Palatin Technologies Inc (PTN) 2009 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies second 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 introduce you to your host for today's call, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies.

Thank you. Good morning, ladies and gentlemen, and welcome to the Palatin conference call.

I'm 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 off today, Mr Wills will provide a financial update.

Thank you, Carl. Good morning, everyone. For the quarter ended December 31st, 2008, which is the second quarter of our fiscal year, Palatin reported a net loss of $4 million, or $0.00 per share, compared to a net loss of $3.8 million, or $0.04 per share for the same period of 2007. The decrease in the net loss for the quarter ended December 31st, 2008, versus the quarter ended December 31st, 2007, was primarily attributable to a decrease in both research and development, and general and administrative operating expenses. At December 31st, 2008, Palatin's cash, cash equivalents and available for sale investments totaled $6.3 million, compared to $12.8 million at June 30th, 2008, and $22.8 million at the period December 31st, 2007.

Regarding revenue and other income, for the quarter ended December 31st, 2008, Palatin recognized $1.2 million of contract revenue under its collaboration agreement with AstraZeneca, versus $0.7 million in the comparable quarter of 2007. Other income for the quarter ended December 31st, 2008, consisted mainly of proceeds of $0.5 million from the sale of equipment and supplies previously expensed on our books. There was no such activity for the quarter ended December 31st, 2007.

Regarding costs and expenses, total operating expenses for the quarter ended December 31st, 2008, were $4 million, versus $6.1 million for the comparable quarter of 2007. The decrease in operating expenses was primarily due to the strategic restructuring and refocusing of our clinical-stage product portfolio development programs. Additionally, there was a $1.2 million decrease in administrative expenses primarily attributable to the reductions in workforce initiated in September 2007 and May 2008.

Regarding our cash position, in addition to our $6.3 million of cash, cash equivalents and available for sale investments at December 31st, 2008, we had $4.9 million of accounts receivables that have been received from AstraZeneca.

A few other items I just want to touch base on that transpired during the quarter. In December, Palatin received a notice from the NYSE Alternex, which is the exchange formerly known as the American Stock Exchange, advising Palatin that it was not in compliance with certain conditions of the exchange's continued listing standards under Section 1003. Specifically, Palatin's stockholders' equity had fallen below $6 million.

In response, Palatin has submitted a plan advising the exchange how it intends to regain compliance by June of 2010. Companies have up to six quarters to regain compliance. If the exchange accepts the plan, Palatin will be able to continue its listing during the plan period, subject to periodic review by the exchange to determine if we are making progress consistent with the submitted plan. If the exchange does not accept the plan, or if Palatin does not regain compliance within Section 1003 by June of 2010, or if Palatin does not make progress consistent with the plan during that plan period, the exchange may initiate delisting procedures. We anticipate hearing from the exchange regarding our plan submission before the end of this quarter.

Regarding our AZ, AstraZeneca, agreement, in early December we announced an extension of our exclusive research collaboration and license agreement with AstraZeneca to discover, develop and commercialize compounds that target melanocortin receptors, and of signing a clinical trial-sponsored research agreement. The clinical trial agreement will be funded 100% by AstraZeneca. The research collaboration term has been extended, with Palatin contributing scientific expertise and AstraZeneca supporting Palatin's internal activities at an agreed full-time equivalent rate. We have received a total of $6.6 million from AstraZeneca during January and February of this year, consisting of $1.6 million as an upfront payment relating to the granting of licenses to additional compounds and patents, and $5 million in milestone payments related to the clinical trial-sponsored research agreement.

In summary, Palatin has sufficient cash to fund its 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 have focused on three exciting programs that we believe can drive significant shareholder value. These are PL-3994 for the treatment of heart failure; our MCR-4 Obesity Program, which is partnered with AstraZeneca; and Pl-6983, our melanocortin receptor compound for treating both male and female sexual dysfunction. All our programs target patient populations where the medical need is high, and with tremendous commercial potential.

With that being said, in the current economic environment, how we advance and derive values 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, resulting in the expansion of our joint research and development collaboration. 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, AstraZeneca, believe that pharmaceutical agents targeting MCR-4 have tremendous potential in treating obesity and diabetes.

As Steve previously mentioned, the license and extension in clinical trial agreements point to the progress Palatin and AstraZeneca have made with their collaborative melanocortin receptor Obesity Program. In addition to reimbursement of Palatin's activities at an agreed-upon full time equivalent rate, a total of $6.6 million in milestone payments has recently been received from AstraZeneca. Additionally, working closely with our partner, we initiated a proof-of-concept trial in humans for our MCR-4 Obesity Program in January of this year.

Regarding our PL-3994 and PL-6983 programs, over the next year our primary focus will be on establishing collaborations with large pharmaceutical or specialty pharmaceutical companies to advance these programs forward. Our PL-3994 clinical results and commercial potential have generated significant interest in both the medical community and from potential pharmaceutical partners.

I'm now going to turn a the call over to Dr. Hallam, who will provide you with additional details on our programs.

Thanks, Carl, and good morning. I will start with an update on our melanocortin 4 receptor programs.

Our collaborative research and development program with AstraZeneca for the discovery and development of anti-obesity agents continues to show great progress. Accumulating data from genetic pharmacological and physiological studies continued to identify the central melanocortin system as an important regulator of energy homeostasis, and potentially a key pharmacological -- pharmacologically amenable mechanism for the treatment of obesity. Palatin's melanocortin receptor Obesity Program combines our core technologies for [lead]-generation chemistry with our preclinical and clinical experience with the melanocortin system to develop novel therapeutics for treating obesity and related diseases.

The collaborative R&D teams have further developed the small molecule peptide compound series that modulates the functions of the melanocortin 4 receptor. The activity profile indicates that they have potential as treatments for obesity and associated diseases. In studies using animal models of obesity, selective compounds reduce food intake and body mass, as well as decreasing plasma glucose and insulin levels. As Steve mentioned, based on this successful progress the research agreement was recently extended and expanded, and a separate clinical agreement was also reached specifically to take a proof-of-principle melanocortin agonist to the clinic. Dosing of subjects in the clinical proof-of-principle study began early this year. The study is on track to complete by mid-year, and certain parameters will be evaluated that will guide the selection of further commercially-viable clinical candidates for development.

Now to sexual dysfunction. We continue to evaluate the opportunity for melanocortin 4 receptor agonists in both the male erectile dysfunction field and in female sexual dysfunction. As you will be aware, Palatin has performed a program of Phase I and II clinical studies of the first-generation cyclic peptide melanocortin 4 receptor agonist, Bremelanotide, for both male and for female sexual dysfunction. Promising efficacy results would have supported further development for both indications; however, as intranasally administered Bremelanotide is associated with increases in systemic blood pressure, new approaches are being evaluated. These approaches, including targeting therapists to second line use in erectile dysfunction, developing routes of administration that improve the exposure predictability for a given dose, and developing new compounds that preserve the efficacy of Bremelanotide but are associated with less cardiovascular effects.

Carl mentioned PL-6983, which is a novel second-generation peptide agonist at the melanocortin 4 receptor, and has strong efficacy in animals, with decreased cardiovascular effects A Phase I trial is planned with PL-6983 to see whether this also holds true in Man. The Phase I study would seek to evaluate whether doses that produce erectogenic activity, measured by RigiScan, a mechanical measure, do so without elevating blood pressure. If this study proves successful, Palatin would aim to develop the agent for male erectile dysfunction, and potentially for female sexual dysfunction, where there is a great opportunity for an on-demand therapeutic for arousal. This is an unmet need with no other therapies presently in development. The market opportunity for effective agents helping women with sexual dysfunction is potentially quite large, with estimates of the rates of sexual dysfunction in post-menopausal women as high as 43%. As the population ages, the proportion of post-menopausal women is only expected to grow.

Now switching to our heart failure program. From clinical findings and preclinical evidence that have emerged over the past couple of years from studies with natural natriuretic peptide agonists, it is clear that stimulation of natriuretic peptide receptors is an important mechanism to rectify the underlying pathophysiology in heart failure, and will undoubtedly lead to improved therapeutic agents that will find utility in several fields. These findings extend the existing therapeutic paradigm of acute IV-infusion treatments of symptoms of decompensated heart failure to include chronic treatment of heart failure patients to decreased rehospitalization rates, and also potentially to prevent left ventricular remodeling, resulting in improved survival rates. Further studies also point to the potential of this mechanism in the area of refractory or resistant hypertension.

Palatin's natriuretic peptide program has applied its technologies to the discovery and development 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 drug-like attributes optimal for these new indications. PL-3994 is a novel long-acting agonist that has been designed by Palatin scientists for daily subcutaneous self-administration by heart failure patients. Early clinical studies have show that PL-3994 has a half-life of three hours in humans, and the duration of its effects on the cardiovascular system is eight to 12 hours. Based on this, daily administration of the subcutaneous dose of PL-3994 should provide the round-the-clock coverage required for chronic benefits. The expectation is that PL-3994 will be able to help prevent the chronic underlying pathophysiologies that ultimately lead to progressive worsening of the heart failure patient until they decompensate, and rehospitalization occurs.

Administered daily, PL-3994 is also expected to decrease cardiac remodeling, an increase in heart muscle mass. Indeed, reduction of cardiac remodeling has been demonstrated by a once daily injection of 3994 for six weeks in an animal model of renovascular hypertension and heart failure. Now the rationale for this is as follows. The cardiac remodeling is a condition in which the size and thickness of the ventricles of the heart increases in response to pathophysiological stimuli, and the condition is a powerful and independent risk factor for cardiovascular morbidity and mortality. There appears to be a link between remodeling and prognosis. Interventions which ameliorate remodeling have had a positive effect on survival, and those that do not fail to lengthen the lives of patients. While existing classes of medication are somewhat effective in reducing symptoms and reducing the rates of hospitalization, chronic heart failure patients nonetheless have poor prognosis, and there is clearly a high medical need for newer agents at newer mechanisms which can provide further improvement.

So PL-3994 will be developed for chronic treatment of the heart failure population. It will be administered as a daily subcutaneous injection as adjunct to other medications such as beta blockers, ACE inhibitors and angiotensin receptor blockers. Initial development will focus on patients with New York Heart Association classification of heart failure Stage 2 and 3, with Stage 4 patients being studied later. Two early phase clinical studies have been completed; a Phase I study in healthy volunteers, which was presented at the Heart Failure Society of America meeting in Toronto in September 2008, and a Phase IIa study in control hypertensives.

Going forward, a multi-dose 28-day study in chronic heart failure patients is planned, which will further characterize safety pharmacokinetics and pharmacodynamics. Rehospitalization rates will be tracked during and beyond the end of the 28-day treatment period of this study. The strong link between ventricular remodeling and survival potentially provides a surrogate marker, allowing for a study of relatively brief duration and smaller size, which can provide an early indication of the likelihood of success of the survival study.

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 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 I'm going to hand back to Carl.

Thank you, Trevor.

In closing, in the past quarter we have been successful in reducing our expenses and increasing our projected cash flow by expanding our research and development collaboration, facilities consolidation, and sale of noncore assets. With cash on hand and projected revenue, we are confident we can move Palatin forward and secure significant value for our programs.

In the near term, we will continue moving our MCR-4 Program for obesity and diabetes forward with partner, AstraZeneca, and look forward to initial clinical results later this year. Our ongoing efforts with PL-3994 and PL-6983 have strengthened their scientific, intellectual property and commercial value, which supports our activities on generating additional corporate and research and development collaborations for these programs.

In these difficult times, we continue to remain positive about the Company's opportunities, and are working on a variety of avenues to strengthen our financial resources.

Now I would like to open the call to questions.

(Operator Instructions)

We'll take our first question from Amy Wang with MDB Capital.

Good morning, everyone. Thanks for taking my call. My first question, just can you remind us, I know you talked about your continued partnership discussions for your clinical and preclinical programs. For the 3994 program, is that your top priority in terms of looking for partnerships, or are you sort of looking at all the different strategies at the same time?

Well, with regard to corporate -- potential corporal partnerships, they're the two programs that are furthest advanced and would be -- the most likely candidates would be Pl-3994, that's the heart failure program, as well as the sexual dysfunction program, which would be -- the lead candidate there would be PL-6983. So both of those are moving forward, and there are discussions on both of those programs.

So for the 3944 clinical trials that are planned for later this year, the multi-dose and the long-term study, will you be going forward with those regardless of whether a partnership is finalized or will you --

Amy, at the current time, we're -- you know, as you might imagine, we're very reluctant to spend corporate assets that can't be easily replaced, so we would really like to take a strong shot at trying the corporate partnering route before we move forward with those clinical trial programs on our own.

Great. Thanks, Carl. And one last question about 6983 for sexual dysfunction. You talked about a planned Phase I study. So that will be in the male -- looking at just the male population first, right?

Correct. If we go forward with that program, or as we go forward with it, we would look at the male population first for a couple of reasons, the predominant one being that we can look at both efficacy as well as safety in a single population, because we can monitor erectile activity in the males. So in a single study, we'll get a chance to look at where we see the erectogenic effect, and then if we see a cardiovascular effect where we see that. And our hope would be, based on the animal data, that we would see either very -- dramatically reduced cardiovascular signal or not at all, and if we do see one, that there would be a nice separation between the efficacy signal and potential safety signal. So that's why we would do that in men first.

Great. Thank you.

Thanks, Amy.

And we'll take our next question is from Rahul Jasuja with MDB Capital Group.

Good morning, folks. Just a couple of clarifications on the sexual dysfunction program. So 6983 is a new version that lacks the high increase in blood pressure, but what about plans to look at the original Bremelanotide as a second-line therapy? Could you elaborate on intent and prospective plans for Palatin, you know, working a second-line therapy irrespective of the 6983 which is the new version?

I think if -- since these presentations are posted, as you probably recall, Dr. Hallam mentioned in his part of the presentation, that we were looking at different aspects of Bremelanotide, either from a formulation standpoint with delivery, as well as patient positioning. And certainly we do believe that there can be an opportunity for Bremelanotide to go forward in the sexual dysfunction space, particularly erectile dysfunction, as a second-line treatment for men that are failing [peptide] inhibitor therapy. That's certainly something I won't elaborate on much more right now, but is certainly something that is a part of discussions with corporate partners as well as internally.

Okay. Thanks.

Thank you.

That concludes the question-and-answer session today. I would like to turn the call back over to you for any additional or closing remarks.

I would like to thank everyone for participating in our quarterly conference call. We long forward to updating you next quarter.

And with that, have a good day, and we'll see you next quarter. Thanks, bye-bye.

This concludes today's presentation. We thank you for your participation. You may now disconnect.