Palatin Technologies Inc (PTN) 2003 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies conference call. At this time, I would like to inform you that all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, ladies and gentlemen, this conference is being recorded. I would now like to turn the conference over to Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies.

Good morning, ladies and gentlemen, and welcome to the Palatin conference call. I'm Carl Spana, President and CEO of Palatin Technologies, and with me I have Stephen G. Wills, Palatin's Chief Financial Officer; and Dr. Perry Molinoff, Palatin's Executive Vice President of Research and Development. Before we get into the main body of the conference call, I would like to just take a moment to go over a little bit of history and somewhat digress from the script, which of course annoys the lawyers and the PR people, but really go over a little bit history.

Three years ago, I became the CEO and President of the Company along with Dr. Prendergast, who became Chairman; Steve Wills became the CFO; and shortly thereafter Dr. Molinoff joined us as our Executive VP of R&D. At that time LeuTech was stalled at the FDA, PT-141 was just a research project, and MIDAS was kind of just hanging in there. I think over the last three years we have made a lot of progress, and I'd like to thank a few groups for helping us along the way. To our investors, I'd like to thank you for your patience. Particularly LeuTech has been a journey, and many who have been with us over the last three years, I'd like to thank you for your patience, your support and your confidence in management. Growing Palatin is a process and along the way we will continue to need your support and confidence. I hope that we've earned that and that we will continue to do so.

With regards to LeuTech, we have had two key partners on LeuTech that I'd like to thank. DSM, which is our contract manufacturer for LeuTech. I think they have done a good job in helping us get it to where it is. And Tyco/Mallinckrodt, who is our corporate partner, who has been extremely supportive over the last three years in helping, both financially as well as with expertise to get LeuTech to a point where it is today. And finally and most importantly, I would like to thank Palatin employees. I think I have never worked with a more dedicated and committed group of people. They come in every day, they do their job with extreme professionalism, and we would not be where we are today without them. I think you guys as investors should be amazingly confident in the job that they have done.

With that, I am going to start the official conference call. Steve Wills will provide a financial update. I will take you through LeuTech and a little bit of PT-141. Dr. Molinoff will finish up with more detail on PT-41 and MIDAS. There will be a summary and then the Q&A will start. With that, I'm going to turn the call over to Steve Wills.

Thank you, Carl, and good morning. Before we begin our remarks, I would like to remind you that statements made by Palatin during this call that are not historical facts may be forward-looking statements. These statements are based on assumptions that may not prove to be accurate and actual results could differ materially from those anticipated due to a variety of risks and uncertainties discussed in the Company's most recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements and Palatin's prospects.

Going into the financial update, Palatin ended fiscal year June 30, 2003, with our balance sheet reflecting total assets of 18.8 million. This included cash, cash equivalents and available for sale investments of 18.4 million. Palatin reported revenues for the fourth quarter of fiscal year 2003 of approximately $83,000, with a net loss of approximately 6.5 million, or 15 cents per share. The net cash used in operating activities for the year ended June 30, 2003, totaled 19.9 million. The increase in net loss for the fiscal year ended June 30, 2003 over 2002 was primarily attributable to increased development efforts and expanding clinical trials of PT-141 and LeuTech.

The Company has improved its cash position significantly since the end of fiscal year 2002 with a $9.3 million increase in cash, cash equivalents and available for sale investments of approximately 9.1 million as of 6/30/2002, to 18.4 million as of June 30, 2003. This improved cash position is mainly attributable to gross proceeds of approximately 32.4 million yielded through the private placement of securities to selected institutional and accredited investors completed during fiscal year 2003. The net proceeds of approximately 30.5 million are being used primarily for the development of PT-141, LeuTech, general corporate purposes and new targets based on our proprietary technologies.

Thank you, Steve. Now Perry and I will go over the LeuTech, PT (ph) summary. I'll start with two parts of LeuTech, LeuTech regulatory update and then LeuTech clinical trial update. Just as a reminder, LeuTech is our proprietary radiolabeled-monoclonal antibody under development for imaging and diagnosing infections. The lead indication for LeuTech will be the imaging and diagnosis of patients with equivocal or hard-to-diagnose appendicitis.

We'd like to take a second and go over our regulatory strategy with regards to the LeuTech manufacturing amendment. We are submitting an amendment, have begun submitting an amendment in response to the FDA's complete review letter received in September of 2000, which was in response to our initial BLA application. As per our agreement with the FDA, we have a split or multipart submission of the amendment. The first part of the amendment was submitted in the first half of calendar year 2003. In September of 2003, we made a major amendment submission to the FDA containing a majority of the data requested by the FDA in their complete review response. This submission has started the six-month FDA review process of the amendment. There will be an additional bit of data submitted as a supplement later this year. That data will not impact the FDA's review of LeuTech amendment. So just to reiterate, the bulk of the information has been submitted in September of 2003, and the FDA review process has started. We expect to receive a complete response from the FDA regarding the amendment filings in the first half of calendar year 2004.

Moving on to the LeuTech clinical trials. We have a variety of Phase II ongoing trials with LeuTech. The objective of these trials is to expand the indications of use for LeuTech. These trials include Phase II trials in fever of unknown origin, inflammatory bowel disease, postsurgical abscess or postsurgical infection and pulmonary imaging. In addition, we have Phase II work going on in osteomyelitis, and I'd like to just give a little brief update on our work in osteomyelitis or bone infection.

On April 24 of 2003, we announced the positive results of a Phase II to study to evaluate the efficacy of LeuTech in diabetic patients with suspected pedio-osteomyelitis, or in simple terms, infection of the bones of the foot. The results were published in the January-February 2003 issue of the Journal of Foot and Ankle Surgery. It is our belief that the study supports our position that LeuTech can effectively meet the need for improved diagnosis of both acute and chronic infections, including bone infection or osteomyelitis. In this study, LeuTech provided equivalent efficacy to the current standard of care with additional benefits of being faster and posing less risk to the patient. In addition, we are working aggressively with Tyco/MallincKrodt to prepare for the launch of LeuTech next year.

Moving on to PT-141. Again, just as a reminder, PT-141 is Palatin's leading drug candidate. It's under development for treatment of both male and female sexual dysfunction. With regards to method of (ph) action, PT-141 is melanocortinous (ph). It's an analogue of a natural neuropeptide hormone, alpha-MSH. It's known to stimulate receptors in the brain that play a role in regulating several behaviors, in particular, sexual function. We know, based on our Phase I and Phase II clinical studies that a profile for PT-141 is emerging that may indicate that PT-141 has better efficacy and safety, particularly cardiovascular safety, than current available oral treatments.

Moving on to, I think, the bigger announcement, as was announced in our press release, we are pleased that we have completed our Phase IIB at-home PT-141 clinical trial. It was completed on time and on budget in September of 2003. I'm happy to announce that the detailed results of this trial will be presented by Palatin Executive Vice President of Research and Development Dr. Perry Molinoff on November 1st at the Leadership Conference on Sexual Cardiovascular Metabolic Syndrome Related Therapeutics, which will be held in Los Angeles. This conference is sponsored by the Keck Medical School, which is part of the University of Southern California. This will be an opportunity to release the data in front of an audience that will be composed of the thought leaders on the development of treatments for erectile dysfunction. With that, I'm going to turn the presentation (technical difficulty) Molinoff, and he is going to take you through some of the Phase IIA results for PT-141.

Thank you, Carl. In May of 2003, positive results of our PT-141 Phase IIA studies were presented to the Sexual Medicine Society of North America meeting at the (technical difficulty) by Hunter Wessell (ph), Associate Professor of Urology at the University of Washington in Seattle. And he presented clinical data on the safety and efficacy of PT-141. The data showed that PT-141 produced a statistically significant improvement in erectile function across a wide range of patients with varying degrees of erectile dysfunction. There were no clinically significant adverse events. MED, or male erectile dysfunction, is defined as the consistent inability to attain and maintain an erection sufficient for sexual intercourse. The condition is correlated with increasing age, with cardiovascular disease, including hypertension, with diabetes, hyperlipidemia, and smoking. In addition, certain prescription drugs and psychological issues can contribute to the development of male erectile dysfunction.

Phase IIA studies were carried out in men with mild, moderate and severe MED, including patients with hypertension, hyperlipidemia, diabetes and depression. The Phase IIA consisted of one study of 24 patients responsive to Viagara and a second study of 24 patients who have an inadequate response to Viagra. That is to say, these individuals were only able to success (technical difficulty) sexual intercourse 25 percent of the time, taking a maximum approved dose of Viagra of 100 milligrams. Multiple analyses were carried out on these data from these Phase IIA trials in a total of 48 men. These analyses led us to conclude that PT-141 treatment improves erectile function in a statistically significant way, in a wide range of patients with varying degrees of erectile dysfunction. Greater than 80 percent of the patients with an inadequate response to Viagra achieved an erection sufficient for intercourse treated with PT-141.

Patients in these studies tolerated treatment over a broad range of doses. There were no significant safety issues observed, and in particular, we did not observe decreases in blood pressure, which has been a problem with other treatments. Results of the study indicate that the rapid appearance of internasal (indiscernible) PT-141 in the blood, with maximum levels reached within approximately 30 minutes. PT-141 was well tolerated, and the common adverse events were generally mild to moderate in intensity and included flushing and nausea. There were no clinically significant adverse events noted.

As Carl stated, our first Phase IIB study has been completed. We enrolled 271 subjects with an at-home environment for 30 days with either placebo or with one of four doses of PT-141. The results are being analyzed and will be presented on November 1. I am not able to discuss the results of this trial today, but I am discussing them on November 1.

As far as MIDAS is concerned, let me tell you that MIDAS is a proprietary platform technology that allows us to routinely design and synthesize novel pharmaceuticals that mimic the activity of peptides. We believe this technology offers significant advantage compared to conventional protein- or peptide-based drug designs. MIDAS uses metal ions to fix the three-dimensional shape of peptides, forming conformationally rigid molecules that remain (indiscernible) specifically in their active forms. MIDAS molecules are easy to synthesize, they are chemically and proteolytically stable, and they have the potential to be (indiscernible) bioavailable. Unlike most other drug discovery approaches, we believe that MIDAS is unique in that it can be used to generate either or agonist or antagonists. Antagonists block a particular response; agonists induce the response. In addition, MIDAS molecules are information-rich and provide data on structure activity relations that can be used to design traditional small molecule drugs.

We have initiated a MIDAS discovery program to identify compounds that interact with the melanocortin family of receptors. These receptors regulate a diverse array of functions, including skin pigmentation, adreno-cortical function, immune modulation, sexual arousal, and energy metabolism. Based on this effort, we have identified several molecules that are now in preclinical development as potential treatments for sexual dysfunction, obesity, cachexia (ph) and inflammation. We expect to file an investigational new drug application, an IND, for at least one of these preclinical compounds and to initiate clinical testing of this compound in the first half of calendar year 2004. Though our main focus is on the advancement and development of our own proprietary targets and products, we also intend to seek to enter into strategic alliances or collaborative arrangements to provide additional financial and technical resources for MIDAS development.

Before we start the Q&A, I would like to just give our objectives for the upcoming year, a little brief summary. I think we had a great year at Palatin in moving LeuTech and PT-141 forward. As we go over the objectives for the coming year, as always, the senior management at Palatin is focused on enhancing shareholder value. Specifically, with regards to LeuTech, we want to finalize any remaining data to the FDA, which will occur later this year. We expect to receive our complete response to the FDA regarding the amendment in the first half of 2004, and upon obtaining FDA approval, we are actively going to support Tyco-MallincKrodt, our marketing partner's, launch of LeuTech and look forward to the revenue generated by LeuTech to help underwrite some of our further development.

With PT-141, we will have the announcement of the Phase IIB clinical trial results by Dr. Molinoff in early November in Los Angeles. Once the data is presented by Dr. Molinoff, we will outline our future PT-141 development programs and our corporate partnering strategy with PT-141. With MIDAS, we are going to continue to support MIDAS, move forward our preclinical candidates. It would be a key part of our future development of the Company, and we look forward to the first compound going into clinical trials early next year.

As always, and before we start opening up to questions, I'd like to thank you for your participation and the support that we've had of our investors, and at the moment, we will open it up to Q&A.

(OPERATOR INSTRUCTIONS) John Edwards (ph), private investor.

I guess my question is directed to Carl Spana. Regarding LeuTech, with the review process apparently underway and later filings not having much of a bearing on that, as you indicated, there is a slight chance you may hear something from the FDA before the year is out. Is that correct, or is there slight chance of that happening?

The FDA has up to 6 months to review the submission. I can't speak for what the FDA will or won't do. I can only tell you that they have up to 6 months to review the application or the amendment and we expect to hear back in that time frame.

Okay, fair enough.

John Podson (ph), Sectoral Asset Management.

Congratulations. I had several questions. Maybe first one on LeuTech. Could you please tell me what else needs to be filed specifically with the FDA, even that they are in the six-month period to review the file?

We in general haven't discussed those things, but in general, they are really just ongoing data collection of the work that has been completed.

Okay. And regarding the PT-141 program, two questions for that. When will investigator meetings take place? And the second thing is what -- are you going for a partner or are you going to go for Phase III on your own?

Can you ask the first question again? I didn't quite hear it.

In terms of investigator meetings for the PT-141, when do you think this will happen?

I'm not really going to comment on that other than to say that the results will be presented by Dr. Molinoff in early November, and at that time, we can go through all of the detail around PT-141, both our development program and corporate strategy.

Okay. And to the second question, in terms of -- okay, it goes with it, but -- then it leads me to a last question about U.S. cash for one year, what is going to happen until then? What will be the next sources of cash to keep the company going?

I think one of the things we will have is LeuTech coming into the marketplace; that will begin to generate revenue. We have sufficient cash for the next year. I think that we are in a good position with regards to the cash that we have and the revenue that will come from LeuTech, so that we can make decisions as to what we need -- the next steps that we need to do.

When do you think the revenues will be coming from LeuTech?

We expect the second, third quarter of 2004.

Okay. Thanks for now.

Tony Pallick (ph) with Matson (ph) Group.

Could you give us a little better definition of what complete response to the BLA amendment will entail? Will they say, yes, you can start selling it right away, or what is that complete response, what are the alternatives?

I'll give you a very technical definition. There are three responses that can come. The FDA can approve -- accept the amendment and approve the original application along with the amendment. They can send us a Type II letter that would state that they would like additional information. Or they can send us a Type II letter pretty much saying that they will not approve the product. Those are the three outcomes that can occur.

Okay. Should we assume that the number 2 that you said will probably not happen since we have given them a lot of stuff in the past and we are now, or is that not a good assumption?

I will answer it in a more global sense. We were given in 2000 a very discrete list of questions that needed to be answered in order to satisfy the FDA's issues with the manufacturing of LeuTech. I believe that we have answered those questions sufficiently. I won't speculate as to what the FDA will do. I think we have done a good job. I am optimistic; but it is the FDA, I can't specifically answer for a third what they would or wouldn't do. I can say we have done a good job in answering the questions.

Skip Klein (ph) with Kaufman Fund.

On the BLA amendment, does the FDA actually have to (technical difficulty) or can they kick it back to you?

No, pretty much they will accept the amendment -- they accept the amendment as submitted. If they don't want it at the end of the 6 months, they will just say, sorry.

So there is no risk in terms of them checking (indiscernible) and then saying, no, we don't accept this because the information that you are going to provide later, we need now before we begin to evaluate.

Two things, Skip. One, the refusal to file is on an initial application. With regards to an amendment, keep in mind that we have had ongoing discussions with the agency concerning this amendment -- what would be submitted, when it would be submitted. I think we have met the terms of our agreement with the agency and the regulations. So they will take the amendment, or have taken the amendment in, and will begin the review process.

Okay, great. Secondarily, why can't you discuss any of the Phase IIB data now? Is there a publication pending?

I will just reiterate the data is under analysis. The study was just unblinded (ph) in September. This data is under analysis and we have decided that the data would be released on November 1, when Dr. Molinoff talks and presented in front of an audience of what I believe will be thought leaders in the field. I think it is a good format for release of the data.

(OPERATOR INSTRUCTIONS) If there are no further questions, I will now turn the conference back to Dr. Spana for closing comments.

I'd like to thank everyone for participating in both the fourth quarter and, I guess, yearly conference call. As always, it is a pleasure to be the CEO of this Company. Just to remind everyone, the LeuTech review process has started, and the PT-141 Phase IIB has been completed and the data will be presented by Dr. Molinoff, our Executive VP of Research and Development, in L.A. on November 1. Thank you and look forward to talking to you next quarter.

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may now disconnect.