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

Good morning, ladies and gentlemen, and welcome to the Palatin PL-9643 Phase II Dry Eye Disease Clinical Trial Results Call. 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 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. Sir, please go ahead.

Thank you. Good morning, and welcome to the PL-9643 Phase II Dry Eye Disease Clinical Trial Results Call. I am Dr. Carl Spana. I'm CEO and President of Palatin. And I will moderate this morning's call to provide introductory and closing remarks. Results we will present today are very promising, and we are excited to review them with you. As stated in our press release, we did not reach physical significance with the co-primary endpoint. However, as you will hear later in the call, this is not unusual for early clinical studies in dry eye disease, and is not indicative of the future success or potential value of the PL-9643 program. The goals of the study were achieved, and the promising efficacy and safety data provided, provides a clear path forward for further development of PL-9643 as a treatment for dry eye disease patients. We are enthusiastic about the results of this trial, not only because of the goals achieved, but also because of points with differentiating emerging product profile. The profile is continued to approval to provide a fast-acting efficacious treatment option which affects the eye in a global manner and has a favorable safety and tolerability profile. On the call today, there will be 2 additional speakers, Dr. Kenneth Kenyon, the study's principal investigator, he's also up on the New England Eye Center and a Professor of Ophthalmology at Tufts University School of Medicine. Also speaking will be Dr. George Ousler, he's the Senior Vice President of Ora, Inc., a world-leading, ophthalmic clinical research organization. Dr. Ousler has extensive development and regulatory experience in the dry eye disease space. And with his team at Ora, assisted Palatin in the conduct and management of the PL-9643 study. For the question-and-answer session, we will be joined by Dr. Bruce Stouch, our lead physician for PL-9643, who is the President and Director and Principal Biostatistician of BCS Statistical Solutions. And we also will be joined by Steve Wills, Palatin's Executive Vice President, Chief Financial Officer and Chief Operating Officer. To start, I would like to frame the key part of our research and development focus. Palatin has a primary scientific concentration in the melanocortin system, which has involved regulation of energy balance, including food intake, sexual function and most importantly for this call, resolution of inflammatory responses. Our first successful melanocortin program was based on the role of melanocortin system in regulating sexual function. This work resulted in the discovery of Vyleesi, and it's eventual approval by the FDA as a treatment for premenopausal women with hypoactive sexual desire disorder. Our current research efforts have been focused on development of drugs that target the ability of the melanocortin system to resolve or turn down inflammation. Based on our preclinical research, we believe the targeting melanocortin system will have broad utility in treating ocular disease, including ocular inflammation. PL-9643 represents a novel approach to treating dry eye disease by targeting the ability of the melanocortin system to resolve pathological information. PL-9643 is not another steroid with cyclosporin analog or reformulation of an older drug. As results from our Phase II trial show, PL-9643's novel action leads to an emerging differentiated product profile with potentially a faster time to onset, excellent ocular safety and tolerability, and a global ocular efficacy for the moderate to severe patient population. PL-9643 Phase II dry eye disease clinical study was our first study evaluating the safety and efficacy of the melanocortin targeted therapeutic in an ocular indication, and appears to have provided translational data from our preclinical inflammatory models to a potential human clinical treatment. This Phase II study was a multicenter, randomized, double-masked and placebo-controlled study, evaluating the efficacy and safety of PL-9643 ophthalmic solution, meaning topical eyedrops, compared to placebo for the treatment of the signs and symptoms of dry eye disease. The study enrolled 160 participants randomized in 1:1 ratio in the 2 arms, PL-9643 or vehicle at 4 sites in the United States. Patients underwent 12 weeks of daily treatment. The 2 prespecified primary endpoints were improvement in inferior corneal fluorescein staining, which is a sign, and ocular discomfort, which is a symptom of dry eye disease as measured in week 12. There were multiple secondary and exploratory outcome measures as well. The co-farming end points with the intent to treat population, which included all patients with mild, moderate and severe dry eye disease, as measured at 12-week did not reach significance. As this was our first PL-9643 clinical study in patients with dry eye disease, it was prospectively designed to evaluate PL-9643 ocular safety, tolerability and treatment effect on a wide variety of clinical endpoints used in dry eye disease studies. As I've said on previous calls, much like development programs, and now approved products, this was designed to provide a broad evaluation of the potential of PL-9643 as a treatment for dry eye disease. We're happy to report the study that it's primary objectives, which were establishing efficacy, safety and tolerability, and to define a development and regulatory path forward for PL-9643. In the moderate to severe patient population, which was greater than 40% of the subjects studied, PL-9643 did achieve physical significance with a p-value of less than 0.05 versus vehicle for the primary sign endpoint, which was inferior corneal fluorescein staining. Efficacy in this patient population was seen at the earliest time point measured, which was 2 weeks, and at the final evaluation time point, which was 12 weeks. PL-9643 also reached statistical significance for other signs associated with dry disease, including improvement in conjunctival staining and tear film breakup time. The improvement in corneal and conjunctival staining is important because it indicates that PL-9643 can treat damaged and subsequent inflammation of dry eye disease. PL-9643 also achieved physical significance for ocular discomfort symptom, and additionally, multiple symptom endpoints measuring ocular and eye comfort demonstrated effects in favor of PL-9643 over vehicle. In summary, PL-9643 demonstrated ocular safety and significant efficacy in reducing corneal and conjunctival damage and improving ocular discomfort, all of which are important for treating dry eye disease patients. In comparison to currently approved treatments, onset of efficacy was seen as early as 2 weeks, and the PL-9643 ocular solubility appears to be similar to artificial tears. For more insight into significance of this potential treatment in the dry eye disease indication, I will turn the presentation over to our first guest speaker to provide some additional insights. I'd like to now introduce Dr. Kenneth Kenyon. As said, he's a member of New England Eye Center and is also a Professor of Ophthalmology at Tufts University Medical School. So Dr. Kenyon, the floor is yours.

Good morning, and thank you, Dr. Spana. As a cornea and ocular service specialist by training and practice, let me first put this in a more global context to point out that dry eye is not trivial. Indeed, it's a debilitating condition affecting tens of millions of patients that leads to significant discomfort, reduced life quality, and from a clinical aspect, damage to the ocular surface and thus, their compromised vision. Indeed, in my practice, probably 1/3 of patients complain of dry eye. And despite awareness of these conditions for a century, the lack of truly effective primary treatment is frustrating for both patients and clinicians alike. But what's exciting about the Palatin study is that it's a new departure, a new dimension, a new direction. Utilizing the melanocortin pathway, it is a novel -- and really sets it apart from all other dry eye therapeutic strategies. To focus on the results of the current study, the demonstration of improved outcomes across important and multiple sign and symptom time points is extremely impressive. Improvement in both corneal and conjunctival staining to statistical relevance is terribly important because it affects the vision and also is the basis for irritative symptoms. And especially so in the more advanced dry eye population. Hence, the emerging profile of the PL-9643 drug, having both a rapid therapeutic onset, recalling patients at 2 weeks were both objectively and symptomatically improved, and also an excellent tolerability profile, patients loved it. They find it to be very comfortable. It's really a potential advance in dry eye therapy. And so I look forward to further engagements with this promising new strategy. Thank you.

Thank you, Dr. Kenyon. I'd now like to introduce Dr. George Ousler, he's the Senior Vice President at Ora, Inc., they are a world-leading clinical research organization. Dr. Ousler has extensive development and regulatory experience in the dry eye disease space. And with his team at Ora, he did assist Palatin in our conduct and management of the PL-9643 study. Dr. Ousler?

Dr. Spana, thank you for the introduction. Ora is the world's leading full-service CRO, dedicated to ophthalmology specifically. And we have been doing this for more than 40 years. We have offices in the United States, Europe, Australia and Asia. We have helped our clients earn 45 product approvals across various ophthalmic indications. Ora has extensive experience in dry eye disease specifically evaluating many of the therapies currently available and in the pipeline. We support a wide area of organizations from start-up to global pharmaceutical and device companies to efficiently bring the products to market. The Phase II study of PL-9643 has provided clear guidance on the clinical and regulatory pathway forward for this program. These first-in-human exploratory drive studies were commonly used to identify the most appropriate patient population, endpoints and time points for the larger Phase III program. In order to gain approval for the treatment of dry eye, the FDA requires that sponsors demonstrate a statistically significant difference between active and placebo treatment arms, a p-value less than 0.05 and 1 sign such as inferior corneal staining and 1 symptom such as ocular discomfort of dry eye in at least 2 independent studies. The agency has been very supportive and consistent in their guidance as well as being flexible with which endpoints are approvable. If the next Phase II/III study meets this prespecified primary sign and symptom endpoints, it may potentially be considered 1 of the 2 required registration studies for approval pending FDA review. In this situation, our clients often quickly move into their confirmatory Phase III, chronic safety and PK studies. We look forward to working with Palatin in confirming the therapeutic potential of PL-9643, which targets meaningful signs and symptoms of dry eye through a novel mechanism.

Thank you, Dr. Ousler. So I can now recap where we are, where we're going and why we are excited to be advancing PL-9643 in dry eye disease. As we think about the future of PL-9643, a clear objective is to confirm the exciting results of this Phase II study and a larger study. PL-9643 Phase II results have defined a clear development and regulatory path forward. Next study we are planning is a Phase II/III study that will start in mid-2021. The study will use endpoints in a patient population defined by the recently completed Phase II study. If results of the next study are significant, we believe it will meet the regulatory requirements for 1 of the 2 required Phase III studies needed to submit for FDA approval. We will be providing additional details of the PL-9643 dry eye disease development and regulatory program at a later date. The emerging product profile of PL-9643 as a treatment for dry eye disease indicates, if approved, PL-9643 can provide a significant advantage over current therapies. PL-9643 has the potential to provide patients with dry disease an efficacious treatment with a rapid onset, excellent ocular tolerability equivalent to artificial tears. The majority of people suffering from dry eye disease are in the moderate to severe category, and in most cases, have had this condition for a prolonged period. As we begin to think about our company beyond PL-9643 and dry eye disease, we have multiple ocular programs that target the melanocortin system and ocular diseases that result from the current study begin to validate melanocortin system as a target for treating ocular disease. These include other front-of-the-eyes indications as well as back-of-the-eye or retinal indications. We will begin to focus most of our development efforts in the ocular disease space, and we will be providing updates on this strategic shift as we move forward. I'd like to point out that importantly, Palatin is also in a strong cash position with greater than $82 million at September 30, 2020, that will allow us to fund the further development of PL-9643 through the planned Phase III program. Before we answer your questions just like to just point out a few things. The results of the study are planned to be written up and presented at a scientific meeting in the beginning of 2021. Also a little bit later today, we will be posting slides that summarize the study on our website. So you'll be able to find them there. That's www.palatin.com. We'll now turn the call over to questions. Thank you.

[Operator Instructions] Our first question comes from John Newman with Canaccord.

Thank you very much for sharing the data with us, guys, really interesting here. So Carl, just curious here, as you think about the next study here, I'm just wondering if there are any specific signs or symptoms endpoints that you think you might focus on? Also, just curious if the next study would include any patients with meibomian gland dysfunction or if you would exclude those patients?

Sure. So I'll take a brief comment, and then maybe George wants to make some as well. Really, the results here, John, are early, we just can't get first look at them. And we really hit a number of the signs that are associated with dry eye disease, both in the cornea and the conjunctiva and as well as effects on the tear. So a very global effect. So I think we have a large number of potential endpoints from the sign standpoint that we can choose. Which ones we will finally go with, that's really going to depend on further data analysis. I don't know if maybe, George, if you want to comment on that? And maybe Dr. Ken can comment on patients' meibomian gland dysfunction.

Sure. Thank you for that background. And I would agree Palatin is in a situation where they demonstrate efficacy on multiple signs as well as symptoms. So they have a variety of endpoints that they can choose from, which is a good situation. As far as MGD, meibomian gland disease, typically, we would exclude patients that have severe MGD in this type of a study so that it's not a compounding factor for the overall study design. But patients with mild and moderate MGD may be included in these are exploratory endpoints that we can certainly look at, but the focus would be on dry eye, which is the more global indication.

May I also interject? This is Ken Kenyon. This is a terribly relevant question because the Venn diagram, if you will, that includes dry eye on one hand and meibomian gland disease on another, has a very strong overlap in its center. That is to say, the same patient population frequently suffers some comorbidities of both conditions. So I mean, to George's point, yes, we are looking to screen patients who have dry eye, but in the practical world, some degree of MGD in -- especially in the older patient population is almost inevitable. What's, thus, of particular interest with the melanocortin pathway is that as a potential and actual anti-inflammatory, the beneficial aspect of -- on the inflammatory aspect of dry eye is, of course, primary. But just saying that anti-inflammatory therapy is a mainstay of MGD is equally valid. So the notion that this can be a twofer, if you will, in managing the comorbidity of these patients is indeed extremely relevant.

Thank you, Dr. Kenneth.

And then, Carl, just wondering if I could make an additional question. So we obviously know that there are some approved therapies on the market for dry eye, but they all do have some side effects, especially when it comes to tolerability. Wondering if you could talk about what you saw with your compound, just in terms of safety and tolerability from this study?

Sure. I think I'll just handle it pretty quick. The ocular tolerability was really excellent. As we said, very similar to artificial tears. There were only -- of the 160 subjects studied, there were only 4 that discontinued from the study, and none of those were due to an ocular condition. There were 3 on placebo and 1 on drug. So and I think Dr. Kenyon pointed out, the patients reported, this was very comfortable, ocular comfort was very high with the product. Not surprising, there's no -- the therapy is very potent, so there's not a lot of drug and it's soluble and ocular solutions. So the vehicle that we use is very close to artificial tears, which is very comfortable to patients.

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

Thanks for all the details thus far. I'd like to ask Dr. Kenyon a question with regard to the overall conduct of the study. Obviously, this was in a broad population, mild, moderate and severe. It appears as the data play out here, that the most effect we're seeing in the moderate to severe. So I was just curious about what role or lack of role that it appears that the mild population had or didn't have with regard to mechanism of action.

Certainly. Given the -- let's say, broad spectrum of dry eye severity, unquestionably, mild -- the affected patients that will have modest largely irritative complaints will probably not have visual deterioration, perhaps ocular fatigue and the like. But they are in truth, reasonably well-managed with the current variance of artificial tear and don't really need to step up to a higher level of anti-inflammatory as well as tear stimulatory therapy. So this brings us to the importance of the Palatin product in terms of dealing with not just comfort, which -- for which there are many strategies, but really dealing -- that are important to be sure. But really dealing with the objective signs of corneal and conjunctival staining and other aspects of ocular surface damage which can be very deleterious to vision. So in that respect, and as I've pointed out earlier, appreciating the notion that there is a definite inflammatory component to the dry eye issue as identified over a decade ago, that has really caused anti-inflammatory therapies to become targeted. And that's where the Palatin product really comes into play.

That is really helpful. And if I could just follow-up on that as my last question. And I don't want to overstate this, but it just seems pretty promising here, and you made a comment, if you could add any more color with regard to the rapid onset of action, how that compares to the current therapeutic landscape in the -- beyond artificial tears?

I'm assuming you're addressing to me since...

Please, yes.

These are the patients that I see. As you can imagine, patients whose predominant complaints are redness, irritation, foreign body sensation, all that bad stuff, they're looking for, if not instant relief, at least a pretty short-term gratification in terms of release. So the last thing that you can -- as it were, sell to these patients is, if you take this drop, you'll start to feel something in about a month to 2 months. And by the way, for the first several weeks, it will really irritate and burn your eyes and the -- and it kind of violates the fundamental principle of the treatment shouldn't be worse than the disease. So you wind up handholding these patients for their run-in period. That might also include some bad taste sensations. And again, I'm not here to disparage other products, but this is real-world stuff and what we face in this particular population. So early onset of reduced symptomatology and very good comfort profile from the get-go. These are huge from the standpoint of what it takes to make a dry eye sufferer a happier camper, indeed.