Palatin Technologies Inc (PTN) 2008 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies second-quarter fiscal year 2008 conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference call is being recorded.

Before we begin our remarks, I would like to remind you that the statements made by Palatin are not historical facts may be forward-looking statements. These statements are based on assumptions that may or 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.

Now I would like to introduce your host for today's call, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies.

Good morning, ladies and gentlemen, and welcome to the Palatin conference call. I am Carl Spana, President and CEO of Palatin Technologies. With me today on the call is Steve Wills, Palatin's Executive Vice President of Operations and Chief Financial Officer, and Dr. Trevor Hallam, Palatin's Executive Vice President of Research and Development.

To start today's conference call, Steve Wills will give a financial update.

Thank you and good morning. For the second quarter ended December 31, 2007, Palatin reported a net loss of $3.8 million or $0.04 per basic and diluted share compared to a net loss of $6.5 million or $0.09 per basic and diluted share for the same period in 2006.

Total revenues for the quarter ended December 31, 2007 were $0.7 million compared to $3.7 million for the same period in 2006. As of December 31, 2007, Palatin had cash, cash equivalents and investments totaling $22.8 million.

The decrease in net loss for the quarter ended December 31, 2007 compared to the quarter ended December 31, 2006 was primarily attributable to the reduction in development expenses on bremelanotide, our drug under development for the treatment of male and female sexual dysfunction.

Regarding revenue for the quarter ended December 31, 2007, we recognized $0.7 million of contract revenue related to our collaboration agreement with AstraZeneca. In the comparable quarter of 2006, we recognized $3.7 million of contract revenue primarily related to the reimbursement by King Pharmaceuticals of bremelanotide development costs pursuant to our collaboration agreement, which was terminated in the quarter ended September 30, 2007.

Regarding costs and expenses, total operating expenses for the quarter ended December 31, 2007 were $6.1 million compared to $11.2 million for the comparable quarter of 2006. This reflected lower development cost of bremelanotide, which were offset slightly by an increase in general and administrative expenses due mainly to an $800,000 litigation settlement agreement and release resolving all outstanding disputes with Competitive Technologies.

Again, our cash position as of December 31, 2007 is $22.8 million. As of June 30, 2007, it was $33.8 million.

Last month we announced that we entered into an agreement to settle all outstanding litigation and disputes with Competitive Technologies related to a license agreement between the two companies. Under the terms of the settlement, Palatin retains all rights to bremelanotide with no obligations for any future payments to Competitive Technologies.

Both the pending arbitration initiated by Competitive Technologies and the action in Connecticut Superior Court were dismissed with prejudice. The existing license agreement between Palatin and Competitive Technologies has been terminated with Competitive Technologies receiving the rights to a peptide developed at the University of Arizona referred to as MT-2 or PT-14, which Palatin ceased developing in the year 2000.

As part of the settlement, we remitted a onetime payment to Competitive Technologies of $800,000 last month. This $800,000 was accrued and reflected in the 12/31/07 quarter financial statements. We believe this settlement is a favorable outcome for Palatin and are pleased that Palatin's full rights to bremelanotide are no longer in question.

Thank you, Steve. Now Dr. Hallam and I will give you a brief update of Palatin's discovery and development programs. These will include bremelanotide, our treatment for sexual dysfunction; NeutroSpec, an agent for imaging detecting sites of infection, and additional details on our drug discovery and development pipelines. These will include PL-3994, which is under development for both congestive heart failure and a new indication that we will tell you about this quarter, which is acute treatment for hypertension.

In addition, we will talk about our MCR-4 program for obesity that is partnered with AstraZeneca. I will start today and give you a very brief update on bremelanotide.

Over the past few months, we have had several meetings and discussions with the FDA regarding our proposed plans for the further development of bremelanotide as a treatment for both male and female sexual dysfunction. As a result of these discussions, we have a clear development pathway forward with bremelanotide in both of these indications, specifically as a second-line therapy in nonresponders to currently approve PD5 inhibitors such as Viagra, Cialis and Levitra for erectile dysfunction faction and as a first-line therapy for the treatment of patients suffering from female sexual dysfunction.

Concerning the safety of bremelanotide, the FDA was concerned with the 1% to 2% of patients who are at risk for developing clinically significant blood pressure increases after exposures to bremelanotide. We have agreed with the agency that the use of an in clinic test dose to screen for these at risk patients should provide adequate safety for the use of bremelanotide in patients with erectile dysfunction and female sexual dysfunction.

As a reminder, an in clinic test dose of bremelanotide has been used in all of our Phase IIb clinical studies.

As part of the ongoing development of bremelanotide, we will be conducting a rigorous program to validate the in clinic test dose of bremelanotide as a screen for identifying patients who are at risk for developing clinically significant blood pressure increases. We have agreed with the agency that the first step of this program will be a single center, placebo-controlled, randomized double-blind study to evaluate the blood pressure effects and pharmacokinetics in healthy male and female volunteers receiving multiple doses of bremelanotide. This study will enroll 40 to 50 adult health female and postmenopausal female volunteers. The duration of the study will be approximately four weeks, including the screening period and will start in the second quarter of 2008.

The successful outcome of this study will be the demonstration that there were no patients with clinically significant blood pressure increases on the second or third bremelanotide administration who failed to show an indicative blood pressure increase on the first or in clinic test dose demonstration.

It is anticipated that the definitive validation of the in clinic test dose will be part of the bremelanotide Phase III program. While we are conducting this study, we will be preparing for additional clinical trials for the further development of bremelanotide as a treatment for both male erectile dysfunction and female sexual dysfunction.

Upon the completion of this trial, we will review and assess the results and then decide the best way to proceed with the future development of bremelanotide.

Now a brief word on NeutroSpec. We continue to believe that NeutroSpec is a product that can benefit the treatment of patients. Our current plan is to meet with the FDA, along with our collaboration partner, Mallinckrodt, in the first half of calendar year 2008 to discuss potential development plans going forward. At this time we cannot issue a prospective timetable or definitive plans regarding the future development of NeutroSpec until after our meeting with the FDA.

Now I'm going to turn over the conference call to Dr. Trevor Hallam, and he will fill you in on PL-3994 and our additional research programs. Dr. Hallam?

Good morning. At this time we have matured and active internal research and development programs that have provided and continue to provide candidate drugs for the treatment of sexual dysfunction, obesity, congestive heart failure and hypertension. Our congestive heart failure program as identified as a series of novel natriuretic peptide receptor agonists that appear to have desirable renal and cardiovascular properties, potentially representing attractive candidates for the treatment of acutely decompensated congestive heart failure.

The objectives of the program are to yield agents that can be developed to differentiate the currently approved treatments for acutely decompensated heart failure, and secondly, to develop agents that can be successfully develop and find utility in managing chronic heart failure and thus prevent return of patients to the emergency room having acutely decompensated.

In recent months we have discovered a novel long-acting natriuretic peptide receptor A agonist, PL-3994. Preclinical studies have demonstrated that PL-3994 is highly potent and achieves its long duration of action through diminished affinity for the natriuretic peptide clearance receptor NPRC and resistance to the body's neutral endopeptidase. In animal models it was able to induce diuresis with a limited decrease in blood pressure and achieves these effects with the stimulation of the production of Cyclic GMP. It is well absorbed by the subcutaneous routes of administration.

This month we completed dosing of PL-3994 in a Phase I clinical trial. The Phase I trial was a randomized double-blind placebo-controlled single event sending dose study in healthy volunteers who received the medication subcutaneously. The evaluations included safety, tolerability, pharmacokinetics and several pharmacodynamic endpoints, including Cyclic GMP levels. Dosing concluded with the successful achievement of the primary endpoint of the study, a reduction in systemic blood pressure by 15%. No volunteer experienced a series or severe adverse event. Data analysis is ongoing and will be submitted for presentation when the analysis is complete.

We are excited to see that PL-3994 has biological activity in humans and was safe and well-tolerated. We look forward to advancing PL-3994 into Phase II trials of acutely decompensated congestive heart failure patients later this year. Potential future plans for heart failure include a further development of PL-3994 for long-term administration in patients with chronic congestive heart failure.

Now in addition to heart failure, we are also developing PL-3994 for the treatment of acute systemic hypertension in the emergency room setting. An acute elevation of blood pressure or acute hypertension is a life-threatening condition that can cause permanent damage to the brain, heart, kidneys and blood vessels that occurs in nearly 50% of patients presenting to the hospital with acute heart failure and is a common occurrence for patients with renal dysfunction. It is critical to rapidly manage and maintain optimal blood pressure to minimize risk of death and damage to vital organs.

Of the over 35 million people in the United States with hypertension, at least 1 million people each year will have one or more acute episodes of high blood pressure requiring treatment in an acute care setting. Many of these people are on conventional antihypertensive medications, but for any of a variety of reasons, the prescribed medication levels are not sufficient for an acute episode.

Acute systemic hypertension has a significant risk of cardiovascular injury, including heart attack, stroke and related injuries. Existing medications for treatment of acute systemic hypertension such as sodium nitro peroxide, labetalol and nifedipine require IV administration and frequently result in excessive decreases in blood pressure, requiring further pharmaceutical intervention to stabilize blood pressure at an acceptable level.

PL-3994, a natriuretic peptide agonist, represents a novel approach in the management of patients with acute hypertension with an easy to use subcutaneous routes of administration. We anticipate commencing a Phase II trial for this indication this calendar year.

Now switching to the melanocortin programs, the melanocortin 4 receptor drug discovery program at Palatin began with our core technologies in peptide drug discovery and coupled them with our expertise in melanocortin receptor medicinal chemistry for small molecules. The result was compounds active at the melanocortin 4 receptor with pharmacological profiles with development potential as therapies for sexual dysfunction or for obesity and related diseases.

Regarding our obesity program, Palatin and AstraZeneca have an exclusive global licensing and research collaboration agreement to discover, develop and commercialize small molecule compounds that target melanocortin receptors for the treatment of obesity, diabetes and related metabolic syndrome. The collaboration is based on Palatin's melanocortin receptor obesity program and includes access to compound libraries, core technologies and expertise in melanocortin receptor drug discovery and development.

Although the melanocortin 4 receptor is clearly a very promising obesity drug target, there has not been an easy target for pharmaceutical drug discovery and development. Activation of melanocortin 4 receptors is associated with a number of physiological effects, including decreased food intake and penile erectogenesis in man.

Furthermore, melanocortin 4 receptors are regulated by both an endogenous agonist and antagonist and the development of compounds for the appropriate pharmacology is complex.

We believe that we have access to the right technology to identify compounds with the right pharmacological profile for the development of therapies for obesity, diabetes and metabolic syndrome. Our collaboration with AstraZeneca will enable our melanocortin 4 receptor obesity program access to the extensive resources required to develop agents in this field.

One of the near-term goals of our collaboration with AstraZeneca will be to finalize selection of a lead drug candidate for clinical evaluation. We remain on target to identify clinical candidates in 2008.

Now back to you, Carl.

Thank you, Trevor. The next 12 months at Palatin should be very exciting as we are positioned to significantly advance our internal programs, primarily the further clinical development of bremelanotide, plus PL-3994 for congestive heart failure and acute hypertension and also moving into the clinical phase of our obesity program.

Before we open the call to questions, I would like to summarize our near-term focus. Over the near-term, our focus will be concentrated in the following areas.

Regarding bremelanotide, now that we have concluded discussions with the FDA and have cleared development pathways forward with erectile dysfunction, female sexual dysfunction, we will begin the validation of the in clinic test dose by conducting a four-week Phase I/II study. Concurrent with this study, we will be preparing for additional erectile dysfunction and female sexual dysfunction efficacy studies.

Upon the completion of this trial, we will review and assess the result and then decide on the best development pathways to follow for the future development of bremelanotide.

Regarding PL-3994, we are very excited to be in a position to commence Phase II clinical trials in two major indications, congestive heart failure and acute hypertension, both of which should start this calendar year.

And finally, we will continue to concentrate on our pipeline of development stage and preclinical therapeutics, including our partner compounds for obesity and diabetes which we are developing with AstraZeneca.

Before I open the call to questions, I would like to let you know that we are, indeed, planning to have an Investor Analyst Day sometime in the second quarter to go over and discuss in more detail the development and research programs at Palatin as well as our strategy. We look forward to having this meeting with you and to inform you of the date as it becomes finalized.

So now I'm going to open the call to questions and turn it back over to the operator.

(OPERATOR INSTRUCTIONS). Rahul Jasuja, MDB Capital Group.

I've got a couple of questions. Let me just ask them all and then take the answers off-line, and then I will come back for a question for Trevor.

The first couple of questions on bremelanotide. So given the interactions with the FDA and your statement that the FDA would like this to be a therapy for nonresponders and so on, explain to me, Carl, that most of us really had on a consensus basis looked at bremelanotide in terms of market acceptance as an alternative to PDE-5 inhibitors.

So from the point of view of your market acceptance, it was modeled in that sense. Clinically the strategy was looking back respectively not the best one, but in these clinical trials, you really had folks who did not want to use PDE-5 inhibitors, may not be classically nonresponders. But if I'm right, more than 90% of these guys tried PDE-5 inhibitors and want to try something else, given the fact that this is a different kind of an experience. It is a sexual experience as opposed to an organic disease that involves cancer or something. How would you then design these trials and then what do you expect different going forward?

Sure. Well, you're absolutely right. I think with the number of your statements regarding positioning of bremelanotide. Clearly the need as for (inaudible) erectile dysfunction is really for men that are having a more difficult time with frontline therapy, which are the PDE-5 inhibitors, which we know as Viagra, Cialis and Levitra. And there are quite a few of them.

In fact, in our last series of Phase II studies, about 90% of the men had tried PDE-5 inhibitors and by self-report had had difficulty getting a satisfactory response with them. So we have been looking in this type of population.

The difference now is after discussions with the agency is that they clearly see that the need and the indication is for second-line, not first-line. And we did present them along with our partner, King Pharmaceuticals, a frontline development program. So now we will be going back and looking at it as a second-line treatment.

The way we would do it is, quite frankly, the protocols are fairly straightforward. You challenge the men. You look at men that are having difficulty with PDE-5s. They are challenged with taking a PDE-5 inhibitor as a running period showing us that they don't respond well. And historically we know from the literature that men that are rechallenged or reeducated, about 10 to 15% of them will become responders. So 85% of the patients that enter screening should be candidates for our studies.

We established their baseline on the PDE-5 and then randomized them into an efficacy study where we evaluate bremelanotide versus placebo either as a monotherapy in this patient population or at our choice, if we would like to, we can do it as an add-on. So, in other words, they would stay on the -- one group would stay on the PDE-5 inhibitor treatment with the placebo spray, and a second group would be randomized to the PDE-5 inhibitor plus bremelanotide active.

So they are very straightforward, fairly simple to conduct. So we don't see really any issues in being able to move the product forward as a second-line therapy. And, in fact, if we can go back over our database and look at what is coming out in the literature, we do believe that there is a very good probability that we should be successful from an efficacy standpoint in this patient population.

So net net the way I take it is that the patient pool per se will not be drastically different from the one that you had in the past trials?

I mean it will be different in the sense that they will instead of we relied in the past on patient self-assessment, and now we will do a formal reeducation period as opposed to patient self-assessment. It probably will not be hugely different in the sense that as I said about 10% to 15% of these patients that by self report say they are not getting response on their PDE-5 inhibitor therapy. About 10% to 15% of them it is because they are not taking it appropriately or they are taking it on a full stomach, and after they go through reeducation, they become responders. So about 85% of the patients that we would come into a screening program should make it through the screen as true nonresponders.

We will be establishing a more formal definition and a more formal population. Whereas before it was a little bit looser in the earlier studies.

Okay and then one question on bremelanotide and then a final one for Trevor on 994. The question on bremelanotide is -- and maybe I missed this -- could you elaborate at this time on the screening of these patients for the Phase I/II trial?

Sure. What we agreed on is that because the incidence of outliers is very low with bremelanotide, it requires a fairly large number of patients to be able to see it. So what we're doing is entering into a very short-term study where we just want to show that on multiple doses of bremelanotide that patients that have an increase in blood pressure actually have maintained as they take multiple doses of the drug.

So what we want to show is that there is not variability in the blood pressure response to bremelanotide as a function of multiple doses. And we have taken a look at this in our previous database and that does look to be the case that it is fairly stable, but we want to now put it on a more rigorous formal validation program. So this is the first step of doing that.

So again, we're going again from retrospective analysis showing plausibility to formal prospective studies, which can be part of the regulatory package to support the in clinic screen as a diagnosis for picking up these patients.

Okay, thanks. And then my final question is on 3994. So the difference between -- and I am trying to find an analogy with what the street is sort of familiar with and Natrecor. Obviously that had some baggage with it, but this is a different product. Now that was a B type natriuretic peptide, and this is an atrial natriuretic peptide. Is that the difference that allows it for even a broader therapeutic landscape given the fact that you're going to be using it for hypertension? What are the other salient features that makes this different?

Well, I would just be a little bit careful with the classification there. You are right. Natrecor is B type natriuretic peptide. The PL-3994 is a completely novel molecule. It has some structural similarities, but it is a completely novel molecule. It does -- like Natrecor, it binds the NPRA receptor. So don't get the AMP and BMP mixed up with the receptor current translations. They are both A type receptor agonists. The cell activities are going to be different because they are different molecules for the other receptors.

And I guess the other key feature, which differentiates it, is that this is a much longer acting molecule. So where Natrecor was developed as a really short half-life variety infusion sequence, switch on, switch off and trying finally to the blood pressure, we have taken a different approach, and we have gone with a molecule which is much more predictable in terms of exposure for a given administration. That way we can give it subcutaneously. We aim to avoid the very high Cmax that you would get, which you switch on with an infusion with Natrecor. So you overshoot and are in danger of really giving it rather too severe hypertensive effect.

What we are trying to do with this molecule is to be able to optimize its other pharmacological activities in terms of diuresis and natriuresis and so on without overshooting and getting into a rather larger hypertensive effect. So that is the aim. And, as we have said, we have just completed dosing in this Phase I study, and further analyses are on the way.

Great. Thanks.

This concludes our question-and-answer session. At this time I would like to turn the conference back over to you for any additional or closing remarks.

I would like to thank everyone for participating in our second-quarter fiscal year 2008 quarterly conference call. It is an exciting time at Palatin, and I look forward to getting out and meeting many of the investors as I do in my one-on-ones over the next quarter. And, just as a reminder, we are looking forward to having an Analyst Investor Day in the second quarter where we can give you a lot more detail on what we're doing both clinically, preclinically and on the strategy of the Company moving forward.

With that, have a good day, and we look forward to speaking with you over the quarter and at the end of the third quarter of the year. Thanks.

Ladies and gentlemen, this concludes today's conference. We thank you for your participation. You may now disconnect.