Palatin Technologies Inc (PTN) 2015 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies first-quarter fiscal year 2015 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 are not historical facts and 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'm 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 will provide updates on our development programs and our first-quarter fiscal year 2015 financial results. To begin, Steve Wills will provide the financial update. Steve?

Thank you, Carl and good morning everyone. Starting with operational highlights -- regarding our bremelanotide development program for female sexual dysfunction, on August 29, 2014, we executed a license, codevelopment, and commercialization agreement with Gedeon Rector on our bremelanotide development program for the treatment of female sexual dysfunction in the European Union and other European countries.

On September 4, 2014, we received EUR6.7 million, approximately $8.8 million, in addition to the $1 million we received back in August 2013. One-half of the approximately $10 million in total upfront payments is non-refundable and is recognized as revenue in the quarter ended September 30, 2014. The remaining half of the total upfront payments will be recognized is revenue in the quarter we initiate our US Phase 3 clinical trial program, which is expected to be prior to December 31, 2014. The initiation of the Phase 3 clinical trial program in the US will trigger a milestone payment from Gedeon Rector of EUR2.5 million or approximately $3.2 million.

We expect to trigger this milestone payment before year-end and receive payment early in the first quarter of calendar year 2015. We have the potential to receive up to EUR20 million, approximately $25 million, in regulatory related milestones and up to EUR60 million, approximately $75 million, in sales related milestones. We also have the potential to receive low double-digit royalties on net sales in the licensed territory.

Palatin will contribute along with Gedeon Richter to the cost of the codevelopment activities for obtaining regulatory approval in Europe. Gedeon Richter will exclusively market bremelanotide for FSD in the licensed territory, and will be responsible for all sales marketing and commercial activities including associated costs in the licensed territory.

Regarding our intellectual property portfolio, we obtained several patents which include broad families of cyclic melanocortin receptor 1 specific peptides with potential utility for treatment of inflammatory diseases and disorders; melanocortin receptor 4 specific peptides with potential utility for treatment of obesity, metabolic syndrome, diabetes, and sexual dysfunction; use of Palatin's PL 3994 natriuretic peptide receptor product candidate for the treatment of acute asthma and chronic obstructive pulmonary disease; and also claims on linear melanocortin receptor 1 specific peptides.

Switching over to our financial highlights, Palatin reported net income of $0.8 million, or $0.01 per basic and diluted share for the quarter ended September 30, 2014, compared to a net loss of $4.5 million or $0.04 per basic and diluted share for the same period in 2013. The increase in net income for the quarter ended September 30, 2014, compared to the same period last fiscal year, was mainly the result of the recognition of $4.9 million in revenue pursuant to our collaboration agreement with Gedeon Richter. Revenue consisted entirely of the portion of the license payment that was non-contingent and non-refundable. There were no revenues recorded in the quarter ended September 30, 2013.

Regarding cost and expenses, total operating expenses for the quarter ended September 30, 2014, were $4 million compared to $4.5 million for the comparable quarter of 2013. The decrease in operating expenses for the quarter ended September 30, 2014, was the result of a decrease in cost primarily relating to our bremelanotide program for the treatment of female sexual dysfunction.

Regarding Palatin's cash position, our cash and cash equivalents were $17.8 million as of September 30, 2014, compared to cash and cash equivalents of $12.2 million at June 30, 2014. Current liabilities were $2.8 million net of $4.9 million of deferred revenue as of September 30, 2014, compared to $1.8 million net of $1 million of deferred revenue as of June 30, 2014.

We believe that existing capital resources will be adequate to fund our planned operations through the quarter ending December 31, 2015, not including initiating our pivotal Phase 3 clinical trials for bremelanotide for female sexual dysfunction or other planned clinical trials. We expect to initiate improvement in our Phase 3 clinical trial program for bremelanotide for female sexual dysfunction prior to December 31, 2014. We are currently in the process of reviewing and assessing several funding avenues both dilutive and non-dilutive, and expect to have some form of new funding in place prior to calendar year-end. Carl?

Thank you, Steve. Our first-quarter fiscal year 2015 operational and programs update will start with an overview of our bremelanotide Phase 3 female sexual dysfunction program. Our activities are focused on the operations required to start and conduct the bremelanotide Phase 3 pivotal registration studies in North America and the European Union and ongoing corporate partnering activities.

Before beginning the bremelanotide update, I would like to make a few comments on the recent FDA two-day public meeting on female sexual dysfunction. The meetings were held on October 27 and 28 at the FDA White Oak campus in Silver Spring, Maryland. The first day was a public meeting on female sexual dysfunction patient-focused drug development in which a number of invited patients and key opinion leaders expressed how female sexual dysfunction impacts their lives and their desire for treatment options. The second day was a scientific workshop on female sexual dysfunction where an FDA-selected panel of experts provided the FDA with guidance on various aspects of female sexual dysfunction clinical trials, including endpoints, patient populations, and determination of treatment benefits.

We believe these meetings were a significant positive for female sexual dysfunction patients and companies developing novel treatments for female sexual dysfunction. The FDA clearly stated that female sexual dysfunction is an unmet medical condition that impacts the quality of life of patients and that they are committed to working with sponsors to develop treatment options for patients. The scientific workshop provided clear guidance to the FDA on key aspects of female sexual dysfunction drug development and clinical trials. We believe the outcomes of these meetings will provide greater regulatory clarity and confirm our confidence in the design of our bremelanotide Phase 3 pivotal registration program.

Now, moving on to the bremelanotide update. The operational and regulatory activities required to open enrollment in the bremelanotide North American pivotal registration program are in place, and we are scheduled to begin patient screening before calendar year-end 2014. We anticipate the initial clinical data will be available in the second quarter of calendar year 2016.

Concerning bremelanotide activities in the European Union, we previously announced a license and codevelopment agreement with Gedeon Richter, a European-based specialty pharmaceutical company. Gedeon Richter, with support from Palatin, will conduct the European Phase 3 clinical trials. Currently, we are working with Gedeon Richter on the activities required to begin enrollment in the European Phase 3 trial. It is anticipated that the Phase 3 trial will start in the second half of 2015.

We believe that there is a substantial global market for bremelanotide, with the United States being the largest potential market followed by the European Union. We believe the most effective strategy is to have distinct partners for each of the United States, the European Union, and other territories of the world. Our license and codevelopment agreement with Gedeon Richter is an initial step in carrying out the strategy.

Concerning the potential of the licensing agreement for bremelanotide in North America, we continue to make progress with these activities, working with potential partners as they conduct their due diligence. At this time, we cannot predict when or if such an agreement will be entered into.

Now, we will move on to our natriuretic peptide program and our clinical development candidate, PL-3994. The natriuretic peptide system is an endogenous neuropeptide hormone system involved in the regulation of cardiovascular function. Natriuretic peptide system includes the peptide hormones ANP and BNP and their associated receptors. Natriuretic peptide system functions to lower blood pressure, suppress the renin-angiotensin-aldosterone system, inhibit cardiac hypertrophy and fibrosis, increase natriuresis, and protect cardiac and kidney function.

The high value of targeting the natriuretic peptide system for treating heart failure is demonstrated by recent Phase III clinical trial results with the compound LCZ696, a compound under development by Novartis. LCZ696 is a one-to-one mixture of the angiotensin receptor blocker, valsartan, and the neutral endopeptidase inhibitor, AHU377. The neutral endopeptidase inhibitor component of LCZ696 up-regulates the endogenous natriuretic peptide system by blocking the enzymatic degradation of natural ANP and BNP. The detailed results of the LCZ696 Phase III trials were recently published in the New England Journal of Medicine and clearly established natriuretic peptide system as a valid target for heart failure therapy. It is highly likely that of up-regulation of the natriuretic peptide system will become part of the standard of care for heart failure patients.

Our natriuretic peptide program, with multiple approaches to up-regulate the natriuretic peptide system, is uniquely positioned to take advantage of this potential paradigm shift in the treatment of heart failure. PL-3994, our lead drug development candidate, is a mimetic of ANP and an agonist at the natriuretic peptide receptor-A. PL-3994 has completed Phase 1 clinical studies and is ready for Phase 2 clinical trials. Our preclinical and clinical studies show that PL-3994 increases circulating cyclic GMP levels, diuresis and natriuresis, inhibits the renin-angiotensin-aldosterone system, decreases systolic and diastolic blood pressure, and inhibits cardiac remodeling. PL-3994 has potential application in heart failure with preserved or reduced ejection fraction, and is ideally suited for replacement therapy in patients with corin or other prohormone processing deficiencies.

In addition to PL-3994 we have preclinical drug development candidates that fine-tune and block natriuretic peptide C-receptor, thus increasing endogenous ANP and BNP levels by decreasing their clearance through this receptor. The recent publication of LCZ696 data has increased interest among potential partners in our natriuretic peptide system program, and we are currently working with potential partners as they conduct due diligence on our program. We are preparing to initiate the PL-3994 Phase 2 clinical development program and given appropriate financial development support, we can initiate a PL-3994 study in the first half of 2015.

Our next update covers our melanocortin receptor 1 based in therapeutic program. We are very excited by the potential of melanocortin-receptor-1-based therapeutics for the treatment of a variety of inflammatory and immunological indications such as inflammatory bowel disease, kidney disease, and uveitis. Our lead compound, PL-8177 has completed the preclinical activities required to begin human clinical trials, and we are targeting the filing of IND with the FDA in the fourth quarter of calendar 2014.

And parallel with these development activities, we have begun discussions with potential corporate licensing partners. Our melanocortin-1-based program has generated significant interest in potential partners, and we continue to work with multiple parties as they evaluate this exciting opportunity.

Our final update before we begin the question and answer session is on our melanocortin 4 receptor obesity program. The scientists at Palatin have made substantial progress in our research into melanocortin 4 receptor biology, and we believe we have identified multiple potential lead clinical candidates. We have been in discussions with our partner AstraZeneca concerning how best to jointly through this program forward. We expect the timeline to potential clinical trials to be clarified as we continue to work with AstraZeneca.

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

I'll give a brief summary before we open the call to questions. We have designed a comprehensive Phase 3 program that, if successful, provides the safety and efficacy data to support regulatory submission or approval of bremelanotide as a treatment for premenopausal women with female sexual dysfunction. We anticipate beginning patient screening in the bremelanotide pivotal program before calendar year-end 2014. Our collaboration with Gedeon Richter is going well, and we remain on track to implement patient environment in the European Union pivotal program in the second half 2015. The FDA's recent two-day public meeting on female sexual dysfunction supports female sexual dysfunction as an unmet medical condition in need of drug treatment and provides additional regulatory clarity on the female sexual dysfunction indication. We continue to present and publish the data from our bremelanotide Phase 2b study, and you can find these presentations on our corporate website.

Recent clinical data indicates that the natriuretic peptide system has the potential to play a key role in the treatment of heart failure. Our preclinical and clinical work with our lead candidate, PL-3994, puts us in a good position to take advantage of this potential paradigm shift in the treatment of heart failure.

Regarding the melanocortin receptor 1 program, PL-8177, our lead candidate has completed preclinical activities required to file and IND with the FDA and conduct human studies. We are also continuing to make progress in identifying potential corporate partners.

And finally, we have made excellent progress with our melanocortin 4 receptor obesity and diabetes program with multiple potential lead clinical candidates identified, and we continue to work with AstraZeneca to determine the best path forward.

I would like to thank everyone for participating in Palatin's first-quarter fiscal year 2015 conference call. We will now open the call to questions.

(Operator Instructions).

Charles Duncan, Piper Jaffray.

Hi, guys. Thanks for taking the question. Just a couple of questions on the bremelanotide FSD program. First in the States, I believe that you said that we were going to be embroiled in or at least screening the first patient by the end of the year. Does that fully satisfy the requirements of the Gedeon Richter program, first of all -- or collaboration first of all? And then, thank you for the timeline walking through the timelines. But can you help us understand some of your assumptions in terms of the enrollment rate and perhaps the screen to implement or enrollment to screen failure kind of ratio that you are assuming?

Sure. The answer to your question, the first patient to screen triggers the milestone payment from Gedeon Richter, so we would meet that obligation. The assumptions are, we've conducted a very large Phase 2 study. We screened over 1000 patients and enrolled approximately 400 plus patients into the Phase 2b, so we have a pretty good understanding of what it takes to get the right patients enrolled into these types of studies. We are targeting approximately a nine-month period for enrollment to complete enrollment into the studies and that puts us on track with the six-month interrogation period to be in the second quarter of 2016 for the data.

And, Carl, one of the key phrases perhaps in your answer -- and thank you for that -- was the right patients enrolled. I guess as you look at the risk to enrollment, how much concern do you have about that? Or do you believe that the protocol is pretty clear and that the investigative sites that you are planning to use will be able to get the right kind of patients or are there other protocol features such as a run-in period that help you to limit that risk?

Sure. Again, we pay very close attention to making sure we have the correct patients -- patients with real FSD that actually are distressed by their sexual dysfunction into these studies. We have a very rigorous training program for sites that are new. So many of the sites that will participate in this study participated in the Phase 2b program. However, with that being said, obviously there will be a lot of sites that did not; those sites go through a very rigorous training and certification program to make sure that we are comfortable that they can actually diagnose and screen and bring in the right patients.

It's not a very difficult diagnosis, but we do need to make sure it that they are paying attention to the details. Making sure that patients not only have say for example, low desire, but that they also have the stress associated with that low desire and that there is no logical cause for their dysfunction, i.e. they're in an abusive relationship or they are taking drugs or they are on antidepressants. So, it's not a particularly difficult diagnosis, but we do pay a lot of attention to it to make sure that we get a good clean set of patients.

Okay. And with regard to the recent FDA workshop, that was nice to see in my view. Wondering if you think it could influence the FDA to approve the treatment for FSD, or do you think the agency is waiting for one that has -- for a drug that is perhaps, if you will, more approvable. And then some of the endpoints that were discussed, do you think that that's absolutely consistent with the protocol that you've designed? And do you anticipate any formal guidance to come out of that FDA workshop?

You have a lot of components there so let me address them. I think -- again, this is a two-part meeting. One is to bring in information from patients on how they perceive their disease condition, what types of symptoms they have, what they are looking for, what they are looking for and treatment options. That's also moderated by the key opinion leaders that are helping to treat these patients. And the second day was a scientific workshop.

We have to keep in mind, of course, none of this is binding on the FDA although this is run by them and it's them listening to information. So in my opinion, having attended meeting and talking to others that were there as well, I think the FDA was quite clear that this is an unmet medical condition and they are going to work with sponsors to try and get a treatment or multiple treatments approved. With that being said, I take that as meaning if you run a clean set of pivotal trials and you submit a nice solid NDA I think you have a good probability -- assuming there's no safety issue of getting approved.

The next drug up for potential approval would be flibanserin, and there are some safety studies that are being run or just been completed being run there and we anticipate that some time in the second half of next year the FDA will have completed their review of those safety studies and we'll see if they approve it or not. And that's going to be really a risk-benefit decision. I think the FDA has already acknowledged benefit and that particular program. The question is, what's the risk part?

With regards to our program, I was very happy to see that with regards to how one measures the benefit with regards to improving desire that the female sexual function index was unanimously by the panel agreed to be a validated instrument and the appropriate instrument to use in Phase 3 clinical trials and that the 28-day recall for desire was the appropriate recall period to use for that instrument.

I think it would be kind of hard for the FDA to -- since they conducted this panel and pulled his panel together, and it was quite diverse since it was a unanimous decision that this is the appropriate way to measure benefit, I think that's likely going to be the case and quite frankly that is our agreed to endpoint with regards to measuring desire with the F -- in our pivotal trials as well. So I don't anticipate any changes to our program based on this meeting. As I did say in the part that I read, I do believe that it confirms a lot of the things that we are doing.

Very good. Thanks for the added color.

Joe Pantginis, ROTH Capital Partners.

I want to take the tack on my questioning about just using the cliche of strike while the iron is hot. And I'm talking about the natriuretic peptides base, especially after Novartis's data. So I guess a couple of things -- I guess when you look at 3994 can you discuss how the product might be differentiated, as well as how you think it might fit in the treatment landscape -- especially with 696 moving forward? And then importantly to my strike while the iron is hot comment, can we discuss potential next steps in more color? Do you think you might want to hold on to this for a little longer to drive more potential value, or do you think you would look to partner it first in order to get the biggest bang for the buck, if you will?

So Jeff and I would kind of answer this together. Just quickly from a differentiating standpoint just keep in mind that the Novartis compound is a fixed ratio of in angiotensin receptor blocker and a neutral endopeptidase inhibitor so there's no ability to change how much natriuretic peptide up-regulation you have with that compound and it's fairly limited in its ability to dose because of potential hypotension. So in other words as you up regulate the NPS system too much you can get some hypotension.

So a key distinction with our program, of course, is that the treating clinician will be able to vary either the angiotensin receptor blocker or the natriuretic peptide system because we are giving a direct activator. So it does give a lot more flexibility.

With that being said, that's a twice a day pill; ours is an injectable so it's likely that we will be going to patients that are a little more difficult to treat, not fully responding to that treatment option. Jeff, I don't know if you want to add any more color and talk about the next study that we have on tap.

Sure. Joe, it's a great question. So as Carl says, as a direct agonist, 3994 does have a pharmacologic differentiation from the neurolysin inhibitor. And so who might benefit from that would be people who still have the potential to exploit that pathway despite the presence of the LCZ696 compound. Specifically, there is a population of people who have an abnormality of the natriuretic peptide processing enzyme system -- specifically corin, which is a protease which actually activates the NP.

And there's a large number of people who have either genetically acquired or functionally acquired defects in corin activation, and therefore can't process the NP. Therefore, they never actually present a functional agonist to the receptor system. So in those patients specifically, we think a direct agonist would be potentially helpful. Now, whether that's in combination with 696 or in people who are refractory to 696 I think needs to be worked out a little bit in a clinic. That would be the first group.

The second group of people with unmet need, despite that availability of that product are people who for whatever reason would prefer to take an actual ACE inhibitor. As you know, those drugs include and ARB, angiotensin receptor blocker, plus the neurolysin inhibitor but not an actual ace inhibitor which appears to be contraindicated. So in our case, we could come with an ACE inhibitor and a direct agonist as an alternative for selected patients. Again, this would have to be worked out in a clinic, but that's another potential segment that could benefit from 3994.

And just for us, the next clinical trial for us would be roughly about a 28-day study where we would be giving multiple doses of PL-3994 over the course of the 28 days and in a variety of patient populations. So, we would be looking at patients that had either preserved ejection fraction, reduced ejection fraction, and those that actually have corin mutation. So it's really the set-up study for us to be able to go home and treat and look for [real outcome] in it with PL-3994.

And from a collaboration standpoint, I think for us certainly the next study that up is one that's within the scope of Palatin to conduct -- it's an in-clinic study, it's not very large. I think after that you would like to have a partner on board because those studies then become larger. They are at home, they take longer duration. You are dealing with a lot more patient numbers because you are looking for reductions in hospitalization, improvement in cardiovascular death. And those things usually require large studies, and you would want the right partner on board.

So for us, we have a nice sample of companies that are interested. They are the appropriate companies; they are all large pharma. And if we can strike the right deal, we would do it sooner rather than later, but we would be willing to run the next set of studies if that was required to generate additional data.

Great. Great. Thanks for the added color, guys.

Rahul Jasuja Noble [Life Science] Partners.

Good morning and thanks for taking my question. Just sticking with the PL-3994 program, kind of following up on what was being discussed, you know besides heart failure isn't there a smaller indication -- maybe a smaller market size such as in acute decompensated heart failure where you could run a smaller study with less of the sort of big pharma kind of clinical trials required. Is that something that has been considered?

Rahul, it's Jeff speaking. Yes, that is a potential application of the compound. As you know, there's precedent for the beta natriuretic peptide -- Natrecor being approved for relief of dyspnea in patients with acute decompensated heart failure. But 3994 bring -- by working through the same receptor, albeit with a much longer half-life and a subcutaneous administration schedule this brings the possibility of a sub-acute intervention followed by chronic domiciliary therapy. So, we think that is an interesting segment that we do intend to explore in the program.

As a small company we sequence that development program probably behind treatment of patients with stable congestive heart failure with unmet need looking for chronic therapy. But we would be willing to obviously explore that, and certainly if the program was to be partnered the partner may wish to accelerate that particular program.

Okay great. And then, one more question -- this is sort of from my notes. Is there any potential since PL-3994 really has pretty potent ability to sort of decreased blood pressure -- is there any hopes for this in a hypertensive population?

That is a great point. I will say the original development thesis for this compound for was for treatment of refractory hypertension and there's no question it's a vasodilative. Is no question that there are people who -- basically refractory hypertension is essentially failure of three or more chronic therapies. And there is potential for benefits. Under expert care of a real hypertension subspecialist, I think that is a real potential application of the drug. Whether or not it's a registrational the focus, I think, remains to be seen.

Okay. Great. And just a follow-up on the FSD program, the questions regarding the US really has been discussed previously, but let me just ask you about the European timelines for the FSD trial. I know it starts the second half of next year. What about the countries and the market size that you think -- what would be market size in Europe versus, if you can comment on that.

Sure. I'll just comment quickly on the development part and let Steve talk about the market. We are targeting five countries in the EU to run the pivotal program in. That's about the right size. And the work to translate into the various languages is ongoing now. With that, I'll hand over to Steve and he can talk about the marketing.

Right. As Carl mentioned, the initial trials will be in approximately five countries, and we've used third parties for the market assessment here at Palatin. And Gedeon Richter used the combination of internal and also third parties. Peak sales for bremelanotide in the US we mentioned in the past are projected to be in that $750 million annual range and the European market, approximately one-third of that, or say $250 million in the European territories that we've license to Gedeon Richter. We also think there several other rest-of-the-world regions outside the, say, North America and the license territory to Gedeon Richter that could account for another $100 million to $200 million of annual peak sales.

Okay. That's useful. And then shifting to the MCR 1 program so obviously that's a hot program from for many. What is to progress there? Preclinical models -- do you have a lead compound? What should we expect out there? Also in terms of potential indications that you are looking at.

It's a program that we haven't yet had opportunities to publish much on. There's a lot of exciting preclinical data that has not yet been presented in IBD, uveitis, and various models of nephritis. So we think it's very broadly active compound. As I said, 8177 is the lead compound; it's a very potent agonists at the MCR 1 receptor and we are in the process of putting the IND together to start the first in human studies with that. With regards to the exact indication, which one will go with, we haven't come to a final decision yet. But we will over the next several months. The first study would be standard first in humans, single ascending dose study so we can look at the systemic effects of the drug. After that we will move into be able to implement and various patient populations.

And you haven't -- maybe I missed that, but you haven't publicly told us if there is going to be an IND timeline for that. You haven't discussed (multiple speakers)?

We have, actually. The IND-enabling studies are completed and as the final reports come in we will put them into the IND and file that before the end of the year.

Great. Thanks.

Charles Duncan, Piper Jaffray.

Thanks for taking the follow-up, guys. A couple of quick questions -- just to make sure I understand the milestone payment from Gedeon, with the commencement of screening that would result in a full, call it, $8.5 million recognized this quarter?

Yes. The way that works is as I mentioned et al. we received approximately $10 million of total upfront. Half of that or approximately $5 million was recognized in the quarter ending September 30. The other half is deferred until we are able to remove it, if you will, the noncontingent/nonrefundable portion of that payment. Once we start the US Phase 3 trials that component is removed. So, we expect and anticipate for the quarter ending December 31 -- this quarter ending December 31, 2014 -- we would recognize the remaining 50% of the upfront payment or approximately $5 million, plus the approximately $3.2 million related to the triggering of the milestone for the initiation start of the Phase 3 trials in the US.

That's helpful. Thanks, Steve, for that clarification. I wanted to ask Carl perhaps on the MCR 4 program, the obesity program with Astra. When do you believe that the collaborators will be in a position to decide on next steps in this collaboration?

I would think that you will see something probably early in the new year. We have discussions ongoing with them now and just based on what I think, they would wrap up and lead to a decision which with a real timeline would probably be in the beginning of 2015.

Okay. And then with regard to your internal candidates, is that impacting -- how would impact your efforts there? Had he had discussions beyond Astra perhaps to look at those candidates?

I'm not going to comment on that.

Do you have a compound that you've identified that could be moved through IND-enabling studies?

If we were on our own and had the money we would be well into the IND-enabling studies.

Okay. Good. All right. Well, we'll look forward to that update next year.

Thank you. That does conclude today's question and answer session. I would now like to turn the conference back over to Dr. Carl Spana for any closing remarks.

I'd like to thank everyone for participating in the Palatin Technologies first-quarter fiscal year 2015 conference call. Everybody, have a great day. I appreciate all the great feedback and questions that we got on the call. I think they were quite good. I'd like to thank everyone at Palatin for the work that they are doing and look forward to updating you next quarter. Thinks a lot. Bye-bye.

That does conclude today's conference. Thank you for your participation.