Good morning, ladies and gentlemen, and welcome to the Palatin Technologies First Quarter Fiscal Year 2020 Operating Results Conference Call. As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that statements made by Palatin that are not historical facts may be forward-looking statements. These statements are based on assumptions that may or may not prove to be accurate, and actual results may differ materially from those anticipated due to a 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 and Palatin's prospects. Now I'd like to introduce you to your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Thank you. Good morning, and welcome to the Palatin Technologies first quarter fiscal year 2019 call. I am 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. On today's call, we will provide financial and operating updates. I'm going to turn the call over to Steve, who will provide the financial updates. Steve?

Thank you, Carl. Good morning everyone. Regarding Palatin's quarter ended September 30, 2019 financial and operational highlights, with respect to Vyleesi, the first as-needed treatment for premenopausal women with acquired generalized hypoactive sexual desire disorder or HSDD. AMAG Pharmaceuticals, our North American licensee, launched Vyleesi nationally in September with its established women's health sales force of approximately 125 sales representatives. In the four weeks since the September national launch, more than 1,300 healthcare providers have prescribed Vyleesi, which has resulted in more than 3,000 prescriptions received by AMAG's specialty pharmacy partners. Palatin is entitled to receive tiered royalties on net sales ranging from high single-digit to low double-digit percentages, and sales milestones based on escalating annual net sales thresholds, the first of which is $25 million, triggered at annual net sales of $250 million. Regarding Vyleesi collaborations for territories outside the currently licensed territories of North America, China and Korea, we have excellent interest and we are in due diligence and advancing discussions and negotiations with multiple parties from multiple regions. With respect to corporate, cash and accounts receivable balances at September 30, 2019 totaled $96.8 million. This is sufficient to cover planned operations through at least calendar 2021, which means we have sufficient cash to go past calendar 2021. Debt and related liabilities was $0.8 million at June 30, 2019 were fully paid off in July of 2019. Regarding our internal warrant buyback. In September 2019, Palatin’s Board of Directors approved a plan to offer to purchase and terminate certain outstanding common stock purchase warrants through privately negotiated transactions. This initiative was undertaken to reduce or minimize hedging or shorting strategies of certain warrant holders. The purchase and termination program have no time limit and may be suspended for periods or discontinued at any time. To date, Palatin has…

Thank you, Steve. I’ll start the operational update with Vyleesi, a first-in-class melanocortin agonist and the only as needed products approved by the FDA to treat hypoactive sexual desire disorder. Commercial sales of Vyleesi in the U.S. are the responsibility of our Vyleesi North American partner, AMAG Pharmaceuticals. In late September, AMAG made Vyleesi available nationally with prescriptions being processed by two specialty pharmacies. On the November 1st conference call, AMAG discussed the results from the first four weeks of Vyleesi launch. I'm happy to report that over 1,300 doctors wrote over 3,000 Vyleesi prescriptions. We believe that this is a good start and then AMAG with a strong commercial presence in female health is well positioned to grow Vyleesi sales. Outside of North America, we continue to work with our Chinese partner, Fosun Pharma, and our South Korean partner, Kwangdong Pharmaceuticals, to advance Vyleesi development in those territories toward regulatory filings. With the recent FDA approval of Vyleesi, commercial interests for unlicensed territories continues to grow and we are now actively engaged with multiple potential partners that are evaluating Vyleesi in all available territories. We are working to determine, who the best potential Vyleesi partners are and to executing additional Vyleesi licensing and commercialization agreements. Our goal is to have Vyleesi partnerships for all the major global territories done by the end of calendar year 2020. We believe our Vyleesi licensing strategy will maximize the return on our investment and allow us to focus our resources on our pipeline programs. In the past quarter, we continue to advance our earlier stage programs in autoimmune and inflammatory diseases. We have developed new families of highly selective melanocortin receptor agonists with potentially broad applications in the treatment of a variety of autoimmune and inflammatory diseases including dry eye, uveitis and retinal…

Thank you. [Operator Instructions] And we'll take our first question from John Newman with Canaccord.

Hi, good morning guys. This is Justin Zelin on for John Newman. I just had a question on the Vyleesi lunch. Do you have a sense from AMAG on how setting up pricing and reimbursement is going with commercial plans? And do you see any prior authorization requirements for the drug?

Yes, thanks for the question. This is Steve. I mean since we're not the commercial partner AMAG is, I'm pretty much just going to repeat what they've publicly disclosed in their filings, in their press releases and conference calls. The initial launch, the national launch in September, AMAG is utilizing their 125, approximately 125 direct sales force and they're also having the prescriptions initially go through these two specialty pharmacies. At the same time, they are working on procuring the reimbursement. I believe they publicly disclose that their target is whether it's over the next four or six months post the national launch in September, they would anticipate getting in that somewhat rule of thumb 70%, 75% of covered lives. I'm not aware of any issues that that they are having from a barrier standpoint with the prescription as we reflected, but we actually reflected it post the reflection by AMAG. And if you actually listen to their call, they seem to be very positive on the launch. It's tracking towards their projections. And I think they've done an excellent job with making sure there's no barriers for the women that would be seeking this treatment, i.e., the first script is, there's no charge for that. And then they have that maximum $99 out-of-pocket related to future scripts. So what they've reported is over the next six months, they will have the reimbursement coverage at a very significant number of covered lives. And I think your – second part of your question was related to, is there a pre-approval there? I really can't comment on that. I know certain – just if you take me personally, if I have something in my shoulder and maybe need an MRI, I have to get a pre-approval. I'm not sure if anything is needed in that regard. But I can circle back and then circle back with you.

Great. Got it. Well congrats on all the progress and thanks for taking my question.

And next we'll go to Joe Pantginis with H.C. Wainwright.

Hey, guys. Good morning, thanks for taking the question. Steve, first, a logistical question. If my calculation is correct, then do you still have about 9 million or so warrants outstanding? And how is that exchange process going?

Yes. We actually have a little bit more than that, Joe, the – there's certain warrants that – they're going to expire very shortly. So I didn't really – Carl and I didn't attack those types of warrants. As I stated in the script, there's a number of warrants out there. Palatin has a pretty significant short position. And we're very confident that we're – that we have the data that a number of our warrant holders have and continue to use the warrants for shorting, to cover their to cover their shorting there. So our plan was to – is to reduce and minimize that strategy. So the – in a nice way, you'll also know who the – who those types of funds are. So we've been targeting those funds a bit more than the others. So the plan, Joe, what I'm trying to get across is we're not looking to take out all the warrants, we're just looking to the warrants that we think are affecting the share price. And if we can get the right value for that, then we will continue to buy back those warrants and retire the warrants accordingly.

Got it. No, that's helpful. And then just switching more towards Vyleesi, and some of my questions might be a little too early to ask, but I'm going to ask them anyway. And certainly, I guess, should be posed to AMAG as well. But do you know what kind of visibility we could expect with regard to, say, initial refill rates, as an example? Are there any data being accumulated with regard to, say, switches from Addyi? So things along those nature.

Its Steve here. It's – that definitely would be an AMAG question. They obviously have all that data. It's – we're – that data is going to be disseminated once – only through way back. Of the two specialty pharmacies that are handling the scripts, only one of them is reporting pharmacy. So even third parties, if you're checking with the IMS and some of the other companies to track that data, you're not going to get an accurate or reflective take on that. So like – as I mentioned prior year, AMAG, this is – we think they're a great partner. We're well aligned. We're very supportive, whatever they need us to do, we'll be helpful where we can. But for those types of numbers, that's going to come from AMAG, and more than likely, just as they're updating their quarterly results.

No. Sure. So I'll ask it a little differently. So from your personal experience then in your discussions, maybe even anecdotally talking with physicians or patients, anything that you could share from your personal experience with regard to, say, switching or refills?

We – I don't think it's best for us to report on the anecdote because in a nice way, it's going to be a limited and it's very early in the launch, Joe. I mean, I appreciate you asking it two different ways. Hopefully, you're not going to do it a third way. But we just have to let the launch play out, right? Because they're – it's – as I mentioned, I think AMAG has done a great job with their reach. Big social media push. And with the first script not, not costing any out-of-pocket money. The – notwithstanding, having these women come in and get this treatment for an issue that they have, the better factor is going to be the repeat, right, the uptake. And it's not just taking scripts from Addyi because Addyi doesn't have a lot of scripts out there to take. So our target and AMAG's target is the millions of women that are – that have this disease, this disorder, that are going to be seeking treatment. So it's really going to be over the next several quarters where you can get a gauge of how well the product is doing. But that's going to come from AMAG's – updates on AMAG – from AMAG with their quarterly and conference meetings.

No. Very good point. Not a good comparator for a very low base line for Addyi. And I guess, just lastly, real quick. With regard to your BD, obviously, you're very, very busy. For multiple territories, you've given prior updates, obviously, for the larger territory of EU, any anecdotes – or not anecdotes or any sort of update you can share with regard to where those stand for EU discussions?

Yes. I mean, it's – Carl and I, we were probably a little bit ambitious at the last call where we stated that we fully expect to have deals soon. That – our enthusiasm hasn't changed, Joe. What's transpired is post the approval, there were a lot of inbound calls coming in. And this is something that – a phrase that Carl and I sort of lived by here at Palatin. We're not day-driven, we're data-driven. So Carl is over in Europe. He's talking to people; I'm talking to people there. We're trying to figure out who's the best partner, not who's the quickest partner. And I can't stress enough that there's not a region that we're – we don't have advancing discussions with. We're under CDA in the data room due diligence with. When I say multiple, it's multiple, multiple companies. And what you – what I'd like to appreciate is Europe is the largest market outside of, say, the U.S. and a number of these European-based companies, they play in other – in areas greater than just Europe, i.e., going into Asia Pacific, the Australia-New Zealand region, and importantly, the Latin American region. So what we're trying to balance is, what's the – it's like the chess pieces. What's are the best – there could be another three, four, five, six partners. When you're looking at Europe, there's Europe and even within Europe, sometimes there's Eastern Europe. Sometimes there's Europe and Asia Pacific. So we're not in any way trying to come up as being defensive. What we're – what I'm trying to convey is, Carl and I want to make sure that we're making the most informed decisions. So we're not just going to do a Latin American deal until we are a little further along, so we can see how all the chess pieces come together. And more than likely, it's going to be multiple partners because even within Latin America, there's – the Brazilian market is very, very indigenous to Brazilian companies there. So some companies, and these are some large companies, only play in Brazil outside Latin America. So again, there's a number of chess pieces we're trying to move around here. But it's – I can't stress enough that we're still very enthusiastic, and we had significant interest across – I'm not sure there's a region we're not talking to. I'm looking over at Rob Jordan. He just wanted me to give him a shout out on this call. He handles all of our programs. And he's my copilot with business development and Carls's copilot also. So we're quite busy, and we're looking forward to announcing not one deal but announcing multiple deals.

No. That's very fair. Thank you. And if you don't mind, can I just switch to a little bit of the pipeline, if you indulge me. So from a high-level standpoint first, it appears really in the space that the melanocortin pathway is really starting to increase in visibility. Obviously, until the last several months, the focus has been on Vyleesi. And while you've been giving very important updates and incremental updates about your pipeline progress. But now, obviously, you're seeing a big switch to more focus on your pipeline, internal development. And I guess, with that said, when you look at the competitive space of the melanocortin pathway, you look at Rhythm, you look at CannaWell, you look at drugs for dry eye, like Restasis and Xiidra. How are you looking to leverage the success and regulatory discussions of others that might benefit your melanocortin pathway programs?

Sure, Joe. I mean, it's very interesting; we come into an interesting time from melanocortin Pathway. I mean, Vyleesi was – probably one of the first products approved that are specifically – directly activating receptors of the pathway. CannaWell, as you mentioned, they just got a product approved as well, and then Rhythm should be submitting for their – some of their orphan indications, I think late this year or early next year. Listen, all these things are all helpful, right? Because, one, it gives a lot of visibility to mechanisms, various mechanism – underlying mechanism. Two, it continues to build the safety data base. So regulatory authorities are looking at it on a broader basis, they're seeing more patients coming in, trying the pathway, so that gives a higher degree of comfort. For us – on the next step for us is, as I think it's pretty apparent from the call is, we're focused a lot more now moving towards the autoimmune and inflammatory indications. And in particular, those in the ocular space where we think that there remains very high medical need, and an ability, really, for our compounds to be very distinguished based on the underlying mechanism. So you mentioned Restasis, for example, its cyclosporine-based compound, multi-billion dollar compound for dry eye. With that being said, patients use it. But compliance rates are very low. There's a lot of stinging to it. Some of the other drugs that have been approved, there are the analog of cyclosporine or Xiidra, which is the other approved class. They have compliance issue as well. So we think that we have a really nice position with 9643 for dry eye, and that we're seeing very good comparable efficacy in the animal models, if not better. Activity stray right away from lag…

Got it. No, thanks Carl, I really appreciated that added color and thanks for taking all the questions guys. I appreciate it.

Thanks, Joe.

Thank you. And I'll turn it back to Dr. Carl Spana for any additional or closing comments.

I'd like to thank everyone for participating in the Palatin first quarter 2020 conference call. I think as you can see, there's a lot of activity here at Palatin, a lot of enthusiasm and excitement about what we've accomplished with Vyleesi, and AMAG's handling of the launch of Vyleesi and really where we're going. 2020 is a big year for us. It's a transitional year as we move from a company that really has had one product in Vyleesi into now having multiple – three new indications going into the clinic and more behind that. So we're quite excited about what we're doing, and we're really looking forward to continuing to update you as the year passes by. So again – once again, thank you for taking – coming on call. Have a great day, and we look forward to keeping you updated on our progress. Thank you.

And that does conclude today's conference. We’d like to thank everyone for their participation. You may now disconnect.