Earnings Call: Q4 2021

Sep 29, 2021

Hello, ladies and gentlemen, and welcome to Palatin's 4th Quarter and Fiscal Year End 2021 Operating Results Conference Call. As a reminder, this conference is being recorded. Before we begin our remarks, I'd like to remind you that the statements made by Palatin are not historical facts and may be forward looking statements. These statements are based on assumptions that may or may not prove to be accurate and that the actual results may differ materially from those anticipated due to the 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 prospects. Now, I'd like I'll turn today's call over to our host, Doctor. Carl Spana, President and Chief Executive Officer of Palatin. Thank you. Good morning, and welcome to the Palatin Technologies 4th quarter and fiscal year end 2021 call. I'm Doctor. 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. I will now turn the call over to Steve to provide the financial update. Steve? Thank you. Thank you, Carl, and good morning, everyone. For framing purposes and as Carl will expand on, Palatin's strategy is to advance our melanocortin based Anti inflammatory and autoimmune programs with an ocular focus. Regarding Vyleesi, which is FDA approved For the treatment of hypoactive sexual desire disorder or HSDD in premenopausal women, our goal with this program It's to demonstrate value in the marketplace by increasing healthcare, provider awareness, patient engagement and market access with an objective of relicensing the U. S. Rights to a committed women's healthcare company. And regarding progress, we are making progress. And this is with a limited and measured investment. For the quarter ended June 30, 2021, gross product sales increased 28%, net revenue increased 149%, And total prescriptions increased 17% over the quarter ended December 31, 2020, which is Palatin's 1st full quarter of IDC operations. Refill rates increased over the quarters ended December 31, 2020 March 31, 2021. Market access and reimbursement coverage also increased over the quarters ended December 31, 2020 And March 31, 2021. Regarding revenue and getting into our 4th quarter fiscal year ended 2021 financial results. Total net revenues consist of net product revenues of Vyleesi and license and contract revenue related to Vyleesi. Vyleesi gross sales for the quarter year ended June 30, 2021 amounted to $1,200,000 $4,700,000 respectively, with net product revenue, net of allowances and accruals of $80,504 and negative $283,286 respectively. Palatin recognized no product revenues for the quarter year ended June 30, 2020, because we didn't get the product back until July of 2020. Palatin did recognize $94,689 in license and contract revenues for the quarter and year ended June 30, 2021, That was related to our license agreement with Kwangdong for the Vyleesi rights to South Korea. And this compared to $117,989 for the year ended June 30, 2020 related to our license agreement with AMAG Pharmaceuticals. Regarding operating expenses for the quarter year ended June 30, 2021 were $13,900,000 $33,200,000 respectively, compared to $7,400,000 23,700,000 respectively for the same periods of 2020. I'm going to expand a bit in some of the other areas, but that $13,900,000 of operating expenses included approximately $4,500,000 of an adjustment related to our termination with the license agreement with AMAG and that was non cash and non recurring. The increase in operating expenses for 2021 was primarily due to the recognition of non cash expenses on the Vyleesi license termination agreement, which I just mentioned and also an increase in the selling, general and administrative expenses, which primarily were the commercial related expenses for the Vyleesi program. Moving over to net loss and cash flows. Palatin's net loss for the quarter, Very close to the amount of the operating expenses, less the revenue was $13,900,000 $33,600,000 or 0 point 06 dollars and 0.14 per basic and diluted common share, respectively, compared to a net loss of $7,300,000 $22,400,000 or 0 point 0 $3 and $0.10 per basic and diluted common share respectively for the same period in 2020. As I mentioned, just with the operating expenses, the main difference For the quarter was the non cash, non recurring adjustment to the Vyleesi license termination agreement And also some increases in the selling and G and A, primarily related to the commercial expenditures for Vyleesi. Cash position I'm sorry, cash flows rather. Palatin's net cash used in operations The quarter year ended June 30, 2021 was $8,500,000 And the main difference, we even though we had the operating expenses of 13 point $9,000,000 and the net loss very close to that. The reason the net cash used in operations Is significantly less of $8,500,000 is that for approximately $4,500,000 non cash non recurring adjustment related to the Vyleesi termination agreement. And we also had $22,600,000 of net cash used in operations for the full fiscal year June 30, 2021. And this compares with net cash used in operations of $6,100,000 and net cash provided by operations of $41,300,000 positive Cash provided there, respectively, for the same periods in 2020. Moving over to cash position, Current operating plan, we believe that existing cash and cash equivalents Will be sufficient to fund currently anticipated operating expenses through the end of calendar 2022. Carl is going to go a bit more granular, but this does include the inflection points of Data readout for our Phase 3 dry eye disease trial and Thank you, Steve. We are continuing to operate under the conditions imposed by the ongoing COVID-nineteen pandemic. To date, the adjustments we have made have allowed us to continue to advance our preclinical, clinical and commercial programs while maintaining the safety of our employees, Patients and Healthcare Providers and Partners. Before I get into discussing our clinical and development programs, I'd like To emphasize the following concerning our Vyleesi operating activities. Upon return of Vyleesi last year, we undertook an extensive review of the Vyleesi commercial infrastructure and activities. Zuzo clearly indicated that a substantial makeover was needed to support Vyleesi commercialization and relicensing. This was not a trivial or short term project. Under Steve's leadership, the Vyleesi commercial infrastructure has been redone and the changes for new treatments to provide patients and clinicians with safe and effective options. We are working to advance a new treatment modality for patients suffering with these inflammatory conditions with a primary focus on ophthalmic diseases such as diabetic retinopathy, dry eye, Uveitis, all of which utilize our unique understanding and expertise in developing drugs that modulate the melanocortin system. Over the past year, we have put in place the infrastructure, scientist and research and clinical development activities that we believe if successful demonstrate the broad utility of the melanocortin system as a target for a variety of new efficacious drugs for treating these diseases. Our research scientists are using the latest in genomic, proteomic and cell biological techniques Results of these activities are already helping to guide our clinical development programs. Our clinical development programs are primarily As we stated, the melanocortin system plays a critical role in protecting the eye from harmful inflammation and we are developing multiple monocortin based products for ocular diseases. Topically delivered PL-nine thousand six hundred and forty three is our most advanced line of cortin antagonist for treating ocular diseases that affect the tissues that comprise the anterior segment or front of the eye. The first indication for PL-nine thousand six hundred and forty three is dry eye disease and we have as we previously reported positive data from a Phase 2 study. In the last quarter, we have had a successful end of Phase 2 meeting with the FDA where we reached agreement on the key aspects of the PL-nine thousand six hundred and forty three Phase III clinical development program. These include patient population and These points will be comprised of signs and symptoms of dry eye disease and were determined based on detailed analysis of the Phase 2 data. MelodyOne will begin enrollment in the Q4 of calendar 2021 with an interim data assessment in the first half of Successful 3 MELODY PHEEL-nine thousand six hundred and forty three DRIV studies will provide as the safety and efficacy data required to file a new drug application with the FDA. The emerging profile of PL-nine thousand six hundred and forty three with its rapid therapeutic onset, Excellent ocular tolerability and safety profile is a potentially distinct advance in dry eye therapy. If the Phase 2 Results are confirmed in the upcoming Phase 3 clinical study, we believe that PL-nine 43 has the potential for substantial penetration into the multi $1,000,000,000 dry eye disease market. We believe that We are currently working on developing a formulation for sustained release of CL-nine thousand six hundred and fifty four that would be administered by intravitreal injection, a common technique used to deliver drugs for treating retinopathies. The current market for various retinopathy drugs is in excess of $10,000,000,000 annually and is anticipated to continue to grow. There remains a large need for new innovative treatments for retinal diseases, and we believe PL-nine thousand six hundred and fifty four, although early in its development, has tremendous potential to positively impact patients with retinal disease and garner a significant part of this very large and growing market. In parallel with our ocular research and clinical development activities, we have been conducting an extensive communication effort targeting ophthalmologists and optometrists. Palatin scientists and collaborators have made presentations at most of the major medical meetings and we have been actively publishing our research. As a result of these efforts, Palatin is now beginning to be recognized as a company developing exciting new treatments for ocular diseases. Moving on to our PL-eight thousand one hundred and seventy seven oral formulation for ulcerative colitis, we are conducting the activities required to initiate a Phase 2 proof of concept study, which is targeted to our patient enrollment in the first half of twenty twenty two, with initial data readout in early second half 2022. This will be our 1st clinical study designed to evaluate the potential of a selective melanocortin 1 receptor agonist as a treatment for ulcerative colitis. The study will evaluate the safety and efficacy of oral PL-eight thousand one hundred and seventy seven. If positive, the results of the study will add to the validation of the linocortin system as an innovative target for new drugs as well as support our efforts to license oral PL-eight thousand one hundred and seventy seven. The market for drugs that treat various inflammatory bowel diseases is a multibillion dollar and there remains a large need for new safe and effective treatment options to expand and advance the treatment of these patients. The emerging safety and efficacy profile of oral PL-eight thousand one hundred and seventy seven, if confirmed, would be a potentially major advance in the treatment inflammatory bowel diseases, particularly in the pediatric patient population, where there remains an extremely high unmet medical need. Finally, our natural peptide program continued to advance PLN-three thousand nine hundred and ninety four, which is a selective natural peptide receptor A agonist. It's continuing to enroll patients in a Phase 2a clinical study in heart disease patients with preserved ejection fraction. The clinical study is being conducted in cooperation with major academic medical centers and is supported by a grant from the American Heart Association. We anticipate preliminary data from this study should be available in early 2022. Now this is just a small snapshot of some of the very exciting programs that we're doing at Palatin, and you can certainly find more and additional information on our website, www.palatin.com. In closing, the past year has been transformative for Palatin. A little over a year ago, with return of Vyleesi, we're a company with a single female health product in need of a major overhaul and some very early, but interesting preclinical programs. As we began fiscal year 2022, we are a different company, advancing a new mechanism for treating a variety of inflammatory and autoimmune diseases based on drugs that modulate the melanocortin system with a focus on ocular diseases. Our first oculaminocortin based drug, PL-nine thousand six hundred and forty three will start a Phase 3 dry eye disease study before calendar year end. And we are advancing PL-nine thousand six hundred and fifty four into the drug development process as a treatment for retinal diseases. Both of these innovative drugs have the potential to be significant players in the growing multibillion dollar markets. We are also planning to move a second front of the eye disease program into clinical trials in the first half of twenty twenty two. The foundation for this transformation is our unique understanding of the Winocortin system, our experience in the development and approval of drugs that modulate the system. Over the past year, we've put in place the infrastructure, scientists and research activities that are advancing our understanding of how the linocortin system works, The results are already helping to guide our clinical programs. We remain on track to start a Phase 2 proof of concept clinical study with our oral formulation of PL-eight thousand one hundred and seventy seven in the first half of twenty twenty two with data to follow later in the year. Under Steve Will's directions, our Vyleesi commercial activities have made significant progress. These changes are beginning to have a positive impact increasing Vyleesi's prescriptions, revenue, are excited by the tremendous opportunity that we have to advance innovative drugs that will positively impact patients and build shareholder value. We'd like to thank you for listening to our call and your continued support. The call will now be opened for questions. Thank We'll take our first question from Joe Pantginis with H. C. Wainwright. Hey, guys. Thanks for taking the question. My question wants to focus on 8,177 for ulcerative colitis, but I guess the basis also talks to your overall platform and mechanisms of action around the underlying melanocortin system. So I guess first, can we Start around the when you look at 8,177, how can you compare it versus the current commercial treatments? And I think one of the next Questions could be, since you have a differentiated mechanism of action, is there any potential for combinability that could Be beneficial for the competitive profile of the asset. Sure. Thanks, Joe. So let's see how Waseem can tackle this in a simple way. Certainly, I think key points here are you mentioned differentiating mechanism of action. One of the things that we like about the melanocortin system is that we're not blocking some pathway that's causing inflammation. We're fundamentally working to resolve the inflammatory process that's going on that's gotten out of control and to bring it back into control And as part of that, you actually get promotion of tissue healing. One thing that we see with this mechanism is that not only do you have the potential to generate safety, Ethically, but it's quite safe. We're not suppressing the immune system. So breakthrough infection, Rare disease, rare inflammatory autoimmune conditions or rare cancers really are not anticipated to occur with this mechanism. So it's really quite safe. So from a positioning standpoint, look, we certainly can't speak to efficacy other than we have tremendous potential, of course, but until we conduct clinical trials and In the collected data, we really can't answer that question in a lot of detail, but we do anticipate that we should see good efficacy based on the preclinical data. We would anticipate it would probably be used before you move to the biologics. So ulcerative colitis and other inflammatory diseases today, There is an existing armamentarium that can be effective in a number of patients, but they have all have their safety conditions and concerns and tolerability concerns. And usually for many patients, at some point, these options begin to stop working. So we would really anticipate us Being somewhere in going from the generic treatments, maybe steroids, post steroids before you move on to a biologic. We're quite excited because of the safety. Keep in mind, this is a peptide that's being given orally. There is no systemic absorption. We know that from the clinical studies that we've already done. So it's quite safe and there remains a really, really high need in the pediatric population. We've been dealing with some of the key opinion leaders there. We're quite excited about the potential. If this drug works, we really do think that in the pediatric population, which we intend to include those patients as soon as we have enough safety data to do that. We really think it could become potentially almost first line treatment in these patients because of its safety and potential efficacy. So we're quite excited about what we really can do with That's good color. Thanks for that. And I guess it might be too early for this question, but obviously, I mean, You have a broader pipeline now, one asset that's about to enter Phase 3 and earlier assets that are percolating. So I guess, At this point, what is your goals on the BD front? Are you looking to out license or keep potential territories? Or What are your overall goals right now from a high level? Sure. I think one of the things that I tried to emphasize and Steve and I have been and Steve started in his part Look, we're not we have some very exciting programs, but it's also the advancement of that underlying science. What how does Yes, we're focused in the ocular space and we think there's tremendous potential there with multiple opportunities as you see them beginning to emerge. As you know, 18 months ago, we had an OCTA program and we had nothing in clinical trials and now we're getting ready to start the first one in Phase 3. That's pretty good. But the goal with ulcerative colitis and we have another indication that we'll add on. We'll tell you about that in That's going to help a lot of patients and it's going to be a tremendously valuable For our shareholders. So that's really what the It is longer term. For ulcerative colitis, we're not going forward. We want to license that program. If we hit it out of the park like I think we will, I'm sure there's going to be a lot of interest and as much as we may want to keep those programs, I think I don't know that we'll have the opportunity I think there are larger companies that will want them, and we'll be willing to pay quite a lot for them. We'll take our next question from John Newman with Canaccord. Hi, guys. Thanks for taking my question. Just curious if you could talk a little bit about the Design of the MELODY-one study, specifically, if you have disclosed Which signs and symptoms you would like to look at in that study? Thanks. We haven't yet, but we will. I mean, they're not they'll be posted fairly soon. We'll be filing the protocol with clinicaltrials.gov. But they're pretty standard. So the design of the study is a pretty typical dry eye disease study. There's a run-in Period where we obviously diagnose the patients and we qualify them that they meet all the entry criteria, so if they actually have moderate to severe disease. Patients studies in the United States in dry eyes, these are generally conducted in what's called an adverse environment. So we put them in a chamber that Essentially drives out their eyes. It's a way that's used commonly to standardize the patient population so that we get a more standardized it was a highly variable disease, So we want to try and standardize that. And as you pointed out, there are 2 types of things that we look at, and they are signs and symptoms with signs being evidence of disease such as Inflammation in the front of the eye, redness, tear film break up time, tear film production, so on and so forth. So for the study, we'll be looking at Fluorescein staining of the cornea as well as lessening green staining of the conjunctiva. So those will be and they'll be total you'll be looking at regional such as inferior and then total. So there are 3 staining endpoints That we'll be looking at. 2 will be primary and 1 will be secondary. The primary sign will be ocular discomfort and then key secondaries will be, And then we'll articulate those in the protocol when we file it, and we'll put that out in the press release when we state it. And so the other thing that we have to study that Okay. One other question is, Will you be looking at patients that have had experience with other agents for dry eye in the study or only patients that have not That been treated with other products? Thanks. Yes. So they have to wash. We don't have artificial tears in the study Or use it in the study, but as long as they're washed out of the study, they're allowed in, as long as they're not currently on active treatment. They'll be allowed in the study. The only thing that you were talking about design, I think one of the things that we have that is a little unique is, as You guys are probably know, but maybe the audience that proscios don't. The odri disease is multifactorial, both on the region of the eye that The outcome caused it as well as the types of patients, their age, underlying immune status and so on and so forth, which as a drug developer, we don't always like because that leads to a lot of variability. And one of the ways you combat that is by putting large numbers of patients in the studies. But what we were able to agree with the agency is a little bit of Design, which is we've got a well powered study based on the 240 patients. But as History will tell you dry eye disease studies don't always come out the way you want. So in order to protect ourselves and allow ourselves to put in more patients if needed, we've actually built In what's called an interim data assessment. So we'll be analyzing the data from a statistical endpoint looking at how the endpoints are doing, it's looking at A power calculation that will allow us to determine if we need to put more patients in. The last thing we'd like we don't want to do is we just miss on 240 and if we have put 300 in the study, we'd And the reason why that's important is because from an FDA regulatory perspective, all we're looking for is a statistical difference in the endpoint From control versus active. There's no measurement or attribution of clinical benefit. The agency doesn't require that. All they look for is a fiscal difference. So therefore, you want to really make sure you don't have an underpowered study. And if you need to put in 120 more patients to hit it, You want to be able to do that. So we think we're going to hit in the 2.40, but if we need to put in more, we've already worked out with the agency and we have a mechanism for doing that. Okay, great. Thanks very much. We'll take our next question from Michael Higgins with Ladenburg Thalmann. Good morning, guys. Thanks for taking the questions. Congrats on the continued progress with the pipeline. Couple of questions here. The first is a follow-up from John's question on the interim. Just trying to get a sense here in this early days, you've not The trial, yes, we don't have the clinical trials right up in front of us, but just trying to get some sense for what we will see from the interim look, If at this point, subject to change, of course, but at this point, if you're looking for issuing a press release of, yes, Interim DSMB is suggested to go forward, increase in numbers would be highlighted at that point. But really the question is how much evidence would you provide at that point on the endpoints? Or do you just Expect just to say, as I mentioned, continuing as a number of patients to change or not. So we won't be we will not be getting any data on like that you're hitting it, you're not hitting All that they will convey to us will be keep the study as is and go to your 2 40 and complete the study Or they will tell us put 150 more patients in the study or put 50 more patients in the study. We recommend that you put 50 more patients in the study or 100 more patients in the study. That's all so the press release would be The interim analysis occurred. We're on track. We will continue to go to 240 or we will go up A certain number of patients. But beyond that, they won't give us anything. And the reason for that is this is not a data This is really just a power calculation assessment. We don't want to take any statistical hits for multiplicity. So it's purely to protect against The variability in these studies, which can be high. So we want to make sure we get enough patients in. That makes sense. Thanks. Just want to clarify that. And then I just want to follow-up one of your comments made And 3,994, congrats that you're looking for data now early 2022. This has been a program that's been A huge upside, but really been out of your hands given the grants and waiting for sites to start and get going and all that. So Smacking on the slow roller, so now we've got Datta here within the next 6 months or so. Tell us what you're looking for, any feedback that you've had so far on enrollments And how the study is progressing? Thanks. So enrollment has been fine. It's been slow. So the study is actually in 2 parts. The first part is collecting safety and hemodynamic data, and that's what we should have by the end of the year. The second part will then go on and look at actually more of a form of dynamic response. So we'll be looking at biopsy and other markers of Improvement in cardiovascular function. So the first part should be completed pretty soon. I think those patients have actually either Been enrolled or identified and are being enrolled. So as soon as they complete, we'll get the data from that, the first part, Which is actually very important. It would be very nice to see the effects of 3,994 on pulmonary capillary wedge pressure Because that's really very important in these patients. And as I said, the second part, we should get data around mid next year, which will be the Markers of cardiovascular, we improved markers of heart failure in these patients. And keep in mind, these are preserved ejection fraction patients where the need It's quite high. Now in addition to that, just as a little prelude to upcoming attractions, we'll have some more information out Early next year on our overall natural peptide program beyond 3,994. We have some great things going on there, but the time is not allowed for us to really get into that on this call. Makes sense. I appreciate the additional fill in there. Thanks. And then one last one here on Vyleesi. There's quite a gap obviously between the gross and the net sales. So looking ahead into 'twenty two And even in the remainder of this calendar year, how should we look for that gap to shrink? What's remaining from an accounting Endpoints and also from maybe from a stocking standpoint before we see those that GAAP shrink? Thanks. I mean, that's the objective and the target is not so much to shrink the gap. And what we're really targeting And spending our time and focus on is the market access to increase the coverage, the net ASP, if you will. With our limited investment and to back it up, that investment was funded by The termination agreement, we did receive $16,300,000 from a The 4th quarter being twelvethirty one and the 3rd quarter, Whether it's June 30 or 9.30. We will we are showing improvements right now. I mean, we look Things every day and obviously we have full vision into July August. All the metrics with whether it's the refills, The prescriptions and importantly in our mind, we think this is the most significant metric, the market access, the scripts that are coming in that are insured drug covered, which is My favorite number, which is Code 8, because when I see the report and there's a Code 8, I know we have insured drug covered. So we're spending the majority of our focus, Not so much the time per se, but just concentrating on that metric to increase it. So Our right partner has the infrastructure. They have a team of market access people, obviously much, much more significant Sales infrastructure than what we have. So we're comfortable with this measured and limited investment that we We are showing progress. We have a very good WACC. We do have a number of subsidies from a co pay standpoint, but we're seeing a lot of positive trends, albeit The healthcare providers with new healthcare providers coming on, the scripts going up and again the market access is our primary metric and that is improving. So hopefully that was responsive. I know it was a bit long there, Michael. No worries. That's great. Appreciate the feedback guys and congrats again. That concludes today's question and answer session. Doctor. Spana, at this time, I'll turn the conference back to you for any additional or closing remarks. Well, I'd like to thank all of you for participating on the call and our analysts for their questions that help us to better illuminate what we're doing. Look forward to continuing to Steve and I look forward to continuing to update you on what we're doing. I mean, and I would really say that the staff This concludes today's call. Thank you for your participation. You may now disconnect.