Palatin Technologies, Inc. (AMEX:PTN) Q4 2023 Earnings Call Transcript

Palatin Technologies, Inc. (AMEX:PTN) Q4 2023 Earnings Call Transcript September 29, 2023

Operator: Greetings, and welcome to Palatin’s Fourth Quarter and Fiscal Year End 2023 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 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.

Carl Spana: Thank you. Good morning, and welcome to the Palatin fourth quarter and fiscal year end 2023 call. I’m Dr. Carl Spana, 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 Wills: Thank you, Carl, and good morning and good afternoon, everyone. Starting with Vyleesi. As a reminder, Vyleesi is our FDA-approved commercial product for pre-menopausal women with hypoactive sexual desire disorder, or HSDD. The goal of the Vyleesi program is to demonstrate commercial product value in the marketplace. With six consecutive quarters of double-digit growth that we are going to talk about shortly, I think we are doing that. But the objective is to re-license the U.S. rights to a committed women’s health care company, and that process is advancing. When I say nicely, we do expect that there will be a transaction that we will strongly consider later this year. More about that as we move forward. Specifically, for the fiscal fourth quarter ended June 30, 2023, Vyleesi gross product sales amounted to $4.1 million.

This was an increase of 20% over the prior quarter and an increase of 78% over the comparable quarter last year. Net product revenue of $1.8 million, increased 47% over the prior quarter and increased 128% over the comparable quarter last year. Total prescriptions dispensed increased 16% over the prior quarter and increased 92% over the comparable quarter last year. All the value metrics are moving in a positive direction. Refill rates, commercial insurance reimbursement and net revenue per prescription dispensed continued with impactful results and trends versus the prior quarter and comparable quarter last year. Regarding Vyleesi licensees outside the U.S., Fosun Pharma, Palatin’s license of Vyleesi in China, reported its first sale in the Hainan Province of China.

Kwangdong Pharmaceuticals, Palatin’s license of Vyleesi in South Korea, completed enrollment in its Phase III clinical trial, evaluating the efficacy and safety of Vyleesi in pre-menopausal women with HSDD. And data from this trial is currently anticipated by calendar year-end, with a potential regulatory submission in the first half of calendar year 2024. On an additional distribution front, Palatin entered into a strategic partnership with UpScriptHealth, a leading direct-to-consumer telemedicine company, providing telemedicine services to pharmaceutical and medical technology companies, and we anticipate the reach for Vyleesi from an awareness standpoint will be increasing over the coming quarters. Moving over to the financial update. For the fourth quarter – and I will also highlight certain fiscal year ended June 30, 2023 results.

Regarding revenue, total revenue consists of gross product sales of Vyleesi, which is net of expenses, allowances and accruals and license and contract revenue. Vyleesi gross product sales to pharmacy distributors for the quarter ended June 30, 2023, as I mentioned, was $4.1 million, with net product revenue of $1.8 million, and this compared to gross product sales of $2.3 million and net product revenue of $0.8 million for the comparable quarter last year. Gross product sales increased 78% and net product revenue increased 128% over the comparable quarter last year. Moving to operating expenses. Total operating expenses were $12.6 million for the fourth quarter ended June 30, 2023, compared to $13.9 million for the comparable quarter last year.

The decrease in operating expenses was mainly the result of the recognition of expenses during the fiscal year June 30, 2022, in connection with the sale and issuance of our Series B and Series C redeemable convertible preferred stock and secondarily, to lower spending on our marketing efforts of Vyleesi during fiscal 2023. I do want to expand a comment in that – regarding this $12.6 million, again, from the fourth quarter of June – fourth quarter ended June 30, 2023. This $12.6 million of operating expenses, this is actually greater than what we, if you will, had projected internally. And the reason being, we advance our programs, primarily our Phase III dry eye disease trial, which we did report on recently [hit full] enrollment, that full enrollment did trigger a milestone, which triggered an expense and a payment.

But I do want to note that $12.6 million expenses – operating expenses for the June 30 quarter, going forward, over the next several quarters, that number, those operating expenses will be significantly less than $12.6 million. Again, we advance the programs, we hit some milestones, we’re going to have some greater expenses. There’s always going to be some timing issues in that regard. Let me move over to the cash flows. Palatin’s net cash used in operations for the quarter ended June 30, 2023, was $9.6 million compared to net cash used in operations of $7.7 million for the same period in 2022. Again, same reason as I just addressed above, we had some greater expenses due to the advancement of the programs, which is a positive thing, hitting some milestones that hit in the June 30 quarter.

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Palatin’s net cash used in operations for the fiscal year ended June 30 for the full fiscal year was $28.4 million compared to net cash used in operations of $29.9 million for the same period in 2022. The decrease in net cash used in operations, which is not a significant amount, was frankly due to a number of items, including different spending levels for Vyleesi, but also we did recognize some sales from net operating losses to the State of New Jersey that generated over $4 million of non-dilutive financing. Finishing up on the financials with the net loss and the cash position, Palatin’s net loss for the quarter, fiscal year ended June 30, 2023, was $10.7 million, again that was for the quarter, and $27.7 million for the year, respectively, compared to a net loss of $12.8 million and $36.2 million, respectively, from the same periods in 2022.

Regarding our cash position. As of June 30, 2023, Palatin’s cash, cash equivalents and marketable securities were approximately $11 million, plus $2.9 million of accounts receivables. Those accounts receivables 100% good. All those funds have been received in the July, August time frame. And this compared to cash and cash equivalents of $19.6 million with $1.7 million of accounts receivables as of March 31, 2023. I’d say, hey, those accounts receivables went up a little bit. Well, we’re selling more, all good. And based on our current operating plan, we believe that existing cash, cash equivalents and marketable securities and receivables will be sufficient to fund currently anticipated operating expenses through calendar year 2023. Of note, I do want to highlight that Palatin’s audited financial statements for the year ended June 30, 2023, to be included in the annual report on Form 10-K does include an audit report from our independent registered public accounting firm, KPMG, that contains a going concern explanatory paragraph, which we have had for quite some time.

With that said, I’m going to turn it back over to Carl to talk a bit more granular about our exciting development and commercial programs. Carl?

Carl Spana: Thank you, Steve. Over the course of 2023, we have continued to successfully execute on our strategy to develop novel therapeutics based on activating the melanocortin system. As I stated previously, we are focused on establishing the melanocortin system as a target for safe and effective medicine to treat inflammatory and autoimmune diseases and to develop a pipeline of highly effective drugs with unparalleled safety. An important component of our strategy is to advance our understanding of the role of the melanocortin system in stress responses, inflammation and tissue repair. Our research efforts are being recognized with the numerous peer-reviewed and scientific presentations by our scientists and academic collaborators.

Our research efforts have allowed us to identify opportunities for novel innovative therapeutics to design better clinical trials and are key support for our business development activities. We have three active clinical programs based on melanocortin agonist developed from our research efforts. We are very pleased, as Steve mentioned, to have completed patient enrollment in the PL9643 MELODY-1 Phase III study in dry eye disease and are working to deliver top line data before calendar year-end. Our Phase II study evaluating oral PL8177, a selective melanocortin-1 receptor agonist in ulcerative colitis patients is on track to complete patient enrollment by calendar year-end with the interim assessment data as early as calendar year-end. BREAKOUT, our Phase II open-label study in diabetic patients with kidney disease is also on track for top line data in the first quarter of 2024.

Some of the additional highlights for the fourth quarter and fiscal year-end 2023 are as follows. On the commercial front, we are pleased with Vyleesi’s quarter-over-quarter double-digit increases across all value metrics. Notably, net product revenue increased 47% and prescription dispensed increased 16% over the prior quarter. We are excited that Vyleesi quarterly net product revenue continues to exceed Vyleesi quarterly operating expenses, i.e., we make some money. As an extension of our commercial efforts in sexual dysfunction, we have developed a co-formulation of our melanocortin receptor-4 agonist bremelanotide with a phosphodiesterase-5 inhibitor as a treatment for men with erectile dysfunction that have failed current PDE-5 inhibitor therapy.

To [set us in] aside, bremelanotide is the active ingredient in Vyleesi and phosphodiesterase-5 inhibitors, or PDE-5 inhibitors, are such drugs as Viagra, Cialis and these are the standard of care for men with erectile dysfunction. You may not be aware, but approximately 35% of men with erectile dysfunction fail or have an inadequate response to current treatments and represent a very large underserved market. The only treatment options for these 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 the PDE-5 inhibitor as a treatment for erectile dysfunction. The large market opportunity and our clinical work support commercial development of this novel formulation, and we are planning to initiate clinical programs as early as the end of this year.

Our ocular programs continue to make impressive advances as we stated, MELODY-1 is fully enrolled, and we expect data by year-end. We are very excited by the emerging product profile for PL9643, which is highly differentiated from current treatments for dry eye disease with excellent ocular tolerability, broad efficacy that we believe will make PL9643 the leading treatment for dry eye disease. We presented data from the analysis of the Lead-In population of MELODY-1 Phase III trial at the Annual Meeting of the Association for Research and Vision and Ophthalmology, also known as ARVO, where PL9643 demonstrated broad efficacy and statistical significance separation across multiple signs and symptoms of dry eye disease and excellent ocular tolerability and safety profile with no, I repeat, no ocular adverse events.

This analysis was extremely important, allowing us to confidently set the primary sign and symptom endpoints, the analytical methods and sample size of secondary endpoints, the analytical methods and sample size for the double-blind segment of MELODY-1. We are very excited about the data coming out, and we believe we’ve done everything we can to reduce the risk of this trial and are anticipating a very positive outcome. We also presented data at ARVO on PL9588, our melanocortin-based treatment for glaucoma. And preclinical studies, PL9588 show competitive effects on reducing intraocular pressure with a single topical dose with the magnitude of effect similar to the positive controls of latanoprost and timolol, which are some of the current treatments that are used with effects lasting out to 24 hours.

Importantly, we also have shown effects on optic nerve protection, which we think next-generation treatments for glaucoma are not a need. So not only do we lower intraocular pressure with this compound, we actually protect the optic nerve. As we are preparing to advance this important program, we have already initiated regulatory discussions with the FDA. Our research efforts also made significant advances with multiple presentations at scientific meetings, publications and peer-reviewed journals. And our expertise in melanocortin system and innovative clinic programs are supporting our business development activities. We have multiple ongoing discussions with potential partners for our programs, and we remain optimistic that we will enter into one or more partnerships to help advance some of these very exciting programs.

As we look forward to fiscal 2024, we have significant opportunities to drive value. We have data coming from 3 clinical trials, initiation of 2 new clinical programs, continued Vyleesi growth and partnerships, advances of Vyleesi by our South Korean and Chinese partners. Steve and I would like to thank you for listening to the Palatin Fourth Quarter and Fiscal Year-end 2023 Conference Call. You can find additional information on our science and clinical programs on our website, www.palatin.com, and you can find additional information on Vyleesi at the vyleesi.com website. Thank you. We will now open the call to questions.

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Q&A Session

Operator: Thank you very much. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question is coming from Joe Pantginis from H.C. Wainwright. Joe, your line in live.

Joseph Pantginis: Hey, guys. Good morning. A couple of questions, if you don’t mind. But first, best of luck with consummating a Vyleesi transaction. I know it’s highly anticipated as you continue to show good traction by not doing that much on your end and having DTC actually show some good results. So best of luck with that. So first, on the 8177 program, I wanted to focus a little more on the upcoming data, which is, I think, anticipated around year-end or maybe going into the beginning of the year. What level of data or what do you think you’re going to be able to show us for that interim in UC patients?

Carl Spana: So that’s the primary endpoint data. So we’re – this is a eight-week treatment study, obviously, active versus placebo. And we’re looking primarily at a colonoscopy score, so – an endoscopic score. So we’re looking for grading. We’re looking forward to see at those lesions – also kind of lesions to decrease and show clear evidence of healing based on the Mayo endoscopic sub-score.

Joseph Pantginis: Got it. And then, obviously, I mean, going back to Vyleesi a little bit, but more for the combination that you recently announced and gave more details today with the PDE-5 combination. Any more color regarding the design that you’re looking at? And what kind of enrollment expectations you might have to be able to drive, say, rapid data?

Carl Spana: Sure. A couple of things. So on – so in company. So in the study that we’re anticipating in conducting the drugs will be given in – co-administered. So they won’t be the co-formulation. What we’re looking for in the study is to determine the right ratio of bremelanotide to the PDE-5 inhibitor for the failure patients. The co-formulation would be used in the second – in the follow-up study to that where we can limit the number of combinations that we have to look at. So the study – these studies enrolled very rapidly. We’ve got – we probably have two clinical sites, actually Philadelphia and New York. We’re working with – one of the advantages we’ve had obviously, a very long history in working sexual dysfunction and ED as well.

So as we reach back out to some of our key investigators, they were quite enthusiastic about conducting this study. As they pointed out to us, there hasn’t been a new innovation in erectile dysfunction in 30 years, and these guys really don’t have an alternative. So I would anticipate extremely rapid enrollment in the study.

Joseph Pantginis: Okay. Good. And then you know what, I will go back to Vyleesi by itself for a second. So look, I believe you guys have the wherewithal to be able to say consummate transactions because, obviously, you’ve had the ex U.S. deals as well already in with upcoming news, as you alluded to. I guess let me play the opposite the argument. Nothing in this world is guaranteed until things are signed. So on the other end of spectrum, if you do not say, license it in the U.S., what potential plans or scenarios would you entertain with regard to Vyleesi and what kind of potential investment you might or might not be considering?

Steve Wills: Well, thanks for that question there, Joe. Internally, we couldn’t be more pleased with the results, 6 consecutive quarters of double-digit growth. But more importantly, we’re not losing any money. In fact, we’re making money on Vyleesi. We have a very limited infrastructure. Our plan is the targeted profitable growth, and we’re doing that. I mean we got $1.8 million of net sales. We anticipate that going up for the third quarter and the fourth quarter. And at some point, if we don’t pull the trigger, and we have options. We 100% have options on pulling a trigger for a transaction for Vyleesi. It’s always that balance of the value now versus potentially the evaluator. There’s many things that we could do to – and we are considering, but we’re trying to balance on it well, if you do it something here now, how does that affect the potential transaction if it’s going to be a quarter or two later.