Palatin Technologies, Inc (NYSEMKT:PTN)
Q4 2016 Earnings Conference Call
September 20, 2016 11:00 ET
Carl Spana - President and Chief Executive Officer
Steve Wills - Chief Financial Officer and Operating Officer and Executive Vice President
Joe Pantginis - ROTH Capital Partners
John Newman - Canaccord
Good morning, ladies and gentlemen and welcome to the Palatin Technologies’ Fourth Quarter and Fiscal Year 2016 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 maybe 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 to you your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.
Thank you and good morning. I am Carl Spana, the President and Chief Executive Officer of Palatin Technologies. With me on the call today is Steve Wills, our Chief Financial Officer and Operating Officer and Executive Vice President.
On today’s call, we will provide updates on our development programs and our fourth quarter and fiscal year end 2016 financial results. To begin, Steve will provide the financial updates. Steve?
Thank you, Carl. Good morning, everyone. I will start with the fourth quarter and fiscal year ended June 30, 2016 significant and recent highlights. Regarding our bremelanotide development program for hypoactive sexual desire disorder, or HSDD, last patient visits for the efficacy portion of our Phase 3 clinical trials were completed in the third quarter of calendar year 2016 and top line results are expected to be released early fourth quarter calendar year 2016. Carl will give you more detail on our female sexual dysfunction program during his part of the presentation.
Regarding the strengthening of our intellectual property portfolio, the United States Patent and Trademark Office issued a key patent from methods of treating female sexual dysfunction using the formulation and dose utilized in our Phase 3 reconnect study with bremelanotide for HSDD. This is the same formulation and dose we will use for commercialization upon FDA approval. The patent expires no earlier than November 2033. The United States Patent and Trademark Office issued a Notice of Allowance on a patent with composition of matter claims for a broad group of melanocortin peptides. The United States Patent and Trademark Office also issued a patent with composition of matter claims for a broad family of melanocortin receptor 1 peptides with potential application and inflammatory disease related and autoimmune indications.
On the equity front – on the equity raising front, in August 2016, we closed on an underwritten offering of units for gross proceeds of $9.25 million with net proceeds after deducting offering expenses of approximately $8.5 million. We issued 11 million – approximately 11.5 million shares of common stock and 10-year pre-funded Series I warrants to purchase approximately 2.2 million shares of common stock at an exercise price of $0.01 and Series H warrants to purchase approximately 10.3 million shares of common stock at an exercise price of $0.70 per share.
Regarding fourth quarter and fiscal year ended 2016 financial results, Palatin reported a net loss of $13.4 million or $0.09 per basic and diluted share for the quarter ended June 30, 2016 compared to a net loss of $12.1 million or $0.09 per basic and diluted share for the same period in 2015. The difference between the three months ended June 30, 2016 and 2015 was primarily attributable to the increase in expenses related to the Phase 3 clinical trial and development program with bremelanotide for HSDD in the quarter ended June 30, 2016.
For the year ended June 30, 2016, Palatin reported a net loss of $51.7 million or $0.33 per basic and diluted share compared to a net loss of $17.7 million or $0.15 per basic and diluted share for the year ended June 30, 2015. The increase in net loss for the year ended June 30, 2016 compared to the net loss for the year ended June 30, 2015 was primarily attributable to the increase in development costs for the progression of the Phase 3 clinical trials and development of bremelanotide for HSDD and secondarily related to license and contract revenue recognized in the year ended June 30, 2015. Regarding revenue, there were no revenues recorded in the quarter or year ended June 30, 2016 or in the quarter ended June 30, 2015. For the year ended June 30, 2015, Palatin did recognize $12.9 million of licensing contract revenue under our agreement with Gedeon Richter. That agreement had since been terminated.
Regarding operating expenses, operating expenses for the quarter ended June 30, 2016 were $12.7 million compared to $11.8 million for the comparable quarter of 2015. For the year ended June 30, 2016, Palatin incurred $49.3 million of operating expenses compared to $30.2 million for the year ended June 30, 2015. Again, the increase in operating expenses for the quarter and the year ended June 30, 2016 was the result of an increase in expenses primarily related to the Phase 3 clinical trial and development program with bremelanotide for HSDD.
Regarding other income and expenses, total other expense net was $0.6 million for the quarter ended June 30, 2016 compared to $0.3 million for the quarter ended June 30, 2015. For the year ended June 30, 2016, total other expense net was $2.5 million compared to $0.9 million for the year ended June 30, 2015. Other income expense for the fiscal years ended June 30, 2016 and June 30, 2015 primarily consist of interest expense related to the venture debt. The increase in total other expense net for the year ended June 30, 2016 is due to the additional venture debt in July of 2015.
Regarding cash position, Palatin’s cash, cash equivalents and investments were $9.4 million as of June 30, 2016 compared to cash and cash equivalents of $27.3 million at June 30, 2015. Current liabilities were $14 million as of June 30, 2016 compared to $7.4 million as of June 30, 2015. Palatin believes that existing capital resources, together with the approximately $8.5 million in net proceeds received from the August 2016 financing will be adequate to fund our planned operations through the quarter ending December 31, 2016. Assuming the Phase 3 clinical trial of bremelanotide for HSDD is successful as to which there can be no assurance, we will need additional funding to complete required ancillary studies in clinical trials, prepare and submit regulatory filings to the FDA for product approval and establish commercial scale and manufacturing capabilities. Carl?
Thank you, Steve. Our fourth quarter and fiscal year end 2016 operational update will focus primarily on our bremelanotide Phase 3 female sexual dysfunction program.
Bremelanotide Phase 3 reconnect clinical protocols 301 and 302 are multi-centered, double-blind, randomized, placebo-controlled clinical studies with 6 months of randomized treatment followed by an open-label safety extension trial.
Clinical trials 301 and 302 randomized 1,250 women with approximately 625 in each of the trials. The objectives of the trials are to evaluate the efficacy and safety of subcutaneous bremelanotide in pre-menopausal women with hypoactive sexual desire disorder as an on-demand, as needed treatment. Clinical trials 301 and 302 have been completed with the last patient completing treatment in Study 302 in August of 2016 and the open-label safety extension is now fully enrolled with 675 patients.
In the last quarter, we also submitted the statistical analysis plan for the bremelanotide reconnect clinical program to the FDA’s division of bone, reproductive and neurological products. And now they are meeting with the division to discuss the statistical analysis plans and their comments. The meeting was collaborative and productive and we reached agreement on the analyses and methodologies that will be in the final statistical analysis plan.
As we look forward to top line data, we are working with our various contract research organizations to complete data collection and entry and to finalize all the activities required to lock the trial databases and begin data analysis. These activities should be completed shortly with database lock anticipated at the end of the third quarter of 2016 and top line data ready for release in the early fourth quarter of 2016. Over the past year, the female sexual dysfunction fields has had major positive changes, with the approval and launch of Addyi, the first FDA approved treatment for women suffering with female sexual dysfunction. We believe this is a major positive for the female sexual dysfunction field and reduces the regulatory risk in the U.S. for bremelanotide.
The Addyi label contains contraindications for the use of alcohol and drugs that are moderate or strong cytochrome P450 inhibitors. In addition, the Addyi label has a risk evaluation and mitigation program that requires both physicians and pharmacists certifications and patient counseling concerning the risk of using Addyi and drinking alcohol. We believe that bremelanotide, if approved will play a major role in the treatment for pre-menopausal with hypoactive sexual desire disorder. Bremelanotide is highly differentiated from Addyi. Bremelanotide is an on-demand product taken only when needed before a sexual event and not a chronic medication taken every day.
In clinical trials specifically designed to evaluate the interaction of bremelanotide with alcohol, bremelanotide did not show any interaction with alcohol. Also, bremelanotide is not a cytochrome P450 inhibitor. We therefore believe that it’s likely that if approved, bremelanotide product label would not have alcohol restrictions or a significant risk evaluation and mitigation program. We are also conducting pre-launch and commercial activities for our bremelanotide female sexual dysfunction program. These include pricing, insurance reimbursement, packaging and trade name activities. In light of above events and significant progress of the bremelanotide Phase 3 clinical trials, we have received significant interest from potential licensing partners. We believe that there is a substantial U.S. and global market for bremelanotide and we continue to make progress with our licensing activities.
Now moving on to our natriuretic peptide program and our clinical development candidate, PL-3994, natriuretic peptide system is one of the body’s primary mechanisms for opposing the disease processes that underlie heart failure. Its function is to lower blood pressure, suppress the rennin angiotensin aldosterone system and to inhibit cardiac hypertrophy and fibrosis and protect cardiac and kidney function. The natriuretic peptide system is a well validated but underexploited target for development of the novel heart failure treatments. Research conducted in academic laboratories and by Palatin demonstrates that PL-3994 has significant effects on reducing cardiac hypertrophy and fibrosis, down regulating the rennin angiotensin aldosterone system and restoring cardiac function without causing significant hypotension. PL-3994 is in development as a treatment for patients with heart failure, with the objective of improving cardiac function, to reduce the patient risk of cardiovascular death and hospitalization. PL-3994 has successfully completed two Phase 1 safety trials and will move into a Phase 2 clinical study in the fourth quarter of calendar 2016.
In addition to our internal activities, we have established research collaborations with multiple leading academic research institutions to help advance our natriuretic peptide program. And we are also currently working on potential partners as they conduct their due diligence on this exciting program. Now regarding our melanocortin receptor-1 program for inflammatory and autoimmune diseases, PL-8177 is our lead candidate. We have conducted and completed activities required to file a new drug application with the FDA and conduct Phase 1 human studies. We are also continuing to make progress with potential collaboration partners. And finally, regarding our melanocortin-4 receptor for obesity and diabetes, we have made excellent progress in developing multiple peptide and small molecule lead candidates and continue to work with potential partners in evaluating this program.
So to recap, over the past calendar year, a number of significant objectives were achieved. Our reconnect trials 301 and 302 completed all patient enrollment and randomized treatment. Our reconnect open label safety extension trial is fully enrolled. Database lock is targeted for the end of the third quarter of 2016. The top line data for trials 301 and 302 will be in the early fourth quarter of 2016, which is just several short weeks from now. Our natriuretic peptide program do work with our academic collaborators continue to advance, strengthening our understanding of the role of this system in the treatment of heart failure. And PL-3994, our lead clinical candidate for treating heart failure is scheduled to begin a Phase 2 clinical trial in the fourth quarter of 2016. And finally, our melanocortin-1 and 4 programs continue to made significant progress with limited funding.
I would like to thank all of you for participating in Palatin’s fourth quarter and fiscal year end 2016 conference call. I will now open the call to questions. Thank you.
[Operator Instructions] And we will go first to Joe Pantginis with ROTH Capital Partners.
Hi Steve and Carl. Good morning. Thanks for taking the question. There are just two real questions I want to ask regarding BMT if you don’t mind and thank you for the update. So, you met with the FDA recently on the SAP, could you provide a little more color on any modifications, were there anything major with regard to the SAP and is that the reason for the few weeks delay for the release of the top line data?
Look, I mean, am not going to discuss any details of the SAP on the call, but certainly really, the goal there was to make sure we got appropriate feedback from the FDA before we finalize the system analysis plan, which really is to make sure that the methodologies used for analyses around potential clinical benefit were correct and in line with the FDA, it was looking for. And we were able to get that clarified and really reach a really good position with them. And we are very pleased with the outcome of the meeting. It was very collaborative and productive. And I think both the FDA and Palatin are on the same page as to how the data should be handled and analyzed and methodologies that should be used. Of course at this stage, any even minor change to the SAP would require reprogramming and it does add some time to it. But the other thing, just in regards to the data and when it’s coming out is we spent 20 months and an awful lot of money as you heard from Steve’s part of the presentation on this program. And we really want to make sure that everything is buttoned down, tight, solid, correct, FDA signed also that way, we go to top line data with confidence that we are delivering the data in a way that it should be delivered. So we will have it out quickly. We will get data as quickly as we can, but we do want to make sure it is correct based on all the time we spent for getting here.
I understand. Thank you. That’s helpful. One quick side question, once the data are available, are you planning to have a conference call around the data or just the press release?
Both, we would have a press release and then a follow-up conference call.
Okay, great. Thanks. And then the second part of my question was regarding the partnering landscape, obviously you said there are significant partners – partnering interest right now, if you can maybe comment about the tenor of those discussions and do you think, it’s possible that partnership might be signed ahead of the data, even though that were disclosed, but the primary focus of my question is obviously, there has been some trepidation in the market right now with regard to the weak or failed launch, depending on how you view it for Addyi and how that might be impacting your partnering discussions?
I will let Steve tackle that.
The – I would say the only – just say, I will characterize it as an A item, the only A item that we have seen in the last say, 12 months regarding potential partners has been around the launch of Addyi by Valeant. And specifically regarding the market, in a nice way, how well received will a female sexual dysfunction treatment be by this patient population. And in the absence of what we believe are significant differentiating factors of our bremelanotide versus the Addyi, Carl has covered them, we have covered them on past calls, whether it’s the REMS, certain issues around alcohol, which is you shouldn’t be taking any alcohol during treatment. But because of these significant differentiating factors of bremelanotide over Addyi, the potential collaboration partners are actually quite enthused about our treatment. Our expectation is that we will be doing collaboration some time after the release of the top line data. In a nice way, as long as what we call a thoughtful evaluation. And in that regard, our expectation is that we will have something between the top line data release and the filing of the NDA with the FDA, which is targeted for mid-calendar year 2017. There is significant interest. There is – yes, Addyi is ahead of us and approved, but obviously there are some questions and some challenges around the product. And frankly, there is – we don’t really see anyone, from a competitive landscape, that close behind us. There is no one through Phase 2. So again, we are comfortable that there is a lot of attention right now and that there will be more attention once we are able to release what we are hoping is the positive Phase 3 trial results.
And we will go next to John Newman with Canaccord.
Hi, guys. Thanks for taking the question. Just one real question on the statistical analysis plan in terms of the discussion you had with the agency. I don’t know if you would characterize the outcome as clarification on the statistical analysis plan that you already had in your mind or if you would characterize it as some minor changes that were made to the analysis. Just trying to get a sense as to whether the FDA confirmed sort of the plan that you had in place or if there are some things that you learned coming out of the meeting that may result in some tweaks? Thanks.
Sure. It’s kind of a mixture of both, John. Really, a lot of it was just around statistical methodologies on how one would determine that the results assuming they are positive were clinically meaningful just what statistical methodologies would you use and making sure that we will clarify exactly what the FDA would want. There are number of ways that you can – there are number of analyses that you can do. We propose some, the agency had some comments on those and we sat down and said listen, there are couple of different ways you can do this. We are really agnostic as to what – all of them are correct. Just we are really agnostic as to what we use. We just want to make sure we get the ones that you want. And we were able to get clarified. They just clarified what they wanted. It’s also whenever you come to these meetings, you certainly are looking for – I am always looking for what’s the tenor in the room, how are the people in the room? Is it a meeting that is flowing nicely and collaborative or is it one where it’s more [indiscernible]? And then I would have to say in this particular case, this meeting was one and where I felt that the FDA was really there to help clarify our questions and make sure that we had a statistical analysis plan that meets their objectives. And as I said, it was one more positive collaborative meetings we have had with this division. So, it was quite refreshing from that standpoint.
Okay, great. Thank you.
That concludes our question-and-answer session for today. I would like to turn the conference back to our moderators for any additional or closing remarks.
Sure. Well, I would like to thank everyone for participating on the Palatin Technologies’ fourth quarter and fiscal year end 2016 conference call. Look, it’s a lot of excitement here. We have worked – the team here has worked long and hard and they continue to work hard to make sure that we get this data wrapped up and ready to be analyzed. It will happen soon. So, we are looking forward to it and we are looking forward to reporting the results out to everybody. I know many of you have followed this for a while. And this is a major event for us. And we are really looking forward and hopeful for a positive outcome. So, I would like to thank you all. Have a great day. And certainly, we will be in touch with many of you as the next quarter rolls on and the data comes out. Thank you.
This does conclude today’s conference. We thank you for your participation. You may now disconnect.
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