Palatin Technologies Inc (PTN) 2004 Q1 法說會逐字稿

Good morning, and welcome to the Palatin Technologies conference call. At this time, I would like to inform you that this conference is being recorded, and that all participants are on a listen-only mode. At the request of the Company, we will open up the conference for questions and answers after the presentation.

I would now like to turn the conference over to Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Thank you. Good morning, ladies and gentlemen, and welcome to the Palatin conference call. I am Carl Spana, President and CEO of Palatin Technologies, and with me today I have Stephen Wills, Palatin's Chief Financial Officer. Today, we will cover the Palatin financials and an update on our operations, including LeuTech, PT-141 and our MIDAS programs.

To start our session today, Mr. Wills will give a financial update.

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.

Regarding the financial update, Palatin ended the first quarter of fiscal year 2004 on September 30th, 2003, with our balance sheet reflecting total current assets of 15.9 million, including cash, cash equivalents and available-for-sale investments of 13.8 million. Working capital amounted to 9.6 million. Palatin reported revenues for the first quarter of fiscal year 2004 of approximately 1.8 million, with a net loss of approximately 6.7 million or 16 cents per share. In the first quarter of fiscal year 2003, revenues totaled 623,505, and the net loss was approximately 4.1 million, or 22 cents per share. Net cash used in operating activities for the three months ended September 30th, 2003 was 5.3 million. The increase in net loss for the quarter ended September 30th, 2003 was primarily attributable to increased development efforts and expanding clinical trials of PT-141 and LeuTech. Subsequent to September 30, 2003, Palatin has received approximately $5 million in cash. This was comprised of 1.75 million in accounts receivable from Tyco/Mallinckrodt, related to LeuTech milestones achieved, and approximately 3.25 million from the exercise of warrants.

Thank you, Steve. Now, I would like to give you a brief update of Palatin's research and development programs, which include LeuTech, our infection imaging and diagnostic agent, PT-141, our treatment for sexual dysfunction and our MIDAS drug discovery platform.

Starting with LeuTech, as many of you know, LeuTech is our proprietary radiolabeled monoclonal antibody under development for imaging and diagnosing infections. Just as a matter of brief update, we commenced the biologicals license application amendment filing to the FDA in the first half of calendar year 2003. The majority of the data requested by the FDA was submitted in a BLA amendment filed in September of 2003, which started the FDA review process. We anticipate filing any remaining data as a supplement to the BLA by the first half of calendar year -- by the first quarter of calendar year 2004. We are now currently working with the FDA reviewers, and expect to receive a complete response from the FDA regarding our BLA amendment filings in the first half of calendar year 2004.

The lead indication for LeuTech is the imaging and diagnosis of patients with equivocal or hard-to-diagnose appendicitis. In addition, we have multiple Phase II studies ongoing with LeuTech in such indications as osteomyelitis or bone infection, fever of unknown origin, inflammatory bowel disease, post-surgical abscesses and pulmonary imaging. We will continue to update you on these programs as we obtain the clinical data.

If we move now onto PT-141, just as a matter of reminder, PT-141 is Palatin's lead drug candidate under development for the treatment of male and female sexual dysfunction. PT-141 is a melanocortin agonist. It activates regions in the central nervous system known to be involved in regulating sexual response. Use of PT-141 causes a neuronal signal that initiates blood flow into the penis, and results in an erection. This is very similar to the natural process of obtaining an erection. PT-141 is therefore classified as an initiator of erectile activity. The CNS mechanism of PT-141 distinguishes it from currently available treatments for erectile dysfunction, such as the PDE-5 inhibitors like Viagra, which work by affecting the peripheral blood flow in the patient. In addition, the CNS mechanism of action of PT-141 leads to both patient preference and safety differences from current treatments. The intranasal route of administration results in a rapid onset of activity. The activation of the central pathway does not lead to general nasal dilation and hypertension, and the initiated action of PT-141 reduces patient anxiety about their ultimate ability to successfully engage in sexual intercourse.

As you are probably all aware, we just recently announced our results of our Phase IIB at-home clinical trial for PT-141. We are very excited that we met our primary end point in this dose ranging at-home study of PT-141, and that end point was the identification of doses that were safe, effective and well tolerated, and that could be carried forward into future commercialization. The detailed results from this trial were presented on November 1st at the leadership conference on sexual, cardiovascular and metabolic syndrome-related therapeutics in Los Angeles by Dr. Perry Mollinoff, Chairman of Palatin's PT-141 clinical advisory group. In addition, we held a teleconference and Webcast on November 6th to provide a detailed overview of these very positive results. Dr. Mollinoff, Chairman of our clinical advisory group, presented the data. And on the line, we were very happy to have Dr. Harin Padma-Nathan, an investigator in the phase IIB clinical trial and a world-renowned expert in the development of treatments for erectile dysfunction. I think they did a very good job of presenting the data and discussing the results. In addition to being able to go back and listen to that Webcast, you'll find that the data slides for the PT-141 presentation will be posted to the Palatin Website later today.

To summarize PT 1-141, based on our full clinical program, including the most recent results in our Phase IIB study, we are very confident that we have identified doses for future commercial development that are safe, well tolerated and highly efficacious. The safety, efficacy and emerging product profile for PT-141 indicates that PT-141 has distinct advantages over current therapies for men suffering from erectile dysfunction. The robustness of the data gives us great confidence in bringing PT-141 forward along the drug development pathway toward approval, which include ongoing efforts to secure a corporate partner for PT-141. These development plans for PT-141 do include a Phase II efficacy study in female patients with female sexual arousal disorder, scheduled for the first half of calendar year 2004.

Moving on to our MIDAS technology, MIDAS is a proprietary platform technology that allows us to routinely design and synthesize novel pharmaceuticals that mimic the activity of peptides, which we believe offer significant advantages to conventional protein- or peptide-based drugs. MIDAS uses metal ions to fix a three-dimensional shape of the peptide, forming conformationally rigid molecules that remain folded specifically in their active forms. These MIDAS molecules are simple to synthesize, chemically and biologically stable, and have the potential to be orally bioavailable. We have initiated a MIDAS program to discover and develop compounds that interact with the melanocortin family of receptors. This is the same receptor family through which PT-141 is working. The melanocortin receptors regulate a diverse array of functions, such as adrenocortical function, modulation, sexual function and energy maintenance. Based on our current efforts, we have identified several MIDAS molecules that are now in preclinical development as potential treatments for sexual dysfunction, obesity, cachexia or muscle wasting, and inflammation. We expect to file an investigational new drug application, or IND, for at least one of these preclinical compounds, and initiate clinical testing in the first half of calendar year 2004.

Though our main focus is the advancement and development of our own proprietary targets and products using MIDAS, we also intend to seek to enter into strategic collaborations (indiscernible) to provide additional financing and technical resources for our MIDAS development.

Before I open up the call to questions, I'd like to really just hit our key objectives for the upcoming your. They are very focused, and I think they are very attainable, and we are very confident that we will attain them.

For PT-141, we intend to aggressively advance the PT-141 development program in both males and females. The emerging safety, efficacy and patient experience with PT-141 gives us confidence that PT-141 can be a first-line treatment for patience with erectile dysfunction, which is a multibillion dollar market opportunity. We are actively pursuing a corporate partnership for PT-141 to assist with our further development of PT-141. For LeuTech, we are very focused in working with the FDA reviewers to make sure that we get a complete review response in the first half of 2004. Upon obtaining final FDA product approval for LeuTech, we will work in conjunction with Tyco/Mallinckrodt, our corporate partner for LeuTech, to help launch LeuTech, and for the first time, generate operating revenue and cash flow for Palatin. On our MIDAS technology, we intend to further build our product pipeline by applying this technology, and plan to advance at least one of our products into clinical trials in the first half of 2004.

Finally, it is always a main goal of this Company to increase shareholder value by continuing to generate clean operating results through ongoing product development, research, and increasing our shareholder, our investor and market awareness of Palatin in the financial and scientific communities.

With that, I would like to thank you for listening to the call, and we're now going to open it up for questions.

(OPERATOR INSTRUCTIONS). Rand Long (ph), private investor.

Good morning, gentlemen. Regarding LeuTech, I would like to know what are the forecasted yearly sales of LeuTech in units, over time and upon product maturity? Also, I would like to know the anticipated selling price per unit to end users like hospitals. And I'd like you know, as well, the royalty percentage on said selling price. And finally, if you could comment on your second-generation ED drug. Is that going to be better than PT-141 or more specific, a more potent molecule, that sort of thing.

Thank you. Many of the points that you asked about LeuTech have not been publicly disclosed, but what I will tell you is we think that LeuTech will be a substantial imaging agent. We expect that it will grow over time to somewhere in the $75 to $100 million range. We have not released details as to the end-user selling price and the royalty rates that we see for LeuTech. We, however, do receive a substantial part of the net sales of LeuTech. Somewhere in the order of 35 to 40 percent of the net sales will flow back to Palatin from LeuTech net sales.

With regards to your second question, which is the second-generation treatment for erectile dysfunction, that product, as always, is developed as a different chemical entity from our lead molecule, and is designed as a true backup to PT-141, and as such, at least in animals, it does represent a molecule that may have the potential for better efficacy then PT-141.

Robert Evans, Photopro Images (ph).

This question is to Mr. Spana. Why is, seemingly, most of the 141 drug not being, I guess, properly nasally absorbed and going down the throat, especially for your higher doses, the 15 and 20? Can anything be done similar, I guess, to the Nastech delivery -- and I don't own the stock -- where they get most, if not all of the drug, nasally absorbed and have very few minor effects? And on top of that, why are you abandoning the 15 and 20 when you have something like 87 or 80 percent, seemingly, effective results, and probably better efficacy with that dose range? Why are you just abandoning it, just because you have 13 or 12 percent dropping out? What is your rationale there?

Well, again, answering multiple questions, I'll try to handle them in order. One, we do not feel that there any issues with the nasal administration of PT-141. Any of the effects, such as maybe tasting the drug or postnasal drip, are transient in nature and generally resolve after several uses of the product by the patient. So we don't believe that there are any issues there. The absorption across all of our doses were as anticipated. We did not see any lack of absorption of PT-141 in this trial or any other trial that we have done. Moving on to our 15-mg and 20-mg doses, I don't think that we have made an announcement that we are choosing to abandon those doses as potential commercial entities. We are focusing on our 10-mg dose as the primary dose for a variety of reasons, not that least of which is that the efficacy demonstrated in those was extremely good. I would anticipate that you would most likely see 15-mg in in additional clinical trials conducted by Palatin. With regards to the 15 and the 20, there was no statistical difference, with regards to efficacy between the 15-mg or 20-mg dosing groups. So one would, of course, not move forward with the 20-mg dose if it did not represent any additional efficacy benefit to the patient population.

Joy Rochelle (ph), CCL Partners.

I am just wondering, for your burn going forward, do you expect it to be at the better $5 million run rate? And then I was wondering if you could just repeat -- you mentioned, I think, that you received about 5 million in cash after the end of the quarter. I just wanted you to confirm that or not.

Certainly. The burn rate for the quarter that ended September 30, 2003 was slightly higher than we normally run at. There were a large number of PT-141 Phase IIB clinical trial expenses and LeuTech manufacturing expenses that came due in that quarter. We expect that the burn rate will probably trend towards its more historical levels, which are somewhere on the order of 1.2 to 1.5 million per month. I will confirm that we did receive an additional 5 million in cash since the quarter ended. Again, to reiterate, that was 1.75 million received from Tyco/Mallinckrodt, due to milestones met with regards to LeuTech development, and an additional 3.25 million that came in from warrant conversions that were issued in previous financings.

John Borzilleri, GRT Capital.

I just wanted to see if you could give a little bit more detail, now that you have this data out, about the additional Phase II trials you're going to do on PT before going into the Phase III, kind of the nature of them. And then also, the partnering thing, what your new thinking about that is, whether you'd look for worldwide, U.S., and maybe we would see one in Europe before the U.S. -- just stuff like that?

Sure. In commenting, I will give you a general comment on the overall Phase II program for PT-141 from now until the start of pivotal trials. The overall objective of that study -- of the program -- is to put us into a position to design an effective Phase III pivotal trial program that will lead in the approval of the product, which we believe we can do. As part of that, there will be a second Phase IIB trial that will be done in a flexible dosing fashion. This is very similar to what is currently done commercially for treatment for erectile dysfunction, meaning the PDE-5 inhibitor class. And in this study, patients will be started on a starter dose, most likely 10 mg; and then, depending on the patient's preference, they will either be moved up in dose or down in dose, after a brief treatment period. This is, again, very standard clinical trial design for treatments for erectile dysfunction, and very similar to what will be done in commercialization of the product. The results of this study will allow us to effectively plan our pivotal trial program. In addition to the second Phase IIB flexible dosing trial, we will do several drug interaction studies. These are designed to enhance and distinguish PT-141 away from the competition. These will be done, for example, interactions with the PDE-5 inhibitor class of compounds, showing that PT-141 does not have a safety issue with that class of compounds. We do not believe that it will, based on methods of action. In addition, we will look at things such as nitrate interaction. There are a large number of patients, somewhere on the order of 9 to 10 million, that have erectile dysfunction that take nitrates that cannot take PDE-5 inhibitors. We do not believe, based on our work in methods of action of PT-141, that these patients will be contraindicated on PT-141, and we want to demonstrate that.

So the overall program is really designed to set us up for our pivotal trial program, and to continue to distinguish our advantages over the PDE-5 inhibitor class of treatment.

John Packer (ph), Factorial (ph) Asset Management.

Two things, one on LeuTech. When do you expect to have results for a Phase II, and in what indication? Commercial strategy that goes with that, and also sources of cash in the next year, because I believe you have enough cash now to go for a year, and you received 5 million from warrant exercise, for instance. But what is next to come, in the next six months, for instance?

Sure. Let me handle that. As you are aware, we do have ongoing clinical trials with LeuTech. We expect the fever of unknown origin Phase II trial data coming out sometime in the first quarter of '04, most likely in the February timeframe. With regards to osteomyelitis, we did present, earlier this year, our Phase IIB data there, and a publication did come out for that study. And I would expect, as 2004 unrolls, you will see these various trials' results being presented and published. With regards to additional sources of revenue, clearly, we have milestones associated with LeuTech approval. for. In addition, we expect to begin receiving revenue from LeuTech. All of those sources of revenue or cash will add to our balance sheet, and in addition to that, we are working very hard on a PT-141 collaboration, and we would expect that that would bring a substantial cash infusion into the Company, as well.

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

As always, I would like to thank the Palatin investors for participating on our quarterly conference call, and for their continued support of the Company. I think that we have made substantial progress this year in all of our programs. I can tell you I am extremely pleased with the operational results that we have accomplished, and I think that next year, we will even accomplish greater things with Palatin, and return a larger percentage of valuation to our shareholders, and we look very much forward to that. So thank you, and thanks for participating.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing 1-800-428-6051, or 973-709-2089, with an ID number of 313680. This concludes our conference for today. Thank you all for participating, and have a nice day. All parties may now disconnect.