Executive Summary

Q2 FY2024 revenue was $2.03M, up 98% YoY (net product revenue on Vyleesi), driven by higher shipments before the December asset sale; sequentially down vs Q1’s $2.11M as Vyleesi transitioned out of PTN’s portfolio .
Operating income turned positive to $1.17M, entirely due to a $7.82M gain on the sale of Vyleesi to Cosette; however, a non-cash $8.07M warrant fair value loss swung net income to a $(7.84)M loss (vs $2.71M profit in Q2 FY2023) .
Liquidity improved: cash, cash equivalents and marketable securities were $9.5M at quarter-end (Dec 31) and pro forma ~$18.7M including $10M gross from the Feb 1 registered direct; management guides runway into 2H CY2024 .
Pipeline catalysts cited: MELODY-1 (PL9643 in DED) topline data “expected in February,” UC PL8177 interim in 2Q CY2024, BMT701 (diabetic kidney disease) topline in 2Q CY2024; obesity (MCR4+GLP‑1) and ED (bremelanotide+PDE5i) Phase 2 starts targeted for 1H CY2024 .

What Went Well and What Went Wrong

What Went Well

Executed divestiture: Closed Vyleesi sale for up to $171M ($12M upfront, up to $159M milestones), producing a $7.82M gain and sharpening focus on melanocortin pipeline .
Strong YoY revenue growth pre-divestiture: Vyleesi net product revenue rose 98% YoY to $2.03M; gross margin remained very high given low COGS recognition .
Cleaned up non‑cash accounting overhang: Management amended warrant terms in January so liabilities are reclassified to equity with “no future adjustments” to P&L from Q1 2024 onward (tone supportive of fewer below‑the‑line surprises) .

What Went Wrong

Non‑cash warrant revaluation drove a GAAP loss: $8.07M fair value loss on warrants overwhelmed operating profit, resulting in $(7.84)M net loss and EPS of $(0.56) vs $0.25 a year ago .
Timing slippages: MELODY‑1 topline moved from “late 4Q CY2023” to “February;” UC PL8177 interim slipped from 1Q to 2Q CY2024; obesity and ED Phase 2 starts shifted from 1Q to 1H CY2024 .
Sequential softness: Revenue declined q/q to $2.03M vs $2.11M in Q1 given exit from Vyleesi distribution, and cash burn remained elevated (net cash used in operations $10.5M for the quarter) .

Financial Results

Revenue, EPS, margins vs prior periods and (if available) estimates

Metric	Q2 FY2023 (Dec 31, 2022)	Q1 FY2024 (Sep 30, 2023)	Q2 FY2024 (Dec 31, 2023)	Consensus (S&P Global)
Net Product Revenue ($USD Millions)	$1.03	$2.11	$2.03	N/A (coverage unavailable)
Diluted EPS ($)	$0.25	$(0.48)	$(0.56)	N/A (coverage unavailable)
Gross Profit ($USD Millions)	$0.93 (calc from revenue $1.03M and COGS $0.10M)	$2.11 (COGS reported as $0)	$1.94 (calc from revenue $2.03M and COGS $0.10M)	N/A
Gross Margin %	90.4% (calc)	100.0% (calc)	95.2% (calc)	N/A
Operating Income (Loss) ($USD Millions)	$(5.59)	$(6.11)	$1.17	N/A
Net Income (Loss) ($USD Millions)	$2.71	$(5.89)	$(7.84)	N/A
Net Income Margin %	263.9% (calc)	(279.6)% (calc)	(385.7)% (calc)	N/A

Notes: S&P Global consensus estimates were not available for PTN this quarter; unable to show vs-estimate comparisons. Values retrieved from S&P Global.

Other notable non-operating items and drivers

Item	Q2 FY2023	Q1 FY2024	Q2 FY2024
Gain on sale of Vyleesi ($USD Millions)	—	—	$7.82
Change in fair value of warrant liabilities ($USD Millions)	$5.25 gain	—	$(8.07) loss
Income tax benefit ($USD Millions)	$4.67 benefit	—	—

Balance sheet/liquidity KPIs

KPI	Sep 30, 2023	Dec 31, 2023	Mar 31, 2024
Cash, cash equivalents, marketable securities ($USD Millions)	$5.5	$9.5	$10.0
Accounts receivable ($USD Millions)	$1.3	$2.3	— (not reported)
Warrant liabilities ($USD Millions)	$1.85 (Jun 30, 2023 ref.)	$11.85	$0 (reclassified to equity post-amendment)

Segment breakdown (single stream)

Revenue Composition	Q2 FY2024
Product revenue, net (Vyleesi pre-divestiture)	$2.03M
License/contract revenue	Not reported

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
PL9643 (MELODY‑1) topline	CY2023	“Topline late 4Q CY2023”	“Topline data expected in February”	Delayed ~1–2 months
PL8177 (UC) interim analysis	CY2024	“Interim 1Q CY2024”	“Interim 2Q CY2024”	Delayed
PL8177 (UC) topline	CY2024	“Topline 1H CY2024”	“Topline 2H CY2024”	Delayed
BMT701 (DKD) topline	CY2024	“Topline 1H CY2024”	“Topline 2Q CY2024”	Narrowed/Specified
Obesity (MCR4 + GLP‑1) Phase 2 start	CY2024	“Targeted Q1 CY2024”	“Targeted 1H CY2024”	Delayed
ED (bremelanotide + PDE5i) Phase 2 start	CY2024	“Targeted Q1 CY2024”	“Expected 1H CY2024”	Delayed
Cash runway	CY2024	“Into 1H CY2024”	“Into 2H CY2024”	Extended

Earnings Call Themes & Trends

Topic	Previous Mentions (Q‑2 and Q‑1)	Current Period (Q2 FY2024 call)	Trend
PL9643 (DED) profile and endpoints	Q‑1: Enrollment complete; topline expected late 4Q CY2023	Database lock; topline expected in February; emphasis on tolerability and broad symptom efficacy; NDA path via additional Phase 3s	Building confidence pre‑readout
Warrant accounting	Q‑1: Not highlighted	Amended warrants; “no future adjustments” to P&L; reclassify to equity	Overhang removed
Obesity (MCR4 + GLP‑1)	Q‑1: Phase 2 targeted Q1 CY2024	Mechanistic rationale for additive/synergistic effect; plan to proceed; maintenance opportunity	Advancing; rationale detailed
ED co‑formulation	Q‑1: Phase 2 targeted Q1 CY2024	Plan for physician‑sponsored trial to accelerate enrollment	Operationalizing
Business development	Q‑1: Objective to re‑license/commercialize selectively	Intend to partner DED and UC; retain ED longer; positioning obesity assets	Active dialogue
Kidney disease (BMT701)	Q‑1: Topline 1H CY2024	Open‑label design; expect proteinuria/creatinine ratio improvement; non‑remitting disease supports signal detection	Data in near‑term

Management Commentary

“With the planned divestiture of Vyleesi completed, our focus is solely on advancing our robust melanocortin‑based development and clinical pipeline.” — Carl Spana, CEO .
“No harm, no foul… There’ll be no future adjustments to the statement of operations regarding the warrants starting with the first quarter of 2024 filing.” — Steve Wills, CFO/COO .
On DED differentiation: “PL9643 has excellent ocular tolerability… broad efficacy… and rapid onset as early as 2 weeks,” positioning it as a leading DED treatment candidate .
On obesity program: combining MCR4 agonists with GLP‑1s may deliver additive effects on weight loss and offer a path for weight loss maintenance .

Q&A Highlights

DED endpoints and regulatory plan: Company expects MELODY‑2/3 with consistent symptom endpoints and refined sign measurement; aims for broad symptom claims on label if replicated .
Obesity strategy: Benchmark is measurable separation vs tirzepatide alone over short duration (2–5% ranges typical over weeks); pigmentation concerns addressed via next‑gen highly selective MCR4 agonists lacking MC1 activity .
UC PL8177 interim disclosure: Company plans transparent communication to support partnering outreach .
ED program execution: Using physician‑sponsored IND to accelerate patient accrual leveraging large urology practices .
Business development: Active discussions to partner DED/UC; exploring funding options to initiate remaining PL9643 Phase 3 studies .

Estimates Context

S&P Global consensus estimates for Q2 FY2024 revenue and EPS were unavailable for PTN; thus, we cannot provide vs‑consensus comparisons this quarter. Values retrieved from S&P Global.
Where applicable above, reported figures and management commentary come from PTN’s 8‑K/press release and call transcripts –.

Key Takeaways for Investors

Q2 optics: Underlying operations produced positive operating income due to Vyleesi sale gain, but non‑cash warrant losses drove GAAP net loss; the warrant P&L volatility is now addressed prospectively via reclassification to equity .
Liquidity improved and runway extended into 2H CY2024, aided by the $10M Feb financing; watch for cash discipline as programs advance .
Near‑term binary catalyst: PL9643 MELODY‑1 topline (expected February) is the key stock driver; management stresses tolerability and broad symptom efficacy as differentiators .
Multiple 1H CY2024 clinical events (UC interim, DKD topline) could add momentum, albeit timelines slipped modestly vs prior guidance .
Strategic focus sharpened post‑Vyleesi: Expect partnering moves in DED/UC and internal push on obesity/ED where PTN sees executable paths and attractive TAMs .
Absence of Street coverage complicates estimate optics near term; trading likely to hinge on data readouts, BD updates, and financing cadence rather than quarterly P&L beats/misses (consensus N/A). Values retrieved from S&P Global.

PALATIN TECHNOLOGIES INC (PTN)·Q2 2024 Earnings Summary