Palatin Technologies Inc (PTN) 2018 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Second Quarter Fiscal Year 2018 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 of 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. Good morning, and welcome to Palatin Technologies Second Quarter Fiscal Year 2018 Call. I'm Dr. Carl Spana, CEO and President of Palatin. With me on the call today is Steve Wills, Palatin's Executive Vice President, Chief Financial Officer and Chief Operating Officer. On today's call, we will provide financial and operating updates. Now, I'm going to turn the call over to Steve, who will provide financial updates. Steve?

Thank you, Carl. Good morning, everyone. Starting with the second quarter ended December 31, 2017, significant and recent operational financial highlights include:

With respect to bremelanotide, which is under development for female Hypoactive Sexual Desire Disorder, or HSDD, in November 2017, we announced the signing of a license agreement with Kwangdong Pharmaceutical for exclusive rights to develop and commercialize bremelanotide in the Republic of Korea. Under the terms of the agreement, we received $417,000 in December, consisting of an upfront payment of $500,000, less $82,000, which was withheld in accordance with tax withholding requirements in South Korea. Kwangdong is also required to pay us a $3 million milestone based on the first commercial sale in South Korea, up to $37.5 million in sales-related milestones. And Kwangdong is also obligated to pay us tiered royalties on annual net sales, ranging from mid-single-digit to low double-digit royalties. All development, regulatory, sales, marketing and commercial activities and associated costs in the licensed territory will be the sole responsibility of Kwangdong.

In September 2017, we entered into a license agreement with Shanghai Fosun Pharmaceutical for exclusive rights to develop and commercialize bremelanotide in the territories of Mainland China, Taiwan, Hong Kong and Macau.

Under the terms of the agreement, we received $4.5 million in October 2017, consisting of an upfront payment of $5 million less $500,000, which was withheld in accordance with tax withholding requirements in China. Fosun is also required to pay us a $7.5 million milestone based on regulatory approval in China; up to 92.5 million in sales-related milestones; and Fosun is also obligated to pay us tiered royalties on annual net sales, ranging from high-single digit to low double-digit royalties. All development, regulatory, sales, marketing and commercial activities and associated costs in the licensed territory will be the sole responsibility of Fosun.

We hope to have the remaining rest of the world territories licensed by the end of calendar year 2018.

We're working closely with AMAG Pharmaceuticals, our licensee for North America, on completing the activities necessary to file a New Drug Application with the FDA. NDA filing with the FDA by AMAG is targeted by the end of this quarter.

With respect to our melanocortin receptor 1 agonist program, which is under development for inflammatory bowel diseases, we received FDA clearance of an IND, Investigational New Drug application, for PL-8177 for ulcerative colitis and initiated subject dosing in a first-in-human clinical study earlier this month.

Moving over to our financial results. Regarding the second quarter fiscal year 2018 financial results, Palatin reported net income of $3 million, or $0.02 per basic and $0.01 per diluted share, for the quarter ended December 31, 2017, compared to a net loss of $10 million or $0.06 per basic and diluted share for the same period in 2016. The difference in financial results between the 3 months ended December 31, 2017 and 2016 was primarily due to the recognition of $10.6 million in license and contract revenue during the 2017 period pursuant to our license agreement with AMAG and a reduction of $2.1 million in research and development expenses.

Regarding revenue. As I stated, we recognized $10.6 million in license and contract revenue for the quarter ended December 31, 2017, which consisted entirely of license and contract revenue-related to our license agreement with AMAG. There was no revenue recorded in the quarter ended December 31, 2016.

Regarding operating expenses. Total operating expenses for the quarter ended December 31, 2017 were $7.7 million compared to $9.4 million for the comparable quarter of 2016. The decrease in operating expenses was mainly attributable to our program development cost for bremelanotide being lower as we advance towards the NDA filing stage by AMAG with the FDA.

Regarding other income and expense. Total other expense net was $300,000 for the quarter ended December 31, 2017 compared to $600,000 for the quarter ended December 31, 2016. Total other expense net of both periods consisted primarily of interest expense related to our venture debt.

Finishing with our cash position and working capital. Palatin's cash and cash equivalents were $35 million as of December 31, 2017, compared to cash, cash equivalents and accounts receivable of $55.6 million at June 30, 2017, and $49.3 million at September 30, 2017.

Current liabilities were $14.1 million net of deferred revenue of $9.5 million as of December 31, 2017 compared to $19.9 million net of deferred revenue of $35 million as of June 30, 2017, and $19.3 million net of deferred revenue of $20 million at September 30, 2017.

We believe that existing capital resources will be sufficient to fund our planned operations through at least the next 12 months. Carl?

Thank you, Steve. I'll start our second quarter fiscal year 2018 operational update with bremelanotide.

As Steve said, we are now working with AMAG Pharmaceuticals, our North American licensing partner, to complete the New Drug Application for bremelanotide, and we anticipate filing a New Drug Application in the first quarter of calendar 2018, putting bremelanotide on track for a potential approval in 2019. Our development of bremelanotide outside of the North American market will only be done in the context of partnerships. Last quarter, we closed our second ex North American licensing deal with Kwangdong Pharmaceuticals, granting them exclusive rights to bremelanotide in South Korea. We're actively working with Fosun Pharmaceuticals, our Chinese partner, and Kwangdong Pharmaceuticals, to support their bremelanotide development and regulatory activities.

We have ongoing discussions with multiple potential partners with different territories and anticipate closing additional bremelanotide licensing transactions in calendar year 2018.

Palatin's other drug development efforts are primarily focused on our melanocortin program for autoimmune anti-inflammatory diseases, and our natriuretic peptide program for cardiovascular and fibrotic diseases.

Regarding our melanocortin abuse seen in diabetes program, we are reviewing our development -- business development strategy, including assessing the pursuit of treatments for rare genetic deficiencies resulting in life-threatening metabolic disorders in orphan drug designations.

Our website, www.palatin.com, has detailed descriptions of our development programs including mechanisms of action, supporting science and commercial potential. So on today's call, I will provide only a brief update.

Our compound PL-8177 is a selective agonist at the melanocortin 1 receptor. It has demonstrated efficacy in multiple models of inflammatory disease including inflammatory bowel disease and uveitis. We are excited to be moving the compound into the clinical development. In the fourth quarter of 2017, our Investigational New Drug application for PL-8177 was accepted by the FDA, And in the first quarter of 2018, we began dosing PL-8177 in a combined single ascending and multiple ascending dose study. This study will evaluate the safety and pharmacokinetics of subcutaneous PL-8177 in healthy subjects.

This study will enroll approximately 55 subjects, and we expect to complete the study in the third quarter of 2018.

In addition, we have developed an oral formulation of PL-8177 and plan to move this formulation into clinical trials later this calendar year.

Our second melanocortin development candidate is PL-8331. It's an agonist at the melanocortin 1 and 5 receptors, and we are currently evaluating PL-8331 in multiple preclinical disease models and drug safety studies. If the data supports continued development, we plan to start the activity required to file an IND.

Our second area of focus is our natriuretic peptides program for cardiovascular and fibrotic diseases. Heart failure in fibrotic diseases are a major health problems in these new treatments. We have developed multiple compounds that regulate the natriuretic peptide system that can address these potential indications. PL-3994 is a selective agonist at the natriuretic peptide A receptor. And as previously disclosed, we will be evaluating the safety and efficacy of PL-3994 in a Phase IIa clinical study that is planned to start in calendar year 2018. The study will enroll heart failure patients with preserved ejection fraction. And we plan to provide further details on this clinical trial when patient enrollment begins.

Our second natriuretic peptide compound is PL-5028. It's an agonist at both the NPR-C receptor and the NPR-A receptor. We believe the dual agonist activity of PL-5028 should allow for superior efficacy in a much broader dosing window compared to other natriuretic peptide approaches. PL-5028 has demonstrated excellent efficacy in preclinical models of heart failure, and we are planning to begin preclinical activities to support first-in-human clinical studies.

We believe that the potential charger being the natriuretic peptide and melanocortin peptide systems has potential beyond indications discussed above. We plan to allocate additional resources to activities that will expand the potential indications of our compounds and also strengthen our intellectual property.

As we think about the future of Palatin, I am very excited by the potential of our development programs to lead to new treatments that could significantly impact the lives of patients. The success we have had in developing bremelanotide from concept to phase clinical trials, and now, multiple commercial partnerships, not only provides resources realizing the value of bremelanotide, this provided us with the resources to unlock the value in our pipeline programs without having to have access to the capital markets funds.

Looking forward, we aim to achieve the following objectives. We will be working diligently with AMAG Pharmaceuticals, our bremelanotide North American commercial partner, to complete the New Drug Application and file with the FDA in the first quarter of 2018. This will put us on track for a potential bremelanotide approval in 2019.

In addition, we will be working with Fosun Pharma and Kwangdong Pharmaceutical to support their development and regulatory activities. And our business development activities will be primary focused on bremelanotide partnerships with EU, Latin America and other territories.

For our natriuretic peptide system program, we're looking to move PL-3994 into a Phase IIa clinical study in heart failure patients with preserved injection fraction.

And finally, for our melanocortin peptide system programs, the following objectives are to complete Phase I single-ascending, multiple-ascending dose study and initiate the clinical studies of our oral formulation and for PL-8331 to initiate and complete the required preclinical activities to begin first-in-human studies.

As we end the call, the management and employees of Palatin will be focused on achieving our objectives and building value for our stakeholders. I should remind you, you can find more information on our website at www.palatin.com.

Thank you. We will open the call to questions.

(Operator Instructions) We'll go first to John Newman with Canaccord.

Just had a question on PL-3994. Just curious on that particular compound if you think it might be eligible for fast-track designation?

I don't know if it will be eligible for fast-track designation, John. That compound is one of our older compounds, and the study that I discussed on the call is actually funded by third-party and being conducted by academic centers. There may be some rare disease designations or orphan designations that we might follow with that compound, but it has a rather short intellectual property right. The compound that I think is really the winner in the natriuretic peptide space is really 5028. I think there's a much better profile with regards, particularly to the potential of close hypotension and some of the other side effects associated with natriuretic peptides, so that's the one that we're really focused on. But we certainly -- because of the clinical background we have with PL-3994, we certainly are looking to see if there are some other smaller indications, as I said, maybe some orphan ones that may -- we may be able to purpose -- repurpose that for.

And on bremelanotide, at this point in time, do you expect to have an FDA panel? I know you haven't filed yet, but I'm just curious as to how you're thinking about that?

Sure. Yes, we will be. It's a first-in-class compound, and in our discussions with the agency in the pre-NDA process, they did tell us that they were planning to have a panel -- advisory panel meeting for the NDA.

We'll go next to Michael Higgins with Ladenburg Thalmann.

Couple of partnering questions if I could. If things go right in the next 3 years on your relatively early stage pipeline, you'll have a lot in the pipeline. What is your outlook on timing for partnership with your pipeline? Is everything post Phase II? Would some of those be partnered sooner? Maybe your thoughts?

Mike, I think the strategy that's going to emerge over the next several quarters, we have -- as we said, the first compound going in is 8177. That's targeted for ulcerative colitis. We're doing the first systemic tox work now. That will be followed up with a oral formulation for that compound in that approach. Certainly, we have had a few preliminary discussions with potential partners, but based on the cash position that we currently have, anticipating cash flow from licensing transactions and continue to (inaudible) bremelanotide, we're not in a hurry to close any additional licenses on the pipeline right now. I think we can drive a little more value -- substantially more value can be built in those programs before we bring in a partnership. I think what you will see us attempt to do over the next 2 to 4 quarters is really begin to focus the pipeline on indications where we can potentially take it through Phase III on our own. And those may be things such -- some we haven't talked too much about. There may be some orphan designations that we haven't yet disclosed or something like dry eye or some of the ocular indications, where the development pathways are a little bit cleaner, a little bit more straightforward, doesn't require quite as many patients. So you'll see some mix of projects, really, that fall in one, so we take forward on our own and somewhere we will look -- partner a little bit early. But right now, the main focus of the business development efforts would be on concluding the rest of the world partnerships for bremelanotide while we build some additional value in the pipeline.

Thanks, that's helpful. I just want to dovetail on your last comments on partners for bremelanotide and in the other areas that you haven't partnered up yet? What are your updated thoughts? What are you hearing from your discussions?

Yes. Michael, it's Steve. We're pretty comfortable with the statement I made that we anticipate having the rest of the world territories that are not currently licensed by the end of the year. We have some excellent interest basically in all the territories, i.e. the remaining larger territories, i.e. EMA, Asia Pacific, Japan, Latin America. So as we -- and, again, we're advancing those discussions right now, and I would anticipate that they would even accelerate post the NDA filing by AMAG later this quarter.

And at this time, there are no further questions, I'll turn the call back over to Dr. Spana.

Great. Thank you, everyone, for participating on our second quarter call. We look forward to, again, having meeting you throughout the quarter and updating you at the end of next quarter. Have a great day and thank you.

This does conclude today's conference. We thank you for your participation.