Palatin Technologies, Inc. (PTN) Q2 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to Palatin's Second 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 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, and good morning, everyone. Earlier today, we reported Palatin's financial results for the second quarter of fiscal year 2026 and provided a corporate update. With me on the call today is Steve Wills, Palatin's Chief Financial Officer; and Chief Operating Officer. Today, we will highlight our progress advancing our melanocortin-4 receptor based obesity pipeline, review strategic -- recent strategic and financial milestones and outline our priorities as we move through 2026 before opening the call for questions. First, I will turn the call over to Steve for the financial and operating results. Steve?

Thank you, Carl. Hello, and welcome, everyone. I'll walk through our second quarter fiscal 2026 operations and financial results. Starting with our recent public offering on November 12, 2025, we closed an upsized $18.2 million underwritten public offering, including the full exercise of the overallotment option. The offering consisted of approximately 2.8 million shares of common stock or prefunded warrants in lieu thereof, along with Series J and Series K warrants at a combined public offering price of $6.50 per share and accompanying warrants. Each Series J warrant has exercise price of $6.50 per share and expires on the earlier of 18 months from issuance or 31 days following FDA acceptance of an IND for an in-house obesity treatment compound. Each Series K warrant has an exercise price of $8.125 per share and a 5-year term, subject to automatic termination if the associated Series J warrants are not exercised within the FDA exercise period. Gross proceeds from the offering were approximately $18.2 million with net proceeds of approximately $16.9 million after underwriting discounts and offering expenses. While the company may receive up to an additional $18.2 million upon the exercise of the Series J warrants, there is no assurance that these warrants will be exercised. The net proceeds from the offering are being used to support the advancement of our obesity programs as well as for working capital and general corporate purposes. As a result of the closing of this financing, Palatin regained compliance with NYSE American continued listing standards, and effective November 12, 2025, our common stock resumed trading on the NYSE American under the symbol PTN. Turning now to the financial results for the second quarter ended December 31, 2025. Regarding revenue for the quarter was $116,000 compared to 0 revenue in the comparable period last year. This revenue relates to cost reimbursements under our collaboration agreement with Boehringer Ingelheim. Total operating expenses were $7.4 million for the quarter compared to $2.6 million in the prior year period. The year-over-year comparison is primarily impacted by the gain on the sale of Vyleesi recorded in the December 31, 2024 quarter, which reduced net operating expenses in that period. In the current quarter, operating expenses increased due to higher investment in our melanocortin-based obesity development programs as well as increased compensation costs and professional fees. Other income net was approximately $65,000 for the quarter compared to approximately $169,000 in the prior year period. The decrease reflects lower investment income and foreign currency translation gains, partially offset by lower interest expense. Net cash used in operations was $4.8 million for the quarter, consistent with the same quarter last year. Net loss for the second quarter was $7.3 million or $2.86 per share compared to a net loss of $2.4 million or $5.92 per share in the comparable period last year. This change reflects higher operating expenses associated with advancing our pipeline programs as well as the absence of the Vyleesi divestiture gain recorded in the prior year. Turning to our cash position. As of December 31, 2025, we had $14.5 million in cash and cash equivalents compared to $1.3 million at September 30, 2025, and $2.6 million at June 30, 2025. Based on our current operating plans, we expect our cash runway to extend beyond the quarter ending March 31, 2027. Finally, with respect to our PL9643 sublicensing transaction, in January 2026, we received approximately $3.8 million of upfront consideration in the form of noncash debt cancellation. This amount is reflected in the current liabilities as of December 31, 2025, and will be recognized as license revenue in the quarter ending March 31, 2026. In summary, the successful completion of our public offering significantly strengthened our balance sheet, restored our NYSE American listing and provides the capital needed to advance our obesity pipeline while maintaining operational flexibility. With that, I'll turn the call back to Carl for program updates. Carl?

Thank you, Steve. Palatin continues to execute on its strategy to advance differentiated melanocortin-4 receptor based therapeutics with a primary focus on rare syndromic and genetic obesity disorders. During the quarter, we made meaningful progress advancing our lead obesity programs towards the clinic, strengthening our balance sheet and sharpening our strategic focus, as Steve mentioned, through the sublicensing of our dry eye disease clinical candidate, PL9643. Turning to the obesity pipeline. We are advancing a portfolio of proprietary melanocortin-4 receptor agonist initially targeted to rare neuroendocrine obesity disorders, including hypothalamic obesity and Prader-Willi syndrome, areas of significant unmet medical need. Our lead oral small molecule MCR4 agonist, PL-7737 continues to progress through IND-enabling toxicology studies, and we remain on track to submit an IND and initiate a Phase I single and multiple ascending dose clinical trial in the first half of calendar year 2026. In parallel, we are advancing our next-generation selective melanocortin-4 receptor peptide agonist which are designed for once weekly subcutaneous dosing. For this program, we are planning an IND submission in the second half of calendar 2026. As we move these programs forward, our development focus is on delivering differentiated product profiles. Specifically, we are designing our compounds to enhance patient tolerability, including the potential for reduced gastrointestinal side effects while minimizing off-target effects such as hyperpigmentation, factors we believe are important for success in the long-term treatment of chronic obesity indications. Our preclinical data supports the potential of targeting melanocortin-4 receptor across both rare and select broader obesity indications. However, our focus will be on rare neuroendocrine disorders, planned registration clinical studies will enroll patients with hypothalamic obesity and Prader-Willi syndrome. In addition, preclinical and early clinical data support the potential for co-administration of melanocortin-4 receptor agonist with the GLP-1-based therapeutics such as tirzepatide, providing optionality as the obesity treatment paradigms continue to evolve. A couple of other things that occurred during the quarter, as Steve had mentioned, in January 2026, we executed the sublicensing of PL9643, a selective melanocortin-1 receptor agonist with positive Phase III clinical data in dry eye disease to Altanispac Labs. This transaction provided approximately $3.8 million in upfront consideration and allows us to sharpen our focus on our core obesity programs while retaining potential future financial participation through milestones and royalties. We also significantly strengthened our balance sheet with the completion of an $18.2 million public offering in November, which included the full exercise of the overallotment. In addition, we successfully regained compliance with the New York Stock Exchange American listing standards and our common stock resumed trading under the symbol PTN, restoring market visibility and liquidity. In summary, Palatin enters 2026 with a strengthened financial position, multiple partnerships with near-term milestones and a focused differentiated obesity pipeline. We believe this positions the company to pursue substantial long-term value creation. With that, I'll turn the call back over to the operator, and we will open the call to questions.

[Operator Instructions] Your first question for today is from Scott Henry with Alliance Global Partners.

If we could start with PL7737, as we get ready for the IND, what preclinical or translational signals give you the greatest confidence in differentiation versus current or emerging MC4R agonists, particularly around the tolerability angle?

Scott, well, the compound is designed -- first of all, we'll talk about hyperpigmentation. It's designed to be more selective for the melanocortin-4 receptor than the melanocortin-1 receptor, which should lead to a reduction or substantial reduction in the hyperpigmentation. Leading to the second part or the first part of your question. Listen, we control potential GI side effects through a variety of mechanisms, not the least of which is the way the product is administered and absorbed. So we slow down the absorption so that we don't get relatively large spikes in the absorption, which can lead to an increase or enhanced GI side effects.

Okay. Great. And as we get into the Phase I SAD/MAD trial, how are you thinking about patient selection? And what endpoints should we be thinking about as far as what we can get out of the clinical -- early clinical data? As well, I noticed Prader-Willi, is that an increased focus in addition to HO or it just seems like I'm seeing that a little more front and center than in the past?

So for the single-ascending and the multi-ascending dose, those are primarily safety studies. So certainly, for the single ascending dose, what we're looking for is just to confirm oral bioavailability that the product is safe and to really define a dosing window for 7737 and will be the same will be for the long-acting peptide when that goes forward as well. In the multiple ascending dose study, those will be carried out for a longer term. So there again, these will be in healthy obese patients. And there, again, of course, safety is always a paramount primary efficacy or primary results that you're looking for in these types of studies. But with that being said, because these will be healthy obese patients in the MAD part, we'll be looking for a reduction in their body weight. We'll be looking for reductions in control of hyperphagia and other parameters that go along with the obesity indication or controlling the obesity indication. So we do expect that we will get at least from the MAD part a pretty clear signal on how well these compounds can work. What's nice about that is we've seen in our hands that there's very good translatability from smaller studies, smaller efficacy studies to larger studies with this mechanism.

Okay, great. And with regards to Prader-Willi syndrome, is there an increased emphasis there? Or has that always just been in the background?

It's always been in the background, we've been -- we're looking for indications where there are, of course, meet the rare and orphan designation, but in which there are were substantial patients. If we think about some of the more micro-orphan indications that are genetically based and they left the melanocortin pathway, there are a relatively small number of patients there. So of course, they do represent valid markets and valid opportunities for development. However, we are still looking at some of the larger indications like HO and Prader-Willi where there are substantially more patients.

Okay. Great. And then final question on the clinical side, with the oral small molecule and the once-weekly injection. How do you anticipate positioning those 2 products between having an oral and an injectable? Do you view it as complementary? Just trying to get an idea of where we should think about each one of those.

I certainly think they're complementary. Each will have their patient populations that they're better suited for. One would expect that certainly for the weekly injectable peptide, one might expect to see a higher level of efficacy for patients on those. In general, we generally tend to see across the board that we can drive better efficacy with peptides than we can with the small molecules. However, of course, we do need to see final decisions on that will be predicated on what we see in the early studies. But there will be patient populations for each. And patients -- in these indications, these are long term -- they're not like generalized obesity where patients can reach a target goal, in other words, where they can come down a certain amount of weight, and come into a more healthy standpoint and then want to move on to lower dosing or maintenance. Here, these patients are probably going to be on long term, pretty aggressive therapy because essentially, their conditions are chronic and they don't go away in that essence. So you'll need both kinds of options to really manage these patients.

Okay. I guess I'll just give Steve a chance to say something. Steve, with regards to OpEx in Q2, fiscal Q2, it looks at about $7.4 million. Was there any kind of onetime noise from the transaction in there? And just -- I'm just trying to get a sense of how we should think about that OpEx number in the March quarter, the fiscal third quarter?

Thanks, Scott. Yes, the fourth quarter of '26 had a number of extraordinary or onetime, I think, is the best descriptions. And that amounted to over $2 million just in that quarter that we do not expect going forward. Onetime related to -- we cleaned up some -- we cleaned up a number of things that we weren't able to clean up with prior to the raise. And we did mention that in the Q that was filed earlier today that there was a number of, if you will, onetime extraordinary type expenses that will not -- we're not going to see going forward. So I would target approximately $2.5 million less in the first quarter of '26 -- second quarter of '26 versus the fourth quarter of 2025, which was a little over 7 -- I think, or approximately $7.4 million.

Your next question for today is from Yale Jen with Laidlaw & Company.

Just going to follow up a little bit on Henry's questions first on the safety side. As we know that in the Prader-Willi syndrome, the current approved drug has some issue on the safety side, and there has 15% to 20% of discontinuation of patients being treated. So how would you guys assess that issue and when you're starting your Phase I study and then maybe further down the pike?

Well, as a Phase I study, we'll get a very good look at what the tolerability and the safety profile for both of the approaches are. And based on our experience with the melanocortin-4 receptor system, we have a pretty good understanding of what we expect to see. In general, you will see some GI side effects. We think that those are controllable through the way these things can be administered, so that those are at lower rates. We don't generally see -- those types of discontinuations with this mechanism. They generally tend to be fairly low with regards to the GI side effects. In addition, we know we want to avoid the MCR1 as much as possible so that we can reduce that potential for hyperpigmentation, which many patients don't like. So overall, I think this mechanistically, this approach probably will result in lower numbers of discontinuations in these patient populations along with delivering really good efficacy. However, with that being said, you have to get in the clinic and we have to show that.

Sure. And maybe 2 quick questions here. The first one will be that in terms of PWS, you were looking for the hyperphagia. And in your Phase I study, maybe probably more likely in Phase II study, how you assess the 2 sort of metrics, one for hyperphagia or the other is for weight reduction in your study design to see clear -- hopefully to see a clear sign that both have -- it will show an impact in both sides, both aspects.

Sure. So I think the way we think about it, when you're dealing with -- we talk about Phase I, we're really talking about the multiple ascending dose study. Obviously, we're not going to expect to see very much in healthy normals from a single dose other than safety. When we're dealing with a 4-week study, so a 20-day study in healthy obese patients, what you're looking for there is, are we seeing consistent target engagement over the full 4 weeks of dosing? Are we seeing consistent PK parameters and consistent exposure of the drug? We expect to see that there should be -- we know that from other studies we've done that we would expect to see a reduction in food intake and a reduction in body mass in these patients. With you go more mechanistically, one of the ways that this product melanocortin-4 receptor works on downstream effect of that is, of course, the control of hyperphagia that can occur in patients and obese patients, whether they be normal or they have a syndromic disease such as PWS. Until you get into PWS patients, I mean, you're not going to really know how much you control the hyperphagia, right? However, you'll get a very strong signal from the Phase I that you're working on target how much efficacy you can drive and that should translate into a strong signal in the PWS patients as well. But until you get there, you're not going to know. I mean you do have to get into the actual intended patient population itself.

Okay. Maybe actually, just continuing with this one is that based on the resources or anticipated resources going forward, PWS will be something that you may contemplate more aggressively next year? I mean, in later this year or really in the next year?

So I'm going to -- the answer is you're correct, but more in the next year, but I'll let Steve kind of walk through how the cash flow plays out over the next 18 months.

Thanks, Carl. So we're -- the initial -- as Carl mentioned, the SAD/MAD Phase I studies are the initial. And we're targeting and we have sufficient cash on hand right now to move forward with both the oral small molecule and the long-acting peptide, again, in the Phase I SAD/MAD. That data will read out for the oral small molecule by year-end and in the first half of next year on the long-acting peptide. Thereafter, we're going to be moving forward into whether you want to call it a Phase II or Phase II/III in specifically just HO patients and PW Prader-Willi syndrome patients in both the oral small molecule and the long-acting peptide, but they will not start before mid of 2027. Is that helpful?

Yes, absolutely. That's actually great color. Maybe the last question here is the -- you guys have a study with the combination of GLP-1 beforehand, I understand that, obviously, that's a very, very crowded space or very highly competitive space. But certainly, you have some positive data. So how would you position or in what context do you anticipate that GLP-1 may play a role in your product development or clinical study going forward?

So again, I think this has been a long thing that we've been doing work in combination of these 2 mechanisms for quite a bit of time. And as you said, we've done clinical trials specifically looking at the interaction. As you see more and more incretin-based therapies coming into the marketplace, now they're moving from just injectables to oral, you're likely to see clinicians wanting to combine these mechanisms, particularly for patients for PWS, for example, that may have really very severe hyperphagia, where they need additional -- something additionally more than, let's say, any one mechanism can combine. So that's why we began to think about how you combine these mechanisms to make sure that every patient that comes through can really get an optimized therapy. So I think it'd be a little naive to think that although during the clinical development program, you'll focus on a monotherapy approach Certainly, some of the patients coming into these studies will be on GLP-1s. But I think longer term, it's likely that you're going to see combination therapy. So it's just really positioning ourselves for, you can call it life cycle management or the reality of what's going to occur in the marketplace when these products get approved.

Okay. Great. Again, congrats with sufficient resources to move forward. Certainly, this is a great space to be in and congrats on all the progress.

We have reached the end of the question-and-answer session. And I will now turn the call over to Dr. Carl Spana for closing remarks.

Thank you. I'd like to thank everyone for participating in the Palatin Second Quarter Fiscal 2026 Conference Call. We're excited to what we're doing here. I think we're in a very good place with really good assets, and we'll continue to be excited in moving these products forward and really updating you as we continue to make progress in our development. That being said, have a great day, and we look forward to continue to update you on our progress. Thank you.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.