Good morning, ladies and gentlemen, and welcome to the Palatin Technologies third quarter fiscal year 2010 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 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 Palatin conference call. I’m Carl Spana, President and CEO of Palatin Technologies. With me today is Steve Wills, Palatin's Executive Vice President of Operations and Chief Financial Officer, and Dr. Trevor Hallam, Palatin's Executive Vice President of Research and Development.
Today Mr. Wills will take you through the financial summary for the quarter. That will be followed by Dr. Hallam who will go through our research and development programs and update you on the progress we have made there. I will finish with a summary and overview, and then we will open it up to questions.
So to start off our call, I’m going to hand it over to Mr. Wills who will go through the financial summary.
Thank you, Carl. And good morning, everyone. For the quarter ended March 31, 2010, which is the third quarter of our fiscal year, Palatin reported a net loss of $2 million or $0.02 per share compared to a net income of $0.1 million or $0.00 per share for the same period in 2009.
Total revenues in the quarter ended March 31, 2010 were $2.6 million compared to $5.2 million for the same period in 2009. The net loss for the quarter ended March 31, 2010 compared to the net income for the quarter ended March 31, 2009 was primarily attributable to a decrease in the recognition of revenue under our agreements with AstraZeneca.
Regarding costs and expenses, total operating expenses for the quarter ended March 31, 2010 amounted to $4.6 million compared to $5.1 million for the comparable quarter of 2009. Included as a component of operating expenses were non-cash, share-based expenses of $0.2 million and $0.3 million for the third quarter of fiscal year 2010 and 2009, respectively.
As of March 31, 2010, Palatin's cash, cash equivalents and investments totaled $10.2 million. This compared to $7.8 million as of June 30, 2009. The increase in cash, cash equivalents, and investments is primarily the net result of the receipt of $5 million in milestone payments from AstraZeneca related to the September 2009 amendment to the license and collaboration agreement, plus net proceeds of approximately $5.2 million from the sale of common stock and warrants in two registered direct offerings, one in August 2009 and one in March 2010, less the cash utilized to fund operations during the nine months ended March 31, 2010.
During the quarter ended March 31, 2010, we received $2.5 million in a milestone payment from AstraZeneca related to our September 2009 amendment to our collaboration agreement. And in March of 2010, we sold approximately 9.6 million units in a registered direct offering. For gross proceeds of $2.6 million, we netted $2.4 million.
Each unit consisted of one share of common stock, a Series A warrant exercisable for 0.33 shares of common stock at an exercise price of $0.30, and a Series B warrant exercisable for 0.33 shares of common stock at an exercise price of $0.27. The Series A warrant is exercisable 181 days from the date of issuance and expires three years thereafter. The Series B warrant is exercisable immediately upon issuance and expires 180 days from the date of issuance.
Additionally, during the quarter, we received a letter from the New York Stock Exchange, AMEX Exchange, determining that Palatin successfully resolved the continued listing deficiencies referenced in a December 2008 letter from the Exchange.
Thank you, Steve. Now Dr. Hallam will give you an update on our research and development programs.
Thanks, Carl, and good morning. Let me start as usual with our sexual dysfunction program. You will be aware that we have switched the routes of administration for the development of bremelanotide from intranasal dosing to subcutaneous. Over the last 18 months, Palatin has performed a number of preclinical studies and an additional clinical study with bremelanotide to further understand the relationship between bremelanotide plasma levels, its route of administration and blood pressure changes. We’ve made progress in demonstrating the subcutaneous injection of BMC has more consistent plasma levels and lower incidence of adverse events when observed with intranasal dosing.
In the last few months, we have recently conducted a clinical study with a subcutaneous formulation of bremelanotide in men 45 to 65 years old. This study will evaluate the effects of BMC on blood pressure at rest and under conditions of physical stress. Positive results in this study would support the safe transition of bremelanotide into larger Phase II studies in men erectile dysfunction and not sufficiently responsive to currently marketed phosphodiesterase-5 inhibitor products.
We will have the data mid-calendar year and we will then discuss with the FDA the results from this study together with a rigorous cardiovascular risk analysis of all previous BMC studies administered by subcutaneous and intranasal means. By completing this rigorous analysis, we aim to establish procedures and protocols to assure safe execution of Phase II at-home studies in the target population.
Palatin had a guidance meeting with the FDA late last year to discuss the development program for bremelanotide as the second line therapy for erectile dysfunction patients that are non-responsive to the phosphodiesterase-5 class of inhibitors. The meeting was very constructive and resulted in a clear plan that we are now in the process of executing.
The Phase II program will evaluate whether bremelanotide monotherapy is optimal or whether adjunct use of bremelanotide with phosphodiesterase-5 inhibitor would bring better benefit. Once the Phase II studies are progressing in the erectile dysfunction program, we aim to seek further guidance from the FDA with regards to progressing bremelanotide development for female sexual dysfunction with the subcutaneous route of administration.
As previously described, we have identified backup peptide molecules of which PL-6983 is an example that at least in preclinical models appears to demonstrate even better separation of efficacy in cardiovascular effects in terms of plasma exposure. At this stage in bremelanotide development, it isn’t clear whether that the separation is necessary in humans. And so for these reasons, we have decided to hold PL-6983 as a backup and not proceed with the Phase I trial this time.
In addition to cyclic peptide molecules, we have also succeeded in deciding novel, potent and selective orally bioavailable, small molecule melanocortin-4 receptor agonist. The ultimate aim is to have an oral on-demand simple tablet for use in both female and male erectile dysfunction. Now I want to progress and talk about our obesity program that’s sponsored with AstraZeneca.
Our research with AstraZeneca for the discovery of novel melanocortin-4 receptor agonist anti-obesity agents reached a successful conclusion this year. Two clinical candidates in Palatin’s discovery efforts were selected and entered into AstraZeneca’s development program. We expect clinical studies to commence in 2010.
In addition, Palatin has enabled AstraZeneca to establish a mature discovery program to develop orally bioavailable clinical candidates. On behalf of AstraZeneca, Palatin has also undertaken to perform proof-of-principle clinical studies on a melanocortin-4 receptor agonist. The data from the initial proof-of-principle studies form the basis for transition analysis to confirm selection of commercially viable clinical candidates.
Furthermore, further proof-of-principle clinical studies are being carried out collaboratively with AstraZeneca under an ongoing clinical study agreement under a new Palatin IND filed with the Division of Endocrinology and Metabolic Products. The results from these studies will be informative for both the melanocortin-4 obesity and sexual dysfunction programs.
Now to our natriuretic peptide receptor program and PL-3994. As we have previously described, Palatin and its scientific advisors believe that chronic stimulation of natriuretic peptide receptors as an approach to treating heart failure patients may decrease re-hospitalization rates and improve survival rate.
Clinical and preclinical data from studies with natriuretic peptide agonists clearly demonstrate that stimulation of natriuretic peptide receptors is an important mechanism to rectify the underlying pathophysiology in heart failure. An exploitation of this approach using chronic exposure to increase tone [ph] of the NPR system has the potential to deliver improved therapeutic agents.
Palatin has developed novel natriuretic peptide agonists that have natriuretic receptor selectivity and desirable pharmacological and drug-like attributes for use as potential chronic therapeutics. One such molecule is PL-3994, a long-acting agonist selectivity for the NPRA receptor that possesses the correct attributes to be suitable for daily subcutaneous self-administration.
Clinical studies have shown that PL-3994 has a half-life of three hours in man and duration of effect on the cardiovascular system of 8 to 12 hours making it suitable for daily administration. Our expectation from preclinical studies is that chronic underlying pathophysiologies that ultimately lead to progressive worsening of the heart failure patient after the initial acute decompensation where we decreased or prevented by a three to six-month course of treatment with PL-3994.
We intend to use PL-3994 as an adjunct with daily subcutaneous injection, adjunct to other medications such as beta blockers, ACE inhibitors and angiotensin receptor blockers to prevent re-hospitalization by combination of decreased cardiac remodeling and the improved kidney function.
Going forward in heart failure, the plan is to evaluate PL-3994 in additional Phase II studies to characterize safety pharmacokinetics, pharmacodynamics, and hemodynamics in heart failure patients. A key objective of the Phase II program will be to demonstrate the ability of PL-3994 treatment to reduce the re-hospitalization rate after the acutely decompensating event.
I want to spend a little more time on other indications for the natriuretic peptide program generally and specifically for PL-3994. So in the past year, we have expanded the medical treatment indications. I believe that PL-3994 has the potential to treat patients with resistant and potentially refractory hypertension. A proof-of-principle study is in the process of being designed to evaluate the potential use of PL-3994 as adjunct to the standard three to four care medications presently prescribed in an attempt to control these patients’ blood pressures.
Additionally, Palatin has conducted a number of preclinical studies to evaluate the feasibility of use of PL-3994 in the emergency room for acute severe asthmatics. In acute severe asthma, patients present in the emergency room are commonly unresponsive to Beta 2 agonists. This unresponsiveness often relates to the over use of Beta 2 agonists but then render the airways unable to adequately dilate. There are no alternative bronchodilators that have been shown to provide relief under these conditions.
Published data, both pre clinical as well as clinical studies, with infused endogenous peptides have shown promise for NPRA agonist. Palatin believes that the improved half-life with PL-3994 that allows either subcutaneous or nebulized administration is likely to bring great benefit to the acute severe asthmatic in the emergency room. This represents an entirely different mechanism from that of beta agonists.
The program would explore the current subcutaneous route of administration as well as emergency room use of nebulizer for optimal therapy. If effective, further developments of formulations and devices maybe warranted to provide wider availability to broader asthma and COPD populations.
Finally, just to touch on our late stage discovery research. The work has succeeded in identifying extremely potent and selective melanocortin ligands that will be evaluated in sophisticated ex vivo human disease models of airways bronchodilation and inflammation as potential glucocorticoid sparing a replacement therapy.
If successful, we aim to progress to clinical development and target the smoking asthmatic population that accounts for 20% to 25% of the total asthmatic population, and because of their smoking, are wholly responsive to glucocorticoid. We would envision that the clinical population that would drive benefit could be expanded also to those with chronic obstructive pulmonary disease.
Now I'm going to hand back to Carl.
Trevor, thank you very much for that overview. Just a few more words before we open the call up to questions. At Palatin, we are very excited about our product line, the depth and potential of our programs. In the near-term, we will continue to focus on our melanocortin programs with sexual dysfunction and obesity and diabetes. Because of our strength in melanocortin research, our partnership with AstraZeneca, and the size of the commercial opportunities, we believe these programs represent the best risk return ratio for shareholders.
Sexual dysfunction space we are targeting is an area where there is clinical need with limited products in development. Approximately 35% of the patients with erectile dysfunction do not respond to current PD-5 inhibitor therapy and an additional 20% are only marginally satisfied. We believe this non-responsive population is an excellent commercial opportunity for bremelanotide.
Based on our clinical experience with bremelanotide, we believe that bremelanotide will have significant benefit in this patient population. Our recent work to address the potential safety concerns of bremelanotide has increased our confidence that bremelanotide can be commercialized with an acceptable risk to benefit ratio.
Regarding female sexual dysfunction, patients and their doctors have limited treatment options. Based on our clinical data, we believe that a melanocortin-4 targeted therapy such as bremelanotide holds great potential for treating these patients. Finally, regarding our natriuretic peptide program, our lead molecule PL-3994 and the expansion of this program into two new therapeutic areas has increased our confidence and the potential to attract corporate partnerships to access the resources required to move these exciting programs forward.
In closing, we continue to make substantial progress in all of our programs while maintaining tight control of our expenses and increasing our cash flows by expanding our collaboration with AstraZeneca. We are looking forward to an exciting year in 2010 with the recommencement of the bremelanotide sexual dysfunction program in ED and FSD and the potential of the corporate collaboration of a partnership for natriuretic peptide program.
Thank you all for participating on our call. And now the operator will now open the call up to questions.
Thank you. (Operator instructions) There are no questions in the queue. I'd like to turn it back to Dr. Carl Spana for any additional or closing remarks.
Thank you. Once again, I'd like to thank all of you for participating on our third quarter conference call. We are very excited here at Palatin, and I look forward to seeing many of you as we go out and talk to investors over the next quarter, and we of course look forward to updating you on our progress next quarter. Thank you all. Have a great day.
This does conclude today's conference. We thank you for your participation.
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