Q2 2022 Palatin Technologies Inc Earnings Call

February 15, 2022

Hello, Ladies and gentlemen, and welcome to Palatin second quarter fiscal year 2022 operating results Conference call. As a reminder, this conference 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 maybe 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 a variety of risks and uncertainties discussed in the company's most recent filings with the Securities and Exchange Commission.

Consider such risks and uncertainties careful in evaluating these forward looking statements by Palatin its prospects.

I would like to turn the call over to our host Doctor Carl <unk>, President and Chief Executive offer officer of Palatin. Please go ahead.

Thank you good morning, and welcome to the Palo Technology's second quarter fiscal 2022 call. Dr. Cross banner, CEO and President of Palatin with me on the call today is Steve Wills, <unk> Executive Vice President Chief Financial Officer, and Chief operating Officer.

Steve Thank you Carlos.

Good morning, good afternoon, everyone.

Regarding Palatin second fiscal quarter ended December 31, 2021 financial results are as follows.

Total revenue consists of gross product sales of <unk> net of allowances and accruals and license and contract revenue.

As a reminder, <unk> is our commercial product for the treatment of premenopausal women with hyperactive <unk> sexual desire disorder.

Why do you see gross product sales to pharmacy distributors for the quarter ended December 31, 2021 amounted to $800000 approximately with net product revenue of approximately $72000 compared to gross product sales of approximately 900000 with negative net product revenue of approximately.

$164000 for the comparable quarter in 2020.

Regarding <unk>.

For the quarter ended December 31, 2021, gross product sales decreased 18% and net product revenue increased 144% over the comparable quarter in 2020.

The gross product sales decreased 46% of net product revenue decreased 55% over the prior quarter ended September 30 of 2021. This decrease importantly was primarily result of pharmacy distributors minimizing their end of year inventory levels.

Total prescriptions dispensed were flat compared to the same period in 2020 and the prior quarter ended September 32021, commercial insurance reimbursement and net revenue per prescription dispensed increased significantly over the comparable quarter in 2020 and the prior quarter ended September 32021.

Also for the quarter ended December 31, 2021, Thompson recognized 250000 in license and contract revenue pursuant to its license agreement with <unk> pharma. There were no license revenues recognized during the comparable quarter in 2020.

Moving over to operating expenses total operating expenses for the quarter ended December 31, 2021 were $8 8 million compared to $9 1 million for the comparable quarter in 2020. The decrease in operating expenses was the result of decreased commercial expenses related to <unk> offset by increased research and development expenses.

Primarily related to the advancement of <unk>.

90, 643 into a pivotal phase III clinical trial for patients suffering from dry eye disease.

Regarding cash flows <unk> net cash used in operations for the quarter ended December 31, 2021 was $6 3 million compared to net cash used in operations of $14 4 million for the same period in 2020.

The decrease is mainly due to a onetime negotiated payment of approximately $7 million in the quarter ended December 31, 2020. This was related to inventory purchase commitments up by Lucy that Palatin assumed as part of our termination agreement with <unk> Pharmaceuticals.

But it also included $16 $3 million of payments by a mag to palatin.

Regarding net loss <unk> net loss for the quarter ended December 31, 2021 was $8 7 million or <unk> <unk> per basic and diluted common share compared to a net loss of $10 million or approximately <unk> <unk> per basic and diluted common share for the same period in 2020.

Yes.

Regarding cash position.

As of December 31, 2021, Palatin is cash and cash equivalents.

Were $47 3 million with approximately 600000 of accounts receivable compared to cash and cash equivalents of $53 4 million and 900000.

Accounts receivable as of September 32021.

Based on our current operating plan Palatin believes that existing cash and cash equivalents will be sufficient to fund currently anticipated operating expenses through at least March 31 2023.

Now going to turn the call the call back over to Carl.

Thank you Steve.

Turning to leasing our operating objective has been to optimize the core metrics that support the commercial value of <unk>, meaning how do we make money on a prescription for the quarter commercial insurance coverage net revenue per prescription and prescription refill rates all increased over prior quarters.

Our ultimate objective is to re license could we see to a committed partner ensuring the continued availability of <unk> as a treatment option for premenopausal women with <unk> sexual desire disorder and a return on our investment we continue engage with potential partners.

And in the U S. In other territories and the timing of a potential license is dependent on those reaching acceptable terms with the right partner.

Moving on across a multitude of inflammatory and autoimmune diseases. There remains a vital medical need for new treatments to provide patients and clinicians with safe and effective options.

Our research and development operations are focused on developing drugs that modulates Atlanta Court system, a new treatment modality for patients suffering from pathologic inflammation with a primary focus on ophthalmic diseases, such as diabetic retinopathy dry eye and uveitis.

Many of the current treatments for inflammatory and autoimmune diseases work by blocking one or more pro inflammatory pathways, which can cause immune suppression and major safety concerns.

The <unk> system, one of the body's natural mechanisms for resolving inflammation.

During the immune system to a normal state promoting tissue healing. We believe that we can develop highly differentiated therapeutics with efficacy and superior safety profile.

We have a multilayered plan to advance our understanding of Atlanta Court system at a molecular level and to establish the clinical validation of <unk> based therapeutics. Our clinical development programs include ocular non ocular indications are designed to demonstrate the broad utility of court system is a new target for drug development is successful we will have to build a new class of therapy.

<unk> for the treatment of inflammatory and autoimmune diseases.

Our first product topically delivered Peel 94, three is our most advanced <unk> agonist for treating ocular diseases that affect the tissues of the interior or foot segment of the eye. The first indication for <unk> four three as dry eye disease and in December 2021, we began enrollment in a pivotal phase III dry eye disease study called <unk>.

Don.

Now let me one is evaluating the safety and efficacy of <unk> 90, 643 versus vehicle control in patients with moderate to severe dry eye disease over a 12 week treatment period.

The study is targeted to enroll 240 patients and includes an interim data assessment that will be conducted by an independent data monitoring committee that will allow us to increase the number of subjects if needed reducing the risk of underpowered study three.

Three co primary at three key secondary endpoints will be comprised of signs and symptoms of dry eye disease were determined based on detailed analysis of the phase II data.

<unk> is currently enrolling patients at multiple sites in the U S and the interim data assessment is on schedule for mid 2022 with preliminary data in the second half of 2022.

This successful Palatin will initiate the second phase III your logic for three <unk> two an open label safety study called <unk> three.

The three <unk> license.

Four three drives these studies will provide the safety and efficacy data required to file a new drug application with the FDA.

Yes.

The emerging profile 90, 643 with its rapid therapeutic onset excellent ocular tolerability and safety profile as a potentially distinct advance in dry eye disease therapy is the phase three results are confirmed in the upcoming phase II clinical study, we believe that PL 90, 643 has the potential for substantial penetration into the multibillion dollar dry eye disease market.

We've appealed 94, three and other <unk> will have utility in treating multiple front of the eye disease indications and we are planning to advance a second disease indication to the investigational new drug filing in 2022 as well.

As we move out through the back of the eye field 96, 5% <unk> from Atlantic <unk> agonist in development for treating various types of retinopathy.

We are currently conducting the preclinical development activities to file an IND with the FDA, which will allow us to begin because our activities with PL nine six 504.

We recently presented preclinical data describing the protective effects of <unk> hundred $96 four in mouse models of retinopathy at the 2021 annual meeting of the American Society of retina specialists in the presentation was awarded a top 10 poster designation.

The current market.

Current drug market with various retinopathy drugs was approximately $20 billion in 2021 is projected to be in excess of $27 billion by the end of 2025.

<unk> is a large need for new innovative treatments for retinal diseases, and we believe PL nine six 504 early in its development has tremendous potential to positively impact patients retinal disease and garner a significant part of this extremely large market.

Obviously, the <unk> move on to other parts of the body.

Our appeal.

707 oral formulation for us as colitis, we are on schedule to initiate patient enrollment in a phase two proof of concept study in the second quarter of 2022, we anticipate initial data readout in the second half of 2022 as well.

Will be our first clinical study designed to evaluate the potential of a selective <unk> receptor agonists as a treatment for inflammatory bowel diseases.

Study will evaluate the safety and efficacy of <unk> hundred 77, and if positive the results of the study will add to the validation of Atlantic quota system as a target for innovative drugs as well as support our business development and licensing efforts around <unk> hundred 70 <unk>.

The market for drugs that treat various inflammatory bowel diseases as multibillion dollar and there remains a large need for new safe.

<unk> and effective treatment options to expand the advance the treatment of these patients the emerging safety and efficacy profile of <unk> hundred 77, if confirmed would be a potential major advance in the treatment of inflammatory bowel disease, particularly in the pediatric population.

You can find additional information on our programs on our website www Palatin dot com.

As a company, we are well positioned to advance a new mechanism for treating inflammatory autoimmune diseases based on drugs that modulate the mine. According system.

This year was an exciting year for <unk> with data Readouts from two major clinical programs and two additional programs advancing towards clinical studies.

So in summary, before we go into the Q&A.

90, 643 is actively enrolling patients in a phase III pivotal dry eye disease study called <unk> one the interim analysis on schedule for mid 2022 with data by year end 2022.

Oral <unk> hundred 77, four treehouses colitis remains on schedule to begin patient enrollment in the second quarter of 2022, and a phase II proof of concept clinical study with preliminary data also before at year end 2022, both of these innovative drugs have the potential to be significant players and growing multibillion dollar markets.

Our pipeline of innovative new treatments continues to grow with Peel $96 for linerboard and Ags, we're treating retinopathy advancing toward 90 filing and started clinical studies as well as the novel <unk> agonist or second part of the <unk> treatment also advancing towards an investigational new drug filing in 2022.

Alicia commercial activities continued to show significant improvement in the core metrics of insurance reimbursement net revenue per prescription and prescription refills. We're also actively engaged in re licenses at least to a committed partner.

To support our clinical development programs that visit development activities.

Scientists and collaborators representing at major medical meetings, and we have been actively publishing our research our communication efforts or establishing pallets and as a company developing exciting new treatments for ocular diseases.

As we look forward to 2022, Steve and I are excited by the tremendous opportunity that we have to advance our portfolio of highly differentiated differentiated innovative drugs that will positively impact patients and build shareholder value.

Thank you for listening to our call and your continued support to call will now be open for questions.

Thank you, ladies and gentlemen, if you'd like to ask a question you may do so by pressing star one on your telephone keypad. Please make sure the mute function on your phone is turned off so the signal can be read by our equipment.

One for questions, we'll pause a moment to assemble the phone queue.

We will take our first question from Joe <unk> with H C. Wainwright. Please go ahead.

Hey, guys. Good morning, Thanks for taking the question a couple if you don't mind, so first with regard to the pivotal <unk> study.

Maybe a little more specifics around the interim and what kind of news flow can be expected by the street is it anything beyond just continue as planned or this study will be upsized.

Okay. That's it.

It's an assessment not a data analysis. So they are really going to be making looking at the power calculations that underpin the study.

And give us guidance on whether or not we need to upsize or we stay as is.

And just a little follow up.

Important innovation that are these things that you would try these studies have a degree of variability and this type of approach really does allow us to make sure that we don't underpowered study, particularly in regards to the key secondary endpoints, we really wanted to get some of those key secondary endpoints in because they will be important for our label.

Got it that's helpful and I guess, let's just stick with ocular for a second I know this is a very broad stroke type of question you might not be willing to necessarily go.

Two deep right now but.

Other types of front of the eye indications that you might be interested in as well as additional indications in the ocular setting even with 96 504 and beyond.

Sure.

Next slide for you is as a back of the eye Dreamer, but 90 643 and other compounds that we havent yet disclosed there are only so many indications for the front of the eye.

Ones that were interested in outside of dry eye would be things like glaucoma for example.

A very big market that needs really desperate need of new treatments and there are various types of diseases that are related to corneal function.

Things routes for example, cataract surgery and other types of surgeries.

That are done.

We better healing, where I think in the linerboard agonist really can help promote better tissue healing.

And what have you. In addition to that there are a few indications that we're just not ready to disclose yet that we think.

Preclinical data continues to pan out will really represent new part of the indication. So we're really.

Looking very deeply and I think the.

Over the next year, we will have a lot of information flow there.

No. That's fair Thanks, and my last question, if I could just switch gears obviously.

<unk> has the long history with your company and it's glad to see that you are seeing increasing reimbursement engagement and.

With the commercial payers. So I guess the overarching question is to the level that you can discuss or wanted to discuss.

How can you describe the tenor of your say ongoing discussions right now, but even more specifically depending on the outcome of those discussions are you potentially considering other options for vie Lee see weather.

I don't know I will just take some wild shots here, a spinout company or.

Even keeping for yourself to expand our women's health again.

Okay.

Hey, Joe It's Steve I'll take that one.

So that's.

Not a particular order, but on the last point.

As Carl mentioned and we've mentioned prior our objective is to re license by <unk> to accompany that frankly, just fits better than we do our our strategy going forward is absolutely the autoimmune anti inflammatory or the micro focus the dry eye disease trials. They also had quite isn't it.

At some point some additional ocular treatments.

That we will illuminate on.

We needed to concentrate I mean, we targeted certain certain metrics that we believed were.

Showed the brand.

And.

I don't know if I want to use the term the right hands, but enhance where someone can do it justice, but they have the infrastructure. They have the resources and frankly their strategic vision is to is to expand the female healthcare.

Landscape, we've we've done that.

Yeah, I'm not going to get into where we started per se, but we when we got the product back we had single digit insurance reimbursement, we actually had negative.

Don't start or negative.

Net revenue so gross to net going down to net so we know we have greater than 50% of every prescription dispense is covered by insurance, we have very good insurance coverage.

And importantly, when you get that type of insurance coverage. Your gross to net is going to increase significantly. So that's where we've concentrated our efforts. We do have social media that we are that we are still engaging in but where we're not going to be putting feet on the ground. We have several several sales folk in place right now, but we're not.

We're not looking to expand.

10, 15, 2020 type of sales focus that's going to be for the for the new partner. So specifically on the tenor we think the tenor is good and it's positive because we're showing that.

If we do something which.

Which is good will happen increased insurance reimbursement increased gross to net on the.

On the prescription dispense. So then it's very very somewhat easy to extrapolate in the REIT and the <unk>.

Hans Hans band that someone that this is their strategy and objectives going forward that they can even do a better job than we've done with the insurance reimbursement and the gross to net and then layer that in with the infrastructure that they have specifically with whether its feet on the ground are just a lot more wherewithal for the for the market.

Access.

We think the product can do can do very well so to be clear. The objective is to license. It continue the path of.

Showing showing progress in our in our primary targeted metrics and we're doing that and our expectation is that we will we will find a good home for <unk> sometime in calendar 'twenty two.

On your point, Joe not to take too much of the response there but.

This is we're approved from premenopausal women in HST day in the right hands lifecycle management looking at at other treatment paradigms, whether it's the postmenopausal.

Or some other areas, possibly even with the with the mail for hard to treat.

Men out there.

Theres other opportunities that could actually be quite quite exciting in the right hands. So hopefully that was responsive Joe.

It certainly was thanks, a lot guys I appreciate it.

We'll take our next question from Michael Higgins with Ladenburg Thalmann. Please go ahead.

Thanks, Good morning, guys I appreciate the opportunity and see some questions here first off looking forward to European will again March 7th.

But that's part of your question since you've held them before how would this wouldn't be different from your previous guidance.

Sure.

Sure absolutely.

I think that just went out today, so actually what we didn't mention it but we are having a dry eye disease.

A key opinion leader event on March 7th and Youll find information coming out on the website shortly on how to listen to that.

Our viewpoint and anything that has stabilized.

These are not just designed as commercials were penalized before three we really want it.

The first part of it is going to be Dr.

Dr. <unk> Datta, so he's going to talk about really how he sees and manage the dry eye disease patient.

Options that he is using.

So can review there's been several new approvals in the space.

We're going to cover those how they're impacting treatment and also whats coming down the pike. Besides pn 943, there are other things that are in development. So we'll be covering some of those as well we will of course also cover Dr.

Dr. Michael <unk>, our Chief Medical Officer, who is also a well respected ophthalmologists will be covering the <unk> III <unk>.

File how that fits into these the potential disease treatment as well and as well as the phase III trial. So it really will be something you want to listen to it if you want to learn about dry eye disease.

NOI.

That's very helpful. I appreciate that thanks.

Thanks explored three.

So we're looking forward data as you noted broadcast of this year, how does the data potentially impact your thoughts on partnering it.

What are your what are your thoughts going in on that thanks.

Sure.

Clearly where.

We have.

I always have a strong business development effort, where actually routine.

Routine basis talking to various potential partners about all of our programs.

The data that clearly if it's strong positive data I would expect we're going to have a tremendous amount of interest and we will have to make some decisions based on what the opportunities are whether or not we want a partner at this stage, where we want to continue to go forward.

Stephen I would never tell you that we're not going to engage in business development activities around our various programs.

Our goal is to maximize the value and if thats the right strategy based on the data is Orlando.

Makes sense.

And that same theme, but switching to eight seven in UC.

What are your thoughts as well there with partnering and also.

In terms of that trial design would there be an interim four 877 as well thanks.

Yeah, so to that 0.1 877, the oral formulation that is <unk>.

<unk>.

At multiple sides for two things one.

When we think it's a great potential treatment option for UC patient patients.

But our goal is really to licensed that program, we would don't do not see ourselves going forward past. This study.

<unk>.

The inventory balance of these whether it's UC crohn's or anything else.

This is really designed it.

Actually has.

Actually.

Input from potential areas partners. So when it has been very helpful as well.

I don't think Theres, a gi franchise out there that hasnt taken a meeting around oral <unk> hundred 77, and we have gotten a tremendous amount of feedback as to what.

We would need to demonstrate in the trial.

And those things have been built in.

According to interim there is an interim analysis there is an instrument.

There is an interim analysis built into that study.

That's what we will have by the end of the year. This is the first 16 patients. We will have a look at and that's what the data will have by the end of the year.

Perfect. Thanks, and then a couple of <unk>.

Financial related ones here for Steve.

How many in the money warrants did you have at year end and the milestone that came from postponed what milestone did they earn I guess kind of a third maybe a back half of that.

Milestone related question would be any others, you're looking for this year.

Sure. Thanks, Michael.

Let me take the easy one warrants.

The money at the end of the year zero why because we have no warrants.

Outstandings, which is which is a good thing very clean cap table.

$232 million common outstanding.

10%, 15% of that we also are on top of that are the are the options.

Equity grants for our employees for a total of about 266 million fully diluted but again no no outstanding warrants. So obviously no.

No in the money.

Regarding the 250000.

I don't think I called out a milestone it was it was contract revenue that was four.

Payment for the for the trial for the clinical trial material for them.

For them to advance the program from a regulatory standpoint so.

The next milestones for either for each whether it's <unk> or <unk> is going to be on.

Regulatory so we're not going to get any milestones as they are advancing any type of clinical activity for the for the regulatory filing it's going to be on the regulatory filing and the approval. So.

So we don't expect don't anticipate anything else in 'twenty, two coming from them that would be a 2023 event.

Awesome I appreciate the color thanks, guys Congrats again.

Thanks, Michael Thanks, Michael.

We will take our next question from John Newman with Canaccord. Please go ahead.

Hey, guys. Thanks for taking the question just wanted to.

877 study it sounds like.

C C.

An interim analysis. There later this year just curious what are the endpoints that youll be looking at this.

This stage of development there.

The primary end point is so we're looking for evidence of mucosal healing based on colonoscopy. So we're using the Mayo score.

Mayo biopsy score as the primary one that we'll be looking for.

Of course, we also have secondary endpoints looking at symptom relief.

But this is these patients are being treated for eight weeks. So we should expect to see pretty strong evidence that mucosal healing, which generally translates into eventually translates into patient symptoms being released.

Also a whole variety of secondary endpoints. This is a.

Yes.

This is a lot of data is being collected here, which is pretty typical for proof of concept study.

Okay, Great and then just had one additional question.

96, <unk> III study.

When you take a look at the interim.

What do you have the opportunity if desired to extend the treatment period.

The follow up for that study or will you primarily be focused on simply the <unk>.

Number of patients that you might look to potentially add there. Thanks.

Okay. So sorry, it's just just the number of patients added.

Typical dry these studies are 12 week treatment periods.

We're not extending past that in this particular study we may choose to do that in the second study Melete too and we certainly will have that data <unk> three which is the open label safety extension will be collecting data over a course of a full year of treatment.

But it's a pretty it's a pretty straightforward.

Question.

Really looking at the power calculations.

And based on the standard deviations that are being seen or are they are they matching and if so then we will hold as we are and if they feel that they need to be moved up a little bit numbers need to be moved up.

Give us guidance as to.

Hello.

Alright, great. Thank you.

Yes.

And ladies and gentlemen. This concludes today's question and answer session. At this time I would like to turn the conference back to Dr. <unk> for any additional or closing remarks.

Well, let me thank everyone for participation in the Palatin technologies second quarter fiscal 2022 conference call.

Good things going on here a lot of stuff happening.

Our programs are moving forward and progressing nicely.

I. Thank all of you participating certainly we'd like to thank all of our employees and collaborators and patients for their participation as well and we look to see when I look forward to continuing to update you on our progress throughout the year. Thank you and have a great day.

Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.

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King 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.

Please consider such risks and uncertainties careful in evaluating these forward looking statements by Palo <unk> prospects that I would like to turn the call over to our host Dr. Carl <unk>, President and Chief Executive offer officer of Pelican. Please go ahead.

Steve Thank you Carl.

Good morning, good afternoon, everyone.

Regarding <unk> second fiscal quarter ended December 31, 2021 financial results are as follows.

Total revenue consists of gross product sales of <unk> net of allowances and accruals and license and contract revenue.

As a reminder, <unk> is our commercial product for the treatment of premenopausal women with hyperactive <unk> sexual desire disorder.

Why do you think gross product sales to pharmacy distributors for the quarter ended December 31, 2021 amounted to $800000 approximately with net product revenue of approximately $72000 compared to gross product sales of approximately 900000 with negative net product revenue of approximately 100.

$64000 for the comparable quarter in 2020.

Regarding <unk>.

For the quarter ended December 31, 2021, gross product sales decreased 18% and net product revenue increased 144% over the comparable quarter in 2020.

The gross product sales decreased 46% and net product revenue decreased 55% over the prior quarter ended September 32021. This decrease importantly was primarily result of the pharmacy distributors minimizing their end of year inventory levels.

Primarily related to the advancement of <unk>.

90, 643 into a pivotal phase III clinical trial for patients suffering from dry eye disease.

Regarding cash flows <unk> net cash used in operations for the quarter ended December 31, 2021 was $6 3 million compared to net cash used in operations of $14 4 million for the same period in 2020.

The decrease is mainly due to a onetime negotiated payment of approximately $7 million in the quarter ended December 31, 2020. This was related to inventory purchase commitments up by Lacey that Palatin assumed as part of our termination agreement with <unk> Pharmaceuticals.

But it also included $16 $3 million of payments by a mag to palatin.

Regarding cash position <unk>.

As of December 31, 2021, <unk> cash and cash equivalents were $47 3 million with approximately 600000 of accounts receivable compared to cash and cash equivalents of $53 4 million and 900000 of accounts receivable as of September 32021.

Based on our current operating plan Palatin believes that existing cash and cash equivalents will be sufficient to fund currently anticipated operating expenses through at least March 31 2023.

Now going to turn the call the call back over to Carl.

Thank you Steve.

Our ultimate objective is to re license related to a committed partner ensuring the continued availability of <unk> as a treatment option for premenopausal women with <unk> sexual desire disorder.

And our return on our investment we continue engage with potential partners and in the U S. In other territories and the timing of a potential license is dependent on us reaching acceptable terms with the right partner.

Moving on across a multitude of inflammatory and autoimmune diseases. There remains a vital medical need for new treatments to provide patients and clinicians with safe and effective options.

Our research and development operations are focused on developing drugs that modulate the Atlanta Court system, a new treatment modality for patients suffering from pathologic inflammation with a primary focus on ophthalmic diseases, such as diabetic retinopathy dry eye and uveitis.

Many of the current treatments for inflammatory and autoimmune diseases work by blocking one or more pro inflammatory pathways, which can cause immune suppression and major safety concerns rytary.

By targeting the <unk> system, one of the body's natural mechanisms for resolving inflammation, restoring the immune system to a normal state and promoting tissue healing. We believe that we can develop highly differentiated therapeutics with efficacy and superior safety profile.

<unk> system is a new target for drug development is successful we will have developed a new class of therapeutics for the treatment of inflammatory and autoimmune diseases.

Our first product topically delivered 940 <unk> is our most advanced <unk> agonist for treating ocular diseases that affect the tissues of the interior or foot segment of the <unk>. The first indication for <unk> 43, as dry eye disease and in December 2021, we began enrollment in a pivotal phase III dry eye disease study called <unk>.

One.

<unk> is evaluating the safety and efficacy of PL 90, 643 versus vehicle control in patients with moderate to severe dry eye disease over a 12 week treatment period.

Study is targeted to enroll 240 patients and includes an interim data assessment that will be conducted by an independent data monitoring committee that will allow us to increase the number of subjects if needed.

Using the risk underpowered study three.

The three co primary in three key secondary endpoints will be comprised of signs and symptoms of dry eye disease were determined based on detailed analysis of the phase two data.

<unk> is currently enrolling patients at multiple sites in the U S and the interim data assessment is on schedule for mid 2022 with preliminary data in the second half of 2022.

This successful Palatin will initiate the second phase III <unk> study called <unk> two an open label safety study called <unk> three <unk>.

Three <unk> <unk>.

Four three drives these studies will provide the safety and efficacy data required to file a new drug application with the FDA.

Yes.

The emerging profile 90, 643 with its rapid therapeutic onset excellent ocular tolerability and safety profile as a potentially distinct advance in dry eye disease therapy.

Phase two results are confirmed in the upcoming phase II clinical study, we believe that PL 960, <unk> has the potential for substantial penetration into the multibillion dollar dry eye disease market.

We've appealed 94 three in other of our adequate as we will have utility in treating multiple front of the eye disease indications and we are planning to advance a second front of the eye disease indication to the investigational new drug filing in 2022 as well.

As we move out through the back of the eye <unk> agonist in development for treating various types of retinopathy.

We are currently conducting the preclinical development activities to file an IND with the FDA, which will allow us to begin because our activities with PL nine six 504.

We recently presented preclinical data describing the protective effects of $96 four in mouse models of retinopathy at the 2021 annual meeting of the American Society of retina specialists in the presentation was awarded a top 10 closer designation.

The current market.

Current drug market with various retinopathy drugs was approximately 20 billion in 2021 and is projected to be in excess of $27 billion by the end of 2025.

It means a large need for new innovative treatments for retinal diseases, and we believe PL 954, although early in its development has tremendous potential to positively impact patients retinal disease and garner a significant part of this extremely large market.

Obviously, the <unk> move on to other parts of the body.

Our appeal.

707, oral formulations relative colitis, we are scheduled to initiate patient enrollment in a phase II proof of concept study in the second quarter of 2022.

We anticipate initial data readout in the second half of 2022 as well.

This will be our first clinical study designed to evaluate the potential of a selective <unk> one receptor agonist as a treatment for inflammatory bowel diseases.

The study will evaluate the safety and efficacy.

<unk> hundred 77, and if positive the results of the study will add to the validation of Atlanta Court system as a target for innovative drugs as well as support our business development and licensing efforts around <unk> 877.

Market for drugs that treat various inflammatory bowel diseases as multibillion dollar and there remains a large need for new.

Safe and effective treatment options to expand the advance the treatment of these patients the emerging safety and efficacy profile or appeal 877, if confirmed would be a potential major advance in the treatment of inflammatory bowel disease, particularly in the pediatric population.

You can find additional information on our programs on our website at www Dot pallets in Dot com.

As a company, we are well position to advance a new mechanism for treating inflammatory and autoimmune diseases based on drugs that modulate the main important system.

This year was an exciting year for <unk> with data Readouts from two major clinical programs and two additional programs advancing towards clinical studies.

So in summary, before we go into the Q&A.

90, 643 is actively enrolling patients in the phase III pivotal dry eye disease study called <unk> one the interim analysis on schedule for mid 2022 with data by year end 2022.

Oral DLA 177, four treehouses colitis remains on schedule to begin patient enrollment in the second quarter of 2022, and a phase II proof of concept clinical study with preliminary data also before at year end 2022, both of these innovative drugs have the potential to be significant players and growing multibillion dollar markets.

Our pipeline of innovative new treatments continues to grow with Peel $96 4 million. According to Ags retreating retinopathy advancing toward 90 filing and started clinical studies as well as the novel <unk> agonist or second part of the <unk> treatment also advancing towards an investigation of new drug filing in 2022.

To support our clinical development programs and business development activities.

Scientists and collaborators representing at major medical meetings, and we have been actively publishing our research our communication efforts or establishing Palatin is a company developing exciting new treatments for ocular diseases.

Thank you for listening to our call and your continued support to call will now be open for questions.

Star one for questions, we'll pause a moment to assemble the phone queue.

We will take our first question from Joe <unk> with H C. Wainwright. Please go ahead.

Hey, guys. Good morning, Thanks for taking the question a couple if you don't mind, so first with regard to the pivotal <unk> study.

Maybe a little more specifics around the interim and what kind of news flow can be expected by the street is it anything beyond just continuous planned or this study will be upsized.

That's it.

It's an assessment not a data analysis. So they are really going to be making looking at the power calculations that underpin the study.

And give us guidance on whether or not we need to upsize or we stay as is.

And just a little follow up.

Important innovation to add these things and you'll drive. These studies have a degree of variability and this type of approach really does allow us to make sure that we don't Underpower. The study, particularly in regards to the key secondary endpoints, we really wanted to get some of those key secondary endpoints in because they will be important for our label.

Got it that's helpful and I guess, let's just stick with ocular for a second I know this is a very broad stroke type of question you might not be willing to necessarily go.

Two deep right now but.

Other types of front of the eye indications that you might be interested in as well as additional indications in the ocular setting even with $96 four and beyond.

Sure.

Slide four is.

As a back of the eye treatment, but 90 643 and other compounds that we havent yet disclosed there are only so many indications for the front of the.

Ones that were interested in outside of dry eye would be things like glaucoma for example.

A very big market that needs really desperate need of new treatments and there are various types of diseases that are related to corneal function.

Things routes for example, cataract surgery or other types of surgeries.

That are done.

We better healing, where I think in the linerboard agonist really can help promote better tissue healing.

And what have you. In addition to that there are a few indications that we're just not ready to disclose yet that we think.

Preclinical data continues to pan out will really represent new.

Indications, so we're really looking very deeply.

<unk>.

Over the next year, we'll have a lot of information flow there.

No. That's fair Thanks, and my last question, if I could just switch gears obviously.

<unk> has a long history with your company and it's glad to see that you are seeing increasing reimbursement engagement and.

With the commercial payers. So I guess the overarching question is to the level that you can discuss or wanted to discuss.

I don't know I will just take some wild shots here, a spinout company or.

Even keeping for yourselves to expand our women's health again.

Okay.

Hey, Joe It's Steve I'll take that one.

So that's.

Not a particular order, but on the last point.

As Carl mentioned and we mentioned prior our objective is to re license by lease to accompany that frankly, just fits better than we do our our strategy going forward is absolutely the autoimmune anti inflammatory ocular focus the dry eye disease trials. They also had quite isn't.

At some point some additional ocular treatments.

That we will illuminate.

We needed to concentrate we targeted certain certain metrics that we believe.

Showed the brand.

And.

I don't know if I want to use the term the right hands, but in the hands, where someone can do it justice that they have the infrastructure. They have the resources and frankly their strategic vision is to us.

To expand the female healthcare.

Landscape.

We've done that.

Yes, I'm not going to get into where we started per se, but we when we got the product back we had single digit insurance reimbursement, we actually had negative <unk>.

<unk> negative.

Net revenue so gross to net going down to net so we know we have greater than 50% of every prescription dispense is covered by insurance, we have very good insurance coverage.

And importantly, when you get that type of insurance coverage. Your gross to net is going to increase significantly so that's where we've concentrated our efforts.

Do have social media that we are that we are still engaging in but where we're not going to be putting feet on the ground. We have several several sales folk in place right now, but we're not we're not looking to expand.

10, 15, 2020 type of sales folks that's going to be for the for the new partner. So specifically on the tenor we think the tenor is good and it's positive because we're showing that if we do something.

Something which.

Which is good will happen increased insurance reimbursement increase gross to net on the.

On the prescriptions dispensed. So then it's very very somewhat easy to extrapolate in the REIT and the <unk>.

Hans Hans band that someone that this is their strategy and objective going forward that they can even do a better job than we've done with the insurance reimbursement and the gross to net and then layer that in with the infrastructure that they have specifically with whether its feet on the ground are just a lot more wherewithal for the for the market.

Access.

We think the product can do can do very well so to be clear. The objective is to license. It continue the path of.

Showing showing progress in our in our primary targeted metrics and we're doing that and our expectation is that we will we will find a good home for <unk> sometime in calendar 'twenty two.

On your point, Joe not to take too much of the response there but.

This is we're approved from premenopausal women in HST day in the right hands lifecycle management looking at at other treatment paradigms, whether it's the post menopausal.

Or some other areas, possibly even with the with the mail for hard to treat.

Men out there.

Theres other opportunities that could actually be quite quite exciting in the right hands. So hopefully that was responsive Jeff.

It certainly was thanks, a lot guys I appreciate it.

We'll take our next question from Michael Higgins with Ladenburg Thalmann. Please go ahead.

Thanks, Good morning, guys I appreciate the opportunity and see some questions here first of all I'm looking forward to European will again March 7th.

That sparked some questions since you tell them before how would this wouldn't be different from you.

Previous to that.

Sure.

Sure actually I think that just went out today, so actually what we didn't mention it but we are having a dry eye disease.

Key opinion leader event on.

Mark <unk> and Youll find information coming out on the website shortly on how to listen to that.

Our viewpoint and anything that is stabilizing.

These are not just designed as commercials for <unk> 43, we really want.

The first part of it is going to be Dr.

Dr. <unk> Datta. So he is going to talk about really how he sees and manage the dry eye disease patient.

Options that he is using.

Also going to review, there's been several new approvals in the space.

We're going to go cover those how they're impacting treatment and also what's coming down the pike. Besides pn 943. There are other things that are in development. So we'll be covering some of those as well we will of course also cover Dr.

Dr. Michael <unk>, our Chief Medical Officer, who is also a well respected ophthalmologists will be covering the PL 9643.

<unk>, how that fits into disease, the potential disease treatment as well and as well as the phase III trial. So.

It would be something you want to listen to it if you want to learn about dry eye disease.

Learn a lot.

That's very helpful.

Thanks.

Thanks explored three.

So we're looking for data as you noted that canceled this year, how does the data potentially impact your thoughts on partnering it.

What are your what are your thoughts going in on that thanks.

Sure.

Clearly where we.

We have a.

I always have a strong business development effort where actually.

Routine basis talking to various potential partners about all of our programs.

The data clearly if it's strong positive data I would expect we're going to have a tremendous amount of interest and we will have to make some decisions based on what the opportunities are whether or not we want a partner at this stage, where we want to continue to go forward.

Stephen I would never tell you that we're not going to engage in business development activities around our various programs.

Our goal is to maximize the value and if that's the right strategy based on the data that will end up.

Makes sense.

And then same thing with switching to a one seven AUC.

What are your thoughts as well there with partnering and also.

In terms of that trial design will there be an interim four 877 as well.

Yeah, so to that 0.1 877, the oral formulation that is designed as we've said it multiple times for two things one.

When we think it's a great potential treatment option for UC patients patients.

But our goal is really to licensed that program, we would don't do not see ourselves going forward past. This study in any.

Any type of inflammatory bowel disease, whether it UC crohn's or anything else.

This is really designed it.

Actually has.

Actually.

Input from potential various partners. So when it has been very helpful. As we I don't think Theres, a gi franchise out there that hasnt taken a meeting around oral <unk> hundred 77, we have gotten a tremendous amount of feedback as to what.

We would need to demonstrate in the trial.

Those things have been built in.

The answer is there is an interim analysis. There is an interim let's start there is an interim analysis built into that study.

That's what we will have by the end of the year. This is the first 16 patients. We will have a look at and that's what the data will have by the end of the year.

Perfect. Thanks, and then a couple of <unk>.

<unk> related ones here Steve.

How many in the money warrants did you have at year end and the milestone that came from postponed what milestone did they earn I guess kind of a third maybe a back half of that.

Millstone related question would be any others, you're looking for this year.

Sure. Thanks, Michael.

Let me take the easy one warrants.

In the money at the end of the year.

Zero.

Because we have no warrants.

Outstandings, which is which is a good thing very clean cap table.

$232 million common outstanding.

Sure.

10%, 15% of that we also are on top of that are the are the options equity grants for our employees for a total of about 266 million fully diluted but again no no outstanding warrants. So obviously no.

No in the money.

Regarding the 250000.

I don't think I called out a milestone it was it was contract revenue that was for.

Payment for the for the trial for the clinical trial material for <unk>.

For them to advance the program from a regulatory standpoint so.

The next milestones for either for each whether it's <unk> or <unk> is going to be on.

Our regulatory so we're not going to get any milestones as they are advancing any type of clinical activity for the for the regulatory filing it is going to be on the regulatory filing and the approval.

So we don't expect don't anticipate anything else in 'twenty, two coming from them that would be a 2023 event.

Awesome I appreciate the color thanks, guys Congrats again.

Thanks, Michael Thanks, Michael.

We will take our next question from John Newman with Canaccord. Please go ahead.

Hey, guys. Thanks for taking the question just wondering for the eight.

<unk> hundred 77 study it sounds like.

We'll see some.

An interim analysis. There later this year just curious what are the endpoints that youll be looking at just at this stage of development there.

The primary endpoint. So we're looking for evidence of mucosal healing based on colonoscopy. So we're using the Mayo score that Mayo biopsy score is.

As a primary one that we'll be looking for.

Of course, we also have secondary endpoints looking at symptom relief.

This is these patients are being treated for eight weeks. So we should expect to see pretty strong evidence that mucosal healing, which generally translates into eventually translates into patient symptoms being released.

There's also a whole variety of secondary endpoints. This is a.

This is a lot of data is being collected here, which is pretty typical for proof of concept study.

Okay, Great and then just said.

One additional question on <unk>.

96, <unk> III study.

When you take a look at the interim.

Well you have the opportunity if desired to extend.

The treatment period.

The follow up for that study or will you.

I'm really be focused on simply.

The number of patients that you might look to potentially add there. Thanks.

So I'm sorry, it's just just the number of patients to add Tim.

Typical dry these studies are 12 week treatment periods.

It's pretty it's a pretty straightforward.

Question.

Really looking at the power calculations.

<unk> give us guidance as to.

Hi.

Alright, great. Thank you.

Yes.

And ladies and gentlemen. This concludes today's question and answer session. At this time I'd like to turn the conference back to Dr. <unk> for any additional or closing remarks.

Well I, thank everyone for participation in the Palatin technologies second quarter fiscal 2022 conference call.

Good things going on here a lot of stuff happening.

Our programs are moving forward and progressing nicely.

I think all you participating certainly we'd like to thank all of our employees and collaborators and patients for their participation as well and we look to Steve and I look forward to continuing to update you on our progress throughout the year. Thank you and have a great day.

Ladies and gentlemen. This concludes today's conference. We appreciate your participation you may now disconnect.

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