Palatin Technologies, Inc. (PTN) Q4 2024 Earnings Report, Transcript and Summary

Greetings. Welcome to Palatin's Fourth Quarter and Fiscal Year-End 2024 Operating Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [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 year-end fiscal 2024 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'll give the financial update.

Thank you, Carl. Good morning, good afternoon, everyone. Before reviewing the financial results, I have a few other corporate items to highlight. Regarding Vyleesi, bremelanotide injection, a commercial product, Palatin developed for hypoactive sexual desire disorder or HSDD. Palatin closed on an asset sale to Cosette Pharmaceuticals for up to $171 million in December 2023. Terms included $12 million upfront plus potential milestones of up to $159 million based on annual net sales ranging from $15 million to $200 million. Importantly, Palatin retains rights to and use of bremelanotide for obesity and male treatment indications. Regarding financings. During fiscal year ended June 30th, 2024, Palatin raised total gross proceeds of $21 million in registered direct and warrant inducement offerings. Regarding Palatin's fourth quarter and fiscal year ended June 30th, 2024 financial results, total revenue consists of gross product sales of Vyleesi, net of expenses, allowances and accruals and license and contract revenue. Pursuant to the completion of the sale of Vyleesi rights for female sexual dysfunction to Cosette Pharmaceuticals, in December 2023, again, for up to $171 million. Palatin did not record any product sales for the fourth quarter ended June 30th, 2024. For the fourth quarter ended June 30th, '23, gross product sales were $4.1 million and net product revenue was $1.8 million. Vyleesi gross product sales to pharmacy distributors for the fiscal year ended June 30th, 2024, were $8.9 million, with net product revenue of $4.5 million compared to gross product sales of $12.5 million with net product revenue of $4.9 million for the prior fiscal year. Total operating expenses were $8.7 million for the fourth quarter ended June 30th, 2024 compared to $12.6 million for the comparable quarter last year. The decrease was mainly the result of lesser spending on our MCR melanocortin receptor programs and secondarily the elimination of selling expenses related to Vyleesi. Total operating expenses for the fiscal year ended June 30th, 2024, were $27 million compared to $37.3 million for the prior fiscal year. This decrease was mainly due to the $7.8 million gain recognized on the sale of Vyleesi and secondarily the elimination of related selling expenses. Regarding cash flows, Palatin's net cash used in operations for the quarter ended June 30th, 2024, was $6.5 million compared to net cash used in operations of $9.6 million for the same period in 2023. This decrease in net cash used in operations is mainly due to the decrease in operating expenses and secondarily to working capital changes. Palatin's net cash used in operations for the fiscal year ended June 30th, 2024, was $31.5 million compared to net cash used in operations of $29.3 million for the same period in 2023. This increase in net cash used in operations was a result of working capital changes and increased payments made related to inventory purchase commitments. Palatin's net loss for the quarter and fiscal year ended June 30th, 2024, was $8.6 million and $29.7 million, respectively, compared to a net loss of $9.8 million and $24 million, respectively, for the same periods in 2023. Variances were covered above under the revenue and operating expenses. Regarding our cash position, as of June 30th, 2024, Palatin's cash and cash equivalents were $9.5 million compared to cash and cash equivalents of $10 million as of March 31st, 2024, and $8 million with $3 million in marketable securities as of June 30th, 2023. We, Palatin is actively engaged with multiple parties for potential funding sources for future operating cash needs consisting of both business development efforts, and other potential collaborators, including entities involved with the same programs that Palatin is advancing. Thank you. And I'll now turn the call back over to Carl?

Thank you, Steve. Fiscal 2024 was an exciting year for Palatin with significant growth in all of our pipeline programs. Results confirm that targeting the melanocortin system can result in safe, effective and differentiated therapeutics that can improve patients' lives and address unmet market needs. Today, I will review some of the significant achievements for each of our therapeutic areas. Since Steve has already covered the sale of Vyleesi to Cosette, I'm going to move on and start with some of our ocular programs. We have multiple ocular programs that have made significant progress over the past year. PL9643 is Palatin's topically administered product for treating the signs and symptoms of dry eye disease. We successfully completed the first Phase III trial, MELODY-1 and announced positive results earlier in the year. Current FDA-approved treatments for dry eye disease have three significant problems that limit their utility. They have poor ocular tolerability, lack broad efficacy and they take a long time to have symptom relief. The results of MELODY-1 clearly demonstrated that PL9643 is a truly differentiated treatment for dry eye disease that solves the three main problems of current treatments. The PL9643 MELODY-1 trial showed that PL9643 had excellent ocular tolerability, broad efficacy in multiple signs and symptoms and demonstrated efficacy as early as two weeks. With this emerging product profile, PL9643 has the potential to be the leading treatment for dry eye disease. In summary, in the MELODY-1 Phase III trial results compared to view control included the following. PL9643 achieved statistical significance for the co-primary endpoints of ocular pain in seven of the secondary symptom endpoints, including eye dryness and ocular discomfort. To the best of our knowledge, no FDA-approved treatment for dry eye disease has shown such broad effect on the symptoms of dry eye disease. For inferior corneal fluorescein staining, which is a sign, which we have agreement with the FDA that this will be the primary sign endpoint for the next Phase III trial and PL9643 also achieved statistical significance at the two-week time point in MELODY-1. PL9643 positive effects on the signs and symptoms of dry eye disease were rapid with efficacy at two weeks after starting treatment and they continue to improve over the 12 weeks of the treatment. PL9643 has excellent ocular tolerability with no subjects discontinuing the study due to an ocular adverse event. Data for approved dry eye disease treatment shows that a lack of efficacy and poor tolerability, such as burning, blurry vision, bad taste, stinging has led to a significant amount of patients dissatisfaction and high discontinuation rates. In a recent Type C meeting, the FDA agreed with our plan for the remaining activities required to file a new drug application with the FDA for approval of PL9643 as a treatment for the signs and symptoms of dry eye disease. Specifically, we have FDA agreement on our protocols, a number of subjects, the primary sign and symptom endpoint and our statistical analysis plan. We are ready to complete the PL9643 Phase III program with all remaining clinical studies to be conducted and completed in calendar year 2025 and an anticipated NDA filing in the first half of calendar year 2026. Our two other ocular programs also made substantial progress in fiscal '24. PL9588 is our topically administered treatment in the development to treat glaucoma. In the last year, we completed a comprehensive evaluation of PL9588 in multiple preclinical glaucoma models. Results indicate that PL9588, not only lowers intraocular pressure, but also provides direct neuroprotection. Direct neuroprotection of the optic nerve is a significantly differentiating factor over current treatments for glaucoma and PL9588 is now ready to begin the IND-enabling studies with clinical trials beginning in calendar year 2025. Retinopathies are a broad category of ocular diseases that cause damage to the retina and can lead to vision loss. The global market for treatment is estimated to be approximately $30 billion by 2030. PL9654 is our novel differentiated treatment for various retinopathies. In fiscal 2024, we completed an extensive evaluation of PL9654 in multiple models of retinal disease. PL9654 demonstrated the ability to preserve vision, protect the retina from damage and a genomic analysis positively affected multiple pathways that are known to be involved in the progression of retinal diseases. We also made substantial progress in the development of intravitreal injectable formulation and PL9654 is now ready to enter into IND-enabling studies starting in calendar 2025. Now I'll move on to our MCR4 melanocortin-4 receptor obesity program. Drug treatment for obesity is now established and growing rapidly. We have multiple drugs with different mechanisms of action that affect weight loss and importantly, weight loss maintenance are needed. Because of the important role of the MCR4 receptor plays in regulating stored energy and food intake, we strongly believe that MCR4 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 MCR4 receptor as treatments for obesity and weight less maintenance. With our extensive experience in the design and development of melanocortin agonist for treating obesity, including two 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 weight loss maintenance. As I'm sure you all know, incretin-based therapeutics, such as Zepbound and Wegovy are the primary treatment for obesity and they have demonstrated impressive growth. However up to 67% of patients that began treatment discontinue in the first year, mainly due to side effects and a plateau effect and they often quickly regain the weight that they have lost. Additional approaches are needed to provide patients an opportunity to safely and tolerably reach their weight loss goals. Research by Palatin and academic groups indicate that combining MCR4 receptor agonist with the GLP-1 receptor agonist like tirzepatide may result in synergistic effects on weight loss, allowing for increased or sustained weight loss at lower and better tolerated doses. To investigate the potential additive effects of combining MC4R receptor agonist with a GLP-1 receptor agonist, we initiated a Phase II clinical study in August. In the study, obese subjects will co-administer the MCR4 receptor agonist bremelanotide along with tirzepatide. The study is designed to enroll approximately 60 obese subjects at four sites in the US. The primary endpoint is to demonstrate the safety and increased efficacy of the coadministration of bremelanotide with tirzepatide on reducing body weight over just tirzepatide alone. Patients will be treated with weekly tirzepatide for four weeks having eligibility confirmed and then randomized to one to four treatment arms, which consist of weekly and daily study drug, including weekly tirzepatide and daily bremelanotide. Patients will undergo multiple assessments of safety and efficacy to help profile the effectiveness of bremelanotide in treating general obesity as a stand-alone treatment or in conjunction with GLP-1 therapy. This study will be completely enrolled this quarter with data in the first quarter of calendar 2025. We've also developed next-generation highly selective melanocortin-4 receptor peptide agonist as well as small molecules for the treatment of obesity and weight loss maintenance. Our new MCR4 receptor peptide agonist are highly selective for the MCR4 receptor versus the MCR1 receptor and are not anticipated to have skin darkening as a side effect. They're designed using a proprietary technology to have once a week dosing. We anticipate final lead selection in the first quarter of calendar 2025 with an IND and first-in-human clinical studies in the second half of calendar 2025. Now we'll move on to our work in sexual dysfunction. Our research in the use of melanocortin agonist to treat various male and female sexual dysfunctions has led to the development of a novel product that is a co-formulation of bremelanotide and a phosphodiesterase-5 inhibitor those are compounds such as Viagra and Cialis. We believe this product could be an ideal treatment for the 35% of men with erectile dysfunction that have an inadequate response to PDE-5 inhibitor therapy. These patients have limited options and represent a large underserved market. We have initiated a development and clinical program for the evaluation of bremelanotide coformulated with the PDE-5 inhibitor for the treatment of erectile dysfunction in patients that are nonresponsive to PDE-5 inhibitor monotherapy. A pharmacokinetic study is expected to initiate in the first half of calendar 2025 and patient recruitment in a Phase II clinical study is anticipated in the second half of calendar 2025 with top line results in 2026. The final program I want to cover is our PL8177 for ulcerative colitis, which is in a Phase II study evaluating oral PL8177, a selective melanocortin-1 receptor agonist in ulcerative colitis patients. The study is nearly completed enrollment and we expect data from the interim analysis later this quarter. In support of the oral PL8177 program, our preclinical studies demonstrated that treatment with oral PL8177 causes disease colons to improve toward a healthy state and to resolve inflammation. Resolving inflammation rather than blocking it provides the possibility of efficacy, coupled with significantly differentiated safety in treating colitis and inflammatory bowel diseases. As we look forward, we want to continue to build on the successes of the past year by focusing on the continued development of our key programs in obesity and dry eye disease. And importantly, collaborations and partnerships for our dry eye disease program or other ocular programs in glaucoma and retinopathies and our ulcerative colitis program. Upcoming milestones and activities for our novel and differentiated programs include the following. For MCR4 obesity program, we want to complete the Phase II study evaluating the coadministration of bremelanotide and tirzepatide and we expect to have the data reported out in the first quarter of calendar 2025. We also are on track to advance our selective MCR4 long-acting peptide agonist through first in-human studies and positioning the program for a Phase II dose-ranging efficacy during calendar year 2025. For our dry eye disease program, we want to start and complete the Phase III trials MELODY-2 and MELODY-3 with beta expected by calender year-end 2025. And also we want to complete all manufacturing activities needed to file a new drug application with the FDA in the first half of calendar 2026. To facilitate moving this program forward, we are in active discussions with potential corporate collaborators and funding partners. For our male sexual dysfunction program, we want to get our pharmacokinetic study started and completed in the first half of calendar year 2025 and begin patient recruitment in a Phase II/III study, which is anticipated to start in the second half of calendar 2025. Importantly, we have also increased our business development activities to support the licensing of our major programs as well as our earlier pipeline programs. Steve and I and the whole Palatin team are extremely excited and enthusiastic by the potential of these programs to bring novel, innovative treatments to improve patient lives and address significant unmet medical needs. I'll now turn the call over to questions.

Certainly. The floor is now open for questions. [Operator Instructions] Your first question is coming from Joe Pantginis with H.C. Wainwright. Please pose your question. Your line is live.

Hey, guys. Thanks for the details and thanks for taking the question. So two sets of questions. First, on your weight loss program with GLP-1. I wanted to talk about the benchmarks of success for the study. Are you looking for a minimum or limit of weight loss to see to move to the next stage? What impacts on lean muscle mass? Hopefully, you could share that with us as well as what are you looking to do to eliminate or alleviate or mitigate some of the pigmentation issues?

Sure. All right. That's a number of things, Joe. So let me talk about what the expectations are for the current Phase II trial where we're using bremelanotide in conjunction with tirzepatide. The main primary question there is, is there an additive effect and that can be one and one equals two, one and one equals three, et cetera. So the primary analysis will be a comparison of the co-administered versus tirzepatide alone. And there's no set -- what we're looking for is essentially a measurable or significant separation. Now these patients are not on long-term treatment. So their weight losses are not going to be 10%, 15% over four weeks. You're going to be in that 2% to 3% range, 2% to 5% range. And we want to see an additive effect which we think based on the design and based on what we expect we're going to see, we should be able to achieve. So again it's not -- we're not using, again, it's not a long-term study where you're going to expect explosive numbers, but we should really see a very clear signal from the study that these two are additive or synergistic.

Got it. Got it. And the pigmentation?

So that -- so skin darkening with the first generation of MCR4 agonist, there are two -- there are actually several approved, bremelanotide being one of them is driven by activity against the melanocortin-1 receptor. And in the case of short-term use, it's not an issue, but when we move on to more chronic use in obese patients, it can be an issue for patients they don't like the skin darkening. So in order to do that, you need next-generation compounds that are really devoid of MCR1 activity. And based on the extensive number of years we've been working in this field, we've been able to achieve that. So compounds that we are in final evaluation have substantial separation between the two receptors. And in fact, many of them are not nonactive at MCR1. So we don't expect any skin darkening with those compounds. And then those are on the peptide front. And when we think about small molecules, that pharmacophore is much smaller and it's really highly selective MCR4. It doesn't have any MCR1 activity at all.

No, that's helpful. Thanks. Yes. I just wanted to switch to the dry eye program because I think it's great you already have the great visibility and discussions from the FDA and looking forward to the start of these programs. So I guess do you think or how mature are your discussions on business development, but more from a logistical standpoint, the guidance from the FDA, I just wanted to make sure, are these the same signs and symptoms from MELODY-1? Are they different? And how would they look to in assessing the primary endpoints in the end?

Sure. So we'll kind of work backwards. So the symptom is the exact same one that was used in MELODY-1. The sign is we're moving from lissamine green to inferior corneal fluorescein staining because all of the fluorescein stains reached significance at the two-week time point in MELODY-1. And inferior corneal fluorescein staining is just a better -- is a better sign in that meaning that it's generally accepted sign that is used in dry eye disease studies. So we're going with that. And again we have concurrence with the FDA on the use of both of those in the study. With regards to being ready to go pending assuming appropriate finances and what have you, the protocols are together, SAP is together, the CROs hired and done. So I mean we're really pretty much ready to go forward as soon as we can, we secure the appropriate funding. And that kind of leads into your first part of your question, which was where are we with that? And we're in, I would say, we've had very good interest from a corporate standpoint. There was a lot of pending, a lot of those entities were in ongoing discussions waiting for the results of the Type C meeting. Now that we have those, we reengage those entities and we're in the middle of discussions with them. And moving towards and hopefully moving towards what will be a conclusion of a licensing deal or some sort of transaction. In addition to that, we've had some very good uptake more recently with discussions in larger funds that would be also interested in potentially funding the Phase III program and moving it forward as well. So we're really attacking it on two fronts. And obviously I've taken a little of Steve's thunder because Steve actually leaves those discussions. But I think we've been pretty pleased with the progress we've been making.

Well, it's good to hear about the optionality and thanks for the details, Carl.

Thanks, Joe.

Your next question is coming from John Newman with Canaccord Genuity. Please pose your question. Your line is live.

Good morning. Thanks for taking the question. Question here for Carl. Carl the question is, do you see the potential to co-formulate some of your MCR4 agonist with drugs like tirzepatide. The reason I'm asking is because there's obviously been a revolution in weight loss treatment, which has been fantastic with the GLP-1s, but we do know that eventually, some of those products at least will be selected for price reductions. But one way to potentially address that is to combine the GLP-1s with novel molecules. And so I'm just curious if maybe over the long-term, maybe not immediately, but longer term, that's a potential avenue for your compounds? Thanks.

Sure. Yes. So along those lines, we haven't yet done any of that work. However, I think it's highly feasible. The formulations for these compounds are pretty, these are pretty soluble compounds both the GLP-1s and stuff that we're working with. So along those lines, it should be relatively easy to come up with formulations in which the two are combined. Now of course I say that not being the guy who actually does the lab work, but I think from a theoretical standpoint, it should be relatively easy to do that to get the two together.

Okay, great. Thank you.

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

Well, Steve and I and the whole Palatin team would like to thank all of you for listening to the Palatin year-end fiscal 2024 call. I'd like to thank the analysts for their insightful questions as well. We're very excited here. I mean this is, for a small company, we have a tremendous amount of opportunity and we're really looking forward to what we can deliver over the next year and keeping you updated on our progress on press releases and quarterly calls and presentations at various scientific and investor meetings. That being said hope all of you have a great day and we look forward to keeping you updated. Thank you.

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.