PALATIN TECHNOLOGIES INC (Form: 10-Q, Received: 02/08/2008 17:02:06)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2007

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to __________

Commission file number 001-15543

PALATIN TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)

Delaware	95-4078884
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4C Cedar Brook Drive
Cranbury, New Jersey	08512
(Address of principal executive offices)	(Zip code)

(609) 495-2200
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


	Large accelerated filer o		Accelerated filer o

	Non-accelerated filer o		Smaller reporting company x
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of February 6, 2008, 85,204,169 shares of the registrant’s common stock, par value $.01 per share, were outstanding.

PALATIN TECHNOLOGIES, INC.
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		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets as of December 31, 2007 and June 30, 2007	2
	Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2007 and 2006	3
	Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2007 and 2006	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14

PART II - OTHER INFORMATION


Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.	Defaults Upon Senior Securities	16
Item 4.	Submission of Matters to a Vote of Security Holders	17
Item 5.	Other Information	17
Item 6.	Exhibits	17

SIGNATURES

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

PALATIN TECHNOLOGIES, INC.
Consolidated Balance Sheets
(unaudited)


	December 31, 2007			June 30, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	20,405,499		$	31,447,615
Available-for-sale investments		2,362,084			2,323,642
Accounts receivable		367,739			607,841
Prepaid expenses and other current assets		456,458			1,008,464
Total current assets		23,591,780			35,387,562
Property and equipment, net		5,809,350			6,070,226
Restricted cash		475,000			475,000
Other assets		254,268			848,446
Total assets	$	30,130,398		$	42,781,234

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligations and notes payable, current portion	$	306,609		$	216,841
Accounts payable		583,192			1,120,894
Accrued expenses		2,393,544			2,420,837
Accrued compensation		467,104			941,300
Deferred revenue, current portion		1,916,669			4,864,833
Total current liabilities		5,667,118			9,564,705

Capital lease obligations and notes payable, net of current portion		238,350			275,126
Deferred rent, net of current portion		1,715,500			1,966,628
Deferred revenue, net of current portion		6,805,553			12,443,087
Total liabilities		14,426,521			24,249,546

Commitments and contingencies (Note 7)

Stockholders' equity:
Preferred stock of $.01 par value - authorized 10,000,000 shares;
Series A Convertible; issued and outstanding 4,997 shares as of
December 31, 2007 and June 30, 2007		50			50
Common stock of $.01 par value - authorized 150,000,000 shares;
issued and outstanding 85,204,169 and 85,126,915 shares as of
December 31, 2007 and June 30, 2007, respectively		852,042			851,269
Additional paid-in capital		207,039,292			205,875,438
Accumulated other comprehensive income		38,442			-
Accumulated deficit		(192,225,949	)		(188,195,069	)
Total stockholders' equity		15,703,877			18,531,688
Total liabilities and stockholders' equity	$	30,130,398		$	42,781,234

The accompanying notes are an integral part of these consolidated financial statements.

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PALATIN TECHNOLOGIES, INC.
Consolidated Statements of Operations
(unaudited)


	Three Months Ended December 31,						Six Months Ended December 31,
	2007			2006			2007			2006
REVENUES:
Licenses, grants and
contracts	$	742,835		$	3,743,109		$	9,720,566		$	8,678,211

OPERATING EXPENSES:
Research and
development		3,791,344			9,569,483			11,735,221			21,693,180
General and
administrative		2,329,052			1,654,932			3,988,062			3,217,408
Total operating
expenses		6,120,396			11,224,415			15,723,283			24,910,588

Loss from operations		(5,377,561	)		(7,481,306	)		(6,002,717	)		(16,232,377	)

OTHER INCOME (EXPENSE):
Investment income		314,470			227,140			711,091			551,374
Interest expense		(12,469	)		(13,122	)		(30,698	)		(23,188	)
Total other income, net		302,001			214,018			680,393			528,186

Loss before income taxes		(5,075,560	)		(7,267,288	)		(5,322,324	)		(15,704,191	)
Income tax benefit		1,291,444			778,308			1,291,444			778,308

NET LOSS	$	(3,784,116	)	$	(6,488,980	)	$	(4,030,880	)	$	(14,925,883	)

Basic and diluted net loss per
common share	$	(0.04	)	$	(0.09	)	$	(0.05	)	$	(0.21	)

Weighted average number of
common shares
outstanding used in
computing basic and
diluted net loss per
common share		85,204,169			71,055,893			85,190,733			70,967,207

The accompanying notes are an integral part of these consolidated financial statements.

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PALATIN TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
(unaudited)


	Six Months Ended December 31,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,030,880	)	$	(14,925,883	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		691,257			707,600
Stock-based compensation		1,054,398			713,958
Changes in operating assets and liabilities:
Accounts receivable		240,102			(78,678	)
Prepaid expenses and other		1,146,184			772,700
Accounts payable		(537,702	)		(637,894	)
Accrued expenses and other		(752,617	)		695,225
Deferred revenues		(8,585,698	)		(2,074,610	)
Net cash used in operating activities		(10,774,956	)		(14,827,582	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(231,593	)		(434,903	)
Net cash used in investing activities		(231,593	)		(434,903	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations and notes payable		(145,796	)		(88,768	)
Proceeds from issuances of common stock and warrants		110,229			691,966
Net cash provided by (used in) financing activities		(35,567	)		603,198

NET DECREASE IN CASH AND
CASH EQUIVALENTS		(11,042,116	)		(14,659,287	)

CASH AND CASH EQUIVALENTS, beginning
of period		31,447,615			28,333,211

CASH AND CASH EQUIVALENTS, end of period	$	20,405,499		$	13,673,924

SUPPLEMENTAL CASH FLOW INFORMATION:
Equipment acquired under financing agreements	$	198,788		$	212,848
Cash paid for interest	$	30,698		$	23,188

The accompanying notes are an integral part of these financial statements.

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PALATIN TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
(unaudited)

(1) ORGANIZATION

Nature of Business — Palatin Technologies, Inc. (“Palatin” or the “Company”) is a biopharmaceutical company primarily focused on discovering and developing targeted, receptor-specific small molecule and peptide therapeutics, including melanocortin (“MC”)-based therapeutics. Therapeutics affecting the activity of the MC family of receptors may have the potential to treat a variety of conditions and diseases, including sexual dysfunction, obesity and related disorders, cachexia, skin pigmentation disorders and inflammation-related diseases. The Company is exploring other receptor-specific therapeutics, including congestive heart failure therapeutics.

Bremelanotide, an MC receptor agonist, is a patented, nasally administered MC-based peptide in clinical development for the treatment of male and female sexual dysfunction. In 2004, the Company entered into a collaborative development and marketing agreement with King Pharmaceuticals, Inc. (“King”) to jointly develop and commercialize bremelanotide. In September 2007, the Company received notice from King terminating the collaborative development and marketing agreement between the Company and King, in accordance with its terms, effective December 5, 2007. Upon this termination, Palatin has retained all rights to bremelanotide. See Note 4 regarding the agreement with King.

The Company has a licensing and research collaboration agreement with AstraZeneca AB (“AstraZeneca”) to discover, develop and commercialize small molecule compounds that target MC receptors for the treatment of obesity, diabetes and related metabolic syndrome. The Company is also conducting research on peptidomimetic compounds for the treatment of other disorders, including congestive heart failure. Certain compounds under investigation result from utilization of the Company’s MIDAS(TM) technology, a proprietary platform technology to design and synthesize compounds that mimic the activity of peptides.

NeutroSpec is the Company’s radiolabeled monoclonal antibody product for imaging and diagnosing infection and the subject of a strategic collaboration agreement with the Mallinckrodt division of Covidien Ltd. (“Mallinckrodt”). In July 2004, the Company received approval from the U.S. Food and Drug Administration (“FDA”) to market NeutroSpec for imaging and diagnosing equivocal appendicitis. In December 2005, the Company and Mallinckrodt voluntarily suspended the sales, marketing and distribution of NeutroSpec following the occurrence of certain serious adverse events involving patients who received NeutroSpec. Significant development activities pertaining to NeutroSpec are currently suspended while the Company and Mallinckrodt evaluate future development and marketing alternatives.

Key elements of the Company’s business strategy include entering into alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale and distribution of the Company’s product candidates under development, expansion of the Company’s pipeline through the utilization of its MC expertise and patented drug discovery platform, opportunistic acquisition of synergistic products and technologies and partial funding of the Company’s development and discovery programs with the cash flow from collaboration agreements.

Business Risk and Liquidity — The Company has incurred negative cash flows from operations since its inception, and has expended, and expects to continue to expend in the future, substantial funds to complete its planned product development efforts. As shown in the accompanying consolidated financial statements, the Company has an accumulated deficit as of December 31, 2007 and incurred a net loss for the three and six months ended December 31, 2007. The Company anticipates incurring additional losses in the future as a result of spending on its development programs. To achieve profitability, the Company, alone or with others, must successfully develop and commercialize its technologies and proposed products, conduct successful pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market such technologies and proposed products. The time required to reach profitability is highly uncertain, and there can be no assurance that the Company will be able to achieve profitability on a sustained basis, if at all.

The Company believes that its cash, cash equivalents and available-for-sale investments as of December 31, 2007, together with expected receipts from collaboration and license agreements and other income, are adequate to fund operations for at least the next twelve months. The nature and timing of the Company’s development activities are highly dependent on its financing activities. Management plans to continue to refine its operations, control expenses, evaluate alternative methods to conduct its business, and seek available and attractive sources of financing and sharing of development costs through strategic collaboration agreements or other resources. Should appropriate sources of financing not be available, management would delay certain clinical trials and research activities until such time as appropriate financing was available. There can be no assurance that the Company’s

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financing efforts will be successful. If adequate funds are not available, the Company’s financial condition will be materially and adversely affected, due to the Company’s expected negative cash flows from operations.

Concentrations — Concentrations in the Company’s assets and operations subject it to certain related risks. Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash and cash equivalents, available-for-sale investments and accounts receivable. The Company’s cash and cash equivalents are primarily invested in one money market fund sponsored by a large financial institution. The Company’s accounts receivable balance as of December 31, 2007 consists of amounts due from its collaboration partners, and is comprised of $317,300 due from AstraZeneca and $50,439 due from Mallinckrodt.

Revenues from collaboration partners as a percentage of total revenues were as follows (see Note 4 regarding the agreement with King):


	Three Months Ended December 31,		Six Months Ended December 31,
	2007	2006	2007	2006
AstraZeneca	99%	-%	15%	-%
Mallinckrodt	1%	2%	1%	2%
King	-%	98%	84%	98%

(2) BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnote disclosures required to be presented for complete financial statements. In the opinion of management, these consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly the Company’s financial position as of December 31, 2007, and its results of operations and its cash flows for the three and six months ended December 31, 2007 and 2006. The results of operations for the three- and six-month periods ended December 31, 2007 may not necessarily be indicative of the results of operations expected for the full year, except that the Company expects to incur a significant loss for the fiscal year ending June 30, 2008.

The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”), which includes consolidated financial statements as of June 30, 2007 and 2006 and for each of the fiscal years in the three-year period ended June 30, 2007.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation — The consolidated financial statements include the accounts of Palatin and its wholly-owned inactive subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates — The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents — Cash and cash equivalents include cash on hand, cash in banks and all highly liquid investments with a purchased maturity of three months or less. Restricted cash secures letters of credit for security deposits on leases.

Investments — The Company classifies its investments as available-for-sale investments and all such investments are recorded at fair value based on quoted market prices. Unrealized holding gains and losses, net of the related tax effect, if any, are generally excluded from earnings and are reported in accumulated other comprehensive income/loss until realized. Interest and dividends on securities classified as available-for-sale are included in investment income. Gains and losses are recorded in the statement of operations when realized or when unrealized holding losses are determined to be other than temporary, on a specific-identification basis.

Fair Value of Financial Instruments — The Company’s financial instruments consist primarily of cash and cash equivalents, available-for-sale investments, accounts receivable, accounts payable, capital lease obligations and notes payable. Management believes that the carrying value of these assets and liabilities are representative of their

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respective fair values based on quoted market prices for investments and the short-term nature of the other instruments.

Property and Equipment — Property and equipment consists of office and laboratory equipment, office furniture and leasehold improvements and includes assets acquired under capital leases. Property and equipment are recorded at cost. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets, generally five years for laboratory equipment, seven years for office furniture and equipment and the lesser of the term of the lease or the useful life for leasehold improvements. Amortization of assets acquired under capital leases is included in depreciation. Maintenance and repairs are expensed as incurred while expenditures that extend the useful life of an asset are capitalized.

Impairment of Long-Lived Assets — The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine recoverability of a long-lived asset, management evaluates whether the estimated future undiscounted net cash flows from the asset are less than its carrying amount. If impairment is indicated, the long-lived asset would be written down to fair value. Fair value is determined by an evaluation of available price information at which assets could be bought or sold including quoted market prices, if available, or the present value of the estimated future cash flows based on reasonable and supportable assumptions.

Deferred Rent — The Company’s operating leases provide for rent increases over the terms of the leases. Deferred rent consists of the difference between periodic rent payments and the amount recognized as rent expense on a straight-line basis, as well as tenant allowances for leasehold improvements. Rent expense is being recognized ratably over the life of the leases.

Revenue Recognition — Revenue from corporate collaborations and licensing agreements consists of up-front fees, research and development funding, and milestone payments. Non-refundable up-front fees are deferred and amortized to revenue over the related performance period. The Company estimates the performance period as the period in which it performs certain development activities under the applicable agreement. Estimated reimbursements for research and development activities and government grants are recorded in the period that the Company performs the related activities under the terms of the applicable agreements. Revenue resulting from the achievement of milestone events stipulated in the applicable agreements is recognized when the milestone is achieved, provided that such milestone is substantive in nature. See Note 4 regarding the agreement with King.

Research and Development Costs — The costs of research and development activities are charged to expense as incurred, including the cost of equipment for which there is no alternative future use.

Stock Options — The Company accounts for options granted to employees in accordance with Statement of Financial Accounting Standards (“SFAS”) 123(R), “Share-Based Payment.” SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services and requires that the compensation cost relating to share-based payment transactions be recognized in the financial statements, measured by the fair value of the equity or liability instruments issued, adjusted for estimated forfeitures.

The Company accounts for options granted to consultants in accordance with Emerging Issues Task Force (“EITF”) Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” and SFAS 123(R).

The Company determines the fair value of options utilizing the Black-Scholes option-pricing model. Compensation costs for share-based awards with pro rata vesting are allocated to periods on the straight-line basis.

Income Taxes — The Company and its subsidiary file consolidated federal and separate-company state income tax returns. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences or operating loss and tax credit carryforwards are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

In accordance with SFAS 109, “Accounting for Income Taxes,” the Company has recorded a valuation allowance against its deferred tax assets. The valuation allowance is based on management’s estimates and analysis, which includes consideration of tax laws that may limit the Company’s ability to utilize its net operating loss carryforwards.

During the three months ended December 31, 2007 and 2006, the Company sold New Jersey state net operating loss carryforwards, which resulted in the recognition of $1,291,444 and $778,308, respectively, in tax benefits.

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Net Loss per Common Share – Basic earnings per share (“EPS”) is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution from the exercise or conversion of securities into common stock, including stock options and warrants, restricted stock units and shares of Series A Convertible Preferred Stock. As of December 31, 2007 and 2006, common shares issuable upon conversion of Series A Convertible Preferred Stock, the vesting of restricted stock units and the exercise of outstanding options and warrants amounted to an aggregate of 16,149,527 and 16,962,992 shares, respectively, and were not included in the computation of Diluted EPS because to do so would have been anti-dilutive for the periods presented.

New Accounting Pronouncements – In December 2007, the Financial Accounting Standards Board (“FASB”) issued EITF Issue 07-1, “Accounting for Collaborative Arrangements,” which applies to collaborative arrangements that are conducted by the participants without the creation of a separate legal entity for the arrangements and clarifies, among other things, how to determine whether a collaborative agreement is within the scope of this issue. EITF Issue 07-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of EITF Issue 07-1 to have a material impact on its results of operations and financial position.

In June 2007, the FASB issued EITF Issue 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities,” which applies to companies involved in research and development activities that make non-refundable advance payments for goods that will be used or for services that will be performed in future research and development activities. EITF Issue 07-3 is effective for financial statements issued for fiscal years beginning after December 15, 2007. The Company does not expect the adoption of EITF Issue 07-3 to have a material impact on its results of operations and financial position.

(4) AGREEMENT WITH KING

In September 2007, the Company received notice from King terminating the collaborative development and marketing agreement between the Company and King, in accordance with its terms, effective December 5, 2007. As of September 30, 2007, the Company had no further obligation to perform any services for King. The notice followed communication with representatives of the FDA, which raised serious concerns about the benefits and risks of the progression of bremelanotide into Phase 3 clinical studies for erectile dysfunction. Upon termination, Palatin regained sole ownership of all rights to bremelanotide without any obligation for future payments to King, other than any amounts payable for the reimbursement of bremelanotide costs incurred by King prior to termination. King has no obligation for future payments to Palatin, other than any amounts payable for the reimbursement of bremelanotide costs incurred by Palatin prior to termination.

In connection with the termination of the agreement, the Company recognized $0 and $6,499,796, respectively, of deferred up-front license fees received from King for the three- and six-month period ended December 31, 2007, together with $0 and $815,561, respectively, of associated deferred costs for the same periods, which prior to termination were being recognized as revenues and amortized as research and development costs over the estimated period of the Company’s performance under the agreement.

(5) COMPREHENSIVE LOSS

Comprehensive loss consists of the following:


	Three Months Ended December 31,		Six Months Ended December 31,
	2007	2006	2007	2006
Net loss	$ (3,784,116)	$ (6,488,980)	$ (4,030,880)	$ (14,925,883)
Unrealized gain (loss) on investments	22,628	(5,010)	38,442	2,543
Comprehensive loss	$ (3,761,488)	$ (6,493,990)	$ (3,992,438)	$ (14,923,340)

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(6) INVESTMENTS

The following is a summary of available-for-sale investments, which consist of mutual funds that invest primarily in debt instruments:


	December 31, 2007	June 30, 2007
Cost	$ 2,323,642	$ 2,323,642
Unrealized gain on investments	38,442	-
Fair value	$ 2,362,084	$ 2,323,642

(7) COMMITMENTS AND CONTINGENCIES

As discussed in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2007, Competitive Technologies, Inc. (“CTI”) initiated arbitration proceedings with the Company for breach of the terms of its license agreement for patent rights related to certain compounds and methods of treatment for sexual dysfunction and for other actions asserted to arise out of the license agreement, and also initiated litigation against the Company by filing a suit in Connecticut Superior Court for breach of the settlement agreement of an earlier arbitration between CTI and the Company. In January 2008, the Company entered into a settlement agreement and release with CTI, resolving all outstanding disputes between the Company and CTI. See Note 9, Subsequent Event, regarding the CTI settlement.

(8) STOCKHOLDERS’ EQUITY

On September 25, 2007, the Company issued grants of restricted stock units under the Company’s 2005 Stock Plan totaling in the aggregate 1,573,915 shares of common stock as retention bonuses to its employees, other than the executive officers, that were not affected by a contemporaneous reduction in workforce. The shares approved for grant initially exceeded the number of authorized shares available for grant under the 2005 Stock Plan by 109,984. As a result, for accounting purposes the 109,984 shares were not considered granted until the date that sufficient authorized shares became available, which was on December 7, 2007, the date that the Company received stockholder approval to increase the number of authorized shares available for grant under the 2005 Stock Plan by 5,000,000 shares. These restricted stock units will vest on September 30, 2008, provided that the employee remains continuously employed by the Company through such date or earlier if the employee is involuntarily terminated by reason of a position elimination or change in control. The Company is amortizing the fair value of the restricted stock units, initially totaling approximately $725,000, on a straight-line basis through September 30, 2008.

(9) SUBSEQUENT EVENT

On January 21, 2008, the Company entered into a settlement agreement and release with CTI, resolving all outstanding disputes between the Company and CTI. The arbitration proceeding and the Connecticut Superior Court proceeding have been dismissed with prejudice. The existing license agreement between CTI and the Company has been terminated. CTI retains all rights to a peptide called variously MT-II or PT-14, which peptide was developed at the University of Arizona, and the Company expressly relinquished all claims to any contractual or intellectual property rights to that peptide or any patents licensed under the terminated license agreement. The Company retains all rights to bremelanotide, and CTI expressly relinquished all claims to any contractual or intellectual property rights to bremelanotide, including any claim that making, using or selling bremelanotide infringes any patents licensed under the terminated license agreement. The settlement agreement and release also includes mutual covenants not to sue and releases of all claims by either party against the other based on, arising out of or in any way involving the subject matter of the license agreement, the arbitration or the Connecticut Superior Court proceeding. As part of the settlement, the Company remitted a one-time payment to CTI of $800,000 that was accrued and charged to general and administrative expense as of December 31, 2007.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the consolidated financial statements and notes to the consolidated financial statements filed as part of this report.

Statements in this quarterly report on Form 10-Q, as well as oral statements that may be made by us or by our officers, directors, or employees acting on our behalf, that are not historical facts constitute “forward-looking statements”, which are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements in this quarterly report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements that are not strictly historical statements contained in this quarterly report on Form 10-Q including, without limitation, current or future financial performance, management’s plans and objectives for future operations, clinical trials and results, product plans and performance, management’s assessment of market factors, as well as statements regarding our strategy and plans and our strategic partners, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results or from any results expressed or implied by such forward-looking statements. Our future operating results are subject to risks and uncertainties and are dependent upon many factors, including, without limitation, the risks identified in this report, in our annual report on Form 10-K for the year ended June 30, 2007 and in our other Securities and Exchange Commission (“SEC”) filings.

We expect to incur losses in the future as a result of spending on our planned development programs and losses may fluctuate significantly from quarter to quarter.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in the notes to our consolidated financial statements included in this report and in our annual report on Form 10-K for the year ended June 30, 2007, and have not changed as of December 31, 2007. We believe that our accounting policies and estimates relating to revenue recognition, accrued expenses and stock-based compensation are the most critical.

Overview

We are a biopharmaceutical company focused on discovering and developing targeted, receptor-specific small molecule and peptide therapeutics. Our proprietary drug development pipeline is based primarily on melanocortin (“MC”)-based therapeutics, and we believe we are a leader in this area of pharmaceutical research and development. Therapeutics affecting the activity of the MC family of receptors may have the potential to treat a variety of conditions and diseases, including sexual dysfunction, obesity and related disorders, cachexia, skin pigmentation disorders and inflammation-related diseases. We are exploring other receptor-specific therapeutics, including congestive heart failure therapeutics.

Bremelanotide is our nasally administered MC-based peptide in clinical development for two distinct indications, the treatment of male erectile dysfunction (“ED”) and the treatment of female sexual dysfunction (“FSD”). In 2004, we entered into a collaborative development and marketing agreement with King Pharmaceuticals, Inc. (“King”) to jointly develop and commercialize bremelanotide. Pursuant to the agreement, we and King shared all collaboration development costs based on an agreed percentage. In September 2007, we received notice from King terminating the agreement in accordance with its terms effective December 5, 2007. As of September 30, 2007, we had no further obligation to perform any services for King. Termination followed comments by the U.S. Food and Drug Administration (“FDA”) raising serious concerns about the acceptable benefit/risk ratio to support the progression of bremelanotide into Phase 3 studies for ED as a first-line therapy in the general population. As a result of termination, we solely own all rights to bremelanotide.

In January 2007, we entered into an exclusive global licensing and research collaboration agreement with AstraZeneca AB (“AstraZeneca”), a major international pharmaceutical and healthcare business, to discover, develop and commercialize small molecule compounds that target MC receptors for the treatment of obesity, diabetes and related metabolic syndrome. The collaboration is based on Palatin’s MC receptor obesity program and includes access to compound libraries, core technologies and expertise in MC receptor drug discovery and development. We and AstraZeneca are in the process of identifying clinical candidate MC therapeutic small molecules for the treatment of obesity and related disorders.

We have developed a library of novel natriuretic (promoting sodium excretion) receptor compounds, and identified a lead clinical candidate for which we submitted an Investigational New Drug application with the FDA, and initiated Phase 1 clinical trials for the treatment of congestive heart failure (“CHF”). We are also conducting

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research to identify additional clinical candidate compounds for the treatment of both chronic CHF and acutely decompensated (rapidly deteriorated) CHF.

We are evaluating future development and marketing activities involving NeutroSpec, our radiolabeled monoclonal antibody product for imaging and diagnosing infection, with the Mallinckrodt division of Covidien Ltd. (“Mallinckrodt”), with whom we have a strategic collaboration agreement. In July 2004, the Company received approval from the FDA to market NeutroSpec for imaging and diagnosing equivocal appendicitis. In December 2005, we and Mallinckrodt voluntarily suspended the sales, marketing and distribution of NeutroSpec following certain serious adverse events involving patients who received NeutroSpec.

Key elements of our business strategy include: entering into alliances and partnerships with pharmaceutical companies to facilitate the development, manufacture, marketing, sale and distribution of product candidates we are developing; expanding our pipeline through the utilization of our MC expertise and patented drug discovery platform; acquiring synergistic products and technologies; and partially funding our development and discovery programs with the cash flow from our collaboration agreements.

We incorporated in Delaware in 1986 and commenced operations in the biopharmaceutical area in 1996. Our corporate offices and research and development facility are located at 4C Cedar Brook Drive, Cranbury, New Jersey 08512 and our telephone number is (609) 495-2200. We maintain an Internet site at http://www.palatin.com, where among other things, we make available free of charge on and through this website our Forms 3, 4 and 5, annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) and Section 16 of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our website and the information contained therein or connected thereto shall not be deemed to be incorporated into this quarterly report on Form 10-Q.

Results of Operations

Three and Six Months Ended December 31, 2007 Compared to the Three and Six Months Ended December 31, 2006.

Licenses, Grants and Contracts – For the three and six months ended December 31, 2007, we recognized $0.7 million and $9.7 million, respectively, in licenses, grants and contracts revenue consisting of (i) $0 and $8.2 million, respectively, related to bremelanotide pursuant to our collaboration agreement with King, (ii) $0.7 million and $1.4 million, respectively, related to our license agreement with AstraZeneca, and (iii) $0 and $0.1 million related to NeutroSpec pursuant to our collaboration agreement with Mallinckrodt. For the three and six months ended December 31, 2006, we recognized $3.7 million and $8.7 million, respectively, in licenses, grants and contracts revenue consisting of (i) $3.6 million and $8.5 million, respectively, related to bremelanotide pursuant to our collaboration agreement with King, and (ii) $0.1 million and $0.2 million related to NeutroSpec pursuant to our collaboration agreement with Mallinckrodt.

The fluctuation in revenue related to King primarily reflects the recognition in September 2007 of the remaining deferred license revenue pursuant to King’s up-front payment, based on the termination of our collaboration agreement with King. License and contract revenue from AstraZeneca for the three and six months ended December 31, 2007 consists of $0.3 million and $0.6 million, respectively, of revenue related to our research services performed during said periods and $0.4 million and $0.8 million, respectively, of license revenue related to AstraZeneca’s $10.0 million up-front license fee received at the inception of the agreement. Contract revenue from Mallinckrodt reflects Mallinckrodt’s share of the costs incurred in certain NeutroSpec development activities. Future contract revenue from AstraZeneca and Mallinckrodt, in the form of reimbursement of shared development costs or the recognition of deferred license fees, will fluctuate based on development activities in our obesity and NeutroSpec programs. We may also earn contract revenue based on the attainment of certain development milestones.

Research and Development – Research and development expenses decreased to $3.8 million for the three months ended December 31, 2007 from $9.6 million for the three months ended December 31, 2006. Research and development expenses decreased to $11.7 million for the six months ended December 31, 2007 from $21.7 million for the six months ended December 31, 2006.

Research and development expenses related to bremelanotide decreased to $0.2 million and $2.7 million, respectively, for the three and six months ended December 31, 2007 compared to $5.4 million and $13.3 million, respectively, for the same periods in 2006. These amounts include both third-party costs incurred by us and partially reimbursed by King and our share of costs for development activities performed by King. Research and development expenses related to bremelanotide decreased in the periods as a result of (i) the completion of certain Phase 2B trials on both men and women, and ii) the delay in the initiation of Phase 3 clinical trials for ED. Similar to the recognition of license revenue explained above, the six months ended December 31, 2007 includes the

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recognition in September 2007 of $0.8 million of deferred costs recorded based on the termination of our collaboration agreement with King. Upon the completion of further discussions with the FDA and external consultants, we will determine the next steps related to the further development of bremelanotide for ED and FSD.

Research and development expenses related to our obesity, CHF and other pre-clinical programs were $0.7 million and $1.7 million, respectively, for the three and six months ended December 31, 2007 compared to $0.8 million and $1.5 million, respectively, for the three and six months ended December 31, 2006. Spending to date has been primarily related to the identification and optimization of lead compounds. We expect to spend approximately $2 million to $3 million of direct costs during fiscal 2008 on laboratory research and the commencement of clinical trials on an identified compound. The amount of such spending and the nature of future development activities are dependent on a number of factors, including primarily the success of our discovery programs, pre-clinical studies, our ability to progress a compound into human clinical trials and discussions with AstraZeneca and other potential development partners.

The historical amounts of project spending above exclude general research and development spending, which decreased to $2.9 million for the three months ended December 31, 2007 compared to $3.4 million for the three months ended December 31, 2006. The decrease is primarily related to the reduction in workforce initiated in September 2007. For the six months ended December 31, 2007, general research and development spending increased to $7.4 million compared to $6.9 million for six months ended December 31, 2006, primarily due to severance costs recognized in September 2007.

Cumulative spending from inception to December 31, 2007 on our bremelanotide, NeutroSpec and MIDAS programs amounts to approximately $117.7 million, $58.2 million and $34.5 million, respectively. Due to risk factors described in our periodic filings with the SEC, including the difficulty in currently estimating the costs and timing of future Phase 1 clinical trials and large-scale Phase 2 and Phase 3 clinical trials for any product under development, we cannot predict with reasonable certainty when, if ever, a program will advance to the next stage of development or be successfully completed, or when, if ever, significant related net cash inflows will be generated.

General and Administrative – General and administrative expenses increased to $2.3 million and $4.0 million, respectively for the three and six months ended December 31, 2007 as compared to $1.7 million and $3.2 million, respectively, for the three and six months ended December 31, 2006. The increase in expenses for the three and six months ended December 31, 2007 primarily reflects the $0.8 million litigation settlement agreement and release resolving all outstanding disputes with Competitive Technologies, Inc. (“CTI”).

Income Tax Benefit – Income tax benefits of $1.3 million in the three and six months ended December 31, 2007 and $0.8 million in the three and six months ended December 31, 2006 relate to the sale of New Jersey state net operating loss carryforwards. The amount of such losses and tax credits that we are able to sell depends on annual pools and allocations established by the state of New Jersey.

Liquidity and Capital Resources

Since inception, we have incurred net operating losses, primarily related to spending on our research and development programs. We have financed our net operating losses primarily through equity financings and amounts received under collaborative agreements.

We will need regulatory approval to market and sell our products. Our product candidates are at various stages of development and will require significant further research, development and testing and some may never be successfully developed or commercialized. We may experience uncertainties, delays, difficulties and expenses commonly experienced by early stage biopharmaceutical companies, which may include unanticipated problems and additional costs relating to:

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the development and testing of products in animals and humans;

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product approval or clearance;

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regulatory compliance;

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good manufacturing practices;

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intellectual property rights;

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product introduction; and

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marketing, sales and competition.

Failure to obtain timely regulatory approval for our product candidates and indications would impact our ability to increase revenues and could make it more difficult to attract investment capital for funding our operations. Any of these possibilities could materially and adversely affect our operations.

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During the six months ended December 31, 2007, we used $10.8 million of cash for our operating activities, compared to $14.8 million used in the six months ended December 31, 2006. Lower net cash outflows from operations in the 2007 period resulted primarily from lower operating expenses. Our periodic accounts receivable balances will continue to be highly dependent on the timing of such receipts and the division of development responsibilities between us and our collaboration partners.

During the six months ended December 31, 2007, net cash used in investing activities amounted to $0.2 million for the acquisition of capital equipment compared to $0.4 million used during the six months ended December 31, 2006.

We have incurred cumulative negative cash flows from operations since our inception, and have expended, and expect to continue to expend in the future, substantial funds to complete our planned product development efforts. We believe that our cash, cash equivalents and available-for-sale investments as of December 31, 2007, together with expected receipts from collaboration and license agreements and other income, will be adequate to fund the Company’s operations for at least the next twelve months. No assurance can be given that we will earn future milestone payments that are contingent on specified events or that we will not consume a significant amount of our available resources before that time. We plan to continue to monitor the progress of our development programs and the timing and amount of related expenditures and potential milestone receipts, refine our operations, control expenses, evaluate alternative methods to conduct our business and seek additional financing and sharing of development costs through strategic collaboration agreements or other resources.

We are actively searching for certain products and technologies to license or acquire, now or in the future, and expect to continue to do so. If we are successful in identifying a product or technology for acquisition, we may require substantial funds for such an acquisition and subsequent development or commercialization. We do not know whether any acquisition will be consummated in the future or whether we will be able to obtain additional funding if such an acquisition is identified.

Our license agreement related to NeutroSpec requires royalty payments by us based on commercial net sales and payments of up to $2.25 million contingent on the achievement of specified cumulative net margins on sales by Mallinckrodt. No contingent amounts will be payable related to NeutroSpec unless sales and marketing of NeutroSpec recommence. We do not reasonably expect to make any such contingent payments during the next twelve months.

We anticipate incurring additional losses over at least the next few years. To achieve profitability, we, alone or with others, must successfully develop and commercialize our technologies and proposed products, conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture and market such technologies and proposed products. The time required to reach profitability is highly uncertain, and we do not know whether we will be able to achieve profitability on a sustained basis, if at all.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk. Our exposure to market risk from changes in interest rates relates primarily to our cash, cash equivalents and available-for-sale investments (collectively referred to as our investment portfolio). As of December 31, 2007, our cash and cash equivalents were $20.4 million and investments, which consisted of mutual funds, were $2.4 million. Due to the average maturity of our investment portfolio, we do not believe that short term fluctuations in interest rates would materially affect the value of it.

Item 4. Controls and Procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

As discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2007, we were the respondent in an arbitration proceeding before the American Arbitration Association initiated by CTI alleging breach of the terms of our license agreement for patent rights related to certain compounds and methods of treatment for sexual dysfunction and other actions asserted to arise out of the license agreement, and were also the defendant in a suit filed by CTI in Connecticut Superior Court asserting, among other claims, breach of the settlement agreement of an earlier arbitration between CTI and us. On January 21, 2008, we entered into a settlement agreement and release with CTI, resolving all outstanding disputes between us. The arbitration proceeding and the Connecticut Superior Court proceeding have been dismissed with prejudice. The existing license agreement between CTI and us has been terminated. CTI retains all rights to a peptide called variously MT-II or PT-14, which peptide was developed at the University of Arizona, and we expressly relinquished all claims to any contractual or intellectual property rights to that peptide or any patents licensed under the terminated license agreement. We retain all rights to bremelanotide, and CTI expressly relinquished all claims to any contractual or intellectual property rights to bremelanotide, including any claim that making, using or selling bremelanotide infringes any patents licensed under the terminated license agreement. We ceased developing the peptide called MT-II or PT-14 in 2000. The settlement agreement and release also includes mutual covenants not to sue and releases of all claims by either party against the other based on, arising out of or in any way involving the subject matter of the license agreement, the arbitration or the Connecticut Superior Court proceeding. We remitted a one-time payment of $800,000 to CTI pursuant to the settlement; there are no obligations for any future payments to CTI with respect to bremelanotide or any other matter.

Item 1A. Risk Factors.

There have been no material changes in our risk factors disclosed in our annual report on Form 10-K for the fiscal year ended June 30, 2007 in Item 1A., Part I of such Form 10-K, with the exception of the following:

Stockholders may experience dilution from the exercise of outstanding options and warrants and the vesting of restricted stock units.

As of December 31, 2007, options and warrants to purchase 13,471,915 shares of common stock were outstanding at various exercise prices ranging from $0.26 per share to $6.50 per share, 1,503,529 shares were issuable under restricted stock units granted to our employees that will vest if the employee remains employed with Palatin through September 30, 2008 or earlier under certain conditions, and 975,000 shares were issuable under restricted stock units that will vest if shares of our common stock trade at certain share prices. The issuance or potential issuance of common stock upon the exercise of these options and warrants and vesting of restricted stock units may adversely affect the market price of our common stock and result in substantial dilution to our existing stockholders.

Our stock price is, and we expect it to remain, volatile, which could limit investors’ ability to sell stock at a profit.

The volatile price of our stock makes it difficult for investors to predict the value of their investment, to sell shares at a profit at any given time, or to plan purchases and sales in advance. A variety of factors may affect the market price of our common stock. These include, but are not limited to:

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publicity regarding actual or potential clinical results relating to products under development by our competitors or us;

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delay or failure in initiating, completing or analyzing pre-clinical or clinical trials or unsatisfactory designs or results of these trials;

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interim decisions by regulatory agencies, including the FDA, as to clinical trial designs, acceptable safety profiles, and the benefit/risk ratio of products under development;

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achievement or rejection of regulatory approvals by our competitors or by us;

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announcements of technological innovations or new commercial products by our competitors or by us;

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developments concerning proprietary rights, including patents;

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developments concerning our collaborations;

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regulatory developments in the U.S. and foreign countries;

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economic or other crises and other external factors;

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•

period-to-period fluctuations in our revenue and other results of operations;

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changes in financial estimates by securities analysts; and

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sales of our common stock.

We will not be able to control many of these factors, and we believe that period-to-period comparisons of our financial results will not necessarily be indicative of our future performance. If our revenues, if any, in any particular period do not meet expectations, we may not be able to adjust our expenditures in that period, which could cause our operating results to suffer further. If our operating results in any future period fall below the expectations of securities analysts or investors, our stock price may fall by a significant amount.

For the six months ended December 31, 2007, the price of our stock has been extremely volatile, ranging from a high of $2.09 per share to a low of $0.19 per share. The volatility in our stock price related primarily to our announcement that we delayed initiation of Phase 3 clinical trials of bremelanotide for ED, following responses in late August 2007 from the FDA raising serious concerns about the acceptable benefit/risk ratio to support progression into Phase 3 as a first-line therapy in the general population.

In addition, the stock market in general, and the market for biotechnology companies in particular, has experienced extreme price and volume fluctuations that may have been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance.

The American Stock Exchange and other national stock exchanges maintain standards for initial and continued listing of shares for trading. These standards include requirements for minimum per share stock prices, aggregate market values of shares outstanding, minimum stockholders’ equity and related factors. We are listed on the American Stock Exchange, and continue to meet standards for continued listing. If we are unable to meet these requirements and are delisted, the ability of investors to buy or sell our shares will be restricted, in which case the market value of our common stock and our ability to obtain additional financing on acceptable terms may be adversely affected.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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Item 4. Submission of Matters to a Vote of Security Holders.

At our annual meeting of stockholders, which convened on December 7, 2007, the stockholders voted on the following issues:

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Election of dirctors;

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Ratification of the appointment of our independent registered public accounting firm for the fiscal year ending June 30, 2008; and

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Approval of the 2005 Stock Plan amendment to increase the shares of common stock available for issuance from 5,000,000 to 10,000,000.

Common stock and Series A convertible preferred stock voted as a single class on all matters. The following tables show the votes cast. All directors identified below were re-elected and their term of office continues after the meeting.


Election of directors:	For	Withheld
Carl Spana, Ph.D.	67,516,203	3,565,175
John K.A. Prendergast, Ph.D.	67,817,647	3,263,731
Perry B. Molinoff, M.D.	67,742,322	3,339,056
Robert K. deVeer, Jr.	67,779,393	3,301,985
Zola P. Horovitz, Ph.D.	63,748,963	7,332,415
Robert I. Taber, Ph.D.	67,811,837	3,269,541
Errol De Souza, Ph.D.	67,832,662	3,248,716
J. Stanley Hull	67,806,119	3,275,259

Other	For	Against	Abstain
Ratification of independent registered public accounting firm	69,877,041	1,081,532	122,805
Approval of the 2005 Stock Plan amendment	21,682,884	2,517,953	120,956

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits filed with this report:

3.1

Bylaws, as amended effective December 14, 2007. *

10.1

First Amendment to the Employment Agreement dated as of July 1, 2007 Between Palatin and Carl Spana. *†

10.2

First Amendment to the Employment Agreement dated as of July 1, 2007 Between Palatin and Stephen T. Wills. *†

10.3

First Amendment to the Employment Agreement dated as of July 1, 2007 Between Palatin and Trevor Hallam. *†

10.4

Palatin Technologies, Inc. 2007 Change in Control Severance Plan. *†

10.5

2005 Stock Plan, as amended effective December 7, 2007. Incorporated by reference to Exhibit 4 of our registration statement on Form S-8, Commission File No. 333-149093, filed with the SEC on February 7, 2008. †

31.1

Certification of Chief Executive Officer. *

31.2

Certification of Chief Financial Officer. *

32.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. *

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32.2

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. *

_________________

* Exhibit filed with this report.
† Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Palatin Technologies, Inc. (Registrant)


Date: February 8, 2008		/s/ Carl Spana Carl Spana, Ph.D. President and Chief Executive Officer


Date: February 8, 2008		/s/ Stephen T. Wills Stephen T. Wills Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

3.1

Bylaws, as amended effective December 14, 2007. *

10.1

First Amendment to the Employment Agreement dated as of July 1, 2007 Between Palatin and Carl Spana. *†

10.2

First Amendment to the Employment Agreement dated as of July 1, 2007 Between Palatin and Stephen T. Wills. *†

10.3

First Amendment to the Employment Agreement dated as of July 1, 2007 Between Palatin and Trevor Hallam. *†

10.4

Palatin Technologies, Inc. 2007 Change in Control Severance Plan. *†

10.5

31.1

Certification of Chief Executive Officer. *

31.2

Certification of Chief Financial Officer. *

32.1

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. *

32.2

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002. *

_________________

* Exhibit filed with this report.
† Management contract or compensatory plan or arrangement.

EXHIBIT 3.1

BY-LAWS

PALATIN TECHNOLOGIES, INC.

ARTICLE I

OFFICES

SECTION 1.01. Registered Office . The registered office of PALATIN TECHNOLOGIES, INC. (the “Corporation”) in the State of Delaware shall be at the principal office of The Corporation Trust Company in the City of Wilmington, County of New Castle, and the registered agent in charge thereof shall be The Corporation Trust Company.

SECTION 1.02. Other Offices . The Corporation may also have an office or offices at any other place or places within or without the State of Delaware as the Board of Directors of the Corporation (the “Board”) may from time to time determine or the business of the Corporation may from time to time require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 2.01. Annual Meetings . The annual meeting of stockholders of the Corporation for the election of directors of the Corporation (“Directors”), and for the transaction of such other business as may properly come before such meeting, shall be held at such place, date and time as shall be fixed by the Board and designated in the notice or waiver of notice of such annual meeting; provided , however , that no annual meeting of stockholders need be held if all actions, including the election of Directors, required by the General Corporation Law of the State of Delaware (the “General Corporation Law”) to be taken at such annual meeting are taken by written consent in lieu of meeting pursuant to Section 2.09 hereof.

SECTION 2.02. Special Meetings . Special meetings of stockholders for any purpose or purposes may be called by the Board or the Chairman of the Board, the President or the Secretary of the Corporation or by the recordholders of at least ten percent of the votes attributable to voting stock of the Corporation issued and outstanding (“Shares”) and entitled to vote generally in the election of directors, to be held at such place, date and time as shall be designated in the notice or waiver of notice thereof.

SECTION 2.03. Notice of Meetings . (a) Except as otherwise provided by law, written notice of each annual or special meeting of stockholders stating the place, date and time of such meeting and, in the case of a special meeting, the purpose or purposes for which such meeting is to be held, shall be given personally or by first-class mail (airmail in the case of international communications) to each recordholder of Shares (a “Stockholder”) entitled to vote thereat, not less than 10 nor more than 60 days before the date of such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the Stockholder at such Stockholder’s address as it appears on the records of the Corporation. If, prior to the time of mailing, the Secretary of the Corporation (the “Secretary”) shall have received from any Stockholder a written request that notices intended for such Stockholder are to be mailed to some address other

than the address that appears on the records of the Corporation, notices intended for such Stockholder shall be mailed to the address designated in such request.

(b) Notice of a special meeting of Stockholders may be given by the person or persons calling the meeting, or, upon the written request of such person or persons, such notice shall be given by the Secretary on behalf of such person or persons. If the person or persons calling a special meeting of Stockholders give notice thereof, such person or persons shall deliver a copy of such notice to the Secretary. Each request to the Secretary for the giving of notice of a special meeting of Stockholders shall state the purpose or purposes of such meeting.

SECTION 2.04. Waiver of Notice . Notice of any annual or special meeting of Stockholders need not be given to any Stockholder who files a written waiver of notice with the Secretary, signed by the person entitled to notice, whether before or after such meeting. Neither the business to be transacted at, nor the purpose of, any meeting of Stockholders need be specified in any written waiver of notice thereof. Attendance of a Stockholder at a meeting, in person or by proxy, shall constitute a waiver of notice of such meeting, except when such Stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the notice of such meeting was inadequate or improperly given.

SECTION 2.05. Adjournments . Whenever a meeting of Stockholders, annual or special, is adjourned to another date, time or place, notice need not be given of the adjourned meeting if the date, time and place thereof are announced at the meeting at which the adjournment is taken. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each Stockholder entitled to vote thereat. At the adjourned meeting, any business may be transacted which might have been transacted at the original meeting.

SECTION 2.06. Quorum . Except as otherwise provided by law or the Amended and Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), the recordholders of a majority of the votes attributable to the Shares entitled to vote thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at all meetings of Stockholders, whether annual or special. If, however, such quorum shall not be present in person or by proxy at any meeting of Stockholders, the Stockholders entitled to vote thereat may adjourn the meeting from time to time in accordance with Section 2.05 hereof until a quorum shall be present in person or by proxy. Where a separate vote by a class or classes or series is required, a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority of shares of such class or classes or series, present in person or represented by proxy at the meeting shall be the act of such class or series.

SECTION 2.07. Voting . Except as otherwise provided by law or the Certificate of Incorporation, each Stockholder shall be entitled to one vote for each Share held of record by such Stockholder. Except as otherwise provided by law, the Certificate of Incorporation or these By-laws, when a quorum is present at any meeting of Stockholders, any question brought before the meeting shall be decided by the affirmative vote of a majority of votes attributable to the Shares present and voting on the question in either the affirmative or the negative.

SECTION 2.08. Proxies . Each Stockholder entitled to vote at a meeting of Stockholders or to express, in writing, consent to or dissent from any action of Stockholders without a meeting may authorize another person or persons to act for such Stockholder by proxy. Such proxy shall be filed with the Secretary

before such meeting of Stockholders or such action of Stockholders without a meeting, at such time as the Board may require. No proxy shall be voted or acted upon more than three years from its date, unless the proxy provides for a longer period.

SECTION 2.09. Stockholders’ Consent in Lieu of Meeting . Any action required by the General Corporation Law to be taken at any annual or special meeting of Stockholders, and any action which may be taken at any annual or special meeting of Stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the recordholders of Shares having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which the recordholders of all Shares entitled to vote thereon were present and voted.

ARTICLE III

BOARD OF DIRECTORS

SECTION 3.01. General Powers . The business and affairs of the Corporation shall be managed by the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these By-laws directed or required to be exercised or done by Stockholders.

SECTION 3.02. Number, Term of Office and Election . The number of Directors shall be five or such other number as shall be fixed from time to time by the Board. Directors need not be Stockholders. Directors shall be elected at the annual meeting of Stockholders or, if, in accordance with Section 2.01 hereof, no such annual meeting is held, by written consent in lieu of meeting pursuant to Section 2.09 hereof, and each Director shall hold office until his successor is elected and qualified, or until his earlier death or resignation or removal in the manner hereinafter provided. Directors shall be elected by a plurality of the votes of the Shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.

SECTION 3.03. Resignation . Any Director may resign at any time by giving written notice to the Board, the Chairman of the Board of the Corporation (the “Chairman”) or the Secretary. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the Chairman or the Secretary, as the case may be. Unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective.

SECTION 3.04. Removal . Any or all of the Directors may be removed, with or without cause, at any time by vote of the recordholders of a majority of the Shares then entitled to vote at an election of Directors, or by written consent of the recordholders of Shares pursuant to Section 2.09 hereof.

SECTION 3.05. Vacancies . Vacancies occurring on the Board as a result of the removal of Directors without cause may be filled only by vote of the recordholders of a majority of the Shares then entitled to vote at an election of Directors, or by written consent of such recordholders pursuant to Section 2.09 hereof. Vacancies occurring on the Board for any other reason, including, without limitation, vacancies occurring as a result of the creation of new directorships that increase the number of Directors, may be filled by such vote or written consent or by vote of the Board or by written consent of the Directors pursuant to Section 3.08 hereof. If the number of Directors then in office is less than a quorum, such other vacancies may be filled by vote of a majority of the Directors then in office or by written consent of all such Directors pursuant to Section 3.08 hereof. Unless earlier removed pursuant to Section 3.04 hereof, each Director chosen in accordance with this

Section 3.05 shall hold office until the next annual election of Directors by the Stockholders and until his successor shall be elected and qualified.

SECTION 3.06. Meetings . (a) Annual Meetings . As soon as practicable after each annual election of Directors by the Stockholders, the Board shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 3.08 hereof.

(b) Other Meetings . Other meetings of the Board shall be held at such times as the Chairman, the President of the Corporation (the “President”), the Secretary or a majority of the Board shall from time to time determine.

(c) Notice of Meetings . The Secretary shall give written notice to each Director of each meeting of the Board, which notice shall state the place, date, time and purpose of such meeting. Notice of each such meeting shall be given to each Director, if by mail, addressed to him at his residence or usual place of business, at least two days before the day on which such meeting is to be held, or shall be sent to him at such place by telecopy, telegraph, cable, or other form of recorded communication, or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held. A written waiver of notice, signed by the Director entitled to notice, whether before or after the time of the meeting referred to in such waiver, shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose any meeting of the Board need be specified in any written waiver of notice thereof. Attendance of a Director at a meeting of the Board shall constitute a waiver of notice of such meeting, except as provided by law.

(d) Place of Meetings . The Board may hold its meetings at such place or places within or without the State of Delaware as the Board or the Chairman may from time to time determine, or as shall be designated in the respective notices or waivers of notice of such meetings.

(e) Quorum and Manner of Acting . One-third of the total number of Directors then in office (but in no event less than two if the total number of directorships, including vacancies, is greater than one and in no event a number less than one-third of the total number of directorships, including vacancies) shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and the vote of a majority of those Directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board, except as otherwise expressly required by law, the Certificate of Incorporation or these By-laws. In the absence of a quorum for any such meeting, a majority of the Directors present thereat may adjourn such meeting from time to time until a quorum shall be present.

(f) Organization . At each meeting of the Board, one of the following shall act as chairman of the meeting and preside, in the following order of precedence:

(i) the Chairman;

(ii) the President;

(iii) any Director chosen by a majority of the Directors present.

The Secretary or, in the case of his absence, any person (who shall be an Assistant Secretary, if an Assistant Secretary is present) whom the chairman of the meeting shall appoint shall act as secretary of such meeting and keep the minutes thereof.

SECTION 3.07. Committees of the Board. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more Directors. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another Director to act at the meeting in the place of any such absent or disqualified member. Any committee of the Board, to the extent provided in the resolution of the Board designating such committee, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided , however , that no such committee shall have such power or authority in reference to amending the Certificate of Incorporation (except that such a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board as provided in Section 151(a) of the General Corporation Law, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes of stock, of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation under Section 251 or 252 of the General Corporation Law, recommending to the Stockholders the sale, lease or exchange of all or substantially all the Corporation’s property and assets, recommending to the Stockholders a dissolution of the Corporation or the revocation of a dissolution, or amending these By-laws; provided further , however , that, unless expressly so provided in the resolution of the Board designating such committee, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law. Each committee of the Board shall keep regular minutes of its proceedings and report the same to the Board when so requested by the Board.

SECTION 3.08. Directors’ Consent in Lieu of Meeting . Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, shall be signed by all the members of the Board or such committee and such consent is filed with the minutes of the proceedings of the Board or such committee.

SECTION 3.09. Action by Means of Telephone or Similar Communications Equipment . Any one or more members of the Board, or of any committee thereof, may participate in a meeting of the Board or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

SECTION 3.10. Compensation . Unless otherwise restricted by the Certificate of Incorporation, the Board may determine the compensation of Directors. In addition, as determined by the Board, Directors may be reimbursed by the Corporation for their expenses, if any, in the performance of their duties as Directors. No such compensation or reimbursement shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor.

ARTICLE IV

OFFICERS

SECTION 4.01. Officers . The officers of the Corporation shall be the Chairman, the President, the Secretary and a Treasurer and may include one or more Vice Presidents and one or more Assistant Secretaries and an Assistant Treasurer. Any two or more offices may be held by the same person.

SECTION 4.02. Authority and Duties . All officers shall have such authority and perform such duties in the management of the Corporation as may be provided in these By-laws or, to the extent not so provided, by resolution of the Board.

SECTION 4.03. Term of Office. Resignation and Removal . (a) Each officer shall be appointed by the Board and shall hold office for such term as may be determined by the Board. Each officer shall hold office until his successor has been appointed and qualified or his earlier death or resignation or removal in the manner hereinafter provided. The Board may require any officer to give security for the faithful performance of his duties.

(b) Any officer may resign at any time by giving written notice to the Board, the Chairman, the President or the Secretary. Such resignation shall take effect at the time specified in such notice or, if the time be not specified, upon receipt thereof by the Board, the Chairman, the President or the Secretary, as the case may be. Unless, otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective.

(c) All officers and agents appointed by the Board shall be subject to removal, with or without cause, at any time by the Board or by the action of the recordholders of a majority of the Shares entitled to vote thereon.

SECTION 4.04. Vacancies . Any vacancy occurring in any office of the Corporation, for any reason, shall be filled by action of the Board. Unless earlier removed pursuant to Section 4.03 hereof, any officer appointed by the Board to fill any such vacancy shall serve only until such time as the unexpired term of his predecessor expires unless reappointed by the Board.

SECTION 4.05. The Chairman . The Chairman shall have the power to call special meetings of Stockholders, to call special meetings of the Board and, if present, to preside at all meetings of Stockholders and all meetings of the Board. The Chairman shall perform all duties incident to the office of Chairman of the Board and all such other duties as may from time to time be assigned to him by the Board or these By-laws. The office of Chairman of the Board may be filled by two individuals serving simultaneously and who shall be referred to collectively as Co-Chairmen and who shall each individually be referred to as a Co-Chairman.

SECTION 4.06. The President . The President shall be the chief executive officer of the Corporation and shall have general and active management and control of the business and affairs of the Corporation, subject to the control of the Board, and shall see that all orders and resolutions of the Board are carried into effect. The President shall perform all duties incident to the office of President and all such other duties as may from time to time be assigned to him by the Board or these By-laws.

SECTION 4.07. Vice Presidents . Vice Presidents, if any, in order of their seniority or in any other order determined by the Board, shall generally assist the President and perform such other duties as the

Board or the President shall prescribe, and in the absence or disability of the President, shall perform the duties and exercise the powers of the President.

SECTION 4.08. The Secretary . The Secretary shall, to the extent practicable, attend all meetings of the Board and all meetings of Stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform the same duties for any committee of the Board when so requested by such committee. He shall give or cause to be given notice of all meetings of Stockholders and of the Board, shall perform such other duties as may be prescribed by the Board, the Chairman or the President and shall act under the supervision of the Chairman. He shall keep in safe custody the seal of the Corporation and affix the same to any instrument that requires that the seal be affixed to it and which shall have been duly authorized for signature in the name of the Corporation and, when so affixed, the seal shall be attested by his signature or by the signature of the Treasurer of the Corporation (the “Treasurer”) or an Assistant Secretary or the Assistant Treasurer of the Corporation (the “Assistant Treasurer”) of the Corporation. He shall keep in safe custody the certificate books and stockholder records and such other books and records of the Corporation as the Board, the Chairman or the President may direct and shall perform all other duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board, the Chairman or the President.

SECTION 4.09. Assistant Secretaries . Assistant Secretaries of the Corporation (“Assistant Secretaries”), if any, in order of their seniority or in any other order determined by the Board, shall generally assist the Secretary and perform such other duties as the Board or the Secretary shall prescribe, and, in the absence or disability of the Secretary, shall perform the duties and exercise the powers of the Secretary.

SECTION 4.10. Treasurer . The Treasurer shall have the care and custody of a the funds of the Corporation and shall deposit such funds in such banks or other depositories as the Board, or any officer or officers, or any officer and agent jointly, duly authorized by the Board, shall, from time to time, direct or approve. He shall disburse the funds of the Corporation under the direction of the Board and the President. He shall keep a full and accurate account of all moneys received and paid on account of the Corporation and shall render a statement of his accounts whenever the Board, the Chairman or the President shall so request. He shall perform all other necessary actions and duties in connection with the administration of the financial affairs of the Corporation and shall generally perform all the duties usually appertaining to the office of treasurer of a corporation. When required by the Board, he shall give bonds for the faithful discharge of his duties in such sums and with such sureties as the Board shall approve.

SECTION 4.11. Assistant Treasurer . The Assistant Treasurer of the Corporation shall generally assist the Treasurer and perform such other duties as the Board or the Treasurer shall prescribe, and, in the absence or disability of the Treasurer, shall perform the duties and exercise the powers of the Treasurer.

ARTICLE V

CHECKS, DRAFTS, NOTES, AND PROXIES

SECTION 5.01. Checks, Drafts and Notes . All checks, drafts and other orders for the payment of money, notes and other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall be determined, from time to time, by resolution of the Board.

SECTION 5.02. Execution of Proxies . The Chairman or the President, or, in the absence or disability of both of them, any Vice President, may authorize, from time to time, the execution and issuance of proxies to vote shares of stock or other securities of other corporations held of record by the Corporation and the execution of consents to action taken or to be taken by any such corporation. All such proxies and consents, unless otherwise authorized by the Board, shall be signed in the name of the Corporation by the Chairman, the President or any Vice President.

ARTICLE VI

SHARES AND TRANSFERS OF SHARES

SECTION 6.01. Certificates Evidencing Shares . Shares shall be either evidenced by certificates in such form or forms as shall be approved by the Board, or uncertificated as determined by the Board in accordance with Section 158 of the Delaware General Corporation Law or any successor statute. Certificates shall be issued in consecutive order and shall be numbered in the order of their issue, and shall be signed by the Chairman, the President or any Vice President and by the Secretary, any Assistant Secretary, the Treasurer or the Assistant Treasurer. If such a certificate is manually signed by one such officer, any other signature on the certificate may be a facsimile. In the event any such officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to hold such office or to be employed by the Corporation before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such officer had held such office on the date of issue.

SECTION 6.02. Stock Ledger . A stock ledger in one or more counterparts shall be kept by the Secretary, in which shall be recorded the name and address of each person, firm or corporation owning the Shares issued by the Corporation, the number of, the date of issuance thereof and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law, the person in whose name Shares stand on the stock ledger of the Corporation shall be deemed the owner and recordholder thereof for all purposes.

SECTION 6.03. Transfers of Shares . Registration of transfers of Shares shall be made only in the stock ledger of the Corporation upon request of the registered holder of such shares, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, and, in the case of certificated Shares, upon the surrender of the certificate or certificates evidencing such Shares properly endorsed or accompanied by a stock power duly executed, together with such proof of the authenticity of signatures as the Corporation may reasonably require.

SECTION 6.04. Addresses of Stockholders . Each Stockholder shall designate to the Secretary an address at which notices of meetings and all other corporate notices may be served or mailed to such Stockholder, and, if any Stockholder shall fail to so designate such an address, corporate notices may be served upon such Stockholder by mail directed to the mailing address, if any, as the same appears in the stock ledger of the Corporation or at the last known mailing address of such Stockholder.

SECTION 6.05. Lost, Destroyed and Mutilated Certificates . Each recordholder of Shares shall promptly notify the Corporation of any loss, destruction or mutilation of any certificate or certificates evidencing any Share or Shares of which he is the recordholder. The Board may, in its discretion, cause the

Corporation to issue a new certificate or uncertificated Shares in place of any certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction, and the Board may, in its discretion, require the recordholder of the Shares evidenced by the lost, stolen or destroyed certificate or his legal representative to give the Corporation a bond sufficient to indemnify the Corporation against any claim made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

SECTION 6.06. Regulations . The Board may make such other rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificates evidencing Shares and of uncertificated Shares.

SECTION 6.07. Fixing Date for Determination of Stockholders of Record . In order that the Corporation may determine the Stockholders entitled to notice of or to vote at any meeting of Stockholders or any adjournment thereof, or to express consent to, or to dissent from, corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other such action. A determination of the Stockholders entitled to notice of or to vote at a meeting of Stockholders shall apply to any adjournment of such meeting; provided , however , that the Board may fix a new record date for the adjourned meeting.

ARTICLE VII

SEAL

SECTION 7.01. Seal . The Board may approve and adopt a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation, the year of its incorporation and the words “Corporate Seal Delaware”.

ARTICLE VIII

FISCAL YEAR

SECTION 8.01. Fiscal Year . The fiscal year of the Corporation shall end on the thirty-first day of December of each year unless changed by resolution of the Board.

ARTICLE IX

INDEMNIFICATION AND INSURANCE

SECTION 9.01. Indemnification . (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 9.01(a) and (b) of these By-laws, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

(d) Any indemnification under Section 9.01(a) and (b) of these By-laws (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 9.01(a) and (b) of these By-laws. Such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even

though less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders of the Corporation.

(e) Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation pursuant to this Article IX. Such expenses (including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate.

(f) The indemnification and advancement of expenses provided by, or granted pursuant to, other Sections of this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office.

(g) For purposes of this Article IX, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article IX with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

(h) For purposes of this Article IX, references to “other enterprises”shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves service by, such director, officer, employee or agent with respect to any employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article IX.

(i) The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IX shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

SECTION 9.02. Insurance for Indemnification . The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation,

partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of Section 145 of the General Corporation Law.

ARTICLE X

AMENDMENTS

SECTION 10.01. Amendments . Any By-law (including these By-laws) may be adopted, amended or repealed by the vote of the recordholders of a majority of the Shares then entitled to vote at an election of Directors or by written consent of Stockholders pursuant to Section 2.09 hereof, or by vote of the Board or by a written consent of Directors pursuant to Section 3.08 hereof.

EXHIBIT 10.1

First Amendment to Employment Agreement

This First Amendment to Employment Agreement (the “First Amendment”) amends the Employment Agreement effective as of June 5, 2007 by and between Palatin Technologies, Inc. and Carl Spana (the “Employment Agreement”), and is effective as of December 7, 2007. The purpose of this First Amendment is to correct an error in the Employment Agreement.

Section 6.5 (c) of the Employment Agreement is amended by striking the words “50% or less” and substituting in lieu thereof the words “50% or more”.

This First Amendment shall be governed by and construed in accordance with the laws of the State of New Jersey.

This First Amendment may be executed in one or more counterparts, each of which shall constitute an original, and all of which, taken together, shall be deemed to constitute one and the same agreement.

As amended hereby the Employment Agreement remains in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an instrument under seal effective as of the day and year set forth above.


PALATIN TECHNOLOGIES, INC.			EMPLOYEE


By:
Name: Stephen T. Wills Title: Executive V.P. of Operations and Chief Financial Officer			Carl Spana

Date: December 7, 2007			Date: December 7, 2007

EXHIBIT 10.2

First Amendment to Employment Agreement

This First Amendment to Employment Agreement (the “First Amendment”) amends the Employment Agreement effective as of June 5, 2007 by and between Palatin Technologies, Inc. and Stephen T. Wills (the “Employment Agreement”), and is effective as of December 7, 2007. The purpose of this First Amendment is to correct an error in the Employment Agreement.

Section 6.5 (c) of the Employment Agreement is amended by striking the words “50% or less” and substituting in lieu thereof the words “50% or more”.

This First Amendment shall be governed by and construed in accordance with the laws of the State of New Jersey.

As amended hereby the Employment Agreement remains in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an instrument under seal effective as of the day and year set forth above.


PALATIN TECHNOLOGIES, INC.			EMPLOYEE


By:
Name: Carl Spana Title: Chief Executive Officer and President			Stephen T. Wills

Date: December 7, 2007			Date: December 7, 2007

EXHIBIT 10.3

First Amendment to Employment Agreement

This First Amendment to Employment Agreement (the “First Amendment”) amends the Employment Agreement effective as of June 5, 2007 by and between Palatin Technologies, Inc. and Trevor Hallam (the “Employment Agreement”), and is effective as of December 7, 2007. The purpose of this First Amendment is to correct an error in the Employment Agreement.

Section 6.5 (c) of the Employment Agreement is amended by striking the words “50% or less” and substituting in lieu thereof the words “50% or more”.

This First Amendment shall be governed by and construed in accordance with the laws of the State of New Jersey.

As amended hereby the Employment Agreement remains in full force and effect.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as an instrument under seal effective as of the day and year set forth above.


PALATIN TECHNOLOGIES, INC.			EMPLOYEE


By:
Name: Carl Spana Title: Chief Executive Officer and President			Trevor Hallam

Date: December 7, 2007			Date: December 7, 2007

PALATIN TECHNOLOGIES, INC. 2007
CHANGE IN CONTROL SEVERANCE PLAN

1. Introduction . Palatin Technologies, Inc. (the “Company”), on its own behalf and on behalf of its affiliated entities with any of the operations covered hereunder, does hereby establish and adopt the Palatin Technologies, Inc. Change in Control Severance Plan (the “Plan”), effective December 7, 2007 (the “Effective Date”). The Plan is an “employee welfare benefit plan” within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), intended to provide specified Change in Control severance benefits to eligible employees whose employment with the Company or its successor is involuntarily terminated in connection with a Change in Control or by reason of his or her Constructive Discharge.

This document constitutes both the Plan document and the summary plan description and is provided to you as required by ERISA. Your ERISA rights are described at the end of this document. You should keep it for future reference.

2. Important Terms . To help you understand how this Plan works, it is important to know the following terms:

2.1 “ Administrator ”means the person(s) or committee appointed by the Board (or its delegate) to oversee the administration of the Plan. The term “Administrator” will also include any person or subcommittee to whom the Administrator has delegated any authority or responsibility pursuant to Section 7, but only to the extent of such delegation.

2.2 "Base Salary" means an employee's base pay, as in effect from time to time.

2.3 "Board" means the Company's Board of Directors.

2.4 “ Cause ” means: (A) a material breach of, or habitual neglect or failure to perform the material duties which an employee is required to perform by the Company; (B) the material failure to follow the reasonable directives or policies established by employee’s supervisor or the Company’s Board of Directors; or (C) engaging in conduct that is materially detrimental to the interests of the Company such that the Company sustains a material loss or injury as a result thereof, provided that the breach or failure of performance by the Employee under subparagraphs (A) through (C) hereof is not cured, to the extent cure is possible, within ten (10) days of the delivery to the Employee of written notice thereof.

2.5 "Change in Control" means the occurrence of any of the following events:

(a) Any “Person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company) becoming the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of

securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities;

(b) the date the individuals who, during any twelve month period, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director during the twelve month period whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board;

(c) a merger or consolidation of the Company approved by the stockholders of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) 50% or more of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a re-capitalization of the Company (or similar transaction) in which no “person” (as defined in Section 6.4(a)) acquires more than 50% of the combined voting power of the Company’s then outstanding securities; or

(d) a sale of all or substantially all of the assets of the Company.

2.6 “ Change in Control Date ” means the date on which a Change in Control is effective, as determined by the Administrator in his sole discretion.

2.7 "Code" means the Internal Revenue Code of 1986, as amended.

2.8 "Company" means Palatin Technologies, Inc., a Delaware corporation and any successor by merger, acquisition, consolidation, or otherwise that assumes the obligations of the Company under the Plan.

2.9 “ Constructive Discharge ” means (A) a material diminution in the employee’s Base Salary as in effect immediately prior to a Change in Control; (B) a material diminution or adverse change, in the Company’s reasonable determination, in the employee’s position, status or circumstance of employment or the assignment to the employee of any duties or responsibilities which result in any material diminution or adverse change in the employee’s position, status or circumstances of employment; or (C) change in an employee’s principal work location to a location more than thirty five (35) miles from his or her principal work location immediately prior to the Change in Control Date.

2.10 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

2.11 "Plan" means the Palatin Technologies, Inc. 2007 Change in Control Severance Plan, as set forth in this document, and as hereafter amended from time to time.

2.12 “ Severance Benefit ” means the “Change in Control severance benefit” that an Eligible Employee may receive pursuant to Section 5.

2.13 "Termination Date" means the effective date of an Eligible Employee's termination of employment with the Company.

3. Eligibility .

3.1 In order for you to be considered an "Eligible Employee," each of the following requirements must be satisfied:

(a) Except as otherwise provided in Section 4.2 below, you must be an “Employee” of the Company on the date immediately preceding the Change in Control Date. The term “Employee” means a current, full-time or part-time employee of the Company who is regularly scheduled to work twenty (20) or more hours per work, but the term “Employee” shall exclude for all purposes any individual who is classified by the Company as a former employee, a temporary or leased employee, a seasonal employee, an intern, a consultant, a vendor or an independent contractor; and

(b) Except as otherwise provided in Section 4.2 below, your employment with the Company must, within twelve (12) months following a Change in Control, be (i) involuntarily terminated by the Company without Cause; or (ii) voluntarily terminated by you in circumstances that would qualify as a Constructive Discharge.

3.2 The Administrator will determine, in his sole discretion, which persons who provide services to, for or on behalf of the Company are excluded from participating in the Plan, and such determinations by the Administrator will be final and binding on all persons for purposes of the Plan.

3.3 If an Employee and the Company have entered into a written agreement which expressly provides for severance benefits or which provides for other payments, benefits or contractual arrangements, the payment of which is conditioned upon his or her termination of employment with the Company in connection with a Change in Control or other similar circumstances (other than the written release described in Section 4.1(c) above), the Employee shall not be considered an Eligible Employee under this Plan.

4. Conditions for Payment of Benefits .

4.1 Notwithstanding any other provision of this Plan, Severance Benefits are payable to an otherwise Eligible Employee only if:

(a) The Eligible Employee’s employment with the Company is not terminated by death or permanent disability or for Cause prior to the Change in Control Date;

(b) Except as otherwise provided in Section 4.2, the Eligible Employee does not voluntarily terminate his or her employment prior to the Change in Control Date; and

(c) The Eligible Employee executes a general waiver and release in substantially the form attached hereto as Exhibit B , that becomes effective in accordance with its terms. Unless a Change in Control has occurred, the Administrator, in his sole discretion, may modify the form of the required release to comply with applicable law and shall determine the form of the required release, which may be incorporated into a termination agreement or other agreement with the Eligible Employee.

4.2 Notwithstanding anything in this Plan to the contrary, if, after the Effective Date and within six (6) months prior to the date on which a Change in Control occurs, an Eligible Employee’s employment with the Company is terminated by the Company other than by reason of the Eligible Employee’s death, permanent disability or circumstances that would constitute Cause, or the terms and conditions of the Eligible Employee’s employment are adversely changed in a manner that would constitute grounds for a termination of employment by the Eligible Employee by reason of a Constructive Discharge, and it is reasonably demonstrated that such termination of employment or adverse change (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control, or (ii) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Plan such termination of employment shall be deemed to have occurred immediately after the Change in Control and shall be considered either termination of the Eligible Employee’s employment without Cause by the Company or termination of the Eligible Employee’s employment by the Eligible Employee by reason of a Constructive Discharge, as the case may be, entitling the Eligible Employee to the benefits under Section 5 below.

5. Amount of Benefits .

5.1 An Eligible Employee who becomes entitled to Severance Benefits under Section 3 and who is not precluded from receiving such benefits under Section 4 shall be eligible to receive the Severance Benefits described in Exhibit A , as modified by the Company (or its delegate) from time to time.

5.2 Severance Benefits for an Eligible Employee who is working on a part-time schedule (provided such schedule provides for at least 20 hours per week of employment) shall be pro-rated based on his or her scheduled workweek at the time of his or her Termination Date.

6. Method of Payment .

6.1 Any Severance Benefits provided for in Sections 3 and 5 above will be paid in a lump sum payment, minus applicable withholdings as required by law, within sixty (60) days following an Employee’s Termination Date, provided however, any Severance Benefits provided for in Sections 4.2 and 5 above will be paid in a lump sum payment upon the Change in Control. All payments under the Plan will be made in the form of a check and will be mailed via first class mail to the address on file. Cash reimbursements or subsidies for COBRA premiums shall be made as and when provided in the applicable Company health plan.

6.2 If an Eligible Employee is indebted to the Company at his or her termination date, the Administrator reserves the right to offset any severance payments under the Plan by the amount of such indebtedness. In no event shall payment of any Plan benefit be made prior to the

Eligible Employee’s Termination Date or prior to the effective date of the release described in Section 4.1(c).

7. Administration .

7.1 The Plan is administered by the Administrator. The Administrator will have full discretionary authority to administer the Plan in all of its details, subject, however, to the requirements of ERISA. For this purpose the Administrator’s power will include, but will not be limited to, the following authority:

(a) to make and enforce such rules and regulations as it deems necessary or proper for the efficient administration of the Plan or required to comply with applicable law;

(b) subject to the Company’s delegation of authority, to amend the terms of the Plan;

(c) to interpret the Plan, its interpretation thereof in good faith to be final and conclusive on any employee, former employee, and beneficiary;

(d) to decide all questions concerning the Plan and the eligibility of any person to participate in the Plan;

(e) to compute the amount of benefits which will be payable to any Eligible Employee, former Eligible Employee, or beneficiary in accordance with the provisions of the Plan, and to determine the person or persons to whom such benefits will be paid;

(f) to authorize the payment of benefits;

(g) to keep such records and submit such filings, elections, applications, returns or other documents or forms as may be required under the Code, ERISA, and applicable regulations, or under state or local law and regulations;

(h) to appoint such agents, counsel, accountants and consultants as may be required to assist in administering the Plan; and

(i) by written instrument, to allocate and delegate its fiduciary responsibilities in accordance with Section 405 of ERISA.

8. Amendment and Termination .

8.1 The Company reserves the right to amend or terminate this Plan at any time; provided, however, that the Board may delegate its authority to approve Plan amendments to the Administrator. Notwithstanding the foregoing, on or after the Change in Control Date, or following or in connection with the approval by the Board of a Change in Control (unless such Change in Control is not reasonably expected to occur), this Plan cannot be amended, altered, suspended or terminated in a manner that adversely affects an Eligible Employee, except upon six (6) months’ prior written notice by the Company (or its delegate) to the affected Eligible Employee; provided, however, that no such amendment, alteration, suspension or termination

shall affect the right to any unpaid benefit of any Eligible Employee whose Termination Date has occurred prior to amendment, alteration, suspension or termination of the Plan. In addition, if a Change in Control occurs within the six (6) month period following the effective date of an amendment to terminate the Plan or otherwise reduce the amount (or alter the terms) of any severance benefit under the Plan, such amendment (or portion of such amendment) will become null and void upon the Change in Control Date. Upon the Change in Control, the Plan will automatically revert to the terms in effect prior to the adoption of said amendment.

8.2 The authorization of an amendment to the Plan must be evidenced by one of the following: (1) a resolution of the Board; (2) execution of the amendment by the Company’s chief executive officer, president or secretary; (3) ratification of the amendment by either a resolution of the Board or written confirmation of ratification by the chief executive officer, president or secretary; or (4) in the event the Board delegates its authority to amend the Plan to the Administrator, formal written confirmation of the Administrator’s ratification of the amendment. Notice of any amendment must be provided to or made available to the Administrator. All amendments and modifications must be in writing and signed as provided above to be effective; oral amendments and modifications of this Plan are not effective.

8.3 Notwithstanding the foregoing limitations, the Plan may be amended at any time (and such amendment will be given effect) if such amendment is required to bring the Plan into compliance with applicable law, including but not limited to Section 409A of the Code.

9. Claims and Appeals Procedures .

9.1 An Eligible Employee does not have to file a claim for Severance Benefits. However, if an Eligible Employee believes his or her Severance Benefits have been incorrectly determined, he or she may file a written notice with the Administrator at the address listed below to request a review of the determination. If the claim is denied (in full or in part), the claimant shall be provided a written or electronic response from the Administrator. The Administrator’s response shall include the following information:

(a) The specific reason(s) for the denial;

(b) Reference to the specific Plan provision(s) upon which the denial was based;

(c) A description of any additional or material information that is necessary for the appeal of the denied claim to be successful, and an explanation of why this information is necessary;

(d) A description of any voluntary appeal procedures available under the Plan and your right to receive information about them;

(e) An explanation of the review procedure summarized below, including the time limits applicable to the review procedures and the claimant’s rights to submit written comments and have them considered, the claimant’s right to review (upon request and at no charge) relevant documents and other information; and

(f) A statement that the claimant has a right to bring a civil action under Section 502(a) of the Employee Retirement Income Security Act of 1974, as amended (ERISA) following a denial of an appeal of the claim.

(g) If the Administrator relied on an internal rule, guideline, protocol, or other similar criterion in denying the claim, then the Administrator either will provide the claimant with a copy of the criterion or will notify the claimant that it relied on such a criterion and inform the claimant that he or she may request a copy of the criterion free of charge.

9.2 A notice of denial shall be furnished to the claimant no later than ninety (90) days after receipt of the claim by the Administrator, unless the Administrator determines that special circumstances require an extension of time for processing the claim. If the Administrator determines than an extension of time for processing is required, then notice of the extension shall be furnished to the claimant prior to the termination of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (90) days from the end of such initial period. The notice shall inform the claimant of the following:

(a) The special circumstances requiring the extension of time;

(b) The date by which the claimant can expect a decision;

(d) The unresolved issue(s) that prevent a decision on the claim; and

(e) A description of any additional information that the claimant needs to submit.

9.3 If the claimant’s claim is denied, the claimant (or his or her authorized representative) may, within sixty (60) days of receiving notice of such denial, apply in writing to the Administrator for a review of the decision denying the claim. The Administrator shall afford the claimant a full and fair review of the decision denying the claim and, if so requested, shall:

(a) Provide the claimant with the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits;

(b) Provide that the claimant shall be provided, upon request and free of charge, reasonable access to, and copies of all documents, records and other information (other than documents, records and other information that is legally privileged) relevant to the claimant’s claim for benefits; and

(c) Provide for a review that takes into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

9.4 The Administrator’s decision on review shall be issued within sixty (60) days following the request for review. The period for decision may, however, be extended up to one hundred and twenty (120) days after such receipt if the Administrator determines that special

circumstances require extension. In the case of an extension, notice of the extension shall be furnished to the claimant (or his or her authorized representative) prior to the expiration of the initial sixty (60) day period. In no event shall such extension exceed a period of sixty (60) days from the end of such initial period. The extension notice shall indicate the special circumstances requiring the extension of time and the date by which the Administrator expects to render the benefits determination. If the claimant’s appeal is subsequently also denied by the Administrator, in whole or in part, then the claimant shall be furnished with a denial notice that shall contain the following:

(a) Specific reason(s) for the denial;

(b) Reference to the specific Plan provision(s) on which the denial is based; and

(c) An explanation of the Plan’s review procedures and the time limits applicable to such procedures including a statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following the denial on review.

10. No Employment Rights . The adoption of this Plan is not a contract between the Company and any employee. Further, this Plan does not affect any employee’s at-will status with the Company and does not give any employee any right to continue employment with the Company, any parent, subsidiary or affiliate of the Company, or any successor entity, nor does it interfere with the right of the Company or any successor entity to discharge any employee.

11. Limitations on Rehire . Upon termination, an Eligible Employee may not be hired or re-hired in a consulting capacity or as a full or part-time employee for a minimum period of one (1) year from his or her Termination Date.

12. Exclusive Benefits . This Plan supersedes any and all other Change in Control severance benefit plans or severance pay practices of the Company insofar as it relates to the Company’s Employees. Notwithstanding the foregoing, the Plan is not intended to eliminate any Change in Control severance benefits to which an Employee may be entitled under an employment agreement with the Company, except to the extent provided under Section 5.2.

13. Legal Expenses . With respect to any claims as to the validity or enforceability of, or the Company’s liability under, any provision of the Plan arising on or after a Change in Control, the Company agrees to pay, to the full extent permitted by law, all reasonable attorneys’ fees and costs which an employee may reasonably incur; provided, however, that such payment shall be made after, and only if, the employee prevails on at least one material issue raised in the proceeding following exhaustion of all rights of appeal or review.

14. Deferred Compensation Limitations . Notwithstanding any other provision of this Plan whatsoever, the Administrator, in his sole discretion, shall have the right to provide for the application and effects of Section 409A of the Code (relating to deferred compensation arrangements) and any related administrative guidance issued by the Internal Revenue Service. The Administrator shall delay the payment of any amounts under the Plan to the extent it deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of the Code (relating to payments made to certain “key employees” of publicly-traded companies); in such event, the

payment(s) at issue shall not be made before the date which is six (6) months after the date of Eligible Employee’s separation from service, or, if earlier, the date of death.

15. Certain Increases in Payment .

15.1 Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined that any payment or distribution by the Company to or for the benefit of an Eligible Employee, whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise (the “Payment”), would constitute an “excess parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the Eligible Employee shall be paid an additional amount (the “Gross-Up Payment”) such that the net amount retained by the Eligible Employee after deduction of any excise tax imposed under Section 4999 of the Code, and any federal, state and local income and employment tax and excise tax imposed upon the Gross-Up Payment, shall be equal to the Payment. For purposes of determining the amount of the Gross-Up Payment, the Eligible Employee shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Eligible Employee’s residence (or, if greater, the state and locality in which he or she is required to file a nonresident income tax return with respect to the Payment) on the date of his or her termination, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

15.2 All determinations to be made under this Section 15 shall be made by the Company’s independent public accountant which served in this capacity immediately prior to the Change in Control (the “Accounting Firm”). The Accounting Firm shall provide its determinations and any supporting calculations both to the Company and the Eligible Employee thirty (30) days of the date of the Eligible Employee’s termination. Any such determination by the Accounting Firm shall be binding upon both the Company and the Eligible Employee. After the Accounting Firm’s determination, the Company shall pay (or cause to be paid) or distribute (or cause to be distributed) to or for the benefit of the Eligible Employee such amounts as are then due to the Eligible Employee under this Plan in accordance with Section 6.

16. No Assignment . An Eligible Employee’s rights under this Plan cannot be assigned, alienated, encumbered or otherwise transferred.

17. Severability . If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability will not affect any other provision of the Plan, and the Plan will be construed and enforced as if such provision had not been included.

18. Headings . Headings in this Plan document are for purposes of reference only and will not limit or otherwise affect the meaning hereof.

19. Indemnification . The Company hereby agrees to indemnity and hold harmless the officers and employees of the Company, and the members of the Board, from all losses, claims, costs or other liabilities arising from their acts or omissions in connection with the administration, amendment or termination of the Plan, to the maximum extent permitted by

applicable law. This indemnity will cover all such liabilities, including judgments, settlements and costs of defense. The Company will provide this indemnity from its own funds to the extent that insurance does not cover such liabilities.

20. Welfare Plan Provisions .

20.1 No payments made pursuant to the Plan are contingent, either directly or indirectly, upon an Eligible Employee’s retirement.

20.2 Any provisions of this Plan to the contrary notwithstanding, no amount payable to an Eligible Employee under this Plan shall exceed two times the “annual compensation” (within the meaning of Section 2510.3-2(b)(2)(i) of Title 29 of the Code of Federal Regulations) received by such Eligible Employee during the twelve months immediately preceding his or her Termination Date.

20.3 Any provisions of the Plan to the contrary notwithstanding, all payments to an Eligible Employee will be completed within twenty-four (24) months following such Eligible Employee’s Termination Date.

21. Source of Payments . All benefits payable under the Plan will be paid in cash from the general funds of the Company; no separate fund will be established under the Plan; and the Plan will have no assets. No right of any person to receive any payment under the Plan will be any greater than the right of any other general unsecured creditor of the Company.

22. Governing Law . The provisions of the Plan shall be construed, administered and enforced according to ERISA and, to the extent not preempted, by the laws of the State of New Jersey.

IMPORTANT PLAN INFORMATION


PLAN NAME:	Palatin Technologies, Inc. 2007 Change in Control Severance Plan

TYPE OF PLAN:	Welfare Benefit Plan

PLAN NUMBER:

PLAN SPONSOR:	Palatin Technologies, Inc. 4-C Cedar Brook Road Cranbury, NJ 08512 Telephone: 609-495-2200

IRS EMPLOYER IDENTIFICATION NUMBER:	95-4078884

PLAN ADMINISTRATOR:	Stephen T. Wills Executive Vice President - Operations and Chief Financial Officer Palatin Technologies, Inc.

PLAN AGENT FOR SERVICE OF LEGAL PROCESS:	Palatin Technologies, Inc. 4-C Cedar Brook Road Cranbury, NJ 08512 Attn: Legal Department Telephone: 609-495-2200

PLAN YEAR:	January 1 through December 31; the initial plan year shall be December 7, 2007 through December 31, 2007.

FUNDING MEDIUM:	Unfunded. Benefits are paid from the general assets of the employer.

YOUR RIGHTS UNDER ERISA

The Employee Retirement Income Security Act of 1974 (“ERISA”) was enacted to help assure that all employer-sponsored group benefits programs conform to standards set by Congress. The Palatin Technologies, Inc. 2007 Change in Control Severance Plan is covered by ERISA and an employee who is a participant in this Plan is entitled to certain rights and protections. ERISA provides that all Plan participants shall be entitled to examine, without charge, at the Company’s business office, all Plan documents and copies of all documents filed by the Plan with the U.S. Department of Labor, such as detailed annual reports and Plan descriptions and to obtain copies of all Plan documents and other Plan information, if applicable, upon written request to the Company. The Company may make a reasonable charge for the copies. The Company is required by law to furnish each participant with a copy of the Plan’s summary annual report, if applicable.

In addition to creating rights for Plan participants, ERISA also sets forth certain duties for the people who are responsible for the operation of the Plan. The people who operate the Plan are called “fiduciaries” of the Plan. They have a duty to operate the Plan prudently and in the best interests of you and other Plan participants and beneficiaries. No one, including your employer, or any other person, may fire you or otherwise discriminate against you to prevent you from either obtaining any Plan benefit or exercising your rights under ERISA. However, neither the existence of the Plan nor this summary plan description constitutes an employment contract or affects the right of the company to lawfully terminate your employment.

If your claim for a Plan benefit is denied in whole or in part, you must receive a written explanation of the reasons for the denial. You have the right to have the Administrator review and reconsider your claim.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Administrator to provide the materials and pay you up to $110 per day until you receive the materials (unless the materials were not sent because of reasons beyond the control of the Administrator). If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that Plan fiduciaries do not fulfill their responsibilities under ERISA, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees (for example, if the court finds your claim is frivolous). If you have any questions about your Plan, you should contact the Administrator.

If you have any questions about this statement or about your rights under ERISA you should contact the nearest Area Office of the Employee Benefits Security Administration, U.S. Department of Labor.

EXHIBIT A


Severance Compensation	Employee Classification	Minimum	Maximum
Paid in a lump sum payment of not less than the Minimum nor more than the Maximum based on: (a) the Employee's job classification immediately preceding the Change in Control Date and (b) years of service (employment) with Company	Chief Executive Officer, Executive Vice President, Chief Financial Officer, Chief Technology Officer	6 Months (Less than two years of service)	12 Months
	Vice President; Executive Director	2 Months per year of service, but not less than 6 Months	9 Months
	Director	1 Month per year of service, but not less than 3 Months	6 Months
	Associate Director; Manager	One-half Month per year of service, but not less than 2 Months	4 Months
	All Other Employees	One-half Month per year of service, but not less than 1 Month	3 Months
Bonuses	If an accrued bonus has not yet been paid to an Employee for the full fiscal year preceding termination, such bonus shall be paid within sixty (60) days of termination of employment.
Extended Medical/Dental/Vision (COBRA)	An Employee receiving medical and/or dental and/or vision coverage under a Company-sponsored health plan will be eligible to continue the applicable benefits at active employee rates for the period of time coinciding with the period for which severance benefits are paid under this Plan. IF YOU LOSE ELIGIBILITY FOR COBRA OR OTHER CONTINUATION COVERAGE, AS DESCRIBED IN THE COBRA DOCUMENTS YOU WILL RECEIVE, THE COMPANY WILL STOP PAYING ITS PORTION OF THE PREMIUMS FOR YOUR CONTINUATION COVERAGE.
Release Required	No separation benefits will be paid to any terminated employee unless he/she executes a written release of all claims against the Company and related parties arising out of the employee's employment or termination of that employment.
Employment Agreement	In the event the Employee is party to any written agreement or employment letter providing severance benefits, the Employee will not be considered an Eligible Employee under the Plan.

EXHIBIT B

Separation Agreement and General Release

This Waiver and Release Agreement (the “Agreement”) is made between Palatin Technologies, Inc. (the “Company”) and ________ (“Employee” or “You”), and is a condition to your receipt of benefits under the Company’s Change in Control Severance Plan.

1. Severance Benefits . Within sixty (60) days following your termination of employment if you terminated after a Change in Control or upon a Change in Control if you terminated employment before a Change in Control, as long as you execute and deliver the Release to the Company and do not revoke the Release, you will receive from Company the benefits to which you are entitled as described in Exhibit A to the Company’s Change in Control Severance Plan (the “Plan”). Company makes no representations or warranties regarding the tax consequences of the payments described above (“Severance Benefits”), and will issue a W-2 and/or Form 1099-MISC as it deems appropriate. You acknowledge that you are not otherwise entitled to this consideration under Company policies and procedures or applicable law.

You acknowledge and agree that the Separation Benefits provide special consideration for this Agreement. You also agree that except for the Severance Benefits, and your final wages, which shall be paid to you in accordance with the Company’s regular payroll practices and applicable law (which payments you will receive whether or not you sign this Agreement), you are not now and shall not in the future be entitled to any other compensation from the Company including, without limitation, other wages, commissions, bonuses, vacation pay, holiday pay, paid time off or any other form of compensation or benefit.

2. Your Release of Claims. You hereby agree and acknowledge that by signing this Agreement and accepting the Severance Benefits, and for other good and valuable consideration, you are waiving your right to assert any and all forms of legal claims against the Company ^1/ of any kind whatsoever, whether known or unknown, arising from the beginning of time through the date you execute this Agreement (the “Execution Date”). Except as set forth below, your waiver and release herein is intended to bar any form of legal claim, complaint or any other form of action (jointly referred to as “Claims”) against the Company seeking any form of relief including, without limitation, equitable relief (whether declaratory, injunctive or otherwise), the recovery of any damages, or any other form of monetary recovery whatsoever (including, without limitation, back pay, front pay, compensatory damages, emotional distress damages, punitive damages, attorneys fees and any other costs) against the Company, for any alleged action, inaction or circumstance existing or arising through the Execution Date.

Without limiting the foregoing general waiver and release, you specifically waive and release the Company from any Claim arising from or related to your prior employment relationship with the Company or the termination thereof, including, without limitation:

Claims under any state or federal discrimination, fair employment practices or other employment related statute, regulation or executive order (as they may have

_________________

^1/ For purposes of this Agreement, the Company includes the Company and any of its divisions, affiliates (which means all persons and entities directly or indirectly controlling, controlled by or under common control with the Company), subsidiaries and all other related entities, and its and their directors, officers, partners, employees, trustees, agents, successors and assigns.

been amended through the Execution Date) prohibiting discrimination or harassment based upon any protected status including, without limitation, race, national origin, age, gender, marital status, disability, veteran status or sexual orientation. Without limitation, specifically included in this paragraph are any Claims arising under the Federal Age Discrimination in Employment Act, the Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal Pay Act, the Americans With Disabilities Act, the New Jersey Conscientious Employee Protection Act and any similar federal or state statutes.

Claims under any other state or federal employment related statute, regulation or executive order (as they may have been amended through the Execution Date) relating to wages, hours or any other terms and conditions of employment.

Claims under any state or federal common law theory including, without limitation, wrongful discharge, breach of express or implied contract, promissory estoppel, unjust enrichment, breach of a covenant of good faith and fair dealing, violation of public policy, defamation, interference with contractual relations, intentional or negligent infliction of emotional distress, invasion of privacy, misrepresentation, deceit, fraud or negligence.

Any other Claim arising under state or federal law.

Notwithstanding the foregoing, this section does not release the Company from any obligation expressly set forth in this Agreement. You acknowledge and agree that, but for providing this waiver and release, you would not be receiving the economic benefits being provided to you under the terms of this Agreement.

It is the Company’s desire and intent to make certain that you fully understand the provisions and effects of this Agreement. To that end, you have been encouraged and given the opportunity to consult with legal counsel for the purpose of reviewing the terms of this Agreement. Also, if you are the age of 40 or older, consistent with the provisions of the Age Discrimination in Employment Act (“ADEA”), which prohibits discrimination on the basis of age, the Company is providing you with twenty-one (21) days in which to consider and accept the terms of this Agreement [45 days if a group termination, and in such event, the applicable schedule is attached hereto] by signing below and returning it to _____________ at the Company. In addition, if you 40 or older, you may rescind your assent to this Agreement if, within seven (7) days after you sign this Agreement, you deliver by hand or send by mail (certified, return receipt and postmarked within such 7 day period) a notice of rescission to ____________ at the Company. The eighth day following your signing of this Agreement is the “Effective Date.”

Also, consistent with the provisions of Federal and State discrimination laws, nothing in this release shall be deemed to prohibit you from challenging the validity of this release under the federal age or other federal and state discrimination laws (the

“Discrimination Laws”) or from filing a charge or complaint of employment-related discrimination with the Equal Employment Opportunity Commission (“EEOC”) or equivalent state agency, or from participating in any investigation or proceeding conducted by the EEOC or state agency equivalent. Further, nothing in this release or Agreement shall be deemed to limit the Company’s right to seek immediate dismissal of such charge or complaint on the basis that your signing of this Agreement constitutes a full release of any individual rights under the Discrimination Laws, or to seek restitution to the extent permitted by law of the economic benefits provided to you under this Agreement in the event that you successfully challenge the validity of this release and prevail in any claim under the Discrimination Laws.

3. Proprietary Information . You agree not to disclose, use or otherwise misappropriate any trade secrets or other confidential and proprietary information belonging to Company or acquired by you during your employment with Company. You also acknowledge that Company’s Employee Agreement on Confidentiality, Intellectual Property, Debarment Certification and Conflict of Interest, which you signed as a condition of your employment, shall remain in effect after your employment with Company ends, and your signature hereto represents your agreement to abide by the terms thereof. You further acknowledge that there shall be no modification or amendment of the Company’s Employee Agreement on Confidentiality, Intellectual Property, Debarment Certification and Conflict of Interest without Company’s prior written consent.

4. Confidentiality . You further agree to maintain this Release and its contents in the strictest confidence and agree that you will not disclose the terms of this Release to any third party without the prior written consent of Company, unless otherwise required by law. Notwithstanding the foregoing, you may disclose the terms of this Release to your spouse, and for legitimate business reasons, to legal, financial, and tax advisors.

5. Return of Company Property . You represent that you have returned to the Company all the Company property (including without limitation, keys to all offices and facilities, mobile telephones, employee handbooks, business cards, client files, corporate credit cards, telephone calling card, files, sales material) in your possession and you have not retained any reproductions of these items.

6. Entire Agreement/Modification/Waiver/Choice of Law/Enforceability. You acknowledge and agree that this Agreement supersedes any and all prior or contemporaneous oral and/or written agreements between you and the Company, and sets forth the entire agreement between you and the Company except as specifically set forth herein. No variations or modifications hereof shall be deemed valid unless reduced to writing and signed by the parties hereto. The failure of the Company to seek enforcement of any provision of this Agreement in any instance or for any period of time shall not be construed as a waiver of such provision or of the Company’s right to seek enforcement of such provision in the future. This Agreement shall be deemed to have been made in the State of New Jersey and shall be construed in accordance with the laws of New Jersey without giving effect to conflict of law principles. Both parties hereby waive and renounce in advance any right to a trial by jury in connection with such legal action. The provisions of this Agreement are severable, and if for any reason any part hereof shall be found to be unenforceable, the remaining provisions shall be enforced in full.

By executing this Agreement, you are acknowledging that you have been afforded sufficient time to understand the terms and effects of this Agreement, that your agreements and obligations hereunder are made voluntarily, knowingly and without duress, and that neither the Company nor its agents or representatives have made any representations inconsistent with the provisions of this Agreement. The parties agree that the last act necessary to render this Agreement effective is for the Company to sign the Agreement, and that the Agreement may be signed on one or more copies, each of which when signed will be deemed to be an original, and all of which together will constitute one and the same Agreement.

If the foregoing correctly sets forth our understanding, please sign, date and return the enclosed copy of this Agreement to [NAME] at the Company by [DATE 21 days after delivery].


	Sincerely,
	Palatin Technologies, Inc.
	By:
		Its:
		Dated: ______________________

Confirmed, Agreed and Acknowledged:

_______________________________
EMPLOYEE NAME

Dated: ______________________

EXHIBIT 31.1

Certification of Chief Executive Officer

I, Carl Spana, certify that:

I have reviewed this quarterly report on Form 10-Q of Palatin Technologies, Inc.;

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 8, 2008

/s/ Carl Spana
Carl Spana, President and Chief Executive Officer

EXHIBIT 31.2

Certification of Chief Financial Officer

I, Stephen T. Wills, certify that:

I have reviewed this quarterly report on Form 10-Q of Palatin Technologies, Inc.;

(a)

(b)

(c)

(d)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 8, 2008

  /s/ Stephen T. Wills
  Stephen T. Wills, Executive Vice President and
  Chief Financial Officer

EXHIBIT 32.1

Certification of Principal Executive Officer
Pursuant to U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Carl Spana, President and Chief Executive Officer of Palatin Technologies, Inc., hereby certify, to my knowledge, that the quarterly report on Form 10-Q for the period ended December 31, 2007 of Palatin Technologies, Inc. (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Palatin Technologies, Inc.

Dated: February 8, 2008

  /s/ Carl Spana
  Carl Spana, President and Chief Executive Officer
  (Principal Executive Officer)

EXHIBIT 32.2

Certification of Principal Financial Officer
Pursuant to U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Stephen T. Wills, Executive Vice President and Chief Financial Officer of Palatin Technologies, Inc., hereby certify, to my knowledge, that the quarterly report on Form 10-Q for the period ended December 31, 2007 of Palatin Technologies, Inc. (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Palatin Technologies, Inc.

Dated: February 8, 2008

  /s/ Stephen T. Wills
  Stephen T. Wills, Executive Vice President and
  Chief Financial Officer (Principal Financial Officer)