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Edited Transcript of PTN earnings conference call or presentation 15-May-18 3:00pm GMT

Q3 2018 Palatin Technologies Inc Earnings Call

CRANBURY May 23, 2018 (Thomson StreetEvents) -- Edited Transcript of Palatin Technologies Inc earnings conference call or presentation Tuesday, May 15, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Carl Spana

Palatin Technologies, Inc. - Co-Founder, President, CEO & Director

* Stephen T. Wills

Palatin Technologies, Inc. - CFO, COO, Principal Accounting Officer, executive VP, Treasurer & Secretary

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Conference Call Participants

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* John Lawrence Newman

Canaccord Genuity Limited, Research Division - Principal & Senior Healthcare Analyst

* Joseph Pantginis

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Third Quarter Fiscal Year 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's call, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [2]

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Thank you. Good morning and welcome to the Palatin Technologies Third Quarter Fiscal Year 2018 Call. I'm 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 will provide financial updates. Steve?

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Stephen T. Wills, Palatin Technologies, Inc. - CFO, COO, Principal Accounting Officer, executive VP, Treasurer & Secretary [3]

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Thank you, Carl, and good morning, everyone. Starting with the third quarter ended March 31, 2018, significant and recent operational and financial highlights include: With respect to bremelanotide, which is under development for female Hypoactive Sexual Desire Disorder, or HSDD, in March 2018, our exclusive North American licensee for bremelanotide, AMAG Pharmaceuticals, submitted a New Drug Application, NDA, to the FDA, and we anticipate that the FDA will notify us in June that this NDA submission is accepted for a review.

We have licensed bremelanotide to Fosun Pharma in the China region, and Kwangdong Pharmaceuticals in South Korea. In addition, we are in discussions with multiple potential partners for other territories and anticipate closing additional bremelanotide licensing collaborations in the second half of calendar 2018.

With respect to our other melanocortin receptor program, under development for inflammatory bowel diseases, we received FDA clearance of an IND application for PL-8177 for ulcerative colitis, and in February 2018, initiated subject dosing in first in-human clinical studies.

In April, 2018, we presented preclinical oral formulation data on PL-8177 at the 2018 Keystone Symposia on The Resolution of Inflammation In Health and Disease.

In May 2018, we presented positive preclinical melanocortin-1 agonist data at the TIDES meeting conference.

Going into the financial results regarding our third quarter fiscal year 2018 financial results, Palatin reported a net loss of $0.7 million or $0.00 per basic and diluted share for the quarter ended March 31, 2018, compared to a net loss of $3.6 million or $0.02 per basic and diluted share for the same period in 2017. The difference in financial results between the 3 months ended March 31, 2018 and 2017 was mainly due to the decrease in the total operating expenses of approximately $4.3 million that is offset by a decrease of $1.8 million of recognized revenue during the 2018 period pursuant to our license agreement with AMAG.

Regarding revenue, for the quarter ended March 31, 2018, we recognized $9 million in license and contract revenue compared to $10.8 million for the comparable quarter in 2017. For both periods, 100% of the revenue recognized was related to our license agreement with AMAG.

Regarding our operating expenses, total operating expenses for the quarter ended March 31, 2018, were $9.5 million compared to $13.8 million for the same period of 2017. The decrease in operating expenses was primarily attributable to the professional services rendered in connection with our license agreement with AMAG, which closed in February of 2017, and secondarily, to the decrease and development expenses of bremelanotide as we advance towards the NDA filing stage with the FDA.

Regarding other income and expense. Total other income expense net was $0.2 million for the quarter ended March 31, 2018, compared to $0.6 million for the quarter ended March 31, 2017.

Total other income expense net for both periods consisted primarily of interest expense related to our venture debt.

Regarding income tax expenses, pursuant to our bremelanotide license agreements with Fosun and Kwangdong, 500,000 and 82,000, respectively, which was held in accordance with tax reporting requirements in China and Republic of Korea. And we will be recorded -- and will be recorded as an expense during the fiscal year ending June 30, 2018.

Regarding cash position and working capital, Palatin's cash and cash equivalents was $25.7 million as of March 31, 2018, compared to cash, cash equivalents and accounts receivable of approximately $55.6 million in June 30, 2017, and $35 million of cash and cash equivalents at December 31, 2017.

Current liabilities were $13.6 million, net of current deferred revenue of $0.6 million as of March 31, 2018, compared to $19.9 million net of deferred revenue of $35.1 million as of June 30, 2017.

As of December 31, 2017, current liabilities were approximately $14.1 million, net of current deferred revenue of approximately $9.5 million.

In April 2018, we entered into a equity distribution agreement, commonly referred to as an ATM program, with Canaccord Genuity, LLC, pursuant to which Palatin may, from time to time, sell shares of its common stock at market prices. Palatin has no obligation to sell any shares under this agreement and may at any time suspend solicitation and offers under this agreement. We believe that existing capital resources will be sufficient to fund our planned operations through at least the June 30, 2019 quarter.

Carl?

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [4]

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Thank you, Steve. I'll start our third quarter fiscal year 2018 operational update with bremelanotide, our lead clinical product.

Bremelanotide is a first-in-class melanocortin antagonist, which is the only on-demand drug to complete Phase III clinical trials for Hypoactive Sexual Desire Disorder. The product is formatted as a simple, single-use subcutaneous autoinjector self-administered by the patient approximately 1 hour prior to sexual activity.

Working with AMAG Pharmaceuticals, our North American licensing partner for bremelanotide, we completed a New Drug Application for bremelanotide, which AMAG submitted to the FDA in March 2018. We anticipate that the FDA will accept the bremelanotide NDA for full review before the end of the second quarter of calendar 2018. We are currently working with AMAG to support the bremelanotide New Drug Application, and if all goes well, we anticipate FDA approval of bremelanotide in March 2019.

Outside of North America, we are working with our Chinese licensee, Fosun Pharma, and our South Korean licensee, Kwangdong Pharmaceuticals, to advance bremelanotide development in those territories towards regulatory filings.

As Steve mentioned, we also have ongoing discussions with multiple potential partners for other territories and anticipate closing additional bremelanotide licensing collaborations in calendar year 2018.

Moving on to Palatin's other drug development efforts, we are primarily focused on our melanocortin program targeting autoimmune and inflammatory diseases and our natriuretic peptide program for cardiovascular and fibrotic diseases. We have developed new families of highly-specific and selected melanocortin-1 receptor agonist, with broad application in inflammatory and autoimmune diseases, including inflammatory bowel disease, dry eye, uveitis and rheumatoid arthritis. Activity in the melanocortin-1 receptor controls immune system dysregulation by inhibition of the NF-Kappa-B and downregulation of proinflammatory cytokines.

PL-8177, our lead clinical development candidate for ulcerative colitis is in Phase I clinical trials, and oral formulation of PL-8177 is also in development.

PL-8177 has demonstrated a reversal of diseases in both inflammatory and autoimmune animal models. The Phase I study of 8177 is expected to be completed in the third quarter of 2018, and Phase I study of the oral formulation of PL-8177 is targeting to start in the second half of calendar 2018.

Our drug candidate under development for treating ocular inflammation, including dry eye disease, is PL-8331, a [duo] melanocortin receptor 1 and 5-agonist. We anticipate completing preclinical enabling activities with PL-8331 later this calendar year, with an IND filing as early as the end of calendar 2018.

Our area of focus is our natriuretic peptide system programs for cardiovascular and fibrotic diseases. Palatin has developed multiple agonist to natriuretic peptide receptors. PL-3994, a synthetic natriuretic peptide drug candidate, has completed Phase I studies, and is scheduled to start a Phase IIA trial in conjunction with major research centers in 2018.

PL-3994 has the potential application in heart failure, including preserved -- heart failure with preserved or reduced ejection fraction and may be suitable for a replacement therapy in patients with prohormone processing deficiencies.

Palatin also developed a peptide that is both a natriuretic peptide A and peptide C receptor agonist for use in cardiovascular and fibrotic diseases, including reduction of cardiac fibrosis. This peptide PL-5028 is in preclinical evaluation including IND-enabling studies.

We've also been working to expand our product portfolio by leveraging our expertise in melanocortin biology and chemistry. We are conducting preclinical activities with an objective of selecting compounds to develop for the treatment of rare genetic and chronic disease in both adults and pediatric populations, including the potential to qualify for orphan designations. Our treatments target patients with mutations in the leptin melanocortin pathway that result in life-threatening disorders. We are also developing treatments for rare chronic inflammatory diseases that may be mediated through the melanocortin-1 receptor pathway.

You could find additional information on our programs on our website, www.palatin.com.

As we think about the future of our company, I am 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 bremelanotide from concept through Phase III clinical trials, and now, multiple commercial partnerships, not only provides the resources for realizing the value of bremelanotide, 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 bremelanotide NDA, and we are on track for the potential bremelanotide approval in March 2019.

In addition, we will be working with Fosun Pharma and Kwangdong Pharmaceuticals to support their bremelanotide development and regulatory activities. Our business development activities will be primarily focused on bremelanotide partnerships for the EU, Asia-Pacific, Latin America and other select territories.

Our natriuretic peptide system program has the following objective: That is to complete the -- or to start PL-3994 trial in heart failures with preserved ejection fraction.

Our melanocortin peptide system programs have the following objectives: For PL-8177, a treatment for ulcerative colitis, the completion of the Phase I single ascending dose and multiple ascending dose study, and initiation of clinical studies of our oral formulation. And for PL-8331, as a treatment for dry eye, is used to initiate and complete the required preclinical activities to begin first in-human studies.

Our objective for the development of treatments for rare genetic and chronic diseases is to select compounds to advance into IND-enabling studies and activities based on our analysis and assessment of potential treatment targets and results from our preclinical work.

The management employees of Palatin will remain focused on achieving our objectives and building value for our shareholders.

As a reminder, you can find more information on our website, as I said before, www.palatin.com. I would like to thank all of you for participating on our call. And we'll now open the call to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll take our first question from Joe Pantginis from H.C. Wainwright.

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [2]

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A couple of quick questions on bremelanotide. First, what is the potential timing that you're looking for an AdCom? But more specifically, what are the lead questions you expect from the panel?

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [3]

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I mean, timing of an AdCom, we would anticipate would be this calendar year. And we guess, more to it, obviously, of course, the latter part of the year. So it could probably be a November, December timeframe. I think that's when the FDA would like to get it done. But we don't have any direct feedback yet. We would expect that we will receive some kind of information when we get our letter saying that our filing is going forward. The question -- always an opinion, I mean, as to what we think they would ask. I think the questions will be around the -- how bremelanotide is used, how an intermittent drug impacts both desire and the stresses associated with desire. I think those are where the questions would be. I think there will be questions around labeling, how should the product be labeled appropriately. I don't think there's any real major safety issues coming out of the clinical program. I'm sure there will obviously be a safety officer there as part as of the panel, that's pretty typical. But I don't have any -- priority any safety concerns. I think that they will press on at the panel meeting. So I think it's very typical at a panel meeting that's held for a new molecular entity, particularly a first-in-class, and that's what bremelanotide is. So I think that's roughly where the FDA will focus...

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Joseph Pantginis, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [4]

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That makes sense -- oh no, sure. And then with regard to looking at Europe, you're obviously looking to obtain EMA advice for the EU Pivotal Program, I'm assuming, so what if any changes do you anticipate in the protocol compared to the U.S. Phase III program?

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [5]

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I mean, obviously, we are approaching them and are in the process of waiting for feedback from the CHMP review group, and we feel that the most appropriate way to study bremelanotide in Europe would be the same way we studied in the U.S., and that is using both desire and the stresses the co-primary endpoints. We know from prior feedback that we will have the populations between pre and post menopausal will most likely be -- continue to be separated so they'll probably require a single trial in premenopausal and then one in postmenopausal as separate indications. So -- and again, I think it will -- for us, we want to make sure that we can use the data from the U.S. in support of that filing, and so therefore, we would want to make sure the trial really runs as closely to the one that we did in the U.S. as possible.

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Operator [6]

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Moving on, we'll take our next question from John Newman from Canaccord.

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John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal & Senior Healthcare Analyst [7]

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My question is regarding the upcoming FDA panel. Just wondering if you think that the panel could actually be beneficial in terms of continuing to draw attention to this disorder, as well as highlighting the clinical profile? I think that the last drug that was approved here seemed to get a lot of attention in the media despite some of the potential drawbacks. So just kind of curious as to how you think about the panel in that regard?

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [8]

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Sure. Thanks for the question, John. So just as a point or a fact, as a part every AdCom, by law, they're required to have an open comment period. And that can be -- it has to be prescheduled, and people submit request to speak and they also can submit written comments that can be included in submissions to the panelists as well. So I expect there certainly will be an open panel session for this product. And I think they will put, most likely based on the topic, there will be a fair amount of people coming out. So there will be -- I would expect a lot of publicity or public relations around the panel meeting just by nature. So obviously, we will work with AMAG to do what we can do to implement public opinion to the extent possible by making sure that we have the right experts and what have you writing in and participating in that public comment period. Of that comment period, the public comment period in the AdCom in general certainly is important to me, to the division, and also as well to the senior members of the FDA. When commissioners have to sit in front of Congress, they like to have covered, be able to say that they've had a panel meeting that was supportive of the product. So we will be working, as I said, with AMAG, to make sure that we have a very robust and well run panel meeting that really highlights the attributes of bremelanotide and really gets our messages across. And I know the team at AMAG is working -- is in the lead on that. And I know they're working very diligently on it, and people at Palatin are supporting them. But more direct to your point, it's certainly -- we do expect that there will be a very robust discussion at the public session.

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John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal & Senior Healthcare Analyst [9]

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Great. Then one additional question on the commercial aspect of the product. Obviously, you have to wait for an FDA decision. But assuming the drug is approved, do you have plans in conjunction with AMAG to conduct DTC marketing? And if so, at what point after approval do you think it might be appropriate to start thinking about that?

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [10]

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Well, I mean, I'll answer a little bit, and maybe Steve can jump in as well. I would -- we would expect that AMAG, at some point, would begin to have direct-to-consumer advertising for the product. It's the type of product where I think it is -- it can be important to success. Certainly, I think already there are websites. AMAG has a website up for disease awareness. I think that's very critical as well. So I think we're very comfortable that AMAG will do a good job with using all the available mechanisms to reach patients and practitioners that being direct to consumer, both through prints, probably radio, other sources of media, online, they're very good at that. With their other products, they've done a very good job building markets with those types of approaches. So when you start that, I mean, obviously, that can be -- is a discussion that you have with the FDA depending on your label and so on and so forth, so I really can't comment on that.

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Stephen T. Wills, Palatin Technologies, Inc. - CFO, COO, Principal Accounting Officer, executive VP, Treasurer & Secretary [11]

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This is Steve, John. Not much more to add from Carl, other than, I mean, AMAG, we're extremely comfortable with the collaboration there. This is a very significant product for them. It's -- they're all about the female healthcare franchise, so it's very synergistic for them. We're really in a supporting role in that regard. I am comfortable stating that they're already discussing these type of things, from the pricing to the specific markets, albeit awareness or education that they're going to be advancing. But that's -- frankly, that's more their call and their timing. But we're in discussions, and from an FYI standpoint, where they're -- as Carl mentioned, they're thinking about it now, and there are certain things that are taking place now as we both prepare. And again, we're in the support role as we prepare for the AdCom conference and the complete FDA, NDA review process.

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Operator [12]

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At this time, that will conclude today's Q&A session. I'd like to turn it back over to our speakers for any additional or closing remarks.

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Carl Spana, Palatin Technologies, Inc. - Co-Founder, President, CEO & Director [13]

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Well, I'd like to thank everyone for participating in the Palatin Technologies Third Quarter Fiscal Year 2018 Conference Call. We look forward to updating you next quarter as we continue to make progress. It's an exciting time at the company. Everybody here is working hard, and real excited about the future of the company. So thank you for participating and have a great day.

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Operator [14]

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At this time, that will conclude today's conference. We do thank you for your participation. You may now disconnect.