Palatin Technologies, Inc. (AMEX:PTN) Q1 2024 Earnings Call Transcript

Palatin Technologies, Inc. (AMEX:PTN) Q1 2024 Earnings Call Transcript November 14, 2023

Operator: Greetings. Welcome to Palatin’s First Quarter Fiscal Year 2024 Operating Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference 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.

Carl Spana: Thank you. Good morning, and welcome to the Palatin first quarter fiscal year 2024 call. I’m Dr. Carl Spana, the CEO and President of Palatin. With me on the call today is Steve Wills, Palatin’s Executive Vice President, Chief Financial Officer and Chief Operating Officer. I’ll now turn the call over to Steve, and he will give financial and operating updates. Steve?

A scientist in a lab coat holding a vial filled with a blue glowing liquid, representing the clinical-stage biopharmaceutical company’s research in rare diseases.

Steve Wills: Thank you, Carl. Welcome everyone. Regarding non-financial highlights for our commercial product Vyleesi, which is approved for premenopausal women for the treatment of HSDD, which stands for hypoactive sexual desire disorder. As we’ve mentioned prior, the goal is to demonstrate commercial product value in the marketplace with an objective of re-licensing the U.S., possibly even the global rights to a committed women’s healthcare company. Palatin’s licensee of Vyleesi in China, Fosun Pharma, reported its first sale in the Hainan Province of China. Palatin’s licensee of Vyleesi in South Korea, Kwangdong Pharmaceuticals, completed enrollment in its Phase 3 clinical trial evaluating the efficacy and safety of Vyleesi in premenopausal women with HSDD.

Data is currently anticipated by calendar year end 2023 with a potential regulatory submission in the first half of calendar 2024. Palatin entered a strategic partnership with UpScriptHealth, a leading direct-to-consumer telemedicine company providing telemedicine services to pharmaceutical and medical technology companies. Regarding operations, specific to Vyleesi, for the fiscal first quarter ended September 30, 2023, gross product sales of $4.6 million increased 11% over the prior quarter and increased 100% over the comparable quarter last year. Net product revenue of $2.1 million increased 20% over the prior quarter and increased 142% over the comparable quarter last year. Total prescriptions dispensed increased 14% over the prior quarter and increased 88% over the comparable quarter last year.

Refill rates, commercial insurance reimbursement, and net revenue per prescription dispensed continued with positive and impactful results and trends, versus the prior quarter and comparable quarter last year. Vyleesi reported its seventh consecutive quarter of double-digit growth across all metrics both significant and some not as significant. Importantly, Vyleesi’s quarterly net product revenue continues to exceed Vyleesi quarterly operating expenses. Moving over to overall operations for the fiscal – for the first quarter ended September 30, 2023. Regarding revenue, total revenue consists of gross product sales of Vyleesi, net of expenses, allowances and accruals, and license and contract revenue. As I mentioned, Vyleesi gross product sales to pharmacy distributors for the quarter ended September 30, 2023 were $4.6 million with net product revenue of $2.1 million.

This compared to gross product sales of $2.3 million and it looks like it was a double and net product revenue of a little under $1 million for the comparable quarter last year. Gross product sales increased 100%. Yes, that’d be a double. And net product revenue increased 142% over the comparable quarter of last year. Regarding operating expenses. Total operating expenses were $8.2 million for the quarter ended September 30, 2023, compared to $9.6 million for the comparable quarter last year. The decrease in operating expenses was mainly related to the overall decrease in expenses on our MC, stands for melanocortin programs, and secondarily to the overall decrease in selling expenses related to Vyleesi and to a certain extent, the reduction in cost of product sold due to the sale of fully reserved Vyleesi inventory.

Regarding cash flows. Palatin’s net cash used in operations for the quarter ended September 30, 2023 was $5.9 million compared to net cash used in operations of $8.6 million for the same period in 2022. The decrease in net cash used in operations is mainly due to a decrease in net loss offset by working capital changes. Regarding net loss. Palatin’s net loss for the quarter ended September 30, 2023, was $5.9 million, or $0.48 per basic and diluted common share, compared to a net loss of $8.3 million, or $0.86 per basic and diluted common share for the same quarter in 2022. Excuse me, I have a little bit of a lingering cough. Regarding cash position. As of September 30, 2023, Palatin’s cash, cash equivalents and marketable securities were approximately $5.5 million plus $1.3 million of accounts receivables, compared to $11 million plus $2.9 million of accounts receivables as of June 30, 2023.

This $5.5 million of cash, cash equivalents and marketable securities as of September 30, 2023, does not include $4.5 million of net proceeds from the Registered Direct Offering, which closed in October 2023. We believe that existing cash, cash equivalents, marketable securities and accounts receivables will be sufficient to fund currently anticipated operating expenses and disbursements into the first half of calendar year 2024. Now I’ll turn it back over to Carl.

Carl Spana: Thank you, Steve. As you know, our focus is on establishing the melanocortin system as a target for safe and effective medicines to treat inflammatory and autoimmune diseases and to develop a pipeline of highly effective drugs with unparalleled safety. We have three active clinical programs based on melanocortin agonist with multiple new programs ready to advance into clinical development pending resources. All of these coming from our highly productive research activities. As previously reported, we have completed patient enrollment in the PL9643 MELODY-1, Phase 3 study for dry eye disease. As a reminder, PL9643 is a topically delivered melanocortin agonist that works by resolving inflammation on the ocular surface that is the cause or a key cause of dry eye disease.

We’ve also conducted an interim analysis of initial 120 patients enrolled in MELODY-1, which showed statistical separation for clinical efficacy across multiple signs and symptoms of dry eye disease. Importantly, PL9643 has excellent ocular safety and tolerability. With the last patient about to complete randomized treatment, we are working to have the top line data by year end. We believe the emerging efficacy and tolerability profile of PL9643 gives the potential to be a leading treatment for dry eye disease. Moving on our Phase 2 study evaluating oral PL8177, a selective melanocortin-1 receptor agonist in ulcerative colitis patients is on track for an interim assessment of the clinical data in the first quarter of 2024. Supporting oral PL8177 development are preclinical studies demonstrating that treatment with oral PL8177 and disease model causes disease colon to improve to a healthy state and to resolve the pathological inflammation.

Resolving inflammation rather than blocking it provides the possibility of efficacy coupled with safety in treating colitis and inflammatory bowel disease. Finally, our BREAKOUT study, which is a Phase 2 open-label study in diabetic patients with kidney disease is on track for top line data in the first part of 2024 as well. I’d like to take a minute to highlight two new clinical studies that we are anticipating starting in the first quarter of calendar 2024. The first is a Phase 2 study evaluating a novel formulation combining bremelanotide, a melanocortin agonist with a phosphodiesterase-5 inhibitor, and these are drugs such as Vyleesi, I’m sorry, such as Cialis and Viagra. This is an extension of our commercial efforts in sexual dysfunction.

Approximately 35% of men with erectile dysfunction fail or have an inadequate response to PDE5 inhibitor treatment represent a large underserved market. The only treatment options for these failure patients are highly invasive, such as penile injections or penile implants. We have previously conducted clinical trials showing the synergistic effects of combining bremelanotide with a PDE-5 inhibitor as a treatment for erectile dysfunction. The second clinical study will evaluate a melanocortin-4 receptor agonist in obese patients taking GLP-1 agonists. The GLP-1 agonist for things such as Ozempic or Wegovy. These are drugs that are being used, you hear them on the news all the time. These are the drugs that are the current standard of care for treating obese patients.

As drug treatment for obesity is now established and growing rapidly, we believe the treatment goal will switch from driving weight loss to overall weight management. This will require a variety of drugs with differing mechanisms of action that affect not only weight loss, but importantly weight loss maintenance. We strongly believe that drugs targeting the melanocortin system will be an important part of the future of obesity. Treatment and overall weight management. With our extensive experience in the design and development of melanocortin agonists for treating obesity including two clinical studies, we are well positioned to be a leader in the development of melanocortin-based therapeutics. Just a few operating highlights before we move on to questions.

Listen, I just want to just reiterate again, we are so pleased with Vyleesi seven consecutive quarters as of double-digit growth across all value metrics. Notably, our net product revenue increased 20% over the previous quarter, prescriptions dispensed another 14% over the prior quarter. Listen, we are also very excited that the Vyleesi quarterly net product revenue continues to exceed Vyleesi quarterly operating expenses because we stated we’re planning to initiate two new programs with Phase 2 clinical studies starting in the first quarter of calendar 2024 with the data readout in 2024 as well. The two studies are, as we just said, one will evaluate the co-formulation of bremelanotide with a PDE-5 inhibitor in patients with erectile dysfunction that have failed first line therapy.

So in other words, Viagra or Cialis isn’t working for them and they need to move on to more aggressive therapy. The second we’ll evaluate the addition of the melanocortin-4 agonist bremelanotide to obese patients taking a GLP-1 agonist. Our ocular programs continue to make impressive advances. Our MELODY-1 Phase 3 DED study, or dry eye study is fully enrolled data coming at the end of the year. We may very excited by the emerging product profile for PL9643, highly differentiated from current treatments. We’ve got excellent ocular tolerability and we think we’re going to have broad efficacy across multiple signs and symptoms, and I think we really excited that this can become a leading treatment for dry eye disease as well. And finally, PL9588, we’ve talked about it in the past, but this is a novel melanocortin agonist for glaucoma.

We are now on track to file an IND sometime around the end of the first half of 2024, and then move on to Phase 2 clinical studies. I’d like to thank you for listening to the Palatin first quarter fiscal year 2024 call. You can find additional information on our science and clinical programs on our website, www.palatin.com. You can also find additional information on Vyleesi at the Vyleesi website, vyleesi.com. And Steve and I would certainly like to thank you for your support, your interest, and we’ll now open up the call to questions.

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Q&A Session

Operator: Certainly. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question for today is coming from Joe Pantginis from H.C. Wainwright.

Joe Pantginis: Hey guys. Thanks a lot. So first, Carl, I wanted to ask about the logistics around the news flow for MELODY-1 coming up. So when you say top line data in the late this year and final data in the first quarter, I guess I wanted to get a sense of what you’re expecting to show for the top line data aspect?

Carl Spana: Sure. Well, we’ll just – we’ll be focused on the primary endpoints of the study and overall safety. So I mean, there’ll be a sign in a symptom. There most likely will be tearful breakup time or inferior corneal fluorescein staining. Those types of things will be for your assigned and then for your symptom and most likely ocular pain.

Joe Pantginis: And it will be…

Carl Spana: Go ahead.

Joe Pantginis: I’m sorry. You like – we’ll be getting like numbers on top line or just more of like, you either met those endpoints and then we’ll get them at the top line or we’re actually looking towards numbers at the top line aspect?

Carl Spana: Well, Steve and I like numbers, so we put numbers out.

Steve Wills: There’ll be numbers.

Carl Spana: If we hit it, we’re going to be – if we hit it, which I think we will – we’re going to be pushing it, promoting it.

Joe Pantginis: Got it. Got it. And then, look, the data you put out recently on the preclinical front regarding the combination of bremelanotide and the GLP-1 for obesity is exciting. And like you said, this is all that we’re seeing in the news here. So I’m hoping to get a little more color on the clinical and regulatory path for this combination. What the studies are going to look like initially and where do you think you can fit as the competitive landscape continues to evolve, any particular patients you might be targeting. And then maybe any additional color when you say about the maintenance of the weight loss because as it stands right now, these GLP-1s, you need to be on them essentially for life? So want to get a sense of how BMT might contribute to that?

Carl Spana: Sure. So I’d like to take step back just a second, kind of even more, maybe a little more globally and in the sense that this is a 20-year process. I mean, not for us, but I mean, weight loss management treatment. This is going to roll out similar to hypertension. You’re going to have multiple classes of therapeutics enter into the marketplace, each with their own niche and providing their own risk reward and benefits. The overall goal here now is going to be how do we get most of the patients that are coming in to really reach their weight loss goals and maintain that because we as a society are going to pay for this. Well, we’re not going to get the benefits. If you lose weight over six or 10 months and say you get that 50 pounds off.

If it comes back on in six months, that’s not good, right? We paid a lot of money and we don’t get the overall long-term benefits. All those beautiful things that Novo’s [ph] reporting about their work on reducing cardiovascular risk, overall mortality, those occur because you keep weight off. It’s not just the weight loss process itself. So in that context, looking at say bremelanotide for example, which is what the study we’re going to be doing in the context of the backdrop of a GLP-1. It’s really there as a first step, right? We have the preclinical data. There were just some recent case studies reported on the use of the melanocortin-4 agonists added on to tirzepatide or Wegovy treatment showing that you can really enhance weight loss with the two mechanisms together without having to elevate that GLP-1 dose.

And that’s an important point because we hear all about these GLP-1, but what we don’t really hear about is really start talking to the patients. A lot of them are taking it because they want to lose weight. They’re not taking them because they have a great experience on them. And so combining mechanisms allows a clinician to have the opportunity to essentially modulate the side effects, making sure that each patient gets the treatment that they need, that they reach their goals. Now let’s switch to the other side, maintenance. Now, probably you guys are probably not aware, but we had a collaboration with AstraZeneca a while back looking at melanocortin for weight loss and then particularly weight loss maintenance. But as part of that, we actually have Palatin compounds that were evaluated in weight loss models.

And very interestingly there, what we were able to show is that melanocortin, you don’t need to give a tremendous amount of melanocortin to actually maintain weight loss. So if you take an animal that’s obese, you bring them through the weight loss process, and now they’re in a state where they’re in a weight loss state. One of the things that, whether it’s an animal or a human you’re fighting is that your body wants to go back, right? You’ve got – you want to consume more calories, your skeletal muscles don’t work as well, you’re using less calories. So you have to fight that process. Turns out that the melanocortin mechanism may be very, very well suited to there. We noticed that it was one-sixth of dose required to maintain versus cause weight loss.

So we think there’s a very, very good opportunity there and that’s going to be very key to the overall success of weight management. So we think about a more globally and where we can play, there’re going to be multiple pockets where we can play from being addition to maybe GLP-1 [ph] therapy so that patients reduce more weight without having to go up in dose or have more tolerable effects, weight loss maintenance patients that aren’t tolerating the GLP-1s are contraindicated. So there are a lot of places where a melanocortin can play and I think it’s probably one of the best mechanisms because it is one of the first mechanisms that we – that really evolved or was the genesis of thinking about treating weight loss from a pharmaceutical perspective.

Joe Pantginis: Very helpful colors. Carl, thanks a lot.

Operator: Your next question is coming from Michael Higgins of Ladenburg Thalmann.

Unidentified Analyst: Hey, good morning. This is Farhana [ph] on behalf of Michael. Congrats on the continued progress this quarter and we’re really looking forward to the MELODY data. Just wanted to follow up on your question earlier regarding the MELODY readout. So I got that the data in the fourth quarter is going to have the primary endpoint and safety. But could you provide some, more specifics on what can we see in the final data readout that’s going to be in the first quarter next year?

Carl Spana: Sure. Look, I mean, there are probably 20 different endpoints that we look at in addition to all of the safety endpoints as well. That so you’ll see the full data set as quickly as we can get it done and out. That can be, I mean, it’s not appropriate for a press release, so that would normally found a publication or on presentations but or maybe we’ll have a conference call to go over it. You’ll also look at any of the sub-analysis that we may do on various types of patients. These are very data rich studies. So I mean, I’m sure we’ll be analyzing this data for the next six months to see what comes out. But in general, we will try to get out as quickly as we can the full dataset, all of the endpoints that are there, both the primary, key secondaries and then the corresponding secondaries and then exploratory endpoints as well.