Palatin Technologies, Inc. (PTN) CEO Carl Spana on Q4 2018 Results - Earnings Call Transcript

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About: Palatin Technologies, Inc (PTN)
by: SA Transcripts

Call Start: 11:00 January 1, 0000 11:32 AM ET

Palatin Technologies, Inc. (NYSEMKT:PTN)

Q4 2018 Earnings Conference Call

September 13, 2018 11:00 ET

Executives

Carl Spana - President & CEO

Steve Wills - EVP, CFO & COO

Analysts

Joseph Pantginis - H.C. Wainwright

John Newman - Canaccord

Operator

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Fourth Quarter and Fiscal Year End 2018 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 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'd like to introduce you to your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Carl Spana

Thank you. Good morning, and welcome to the Palatin Technologies' fourth quarter and fiscal year 2018 call. I am 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.

Now, I'm going to turn the call over to Steve, who'll provide the financial updates. Steve?

Steve Wills

Thank you, Carl. Good morning, everyone. Starting with the fourth quarter and fiscal year ended June 30, 2018, significant and recent operational and financial highlights, I'm going to start with Vyleesi.

Now Vyleesi is the trade name, the official trade name for bremelanotide which is under development for Hypoactive Sexual Desire Disorder or HSDD. In June 2018, our exclusive North American Licensee for Vyleesi, AMAG Pharmaceuticals, Inc. was notified by The United States Food and Drug Administration of acceptance for the filing of the New Drug Application for Vyleesi. The FDA PDUFA which is the Prescription Drug User Fee Act goal date for completion of the FDA review of the NDA is March 23, 2019. The FDA's acceptance of the NDA triggered a $20 million milestone payment to Palatin, less expenses paid by AMAG. Palatin is also entitled to receive a $60 million milestone payment upon FDA regulatory approval. If approved, Vyleesi would become the first and only on-demand pharmacologic option indicated for the treatment of HSDD in premenopausal women in The United States.

During the June 30, 2018 fiscal year, we entered into a collaborations and license agreement with Fosun Pharma for exclusive rights to develop and commercialize Vyleesi in the territories of mainland China, Taiwan, Hong Kong, and Macau. We received an upfront payment of $500,000 less taxes -- I'm sorry, an upfront payment of $5 million less taxes of $500,000. We also entered into a license agreement with Kwangdong Pharma for exclusive rights to develop and commercialize Vyleesi in the Republic of Korea. We received a $500,000 upfront payment, less $82,500 of taxes.

Carl will expand on our other programs that we are advancing during his part of the presentation. Regarding other corporate, during the fiscal year ended June 30, 2018, we decreased debt from $14.8 million at June 30, 2017 to $7.2 million. Palatin was added to the Russell 3000 Index in June 2018, and throughout the year, as we've done in prior years, we grew the Company's intellectual property portfolio with several filings and issuances this year.

Going into the specific financial results, regarding our fourth quarter and fiscal year ended 2018 financial results, Palatin reported net income of $11.8 million or $0.06 per basic and diluted share for the fourth quarter ended June 30, 2018, compared to net income of $13.3 million or $0.07 per basic and diluted share for the same period in 2017. The difference between the three months ended June 30, 2018 and 2017 was primarily attributable to the recognition of contract revenue pursuant to our license agreement with AMAG of approximately $20 million for the quarter ended June 30, 2018 compared to approximately $33 million in 2017.

For the fiscal year ended June 30, 2018, Palatin reported net income -- again, this is for the full year, $24.7 million, or $0.12 per basic and diluted share compared to a net loss of approximately $13 million, or $0.07 per basic and diluted share for the year ended June 30, 2017. The difference in net income for the year ended June 30, 2018, and the net loss for the year ended June 30, 2017, was primarily attributable to the recognition of $67 million in license and contract revenue for the year ended June 30, 2018 compared to $44.7 million of recognized revenue in the period, the year ended June 30, 2017, and secondarily to a $14 million decrease in operating expenses to $41.2 million for the year ended June 30, 2018 as compared to $55 million for the year ended June 30, 2017.

Regarding cash position and working capital; Palatin's cash and cash equivalents were $38 million compared to cash and cash equivalents and investments of $40.5 million, and accounts receivable of $15 million at June 30, 2017. Current liabilities were $10.8 million as of June 30, 2018, compared to $19.9 million net of deferred revenue of $35 million at June 30, 2017. Palatin believes the existing capital resources will be sufficient to fund our planned operations through at least September 30, 2019.

With that, I'll be turning the call back over to Dr. Carl Spana. Carl?

Carl Spana

Thank you, Steve. I will start the operational update with Vyleesi, our lead clinical product. Vyleesi is a first-in-class melanocortin agonists which is the only on-demand drug to complete Phase 3 clinical trials for Hypoactive Sexual Desire Disorder. The product is formatted as a simple, single-use subcutaneous auto-injector, self-administrated by the patient approximately one hour prior to sexual activity.

We have been working with AMAG Pharmaceuticals, our North American licensee partner for Vyleesi. We completed a new drug application for Vyleesi, which AMAG submitted to the FDA in March 2018. The NDA was acceptably reviewed by the FDA in June. The PDUFA date for Vyleesi NDA is March 23, 2019, and the FDA plans to hold an advisory committee meeting to discuss the Vyleesi NDA in early 2019. We're currently working with AMAG to support the Vyleesi new drug application and to prepare for the advisory committee meeting. Outside of North America, we are working with our Chinese licensee, Fosun Pharma, and our South Korean licensee, Kwangdong Pharmaceuticals to advance Vyleesi development in those territories toward regulatory filings. In addition, we also have ongoing discussions with multiple potential partners for other territories.

Now moving on to Palatin's earlier drug development programs, we're primarily focused on our Melanocortin program, which has two broad therapeutic areas of interest which are autoimmune and inflammatory diseases and rare genetic forms of obesity that maybe treated with Melanocortin 4-receptor agonist. A second area of interest in our natriuretic peptide program for cardiovascular and fibrotic diseases. We've developed new families of highly specific and selective Melanocortin 1-receptor agonists with potentially broad applications in treating a variety of inflammatory and autoimmune diseases, including inflammatory bowel disease, dry eye, uveitis, and rheumatoid arthritis.

Activity in Melanocortin 1-receptor controls immune system disregulation by inhibition of the NF-kappa B and down regulation of pro-inflammatory cytokines. Our lead Melanocortin 1 clinical development compound, PL-8177, is a highly selective and potent Melanocortin 1-receptor agonist which we believe will have broad application treating inflammatory and autoimmune diseases. PL-8177 has demonstrated reversal of disease in both inflammatory and autoimmune animal models. We are developing both subcutaneous and oral formulations of PL-8177. Our subcutaneous formulation of PL-8177 has completed a Phase 1 single ascending and multiple ascending dose study, and we expect to have the unblinded data in the third quarter of 2018.

Our next step with the subcutaneous formulation is to conduct a Phase 2A study that will evaluate the safety and activity of PL-8177 in a variety of autoimmune diseases. This study is designed to provide the data needed to support larger Phase 2 efficacy studies and is anticipated to start in the first quarter of 2019. Our oral formulation of PL-8177 is in development as a potential treatment for Ulcerative Colitis, and a Phase 1 pharmacokinetic study is scheduled to start in the fourth quarter of 2018.

Our drug candidate under development for treating ocular inflammation including dry eye disease is PL-8331, a dual Melanocortin receptor-1 and 5 agonist. We are developing eye drop formulation of PL-8331 as a potential treatment for dry eye. We anticipate completing pre-clinical-enabling activities with PL-8331 in 2019 and to file an IND and begin clinical studies shortly thereafter.

We've also been working to expand our product portfolio by leveraging our expertise in Melanocortin biology and chemistry. We are developing orally active, small molecule, Melanocortin 4-receptor agonist, PL-9610. PL-9610 has demonstrated efficacy in a number of animal models of rare human genetic obesity. We believe PL-9610 has potential as a treatment for patients with mutations in the leptin melanocortin pathway that resulted in life-threatening early onset obesity disorders. We plan to initiate preclinical safety activities to support an IND filing and clinical studies with PL-9610 in the first half of 2019, and a number of the potential indications with PL-9610 may qualify for orphan drug designation.

Our other area of focus has been our naturally peptide system programs for both cardiovascular and fibrotic diseases. Our lead development candidate, PL-3994 is a selective and potent agonist as the naturally peptide A receptor. It's completed Phase 1 studies and is scheduled to start a Phase 2A trial sponsored by the American Heart Association in juncture with major research centers in the first half of 2019. We believe that PL-3994 has a potential as a treatment for heart failure patients that preserved or reduced ejection fraction and maybe suitable for replacement therapy in patients with pro-hormone processing deficiencies.

Palatin has also developed a peptide that is both, a naturally peptide A and naturally peptide C receptor agonist for use in both cardiovascular and fibrotic diseases including reduction of cardiofibrosis. This peptide, PL-5028 is in pre-clinical evaluation, and we expect to have data in our fibrotic models later this year or early next year. As a reminder, you can find additional information on our programs on our website, www.palatin.com.

In fiscal year 2018, we made substantial progress in advancing our development programs and we anticipate the approval of Vyleesi in March 2019. As we think about the future of our Company, I'm very excited by the potential of our development programs to lead to new treatments that could significantly impact the lives of patients. The success we have had in developing Vyleesi from concept to Phase 3 clinical trials and now multiple commercial partnerships not only provides the resources for realizing the value of Vyleesi, but has provided us with the resources to unlock the value in our pipeline programs.

Over the next year, we have the following objectives; we'll be working diligently with AMAG Pharmaceuticals to support Vyleesi new drug application, and to prepare for the Vyleesi FDA advisory committee in early 2019. And we remain on-track for a potential Vyleesi approval in March 2019. In addition, we will work with Fosun Pharma and Kwangdong Pharmaceuticals to support their Vyleesi development and regulatory activities, and our business development activities will be primarily focused on Vyleesi partnerships for the European Union, Asia Pacific, Latin America and other selected territories.

For our naturally peptide system program, our main objective is to really to initiate the PL-3994 Phase 2A study in heart failure patients with preserved ejection fraction. And for our melanocortin system program has the following objectives; for PL-8177 we would like to initiating to complete the Phase 1 PK study with our oral formulation for Ulcerative Colitis, and for our subcutaneous formulation to initiating complete our Phase 2A study. For PL-8331 as a treatment for dry eye disease, we would like to initiate and complete the required pre-clinical activities to begin first human studies. And finally, for PL-9610, or orally active small molecule, agonist at the MCR-4 receptor we can't initiate our R&D enabling studies and activities.

The management and employees of Palatin remain focus on achieving our objectives and building value for our shareholders. I'd like to remind you that you can find a lot more detail on these development programs at our website www.palatin.com.

And now I'd turn the call over to the operator to open it up for questions. Thank you all for participating on our call.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Joe Pantginis of H.C. Wainwright.

Joseph Pantginis

First, regarding the upcoming AdCom, do you see any potential or -- I'm sorry, any outstanding issues or things that need to still be prepared or are things sort of status quo and ready to go?

Carl Spana

We'll be working on being ready with AMAG up until the last minute. I think with that being said, our review – the information request and the review that’s been going on with the agency, I think has really not highlighted anything that we were anticipating. As you probably know, Vyleesi has been a very well-studied compound, and so we expect that the panel meeting -- the FDA will do their job, I'm sure they will have a very rigorous panel meeting, but we will be prepared or AMAG will be prepared, and we'll be working with them to do that.

Joseph Pantginis

And then, assuming the drug gets approved in the March timeframe, is there any indication that you might have received from AMAG about how quickly they might be able to launch the drug?

Steve Wills

The plan is to launch the drug immediately thereafter, so the target is the second quarter. Let's -- we've stated both of us that the PDUFA date is March 23, as quickly as we can have that approval and final labeling, things of that nature -- AMAG is targeting and working out to be able to launch again, as soon as possible, and it would be in the second quarter of calendar 2019.

Joseph Pantginis

And then just one quick last one on Vyleesi, Any clinical work needed to be done with regard to Fosun or Kwangdong collaborations or is it strictly regulatory?

Carl Spana

I think both of them are planning to do a Phase 1 pharmacokinetic study to just to confirm that the absorption and metabolism of Vyleesi is the same in the Asian population as it is, and the predominant Caucasian population of the study in the North America trials. Those would be done in time to file off of the Vyleesi approval in the U.S.

Joseph Pantginis

You have the opportunity to have a broad set of pipeline opportunities here; so no lack of riches with regard to pipeline opportunities if you will. So I guess, with everything that you've discussed as well as even looking into these additional orphan indications, how are you going to look to provide focus to investors for all of these opportunities or are you just basically being driven by the data?

Carl Spana

I think since these programs are at fairly early stage, we certainly would definitely be driven by the data as we always are. I think for the most part, you won't see us focused very much in the heart failure space, I mean that's an area that's really just too broad for us and too large an indication. We're really -- we're looking to drive forward in indications where we can take the products forward on our own a substantial distance with the resources that we have in the Company. And those really will fall in the autoimmune -- some of the autoimmune diseases and in the -- or some of the orphan indications. We're quite excited about the work with PL-9610 as one of the first orally active, small molecule active melanocortin 4-receptor and we've been doing a lot of preclinical work in that looking at various models of where that have -- with our mutations in the path -- leptin melanocortin pathway, and we've been able to rescue the phenotype quite nicely.

So I think that there is a very nice place for that compound optically because these are -- many of these patients are younger children and injectable compounds and what have you are a little more difficult, but oral works quite nicely in that patient population. So, as you've said, we have a lot of opportunity, but really the next year for us is really starting through and making sure we really drive the data that's required to make the decisions on which one of these things will really progress into the larger Phase 2 studies.

Operator

[Operator Instructions] Our next question comes from John Newman of Canaccord.

John Newman

Obviously, we know that Vyleesi is still under FDA review, but what I wondered is, if you could start with Vyleesi -- I wondered if you could talk to us a bit about some of the market prep that you are allowed to do now, obviously we realize that you're restricted in terms of what you can do but just curious as to some of the things that you're doing at the moment to just make sure that physicians are aware that the drug is under review and that it might be an option for their patients?

Steve Wills

I mean obviously, AMAG being the commercial partner has taken the lead and pretty much everything behind that regarding the commercial preparation or potential commercial preparation. As of right now, they are concentrating on education, primarily through targeting the consumers and the HEPs; they have several websites up and running right now, and actually if you go to the AMAG website, it will direct you with Vyleesi/bremelanotide and HSDD. So, at this stage, I think that's appropriate, and again the websites and whether it's also at conferences, sometimes Palatin has some KOLs or we're doing some presentation of some data and AMAG is doing the same thing, but the primary effort is around education of the condition and the potential treatments and coming treatments.

John Newman

Just in terms of FDA panel, how you plan on really emphasizing the advantage of an on-demand dosing regimen? I suspect perhaps if you or the panel members will be familiar with ADI [ph] and obviously, you have some advantages in terms of dosing just in terms of safety but how do you plan on just really explaining to the panel that we know that we're injecting product but look, you know, we think it's an advantage, we think that's actually really good for this disorder?

Carl Spana

John, I think AMAG is doing a tremendous job and we're -- Palatin personal are in support of AMAG, they will be front and center on the presentations and we've been working with them on what they are doing. You know, the way these things typically happen is, we keep them on one, this is FDA meeting, it's not obviously a company meeting, we're invited to present at the meeting. But we will have an addition to AMAG personal that will be presenting both the safety and the FC data, we'll have key opinion leaders that will be there as well and they will present the overall view of what HSDD is and how Vyleesi fits in. And we also will have -- I think we're planning to have -- Key Webel [ph] will speak from the clinical trial experience how Vyleesi performed and how patients accepted the product. So I think they will have all that covered and there will -- and it clearly will be articulated to the panel. How much latitude we'll have, how the questions we'll get, obviously that's upto the FDA and the Chairman of the panel.

Operator

Our next question comes from [indiscernible].

Unidentified Analyst

With other questions on Vyleesi, I have a few questions on the pipeline you compared. First on PL-9610; you showed some data on the recent slide deck and guiding these to obese mice and MC4r, knockout mice. Do you have data anywhere that shows it's an MC4r activator? And also do you have a publication strategy for this program?

Carl Spana

The answer is yes, actually in the -- we have lot of the data in our slide deck, we'll be updating that as we go forward but we certainly have a tremendous amount of data showing that the compound is a selective MC4r agonist. In addition, we know -- we do have in slide deck, we do show that if you look at obese animals that don't have melanocortin 4-receptor, the drug doesn't work, so that's pretty good evidence that's certainly through melanocortin 4 process. In addition, I think the other data we have in there, we have in mice lacto-leptin itself, so leptin is a hormone that's involved in regulating food intake and -- wait, and those animals are also obese and we can rescue that phenotype -- we've got that data in the presentation as well. So right now as we continue to generate more data, we will -- as we've done at all of our programs published, we have a number of publications, not only for the PL-9610 in preparation but we've been doing a lot of work, particularly in the inflammatory area and the data has been quite exciting and we have a number of papers that are in preparation right now for that as well.

So much like we do with Vyleesi which has a very -- which has very rigorous publication strategy, all these programs you should expect over the next year or so to see not only presentations and abstracts presented at meetings but the publications will start to come out as well.

Unidentified Analyst

And a follow-up on 9610; what are your plans for specific indications [indiscernible]? It looks like you're looking at rare genetic metabolic and obesity disorders might be included upon steam and pepper [ph]?

Carl Spana

Look, I think there are other companies that are -- but we're going forward in those indications with injectable products, I think that it's a lot of good [ph] place for us to start, we know that the leptin melanocortin pathway played a very key role in the regulation of food intake and weight. And if you help me with stasis [ph], and there are number of definable mutation in that pathway that do lead to early onset obesity where the need for treatment is quite high, and I think -- again, mainly these are children, I think that in oral format it's one that may play very well in that patient population, so you obviously have focus there first. For that program, not for the [indiscernible] the next step for us is, we've done some preliminary tox work, looks like good but it's really inadequate into the formal tox studies and driving forward and we're hopeful that the best we've seen so far that the compound will pass that hurdle and be ready for clinical trials early next year.

Unidentified Analyst

I didn't see 8905 and 7737 in recent deck; are those still in development?

Carl Spana

8905 is a peptide agonist of melanocortin 4-receptor, very selective, and again, that would be an injectable product; so we have made a decision to go with the orally active small molecule versus the peptide which would be injectable. I think when you think about obesity in general, I think being able to have an oral compound probably is an advantage versus having to deal with an injectable product that would need either daily injection or formulations that would be extended release. So that's why we don't -- 8905 is a great compound and we've done a tremendous amount of work with it but because it's an injectable product, we decided to go and push these small molecules forward.

I missed on the second compound; the second half -- that 7737 is -- was just renamed 9610. Those are -- I'm not quite clear why the guys did it internally but they did, they moved from PL-7737 to PL-9610. I'm not sure why but that's what they did. So that's -- otherwise they are one and the same compound.

Unidentified Analyst

My last question on the pipeline being on 8177; inflammatory bowel Phase 2A -- you didn't give us an overview of that one -- where that sat in this development? We should speak on this just trying to clarify and this will…

Carl Spana

We're happy to do it. I think -- again, these are earlier programs and we haven't been as -- we haven't put us much information at/or -- maybe not as clear as we should be with them. So for that compound PL-8177, we're quite excited about the prospects for that compound. And as I said there are two formulations, so the oral formulation would be limited to treatment of inflammatory bowel disease as a particular to Ulcerative Colitis. And the next step for that particular compound is a Phase 1 study where we would be dosing patients with the oral formulation and really looking to show that the peptide that's in there -- 8177 is released in the colon and is hitting the target tissue. The product has made the -- regulatory filings are in, sites have been identified as [ph] onboard, so that study will start probably in October/November timeframe, it's relatively quick study but it's one where we really need to show that the formulation is working in humans the way it's been working in animals.

And post that we would be in a position then to go forward into larger efficacy studies in Ulcerative Colitis. For the subcutaneous formulation, we -- as I've mentioned on the call, we just completed the first inhuman studies with 8177 where we were looking at systemic exposure in both a single or multiple ascending dosing regimen, we went to quite high doses, quite a delta of where we expect the therapeutic window will be. We know there weren't really no -- there were no in-length observations, so we're just waiting for the final unblinding and look at both, the PK in any of the laboratory numbers, but I don't expect there is going to be safety signal there.

So our next step with that compound subcutaneous was really looking at another oral immune indication such as RA [ph] uveitis where we'd be giving the drug systemic and we're looking for predominantly in those things as really -- are we seeing translation of the animal data that we have into humans. While we're seeing the pronounced reduction in inflammatory cytokine, the upregulation in cytokines like IL-10 which suppress the immune response. And importantly, are we going -- are we seeing some of the sulfate switching that we see in the animal studies. When the animal work, we see a very pronounced switching of T-cells and macrophages from inflammatory to either regulatory or pro-resolution of phenotypes and we're looking to see if we can do the same thing in humans.

So their importance as studies; the protocols are in development now, so -- and we're pretty optimistic we can get started pretty early in 2019. So that's really the full range of what we're trying to do in 2019 over the next four quarters.

Operator

I would now like to turn the conference back over to Dr. Spana.

Carl Spana

I'd like to thank everyone for participating in Palatin Technology's fourth quarter and year end 2018 conference call. As always, I thank the analysts who asked questions, I think they helped to earlier clarify and illuminate with Steve and I present. So I'd like to thank you all for participating. Have a great day and we look forward to meeting with you over the course of the quarter and updating you on our progress. Thanks.

Operator

Thank you, ladies and gentlemen. This now concludes today's teleconference. You may now disconnect.