Greetings. Welcome to Palatin's Q1 fiscal year 2024 operating results conference call. At this time, all participants are in a listen-only mode. A Q&A 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 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.
Thank you. Good morning, and welcome to the Palatin Q1 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?
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've mentioned prior, the goal is to demonstrate commercial product value in the marketplace with an objective of relicensing the U.S., 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 Henan province of China. Palatin's licensee of Vyleesi in South Korea, Kwangdong Pharmaceuticals, completed enrollment in its phase III 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 Q1 ended September 30th, 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 Q1 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, it 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 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 product 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 30th, 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.
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 agonists, with multiple new programs ready to advance into clinical development, pending resources, all of these coming from our highly productive research activities. As you previously reported, we have completed patient enrollment in the PL9643, MELODY-1, phase III study for dry eye disease. As a reminder, PL9643 is a topically delivered melanocortin agonist that works by resolving inflammation on the ocular surface that is the 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 shows 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 the top-line data by year-end. We believe the emerging efficacy and tolerability profile of PL9643 gives it the potential to be a leading treatment for dry eye disease. Moving on. Our phase II 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 Q1 of 2024.
Supporting oral PL8177 development are preclinical studies demonstrating that treatment with oral PL8177 in disease model causes disease colon to improve toward a healthy state and to resolve the 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 II 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 Q1 of calendar 2024.
The first is a phase II study evaluating a novel formulation combining bremelanotide, a melanocortin agonist, with a phosphodiesterase 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 and 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 conducted 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 agonists.
The GLP-1 agonists are 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 differing 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 agonists 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 can move on to questions.
Listen, I just want to just reiterate again, you know, we are so pleased with Vyleesi. Seven consecutive quarters double-digit growth across all value metrics. Notably, our net product revenue increased 20% over the previous quarter. Prescriptions dispensed another 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 initiating two new melanocortin programs, with phase II clinical studies starting in the Q1 of calendar 2024, with the data readout in 2024 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 four agonist bremelanotide to obese patients taking a GLP-1 agonist. Our ocular programs continue to make impressive advances. Our MELODY-1 phase III DED study, our dry eye study, is fully enrolled, data coming at the end of the year. We're very excited by the emerging product profile for PL-9643, highly differentiated from current treatments. We got excellent ocular tolerability, and we think we're gonna have broad efficacy across multiple signs and symptoms, and I think we're really excited this can become the leading treatment for dry eye disease as well. And finally, PL-9588. We've talked about it in the past, but this is 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 II clinical studies. I'd like to thank you for listening to the Palatin in the Q1 fiscal year 2024 call. You can find additional information on our science and clinical programs on our website, www.palatin.com. You can also find additional information on Vyleesi at the Vyleesi website, vyleesi.com. Steve and I would certainly like to thank you for your support, your interest, and we'll now open up the call to questions.
Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Your first question for today is coming from Joe Pantginis with HC Wainwright.
Hey, guys. Thanks a lot. 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, you know, late this year and final data in the Q1, I guess I wanted to get a sense of what you're expecting to show for the top-line data aspect.
Sure. Well, we'll be focused on the primary endpoints of the study for the most... And overall safety. So I mean, there'll be a sign and a symptom. There most likely will be a tear from breakup time or inferior corneal fluorescein staining. Those types of things will be for your signs and then for your symptom, and most likely ocular pain.
And it will be-
Go ahead.
I'm sorry. You like will be getting like numbers on top- line or just more of like you 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?
Well, you know, Steve and I like numbers, so we put numbers out.
There'll be numbers.
If we hit it, which I think we will, we're gonna be pushing it, promoting it.
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, you know, 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, you know, clinical and regulatory path for this combination. You know, what the studies are gonna look like initially, and, you know, where do you think you can fit, you know, as the competitive landscape continues to evolve? You know, any particular patients you might be targeting, and then maybe any additional color when you say about, you know, the maintenance of the weight loss. Because as it stands right now, these GLP-1s, you know, you need to be on them essentially for life.
So, want to get a sense of how BMT might contribute to that.
Sure. So I let me take a step back just a second, kind of think a little more, maybe a little more globally in the sense that this is a 20-year process. I mean, not for us, but I mean, weight loss management, you know, treatment, this is gonna roll out similar to hypertension. You're gonna have multiple classes of therapeutics entering into the marketplace, each with their own niche and providing their own, you know, risk, reward, and benefits. You know, the overall goal here now is gonna be, how do we get most of the patients that are coming in to really reach their weight loss goals and maintain that? Because, you know, we as a society, are gonna pay for this, well, we're not gonna get the benefits.
If you lose weight over 6 or 10 months and say you get that 50 pounds off, if it comes back on in 6 months, that's not good, right? You know, we paid a lot of money, and we don't get the overall long-term benefits. All those beautiful things that Novo's reporting about, you know, their work on reducing cardiovascular risk, overall mortality, those occur because you keep weight off. You know, it's not just the weight loss process itself. So in that context, you know, 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, right? We have the preclinical data.
There are, there were just some recent, case studies reported on the, on the use of the melanocortin-4 agonist added on to, tirzepatide 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, you know, we hear all about these GLP-1s, but what we don't really hear about is really start talking to the patients. A lot of them are taking it because they wanna lose weight. They're not taking them because they have a great experience on them. And so combining mechanisms allows a clinician to have the opportunity to essentially, you know, modulate the side effects, making sure that each patient gets the treatment that they need, so they reach their goals.
Now, let's switch to the other side, maintenance.
Now, probably, you guys are probably aware, but we had a collaboration with AstraZeneca a while back, looking at melanocortin for weight loss and in particular, weight loss maintenance. But as part of that, we actually have Palatin compounds that were evaluated in weight loss models. And very interestingly there, what we were able to show is that, you know, 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 know, you've got, you know, 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 to there. We noticed that it was 1/6 the dose required to maintain versus cause weight loss. So we think there's a very, very good opportunity there, and that's gonna be very key to the overall success of weight management. So when we think about it more globally and where we can play, there are going to be 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, weight loss maintenance, patients that aren't tolerating the GLP-1s or are contraindicated.
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 mechanisms that really evolved or was the genesis of thinking about treating weight loss from a pharmaceutical perspective.
Very helpful, Carl. Carl, thanks a lot.
Your next question is coming from Michael Higgins, with Ladenburg Thalmann.
Hey, good morning. This is Farhana on behalf of Michael. Congrats on the continued progress this quarter, and we're really looking forward to the MELODY-1 data. Just wanted to follow up on Joe's question earlier regarding the Melody readout. So, I got that the data in the Q4 is gonna have the primary endpoint and safety, but could you provide some you know more specifics on what can we see in the final data readout that's gonna be in the Q1 next year?
Sure. Look, I mean, we well, there are probably 20 different endpoints that we look at in addition to all of the safety endpoints as well. You've got so you'll see the full data set as quickly as we can get it done and out. If that can be, you know, I mean, it's not appropriate for a press release, so that would normally find a publication or presentations, but or maybe we'll have a conference call to go over it. You also look at any of the sub-analysis that we may do on various types of patients. You know, these are very data-rich studies, so, I mean, I'm sure we'll be analyzing this data, you know, 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 data set, all of the endpoints that are there, both the primary, key secondaries, and then the corresponding secondaries, and then exploratory endpoints as well. And there'll be a variety of signs and symptoms, you know, everything from all of the different staining using either 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 studies. So we will try to be as transparent as we can be.
The only caveat I will put there is, you know, it 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.
Okay, great. And then on Vyleesi, so on out-licensing or the sale in the U.S., how confident are you that you can complete this maybe by this spring?
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... Well, we actually, we do anticipate eight consecutive quarters of double-digit growth, but, we, we are in advancing discussions, and we're reasonably confident that we, we will transact on Vyleesi, in the very near future.
All right, and then one more follow-up on the GLP-1 program. Could you give us any feedback on the trial design? In particular, are you looking for any particular type of obese patients to target, such as, like, those of a minimum BMI or who are refractory to GLPs?
Sure. So these are patients that will already be on GLP treatment, and most likely, tirzepatide, so which is the mixed GLP-1. You're looking for BMIs probably in excess of 35. So these are gonna be, you know, pretty, pretty obese patients. We certainly will genetically profile the patients, so we'll get a full understanding of any mutations they have in the, you know, leptin-POMC 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 are looking for is mainly the transition of melanocortin now from more specialized treatment to, you know, specific populations with genetic mutation into the more general obese population.
And so this is really just the first look at, you know, really confirming the interaction between the two. Because I think it will be important, you know, to have for the GLP-1s to really reach their maximum potential, right? And not that Lilly or Novo need any help from little Palatin, but, you know, to really for them to reach their maximum potential, you're gonna have to add them you're gonna have to add other mechanisms to them. Because not every patient can tolerate, you can't move not every patient can move up in the, dosing for those treatments. And if you talk to a lot of patients, you know, the side effects, that, you know, deadening some of the pleasure of, not just food intake, but other things that people do are, can be troublesome.
A lot of patients do experience, you know, 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 gonna be key.
Okay. I'm gonna ask one more, and then I'll hop back in the queue. With regards to bremelanotide, in the breakout study, is the primary goal to outlicense this as well, or do you see yourself developing it?
Well, there were two objectives. One was to, you know, look, we believe that in autoimmune anti-inflammatory type of diseases, that melanocortin system will play a key role there. So this is one to show how broad it can be. So that's we have a UC study, we have kidneys, you have the ocular studies that are going on, and it was also to support our licensing. I don't see us necessarily moving forward as, you know, a kidney company. It's really to support our licensing or continued use. Keep in mind, though, behind bremelanotide and any of our programs, you know, we have an extensive portfolio of selective compounds for the various melanocortin receptors.
So this is, you know, we're using bremelanotide in many cases, such as a 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, you know, we've gotten previous data, and now the fact that we have novel compounds with, you know, is attracting larger companies.
Okay, great. I'm gonna hop back in the queue. Thank you.
Sure.
As a reminder, if you would like to ask a question, please press star one. We do have a follow-up question coming from Michael Higgins.
Hey there,
Okay.
With regards to PL8177 and ulcerative colitis, are you seeing the data in real time? And if so, any feedback for us?
Well, this is a blinded study. I t's not an open label study, so you know, so I don't like to really, you know, speak out of school on it. Let's just say, you know, we are optimistic that there will be a signal. Let's leave it at that.
Okay. All right, 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 II and III, and then any specific regarding the number of refractory attempts with a single, you know, PDE5 inhibitor?
Sure. So in general, we would stick with, you know, general guidance on that. So you'd like to see that the patient, to be a PDE5 inhibitor failure, should be on a maximum dose of the PDE5 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 and we would characterize them based on the cut-off on that domain. I'm blanking on the exact numbers, but they're established and well published.
But you've hit on a key thing, one of the things that we will, you know, as a regulatory process, as we advance from a study that we're doing now to more of a formal, you know, registration study, we will have to, you know, 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, you know, 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.
Okay, great. Thank you so much for all the feedback.
No problem.
We have reached the end of the Q&A session, and I will now turn the call over to Carl for closing remarks.
Great. 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, you know, but we're really looking forward to what we're gonna deliver over the next couple of quarters. So Steve and I would like to thank you. Have a great day, and happy holidays.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.