Palatin Technologies Inc (PTN) 2009 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies fourth quarter of 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 that time at the end of the Company's remarks. As a reminder this conference is being recorded.

Before we begin our remarks I would like to remind you that the 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 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 today 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 let me say a few words that will serve to outline our three main programs. Palatin is focusing on three exciting programs that we believe will create significant shareholder value. These are our sexual dysfunction program aimed at both male and female sexual dysfunction, our obesity and diabetes program, which is partnered with AstraZeneca, and lastly our heart failure program with lead development compound PL-3994. All our programs target patient populations where the medical need is high and with tremendous commercial potential.

We are quite excited by the potential of our melanocortin receptor target sexual dysfunction program. Our lead compound in this program is bremelanotide, which has been extensively evaluated in clinical studies as a treatment for erectile dysfunction as well as female sexual dysfunction. A potential safety concern with intranasal bremelanotide is its ability to significantly raise systolic blood pressure in a small number of patients.

To address this potential concern we conducted a repeat dose Phase I safety study using subcutaneous instead of intranasal administration of bremelanotide. The results demonstrate that with subcutaneous administration consistent, therapeutic blood plasma levels can be obtained without blood pressure side effects. Based on the positive results of this study Palatin has scheduled a meeting with the US Food and Drug Administration to discuss initiation of a Phase IIb study of subcutaneously administered bremelanotide.

Dr. Hallam will be covering the new bremelanotide data in detail later in the presentation. Pending discussions with the FDA, we intend to move bremelanotide forward for female sexual dysfunction as well as a treatment for men with erectile dysfunction that are non-responsive to current PD5 inhibitor therapy.

Obesity and diabetes are two diseases where there remains a strong need for pharmacological interventions. The cost associated with treating these patients is enormous. We, along with our partner, AstraZeneca, believe that pharmaceutical agents targeting the melanocortin-4 receptor have tremendous potential in treating obesity and diabetes.

Over the past year the research teams at Palatin and AstraZeneca have made significant progress in our melanocortin-4 obesity and diabetes program resulting in the extension and expansion of our joint research and development collaboration. Additionally we reached a clinical trial agreement earlier this year with AstraZeneca to conduct a proof-of-concept clinical trial in obese patients. This study has been completed successfully and the program is continuing to move forward.

PL-3994 is a novel natriuretic peptide agonist for treating heart failure patients. PL-3994 clinical results and the commercial potential of this program have generated significant interest in the medical community and for potential pharmaceutical partners. PL-3994 is a first-in-class molecule we are developing for subchronic treatment of heart failure patients after an acutely decompensating event. We expect that PL-3994 will be effective in reducing the high re-hospitalization rate in this patient population in the three- to six-month period after their release from the hospital.

We met with the FDA in the second quarter of 2009 to discuss PL-3994 as a subchronic treatment. The outcomes from this meeting have provided guidance towards a novel and registrable indication and has clearly defined our PL-3994 clinical development plan with agreement on the next study.

I now want to hand the call over to Steve to provide a financial update before Trevor goes through our plans for our research and development programs.

Thank you, Carl, and good morning, everyone. For the quarter ended June 30, 2009, which is the fourth quarter of our fiscal year, Palatin reported a net loss of $0.2 million or $0.0 per basic and diluted share compared to a net loss of $5.2 million or $0.6 (sic--see press release) per share for the same period in 2008. For the year ended June 30, 2009, we reported a net loss of $4.8 million or $0.06 per basic and diluted share compared to a net loss of $14.4 million or $0.17 per basic and diluted share for the previous fiscal year.

The decreases in net loss for the year and quarter ended June 30, 2009, versus the year and quarter ended June 30, 2008, were primarily due to a net decrease in operating expenses resulting from strategic restructuring and refocusing of Palatin's clinical stage development programs and for the quarter ended June 30, 2009, an increase in revenue earned under Palatin's licensed and clinical trial collaboration agreements with AstraZeneca.

Regarding revenue, for the quarter ended June 30, 2009, Palatin recognized $4.2 million of revenue under its agreements with AstraZeneca. In the comparable quarter of 2008, Palatin recognized $0.8 million of revenue from AstraZeneca and the revenue for the year ended June 30, 2009, amounted to $11.4 million compared to $11.5 million for the prior year.

Regarding cost and expenses, total operating expenses for the quarter ended June 30, 2009, were $4.5 million compared to $6.4 million for the comparable quarter in 2008. For the year ended June 30, 2009, total operating expenses amounted to $18.7 million compared to $28.1 million for the prior year. The net decreases in operating expenses for the quarter and year just ended were primarily due to the strategic restructuring and refocusing of Palatin's clinical stage development programs partially offset by increases from clinical costs associated with Palatin's agreements with AstraZeneca.

Regarding AstraZeneca, during the year we amended and extended agreements with AstraZeneca including entering into a clinical trial-sponsored research agreement. In addition to reimbursement of Palatin activities at an agreed full-time equivalent rate during the fiscal year ended June 30, 2009, Palatin received payments of $6.6 million from AstraZeneca, $5.7 million of which was recognized as revenue during the fiscal year.

In August 2009 we announced a raise of approximately $3.1 million in gross proceeds before deducting placement agent fees and other operating expenses in a registered direct offering of 9.5 million units at a price of $0.33 per unit. Each unit consisted of one share of common stock and one warrant exercisable at any time on or after issuance and on or before the five-year anniversary date of the issuance to purchase 0.35 of one share of common stock at an exercise price of $0.33 per share of the common stock.

Regarding cash position, Palatin's cash, cash equivalents, and investments totaled $7.8 million as of June 30, 2009, compared to $12.8 million at June 30, 2008. Again, subsequent to the fiscal year-end Palatin received $2.8 million in net proceeds from the August 2009 equity offering referenced above.

Thank you, Steve. Now Trevor will take us through our research and development programs.

Thanks, Carl, and good morning. Let me start with the sexual dysfunction program.

In the fall of 2007 our end of Phase II data with intranasally administered bremelanotide revealed a couple of key concerns -- a wide variation in plasma exposure for a given intranasal dose across the ED population and secondly the propensity to cause a small increase in blood pressure. Of most concern to the program, a few individuals in the study showed larger blood pressure increases.

Palatin's melanocortin-4 receptor sexual function program is on a major objective to further understand the mechanism or mechanisms underlying the cardiovascular effects of bremelanotide. Palatin had two major goals for the program. First, to redefine the bremelanotide development program to optimize the benefit to risk by reassessing the target patient population by considering adjunct use with PD-5 inhibitors and to reanalyze the root of administration. And, secondly, to define design criteria for subsequent second-generation melanocortin agonists. We made substantial progress on both fronts.

Since early 2008 Palatin has performed a number of preclinical studies and an additional clinical study with bremelanotide to furtherly sedate the mechanism of blood pressure increase and its relationship to bremelanotide plasma levels. Our data had suggested that by changing the route of administration from intranasal administration to subcutaneous there is much less variability in plasma exposure. Additional clinical data generated in the first half of this calendar year has allowed us to determine if subcutaneous administration of bremelanotide with its predictable plasma exposure levels reduces or even eliminates the blood pressure response when dosed at efficacious levels.

This 15-day, randomized, double-blind, placebo-controlled study in 54 subjects -- so 27 on placebo and 27 administered bremelanotide -- measured blood pressure at baseline and before and after each of 45 doses of bremelanotide or placebo administered subcutaneously. The dose administered was selected to result in a plasma concentration known from previous studies to be efficacious for improving erectile function.

Continuous ambulatory blood pressure measurements were also collected during the 48-hour period after the first dose on every subject. The key findings were as follows. All subjects administered with subcutaneous bremelanotide resulted in consistent and predictable plasma concentrations in the target range, i.e., known to be erectogenic. No statistically significant difference in mean changes in blood pressure were seen in subjects receiving bremelanotide compared to placebo.

No clinically significant differences in the range of blood pressure changes was seen in subjects receiving bremelanotide compared with placebo. No subjects discontinued participation in the study due to protocol stopping rules based on blood pressure. No subjects discontinued participation in the study due to nausea and no difference was observed in the rate of vomiting between subjects receiving bremelanotide compared to placebo. There was one incident in each group -- one in placebo and one in bremelanotide.

Our next step is to meet with the FDA to discuss the development plans for bremelanotide as a second-line therapy for ED patients that are non-responsive to PD-5 inhibitors. This meeting has been scheduled. Given the exciting data from the clinical study and providing that the outcomes from the FDA meeting are favorable concerning the ED development program, we would also aim to restart bremelanotide development for female sexual dysfunction.

In terms of new and improved molecules our follow-up program has defined PL-6983 as a new and novel second-generation peptide melanocortin-4 receptor agonist for sexual dysfunction. It has shown strong efficacy in animals with greater separation still over cardiovascular effects. A Phase I trial has been planned with PL-6983 to see if this also holds true in man by seeking to evaluate whether the doses that produce erectogenic activity measured by RigiScan, a mechanical measure of erectile response, do so with an even greater separation from those with elevated blood pressure.

Given the exciting new data with subcutaneously administered bremelanotide, our intention is to hold PL-6983 as a potential backup and not proceed with the Phase I trial at this time.

In addition to the cyclic peptide therapies we also have novel, potent, and selective orally bioavailable small molecule melanocortin-4 receptor agonists that would be ready to begin preclinical safety testing in the second half this year with the ultimate aim of having a drug useful as an on-demand, simple tablet for use in both female and male erectile dysfunction.

Now moving to our obesity program with AstraZeneca. 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 continue to identify the central melanocortin system as an important regulator of energy, homeostasis, and potentially a key pharmacological target for 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. In studies using animal models of obesity melanocortin-4 receptors in selected compounds reduced food intake and body mass as well as decreasing plasma glucose and insulin levels. As previously mentioned, the research agreement with AstraZeneca was extended and expanded earlier this year and a separate clinical study agreement was also reached specifically to take a proof-of-principle melanocortin agonist to the clinic. This study has been completed successfully and the data now is available to the teams.

The data from this proof-of-principle study forms a basis for translation of preclinical data to confirm selection of commercially viable clinical candidates expected to enter clinical studies in 2010. Developments of orally bioavailable clinical candidates is on track with the timeline defined by our collaborative agreement with AstraZeneca.

Now to our heart failure program and our compound PL-3994. The American Recovery and Reinvestment Act of 2009 called on the Institute of Medicine to recommend a list of priority topics to be the initial focus for investments in comparative effectiveness research. Amongst the top 100 was a call for comparing innovative treatment strategies for congestive heart failure.

Heart failure readmissions have not improved from 1995 through 2004, and in fact have increased slightly based on Veterans Administration data. Since heart failure admissions account for 80% of the cost of heart failure, the VA healthcare system has concluded in the May 2009 issue of FORUM that any treatment that reduces heart failure hospitalizations is cost effective. Palatin and its scientific advisers believe that chronic stimulation of the natriuretic peptide receptors as an approach to treating heart failure patients may decrease re-hospitalization rates and improve survival rates.

Clinical and preclinical data from studies with natriuretic peptide agonists clearly demonstrate that stimulation of natriuretic peptide receptors is an important mechanism to rectify the underlying pathophysiology in heart failure and proper exploitation of this approach has the potential to deliver improved therapeutic agents. Palatin has developed novel natriuretic peptide agonists that have natriuretic receptor selectivity, desirable pharmacological and drug-like attributes for use as potential therapeutics.

We received this summer a notice of allowance from the US Patent and Trademark Office. The allowed claims cover a family of cyclic compounds that bind to natriuretic peptide receptor A including PL-3994. Palatin expects the patent will issue in the second half of this year. The patent's 20-year term would expire in 2027.

PL-3994 is a long-acting agonist that has been designed to be suitable for daily, subcutaneous, self-administration by heart failure patients. Clinical studies have shown that PL-3994 has a half-life and duration of effect on the cardiovascular system that is suitable for daily administration. The expectation is that the chronic, underlying pathophysiologies that ultimately lead to progressive worsening of the heart failure patient until they decompensate and then re-hospitalize will be decreased or prevented by a three- to six-month course of treatment with PL-3994.

It's expected it will do this by a combination of decreased cardiac remodeling and improved kidney function. PL-3994 will be administered as a daily subcutaneous injection as adjunct to other medications such as beta blockers, ACE inhibitors, and angiotentin receptor blockers.

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 controlled hypertensives that will be presented at the Heart Failure Society of America meeting in Boston next week. Going forward PL-3994 will be evaluating an additional Phase II studies. These studies will be designed to characterize the safety, pharmacokinetics, and pharmacodynamics in heart failure patients.

A key objective of the Phase II program will be to demonstrate the ability of PL-3994 treatment to reduce the re-hospitalization rate in heart failure patients after an acutely decompensating event.

Palatin met with the FDA earlier this year to discuss PL-3994 as a subchronic treatment in heart failure patients. The meeting was very constructive and useful to define our PL-3994 development plans. The highlights are as follow. PL-3994 could be developed for novel and registrable indication to reduce re-hospitalization; this is consistent with the comparative effectiveness and research emphasis on heart failure readmission and cost-effectiveness.

FDA guidance clarified the clinical development plan; as part of this process, the design of the next clinical study was conceptually agreed. Additionally, we received guidance as to the likely requirements for adequate safety and tolerability data that would be both appropriate from a patient safety perspective and manageable from a clinical development perspective.

Thanks. Now I am going to hand the call back to Carl.

Thank you, Trevor. Before we move on to the question-and-answer period I have a few additional comments. I remain very excited about the Palatin product pipeline and the potential to substantially increase shareholder value. The depth and potential of our programs has allowed us to access needed resources during a very difficult economic period. However, we realize that we will not be able to pursue all of our opportunities and will have to prioritize.

In the near term we will focus on our melanocortin receptor programs for sexual dysfunction and our melanocortin receptor program for obesity and diabetes. Because of our strength in melanocortin receptor research, our partnership with AstraZeneca, and size of the commercial opportunities, we believe that these programs represent the best risk to return for our shareholders.

Sexual dysfunction space is an area where there is clinical need with very few products in development. 35% of patients with erectile dysfunction do not respond to current PD-5 inhibitor therapy such as Viagra and an additional 20% are only marginally satisfied. We believe this non-responsive population is an excellent commercial opportunity for bremelanotide. Based on our clinical experience with bremelanotide, we believe bremelanotide will have significant benefit in this patient population.

Our recent clinical results indicate we have addressed the potential safety concerns of bremelanotide which has increased our confidence that bremelanotide can be commercialized with an acceptable benefit to risk ratio.

In the female sexual dysfunction space patients and their doctors have very limited treatment options. Based on our clinical and preclinical data, we believe that MCR-4 targeted therapies such as bremelanotide holds great potential for treating these patients. As previously mentioned, we are scheduled to meet with the FDA later this year to discuss our bremelanotide development plans. The results of this meeting will guide our final development program and at that time we will be able to provide you with the details.

Regarding PL-3994 and our earlier melanocortin receptor programs, we intend to enter into corporate partnerships to access the resources to move these exciting opportunities forward.

In closing, through tight control of our expenses and increasing our projected cash flow by expanding our obesity and diabetes collaboration with AstraZeneca we are confident we can move Palatin forward and secure significant value for our shareholders. Now I would like to open the call to questions.

(Operator Instructions) Matt Kaplan, Ladenburg.

Good morning. So a couple questions starting off with the AstraZeneca agreement, you mentioned that you amended and extended the agreement. What does that mean for Palatin going forward?

Steve?

We amended the agreement and during the fiscal year we actually received $5 million of milestones related to the progress we have made with the obesity program including the recent trial that we completed. The actual research collaboration part of the support whereby AstraZeneca reimburses us for an agreed upon FTE rate, full time equivalent rate, initially would have expired January 31, 2008. That was extended for another year -- 2009. Thank you, Trevor. That was extended for another year, for January 31, 2010.

The additional amendments to the agreements included a clinical trial for the obesity program that Trevor and Carl just discussed.

So really the next steps for this program are to move the selected molecules into clinical development in 2010?

Yes, and we are on course. In fact the selection will be this year. Of course, we aim to get into the clinical studies next year. But as I mentioned, the proof-of-concept clinical study we did earlier this year that will be done on behalf of AstraZeneca has been tremendously useful in that it will really allow us to make the translation to the clinic with commercial candidates.

Then in terms of bremelanotide, can you give us a sense from your prior studies in the PD non-responders what you saw in those patients in terms of efficacy? And then also kind of secondarily, what you saw in the subcu trial, give us some more detail in terms of the side effect profile compared to the intranasal.

Previous and earlier clinical studies have included small populations of non-responders. That data together with some studies that an Iranian group in Tehran actually did with bremelanotide, which weren't sponsored by the Palatin, look very consistent, look very intriguing.

In fact, the Iranian studies show that monotherapy with bremelanotide was very good, and those PD-5 non-responders were running properly along the lines that we would be recruiting, selecting, and then randomizing. In other words, you take all the subjects that are candidates for the study through a running period with a PD-5 inhibitor to really show they are not effective before you then randomize to bremelanotide either as monotherapy or as adjunct.

Your second part of the question, Matt, concerning --

In terms of what you are seeing in the side effect profile with the subcu dosing regimen rather than the intranasal.

Well, we actually didn't see a number of the AEs that we saw that were due to the intranasal route of administration of course, but it's always nice to establish that, to flush in a little bit of that early headache and so. But what we did -- what we also were very excited about is that as we had hoped that we could really separate and lose the changes in blood pressure, but also the GI side effects, nausea and vomiting, at plasma concentrations that we know are going to be very robust and very erectogenic. So that was the really exciting outcome from the study.

Great. And just one final question in terms of -- you said you had mentioned in your prepared remarks that you are going to have some data at the HFSA conference upcoming. What should we expect to see there?

That is really a small study with PL-3994 which was run through as controlled hypertensives. Basically it was a PK and a safety study, but we will be able to show some cardiovascular effect and dose ranging which will guide the dosages we will use in future heart failure patient studies.

And then I guess a question for Carl. Can you give us a sense in terms of where you are in the partnering discussions for 3994?

Sure. We have targeted most of the major pharma for that and we have interest from multiple partners in the program. When anything would conclude -- I don't have an exact idea if or when anything would conclude, but certainly there is good interest. We are optimistic that we should be able to conclude a transaction that allows PL-3994 to move forward and for us to realize the value here.

Thanks, guys.

Due to no further questions in the queue I would like to turn the conference back over to Dr. Carl Spana.

Thank you. I would like to thank everyone for participating in our year-end conference call. As always remain very excited about the potential at Palatin. We have done tremendous work in the last year and moving the Company forward under some very difficult conditions. I think we are well-positioned for a great year this year and we are really looking forward to it.

As always I look forward to meeting the various investors and analysts and so on and so forth as I get out to make the rounds, particularly in the fall. With that said, we will talk to you next quarter, and Steve, Trevor, thank you.

That does conclude today's conference. Thank you for your participation.