Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Second Quarter Fiscal Year 2015 Conference Call. As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that today's -- 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'd like to introduce you to your host today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Thank you. I'm Carl Spana, President and Chief Executive Officer of Palatin Technologies. With me on the call today is Steve Wills, our Chief Financial and Operating Officer and Executive Vice President. On today's call, we will provide updates on our development programs and our second quarter fiscal year 2015 financial results. To begin, Steve will provide the financial operational updates.

Thank you, Carl, and good morning, everyone. Starting with recent highlights. Regarding our bremelanotide development program for female sexual dysfunction, in December 2014 and January 2015, we initiated the 2 pivotal studies of our Phase III clinical trial, reconnect study in the United States for the treatment of female sexual dysfunction. The start of the reconnect study in the United States triggered a development milestone payment of EUR 2.5 million, approximately $3.1 million, from Gedeon Richter, which was recognized as revenue in the quarter ended December 31, 2014, and received in January 2015. In December 2014, we closed on a mix of debt and equity financing which, in the aggregate, amounted to gross proceeds of $30 million and consisted of a $10 million venture loan and $20 million private placement of approximately 2.1 million shares of our common stock and Series C warrants to purchase approximately 25 million shares of common stock. Two accredited investment funds invested $10 million each. The funds paid $0.75 for each share of common stock and $0.74 for each Series C warrant, resulting in gross proceeds to Palatin of $20 million, with net proceeds after deducting offering expenses of approximately $18.6 million. The Series C warrants are exercisable immediately upon issuance of an exercise price of $0.01, and expire on the 10th anniversary of the date of issuance. The $10 million debt facility is a 4-year Senior Secured Term Loan that bears interest at a current floating coupon rate of 9% and includes an interest-only payment period for the first 18 months, followed by a monthly principal payments of approximately $333,000 plus accrued interest over the remaining 30 months. The lenders also received Series D warrants to purchase approximately 667,000 shares of Palatin's common stock at an exercise price of $0.75 per share, are exercisable immediately upon issuance and expire on the fifth anniversary of the date of issuance. In December 2014, we received approximately $500,000 in net proceeds from the sale of New Jersey state net operating loss carryforwards, which resulted in the recognition of $500,000 tax benefits for the quarter ended December 31, 2014. Regarding our intellectual property portfolio. In November 2014, we obtained a U.S. patent for melanocortin receptor-1 cyclic peptides with potential application in the treatment of inflammatory and dermatologic disease indications. Regarding financial highlights. Palatin reported net income of $2.8 million, or $0.03 per basic and diluted share for the quarter ended December 31, 2014, compared to a net loss of $3.6 million, or $0.03 per basic and diluted share for the same period in 2013. The increase in net income for the quarter ended December 31, 2014, compared to the same period last fiscal year was mainly the result of the recognition of approximately $8 million in contract revenue pursuant to our collaboration with Gedeon Richter. Regarding revenue. The total revenue for the quarter amounted to $8 million and consisted of the remaining $4.9 million of license revenue, which was previously deferred, plus approximately $3.1 million from a development milestone upon the start of the reconnect study in the United States. There were no revenues recorded in the quarter ended December 31, 2013. Regarding cost and expenses. Total operating expenses for the quarter ended December 31, 2014, were $5.7 million, compared to $3.6 million for the comparable quarter of 2013. The increase in operating expenses for the quarter ended December 31, 2014, was the result of an increase in costs, primarily relating to Phase III clinical trial program costs for bremelanotide for the treatment of female sexual dysfunction. Regarding Palatin's cash position. Our cash and cash equivalents were $42.7 million, with accounts receivable of approximately $3.1 million as of December 31, 2014, compared to cash and cash equivalents of $12.2 million at June 30, 2014. Current liabilities amounted to $5.1 million as of December 31, 2014, compared to $1.8 million, net of $1 million of deferred revenue, as of June 30, 2014. We believe that existing capital resources will be adequate to fund our planned operations through the quarter ending March 31, 2016.

Thank you, Steve. Our second quarter fiscal year 2015 operational update will focus on our bremelanotide Phase III female sexual dysfunction program. Last quarter, our bremelanotide program achieved a significant milestone of initiating the North American Phase III pivotal registration program, and we are excited to report that both clinical trials of the reconnect study are enrolling patients due to Protocols 301 and 302 of the reconnect study, our multi-center, randomized, placebo-controlled parallel group clinical studies with a 6-month randomized treatment phase and an open label extension phase. The North American clinical trials are designed to randomize approximately 1,100 women, which is 550 for each trial, to evaluate the efficacy and safety of subcutaneous bremelanotide in premenopausal women with hypoactive sexual desire disorder as an on-demand, as-needed treatment. The reconnect study is anticipated to include approximately 160 clinical sites, which is 80 for each protocol, in the United States and Canada. More information on the trial protocol, including trial design, including exclusion criteria, can be found on the clinicaltrials.gov website. The BMT reconnect study is projected to complete enrollment in the second half of calendar 2015, with top line data reading out in mid-calendar 2016. Our current operational activities are focused on meeting this timeline. Concerning the bremelanotide clinical trials. In Europe, we are working with our partner, Gedeon Richter, on the activities required to begin enrollment in the European Phase III trial. As anticipated, the Phase III European clinical trial will begin in the second half of calendar 2015. Although I commented on the FDA 2-day public meeting on female sexual dysfunction on our last call, I think it's important to go over the key points again. We believe the outcomes from these 2 meetings point to a favorable regulatory environment for the potential approval of drugs to treat female sexual dysfunction. The meetings were held on October 27 and 28, 2014, at FDA White Oak Campus in Silver Spring, Maryland. The first day was a public meeting of female sexual dysfunction patient-focused drug development, which a number of invited patients and key opinion leaders expressed how female sexual dysfunction impacts their lives and their desire for treatment options. The second day was a scientific workshop on female sexual dysfunction, where FDA's selected panel of experts provided the FDA with guidance on various aspects of female sexual dysfunction clinical trials, including endpoints, patient populations and the determination of treatment benefit. In our opinion, these meetings were a significant positive for female sexual dysfunction patients and for companies developing novel treatments for female sexual dysfunction. The FDA clearly stated that female sexual dysfunction is an unmet medical condition that impacts the quality of life of patients, that the FDA is committed to working with sponsors to develop the treatment options for patients. The scientific workshop provided clear guidance to the FDA on key aspects of female sexual dysfunction drug development and clinical trials. The outcomes of these meetings provide greater regulatory clarity and confirm our confidence in the design of the bremelanotide Phase III pivotal registration program. We believe that there is a substantial global market for bremelanotide, with the United States being the largest potential market, followed by the European Union. Concerning the potential of the licensing agreement for the bremelanotide North American development and commercialization rights, we continue to make progress with these activities, working with potential partners as they conduct their due diligence. At this time, we cannot predict when or if such an agreement will be entered into. Now moving on to our natriuretic peptide program and our clinical development candidate, PL-3994. Natriuretic peptide system is an endogenous neuropeptide hormone system involved in the regulation of cardiovascular function. Natriuretic peptide system includes the peptide hormones atrial natriuretic peptide and brain natriuretic peptide and their associated receptors. Natriuretic peptide system is upregulated to a heart failure and functions to lower blood pressure, suppress the renin-angiotensin-aldosterone system, inhibit cardiac hypertrophy and fibrosis, increase natriuresis and protect cardiac and kidney function. A high value of targeting natriuretic peptide system for heart failure treatment is demonstrated by recent Phase III clinical trial results with the compound LCZ696, a compound under development by Novartis. LCZ696 upregulates the endogenous natriuretic peptide system by blocking the enzymatic degradation of atrial natriuretic peptide and brain natriuretic peptide. The detailed results of the LCZ696 Phase III trials were recently published in the New England Journal of Medicine and clearly established the natriuretic peptide system as a validated target of heart failure therapy. It is highly likely that upregulation of the natriuretic peptide system will become part of the standard of care for heart failure patients. Our natriuretic peptide system program with multiple approaches to upregulating natriuretic peptide system is uniquely positioned to take advantage of this potential paradigm shift in the treatment of heart failure. PL-3994, our lead drug development candidate, is a mimetic of atrial natriuretic peptide and an agonist at the natriuretic peptide A receptor. PL-3994 has completed Phase I clinical studies and is ready for Phase II clinical trials. Our preclinical and clinical studies show that PL-3994 increases circulating cyclic GMP, diuresis and natriuresis, inhibits the renin-angiotensin-aldosterone system, decreases systolic and diastolic blood pressure and inhibits cardiac modeling. PL-3994 has potential application in heart failure, with preserved or reduced ejection fraction and is ideally suited for replacement therapy in patients with corin or other pro hormone processing deficiencies. In addition to PL-3994, we have preclinical development drug candidates that bind to unblock the natriuretic peptide C receptor, thus increasing endogenous atrial natriuretic peptide and brain natriuretic peptides by decreasing their clearance. In parallel with our business development efforts, we are preparing to initiate the PL-3994 Phase II clinical development program, and given appropriate financial and development support, we could initiate a PL-3994 Phase II clinical study in the first half of calendar 2015. Melanocortin 1 receptor anti-imflammatory in melanocortin-4 receptor for obesity and diabetes preclinical programs continued to make substantial progress on both the operational and business development areas. We plan to provide more detail on these 2 exciting programs later this year. In summary, in the past quarter, we achieved the significant milestone of initiating the bremelanotide Phase III pivotal registration program in the United States. Stated Protocols 301 and 302 are enrolling patients and on track to complete enrollment in the second half of calendar 2015, with data anticipated in mid-calendar 2016. We have designed a comprehensive Phase III program that is successful, will provide the safety and efficacy data to support regulatory submission for approval of bremelanotide as a treatment for premenopausal women with female sexual dysfunction. Our collaboration with Gedeon Richter is going well, and we remain on track to begin patient enrollment in the EU pivotal program in the second half of 2015. The FDA's recent 2-day public meeting on female sexual dysfunction supports female sexual dysfunction as an unmet medical condition in need of drug treatment and provides additional regulatory clarity on the female sexual dysfunction indication. We continued to present the published data from our bremelanotide Phase IIb program, and you can find these presentations on our corporate website. Recent clinical data indicates that the natriuretic peptide system has the potential to play a key role in the treatment of heart failure. Our preclinical and clinical work with lead clinical candidate PL-3994 puts us in a good position to take advantage of this potential paradigm shift in the treatment of heart failure. Regarding melanocortin receptor 1 program, PL-8177, our lead candidate has completed preclinical activities required to file an IND with the FDA and conduct human studies. We also continue to make progress on identifying potential corporate partners. And finally, we have made excellent progress with melanocortin-4 obesity and diabetes program, with multiple potential lead clinical candidates identified, and we continue to work with AstraZeneca to determine the best path forward. With that, I'm going to end the call and open it up for questions. And thank you, everyone, for participating on our second quarter fiscal year 2015 conference call. Now we'll open for questions.

[Operator Instructions] And we'll take our first question from Charles Duncan of Piper Jaffray.

Hey, guys, it's Roy for Charles. Give us a bit more detail on the timing for data from both -- are you going to release them at the same time? And then how about for NDA filing?

Yes. I mean that the trials really started within 30 days of each other. So we would have them enrolled and completed at -- in an alpha data simultaneously from both studies.

Okay. And regarding the -- have they gone well, moving forward, the FDA NDA submission we're targeting for the fourth quarter of calendar year 2016, and FDA action on that NDA submission in the fourth quarter of 2017. And as of right now, the EU Phase III program is tracking about 2 quarters behind the U.S. pivotal program. And there, they're targeted to start the Phase III program in the EU, in selected countries, in the second half of calendar 2015.

Okay, that's helpful. And then I know you discussed partnering and you can't give us a strict timeline. But can you give us a sense if you expect to -- is something done for the U.S. before the Phase III data? Do you prefer to do it after? What's your thoughts?

I mean, I think we have the flexibility with the financing that came in and the support we have from the good institutional investors that we have to get the trials up running and get to the data point. So we don't feel that we have any pressure that we have to do a deal to support the development going forward. So that gives us the flexibility to really continue to work with the companies that are interested and make sure that we get the right deal for this program. As I said during the call, we don't have -- we're not giving any direct timing on that, but as I said, we have the flexibility now to make sure that we get a deal that really truly values the way we believe bremelanotide is worth.

Okay, that make sense. And then on the 3994. As you mentioned, a lot of interest considering Novartis's compound. And probably discussed it but it was a little fast and complicated. Can you expand a little bit on how 3994 works? How it's similar to [indiscernible] Novartis's compound? And what you plan for the next steps? And that are you holding out for a collaboration? Or are you going to start Phase II yourselves?

[indiscernible], okay, with multiple parts. So on a mechanistic front, the natriuretic peptide system is the -- really a -- the body's natural defense against heart failure. It essentially is designed to counteract all the things that are going wrong in terms of heart failure. And it predominantly works through release of atrial natriuretic peptide and then atrial natriuretic peptide binding to its receptor on various cell types as -- and causing its effects, whether that be suppression of cardiac hypertrophy or increasing kidney function or decreasing blood pressure. 3994 was designed to be an analog or a mimic of atrial natriuretic peptide that is very selective and stable and binds as -- and activates natriuretic peptide A receptor. Where it's analogous to the Novartis product is, is they accomplished upregulation of the natriuretic peptide system by blocking the breakdown of the normal hormone. So whereas they block breakdown, we give the direct acting agonist. So the difference is we have a more flexibility. We provide more flexibility to the physician on how much natriuretic peptide system agonism they want to provide to the patient. So they can either move up or down to provide more MPS activation than you can with Novartis' product. We really see them as being very complementary. And there is an analogous treatment paradigm out there in the diabetes space where we have DPP- 4 inhibitors that block the breakdown of endogenous GLP-1, and then we have direct-acting GLP-1 agonists that are given. Both of those classes are $1 billion classes of compounds, and it's a some -- somewhat of an analogous way you can think about the Novartis compound and 3994. From a development standpoint, the next study for us is really the first -- the early Phase II study. It's designed to be a multidose study in heart failure patients where -- of different types, so those with preserved ejection fraction, reduced ejection fraction. And importantly, there is a subset of patients that have genetic mutations in which they don't make enough natriuretic peptides. So therefore, supplementing in some of that 3994 would get around that genetic block. We want to look at those 3 types of patients and determine the appropriate way to dose them, so that we can then send them into an at-home -- a large at-home study where we can do real outcome, which would be the second part of the Phase II program. That study can start as early as the first half of this year. It is dependent on financial resources of the company. So -- and we do have active discussions from a business development standpoint. And we probably will allow those to play out before we make a final decision on whether or not we go forward on our own or not. So I hope I clarified your questions.

And we'll go next to Joe Pantginis of Roth Capital Partners.

Maybe switch gears a little bit. When you look at -- obviously, you have a broad pipeline at the company besides BMT, and obviously, the increasing visibility with 3994. But when you look at the melanocartin -- melanocortin, sorry, program, a lot of focus in the past was placed on AstraZeneca, had a little hiccup with the earlier study, that they were sort of going back. I was just curious, what do you think are the next steps regarding your collaboration with AstraZeneca? And then I'll follow-up.

Sure. You're correct in all of those statements on MCR -- the MCR-4 program with AstraZeneca. And what we did -- well, AstraZeneca has -- went through a number of changes, particularly in the division in which our program was. However, we maintain a very strong interest and moved the program forward on our own. And I think we made, as I said a number of times, substantial progress on a number of fronts, which, on a future date, we'll update you. But suffice it to say, we believe that we put the program on a position where there are new lead compounds that can go forward into development. We have discussions with AstraZeneca about those and as well as others, by the way. And we expect in the not-too-distant future that we'll be getting feedback on how AstraZeneca wants to go forward and also provide some alternatives as well.

Okay, now that's helpful. And then when you look at your MCR1 program for inflammation and dermatologic diseases, do you have a lead compound at this point? And what kinds of diseases and/or indications would you be looking at?

Sure. The lead compound is PL-8177. Again, this is a compound that is very selective for MCR1 receptor, quiet clean in preclinical tox. This is -- all of the preclinical tox has been done. As soon as we manufacture the drug product, we would be able to finalize our IND and go forward with the patients. So it is quite advanced. We've generated some very interesting data. And again, we will, at a later call, spend some time going over these programs with a little more detail because it -- the preclinical data is quite exciting, but we generated very -- I think good evidence and efficacy in models in the inflammatory bowel disease, uveitis as well. And these are 2 strong indications, so we're -- we have evaluate which one we want to go forward with.

And we'll go next to Rahul Jasuja of Noble Life Science Partners.

A few questions here. So let me start with the FSD program. Beyond the questions already discussed, what are the populations that are beyond the premenopausal women's population that's targeted formally in these trials? And also, despite the women population, when you -- and I'm not sure how appropriate you should discuss this right now, but when you discuss their partners, is the discussion on ED, and off-label use for ED or even a formal setting for ED, discussed with larger pharma and midsized pharma?

Sure. So I'll take that [indiscernible] thesis from a patient population standpoint. The initial population is premenopausal women with low desire, with or without arousal symptoms, and that's -- beyond that, I think there are probably at least 3 populations that are interesting. Clearly, post menopausal women, we've done earlier Phase II work where we've shown very good efficacy in post menopausal women. And certainly, as part of the Phase III overall program, we would like to, at a minimum, evaluate in detail the safety parameters in the dosing of bremelanotide in that patient population so that can go forward. Two other populations are women with gynecological cancers. They have a very, very high rate of sexual dysfunction, and we think that they would be good -- another good specialty population. And then the third one would be women on antidepressants. The last 2 don't -- although they have -- although they're premenopausal women with symptoms of FSD -- they don't meet the formal definition so they're not on our clinical trials, but we do think there are ones that are market segments where we can expand the indication as the product gets approved. So those are the 2 there. With regards to use in erectile dysfunction, clearly, MCR-4 agonist, through our work and work with others, can play a role on erectile dysfunction. The partners that we're talking to -- generally really, we're talking to their Women's Health franchises, so they don't tend to be focused on the erectile dysfunction aspects of it. So we not yet had any discussions about erectile dysfunction with those partners. And certainly, we don't comment on off label use of -- we -- as always, we would like to see our drugs used as they are labeled, as they should be.

Okay, fair enough. One more question on the FSD program. We could start the FDA workshop on FSD. So my understanding here is that this is not a formal guidance. Are we expecting guidance down the road that's formal from the FDA?

We have not heard if they're going to issue any formal guidance yet. There is a meeting coming up at the end of next week. If that -- a number of the key consultants will be at. It's a FSD meeting. So we'll get a little bit better feedback there. If they heard -- if the FDA is going to have any guidance coming out or not. But as far as we know, they haven't put out any formal announcement that they're going to put a guidance document in FSD.

Okay. And then moving onto the MCR-4 pathway. You've discussed in your presentation sort of the monogenic obesity the MCR-4 is deficient. Is that really what the first pathway or first clinical trial could be? Or is that not an appropriate pathway just because the population has somehow declined?

I mean, that type --we've looked at that patient population and it's a very tiny patient population, relatively tiny patient population. The MCR-4 pathway, I mean, is actually a -- absolutely key hypothalamus pathway. I mean, most of it -- I think, these are 3 drugs approved for treating obesity today. And they probably all require at least, I know, minimally at least 2 of those drugs require a functioning MCR-4 pathway to actually drive a large part of their weight loss. I'm sure, for the third one, it plays a key role as well. So I think it's very hard to contemplate most of the mechanisms out there, most the drugs out there are, at some point, rely on the system. So we don't believe that's going to have -- it's just restricted to just a specialty population. Now however, with that being said, in light of the fact that there are drugs out there that are orally active, this would be a peptide have to be injectable. I think you have to be a little bit smart as to how you develop it, where the higher -- highest need is. And it may not be in this generalized obesity population . It may be more in a specialty population and a very logical one that comes to mind, of course, is in the diabetes area. And although we haven't talked about it much and won't get any detail on this call, we have been doing a lot of work in preclinical models, diabetes models. And I think we have some very interesting results and have generated some very interesting intellectual property, and that will be the topic for our future call.

All right, great. Then one last question and I'll get off. On 3994. Just sort of building on the previous Q&A on 3994. So is the gist of the difference when you use 3994 oral natriuretic peptide system modulator here that you're getting more or less cardiac remodeling compared to standard of care? Is that sort of the general thinking here?

Well, I mean, that's an -- that can be an inference that one would take from Novartis' data. ACE inhibitors have demonstrated a survival benefit in heart failure in a halting and potential reversal of cardiac remodeling. And that was the control group for the Novartis compound. And so we do know from our work and from literature mechanistically that natriuretic peptide system does have receptors on cardio fibroblast and cardio myocytes and directly suppresses the genes that are involved in cardio hypertrophy. So we would expect that and anticipated that we could have -- one could have seen a very good result in affecting cardiac modeling. But however, I think that -- although that's probably playing an important role with natriuretic peptide, I wouldn't limit it to just cardiac remodeling. The system really does push back against renin-angiotensin-aldosterone system, for example. So that gets your aldosterone levels dramatically drop, kidney function improves, you get better profusion of tissue. So it really -- it is a mechanism that has been out there for a while. And there has been -- it's just taking a while for us to come up with compounds that are safe and effective to effect it. And Novartis got there first, that's great. They're providing a lot of clinical validation. We think 3994 -- it will be a very good strong complement to that and a strong player in that marketplace.

And there are no further questions from the phone lines at this time. I would like now -- I would now like to turn the call back to Carl Spana for any additional or closing remarks.

Well, I thank all of you for participating in the Palatin Second Quarter Fiscal Year 2015 Quarterly Conference Call. We're quite excited about what's up for us this year. It's a big year for us with BMT and 3994. We're very focused here on delivering on our timelines, and we're quite excited, and certainly look forward to seeing a number of you as we get out, do our roadshows, and attend a number of the conferences. So have a great day. Stay warm, if you're in the Northeast. And we look forward to updating you in the next quarter in our progress on bremelanotide.

This does conclude today's conference. We thank you for your participation. You may now disconnect.