Q3 2017 Palatin Technologies Inc Earnings Call CRANBURY Jun 21, 2017 (Thomson StreetEvents) -- Edited Transcript of Palatin Technologies Inc earnings conference call or presentation Tuesday, May 16, 2017 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Carl Spana Palatin Technologies, Inc. - Co-Founder, CEO, President and Director * Stephen T. Wills Palatin Technologies, Inc. - CFO, COO, EVP, Treasurer and Secretary ================================================================================ Conference Call Participants ================================================================================ * John Lawrence Newman Canaccord Genuity Limited, Research Division - Principal and Senior Healthcare Analyst * Michael John Higgins Roth Capital Partners, LLC, Research Division - Senior Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good morning, ladies and gentlemen, and welcome to the Palatin Technologies Third Quarter Fiscal Year 2017 Conference Call. As a reminder, this conference is being recorded. Before we begin our remarks, I would like to remind you that statements made by Palatin 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 actual results could 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 introduce you to your host for today, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir. -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [2] -------------------------------------------------------------------------------- Thank you. Good morning, and welcome to the Palatin Technologies Third Quarter Fiscal Year 2017 Call. I am Dr. Carl Spana, the 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'm now going to turn the call over to Steve, who will provide the financial updates. -------------------------------------------------------------------------------- Stephen T. Wills, Palatin Technologies, Inc. - CFO, COO, EVP, Treasurer and Secretary [3] -------------------------------------------------------------------------------- Thank you, Carl. Good morning, everyone. Starting with the quarter and recent operational highlights regarding our intellectual property portfolio, the United States Patent and Trademark Office issued a Notice of Allowance for methods of treating female sexual dysfunction, FSD, and hypoactive sexual desire disorder, HSDD, with bremelanotide, our investigational product designed for on-demand treatment of HSDD in premenopausal women. Once issued, this patent will have a term to November 2033. Regarding our bremelanotide development program for HSD -- HSDD, rather, on February 2, 2017, we closed on a license agreement with AMAG Pharmaceuticals for exclusive North American rights to develop and commercialize bremelanotide. Pursuant to the terms of the license agreement, we received an upfront payment of $60 million. AMAG is required to pay up to an aggregate amount of $25 million in reimbursement for all reasonable direct out-of-pocket expenses incurred by Palatin following the closing date in connection with certain continued development and regulatory activities necessary to file an NDA with the FDA. For accounting purposes, we've determined that the $60 million upfront payment and the $25 million in reimbursable direct out-of-pocket expenses represent a combined unit of accounting totaling $85 million that should be deferred and recognized as revenue over the next year as we complete our development obligation to AMAG related to certain activities necessary to file an NDA with the FDA. In addition, AMAG is also required to pay us up to $80 million upon achievement of certain development and regulatory milestones, up to $300 million upon achievement of sales milestones. And AMAG is also obligated to pay us tiered royalties on annual net sales ranging from high-single digits to low-double digits. Moving over to our operational results. Regarding the third quarter of fiscal year 2017 financial results, Palatin reported a net loss of $3.6 million or $0.02 per basic and diluted share for the quarter ended March 31, 2017, compared to a net loss of $12.7 million, or $0.08 per basic and diluted share for the same period in 2016. The difference between the 3 months ended March 31, 2017, and 2016 essentially relates to the recognition of $10.8 million in contract revenue pursuant to the combined unit of accounting related to our agreement with AMAG. Regarding revenue, as I stated, we recognized $10.8 million in contract revenue for the quarter ended March 31, 2017. There was no revenue recorded in the quarter ended March 31, 2016. Regarding operating expenses. Total operating expenses for the quarter ended March 31, 2017, were $13.8 million compared to $12.1 million for the comparable quarter of 2016. The increase in operating expenses was mainly the result of professional fees incurred related to the closing of the licensing agreement with AMAG. Regarding other income/expense. Total other expense net was $0.6 million for the quarters ended March 31, 2017, and 2016, which consisted mainly of interest expense related to our venture debt. Regarding Palatin's cash position. As of March 31, 2017 Palatin's cash, cash equivalents and investments were $55.4 million compared to cash, cash equivalents and investments of $9.4 million at June 30, 2016. Current liabilities as of March 31, 2017, were $17.4 million net of $53.8 million of deferred revenue compared to current liabilities of $13.9 million as of June 30, 2016. We believe that with the proceeds from our license agreement with AMAG, existing capital resources will be adequate to fund our planned operations through at least calendar year 2018. Carl? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [4] -------------------------------------------------------------------------------- Thank you, Steve. I will start our third quarter fiscal year 2017 operational update with bremelanotide and then cover our pipeline programs. Concerning bremelanotide, we are working with AMAG Pharmaceuticals, our North American licensing partner, to complete the activities required to file a new drug application or NDA with the FDA. These activities include various drug-drug interaction studies, certain manufacturing activities and the preparation of the NDA document. We anticipate that the bremelanotide NDA will be filed by the first quarter of calendar 2018. Regarding development of bremelanotide outside of the North American market, we will do this only in the context of a partnership. To this end, we are focusing our business development efforts on a bremelanotide partnership with the European Union as well as other regions of the world. And we currently have ongoing discussions with multiple potential partners. Palatin's drug development efforts are focused on our natriuretic peptide program for cardiovascular disease, specifically heart failure, and melanocortin autoimmune anti-inflammatory disease program specifically targeting inflammatory bowel diseases and ocular inflammatory indications. On last quarter's conference call, we presented our long-term objectives for our drug development programs. And over the past quarter, we continued to make progress in meeting those objectives. I'll provide more detail on our pipeline programs starting with our natriuretic peptide heart failure program and our 2 development candidates, PL-3994 and PL-5028. PL-3994 is a selective agonist at the natriuretic peptide A receptor. The compound has been extensively evaluated in preclinical models of heart failure, demonstrating suppression of the renin-angiotensin-aldosterone system, cardiac hypertrophy, fibrosis and remodeling. PL-3994 has also been evaluated in 2 Phase I clinical studies, which have allowed us to establish initial safety, pharmacokinetic and pharmacodynamic properties and define a dosing range. We will be evaluating the safety and efficacy of PL-3994 in a Phase IIa clinical study that is planned to start in the first half of 2017. This study will enroll heart failure patients with preserved ejection fraction, and we anticipate preliminary data by year-end 2017. We plan to provide further details on this clinical trial when the patient enrollment begins. PL-5028 is an agonist (inaudible), C receptors and A receptors. The emerging science conducted by Dr. Adrian Hobbs, a member of Palatin's Scientific Advisory Board, indicates that NPR-C agonism plays a key role in reducing cardiac fibrosis, which is a major component of the underlying cardiac dysfunction in heart failure. The dual agonist activity at PL-5028 should allow for superior efficacy and a much broader dosing window when compared to the indirect activation of Entresto. PL-5028 has demonstrated excellent efficacy in preclinical models of heart failure. And we are planning to begin preclinical activities to support human clinical studies with first-in-human studies targeted to begin in the first half of 2018. Heart failure is a major health issue. In 2013, there were 5 million patients with heart failure in the U.S., and the management of these patients represents a significant cost to the healthcare system. Although there are numerous classes of medication approved to help the management of heart failure patients, most patients have progressive disease and a poor 5-year prognosis. Clearly, there remains a high unmet medical need in the treatment of heart failure. We believe the natriuretic peptide system represents an underexploited mechanism for treating heart failure with the potential to not only improve patient symptoms, but to alter the underlying pathophysiology. We also believe our research and development efforts have put us in a leading position to develop direct-acting natriuretic peptide receptor agonist as treatments for heart failure and potentially other disease indications. We have established multiple sets of compounds that are selective for each of the 3 natriuretic peptide receptors and combinations thereof. Our development work is protected by a broad intellectual property program. As our clinical development programs in this area advance, we will continue to expand our knowhow and intellectual property. Now moving on to our second area of focus, which is our melanocortin autoimmune and anti-inflammatory disease program. In this area, we are initially focused in our development efforts on inflammatory bowel disease and ocular inflammatory indications. The current treatments available for managing patients with inflammatory bowel disease or ocular inflammation, in general, suppresses key proteins in pro-inflammatory pathways. Use of these agents results in moderation of symptoms with few patients having meaningful remission of their disease. We believe targeting of the melanocortin pathways as a treatment for inflammatory disease incorporates a novel mechanism of action that has the potential to induce resolution of disease and restore homeostasis to the immune system. Activation of the melanocortin system results in both the pro-resolution and anti-inflammatory effects. Our compound PL-8177 is a selective agonist of the melanocortin-1 receptor that has demonstrated efficacy in multiple models of inflammatory disease, including IBD and uveitis. We're excited to be moving the compound into clinical development. PL-8177 has completed all preclinical activities needed to support moving into clinical trials, and we anticipate first PL-8177 clinical study will begin enrolling patients in the second half of calendar 2017. Lead indication for this compound is inflammatory bowel disease. Our second development candidate is PL-8331. An agonist at both the melanocortin-1 and 5 receptors. We believe there are a number of autoimmune and inflammatory diseases such as ocular inflammation, where the dual agonist activity of PL-8331 may provide superior treatment benefit. We are currently evaluating PL-8331 in multiple preclinical disease models and drug safety studies. If data supports continued development of PL-8331, we plan to start the activities required to file an IND, which would allow us to be in clinical studies in the first half of 2018. We believe that our research and development efforts have put us in a leading position to develop melanocortin receptor antagonists as novel treatments for autoimmune and inflammatory diseases. We have established multiple sets of compounds that are selective with the melanocortin receptors involved in resolving pro-inflammatory pathways. We have broad intellectual property that protects our development work. As our clinical development programs in this area advance, we will continue to expand our knowhow and intellectual property in this area. As I think about the future of our company, I am very excited about the potential of our development programs to lead to new treatments that could significantly impact the lives of patients. The success we have had in developing bremelanotide from concept through Phase III clinical study and a North American partnership not only provides a potential for realizing the value of bremelanotide, but has provided us with the resources to unlock the value in our pipeline programs without having to access the capital markets. As you look forward to 2017 and 2018, we have an aggressive set of objectives that we are trying to achieve. We will be working diligently with AMAG Pharmaceuticals, our bremelanotide North American commercial partner, to complete the remaining activities required to file a New Drug Application with the FDA by early 2018. This should put us on track for a potential bremelanotide approval in early 2019. Our business development activities will be focused on bremelanotide partnerships with the European Union and other territories. Our natriuretic peptide system program has the following objectives: PL-3994 to begin a Phase IIa clinical study in heart failure patients with preserved ejection fraction with initial data by the end of calendar 2017; PL-5028 to complete required preclinical activities to begin clinical studies with Phase I studies to start in the first half of 2018. For melanocortin peptide system program, we have the following objectives. PL-8177 to initiate IBD clinical development program in the first half of 2017 followed by Phase II proof-of-concept studies in 2018; and for PL-8331 to complete the required preclinical activities to begin studies with Phase I studies to start in first half of 2018. Management believes that Palatin will be focused on achieving our objectives and building value for our stakeholders. As we -- with that being said, I'm going to now turn the call back over to the operator and open it up to questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And we'll take our first question from John Newman with Canaccord. -------------------------------------------------------------------------------- John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal and Senior Healthcare Analyst [2] -------------------------------------------------------------------------------- Lots going on in the pipeline, and it's really interesting. Just had one question to start. In terms of the bremelanotide NDA filing, I just wondered if you could talk a little bit about the OLE Study, the drug-drug interaction study and the manufacturing work that you'll be completing before that submission in the first quarter of '18? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [3] -------------------------------------------------------------------------------- Sure. The open-label is obviously fully enrolled, as we previously stated. And we will be done -- last patient out is in -- by the end of the first half of this year. So that really is winding down. We only have a few patients left, and that will wind down, as I said by, over the next few months. The drug-drug interaction studies are all fairly typical. Some of these would have been done in conjunction with the Phase III. But based on the finance of the company, we needed to move them a little bit later. They include standard things like working with patients that have hepatic impairment or renal impairment to see how the drug is metabolized, looking at the most common types of drugs that patients that we're treating, so these are HSDD patients that are premenopausal that they may be taking, such as birth control pills, certain anti-inflammatories, flu medications, things of that nature. So all the common drugs that you might find these patients taking, just to make sure that there are no drug interactions. These are all Phase I type studies. Most -- as I think actually all of them are currently enrolling patients, and some of them have actually completed the enrollment. Many of these are check box studies. We don't anticipate seeing any interactions with them based on the work that we've done in the clinic already or work that we've done preclinically. So those are being done. With regards to manufacturing, I'll pass over to Steve, since he is running that part of the business and let him really talk about some of those activities. -------------------------------------------------------------------------------- Stephen T. Wills, Palatin Technologies, Inc. - CFO, COO, EVP, Treasurer and Secretary [4] -------------------------------------------------------------------------------- Yes, we're actually very comfortable with the -- with our budget and our timelines for the NDA submission. We're working very closely with the AMAG team. We have an excellent professional and collegial relationship. And we're on target to have the activities completed by the end of the year and file the NDA with the FDA in the first quarter of 2018. As Carl mentioned, we're very comfortable with the specific items that have to be done. We have had a lot of communication and correspondence with the FDA and our outside consultants. And specifically regarding the CMC, there's nothing we haven't done before. We're in the final stages of some of the process validation work. And again, we're very comfortable that we are on target to complete all the task by the end of the year and file the NDA with the FDA in the first quarter of calendar 2018. -------------------------------------------------------------------------------- John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal and Senior Healthcare Analyst [5] -------------------------------------------------------------------------------- Great. And then I had one other question on bremelanotide. On the commercial side, assuming FDA approval in 2018, I'm just wondering if you plan on launching the drug immediately after approval or given that the approval may be near the end of the year, if you might take some time immediately after the approval to prep the physicians and the patients? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [6] -------------------------------------------------------------------------------- Well, the -- John, to be clear, the NDA submission with the FDA, is the first quarter of 2018. We would not be approved if everything goes well till the, say, first quarter of calendar 2019. Even though AMAG is -- they are our North American partner and they are absolutely the lead regarding the commercialization and also what we would call the market preparedness. They -- with us, but they, again, are the lead. They are taking steps right now and frankly spending money to increase the market awareness, whether it's education with the HCPs or with the consumers. So that -- those particular items, they will accelerate and increase as we get closer. And definitely, post the NDA application with the FDA, say, post first quarter of calendar 2018, I would anticipate that those activities will increase even greater as we approach the approval. But again, we're working very closely with AMAG, but they are taking the lead in that regard. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- And we will take the next question from Michael Higgins with ROTH Capital Partners. -------------------------------------------------------------------------------- Michael John Higgins, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [8] -------------------------------------------------------------------------------- Congrats, really smooth quarter. Appreciate the updates. Looks like your pipeline programs remain on track. 8177 the IND seems to be back half of the year from Q2, but 3994 looks a little bit earlier. A question on 3994. On the last call, you had noted the AHA and academic centers are running this really -- just if you can give us any updates as to what the size of the trial may be. I know you mentioned you want to give us some update when that starts. But just curious as to the potential size of this trial. -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [9] -------------------------------------------------------------------------------- Yes, the trial -- as I said, we'll put the full protocol out in a lot more detail when we begin enrolling patients, and that's really more in deference to what our partners on that trial. As you referenced, we are working with 2 academic centers. And that is a trial that's being funded by an outside funding agency. But that trial will run -- that's going to be about 60 patients, and it's an open-label study. So we will get data in real time. It's an important study, because it's looking at patients with preserved ejection fraction. And those patients don't currently have any FDA-approved products. So this will really allow us to take a very detailed look mechanistically at how the natriuretic peptide system can potentially work in treating these patients. And I think if we see the right type of biomarkers moving and changing, I think that would be very positive towards natriuretic peptide system playing a potential role in treating these patients really, which are -- represent almost 50% of the heart failure patients have preserved ejection fraction. And there are, as I said, no treatments approved for them. So it really is a very large, very untapped market that's out there. And so it's an important study, and it's one that we're very interested in seeing get started. And based on our discussions with the centers that are running it, we should see it start relatively soon. -------------------------------------------------------------------------------- Michael John Higgins, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [10] -------------------------------------------------------------------------------- Okay, that's very helpful. Just to follow-up on that. You mentioned you'll see the data in real time. Would you expect on quarterly calls to give us some updates as to enrollment feedback that you're getting in terms of the safety and efficacy, anything like that? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [11] -------------------------------------------------------------------------------- Yes, I mean, I think what we would probably do is -- I probably wouldn't do it every quarter, but probably every other quarter, when you get enough patients, I don't think putting data out on 3 or 4 patients at a time makes any sense. But when we get, say, 1/4 of the patients through and we have some type of look at the data, then we'll probably report on it. And obviously, safety is always monitored in any study on an ongoing basis. And certainly, we wouldn't anticipate based on the dosing that we're doing that we would see any acute safety issues. But obviously, if there was something significant that had to be reported, it would be reported probably inter-quarter, but that's not something we'd anticipate. -------------------------------------------------------------------------------- Michael John Higgins, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [12] -------------------------------------------------------------------------------- Very helpful. A couple on bremelanotide, if I could. We talked in last quarter about updates from any marketing-based clinical programs that the joint steering committee may pursue. Any updates for us on that? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [13] -------------------------------------------------------------------------------- The short answer is we're not ready to publicly release what specific targets. The longer answer is that we are in very healthy discussions with AMAG, and we anticipate definitely into the second half of the year that we will be giving some updates on some additional target indication areas for bremelanotide. -------------------------------------------------------------------------------- Michael John Higgins, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [14] -------------------------------------------------------------------------------- Okay. That's very helpful. And then lastly ex-U. S., you've mentioned you've got ongoing discussions with multiple partners. What you're looking for, in a broad sense, are you looking more upfront, more back-end-loaded, regional or independent by country? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [15] -------------------------------------------------------------------------------- The -- I mean, to a certain extent, everything is on the table. We really only started this significantly post the closing of the North American rights with AMAG, because at that time, prior to that, we were in discussions whether it was going to be a global deal or specifically a North American deal. So now post-February that we know the North American rights are now locked up with AMAG, we are pursuing rest of world territories. And the way it's coming -- moving along right now, I mean, some of the larger territories, say, Europe and Europe is always a little bit more of Asia, Western Asia there. We're getting activity there, Latin America. But we're also getting some activity, and we're pursuing some other -- say some of the smaller regions, the standalone countries. And that could be China, Korea, new territories, Russia -- not Russia, it's New Zealand and Australia appears to be a territory that's linked together. Our anticipation is that we'll have multiple collaborations there. There are a number of people that as discussions advance that, say, could handle multiple territories, i.e., some of the people that handle Europe are significant players in Latin America. Regarding your question on what are we looking for, I mean, it really depends on the territory, i.e., some of the smaller Rest of World territories, there is no market there. There is a lot of development that for the market that's going to take place. So there is only so much upfront you're going to be able to get. So it's going to be a variable deal. We don't -- in a nice way, since we now have the AMAG north American rights closed and we do have cash, it's -- we're looking more for the right partner and a variable deal. I'm not looking to try and beat somebody up, where we get the huge upfront, but they may not be the best partner from an infrastructure or distribution standpoint. And the best partnerships are the variable ones. When they do well, we want a share in it there. -------------------------------------------------------------------------------- Michael John Higgins, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [16] -------------------------------------------------------------------------------- I appreciate the color on that. One follow-up on the ex-U.S. marketing opportunity. Any proxies you're looking at for us to use to grade the potential value of an ex-U.S. deal? -------------------------------------------------------------------------------- Stephen T. Wills, Palatin Technologies, Inc. - CFO, COO, EVP, Treasurer and Secretary [17] -------------------------------------------------------------------------------- As of right now, I mean, I have a lot on my desk. I will tell you it's not like I have a lot of history, right? There's never -- female sexual dysfunction, the only thing that's ever been approved in the U.S., say, North America is Addyi. The only thing that's been approved outside the U.S. is Intrinsa, the Procter & Gamble one in Europe, and that one didn't do very well. So this is -- I don't think you're going to be able to point to something that -- because I don't have it. And I also notwithstanding the word that I do or Carl does, we do have some outside consultants that have expertise in these areas there. So it's really going to be a country-by-country basis. I mean, maybe with some of the larger territories, i.e., EMEA or Latin America, you might be able to have, say, a biomarker there. But regarding the smaller territories there, with no history and just a lot of work that has to be done to -- from an awareness standpoint, from an education standpoint for the market, I don't think you're going to be able to point to, what I call, any biomarkers there. -------------------------------------------------------------------------------- Michael John Higgins, Roth Capital Partners, LLC, Research Division - Senior Research Analyst [18] -------------------------------------------------------------------------------- That's very helpful. Maybe just one last follow-up or one last question here. You mentioned in our conference in March, the ROTH conference that there was some stock sales occurring from a shareholder. Can you provide us any updates as to where you believe that situation sits? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [19] -------------------------------------------------------------------------------- Yes, we actually -- we filed our Q last night, Michael, and there is -- so this is public; if it's not public, we don't disclose. But we actually put in the Q, both in our equity note and also there's a subsequent event note that the -- we call them the penny warrants. These are the warrants that the exercise price is a penny. Since the approval, there has been over $60 million -- I'm sorry, not the approval. Since the -- since our fourth quarter of 2016, Phase III, the bremelanotide Phase III results, the positive results where we met the co-primary efficacy endpoints, there has been a reduction in those penny warrants of over $60 million. As of March 31 -- and this number has gone down from, if you will, $120 million to as of March 31, we have approximately $51 million of penny warrants still outstanding. We haven't disclosed exactly who the 2 shareholders are that hold those penny warrants. But we do disclose in our Q the activity related to any equity. And what transpires with these penny warrants, in essence, they are exercised and sold. So our common stock has increased significantly also. A year ago, we were 80 million of common outstanding. We're now approximately 145 million of common shares outstanding. Our expectation is that these penny warrants will continue to be exercised and sold over the next quarter or 2. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- And we have a follow-up question from John Newman with Canaccord. -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [21] -------------------------------------------------------------------------------- Could you repeat that question, John? -------------------------------------------------------------------------------- John Lawrence Newman, Canaccord Genuity Limited, Research Division - Principal and Senior Healthcare Analyst [22] -------------------------------------------------------------------------------- Just wondering if you could talk a little bit about how you're thinking about 8177, specifically in IBD and if you would go for something more serious, like ulcerative colitis and Crohn's, or if you would go for something a little bit more on the mild side? -------------------------------------------------------------------------------- Carl Spana, Palatin Technologies, Inc. - Co-Founder, CEO, President and Director [23] -------------------------------------------------------------------------------- Sure. Thanks. Really initially, we'd be looking at probably ulcerative colitis. And 8177 is a peptide and we're actually -- although it's not orally bioavailable, meaning that if you take it orally, it doesn't get absorbed into systemic circulation, which is -- when we're treating ulcerative colitis or other types of bowel disease what we're talking about is local delivery. So we're actually working and we should, hopefully by the end of the year, have a pretty good read on, on the development of a capsule that you would take and essentially it would dissolve in lower part of the colon and release the drug for treatment there. So really what some initial indications would be in ulcerative colitis. When you're initially going into the clinic for those types of indications, what's attractive about it is you can do biopsy, although you have to treat for 8 weeks before you see healing of the luminal wall. You can do biopsies earlier than that and begin to look at different biomarkers, is the target being engaged, are we seeing suppression of some of the pro-inflammatory cytokines in the right types of cells infiltrating. So it's a first type of study we would be looking at doing would be one where you're going to be -- you're probably not looking for an overt clinical outcome, which would -- you're really going to be looking more for treatment and demonstration of target engagement and suppression of pro-inflammatory pathways and changing the cell infiltrate. So that's really -- and again, from a positioning standpoint, one of the best thing -- one of the interesting things about targeting the melanocortin pathway is that they have very little to no systemic toxicity here. These are drugs that can be -- the system is only up-regulated when the patient is undergoing an inflammatory condition and it's local at the site where the inflammation is occurring. So we think we can dose quite well here. And we really would see this coming in post the steroid, methotrexate type stuff and before you go on to the more expensive and more difficult-to-use injectable products, the anti-TNFs, some of the other injectable antibodies that are coming out. So we think there's a very nice position for this product and it's one where we'd like to able to show that we can actually see good remission rates and maintenance of remission in patients that go into remission. All right. And if there are no other questions, I would like to thank everyone for participating on our Third Quarter Conference Call. It's a very busy time at Palatin, a lot of work being getting that bremelanotide NDA together going forward. And the team is also quite excited about -- we're pushing some of these earlier programs forward. And we're very excited to see them move forward and have the resources to properly do that. And we certainly look forward to continuing to update everyone as we make progress. And with that being said, have a great day. And we'll see some of you throughout the quarter. And we'll look forward to updating you at the end of next quarter. Thank you. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- This concludes today's call. Thank you for your participation. You may now disconnect.