Palatin Technologies, Inc. (PTN) Q1 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to Palatin's First Quarter Fiscal Year 2026 Operating Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin our remarks, I'd 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 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'd like to turn the call over to your host, Dr. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead.

Thank you. Good morning, and welcome to the Palatin's First Quarter Fiscal Year 2026 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 and also include several corporate items as well. Steve?

Thank you, Carl. Good morning, good afternoon, and good evening, everyone. Regarding out-licensing programs update, in August 2025, we executed a research collaboration, license and patent assignment agreement with Boehringer Ingelheim for the treatment of retinal diseases, wherein we received an upfront payment of EUR 2 million or approximately $2.3 million in August of 2025, and we achieved a EUR 5.5 million, approximately $6.5 million research milestone in September 2025. In addition, we are eligible to receive up to EUR 12.5 million or approximately $14.5 million in additional near-term research milestones and up to EUR 260 million or approximately EUR 307 million in development, regulatory and commercial milestones, plus tiered royalties on future net sales. Regarding corporate update, public offering and NYSE American, on November 12, 2025, Palatin announced the closing of its upsized $18.2 million underwritten public offering, including the full exercise of the overallotment option consisting of approximately 2.8 million shares of common stock or prefunded warrants, together with Series J warrants to purchase up to approximately 2.8 million shares of common stock or prefunded warrants and Series K warrants to purchase up to approximately 2.8 million shares of common stock or prefunded warrants at a combined public offering price of $6.50 per share of common stock and accompanying Series J and Series K warrants. Each Series J warrant will have an exercise price of $6.50 per share and will be immediately exercisable. The Series J warrants will expire on the earlier of the 18-month anniversary of the original issuance date or the 31st calendar day following the date that Palatin receives FDA acceptance of an investigational new drug for an in-house obesity treatment compound, albeit a long-acting peptide or oral small molecule. Each Series K warrant will have an exercise price of $8.125 per share and be immediately exercisable. The Series K warrants will expire on the 5-year anniversary of the original issuance date. However, and importantly, if a holder of Series J warrants have not been terminated in accordance with their terms prior to the expiration of the FDA exercise period, such holders Series K warrants will terminate automatically upon the earlier of the 18-month anniversary of the original issuance date of the Series J warrant or the expiration of the FDA exercise period and prior to the 5-year anniversary of the issuance of the Series K warrant. In nonlegal speak, that means if Palatin hits the IND acceptance in, say, the first half of 2026, which is what we're anticipating, if the warrants are not exercised by the holder, the Series J warrant expires and the Series K warrant expires. Our expectation is that we would receive full exercise of the Series A warrants at that performance criteria. Moving over to the actual offering. The gross proceeds from the offering before deducting the underwriting discounts, commissions and offering expenses are expected to be approximately $16.9 million. Plus Palatin may receive additional proceeds of up to $18.2 million upon the cash exercise of the milestone-related Series J warrants that I just referenced. However, there is no guarantee that such warrants will be exercised and accordingly, Palatin will receive any proceeds from such exercise. Palatin intends to use the net proceeds from the offering to support the development of its obesity program and for working capital and general corporate purposes. Regarding NYSE American, we are very pleased with the result here of the offering and some of the other operating activities. But specifically, as a result of the closing of the offering, Palatin regained compliance with NYSE American continued listing standards. So effective November 12, yesterday, 2025, Palatin's common stock resumed trading on the NYSE American under the symbol PTN, which was our old symbol when we were on the NYSE American Exchange. Moving over to the financial results for the quarter ended September 30, 2025. Regarding revenue, for the quarter ended September 30, 2025, Palatin recognized approximately $8.8 million in collaboration license revenue compared to 0 for the comparable quarter last year. The increase in collaboration license revenue is all related to the Boehringer Ingelheim, the BI agreement, which consisted of the upfront payment and the achievement of a research milestone and certain cost-related reimbursements. Regarding operating expenses, total operating expenses were $4.2 million for the first quarter ended September 30, 2025, compared to $7.8 million for the comparable quarter last year. The decrease was mainly related to a decrease in spending on our MCR development programs, melanocortin receptor system related development programs. Cash flows. Palatin's net cash used in operations for the quarter ended September 30, 2025, was $1.6 million compared to net cash used in operations of $7 million for the comparable quarter last year. The decrease in net cash used in operations was mainly due to the recognition of license and contract revenue related to our BI agreement recognized during the quarter. Now moving over to net income and loss. Palatin reported net income for the quarter ended September 30, 2025, of $4.7 million compared to a net loss of $7.8 million for the comparable quarter last year. The increase in net income for the quarter ended September 30, 2025, was, again, mainly due to the revenue recognized pursuant to the BI agreement and partially for the decrease in operating expenses. Regarding cash position. As of September 30, 2025, Palatin's cash and cash equivalents were $1.3 million, a bit low compared to cash and cash equivalents of $2.6 million as of June 30, 2025. The $1.3 million of cash and cash equivalents as of September 30, 2025, does not include approximately $6.5 million milestone payment pursuant to our BI agreement for retinal diseases, which was received in October 2025 and importantly, the net proceeds from our underwritten public offering, again, the net proceeds of $16.9 million, which closed on November 12, 2025. As a result of the offering, net proceeds of $16.9 million and projected operating expenses, the going concern provision has been removed. Palatin currently expects a cash runway beyond the quarter ending December 31, 2026. Now I'll turn it back over to Dr. Spana. Carl?

Thank you, Steve. As we move forward into 2026, our research and development efforts will be focused on the development of highly selective melanocortin-4 receptor agents for the treatment of various forms of syndromic and genetic obesity, such as hypothalamic obesity. Melanocortin receptor system, especially the melanocortin-4 receptor, is essential in regulating energy balance and food intake and is a well-validated target for obesity treatment. Using our technology and extensive experience in the design and development of melanocortin agonist, we have developed a proprietary portfolio of highly selective melanocortin-4 receptor agonist that includes both orally active small molecules and long-acting peptides. Our novel selective melanocortin 4 receptor compounds have reduced activity at the melanocortin-1 receptor and therefore, reduced potential to cause skin darkening. The lack of activity at the melanocortin-1 receptor and the once-weekly oral dosing are significant improvements over current FDA-approved melanocortin treatments for obesity. PL-7737 is our melanocortin-4 receptor selective orally active small molecule. In multiple preclinical obesity models, PL-7737 has demonstrated significant reductions in food intake and weight loss. PL-7737 is currently undergoing the various activities required to open up an investigational new drug application with the FDA, such as animal toxicity testing and cGMP manufacturing. PL-7737 is on track for an IND filing in the first half of calendar 2026. And the initial PL-7737 clinical studies will include single ascending and multiple ascending studies in healthy obese and hypothalamic patients. Data is expected in the second half of 2026. Melanocortin-4 receptor extended duration peptides are highly selective for the melanocortin-4 receptor and have demonstrated pharmacokinetic properties consistent with either once a week or once every 2-week dosing. We expect to initiate IND-enabling studies in the first half of calendar '26 and first-in-human studies are anticipated in the second half of calendar 2026 as well. In addition to our melanocortin-4 receptor obesity programs, we have multiple programs designed to take advantage of the role that the melanocortin system plays in regulating stress responses and resolution of inflammation. Based on this approach, we have development candidates for multiple ocular indications, inflammatory bowel diseases and kidney diseases that we are expecting to out-license. We recently entered into a collaboration agreement with Boehringer Ingelheim for the development of candidates for the treatment of various types of retinal diseases such as diabetic retinopathy or diabetic macular edema. As part of the collaboration agreement, we received an upfront payment and are entitled to receive additional development, clinical and regulatory milestones as well as royalties on net sales. Our agreement with Boehringer Ingelheim validates the potential of targeting melanocortin system, and we believe we will be focusing our business development efforts on licensing our other melanocortin receptor system programs. These include PL-9643, a Phase III development candidate for dry eye disease; PL-8177, a clinical stage development candidate for ulcerative colitis and our preclinical candidates for kidney disease. Additional highlights for the quarter include the execution of an $18.2 million equity offering, which Steve talked about, and the resumption of our stock trading on the NYSE American under the PTN ticker symbol. Thank you for participating in the Palatin First Quarter Fiscal Year 2026 Conference Call. As a reminder, you can find additional information on our programs on our website. We will now open the call to questions.

[Operator Instructions] Your first question is coming from Scott Henry from AGP.

Congratulations on the considerable progress. If I could just talk a little bit about the pipeline. Could you highlight the ideal target profile for use to treat HO patients for PL-7737 as well as the long-acting peptides?

Sure, Scott. Thanks for the question. So we'll focus first on 7737, which is an oral compound. What we'd like to see in that comp is one, we really want to see a significant diminishment of activity at the melanocortin 1 receptor, which we actually -- we know we have accomplished that. And we also like to see in dealing with obesity, we want to avoid our spikes in exposure and rapid drops in exposure. So we want compounds that have essentially a very slow absorption and a very flat pharmacokinetic curve. So one that will be indicative of once-a-day dosing and one that would allow us to essentially keep the patients for a prolonged period of time in the therapeutic window of where the drug is active. So we don't see dips. We want that drug to stay for as long as possible where it's active because we know that once we can fall out of that range, we see that with other obesity treatments, patients start to eat again. So you really want to keep them up there. And that's really what we've accomplished with 7737. It has a very long half-life in both rats, mouse and dogs, and we suspect that will be the same in humans as well. And we can -- therefore, you'll keep it dosing to a steady state and allow these patients for a prolonged period of time to stay in that therapeutic window and really maximize efficacy. And that's very similar to what we're trying to accomplish with the long-acting peptides as well. Again, these are absorbed. They very quickly bind to plasma proteins, and they have a very flat, long extended pharmacokinetic profile. And these are the profiles that are ideal for treating obesity patients. We avoid spikes. We don't want a rapid spike, a very high C Max, for example, because that can lead to side effects such as GI side effects. I don't want to avoid those. You want to keep it essentially steady absorption, slow, steady and flat. Those really, I think, are the ideal parameters. And we see that for both our peptides and we see that for the oral active small molecule. So we think we really have a very nice profile that's going to play very well, both from a reduction of side effects and increased efficacy.

Okay. And these are next-generation compounds. So I know one of the issues was hyperpigmentation. Can you talk about how these next-generation compounds address some of those side effects in that adverse profile?

Sure. So the pigmentation or hyperpigmentation is driven through activity at the melanocortin-1 receptor. So we spent a lot of time -- we've been in this field for a long time, and we've been able to develop selective agonists for the various receptors and we really understand the structure function relationships that have allowed us to really drop down that MCR1 receptor activity. So we're talking about hundreds of thousand fold selectivity for 4 over 1 that will really allow us to either dramatically reduce or potentially eliminate the potential for skin darkening. So that's how we accomplished it.

Okay. Great. Final question on the HO program. There's a big player out there that you will be competing with. How do you see yourself positioned in that landscape?

Well in any drug market, we believe there's going to be a multibillion-dollar market, and there's going to be room for multiple players. I think it's all going to come down to the quality of the compounds that you bring forward. And I'm not going to comment on the compounds that they have and -- clearly, their first compound that should be approved will be first generation. We know that it has MCR1 activity, and it has once-a-day dosing. We have some other compounds that are further back in development. I don't -- there's not a lot of information on those, so I won't comment on them. What I will say is the way to be a player in that marketplace is to have the type of compounds that we have in both our long-acting peptide and early active small molecule, which are reduction of MCR1, so the elimination of potential hyperpigmentation and really an efficacy profile that -- an exposure profile that limits the potential for GI side effects and maximize the potential for activity. So speaking of where we are, we're very confident and very comfortable with our compounds. We think they have really excellent properties to be successful. And as we get to the clinic, we're going to prove that.

Okay. Great. Final question. The BI collaboration brought in a considerable amount of nondilutive capital. Do you have any guidance when we may see the next collaboration from some of the other pipeline compounds?

Scott, this is Steve. Yes, we were extremely pleased with not just the execution of the BI, Boehringer Ingelheim collaboration but the actual partnership. We -- the dating was quite significant before we executed with BI. And since we've executed, it's been fabulous, really great group to work with. So notwithstanding the initial upfront payment of $2.3 million and the $6.5 million for the milestone achievement, we have stated that we anticipate near-term resource development milestones of approximately $15 million. And the guidance I can give you that my definition of near term is within the next 12 months. So hopefully, that's helpful.

That concludes our Q&A session. I'll now hand the conference back to Dr. Spana for closing remarks. Please go ahead.

Thank you. It's been a really tremendous quarter for us with the Boehringer Ingelheim collaboration, which took quite an extensive period of time to accomplish but we're very proud of that and very happy to be working with them. We think they're going to be a phenomenal partner for our retinal program. The execution of the financing with some very excellent investors and really the hard work that was done by Steve and others to really get us relisted on the NYSE Amex and get off the pink sheets was really another great accomplishment. So really very pleased with where we are and the opportunity in front of us and have the capital to really execute. So we really look forward to keeping you guys informed on our progress and getting out there and meeting with various investors inter-quarter period. So with that being said, really the rest of 2020 -- or as we look at 2026 from a calendar perspective, we expect a lot of great things to be going on at Palatin and really excited here and working hard and look forward to keeping you updated. So have a great day, be safe. Enjoy the holidays. Thanks.

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.