Palatin Technologies Inc (PTN) 2010 Q2 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the Palatin Technologies second-quarter, fiscal-year 2010 conference call. At this time all participants are in 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.

Good morning ladies and gentlemen, and welcome to the Palatin conference call. I'm Carl Spana, President and CEO of Palatin Technologies. With me today is Stephen 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 off our conference call, let me say a few words 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, both male and female sexual dysfunction; our obesity and diabetes program, which is partnered with AstraZeneca; and lastly, our natriuretic peptide program, with heart failure as a first indication.

All of our programs target patient populations where the medical need is high and with tremendous commercial potential.

We are excited about the potential of our melanocortin targeted sexual dysfunction program. Our lead compound in this program is Bremelanotide. An intranasal formulation of Bremelanotide has been extensively studied in large Phase II clinical studies as a treatment for both erectile dysfunction as well as female sexual dysfunction.

The data from Phase -- the Bremelanotide intranasal Phase II program has led us to several key conclusions that are guiding the future development of Bremelanotide.

First, Bremelanotide has demonstrated meaningful efficacy in a broad range of patients in both erectile dysfunction and female sexual dysfunction patient populations.

Second, intranasal Bremelanotide administration results in highly variable absorption, with some patients receiving up to five times more than the targeted dose range. To adjust this variability, we have switched the route of administration from intranasal to subcutaneous.

Finally, a small number of patients receiving intranasal Bremelanotide experienced a significant increase in systolic blood pressure, a potential safety concern. Working with the FDA to address this potential safety concern, we have designed a Bremelanotide subcutaneous cardiovascular safety program, which will generate the data required to evaluate the effects of subcutaneous Bremelanotide on blood pressure and guide the safe development of Bremelanotide.

The first clinical study, completed last year, evaluated the safety of multiple daily repeat doses of subcutaneous Bremelanotide. The second study, which is currently enrolling subjects, will evaluate the safety of a signal daily administration of subcutaneous Bremelanotide in our target erectile dysfunction demographic. That is men 45 to 65 years old.

Palatin has been in discussions with the FDA concerning the clinical development of Bremelanotide for men with erectile dysfunction and who do not respond to current phosphodiesterase-5 inhibitor therapies.

We anticipate beginning enrollment of patients in a Phase IIb study designed to evaluate the safety and efficacy of subcutaneous Bremelanotide in men with erectile dysfunction and not responsive to current therapy later this calendar year.

In addition we intend to further develop Bremelanotide as a treatment for women with female sexual dysfunction, and we plan to discuss our female sexual dysfunction Phase II clinical development program with the FDA in the first half of calendar year 2010.

Dr. Hallam will cover our subcutaneous Bremelanotide program in more detail later in the call.

Obesity and diabetes are two diseases where there remains of a strong need for pharmacological intervention. The costs 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.

Our research collaboration with AstraZeneca achieved several key milestones in the past year, which has generated substantial enthusiasm outside of both companies. The program has now transitioned from the research stage into clinical development. As anticipated as part of this transition, research at Palatin has stopped, and AstraZeneca has now taken over the future development of the program, and we anticipate the first clinical studies to begin this calendar year.

As part of the successful conclusion of the AstraZeneca research collaboration, Palatin will receive a $2.5 million milestone payment later this calendar quarter.

We remain excited about the potential of this program as it begins its clinical development under the leadership of AstraZeneca with Palatin providing additional support as needed.

Finally, our natriuretic peptide program has made substantial progress in the past year, resulting in the addition of two new therapeutic areas of interest. The program has been expanded to include pulmonary indications and the additional cardiovascular indication of resistant hypertension.

We have been generating additional intellectual property and research results to support these areas of interest, and both of these new therapeutic areas have generated substantial interest for potential corporate partners.

Our lead molecule in our natriuretic peptide program is PL-3994, a novel, natriuretic peptide agonist. PL-3994 is a first-in-class molecule in development for the [sub chronic] treatment of heart failure patients after an acutely decompensating event. We expect that PL-3994 will be effective in reducing the high re-hospitalization rates in patient population in the three- to six-month period after they are released from the hospital.

We have met with the FDA to discuss PL-3994 as a sub chronic treatment. The outcomes of this meeting have provided guidance as a novel indication that is clearly defined in our PL-3994 clinical development plan, with agreement on the next study.

Dr. Hallam will provide additional details later in the call.

Now I'm going to hand the call over to Stephen Wills, who will provide the financial update before Trevor goes into detail about our research and development programs.

Thank you Carl and good morning. For the quarter ended December 31, 2009, which is the second quarter of our fiscal year, Palatin reported net income of $4.5 million, or $0.04 per share, basic and diluted, compared to a net loss of $0.4 million, or $0.00 per share for the same period in 2008.

For the quarter ended December 31, 2009 total revenues amounted to $7.3 million, compared to $1.2 million for the same period in 2008. The increase in net income for the quarter ended December 31, 2009 compared to the same period last fiscal year was primarily due to an increase in revenue recognized under Palatin's license and clinical trial agreements with AstraZeneca.

Regarding revenue, for the quarter ended December 31, 2009 Palatin recognized $7.3 million of contract revenue under its collaboration agreement with AstraZeneca, compared to $1.2 million for the same period in 2008.

Based on the September 2009 amendment, Palatin provided research services to AstraZeneca through January 2010. Accordingly, contract revenue is being recognized over that performance period.

Regarding costs and expenses, total operating expenses for the quarter ended December 31st, 2009 amounted to $3.8 million, compared to $4.0 million for the comparable quarter of 2008.

Regarding our cash position as of December 31, 2009, Palatin's cash, cash equivalents and investments totaled $7.4 million compared to $7.8 million at June 30, 2009 and $6.3 million for the same period last year. We anticipate receiving $2.5 million from AstraZeneca related to our September 2009 amendment to our collaboration agreement later this calendar quarter.

Thanks, Steve. Dr. Hallam will now go over the research and development program.

Good morning. Let me start with our sexual dysfunction program.

The Bremelanotide program continues to move forward as we plan to begin Phase II at-home studies in subjects non-responsive to PDE-5 inhibitors later this year. Our primary concern is to establish safe procedures and protocols to assure safe execution of Phase II at-home studies in the target population by the subcutaneous route.

Over the last 18 months, Palatin has performed a number of preclinical studies and an additional clinical study with Bremelanotide to further understand the relationship between Bremelanotide plasma levels, it's route of administration, and blood pressure changes. The data show that controlling BMT plasma exposures in the range required for efficacy by dosing subcutaneously appears to reduce to the point of elimination the blood pressure response.

In addition, the incidence of gastrointestinal side effects such as nausea and vomiting observed in the intranasal studies were also much better controlled.

Palatin had a guidance meeting with the FDA late last year to discuss the development program for Bremelanotide as a second line therapy for ED patients that are non-responsive to PDE-5 inhibitors. The meeting was very constructive, and we have a clear and agreed plan to proceed forward cautiously to assure safe execution of Phase II at-home studies in the target population.

The subcutaneous clinical program has begun with a Phase I study in 45- to 65-year-old men who have been subjected to several subcutaneous administrations of BMT and placebo. The aim of the study is to show that observed blood pressure changes are consistent from one does to the next for a given individual. This is important to provide assurance that an (technical difficulty) [n] of these first testers could be utilized in future Phase II studies to remove a subject that might be particularly sensitive to Bremelanotide.

Bremelanotide will be targeted as a second line therapy for those men with ED who are non-responsive to PDE-5 inhibitors. The Phase II program will evaluate whether Bremelanotide monotherapy is optimal, or whether adjunct use of Bremelanotide together with PDE-5 inhibitors will bring better benefit.

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 of the cardiovascular effects.

The Phase I trial has been planned with PL-6983 to see if this also holds true in man by seeking to evaluate whether doses that produce erectogenic activity measured by RigiScan and mechanical measure of erectile response, do so with an even greater separation than those that elevate blood pressure.

Our intention is to hold PL-6983 as a potential backup and not proceed with a Phase I trial at this time.

In addition to the psychic peptide therapies, we also have novel potents in selective, orally bioavailable small molecule melanocortin-4 receptor antagonists. The ultimate aim would be to have an oral, on-demand simple tablet form for use in both female and male erectile dysfunction.

Now moving to our obesity program with AstraZeneca. The research phase with AstraZeneca for the discovery of novel melanocortin-4 receptor agonists anti-obesity agents reached a successful conclusion this year. Two clinical candidates from Palatin's discovery efforts have been selected and entered into AstraZeneca's development program, and we expect clinical studies to commence this year.

Palatin has enabled AstraZeneca to establish a mature discovery program to develop orally bioavailable clinical candidates. And together with AstraZeneca, Palatin has performed a proof of principle clinical study on a melanocortin-4 receptor agonist. The data from this proof of principle study has formed the basis for translational analysis that confirms selection of commercially viable clinical candidates. And further collaborative proof of principle clinical studies with AstraZeneca are planned.

Now turning to our heart failure program, which -- where we are targeting our natriuretic peptide program and PL-3994.

Palatin and its scientific advisers believe that chronic stimulation of 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 of the natriuretic peptide agonist 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 cell activity and desirable pharmacological and [drug-like] attributes for use as potential therapeutics. One such molecule is PL-3994.

PL-3994 is a long-acting agonist that has been designed to be suitable for daily subcutaneous self administration. 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 re-hospitalization occurs will be decreased or prevented by a three- to six-month course of treatment with PL-3994.

PL-3994, which will be administered as a daily subcutaneous injection as adjunct to other medications such as beta blockers, ACE inhibitors, and angiotensin receptor blockers is intended to prevent re-hospitalization by a combination of decreased cardiac remodeling and the improving kidney function.

As earlier described, two early phase clinical studies have been completed, a Phase I study in healthy volunteers, and a Phase II study in controlled hypertensives, both of which have been presented for (technical difficulty) the Heart Failure Society of America meetings over the last year or two.

Going forward, the plan is to evaluate PL-3994 in additional Phase II studies to characterize the safety, pharmacokinetics and pharmacodynamics in heart failure patients. The 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 in mid-2009 to discuss the development plan for 3994 in heart failure. The outcomes were that PL-3994 could be developed for a novel and registrable indication to reduce re-hospitalization. And secondly, the FDA guidance clarified the clinical development plan, and 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 will be both appropriate from a patient safety perspective and management -- manageable from a clinical development perspective.

Now, we continue to evaluate potential for other key indications with unmet need in addition to heart failure for our natriuretic peptide receptor program. Of these, acute severe asthma, resistant hypertension, and pulmonary arterial hypertension all represent therapeutic opportunities for stimulators of the NPRA mechanism and are therefore of great relevance to PL-3994.

Palatin is conducting a number of preclinical studies to evaluate the feasibility of use of PL-3994 in the emergency room for acute severe asthmatics. In acute severe asthma patients presenting in the emergency room are commonly unresponsive to beta 2 agonists. This unresponsiveness sometimes relates to the overuse of beta 2 agonists that then render the airways unable to adequately dilate, and sometimes they have a different root cause.

Despite there being some excellent beta agonist bronchodilators available, there are no bronchodilators that have been shown to provide relief under these conditions, and treatment relies on the administration of large doses of glucocorticoids, with symptoms improving gradually only after several hours at risk. This period of unresponsiveness is associated with significant morbidity and occasional mortality and represents a huge unmet need.

To give you an example, in 2004 in the United States alone, asthma exacerbations resulted in 14.7 million outpatient visits, 1.8 million emergency room visits, 497,000 hospitalizations, and 4,055 deaths. Case fatality from asthma in the United States is estimated at 5.2 per 100,000.

Published data, both preclinical as well as clinical studies, have shown that NPRA agonists are very effective bronchodilators, acting to relax airway smooth muscles by increasing cyclic GMP. This is an entirely different mechanism from that of beta agonists that act to cause bronchodilation by stimulating increases in cyclic AMP levels.

An alternative bronchodilator such as PL-3994 should meet this high unmet medical need.

The program would explore the current subcutaneous route of administration as well as emergency room use of nebulizer for optimal therapy. If effective, further developments of formulations and devices may be warranted to provide wider availability to broader asthma and COPD populations.

Finally, let me say a few words about our late stage discovery research.

First, we have succeeded in identifying extremely potent and selective melanocortin [ligons] that will be evaluated in sophisticated ex vivo human disease models of airways inflammation. If successful, we aim to progress to clinical development and target the smoking asthmatic population that accounts for 20% of the total asthmatic population. And because of their smoking, these folk are poorly responsive to glucocorticoid treatment.

We would envision that the clinical population that would derive benefit could be expanded to those with COPD.

In addition, we continue to have interest in antagonists and inverse agonists of the melanocortin-4 receptor. We are in the late stage discovery process to identify potent melanocortin antagonists of the MC-4 receptor for cachexia associated with COPD and also with tumor growth.

Now I'm going to hand back to Carl.

Thank you Trevor. Just a few words before we open to Q&A.

At Palatin we are very excited about our product pipeline. The depth and potential of our programs has allowed us to access needed resources during a very difficult economic period. However, we realize we will not be able to pursue all of our opportunities and we have to prioritize.

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

The sexual dysfunction space we are targeting is an area where there is clinical need with limited products in development. 35% of the patients with erectile dysfunction do not respond to current PDE-5 inhibitor therapy, 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 that Bremelanotide will have significant benefit in this patient population. Our recent work to address the potential safety concerns of Bremelanotide has increased our confidence that Bremelanotide can be commercialized with an acceptable risk-to-benefit ratio.

Regarding female sexual dysfunction, patients and their doctors have limited treatment options. Based on our clinical data we believe that a melanocortin-4 targeted therapy holds great potential for treating these patients. We are fortunate to have two potential drug candidates, Bremelanotide and PL-6983 for this indication. As previously mentioned we are targeting to begin Phase II advocacy studies later this calendar year in erectile dysfunction patients.

Finally, regarding our natriuretic peptide program, our lead molecule PL-3994 and the expansion of the program into two new therapeutic areas has increased our confidence in the potential to attract corporate partnerships to access the resources required to move these exciting opportunities forward.

In closing, we have made substantial progress in all of our programs while maintaining tight control over our expenses and increasing our cash flows by expanding our obesity and diabetes collaboration with AstraZeneca. We are looking forward to an exciting year in 2010 with the recommencing of the Bremelanotide sexual dysfunction program in ED and FSD and the potential of a corporate partnership for our natriuretic peptide program. We are confident we can move Palatin forward and secure significant value for our programs and our shareholders.

Thank you for joining the Palatin conference call. And the operator will now open up the call to questions.

(Operator Instructions). Matt Kaplan, Ladenburg.

So a couple things. First, with the BMT program, Bremelanotide program, the study that you have just recently started that's ongoing? And then when could you see data from that?

We would expect to complete the dosing part in the first quarter, and then we'd have the data out in the second quarter. And right now we seem to be -- we're on-track.

And is that -- do you have to take that data to FDA before you start the Phase IIb study in -- sometime later this year?

That would be the prudent course of action. We would intend to put that in front of the FDA, and along with the final protocol for the Phase IIb, and then get clearance and begin enrollment.

And what are you looking to see in this single dose daily -- daily dose study? And then -- just to be able to move it forward?

Sure. A couple of things. There are really a couple of main things we're looking for -- and Trevor can jump in as well.

Really we're looking to see if -- are there differences -- are there any changes in blood pressure pre or post dose when you compare Bremelanotide to placebo? Based on our work in earlier subcu, we would expect to see little to no change.

In addition to that, what we also want to do is we're doing multiple doses so we can see that if there is any change on the first dose, for example, does it hold or does it stay over the course of treatment? So what want to do is also qualify -- potentially qualify the first dose as a screening dose. That would mean that if your blood pressure is fine on your first dose, you wouldn't want to see it go up on any subsequent dose.

I don't know if Trevor wants to (multiple speakers)

Oh, just -- I mean, this is purely very cautious (multiple speakers) change the routes of administration to subcu. We just want to make sure. We know we've got some very good data which show three doses a day for 15 days, so very consistent PK and appear to show there is no increase in blood pressure. Now, that's great because that tells us that such chronic stimulation over 15 days doesn't have any effect on drifting baseline.

What this study -- this study is slightly different in that it's looking to check consistency. So just to make sure that should there be an individual that's particularly sensitive to BMT and you see a blood pressure increase, do you see that every time? And that would qualify a test dose for use in the at-home study. It's just to be sure we are keeping people safe. We are not expecting to see it, but that's the sort of data we need to collect.

Just as a follow-on, we really are taking a very thorough approach here to put the potential safety risk of Bremelanotide behind us and with a strong foundation so we go forward safely with no surprises as we conduct the remaining development program for the compound.

Just to be clear, can you describe the subcu injection, how long does it take? Where is it given?

Sure. It's a very small volume, less than 100 micro liters (multiple speakers) -- yes, 0.3. It can be given essentially upper arm, abdomen, upper leg, thigh, so this is a very short needle, so we probably in commercialization would use a device where you would just essentially -- a pen device where you would just essentially click it, it would deliver -- and essentially almost instantaneously deliver the dose of the drug. So very easy, very convenient to use.

And just changing the subject a little bit, with AstraZeneca, the obesity program, you mentioned you were expecting to see a milestone payment, $2.5 million, this quarter. Are there other milestone payments that you could get from that program in the future?

Absolutely. If you recall, we signed the deal in January 2007. We received $10 million upfront. During the period '07, '08 and through '09 we've received approximately $25 million of additional milestones and FTE reimbursements. And that doesn't include this next $2.5 million that's due this quarter. We have remaining approximately $85 million of development milestones related to the collaboration and another $60 million of sales milestones. And on top of that we have tiered royalties upon commercialization.

And do you expect that to move into the clinic sometime later this year you indicated?

Yes.

Yes.

Then in terms of the natriuretic peptide program, what do you see really needing to get partners excited about this program? Do you need additional clinical data? Or where are you in that?

Well I -- this is an intriguing space. I think I would be a little crazy if we weren't to acknowledge that the heart failure area has been really tough for a number of different indications and made worse by failures of agents like [relufalin] and from Merck's drug early last year -- late last year. So it's sensible of us to explore a number of different indications.

We are very excited about the pulmonary indications we're exploring, and they're well precedented.

Partners have got their own strategic alignments, and we are hearing loud and clear from one or two that they are getting a little put-off the heart failure area, they're finding it very difficult. We still believe in the program, we think there's a great opportunity there.

So it's probably about finding the right partner and getting the right timing. But just to make sure we are getting the most out of our asset, we are also chasing now what we think is an extremely exciting indication in the cu asthma area.

Again, that's been generating good interest -- good corporate interest as well. So I think overall I don't necessarily view the program just as a single indication. I think we're seeing interest across the board with potential indications for natriuretic peptides that -- not just with PL-3994 but also with compounds that we have behind that based on the underlying technology. So we feel pretty confident we can get something done from a corporate partnering standpoint to continue to get -- drive some value out of that asset.

Then just one other question on Bremelanotide. What do you see gauging your ability to start in the FSD indication? Is it also the ongoing study right now? Or (multiple speakers)

Certainly any safety study that's ongoing will be reviewed by the FDA and be part of the package that's reviewed. I think for us it's really just sitting down at the agency now and combining the existing safety data that we have, subcu, because the earlier study that Trevor was referencing was done in females, and the efficacy data that we have, and really just finalizing what the program would look like, what additional safety data if any is required before we begin at-home dosing of some of the larger studies, and really making sure we've got the right patient population defined and the right endpoints as we go forward.

So a lot of it is just really getting down and getting guidance from them so that we make sure we have the right clinical programs.

All right, thanks for taking my questions.

It appears we have no further questions. At this time I'd like to turn the call back over to Dr. Carl Spana.

Thank you. I'd like to thank everyone for participating in our quarterly conference call, and we look forward to updating you next quarter. Have a great day, and we will talk to you soon.

This does conclude today's conference, we thank you for your participation.