Under the option agreement, the company has received a $1m, non-refundable option fee.
If not exercised, the option that is subject to certain contingencies will expire on 30 April 2014.
The option deal is with a European specialty pharmaceutical company with pharmaceutical manufacturing, research and development, sales and marketing capabilities.
Under the deal, the parties sought and received clear regulatory advice from the European Medicines Agency (EMA) on the Phase III clinical data required for approval of bremelanotide for female sexual dysfunction in the EU.
The extension is to enable the potential optionee to complete its comprehensive market assessment, including qualitative and quantitative surveys, in selected countries.
Palatin president and CEO Carl Spana said the company believes the EU is a significant market for female sexual dysfunction and we are pleased with the relationship with the company’s potential European partner.
"The discussions with EMA have proceeded exceptionally well and we believe their guidance on a Phase III program and approval pathway has been positive and clear.
"We are also in active discussions with multiple pharmaceutical companies on commercialization of bremelanotide in the United States."
The company is mainly focused in developing targeted, receptor-specific peptide therapeutics for the treatment of diseases with significant unmet medical need and commercial potential.