Welcome to the Palatin Technologies’ fourth quarter fiscal year 2008 conference call. (Operator Instructions) 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 could 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 would like to introduce your host for today’s call, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technology.

With me on the call today I have Steve Wills, our CFO and Head of Operations, as well as Dr. Trevor Hallam, who is our Executive Vice President of Research and Development. As we normally do, we will start the conference call off with Mr. Wills providing a financial update and then Dr. Hallam and I will take you through more of the details around the programs that we are on. Stephen T. Wills: For the quarter ended June 30, 2008, which is the fourth quarter of our fiscal year, Palatin reported a net loss of $5.2 million, or $0.06 per share, compared to a net loss of $6.1 million, or $0.07 per share, for the same period in 2007. For the quarter ended, June 30, 2008, total revenues amounted $1.0 million, compared to $2.6 million for the same period in 2007. For the year ended, June 30, 2008, total revenues were $11.5 million as compared to $14.4 million for the previous fiscal year. For the year ended June 30, 2008, we reported a net loss of $14.4 million, or $0.17 per share, compared to a net loss of $27.8 million, or $0.36 per share, for the previous fiscal year. The decrease in the net loss and revenue for the current year periods, the year end and the quarter, was primarily attributable to the reduction in development expenses for bremelanotide, our drug previously under development for the treatment of male and female dysfunction. The audited consolidated financial statements in Palatin’s annual report on Form 10-K for the year ended June 30, 2008, contains a going concern qualification from our independent, registered public accounting firm. Going into a little detail, regarding revenue for the quarter ended June 30, 2008, Palatin recognized $0.8 million of contract revenue related to our collaboration agreement with AstraZeneca. In the comparable quarter of 2007 Palatin recognized $0.7 million of contract revenue related to our collaboration with AstraZeneca, and $1.8 million under our collaboration agreement with King Pharmaceuticals, which was terminated in the quarter ended September 30, 2007. Regarding costs and expenses, total operating expenses for the quarter ended June 30, 2008, were $6.4 million, compared to $9.1 million for the same period in 2007, reflecting lower development costs of bremelanotide. In addition, Palatin took a $400,000 charge for severance and related costs in the quarter ending June 30, 2008, as a result of our May reduction in force of 30% of Palatin’s employees. Some significant developments in Palatin’s operations since June 30, 2007, include the following: We have restructured and refocused our development and clinical programs. As part of the restructuring Palatin discontinued development of bremelanotide for the treatment of sexual dysfunction and reduced its number of employees by 50%. The downsizings leave Palatin with 46 employees today and will result in annual savings of approximately $7.0 million. We have continued to advance our product portfolio in cardiovascular, obesity, and sexual dysfunction fields. We filed an investigational new drug application and successfully completed both a Phase 1 and Phase 2a trial with PL-3994, a natriueretic peptide receptor A agonist under development for the treatment of heart failure and difficult to treat hypertension. We positioned bremelanotide as a therapeutic drug for the prevention of organ damage secondary to cardiac surgery and for related indications. We developed a new molecule for the treatment of sexual dysfunction PL-6983, that in animal models show efficacy for sexual dysfunction with significantly less effect on blood pressure than that seen with bremelanotide. Our agreement with AstraZeneca was amended to license additional compounds and associated intellectual property. The original global licensing and research collaboration agreement with AstraZeneca to discover, develop, and commercial compounds for the treatment of obesity, diabetes, and related metabolic syndrome was entered into in January 2007. Going forward, as of June 30, 2008, Palatin’s cash, cash equivalents, and investments totaled $12.8 million. Our operating expenses for the September 30 and December 31 quarters of 2008 are projected to be between $4.0 million to $5.0 million per quarter of cash burn. We anticipate receiving a significant milestone payment from AstraZeneca by the end of this calendar year for the first quarter of calendar year 2009 approximating our quarterly cash burn.

Dr. Hallam and I will now give an update on the company’s research and development programs. As you have heard from Steve, over the past year the company has focused on the restructuring of its product pipeline. Based on the strength of our science and technology and the hard work of our scientists, we have been able to put in place a product pipeline that is the strongest that the company has ever had. We now have four exciting programs that we believe can drive significant shareholder value. These are PL-3994, for the treatment of heart failure; our MCR4 obesity program which is partnered with AstraZeneca; PL-6983, melanocortin receptor compound for treating both male and female sexual dysfunction; and BMT for organ protection. All our programs target patient populations in which the medical need is high and with tremendous commercial potential. With that being said, in the current economic environment, how we drive value from our programs will vary. Over the next [inaudible] our primary focus will be on moving PL-3994 to additional Phase 2 studies and are working closely with AstraZeneca, our partner, on moving our MCR4 obesity-diabetes program through initial clinical trials. We will be seeking additional collaborations for our programs in sexual dysfunction and organ protection. PL-3994, which is a development as a treatment for heart failure, has completed both Phase 1 and early Phase 2 clinical studies and is our lead program. As Dr. Hallam will tell you in more detail, the initial clinical results of PL-3994 have been very encouraging. The PL-3994 clinical results and commercial potential have generated significant interest in both the medical community and from potential pharmaceutical partners. As you may be aware, heart failure is a progressive disease that affects over 5 million Americans and 10 million Europeans. In the U.S. 550,000 new cases of heart failure are diagnosed each year, with these incidents expected to increase with the aging of the population. Despite the treatment of heart failure with multiple drugs, the incidences of mortality and hospitalization of heart-failure patients remains high. Heart failure has tremendous human and financial costs. Estimated direct costs in the U.S. for heart failure were $29.6 billion in 2006, heart failure constituting the leading cause of hospitalization in people over the age of 65 with over 1.1 million hospitalizations for heart failure in 2004. Heart failure is also a high-mortality disease with approximately 50% of the heart-failure patients dying within five years of their initial diagnosis. Mechanism action and the ability for chronic treatment of heart-failure patients leads us to believe that PL-3994 has the potential to become a major treatment option for heart-failure patients. Moving on, over the past year the research teams at both Palatin and AstraZeneca, working together, have made significant progress in our MCR4 obesity-diabetes program. Obesity and diabetes are two diseases in which there remains a strong need for novel pharmacological interventions. The human and medical costs associated with treating these patients are enormous. We, along with our partner, believe that pharmaceutical agents targeting MCR4 have tremendous potential in treating both obesity and diabetes. Now I am going to turn the call over to Dr. Hallam who will spend some time going over the exciting science and progress of our programs, as well as covering the next steps for the various programs.

I want to take the time this morning to go through the scientific and clinical rational underpinning our programs and to describe why we are excited by the opportunities before us. I will start off describing our natriueretic peptide receptor programs, spending most of my time on chronic heart failure, but also discuss the opportunities in difficult-to-treat hypertensive states. Then I will get to melanocortin agonist programs on obesity, female sexual dysfunction, and lastly on organ preservation during cardiac surgery with cardiopulmonary bypass. PL-3994 is a novel, long-acting subcutaneous administered NPRA agonist that has been designed by Palatin scientists for the chronic treatment of heart-failure patients. The expectation is that PL-3994 will be administered daily and will affect heart remodeling and thereby reduce the rate of hospitalization and expand survival in this population. So firstly, I want to address the rationale for selective, chronically administered natriueretic peptide receptor A agonist for heart failure, and then secondly why, unlike other heart-failure therapies currently on the market, PL-3994 has the desired attributes for a drug that will be efficacious and suitable for chronic use. A cardinal feature of chronic heart failure is a phenomenon called ventricular remodeling, or ventricular hypertrophy. This is a condition in which the size and/or thickness of the ventricles of the heart increases in response to pathophysiological states and the condition is a powerful independent risk factor for cardiovascular morbidity and mortality. This increase in muscle mass of the ventricle is the body’s attempt to [inaudible] cardiac overload, but instead in contributes in multiple ways to the poor prognosis of these patients. The link between remodeling and prognosis is quite solid in that interventions which ameliorate remodeling have had a positive effect on survival and those that do not have such an effect fail to lengthen the lives of these patients. So this is a clear opportunity to be able to treat these chronic patients. Ventricular mass increase in hearts is driven primarily through activation of the renin-aldosterone-angiotensin system, which I will abbreviate to RAAS. Multiple pre-clinical studies and clinical studies have shown that suppression of the RAAS slows or reverses remodeling. Agents effective in this way are angiotensin converting enzyme inhibitors, angiotensin receptive blockers, and beta-adrenergic blocking agents. Combinations of these agents can be more effective than either single agent alone. While these classes of medication are effective in reducing symptoms, reducing the rates of hospitalization and extending life, chronic heart-failure patients nonetheless have poor prognoses. Thus there is clearly a high, medical need for neuro-agents which can provide further improvement. So the notion is quite simple. The addition of a novel medication, with a different mechanism action, which both further suppresses RAAS and affects ventricular mass and remodeling directly, is likely to provide additional benefit to heart-failure patients. And this is where we want to play. So what are the data supporting the expectation of a chronic NPRA stimulation will do these things, will reduce remodeling and improve outcomes in heart-failure patients? Well, the natural natriueretic peptides, AMP and BMT, are potent natriueretic and beta relaxing hormones that are secreted by cardiomyocites and play a significant role in cardiovascular homeostasis. They do this through stimulation of their receptor, the natriueretic peptide receptor A, NPRA. Stimulation of the NPRA receptor actually suppresses the activation of the RAAS system and therefore the drive of cardiac hypertrophy. But in addition, there is recent evidence that NPRA stimulation can suppress cardiac hypertrophy directly. Natriueretic peptides are able to directly decrease ventricular muscle mass by receptors and cardiomyocites. In some rather elegant pre-clinical studies, genetic manipulation revises the levels of indigenous agonist, ANP, or the levels of the receptor, NPRA, show the stimulation of the NPRA receptor chronically reduces cardiac remodeling. And pharmacologically, Palatin scientists have shown that PL-3994, acting through the NPRA receptor, can suppress aldosterone and slow cardiac remodeling in a RAAS model of renovascular hypertension and heart failure. Most importantly, there is also compelling evidence in humans that the importance of chronic NPRA stimulation to suppress cardiac hypertrophy. Human genetic studies have shown that known polymorphosis and receptors for natriueretic peptides, also the natriueretic peptides themselves, result in decreased ANP NPRA activity and the [inaudible] increase the severity of heart failure, providing evidence of a natural feedback mechanism control in cardiac mass. The direct evidence for the role of the ANP NPRA system in the regulation of cardiac hypertrophy in humans suggests that the mechanism appears to be overwhelmed in patients with heart failure. If this is indeed the case then exogenously administered natriueretic peptide receptor agonist could increase survival by slowing or reversing ventricular hypertrophy. In fact, several clinical studies conducted in Japan in the last two to three years have shown that continuous infusions of human ANP for greater than 96 hours, when given immediately after a myocardial infarction, reduced left ventricular remodeling and improved cardiac function when measured one month later. Similar benefits were also evident when ANP was infused into patients with decompensated congestive heart failure. This evidence suggests that chronic treatment with an NPRA agonist will prevent or reverse the degree of left ventricular hypertrophy and increase survival in heart-failure patients. So what is different about PL-3994 that makes it suitable for chronic administration when NATRECOR nesiritide was not? NATRECOR nesiritide, of course, is the J&J product that has been on the market since 2000 indicated for acute decompensated heart failure and also acts through the NPRA receptor. Well, in the well-publicized Science Institution 2 study, nesiritide failed to provide any long-term benefit when administered as one or two 4-6-hour intravenous infusions weekly. Given that the human half-life of nesiritide is 22 minutes, the result probably reflects the small fraction of time when they pharmacologic action of the drug was available. Positive signals in the Japanese studies that I just alluded to with continuously infused ANP, with generations of greater than 96 hours, suggest that chronic NPRA stimulation is in fact a sound approach. PL-3994 has a half-life of approximately 3 hours in humans and the duration of its effect on the cardiovascular system is 8-12 hours. Based on this, once or twice a day subcutaneous injections of PL-3994 should provide around-the-clock coverage, and are more likely to show benefits. Should two injections a day prove superior to a single daily injection in clinical trials, the shift to a single injection of the slow-release formulations will be made to improve market acceptance. The benefit of once-daily injections of PL-3994 for six weeks was demonstrated in a RAAS model of renalvascular hypertension and heart failure supporting the above assertion. So the ability to achieve daily coverage with a self-administered subcutaneous injection positions PL-3994 to provide benefit in chronic heart failure. What is the expected clinical benefit and market positioning for PL-3994? PL-3994 is expected to be useful for the treatments of chronic heart failure. It is expected to affect heart remodeling and thereby reduce the rates of re-hospitalization and extend survival in this population. It will be administered as a daily subcutaneous injection as an adjunct to other standard medication such as beta-adrenergic blocking agents, ACE inhibitors, and [inaudible]. In initial development will focus on patients with [neocos] association classifications of heart failure stage 2 and 3. The stage 4 patients are being studied later. The natural natriueretic peptides have as part of their pharmacology adrenal [amphuric robated dilate] reaction. And when the doses are pushed high can lower systemic blood pressure. With PL-3994 our base case chronic heart-failure population would initially include the 90% of heart-failure patients who have normal or elevated blood pressure of greater than 100 mm of mercury. And this will be the appropriate population should PL-3994 lower systemic blood pressure at the same basis as down-regulate RAAS activity and prevent cardiac hypertrophy. Some interest to note, that 1% to 2% of the acutely decompensated heart-failure patients who received nesiritide infusions decreased systemic blood pressure to the point where there is systemic hypotension. And of course, there is then concern that the kidneys might be properly profused. This is particularly true in patient populations starting with lower blood pressures of less 90 mm of mercury. Of course, what the nesiritide problems show is that 98% of patients infused with nesiritide do not have the problem. Nesiritide still down-regulates RAAS activity in the wider population, the 98% of who do not develop systemic hypotension. What this means is that we do not anticipate a significant problem with hypotension with PL-3994 in the chronic heart-failure population. PL-3994 is also expected to provide relief of the symptoms of heart failure. Acute decompensated heart failure, the condition in which there is a sudden inability of the heart to pump sufficiently, is a significantly smaller market than the chronic heart-failure market, however, the shorter nature of the clinical development program means that the acute decompensated heart-failure program can be completed more quickly and can reach regulatory submission earlier. Thus, the plan is to start the development of both indications in parallel with the expectation that the acute indication will be first and the chronic indication as a supplement. So how can proof of concept of PL-3994 for the chronic indication be achieved in the short term given that survival studies are so lengthy? The strong link between ventricular remodeling and survival provides a surrogate market. This allows a study of relatively brief duration of smaller time compared to a full-blown survival study, which will provide an early indication of the life [inaudible] survival study and achieving approval of the chronic indication. Specifically, a study is planned which would randomize chronic heart-failure patients to receive daily subcutaneous injections of PL-3994 in addition to their existing regimens. Cardiac remodeling is measured by cardiac MRI before and after 6 months of treatment which show whether PL-3994 is effective in preventing worsening of, or reversing, cardiac hypertrophy. A positive result in this study will be a strong indicator of the probability of success of the longer survival studies needed for registration. So as for our clinical development plans, two early-phase clinical studies have been completed, a Phase 1 study in healthy volunteers which has been presented to the Heart Failure Society of America meeting in Toronto this month and a Phase 2a study in controlled hypertensives. Going forward, a single-dose fringing study in heart-failure patients will begin this year with a multi-dose 28-day pilot study in chronic heart-failure patients planned to begin the first half of 2009. Proof of concept studies for both chronic heart failure, a six-month treatment, and for acute heart failure, are both planned to commence in the second half of 2009. Now let’s switch and talk to an opportunity, potentially, also for PL-3994 in the chronic treatment of difficult-to-treat or resistant hypertension indications. As I have described, in high concentrations, peptides acting on the NPRA receptor can quickly decrease in blood pressure. While the doses used for heart failure will be selected to minimize this effect, the ability of PL-3994 to reduce blood pressure for at least 8-12 hours, provides an opportunity using high indices for treatments of elevated blood pressure in specific populations when this blood pressuring lowering effect is therapeutic. With the help of its scientists at [inaudible] Palatin applied a number of specific areas of a met-medical need within the hypertension field where a product with this specific pharmacological properties of PL-3994 were favorable. These clinical areas include hypertension in renal dialysis patients, hypertension in post-operative patients who take oral medication, and resistant hypertension patients. Resistant hypertension is defined as blood pressure which cannot be brought back to healthy levels despite the three appropriate blood pressure medications used in combination. Now, in order to promote acceptance, Palatin plans to start developing the anti-hypertensive indication in renal dialysis patients. Approximately 300,000 patients who are on renal dialysis in the United States and studies have shown that up half of them are hypertensive between their dialysis sessions. This form of hypertension is poorly treated with approved oral medications. Because cardiovascular disease is a major problem in these patients, an oral therapy would be welcome and would likely experience rapid up take in use. We plan a Phase 2 proof-of-concept study to study PK and efficacy in dialysis patients with hypertension. It is anticipated that this study will provide adequate information to support an end-of-Phase-2 meeting with the FDA. Now I want to continue and discuss our melanocortin-4 agonist programs and I will start with the program for obesity. This is a collaborative research and development program with AstraZeneca for the discovery and development of anti-obesity agents. The global increase in the number of and rate of which people are becoming obese, or overweight, will continue to stretch health care systems. The health that is associated with obesity and the difficulty of treating the disease indicates there is a large growing need for therapies of treating obesity. Palatin’s melanocortin receptor obesity proton combines our core technologies for regeneration with our pre-clinical and clinical experience with the melanocortin system to develop novel therapeutics for treating obesity-related behaviors. The accumulating datas in genetic pharmacological and physiological studies identify the central melanocortin system as an important regulator of energy homeostasis and potentially a key drug for obesity. Palatin has developed small molecule peptide mimetic and peptide compounds that modulate the function of melanocortin –4 receptor. The activity profile indicates that they have potential as treatments for obesity and associated diseases. The studies using animal models of obesity selected compounds to reduce food intake and body mass as well as decreasing glucose and insulin levels. As Steve mentioned, in January 2007 AstraZeneca and Palatin Technologies announced an exclusive global licensing and research collaboration agreement to discover, develop, and commercialize compounds that target melanocortin receptors. In June 2008 AstraZeneca and Palatin Technologies amended the collaboration agreement to include additional compounds and associated intellectual property developed by Palatin. Under the terms of the initial agreement Palatin received an upfront payment of $10.0 million from AstraZeneca and [inaudible] payments totaling $300.0 million with up to $118.0 million contingent upon developments and regulation [inaudible] and the balance on achievements of sales targets, together with the payments of royalties and product sales to double-digit rates dependent on sales achieved. AstraZeneca has assumed responsibility for product commercialization, product discovery and development costs, with both companies contributing scientific expertise and research collaboration. Palatin and AstraZeneca have made significant progress under the collaboration agreement using core technologies and lead generation and expertise in melanocortin biology to develop the technologies. We expect to take a proof-of-concept compound to the clinic later this year for clinical evaluation. Now to female sexual dysfunction and Carl mentioned PL-6983, which is a novel second-generation peptide agonist for the melanocortin-4 sector with decreased cardiovascular effects for the treatment of female sexual dysfunction. The melanocortin system has long been recognized as intricately involved in the pathways controlling sexual arousal, notably those located in the hypothalamus. Palatin performed a series of Phase 1 and 2 clinical trials of the first generation peptide, bremelanotide, for both male and female sexual dysfunction. Promising accuracy results would have supported Phase 3 trials for both indications, however, after bremelanotide associated with an increase in systemic blood pressure new compounds were sought which preserve the efficacy of bremelanotide but with less cardiovascular effects. Nevertheless, bremelanotide development provided important insight. Further, it demonstrated an improvement in erectile function in men with erectile dysfunction. The magnitude of improvement was similar to that with the marketed PD-5 inhibitors Viagra, Cialis, and Levitra. Second, it led to highly statistical significant improvements in desire, arousal, and orgasm in female patients with hypoactive arousal disorder, particularly in post-menopausal patients. This result was particularly remarkable since there are no further on-demand agents with these properties. These on-demand agents are given only for the time of planned sexual intercourse rather than chronically it is likely that they will face a lower regulatory hurdle than agents which must be given daily even if intercourse is not planned. These results have been presented at recent urology, sexual medicine, and gynecology meetings and are being prepared for publication. In addition, efficacy has been confirmed in a non-company-sponsored study. A goal of our discovery program has been to separate the pro-erectile and blood pressure responses of selective MC-4 receptor agonists. Recent compounds have been designed for the peer and animal models to have similar efficacy to bremelanotide but with a wider separation from blood pressure effects compared with bremelanotide. A Phase 1 trial is planned for the first half of 2009 with PL-6983, a peptide agonist which would seek to demonstrate the better therapeutic window than bremelanotide by comparing the doses needed to produce an erectile effect, measured by rigid scan and not raise blood pressure. If this can be demonstrated Palatin will focus development efforts on female sexual dysfunction, both disorders of arousal and desire as the medical need and commercial opportunities are significantly higher there compared to erectile dysfunction, where three agents are satisfactory for many patients. The market opportunity for an effective agent helping women with sexual dysfunction is potentially quite large. Estimates of the rates of sexual dysfunction in post-menopausal women range as high as 43%. As the population ages the proportion of post-menopausal women is only expected to grow. Now, lastly I want to talk a little about organ preservation so this is specifically the use of melanocortin-4 receptor agonist for the prevention of organ dysfunction after cardiac surgery with cardiopulmonary bypass. Organ damage, particularly kidney damage, is a recognized complication of many surgical procedures, including cardiac surgeries involving use of a heart-lung machine, or cardiopulmonary bypass. Patients with acute renal kidney failure resulting from surgery have higher death rates, longer hospital stays and may require dialysis. Ischemia re-profusion injury, that is injury resulting from inadequate blood flow or reintroduction of blood flow, and inflammation are believe to be the primary contributors to surgically-injured organ injury. The kidneys, which are high metabolic requirements, are particularly vulnerable to this type of injury. The brain, liver, lungs, and gut may also suffer injury following cardiopulmonary bypass or high blood-loss surgeries. There are no approved drugs for prevention of acute renal injuries secondary to cardiac surgery. This remains a major medical need. Palatin technologies is developing bremelanotide for this and related indications. There was an extensive pre-clinical trial on the use of melanocortin-4 in hemorrhagic shock. Palatin has been able to confirm these findings in its own laboratories with the use of bremelanotide. Furthermore, small clinical trials of other melanocortin-4 agonists has been promising lowering mortality in very severe hemorrhagic states. In particular, one randomized trial showed a significant decrease in mortality in patients with ruptured abdominal aortic aneurisms undergoing emergency surgery. Palatin plans to initially develop bremelanotide in clinical situations with a lower degree of human dynamic compromise but with significant morbidity and excess resource equalization on the last. Acute renal failure remains a major complication of cardiopulmonary bypass surgery but it is strongly associated with in-hospital mortality. Over 450,000 coronary-artery bypass graph surgeries are performed annually in the United States. The incidence rate of acute renal failure has increased, resulting in increases in health care resource utilization and length of intensive care in hospital stay. Prevention of organ dysfunction in patients undergoing cardiac surgeries, including surgeries with cardio-arterial bypass is the initial projected indication for bremelanotide. Other potential indications include improvements in survival and prevention of organ dysfunction in patients with traumatic injuries resulting in hemorrhagic shock. This patient population includes potential emergency medicine and military applications. Our clinical development plan is to conduct a Phase 3 study in patients undergoing procedures requiring cardiopulmonary bypass. After patients have a couple of units of blood removed, but before commencing bypass, patients will have either placebo or single-escalating dose of bremelanotide. Primary end point for this study is related to safety and the secondary end points will be hemodynamic. This will allow safe [inaudible] to be selected for the next studies which would be a Phase 2 study in patients undergoing procedures associated with hypertension and post-operative organ dysfunction. Primary end points will be based on prevention of organ dysfunction setting up potential registration end points. Well, I hope you appreciate how excited we are by these programs in Palatin and I’m going to hand back to Carl.

I believe we have given you a rather detailed overview of the past year’s activities and where we plan to go in the upcoming year to drive and increase shareholder value. I just want to give a quick summary and then we will turn things over to questions. The key focus for us will be to draw PL-3994 forward to establish a strong foundation for Phase 2b and Phase 3 clinical studies as a chronic treatment for heart-failure patients. We believe this will set the stage for significant corporate collaborations for this program and in fact, we are already making progress on the collaboration front with multiple discussion already opened. As you have heard from Dr. Hallum, we anticipate that we will enter into our first clinical studies for MCR4 obesity-diabetes program later this year. We want to remain focused on supporting this program for these important indications. For our programs for organ protection and sexual dysfunction we are actively engaged in entering into corporate partnering and strategic collaborations for these programs. Finally, we anticipate that we will receive significant milestone payments from MCR4 obesity-diabetes program which we will compliment with additional funds from new collaborations and from strategic investors. Before I turn the call over for questions, in my opinion the company has gone through a very successful reorganization of its product portfolio. This has been done in the backdrop of a very difficult financial and operating environment. I believe that we are well positioned to continue to attract the corporate, human, and financial resources required to drive substantial shareholder value in the upcoming year. As the coming progresses we will be evaluating all means possible for the company and its shareholder to realize the growing value of our company as the Board, management, and employees of Palatin remain committed to the success of our company. Before we open this call up to questions, just a couple of quick notes. One, this is a rather detailed presentation and for those that are new to the company, we don’t normally cover our programs in this much detail, but because this is one of the first times that we are introducing the full company and all its potential, we wanted to give you a little more detail about the science and why we are so excited about the programs. Because of that, we will make a replay of this available for the next week and in addition we will put a transcript of the teleconference up on our website as well so you will have a little more time to go through the detail as you wish. With that, we will open the call to questions.

(Operator Instructions) Your first question is from Amy Wang with MDB Capital.

How do you see PL-3994 fitting into the [inaudible] market? Do you think that will be taken along with beta blockers and other drugs that are currently available.

Absolutely. We will develop that. It could be used as mono-therapy but I think in this chronic treatment paradigm which really does have very poor prognosis at the moment, there is plenty of room for an adjunct therapy on top of those other medications. So I think that’s how this will be actually used in anchoring that patient population.

And secondly, what aspect of PL-3994 do you think differentiates itself from NATRECOR and in particular can you address if it has perhaps a better safety profile and can you touch a little bit on hypotension or the risk of hypotension?

Yes, of course. Firstly, in any chronic treatments of any chronic disease you need the ability to get coverage 24 hours a day so that you can have the maximum possible benefits. And the Fusion 2 studies with nesiritide were really trying to get to a more chronic cover in those patients visiting outpatient clinics, but they only amounted to a couple of infusions per week. Remember, nesiritide and NATRECOR has a 22 minute half-life and there are two very active mechanisms for getting rid of it when dosed. One is an anti-peptidace in the plasma which degrades it and the other is because the compound nesiritide binds to the NPRC receptor and gets rapidly cleared. So it’s very difficult to actually adjust dose because as soon as you infuse it’s getting churned out by two mechanisms. So getting it accurately dosed is tough. Trying to infuse something 24 hours a day, 7 days a week is not feasible, of course, for chronic treatment. So the reason why we have developed PL-3994 is to really go for the same receptor, which is so fundamentally linked to the heart remodeling and the survival outcomes, and that’s the genetic evidence I covered, but also supported by clinical precedence of the other agonist, ANP, which is commercialized in Japan, and they have the continuous infusions to greater than 3 days and can show a signal that you’re improving heart remodeling measured 3-4 weeks later. So I think the clinical precedence efforts to coming back to PL-3994, PL-3994 has got a 3 hour half-life, certainly twice a day will cover the 24 hour exposure you need on a chronic basis. It will be developed as a subcutaneous injection, so it could be self-administered, and the good thing about it is that we have designed it to be NPRA selective. It doesn’t get cleared by the NPRC receptor, it doesn’t get degraded by the anti-pepsodace. So it’s got a very long half-life because of that. And also you get the luxury then of having a very predictable drug, which allows you to dose range properly so you don’t over-shoot the dose and dangerously drop, if you really push it you could decrease the blood pressure, but we won’t get into that situation, for these reasons. So with nesiritide we know that 1% to 2% of patients do get a systemic hypotension and that’s largely because it’s tough to actually control the infusion rate. I think it’s only approved for one infusion rate. We are anticipating we can avoid that in two ways. One is we will get the dose right. As we develop it we will do much more comprehensive dose rate in new studies. But the other thing that counts in our favor is that we will initially start off with not the 100% of heart-failure patients, but 90% of heart-failure patients who are normatensive or hypertensive. So any drop in blood pressure that we would get that we would predict would not have the result of driving people into systemic hypotension that will potentially compromise in kidney profusion and renal effects.

So the PL-3994 is differentiated from NATRECOR in extended half-life, it’s sub-cu delivery, so that you can better control the amount of PL-3994 you are administering to the patients, which is not necessarily what you have with NATRECOR.

Yes, that’s largely correct.

Your next question comes from Rahul Jasuja with MDB Capital.

You mentioned ventricular modeling as a surrogate end point that equated to survival. You’ve got a template that you can follow based on what NATRECOR did, is this one of the end points that NATRECOR also used or is this something that is novel given recent findings for PL-3994.

Why I’m making such a strong case for the link between hypertrophy remodeling and ultimately the outcomes for survival, which is the bee’s knees for these patients, is that that has been linked, when you look at ACE inhibitors and beta blockers you can see an improvement to go along. So the better you affect hypertrophy, the better the survival is. Although, there is plenty of room for improvement. And the direct effects of the NPRA, the natural agonist, on the NPR receptor through human genetics and through the Japanese infusion studies, further support the therapeutic application of NPRA agonists are going to work, chronically. So that’s the rationale for it. Nesiritide was trying to play to the chronic market by reducing re-hospitalization. You remember, it’s approved for actually decompensated IV infusions in the ER. That’s where it is approved. But it got taken up in these out-patient clinics by physicians that were trying to offload some fluid, reduce the blood pressure somewhat, and keep people out of the re-hospitalization. And that’s what the Fusion studies, the Fusion 2 study was all about, which failed to show any benefits at all. My conclusion from that, the conclusion of Palatin scientists, and those experts that we’ve talked to externally, is that simply the NPRA mechanism is a good mechanism, it’s just that nesiritide didn’t have what it takes to give you that coverage to allow benefits to be seen.

It seems like you have been able to tease out the blood pressure effects that you’re seeing with the melanocortin receptor program and get the desired effect. Was the move from using peptide-based agents to small molecule agents the secret answer there?

No, in short. Obviously we have done a lot of peptide work, bremelanotide is a psychic peptide, and we started, we had a chemistry and peptide program going in the background over the last year and a half to two years, looking for something that would be better than bremelanotide should the blood pressure effect and other selectivities not previewed, so we are always looking for something better. And we were always into small molecules because ultimately we would have like to emulate the success of something like Viagra by having an on-demand oral tablet. So we would be looking for that as another opportunity as well. The obesity deal with AstraZeneca is largely around small molecules but we’ve actually been exploring small molecules as well as peptides for sexual dysfunction and we’ve moved with AstraZeneca to include peptide structures, too. So for both series we’re into both peptides and small molecules and that is separate, again, from the blood pressure effects that we’re separating in both series.

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