================================================================================

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

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

                For the quarterly period ended September 30, 1999

                                       or

[ ]  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 0-22686



                           PALATIN TECHNOLOGIES, INC.
        (Exact name of small business issuer as specified in its charter)


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


    214 Carnegie Center - Suite 100
         Princeton, New Jersey                            08540
(Address of principal executive offices)               (Zip Code)

                    Issuer's telephone number: (609) 520-1911

Check whether the Issuer (1) 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 Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

As of November 12, 1999, 7,243,784 shares of the Issuer's common stock, par
value $.01 per share, were outstanding.

Transitional Small Business Disclosure Format:    Yes  [  ]      No  [X]

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                           PALATIN TECHNOLOGIES, INC.

                                Table of Contents



PART I - FINANCIAL INFORMATION

  Item 1.  Financial Statements (unaudited)

     CONSOLIDATED BALANCE SHEETS -- As of September 30, 1999
       and June 30, 1999 ............................................... Page 3

     CONSOLIDATED STATEMENTS OF OPERATIONS --
       For the Three Months Ended September 30, 1999
       and September 30, 1998 and the Period from January 28, 1986
       (Commencement of Operations) through September 30, 1999.......... Page 4

     CONSOLIDATED STATEMENTS OF CASH FLOWS --
       For the Three Months Ended September 30, 1999
       and September 30, 1998 and the Period From January 28, 1986
       (Commencement of Operations) through September 30, 1999.......... Page 5

     Notes to Consolidated Financial Statements......................... Page 6


  Item 2.  Management's Discussion and Analysis of Financial Condition
             and Results of Operations.................................. Page 10

PART II - OTHER INFORMATION

  Item 1.  Legal Proceedings............................................ Page 14

  Item 2.  Changes in Securities and Use of Proceeds.................... Page 14

  Item 3.  Defaults Upon Senior Securities.............................. Page 14

  Item 4.  Submission of Matters to a Vote of Security Holders.......... Page 14

  Item 5.  Other Information............................................ Page 14

  Item 6.  Exhibits and Reports on Form 8-K............................. Page 14

Signatures.............................................................. Page 15


                                       2
<PAGE>




PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements

<TABLE>
<CAPTION>

                                                      PALATIN TECHNOLOGIES, INC.
                                                   (A Development Stage Enterprise)
                                                      Consolidated Balance Sheets
                                                              (unaudited)

                                                                                 September 30, 1999          June 30, 1999
                                                                                ----------------------   ----------------------
<S>                                                                            <C>                      <C>
ASSETS
Current assets:
  Cash and cash equivalents                                                    $           10,725,204   $             2,333,801
  Accounts receivable                                                                       1,250,000                        -
  Short term investments                                                                      857,457                  454,827
  Prepaid expenses and other                                                                   78,321                  147,780
                                                                                ----------------------   ----------------------
      Total current assets                                                                 12,910,982                2,936,408

Fixed assets, net of accumulated depreciation and amortization
  of  $733,030 and $676,362, respectively                                                   1,405,750                1,457,605
Restricted cash                                                                               185,000                  185,000
Other                                                                                          62,530                  144,032
                                                                                ----------------------   ----------------------
                                                                               $           14,564,262   $            4,723,045
                                                                                ======================   ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                             $            1,326,766  $             1,116,894
  Accrued expenses                                                                          1,285,709                1,264,893
                                                                                ----------------------   ----------------------
      Total current liabilities                                                             2,612,475                2,381,787
                                                                                ----------------------   ----------------------
Long term debt                                                                                      -                2,000,000
                                                                                ----------------------   ----------------------

Commitments and contingencies (Note 4)


Stockholders' equity:
  Preferred stock of $.01 par value - authorized 10,000,000 shares;
   Series A Convertible; 38,936 and 42,484 shares issued and outstanding
    as of September 30, 1999 and June 30, 1999, respectively;                                     389                      425
   Series B Convertible; 12,875 and 13,575 shares issued and outstanding
      as of September 30, 1999 and June 30, 1999 respectively;                                    129                      136
   Series C Convertible; 700,000 shares issued and outstanding
      as of September 30, 1999;                                                                 7,000                       -
  Common stock of $.01 par value - authorized 75,000,000 shares;
    Issued and outstanding 7,240,329 and 7,137,595 shares as of
      September 30, 1999 and June 30, 1999, respectively;                                      72,404                   71,376
  Additional paid-in capital                                                               48,616,207               35,610,243
  Unamortized deferred compensation                                                                 -                  (18,558)
  Deficit accumulated during development stage                                            (36,744,342)             (35,322,364)
                                                                                ----------------------   ----------------------
      Total stockholders' equity                                                           11,951,787                  341,258
                                                                                ----------------------   ----------------------
                                                                               $           14,564,262   $            4,723,045
                                                                                ======================   ======================


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

</TABLE>

                                       3

<PAGE>

<TABLE>
<CAPTION>

                                                      PALATIN TECHNOLOGIES, INC.
                                                   (A Development Stage Enterprise)
                                                 Consolidated Statements of Operations
                                                              (unaudited)

                                                                                                          Inception
                                                                                                     (January 28, 1986)
                                                              Three Months Ended September 30,             through
                                                                1999                  1998           September 30, 1999
                                                          ------------------    ------------------  ----------------------
<S>                                                      <C>                   <C>                 <C>
REVENUES:
     Grants and contracts                                $       1,250,000     $               -   $           4,554,629
     License fees and royalties                                    500,000                     -               1,734,296
     Other                                                               -                     -                 318,917
                                                          ------------------    ------------------  ----------------------
          Total revenues                                         1,750,000                     -               6,607,842
                                                          ------------------    ------------------  ----------------------

OPERATING EXPENSES:
     Research and development                                    2,448,623             2,137,591              26,086,292
     General and administrative                                    769,434               846,290              15,554,435
     Net intangibles write down                                          -                     -                 259,334
                                                          ------------------    ------------------  ----------------------
          Total operating expenses                               3,218,057             2,983,881              41,900,061
                                                          ------------------    ------------------  ----------------------

OTHER INCOME (EXPENSES):
     Interest income                                                71,315                60,216               1,019,715
     Interest expense                                              (25,236)              (33,999)             (1,946,838)
     Merger costs                                                        -                     -                (525,000)
                                                          ------------------    ------------------  ----------------------
          Total other income/(expenses)                             46,079                26,217              (1,452,123)
                                                          ------------------    ------------------  ----------------------

NET LOSS                                                        (1,421,978)           (2,957,664)            (36,744,342)

PREFERRED STOCK DIVIDEND                                                 -                     -              (3,121,525)
                                                          ------------------    ------------------  ----------------------
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS                                             $       (1,421,978)   $      (2,957,664)  $         (39,865,867)
                                                          ==================    ==================  ======================

Basic and diluted net loss per common share              $            (0.20)   $           (0.66)  $              (29.69)
                                                          ==================    ==================  ======================
Weighted average number of common shares
     outstanding used in computing basic and
     diluted net loss per common share                            7,203,601            4,502,090               1,342,745
                                                          ==================    ==================  ======================



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

</TABLE>

                                       4

<PAGE>

<TABLE>
<CAPTION>

                                                      PALATIN TECHNOLOGIES, INC.
                                                   (A Development Stage Enterprise)
                                                 Consolidated Statements of Cash Flows
                                                              (unaudited)
                                                                                                          Inception
                                                                                                      (January 28, 1986)
                                                               Three Months Ended September 30,            Through
                                                                 1999                 1998            September 30, 1999
                                                           -----------------   -------------------  ----------------------
<S>                                                       <C>                 <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                $     (1,421,978)   $       (2,957,664)  $     (36,744,342)
  Adjustments to reconcile net loss to net cash
    used for operating activities:
      Depreciation and amortization                                 59,170                57,757             896,449
      License fee                                                        -                     -             500,000
      Interest expense on note payable                                   -                     -              72,691
      Accrued interest on long-term financing                            -                     -             796,038
      Accrued interest on short-term financing                           -                     -               7,936
      Intangibles and equipment write down                               -                     -             278,318
      Common stock and notes payable issued for                                                -             751,038
expenses                          -
      Settlement with consultant                                         -                     -             (28,731)
      Amortization of deferred compensation                          18,558               254,881          3,444,926
      Changes in certain operating assets and
liabilities:
        Accounts receivable                                     (1,250,000)                    -          (1,250,000)
        Prepaid expenses and other                                   69,459             (104,578)            (78,322)
        Other                                                        79,000               (8,856)           (630,700)
        Accounts payable                                            209,872              452,205           1,325,866
        Accrued expenses and other                                   20,816             (451,999)            825,442
                                                           -----------------   -------------------  ------------------
            Net cash used for operating activities              (2,215,103)           (2,758,254)        (29,833,391)
                                                           -----------------   -------------------  ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of short term investments                             (402,630)                     -           (857,457)
  Purchases of property and equipment                               (4,812)              (15,825)         (2,194,120)
                                                           -----------------   -------------------  ------------------
            Net cash used for investing activities                (407,442)              (15,825)         (3,051,577)
                                                           -----------------   -------------------  ------------------

 CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from notes payable, related party                             -                     -             302,000
  Payments on notes payable, related party                               -                     -            (302,000)
  Proceeds from senior bridge notes payable                              -                     -           1,850,000
  Payments on senior bridge notes payable                                -                     -          (1,850,000)
  Proceeds from notes payable and long term debt                         -                     -           3,951,327
  Payments on notes payable and long term debt                           -              (241,707)         (1,951,327)
  Proceeds from Common stock, stock option
     and warrant issuances, net                                     13,948             2,209,324          17,401,513
  Proceeds from Preferred stock, net                            11,000,000                     -          24,210,326
  Purchase of treasury stock                                             -                     -              (1,667)
                                                           -----------------   -------------------  ------------------
            Net cash provided by financing activities           11,013,948             1,967,617          43,610,172
                                                           -----------------   -------------------  ------------------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                           8,391,403              (806,462)         10,725,204

CASH AND CASH EQUIVALENTS, beginning
   of period                                                     2,333,801             4,511,187                   -
                                                           -----------------   -------------------  ------------------
CASH AND CASH EQUIVALENTS, end of period                  $     10,725,204    $        3,704,725   $      10,725,204
                                                           =================   ===================  ==================

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

</TABLE>
                                       5

<PAGE>



                           PALATIN TECHNOLOGIES, INC.
                        (A Development Stage Enterprise)
             Notes to Consolidated Financial Statements (Unaudited)

(1)      Organization Activities:

Nature of Business -- Palatin Technologies, Inc. ("Palatin" or the "Company") is
a development-stage, pharmaceutical company headquartered in Princeton, New
Jersey, with its research facility in Edison, New Jersey. The Company is
dedicated to developing and commercializing products and technologies for
diagnostic imaging and ethical drug development utilizing peptide, monoclonal
antibody, and radiopharmaceutical technologies. The Company is concentrating on
the following products and technologies:

     (i)  LeuTech(TM), an infection and inflammation imaging product
          ("LeuTech"),

     (ii) PT-14, a peptide hormone product for the treatment of sexual
          dysfunction ("PT-14"), and

     (iii) Metal Ion-induced Distinctive Array of Structures ("MIDAS(TM)")
          metallopeptide technology ("MIDAS technology").

Business Risk and Liquidity - As shown in the accompanying financial statements,
the Company incurred substantial net losses of $1,421,978 for the three months
ended September 30, 1999 and has a deficit accumulated during development stage
of $36,744,342. The Company anticipates incurring additional losses over at
least the next several years, and such losses are expected to increase as the
Company expands its research and development activities relating to various
technologies. To achieve profitability, the Company, alone or with others, must
successfully develop and commercialize its 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
there can be no assurance that the Company will be able to achieve profitability
on a sustained basis, if at all.

On August 16, 1999, the Company entered into a Strategic Collaboration Agreement
with Mallinckrodt, Inc., a large international healthcare products company, to
jointly develop and market LeuTech. Under the terms of the agreement,
Mallinckrodt paid a $500,000 license fee, which the Company recognized as
revenue in the three months ended September 30, 1999, and purchased 700,000
restricted shares of our Series C Convertible Preferred Stock for $13,000,000.
Upon the occurrence of the earlier of 5 years or a change of control in Palatin
(as defined in the agreement), the stock is convertible into 700,000 shares of
Common Stock with certain registration rights and anti-dilution rights . In
addition, Mallinckrodt agreed to make milestone payments totaling $10,000,000
upon FDA approval of the first LeuTech indication and attainment of sales goals
following product launch, reimburse us for 50% of all ongoing LeuTech
development costs and pay us a transfer price on each LeuTech product unit and a
royalty on Mallinckrodt's future net sales of LeuTech. After offsetting our
$2,000,000 subordinated note to Mallinckrodt including interest of $46,849, we
received net proceeds of $11,453,151 on August 17, 1999. During the three months
ended September 30, 1999, the Company recognized $1,250,000 as contract revenue
related to the shared development costs of LeuTech.

                                       6

<PAGE>

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. Management
believes that through one or a combination of such factors the Company will be
able to obtain adequate financing to fund its operations through calendar year
2000, based on current expenditure levels. There can be no assurance that the
Company's efforts will be successful.


(2)  Basis of Presentation:

The accompanying financial statements have been prepared by the Company without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "Commission"). Certain information and footnote disclosures
normally included in the Company's audited annual financial statements have been
condensed or omitted in the Company's interim financial statements. In the
opinion of management, these financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of the Company as of September 30, 1999 and the results
of operations and cash flows for the three month period ended September 30, 1999
and 1998 and for the period from inception (January 28, 1986) to September 30,
1999. The results of operations for the three month period ended September 30,
1999 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 ended June 30, 2000. The accompanying financial statements and
the related notes should be read in conjunction with the Company's audited
financial statements for the fiscal years ended June 30, 1999 and 1998 filed
with the Company's Form 10-KSB for the year ended June 30, 1999.


(3)  Summary of Significant Accounting Policies:

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

Use of Estimates -- The preparation of consolidated financial statements in
conformity with 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. Short-Term Investments -- The Company accounts for its investments in
accordance with Statement of Financial Accounting Standards No. 115 "Accounting
For Certain Investments in Debt and Equity Securities." The Company classifies
such investments as available for sale investments and as such all investments
are recorded at fair value. The investments consist of certificates of deposit.
As of September 30, 1999 the unrealized gain on investments was immaterial.

Fixed Assets -- Fixed assets consist of equipment, office furniture and
leasehold improvements. Fixed assets are stated at cost. Depreciation is
recognized using the straight-line method over the estimated useful lives of 5
years for equipment, 7 years for office furniture and over the term of

                                       7

<PAGE>

the lease for leasehold improvements. 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 complies with Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." 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 its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows, without
interest charges, will be less than the carrying amount of the assets.
Impairment is measured at fair value.

Revenue Recognition -- Grant and contract revenues are recognized as services
are provided. License and royalty revenues are recognized when earned.

Research and Development Costs -- The costs of research and development
activities are expensed as incurred.

Stock Options and Warrants -- Warrants and the majority of common stock options
have been issued at exercise prices greater than, or equal to, their fair market
value at the date granted. Accordingly, no value has been assigned to these
instruments. However, certain stock options were issued under non-plan option
agreements and a non-qualified stock option plan at exercise prices below market
value. The difference between the exercise price and the market value of these
securities has been recorded as deferred compensation and is being expensed over
the vesting period of the option.

Income Taxes -- The Company and its subsidiaries intend to file consolidated
federal and combined state income tax returns. The Company accounts for income
taxes in accordance with Statement of Financial Accounting Standards No. 109
("SFAS 109"), "Accounting for Income Taxes." SFAS 109 requires, among other
things, the use of the liability method in computing deferred income taxes.

The Company provides for deferred income taxes relating to timing differences in
the recognition of income and expense items (primarily relating to depreciation,
amortization and certain leases) for financial and tax reporting purposes. Such
amounts are measured using current tax laws and regulations in accordance with
the provisions of SFAS 109.

In accordance with SFAS 109, the Company has recorded a valuation allowance
against the realization of its deferred tax assets. The valuation allowance is
based on management's estimates and analysis, which includes tax laws which may
limit the Company's ability to utilize its tax loss carryforwards.

Net Loss per Common Share -- The Company applies SFAS No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 requires dual presentation of basic and diluted
earnings per share ("EPS") for complex capital structures on the face of the
statement of operations. Basic EPS is computed by dividing the income (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, such as stock options. For the three months ended
September 30, 1999 and 1998 and for the period from inception (January 28, 1986)
through September 30, 1999, there were no dilutive effects of stock options or
warrants as the Company incurred a net loss in each period. Options and warrants
to purchase 5,421,837 shares of

                                       8

<PAGE>


common stock at prices ranging from $0.20 to $360 per share were outstanding at
September 30, 1999.

Reclassifications -- Certain reclassifications have been made to the prior year
financial statements to conform to the current year presentation.

Fair Value of Financial Instruments -- Statement of Financial Accounting
Standards No. 107 ("SFAS 107"), "Disclosures about Fair Value of Financial
Instruments," requires disclosures of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which it is
practicable to estimate the value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or other
valuation techniques. These techniques are significantly affected by the
assumptions used, including discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. SFAS 107 excludes certain financial
instruments and all non-financial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not represent the
underlying value of the Company.

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments: the carrying amount reported
on the balance sheet approximates the fair value for cash, short-term borrowings
and current maturities of long-term debt; and the fair value for the Company's
fixed rate long-term debt is estimated based on the current rates offered to the
Company for debt of the same remaining maturities. Based on the above, the
amount reported on the balance sheet approximates the fair value.

New Accounting Pronouncements - Effective July 1, 1998, the Company adopted SFAS
No. 130, "Reporting Comprehensive Income"("SFAS 130"). This statement requires
companies to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position. For the years ended June
30, 1999, 1998 and 1997, the Company's comprehensive income consists only of its
net loss.

Effective July 1, 1998 the Company adopted SFAS No. 131, "Disclosure About
Segments of an Enterprise and Related Information" ("SFAS 131"). This statement
establishes additional standards for segment reporting in the financial
statements. The Company operates in one industry segment and, accordingly, the
adoption of SFAS 131 had no effect on the Company.


(4)  Commitments and Contingencies:

Consulting Agreements -- The Company is obligated under three consulting
agreements to make payments totaling $112,800 in fiscal 2000. License Agreements
-- The Company has four license agreements that require minimum yearly payments.
Future minimum payments under the license agreements are: 2000- $200,000, 2001 -
$150,000, 2002 - $200,000, 2003 - $200,000 and 2004 - $200,000.

Legal Proceedings -- The Company is subject to various claims and litigation in
the ordinary course of its business. Management believes that the outcome of
such legal proceedings will not have a material adverse effect on the Company.

                                       9

<PAGE>

(5)  Subsequent Event:

On November 12, 1999, the Company announced that the Board of Directors of both
Palatin and Molecular Biosystems, Inc. ("MBI"), have approved a definitive
agreement to merge the two companies. The combined company will keep the Palatin
name and be headquartered in Princeton, New Jersey. The definitive agreement
specifies that the merger is subject to approval of the stockholders of both
companies. Under the agreement, stockholders of MBI will receive 0.525 shares of
Palatin Common stock for each share of MBI Common stock. The stock swap will be
accounted for using the purchase method of accounting. Upon completion of the
transaction, stockholders of Palatin and stockholders of MBI will each own
approximately 50% of the combined company. The merger agreement provides for a
termination payment in the event that either party terminates the merger.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

General

The following discussion and analysis should be read in conjunction with the
consolidated financial statements and accompanying notes filed as part of this
report. Unless otherwise indicated, all references to our business include
Palatin and our wholly owned inactive subsidiary, RhoMed. We make
forward-looking statements in this report. Sometimes these statements contain
words such as "anticipates," "plans," "intends," "expects" and similar
expressions to identify forward-looking statements. These statements are not
guarantees of our future performance. Our business involves known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from what we say in this
report. We describe a number of these factors in our annual report on Form
10-KSB for the year ended June 30, 1999. Given these uncertainties, you should
not place undue reliance on these forward-looking statements, which speak only
as of the date of this report. We will not revise these forward-looking
statements to reflect events or circumstances after the date of this report or
to reflect the occurrence of unanticipated events.

We expect to incur substantial operating losses over the next several years due
to continuing expenses associated with our research and development programs,
including pre-clinical testing, clinical trials and manufacturing. Operating
losses may fluctuate from quarter to quarter as a result of differences in the
timing of when we incur expenses.

Results of Operations

Three Month Period Ended September 30, 1999 Compared to Three Month Period Ended
September 30, 1998.

Grants and Contracts - We recorded $1,250,000 as contract revenue during the
three month period ended September 30, 1999 related to the shared development
costs of LeuTech pursuant to our strategic collaboration agreement. We had no
revenues from grants and contracts during the three month period ended September
30, 1998.

                                       10

<PAGE>

License Fees and Royalties - We recorded $500,000 in license fees as revenue
during the three month period ended September 30, 1999. We received these
license fees pursuant to our strategic collaboration agreement with
Mallinckrodt, Inc. We had no revenues from license fees or royalties during the
three month period ended September 30, 1998.

Research and development - Research and development expenses increased to
$2,448,623 for the three month period ended September 30, 1999 compared to
$2,137,591 for the three month period ended September 30, 1998. We substantially
increased research and development spending, primarily relating to development
of LeuTech, including increased expenses for manufacturing scale-up and
regulatory consulting. We expect research and development expenses to continue
to increase in future quarters as we expand clinical trials and manufacturing
efforts on LeuTech and expand our efforts to develop our PT-14 technology.

General and administrative - General and administrative expenses decreased to
$769,434 for the three month period ended September 30, 1999 compared to
$846,290 for the three month period ended September 30, 1998. The decrease in
general and administrative expenses were mainly attributable to the decrease in
amortization expense of deferred compensation, totaling $18,558 for the three
month period ended September 30, 1999.

Interest income - Interest income increased to $71,315 for the three month
period ended September 30, 1999 compared to $60,216 for the three month period
ended September 30, 1998. Interest income increased primarily because we
received funds available for investment purposes pursuant to our strategic
collaboration agreement with Mallinckrodt.

Interest expense - Interest expense decreased to $25,236 for the three month
period ended September 30, 1999 compared to $33,999 for the three month period
ended September 30, 1998. Interest expense decreased because we repaid
outstanding principal on long-term debt provided by Phoenixcor, outstanding in
1998. That decrease was partially offset by interest expense on the $2,000,000
note payable to Mallinckrodt which was repaid in connection with the strategic
collaboration agreement.

Net loss - Net loss decreased to $1,421,978 for the three month period ended
September 30, 1999 compared to $2,957,664 for the three month period ended
September 30, 1998. The decrease is due to revenues received under our strategic
collaboration agreement with Mallinckrodt.

Liquidity and Capital Resources

Since inception, we have incurred net operating losses. As of September 30,
1999, we had a deficit accumulated during development stage of $36,744,342. We
have financed our net operating losses through September 30, 1999 by a series of
debt and equity financings. At September 30, 1999, we had cash and investments
of $11,582,661.

For the three months ended September 30, 1999, the net increase in cash was
$8,391,403. Net cash used for operating activities was $2,215,103, net cash used
for investing activities was $407,442 and net cash provided by financing
activities was $11,013,948.

As of August 17, 1999, we entered into a strategic collaboration agreement with
Mallinckrodt, a large international healthcare products company, to jointly
develop, manufacture, market and sell LeuTech. Under the terms of the agreement,
Mallinckrodt:

     o    received an exclusive worldwide license (excluding Europe) for sales,
          marketing and distribution of LeuTech and paid a licensing fee of
          $500,000;

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<PAGE>

     o    agreed to make milestone payments totaling $10,000,000 upon FDA
          approval of the first LeuTech indication and upon the attainment of
          certain sales goals following product launch;

     o    agreed to reimburse Palatin for 50% of all ongoing LeuTech development
          costs, subject to a cap, which can be amended;

     o    agreed to pay to Palatin a transfer price for each LeuTech product
          unit delivered to Mallinckrodt and a quarterly royalty on
          Mallinckrodt's future net sales of LeuTech;

     o    purchased 700,000 restricted shares of Palatin's non-voting Series C
          convertible preferred stock for $13,000,000; and

     o    agreed that the Series C convertible preferred stock purchased by them
          would be convertible after five years, or earlier upon the occurrence
          of a change in control in Palatin (as defined in the agreement), into
          700,000 shares of our common stock with certain registration rights
          and anti-dilution rights.

In March 1997, we entered into a ten-year lease on research and development
facilities in Edison, New Jersey, which commenced August 1, 1997. Minimum future
lease payments escalate from approximately $116,000 per year to $200,000 per
year after the fifth year of the lease term. The lease will expire in fiscal
year 2007.

Effective August 1, 1997, we entered into a five-year lease on administrative
offices in Princeton, New Jersey. Minimum future lease payments are
approximately $97,000 per year.

We have entered into four license agreements, which require minimum yearly
payments. Future minimum fiscal year payments under the license agreements are
as follows: 2000 - $200,000, 2001 - $150,000, 2002 - $200,000, 2003 - $200,000
and 2004 - $200,000.

We are and expect to continue actively searching for certain products and
technologies to license or acquire, now or in the future. 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.

We have incurred 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 expect that our existing
capital resources, subsequent to the execution of the strategic collaboration
agreement with Mallinckrodt, will be adequate to fund our projected operations
through December 31, 2000, based on current expenditure levels.

We anticipate incurring additional losses over at least the next several years,
and we expect our losses to increase as we expand our research and development
activities relating to LeuTech, PT-14 and our MIDAS technology. 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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<PAGE>

Year 2000 Compatibility

The year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. In other words,
date-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in system failures or miscalculations
causing disruptions of operations, including, among others, a temporary
inability to process transactions and information or engage in similar normal
business activities.

We believe that we do not have significant year 2000 issues related to our
computerized information systems. It is possible that certain computer systems
or software products of our suppliers and contractors may not be year 2000
compatible. Since we are not heavily dependent on any particular software
package or vendor in our operations, our assessment of these year 2000 issues
related to our suppliers and contractors is minimal.

We currently believe that costs of addressing these issues will not have a
material adverse impact on our financial position. We plan to devote all
resources required to resolve any significant year 2000 issues in a timely
manner. Through the fiscal year ended June 30, 1999, we have expended under
$10,000 on the year 2000 issue and expect that future costs will be
approximately $10,000. There were no systems projects or undertakings which were
delayed or postponed due to the Company's Year 2000 efforts. To date, we have
not made any contingency plans to address third-party year 2000 risks. We will
formulate contingency plans to the extent necessary in the remainder of 1999.

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<PAGE>

                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

None.


Item 2.    Changes in Securities and Use of Proceeds.

As of August 17, 1999, we sold 700,000 restricted shares of Series C Convertible
Preferred Stock to Mallinckrodt, Inc. at an effective sale price in excess of
$18.57 per share, for gross proceeds of $13,000,000. We sold the preferred stock
to Mallinckrodt, an accredited investor, pursuant to Rule 506 of Regulation D
under the Securities Act of 1933, as amended. Mallinckrodt represented that it
was purchasing the preferred stock for its own account for investment and not
with a view toward resale or distribution to others. The certificate
representing the preferred stock bears a restrictive legend.


Item 3.    Defaults Upon Senior Securities.

None.


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

None.


Item 5.  Other Information.

None.


Item 6.  Exhibits and Reports on Form 8-K.

          (a) Exhibits

              27  Financial Data Schedule

          (b) Reports on Form 8-K

          We filed no reports on Form 8-K during the three months ended
          September 30, 1999.


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                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                              Palatin Technologies, Inc.
                                              (Registrant)


                                               /s/ Edward J. Quilty
                                              ----------------------------
Date: November 15, 1999                       Edward J. Quilty
                                              Chairman of the Board
                                              and Chief Executive Officer


                                               /s/ Stephen T. Wills
                                              ----------------------------
Date: November 15, 1999                       Stephen T. Wills
                                              Vice President and Chief Financial
                                              Officer (Principal Financial and
                                              Accounting Officer)



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