Palatin Technologies Inc (PTN) 2014 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies second-quarter fiscal year 2014 conference call. As a reminder, this conference 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'd 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, and good morning everyone. I am Carl Spana, President and Chief Executive Officer 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'll be providing updates on our programs on our development and our second-quarter fiscal year 2014 financial results. To begin, Steve Wills will provide the financial update.

Thank you, Carl, and good morning everyone. Regarding operational highlights. Pivotal Phase 3 clinical trials of bremelanotide for the treatment of female sexual dysfunction are anticipated to start in the first half of calendar year 2014. Carl will provide detail around the program during his presentation.

In January 2014, we received $1.85 million in net proceeds from the sale of New Jersey state net operating loss carry-forwards, which will result in the recognition of $1.85 million in tax benefits for the three months ending March 31, 2014 financial statements.

Palatin obtained 2 patents during the quarter ended December 31, 2013. The first one, titled Amide Linkage Cyclic Natriuretic Peptide Constructs, was issued November 12, 2013, and it has composition-of-matter claims to a novel series of memetics of atrial natriuretic peptide.

The second patent, titled Cyclic Natriuretic Peptide Constructs, was also issued November 12, 2013, and it has composition-of-matter claims relating to our PL-3994 natriuretic peptide receptor-A agonist for the treatment of cardiovascular and pulmonary indications.

Regarding financial highlights, for the quarter ended December 31, 2013, Palatin reported a net loss of $3.6 million, or $0.03 per basic and diluted share, compared to a net loss of $1.7 million, or $0.02 per basic and diluted share, for the same period in 2012.

The increase in net loss for the quarter ended December 31, 2013, compared to the same period last fiscal year, was mainly attributable to the recognition of $1.8 million in tax benefits received in December 2012 pursuant to the sale of New Jersey state net operating losses.

Regarding revenue, there were no revenues recorded in the quarter ended December 31, 2013, compared to $6600 for the same period in 2012. Revenue in the 2012 period consisted entirely of reimbursement for development costs and for employee compensation earned at the contractual rate pursuant to our agreement with AstraZeneca.

Regarding costs and expenses, total operating expenses for the quarter ended December 31, 2013 were $3.6 million, compared to $3.4 million for the comparable quarter of 2012. The increase in operating expenses for the quarter ended December 31, 2013 was primarily the result of higher period costs related to our bremelanotide program for the treatment of female sexual dysfunction.

Regarding Palatin's cash position, our cash, cash equivalents, and short-term investments were $18.2 million as of December 31, 2013, compared to $24.4 million at June 30, 2013. And, as stated previously, Palatin did receive $1.85 million in net proceeds in January 2014 related to the sale of the New Jersey net operating loss carry-forwards.

Current liabilities were $3.5 million as of December 31, 2013, compared to $2.1 million as of June 30, 2013. The current liabilities as of December 31, 2013 includes $1 million of unearned revenue for a non-refundable option fee relating to negotiation of a potential future license of bremelanotide in the defined territory, primarily Europe, for the treatment of female sexual dysfunction.

Subject to certain contingencies, if not exercised or extended, the option expires in the quarter ending March 31, 2014. This payment is credible against any upfront or initial license fee in the event of negotiation of definitive license agreement. We believe the existing capital resources will be adequate to fund our currently planned operations, including submitting and finalizing complete Phase 3 protocols with the FDA for our bremelanotide program for the treatment of female sexual dysfunction; but not initiating patient enrollment in the Phase 3 trials through at least a period of March 31, 2015.

To be clear, we do not intend to initiate Phase 3 patient enrollment in our bremelanotide program for the treatment of female sexual dysfunction unless we have adequate funds or commitment to adequate funds to complete the Phase 3 program.

Carl?

Thank you, Steve. Our second-quarter fiscal year 2014 operational and programs update will start with our bremelanotide Phase 3 female sexual dysfunction program. Our activities are focused in two areas -- operations required start and conducted bremelanotide Phase 3 pivotal registration studies, and business development activities.

On the operating front, Phase 3 bremelanotide clinical trial supplies have been manufactured. The contract research organization and related vendors that will assist us in our potential future partners to conduct the Phase 3 program have been selected and also engaged.

We continue to identify and screen potential clinical trial sites, and we have been and will continue to present and publish the extensive data from our Phase 2b female sexual dysfunction clinical program.

On the regulatory front, we believe the recent outcome of the appeal of the FDA's non-approval of the flibanserin new drug application is a positive for the development of pharmaceutical treatments for female sexual dysfunction. Our analysis, based on review of publicly available information, is that the FDA appears willing to approve a product for female sexual dysfunction given an appropriate risk management profile and that there is additional clarity on the measurement of benefit in female sexual dysfunction clinical trials.

We will incorporate this new information as we finalize the protocols for our bremelanotide pivotal Phase 3 clinical trials with the FDA.

As we have previously reported, we believe that we have reached agreement with the FDA on the main aspects of the Phase 3 program including potential patient population, primary and key secondary endpoints, study design, and safety monitoring. We are now actively engaged in finalizing our Phase 3 pivotal trial protocols and expect to be in position to begin the trials later in the first half of this calendar year.

As stated prior, the start of the bremelanotide Phase 3 pivotal program is dependent on a number of factors including the status of our corporate partner discussions and financial resources.

I will now give a brief update on the status of our corporate partnering activities. Currently, we believe that there are two large potential markets for bremelanotide: the United States and the European Union, with the United States being the largest potential market based on a number of factors including differences in patient population, regulatory requirements, marketing, and reimbursement practices.

It may be most effective to have distinct partners in each of the United States and European Union. As part of our licensing activities in the European Union, we entered into a short-term option agreement with a pharmaceutical company with research and development, sales and marketing, manufacturing, and regulatory expertise and activity from the European Union.

Execution of the option agreement resulted in Palatin receiving a $1 million non-refundable option fee relating to the negotiation of a future license of bremelanotide for the treatment of female sexual dysfunction in European countries including the European Union.

This option expires in the first quarter of calendar 2014 if not exercised or extended. As part of the option agreement, the potential licensee, who has extensive clinical and regulatory experience in the region, is collaborating with Palatin regarding a regulatory meeting with the European Medicines Agency.

The objective of this meeting was to receive scientific advice on the bremelanotide Phase 3 registration program for the European Union. We are pleased to report that, earlier this calendar year, Palatin and our potential licensee met with the European Medicines Agency review team, and we have received regulatory guidance that provides a clear path forward for the bremelanotide Phase 3 pivotal program in the European Union.

We are currently working with our potential European partner to provide any additional information that they may need to make a final decision on exercising their option to bremelanotide for the treatment of female sexual dysfunction in a defined European territory. We believe the potential licensee would be a strong partner for bremelanotide in the European Union, as they currently have substantial sales and marketing activities in the women's health area.

Now let's move to licensing activities for the United States rights to bremelanotide for female sexual dysfunction. We are currently involved in a competitive licensing process with multiple potential partners under CDA and in active discussions and due diligence.

In some cases, preliminary non-binding terms have been negotiated. Although we have targeted selection of a potential partner by the end of calendar 2013, due to pending regulatory activity in the female sexual dysfunction indication, we moved this time frame back. The resolution of this recent regulatory action has provided better clarity on a development of treatment for female sexual dysfunction, and we believe we are now in a stronger position to move the US licensing process forward.

We continue to engage with potential partners as we progress the bremelanotide licensing activities. And we anticipate being in a position to select a partner or partners and to move to a final agreement in the latter -- later in the first half of calendar 2014.

Now let's move on to our melanocortin-4 receptor obesity program, which is under the direction of our collaboration partner AstraZeneca. After a period of corporate restructuring, AstraZeneca has assigned a new product development team to our joint melanocortin-4 receptor obesity program. We recently met with the new senior director of the program to discuss how best to jointly move this program forward. We expect that this program will continue with a strong joint focus on pre-clinical research to identify potential new melanocortin-4 receptors clinical lead compounds and transition to clinical trials. We expect the time line to potential clinical trials will be clarified as we work with AstraZeneca over the next one to two quarters.

Melanocortin-4 receptor is a well-validated target for obesity therapeutics. Human, genetic, and preclinical evidence indicates a key role for this receptor and associated saline pathways in the regulation of food intake and weight. Our results from earlier clinical trials in obese patients with compounds that target the melanocortin-4 receptor show significant reductions in food intake and weight loss. This program has significant commercial potential, and we believe that our partner, AstraZeneca, has the resources to progress development of the program and realize its potential.

Pursuant to the terms of the research collaboration and license agreement with AstraZeneca, we are eligible for milestone payments upon achieving development and regulatory milestones. We are also eligible for payments on the achievement of sales targets in addition to royalties on sales of approved products. AstraZeneca has responsibility for product commercialization, discovery, and development costs.

Now moving on to our PL-3994 natriuretic peptide receptor agonist program. We have been and continue to conduct a variety of non-clinical activities to better define the role of natriuretic pathways in cardiovascular diseases. This work is being done to support our efforts in finding a potential licensing partner. We believe that our ongoing preclinical work, along with our earlier clinical results, puts us in a strong position to move forward with the clinical development of PL-3994 as well as to track potential licensing partners.

Our final update on this call is our melanocortin receptor 1 therapeutics program. We are very excited by the potential of a melanocortin receptor 1 therapeutic for the treatment of a variety of inflammatory and immunological indications such as inflammatory bowel disease, kidney disease, and uveitis.

We have designated a lead compound, PL-8177. The preclinical activities required to progress PL-8177 into clinical trials have begun, and we are targeting first-in-human studies by the end of calendar year 2014. In parallel with these development activities, we will begin discussions with potential corporate licensing partners.

Before we open the call to questions, I would like to make a few concluding remarks. We are extremely pleased with our opportunities regarding bremelanotide for the treatment of female sexual dysfunction and are excited to be in a position to potentially start the Phase 3 pivotal registration studies for the treatment of female sexual dysfunction later in the first half of this calendar year.

Our excitement is supported by the strength of our bremelanotide Phase 2b efficacy and safety data, the regulatory guidance of both the US and European Union, and the significant interest from potential collaboration partners.

We have designed a comprehensive Phase 3 program that, if successful, will provide the safety and efficacy data to support regulatory submissions for approval of bremelanotide as a treatment for premenopausal women with female sexual dysfunction. We are actively engaged in activities required to begin patient enrollment in the bremelanotide Phase 3 pivotal registration studies. We have an active program to continue to present data from our bremelanotide Phase 2b studies in medical meetings and to prepare reports of the Phase 2b data for publication and peer-reviewed journals.

As stated prior, we are making substantial progress on establishing one or more corporate collaborations to facilitate the development of our bremelanotide Phase 3 program.

Regarding PL-3994, we have generated a substantial package of preclinical data to support our corporate licensing efforts. And finally regarding our melanocortin receptor 1 program, we have selected the first lead clinical candidate and are conducting the preclinical activities required to begin human clinical studies. We've also continued to make progress in identifying potential corporate partners.

I would like to thank everyone for participating on Palatin's second-quarter 2014 conference call, and we'll now open the call to questions.

(Operator Instructions) Charles Duncan, Piper Jaffray.

Thanks, guys, for taking the question, and congratulations on a good year of progress. Looking forward to more this year.

So Carl, you mentioned that the recent competitor regulatory dispute resolution is a positive. And I understand that generally. But I'm wondering if you could touch on what the key point of debate was there and why resolution of that favors progress within your own Phase 3 program?

Sure. I'll give a viewpoint, and certainly Doc Edelson, who is here, can chime in to add some additional aspects to that. First, let me just predicate any statements I make that our opinion and view on this is certainly based on publicly available information but not on any direct discussions with the other sponsor or any active -- any access to any type of confidential information.

With that being said, the flibanserin NDA resubmission was under dispute, and it is our understanding that the senior members of the FDA have reviewed the dispute and have -- and as the Company has publicly reported with regards to their pathway forward, they are only left having to do a number of small Phase 1 safety-directed studies. This would indicate that the FDA was comfortable with flibanserin's measurement or benefit demonstrated in their clinical trials.

And what's important about that is if you think about two aspects of the Phase 3 clinical program, one is to measure benefit in the intended patient population, and the other is to measure risk. And it would appear based on a public statement that the FDA is comfortable with the benefit aspect of flibanserin. They have a few remaining questions on risk and, in order to come to a final risk-benefit decision, will need that information.

And why that is a positive is if that product has got a measurement to benefit, then the types of endpoints used to measure that benefit certainly must be valid and acceptable from the FDA perspective.

So the positives here are, one, it does appear that the FDA is in line to approve a product and, again, give it an appropriate risk benefit; and, two, that the measurement of benefit is something that the FDA appears to be able to get their head around and can ascribe benefit to a product. And that should carry through to all the other sponsors in this space.

Dr. Edelson is saying that I did a perfect job. (laughter)

Some of the endpoints that you are using are the same as were used or evaluated for the flibanserin program?

Sure. Dr. Edelson will answer that.

Yes, Charles, the final structure of the flibanserin program was outlined in the briefing materials for the previous advisory committee meeting. And those -- that program was well constructed and extensive and generally consistent with the prior FDA's guidance on the valuation of efficacy for this population. And those materials and then the subsequent finding that they had demonstrated benefit, we find very encouraging to the present program.

And the endpoints are similar that we'll use, and they really revolve around a behavioral measure of sexual activity, such as satisfying sexual events. And for those of you that have been following our progress, we report quite frequently on the number of satisfying sexual events with bremelanotide.

And the other is a measure of a more longitudinal nature of the concept of desire because the patient population we are studying is the patient population that has low desire, and that is generally done using a validated instrument such as the Female Sexual Function Index. And so these types of endpoints will be similar between the two programs.

Okay. Now hopping over to the advice you've gotten from the European regulatory authorities, you mentioned that there's a path forward. Would you see that as relatively capital-efficient path forward? And is it consistent with some of these same issues in terms of not only evaluating benefit in a way that you've done in the past that perhaps would have predictive value for Phase 3 success as well as evaluating risk?

Yes, Charles, I would say that those are -- the feedback we received is very consistent with our concept of the measurement of benefit and risk in this indication using bremelanotide. We were -- reached consensus on a variety of issues -- patient population, length and duration of study, endpoints used, dosing. So we we're very pleased. It's a very -- I think they gave us relatively clear guidance, and we should really have no problem designing and putting in the protocols to support the registrational studies in the European Union. And then if they are successful, obviously submission to the agency.

I don't know, Jeff, if you have any other --

Yes, a lot of our discussion -- it was very helpful and, as Carl said, quite positive. Varied on some of the statistical approaches in terms of the trial design, which I won't go into right at this moment. And then some of the safety monitoring features, which were not unanticipated given the known pharmacology of the drug.

A very positive outcome.

Last question on bremelanotide. You mentioned possible additional data presentations. Could you point to certain meetings? I don't know if you've actually submitted abstracts, but what are you targeting this year?

Well, we have a big one coming up at the end of this week, which will be the ISSWSH meeting, which is in San Diego, and we have a number of presentations going on there. And we'll inform the community a little bit later in the week as to exactly what those presentations are. We have ACOG coming up in --

In May, in Chicago.

In May after that as well. There are additional meetings -- psychiatric-based meetings as well as additional female-health-focused meetings that will occur really throughout the rest of the year. And then in addition to that, we have -- we'll have to submit to publications -- we have, I think, a fairly extensive set of publications that are in the process of being written right now, and we expect that those will start to hit as we get to the end of this year and throughout next year.

Carl, last question hopping over to the obesity collaboration -- and sorry for dominating. Lots of questions here. Pleased to see that that is being picked up again. Would you anticipate milestones; either milestone pavements either this year or in the next 12 to 18 months from that program in terms of achieving certain development goals with that program?

You want to answer, Steve?

This is Steve. It's a little bit of a moving target. There's a number of things being discussed internally at AZ and also with Palatin, and I believe we'll have a lot more clarity on that in the next 60 to 90 days. There's an outside chance that, depending on certain circumstances, we could receive a milestone in calendar 2014. Our internal estimates -- projections are more in the conservative in the 2015 calendar year, though.

Okay. That's helpful. Thanks a ton for taking my questions.

Rahul Jasuja, Noble Capital.

Most of my questions on FSD have been answered, but let me just broach that subject one more time. Now, looking at the European and US approaches here now that you've got an option agreement that could be executed this quarter, what are the differences between the European FSD approaches or the guidance you're getting versus the US? And how does that affect any Phase 3 study design that you would like to conduct and may be sort of leverage in one continent versus the other? Could you add some color on any differences there?

I'll give a brief little bit, and then Jeff can kind of jump in. You know, certainly there's always -- when you do these types of regional programs, there's always slight differences in regulatory requirements. In general, the concept of benefit being a component of behavioral measures such as SSE's and more longitudinal measure of something like desire and distress is similar between the two regulatory regions. The overall patient population is very similar. There are small differences in the duration of trials and desire for duration of trials and safety monitoring. Jeff, I don't know if you have any other color.

Yes, the differences are really unique aspects of individual trial design; perhaps statistical approach, this type of thing. In general, I will say based on the current discussions that we've had, et cetera, it's pretty clear that the two regional programs will be mutually supportive and really add to a very robust, we hope, body of evidence. As Carl says, the definitions of clinical benefit are very similar. The safety monitoring program that profiles the risk side of the equation are also very similar.

And I actually think one of the biggest differences I'd call out is the language and cultural differences perhaps unique to some of the individual evaluative tools that we'll be using. But then that's countered by the fact that this condition, obviously, is recognized [insignificant] in multiple cultures. It just validates the importance of this therapeutic area for drug development.

Okay. That's helpful. And then one more question on the FSD space and maybe -- I'm not going to get an answer that is substantive, but let me try.

In looking at a licensing or partnering with big pharma, how would you want us to view the fact that you've got an option agreement in Europe, and then you could progress that direction very soon -- begin Phase 3 studies? But then you're looking for US partner, and that US partner may be conflicted by just getting US and wanting sort of a larger worldwide territory. How does that all play out as you look at partnering worldwide?

Certainly. We went through a very -- we've been going through a very intensive process in talking to multiple potential partners. And, as we reported I think last time we had a call, we figured it's probably in the best interest of this program to have them split at the current time. Even large pharma that we were talking to and have been talking to and continue to talk to, which would have an international view on it, really was focused on the -- were really focused on the US market as being the larger potential opportunity and the one that would drive their evaluation and the one they were most interested in.

So we felt that in order to secure additional benefit that we would bring in a potential partner in the European, and that's the process that we are following. I don't think at the end of the day -- and Steve made a comment on this -- if it came down to the fact that we had to have -- we were going to [conclude] something with a multi-national that wanted the rights, I think we would be able to accommodate them.

Okay, great.

We have flexibility there. And, as Carl mentioned, based on the discussions thus far, we haven't in any way biased or prejudiced our position by doing the option agreement with the company -- European-based company.

We don't feel that we've restricted our ability in any manner.

Right.

Okay, good. And then finally the Mcl-1 program. This really to me is an under-evaluated and under-appreciated program. Could you tell us where you're going with this this year and sort of events and milestones coming up?

Sure. As I reported, we are really getting into the thick of the preclinical toxicology program for this because we are moving towards first-in-man studies probably late this year. So those activities are clearly actively underway.

This particular receptor is highly upregulated in a variety of immune conditions in the local tissues that are undergoing inflammation. And there are a number of preclinical studies that we've been doing in things such as IBD and kidney disease and uveitis where we've been seeing some very nice results.

You know, mechanistically, it appears as if we are affecting -- downregulating TNF alpha-signaling pathways. So that opens up a whole variety of indications for us. What we are doing in parallel now is really -- I think we're going to have to, at some point as we get to the end of the second quarter, really narrow it down and begin to select the final indication for the program. And that's going to be a mixture of both this development -- final clinical review and potential regulatory feedback.

So the lead indications for this really are -- there are three: IBD; nephritis; and uveitis, which is ocular inflammation. So really just running the business models right now, clinical models right now to determine which is the best one. I think we're going to be able to go to all three at some point.

Great. Thanks, and congratulations on a solid last several months.

Thank you.

I would now like to turn the conference back over to Dr. Carl Spana for any additional or closing remarks.

Well, thank you. It's a very exciting time at Palatin. We have a very busy time coming up with regards to bremelanotide, and we're very pleased that we are making tremendous progress on our other programs. And as some of the questionnaires have pointed out, we don't talk much about them but they are going to add tremendous value to this Company as we go forward along with bremelanotide.

So we are quite excited about what we're doing here. And I'd like to thank all of you for participating on the call. And certainly all the people at Palatin are working hard to make these things happen. As well, Jeff and Steve for their participation and contribution as well.

So thank you all. We look forward to updating you next quarter and continue to make excellent progress here at Palatin. Thank you.

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