Setback for AZN Obesity Drug

Palatin Technologies, Inc. (PTN - Snapshot Report) recently announced that the company and its partner, AstraZeneca (AZN - Analyst Report), have halted the development of phase I obesity candidate, AZD2820. AZD2820 is a subcutaneously-administered peptide melanocortin-4 receptor partial agonist. The clinical development of the candidate was stopped after it was suspected that it may cause allergic reactions.

AZD2820’s safety, tolerability, pharmacokinetics and pharmacodynamics were being evaluated in an ascending dose phase I study conducted by AstraZeneca. AstraZeneca planned to enroll 72 obese males for this trial. However, the study was stopped by the Safety Review Committee at AstraZeneca due to the occurrence of the aforementioned serious adverse event. Before the study was discontinued, 11 patients had already completed their dosing schedule.

We note that this was the second phase I study of AZD2820. The first one was completed in 2011 without any reported incidence of serious adverse events.

Agreement

In January 2007, Palatin and AstraZeneca entered into an exclusive research collaboration and license agreement for the development of melanocortin receptor drugs for the treatment of obesity, diabetes and related metabolic syndrome. The agreement has been modified several times since then to include more compounds and amend royalty rates and milestone payments.

As per the terms of the agreement, Palatin is eligible to receive mid-to-high single digit royalties on sales of any approved products arising from this collaboration. The research collaboration expired in January 2010 post which AstraZeneca has undertaken all the developmental duties.

Our Recommendation

We currently have a Neutral recommendation on both AstraZeneca and Palatin. While Palatin carries a Zacks #2 Rank (Buy rating) in the short run, AstraZeneca carries a Zacks #3 Rank (short-term Hold rating).