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Palatin Technologies (PTN) Q3 2019 Earnings Call Transcript

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Palatin Technologies (AMEX: PTN)
Q3 2019 Earnings Call
May. 09, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks

  • Questions and Answers

  • Call Participants

Prepared Remarks:


Operator

Good morning, ladies and gentlemen, and welcome to the Palatin Technologies third fiscal quarter 2019 operating results 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 may 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 the 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.

Carl Spana -- President and Chief Executive Officer

Thank you. Good morning, and welcome to the Palatin Technologies third-quarter fiscal-year 2019 call. I'm Dr. Carl Spana, CEO and president of Palatin Technologies.

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

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Steve Wills -- Executive Vice President, Chief Financial Officer, and Chief Operating Officer

Thank you, Carl. Good morning, everyone. Regarding Palatin's quarter ended March 31, 2019, operational and financial highlights with respect to Vyleesi, which is the trade name for bremelanotide, is under development for female hypoactive sexual desire disorder, or HSDD. an FDA-requested frequent dosing study with premenopausal volunteers, assessing short-term daily use of Vyleesi, has been completed by Palatin and our exclusive licensee for North America, AMAG Pharmaceuticals.

Data from that study has been submitted to the FDA. On the Vyleesi business development front, Palatin is in advancing discussions with potential collaboration partners for certain regions outside the license territories of North America, China and South Korea. With respect to our anti-inflammatory and autoimmune programs, we announced positive top line results of an oral clinical study of PL-8177 for ulcerative colitis and other inflammatory bowel diseases. We are advancing activities to commence Phase II proof-of-concept clinical studies in ulcerative colitis and noninfectious uveitis.

With respect to future milestones, the FDA PDUFA date is June 23, 2019. And if approved, Palatin is due to receive a $60 million milestone from AMAG. Phase II proof-of-concept clinical study with the oral formulation of PL-8177 in ulcerative colitis patients is anticipated to commence in the fourth quarter of calendar year 2019. Phase II proof-of-concept clinical study with a systemic formulation of PL-8177 in noninfectious uveitis patients is anticipated to commence in the fourth quarter of calendar 2019 also.

Carl will expand on these programs during his portion of the presentation. Regarding financial results for the quarter ended March 31, 2019, Palatin reported a net loss of $5.7 million or $0.03 per basic and diluted share for the quarter ended March 31, 2019, compared to a net loss of $0.7 million or $0.00 per basic and diluted share for the same period in 2018. The difference in financial results between the three months ended March 31, 2019 and 2018 was mainly due to the recognition of $9 million in license and contract revenue during the 2018 period pursuant to our license agreement with AMAG. Regarding revenue.

There were no revenues recorded in the three months ended March 31, 2019. For the three months ended March 31, 2018, the $9 million of revenue recognized was related to our license agreement with AMAG. Regarding operating expenses. Total operating expenses for the quarter ended March 31, 2019, were $5.8 million compared to $9.5 million for the comparable quarter in 2018.

The decrease in operating expenses reflects the completion of the Vyleesi Phase III clinical trial program and ancillary studies necessary to file the NDA with the FDA in March of 2018. Regarding cash position and working capital. Palatin's cash and cash equivalents were $19.8 million at March 31, 2019, compared to $38 million at June 30, 2018. Current liabilities were $4.9 million at March 31, 2019, compared to $10.8 million at June 30, 2018.Palatin decreased its debt-related liabilities from $7.2 million at June 30, 2018, to $1.8 million at March 31, 2019.

By July of 2019, all that debt, that $1.8 million, which is our venture debt, will be paid off. We believe that existing capital resources will be sufficient to fund our planned operations through at least the second quarter of calendar 2020. Carl?

Carl Spana -- President and Chief Executive Officer

Thank you, Steve. I'll start the operational update with Vyleesi, our lead clinical product. Vyleesi is a first-in-class melanocortin agonist, which is the only on-demand drug to successfully complete Phase III clinical trials for hypoactive sexual desire disorder. Vyleesi is a simple, single-use auto-injector self-administered by the patient approximately one hour prior to sexual activity.

We have been working with AMAG Pharmaceuticals, our Vyleesi North American partner, to support the Vyleesi New Drug Application which AMAG submitted to the FDA in March 2018. The NDA was accepted for review by the FDA in June 2018, and the PDUFA date of Vyleesi NDA is June 23, 2019. In November 2018, the FDA requested additional data from a clinical study assessing 24-hour ambulatory blood pressure with short-term daily use of Vyleesi. The requested study has been completed.

The data and final study report have been submitted to the FDA for review, and we are currently in labeling discussions with the FDA. We believe that we and our partner, AMAG, can provide the FDA with all the information requested for the completion of the Vyleesi New Drug Application review and decision by the June 2three PDUFA date. Outside of North America, we are working with our Chinese licensee, Fosun Pharma; and our South Korean licensee, Kwangdong Pharmaceuticals, to advance the Vyleesi development in those territories and toward regulatory filings. In addition, the Committee for Medicinal Products for Human Use of the European Medicines Agency has provided advice on the European Union Vyleesi development program, indicating that only a single Phase III study in the European Union is needed to support a licensing application.

Now moving on to Palatin's melanocortin and natriuretic peptide receptor agonist drug development programs. Palatin's melanocortin program has two therapeutic areas of interest: autoimmune inflammatory diseases and rare genetic forms of obesity. We have developed new families of highly selective melanocortin receptor agonists with potentially broad applications in the treatment of a variety of inflammatory and autoimmune diseases, including inflammatory bowel disease, dry eye, uveitis and other retinal diseases. Our lead clinical development candidate, PL-8177, is a highly selective and potent melanocortin-1 receptor agonist.

In a Phase I, single and multiple-ascending dose study completed at the end of 2018, PL-8177 subcutaneously administered to healthy volunteers was well tolerated, and no potential safety concerns were noted. In the first quarter of 2019, we completed a Phase I pharmacokinetic study of an oral-dosing formulation of PL-8177 as a potential treatment for inflammatory bowel disease. The data from this study indicates that the oral formulation can deliver PL-8177 to the colon without detectable systemic exposure. We believe that PL-8177 will have broad applicability as a treatment for inflammatory and autoimmune diseases.

We are currently developing PL-8177 for autoimmune diseases that affect the gastrointestinal systems and the eye with two clinical studies targeted to start enrollment later this year. We are preparing to conduct a Phase II proof-of-principle study in ulcerative colitis patients, which is targeted to start in the fourth quarter of 2019. In addition, we are also preparing to conduct a Phase II proof-of-principle study in noninfectious uveitis patients, which is also targeted to start in fourth quarter of this year. PL-9643 is our melanocortin agonist for ocular autoimmune diseases.

PL-9643 replaces our compound PL-8331 providing for a substantially longer patent term and potentially better efficacy. PL-9643 has demonstrated excellent activity in animal models of dry eye and diseases of retinal inflammation. We have developed an eye drop formulation of PL-9643 as a potential treatment for dry eye, and clinical studies in dry eye are anticipated to start in the first half of calendar 2020. Regarding our natriuretic development candidates.

PL-3994 is scheduled to start a Phase II trial sponsored by the American Heart Association in conjunction with major research centers in the first half of 2019. We believe that PL-3994 has a potential to treatment for heart failure with patients with preserved ejection fraction; and PL-5028, a dual natriuretic peptide A and C receptor agonist for use in cardiovascular and fibrotic diseases, including reduction of cardiac fibrosis, PL-5208 is a preclinical evaluation as a potential treatment for fibrotic diseases. We are looking forward to the FDA's decision on the Vyleesi NDA and advancing our product pipeline. We are now positioned to advance multiple compounds into clinical studies for a variety of diseases with high unmet medical needs.

We're preparing to initiate clinical studies for multiple ocular inflammatory studies, including dry eye uveitis. Our oral formulation of PL-8177 is advancing into initial Phase II studies in ulcerative colitis patients. And for PL-3994, we will begin enrollment in American Heart Association-sponsored study early in the second half of 2019. We have potential clinical candidate in PL-5028 for possible treatment of fibrotic diseases.

We believe that we have a very exciting product pipeline that is positioned to drive long-term growth and shareholder value. You can find additional information on our programs on our website, www.palatin.com. At this point, I'm going to stop and open the call for questions. Thank you.

Questions & Answers:


Operator

Thank you, sir. [Operator instructions] Our first question will come from John Newman with Canaccord.

John Newman -- Canaccord Genuity -- Analyst

Thanks for the question. It seems like the studies that the FDA requested have been completed. Just wondered if you could comment as to whether the agency has requested any additional data? Or you think, at this point, you're in good shape there? Thanks.

Carl Spana -- President and Chief Executive Officer

Sure. Thanks for the question, John. At this point, there are no additional information requested we're working off from the agency. So we think that we've given them everything that they need.

And as we stated, we've moved on, and we're in labeling discussions. So we're now less than 60 days from the PDUFA date, so we're very excited to hear what the FDA has to say.

John Newman -- Canaccord Genuity -- Analyst

OK. Great, great. And in terms of the work that's going on outside the United States for Vyleesi, how should we be thinking about additional partnerships in territories that are not currently licensed? Is that something that you think would be more of a near-term event or probably something that will take a bit more time?

Steve Wills -- Executive Vice President, Chief Financial Officer, and Chief Operating Officer

John, it's Steve. We're in advancing discussions right now with multiple parties. Nothing is going to happen before the FDA's PDUFA date, but we're -- we've been socializing now for a few quarters because it takes time to get people acclimated to where you've been and where you're going. So we're -- I'm going to go a little aggressive with this position, but we expect that we will have multiple rest of the world in the non-licensed territories executed before the end of calendar 2019.

As soon as that PDUFA date hits, we get what we expect and hope is the approval. We'll have the traditional Coke and hot dog and then get right back on the phones and get to meetings to try and finalize these territories, these licenses. We have good interest. And as you can expect, once -- there's only so much you can advance the discussions prior to the approval.

But post that approval, we believe that the people that we're talking to will -- that activity will increase. And frankly, some of the people that we're not talking to we anticipate knocking on the door.

John Newman -- Canaccord Genuity -- Analyst

Right. Thank you.

Operator

Thank you. Our next question comes from Joe Pantginis with H.C. Wainwright.

Joe Pantginis -- H. C. Wainwright and Company -- Analyst

Hey, guys. Thanks for taking the question. Just to do a little follow-up, if you don't mind. With regard to the ambulatory blood pressure study that was submitted, doesn't appear like there were any hitches.

You said FDA hasn't requested any additional info, so thanks for that. Can you provide any info regarding the actual data that was generated from the study?

Carl Spana -- President and Chief Executive Officer

Joe, I knew somebody was going to ask that question. The study is an AMAG study, and AMAG, as you know, has not disclosed any of the data. What I can say is the study was really designed to help inform the label, how the product would be labeled for patient -- or in case patients took multiple daily doses of the drug. And I think that since we're now moving on to labeling discussions, we'll leave it at that.

On a personal front, I'm pretty comfortable that the data will allow the agency to label the product appropriately for safe use.

Joe Pantginis -- H. C. Wainwright and Company -- Analyst

Understood, understood. And if I could just switch to a little bit of financial standpoint. Obviously, you have the potential for real nice cash infusion with the $60 million milestone. So curious, from a P&L standpoint, is are you going to recognize this as revenue or deferred revenue? And then considering future milestones as well, can you remind us what the potential milestone payments are from Fosun and Kwangdong?

Steve Wills -- Executive Vice President, Chief Financial Officer, and Chief Operating Officer

Sure. Thanks, Joe. The -- if everything goes as planned, the $60 million, it would actually be recognized in the second quarter, say, the PDUFA date of June 23. The actual cash we'll receive sometime in July.

The -- that recognition is 100% revenue. There is no deferred recognition for this type of payment at this stage. Regarding the other -- the two license deals that we have and the next regulatory or the next milestone, rather, Fosun, for China, the next milestone is regulatory approval in China, and that is $7.5 million. And if things go as planned, the -- it could come in as early as the end of 2020, but we're -- internally, our expectation is the first quarter of 2021.

Switching over to Kwangdong for South Korea, that milestone is a little less. That's $3 million. It's the same type of trigger event, which is regulatory approval. And the timing is actually the same as the Fosun with the China.

A little bit aggressive, but there's a chance for the end of 2020, calendar 2020. But just like with the Fosun one, our internal estimates are the first quarter of 2021.

Joe Pantginis -- H. C. Wainwright and Company -- Analyst

Great. Thanks a lot, guys.

Operator

Thank you. Our next question comes from Michael Higgins with Ladenburg Thalmann.

Michael Higgins -- Ladenburg Thalmann -- Analyst

Thank you, operator. Morning, guys. Just a follow-up on the ambulatory blood pressure monitoring study. I understand from AMAG's comment earlier this week that they're in discussions with the FDA and the label. Has the agency given them or you any feedback whatsoever on the blood pressure monitoring study results?

Carl Spana -- President and Chief Executive Officer

No. They have not given any feedback on it. I wouldn't expect that they would. I would expect -- most I would have expected would have been an information request for some additional analyses, but they haven't -- that has not occurred.

Michael Higgins -- Ladenburg Thalmann -- Analyst

OK. Great to hear. And then looking to Europe. You had some comments earlier about that.

Just looking for some clarity as to the structure of these. Are you talking with partners such that you would have a country-by-country partner in Europe? Or is it more likely that you've got partnerships across the entire European region? And then that structure of the deal, should we look more for front-end versus back-end loaded deals? And I assume won't take some time following the June 23 PDUFA. Should we look for anything in the summer? Or would it be more so in the fall?

Steve Wills -- Executive Vice President, Chief Financial Officer, and Chief Operating Officer

Michael, this is Steve. The -- we don't anticipate -- based on the discussions and our strategy, we don't anticipate a very decentralized European partnership. We believe it will be all of Europe. And frankly, some of the parties we're talking to could take multiple territories.

So we look at Europe as one territory. The Asia Pacific, Latin America being separate territories. Lot of times some of these companies, they have a presence in New Zealand and Australia. That could be a territory.

India appears, based on some of our initial discussions, would be a separate territory but definitely not a country-by-country licensing for Europe. Regarding timing, it's definitely going to be -- I mean, the summer starts when the PDUFA date, so that would be really ambitious and aggressive. So we're really targeting the fourth quarter, so the fall going into the winter. But we do believe we will have multiple regions licensed by the end of calendar 2019.

Michael Higgins -- Ladenburg Thalmann -- Analyst

OK. That's helpful. Also, should we look for a start of the pivotal before year-end [Inaudible] with EMA before you can start the pivotal in Europe?

Carl Spana -- President and Chief Executive Officer

So just -- we're actually doing a lot of the work now. So we took the lead to show that we've got correct regulatory feedback, which we have, and we're now putting the protocol together -- final protocol together, identifying potential sites. So we will make this as easy as possible for a licensee coming in that they can essentially have a turnkey operation to pick up and start to run. It would be our preference that we would not be the lead on running this trial in Europe as a partner would do that.

Obviously, they would fund that. But just to make sure that we maximize the downtime before that starts, we're doing a lot of the work getting it ready.

Steve Wills -- Executive Vice President, Chief Financial Officer, and Chief Operating Officer

Michael, let me just jump in. Carl pointed out that I didn't answer one part of your question. Thanks for that, Carl. Regarding structure, it's going to be a similar structure to say the Fosun and the South Korea deals, which is something upfront, something on approval, and then as you go forward, some sales milestones and royalties there.

I can't go overly specific on is it going to be larger upfront versus the approval. It really depends on the region. Our main thrust is we want to advance the program, whether in main Europe or other regions. So we have some flexibility there.

We look for partnerships and variable relationships, good for us, good for them and more variable. When milestones happen, I think the better both parties feel with sharing those types of proceeds. So hopefully, that was helpful.

Michael Higgins -- Ladenburg Thalmann -- Analyst

Yes. Definitely. Appreciate that. If I can turn your attention to your pipeline, specifically in 8177.

If you can give us some help on the timing and the size of those studies with oral and the subcu. Looks like you're getting them going before year-end, but any trial design help would be helpful.

Carl Spana -- President and Chief Executive Officer

Sure. So ulcerative colitis is, there's an oral formulation. It's going to be a pretty traditional trial. There will be a controlled study, a randomized, controlled trial with at least two doses of the PL-8177.

Since this is a proof-of-concept study, treatment duration here will be about 8 weeks. We will be looking at nutritional outcomes that you would look for in ulcerative colitis trial, which are clinical outcomes: reduction in bloody stools, pain, so on and so forth, but we also will be doing a lot of extensive colonoscopy examination as well since this is really a proof-of-principle and a mechanism study. So there will be a combination of both clinical outcomes as well as colonoscopy and biopsy and biomarkers as well. And then on the uveitis, again that's a systemic study.

So the drug will be administered through intermittent subcutaneous dosing. And there are really no shorter terms. You'd be doing a lot of ocular -- looking at the retina, looking at improvement in the inflammation in the eye, but the overall outcome is maintenance or improvement in vision for those types of studies. Size of these, they're not going to be huge studies.

The ulcerative colitis study will be probably around 100 patients over the three arms of the study, and then uveitis will be around the same size. So again, these are very classical, first look at efficacy studies to get a sense of how to dose, which types of patients are going to show efficacy, what -- how is the mechanism performing.

Michael Higgins -- Ladenburg Thalmann -- Analyst

OK. And then what are the big drivers for Palmaz Stent 394? Any comments there on the timing of that? I think you're still looking for that to start in '19. But is it back half of the year? Is that what I heard?

Carl Spana -- President and Chief Executive Officer

Well, we're optimistic. We've had -- which is we're not running the studies. It's really -- it's funded by the American Heart Association, and it's -- and the leads are the two academic institutions that are running it. We've provided the regulatory support, drug supply, so on and so forth.

But we do have IRB approvals now. We'll be delivering drug in late June, so we're optimistic that as soon as we deliver drugs to the site that they'll start. So it should start really early in the second half. It's taken a while to get that study going, but I think it will be a good study, and it does appear that these sites are now ready to go with all the appropriate approvals from their institutional review boards.

And we will have drug, as I said, in our hands late first half, early second half of this year. So it should start in the summertime.

Michael Higgins -- Ladenburg Thalmann -- Analyst

OK. Appreciate the feedback. I'll jump back in the queue. Thanks, guys.

Operator

At this time, I am showing no further questions in the queue. I will now like to turn it back over to management for closing remarks.

Carl Spana -- President and Chief Executive Officer

Thank you all for participating on the call and the good questions that we had. Obviously, this is going to be -- the end of this quarter is going to be a very exciting time for us. Next time we speak will be after the PDUFA date, and we are optimistic that we'll have a positive outcome and a lot to discuss with you. So with that being said, have a great day.

Thanks for participating on the call, and we'll speak to you next quarter.

Operator

[Operator signoff]

Duration: 26 minutes

Call participants:

Carl Spana -- President and Chief Executive Officer

Steve Wills -- Executive Vice President, Chief Financial Officer, and Chief Operating Officer

John Newman -- Canaccord Genuity -- Analyst

Joe Pantginis -- H. C. Wainwright and Company -- Analyst

Michael Higgins -- Ladenburg Thalmann -- Analyst

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