Palatin Technologies Inc (PTN) 2012 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies second-quarter fiscal year 2012 conference call. As a reminder, this conference call is being recorded.

Before we begin our remarks, I would like to remind you that statements 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 you to your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Thank you. Good morning. I am 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 second-quarter 2012 financial results. Steve?

Thank you, Carl. Good morning, everyone. First off, I just want to put out an FYI that, inadvertently, Dow Jones' wire services picked up on their tagline regarding Palatin's operating results that we had $1.9 million of cash and cash equivalents. The actual figure is $11.9 million. So inadvertently, they dropped the 1 and we are working with Dow Jones to correct that.

Regarding our results, Palatin's net loss for the quarter ended December 31, 2011 was $2.6 million, or $0.08 per basic and diluted share, compared to a net loss of $1.1 million, or $0.09 per basic and diluted share for the quarter ended December 31, 2010. The increase in net loss for the quarter ended December 31, 2011 compared to the same period last fiscal year was attributable to costs related to our ongoing Phase IIb clinical trial with bremelanotide for female sexual dysfunction and a decrease in grant and contract revenue.

The decrease in net loss per share reflects the impact of a greater number of shares outstanding in the quarter ended December 31, 2011 compared to the same period last fiscal year due to our sale of shares of common stock in March 2011.

Regarding revenue, total revenue for the quarter ended December 31, 2011 was $11,000, which consisted entirely of amounts recognized under our collaboration agreement with AstraZeneca. For the quarter ended December 31, 2010, we recognized revenue of $1 million consisting of $200,000 pursuant to our collaboration with AstraZeneca and $800,000 in grant revenue received under the Patient Protection and Affordable Care Act of 2010.

Regarding costs and expenses for the quarter ended December 31, 2011, total operating expenses were $3.7 million compared to $2.9 million for the same period in 2010. The increase in operating expenses for the quarter ended December 31, 2011 compared to the comparable quarter in 2010 was primarily due to costs related to our ongoing Phase IIb clinical trial with bremelanotide for female sexual dysfunction.

Regarding our cash position, our cash and cash equivalents as of December 31, 2011 were $11.9 million. Again, $11.9 million -- not $1.9 million. We also reflected $1.1 million in accounts receivable due from the sale of New Jersey State net operating loss carryforwards, which we received the funds in January of 2012. Our current liabilities amounted to $2.2 million as of December 31, 2011. Cash and cash equivalents as of June 30, 2011, our last fiscal year-end, were $18.9 million with current liabilities of $2.8 million. We believe, based on our current operating plans, that our cash and cash equivalents will be sufficient to fund our operations through at least calendar year 2012. Carl?

Thank you, Steve. And now for an update on our programs. I will start with our obesity and diabetes melanocortin-4 receptor program, which is partnered with AstraZeneca. This program, under the direction of AstraZeneca, continues to make substantial progress. In 2011, Astra designated lead compound AZD-2820, which was developed by Palatin, as a candidate for clinical development. AstraZeneca has completed a Phase I study with AZD-2820 and results from this study indicate that AZD-2820 has the safety and pharmacokinetic properties for further development.

AstraZeneca plans to conduct a second clinical study in obese subjects that will evaluate the safety and effects on fluid intake of AZD-2820. The details of this study can be found on the website, clinicaltrials.gov and it is our understanding that this study is anticipated to start in this calendar quarter.

The commercial drug candidate, AZD-2820, 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 of proof-of-principal clinical trials in obese patients with non-commercial compounds that target the melanocortin-4 receptor shows significant reductions in food intake and weight loss. We believe this clinical data, along with earlier work in animal models of obesity, demonstrate the significant role that the melanocortin pathway plays in regulating food intake, weight loss 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 realize 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 product. AstraZeneca has responsibility for product commercialization, product discovery and all development costs.

Moving on to PL-3994, our natriuretic peptide receptor agonist in development as a treatment for acute exacerbations 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 PL-3994 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 development, regulatory and commercial resources to assist us in advancing this exciting program.

Finally, I will cover our female sexual dysfunction program. Bremelanotide is a melanocortin-4 receptor agonist in development as a treatment for female sexual dysfunction and it 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 safety and efficacy data 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 has four parallel arms, one placebo and three bremelanotide doses. We are targeting to enroll 100 premenopausal female sexual dysfunction patients per arm for a total of 400 patients.

This study uses multiple endpoints to measure the effects of bremelanotide on improving the symptoms of female sexual dysfunction. These include improvement in the number of satisfying sexual events as measured by a validated event log or diary and 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 patient population.

The bremelanotide Phase IIb study of female sexual dysfunction patients initiated enrollment in June of 2011 and is on schedule to complete patient enrollment this quarter and we remain on track to release top-line data in the second half of calendar 2012.

We believe 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 of this program 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.

So in closing, we continue to make significant progress in advancing our programs. Our bremelanotide female dysfunction program will complete patient enrollment this calendar quarter in a major Phase IIb clinical study designed to provide the safety and efficacy data to move into Phase III registration trials. This program remains on schedule to deliver top-line data in the second half of 2012.

Our PL-3994 program for severe asthma is ready to begin a proof-of-principal clinical trial and we are in discussions with potential partners.

And finally, our melanocortin-4 receptor obesity and diabetes program, which is partnered with AstraZeneca, has achieved the significant milestone of completing its first clinical study. We are quite excited that AstraZeneca has made the decision to continue to progress AZD-2820 and will begin the next clinical study this calendar quarter.

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.

I would like to thank you for participating in the Palatin fiscal second-quarter conference call and we will now open the call to questions.

(Operator Instructions). Rahul Jasuja, Noble Financial.

Good morning, guys. Just a couple questions on the FSD space and then one on the AstraZeneca partnership. Let me start with FSD. So one of the issues that has been discussed actively in the FSD space is the potential for a high placebo response. How would you want us to think as to how the mechanism of action of bremelanotide or MCR-4-based agonist or the clinical trial design can mitigate such aspects of high placebo response, maybe on-demand kind of a therapy versus a more chronic sort of thing? And secondly, how driven are these premenopausal women compared to say the postmenopausal and are there any comorbidities that the postmenopausal have that the premenopausal don't have?

Well, you asked a lot of questions there, so let me try and take them one at a time. And I think one of the things you have touched on is the potential for placebo response or an increased placebo response in clinical trials of patients with female sexual dysfunction. And this certainly has been seen in other large programs, most recently the one conducted by BioSante.

We have been in a pretty good position at Palatin because we were able to look at some of the other programs that have gone before us and look at some of the ways those studies were conducted and some of the parameters around how those studies were conducted and begin to incorporate some different thinking about how these trials can be conducted to potentially minimize or better characterize the placebo effect and the impact it may have on your results.

So from a mechanistic standpoint, we are taking a product that is certainly taken on demand, so there is a very strong correlation between cause and effect. If a woman is going to engage in sexual intercourse, take the product, has sexual intercourse and if there is a benefit, she can relate that very nicely to the fact that she took a treatment intervention as opposed to a more chronic therapy that you may take dissociated from when it is needed. Meaning you may take it every morning or every night and then you have to try to remember -- try and relate that it has some benefit when you are having an encounter. So that is one aspect of where we are different from more chronic medication, more chronic approaches.

The other thing that we have done is we were able to, in looking at the current study that we are enrolling, we were very fortunate in that Boehringer Ingelheim had published the results of their study with flibanserin in the same very similar patient population, premenopausal women with FSD. And we were able to take a look at what the placebo response rate was in that study and to incorporate that in our calculations or power calculations and statistical calculations for this study. So I think we have a much better handle on what we might see as a placebo response.

And finally, we have incorporated a number of screening and clinical design parameters and I don't want to go into them because the trial is ongoing and this is going to be posted for people to see, so I don't want potential patients to be unblinded or to think about the design, that would minimize the potential effect of placebo on the trial. And these types of things have been taken from other disciplines such as depression studies, pain studies where placebo response rates can be higher.

So I think overall we have really attacked the potential issue and incorporated a number of elements that we feel give us a really good shot at seeing a very clear drug effect in the patient population and set us up for Phase III.

I think there are some other parameters asking about comorbidities and patient enthusiasm. Certainly, this study -- from a patient enthusiasm standpoint, we get many, many women coming in for screening. So many of them, of course, don't meet the formal definition and don't come into the study, but it certainly indicates that the demand for these products is very high.

We have many, many patients coming in, so that allowed us to get this trial done very quickly. So we do believe that, based on what we can see from patient recruitment, that the demand for this type of product is very, very high and we expect that there will be a lot of use should we be fortunate enough to get approval of the product.

And then the comorbidity standpoint, I mean there is no distinguishing characteristics that we can tell that co -- that co-occur with the disease or the dysfunction.

Right, so between postmenopausal and premenopausal, really there is not a case where the postmenopausal women are sicker or something. That is not true?

(inaudible) case. The only thing you can say is certainly hormonal status is different because they are postmenopausal. They have other comorbidities such they probably have higher rates of diabetes and cardiovascular disease and in general overall health that may impact their perception of FSD and their desire to use female sexual dysfunction products. But certainly for us, we focus on the premenopausal population because it is larger than the postmenopausal population and they are more sexually active, so it is a larger market opportunity.

I had one more question, then I will get offline. This is about the AstraZeneca MCR-4 partnership. Could you sort of add some color to MCR-4 as a target for obesity and diabetes? And also maybe in the context, if at all it is relevant, to the other obesity drugs and some of them are coming up for review or rather re-review. Thanks.

Sure. Well, that is a very good question. The melanocortin-4 receptor is predominately found in regions of the hypothalamus that are involved in regulating food intake and energy expenditure. We do know that loss of function of that receptor and subsequent signaling pathway does lead to early-onset obesity and diabetes in humans, as well as animals and it does appear to play a very key function in both food intake and energy homeostasis.

Now, we also know that many of the agents that bring about a reduction in food intake actually require a functioning MCR-4 receptor. So for example, the majority of the effect that leptin has in reducing weight requires an actually functioning MCR-4 program. Based on my understanding of mechanisms of action for some of the other drugs, for example, we know that the Orexigen product certainly needs a functioning MCR-4 to bring about its weight loss. Based on the literature, we would assume that the Arena product, lorcaserin, probably does as well.

So we do know that some of the things that have been tried and that are in development are activating the same pathway. We believe that we are in a better position because we are further down, probably less chance for side effects or off-target effects based on where the MCR-4 receptor is in the food-reduction pathway. So we know that we are in a key place and we know that the animal studies we have done and the preliminary clinical results that we have generated with noncommercial compounds would clearly indicate that you can drive substantial reduction in food intake in weight loss with an MCR-4 agonist.

Okay, great. Thanks.

David Moskowitz, ROTH Capital.

Yes, thanks and good morning and thanks for taking my questions. First series of questions is -- I jumped on the call a little bit late. Did you guys talk about whether or not the trial enrollment is still on track? Do you expect complete trial enrollment this quarter? And also could you give us an update on the status of the potential oral formulation for BMT for FSD? Thanks.

Sure. So we are definitely on track. We will complete enrollment this quarter and we will have top-line data in the second half of this calendar year. So the program, David, is absolutely on track and quite frankly from what we can tell, we have been very pleased with the recruitment rates and the patients we are getting into the study. So we think it is going to be a really good study far as we can tell.

The second part was -- I think you asked about potential for an oral formulation for bremelanotide.

Yes, on the status of that.

Sure. We are working with a number of companies that have technologies for oral formulation of peptides for oral delivery. I am sure you are familiar with some players in that space and the preliminary results are early with small numbers of animals, but they are encouraging and we are going to continue to push down that pathway. Certainly won't probably have it ready for a Phase III start, but it is certainly a goal for us to make sure that we have a clear readout as to whether or not oral delivery is possible for this and if so, we certainly will aggressively pursue that. And I think we are working with the right companies that bring the right technology for this.

Adam Selkin, Chardan Capital Markets.

Hey, guys, going back to FSD treatments, why do you think BMT will be different for something like flibanserin or LibiGel, which have both failed recently?

Well, I kind of addressed that in the initial question from Dr. Jasuja, but I will just kind of summarize again. We are really transitioning from -- those approaches are attempting to have a general increase in a woman's level of desire. And because of that characteristic, they were required to measure by the FDA the change in desire on a daily basis.

Now, we don't necessarily believe that that is the right way that you should do those studies, but that is something that both Boehringer Ingelheim and BioSante unfortunately had to contend with and probably led to a higher placebo response rate than they may have anticipated.

Bremelanotide is on-demand. We don't take it chronically. We are not trying to chronically elevate their desire. It is episodic. They take it just before a sexual encounter and therefore, we are only really interested in the results around the sexual encounter and any changes that they may perceive in desire or arousal or decreases in distress are measured on a longer timeframe, which is generally a four-week recall.

So I think that it is a different mechanism, different approach, different dosing. And as I said before, that on-demand characteristic really does allow a very cause-and-effect, so to speak, to be attributed to the product. They take it, they have sexual intercourse. A positive benefit, if it's there, they can ascribe it very easily to the product. So I hope that helps to clarify some of that issue because I know it is a question I quite frequently hear from investors.

David Moskowitz, ROTH Capital.

Yes, thanks. So the follow-up is you guys mentioned in your earlier remarks that you incorporated the placebo effect from flibanserin in the design of the BMT trials. What about the placebo response that you saw in the LibiGel trials? Does that confirm a similar type of placebo response or was it the LibiGel that just didn't show a response or was it a higher-than-expected placebo response. And again, do you believe you have accounted for that kind of a placebo response in the BMT trials? Thanks.

So again, we did have the benefit that the flibanserin data had been presented at a scientific meeting in some detail and we were able to get a hold of some of those presentations. That has not yet occurred for LibiGel. We only have a little bit that the company has put out from not a full analysis. But with that being said, it would appear on its face that the placebo response rate with regards to satisfying sexual events may be similar between both flibanserin and testosterone, but that really remains to be finalized after BioSante finishes their analysis and puts the data out.

So we did look at -- and for our perspective, the patient population that BioSante studied was postmenopausal. We are in premenopausal, so the flibanserin data is more relevant or directly relevant to us and we did incorporate that data in the design of this study.

Okay, excellent. And my final question is on the AstraZeneca obesity partnership. I believe there was some data that is expected to come out in the near term, sometime in the first half of the year. Can you talk about that? Is there an update that AstraZeneca has provided you with regard to any Phase I data or dosing data that is going to be announced? Thanks.

Sure. Again, we had this on the call in November and typically for Phase I studies, you really don't save all that much if you are going forward and I anticipate that is the approach that AstraZeneca is taking. We have had the discussion about the preliminary results from that study. I think AstraZeneca was quite pleased with those results. I am not at liberty to disclose them to you.

Suffice it to say that one of the key hallmarks that we did say was that the program would progress -- you really want to look at the program to progress to the next study and that is happening. So they have posted the second study on clinicaltrials.gov and we have had a basic or a preliminary discussion with them about the study and they anticipate launching that study probably this quarter.

So the program is progressing. From what I can tell, they appear quite happy with the progress and what they have seen so far and they believe that it is worth continuing to develop the compound.

Does that mean it is advancing into Phase II and again, do you think we will have an opportunity to see the data?

I will give you what I know. I have not yet discussed the protocol in any detail with AstraZeneca and if I had, I am sure they wouldn't allow me to disclose it, but they have put a very nice summary on clinicaltrials.gov. They would call this a Phase I study. Palatin would call it a Phase IIa study; it is just semantics. It will be a study that will be in obese subjects. They will be looking at the effects of multiple doses of the agent on reductions in food intake in the patients, as well as a whole variety of safety parameters as you might imagine. This will be the first time that that drug will be given in multiple doses to a patient.

So it is going to be done in obese subjects. They will continue to be looking at safety, which is required and they also will be monitoring food intake in the study. So in those parameters, we would call it a Phase IIa, they call it a Phase I or a Phase Ib; it is really just semantics. We would expect that they should be able to complete the study before the end of the year. Again, we are not in control of the study and we are, of course, always at the discretion of AstraZeneca as to how much we can disclose of the results. And we do have to be cognizant of that confidentiality. Long-term goal here is for this study to be successful and for us and our partner to have the longest window possible before potential competitors may come into the space. So we want to preserve that confidentiality when we can.

Thanks. I appreciate it. That answers my questions. Thanks, Carl.

At this time, we have no further questions in queue. Doctor Spana, I would like to turn the conference back to you for any closing remarks.

Great. Well, thanks, thanks to all of you for participating in the call. I think there are some very key questions that were raised in the Q&A. I think we have addressed them and this is a big year for us, I mean two programs moving forward in very exciting areas, very large areas, the funding to get them through major milestones. We are really enthusiastic about the FSD program. We really expect a good study, a clean study and looking for some real positive results there. So thank you and have a great day and I will look forward to seeing you guys throughout the quarter as we go out and meet with the investors. Thanks. Bye-bye.

Ladies and gentlemen, this concludes today's teleconference. We thank you for your participation.