Palatin Technologies, Inc. (NYSEMKT:PTN)
F2Q2014 Earnings Conference Call
February 18, 2014 11:00 AM ET
Carl Spana - President and CEO
Steve Wills - CFO, COO and EVP
Dr. Jeffrey Edelson - CMO
Charles Duncan - Piper Jaffray
Rahul Jasuja - Noble Financial Capital Markets
Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Second Quarter Fiscal Year 2014 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 Palatin’s prospects.
Now I would like to introduce you to your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.
Thank you, and good morning, everyone. I am Carl Spana, President and Chief Executive Officer of Palatin Technologies. With me on the call today is Steve Wills, our Chief Financial and Operating Officer and Executive Vice President; and Dr. Jeffrey Edelson, our Chief Medical Officer.
On today’s call we will be providing updates on our product programs under development and our second quarter fiscal year 2014 financial results. To begin, Steve Wills will provide the update.
Thank you, Carl, and good morning, everyone. Regarding operational highlights pivotal Phase 3 clinical trials of Bremelanotide for the treatment of female sexual dysfunction are anticipated to start in the first half of calendar year 2014. Carl will provide detail around the program during his presentation. In January 2014, we received $1.85 million in net proceeds from the sale of New Jersey State net operating loss carry forwards, which will result in the recognition of $1.85 million in tax benefits for the three months ending March 31, 2014 financial statements.
Palatin obtained two patents during the quarter ended December 31, 2013, the first one tilted Amide Linkage Cyclic Natriuretic Peptide Constructs was issued November 12, 2013 and the composition of matter claims to a novel series of mimetics of atrial natriuretic peptide. The second patent titled Cyclic Natriuretic Peptide Constructs was also issued November 12, 2013, and it has composition of matter claims relating to our PL-3994 natriuretic peptide receptor A agonist for the treatment of cardiovascular and pulmonary indications.
Regarding financial highlights; for the quarter ended December 31, 2013 Palatin reported a net loss of $3.6 million or $0.03 per basic and diluted share compared to a net loss of $1.7 million or $0.02 per basic and diluted share for the same period in 2012. The increase in net loss for the quarter ended December 31, 2013 compared to the same period last fiscal year was mainly attributable to the recognition of $1.8 million in tax benefits received in December 2012 pursuant to the sale of New Jersey State net operating losses.
Regarding revenue, there were no revenues recorded and the quarter ended December 31, 2013 compared to 6,600 for the same period in 2012. Revenue in the 2012 period consisted entirely of reimbursement of development costs and for employee compensation earned at a contractual rate pursuant to our agreement with AstraZeneca.
Regarding cost and expenses, total operating expenses for the quarter ended December 31, 2013 were $3.6 million compared to $3.4 million for the comparable quarter of 2012. The increase in operating expenses for the quarter ended December 31, 2013 was primarily the result of higher period cost related to our Bremelanotide program for the treatment of female sexual dysfunction.
Regarding Palatin’s cash position, our cash, cash equivalents and short-term investments were $18.2 million as of December 31, 2013 compared to $24.4 million at June 30, 2013. And as stated previously Palatin did receive $1.85 million in net proceeds in January 2014 related to the sale of New Jersey net operating loss carry forwards.
Current liabilities were $3.5 million as of December 31, 2013 compared to $2.1 million as of June 30, 2013. Current liabilities as of December 31, 2013 includes $1 million of unearned revenue for a non-refundable option fee relating to negotiation of a potential future license of Bremelanotide in a defined territory, primarily Europe for the treatment of female sexual dysfunction. Subject to certain contingencies if not exercised or extended, the option expires in the quarter ending March 31, 2014. This payment is credible against any upfront or initial license fee in the event of negotiation of definitive license agreement.
We believe, the existing capital resources will be adequate to fund our currently planned operations including submitting and finalizing complete Phase 3 protocols with the FDA, where our Bremelanotide program for the treatment of female sexual dysfunction, but not initiating patient enrollment in the Phase 3 trials through at least a period of March 31, 2015. To be clear, we do not intend to initiate Phase 3 patient enrollment in our Bremelanotide program for the treatment of female sexual dysfunction, unless we have adequate funds or commitments for adequate funds to complete the Phase 3 program. Carl.
Thank you, Steve. Our second quarter fiscal year 2014 operational and programs update will start with our Bremelanotide Phase 3 female sexual dysfunction program. Our activities are focused in two areas; operations required to start and conduct Bremelanotide Phase 3 pivotal registration studies and business development activities.
On the operating front, Phase 3 Bremelanotide clinical trial supplies have been manufactured, the contract research organization and related vendors that will assist us, potential future partners to conduct the Phase 3 program have been selected and also engaged. We continue to identify and stream potential clinical trial sites and we have been and we’ll continue to present and publish the extensive data from our Phase 2B female sexual dysfunction clinical program.
On the regulatory front, we believe the recent outcome of the appeal of the FDAs non-approval of the flibanserin new drug application is positive for the development of pharmaceutical treatments for female sexual dysfunction. Our analysis based on review of publically available information is that the FDA appears willing to approve a product for female sexual dysfunction given an appropriate risk benefit profile and if there is additional clarity on the measurement of benefit in female sexual dysfunction clinical trials.
We will incorporate this new information as we finalize the protocols for our Bremelanotide pivotal Phase 3 clinical trials with the FDA. As we have previously reported, we believe that we have reached agreement with the FDA on the main aspects of the Phase 3 program, including potential patient population, primary key, secondary end points, study designs and safety monitoring. We are now actively engaged in finalizing our Phase 3 pivotal trial protocols; expect to be in position to begin the trials later in the first half of this calendar year. As stated prior, the start of the Bremelanotide Phase 3 pivotal program is dependent on a number of factors including the status of our corporate filing discussions and financial resources.
I will now give a brief update on the status of our corporate partnering activities. Currently, we believe that there are two large potential markets for Bremelanotide; the United States and the European Union. With United States being the largest potential market based on a number of factors including differences in patient population, regulatory requirements, marketing and reimbursement practices.
It may be most effective to have distinct partners for each of the United States and European Union. As part of our licensing activities in European Union, we entered into a short-term option agreement for the pharmaceutical company with research and development, sales and marketing, manufacturing and regulatory expertise and activity in the European Union. Execution of the option agreement resulted in Palatin receiving a $1 million non-refundable options fee related to the negotiation of a future license of Bremelanotide for the treatment of female sexual dysfunction in European countries including the European Union. This option expires in the first quarter of calendar 2014, if not exercised or extended.
As part of the option agreement the potential licensee was extensive clinical and regulatory experience in the region is collaborating with Palatin regarding a regulatory meeting with the European Medicine Agency. The objective of this meeting was to receive scientific advice on the Bremelanotide Phase 3 registration program for the European Union. We are pleased to report that earlier this calendar year, Palatin and our potential licensee met with the European Medicine Agency review team and we have received regulatory guidance that provides a clear path forward for the Bremelanotide Phase 3 pivotal program in the European Union.
We’re currently working with our potential European partner to provide any additional information that they may need to make a final decision on exercising their option to Bremelanotide for the treatment of female sexual dysfunction a defined European territory. We believe the potential licensee would be a strong partner for Bremelanotide in the European Union as it currently has substantial sales and marketing activities in the women’s health area.
Now let’s move to licensing activities for United States rights to Bremelanotide for female sexual dysfunction. We’re currently involved in a competitive licensing process with multiple potential partners under CDA and in active discussion and due diligence. In some cases pulmonary nonbinding terms have been negotiated. Although we had target selection of the potential partner by the end of calendar 2013 due depending regulatory in the Female Sexual Dysfunction indication we move this time frame back. The resolution of this recent regulatory action has provided better clarity our development of treatments for Female Sexual Dysfunction and we believe we are now in a strong position to move the U.S. licensing process forward. We continue to engage with potential partners as we progress the Bremelanotide licensing activities, and we anticipate being in a position to select a partner or partners and move to the final agreement later in the first half of calendar 2014.
Now let’s move on to our melanocortin-4 receptor obesity program which is under the direction of our collaboration partner AstraZeneca. After the period of corporate restructuring, AstraZeneca has assigned a new project development team to our joint melanocortin-4 receptor obesity program. We recently met with the new senior director of the program to discuss how best and jointly move this program forward. We expect that this program will continue with a strong joint focus on preclinical research to identify potential new melanocortin-4 receptor clinical lead compounds and transition to clinical trials. We expect the time line to potential clinical trials will be clarified as we work with AstraZeneca over the next one to two quarters.
Melanocortin-4 receptor is a well validated target for obesity therapeutics; human, genetic and preclinical evidence indicates a key role for this receptor and associated signaling pathways in the regulation of food intake and weight. Our results with earlier clinical trials in obese patients with compounds that target the melanocortin-4 receptor to a significant reductions in food intake and weight loss. This program has significant commercial potential and we believe that our partner AstraZeneca has the resources to progress development of the program and realize its potential. Pursuing to the terms of the research collaboration and license agreement with AstraZeneca we are eligible for milestone payments upon achieving development and regulatory milestones. We are also eligible for payments on achievement of sales targets in addition to royalties on sales of approved products. AstraZeneca has responded with the product commercialization, discovery and development cost.
Now moving onto our PL-3994 natriuretic peptide receptor agonist program, we have been and continue to conduct a variety of non-clinical activities to better define the role of natriuretic pathways in cardiovascular diseases. This work is being done to support our efforts in finding a potential licensing partner. We believe that our ongoing preclinical work along with our clinical results puts us in a strong position to move forward with the clinical development of PL-3994 as well as to track potential licensing partners.
Our final update on this call is a melanocortin receptor 1 therapeutics program. We are very excited by the potential of our melanocortin receptor 1 therapeutic with the treatment of a variety of inflammatory immunological indications such as inflammatory bowel disease, kidney disease and uveitis. We have designated a re-compound the PL-8177 the preclinical activity is required to progress PL-8177 and the clinical trials have begun and we are targeting first in human studies at the end of calendar year 2014. And parallel with these development activities we will begin discussions with potential corporate licensing partners.
Before we open the call to questions, I like to make a few concluding remarks. We are extremely pleased with our opportunities relating or regarding Bremelanotide for the treatment of Female Sexual Dysfunction and are excited to be in a position to potentially start the Phase 3 pivotal registration studies for the treatment of Female Sexual Dysfunction later in the first half of this calendar year. Our excitement is supported by the strength of our Bremelanotide Phase 2B efficacy and safety data, the regulatory guidance in both the U.S. and the European Union and the significant interest from potential collaboration partners. We have designed a comprehensive Phase 3 program that is successful will provide the safety and efficacy data to support regulatory submissions for approval of Bremelanotide as a treatment for premenopausal women with Female Sexual Dysfunction.
We are actively engaged in activities required to begin patient enrollment in the Bremelanotide Phase 3 pivotal registration studies. We have an active program to continue to present data from our Bremelanotide Phase 2B study at medical meetings and to prepare reports of the Phase 2B data for publication in peer-reviewed journals. As stated prior, we are making substantial progress on establishing one or more corporate collaborations to facilitate the development of our Bremelanotide Phase 3 program. Regarding PL-3994, we have generated substantial package of preclinical data to support our corporate licensing efforts. And finally regarding our melanocortin receptor 1 program we have selected the first lead clinical candidate and are conducting the pre-clinical activities required to be given in human clinical studies. We’ve also continued to make progress in identifying potential corporate partners.
I would like to thank everyone for participating on Palatin’s second quarter 2014 conference call and we’ll now open the call for questions.
And we’ll take our first question from Charles Duncan with Piper Jaffray.
Charles Duncan - Piper Jaffray
Thanks guys for taking the question and congratulations on a good year of progress, looking forward to more this year. So, Carl, you mentioned that the recent competitor regulatory dispute resolution is positive and I understand that generally. But I am wondering if you could touch on what the key point of debate was there and why resolution of that favors progress within your own phase III program?
Sure, I will give a viewpoint and certainly Dr. Edelson who is here can chime in to share some additional aspects to that. On your first, let me just you predicate any statements I make that our opinion and view on this is certainly based on publicly available information on not on any direct discussions with the other sponsor or any access to any type of confidential information. With that being said the flibanserin NDA resubmission was on the dispute and it is our understanding that the senior members of the FDA have reviewed the dispute and have, company has probably reported with regards to their pathway forward, they are only left having to do a number of small phase I safety directed studies. This would indicate that the FDA was comfortable with flibanserin’s measurement or benefit demonstrated in their clinical trials. And what’s important about that is if you think about two aspects of the phase III clinical program one is to measure benefit in the intended patient population and the other is to measure risk.
And it would appear based on the public statement that the FDA is comfortable with the benefit aspect of flibanserin. They have a few remaining questions on risk and in order to come to a final risk benefit decision, will need that information. And why that’s positive is, if that product has measurement of benefit then the types of endpoints you use to measure that benefit certainly must be valid and acceptable from the FDA perspective. So, the positives here are, one, it does appear to the FDA is in line to approve a product again given at appropriate risk benefit and two, that the measurement of benefit is something that the FDA appears to be able to get their head around and can ascribe benefit to a product and that you carry it with all the other sponsors in the space. It’s okay to say that I did a perfect job.
Charles Duncan - Piper Jaffray
And some of the endpoints that you are using are the same as were used or evaluated flibanserin program?
Sure, Dr. Edelson will answer that.
Yeah, sure. The file structure of the flibanserin program was outlined in the briefing materials for the previous advisory committee meeting and that program was well constructed and extensive and generally consistent with the prior FDA’s guidance on evaluation of efficacy for this population. And those materials and then the subsequent finding that they had demonstrated benefit, we find very encouraging to the present program.
And the endpoints are similar that we will use and they really revolve around a behavioral measure of sexual activity such as satisfying sexual events and for those who have been following our progress we report quite frequently on the number of satisfying sexual events with Bremelanotide. And the other is a measure of a more longitudinal nature of the concept of desire because patient population, we are studying is the patient population has low desire and that’s generally done using a validated instrument such as the female sexual function index. And so these types of endpoints will be similar between the two programs.
Charles Duncan - Piper Jaffray
Okay. Now hopping over to the advice you have gotten from the European regulatory authorities. You mentioned that there is a path forward, would you see that as relatively capital efficient path forward and is a consistent with some of the same issues in terms of not only evaluating benefit in a way that you have done in the past that perhaps would have predicted value for phase III success as well as evaluating risk?
Charles I will say, the feedback we received is very consistent with our concept of the measurement of benefit and risk in this indication using Bremelanotide. We reached consensus on a variety of issues, patient population, duration of study, endpoints used, dosing. So, we’re very pleased it’s a very, I think they gave us relatively clear guidance and we should really have no problem designing and putting in protocols to support registration studies in European Union and then at the successful submission to the agency. Jeff if you have any other?
A lot of our discussion that was very helpful and as Carl said quite positive varied on some of the statistical approaches in terms of trial design which I won’t go into right at this moment and then some of the safety monitoring features which were not unanticipated given the non-pharmacology of the drug.
Charles Duncan - Piper Jaffray
Okay. And last question on Bremelanotide, you mentioned possible additional data presentations, could you point to certain meetings, I don’t know if you have actually submitted abstracts, but what are you targeting this year?
Sure, big one coming up at the end of this week which will be the [indiscernible] meeting which is in San Diego and we have a number of presentations going on there. And we will inform the community a little bit later in the week as to exactly what those presentations are. We’ve ACOG coming up in May, day after that as well. There are additional meeting, psychiatric base meetings as well as additional female health focus meetings that will really go throughout the rest of the year. And in addition to that we have submitted publications; I think fairly extensive set of publications that are in the process of being written right now. And we expect that those will start to hit as we get to end of this year and throughout next year.
Charles Duncan - Piper Jaffray
Carl, a last question, hop in over to the obesity collaboration. And I’m sorry for dominating, lots of questions here. Please see that that is being picked up again. Would you anticipate milestone payments either this year or in the next 12 to 18 months from that program in terms of achieving certain development goals with that program?
Steve you want to answer.
This is Steve. It’s a little bit of a moving target. There’s a number of things being discussed in terms of [indiscernible] and also with Palatin. And I believe there is a lot more clarity on that in the next 60 to 90 days. There is an outside chance that depending on certain circumstances we could receive a milestone and count it to 2014, our internal estimates -- projections are more in the conservative in the 2015 calendar year.
And we will now go to Rahul Jasuja with Noble Capital.
Rahul Jasuja - Noble Financial Capital Markets
Most of my questions on FSD have been answered but let me just broach the subject one more time. Now looking at the European and the US approaches here, now that you got an option agreement that could be executed this quarter, what are the differences between the European FSD approaches or the other guidance you’re getting versus the US. And how does that affect any phase 3 study design that you will like to conduct and maybe sort of leverage in one continent versus the other. Can you add some color on any differences there?
I will give a brief little bit and then Jeff can jump in. Certainly there is always when you do this types of regional programs, there’s always slight differences in regulatory requirements. In general the concept of benefit being a component of your behavioral measures such as SSCs and more longitudinal measure of something like desire and distress. It’s similar between the two regulatory regions. The overall patient population is very similar. There are small differences in the duration of trials and desire for duration of trials and safety monitoring. Jeff I’ll allow you to have any other.
The differences are really unique aspects of individual trial design perhaps statistical approach, this type of thing. In general I will say based on the current discussions that we have had et cetera, it’s pretty clear that the two regional programs will be mutually support of and really add to a very robust, we hope, body of evidence as it crosses the definitions of clinical benefit are very similar, the safety monitoring program, the profiles, the risks, or the equation are also very similar. And as I actually think one of the biggest differences I call out is the language and cultural differences perhaps unique to some of the individual valued of tools that we will be using. But then that is countered by the fact that this condition obviously is recognized and significant in multiple cultures that just validates the importance of this therapeutic area for drug development.
Rahul Jasuja - Noble Financial Capital Markets
Okay, that’s helpful. And then one more question on the FSD space and maybe I’m not going to get an answer, that’s a [indiscernible] let me try. In looking at licensing or partnering with a big pharma, how would you want us to view the fact that you got an option agreement in Europe and then you could progress that direction very soon beginning phase 3 studies. But then you’re looking for a US partner and the US partner may be conflicted with just getting US of wanting sort of a larger worldwide territory. How does that all play out as you look at sort of partnering worldwide?
Certainly, we’ve gone through a very intense process, in talking to multiple essential partners and as we reported I think last time at call, we think it is probably at the best interest of the this program to have them split at the current time. Even large pharma that we were talking to and have been talking to and continue talk to which would have an international view on really was focused on the U.S. market as being the larger potential opportunity in one that we drive the evaluation and the one they were interested in. So we felt that in order to secure additional benefit that we would bring in potential part of the European and that’s the process that we’re following. I don’t think at the end of the day and see may comment on this, it came down to the fact that we have to have - we were going to conclude with some multinational that wanted the rights, I think we would be able to accommodate them. We have flexibility there and as Carl mentioned based on the decisions thus far, we have in anyway biased or prejudiced our position by doing the option agreement with the company, European based company We don’t feel we’ve restricted our ability in any matter, right.
Rahul Jasuja - Noble Financial Capital Markets
Okay, good. And then finally the MCL one program and this is really to me is an under-evaluated and underappreciated program, could you tell us where you’re going with this year and sort of events and milestones coming up?
Sure, as I have reported, we’re really getting into the seek of the preclinical toxicology program for this because we’re moving towards first in men studies probably late this year so the activities are clearly actively underway. This particularly receptor is highly up regulated in variety of immune conditions in the local tissues that are undergoing formation. And they were number of preclinical stages that we’ve been doing and things such as IBD and kidney disease and the uveitis where we’ve been seeing some very nice results.
Mechanistically, it appears that therefore effecting down regulating TNF-alpha signaling pathways, so that opens a whole variety of indications for us. What we’re doing in parallel now is really, I think, we’re going to have to at some point as we get to the end of second quarter really now we’re now in begin to select the final indication for the program and that’s going to be a mixture of both business development final clinical review and potentially regulatory feedback.
So the lead indications for this really there’re three IBD, nephritis and uveitis which is ocular inflation. So you really just wind the business models right now clinical models right now to determine which is the best one, I think we’re going to be able to go all three at some point.
I would now like to turn the conference back to over Carl Spana for any additional or closing remarks.
Thank you. It’s very exciting time at Palatin. We have a very busy time coming up with regards to Bremelanotide and we’re pleased that we’re making tremendous progress on our other programs and as some of the questions that pointed out, you know, we don’t talk much about them but they’re going to add tremendous value to this company as we go forward along with Bremelanotide. So we’re excited by what we’re doing here and I’d like thank all of you for participating on the call and certainly all the people at Palatin that are working hard to make these things happen as well Jeff and Steve for their participation and contribution as well. So thank you all. We look forward to updating you next quarter and continue to make excellent progress here at Palatin. Thank you.
Ladies and gentlemen, this concludes today’s conference. We thank you for your participation.
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