Q1 2024 Palatin Technologies Inc Earnings Call
Participants
Carl Spana; CEO, President & Director; Palatin Technologies, Inc.
Steve Wills; CFO, COO, Treasurer & Secretary; Palatin Technologies, Inc.
Joe Pantginis; Analyst; H.C. Wainwright & Co., LLC
Farhana Sakloth; Analyst; Ladenburg Thalmann & Co. Inc.
Presentation
Operator
Greeting. Welcome to Palatin's first quarter fiscal year 2024 operating results conference call. (Operator Instructions) As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that statements made by Palatin are not historical facts and may be forward-looking statements.
These statements are based on assumptions that may or may not prove to be accurate and that the actual results may differ materially from those anticipated due to the variety of risks and uncertainties discussed in the company's most recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements by Palatin's prospects.
Now, I would like to turn the call over to our host, Dr. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead.
Carl Spana
Thank you. Good morning, and welcome to the Palatin first quarter fiscal year 2024 call. I'm Dr. Carl Spana, the CEO and President of Palatin. With me on the call today is Steve Wills, Palatin's Executive Vice President, Chief Financial Officer, and Chief Operating Officer.
I'll now turn the call over to Steve and he'll give the financial and operating update. Steve?
Steve Wills
Thank you, Carl. Welcome, everyone. Regarding non-financial highlights for our commercial product Vyleesi, which is approved for premenopausal women for the treatment of HSDD, which stands for hypoactive sexual desire disorder.
As we mentioned prior, the goal is to demonstrate commercial product value in the marketplace with an objective of relicensing the US, possibly even the global, rights to a committed women's healthcare company.
Palatin's licensee of Vyleesi in China, Fosun Pharma, reported its first sale in the Hainan Province of China. Palatin's licensee of Vyleesi in South Korea, Kwangdong Pharmaceuticals, completed enrollment in its Phase 3 clinical trial evaluating the efficacy and safety of Vyleesi in premenopausal women with HSDD.
Data is currently anticipated by calendar year end 2023 with a potential regulatory submission in the first half of calendar 2024. Palatin entered a strategic partnership with UpScriptHealth, a leading direct-to-consumer telemedicine company providing telemedicine services to pharmaceutical and medical technology companies.
Regarding operations specific to Vyleesi, for the fiscal first quarter ended September 30, 2023, gross product sales of $4.6 million increased 11% over the prior quarter and increased 100% over the comparable quarter last year.
Net product revenue of $2.1 million increased 20% over the prior quarter and increased 142% over the comparable quarter last year. Total prescriptions dispensed increased 14% over the prior quarter and increased 88% over the comparable quarter last year.
Refill rates, commercial insurance reimbursement, and net revenue per prescription dispensed continued with positive and impactful results and trends versus the prior quarter and comparable quarter last year. Vyleesi reported its seventh consecutive quarter of double-digit growth across all metrics, both significant and some not as significant. Importantly, Vyleesi's quarterly net product revenue continues to exceed Vyleesi quarterly operating expenses.
Moving over to overall operations. For the first quarter ended September 30, 2023, regarding revenue, total revenue consists of gross product sales of Vyleesi, net of expenses, allowances and accruals, and license and contract revenue. As I mentioned, Vyleesi gross product sales to pharmacy distributors for the quarter ended September 30, 2023, were $4.6 million with net product revenue of $2.1 million.
This compared to gross product sales of $2.3 million -- looks like it was a double. And net product revenue of a little under $1 million for the comparable quarter last year. Gross product sales increased 100% -- yeah, that'd be a double, and net product revenue increased 142% over the comparable quarter of last year.
Regarding operating expenses, total operating expenses were $8.2 million for the quarter ended September 30, 2023, compared to $9.6 million for the comparable quarter last year. The decrease in operating expenses was mainly related to the overall decrease in expenses on our MC, stands for melanocortin programs, and secondarily, to the overall decrease in selling expenses related to Vyleesi and to a certain extent, the reduction in cost of products sold due to the sale of fully reserved Vyleesi inventory.
Regarding cash flows, Palatin's net cash used in operations for the quarter ended September 30, 2023, was $5.9 million compared to net cash used in operations of $8.6 million for the same period in 2022. The decrease in net cash used in operations is mainly due to a decrease in net loss offset by working capital changes.
Regarding net loss, Palatin's net loss for the quarter ended September 30, 2023, was $5.9 million or $0.48 per basic and diluted common share, compared to a net loss of $8.3 million or $0.86 per basic and diluted common share for the same quarter in 2022.
Excuse me, I have a little bit of a lingering cough. Regarding cash position, as of September 30, 2023, Palatin's cash, cash equivalents and marketable securities were approximately $5.5 million, plus $1.3 million of accounts receivables, compared to $11 million plus $2.9 million of accounts receivables as of June 30, 2023.
This $5.5 million of cash, cash equivalents and marketable securities as of September 30, 2023, does not include $4.5 million of net proceeds from the registered direct offering, which closed in October 2023. We believe that existing cash, cash equivalents, marketable securities and accounts receivables will be sufficient to fund currently anticipated operating expenses and disbursements into the first half of calendar year 2024.
Now, I'll turn it back over to Carl.
Carl Spana
Thank you, Steve. As you know, our focus is on establishing the melanocortin system as a target for safe and effective medicines to treat inflammatory and autoimmune diseases and to develop a pipeline of highly effective drugs with unparalleled safety.
We have three active clinical programs based on melanocortin agonist with multiple new programs ready to advance into clinical development, pending resources, all of these coming from our highly productive research activities.
As we've previously reported, we've completed patient enrollment in the PL9643 MELODY-1 Phase 3 study for dry eye disease. As a reminder, PL9643 is a topically liberating melanocortin agonist that works by resolving inflammation on the ocular surface that is a cause or a key cause of dry eye disease.
We've also conducted an interim analysis of initial 120 patients enrolled in MELODY-1, which showed statistical separation for clinical efficacy across multiple signs and symptoms of dry eye disease. Importantly, PL9643 has excellent ocular safety and tolerability.
With the last patient about to complete randomized treatment, we are working to have top line data by year end. We believe the emerging efficacy and tolerability profile of PL9643, given the potential to be a leading treatment for dry eye disease.
Moving on, our Phase 2 study evaluating Oral PL8177, a selective melanocortin 1 receptor agonist in ulcerative colitis patients, is on track for an interim assessment of the clinical data in the first quarter of 2024. Supporting Oral PL8177 development, our preclinical studies demonstrating that treatment with Oral PL8177 in disease model causes disease colon to improve to a healthy state and to resolve pathological inflammation. Resolving inflammation rather than blocking it provides the possibility of efficacy coupled with safety in treating colitis and inflammatory bowel disease.
Finally, our BREAKOUT study, which is a Phase 2 open-label study in diabetic patients with kidney disease is on track for top line data in the first part of 2024 as well. I'd like to take a minute to highlight two new clinical studies that we are anticipating starting in the first quarter of calendar 2024.
The first is a Phase 2 study evaluating a novel formulation, combining bremelanotide, a melanocortin agonist, with a phosphodiesterase 5 inhibitor, and these are drugs such as Vyleesi -- such as Cialis and Viagra. This is an extension of our commercial efforts in sexual dysfunction.
Approximately, 35% of men with erectile dysfunction fail or have an inadequate response to PDE5 inhibitor treatment, represent a large underserved market. The only treatment options for these failure patients are highly invasive such as penile injections or penile implants. We have previously conducting clinical trials showing the synergistic effects of combining bremelanotide with a PDE5 inhibitor as a treatment for erectile dysfunction.
The second clinical study will evaluate a melanocortin-4 receptor agonist in obese patients taking GLP-1 agonist. And the GLP-1 agonist for things such as Ozempic or Wegovy. These are drugs that are being used, you hear them on the news all the time. These are the drugs that are the current standard of care for treating obese patients.
As drug treatment for obesity is now established and growing rapidly, we believe the treatment goal will switch from driving weight loss to overall weight management. This will require a variety of drugs with different mechanisms of action that affect not only weight loss, but importantly, weight loss maintenance.
We strongly believe that drugs targeting the melanocortin system will be an important part of the future of obesity treatment and overall weight management. With our extensive experience in the design and development of melanocortin agonist for treating obesity, including two clinical studies, we are well positioned to be a leader in the development of melanocortin-based therapeutics.
Just a few operating highlights before we move on to questions. I just want to -- just reiterate again, we are so pleased with Vyleesi, seven consecutive quarters of double-digit growth across all value metrics. Notably, our net product revenue increased 20% over the previous quarter, prescriptions dispensed of 14% over the prior quarter. Listen, we are also very excited that Vyleesi quarterly net product revenue continues to exceed Vyleesi quarterly operating expenses.
As we stated, we're planning to initiate two new melanocortin programs with Phase 2 clinical studies starting in the first quarter of calendar '24 with a data readout in '24 as well. The two studies are, as we just said, one will evaluate the co-formulation of bremelanotide with a PDE5 inhibitor in patients with erectile dysfunction that have failed first-line therapy. So in other words, Viagra or Cialis isn't working for them and they need to move on to more aggressive therapy.
The second will evaluate the addition of the melanocortin 4 agonist bremelanotide to obese patients taking a GLP-1 agonist. Our active programs continue to make impressive advances. Our MELODY-1 Phase 3 DED. study or dry eye study is fully enrolled, data coming at the end of the year. We're remain very excited by the emerging product profile for PL9643, highly differentiated from current treatments. We got excellent ocular tolerability, and we think we can have broad efficacy across multiple signs and symptoms. And I think we're really excited, this can become a leading treatment for dry eye disease as well.
And finally, PL9588, we've talked about it in the past, but it's a novel melanocortin agonist for glaucoma. We are now on track to file an IND sometime around the end of the first half of 2024 and then move on to Phase 2 clinical studies.
I'd like to thank you for listening to the Palatin first quarter fiscal year 2024 call. You can find additional information on our Science and Clinical Programs on our website, www.palatin.com. You'll also find additional information on Vyleesi at the Vyleesi website, vyleesi.com. And Steve and I would certainly like to thank you for your support, your interest, and we'll now open the call to questions.
Question and Answer Session
Operator
Certainly. (Operator Instructions) Joe Pantginis, H.C. Wainwright.
Joe Pantginis
So first, Carl, I wanted to ask about the logistics around the news flow for MELODY-1 coming up. So when you say top line data in the -- late this year and final data in the first quarter, I guess, I wanted to get a sense of what you're expecting to show for the top line data aspect?
Carl Spana
Sure. We just really focused on the primary endpoints of the study and overall safety. So there will be a sign and a symptom, there most likely will be a tear from breakup time inferior corneal fluorescein staining. Those types of things will be for your signs. And then for your symptom, most likely, ocular pain.
Joe Pantginis
And it will be -- sorry, we'll be getting numbers on top line or just more of you either met those endpoints and then we'll get them at the top line or we're actually looking towards numbers at the top line aspect.
Carl Spana
Well, Steve and I like numbers, so we put numbers.
Steve Wills
There'll be numbers.
Carl Spana
If we hit it, which I think we will, we're going to be pushing it, promoting it.
Joe Pantginis
Got it. And then look, the data you put out recently on the preclinical front regarding the combination of bremelanotide and the GLP-1 for obesity is exciting. And like you said, this is all that we're seeing in the news here. So I'm hoping to get a little more color on the clinical and regulatory path for this combination, what the studies are going to look like initially and where do you think you can fit as the competitive landscape continues to evolve?
Any particular patients you might be targeting? And then maybe any additional color when you say about maintenance of the weight loss, because as it stands right now, these GLP-1s, you need to be on them essentially for life. So I want to get a sense of how BMT might contribute to that.
Carl Spana
So if I take back just a second, even more -- maybe a little globally in a sense that this is a 20-year process. Not for us, but weight loss management -- treatment, this is going to roll out similar to hypertension. You're going to have multiple classes of therapeutics enter into the marketplace each with their own niche and providing their own risk-rewarded benefit.
The overall goal here now is going to be how do we get most of the patients that are coming in to really reach their weight loss goals and maintain that because we, as a society, are going to pay for this, we're not going to get the benefits if you lose weight over 6 to 10 months, and say, you get that 50 pounds off, if it comes back on in six months, that's not good, right? We paid a lot of money, and we don't get the overall long-term benefit. All those beautiful things that Novo reporting about their work on reducing cardiovascular risk, overall mortality, those occur because you keep weight off. It's not just the weight loss process itself.
So in that context, looking at, say, bremelanotide, for example, which is what the study we're going to be doing, in the context of the backdrop of a GLP-1, it's really there as a first step. We have the preclinical data, there are -- there were just some recent case studies reported on the use of melanocortin 4 agonist added onto Zepatide or Wegovy treatment showing that you can really enhance weight loss with the two mechanisms together without having to elevate that GLP-1 dose.
And that's an important point, because we hear all about these GLP-1, but what we don't really hear about it is really, start talking to the patients. A lot of them are taking because they want to lose weight, they don't take them because they have a great experience on them. And so combining mechanisms allows a clinician to have the opportunity to essentially modulate the side effect, making sure that each patient gets the treatment that they need so that they reach their goals.
Now, let's switch to the other side, maintenance. Probably -- you guys are probably aware, but we had a collaboration with AstraZeneca a while back looking at melanocortin for weight loss and particularly, weight loss maintenance. But as part of that, we actually have Palatin compounds that were evaluated in weight loss models.
And very interesting there, what we were able to show is that in melanocortin you don't need to give a tremendous amount of melanocortin to actually maintain weight loss. So if you take an animal that's obese, you bring them through the weight loss process and now they're in a state where -- they're in a weight loss state.
One of the things that whether it's an animal or a human you're fighting is that your body wants to go back, right? You've got -- you want to consume more calories; your skeletal muscles don't work as well. You're using less calories. So you have to fight that process. Turns out that the melanocortin mechanism may be very, very well suited there.
We noticed that it was one-sixth the dose required to maintain versus cause weight loss. So we think there's a very, very good opportunity there. And that's going to be very key to the overall success of weight management.
So we think about it more globally and where we can play, they're going in multiple pockets where we can play from being addition to maybe GLP-1 therapy so that patients reduce more weight without having to go up in dose or have more tolerable effects in weight loss maintenance or patients that aren't tolerating the GLP-1s or contraindicated.
So there are a lot of places where melanocortin can play, and I think it's probably one of the best mechanisms because it's one of the first mechanism that we -- that really evolved or was the genesis of thinking about treating weight loss from a pharmaceutical perspective.
Operator
Michael Higgins, Ladenburg Thalmann.
Farhana Sakloth
This is Farhana on behalf of Michael. Congrats on the continued progress this quarter and we're really looking forward to the MELODY data. Just wanted to follow up on Joe's question earlier regarding the MELODY readout.
So I got that the data in the fourth quarter is going to have the primary endpoint and safety, but could you provide some more specifics on what can we see in the final data readout that's going to be in the first quarter next year?
Carl Spana
Sure. Look, well, there are probably 20 different endpoints that we look at in addition to all of the safety endpoints as well. So you'll see the full dataset as quickly as we can get it done and out if that can be -- it's not appropriate for a press release. So that would not be [found on] publications or presentations, but maybe we'll have a conference call to go over it.
You also look at any of the sub analyses that we may do on various types of patients. These are very data rich studies. So -- I'm sure we'll be analyzing this data for the next six months to see what comes out. But in general, we will try to get out as quickly as we can the full dataset, all of the endpoints that are there, both the primary, key secondaries, and then the corresponding secondaries, and then exploratory endpoints as well.
And then there will be a variety of signs and symptoms. Everything from all of the different staining, using the fluorescein, or lissamine green that we're using, or the various symptom endpoints, ocular pain, dryness, stinging, burning, all those types of -- standard types of things that are evaluated in dry eye study.
So we will try to be as transparent as we can be. The only caveat I will put there is reasonable to assume on a positive study that we may be involved in certain discussions and maybe as part of that, we may not want to disclose certain things. But otherwise, we will try to be as transparent as we can.
Farhana Sakloth
Great. And then on Vyleesi, so on out-licensing obviously, in the US, how confident are you that you can complete this maybe by this spring?
Carl Spana
Well, when we were three consecutive quarters of double digit growth, we were pretty confident, at seven that confidence has just enhanced and expanded. We don't anticipate -- while we actually do anticipate eight consecutive quarters of double-digit growth, but we are advancing discussions and we're reasonably confident that we will transact on Vyleesi in the very near future.
Farhana Sakloth
All right. And then one little follow-up on the GLP-1 program. Could you give us any feedback on the trial design and in particular, are you looking for any particular type of obese patients to target such as like those have a minimum BMI or who are refractory to GLPs?
Carl Spana
Sure. So these are patients that will already be on GLP treatment and most likely, tirzepatide, so which is the mix of GLP. You're looking for BMIs probably in excess of 35. So these are going to be pretty obese patients. We certainly will genetically profile the patient, so we'll get a full understanding of any mutations they have in the leptin (inaudible) pathways as well.
But we're not stratifying on that. We're really looking for more general obesity. I think one of the things that we really looking forward is mainly the transition of melanocortin now for more specialized treatment to specific populations with genetic mutation into the more general obese population. And so this is really just the first look at really confirming the interaction between the two because I think it will be important -- for the GLP-1s to really reach their maximum potential.
Not that Lilly or Novo need any help from little Palatin, but really for them to reach their maximum potential, you're going to have to add them -- you're going to have add other mechanisms to them because not every patient can tolerate. You can't -- not every patient can move up in the dosing to those treatments.
And if you talk to a lot of patients, the side effects that deadening some of the pleasure of not just food intake but other things that people do can be troublesome and a lot of patients do experience the GI side effects. And so being able to minimize those and keep people on so that they really do lose the weight that they need to lose is going to be key.
Farhana Sakloth
I'm going to ask one more and then I'll hop back in the queue. With regard to bremelanotide in the BREAKOUT study, is the primary goal to out-license this as well or do you see yourselves developing it?
Carl Spana
There were two objectives, one was to -- look, we believe that from a autoimmune anti-inflammatory type of diseases that melanocortin system will play a key role there, so this is one that show that how broad it can be. So that's why we have a UC study, we have kidneys, you have the ocular studies that are going on, and it was also to support out-licensing. I don't see us necessarily moving forward as a kidney company. It's really to support out-licensing or continued use.
Keep in mind that behind bremelanotide in any of our programs, we have an extensive portfolio of selective compounds through the various melanocortin receptors. So this is -- we're using bremelanotide in many cases such as -- potentially for obesity and kidney studies, for example, as a proof of concept, proof of mechanism.
And then if there are opportunities for bremelanotide itself, great, we'll try to pursue those or bring in third parties to help us. If not, it does provide the evidentiary basis for earlier compounds to move into development and also be part of collaborations with larger companies. And we're seeing that in other indications where we've gotten previous data and now the fact that we have novel compounds with -- is attracting larger companies.
Operator
(Operator Instructions) Michael Higgins.
Farhana Sakloth
(multiple speakers) PL8177 in ulcerative colitis, are you seeing the data in real time, and if so, any feedback for us?
Carl Spana
Well, it is a blinded study, it's not an open-label study. So I don't like to really speak out of school on it. Let's just say, we are optimistic that there will be a signal. Let's leave it there.
Farhana Sakloth
And then last one from me. With regards to the erectile dysfunction study, can you share with us your regulatory plans for this combination? Like, how many patients in Phase 2 and 3 and then any specific regarding the number of refractory attempts with a single PDE-5 inhibitor?
Carl Spana
Sure. So in general, we would stick with the general guidance on that. So you'd like to see that -- patient, to be a PDE-5 inhibitor, failure should be on a maximum dose of the PDE-5 inhibitor with correct instructions and then would have a -- we would probably use the International Index of Erectile Function. The erectile function subdomain score.
So we would look at -- we would characterize them based on the cutoff on that domain. I'm blanking on the exact numbers, but they're established and well published. But you've hit on the key thing, one of the things that we will -- as a regulatory process, as we advance from a study that we're doing now to more of a formal registration study, we will have to reach final consensus with the agency on the exact definition of a failure. But that should be pretty easy to do, as I said, based on guidance that's already out there, publications that are already out there using the International Index of Erectile Function and making sure that patients have been on a maximal dose with appropriate education.
Operator
We have reached the end of the question-and-answer session, and I will now turn the call over to Carl for closing remarks.
Carl Spana
Steve and I would like to thank you for your participation. Obviously, the great questions from our analysts. We appreciate their support as well. We look forward to keeping you updated. Obviously, Q4, for us, big quarter. And as everyone is, but we're really looking forward to what we're going to deliver over the next couple of quarters.
So Steve and I will thank you. Have a great day, and happy holidays.
Operator
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
