Palatin Technologies Inc (PTN) 2012 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies fiscal first quarter 2012 conference call. As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that statements from Palatin that are not historical-looking facts may be forward-looking statements. These statements are based on assumptions that may or may not prove to be accurate, and actual results may differ materially from those anticipated due to a variety of risks and uncertainties discussed in the Company's most recent filings from the Securities & 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.

Thank you, good morning, I'm Carl Spana, President and CEO of Palatin Technologies. With me on the call today is Steve Wills, our Chief Financial and Operating Officer and Executive Vice President, and Dr. Jeffrey Edelson, our Chief Medical Officer. On today's call, we will be providing updates on our product programs and financial results. To begin, Steve Wills will provide an update on our fiscal first quarter 2012 financial results. Steve?

Thank you, Carl. Good morning, everyone.

Regarding the financial update, Palatin's net loss for the quarter ended September 30, 2011, was $3.4 million or $0.10 per basic and diluted share compared to a net loss of $4.6 million or $0.39 per basic and diluted share for the quarter ended September 30, 2010.

The decrease in net loss for the quarter ended September 30, 2011, compared to the same period last fiscal year is the result of Palatin's strategic decision to reduce staffing levels and to focus resources and efforts on clinical trials of bremelanotide for female sexual dysfunction, the preclinical development of an inhaled formula of PL3994 and a new peptide drug candidate for sexual dysfunction. The decrease in net loss per share was also significantly impacted by the higher number of shares outstanding in the quarter ended September 30, 2011, compared to the same period last fiscal year due to the sale of shares of stock in March of 2011.

Regarding revenue, total revenue for the quarter ended September 30, 2011, was $27,000, compared to $216,000 for the same period in 2010. Revenues for these periods consisted entirely of amounts recognized under our agreements with AstraZeneca.

Regarding costs and expenses for the quarter ended September 30, 2011, total operating expenses were $3.4 million, compared to $4.8 million for the same period in 2010. The decrease in operating expenses for the quarter ended September 30, 2011, compared to the comparable quarter in 2010, is the result of our strategic decision to reduce infrastructure costs referenced prior.

Regarding our cash position, our cash and cash equivalents were $14.9 million as of September 30, 2011, compared to $18.9 million at June 30, 2011. Our current liabilities were $1.7 million as of September 30, 2011, and $2.8 million as of June 30, 2011, a reduction of $1.1 million.

We believe, based on our current operating plan that our cash and cash equivalents will be sufficient to fund our operations through at least calendar year 2012.

Thank you, Steve. And now for an update on our programs.

Before I give the update, I would just like to draw your attention that earlier in November, the Company held an analyst day in New York City, in which we had two invited guest speakers who were experts in the field of female sexual dysfunction, presentations from that analyst day are on the website, for those of you who would like a little more information, a little more detail on FSD and our programs in that area, please go to the website. You might find that those presentations are quite informative.

So to start on the programs I'll cover our obesity and diabetes melanocortin-4 receptor program which is partnered with AstraZeneca. AstraZeneca continues to progress AZD2820 through a Phase I clinical study. We expect initial data by the end of this calendar year.

The commercial drug candidate, AZD2820 is a melanocortin receptor-4 partial agonist developed by Palatin as part of its collaborative research program with AstraZeneca. The decision to move this program into clinical development was in part based on exciting clinical data generated by Palatin as part of our collaboration with AstraZeneca. Results in proof of principal clinical trials in obese patients with non-commercial compounds that target the melanocortin-4 receptor showed significant reductions in food intake and weight loss. We believe this clinical data, along with earlier work in animal models of obesity, demonstrates the significant role that the melanocortin pathway plays in regulating food intake and weight, and validates the melanocortin-4 receptor as a major target for obesity therapeutics.

We believe that therapeutics that target the melanocortin-4 receptor have the potential to demonstrate the safety and efficacy required for approval, and to dramatically impact the treatment of obesity. As you can imagine, this program has huge commercial potential, and we believe that our partner AstraZeneca has the resources and commitment to recognize this potential.

We are eligible for milestone payments totaling up to $145 million, with up to $85 million contingent upon development and regulatory milestones, and the balance on achievement of sales targets, plus mid-single to high-single digit royalties on sales of approved products. AstraZeneca has responsibility for product commercialization, product discovery, and all development costs.

Moving on to PL3994, our next program, our natriuretic peptide receptor agonist, in development as a treatment for acute exacerbation of asthma, which is defined as an ongoing asthma episode in which asthma symptoms do not adequately respond to initial bronchodilator or corticosteroid therapy. As we have previously stated, a key near-term objective for our PL3994 program is to identify a development and marketing partner, and once we do that, to initiate clinical studies. We are in discussions with multiple potential partners that we believe have the developmental, regulatory, and commercial resources to assist us in advancing our PL3994 program.

Finally, we'll cover our female sexual dysfunction program. Bremelanotide, a melanocortin-4 receptor agonist, in development as a treatment for female sexual dysfunction is our lead clinical program. Bremelanotide is currently being studied in a Phase IIb clinical trial designed to evaluate its safety and efficacy as a treatment for premenopausal women with female sexual dysfunction. The main objectives of this trial are to generate the safety and efficacy date to support the transition of this program into Phase III registration trials.

The trial is designed as a placebo controlled double blind study. The study will have four parallel arms -- one placebo, and three bremelanotide doses. We are targeting to enroll 100 premenopausal female dysfunction patients per arm, for a total of 400 patients. The primary efficacy measure for the study will be the improvement in the number of satisfying sexual events. This will be measured using a validated event log, or diary. Additional efficacy evaluations will include changes in arousal, desire, and dysfunction-associated distress as measured using validated patient self-assessment questionnaires. We will also evaluate the blood pressure effects of subcutaneously administered bremelanotide in this population.

Bremelanotide Phase IIb study in female sexual dysfunction patients initiated in June of this calendar year and enrollment is proceeding on schedule. We anticipate delivering the results of this study in the second half of 2012. We have designed a comprehensive program to evaluate the safety and efficacy of bremelanotide and if the results of this study are positive, they will support the transition into Phase III registration trials.

We believe that our bremelanotide female dysfunction program has tremendous potential. There are no FDA approved treatments for female sexual dysfunction, and these patients have limited treatment options. We believe that female sexual dysfunction represents a significant area of medical need, and a substantial commercial opportunity.

In closing, over the past quarter we continued to make significant progress in advancing our programs. Our bremelanotide female sexual dysfunction program is enrolling patients in a major Phase IIb clinical trial, designed to provide the safety and efficacy data to move into Phase III registration trials. This program is on schedule to deliver data in the second half of 2012. Our PL3994 program for severe asthma is ready to begin a proof of principle clinical trial, and we are in discussions with potential partners. And finally our melanocortin-4 receptor obesity program, which is partnered with AstraZeneca, is enrolling patients in a Phase I study, and is on track to deliver data later this calendar year.

We believe that Palatin is in a strong position to deliver value for our shareholders. We have several exciting clinical programs, and the financial and human resources needed to reach substantial development milestones. Thank you for participating in the Palatin fiscal Q1 conference call. We'll now open the call to questions.

Thank you. (Operator Instructions). And we'll now take our first question from David Moskowitz with Roth Capital.

Thanks. Good morning, and thanks for taking the question. So I just wanted to quickly focus on the financials. It looked like the burn was a little bit high in this period. Can you speak to the cash inflows and outflows of the quarter, and why, again, the P&L looked a little bit more burdened than we expected? And at the same time, can you talk about if those trends are going to continue into the fourth quarter?

Okay. Thanks David, this is Steve Wills. The -- 95% of what Palatin is spending money on is the bremelanotide trial for female sexual dysfunction. The overall budget, and the budget being defined as through the period June 30, calendar year 2012, when we anticipate the trial being completed, we're on target for that budget. For both cost, and as Carl mentioned, enrollment target dates. The quarters will fluctuate between a little bit high, a little bit low, based on the budget. But frankly that's just a timing difference on when certain expenses based on the projected trial costs hit. I'm comfortable that if we're a little over in the September 30th quarter, it will be adjusted in the December 31, first quarter of calendar 2012. I think the take home here is that the trial is on track from an enrollment standpoint, projected data points, and projected costs through June 30, calendar 2012.

So no unusual uses of cash in the quarter?

No, everything was expected. Again, just a little bit of a timing difference when some of the accrued expenses hit. The September 30 quarter again could be a little bit high or low, and more than likely that will take care of itself in the subsequent two quarters.

Okay. And can you talk about how the cash is going to work through 2012, specifically as it relates to obtaining the results from the Phase II BMT trial?

The cost for the bremelanotide female sexual dysfunction trial should be completed by June 30, of calendar year 2012. At that time, our operating cash burn will be reduced to approximately $1.3 million per quarter. So when we talk about having $15 million at September 30, 2011, and I make the statement that based on our current operating plan that we have sufficient cash to fund operations through calendar year 2012. The reason being, the significant burn related to the bremelanotide female sexual dysfunction trial will be completed at June 30, 2012. At that point we're projected to have between $6 million and $7 million of cash, and our burn, again, will be reduced to approximately $1.3 million per quarter.

Steve, does that include anything from AstraZeneca or the natriuretic peptide program?

No, those are conservative figures. It does not include any potential milestone that we may receive from AstraZeneca in calendar year 2012, or any potential collaboration-type funds related to our collaboration efforts on PL3994.

Okay. Excellent. And Carl with regard to the AstraZeneca partnership, when are we expected to get the next data? I think, Steve, you might have said in your prepared marks, we could see data in the first quarter. Can you just clarify what that data would be? What kind of trial results and --

Sure. Two things in this program. One, AstraZeneca is currently conducting a Phase I, dose-escalation study in normal healthy humans for first (inaudible) with a commercial compound. That study should be close to being concluded and we would expect the data either late this year or early next year. That would really be -- data from that would really be that there was no safety signal seen with the compound, and that they are ready to go forward into additional clinical trials. Most likely in obese patients, where we will begin to collect safety and the initial efficacy data. So that's the type of data that we're looking for. So the key take home there would be that one, the program is still progressing and that they're moving into the next phase of studies, which would really give us additional safety and efficacy data.

What do you think the propensity is for AstraZeneca to actually release that data? It sounds like it's Phase I data. Do you think AstraZeneca will come to the forefront with it?

Sure. I mean, I don't know in what level of detail they would release it. I'm not even sure how interesting Phase I dose-escalation in normal people really are. I think the take home message would be are they doing the next study, which means that they didn't see anything of any significance, and they are committed to taking the product forward.

When do you think -- do you have any idea when we might know about -- when does AstraZeneca give a pipeline update?

We would expect it before the end of the year. That's our expectation.

Okay. And with regard to that program, when would there be an opportunity for you guys to get a milestone from the program?

I'll let Steve handle that.

Based on certain criteria -- and hopefully you can appreciate that some of that criteria is confidential for competitive reasons. If things stay positive and progress, we would have an opportunity for a potential milestone in the second half of calendar 2012 of $2.5 million.

Okay. Thanks for that clarification, I appreciate it. Let me jump back in queue, and appreciate it.

Great. Thanks, David.

And we'll take our next question from Rahul Jasuja with Noble Finance.

Hi guys, thanks for taking my question. Sticking to the AstraZeneca partnership for one minute here. Steve, you mentioned $2.5 million (inaudible - audio dropped) sometime next year. Is that tagged to initiation of Phase II?

So again, as I mentioned for confidential and competitive reasons, we have agreed to not disclose the specific performance criteria. It's for the advancement of the program, we're just not in a position to state how specific that performance criteria is.

Okay, and at the risk of being redundant, from the investor analyst point of view, the expectation for Phase I data coming out later this year or early next year from AstraZeneca, we should just be really looking forward to the progress to the next stage, and not really any efficacy and safety -- well, safety of course will come out, but no efficacy signals?

Correct. The Phase I trial, the details of that are on clinicaltrials.gov. These are normal humans, there would be -- and they're single dose, so there would be no expectation that you would see any efficacy in that. I will go on the assumption that AstraZeneca would be relatively conservative in wanting to keep proprietary as much of the safety data as possible, which I don't blame them for. Because it's a competitive field. And they don't want to give out their information. But I think the real take home message is the progression of the program to the next step which would really be -- my guess would be a Phase II type study in probably the in-clinic setting with obese patients. And that's really what you want to see, because that means the program is -- they are committed it to, and they are continuing to progress the program forward, and that's what we're really looking for.

And then just want to move on to the FSD program. So Carl, the older studies that were done with the intra nasal delivery looked very promising -- fairly promising in the short four weeks or so pre and post menopausal FSD clinical trials you guys ran in 2007 or 2008. I remember those were intra nasal 10mg doses. For my clarity, could you just talk about the fact that now you are using these, I guess it's 0.75mg to 1.75mg, these dose ranges. The 10mg -- The dose you used intra nasal were limited at that time was there were issues with -- it was mainly -- I guess compliance, nausea and so on maybe. Could you talk about these doses as it relates to that?

Sure, couple of things. So the 10mg intranasal, just on the Cmax that was attained with that 10mg dose, we should be covering that range with the doses that we have subcutaneously. What we expect from this type of study is to have much better control over the pharmacokinetics and exposure, and really we knew from looking at those studies and many of the other intra nasal studies, that in particular, the gastrointestinal effect, nausea and emesis, tracked fairly closely with over exposure to the drug. So we would expect that the rates of nausea and emesis really should be very low in this study, and there really should be little to no emesis and nausea should be very low and very mild in nature, so we just have a very good tolerability profile and maintained the efficacy that was seen in those studies. So that's really what the goal of this move from intra nasal to sub-cutaneous was. It's really to get control of the dosing. I don't know if Jeff wants to add anything onto that or not.

Only to add that the extensive experience that was accumulated with the intra nasal program was used to perform some fairly detailed pharmacokinetic, pharmacodynamic analyses which allowed us to model the dosing with a much more controlled sub cutaneous program. So we've clearly reduced variability in PK, and based on the modeling that we were able to do with the prior data, I think we've focused in on a range of doses that will interrogate the safety and efficacy in a much tighter range.

Okay. That's fair. Thanks. And I recall that the FSD program had women that were really driven. This was both pre menopausal and post menopausal. One issue that may often come up with those looking at Palatin is when you look at a delivery system are these women equally driven? For example, versus the intra nasal versus now, the sub cutaneous?

We have taken it on two levels. We know from marketing research work that we've done that you will lose about 15% of these patients will not want to take a needle versus a pill, so you will have some loss, which is pretty typical. In general, the FSD patients, the sexual dysfunction patients in general, are fairly motivated to come in for treatment options. As we had on our analyst day, it doesn't appear as if with regards to this particular trial that the sub cutaneous route of administration is posing any problem. I don't know if Jeff wants to comment or not.

Well no, but these are people who have agreed to participate in a four month period of sub cutaneous self-administration. I think Carl's mentioned the data we have. There are some women who will not voluntarily take a sub cutaneous product, but there's a lot of precedent for PTH and TNF products, and a range of products that are routinely self-administered.

Okay, good, and one final question that seems to be a question on many investors and analysts minds, looking at FSD, is number one, the fact that there's no drug approved in the US so far. There is LibiGel coming out for post menopausal women. How should we be looking at the FDA's stance on FSD, given the fact that there is nothing approved, it is a big market, there seems to be a strong demand, and now you have potentially a post menopausal approval, could you just comment on those factors?

Sure. My view point is, and experience dealing with the FDA in particular on this indication is that I think there is a desire to have a safe effective treatment option for these patients, and it's evidenced by the fact that there are Phase III programs, the LibiGel program has gone forward, Flibanserin before that. We had a very, I think constructive and substantial meeting with them concerning the study that we're currently conducting, and I think we found them to be very helpful. I mean they're doing their job, obviously, but very helpful in giving us a number of items that we need to keep in mind as we progress our program forward. So I think it's a good regulatory environment. But let's be clear. People don't die from this indication, so we do have to make sure that our products are safe and effective and give a true benefit to the patients. So I don't think that's going to change. And obviously as -- we're hopeful that LibiGel will have positive data and continue to go forward, and we'll have an ability to look at the regulatory process as it unfolds, and certainly we will as much of it as we possibly can.

Thank you, guys.

We'll now go to David Moskowitz with Roth Capital.

Thanks for the follow-up. I wanted to just focus a little bit on enrollment. Can you guys talk a little bit, I guess anecdotally, about the enthusiasm that you are seeing with regard to enrollment, I guess as it pertains to you being on track. And specifically the trial design as I understand it is pretty burdensome, with some of the monitoring that's going on. So can you also speak to how you are getting over those hurdles with regard to enrollment?

Yes, thanks, David. This is Jeff speaking. Your comments are correct. This is a fairly complex study, given the number of safety and efficacy parameters that we're examining. The trial population is actually one of the first to examine patients with HSDD and FSAD, hyposexual desire disorder and female sexual arousal disorder, the two components of FSD. And we have a series of end points that are unique to each subgroup as well as a mixed population, so it's a fairly complex trial. That being said, the uptake from the sites have been excellent, we really appreciate the dedication and courage of the patients who participate in such a trial, and appreciate the burden that they are bearing on this.

Can you talk on some of the monitoring that takes place and what is the most burdensome within the trial?

Well, there is a fair survey burden, given that most of the diagnostic and efficacy tools here are patient-reported outcomes. I would say the survey burden is significant. We also have three 24-hour monitored ambulatory blood pressure assessments that allow us to examine any possible hemodynamic signal that emerges over the program.

So in other words, a patient has to come in and be monitored for 24 hours?

No, these are ambulatory blood pressure measurements following in-clinic dosing.

Okay. And how long do they have to remain, when you do in-clinic dosing, how long do they have to remain on site for that?

They stay in clinic for a period of four hours, and then they are discharged home with the ABPM device.

Got it. Okay. And just with regard to safety, is there anything you guys can comment on at this point? I imagine there is a DSMB that is monitoring the trial, and there is obviously key parameters, blood pressure and some of the other adverse events that were seen with the nasally delivered formulation. Anything that you guys can say with regard to that? And, anything that -- the DSMB -- any comments or anything out of that at all?

You know, I think you hit it. We have a DSMB, and obviously you can -- we would take any news from them quite seriously, and that would be obviously discloseable, and you can take the fact that we haven't disclosed anything as -- for what it is.

Okay.

If there was an issue, believe me, they would know it, and we would know it, and I'm pretty sure you would know it.

Got it. And you have a fair amount of patients that have been dosed thus far?

We routinely tell you guys enrollment is going fine. We're on track. If we put our data out, you do the math anyway you want.

Okay. Excellent. Thanks so much, guys, for the update. Appreciate it.

All right.

That concludes today's question-and-answer session. Dr. Spana, at this time I'll turn the conference back to you for any additional or closing remarks.

Thank you all for participating in the Palatin fiscal first quarter conference call. I certainly enjoy seeing you guys when I'm out on the road meeting investors and the analysts. We love keeping you guys informed. We feel that the program has been progressing quite nicely. We're very excited about what is going on at Palatin. I think we are very well positioned. As we said, we're financed through some major milestones. Programs are progressing quite well. Just a reminder, if you want a little more information on FSD, please see the websites, the presentations are quite informative that are on there. With that being said, enjoy your day, and enjoy your holiday season, and I look forward to seeing you when I'm out on the road. Thank you, good bye.

Ladies and gentlemen, that does conclude today's conference call. And we thank you for your participation.