Palatin Technologies, Inc. (AMEX:PTN) Q2 2024 Earnings Call Transcript
Palatin Technologies, Inc. (AMEX:PTN) Q2 2024 Earnings Call Transcript February 15, 2024
Palatin Technologies, Inc. misses on earnings expectations. Reported EPS is $-0.56 EPS, expectations were $-0.43. Palatin Technologies, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings. Welcome to Palatin’s Second Quarter Fiscal Year 2024 Operating Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that statements made by Palatin are not historical facts and may be forward-looking statements. These statements are based on assumptions that may or may not prove to be accurate and that the actual results may differ materially from those anticipated due to the variety of risks and uncertainties discussed in the company’s most recent filings with the Securities and Exchange Commission.
Please consider such risks and uncertainties carefully in evaluating these forward-looking statements by Palatin’s prospects. Now I would like to turn the call over to our host, Dr. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead.
Carl Spana: Thank you. Good morning, and welcome to the Palatin second quarter fiscal year 2024 call. I’m Dr. Carl Spana, the CEO and President of Palatin. With me on the call today is Steve Wills, Palatin’s Executive Vice President, Chief Financial Officer and Chief Operating Officer. I’ll now turn the call over to Steve, and he will give financial and operating updates. Steve?
Steve Wills: Thank you, Carl. Good morning, good afternoon and good evening everyone. For Palatin's fiscal second quarter ended December 31, 2023, certain business highlights and recent updates follow. Regarding Vyleesi, which is our bremelanotide injection for FDA approved for hypoactive sexual desire disorder or HSDD, we completed an asset sale to Cosette Pharmaceuticals for up to $171 million in December of 2023 for female HSDD. We received $12 million upfront plus potential sales-based milestones of up to $159 million based on annual net sales ranging from $15 million up to $200 million. Importantly, Palatin retained the rights and use of bremelanotide Vyleesi for obesity and male erectile dysfunction indications. Regarding other, we had two equity offerings, a registered direct offering in January 30, 2024, we entered into a securities purchase agreement with healthcare focused institutional investors, selling and issuing an aggregate of approximately 1.8 million shares of Palatin common stock at a purchase price of $5.46 per share of common stock, which was our market price at the time of the transaction.
Palatin also agreed to issue in a private placement, warrants to purchase up to an aggregate of approximately 1.8 million shares of Palatin common stock at an exercise price of the same $5.46 per share. The offering was completed on February 1, 2024 with gross proceeds of $10 million. The common warrants are exercisable beginning six months after the date of issuance and will expire on the date that is four years after the closing date. Second equity offering was October 2023 -- October 23, 2023, we entered into a securities purchase agreement with one institutional investor selling and issuing an aggregate of approximately 2.4 million shares of Palatin common stock at a purchase price of $2.12 per share of common stock. Palatin also agreed to issue in a private placement warrants to purchase up to an aggregate of approximately 2.4 million shares of Palatin common stock at the exercise price of $2.12 per share.
This offering was completed on October 24, 2023 with gross proceeds of $5 million. The common warrants are exercisable beginning six months after the date of issuance and will expire on the date that is five and half years after the closing date. Moving over to our fiscal Q2 ended December 31, 2023 financial results. Regarding revenue; total revenue consists of gross product sales of Vyleesi, net of allowances and accruals. Vyleesi gross product sales to pharmacy distributors for the quarter ended December 31, 2023 were $4.3 million with net product revenue of approximately $2 million. This compared to gross product sales of $2.6 million and net product revenue of $1 million for the comparable quarter last year. Gross product sales for this period December 31, 2023 quarter increased 64% and net product revenue increased 98% over the comparable quarter last year.
Regarding operating expenses, total operating expenses were $0.9 million net of a $7.8 million gain on the sale of Vyleesi compared to $6.6 million net of a $1 million gain on Vyleesi purchase commitments for the comparable quarter last year. The decrease in operating expenses was mainly the result of the gain recognized on the sale of Vyleesi Lisi to Cosette Pharmaceuticals. Moving over to other income/expense. This net figure consists mainly of the change in fair value of warrant liabilities, which Palatin has recorded as a liability on the consolidated financial statements, including the revisions of certain prior period excuse me -- of certain prior period amounts to correct the misstatement with respect to classifying warrants as equity instead of a liability.
The statement of operations is adjusted each quarter to reflect changes in the fair value of these warrants. For the quarters ended December 31, 2023 and 2022, Palatin recorded a fair value adjustment loss of $8.1 and a gain of $5.2 respectively. Regarding warrant liabilities, Palatin has assessed the impact of improperly classifying the warrants related to the October 2022 financing within equity rather than as a warrant liability as adjusted through charges or credits to the statement of operations to reflect changes in the fair value of the warrants and we've determined that the impact is not material to any prior period impacted. Accordingly, Palatin will adjust prior periods only as those financial statements are presented for comparative purposes in future filings.
On January 24, 2024, Palatin and the warrant holders amended the terms of the warrants related to the October 22 and October 2023 financings. As a result, the $11.9 million of warrant liabilities as of December 31, 2023 will be reclassified to additional paid-in capital upon amendment. So let me give you the concise version. No harm, no foul. There'll be no future adjustments to the statement of operations regarding the warrants starting with the first quarter of 2024 filing and the liability that's on the balance sheet as of December 31 2023 will be reallocated to equity. We amended the warrants to characterize it as equity versus the liability treatment. Regarding Palatin's net loss for the quarter ended December 31, 2023 was $7.8 million or $0.56 per basic and diluted common share compared to income of $2.7 million or $0.25 per basic and diluted common share for the comparable period last year.
The change in net loss of the comparable quarter last year was due to several factors. Since the derivative liability accounting took place in the fourth quarter, we have several and also the sale of Vyleesi. So specifically, we had an increase in net product revenue of Vyleesi of $1 million compared to the prior quarter of last year. We had a gain on the sale of Vyleesi of $7.8 million and we had a change in fair value of warrant liabilities of $8.1 million of expense in 2023. For 2022, we had $5.2 million of income related to the change in fair value of warrant liabilities and we had the recognition of an income tax benefit of $4.7 million during the 2022 period. The income tax benefit is related to That very nice program they have in the state of New Jersey for net operating losses.
Moving over to cash position, as of December 31, 2023, Palatin's cash, cash equivalents and marketable securities were $9.5 million plus we had $2.3 million of accounts receivable compared to cash, cash equivalents and marketable securities of $5.5 million plus $1.3 million of cash receivable as of September 30, 2023. The $9.5 million of cash, cash equivalents and marketable securities as of December 31, 2023 does not include the $9.2 million of net proceeds from the registered direct equity offering which closed in February of 2024. So proforma as of December 31, January 1, 2024, we have approximately $18.7 million of cash, cash equivalents and marketable securities. We believe that existing cash, cash equivalents and marketable securities and accounts receivable will be sufficient to fund currently anticipated operating expenses and disbursements into the second half of calendar year 2024.
Now I'll turn the call back over to Carl. Carl?
Carl Spana: Thank you, Steve. Nice lesson in accounting. As you know, our focus has been on understanding the biology and chemistry of the melanocortin system with the goal of developing selective melanocortin agonists for variety of medical indications. Our research efforts have resulted in a growing portfolio of melanocortin based therapeutics. We have three active clinical programs based on melanocortin agonists with multiple new programs ready to advance into clinical development pending resources, all coming from our highly productive research activities. As we have previously reported, we have locked the database and instructed the statistical contract research organization to unblind the data for the PL9643 MELODY-1, Phase 3 study for dry eye disease.
We expect to report the top line data this month. Our Phase 2 study evaluating oral PL8177, a selective melanocortin-1 receptor agonist in ulcerative colitis patients is on track for an interim assessment of the clinical data in the first half of 2024. Supporting oral PL8177 development are preclinical studies demonstrating that treatment with oral PL8177 and disease models causes disease colons to improve toward a healthy state and to resolve inflammation. Resolving inflammation rather than blocking it provides possibility of efficacy coupled with significantly differentiating safety in treating colitis and inflammatory bowel disease. Additionally, research work at Palatin has mapped clear mechanisms of action pathways melanocortin agonist in supporting the resolution of inflammation.
BREAKOUT, our Phase 2 open label study evaluating melanocortin agonist in diabetic patients with kidney disease is also on track for top line data in the first half of 2024. So clearly, this is a big half for us, three clinical trial readouts. As far as what is on the horizon of Palatin, I would like to take a minute to highlight two new clinical studies that we are anticipating starting in the first half of calendar 2024. The first is a Phase 2 study evaluating co-administration of bremelanotide, a melanocortin agonist with a phosphodiesterase 5 inhibitor and those are just Viagra, Cialis. So those are the drugs that are currently used to treat erectile dysfunction. This would be in erectile dysfunction patients that have not responded to current therapy.
So these are guys that are failing Cialis, Viagra and so on. This clinical study will support the development program of a combination product, which is the co-formulation of our MCR4 agonist bremelanotide with a phosphodiesterase 5 inhibitor. Just as a reminder, bremelanotide is the active agent in Vyleesi, our approved product for female sexual dysfunction. All of this work is an extension of our commercial efforts in sexual dysfunction. Just to note, approximately 35% of men with erectile dysfunction fail or have an inadequate response to current therapy and represent a large underserved market. The only treatment options for these failure patients are highly invasive such as direct penile injections or penile implants. We have previously conducted clinical trial showing the synergistic effects of combining bremelanotide with a PD-5 inhibitor and a treatment for erectile dysfunction and feel well positioned for an efficient and successful development program of this co formulated product.
Second planned study will evaluate a melanocortin-4 receptor agonist in obese patients, taking a glucagon like peptide 1 or the GLP-1 and you know those as Mounjaro, Wegovy these are over the range now, these are the current treatments that are being used for obesity. Since drug treatment for obesity is now established and growing rapidly, we believe the treatment goal will switch from driving down weight loss to overall weight management. This will require a variety of drugs with different mechanisms of action that affect weight loss and very importantly weight loss maintenance. We strongly believe that drugs targeting the melanocortin system will be an important part of future obesity treatment and weight loss management. Through our extensive experience in the design and development of melanocortin agonist for treating obesity, including two clinical studies completed and published, we are well positioned to be a leader in the development of melanocortin based therapeutics for weight loss and importantly weight loss maintenance.
The operating highlights for the second quarter fiscal year 2024 are as follows. As Steve noted, we completed the asset sale of Vyleesi to Cosette Pharmaceuticals were up $171 million with $12 million received upon as an upfront payment. We are planning on initiating two new melanocortin programs, phase 2 clinical studies starting in the first half of calendar 2024 with readout later in the calendar year. And as we noted, these studies are: First, we'll evaluate the co-formulation of bremelanotide with a PD-5 inhibitor in ED patients that have failed first line therapy. And the second, as we also noted, we'll evaluate the addition of melanocortin-4 receptor agonist, bringing bremelanotide to obese patients taking GLP-1 agonist. Our clinical programs also continue to make good advancements for our PL9643 MELODY-1, Phase 3 dry eye disease study, we should report top line data this month.
The emerging product profile for PL9643 is highly differentiated from current treatments with excellent ocular tolerability and broad efficacy that we believe will make it a leading treatment for dry eye disease. Our oral PL8177 clinical trial in ulcerative colitis will have the interim analysis in the first half of this year as will our BREAKOUT open-label phase 2 study evaluating melanocortin agonist in diabetic kidney disease. I'd like to thank you for listening to the Palatin to second quarter fiscal year 2024 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. Steve and I would like to thank you all for participating on the conference call and we will now open the call to questions.
Operator: Thank you. [Operator Instructions]. Your first question for today is coming from Joe Pantginis at H.C. Wainwright.
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