Palatin Technologies, Inc. (PTN) Q3 2026 Earnings Report, Transcript and Summary

Hello, everyone. Welcome to Palatin's Third 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 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 recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements by Palatin prospects. Now I would 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 Third 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. Earlier today, we issued a press release reporting Palatin's financial results for the third quarter of fiscal year 2026 and are now providing a corporate update. Today, we will highlight our progress advancing our melanocortin-4 receptor-based obesity pipeline, review recent strategic and financial milestones and outline our priorities as we move through 2026, followed by a question-and-answer session. First, I will turn the call over to Steve for the financial and operating results. Steve?

Thank you, Carl, and hello, everyone. I will briefly review our financial results for the fiscal third quarter ended March 31, 2026. Beginning with revenue. For the third quarter, we recognized $3.9 million in collaboration and license revenue compared to no revenue in the prior year period. The increase was primarily related to the revenue recognition of the upfront consideration under the Altanispac agreement. Turning to operating expenses. Total operating expenses for the quarter were $5.5 million compared to $4.8 million in the prior year period, which included a $0.4 million gain on purchase commitment. The increase was primarily attributable to higher compensation costs and professional fees. Net cash used in operations for the quarter was $4.4 million compared to $5.4 million in the prior year period. The reduction in cash used in operations was primarily driven by collaboration and license revenue recognized during the quarter. Net loss for the third quarter of fiscal 2026 was $1.4 million or $0.37 per basic and diluted common share compared to a net loss of $4.8 million or $9.13 per basic and diluted common share for the prior year period. The improvement in net loss was primarily related to collaboration and license revenue recognized during the quarter. Turning to our balance sheet and liquidity position. As of March 31, 2026, Palatin had cash and cash equivalents of $10.2 million in addition to approximately $2.2 million of other receivables, which are expected to be collected during the quarter ending June 30, 2026. Based on our current operating and development plans and our ability to manage the timing of certain operating expenses, we believe our existing cash resources and expected receivables will be sufficient to fund operations through June 30, 2027. With that, I will turn the call back to Carl. Carl?

Thank you, Steve. This quarter, Palatin continued to execute on its strategy of advancing our melanocortin-4 receptor agonist therapies for rare obesity disorders, with a focus on improving tolerability, usability and long-term outcomes in chronic treatment settings. The melanocortin-4 receptor pathway is a clinically and commercially validated target. We strongly believe the next phase of innovation will be defined not just by efficacy, but by improvements in overall treatment profile, particularly tolerability and patient-friendly delivery to support long-term patient adherence. In this context, our goal is very straightforward, it's to develop best-in-class melanocortin-4 receptor agonist for the treatment of rare syndromic and genetic obesity disorders. We are uniquely positioned to achieve this with our extensive experience in the design of melanocortin-4 receptor selective agonists, along with our recent advancements in the understanding of receptor ligand interactions. In rare obesity disorders such as hypothalamic obesity, Prader-Willi syndrome and Bardet-Biedl syndrome, patients face severe hyperphagia, rapid weight gain and significant metabolic complications. These are chronic conditions that require lifelong treatment and current therapeutic options often present challenges for long-term use. As a result, improving tolerability and usability is critical to achieving meaningful sustained outcomes for patients. Updating our obesity pipeline. Our melanocortin-4 receptor agonist peptide program is designed to achieve sustained efficacy with a treatment profile optimized for high selectivity for the melanocortin-4 receptor and a once-weekly delivery. Our once-weekly melanocortin-4 receptor selective peptide agonist remains on track for an initial new drug application submission in the fourth quarter of calendar 2026 and represents our lead clinical asset. In our oral small molecule program, we are advancing next-generation oral melanocortin-4 receptor selective agonist candidates based on data and learnings from earlier compounds, including PL7737, recent data from our research work in medicinal chemistry and our advancements in understanding detailed receptor ligand interactions. In internal preclinical studies, our candidates demonstrate significantly improved melanocortin-4 receptor selectivity with minimal melanocortin-1 receptor activity and increased potency at the melanocortin-4 receptor compared to earlier compounds. We believe this improved selectivity and potency will result in lower dosing requirements and a meaningful reduction in the potential elimination of hyperpigmentation. I want to emphasize the importance of the last point. Hyperpigmentation is a known class effect associated with melanocortin-1 receptor activity and remains a limitation of current therapies. Our approach is specifically designed to minimize the melanocortin-1 receptor off-target interactions and the selectivity data we have supports this conclusion. Our goal is to develop best-in-class therapies with superior efficacy and long-term patient compliance. In addition to advancing our obesity programs, we continue to leverage the broader potential of our melanocortin receptor platform through strategic partnerships and business development activities. Our partnership with Boehringer Ingelheim for retinal diseases continues to provide nondilutive capital milestone opportunities and potential long-term royalty participation. During the second half of calendar 2025, we received upfront and milestone payments totaling EUR 7.5 million or approximately $8.8 million. We also completed the sublicensing of PL-9643 for dry eye disease to Altanispac Labs in January of 2026, receiving $3.8 million in upfront consideration while retaining the potential for future payments and royalties. In addition, our PL-8177 ulcerative colitis program remains positioned for potential partnering following positive Phase II proof-of-concept results. These transactions reflect our strategy of leveraging the breadth of our melanocortin receptor platform to generate nondilutive capital and support our pipeline advancements and create multiple potential long-term value drivers for shareholders. In summary, our peptide program remains on track for an IND submission in the fourth quarter of calendar 2026. Our oral small molecule program is advancing next-generation candidates with improved selectivity and potency for an IND in the first half of calendar 2027. We have developed new Intellectual property around melanocortin-4 receptor selectivity, and we are continuing to leverage both our vast experience and new data to design melanocortin-4 receptor therapies with improved selectivity and overall better treatment profiles. We believe this strategy positions Palatin to deliver differentiated best-in-class melanocortin-4 receptor agonist therapies for patients with significant unmet medical need. With that, we will now open the call to questions.

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

Just recapping on PL7737. Is that molecule now discontinued. And if so, was it due to an issue with PL7737. Or did some of the backup compounds present a better profile to take going forward?

Thanks for the question, Scott. We're not going to be first to market in this space. So we really want to make sure we have best-in-class compounds. So our selectivity -- our premise for selecting a compound or continuing a compound to go through development into the clinic is pretty stringent. So it's kind of -- when the decision was really multifactorial. As we were running through the PL-7737 development, we came to a point where we felt that the selectivity and the dosing that we wanted to achieve to be best-in-class, we didn't necessarily think that the compound would meet that. And in addition to that, we were seeing -- since we were funded in November of last year, we were able to really push some of these backup compounds forward, and we started to see compounds that really are verging on almost the elimination of MCR1 activity. So their profiles are just coming out just better than where 7737 is. And so we had to make the decision on do we continue to put resources into a compound that may not be best-in-class or do we divert those to the peptide which is really highly selective and once a week and has a really excellent profile and then bring along a second-generation compound that really has got a much better profile. So it was a combination of a number of factors that went in. And we also have to consider that this is a target that is growing in interest and there's potential competition. So when we are making final decisions to go in the clinic and start spending lots of investor money, we really want to make sure that it's a very stringent decision and that the compounds that we take forward really meet a high degree of selectivity for MCR4, have excellent drug-like characteristics, are easier for the patients to use, whether it be oral or once weekly. And so those -- there were a lot of factors that went into the decision. And 7737 is still extremely valuable to the company. We've learned a tremendous amount from it. We're still evaluating it, and we'll continue to be supportive of everything that we're doing.

Okay. In the next-generation oral small molecule compound, would you expect to have a similar clinical game plan as you did for PL-7737 as far as looking at hypothalamic obesity patients as well as Prader-Willi.

Absolutely. It will follow a similar path. I think that the peptides and the oral small molecules will each have their place in treating these patients based on patient preferences, efficacy, side effect profiles. But the next-generation compounds, really, we're seeing -- I expect that these compounds really won't have any MCR1 activity at all. They're going to be quite clean. And I think that's going to be a major advancement. And again, we have to keep in mind that this is going to be a competitive field, and we really want to make sure we're bringing the best that we can deliver based on the experience that we have.

Okay. And when you think about the differentiation of your pipeline with compounds on the market and under development. What do you think are the key attributes that separate your pipeline. I mean, obviously, you've mentioned selectivity in hyperpigmentation. Are there any other aspects that you would highlight?

Sure. I mean that's a key aspect. I think the technologies that we use for potentially delivering once-a-week injections for peptides can be differentiating as well. I think the understanding that the PK parameters of these compounds have to put them in a range where we don't need to go to levels of drug exposure that exceed the therapeutic window so that we can eliminate or drastically reduce the potential side effects that you can see outside of hyperpigmentation. In addition to that, in the small molecule program, we're looking for compounds that really limit the brain penetrants so that they don't get into the CNS. So there are a number of things that are built into these things that overall will make them better drugs. And this is not atypical. As indications move from first approved drugs, it's generally when you get to that second or third one where you get the better compounds coming through, better drug-like characteristics, better PK parameters, more usability for the patient, and that's what we're aiming for.

Okay. Great. And kind of the final question. Obviously, your game plan has followed a lot of what we've seen with Rhythm and what they've done. How would you compare your products to those of Rhythm? And how far behind do you consider yourself at this point?

Sure. So currently, from an approved standpoint, setmelanotide or imcivree is Rhythm's product. And they've done a tremendous job bringing that product forward, expanding its indications and potentially beginning to build new markets for MCR4 agonist. That's a first-generation peptide that's got limitations with regards to MCR1 activity, and it's a daily injectable. I know that they have a weekly injectable that's coming behind that. There's very little data. I can't comment on that. There's no data available. I think there will be data later in the quarter, but I can't comment on that. They have a small molecule in Bivamelagon. Again, it's a first-generation compound. Again, we see hyperpigmentation in the clinic, and it's going through some reformulation work. And I don't know where that's going to lead. They're going to hopefully get that back in the clinic later in the year. So I think from my perspective, I think that we're going to deliver better compounds. I think they're going to be cleaner, I think going to have better drug-like characteristics, going to have better PK parameters and a chance to be highly competitive and expand and take market share. And that's the goal in bringing best-in-class forward, right, just to have a better compound. From how far behind are you, depending on the indication, obviously, setmelanotide is approved. It's approved for HO, it's approved for a number of indications. So you can look at our plan to get there in that case, we're several years behind. With regards to compounds coming through, I don't know, is it a year, 1.5 years? I mean, I'm not clear. I know it's a question that investors always ask and it's relative here. We're not all that far behind and you're coming -- and you're trying to come in with a better candidate and a better product. And I think that's the more important part. Who's going to have the compounds that really help to solve this issue with better patient compliance and better patient usability, maintaining good efficacy. And that's really what you're trying to drive forward. And that's really at the end of the day, what's going to probably determine this market.

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

Your oral compound now it's pushed out probably roughly a year compared to 7737. My question to you is that what you -- do you see any challenges to have that become IND ready next year. So specific -- any specific you can mention without revealing too much on the competitive side?

Sure. Look, whenever you're dealing with orally active small molecules, we've run as we did with 7737, we run a tremendous amount of preclinical studies on these compounds to evaluate not only their efficacy and their selectivity, what have you, but really the drug ability, side effect profiles, metabolism, all sorts of other things. At any point, the predictability, even though we use state-of-the-art software and what have you to help predict and obviously, wet chemistry to go through all this stuff. Until you get into animals, until you get through that process, you're not going to really know what you have and how high you can dose and so on and so forth. So I would characterize it as we have a very good handle on what's required. I think we understand the pharmacophores that we're dealing with very well. They are very druggable and with regards to their interactions with SIPs and their metabolism and so on and so forth. So we have a high degree of confidence that we can deliver a compound. But until we get through the work, I can't tell you what the actual outcome was going to be. So I mean, we will -- I'm confident that we will do the work. We will get the candidate forward, we'll go through the process with the candidate, and I'm confident that it will pass and it will have a great profile. But until it's done, I can't comment, I don't know.

Fair enough. That's very helpful. Without revealing too much, should I think about this is heading to animal study or it's already in animal study.

I mean, we haven't made a final selection, so it depends on the candidate. Some are in animal studies, some are a little further back. We'll make a little bit later in the year, we'll make a final selection on the actual candidate that we want to go forward with. So it varies depending on the candidate.

Okay. So still -- okay, great. Maybe the last question here is that for the subcu weekly peptides that you are slightly ahead -- I mean, I thought the last time we thought that you may start it in the third quarter, but I guess it's slightly more push out to the fourth. Was there any issues that you want to resolve. It seems -- like you said, will be the new product going forward?

There's no issues. I mean, listen, we don't make -- we're not manufacturing screws here where we're doing very complex things. And we want to make sure, again, that we have the right compound. One of the things that we're seeing is with the ability -- with the funding that we did in the third or fourth quarter of last year, that really allowed us to really accelerate a lot of the work we were doing on the medicinal chemistry side with both the peptides and the small molecules. So what we're trying to make sure is we are -- particularly on the peptide side, in the candidate we selected, we want to make sure it was the best we have, right, not something -- not something that's really good, but when we find out a month later, we've got something better. So it's really an issue of making sure we've got the right candidate. It's in a nice way, we have been very productive in our understanding of this -- of the receptor and the receptor ligand interactions. And we've been really pushing the boundaries and understanding how to eliminate the MCR1 activity and building that into these compounds. So we really want to make sure we pick the best one. So I don't really see much difference. That peptide program to me is moving along quite nicely. I think we have an excellent candidate, and we'll be running through -- I mean, we're actually now entering in the IND-enabling studies. So I see that moving along and staying on track quite nicely.

Okay. Great. Maybe last question, just squeeze in, which is that you mentioned about also your contemplating the PWC Prader-Willi syndrome. At this point, would that be second priority to HO or you feel that you may jump the gun into the PWC even faster earlier.

Again, Jen, everything is based on resources. I think that they're equal. I mean they're both excellent commercial activities. They're both ones where there's an extremely high medical need for innovative treatments. So given resources, we'd like to move them in parallel.

Your next question is coming from Dev Prasad with Lucid Capital.

I have a few. One is, is the goal with the new oral compound, is the goal is to eliminate hyperpigmentation entirely or you're trying to reduce the frequency and severity. And a follow-up is that what preclinical species or model is the most predictive for the MC1R-mediated hyperpigmentation. And then on once-weekly injectable, just wondering what are the key IND-enabling studies still remaining before the planned 4Q IND submission?

All right. A lot there. So let's go through. For the small molecule, I mean, what we're seeing is the potential to eliminate activity. That doesn't mean that when you go in and you start treating chronically that you won't see some small amount, but that's really what the goal is, and that's what we're seeing preclinically really, a very significant separation between 1 and 4. And -- but until you get into the clinic, you're not going to know. The animal models that we use -- so animals -- if you look at a rat, a dog or mouse, their skin is not really pigmented. So you have to look at fur. You look at fur darkening and there are a number of models that you can use for that. When you're seeing -- if your compounds have good MCR1 activity and they work in these models, you're going to see that translate to humans. So we think there's a high degree of predictability. And if you're showing lack of efficacy or very large separations between where you see weight loss and then where you see potential for even a small change in pigmentation that that's going to translate to the human condition as well. So with regards to where we are in development, there's -- right now, we're beginning the IND-enabling studies. That's going to include a whole bunch of in vitro assays that we're required to do with regards to SIP binding metabolism and so on and so forth as well as getting into the animal work that will start as well. So we have everything moving and coming together so that we will have the documentation we need to file with the FDA and open up an IND in the fourth quarter of the year.

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

So I'd like to thank everyone for their participation on the call. There's an opportunity for us to give you updates. And we're quite excited about where we are, where we're going. I thank the analysts for their questions that allow us opportunities to maybe speak a little beyond what we have in the script and maybe give a little more color and context to what we're doing. I think that the advances that we're making are quite significant. We're generating some very good IP that I think is going to not only support the work that we're doing, but make it a little more difficult for those that are following behind as well. So I think we're very well positioned and feel pretty confident about what we're doing and going forward that we're going to deliver some really phenomenal compounds into the clinic. So with that, thank you, guys. Have a great day, and we look forward to keeping everybody updated as we continue to make progress on our programs. Steve?

Thanks also. Have a great rest of the day. Take care.

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.