Palatin Technologies Inc (PTN) 2021 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Palatin Technologies Second Quarter Fiscal Year 2021 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 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 the actual results may differ materially from those anticipated due to a variety of risks and uncertainties discussed in the company's most recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements and Palatin's prospects.

Now I would like to turn the call over to today's host, 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 Second Quarter Fiscal Year 2021 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. I will now turn the call over to Steve, who will provide the financial update as well as an update on Vyleesi. Steve?

Thank you, Carl. Good morning, everyone. Regarding the second quarter ended December 31, 2020, financial highlights. Net loss for the quarter was $10 million or $0.04 per share compared to a net loss of $5.2 million or $0.02 per share for the comparable quarter of 2019. Total operating expenses for the quarter ended December 31, 2020, were $9.1 million compared to $5.7 million for the comparable quarter of 2019. The increase in net loss and operating expenses was primarily attributable to commercial expenses related to Vyleesi and to PL-9643's Phase II study for the treatment of dry eye disease.

Of note, we had a number of nonrecurring expenses related to Vyleesi for the 12/31/'20 quarter. Going forward, for the next few quarters, we anticipate the operating expenses to decrease prior to initiation of our dry eye treatment and ulcerative colitis trials, which are targeted to commence around midyear. As of December 31, 2020, we had $72.2 million in cash and cash equivalents and $4.7 million in accounts receivable compared to $82.9 million in cash and cash equivalents and no accounts receivable as of June 30, 2020. Palatin has no outstanding debt.

A few comments regarding our Vyleesi program. And to help frame this, where we have been and where we are at regarding Vyleesi, I think it's helpful to recap some history. The products we received back from AMAG last year was a program that needed attention. At the time of the transfer, there was limited to no sales and marketing support. We know it. And in part, that is why we received $12 million upfront and are due an additional $4.3 million from AMAG/Covis on March 31, 2021.

To ensure patient access to Vyleesi and regulatory compliance during the transition back to Palatin, we entered into a transition services agreement and importantly, commenced the rebuild of the sales and marketing commercial infrastructure, and a restructure and streamline of the operational distribution network, including processes and procedures to improve the patient access experience, health care provider interaction, and increased insurance reimbursement.

Though Carl will share additional specificity around some of our Vyleesi efforts, our measured plan and investment is showing positive trends and returns with a significant rise in payer reimbursement and double-digit increases to month-over-month prescription numbers continuing through January of 2021. Carl?

Thank you, Steve. We continue to conduct our operations under the conditions imposed by the ongoing COVID-19 pandemic. To date, we believe that the adjustments we have made have allowed us to continue to advance our preclinical, clinical and commercial programs while maintaining the safety of our employees, our patients and health care providers and partners.

As we have previously disclosed in 2020, we reacquired Vyleesi from AMAG Pharmaceuticals. As a reminder, AMAG divestiture of Vyleesi was based on a strategic and operational changes at AMAG and not on the potential value of Vyleesi.

While Steve covered details on our Vyleesi commercial plan, there are a number of accomplishments that I would like to emphasize. After we reacquired Vyleesi, we undertook an extensive evaluation of the commercial infrastructure and patient experience. It's a stress to say that the commercial infrastructure was not functioning properly, and it really was leading to a very suboptimal patient experience and very unfavorable economics. Under Steve's direction, we have rebuilt the Vyleesi commercial infrastructure. And as he mentioned, this is a ground-up rebuild from distribution, telemarketing, specialty pharmacies, all of this have been redone.

We've expanded the patient access of the product, and we believe that the changes that we have put in place over the past 6 months will dramatically improve the patient experience, patient access, relationships with prescribers and the profitability of Vyleesi. We are now in a position to focus our efforts on improving Vyleesi prescription numbers and partnership discussions. Though early, the initial results of our ongoing geo-targeting efforts are beginning to improve Vyleesi prescriptions and reimbursement, which we're working to expand.

These accomplishments will put us in a strong position to demonstrate the potential value of Vyleesi in a cost-effective manner and obtain our ultimate objective to be licenses of Vyleesi for a committed partner, ensuring the continued available of Vyleesi as a treatment option for premenopausal women with hypoactive sexual desire disorder and a substantial return on our investment.

Moving on. Our clinical and preclinical pipeline programs continue to advance, and we have some pretty exciting results in the past quarter. As a reminder, our primary scientific focus is on the melanocortin system, which is involved in the regulation of energy balance, including food intake, sexual function and resolution of inflammatory responses.

Our first melanocortin program was based on the role of melanocortin system in regulating sexual function. This research work resulted in the discovery of Vyleesi and its approval by the FDA as the first on-demand treatment for premenopausal women with hypoactive sexual desire disorder. Also to note Vyleesi was also the first melanocortin-based therapeutic approved by the FDA. Our current research focus is on developing drugs that target the ability of the melanocortin system to resolve or turn down inflammation and reduce fibrosis.

We are working to build a portfolio of melanocortin-based therapeutics that we believe will have significant potential in treating a variety of ocular diseases. We have developed clinical stage for our candidates for ocular diseases such as dry eye disease, other corneal disease indications, noninfectious uveitis and retinal diseases. We also have a clinical stage orally delivered drug candidate for gastrointestinal diseases, such as ulcerative colitis.

Our first melanocortin therapeutic is properly delivered, PL-9643. We reported positive data from our Phase II dry eye disease study in December of 2020. The study met its primary objective, which was to provide the data required to continue the advancement of PL-9643. Dry eye disease, also known as keratoconjunctivitis sicca, affects the cornea and conjunctiva of the eye resulting in irritation, redness, pain and blurry vision. Causes are varied, and we believe that by activating melanocortin system locally delivered PL-9643 will reduce or resolve the inflammation that underlies many negative aspects of dry eye disease.

The PL-9643 Phase II study was a multi-centered randomized controlled study comparing properly delivered PL-9643 to placebo over a 12-week treatment period. The study enrolled 160 subjects and evaluated the safety, tolerability and efficacy as measured by improvement in multiple signs and symptoms of dry eye disease. The co-primary endpoints were inferior fluorescein corneal staining, which is a sign of dry eye disease and ocular discomfort, which is a symptom of dry eye disease.

The study also included multiple secondary endpoints to provide a detailed measure of the effects of topical delivered PL-9643 on improving the signs and symptoms of dry eye disease. In an overview of the data, statistical significance improvement in multiple signs and symptoms was achieved in a moderate-to-severe patient population after 2 weeks of dosing and at the 12-week visit. There were no safety signals identified and PL-9643 had excellent ocular tolerability. However, statistical significance for the primary endpoint was not achieved in the overall enrolled population that included mild, moderate and severe patients.

In the subpopulation of modest-to-severe patients, PL-9643 achieved statistical significance at weeks 2 and week 12 for multiple signs, including inferior, superior and total corneal fluorescein staining; temporal, nasal and total conjunctival staining; Tier 1 breakup time and multiple ocular symptoms, including ocular discomfort. Additionally, multiple sign and symptom measures trended towards significance. I think it's important to note, this was our first dry eye disease study with PL-9643, and the efficacy results were broad-based showing improvement of both corneal and conjunctival inflammation.

Positive effects were seen as early as 2 weeks and maintained over the course of treatment. Results of the study have allowed us to identify the patient population endpoints, time points and regulatory pathway for the continued development of PL-9643 as a treatment for dry eye disease. We are currently preparing for an end of Phase II meeting with the FDA and in the start of the Phase II/III PL-9643 clinical study in dry eye disease that is starting to start in mid-2021. And later readout in the first half of 2022.

As a reminder, detailed data from the recently concluded Phase II study will be presented at the annual meeting of the Association for Research in Vision and Ophthalmology in early May of this year.

In summary, the emerging profile of PL-9643 with its rapid therapeutic onset and excellent ocular tolerability profile is a potentially distinct advancement in dry eye therapy. If the results that confirmed in larger clinical studies, we believe that PL-9643 has the potential for substantial penetration into the multibillion-dollar dry eye disease market.

As stated earlier in the call, we believe that melanocortin-based therapeutics have the potential to treat a variety of ocular diseases. Treatments for ocular diseases can be divided into 2 broad categories, front of the eye or anterior segment, or back of the eye, posterior segment. The anterior segment includes diseases such as dry eye disease and corneal transplant. We are evaluating clinical candidates for additional anterior segment indications and anticipate making a decision on our next anterior segment disease indication by mid-2021. Posterior segment diseases include various retinopathies and uveitis. We are planning to advance a clinical candidate forward for treating a retinal disease indications by mid-2021 as well.

Moving on to our PL-8177, oral formulation of ulcerative colitis. We are conducting activities required to conduct a Phase II proof-of-concept study, which is targeted to start patient enrollment in the second half of 2021, with data readout in 2022. This will be our first clinical study designed to evaluate the potential of a selective melanocortin 1 receptor agonist as a treatment for ulcerative colitis. This study will evaluate the safety and potential efficacy of fully delivered PL-8177. If positive, the results of the study will support our efforts to license PL-8177.

Regarding PL-8177 for pulmonary indications, in particular, the treatment for COVID-19 patients, we continue to conduct activities required to file an IND and conduct clinical studies. As a potential treatment for patients with COVID-19 infection, PL-8177 may reduce inflammation and lung fibrosis associated with the disease. As discussed on previous calls, our press releases and our 10-K, the landscape for conducting clinical studies in COVID-19 patients is rapidly evolving, which impacted design, risk and ability to conduct new studies in COVID-19 patients.

Based on this and uncertainties of conducting clinical studies in COVID patients, the start of the PL-8177 COVID-19 clinical study is dependent on external funding. We continue to seek external support and look forward to hopefully finding support for this very promising program.

Finally, based on our research work on our natriuretic peptide system, our drug candidate PL-3994, which is a selective natriuretic peptide receptor A agonist, is being evaluated in a Phase II clinical study in heart disease patients with preserved ejection fraction. The clinical study is in cooperation with 2 major academic medical centers and is supported by a grant for the American Heart Association. Late last year, the study began enrolling patients and is currently ongoing. We anticipate preliminary data in 2022. We provide additional information on our programs on our website, www.palatin.com.

In response to the pandemic, the executive management, employees and the Board of Directors acted quickly to adjust our business operations, and we have been able to continue to advance our programs. Adjusting to the COVID-19 pandemic, we took immediate actions to ensure the safety of our employees, patients and health care partners. Our ability to advance our development programs and our strong cash position will allow us at Palatin to emerge from this pandemic in a strong position.

While Vyleesi commercial activities have made significant progress under Steve Wills' direction, we have put in place an excellent commercial team that has addressed efficiencies we inherited from AMAG Pharmaceuticals, we have now begun the selective marketing of Vyleesi. We continue to work with our Chinese and Korean partners, which are now advancing Vyleesi into interclinical studies and to support their regulatory submissions. For our dry eye disease program, we completed our first Phase II study with positive results that are preparing for the start of the Phase II/III study in mid-2021. In addition, we continue to build our melanocortin-based ocular therapeutics product portfolio with additional clinical studies and new indications starting in the second half of 2021.

As we look forward to the rest of 2021, we have a strong pipeline of novel clinical candidates, and we will remain focused on their advancements.

In closing, I would like to thank Palatin team and all of our partners for their rapid adjustments to a new working environment, their continued dedication to the advancement of our programs. And we'll now open the call to questions.

(Operator Instructions) Our first question will come from John Newman with Canaccord.

So I actually had 2 questions. The first one is for Steve. Steve, just curious as to what the additional steps are that you would like to take with the commercial approach for Vyleesi? Obviously, you've done a lot at this point already, but just curious as to what the next steps are over the next few quarters.

And then also curious regarding the partnership discussions for Vyleesi. Wondered if you believe those are really tied in any way to the commercial progress for Vyleesi? Or if that is really independent and sort of more focused on longer-term potential there?

Thanks, John. This is Steve. So regarding the Vyleesi and the commercial strategy, as I mentioned, and Carl illuminated a bit more, there were things from an infrastructure standpoint that just had to be modified. And being somewhat specific is the prior authorization process was not being implemented the way it should be implemented. And the prior authorization process, which is done by the specialty pharmacies, is how we get reimbursed for the product.

So that level of reimbursement was significantly lower than what we think it should be, especially with the amount of coverage that we have in place, the covered lives with the payers. So that was an absolute A item that we've attacked. And we believe it's definitely improved. And I anticipate by the end of February, it will be in a position that we think it should be in. In addition, we've attacked the -- telemedicine is a pretty significant avenue. So we've revamped that experience for the patient, made it more streamlined and also working with the pharmacies.

That has been a work in process. That, too, we believe, will be in the position that we think it should be by the end of February. Those items are very significant tenets, metrics for the Vyleesi value. Greater insurance coverage means greater profitability. Making the patient experience. And also the HCP interaction in that regard is, of course, a plus, and that will drive script growth.

Regarding the other part of your question, the brand -- as we're -- the steps we're doing right now are going to increase the brand value. If we -- if the brand value is increased, we're going to have -- we'll be in a much better position regarding our dialogue with potential partners, collaborators regarding the relicense of Vyleesi for the U.S. and also other regions.

We -- as I mentioned in the last call, we did slow down some of those discussions with the other regions because we wanted to concentrate on rebuilding the Vyleesi brand in the U.S. We still have ongoing discussions. We anticipate having partnerships with the rest of the world later in the year. And for the U.S., that is our strategy. We have dialogue. We think it's going to be a later in the year event. And that's, frankly, because of certain things that we're -- we think made sense to modify the Vyleesi commercial operations. So was that reasonably responsive, John?

Yes.

And our next question will come from Michael Higgins with Ladenburg Thalmann.

Congrats on the continued execution. A couple on Vyleesi, if I could start off here. Can you give us a little help on the reimbursement? You mentioned that it's been increasing. Can you give us some level of detail as to how many lives are covered, how that's been changing recently?

Yes. It's Steve, Michael. I'll jump in a little bit. When we first started -- let me also preface the way these lives are calculated. If you actually put them all together, it would be greater than 100%. But notwithstanding that, we've increased the covered lives. And importantly, we've increased the contracts -- the way the covered lives are applied in the contract. So we have contracts in place. Some of these contracts were in place with AMAG. We've had some transferred over. We've had some added through just Palatin. All the contracts right now in Palatin's name. And we've been spending time with our market access group to tweak the contracts, really customizing it to Vyleesi and where we should be positioned. And that in addition to implementing a more robust prior authorization process has generated multiple insurance coverage from a -- we might have been at XX, when we first started and now at multiples of that X.

From a covered live standpoint, the way most people do the calculations, we're in that 70% range, even though we're just in that 70% range recently. That's considered very good coverage. You're not going to get 100% coverage. The majority of the big boys, and there's only so many big boys in this landscape we have in place. The 1 or 2 that we don't have in place are some of the regional players. We are advancing that dialogue with our market access group, and we anticipate -- not hope, we anticipate that we will have those additional contracts and agreements in place over the next several months.

Okay. That's really helpful. I appreciate that little more detail. In terms of the profitability on a quarterly basis of this asset. Obviously, as you've alluded to and described in great detail, you've got a lot of marketing, a lot of rebuild from the ground up that you've done. The expenses appear to be around $1.1 million in the last couple of quarters. Is that a fair number to look at going forward? Or might that increase?

It's going to be a little bit -- it's going to fluctuate depending on what we're doing. We did have -- we did initiate a geo-targeted digital marketing campaign in the fourth quarter. We're in the process of revamping that, now that we have the data back and see where we need to tweak it, whether it's a region or go after a different avenue or landscape for the digital marketing.

We did have several onetime expenses, say, nonrecurring in the fourth quarter. But that number, I mean, it could go -- I don't think it's going to go down much, maybe a few hundred thousand, but it could also go up by a few hundred thousand, just depends on what's transpiring in that month.

Okay. That's really great. Last one here on Vyleesi. In terms of timing for partnering, I guess our assumption is that you're making some efforts here, getting the product up and going. Is there any kind of a level that you can allude to with which you'll increase your partnering efforts?

I don't think you want to partner it until you really can demonstrate that this is a product that the consumer really wants. And as you get that going, that probably is the best optimal time then to partner this. Is that something you might see here this year? Is that something more of a 2022 effort?

Well, I definitely think the dialogue will increase in '21 as we're advancing. The -- for this type of brand, the 2 main tenets that partners are looking for are the script increase, obviously, the refill increase but also the insurance coverage. So we believe we're attacking all 3 of those items, and we're showing significant progress. So we're not going to wait until the end of the year to start these conversations. Some of the conversations are ongoing. But I do and -- Carl and I anticipate those discussions will enhance definitely in the second half of the year.

And if the things make sense, we'll -- we're not opposed to doing something sooner than later. It really just depends on the type of deal, the partner, the collaboration. But that's our strategy to relicense the product, invest a -- what we call a reasonable and a measured amount. I mean, we have an approved product. This is a product that we received $165 million since the first quarter of 2017. It's a very valuable asset.

So we're -- we want to give a certain amount of attention that Palatin can, but it's not going to be the same level of attention that a much larger partner that's, say, committed in the female health care space is. You see with our presentation, we have a number of other programs that we're evolving towards which -- around the autoimmune and anti-inflammatory. But we think we have a great asset here, and we're going to be increasing the value of that. And later -- whether it's later in the year or the first half of '22, we will relicense that product.

I appreciate all the detail. I have just one last question here. It's on PL-9643. Remind us again the numbers used for the NDA filing. And the size of the upcoming trial, if you think that, that's all that you're going to need or you need the Phase III, I guess, is where I'm going? It's kind of an odd question but if you could update us.

Yes, I think you kind of broke up a little bit. So I'll try and perfect through the connection. So right now, we completed our first study. We're very pleased with the results, and well, as I said, we'll have a detailed presentation occurring a little bit later in the year. So the upcoming trial is we plan a Phase II/III. We'll be looking at both -- will be co-primary endpoints again, that will be the sign and symptom. The end size hasn't been finally set yet. But from a statistical standpoint, you don't need it, you can probably get away with 60 or 80 per arm and see -- and have a good power.

So it'll probably be higher than that just to -- because -- again, for the safety -- want to generate additional safety data to support this as a regulatory submission. And the requirements from the FDA would be 2 trials. There will be 2 trials where you hit both a sign and a symptom in both trials. So what we'd look to do now is to get this trial kicked off in midyear. We will be taking advantage of an adaptive clinical trial design. And so by the third quarter this year, probably fourth quarter this year, we'll get a sense how the trial is going. And we'll make a decision on how quickly we want to kick off the second Phase III trial, which could be as early as late this year or probably no later than the first quarter next year.

In that study again, [clinical phase] is probably going to come in around 200 to 300 patients per study. They are probably going to come in at that.

And this will conclude today's question-and-answer session. I would now like to turn the conference (technical difficulty)

Well, I don't know if we're still on. But if we are, everybody, thank you for participating in our Palatin Technologies Second Quarter Fiscal Year 2021 Conference Call. Be safe, and we look forward to continuing to update you over the next quarter. Thank you, and have a great day.

And this concludes today's conference. Thank you for your participation. You may now disconnect.