Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Second 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 turn the call over to today's host, 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 second quarter fiscal year 2020 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. 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, and good morning, everyone. Regarding Palatin's quarter ended December 31, 2019, financial and operational highlights include with respect to Vyleesi, the first as needed treatment approved for premenopausal women with acquired generalized Hypoactive Sexual Desire Disorder or HSDD. On January 9, 2020, AMAG announced that as a result of a strategic review it will divest Vyleesi and another female healthcare product Intrarosa. AMAG stated that it has received preliminary expressions of interest regarding these assets. Under the Vyleesi license agreement, AMAG has a contractual obligation to use commercially reasonable efforts to commercialize Vyleesi. If AMAG materially breaches this obligation and fails to cure such breach, Palatin could potentially have the right to terminate the license agreement and require AMAG to assign and transfer it's Vyleesi rights to Palatin. In the event AMAG assigned its Vyleesi license other than to Palatin, the signee must expressly agree to be bound by the Vyleesi license agreement between AMAG and Palatin. Regarding Vyleesi collaborations, we are advancing discussions for territories outside, the currently licensed territories of North America, China and Korea, and we anticipate executing multiple agreements during calendar year 2020. Vyleesi is licensed to Fosun Pharma in China and Kwandong Pharmaceuticals in South Korea. Both companies are advancing Vyleesi through the regulatory process in the respective territories, which includes the conduct of certain clinical studies in those territories prior to filing for market approval. With respect to Vyleesi and our other programs under development, Dr Spana will expand on these during his portion of the presentation. Switching over to financial highlights; for the quarter ended December 31, 2019, regarding revenue for the quarter ended December 31, 2019, we recognized as revenue $20,610 and reimbursement of shared Vyleesi costs related to our license agreement with AMAG. There were no revenues recorded…

Thank you, Steve. I'll start the operational update with Vyleesi, the first in class melanocortin agonist and the only as needed products approved by the FDA to treat Hypoactive Sexual Desire Disorder or HSDD. Providing premenopausal women a safe and effective as needed treatment. As I'm sure, you are all aware January, 2020 AMAG Pharmaceuticals announced that as result of a strategic review, it will divest by Vyleesi, which it exclusively licensed from Palatin for North America. AMAG's planned divestiture of Vyleesi is based on its change in strategy and the uncertain commercial viability of Mckenna, it's preterm or premature birth medication and not on the value and commercial potential of Vyleesi. AMAG's divestiture of Vyleesi means that we will have a new North American partner for Vyleesi. As Steve said earlier on the call, we are taking all the appropriate steps to protect our rights under the Vyleesi license agreement and to ensure that the value Vyleesi remains intact through this process. With that being said, we understand AMAG's reasons for divesting Vyleesi and we will support their efforts to ensure that a new North American Vyleesi partner is committed to a real robust commercialization program that can realize the potential of Vyleesi. In late September, 2019, AMAG made by Vyleesi available nationally with prescriptions being processed by two specialty pharmacies. Vyleesi commercial launch remains ongoing under AMAG's direction. Based on the initial launch data and additional information we have collected, we remain strongly committed to the belief that Vyleesi has significant commercial potential. Outside of North America, we are working with our Chinese partner, Fosun Pharma and our South Korean partner Kwangdong Pharmaceuticals to advance Vyleesi development in those territories towards regulatory filings. With the FDA approval of Vyleesi, the commercial interest for unlicensed territories continues to grow…

Our first question comes from John Newman.

Just had a question on Vyleesi. So I'm just curious if just roughly speaking, if there's any sort of timeframe that you and AMAG are thinking about in terms of locating a new partner for [indiscernible] specific items that are laid out in the agreement that you signed or if it's -- if the timing is different, I was just curious.

Sure. Thanks for the question, John. It's Steve. Let's be clear. This is AMAG's process. The North American licensee and based on strategic factors, they've decided to divest Vyleesi and Intrarosa. AMAG has publicly stated that they are moving forward with the divestiture process and they hope to have something completed or in advanced discussions by the end of the first quarter or sometime in the second quarter of this calendar year. We are supportive of the process. We get along very well with AMAG and if Palatin is brought into the process with discussions with potential partners, we will cooperate accordingly. We want to make sure that if AMAG is no longer the North American licensee, that the next owner of Vyleesi, the licensee for North America is, we talk about the commitment, but it's also the capabilities, right? You want a company that's committed to the advancement of this female health care product, but also has the capabilities to move it forward. So the value of [indiscernible] of Vyleesi can be achieved. We hope and anticipate that with this being a 12/31 year-end, we're actually a fiscal June 30, AMAG will not be having their conference call until early March. So we would anticipate and expect that they will give a lot more granularity around the divestiture process at that time.

Okay, great. And as far you know, the full promotional activities and support for Vyleesi remain in place and active, is that an accurate statement?

Well, I mean, that's -- I think that's a statement. That's a question that AMAG can answer a lot better from an accuracy standpoint. We are aware that they're not going forward with the product as if they owned it. And that was stated at the JPMorgan conference, which is not a surprise. It's moving forward on a product that you're going to be divesting is different than moving forward on a program that you're investing in for the greatest value [indiscernible]. So we understand where that is in the process. And again, I would anticipate and expect that we'll get a bit more granularity regarding the divestiture process on the early March AMAG conference call.

Okay, great. Thank you.

Our next question comes from Joe Pantginis, HC Wainwright.

Just following up on Vyleesi, if you don't mind. So you did mention it early in your prepared comments about AMAG's requirement to sort of move this process forward in good faith under the contract. So, is there any stipulations in the contract with regard to actual timing that they have to divest the product and is there, what is your potential recourse that would I guess define a breach of contract?

Sure. There are no specific timings as to a divestiture. Just in practical terms, I think it's in their interest to do it as quickly as possible. They have a full sales force, its not to our knowledge, Joe, they have not yet released any of their sales force people. So, and we know that the sales force people are out detailing the product to doctors as they're required to do. At some point in order to save the expenses that they think they might save through the divestiture there, they may have to cut back. When they began to do that that will put them in a more difficult position vis-à-vis the relationship with Palatin and the potential contract that we have. So although there's no direct timeline, I would expect they're kind of do it as quickly as they can because they do want to.

No, I understand. Thank you. And then since you mentioned Fosun and Kwangdong, obviously, can you just give maybe a little more detail as to where each of those territory stand into being able to get Vyleesi to the market?

Sure. Both of those countries have had multiple discussions with their regulatory authorities to which we've been a part of. They are requested that they do small additional clinical studies predominantly to look at the pharmacokinetics of the product in the various patient populations, which is fairly typical in those countries, those studies, protocols are in and we would anticipate them starting in the first half of this year and they should be in and done and completed before the end of the year with submissions following shortly thereafter.

Our next question comes from Michael Higgins.

Couple on Vyleesi, if I could. If you can give us an update on, if this is still accurate or not. I believe in the past you've mentioned from [indiscernible] milestones really in 21, from Fosun and Kwangdong of roughly 7.5 million and 3 million. Are those still numbers we should look forward in that timing?

This is Steve. Michael, thanks for the question. The numbers are accurate. The timing is going to be to the latter part of 21, early part of '22. These are regulatory milestones related to approval in China and South Korea. The larger the 7.5 million is related to the China milestone.

Okay. That's helpful. Thanks. A question on the uncertainty here that's happening with, with AMAG. And Joe asked a good question on timing and it sounds like, this is something that's clearly they're working towards. There's also precedent here in the past where [indiscernible] is developed and sold and then it came back to them. And they had argued that it wasn't being marketed properly and they essentially got the drug back and were paid for it. It was essentially a settlement. Is that something that could happen here given the contract and how it structured if need be?

Mike, this is Carl. Look, we are, let me reiterate it. This is as strong as the words, we are absolutely of the belief there was a tremendous commercial potential for Vyleesi. And we certainly believe that AMAG was a partner to realize that. And it's unfortunate that it didn't work out. They weren't committed up until their divestiture. It comes down to that we will not let this product go to a party that we don't believe is committed to selling it. That means that Palatin has to step into the breach and take the product back then that's what we'll do. We believe that there's tremendous value here and we are not afraid to take it on and grow it. I mean, it just -- our preference of course would be for a larger company with better resources and infrastructure. But we are certainly not going to let this product wither. We are going to protect it.

Right. So if it does come back your preference then would be develop your own internal sales force. So let yourself versus partner it with somebody else?

Suffice to say that, Steve and I have worked and been working for that eventuality. If that's the case and we have a very, I think, well thought out plan, which will be, if it does come back to us, we will articulate and act on and that will include being able to have the commercial infrastructure to support the product going forward and growing it.

Okay. So it's actually a preference is what I'm hearing that you'd rather market it than re-partner it?

Well, I think, I think at this point we would take it back. We would remarket it and really demonstrate how great this product can be before we would entertain whether or not we wanted to sell it or keep it.

Michael, it's Steve. Just to add onto that, it's -- you'd have to approach this sequentially, right? If you can't bring it back in, if that's the scenario that transpires with a strategy to relicense it because that would have to be sequential strategy. The plan would be to commercialize it and build the value, show the value, and then at a certain point in the future and that could be four quarters, six quarters that would be another potential strategic scenario to consider. But initially we would be moving forward with the product and just giving it the attention that it needs to grow to the greatest enormous.

Okay. That makes sense. Thanks. That's very helpful. I know this, we didn't see any Vyleesi revenues reported in this Q despite the launch last fall and obviously you're having to report earlier than AMAG. So that kind of forces it, is there a potential restatement of the Q1 AMAG reports Q4 -- calendar Q4 revenues or in the future, do you expect to continue to report a one quarter lag of revenue?

No. I mean, not withstanding AMAG's reporting, we do get quarterly numbers. So we're comfortable with what we've reflected that it's not going to be -- if there is a change, it's not going to be material enough that would warrant any type of a restatement. I think you just need to appreciate and understand that the way AMAG has launched the product, the first script which is a four pack there's no charge to the consumer. That's the strategy that AMAG has set up. They want to ensure that there's no barriers for entry into the market by the female. Subsequent doses are kept at a $99 per script. So with the launch starting in late September, you're just in, from a number standpoint, it's just going through the throughput. There would not be a significant revenue because the first dose, which is a four-pack script, has to go through the cycle with the female. We fully expect that the first quarter will include royalties, that we will of course reflect. And as I mentioned earlier some of the more granular numbers around the launch i.e., the script, we would anticipate and expect that AMAG will expand upon in their first quarter conference call which is I believe scheduled for early March.

Okay. That's very helpful. Appreciate it. I'll jump back in the queue. Thanks guys.

There are no further questions in the queue at this time.

Great. Thank you everybody for participating on the fiscal second quarter call for Palatin. Thank you for the insightful questions and hopefully the questions to help clarify where we are and where we're going. We look forward to continuing to move the company forward. We're very excited about our prospects and we will look forward to updating you next quarter. Thank you.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.