Q2 2023 Palatin Technologies Inc Earnings Call

Greetings and welcome to Palatin second quarter fiscal year, 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.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

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 may be forward looking statements. These statements are based on assumptions that may or may not prove to be accurate.

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 carefully in evaluating these forward looking statements by <unk> prospects.

Now I would like to turn the call over to your host Dr. Carl <unk>, President and Chief Executive Officer of Palatin. Please go ahead.

Thank you and good morning, welcome to the <unk> second quarter fiscal 2023 call I'm, Dr. Carl Spanish CEO and President of Palatin with me on the call today is Steve Wills Pallets, as executive Vice President and Chief Financial Officer, and Chief Operating Officer, I will now turn the call over to Steve and he will give the financial and operating update Steve.

Thank you Carl and good morning, everyone Carl will provide detail on our development programs a bit later on.

Starting with <unk>, which is our commercial product approved for hyperactive sexual desire disorder in premenopausal women.

The goal.

D. C program is to demonstrate commercial product value in the marketplace, which we are doing.

With an objective of re licensing the U S rights to a committed women's health care company.

For the fiscal second quarter ended December 31, 2022, gross product sales were $2 6 million.

An increase of 14% over the prior quarter and an increase of 238% over the comparable quarter last year.

Net product revenue of $1 million increased 18% over the prior quarter and increased 1323% over the comparable quarter last year. We are pleased actually very pleased that net product revenue exceeded by lease operating expenses for the quarter.

Total prescriptions dispensed increased 12% over the prior quarter and increased 134% over the comparable quarter last year.

Refill rates commercial insurance reimbursement and net revenue per prescription dispensed increased over the prior quarter and comparable quarter last year.

Regarding our recent registered direct offering on October 31, 2022, palettes and entered into a securities purchase agreement with an institutional investor selling and issuing an aggregate of approximately 1 million shares of Palatin common stock.

Pre funded warrants to purchase approximately 0.8 million shares of pallets and common stock and common warrants to purchase up to approximately 1.8 million shares of Palatin common stock.

Each share of common stock and pre funded warrants was offered with one accompanying common warrant for combined offering price of approximately $5 50.

The common warrants have an exercise price of $5 83 per share and will expire five and one half years from the date of issuance.

The offering was completed on November <unk> 2022, with Palatin, receiving gross proceeds of $10 million sub.

Subsequent to December 31, 2022, the institutional investor exercised all outstanding pre funded warrants to purchase approximately 0.8 million shares of <unk> common stock.

Next item pallets and participated in the state of new jerseys technology business tax Certificate transfer program. This program enables approved biotech companies with unused net operating losses, Nols and unused research and development credits to sell these tax benefits to unaffiliated profitable core.

Taxpayers in the state of New Jersey.

Palatin received final approval in December 2022 for the sale of the Nols and R&D credits.

And this resulted in the receipt of approximately $4 7 million in January of 2023.

Accordingly, Palatin recorded the income tax benefit for the three and six months ended December 31, 2022, and a corresponding receivable as of December 31, 2022 again all the funds were received early January 2023.

Regarding specific financial results for the second quarter ended December 31, 2020 to revenue total revenue consists of gross product sales of <unk> net of allowances and accruals and license and contract revenue.

As noted prior while you see gross product sales were $2 6 million with net product revenue of $1 26000, compared to gross product sales of 0.8 million and net product revenue of 72000 for the comparable quarter last year again gross product sales increased 238% and net product revenue increase.

<unk>, 1323% over the comparable quarter last year.

For the quarter ended December 31, 'twenty, one 2021 palatin recognized 250000 in license and contract revenue pursuant to our license agreement with Fosun pharma.

Regarding operating expenses total operating expenses were $6 6 million compared to $8 8 million for the comparable quarter last year the.

The decrease in operating expenses was mainly the result of lower spending on our development programs and the gain recognized as a result of amending certain minimum purchase commitments with third party vendors.

Net loss Pelicans net loss was $1 4 million or <unk> 13 cents per basic and diluted common share compared to a net loss of $8 7 million or 91 cents per basic and diluted common share for the comparable comparable period last year.

The decrease in net loss over the comparable quarter last year was mainly due to the recognition of income tax benefit I referenced prior a $4 7 million again, the sale of New Jersey, Nols and the decrease in operating expenses of approximately $2 2 million and an increase in net product revenue from <unk>.

Cash position as of December 31, 2020 to Palatin is cash and cash equivalents were approximately $21 2 million plus $6 5 million of accounts and other receivables compared to cash and cash equivalents of $21 2 million with $2 million of accounts receivable as of September 30th 2022.

$29 9 million with $1 8 million of accounts receivable as of June 32022.

Based on our current operating plan, we believe that existing cash and cashew quote equivalents and receivables will be sufficient to fund currently anticipated operating expenses through calendar year 2023.

Now I'll turn the call back over to Carl.

Thank you Steve as I stated on previous calls our major objectives are established in Atlanta, corn system as a target for safe and effective medicines to treat inflammatory autoimmune diseases and to develop a pipeline of innovative drugs. There are two key parts to achieving our objectives. The first is to advance our understanding of how the Atlanta cord system works by defining the molecular.

Mechanisms and key signaling pathways that determine physiological effects. We accomplished this through research and palaces laboratory and multiple collaborations with academic researchers.

2023, we already have multiple abstract accepted for presentations at scientific and medical meetings.

Addition, we have managed scripts that have undergone peer review and that had been accepted for publication. Our research efforts are helping us to design better clinical trials and to support our business development activities.

The second part of the translation of the science, the clinical results and ultimately therapeutics that address unmet medical needs.

Now enrolling patients in three studies <unk>, one a phase III study in dry eye disease phase.

Phase II study evaluating oral P. O 877, a selective <unk> one receptor agonist.

In patients with ulcerative colitis, and our third is called breakout a phase II study in diabetic patients with kidney disease we.

We anticipate all three clinical studies will have data readouts in calendar 'twenty three and.

In addition, all three clinical studies are evaluating compounds that work by modulating the ability of Atlantic quota system to resolved pathologic inflammation and promote tissue repair.

Summarizing our second quarter fiscal 2023 results and looking forward to calendar 'twenty three.

We've told you by leasing continues to show impressive quarter over quarter growth in all key metrics and we anticipate this growth to continue.

We continued to make significant progress in establishing the Milan court system as an innovative target for therapeutics to treat a variety of inflammatory diseases.

We are enrolling patients with three clinical studies that are evaluating the efficacy and safety of a mile adequate target therapeutics and all three have planned data readouts in 2023.

Our research efforts continue to expand our understanding of them linerboard system and are being recognized by the broader scientific and.

In biotechnology and pharmaceutical communities.

Successful our efforts will support the continued advancement of our innovative therapeutics and our efforts to attract partnerships with larger biotechnology and pharmaceutical companies to help advance our programs.

Thank you for listening to the <unk> second quarter fiscal 2023 conference call you can find additional information on our science and clinical programs on our website www Dot pallet dot com and you can find additional information on <unk> at <unk> Dot Com website.

Thank you all and we will now open the call for questions.

At this time, we will be conducting the question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

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A question for the Q.

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Just one moment, while we poll for questions.

Your first question is coming from.

Tien Tsin, it's Paul I'm, sorry, Joe.

Dennis.

Please pose your question your line of sight.

Hey, guys.

Good afternoon, or good morning, still thanks for taking the question a couple if you don't mind, so just focusing and by Lee C. For the moment. So Steve I was hoping you could provide some more color regarding the current refill rates that youre seeing let's start with that.

Hey, Thanks for the question there Joe.

The way, we respond to the refill rate. There is two metrics you look at one is the <unk>.

Percentage of.

Of the TR action of the total total prescriptions dispensed that you have how much of that is as our from refills and we've been increasing that every every month.

And definitely quarter over quarter.

And Thats.

And thats not because the <unk> is going down it's because it's actually even stronger than that because our T. Rx is actually going up schrader.

The second metric is.

<unk> to the patient in a nice way if they were just 10 10 women.

Getting a prescription slash dispatch how many of them are getting back in line and that's also a very significant metric and we have seen that that number also increase every month quarter over quarter and we're now in excess of 40% of any woman. That's taken the first prescription dispense has gotten back in line for a for a renewed script.

That's that's helpful and nice to hear.

So I guess this is more of a scenario question. So obviously you guys are real busy in the background regarding the potential U S licensing of Vie Lee C.

So I guess, let me ask this scenario, excluding a U S license fee. What are you guys prepared to do internally with <unk>.

Yes.

As I mentioned.

The objective of Carl and Steve and the Board is is to find a home for provide easy that's in a nice way with a company that has a reasonably significant female health care franchise. This is not our primary focus going forward.

We have made what we believe are measured informed investments when.

When we first got the product back we were actually losing significant money multiple seven digits on a quarterly on a quarterly basis, we know we have.

Little little greater than break breakeven for that for the quarter, which is which is great.

What we are still concentrating on is showing that these metrics.

You can extrapolate you can see that you can scale it up and in the right and the right organization in the right hands. This product can do so much more than its doing doing with us. So we're we're in a better position for these discussions we're not going to rush into anything we think <unk> has significant value. So it's not costing us anything.

If you will call says he doesn't care, if I have to work extra nights and weekends I'm on a fixed salary. So that's that's okay.

But we absolutely have interest.

And we do believe that at some point when it's right we will be hanging off the baton to the to a new partner.

And that's on the U S front.

Got it and then with that.

Talking about geography, I guess, we havent had a lot of visibility and hopefully hopefully you could share any expectations coming out of your current ex U S licensees in both China and South Korea.

Alright.

So with boson.

Later stage of their.

Let's just call it somewhat smaller much smaller phase III trial for regulatory approval and that should finish up by mid year and then they will be falling there.

If everything goes as planned filing for regulatory approval and that would not.

The first commercial sale, we don't anticipate until we.

Okay.

Let's just say mid mid 'twenty.

Maybe second half calendar 'twenty four I think it would be the the best that they would be in a position and this is of course, Guangdong in South Korea.

We're focused on.

I think we're going to hold off a little bit on some coming attractions, we're making some good progress with the focus on partner and they're exploring several avenues to accelerate the revenue.

<unk>.

The regulatory approval, so I'd, rather occurring I'd, rather just hold off on that until we get a little bit more granularity, but they are 100%.

Committed to moving the program forward and to commencing.

Sales of our leasing in China as soon as possible.

Got it real helpful. Thanks, a lot.

Your next question is coming from Michael Higgins with Ladenburg Thalmann. Please pose your question your line of sight.

Hey, good morning. This is kind of hard on behalf of Mike. We have two questions first on the breakout trial. So the first one is that clinical trials. Gov. Currently shows that five sites that are recruiting is that accurate and then do you expect all the seven sites to be enrolling.

The second question is why not having followed the Audi E. S. S.

Caterpillar alone and the third question is when will you decide to advance this program considering that that is the renal biopsy in these patients after 12 months. Thank you.

Okay.

Let's ask about.

So let's take them in order so.

So part of the reason we're doing the studies that were really collaborating with a.

A group of.

Prologist Nephrology group that has lots of patients.

We actually think the study will pretty much.

Do complete enrollment probably by the middle by the middle of the end of the second quarter. So we have five sites up now the other seven should come on pretty quickly.

We actually are enrolling patients quite readily in that study and we actually already have started dosing patients. So that study is going to I expect that study will go very very quickly because of the group that we're working with they're very motivated they've actually been looking for a mill out of court based therapeutic to actually evaluate in.

Patients with <unk>.

Kidney patients.

Diabetic patients with kidney disease.

So the other question is why do we not have any strict control arm.

That was really due to think of this as it was designed originally as patients don't spontaneously revert.

This is not a type of inflammatory condition or immune condition, where these patients or is that actual immune conditions more inflammatory where these patients actually wax and wane. They will continue to steadily progress.

So that's one reason and then the second reason is because this is really was designed to be a a first look to really gathered how well Kenneth.

It doesn't really work in this patient population.

That's really really the reasoning there. It also it's an issue of cost because this is.

You'll be able to do 40 patients pretty quickly we'll get a really good look at the six month time point.

And then we'll go from there and then.

I'm forgetting what was in your third point.

Yes, that's what I find with a when we do decide to advance the program given that you know that is the renal biopsy in these patients after 12 months.

So we'll get we'll have.

<unk> be an open label study, obviously data will continue to roll in so we'll see as each patient data comes in we'll see it and we obviously will look from there.

We have to make some decisions post the data coming in.

Due to be prepared to go forward, so even though the last patient out its still six months further until you get the final data.

I think you will know if the study works and we'll be able to make some decisions in that intervening period and quite frankly in today's world.

Turning around clinical trial times, getting clinical trial sites materials, and so on and so forth will take longer than from last patient, leaving until their last data point comes in.

Okay, great. Thank you I'll get back in line.

Your next question is coming from John Newman with Canaccord. Please pose your question your line is live.

Hey, guys. Thanks for taking my question.

One is just on the regulatory filing strategy for <unk>.

The dry eye indication just if you could just remind us.

What do you think you'll need just in terms of the number of clinical studies and then also just kind of your thinking on the.

The end points that.

You will look to take forward.

To the agency there thanks.

Okay.

So John I think we're so there are in dry either obviously there are multiple strategies that one can employ.

The most efficient of course would be to be to have two clinical phase III clinical trials that replicate and in which both a sign and a symptom met significant statistical significance in both studies actually the same scientists have been both studies.

In addition to that you would need your open label safety. So it's technically three studies, depending on how you do it and that's really what we're really shooting for here right. That's the most efficient way to do it.

And that's one of the reasons why we built in an interim assessment in the first study is really to make sure that we can take a look make sure that we were on track because we have the right size right symptoms as we go forward.

And.

Kind of a successful phase first phase three trial, which is where we hit a sign and a symptom.

And then that would have to replicate it in a second study if one was only to hit say for example, a sign.

But it had a very good idea of how you might reach the symptom or vice versa.

Then you could take it alternative strategy, which would be to do.

Four phase III studies that can be smaller of course and size, where you would look for hitting the sign into and then the symptom in the second.

Longer term strategy, obviously more expensive strategy. So our overall objective is really to nail the sign and a symptom in both <unk> one and then a subsequent melody to <unk> would be an open label safety study that will be the most cost effective and efficient way to go forward with regards to the signs and symptoms.

Have some that are predefined, but of course based on the interim assessment, we have some flexibility there and I think I would rather wait.

Until the.

Second quarter to kind of give a little more detail on that we have.

An abstract that has been on the first 120 patients that's been accepted for presentation. So I don't want to front run that but.

<unk> be some nice coming attractions.

In late April at the.

ARVO meeting, which is a.

Sure.

Meeting our vision research.

In ophthalmology, which is occurring as I said and I think in <unk>.

April down in New Orleans, and we have a nice presentation going on there on those first 120 patients and we'll give a lot more clarity on how we expect the first phase three study to read out.

Okay, great. Thank you.

We have reached the end of our question and answer session and I will now turn the call back over to <unk> for any closing remarks.

Right.

Stephen I would like to thank you all for participating in the Palatin second quarter fiscal 2023 conference call. As you can see I mean, we're really we're really shaken a move in here I mean, if I <unk> doing great under Steve's leadership.

Research and development activities I mean, we now have three clinical trials that are enrolling patients lots of data Readouts. This year, it's a big year for us Steve and I are very excited about where we're going to deliver so stay tuned theres a lot come in so again, Stephen I think you all have a great day, and we look forward to updating you next quarter.

<unk>.

This does conclude today's conference and you may disconnect. Your lines at this time. Thank you for your participation.