Earnings call transcript: Palatin Technologies Q2 FY2025 sees stock surge

Palatin Technologies reported its Q2 FY2025 earnings, revealing a mixed financial performance but a significant stock price surge. The company posted an earnings per share (EPS) of -0.12, beating the forecasted -0.51. This unexpected performance led to a notable 15.69% increase in its stock price, reaching $1.145, an impressive leap from its last close at $0.9897. According to InvestingPro data, the company maintains a WEAK overall financial health score of 1.67 out of 5, though it holds more cash than debt on its balance sheet. Despite zero product sales this quarter, Palatin’s strategic initiatives and future outlook have attracted positive market sentiment.

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Key Takeaways

• Palatin Technologies’ EPS beat forecasts significantly.
• The company’s stock surged by 15.69% in pre-market trading.
• Cash usage in operations decreased significantly YoY.
• Palatin is focusing on strategic partnerships and innovation in obesity treatments.
• The company raised an additional $4.3 million through an equity offering.

Company Performance

Palatin Technologies experienced a challenging quarter with zero product sales, a stark contrast to the $4.3 million recorded in the same quarter last year. However, the company managed to reduce its net cash used in operations to $4.8 million, down from $10.5 million in the previous year. The net loss also improved to $2.4 million from $7.8 million. These results indicate a trend towards financial stabilization, despite the lack of product sales.

Financial Highlights

• Revenue: $0, down from $4.3 million in Q2 FY2024.
• Earnings per share: -0.12, beating the forecasted -0.51.
• Net cash used in operations: $4.8 million, down from $10.5 million in 2023.
• Net loss: $2.4 million, improved from $7.8 million in 2023.
• Cash and cash equivalents: $3.4 million as of December 31, 2024.

Earnings vs. Forecast

Palatin Technologies reported an EPS of -0.12, significantly outperforming the forecasted -0.51. This positive surprise represents a 76.5% beat over expectations, marking a substantial improvement over previous quarters where the company often struggled to meet forecasts.

Market Reaction

Following the earnings announcement, Palatin’s stock price surged by 15.69%, reflecting investor optimism. InvestingPro analysis shows the stock is currently trading at $1.15, which is 73% below its 52-week high of $4.18 and has declined nearly 75% over the past year. The stock’s current valuation appears to be fairly valued according to InvestingPro’s Fair Value model, though the company’s market capitalization stands at just $25.57 million. The stock’s performance contrasts with broader market trends, highlighting investor confidence in Palatin’s strategic direction and future prospects.

Outlook & Guidance

Palatin Technologies is advancing its obesity treatment programs and expects to move these into IND-enabling activities in 2025. The company is actively seeking strategic partnerships and exploring expansion into rare disease markets, which could significantly boost its revenue in the coming years. The forecast for FY2025 includes an EPS of -1.59 and revenue of $4.49 million, with significant growth anticipated in FY2026.

Executive Commentary

Dr. Carl Spana, CEO of Palatin Technologies, emphasized the potential of the obesity treatment market, stating, "We believe that the pharmacological treatment of obesity... will have a market value in excess of $100,000,000 per year." He also highlighted the company’s strategic discussions, noting, "We are actively engaged in discussions with larger potential strategic partners."

Risks and Challenges

• Zero product sales this quarter could signal ongoing challenges in market penetration.
• Dependence on strategic partnerships introduces uncertainty.
• Potential market saturation in obesity treatments could limit growth.
• Regulatory hurdles in developing and launching new treatments.
• Financial constraints with limited cash reserves may impact R&D investments.

Q&A

During the earnings call, analysts focused on the expectations for Palatin’s obesity study. Dr. Spana clarified that the study is centered on signal detection rather than specific weight loss percentages, indicating a strategic focus on long-term research and development goals.

This comprehensive overview of Palatin Technologies’ Q2 FY2025 performance highlights the company’s strategic maneuvers and market reactions, providing investors with a nuanced understanding of its current position and future potential.

Full transcript - Palatin Technologies Inc (NYSE:PTN) Q2 2025:

Conference Operator: Greetings. Welcome to Palatin’s Second Quarter Fiscal Year twenty twenty five Operating Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal As a reminder, this conference call 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, Doctor. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead.

Dr. Carl Spana, President and Chief Executive Officer, Palatin Technologies: Thank you. Good morning and welcome to the Palatin’s second quarter fiscal year twenty twenty five Call. I’m Doctor. Carl Spana, CEO and President of Palatin. With me on the call today is Steve Wills, Palatin’s Chief Financial Officer and Chief Operating Officer.

I’ll now turn the call over to Steve and he’ll give the financial update.

Steve Wills, Chief Financial Officer and Chief Operating Officer, Palatin Technologies: Thank you, Carl, and welcome everyone. Regarding our financial results, starting with revenue, pursuant to the completion of the sale of Vyleesi’s worldwide rights for female sexual dysfunction to COSAT Pharmaceuticals for up to $171,000,000 in December of twenty twenty three, Palatin did not record any product sales to pharmacy distributors for the second quarter ended 12/31/2024. For the second quarter ended 12/31/2023, gross product sales were $4,300,000 and net product revenue was $2,000,000 Regarding operating expenses, total operating expenses were $2,600,000 net of a $2,500,000 gain on the sale by lessee for the second quarter ended 12/31/2024, compared to $900,000 net of a $7,800,000 gain on the sale by lessee for the comparable quarter in 2023. The increase was mainly the result of the decrease in gain on the sale by lessee to COSAT for the second quarter ended 12/31/2024. Regarding other income and expense, total other income expense net consists mainly of foreign currency transaction gains and losses and the change in fair value of warrant liabilities, which Palatin had recorded as a liability on the consolidated financial statements.

For the quarter ended 12/31/2023, Palatin recorded a fair value adjustment loss of $8,100,000 and offering expenses of $700,000 Regarding cash flows, Palatin’s net cash used in operation for the quarter ended 12/31/2024 was $4,800,000 compared to net cash used in operations of $10,500,000 for the same period in 2023. The decrease in net cash used in operations is mainly due to the decrease on the gain on the sale by lessee during the period and secondarily to working capital changes. Regarding net loss, Palatin’s net loss for the quarter ended 12/31/2024 was $2,400,000 compared to a net loss of $7,800,000 for the same period in 2023. The decrease in net loss for the 2024 quarter over the quarter ended comparable quarter ended in 2023 was driven primarily by the change in fair values of the warrant liability and the elimination of by leasing net product revenue and selling expenses offset by the decrease on the gain of the sale of Vyleesi. Regarding cash position, as of 12/31/2024, Palatin’s cash and cash equivalents were $3,400,000 compared to cash and cash equivalents of $2,400,000 at 09/30/2024, and $9,500,000 as of 06/30/2024.

This 3,400,000 of cash and cash equivalents as of 12/31/2024, does not include the $4,300,000 of net proceeds that we raised in an equity offering, which closed in February of twenty twenty five. We are in active we are actively engaged with multiple potential funding sources for future operating cash requirements. I’ll now turn the call back over to Carl.

Dr. Carl Spana, President and Chief Executive Officer, Palatin Technologies: Thank you, Steve. I’ll now go over some of the operating highlights for the quarter. Starting with our Phase two signal detection study BMP-eight zero one evaluating the safety and efficacy of the co administration of the melanocortin-four receptor agonist, bremelanotide with drocepatide a GLP-one GIP-one dual agonist. This is being done in patients with generalized obesity. This study has been completed and the database has been locked.

Top line data from the study will be available later this month. The study was designed to evaluate two primary research questions. This co administration result in increased weight loss and can treatment with hemolyoclonal four receptor agonist be used for weight loss maintenance by blunting the weight regain seen post incretin treatment. In addition to safety, the study’s primary endpoint is percent weight loss of the combined treatment compared to placebo control at the end of the treatment. A variety of secondary endpoints such as satiety and preservation of lean body mass were also evaluated.

Our obesity and weight loss management portfolio includes both long acting monoclonal four receptive selective peptide agonist and the orally active monoclonal four receptor selective small molecule PL7737. We are on track to move both programs into IND enabling activities and clinical studies in calendar twenty twenty five. Our novel next generation selective melanocortin four receptor compounds have reduced activity at the monocortin one receptor and therefore have reduced potential to cause skin darkening. The lack of MCR1 activity, the once weekly dosing or oral dosing represents significant improvements over current FDA approved melanocortin treatments. You can find additional information on our clinical trial at clinicaltrials.gov and our website has recent presentations on our novel next generation melanocortin-four receptor selective compounds.

For OP08177 orally selective melanocortin-one receptor treatment for ulcerative colitis, the Phase two study remains on track for release of top line data in the first quarter of calendar twenty twenty five. In anticipation of the data, there has been a significant increase in business development discussions with potential partners, which is in line with our current strategy to out license this exciting program. In December of twenty twenty four, we released the top line data from our Phase two breakout study evaluating Bremelanotide as a treatment for patients with diabetic kidney disease. Key results from the study are the seventy one percent of the patients in the study achieved a greater than 30% reduction in the urinary protein to creatinine ratio and seventy one percent of the patients had an improved or stabilized estimated glomerular filtration rate. The results validate the modulating the melanocortin system could potentially be a new therapeutic strategy and possibly disease modifying treatment option for people living with progressive kidney disease.

The detailed results of the breakout study have been accepted for presentation at upcoming medical meeting. Based on the successful outcome of the study, we have initiated discussions with potential partners for out licensing this program, which is in line with our current strategy. We previously announced that we are taking a multi pronged approach to realizing the value of our oculomelanocortin program. In support of this, we are actively engaged in discussions with larger potential strategic partners for out licensing, investors interested in funding further development and with peer companies concerning potential business combinations. Before moving on to take questions, I would like to comment on our strategy.

We are focusing our research and development efforts on our melanocortin four receptor obesity assets. We believe that the pharmacological treatment of obesity in the early stages of a multiyear cycle of innovation will have a market value in excess of $100,000,000,000 per year. The melanocortin system plays a critical role in regulating stored energy and food intake. We strongly believe that melanocortin four receptor agonist will be an important part of the future of obesity treatment and weight loss management. Palatin has a long standing research effort to develop melanocortin therapeutics that selectively activate melanocortin four receptor as treatments for obesity and weight loss maintenance.

With our extensive experience and the design and development of melanocortin Agnes for treating obesity, including two clinical studies previously completed and published, we are well positioned to be a leader in the development of monoclonal based therapeutics for weight loss and importantly weight loss maintenance. Thank you for your time. We will now open the call to questions.

Conference Operator: Thank you. At this time, we’ll be conducting a question and answer session. And the first question today is coming from Joe Pantginis from H. C. Wainwright.

Joe, your line is live.

Joe Pantginis, Analyst, H.C. Wainwright: Hey guys, good morning, good afternoon. So I wanted to focus on the upcoming obesity data. I know you can’t say much right now after the database locks, but first I wanted to just discuss the benchmark and you can correct me if my numbers are wrong. So if you look at the tirzepatide data alone, after eight weeks, we’re looking at about a six percent weight loss and maybe around 4% for placebo adjusted. So with that benchmark in mind, what would you consider a win for your study with regard to weight loss at eight weeks?

And whether it’s the same or not, what would you consider to be enough percentage weight loss to move the program forward?

Dr. Carl Spana, President and Chief Executive Officer, Palatin Technologies: That’s a good question, but maybe we think about it slightly differently. So the answer to your question is, this is a signal detection study. So we don’t a priori or not a priori going in with some preconceived number, right. What we’re really looking for is a very clear signal. So what we’d like to see in the study is that the combined arm is a high percentage of weight loss.

And then in addition to that, we’re looking at some other key metrics. For example, the percentage of patients that are achieving either four percent, five percent, six percent, seven percent or 8% weight loss in that eight week period combined versus tirzepatide alone, because that’s a little bit more important. It’s more important from a clinical question, right. If you put somebody on this, how many of them are going to get 5% weight loss, which is really clinically meaningful and the FDA level of approval. So that’s one metric we’re looking at.

And the second way of looking at it also is tirzepatide is going as if you think about things in four week increments, right, tirzepatide monotherapy is going to probably have its maximal effect in the first four weeks and then it’s going to start to slow down as you go forward from there. So can we reverse that slowdown, right? Can we see more patients losing more weight the second four weeks versus the first four weeks when we compare the co administration versus the monotherapy arm? So those are the three things that we’re looking for. We are looking for an increase in the absolute weight on a percentage basis.

There’s no number for magical number. And what I mean by that is, this is not an optimized study. This is very low dose of remelanotide. So we’re not optimized for necessarily to see some big jump. But I think we are certainly dosing high enough to get a nice clear signal.

The other point that I do want to bring up though is really, we talk about combination versus the monotherapy arm, but let’s think about the brimonocytolone arm versus the placebo arm.

Conference Operator: I

Dr. Carl Spana, President and Chief Executive Officer, Palatin Technologies: expect placebo patients that are going on to placebo, they will have weight loss in their first treatment period on tirzepatide, they should regain weight. And we’d really like to see if this low dose can blunt that weight regain, really speaking to the concept of weight loss maintenance. So those are kind of the three major concepts that we’re looking for signal on.

Joe Pantginis, Analyst, H.C. Wainwright: No, I understand totally about how you’re looking at it and it makes sense. I guess, the reason for my question is, when you look at, I guess, the analyst’s viewpoint and investment community viewpoint, I think they’re going to be automatically comparing right or wrong, having comparing against the benchmark. So I think that’s what’s driving the what would be expected to be a win from a percentage standpoint. But I understand your approaches here and it makes sense. I guess when you look forward for the program, are there additional indications you might consider beyond sort of the broader weight loss community, any sort of orphan indications that you might consider from MCR4 standpoint?

Dr. Carl Spana, President and Chief Executive Officer, Palatin Technologies: Sure. Certainly. Listen, there is a I think a growing opportunity to think about the use of melanocortin four receptor agonists in rare and orphan syndromic diseases. There are a number of mutations in the left and melanocortin system. There’s Prader Willi syndrome, there’s Bartle Bartle.

And these are things that this is not unknown. I mean, the rhythm is out there. They have their products have a line of type folks in there. But hypothalamus obesity is a very key one because that’s probably the largest market opportunity. And it’s one where we think our new compounds coming through will be very competitive.

And that gives us a in a nice way, there’s two of us in that and monoclonal four receptor agonism and looking at that orphan rare space, when you go through the general obesity side, although I believe this is the best mechanism, we’re going to get moved into a bunch of other mechanisms that are out there. So I think we’ll be focusing likely to be focusing in that rare space.

Joe Pantginis, Analyst, H.C. Wainwright: No, it makes sense and good luck for the upcoming data. Thanks a lot for the details.

Conference Operator: Thank you. And there were no other questions at this time. I would now like to hand the call back to Doctor. Carl Spana for closing remarks.

Dr. Carl Spana, President and Chief Executive Officer, Palatin Technologies: So good. Thank you. Joe, thank you for your questions. Everybody, thank you for your time. Steve and I are always grateful that you give us your time and you take meetings with us, talking about the company.

We’d like to have a great day. It’s going to be an exciting quarter for us and we’re really looking forward to it’s actually going to be exciting 2025 for us. So, we really can be more excited than what we’re doing here and look forward to reporting our results out. So from Steve and I, thank you everybody and have a great day and a great quarter. Thank you.

Conference Operator: Thank you. This does conclude today’s conference. You may disconnect your lines at this time. Thank you for your participation.

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