Palatin Technologies, Inc. (NYSE:PTN) Q1 2023 Earnings Conference Call November 14, 2022 11:00 AM ET
Company Participants
Carl Spana – President and Chief Executive Officer
Steve Wills – Executive Vice President, Chief Financial Officer and Chief Operating Officer
Conference Call Participants
Michael Higgins – Ladenburg Thalmann
Operator
Hello, ladies and gentlemen, and welcome to Palatin’s First Quarter Fiscal Year 2023 Operating Results Conference Call. As a reminder, this conference call 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 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 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 your host, Dr. Carl Spana, President and Chief Executive Officer at Palatin. Please go ahead.
Carl Spana
Thank you. Good morning, and welcome to the Palatin first quarter fiscal 2023 call. I’m Dr. Carl Spana, CEO and President of Palatin. With me on the call today is Steve Wills, Palatin’s Executive Vice President, Chief Financial Officer, and Chief Operating Officer.
I’ll turn the call over to Steve, and he will give the financials and operating results.
Steve Wills
Thank you, Carl. Good morning, good afternoon and welcome everyone. Starting with certain highlights and recent updates. Regarding Vyleesi, which is FDA-approved for hypoactive sexual desire disorder, the goal of our Vyleesi program is to demonstrate commercial products value in the marketplace with an objective of relicensing the U.S. rights to a committed women’s healthcare company.
For the fiscal first quarter ended September 30, 2022, gross product sales were 2.3 million for the quarter ended September 30, 2022 and also the June 30 quarter with an increase of 64% over the comparable quarter in 2021. Net product revenue increased 13% over the prior quarter with an increase of 445% over the comparable quarter in 2021.
Total prescriptions dispensed increased 17% over the prior quarter and increased 108%, compared to the comparable quarter in 2021. Refill rates, commercial insurance reimbursement, and net revenue per prescription dispensed increased over the prior quarter and comparable quarter in 2021.
A few other items. On October 31, 2022, Palatin entered into a securities purchase agreement with a certain institutional investor selling and issuing an aggregate of 1,020,000 shares of our common stock and prefunded warrants to purchase up to 798,182 shares of Palatin common stock. And in addition, common warrants to purchase up to 1,818,182 shares of Palatin common stock.
Each share of common stock was offered with one accompanying common warrant for a combined offering price of $5.50. The offering was completed on November 2, 2022. Gross proceeds amounted to 10 million with net proceeds of approximately 9.1 million. Regarding our reverse stock split, the Board of Directors approved the implementation of a 1-for-25 reverse stock split on August 30, 2022.
The reverse split reduced the number of shares of Palatin’s common stock outstanding from approximately 232 million shares to approximately 9.3 million shares, but did not change the authorized number of shares of Common Stock, which remain at 300 million shares.
Moving over to the fiscal first quarter ended September 30 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 September 30, 2022 was 2.3 million with net product revenue of a little under $900,000, compared to gross product sales of 1.4 million with net products revenue of approximately $160,000 for the comparable quarter in 2021.
Gross product sales increased 64% and net product revenue increased 445% over the comparable quarter in 2021. Regarding operating expenses, total operating expenses for the quarter ended September 30, 2022 were 9.6 million, compared to 7.4 million for the comparable quarter in 2021.
The increase in operating expenses was a result of increased research and development expenses, primarily related to our ongoing pivotal Phase 3 clinical trial of PL9643, and Phase 2 clinical trial of oral PL8177, offset by decreased commercial expenses related to Vyleesi.
Regarding other income and expenses, total other income net consist mainly of unrealized foreign currency transaction gains of approximately $400,000 for the quarter ended September 30, 2022, compared to approximately 107,000 for the comparable quarter in 2021. Regarding net loss, Palatin’s net loss for the quarter ended September 30, 2022 was 8.3 million, compared to a net loss of 7.1 million for the same period in 2021.
The increase in net loss for the quarter ended September 30, 2022 over the quarter ended September 30, 2021 was mainly due to the increase in operating expenses offset by an increase in net product revenue of Vyleesi.
Regarding cash position, as of September 30, 2022, Palatin’s cash and cash equivalents were 21.2 million with approximately 2 million of accounts receivable, compared to cash and cash equivalents of 29.9 million with approximately 1.8 million of accounts receivable as of June 30, 2022.
The 21.1 million of cash and cash equivalents as of September 30, 2022 does not include approximately 9.1 million of net proceeds from the registered direct offering, which closed in November of 2022, and does not include the 15 million private placement of redeemable convertible preferred stock. This 15 million is being held in an escrow account pending the investors’ election to redeem the shares for cash or notes or convert the shares to common stock. At this stage, Palatin currently expects an operating cash runway through calendar 2023.
I’ll now turn the call back over to Carl. Carl?
Carl Spana
Thank you, Steve. Before covering some of the operating results, I would like to go over our key objectives that I believe will help to put the results in context. Our long-term goals are to establish the melanocortin system as a validated target for safe and effective medicines to treat a variety of inflammatory and autoimmune diseases. and through this process developed a pipeline of innovative drugs with unparalleled safety.
There are two key parts to achieving these objectives. The first is to advance our understanding of how the melanocortin system works by defining the molecular mechanisms and key signaling pathways that support its physiological effects. This research is ongoing in Palatin’s laboratory and through multiple collaborations with academic researchers.
Our success is measured by our multiple scientific publications and presentations at scientific and medical meetings. The second more important part is the translation of the science into clinical results and ultimately therapeutics that address unmet medical needs. We are currently enrolling patients in two clinical trials: One is a Phase 3 study in dry eye disease and the second is a Phase 2 study in ulcerative colitis.
We are also on track to initiate patient enrollment in a third clinical program, which will be a Phase 2 study in diabetic kidney disease. For the quarter, Vyleesi continued to show impressive growth in all key metrics, including sales, revenue, new prescriptions, and refill rates. Our efforts are continuing to increase Vyleesi’s value to potential partners.
Moving down to our clinical programs. Melody 1, our Phase 3 clinical trial evaluating topical PL9643 as a treatment for dry eye disease continues to enroll patients and we expect complete enrollment in the first quarter of 2023 with data readout in the second quarter of 2023. As a reminder, in August, the studies data monitoring committee evaluated data from the first 120 patients to complete the study.
The data monitoring committee recommended that the study continue to enroll a total of 350 patients. This indicates that one or more of the endpoints was promising and we believe the study has been substantially de-risked. Our second clinical program is evaluating an oral formulation of PL8177, a selective melanocortin receptor 1 agonist and a Phase 2 study in ulcerative colitis patients.
The study is evaluating the safety and efficacy of oral PL8177, utilizing an adaptive design with an interim assessment plan for the first quarter of 2023 and top line data in the second half of 2023. Enrollment is going well and we do not anticipate any changes to the program timeline. Our next clinical study will be a Phase 2 clinical trial evaluating the safety and efficacy of melanocortin agonist in patients with diabetic, nephropathy, or kidney disease.
The investigational new drug application for this study has been approved by the FDA and the first patient should be enrolled this quarter. The results from this study are anticipated in the second half of calendar 2023. You can find additional information about our clinical programs at clinical trials dot gov.
For the first quarter of fiscal 2023, our research and clinical programs continue to meet their objectives and Vyleesi continues to show impressive quarter-over-quarter growth in all key metrics. Steve and I would like to thank you for listening to the Palatin first quarter fiscal 2023 conference call. You can find additional information on our science and clinical programs on our website www.palatin.com., and you can find additional information of Vyleesi at the Vyleesi.com website. Thank you.
We’ll now open the call to questions. I’m going to hand it back over to the operator.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from the line of Michael Higgins from Ladenburg Thalmann. Please go ahead.
Michael Higgins
Thanks, everyone. Good morning, guys. Congrats on the continued progress. Thanks for taking a couple of questions. On the second front-of-the-eye indication, can you give us an update on your thoughts on what that might be?
Carl Spana
Well, we haven’t selected one yet, Michael. It can be a variety of potential indications. And right now, at the moment, with three clinical trials enrolling patients, we’ll probably not initiate that until really we get to the second quarter of next year. We have quite a lot on our plate. But with that being said, I mean, it may be in glaucoma, it may be in something related to corneal transplantation, we have really good data, preclinical data that supports clinical catalysts and [indiscernible] types of indication. I think right now due to resources and what have you, I think we’re going to probably sit tight with the three clinical trials that we’re enrolling.
Michael Higgins
Yes, that makes sense. Just to follow-up on that, regarding a maybe back of the eye diabetic macular edema, retinopathy, any updated thoughts on those or is that similar outlook you’re going to pace those after these three are completed?
Carl Spana
Well, that’s a little bit of a different indication since [indiscernible] timelines there are substantially longer. We will have a decision probably around first quarter next year on a final clinical candidate and route of administration. Once that’s done, we’ll keep probably start the toxicology program because we will need longer-term [tox] [ph] for that. So that program probably will continue to go forward towards the clinic, but from a clinical standpoint that will not get into the clinic until 2024.
One of the things that we are looking to accomplish there is, we haven’t published it yet, but we will be publishing probably in the first half of next year. We have some really exciting data in various models, based on how this – our mechanism is working there. And one of those goals is, we may look [to have partnered] [ph] that a little bit earlier than we had previously thought.
We think that market is huge, really dominated only by the anti-VEGFs and we have a new novel mechanism that has nothing to do directly with affecting new vascularization, I think will be quite attractive potential partners. So, we’ll be looking to do – we will continue to move forward. We will also maybe looking to an earlier clinical – a corporate transaction.
Michael Higgins
That’s super helpful. Thanks. And then just to switch it over to the PL8177 and colitis, if you could just confirm for us, are you seeing data along the way? If so, is there anything you can share with us? And then for the interim look, what type of data would you plan to share with us then? Thanks.
Carl Spana
So that study is a placebo controlled study. So, we do not see – I mean obviously we always see safety data, any data we do see is blinded. So, really – that’s where we really get a look at the DMC in the first quarter of next year where we have our first look at that.
Michael Higgins
And then when do you do post results primary, secondary indications or endpoints [Multiple Speakers]?
Carl Spana
Sure. The way I was going to look at it, it’s mostly similar to what we did in the dry eye data monitoring committee. So, they’ll take a look and they’ll be looking – if they – thanks in the trial to continue. That will mean that one – that most likely the primary endpoint is looking good in a nice way. That means that the basic modeling is correct, the results coming in are supportive, and it’s like that you have a positive study as you continue to enroll.
Michael Higgins
Understood. Okay. Appreciate it. Thanks guys.
Steve Wills
All right. I’ll jump in since we have that bit of an awkward silence. I think we’re having a little trouble with the Q&A. [Operator Instructions] Okay. I think Carl and I – go ahead operator.
Operator
Sorry. [Operator Instructions] We have no further questions on the line. So, I’ll turn the call back to Dr. Spana.
Carl Spana
Okay. Great. Well, I’d like to thank everyone for participating in the Palatin first quarter 2023 quarterly conference call. Michael, thank you for your questions. They help us to eliminate really exciting things that are going on at Palatin. Steve and I and team are working hard here. I can’t tell you the enthusiasm we have around Vyleesi’s continued growth. I think a lot of people should be paying attention to that. It’s got a lot of skepticism about female sexual dysfunction.
I think what we’re doing at Vyleesi shows that that’s not correct, that there’s a quite a nice market for it, and that product is going to continue to grow. And we’re really excited about having three clinical trials by the end of the year. We’ve got a lot of exciting things coming on up in 2023. So, that being said, thank you, Steve. Thank you, everybody. Have a great day and we’ll talk to you next quarter. Take care, everyone.
Operator
Thank you for joining today’s call. You may now disconnect your lines. Host, please stay on the line and await further instructions.
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