Palatin Technologies, Inc (PTN)

F3Q2011 Earnings Call Transcript

May 16, 2011 11:00 am ET


Carl Spana – President and CEO

Steve Wills – EVP, Operations and CFO

Jeffrey Edelson – CMO


David Moskowitz – Roth Capital

Leland Gershell – Madison Williams and Company

Adam Selkin – Chardan Capital Markets



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Good morning, ladies and gentlemen, and welcome to the Palatin Technologies third quarter fiscal year 2011 conference call. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session and instructions for the question-and-answer session will be given at that end of the company’s remarks. As a reminder, this conference is being recorded.

Before we begin our remarks, I would like to remind you that statements by Palatin that are not historical facts may be forward looking statements. These statements are based on assumptions that may or may not prove to be accurate and actual results 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 would like to introduce your host for today’s call, Dr. Carl Spana, President and Chief Executive Officer of Palatin Technologies. Please go ahead, sir.

Carl Spana

Thank you. Good morning. I’m Carl Spana, President and Chief Executive Officer of Palatin Technologies. With me on the phone today is, Steve Wills, Our Executive Vice President of Operations and Chief Financial Officer; and Dr. Jeffrey Edelson, our Chief Medical Officer.

On today’s call, we’ll be providing updates on product programs and financial results. Again, Steve Wills will provide an update on the fiscal third quarter financial results. Steve?

Steve Wills

Thank you, Carl, and good morning, everyone.

Regarding the financial

update, Palatin’s net loss for the quarter ended March 31, 2011, was $3.8 million or $0.17 per basic and diluted share, compared to a net loss of $2 million or $0.20 per basic and diluted share for the quarter ended March 31, 2010. The increase in net loss for the quarter ended March 31, 2011, compared to the net loss for the same period last fiscal year was primarily due to a decrease in revenue recognized under our collaboration agreements with AstraZeneca as a result of the successful completion of the research collaboration portion of the agreements in January 2010 and secondarily, to a non-cash non-operating expense of $1.3 million, which represents the increase in the estimated fair value of a warrant liability recorded on the balance sheet in connection with our previously announced underwritten public offering, which resulted in net proceeds of $21.1 million. In connection with this underwritten public offering, a portion of the warrants issued in March, 2011 require that the company seek stockholder authorization to increase Palatin’s authorized common stock and are therefore, classified as a liability at their estimated current fair value on our balance sheet as of March 31, 2011.

Warrants that are classified as a liability are revalued at each reporting date until the classification as a liability changes.

On May 11, 2011, at our Annual Meeting, the stockholders approved an increase in authorized common stock from 40 million shares to 100 million shares, providing sufficient available and authorized common stock to permit exercise of all Series B warrants. Accordingly, these warrants seek to be classified as a liability and will not be reported or revalued at any subsequent reporting date after May 11, 2011. In essence, the amount classified as liability will be reclassified to the equity section of our balance sheet during the quarter ended June 30, 2011. In addition to the approval to increase Palatin’s authorized common stock, the following proposals were submitted to and approved at our Annual Stockholders Meeting on May 11.

The election of seven directors to Palatin’s Board of Directors, the appointment of KPMG LLP as Palatin’s independent registered public accounting firm for fiscal year ending June 30, 2011 and the ratification of Palatin’s 2011 Stock Incentive Plan.

Regarding revenues, for the quarter ended March 31, 2011, we had $0.1 million of contract revenue recognized under agreement with AstraZeneca compared to $2.6 million for the same period in 2010. For the quarter ended March 31, 2011, total operating expenses were $2.7 million compared to $4.6 million for the comparable quarter of 2010. The decrease in operating expenses for the quarter was primarily related to our previously disclosed realignment of resources.

At March 31, 2011, Palatin’s cash and cash equivalents were $22 million, compared to cash and cash equivalents of $8.9 million at June 30, 2010. We anticipate, based on our current operating plan, being able to fund our operations through calendar year 2012. Having strong position on our balance sheet eliminates the need and distraction of quarterly or semi-annual fund raising and allows us to focus our efforts on the advancement of our programs.

Carl Spana

Thank you, Steve. An update on our programs. First up is our obesity and diabetes in melanocortin-4 receptor program which is partnered with AstraZeneca. As I’m sure, you are all aware obesity is a major health issue. A recent report by Thomson Reuters noted the following. Obesity is the global epidemic of the 21 century. The Center for Disease Control h as declared it to be the number one health threat in the United States. At the present time, worldwide, there are over 1 billion adults overweight, with 300 million classified as clinically obese. By 2015, the world’s organization predicts these figures to rise to 2.3 billion overweight and 700 million clinically obese adults. We believe the therapeutics that target receptor have the potential to demonstrate safety and efficacy required for approval and dramatically impact the treatment of obesity.

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