Palatin Technologies, Inc. (PTN) Q4 2026 Earnings Report, Transcript and Summary

Greetings. Welcome to Palatin's Fourth Quarter and Fiscal Year-End 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.

Good morning, everyone, and thank you for joining us. I'm Carl Spana, President and Chief Executive Officer of Palatin Technologies. Today, I will discuss our strategic priorities and progress across our development programs. Steve Wills, our Chief Operating Officer and Chief Financial Officer, will then review our fiscal 2026 financial results and liquidity position. We'll then conclude with questions. Our principal strategic focus is the development of next-generation best-in-class melanocortin-4 receptor or MC4R agonist for treating syndromic and rare obesity disorders. We are initially targeting hypothalamic obesity, Prader-Willi syndrome and Bardet-Biedl syndrome with potential applicability to other disorders involving the MC4R pathway. MC4R agonism is now clinically and commercially validated in multiple rare and syndromic obesity disorders, establishing a strong foundation for the development of next-generation therapies. Palatin brings more than 25 years of melanocortin research and drug development experience to this opportunity, including the development of FDA-approved bremelanotide or Vyleesi. While currently available and emerging therapies have demonstrated meaningful efficacy, gastrointestinal adverse events and hyperpigmentation remain important challenges for patients requiring long-term treatment. Clinical studies of the approved MC4R agonist in the rare obesity space and the next-generation investigational MC4R therapies under development have continued to report high levels of nausea and vomiting as well as incidence of hyperpigmentation. Our objective is to develop best-in-class melanocortin-4 receptor therapies that deliver comparable or greater efficacy with improved tolerability, little to no hyperpigmentation and product profiles suitable for lifelong use. We are advancing 2 complementary peptide series, non-lipidated PL-1000 and lipidated PL-2000 series. Tested compounds from both series have demonstrated potent MC4R agonism, activity without MC1R agonism. Because MC1R agonism activation contributes to pigmentation, these findings support our strategy to minimize or potentially eliminate hyperpigmentation. Both peptide series contribute to our effort to develop a long-acting once-weekly subcutaneous therapy. In preclinical studies, compounds from both the PL-1000 and PL-2000 series have produced significant dose-dependent reductions in body weight and food intake in diet-induced obese mice. For our PL-1000 lead development candidate, we have established feasibility of once-weekly subcutaneous dosing and are working to optimize a controlled release formulation. Our lead MC4R lipidated peptide development candidate has demonstrated significant reductions in food intake and weight loss with once-weekly subcutaneous dosing in a diet-induced obese mouse model. Preclinical pharmacokinetic data supports the potential for longer than once weekly or less frequent dosing in humans. We are currently conducting the activities required to file an IND and begin human clinical studies. Our oral small molecule MC4R program provides a 3rd treatment approach, building on learnings from an earlier drug candidate, PL-7737 and utilizing multiple approaches, including artificial intelligence and machine learning tools, we have identified potential drug candidates with improved potency and MC4R selectivity. Our objective is to develop an oral MC4R agonist capable of delivering comparable or greater efficacy than emerging oral MC4R therapies with improved gastrointestinal tolerability. We are also designing our oral candidates to have limited or avoid MC1R mediated off-target activity to minimize or eliminate hyperpigmentation. Subject to appropriate funding, we are targeting initiation of a Phase I single ascending dose and multiple ascending dose studies for our lipidated peptide candidate in the first half of calendar 2027 with data targeted for the second half of 2027, and are targeting initiation of the oral Phase I single ascending dose and multiple ascending dose studies in the second half of calendar '27 with initial data expected in the first half of 2028. These studies will evaluate human safety, tolerability, pharmacokinetics and clinical efficacy. Taken together, our non-lipidated peptide, lipidated peptide and oral small molecule programs provide 3 distinct approaches to developing differentiated selective MC4R agonist for the long-term treatment of patients with syndromic and rare obesity disorders. Each approach is being designed around the same core best-in-class objective, meaningful efficacy, improved tolerability, little to no hyperpigmentation and a dosing profile suitable for lifelong treatment. Beyond our obesity programs, our broader melanocortin platform has already generated meaningful strategic collaborations. Under our August 2025 retinal disease research collaboration and license agreement, Boehringer Ingelheim paid an aggregate of EUR 7.5 million upfront and initial milestone amounts. The agreement provides for up to EUR 280 million in additional success-based milestones and tiered royalties. We continue to perform reimbursed research under the collaboration. We also sublicensed our PL-9643 dry eye program to Altanispac Labs earlier this year. Beyond those partnered assets, our PL-8177 ulcerative colitis program has positive Phase II proof-of-principle findings and our diabetic nephropathy program has encouraging open-label Phase II data as well. We are pursuing partnerships with these noncore assets, so our internal development effort can remain focused on rare obesity MC4R therapies. Our priorities are clear: advance our complementary non-lipidated and lipidated selective MC4R agonist drug candidates and oral program for clinical development, translate preclinical differentiating findings into human clinical evidence and continue creating value through our strategic collaborations and partnerships. Steve will now review our financial results. Steve, over to you.

Thank you, Carl, and good morning, everyone. I will review our fiscal fourth quarter and full year 2026 results, followed by our cash position and liquidity outlook. Unless otherwise noted, comparisons are with the corresponding fiscal year 2025 periods. For the fourth quarter ended June 30, 2026, Palatin recognized $300,000 in collaboration and license revenue compared with no revenue in the prior year quarter. For the full fiscal year, collaboration and license revenue totaled $13.2 million compared with no revenue in fiscal 2025. This included $9.4 million related to our Boehringer Ingelheim collaboration and $3.8 million related to the Altanispac sublicense. The Altanispac revenue was recognized in the form of noncash debt cancellation. Fourth quarter operating expenses were $4.7 million compared with $2.3 million in the prior year quarter. The prior year quarter included gains associated with Vyleesi and purchase commitments affecting comparability. Research and development expense was $2.0 million in each fourth quarter, while general and administrative expense was $2.7 million as compared with $2.6 million a year earlier. For fiscal 2026, total operating expenses were $21.9 million compared with $17.5 million in fiscal 2025. Research and development expenses decreased to $12.4 million from $14.9 million, primarily attributable to lower expenses related to the timing of certain activities on our MC4R programs. General and administrative expenses increased to $9.5 million from $7.8 million, primarily due to higher professional fees. Fiscal 2025 operating expenses included a $3.1 million gain on the sale of Vyleesi and a $2.1 million gain on purchase commitments. We reported a fourth quarter net loss of $4.4 million compared with $2.2 million in the prior year quarter. For the full fiscal year, net loss decreased to $8.4 million or a loss of $2.96 per basic and diluted common share compared with a net loss of $17.3 million or a loss of $32.15 per basic and diluted common share in fiscal 2025. The year-over-year improvement in net loss was primarily attributable to collaboration and license revenue and gains related to Vyleesi and purchase commitments. Net cash used in operating activities was $13.5 million in fiscal 2026 compared with $21.3 million in fiscal 2025. Net cash provided by financing activities was $18.5 million, consisting primarily of $16.9 million in net proceeds from common stock and warrant sales and $1.6 million from warrant exercises. Turning to liquidity. We ended June 30, 2026, with $7.5 million in cash and cash equivalents compared with $2.6 million at June 30, 2025. Current liabilities were $1.8 million at fiscal year-end. Based on that cash balance and our current operating and development plans, including our ability to reduce or delay certain expenditures within management's control, we do not expect existing cash to be sufficient to fund operations for at least 12 months following issuance of our financial statements. Accordingly, substantial doubt exists about our ability to continue as a going concern. We will require additional financing to continue advancing our development programs and fund operations. We intend to pursue equity financings, collaboration arrangements and other potential sources of capital, but there can be no assurance that funding will be available when needed or on acceptable terms. The timing of planned development milestones remains subject to appropriate funding. Operationally, we are prioritizing our peptide and oral MC4R obesity programs, executing our collaboration obligations and pursuing opportunities to realize value from our partnered and partnering assets. That concludes my financial review. Carl, I will turn the call back to you for closing comments and questions.

Thank you, Steve. Our focus is on translating the promising preclinical findings from both non-lipidated and lipidated peptides together with our oral small molecule program into clinical evidence. We are pursuing melanocortin-4 receptor agonist therapies designed for meaningful efficacy, improved tolerability and little to no hyperpigmentation for patients with rare obesity disorders. Thank you for joining us. We are ready to now take your questions.

[Operator Instructions] And your first question this morning is coming from Scott Henry from AGP.

Carl, I'll start with you. You mentioned the lipidated and non-lipidated peptide approaches. Could you talk a little bit about the advantages and the differences between those 2 approaches? And eventually, would you narrow it down to 1? Or would you keep both going all the way?

Thanks, Scott. So the main difference is that in the case of a lipidated peptide, it has an aliphatic part of it that actually binds to plasma protein. So its longevity is built into the molecule. So you don't have to have a polymer formulation. So it's very similar to what you would see with the GLP-1s. When you go to the non-lipidated, that means you're now formulating in erodible polymers that essentially are injected and then they erode over a certain period of time and they would slowly release your drug. Both can accomplish long-term delivery. Our preference would be for a lipidated approach in that it gives a little more flexibility. You're not dependent on the release characteristics of the polymer. Only essentially, it's a single API that's being made. It's not being formulated, not as bulky on the injection side. And we believe it's also going to give maximum flexibility for dose titration. So you'll be able to have multiple doses or to more easily have multiple doses that can be used in a more titrated fashion, very similar to what's done with the GLP-1s today. So I think it gives the clinician and the patient the most flexibility over the polymer approach. We will run both of those in parallel. Our goal is really to deliver, as we said, a weekly product that has really good efficacy. So the high MC4R selectivity and potency and limited to no hyperpigmentation. Our preference, of course, would be to just follow through and lipidate. And certainly, as that goes into the clinic and begins to show efficacy and then we would probably slow down the polymer part. We would most likely advance both of them all the way through into Phase II clinical development before we make a decision.

Okay. Great. And I know you've spoken a lot about hyperpigmentation. I did hear a little bit more about improving gastrointestinal tolerability. What are you doing specifically to address that with the MC4R agonist?

Sure. So there are 2 approaches. So 1, there's going to be -- the GI side effects are indeed driven by MC4R agonism. 1 way of reducing that is to essentially not overdose patients. So when you're going with, for example, the lipidated peptide, it's a lot easier to keep the patient in the intended therapeutic range without going over. So 1 of the problems you have with these simpler peptides that aren't formulated is that you're injecting a big bolus dose, right, because of short-acting drug. So you go way above the therapeutic window for the drug and then you get yourself into higher levels of AE. So 1 approach is simply by flattening out the absorption of the drug and keeping it in a defined therapeutic window, you should -- you'll limit some of the GI side effects and you'll be left with, say, some of the inherent effect that occurred by just activating the receptor. Second way of doing it, which is a little more complicated is to try to develop compounds that inherently don't have any ability to cause nausea and emesis. And then there are structural elements that we're working on that can lead to that, but we're not quite there yet. So right now, the primary way you're going to do is really by limiting that -- essentially that bolus dosing, keeping it in that flat therapeutic window. And that's ideally done with these peptides.

Okay. Great. Final question for you, Carl. Have you given thought to what rare obesity indication you would likely pursue first?

So I think the first 1 will be the hypothalamic obesity indication. There are certain advantages there that patients are relatively easy to identify. They have had a type of cancer that causes damage to the hypothalamus when it's treated, and they're relatively healthy patients that essentially have had a damage of hypothalamus that can be corrected with MC4R agonist. That would be the first indication. Prader-Willi syndrome would be also probably done pretty closely, if not in parallel. There is a little bit different. You're working on hyperphagia and trying to reduce some of the obesity as well. And then the 3rd would be the Bardet-Biedl syndrome. So those are the 3 pretty much in order. But I think the first 2, we would -- depending on resources, we try to run in parallel -- as close to parallel as we can.

Okay. Great. A couple of questions for Steve. Steve, how should we think about collaboration license revenue in fiscal year 2027? Should it be material, significant? Just trying to get a thought relative to what we saw in fiscal 2026.

Well, thanks, Scott. In our mind, any -- achieving any milestone with these collaborations is significant. We do anticipate we -- just to back up, we have 2 ongoing collaborations, 1 in the ocular with Boehringer Ingelheim, another in the ocular with Altanispac. We anticipate and expect to receive a milestone -- achieved milestone from Boehringer Ingelheim sometime within the next 2 to 3 quarters. Altanispac is a little further out. But also notwithstanding the existing ongoing collaborations, we do have interest. We have very good interest in some of our other programs, the nonobesity, specifically around our ulcerative colitis and also some other ocular indications and MC1R autoimmune and anti-inflammatory. It's -- we're not to the point where I could say we expect to get something within the next several quarters, but we wouldn't be surprised if someone does pull the trigger on a research or an early-stage collaboration in that regard.

Okay. Great. And then OpEx trends, certainly lower in Q4. As you prepare to move things along more aggressively, should we expect OpEx to sequentially increase throughout 2027?

Well, initially, yes. The -- for the quarter ended June 30 and the same thing with the quarter prior to that, certain activities are -- they're done sequential. So based on timing, you're going to fluctuate a bit. But we do anticipate the next several quarters, say, the quarter ended 12/31 in the first quarter or frankly, even the first half of '27 to move -- to increase. Nothing -- it's not going to double, if you will. It's going to be more than likely around what we've done in the first few quarters of calendar '26. But again, we're advancing the program, and it's -- I know people like we are spending -- we're investing the money. We couldn't be more pleased with where we are from a differentiating standpoint in the obesity space we're moving forward with.

Okay. Great. And final question, when we think about the balance sheet and funding development, are we still thinking about those -- I believe they were the Series J warrants that were activated, I believe, by an IND acceptance. Is that still part of the financing picture?

100% is part of the funding picture, and that's why we set it up. The November 2025 financing included a -- we call it a short-term warrant, the Series J warrant is correct. And that actually triggers the -- and it triggered on either 18 months -- the lesser of 18 months or the IND filing of 1 of our internal obesity MC4R compounds. And if that was exercised at 100%, that would yield approximately $18.5 million. So 100%, that's part of the future funding. And if we hit that trigger, things are going well.

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

My first question is about the PL-2000. This is the lipidated ones that you anticipate to start trial in the first half of next year, calendar next year. So what are the remaining IND enabling works remain before you can start the filing and Phase I studies? And then I have a follow-up.

Sure. So the main thing remaining is really getting the initial animal tox work done. So we're in scale up now and those studies are scheduled and getting ready to start. But that's really the main largest bulk of what we need to get done. There's always a bunch of other earlier studies or in vitro studies, but a lot of those have been done already. So it's really getting the animal work done and the reports in.

Would there any manufacturing work that need to be done? Or would that be...

There's always manufacturing. Once you start doing the compound, manufacturing work never stops. So that's -- I mean we can manufacture them under cGMP conditions. Now -- and we'll continue to work on that, improving efficiencies and scale, formulations and so on and so forth. I mean, that never really ever stops. There's always -- from now on, there's always some type of level of manufacturing work that's going to be ongoing. That's pretty typical for most programs.

Sure. And in terms of lipid versus non-lipidated, it generally will maybe have a longer half-life, maybe a more potent activity, biological activities. When you compare your lipid data versus the earlier non-lipid data, was there any meaningful difference in some of these metrics?

Sure. 1 of the things that we're seeing is the -- let me back up and take a second and kind of talk about lipidated peptides, at least when it comes to melanocortins. The ability to get 1 of these peptides lipidated and maintain good MC4R selectivity and potency was not a trivial undertaking. That's quite a lot of work on -- you can't just stick any type of aliphatic tail on 1 of these peptides and expect it to work. That's not the case. And that's -- and some of that is going to be the nature of patents that have been filed and are continue to be filed. So it was really a -- it took a technological breakthrough to really get good lipidated peptides. 1 that we're seeing is, as we look at the pharmacokinetics across multiple species, both rodent and nonrodent, we're seeing very long half-lives. And 1 of the things that we're optimistic about is that there's a very good probability that these peptides will be less than once a week, meaning that we might be able to dose these things once every 2 weeks. So that's something that we're really excited about, and it's something we didn't expect as we went in. But as we're now looking at it and modeling it, it looks like we're going to have really potential for longer-term dosing windows, which is quite nice.

Okay. Great. That's very helpful. Maybe just 1 question along this line, which is that if you compare your -- I'm sorry, your lipidated PL-2000 versus, for example, Rhythm's next-gen sort of weekly administrated drug. Do you know whether their compound is lipidated or nonlipidated?

They're using -- my understanding would tell that they're using a polymer approach. So they have a potent MC4R agonist that they've put in a polymer that erodes over about -- would indicate that based on what little bit of information that's available, I would presume erodes over about a week and releases the drug. So it's a different approach. They're not using the lipidated approach. They're using a polymer approach.

Okay. Great. Maybe just 2 quick questions here. Talk about the oral drugs in terms of what -- I guess, what lessons you have learned from the prior PL-7737 and what sort of improvement you feel that you want to add to it before you feel comfortable to move the program into clinical stage?

Listen, certainly, we were -- we would have preferred that compound move forward. We did pick up a tox issue at the end of the tox studies. We have a good understanding of what that was. So we've now taken multiple approaches. So we have behind PL-7737, we had multiple scaffolds that were moving forward that had better selectivity, really deposing better selectivity. Those are being optimized now at multiple in parallel. And then with the PL-7737 series understanding what was -- what about that was potentially problematic from a drug standpoint, we've been able to fix that. And those analogs are also now being optimized and will be fully evaluated and go forward. So on that front, we did learn a lot and understanding what it takes to get 1 of these things optimized and go forward. And we now have multiple scaffolds, including the PL-7737 scaffold to go forward. But we also learned that these can be quite potent in multiple animal species, we did see really excellent weight loss. So it's nice, it's very clear that if you get it right, you should be able to drive a really good efficacy with an MC4R small molecule.

Do you anticipate to get into the, again, IND-enabling study toward end of the year or that will be in 2027?

I mean we're pushing real hard to make a selection of the compound by the end of the year and begin the IND-enabling studies that will put us in the second half of the year in the clinic.

Okay. And maybe the last question here is that just curious in terms of PWS, there obviously is a drug already approved in current days. So do you feel that ultimately, you will use the -- whichever compound you would for the PWS as a monotherapy? Or you think that may potentially be a combination because of different mechanism of actions?

I think ultimately, over time, for a lot of these rare syndromic particularly HO and Prader-Willi, it's likely that you'll find a number of patients who will move on to combination therapy. I don't believe that it necessarily will be with the currently approved drug of VYKAT. I mean that drug is -- it works and is the first approved, and I'll leave it at that and leave it at that. I think MC4R agonist can provide probably better tolerability, better safety and better efficacy than what's out there today. And when you combine that with, say, the GLP-1s, there's a potential to drive even better efficacy. So I think it's going to be a combination of polypharmacy for these patients is going to be certainly very dependent on the initial response that the patient has to MC4R agonism and if it's needed to move there. But what's nice is there is an opportunity to continue to push the therapy envelope by including an additional drug.

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

Congrats on the progress. A couple of questions. 1 is like you mentioned that tested compound from both peptide series are not agonist at MC1R. Can you provide a little bit color on quantification MC4R versus MC1R selectivity margin compared to previous Palatin compound? And -- and the next question is on the clinical trial. How are you planning those trials in terms of design? What you want to learn from Phase I for both peptide and oral?

In general, I'm not going to really enter into ultimately a lot of detail on how we characterize the agonism in part, this has become a pretty competitive field. There's not just Rhythm and Palatin, there are other companies that are looking at this. And 1 of the reasons why we use 1000 and 2000 others is that we're trying to maintain as much competitive advantage for as long as possible. And so that people can't just troll through patents and start to immediately see what the lead compound looks like. So to answer your question is we're pretty confident that they are -- we know how to characterize an agonist and that we believe these have de minimis MC1R agonism and that should relate clinically to a good improvement in the hyperpigmentation. And then on the second part, if I remember, you were asking about what clinical trial design?\.

Yes. I mean, what are you planning to learn from Phase I?

So in the -- obviously, the single ascending dose part of Phase I, that's a single dose, really, what you're looking for is, is there any over acute toxicity and then how -- what your tolerability window is and what your dosing window is. When we move into the multiple ascending dose part, these will now move to what are called healthy obese patients. They'll be treated for 28 days, and we intend to learn a tremendous amount from that. We should be able to see efficacy data. So we should -- we want to see the compounds can indeed cause reductions in food intake and weight loss. We'll be looking for long-term tolerability, longer-term safety signals. So when we come out of that MAD study, we'll have a pretty good idea on how well this compound is going to work and when we move into the intended patient population that hypothalamic or Prader-Willi or the BBS patients. 1 thing about the mechanism is it has very, very good translatability across patient populations with regards to efficacy as well as tolerability and safety.

This does conclude today's question-and-answer session. I would now like to pass the floor back to Dr. Carl Spana for closing remarks.

Great. I'd like to thank everyone for your participation in our year-end and first fiscal quarter. We here are extremely excited about the accomplishments that we've had. We've made, I think, some tremendous technical breakthroughs that are leading to, I think, some really best-in-class compounds with strong intellectual property supporting them. We're excited about where we are and where we're going. I mean this is really a very exciting time for Palatin, where we've been able to essentially use accumulated experience in this target really to develop some excellent compounds that we believe are going to be best-in-class. So we look forward to continuing to update you on our progress. Steve and I obviously will talk to some of you, I guess, throughout the quarter. And with that being said, enjoy your day, and we look forward to keeping you updated. Thank you.

Thank you. This does conclude today's conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.