Palatin Technologies Inc (PTN) 2018 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Fourth Quarter and Fiscal Year-End 2018 Operating Results Conference Call. As a reminder, this conference is being recorded.

Before we begin our remarks, I would like to remind you that the 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 risk and uncertainties discussed in the company's most recent filings with the Securities and Exchange Commission. Please consider such risk 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. Good morning, and welcome to the Palatin Technologies Fourth Quarter and Fiscal Year-End 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 the financial updates. Steve?

Thank you, Carl. Good morning, everyone. Starting with the fourth quarter and fiscal year ended June 30, 2018, significant and recent operational and financial highlights, I'm going to start with Vyleesi.

Now Vyleesi is the tradename, the official tradename for bremelanotide, which is under development for Hypoactive Sexual Desire Disorder, or HSDD. In June 2018, our exclusive North American licensee for Vyleesi, AMAG Pharmaceuticals, was notified by the United States Food and Drug Administration, of acceptance for the filing of the New Drug Application for Vyleesi.

The FDA PDUFA, which is the Prescription Drug User Fee Act, goal date for completion of the FDA review of the NDA is March 23, 2019. The FDA's acceptance of the NDA triggered a $20 million milestone payment to Palatin, less expenses paid by AMAG. Palatin is also entitled to receive a $60 million milestone payment upon FDA regulatory approval. If approved, Vyleesi would become the first and only on-demand pharmacologic option indicated for the treatment of HSDD in premenopausal women in the United States.

During the June 30, 2018 fiscal year, we entered into a collaborations and license agreement with Fosun Pharma for exclusive rights to develop and commercialize Vyleesi in the territories of Mainland China, Taiwan, Hong Kong and Macau. We received an upfront payment of $500,000, less taxes -- I'm sorry, an upfront payment of $5 million, less taxes, of $500,000. We also entered into a license agreement with Kwangdong Pharma for exclusive rights to develop and commercialize Vyleesi in the Republic of Korea. We received a $500,000 upfront payment, less approximately $82,500 of taxes. Carl will expand on our other programs that we are advancing during his part of the presentation.

Regarding other corporate, during the fiscal year ended June 30, 2018, we decreased debt from $14.8 million at June 30, 2017 to $7.2 million. Palatin was added to the Russell 3000 index in June of 2018 and throughout the year, as we've done in prior years, we grew the company's intellectual property portfolio with several filings and issuances this year.

Going into the specific financial results. Regarding our fourth quarter and fiscal year ended 2018 financial results, Palatin reported net income of $11.8 million or $0.06 per basic and diluted share for the fourth quarter ended June 30, 2018, compared to net income of $13.3 million or $0.07 per basic and diluted share for the same period in 2017.

The difference between the 3 months ended June 30, 2018 and 2017 was primarily attributable to the recognition of contract revenue pursuant to our license agreement with AMAG of approximately $20 million for the quarter ended June 30, 2018 compared to 33 -- approximately $33 million in 2017.

For the fiscal year ended June 30, 2018, Palatin reported net income -- again this is for the full year -- $24.7 million or $0.12 per basic and diluted share compared to a net loss of approximately $13 million or $0.07 per basic and diluted share for the year ended June 30, 2017.

The difference in net income for the year ended June 30, 2018 and the net loss for the year ended June 30, 2017, was primarily attributable to the recognition of $67 million in license and contract revenue for the year ended June 30, 2018, compared to $44.7 million of recognized revenue in the period, the year ended June 30, 2017. And secondarily, to a $14 million decrease in operating expenses to $41.2 million for the year ended June 30, '18, as compared to $55 million for the year ended June 30, 2017.

Regarding cash position and working capital, Palatin's cash and cash equivalents were $38 million compared to cash and cash equivalents and investments of $40.5 million and accounts receivable of $15 million at June 30, 2017. Current liabilities were $10.8 million as of June 30, 2018, compared to $19.9 million net of deferred revenue of $35 million at June 30, 2017.

Palatin believes that existing capital resources will be sufficient to fund our planned operations through at least September 30, 2019.

With that, I'll be turning the call back over to Dr. Carl Spana. Carl?

Thank you, Steve. I will start the operational update with Vyleesi, our lead clinical product. Vyleesi is a first-in class melanocortin agonist, which is the only on-demand drug to complete Phase III clinical trials for Hypoactive Sexual Desire Disorder. The product is formatted as a simple, single-use subcutaneous autoinjector, self-administered by the patient approximately 1 hour prior to sexual activity.

We've been working with AMAG Pharmaceuticals, our North American licensing partner for Vyleesi. We completed a New Drug Application for Vyleesi, which AMAG submitted to the FDA in March 2018. The NDA was accepted for review by the FDA in June. The PDUFA date for the Vyleesi NDA is March 23, 2019, and the FDA plans to hold an advisory committee meeting to discuss the Vyleesi NDA in early 2019.

We are currently working with AMAG to support the Vyleesi New Drug Application and to prepare for the advisory committee meeting. Outside of North America, we are working with our Chinese licensee, Fosun Pharma, and our South Korean licensee, Kwangdong Pharmaceuticals to advance Vyleesi development in those territories towards regulatory filings.

In addition, we also have ongoing discussions with multiple potential partners for other territories.

Now moving on to Palatin's earlier drug development programs. We are primarily focused on our melanocortin program, which has 2 broad therapeutic areas of interest which are autoimmune and inflammatory diseases and rare genetic forms of obesity, that may be treated with melanocortin-4 receptor agonist.

A second area of interest is our natriuretic peptide program for cardiovascular and fibrotic diseases.

We've developed new families of highly specific and selective melanocortin-1 receptor agonists with potentially broad applications in treating a variety of inflammatory and autoimmune diseases, including inflammatory bowel disease, dry eye, uveitis and rheumatoid arthritis.

Activity in melanocortin-1 receptor controls immune system dysregulation by inhibition of the NF-Kappa-B and downregulation of proinflammatory cytokines. Our lead melanocortin-1 clinical development compound, PL-8177 is a highly selective and potent melanocortin-1 receptor agonist, which we believe will have broad application in treating inflammatory and autoimmune diseases. PL-8177 has demonstrated reversal of disease in both inflammatory and autoimmune animal models.

We are developing both subcutaneous and oral formulations of the PL-8177. Our subcutaneous formulation of PL-8177 has completed a Phase I single-ascending and multiple-ascending dose study and we expect to have the unblinded data in the third quarter of 2018. Our next step with the subcutaneous formulation is to conduct a Phase IIa study that will evaluate the safety and activity of PL-8177 in a variety of autoimmune diseases. This study is designed to provide the data needed to support larger Phase II efficacy studies and is anticipated to start in the first quarter of 2019.

Our oral formulation of PL-8177 is in development as a potential treatment for ulcerative colitis. And a Phase I pharmacokinetic study is scheduled to start in the fourth quarter of 2018.

Our drug candidate under development for treating ocular inflammation, including dry eye disease, is PL-8331, a dual melanocortin receptor-1 and 5 agonist. We have developed an eye-drop formulation of PL-8331 as a potential treatment for dry eye. We anticipate completing preclinical-enabling activities with PL-8331 in 2019 and to file an IND and begin clinical studies shortly thereafter.

We've also been working to expand our product portfolio by leveraging our expertise in melanocortin biology and chemistry. We have developed an orally active, small molecule, melanocortin-4 receptor agonist PL-9610. PL-9610 has demonstrated efficacy in a number of animal models of rare human genetic obesity. We believe PL-9610 has potential as a treatment for patients with mutations and the leptin melanocortin pathway that resulted in life-threatening early onset obesity disorders. We plan to initiate preclinical safety activities to support an IND filing and clinical studies with PL-9610 in the first half of 2019. And a number of the potential indications for PL-9610 may qualify for orphan drug designation.

Our other area of focus has been our natriuretic peptide system programs for both cardiovascular and fibrotic diseases. Our lead development candidate, PL-3994 is a selective and potent agonist of the natriuretic peptide A receptor. It's completed Phase I studies and is scheduled to start a Phase IIa trial, sponsored by the American Heart Association in conjunction with major research centers in the first half of 2019.

We believe that PL-3994 has the potential as a treatment for heart failure patients that preserved or reduced ejection fraction and may be suitable for replacement therapy in patients with prohormone processing deficiencies.

Palatin has also developed a peptide that is both a natriuretic peptide A and natriuretic peptide C receptor agonist for use in both cardiovascular and fibrotic diseases, including reduction of cardiac fibrosis. This peptide PL-5028 is in preclinical evaluation and we expect to have data in our fibrotic models later this year or early next year. As a reminder, you can find additional information on our programs on our website, www.palatin.com.

In fiscal year 2018, we made substantial progress in advancing our development programs and we anticipate the approval of Vyleesi in March 2019.

As we think about the future of our company, 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 Vyleesi from concept through Phase III clinical trials and now multiple commercial partnerships, not only provides the resources for realizing the value of Vyleesi, but has provided us with the resources to unlock the value in our pipeline programs.

Over the next year, we have the following objectives. We will be working diligently with AMAG Pharmaceuticals to support the Vyleesi New Drug Application and to prepare for the Vyleesi FDA advisory committee in early 2019. And we remain on track for a potential Vyleesi approval in March 2019. In addition, we will work with Fosun Pharma and Kwangdong Pharmaceutical to support the Vyleesi development and regulatory activities. And our business development activities will be primary focused on Vyleesi partnerships for the European Union, Asia Pacific, Latin America and other selected territories.

For our natriuretic peptide system program, our main objective is really to initiate the PL-3994 Phase IIa study in heart failure patients with preserved ejection fraction. And for our melanocortin system program it has the following objectives. For PL-8177, we would like to initiate and complete the Phase I PK study with our oral formulation for ulcerative colitis and for our subcutaneous formulation to initiate and complete our Phase IIa study.

For PL-8331, as a treatment for dry eye disease, we would like to initiate and complete the required preclinical activities to begin first-in-human studies.

And finally for PL-9610, our orally active, small molecule, agonist at the MCR4 receptor, we intend to initiate our IND-enabling studies and activities.

The management and employees of Palatin remain focused on achieving our objectives and building value for our shareholders. I'd like to remind you that you can find a lot more detail on these development programs at our website, www.palatin.com.

I'm now going to turn the call over to the operator and open it up to questions. Thank you all for participating on our call.

(Operator Instructions) Our first question comes from Joe Pantginis of H.C. Wainwright.

Couple of quick questions, if you don't mind. First, regarding the upcoming AdCom, do you see any potential -- or I'm sorry, any outstanding issues or things that need to still be prepared? Or are things sort of status quo and ready to go?

Well, Joe, we'll be working on being ready with AMAG up until the last minute. I think with that being said, our review -- the information request and the review that's been going on with the agency I think has really not highlighted anything that we weren't anticipating. As you probably know, Vyleesi has been a very well-studied compound and so we expect that, the panel meeting -- the FDA will do their job and I'm sure they'll have a very rigorous panel meeting, but we will be prepared -- or AMAG will be prepared. And we'll be working with them to do that.

Great. And then assuming the drug gets approved in the March time frame, is there any indication that you might have received from AMAG about how quickly they might be able to launch the drug?

Hey Joe, it's Steve. Yes, the plan is to launch the drug in the -- immediately thereafter. So the target is the second quarter. Let's -- we've stated, both of us, that the PDUFA date is March 23, as quickly as we can have that approval and final label and things of that nature. AMAG is targeting and working up to be able to launch, again, as soon as possible, and it would be in the second quarter of calendar 2019.

Great. And then just one quick last one on Vyleesi. Just any clinical work needed to be done with regard to Fosun or Kwangdong collaborations? Or is it strictly regulatory?

I think both of them are planning to do a Phase I pharmacokinetic study to just -- to confirm that the -- the absorption and metabolism of Vyleesi is the same in the Asian population, as it is in the predominant Caucasian population that was studied in the North American trials. Those would be done in time to file off of the Vyleesi approval in the U.S.

Got it. And thanks for your patience with this. Just wanted to ask maybe one last broader question. You have the opportunity to have a broad set of pipeline opportunities here. So no lack of riches with regard to pipeline opportunities, if you will. So I guess, with everything that you've discussed as well as even looking into these additional orphan indications, how are you going to look to provide a focus to investors for all of these opportunities? Or are you just basically being driven by the data?

Well, Joe, I think we're -- since these programs are at a fairly early stage, we certainly will definitely be driven by the data, as we always are. I think for the most part, you won't see us focus very much on the heart failure space. I mean that's an area that's really just too broad for us and too large an indication. We're really looking to drive forward in indications where we can take the products forward on our own a substantial distance with the resources that we have in the company. And those really will fall really in the -- some of the autoimmune diseases and then in the -- some of the orphan indications. We're quite excited about the work with PL-9610 as one of the first orally active small molecules, active at the melanocortin-4 receptor and we've been doing a lot of preclinical work in that, looking at various models of where -- that have -- where there are mutations in the leptin melanocortin pathway and we've been able to rescue the phenotype quite nicely. So I think that there's a very nice place for that compound, particularly because these are -- many of these patients are younger children and injectable compounds and what have you are a little bit more difficult but oral works quite nicely in that patient population. So as you said, we have a lot of opportunity. But really, the next year for us is really sorting through and making sure we really drive the data that's required to make the decisions on which one of these things will really progress into the larger Phase II studies.

(Operator Instructions) Our next question comes from John Newman of Canaccord.

Obviously, we know that [Kyleesi] is still under FDA review. But what I wondered is, if you could start with -- Vyleesi, I wondered if you could talk to us a bit about some of the market prep that you are allowed to do now. Obviously we realize that you're restricted in terms of what you can do. But just curious as to some of the things that you're doing at the moment to just make sure that physicians are aware that the drug is under review and that it might be an option for their patients?

Hey John, this is Steve. I mean, obviously, AMAG, being the commercial partner, is taking the lead, in pretty much everything behind that regarding the commercial preparation or potential commercial preparation. As of right now, they are concentrating on education, primarily through the -- through targeting to consumers and the HCPs. They have several websites up and running right now, and actually if you go to the AMAG website, it will direct you, say, with Vyleesi/bremelanotide and HSDD. So at this stage, I think that's appropriate. And again, the websites and whether it's also at conferences, sometimes Palatin has some KOLs or we're doing some presentation of some data and AMAG's doing the same thing. But the primary effort is around education of the condition and the potential treatments and coming treatments.

All right, great. And just in terms of the FDA panel, how do you plan on really emphasizing the advantage of an on-demand dosing regimen? I suspect, perhaps a few of the panel members will be familiar with Addyi and, obviously, you have some advantages in terms of dosing, just in terms of safety. But how do you plan on just really explaining to the panel that, "Hey, we know that we're an injector product, but look, we think that's an advantage, we think that's actually a really good thing for this disorder."

This is Carl. John, I think AMAG is doing a tremendous job and we're -- Palatin personal are in support of AMAG, they'll be front-and-center on the presentations. And we've been working with them on what they're doing. And the way these things typically happen, we keep in mind, one, this is an FDA meeting, it's not obviously, a company meeting where we're invited to present at the meeting. But we will have, in addition to AMAG personnel that will be presenting, both the safety and efficacy data, we'll have key opinion leaders that will be there as well and they'll present the overall view of -- of what HSDD is and how Vyleesi fits in. And we also will have a -- I think, we're planning to have a [K-level] speak from the clinical trial experience, how Vyleesi performed and how patients accepted the product. So I think they'll have all that covered and they will be -- and clearly, will be articulated to the panel How much latitude we'll have, questions we'll get, obviously, that's up to the FDA and the Chairman of the panel.

Our next question comes from Michael Higgins of Ladenburg Thalmann.

A lot of questions on Vyleesi. We have a few questions on the pipeline if we could. First on PL-9610. You showed some data in the recent slide deck in diet-induced obese mice and MC4r knockout mice. Do you have data anywhere that shows it's an MC4r activator? And also do you have a publication strategy for this program?

The answer is yes. Actually in the -- we have a lot of the data in the -- our slide deck, we'll be updating that as we go forward. But we certainly have a tremendous amount of data showing that the compound is a selective MCR4 (sic) [MC4r] agonist. In addition, we know -- what we do have in the slide deck, we do show that if you look at obese animals that don't have the melanocortin-4 receptor, the drug doesn't work. So that's pretty good evidence that it's certainly working through melanocortin-4 process. In addition, I think the other data we have in there is we have, in mice, so the melanocoleptin itself, so leptin is a hormone that's involved in regulating food intake and weight. And those animals are also obese and we can rescue that phenotype, we've got that data in the presentation as well. So right now, as we continue to generate more data, we will -- as we've done with all of our programs published, we have a number of publications, not only for the PL-9610 in preparation, but we've been doing a lot of work, particularly in the ocular and inflammatory area and the data has been quite exciting. And we have a number of papers that are in preparation right now for that as well. So, much like we do with Vyleesi, which had a very rigorous publication strategy, all these programs, you should expect over the next year or so to see not only presentations and abstracts presented at meetings, but the publications will start to come out as well.

Great, very helpful. And a follow-up on 9610. What are your plans for specific indications to develop this in -- it looks like you're looking at rare genetic metabolic and obesity disorders, might they include POMC and LEPR?

Yes, sure, I think -- I think there are other companies that are forward -- going forward in those indications with injectable products. I think that -- it's a logical place for us to start. We know that the leptin melanocortin pathway played a very key role in the regulation of food intake and weight and anti-homeostasis, and there are a number of definable mutations in that pathway that do lead to early-onset obesity where the need for treatment is quite high. And I think, [the kind of doses], many of these are children. I think that an oral format is one that may play very well in that patient population so you'll probably see us focus there first. But for that program, not to put the cart before the horse, the next step for us is we've done some preliminary tox work, it looks quite good, but it's really now to put into the formal tox studies and drive it forward and we're hopeful that, based on what we've seen so far, that the compound will pass that hurdle and be ready for clinical trials late next year.

Great. Thanks, that's very helpful. I didn't see 8905 and 7737 in that recent deck, are those still in development?

Well, 8905 is a peptide agonist melanocortin-4 receptive, very selective and again, that will be an injectable product. So we have made a decision to go with the orally active small molecule versus the peptide, which would be injectable. I think when you think about obesity in general, I think being able to have an oral compound, probably is an advantage versus having to deal with injectable product that would need either a daily injection or formulations that would be extended release. So that's why we don't -- 8905 is a great compound, and we've done a tremendous amount of work with it but because it's an injectable product, we decided to go and push the small molecule forward. I missed on the second compound?

7737.

The 7737.

The 7737 is -- it was just renamed 9610. There was a -- Mike, I'm not quite clear why the guys did it internally but they did, they moved from PL-7737 to PL-9610. So I'm not sure why, but that's what they did. So that's -- otherwise they're one and the same compound.

All right. Sure. No -- the comments on (inaudible). Question then -- last question on the pipeline being an 8177, inflammatory bowel, Phase IIa. If you can give us an overview of that one, where that's at in its development? We heard a few comments, just trying to clarify on this one.

Happy to do it. I think -- and these are earlier programs and we haven't been as -- we haven't put as much information out or are maybe not as clear as we should be with them. So for that compound PL-8177, we're quite excited about the prospects for that compound. And as I said, there are 2 formulations. So the oral formulation would be limited to treatment of inflammatory bowel diseases, in particular ulcerative colitis. And the next step for that particular compound is a Phase I study where we would be dosing patients with the oral formulation and really looking to show that the peptide that's in there, 8177, is released in the colon and is hitting the target tissue. That -- the product is made -- the regulatory filings are in, sites have been identified, [shareholders] are onboard. So that study will start probably in October, November time frame. It's a relatively quick study, but it's one where we really need to show that the formation is working in humans the way we've -- it's been working in animals. Then post that, we would be in a position then to go forward into larger efficacy studies in ulcerative colitis. For the subcutaneous formulation, we -- as I mentioned on the call, we just completed the first in-human studies with 8177, where we were looking at systemic exposure in both a single or multiple-ascending dose -- dosing regimen. We went to quite high doses, quite a delta over what we expect the therapeutic window will be. We know there weren't really no [in-life] observations, so we're just waiting for the final unblinding and a look at both the PK and any of the laboratory numbers. But I don't expect there's going to be any safety signal there. So our next step with that compound, subcutaneous, was really looking at a number of oral immune indications such as RA gout, uveitis, where we would be giving the drug systemic And what we're looking for predominantly in those things is really are we seeing translation of the animal data that we have into humans? In other words, are we seeing the pronounced reduction in proinflammatory cytokines the upper regulation in cytokines like IL-10 which suppress immune response. And importantly, are we seeing some of the cell-fate switching that we see in the animal studies? So in the animal work we see a very pronounced switching of T cells and macrophages from proinflammatory to either regulatory or proresolution phenotypes, and we're looking to see if we can do the same thing in humans. So they're an important set of studies, the protocols are in development now. So -- and we're pretty optimistic we can get started pretty early in 2019. So that's really the full range what we were trying to do with 2019, over the next 4 quarters.

I would now like to turn the conference back over to Dr. Spana.

Well, I'd like to thank everyone for participating in Palatin Technologies Fourth Quarter and Year-End 2018 Conference Call. As always, I thank the analysts that asked questions, I think they help to clarify and illuminate what Steve and I present. So I'd like to thank you all for participating. Have a great day, and we look forward to meeting with you over the course of the quarter and updating you on our progress. Thanks.

Thank you, ladies and gentlemen. This now concludes today's teleconference. You may now disconnect.