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

Good morning, and thank you for joining us for the Palatin KOL Webinar. [Operator Instructions] As a reminder, this conference is being recorded, and a replay will be made available on the Palatin website following the conclusion of the event. I would now like to turn the call over to your host, Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead, Carl.

Thank you, Sara. Steve and I would like to welcome all of the attendees that are listening into the Palatin seminar today on melanocortin agonist for ocular diseases. Today, we have actually a very full agenda for you with a number of very distinguished guest speakers, which we'll introduce in a second. You're going to hear a lot today about the melanocortin system and its role in resolving inflammation and in particular, how we're applying it to development of therapeutics for ocular indications. Just as a housekeeping point, questions will be at the end after all of the speakers, and Sara will come back on and she'll give directions on how to do it. Our analysts will be given preference for live questions, and all others will be asked to submit your questions written through our website. So today, we have a very distinguished group of guest speakers. Actually, if I had to read through all their bios, we'd spend all the time just going through it. Each is a clear expert in their defined area of research, whether it be clinical or preclinical. We're going to start off today with Dr. Andrew Taylor. He is the Associate Dean of Research and Professor of Ophthalmology at Boston University School of Medicine. Dr. Taylor's research is really focused on understanding mechanisms that lead to immune privilege in various tissues, and particularly the eye. The melanocortin system is one of the neuropeptides in the eye that is involved in immune privilege, and Dr. Taylor is going to give us a very -- overview of melanocortin system and also the role that's its playing in Ocular Immune Privilege. We also have Dr. Eric Donnenfeld. He's a Trustee at Dartmouth School of Medicine, and he's also a clinical professor of Ophthalmology at New York University. Dr. Donnenfeld is a well-known expert in the anterior segment of the eye. He's been involved in a variety of clinical studies, quite extinguished, hundreds of publications. He's the Editor in Chief of Eye World. In addition, he holds leadership positions in multiple national and regional societies and opthalogical organization. So he's quite extinguishment. I'm very happy to have him present Phase II data of PL-9643 in dry eye disease as well as give an overview of dry eye disease and help you how 643 fit into the current treatment paradigm with dry eye disease. Very happy to have him as well. We'll also hear from George Ousler. He is a Senior Vice President in the Anterior Segment at Ora, which is a leading CRO in conducting ophthalmology studies. George has been very involved in the dry eye program at Palatin. And he's clearly has been involved -- and I think -- I don't think there are too many major dry eye disease programs in which George hasn't had a role. He is actually very distinguished, again, hundreds of publications. He really brings a wealth of knowledge to us on the regulatory and design of dry eye clinical trial. So he's going to be covering the upcoming Phase III clinical trial of the design and some of the objectives and endpoints there. And last but certainly not least, will be Dr. Peter Kaiser. He's a staff member at the Vitreoretinal Facility of Cole Eye Institute, Department of Ophthalmology at the Cleveland Clinic. He's also a founding director of the Digital Optical Hear at Reading Center at Cole Institute as well. Dr. Kaiser is trained at Harvard. For his medical degree, he graduated magna cum laude. He continues his training -- online trading at Harvard. I don't think that there is a major retinal disease program -- clinical program that he wasn't involved with or wasn't leading. His publication list is outstanding, and we are certainly very happy to have him present our data in the back of the eye, most series segment, some of the preclinical data that we have in various retinal disease models as well as how a melanocortin agonist could be used or may be positioned as a treatment for retinal diseases, should we be successful in getting one approved. So as you can see, quite distinguished. On the Palatin front, we have host of speakers that will be presenting to you as well, myself, Steve and John Dodd. He is our Senior Vice President of Research. We will be speaking today. And we also have Rob Jordan; Dr. Paul Kayne, Dr. Bruce Stouch, who will all be available during the Q&A session to help answer some of the questions that may come through. So as we move forward, we're going to do a corporate overview, myself and Steve, and then we're going to really get into the need of why we're here today. Listen, at Palatin, you probably may be aware, we have a very long interest and really do quite a lot of expertise in the science and biology chemistry of the melanocortin important system, development the melanocortin-based drugs. In fact, as you can see Vyleesi, which is the first approved melanocortin agonist more than any disease indication, was really taking from concept to approval by Palatin. But as you can see on the pipeline slide here, we're really focused -- past female health, really focused on the ability of a system to resolve from melanocortin system. We have a very strong focus in the eye. We think that it plays a very key role there as well as in other tissues. But one way to put what we're doing as we go forward, in context or is that this is really an excercise to translation. The science, the preclinical science done by Palatin and others on the role of melanocortin system is amazingly promising as it pertains to controlling harmful inflammation, protecting tissue damage of on fibrosis. And what we're really trying to do here is take that great science and translate it into clinical medicine. If we're successful, we will deliver tremendous value to patients, clinicians and to our shareholders. So it's really the exercise that we're involved and the docs from the phone today and the guest speakers are all involved in helping us to really reach that goal. So that being said, I'm going to turn it over to Steve, and he's going to just give you a very brief update on Vyleesi because it wouldn't be a Palatin presentation if we didn't mention Vyleesi, and we'll kick off the presentation from there. Steve? Are you on mute?

Yes. I thought I'd get the first one out of the way to mess up on the mute. So everyone, I took the dive for the team. Thank you, Carl, and good morning, everyone. Regarding Vyleesi, as Carl mentioned, this is our commercial product. It is FDA-approved for premenopausal women with hypoactive sexual desire disorder, or HSDD. It is a significant unmet need market with multiple millions of women suffering HSDD. It is estimated that 1 in 10 women have low desire with associated distress. We received the product back July of 2020. And over the last several quarters, we've made significant improvements. They include: we renegotiated the supply agreement. We realigned the specialty pharmacies, and that includes improvements in the prior authorization, processes and streamlining the HCP and patient experience. We changed our telemedicine partner to drive online conversion. Importantly, very importantly, we've increased patient access. Vyleesi is now at approximately 75% of covered lives and 50% of commercial formularies. Additionally, we continue our geo-targeting, digital marketing program, which is greatly enhancing HCP and patient awareness of HSDD and Vyleesi as an option. For our recent quarter, which was March 31, '21, versus the prior quarter ended December 31, 2020, prescriptions were up 24%. Gross Vyleesi sales were up 89% and net revenue was up 154%. On the licensing front, we have collaborations in China with Fosun, in South Korea with Kwangdong. And for other regions, the U.S. and other regions around the globe, we are engaged with multiple parties in active discussions. So that's the update -- corporate update, if you will, for Vyleesi. And now it is my great pleasure to turn the call over to Dr. Andrew Taylor to talk about the melanocortin system. Dr. Taylor?

Thank you. So what are the melanocortins? The melanocortins are a family of conserved peptides that are derived from the breakdown of propel and melanocortin hormone. The prototypic melanocortin is alpha Melanocyte-stimulating hormone or alpha-MSH that you see at the bottom there, which is a modified peptide fragment of the first 13 immunal acids of ACTH. These enzymes are very important for the breakdown for POMC and to bring about alpha-MSH in the neuropeptides. So it's only limited areas in the body and where these peptides produce, the hypothalamus, the macrophages -- activated macrophages and the retinal pigment epithelial cells. Equally conserved, our whole series of melanocortin receptors, melanocortin 1 through 5. One thing to note is the melanocortin 2 receptor is the only ligand for is ACTH, and that's what induces the cortisol release. The other melanocortins accords such as alpha-MSH does not activate through this receptor. Melanocortin 1 receptor is one of the most abundant within our bodies, but yet you could see that melanocortin 3, 4 and 5 are scattered amongst many cells within our body and including, and of our own interest been immune system. Because of that, then the activity in melancortins have had some pretty important roles. One is in pigmentation. And this -- the best example is that in melanocortin 1 receptor, there is a mutation in humans, and that gives you red hair. And it has roles in metabolism. It has controls and roles in neural behavior. And the stereo genesis, of course, it's the hypothalamic pituitary adrenal axis, which, of course, ACTH through melanocortin 2 receptor. Other roles, which is what we're really interested in is the activity of which the Melanocortin have in immunobiology. The literature will show you tons of examples in which alpha-MSH -- using the alpha-MSH in a therapeutic approach suppresses inflammation mediated by both the innate and adaptive immune system. Several papers also show that alpha-MSH may even drive the expansion and activation of TREG cells. Experimental models of septic shock, arthritis, encephalitis and even graft rejection, along with uveitis, have been shown to be suppressed by therapeutic treatments using alpha-MSH. And when you compare alpha-MSH with the glucocorticoids, you will find that one of the most interesting and important features of alpha-MSH is that it is probably most likely the natural regulator immunity in a healthy eye, and therefore, well tolerated. So what do the melanocortins have in ocular immunobiology? This has been the focus of the research within my laboratory for many years, and that is what are the mechanisms of Ocular Immune Privilege? The uniqueness of the eye is the fact that it is the site and where it is an integrated biological system of a neuroimmune individual systems that exist within a blood barrier with no direct lymphatic drainage. It's a tissue site that affords prolonged allograft survival. It's an evolutionary adaptation of an organ that needs to minimize the collateral damage of inflammation and infection to preserve its function. And an interesting feature of it is that it does dominate immune responses to promote immune tolerance. So understanding the mechanism of Ocular Immune Privilege provides us with insights into what is a healthy eye, but also the possibility of therapeutic effects of using the melanocortin -- or the mechanisms of Ocular Immune Privilege, which should be well tolerated molecules for therapies and also in the protection of cells as well as transplants. In our studies, we tried to find out what are the factors and the mechanisms within the Ocular microenvironment. And as you see, there are several approaches. There are both those that are soluble and then there are those that are membrane bound. Alpha-MSH is one of the most important ones of the soluble factors produced within the eye. And that the other factors that are within the eye, the control immunity, very often complement the activity that alpha-MSH is already doing. Some of the membrane-bound factors, they are also well complemented by alpha-MSH and even may -- some of them may be countered by alpha-MSH in order to preserve cells and survival. When we looked at what were the immune responses that we can see within the eye, the eye seems to allow for the presence of alternatively activated macrophages, which after being stimulated with endotoxin, instead of producing pro-inflammatory cytokines produced anti-inflammatory cytokines. Also, alpha-MSH is involved in bringing about suppressor macrophages, which have a strong ability to kill and eliminate effector T cells. Also, if there is antigen presentation, alpha-MSH is involved in driving the expansion and activation of TREG cells. Interestingly, we have found that many of the receptors for the melanocortin receptor may have different features and functions within this mechanism, as you can see, melanocortin 1, 3 and 5 are involved. Our lab uses an animal model of uveitis, experimental immune uveitis. It's a mouse model. We can induce uveitis in the mice. They reach a plateau within a few weeks. When we treat the mice at that point of the plateau with alpha-MSH, in this picture, is a systemic injection of only a few micrograms of alpha-MSH that the mice have an early recovery of -- from the inflammation. Not only that they show the very same symptoms that we would find spontaneously occur in a mouse that recovers from uveitis, in that there are TREG cells and that also there's preservation of the retina. In comparison with the untreated or the uveitic mouse, the alpha-MSH-treated mouse has preservations of ganglion cells and photoreceptors, which is something we've also seen in models that we've done with diabetic retinopathy. Since many people are -- become resistant to steroid therapy, new approaches have been used to use antibodies that are biologics that specifically bind and neutralize certain cytokines. I point this out and here, these are things that people have proposed, things that have worked, things that have not worked. One of the things I do want to note is that it just simply targets a single -- many of these therapies only target a single cytokine, whereas others may still be produced, but also the immune cells themselves making those cytokines. And one of the aspects -- one of the things that when we look at alpha-MSH, one of the features that we find is that it actually turns off the immune cells. it sort of resets them to a new function and behavior. So they stop making those cytokines that damage the tissue, the mediate inflammation and may actually bring about regulatory immunity, which could bring a long-term protection. One of the features of alpha-MSH also is the survival of cells. Alpha-MSH is showing it to be an anti apoptotic signal for many cells. And within the eye, it seems the photoreceptors and the ganglion cells benefit from alpha-MSH being around to prevent their death and allow their survival. And just like as we found with looking at other specific immune cell activities, several of the melanocortin receptors seem to be very -- appear to be specific for many of these activities. As you see in melanocortin 5 and 1 receptor, have been involved in alpha-MSH mediating suppression of epitopic or death signals within photoreceptors and actually and ganglion cells. The immune system, again, is one of melanocortin 5 receptor area to bring about suppressive adaptive immunity through TREG activation. And melanocortin 1 and 3 appear be involved mainly with suppressing inflammatory activity and responses. In conclusion, alpha-MSH peptides are highly effective in suppressing uveitis. Stimulating the melanocortin receptors is not just an antagonism of a pro-inflammatory signal, which has been the goal of many other of the therapies, but it actually changes the cellular behavior to support the immune -- support retinal survival and function. The melanocortin pathway could very well be induced in many diseases for benefits such as even in transplantation, diabetic retinopathy and encephalomyelitis. And now I think -- yes, I want to hand this over now to John Dodd, the Head of Research at Palatin.

Thank you, Andy. So Dr. Taylor has laid out a really compelling case for the use of melanocortin agonist and inflammation and immune-mediated diseases. It's Palatin's job to design compounds to harness this potential. So what do we have to do to bridge the gap from a very important mechanism that's important in inflammatory disease to get to a commercially successful product. Well, we have to build properties into a single molecule that not only affect the melanocortin system but bring about the drug ability necessary to get the most acceptable round administration. More efficacy, excellent safety profile. And really, if you do all that, and you combine that in 1 molecule, you'll have a clear advantage over existing future therapies that give the compound the lags to be able to be commercially successful. So at Palatin, the first 2 cases that we brought the indication together with the properties of the compound are ulcerative colitis and dry eye disease. In ulcerative colitis, we have PL-8177 OCD, which stands for oral, but -- oral route of administration but delivered to the colon. And in 9643, we use topical eye drops. In 8177, we know that in a colon, unlike the eye that MCR drives almost all the efficacy in the melanocortin system, 3 and 5 don't play a major role there. So we have a very selective MC1r agonist for ulcerative colitis in the eye. As Dr. Taylor's pointed out, we use pan melanocortin agonist so that we can affect both 1, 3 and 5, which is important. In both compounds in both diseases, we have preferred route administration, oral or topical to the eye. The compounds are applied directly to the tissues that are involved in the inflammation, so they have a local site of action, no systemic absorption. We haven't identified in any preclinical studies or any human studies, any safety issues or any tolerability issues with either of the compounds. And our efficacy so far has been very good. We've got preclinical efficacy of 8177 against sulfasalazine, mesalamine and steroids. It looks as good or better than those compounds. And in 9643, we're equivalent to cycle score and with possibly some other features that will described in the clinical studies of 9643 that can distinguish it as a potential compound. Let's take a look at these individual compounds a little bit closer. We have superior potency in 8177. It's 640x more potent than alpha-MSH, the endogenous ligand. This is important because it allows very practical dosing levels. The amount of loading we do on the formulation to deliver the coal is in the very low single digit percent, which makes the behavior quite dependable. We have no activity at 2, 3 and 5, and we're 6,000x more potent than MC4 -- at 1 than we are at MC4. Importantly, we looked at 72 different non-melanocortin targets. And in a million times, the concentration of MC1r activity, we have no hint of activity in all these other targets. So 8177 is exquisitely selective for it's a cyclic peptide. So it's very stable. It stands up very well in a quite hostile environment of the colon. The Bacteria there can be destructive in peptides, but our compound has good ability to stick around and the engage receptor. Because it's got low membrane permeability, we get high levels at the colon lumen surface, which is where the activity is at. And this avoids any systemic uptake. So in terms of safety, we kind of have a triple approach of safety: one, it's very selective, only interacts with MC1r; two, we apply it directly to the tissue where MC1r is expressed to get our efficacy; and three, even if it were to be absorbed, which we have never seen any evidence of it, we know that by -- with preclinical studies in systemic studies that we have no side effects, no off-target effects there. Next, we'll take a look at 9643. Now as Dr. Taylor pointed out, the eye is important to have both MC1r, MC3 and MC5r, so we use a pan agonist now at the eye. And we think the most important thing in the pan agonist is that our ratios versus alpha-MSH are favorable. So you can see that against alpha-MSH, here, you see in the center and the in-vivo in-vitro activity, we are significantly more potent all the important receptors 1, 3 and 5. We're a little more potent at 3 and 5 than 1 versus alpha-MSH, and we think that's important so that we engage those receptors when we do engage MC1r. Now this high potency that we have we're a 69x more potent than alpha-MSH, allows us to do a very dilute solution in treating patients and in preclinical models. Our formulation is 1 milligram in a liter so the eye really knows nothing about any kind of chemical irritability or any problems, any tolerability issues because the really dilute solution is quite favorable for treatment of surface of the eye. Again, cyclic peptide is very stable, no proteolysis problems. The distribution is good. It stays on the cornea and the conjunctive tissue, is absorbed into the systemic circulation. And safety since, we have no systemic levels detected, and we have very low drug concentration in the eye, we get no preclinical adverse events or tolerability issues after the compound. So both compounds are quite safe. So far, have been very efficacious and are really -- have a great route of administration for the diseases they're meant for. Now one little peak, it's some research that we're doing. We're also working in the back of the eye to try to get a therapeutic agent there. This is a model of laser burns in the back of the eye. The black bar that you see is vehicle, no drug treatment. The bar on the left is anti-VEGF therapy. And then the 4 bars on the right are 2 different concentrations of, 2 research compounds, and you can see they compare quite favorably to the anti-VEGF therapy, both for leakage area, angiogenesis and fibrosis. So we know that our compounds -- and these are pan agonist. We know that our compounds engage the receptor successfully and seemed to have quite a significant impact for retinal diseases and the treatment thereof. So we have some t's to across an i's to dot and bring on compounds into the clinic, but we think we're getting close to that. And hopefully, very soon, we'll be able to move our compound into the clinic for studies to back of the eye. Just to summarize, we got a great route of administration both diseases, high potency, no systemic exposure, good preclinical properties in dry eye. We got a rapid onset of action, no tolerability issues at all. Both of them are very safe treatments with a good route of administration. And in ulcerative colitis, we start proof of principal studies in humans in the second half of 2021. And in 9643, we go into our Phase III trials in the second half of 2021. So I'd like to thank everybody and turn this over to Dr. Donnenfeld, who will now talk about our Phase II clinical trials with PL-9643.

There we go. My apologies. My first Zoom call. Thank you, everybody. My name is Eric Donnenfeld. And I'm going to talk in general about dry eye disease, and I'll talk specifically about the study that was conducted a Phase II study that conducted at with ORA, and I think that's very exciting. So what about dry eye? First of all, dry eye is extremely common and often underdiagnosed. I've been involved with dry eye for decades. I was one of the primary investigator stasis. And with Xiidra, we've been involved with multiple studies. And we know that dry eye is one of the great unmet needs in all of ophthalmology. It can negatively impact vision on quality and quantity can cause lured vision fluctuate envision, reduce contrast sensitivity. And bottom line is that dry eye affects quality of life and daily activities, and it can really have a significant effect on psychological quality of life for these patients who have a chronic disease. I've often suggest that dry eye is really the back pain of ophthalmology, a chronic clam, which is difficult-to-treat and again, having that significant impact upon all aspects of life with several papers that have been performed that show that patients would actually trade years of life to be free of their dry eye disease. Dry eye is multifactorial. It's inflammatory. Right now, we have only one mode of action, we really work on T lymphocytes with both cyclosporin with lifitegrast. The tear film is a combination of aqueous, mucin and lipid, and it's characterized by often irritation and potential visual impairment. Existing therapies are great. We're glad we have them, but are they the answer? And are we comfortable? And are we content with where we are? We absolutely are not. Dry eye specialist, ophthalmology in general, are looking for better treatment than we have now because of many patients' poor response to present therapy, adverse events, poor ocular tolerability, prolonged onset of action before patients receive relief from their medications. There are many studies that have been done. Most of these studies are are on the older side, but they suggest that anywhere from 5% to 15% of the population has dry eye. And we know that dry eye is very common in one-time or other than life, almost everyone has dry eye and dry eye increases with age, it's more common in females and in men. And it suggested that dry eye is epidemic for a variety of reasons. And the numbers, I think we're looking at right now are grossly inadequate to describe the magnitude of dry eye. One study suggested that there are 29 million Americans who have dry eye disease. I'm going to suggest that it's actually much higher than that. So having shown you that information, I think the first suggestion I would make is that dry eye is the single most common reason why people come in a ophthalmologist or optometrist office. And there have been studies that show that 30% of patients who go to an ophthalmologist have dry eye as a complaint, while 40% of the patients who go to an ophthalmologists have that complaint. As a LASIK surgeon, the majority of my patients come to me for LASIK because they can't wear contact lenses, they have dry eye. And every year, we lose 2 million to 4 million contact lens wearers because they can't wear their content lens, again, overwhelmingly due to dry eye. Dry eye disease may impact patients' ability to perform daily activities. It has a significant effect on work productivity. People can't sit at a computer screen for long periods of time. They can't drive comfortably. They can't watch television. And in a technologically enabled society, like we live in today, it's just not acceptable to not be able to look at the screen for a prolonged period of time. No one starts with very severe dry eye. Very severe dry eye, it can be devastating, impacting patients in a really terrible way. Everyone starts with mild disease, and it progresses over time. And be great if we had therapies that could actually prevent the progression of dry eye disease. So with that in mind, let's talk about the Phase II multi-center, randomized, double mass, placebo-controlled study, evaluating the efficacy and safety of PL-9643 Ophthalmic Solution compared to placebo in subjects with dry eye. This is the Palatin study. And in this study, they had a 12-week study with a 2-week run in. So there were 160 patients who were enrolled in the trial. They were randomized 1:1 to receive the placebo or to receive the active ingredients. Patients and the doctors were masked. It was a run-in period of 2 weeks and also the patient received the placebo. And then starting on day 0 of therapy, they to either receive 1 microgram per ml of the experimental solution, PL-9643, 3 times a day versus the placebo, which was just basically a vehicle, 3 times a day. Patients were then followed at after 2 weeks of therapy, 4 weeks of therapy, 8 weeks, and the final study analysis was done at 12 weeks after the initiation of therapy. The study subjects were all adults with mild, moderate, severe dry eye disease. And the co-primary endpoints at week 12 were inferior corneal Fluorescein staining, which is a sign, an ocular discomfort, which was the symptom. I'd just pause for a moment and say that most of these that are done now on dry eye separate these co primary endpoints because it's very difficult to find a study in which both therapies, which both sign and symptom respond in a dry eye study. It's been well documented that in general, signs move in the opposite direction symptoms with dry eye. The secondary endpoints at week 2 and week 12 were signs, which were fluorescein staining, Lissamine green staining, tear film breakup time and Conjunctival redness. And the symptoms or a variety of symptoms you see listed here, most notably burning and dryness, but there's a whole list of symptoms that you see right in front of you right now. So let's talk about the co-primary endpoints and patient population. The co-primary endpoints were measured from baseline to week 12, where again inferior corneal fluorescein staining, this is a fairly classic way of measuring dry eye and ocular discomfort, which is a symptom. Overall, intent-to-treat was 160 patients with mild, moderate to severe dry eye, and there was no statistical difference in Phase II endpoints when you looked at the entire population of patients. This is kind of normal in patients who are having studies for dry eye. In general, it's very difficult to get a mild dry eye patient to improve, which is why in most studies, we don't incorporate mild disease. Variety of studies have been involved and have shown this repeatedly. So when you take out the mild patients and you only look at the moderate-to-severe population, which was 54 patients, these were defined as patients who had duration of disease of greater or equal to 5 years, inferior corneal fluorescein staining of greater than 1, and eye discomfort scales of greater or equal to 25 on a 1 to 100 scale. So we're not looking at the entire population from now on. We're going to concentrate on the moderate-to-severe group, which is normal for a dry eye study. So here are the differences between experimental PL-9643 compound versus placebo in fluorescein staining and moderate severe subgroup. And you can look at the lines here, and you see very profound differences and improvement in total sum standing when you combine the cornea and the conjunctiva. But the primary endpoint, which was the total corneal inferior staining, again, was significant. On the second diagram down, you see the total cornal inferior and superior in central staining, and this was statistically significant. Conjunctival staining showed an improvement. And then if you go across line, nasal temporal for superior and central staining, there was, in general, just a mild improvement seen here. Some of them are significant. But again, with an only 54 patients, it's difficult to achieve statistical significance with a study size of 54 patients. Let's move on to the next slide and look at differences between PL-9643 and placebo and Lissamine green standing. This is a staining of the conjunctiva. Looking at the moderate-to-severe group, again, you see a very dramatic improvement in total conjunctival staining. When you look at total corneal and conjunctival staining, you see an improvement. Even at 2 weeks, you see a very large improvement, which is really unusual in staining studies. It usually takes a long period of time to improve in a dry eye study. I think -- again, when you go across the slide here, you see total corneal inferior superior central. There was improvement there was significant with total congenial, temporal and nasal, which is, again, that's an endpoint for many studies. And then going across the line in nasal inferior, or superior central, all showed general variations improvement. I think this is very encouraging data. We had conjunctival redness and tear breakup time. Conjunctival redness showed improvement. Again, it's nice to show improvement in readiness. This suggests that there is an anti-inflammatory effect here as conjunctival redness is usually a sign of inflammation. It also is cosmetically pleasing for patients to have an improvement in redness in the eye, and tear breakup time showed a fantastic improvement to 12 weeks here. This is statistically significant in this small study. When we go to look at symptoms, the primary symptom was ocular on the ORA Calibra. Discomfort scale and again you see significant improvement actually, numeric improvement, wasn't statistic, but numerical improvement in symptoms in the trial, then when we break it down and we look at the entire symptoms with a 5-question scale, looking at ocular discomfort, burning, dryness, grittiness and stinging, basically, all of them showed some improvement here. And again, the's most notable symptom that most patients will have will be ocular discomfort or burning, again, showing nice improvement. And again, the improvement as early as 2 weeks. Differences between the experimental PL-9643 PL and placebo, using a visual analog scale, on a scale of 0 to 100 patients just ask to locate where they thought their disease improved. And here, you can see, again, a general trend that there was an improvement in these patients, eye discomfort was dramatic at 2 weeks. But again, a strong trend that individual analog scale, patients felt the systems are improved as well. Now I think this is the key slide for me in looking at this trial. It's odd that I would say that adverse events are important. And the reason why I believe this is extremely important is that in all the dry eye sides have been involved in using immunomodulators other than a corticosteroid. You usually see significant ocular pain or irritation on to installation. It varies between 13% and 15% in most of the FDA trials involving cyclosporin and lifitegrast. And here, there were no patients pan installation. So a comfortable drop is really one of the most important aspects of therapy for drive as patients who have dropped sting, generally will not continue their therapy. If you look at the data here, there were no treatment-related serious adverse events or ocular adverse events in the patients receiving the PL-9643. And again, no pain on installation, and there were fewer adverse events versus the placebo. So we've just gone through very quickly the presentation. In conclusion, in patients with moderate-to-severe dry eye disease, PL-9643 ophthalmic solution led to benefits and signs and symptoms by the first evaluation in 2 weeks. They were maintained for the 12-week study duration. PL-9643 was well tolerated. There were no treatment-related ocular adverse events, and the safety profile was excellent. These positive results across multiple signs and symptoms support the continued development of 9 -- of PL-9643 as a novel therapeutic approach for treating dry disease. And I think it's exciting with these preliminary Phase II trials to see what comes in. And now the studies will obviously be reevaluated and modified based on the experience we have, but these are very interesting and exciting findings. So I as an ophthalmologist with a strong interest in dry eye, believe that the melanocortin pathway provides a novel way to treat inflammatory conditions. I welcome this into the armamentarium for treating dry eye, and it will be very interesting to see how the next studies go and if dry eye can be significantly improved by activating and dry eye is just on of the core receptors, that will be a significant improvement to patient care. In this trial, with PL-9643, we showed a Phase II trial. The results are promising for both signs and symptoms and melanocortin agonist PL-9643 add to the treatment opportunities we have to treat dry eye disease. And I think it's certainly worth encouraging continued study. The advantage to patients is that PL-9643 is potent when compared to other treatments, therefore, a smaller concentration was effective in treating dry eye signs. And that may also be why they were less simple or actually no symptom of burning on irritation on installation. Again, a very important finding of this trial. Overall, a superior safety profile was observed with the absence of any treatment-emergent adverse events, and PL-9643 may provide a new option for those patients whom other treatments have failed or in addition, it may be additive to other therapies that are out there and the need for dry eye therapy has never been greater. And that concludes my presentation. Thank you very much. I appreciate your attendance. I'll be around for questions afterwards. And at this point, I'll turn the microphone over to George Ousler, who is the Senior Vice President of Anterior Segment at Ora. Thank you very much.

Thank you, Dr. Donnenfeld, excellent presentation. So today, I'll be presenting the study design for MELODY-1 and walk you through all those details. Next slide. I think that's one slide ahead, if you can go back. I think there is previous slide to this. If we can go back to the original slide.

George, the only I see on mine is the study design is in the next slide but MELODY-1 titled, then we move into the study design. So hoping, was there 1 dropped?

Yes. There was one slide prior to that, just went through the detail.

Well, you're to have to wing it.

Okay. No worries, Not a problem. All right. So when we look at the study design, this is the schema of the MELODY-1 as well as identifying the primary endpoints. So I'll walk you through indeed here. As you can see, there is a 2-week run in period. So that's weak minus 2 to day 0. And during this run in period, we provide all the patients, placebo was essentially the vehicle of the active formulation. And the reason for this is that we are identifying patients who have a response to that placebo. And the intent is that we identify the placebo responders and exclude them prior to being moved into the study. So it's an enrichment criteria. We do see that there's often a placebo response in dry eye programs. So this is a big advantage to enhance the outcome of the trial. At day 0, randomization is when patients will be randomized to either stay on that vehicle or be randomized to be active concentration of PL-9643. Patients will be using this formulation for a 12-week period. And during those 12 weeks, there's fall visits at weeks 2, 6 -- I'm sorry, 2, 4, 8 and 12. And during these fall visits, we will be doing a number of assessments, both environmental as well as in the controlled efforts environment. And for those who are not familiar with the control environment. This is a challenged model that allows us to temporarily exacerbate the signs and symptoms of dry eye. And it's an endpoint that's accepted by the FDA. So when we step down to the lower part of the slides here, we are identifying co-primary endpoints for the sign as well as for the symptom. So to walk you through those specifically, the first one is looking at signs, and this is the inferior corneal fluorescein staining. And as Dr. Donnenfeld was pointing out, we saw a very nice signal with this in the previous Phase II study as well as a second co-primary sign which is total conjunctival lissamine green staining, and that's basically adding both the nasal and temporal regions of the eye or basically the whites of the eye and other side of the puple. The co-primary symptom is ocular discomfort. Again, we saw a nice signal with that in the previous program. So that's why we're focusing on this particular endpoint. And then we've identified some key secondary endpoints, and this is specifically a week 2 and for the signs that total conjunctival staining for lissamine green as well as symptoms being burning in eye discomfort. I just want to point out that the primary symptom point is at week 2, whereas primary sign endpoint is that week 12. And as Dr. Donnenfeld mentioned, it's very important to see that we have a fast onset of action with these dry eye therapies. Patients are complaining a symptom specifically, and that's what they're aware of. So if we can see efficacy quickly, that's what will make the patient happy and then ultimately allow them to be more compliant. And this is what will drive the efficacy profile for therapy. Something that's important to identify here is that there will be an adaptive design. So we will have the patients -- up to 120 patients, 60 patients from the active arm and 60 patients from the placebo arm, complete the study. At that point, we will go ahead to do an interim analysis and identify if we've had enough power with these endpoints to either to increase the number of patients that are required. So this would be conducted both at the 2-week time point as well as the 12-week time point. And at that point, after completing the 120 patients, we'll make the decision of do we go up to 240 patients? Or do we go up to 320 patients. So this is sort of an intelligent way of running our clinical trial and making sure that we're maximizing the opportunity for success, not only for the primary endpoints, but also for the key secondary endpoints. Next slide. In addition to our primary endpoints and key secondaries, there will be many other endpoints. So just to highlight what those are going to there's both clinical signs as well as symptoms. So on the clinical signs side of things, we will be looking at temporal lissamine green staining, conjunctival redness, nasal lissamine green staining, tear film breakup time, corneal sum fluorescein staining, total some listening green standing, total some fluorescein staining and superior corneal fluorescein staining. And really, the idea here is to leverage some of the findings we had in the Phase II study. And as Dr. Donnenfeld mentioned, we had some nice efficacy in most of these areas. And that's what's really important to dry eye program to not only see efficacy, see it across multiple endpoints. So we will prospectively look at these endpoints as well. And then for symptoms, there are some additional endpoints that we saw efficacy and are interested in earning program, and that would include grittiness specifically ocular discomfort and then a variety of endpoints with the VAS scale, which is for body sensation, pain, itching and eye dryness. And of course, we'll have some additional points beyond that, that we're calling Tertiary endpoints, and that will be outlined in our statistical analysis plan. Next slide. And then to have a snapshot of the program time lines, as you can see, the MELODY-1 study will be starting later this year. And the first interim assessment will occur before the end of the year. The second interim assessment will happen at the beginning of 2022. And then mid-2022, we'll be looking at a database lock for MELODY-1 as well as the results and ultimately, the clinical side of report. At that point, we'll then move on to MELODY-2 as well as a chronic safety study, which is required by the FDA, and those will run into 2023. And there is the anticipation for an NDA submission in 2023. So that's the overview of the study design endpoints and time line. So at this point, I'm pleased to turn it over to Dr. Kaiser.

Thank you so much. It's actually interesting to watch all the dry eye and how well this product appears to be doing in dry eye and then to switch to the back of the eye. But Dr. Taylor's talk really shows why as a retina specialist we're so excited about the melanocortin receptors for many of the retinal diseases that we're talking about. And I'm going to walk you through some of the preclinical work that the retinal SAB is excited about and why we think this product may have some excellent use in our diseases. The first preclinical model is a very standard model that we use. It's basically a laser-induced choroid neovascularization model. In this model, laser is used to make a break in Bruch's membrane. A break in Bruch's membrane causes the animal to develop choroid neovascularization, and this is very similar to the neovascularization. We see an exudative age-related macular degeneration. So the model is very easy to perform. It's very reproducible, and we actually know so about it. So if a drug works in this model, we have a pretty good feeling about how it will do in a clinical trial. The Palatin compounds have been tested in this model and the different compounds have actually been able to reduce CNV leakage areas, and CNV leakage grades reduced the amount of neovascularization. But since this is also an anti-inflammatory play, it reduces collagen deposition. Fibrosis and neovascularization is a big problem in terms of long-term outcomes in patients with age-related macular degeneration. The other model that they've used is also a very common model from our diabetic retinopathy. So in this model, the animals are made diabetic using stressed, and they developed the findings very similar to diabetic retinopathy actually identical to diabetic retinopathy. And so in these cases, as you can see in slide middle, the animals developed thinning of the retina, they eventually developed neovascularization, leakage, et cetera So in this model, we can see the effect of the melanocortin agonist to preserve retinal anatomy on slide right. So this is something that's very important, if you look at the difference between the middle and right side of the slide. But more importantly, we know that diabetic retinopathy is an inflammatory disease. So obviously, VEGF plays a role, but the majority of changes in diabetes, in particular the neurodegenerative changes, are related to the inflammation that we see. And so in the animals receiving the melanocortin agonist, there was suppression of these pro-inflammatory cytokines to control levels. There was increased levels of basically markers inflammatory resolution, including IL-10. So the preclinical models with the different agonists have shown that this drug or drug class I should say seem to work very, very well in diabetic retinopathy. Now the area that really was big for us on the retinal SAB was there's a whole host of different therapeutic candidates that Palatin had, and we really wanted the one with the highest potency for receptors 1 and 5. Obviously, we wanted to see good efficacy in the preclinical animal models. But also some of the other factors that go into drug development were taking into account solubility, good PK, straightforward synthesis and for the most part, obviously an excellent IP position, and because of that 9654 was actually chosen. So I want to show you some of the data for 9654. So this was already shown in a little different form. This, again, is that mouse CNV model where we use laser to produce CNV. In purple, it's important to understand that's the anti-VEGF control because, obviously, anti-VEGF is going to work very, very well in this. But using 9654, you can see results in terms of reduction in leakage, reduction in mean area of angiogenesis and really importantly, reduction in the area of fibrosis using 9654, very comparable and, in some cases, slightly better than anti-VEGF and significantly different from the saline control. So exciting data in basically a model for wet age-related macular degeneration. In the rat diabetics model, you're actually able to measure visual function animals. And over time, the visual function of the animals as the diabetes and a diabetic retinopathy gets worse in red gets worse. So that you can see that's contrast sensitivity. Over time, it's getting worse. And at 3 different dose levels of PL-9643, that reduction in contrast acuity, which again, is a measure of visual function, was preserved. So you're preventing the vision loss due to diabetic retinopathy in this animal model. This is the final results of what I just showed you was basically over time that over time, these animals are getting worse. But at the primary outcome time point, there's a very significant difference between the vehicle control versus 3 different dosages of 9654 in preventing this loss of contrast sensitivity, which, as I mentioned, is a measure of visual function. Now some of the things we also consider when we're considering a molecule that works in the eye is, does it produce a cataract? Or in this case, does it prevent cataract formation? So we know that diabetic patients as well as diabetic animals have a increased risk and develop cataracts earlier. And in this case, it was prevented using 9654. And the other thing that's really important and many people don't realize about drug development for diabetic retinopathy is if the molecule affects glucose levels, in particular, if it affects hemoglobin A1c, the development pathway just change. The development pathways actually increased up to 3 years for drug affects the hemoglobin A1c. As shown here, the glucose levels were not affected. So for us -- for those of us in drug development, this was a good sign, not a bad sign. So we're very excited on the retinal SAB side for 9654. There's still some additional work we're going to do. In different animal models, looking at different PK and tox studies before we go into patients. But I can tell you that looking at this drug, we're very excited about potential of what 9654 could do for our patients. So now I'm going to turn it back over to Carl for the Q&A section.

Okay. Thank you, Peter. Really very exciting. So I'd like to thank all of the speakers today for taking the time out to present to us and answer some questions. I think now I'm going to turn it back over to Sara, who's going to go through the instructions and what to expect next, and then we'll start Q&A. So Sara?

[Operator Instructions] Thank you, everyone, for waiting. So the first question will come from Matt Keller. Matt Keller is from H.C. Wainwright.

Can you hear me okay?

Yes.

Okay. This is actually Matt Keller on for Joe Pantginis. And so my first question, and this may be also relevant to Dr. Donnenfeld, but anyone's feedback is welcomed. We're wondering, looking at the Phase II/III design, how do you think 9634 being potentially 3 times daily treatment impact, if and how it could be adopted for treatment in dry eye?

Well, 3 times a day is a very reasonable therapeutic dosage dry eye product. The 2 products that are out there right now are BID. But patients who have dry eye are accustomed to taking drops, usually 4 or more times a day because that's how they get relieved from their symptoms. So it's not like glaucoma, where there's a problem with patient compliance. These patients are usually very comfortable using drops. And I think 3 times a day, we'll be very well tolerated. So I don't have an issue with that at all.

Very helpful. My second question, I guess, a little bit more broadly. I was wondering, you kind of touched on that earlier, but could you give a little bit more clarification about where you think or where are you in term of molecule like 9643 to fit into current treatment strategies, assuming it demonstrates similar efficacy and similar safety profile compared to maybe some of the other treatments on the market for ocular indications?

I'll take a stab at that first and say that there's a strong need for more therapy for dry eye. If you look at the data from Xiidra and Restasis, the average patient fills -- has 1 refill. They don't keep taking the medication because of discomfort and irritation associated with the drops. That's one of the reasons why I'm impressed by the data I've seen so far, not only is it efficacious so far, but it's very well tolerated. And I think that's a good starting point for any dry eye therapy. Patients don't tolerate rating drops. Now where would it sit in the regimen, that depends upon efficacy. At the end of the day, we need to have a Phase III study to establish exactly how good this is. And then hopefully, eventually, they'll comparative trials, but there's no reason that I see that this could be primary therapy or to be additive therapy to the therapies that we have right now. There's a large number of patients who have failed current dry eye therapies, who are waiting for new medication. There's nothing has been FDA-approved other than a corticosteroid, really in the last 8 or 9 years. So the dry eye market is really right for a new therapeutic. And I love the idea that this works on a completely different pathway than we've ever seen before. I, too, will wait for results to see how the medication pans out and the oral trial should be very interesting. But for me, right now, the final place where this will fit in my regimen will completely depend upon the efficacy as we see it in later trials. Great. Does anyone else want to add anything to what I said.

The next question will come from Michael Higgins at Ladenburg.

A couple of questions, if I can, primarily on the Phase III. So I guess I'll direct this towards Dr. Donnenfeld. How does the design of the Phase III pivotals compared to other dry eye disease approved meds? And then does this differ from these studies in Europe?

Well, this trial is similar to several other trials many trials I've been involved with now have involved separate trials for signs and symptoms, where the FDA has approved that you can have 2 studies that look at signs in 2 studies that look at symptoms. They're trying to keep this all done in 1 trial. And there have been many trials that have been done like that. Several of them have failed, unfortunately. But the results of the Phase II are encouraging that we will see a good response here. So there are several trials that have tried to do it all at once and have been successful early on. So I remain cautiously optimistic. I think what you're seeing here is a study design that's predicated on the results of the Phase II trial, which is what it should be. At the end of the day, when they run the phase which would be larger, they'll analyze the data. And I think the worst-case scenarios, you'll have to run more studies, where they separate signs and symptoms, but getting it all done in 1 trial is very exciting to me and that it shows efficacy. It's very easy to make a trial you load the deck on 1 side to signs and 1 side to symptoms. But if you can have a trial that shows both, I think that's really refreshing and will be really speak to the efficacy of the medication.

Maybe George or Bruce would like to comment a little more as this question was about the clinical trial design. I mean there are a lot of the number of elements that are interesting. I think that the design we're trying to use so maybe Bruce or George wants to touch on.

Sure Carl, I'd be glad to comment on that. And actually, springboarding off the results of the Phase II, there were really 3 elements that went the design of the Phase III. The first is, as Dr. Donnenfeld laid out, it's rare to see both signs and symptoms in 1 study going in the positive direction for you with the active drug over vehicle. The second is you saw, there were many signs and many symptoms that we saw in the Phase II study in a moderate severe population that were very encouraging. And then the third element that went into our design for the phase day is we really did not want to miss our endpoint, which is why this is an adaptive design. And so what we've done is we've selected 3 co-primary endpoints, and we will test those simultaneously by splitting the Type 1 or rate or the alpha. So we're looking at hitting on at least one of those 3 for the co-primary. And if we hit on one of those 3 or 2 of the 3 or all of the 3, we then get to step down. We then go into a hierarchical step down model, where we then can go ahead and evaluate 3 other separate endpoints. So what we try to do is really minimize the risk of missing an effect and really using the power that we observed in the Phase II study, seeing strong response in both sides. George, would you like to add to that?