on active treatment. There'll be allowed in the study. And the only other you were talking about design, I think one of things that we have that is a little unique is, as you guys are probably know, but maybe the audience don't, your dry disease is multifactorial both on the region of the eye, the front of the eye that can cause it as well as the types of patients, their age, underlying immune status and so on and so forth, which is a drug developer we don't always like so that it leads to a lot of variability. And, one of the ways you combat that is by putting large numbers of patients in the studies. But what we were able to agree with the agency is a little bit of a unique design, which is we've got a well powered study based on the 240 patients, but as history will tell you dry eye disease studies, don't always come out the way you want. So in order to protect ourselves and allow ourselves to put in more patients, if needed, we've actually built in, what's called an interim data assessment. So we won't be analyzing the data from a statistical standpoint, looking at how the end points are doing. It's looking at the power calculation that will allow us to determine if we need to put more patients in. The last thing we'd like, we don't want to do is, we just miss on 240 and if we have put 300 in the study would have hit it. And the reason why that's important is because from an FDA regulatory perspective, all we're looking for is a statistical difference in the endpoint from controlled versus active, where there's no measurement or attribution of clinical benefit. The agency doesn't require that. All they look for is a statistical difference. So therefore you want to really make sure you don't have an underpowered study, and if you need to put in 120 more patients to hit it, you want to be able to do that. So we think we're going to hit on the 240, but if we need to put any more, we've already worked that out with the agency and we have a mechanism for doing that.

Okay, great. Thanks very much.

We'll take our next question from Michael Higgins with Ladenburg Thalmann.

Hey guys, thanks for taking the questions. Congrats on ongoing continued progress with the pipeline. A couple of questions here, the first is a followup from John's question on the interim, just trying to get a sense here in the early days, you've not started the trial yet. We don't have the clinic trials right up in front of us, but just trying to get some sense for what we will see from the interim look, if at this point subject to change, of course, but at this point, if you're looking for issuing a press release of yes, interim DSMB is suggested to go forward increase in numbers would be highlighted at that point. But really the question is how much evidence would you provide at that point on the endpoints? Or do you expect just to say as I mentioned continuing as number of patients to change or not.

We will not be getting any data on that you're hitting it, you're not hitting it. All they will convey to us, we'll be keep the study as this and 240 and complete the study or they will tell us, put 150 more patients in the study or put a few more patients in this study? We recommend that you put 50 more patients in this study or a 100 more patients in this study. So the first reason would be, the interim analysis occurred, we're on track. We will continue to go to 240, or we will go up a certain number of patients. But beyond that we won't, they won't give us anything and the reason for that is this is not a data analysis. This is really just a power calculation assessment. We don't want to take any statistical hits for multiplicity. So it's purely to protect against the variability in these studies, which can be high. So we want to make sure we get enough patients in.

That's makes sense. Thanks. Just want to clarify that and then just want to follow up on your comments made and 3994, congrats that you're looking for data and really 2022 this has been a program that's been a huge upside for really been out of your hands, given the AJ grants and waiting for sites to start and get going and all that. So it's been kind of a slow roller. So now we've got data here within the next six months or so. Tell us what you're looking for any feedback that you've had so far on enrollments and how this study is progressing, thanks.

So, enrolment has been fine. It's been slow. So the study is actually in two parts. The first part is collecting safety and hemodynamic data and that's what we should have by the end of the year. The second part will then go on and look at actually more of a form of that dynamic response. So we'll be looking at biopsy and other markers of improvement and cardiovascular function. So the first part is, should be completed pretty soon. I think those patients have actually either been enrolled or are identified and are being enrolled. So as soon as they complete we'll get the data from the first part, which will be hemodynamic and which is actually very important. It would be very nice to see the effects of 3994 on pulmonary capillary wedge pressure because that's really very important in these patients. And as I said, the second part, we should get data around mid-next year, which will be the markers of cardiovascular and we improved markers of heart failure in these patients. And keep in mind, these are preserved ejection fraction patients, where the need is quite high. Now, in addition to that just as a little prelude to upcoming attractions, we'll have some more information out early next year on our overall natural peptide program beyond 3994. We have some pretty things going on there, but the times out allow for us to really get into that on this call.

Makes sense. I appreciate the additional fill in there. Thanks and then one last one here on Vyleesi. There's quite a gap obviously between the gross and the net sales. So looking ahead into '22 and even into the remainder of this calendar year, how should we look for that gap to shrink? What's remaining from an accounting standpoint and also from a stocking standpoint before we see that gap shrink? Thanks.

Yeah. That's the objective and the target is not so much to shrink that gap and what we're really targeting and spending our time and focus on is the market access to increase the coverage the net ASP, if you will. With our limited investment and to back it up, that investment was funded by the termination agreement. We did receive $16.3 million from AMAG with the regaining of the rights. Albeit we did pick up some obligations regarding CMC. But, I don't anticipate a significant difference in the fourth quarter versus the fourth part of being 1231 and the third quarter whether it's doing 30th or 930. We will -- we are showing improvements right now. We look at things every day and obviously, we have full vision into July and August. All the metrics with whether it's the refills, the prescriptions and importantly, in our mind, we think this is the most significant metric the market access, the scripts that are coming in that are insured drug covered, which is my favorite number, which is Code 8, because when I see the report and there's a Code 8, I know we have insured drug covered. So we're spending the majority of our focus not so much at time per se, but just concentrating on that metric to increase it. So we're comfortable that we're showing the progress, and this is the type of progress that that's needed when, when you're doing the relicense with the partners, they want to see that what does the data can they extrapolate, can they get a comfort level that in their hands and in their hands, a right partner has the infrastructure. They have a team of market access people obviously much, much more significant sales infrastructure that then what we have. So we're comfortable with this measured and limited investment that we are showing progress. We have a very good whack. We do have a number of subsidies from a co-pay standpoint, but we're seeing a lot of positive trends, albeit at the healthcare providers with new healthcare providers coming on, the scripts going up. And again, the market access is our primary metric and that is improving. So hopefully that was responsive. I know it was a bit long there, Michael.

No worries. That's great. Appreciate the feedback guys. And congrats again.

That concludes today's question-and-answer session. Dr. Spana at this time, I'll turn the conference back to you for any additional or closing remarks.

Well, just thank all of you for participating on the call and our analysts for their questions that help us to better illuminate what we're doing. Look forward to continue to, Steve and I look forward to continuing to update you on what we're doing and I would really say that the staff here and the people here even though we're working under pandemic conditions, there is a tremendous amount of excitement and what we can do. And we're really looking forward to 2022 and a number of maybe significant events that are going to occur with this company. So stay tuned and you have a great day.

This concludes today's call. Thank you for your participation. You may now disconnect.