Palatin Technologies, Inc. (NYSEMKT:PTN)
F2Q09 Earnings Call
February 17, 2009 at 11:00 am ET
Carl Spana, Ph.D. - President and Chief Executive Officer
Stephen T. Wills - Chief Financial Officer
Trevor Hallam, Ph.D. - Executive Vice President of R&D
Amy Wang - MDB Capital Group LLC
Rahul Jasuja - MDB Capital Group LLC
Good morning, ladies and gentlemen and welcome to the Palatin Technologies’ second quarter fiscal year 2009 conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions for the question-and-answer session will be given at the end of the Company's remarks. As a reminder, this conference call is being recorded.
Before we begin our remarks, I would like to remind you that statements made by Palatin that are not historical facts may be forward-looking statements. These statements are based on assumptions that may or may not prove to be accurate and actual results could differ materially from those anticipated due to a variety of risks and uncertainties discussed in the Company’s most recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements and Palatin’s prospects.
Now I would like to introduce your host for today’s call, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies.
Thank you. Good morning, ladies and gentlemen and welcome to the Palatine conference call. I am Carl Spana, President and CEO of Palatin Technologies. With me, Steve Wills, Palatin's Execuvie Vice President of Operations and Chief Financial Officer and Dr. Trevor Hallam, Palatin's Executive Vice President of Research and Development. To start our conference call today. Mr. Wills will provide the financial update.
Stephen T. Wills
Thank you Carl and good morning everyone. For the quarter ended December 31, 2008, which is the second quarter of our fiscal year, Palatin reported a net loss of $4 million, or $0.00 per share, compared to a net loss of $3.8 million, or $0.04 per share for the same period in 2007. The decrease in the net loss for the quarter ended December 31, 2008 versus the quarter ended December 31, 2007 was primarily attributable to a decrease in both research, development and general and administrative operating expenses.
At December 31, 2008, Palatin's cash, cash equivalent and available for sale investments totaled $6.3 million compared to $12.8 million at June 30, 2008 and $22.8 million at the period December 31, 2007. Regarding revenue and other income for the quarter ended December 31, 2008, Palatin recognized $1.2 million of contract revenue under its collaboration agreement with AstraZeneca versus $0.7 million in the comparable quarter of 2007.
Other income for the quarter ended December 31, 2008 consisted mainly of proceeds of $0.5 million from the sale of equipment and supplies previously expensed on our books. There was no such activity for the quarter ended December 31, 2007. Regarding cost and expenses, total operating expenses for the quarter ended December 31, 2008 were $4 million versus $6.1 million for the comparable quarter of 2007. The decrease in operating expenses was primarily due to the strategic restructuring and refocusing of our clinical stage product portfolio development programs.
Additionally, there was $1.2 million decrease in administrative expenses primarily attributable to the reductions and work force initiated in September 2007 and May 2008. Regarding our cash position in addition to our $6.3 million of cash and cash equivalent and available for sale investment at December 31, 2008, we have $4.9 million of accounts receivables that have been received from AstraZeneca.
Two other items I just want to touch base that transpired during the quarter. In December, Palatin received a notice from the NYSE Alternext which is formally known as the American Stock Exchange advising Palatin that it was not in compliance with certain conditions of the exchanges continued listing standards under Section 1003. Specifically, Palatin stockholders equity had fallen below $6 million. In response, Palatin has submitted a plan advising the exchange how it intends to regain compliance by June of 2010. Companies have up to six quarters to regain compliance.
If the exchange accepts the plan, Palatin will be able to continue at listing during the plan period subject to periodic review by the exchange to determine we are making progress consisted with the submitted plan. If the exchange does not accept the plan or Palatin does not regain compliance with Section 1003 by June of 2010 or Palatin does not make progress consistent with the plan during that plan period, the exchange may initiate the listing procedures. We anticipate hearing from the exchange regarding our plan submission before the end of this quarter.
Regarding our AZ, AstraZeneca agreement, in early December, we announced an extension of our exclusive research collaboration and license agreement with AstraZeneca to discover, develop and commercialize compounds to target melanocortin receptors and the signing at a clinical trial sponsored research agreement. The clinical trial agreement will be funded 100% by AstraZeneca. The research collaboration term has been extended with Palatin contributing scientific expertise and AstraZeneca supporting Palatin's internal activity at an agreed full time equivalent rate. We have received a total of $6.6 million from AstraZeneca during January and February of this year consisting of $1.6 million as an upfront payment relating to the granting of licenses to additional compounds and patents and $5 million in milestone payments related to the clinical trial sponsored research agreement.
In summary, Palatin has sufficient cash to fund its projected operations through calendar 2009.
Thank you, Steve. Dr. Hallam and I will now give an update and overview on the Company’s research and development programs.
We have focused on three exciting programs that we believe can drive significant shareholder value. These are PL-3994 for the treatment of heart failure, our MCR4 obesity program which is partnered with AstraZeneca and PL-6983 on melanocortin receptor compound for treating both male and female sexual dysfunction. All our programs target patient populations in which the medical need is high and with tremendous commercial potential.
With that being said in the current economic environment, how we advance and drive value from these programs vary. Over the past year, the research teams of Palatin and AstraZeneca have made significant progress in our MCR4 obesity and diabetes program resulting in the expansion of our joint research development collaboration. Obesity and diabetes are two diseases in which there remained a strongly need for pharmacological interventions. The human and medical cost associated with treating these patients is enormous. We, along with our partner AstraZeneca believe that pharmaceutical agents targeting MCR4 have tremendous potential in treating obesity and diabetes. As Steve previously mentioned, license and extension in clinical trial agreements point to the progress Palatin and AstraZeneca have made with the collaborative melanocortin receptor obesity program.
In addition to reimbursement of Palatin's activities at an agreed upon full-time equivalent rate, it totaled $6.6 million in milestone payments as recently have been received from AstraZeneca. Additionally with working closely with our partner, we initiated a proof of concept trial in humans or MCR4 obesity program in January of this year.
Regarding our PL-3994 and PL-6983 programs, over the next year, our primary focus will be on establishing collaborations with large pharmaceutical or especially pharmaceutical companies to advance these programs forward. Our PL-3994 clinical results and commercial potential have generated a significant interest in both the medical community and from potential pharmaceutical partners.
I am now going to turn the call over to Dr. Hallam who will provide you additional details on our programs.
Thanks Carl and good morning. I will start with an update on our melanocortin-4 receptor programs. Our collaborative research and development program with AstraZeneca for the discovery and developments of anti-obesity agents continues to show a great progress. Accumulating data from genetic pharmacological and physiological studies continue to identify with central melanocortin system as an important regulator of energy homeostatis and potentially a key pharmacologically amenable mechanism for treatments obesity.
Palatin's melanocortin receptor obesity program combines our core technologies for lead-generation chemistry with our preclinical and clinical experience with the melanocortin system to develop novel therapeutics for treating obesity and related diseases. The collaborative R&D teams have further developed the small molecule and peptide compounds series that modulates the function of the melanocortin-4 receptor. The activity profile indicates that we have potential as treatments for obesity and associated diseases. In studies using animal models of obesity, selected compounds reduced food intake and body mass as well as decreasing plasma glucose and insulin levels.
As Steve mentioned based on the successful progress, the research agreement was recently extended and expanded and a separate clinical study agreement was also reached specifically to take a proof-of-principle melanocortin agonist to the clinic. Dosing of subjects in the clinical proof-of-principle study began early this year. The study is on track to complete by midyear and certain parameters will be evaluated that will guide the selection of further commercially viable clinical candidates for development.
Now to sexual dysfunction. We continue to evaluate the opportunity for melanocortin-4 receptor agonist in both the male erectile dysfunction field and in female sexual dysfunction. As you will be aware, Palatine has performed a program of Phase I and II clinical studies of the first generation cyclic peptide melanocortin-4 receptor agonist, Bremelanotide for both male and for female sexual dysfunction. Promising efficacy results would have supported further development for both indications; however, as intranasally administered Bremelanotide is associated with increases in systemic blood pressure, new approaches are being evaluated.
These approaches including targeting therapies to second-line in erectile dysfunction developing routes of administration that improve the exposure predictability for a given dose and developing new compounds that preserve the efficacy of Bremelanotide but are associated with less cardiovascular effect. Carl mentioned PL-6983 which is a novel second-generation peptide agonist as the melanocortine-4 receptor and has strong efficacy in animals with the decreased cardiovascular effect. The Phase I trial is planned with PL-6983 to see whether this also holds true in man.
The Phase I study would seek to evaluate whether doses of producer estrogenic activity measured by RigiScan, a mechanical measure, do so without elevating blood pressure. If this study proves successful, Palatin would aim to develop the agent for male erectile dysfunction and potentially for female sexual dysfunction where there is a great opportunity for an on-demand therapeutic for arousal. This is unmet need with no other therapies presently in development. The market opportunity for effective agents helping women with sexual dysfunction is potentially quite large with estimates of the rates of sexual dysfunction in post-menopausal women as high as 43%. As the population ages, the proportion of post-menopausal women is only expected to grow.
Now switching to our heart failure program. From clinical findings and pre-clinical evidence that have emerged over the past couple of years from studies with natural natriuretic peptide agonist, it is clear that stimulation of natriuretic peptide receptors is an important mechanism to rectify the underlying path of physiology in heart failure and will undoubtedly lead to improve therapeutic agents that will find utility in several fields. These findings extend existing therapeutic paradigm of acute IV infusion treatments of symptoms of decompensated heart failure to include chronic treatment of heart failure patients to decrease re-hospitalization rates and also potentially to prevent ventricular remodeling resulting an improved survival rates.
Further studies also pointed the potential of this mechanism in the area of refractory or resistant hypertension. Palatin's natriuretic peptide program has applied its technologies to the discovery and development of novel natriuretic peptide agonist that have the desired selectivity of action on one or more with three no-natriuretic peptide receptors to generate the desired pharmacological and drug-like attributes optimal for these new indications.
PL-3994 is a novel long-acting agonist that has been designed by Palatin scientists for daily subcutaneous self administration by heart failure patients. Early clinical studies have shown that PL-3994 has a half-life of three hours in humans and the durations of its effect on the cardiovascular system is 8 to 12 hours. Based on this, daily administration of the subcutaneous dose of PL-3994 should provide round the clock coverage required for chronic benefits. The expectation is that PL-3994 will be able to help prevent the chronic underlying part of physiologist that ultimately leads to progressive worsening of the heart failure patient until they decompensate and re-hospitalization occur.
Administered daily, PL-3994 is also expected to decrease cardiac remodeling, an increase in heart muscle mass. Indeed, reduction of cardiac remodeling has been demonstrated by once daily induction of 3994 for six weeks in an animal model of renovascular hypertension and heart failure. Now the rationale for this is as follows; the cardiac remodeling is a condition in which the size and thickness of the ventricles of the heart increases in response to pathophysiological stimuli and the condition is a powerful and independent risk factor for cardiovascular morbidity and mortality. There appears to be a link between remodeling and prognosis.
Interventions which ameliorate remodeling have had a positive effect on survival and those that do not fail to lengthen the lives of patients. While existing classes of medication is somewhat effective in reducing symptoms and reducing the rates of hospitalization, chronic heart failure patients nonetheless have poor prognosis and there is clearly a high medical need for newer agents at newer mechanisms which can provide further improvement. So PL-3994 will be developed for chronic treatment of the heart failure population. It will be administered as a daily subcutaneous injection as adjunct to other medications such as beta-blockers, ACE inhibitors and angiotensin-receptor blockers.
Initial development will focus some patients with New York Association classification of heart failure Stage II and III with Stage IV patients being studied later. Two early phase clinical studies are being completed, the Phase I study in healthy volunteers, which was presented there at the Heart Failure Society of America Meeting in Toronto in September 2008 and a Phase IIa study in control hypertensive.
Going forward, a multi-dose 28 days study in chronic heart failure patients is planned which will further characterize safety pharmacokinetics and pharmacodynamics. Re-hospitalization rates will be track during and beyond the end of the 28-day treatment period of the study. The strong link between ventricular remodeling and survival potentially provides a surrogate marker allowing for study of relatively brief duration and smaller size which can provide an early indication of the likelihood of success of the survival study.
Specifically, a study is planned which would randomize chronic heart failure patients to receive daily subcutaneous injections of PL-3994 in addition to their existing regiment. Cardiac remodeling measured by cardiac MRI before and after six months of treatment would show where the PL-3994 is effective in preventing worsening of or reversing cardiac hypertrophy. The positive results in this study will be a strong indicator of the probability of success of the longer survival studies needed for registration.
Now, I am going to hand back to Carl.
Thank you, Trevor. In closing, in the past quarter we have been successful in reducing our expenses and increasing our projected cash flow by expanding our research and development collaboration, affiliates consolidation and sale of noncore assets. With cash on hand and projected revenue, we are confident we can move Palatin forward and secure significant value for our programs. In the near term, we will continue moving our MCR4 program for obesity and diabetes with our partner, AstraZeneca, and look forward to initial clinical results later this year.
Our ongoing efforts with PL-3994 and PL-6983 have strengthened their scientific, intellectual property and commercial value which supports our activities on generating additional corporate and research development collaborations for these programs. In these difficult times, we continue to remain positive about the Company's opportunities and are working on a variety of avenues to strengthen our financial resources.
Now, I would like to open the call to questions.
(Operator Instructions) Your first question comes from the line of Amy Wang - MDB Capital Group, LLC.
Amy Wang - MDB Capital Group LLC
My first question, can you remind us, I know you talked about your continued partnership discussions for your clinical and preclinical program. For the 3994 program, is that your top priority in terms of looking for partnership or are you sort of looking at all the different strategies at the same time?
Well, with regard to potential corporate partnerships, the two programs that are furthest advanced and most likely candidates would be PL-3994 in this heart failure program as well as the sexual dysfunction program which would be, the lead candidate would be PL-6983. So both of those are moving forward and there are discussions on both of those programs.
Amy Wang - MDB Capital Group LLC
For the 3994 clinical trials that are planned for later this year, the multi-dose and the long-term study, will you be going forward with those regardless of whether a partnership is finalized or will you..?
Amy, as you might imagine we are very reluctant to spend corporate assets that cannot easily be replaced. So we would really elected to take a strong shot at trying the corporate partner route before we move forward those clinical trial programs on our own.
Amy Wang - MDB Capital Group LLC
Okay and one last question about 6983 for sexual dysfunction, you talked about a plan Phase I study so that will be in the male, looking just the male population first, right?
Correct. If we go forward with that program or as we go forward with it, we would look at the male population first for a couple of reasons, the predominant one being that we can look at both efficacy as well as safety in a single population because we can monitor erectile activity in the males. So in a single study, we will get a chance to look at where we see the erectogenic effect and then if we see a cardiovascular effect where we see that and our hope would be based on animal data that we would see either, dramatically reduced cardiovascular signal or not at all and if we do see one, that would be a nice separation between the efficacy signal and the potential safety signal. So that is why we will do that in man first.
Your next question comes from the line of Rahul Jasuja - MDB Capital Group LLC.
Rahul Jasuja - MDB Capital Group LLC
Just a couple of clarifications on the sexual dysfunction program. So, 6983 is the new version that lacks the high increase in blood pressure but what about plans to look at the original Bremelanotide as a second line therapy? Could you elaborate on intent and prospective plans for Palatine working a second line therapy irrespective of the 6983 which is the new version?
I think if these presentations are posted, as you probably recall Dr. Hallam mentioned in his part of the presentation that we were looking at different aspects of Bremelanotide either from the formulation standpoint with delivery as well as patient positioning and certainly we do believe that there can be an opportunity for Bremelanotide to go forward in the sexual dysfunction space particularly erectile dysfunction as a second line treatment for men that have failed in [21.49] therapy, that is certainly something I do not want to elaborate on much more right now but it is certainly something that is a part of discussions with corporate partners as well as internally.
That concludes the question-and-answer session today. I would like to turn the call back over to you for any additional or closing remarks.
Well, thank you everyone for participating in our quarterly conference call. We look forward to updating you next quarter and with that, have a good day and we will see you next quarter. Thanks, bye bye!
This concludes today's presentation. We thank you for your participation. You may now disconnect.
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