Palatin Technologies, Inc. (0KF3) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the Palatin Technologies conference call to discuss the return of Vyleesi, Palatin's FDA-approved treatment for HSDD. 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 these forward-looking statements and Palatin's prospects. Now I'd like to turn the call over to today's host, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Thank you. Good morning and welcome to the Palatin Technologies conference 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. If we sound a little muffled, it is because we are wearing masks and we are social distanced in our conference room. So I apologize for that. But as we go forward, we'd like to sincerely hope that you and your families are safe and healthy as you deal with the life-altering changes brought about by the COVID-19 pandemic. Like many of you, there are members of the extended Palatin family that are working on the frontline selflessly taking care of patients. And to them, we are eternally grateful and applaud their dedication and pray for their safety. As you know, we announced earlier today that Palatin and AMAG have mutually agreed to terminate the North American Vyleesi licensing agreement. What this means is that Palatin has regained the North American rights to Vyleesi and all associated assets have now been transferred to Palatin. We are excited to have Vyleesi back. It's an opportunity to have an FDA-approved product with a good label that addresses an unmet medical need. Our objective today is to provide an overview of the primary details of the termination agreement and some of the initial next steps that we will be taking to demonstrate the value of Vyleesi that we believe will support its future relicensing. Today, Steve will provide details on the termination agreement, and I will focus my discussion on some of the near-term steps we will be taking with Vyleesi. Steve?

Thank you, Carl, and good morning, everyone. Under the terms of the termination agreement, Palatin regained all North American development and commercialization rights for Vyleesi. AMAG will make a $12 million payment to Palatin at closing and a $4.3 million payment to Palatin on March 31, 2021. Palatin will assume all Vyleesi manufacturing agreements and AMAG will transfer all information, data and assets related exclusively to Vyleesi, including, not limited to significant existing inventory. AMAG will provide certain transitional services to Palatin for a period of time to ensure continued patient access to Vyleesi during the transition back to Palatin. Palatin will reimburse AMAG for the cost of the transition services during this time. And to be clear, there are no other monies owed AMAG. Carl?

Thank you, Steve. To begin, let me remind you that Vyleesi was approved by the FDA in June 2019 and is the first and only on-demand treatment for premenopausal women with acquired hypoactive sexual desire disorder, a condition that affects 1 in 10 premenopausal women. Our immediate priority with Vyleesi is to build upon the initial launch activities with the objective of demonstrating its commercial value and, at a future point, relicensing Vyleesi to a committed partner. Unfortunately, the AMAG launch activities for Vyleesi were significantly scaled back within the first 60 days of the launch due to a change in strategic direction at AMAG, which was then followed by the highly disruptive COVID pandemic. As Steve mentioned, we have entered into a transitional services agreement with AMAG that covers all commercial and regulatory functions to ensure there will be no disruption to physicians' or patient access to Vyleesi. In preparation for the return of Vyleesi, we have assembled a core team of experts in the pharmaceutical commercial operations to assist with demonstrating the value of Vyleesi. This team will be expanded as needed. Key aspects of the Vyleesi launch were the use of telemedicine, social media and select digital advertising to patients and health care providers. Our due diligence and data review indicate these approaches were able to generate substantial interest in Vyleesi, and initial prescriptions quickly exceeded AMAG's base forecast. However, with the significant reduction of Vyleesi marketing activities by AMAG and the pandemic, current prescriptions have decreased by more than 50% per month. We have identified a number of readily addressable issues concerning Vyleesi distribution, patient and physician communications and patient access that have the potential to quickly improve the value of Vyleesi. Our initial efforts will be focused on correcting these issues while we work to implement our strategy and ongoing operational plan. Some of the basics of the strategy will be the following: we will use an informed and highly targeted approach and an important activity will be to continue to expand Vyleesi patient access and reimbursement coverage. We believe we can increase coverage to 65% to 70% of covered lives. Marketing activities will build on the early demonstrated success of telemedicine, social media and select digital advertising to patients and physicians. This will be coupled with a targeted advertising effort in regional areas supported by high Vyleesi prescribers. The overall goal is to demonstrate that there is a viable market for Vyleesi and a level of interest that will support its eventual relicensing to a partner focused on female health and committed to growing Vyleesi. As Steve said -- noted, Palatin will also be reassuming control of Vyleesi manufacturing. As a reminder, the Palatin manufacturing group was responsible for selecting Vyleesi's manufacturers, vendors in establishing the commercial manufacturing process of Vyleesi. So we are well positioned to supply Vyleesi to our current partners, Fosun Pharma and Kwangdong Pharmaceuticals. Control of manufacturing also puts us in a better position as we move to conclude additional partnerships. In conclusion, we are very excited by the tremendous opportunity that has been created by the reacquisition of Vyleesi. We understand the product and are looking forward to demonstrating the value we believe Vyleesi has as a treatment for the millions of premenopausal women suffering with hypoactive sexual desire disorder. We look forward to updating you as we continue to make progress. Thank you. We will now open the call for questions.

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

Very nice announcement to be able to take this asset cleanly forward. So thanks for the visibility here. First thing, when you have your decision tree now about where to take the drug next, obviously, you're talking about relicensing it. So I'm assuming that could go down multiple avenues, whether it's North America again or even beyond that North America and Europe. So number one, is that a safe assumption? And number two, as part of your decision tree, I guess does any part of your internal discussions involve potentially keeping the asset for North America?

Joe, this is Carl. Thanks for the question. Certainly, with regards to licensing the product, anything's -- everything's on the table. We're going to obviously be opportunistic and look for the best licensing partner that we can when it's appropriate for us to reenter into a licensing agreement for the product. With regards to would we keep the product, we don't have a clear answer on that. I think it really depends on what we can do with it. Does it make sense for Palatin where Palatin is in the future? I mean, I think right now, we're really going to be focused on correcting the -- there are a number of things that we can easily address that will make Vyleesi a much more valuable asset that AMAG did not have time to do because of the pullback. We want to get those things done, and we want to really show the responsiveness of this product to marketing activities. And at that juncture, we'll begin to make some additional decisions on which way we go. I don't know, Steve, if you want to add a few more comments to that.

Yes. I mean I absolutely echo Carl's comments. And whether we put it in the press release or it was on our script, the -- everything is on the table. We're -- we now have the status where the product is back. So some of the preliminary discussions we've -- that have been taking place can be a lot more substantive as we advance. With our very limited commercial infrastructure, it was absolutely key and critical for us to come to a transitional services agreement with AMAG so that all the functionality is covered. Anything that was done last week when a woman wanted a script or an HCP wanted to reach out, those -- that functionality remains in place. So our strategy is to use an informed, creative and -- approach. As we go forward, we will be doing some marketing, what we call very targeted, very, very data-driven. There's -- a lot of good things happened during the launch, during the initial phase before things changed from a strategic standpoint with AMAG. So there's some excellent data out there that we're going to utilize for our marketing approach as we go forward with the plan to make Vyleesi much more of a performing asset and a valuable asset and something that Palatin could be interested in further or third parties. So we're very excited at this stage.

That's really helpful. And my second and last question, if you don't mind is, I guess I would link my marketing question to everything you just disclosed to your comments with regard to also taking on existing inventory. So I guess where does the inventory and your commercialization plans sort of link up along the continuum? And what I mean by that is what is the depth of the current inventory? And how much of that inventory do you anticipate still to be part of the initial sampling periods?

I'm going to let the Chief Operating Officer handle that.

Yes. I -- hopefully, you picked up in my inflection that the -- in addition to everything being transferred, a critical aspect is the existing inventory. We have existing inventory, an existing inventory being defined as the API, the various supplies, final drug product, final drug product already packaged, albeit with, you call it, sampling. We actually do some -- or AMAG did do some sampling, but for the most part, it was for the first dose with the patients. We have, frankly, enough for several years. There is a very significant amount. And when I say several years, that's on the high end there. Depending on how much we're able to increase the script and the usage, there is absolutely no concern with the inventory, the existing inventory. We don't have to do anything for 2, 3 years as we go forward.

Our next question comes from Michael Higgins with Ladenburg Thalmann.

Congrats from me as well. I know you wanted this product back. It increases your optionality on partnering. If you could help us with a bit more on the formulary coverage for Vyleesi. You mentioned the target of 65%, 70% of covered lives. Can you give us a sense for where it's at now? Do you plan on hiring account managers? The people you're bringing over, are there people that you need to hire to continue that effort?

Yes. They're halfway there. They have good formulary coverage. They have 2 major groups that we're already covering. And we actually have identified in our -- and have brought in actually a group that will help us deal with and expand that out. Typically, for these types of products, we should be in that 65% range. And then in addition to that, what we really want to make sure is that we are working with our specialty pharmas and other distributors to make sure that patients coming in that have coverage get all of their prior authorization and everything lined up so that we actually get paid for the scripts that are being done. And I'm going to pass it over to Steve. He may give you a little more color on that.