Palatin Technologies Inc (PTN) 2012 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies third-quarter fiscal year 2012 fiscal conference call. As a reminder, this 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'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 third-quarter 2012 financial results. Steve?

Thank you, Carl, and good morning, everyone. Regarding our operating results, Palatin's net loss for the quarter ended March 31, 2012 was $6.0 million or $0.17 per basic and diluted share compared to a net loss of $3.8 million or $0.17 per basic and diluted share for the quarter ended March 31, 2011.

The increase in net loss for the quarter ended March 31, 2012 compared to the same period last fiscal year was attributable to costs related to our ongoing phase to be Phase 2b clinical trial with bremelanotide for female sexual dysfunction. This trial commenced June of 2011.

The net loss per share of $0.17 for both quarters reflects the weighted average impact of a greater number of shares outstanding for the entire quarter ended March 31, 2012 compared to the same period in 2011.

Regarding revenue, total revenue for the quarter ended March 31, 2012 was $24,000 compared to $61,000 for the quarter ended March 31, 2011. This revenue consisted entirely of amounts recognized under our collaboration agreement with AstraZeneca.

Regarding cost and expenses, total operating costs for the quarter ended March 31, 2012 were $6.1 million compared to $2.7 million for the same period in 2011. As I mentioned, the bremelanotide trial for female sexual dysfunction commenced June of 2011.

The increase in operating expenses for the quarter ended March 31, 2012 compared to the comparable quarter in 2011 was primarily due to costs related to our ongoing Phase 2b clinical trial with bremelanotide for female sexual dysfunction.

Regarding our cash position, as of March 31, 2012 our cash and cash equivalents were $8.8 million and our current liabilities amounted to $3.4 million. We believe, based on our current operating plans, that our cash and cash equivalents will be sufficient to fund our operations through March 31, 2013. Carl?

Thank you. And now for an update of our programs starting with our obesity and diabetes melanocortin-4 receptor program partnered with AstraZeneca. This program, under the direction of AstraZeneca, continues to make substantial progress. In 2011 AstraZeneca designated the compound AZD2820 which was developed by Palatin as a candidate for clinical development.

AstraZeneca has completed a Phase 1 study of AZD2820 and results from this study indicate that AZD2820 has the safety and pharmacokinetic properties for further development. Earlier this quarter AstraZeneca began enrollment in a second clinical trial of AZD2820; this study is a randomized and single blind placebo controlled study to investigate the safety, tolerability and pharmacokinetics and pharmacodynamics of repeated and ascending doses of AZD2820 in obese subjects.

The study is targeting to enroll approximately 72 obese subjects and additional details can be found on the website, clinicaltrials.gov. Results of this trial should be available later this calendar year. If the results of this trial support further development of AZD2820 we expect that AstraZeneca will aggressively move AZD2820 into larger Phase 2b clinical studies.

The commercial drug candidate AZD2820 in a melanocortin receptor -- 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 have proved that principle clinical trials in obese patients with noncommercial 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, demonstrated a significant role that melanocortin pathway displays 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're 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 development, cost.

As we move on to PL-3994, our natriuretic peptide receptor agonist in development as a treatment for acute exacerbation of asthma which are defined as ongoing asthma episodes in which asthma symptoms do not adequately respond to initial bronchodilator or corticosteroid therapy. As we've previously stated, a key near-term objective of our PL-3994 program is to identify a development and marketing partner and, once we do that, to initiate clinical studies.

We are currently 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'll 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 2b clinical trial designed to evaluate its safety and efficacy as a treatment for pre-menopausal women with female sexual dysfunction.

We are very happy to report that patient enrollment of this trial was completed on schedule in the first calendar quarter of this year and we remain on schedule to report the results of this exciting trial in the second half of this calendar year.

As a reminder, the main objectives of this trial are to generate safety and efficacy data to support the transition of this program in the Phase 3 registration trials. The trial was 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 approximately 100 pre-menopausal 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. We believe we have designed a comprehensive program to evaluate the safety and efficacy of bremelanotide and, if the results of the study are positive, they will support the transition of this program into Phase 3 registration trials.

We believe that our bremelanotide female sexual dysfunction program has tremendous potential. There is no FDA approved treatment 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 sexual dysfunction program has completed patient enrollment in a major Phase 2b clinical study designed to provide safety and efficacy data to move into Phase 3 registration trials and remains on schedule to deliver data in the second half of 2012. Our PL-3994 program for severe asthma is ready to begin a proof of principle clinical trial and we are in discussion with potential partners.

Finally, we are quite excited that AstraZeneca has made the decision to continue to progress AZD2820 and has begun patient enrollment in a second 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'd like to thank you for participating on the Palatin fiscal third-quarter conference call and we will now open the call to questions.

(Operator Instructions). Joe Pantginis, ROTH Capital Partners.

The first question I have is on the obesity program and I guess it's sort of a two-pronged question. And I know you can't really comment too much on AstraZeneca's thoughts, but hoping you can at least share some insight.

I guess the first part of the question is AstraZeneca is obviously moving the drug forward; I just wanted to see if you can provide any commentary as to their level of excitement on the drug and the body language that you get for them regarding their commitment that they do have for the program and which could have been bolstered.

Which is the second part of my question -- which could have been bolstered by the recent news that came out of Arena and the lorcaserin advisory committee? And then I guess the second aspect of that question is based on lorcaserin, when you talk about the science maybe you can just spend two seconds on the comparing and contrasting regarding the mechanistic approach of the two drugs? Thanks a lot, guys.

We'll take it in two parts. We did have an opportunity earlier in the quarter to go and sit down with our colleagues at AstraZeneca and we were given a very comprehensive review of where the program stands that certainly includes the Phase 1 data that was generated as well as the design and objectives of the current trial and really the future plans all the way out to Phase 3.

This is a key program for them in their metabolism and endocrinology group; it's one of their lead programs. Beyond that I'm certainly not -- the enthusiasm is quite high. Obviously we're not at liberty to discuss the details of it, but suffice it to say that they've got a very comprehensive program designed and ready to implement from where we sit today to the Phase 3 decision point. So we're very, very pleased with the program and what they're willing and committed to putting into it.

Getting onto the second part, which is thinking about different mechanisms, and we certainly in the last week had a very nice vote from the FDA advisory panel on Arena's product lorcaserin, that's a 5H2C agonist designed for the treatment of obese patients and on their second panel round -- go around they actually had, as I said, a positive vote.

One of the things that's exciting to us about the program is the melanocortin-4 receptor and its intended signaling pathways play a key role in regulating many, many different signaling pathways that are involved in food and energy regulation. So, for example, signals like leptin, ghrelin, [seratonin] signals like [5-HTC] receptors in part signal inside the hypothalamus and work through the MCR-4 signaling pathway to actually bring about their effects on reduction of food intake and weight loss.

So we really do believe that we're sitting in a very key junction and a very key signaling pathway that's involved in regulating food intake. So when you think about things like 5H2C receptor agonists, these are compounds that stimulate or activate a large number of signaling pathways both in the central nervous system and peripheral, many of which have benefit and some of which don't.

So as you can see, part of that panel was quite heavily involved in discussing the potential safety affects of that drug due to its non-obesity related signaling. So we believe that really targeting the MCR-4 receptor directly, which is what AZD2820 does, really avoids a lot of that ancillary issues around nonspecific activation and puts you right where you want to be, direct activation of the key signaling pathway, patients taking it feel that they're satiated, less food intake, weight lost. So I hope that (multiple speakers).

No, no, thank you, that's very helpful. Maybe if I could just switch gears real fast just over to the BMT program. Obviously you have a big catalyst coming in the second half of the year, that's also an area that has been -- in the news a lot with regard to other potential -- or other failures in this space such as like [BioSante's].

So, not necessarily to do a compare and contrast with regard to the mechanistic, because obviously you don't take a hormonal approach as other companies have, and I think that's a key differentiator. But maybe a little to share about potential differentiation on the actual endpoints in the study and how patient outcomes are reported.

Sure. So I mean a key differentiating feature with regards to the trials are one, bremelanotide is an on-demand product, so it's taken just prior to a sexual encounter as opposed to something like testosterone which is taken on a chronic basis. So testosterone is taken probably approximately 12 to 16 weeks before the potential for a clinical benefit can be realized by the patient and they have to take it in the case of LibiGel every day.

Because of that, and because of the fact that the underlying presumption of an agent like testosterone is that it has a generalized increase in libido or sexual desire, they were required in their trial to measure changes in desire every day.

And we -- our beliefs in them and that of many others is that that's way too frequent a measurement period for desire, women don't think about it every day, and the fact that they fill out a big questionnaire every day about their desire actually can increase a placebo response and that's fairly well documented in literature.

Because bremelanotide doesn't purport to take -- to increase innate desire and because we're not taken on a chronic basis we don't have that requirement, we're measuring changes in arousal and desire on a monthly basis using validated instruments like female sexual function index and others that have been well tested in clinical trials so we don't have that daily diary issue.

And the other endpoint that we're using to satisfying sexual events which is a commonality between almost all of the Phase 3 programs and large programs on sexual dysfunction and that's a simple log or entry that's within 24 hours of an event a woman -- it's a simple yes or no question, was the event satisfying or not. So those are some of the key differentiations.

I mean, in all trials the generalities are -- have been satisfying sexual events, effects on arousal and desire and a decrease in sexual dysfunction associated distress. A key difference though with the chronic medications is that we're using those -- arousal desire measurements are done every four weeks and we don't have that daily diary.

Great, thanks so much for the added color, Carl.

Rahul Jasuja, Noble Financial Capital Markets.

So some of my questions sort of overlap with the previous questioning, so let me start with the FSD program. I was just going through the clinicaltrials.gov protocol out there, so just help me clarify here. So my understanding is that -- and this sort of leads into the difference in the clinical trial design that may filter out potential high placebo responders.

So let me ask the first part wherein you've got the primary endpoint as SSE, satisfying sexual events, during the last four weeks of the trial, but the trial goes to 20 weeks. And then could you explain to me the timeline from the time a patient comes in to the weeding out process and then getting on the drug and then actually taking the measurements, that's my first question.

Sure, I'm going to let Dr. Jeff Edelson who was [intuitively] in the design of that study address that question.

Thanks, Carl. So, basically there are four treatment assignments of one month duration during the clinical trial, one or more of which may be placebo. And I don't want to go into any more detail at this point because the trial is still ongoing. But I think at the end of the day you'll see the design will allow us to calibrate response to placebo as compared to response to active agent.

So am I right in thinking that the early weeks of the study would test if these -- and I'm not sure if you can answer that question, but let me ask it anyway -- the early weeks of the study would test for those responders who would potentially be the high placebo responders. And the reason I ask this obviously is we've seen in past studies, namely BioSante, that the placebo response had been more than expected. So my question here is, are we -- is it in the protocol to weed out these early -- these potential high placebo responders?

No. In this study we are not eliminating people who respond to placebo. But let me just say that we are very aware and focused on the issue of the high placebo rates endemic in these sorts of trials. And this trial would potentially enable Palatin to use a refinement design if needed in future clinical studies. So this trial would enable future trials to do that, but we're not doing that in this particular trial.

Okay, so then -- so that -- so in the future you could weed them out, also the lack of a daily diary should help the placebo response being as expected?

Let me just [talk for a second], one of the things that we did here just on a global basis, and we don't want to obviously get into too many of the details of the clinical trial design elements we put in to help us lessen or deal with the placebo response because the trial is ongoing and this is an open call.

We looked at this a little bit differently than maybe others have. This indication is one in which patient self assessment instruments are widely used for most of the endpoints. This, however, is not the only indication where those are used. Things like depression, pain, [urinating] incontinence are all clinical indications where patient reported outcomes measures are used, placebo rates can be higher in those studies.

However, they have -- in those indications there have been a -- the design of clinical trial elements that can lessen or deal with a placebo response and Jeff and his team brought some of those elements into this study. So we believe we're going to have a good handle on the potential measurements of the placebo response, how to deal with it and lessen it so that we can really elucidate a drug signal for the compound.

Okay, that's great. And then the other question I have is, again, maybe a little dicey question for you guys to answer, but let me ask it anyway. So we saw testosterone in post-menopausal women, Intrinsa is approved in Europe. But what is your viewpoint? I mean, does testosterone work in post-menopausal women? Maybe it's better in pre-menopausal? Could you sort of add some color on that if you can?

My understanding of the current approval for the Intrinsa product is in surgically post-menopausal women and that's a pretty unique subset of people with FSD. The other aspect of the Intrinsa pivotal studies was standardization of estrogen levels and that's an area that's gotten more complex with the findings from the women's health study. So we're focused on pre-menopausal females with both HSDD and FSAD and I think our program is going to be focused on that in the near term.

Just getting along to the testosterone, I mean whether it works or not is obviously -- there you have one program that showed yes, one that's a little bit equivocal. We do know that there are several million scripts a year written off label for testosterone in women, so they're -- at least the community -- in the community there's a perceived potential benefit of putting women on testosterone.

Right, and really I was coming from the angle where a lot of the investors have looked at the testosterone study and forgot about FSD, assuming that that's a disease that's tough to handle and trying to sort of parse out differences in the mechanism. But thank you, anyway.

The final question I have is on obesity and it's certainly been answered, but theoretically given the mechanism by which BMT works or other -- 2820 works, again theoretically you would think that since melanocortin receptors sort of integrate signals from the brain and got them -- and sort of have an effect on feeding behavior, if you directly target MCR-4 in a safe and effective manner you could have less side effects than the other targets that ultimately indirectly target melanocortin-4, is that right -- is that thinking right?

I think that's a valid premise for the MCR-4 based treatment for obesity. You are directly activating and specifically activating the pathway as opposed to activating multiple tangential pathways one of which you're interested in and others that you're not. So I agree -- I would agree with that.

Okay, thank you, guys.

If no further questions in the queue, I'd like to turn the call back to Dr. Carl Spana for any additional or closing remarks.

Great, thank you guys for participating on the call. I'd like to thank both the questioners, they asked some, I think, very key questions about our programs and it gives a nice opportunity to talk about them. So have a great day. We look forward to continuing to update you as our programs progress and this is an exciting year for us.

We have two major milestones coming up later in the year; we're quite excited about them and I think they really will help to transform the Company and return a lot of value to our shareholders. So with that, have a nice day, look forward to updating you all, thanks for participating on the call.

This does conclude the call for today, we thank you for your participation.