Palatin Technologies Inc (PTN) 2009 Q1 法說會逐字稿

Good day, everyone, and welcome to the Palatin Technologies first quarter fiscal year 2009 conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions for the question-and-answer session will be given at the end of the Company's remarks. As a reminder, this conference call is being recorded.

Before we begin our remarks I would like to remind you that statements made by Palatin that 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. 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. With me 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 our conference call, Steve will provide a financial update.

Thank you, Carl. Good morning.

For the quarter ended September 30th, 2008 -- which is the first quarter of our fiscal year -- Palatin reported a net loss of $4.3 million or $0.05 per-share compared to a net loss of $247,000 for the same period in 2007. For the quarter ended September 30th, 2008, total revenues were $754,000 compared to $9 million for the same period in 2007.

The increase in the net loss for the quarter ended September 30th, 2008, versus the quarter ended September 30th, 2007, was primarily attributable to the recognition in September 2007 of the remaining $6.5 million of deferred license revenue pursuant to the termination of our collaboration agreement with King Pharmaceuticals related to bremelanotide, Palatin's drug previously under development for the treatment of male and female sexual dysfunction.

As of September 30th, 2008, Palatin's cash, cash equivalents and investments totaled $8.1 million compared to $26.6 million at September 30th, 2007, and $12.8 million at June 30th, 2008.

Regarding revenue, for the quarter ended September 30th, 2008, Palatin received $754,000 of contract revenue under our collaboration agreement with AstraZeneca. In the comparable quarter of 2007, we received and recognized $8.2 million of contract revenue from King, $0.7 million from AstraZeneca and less than $100,000 related to NeutroSpec pursuant to our collaboration agreement with the Mallinckrodt division of Covidien Ltd.

Regarding costs and expenses, total operating expenses for the quarter ended September 30th, 2008, were $5.1 million versus $9.6 million for the comparable quarter of 2007. This was primarily due to lower development costs of bremelanotide.

Regarding Palatin's cash and liquidity position, we are currently negotiating an extension of the collaboration portion of our agreement with AstraZeneca which, if successfully concluded, would result in cash support for an increased number of Palatin employees during calendar year 2009.

We intend to seek additional capital primarily through new collaborative arrangements on our product candidates, but also milestone and other payments from existing collaborations. We may also seek capital from other sources including program-specific funding and public or private equity financings.

Again, as of September 30th, 2008, Palatin's cash, cash equivalents and investments totaled $8.1 million. Within the next three months, we anticipate receiving $9 million of cash, consisting primarily of payments from AstraZeneca plus proceeds from the sale of noncore assets, mainly related to the sale of State of New Jersey net operating losses.

Thus, without any future financings we believe we can fund our projected operations through calendar 2009.

Thank you, Steve. Dr. Hallam and I will give an update and overview on the Company's Research and Development programs.

We now have four exciting programs that we believe can drive syndicate shareholder value. These are PL-3994 for the treatment of heart failure; our MCR-4 obesity program, which is partnered with AstraZeneca; P/L 6983, the melanocortin receptor compound for treating both male and female sexual dysfunction; and BMT for organ protection.

All our programs target patient populations in which the medical need is high and with tremendous commercial potential. With that being said in the current economic environment, how we advance and drive value from these programs will vary.

Over the past year, the research teams at Palatin and AstraZeneca have made significant progress in our MCR-4 obesity and diabetes program. Obesity and diabetes are two diseases in which there remains a strong need for pharmacological interventions. The human and medical costs associated with treating these patients is enormous.

We, along with our partner, believe that pharmaceutical agents targeting MCR-4 have tremendous potential for treating both obesity and diabetes. Working closely with our partner, our MCR-4 obesity program, we anticipate initiating proof of concept trials in humans within the next few months, resulting in Palatin receiving a $5 million milestone payment.

We are also very excited to be finalizing extension of our collaboration with AstraZeneca to support the further advancement of the program.

Regarding our other products under development over the next year, our primary focus will be on establishing collaborations with large specialty pharmaceutical companies to advance these programs forward.

PL-3994, which is in development as a treatment for heart failure, has complete both Phase 1 and early Phase 2 clinical studies and is our lead program. In PL-3994, clinical results and commercial potential have generated significant interest in both the medical community and from potential pharmaceutical partners.

As you may be aware, heart failure is a progressive disease that affects over five million Americans and 10 million Europeans. In the US, 550,000 new cases of heart failure are diagnosed each year with these incidents expected to increase with the aging of the population.

Despite the treatment of heart failure with multiple drugs, the incidents of mortality, hospitalization of heart failure patients remains high. Heart failure has tremendous human and financial costs. Estimated direct costs in the US for heart failure were $29.6 billion 2006. Heart failure constitutes the leading cause of hospitalization for people over the age of 65 and over 1.1 million hospitalizations for heart failure in calendar year 2004.

I am now going to turn the call over to Dr. Hallam. He is going to talk a little bit more about 3994 for heart failure. Trevor?

Thank you, Carl. Good morning. I'm going to go through the scientific and clinical rationale underpinning our natriuretic peptide receptor program, with particular emphasis on PL-3994 for chronic treatment of heart failure patients and describe why we are excited by this opportunity.

From clinical and preclinical evidence that's emerged over the past couple of years using endogenous agonist, it's clear that stimulation of the NPR receptors will lead to improve therapeutic agents that will find utility in several fields. These findings extend the existing therapeutic paradigm of treatments of symptoms of acute decompensated heart failure, to include the chronic treatment of heart failure patients -- that's prevent left ventricular remodeling resulting in decreased rehospitalization rates and improved survival rates.

Further studies also point to the potential of this mechanism in the area of refractory or resistant hypertension. Palatine's natriuretic peptide program has applied its technologies to the discovery and developments of novel natriuretic peptide agonists that have the desired selectivity of action on one or more of the three known natriuretic peptide receptors to generate the desired pharmacological and druglike attributes optimal for each of these different indications.

So, to PL-3994. PL-3994 is a novel long-acting subcutaneously administered agonist that has been designed by Palatin scientists for the chronic treatment of heart failure patients. The expectation is that PL-3994 will be administered daily and will affect ventricular remodeling or ventricular hypertrophy, an increase in heart muscle mass.

This is a condition in which the size and thickness of the ventricles of the heart increases in response to [patho-physiological] stimuli and the condition is a powerful, independent risk factor for cardiovascular morbidity and mortality.

The increase in muscle mass of the ventricle is the body's attempt to deal with cardiac overload. But instead it contributes to multiple ways to the poor prognosis of these patients. The link between remodeling and prognosis is quite solid and that interventions which ameliorate remodeling have had a positive affect on survival and those that do not fail to lengthen the lives of patients.

While existing classes of medication are effective in reducing symptoms and reducing the rates of hospitalization, chronic heart failure patients nonetheless have poor prognosis. There is clearly a high medical need for newer agents which can provide further improvement.

Ventricular mass increase in heart failure is driven primarily through activation of the renin--angiotensin system, which I will abbreviate to RAS.

Multiple preclinical studies and clinical studies have shown that suppression of the RAS slows or reverses remodeling. The addition of a novel medication with a different mechanism of actions which both further suppresses RAS and suppresses increased ventricular mass and remodeling directly is likely to provide additional benefit to heart failure patients. A long acting chronically administered natriuretic peptide receptor, A agonist, will do both of these things.

Stimulations of the NPRA receptor suppresses activation of the RAS system and, therefore, the drive for cardiac hypertrophy but in addition natriuretic peptide receptor stimulation suppresses cardiac hypertrophy directly.

So this has been further substantiated in the clinic. Several clinical studies conducted in Japan over the last two to three years have shown that continued infusions of agonist at the NPR A receptor -- greater than 96 hours -- when given immediately after the myocardial infraction reduced left ventricular modeling and improved cardiac function. In fact, similar benefits have also been shown in patients with decompensated heart failure.

So this does suggest the chronic treatment at the NPRA receptor will prevent or reverse the degree of left ventricular hypertrophy and should increase survival in heart failure patients.

However, the natriuretic peptide receptor agonist on the market as certified in the US and [coperitide] in Japan have neither the selectivity nor the half-life suitable for chronic administration. Their half-life (inaudible) around 20 minutes and thus require continuous IV infusion and are only suitable for short-term symptom relief such as dysemia.

In contrast PL-3994 which is an NPRA agonist has a half-life of three hours in human, and the duration of its effects on the cardiovascular system is eight to 12 hours. Based on this, daily administration of a subcutaneous dose of PL-3994 should provide round-the-clock coverage required for chronic benefit. Reduction of heart remodeling has been demonstrated by once daily injection of PL-3994 for six weeks in an animal model of renal vascular hypertension and heart failure.

So (inaudible) PL-3994 to be developed for the chronic heart to population. It is the only NPR agonist under development with the desirable properties, including suitability for daily administration required for this indication.

It will be useful for the treatment of chronic heart expected to affect heart remodeling and thereby reduce the rates of rehospitalization and extend survival in the population. It will be administered as a daily subcutaneous injection as an adjunct to other medications, such as beta block inhibitors and angiotension receptor blocks.

Initial development will focus on patients with (inaudible) heart association classification of heart failure stage two and three with stage four patients being studied later.

After the feasibility of development for this indication we believe that a proof of concept study with PL-3994, for the chronic medication, can be achieved in the short term. The strong link between ventricular remodeling and survival provides a surrogate marker allowing for study of relatively brief duration and smaller size, which can provide an early indication of the likelihood of success of the survivor study and achieving approval for the chronic indication.

Specifically, a study is planned which would randomize chronic heart failure patients to receive daily subcutaneous injections of PL-3994 in addition to their existing regimen. Cardiac remodeling measured by cardiac MRI before and after six months of treatment would show whether PL-3994 is effective in preventing worsening of, or reversing, cardiac hypertrophy. The positive results in this study will be a strong indicator of the probability of success of the longer survival studies needed for registration.

Now PL-3994 is also expected to provide relief of the symptoms of heart failure. Acute decompensated heart failure condition in which there is a sudden inability of the heart to pump efficiently is a significantly smaller market in the chronic heart failure market. However, the shorter nature of the clinical development program means that the acute decompensated heart failure program can be completed more quickly and can reach regulatory submission earlier.

Thus the plan is to start the developments of both indications in parallel.

So as for our clinical development program, two early phase clinical studies have been completed -- a Phase 1 study and healthy volunteers which were presented at the Heart Failure Society of America meeting in Toronto in September; and a Phase 2-A study in controlled hypertensis.

Going forward a single dose ranging study in heart failure patients on a multidose 28 day private study in chronic heart failure patients are planned to begin next year. And proof of concept studies for both chronic heart failure and for acute heart failure are planned to commence in the second half of 2009.

I hope you appreciate how excited we are by this program. Now I am going to hand you back to Carl.

Trevor, thank you.

Before we start the questions we worked diligently to reduce our expenses and to increase our projected cash flow [from] increasing our research and development collaboration, facilities consolidation, and sale of (inaudible). With cash on hand and projected revenue we are confident we can move (inaudible) forward and secure significant value for our programs.

In the near term, we will focus on PL-3994 as the treatment for both chronic as well as acute heart failure as you just heard from Trevor. We'll also been moving our MCR-4 program for obesity and diabetes forward with our partner, AstraZeneca, and we will be looking to generate some very hopefully exciting results in the clinic as well.

And finally will be focusing on corporate collaborations for our sexual dysfunction organ protection programs. We feel that there is significant interest and there certainly is, based on the undervaluing of opportunities in the marketplace today, there's a lot of large Pharma -- especially Pharma interest -- in programs. And we feel that with a focused effort we should be able to secure at least one, if not two, corporate collaborations for these programs as well.

With that I'm going to open the call to questions and hope you guys have a nice day.

(Operator Instructions) [Amy Wang] at [MBD Capital].

Good morning. I have a couple of questions. First, given the issues with [Natucor] such as hypertension and renal dysfunction, what kind of strategies do you have been place with 3994 that can address or tackle potential or likely FDA hurdles?

I will answer some of that and then, Trevor can as well. One, I'm not sure there actually really are any documented issues with Natucor.

Natucor is used at -- was used at extremely high -- was used at very high doses in the initial studies and in the commercialization phase. And you are really looking there to drive the hemodynamic effects of a natriuretic peptide system. We are really in the chronic phase really looking at effects on dampening down the renal [vascular] system and looking at effects on directly on cardiac hypertrophy. And there your dosing is substantially lower.

So in one respect, we will be dealing with really relatively low doses of the drug on a chronic basis where we don't expect to see much in the way of hypertension with it. The renal effects in large studies -- in the large prospective studies of the Natucor were not substantiated. So those are not effects that I think we are really concerned about nor will the agency probably be concerned about as well.

Let me add a little bit of maybe a little bit of refinements to your -- (multiple speakers)

Sure. Go ahead.

I mean, we've actually been obviously very aware that these agents -- the natural agents -- are very good beta dilators as well as (inaudible). And therefore that is going to be always an issue when you are trying to resolve the problems of dysemia as a symptom, and you are trying not to drop the blood pressure too low with Natucor.

With PL-3994, we've based our design program such that we are able to achieve good exposures over a longer period, which will allow us to separate the pharmacologists and we know that the ability to reduce the increase in mass in the ventricle is going to be at the lower concentration of these agonists than you would require to drive a beta [dilatation].

So we are really playing to that and being able to separate it by designing the right properties into the markets to separate the pharmacologists. There is much evidence in both animals but also in man that you can achieve a decrease in cardiac remodeling at doses where you get no beta (inaudible) or by pushing it up -- certainly at doses which are very tolerable, given a very moderate and small decrease in the blood pressure for just a few minutes or hours.

So I think we are going to be really be able to find a sweet spot for the therapy. And of course our molecule is rather different from them. Endogenous molecules, we are not only increasing the half-life of these molecules to allow us to find that dose range properly, by daily administration, but we have also got a more selective molecule at the natriuretic peptide receptors. We just target one particular receptor.

Okay, so basically what you're saying is that for targeting ventricular remodeling, the dosing will be much lower than when you are trying to beta [dilate] which would require a higher dose of the natriuretic peptide. And so since we're doing the -- we are looking at the ventricular remodeling, then, the lower does should not cause vaso dilation?

That's correct.

Great. What about looking at particular pa -- or screening patients that are like, let's say looking at blood pressure or having certain criteria in your patient populations?

According to the [Adeer] Register which is really left to the whole population of heart failure patients, we know that 50% of the chronic heart failure patients have systolic blood pressures above 140 mm of mercury and another 40% of populations are above 100 mm of mercury.

So 90% of the heart failure population are in a blood pressure range which really should not cause any major problem if you've got a therapy which should drop your systolic by 10% or so. I think some of the supposition amongst the experts is some of the issues around renal function with Natucor have come from very robust infusion rates. In other words high doses, which have been applied across the whole population, including those that were relatively hypertensive.

And that clearly can mean that if you've got a peripheral vaso dilation you are going to reduces the amount of blood flow to the kidneys and that will potentially end up with issues. I think that's one of the things that may be going on.

My last question regarding the obesity program. Given that the the melanocortin receptors are a pretty highly sought-after target for both obesity and diabetes and many other big Pharma and biotechs have not had great success, how do you think your program is different or your agonists are differentiated and will likely or possibly succeed where others have failed?

I will start again. Trevor can come in on top of it.

I think one of the things that we were -- one, we've had an ability to build on a lot of the information that came out from all these failures. And I think a lot of the things that has held back the development of these agents were new observations that occurred in clinical trials as opposed to being found out in animal studies.

But right now we really realize that something you need to avoid in a melanocortin agonist is, one, you don't want to see a spontaneous erectile activity. Although that may be great for sexual dysfunction, you probably don't want to give people erections on a -- several times a day for obesity. And then the second thing is you have to be concerned about the potential to increase blood pressure.

And we've been very careful in the way we screen compounds and design compounds so that we can avoid those pharmacologies in the agents that we're taking forward. So we think that to -- and a relatively short answer is that we've been able to build on the observation of others and then using the technology base that we have, avoid taking forward compounds that have those effects as we go forward.

Trevor may want to -- .

No, I agree with that. The only other thing I would add is that AstraZeneca had a program in melanocortin 4 before so clearly they knew some of the issues around it and feel that we are worth collaborating with. So that's probably the clearest answer I can give you.

Thank you.

There are no more questions at this time. I would like to turn the call back over to Dr. Spana for any additional or closing remarks.

Thank you, everybody, for participating on the call. I'd like to thank Trevor and Steve as well.

Have a great day, and as always, as we are out there talking to investors we look forward to seeing you on an individual basis and to updating you on our progress for next quarter. Thanks and have a good day.

That does conclude today's conference. We appreciate your participation and have a great day.