AIM ImmunoTech Inc (AIM) 2006 Q3 法說會逐字稿

Greetings, ladies and gentlemen, and welcome to the Hemispherx Biopharma investor update conference call. [OPERATOR INSTRUCTIONS]. It is now my pleasure to introduce your host, Steve Spence, Director of Hemispherx. Thank you, you may begin.

Thank you. Good afternoon to everyone. Welcome to the Hemispherx Biopharma conference call. I'm Steven Spence, I'm a Director on the Board of Hemispherx. Joining me today on the call we have our Chairman and CEO, Dr. William Carter and our CFO, Robert Peterson.

I just want to take a few quick moments to read our Safe Harbor statement. The information contained in this conference call other than historical information should be considered forward-looking and is subject to various risk factors and uncertainties. For instance, the strategies and operations of Hemispherx involve risks and uncertainties, changing market conditions, changes in laws and regulations affecting these industries and numerous other factors discussed in this release and in the Company's filings with the Securities and Exchange Commission.

Any specifically referenced investigational drugs and associated technologies of the company including Ampligen, Alferon LDO, and Oragens are experimental in nature and as such are not designated safe and effective by regulatory authority by general use and are legally available only through regulatory trials with referenced disorders. The forward-looking statements represent the Company's judgment as of the date of this release, the Company disclaims however any intent or obligation to update forward-looking statements. Clinical trials for other potential indications of the approved biologic Alferon do not imply that the product will ever be specifically approved commercially for these other treatment indications.

With all that completed I will turn the call the over to Dr. Carter.

Thanks very much, Steve. As everyone knows this is the third quarter of fiscal 2006 conference call. We are going to really touch on three items today. The first is going to be a ramping up of the chronic fatigue syndrome NDA and potential marketing program, and then I'm going to turn it over to Mr. Peterson for a brief update on the fiscal status and finally I will close with some benchmarks that we are looking to achieve in late 2006 and 2007.

I think all of you who are in this call know that we are on an accelerated path now to apply for New Drug Application for the treatment in chronic fatigue syndrome with Ampligen which is of course an RNA based therapy. We do have a very robust pipeline of RNA based therapy and as many of you know this has become one of the hottest topics in medicine today and in fact the Nobel Prize was given about a month ago to two physicians in Massachusetts and at Stanford who developed a special type of RNA which has some very unique properties.

We are obviously preparing a new drug application for which we intend to initiate before 12/31/06 and I will give you a few details about that. One of the major catalysts here has been the role of the Centers For Disease Control and as you know, the Center For Disease Control is a Federal agency which literally is the nation's health protection agency. And I would encourage all of you who have not looked recently at the CDC website or who have not seen any of the recent nationwide announcements to look at the Web site, specifically to go to the part that says, CDC.gov/CFS/PSA [sic -- see http://www.cdc.gov/cfs/PSAGerberding.htm]. Let me repeat it. CDC.gov/CFS/PSA.

This will give you an opportunity to see what I think is one of the most remarkable advancements that we've had in 15 years in chronic fatigue syndrome which is a brief, two-minute scientific and medical and public policy statement by Dr. Julie Gerberding who as you know, is Director of the CDC. In this announcement, she states for the first time that there are now believed to be at least 4 million Americans who have this disease much that's up 400% since their last analysis which is about 1 million people. She further describes very briefly some of the genetic problems, the cognitive problems, some of the organic issues here. And states explicitly, this is one of the most severe diseases in America and she is seeking help from the medical and the pharmaceutical communities to deal with this problem.

Now, for some of those who of you who have followed the company for a few years, you know that we've done macroeconomic studies on Ampligen and we have of course looked at the disease itself from how it ways on the American economy and how it ways on individual patients and families. And given the new number of 4 million Americans or more taking the CDC's own data, it would appear that this disease is costing the taxpayers about $60 billion a year, not including the Social Security disability payments. So it's obviously having a huge effect on the country's medical economy as well as having devastating effects on individual families.

So we reached a conclusion in various meetings and conversation with the FDA that now is the time to move forward with our New Drug Application. It's a huge amount of work. Some of you I think have heard this figure, we are going to be reporting on 80,000 drug administrations. Most of it, though not all of it, is in chronic fatigue syndrome and we have been having a series of tell conferences and meetings with the FDA, more meetings are planned in the near future. And the quality of the guidance that we've been receiving from the agency has been very high and very helpful to us. And all this has produced the, contributed to the momentum that we feel that we have at this point.

Some of you also know that other branches of the U.S. Government including an agency for research and quality have stated that just based on our Phase II data not even including the newer Phase III data that our drug was quote the most promising clinical results related to CFS, unquote. So we feel very comfortable about this. Some people say, why are you taking so long to do the New Drug Application? It's important to remember that some of the reporting requirements have changed in more than a decade and or so that we've been in the clinic and obviously there's a whole set stringent reporting requirements. We have to make absolutely sure about the safety issues so we are doing a lot of field auditing of many of these 80,000 injections to be absolutely sure that we are producing all the data that relates to the safety because this is very important regardless of the fact that this is a very severe disease.

And we continue to feel confident that the drug has therapeutic potential and has a very favorable safety profile. And again, coming in a setting here where you are looking at what could be $60 billion per year, excluding disability benefits which is being lost in the U.S. economy due to this disease.

Now at this point before I go over some of the specific bench marks and targets that we are looking at in the coming weeks and coming months I want to turn it over to Pete Peterson just to give us an encapsulation of the third quarter financially. Pete?

Thank you, Dr. Carter. Once again we filed our form 10-Q for the third quarter ending September 30, '06, with the SEC on November 7, 2006.

Our financial statements for the third quarter reflect a net loss of $3.8 million, including non-cash expenses or an increase of $1.164 million compared to the same period in 2005. This increase basically reflects increased spending and direct costs associated with the development of our lead product Ampligen as a therapy to treating serious debilitating disorders. Much of our R&D spending this period relates to our production polymers at our new production plant and recently installed in our New Brunswick facility as well as the manufacturing and scientific efforts devoted to our new drug application efforts for Ampligen and certain costs related to clinical and clinical trial testing for possible treatment for Avian and seasonal influenza viruses. Our net loss per share was $0.06 for the third quarter versus $0.05 for the same period in 2005. On a nine-month YTD basis our net loss per share was $0.24 for 2006 versus $0.18 for the same period in 2005.

Our balance sheet and liquidity remains strong as of September 30, With cash and cash equivalents of some $19 million and stockholder equity of approximately $21.3 million. Our five, $50 million stock purchase agreement has been implemented and as of November 1, Fusion Capital has purchased 922,000 shares for an aggregate gross proceeds of $1.85 million Thank you, Dr. Carter. That concludes our financial comments.

Thanks very much, Pete. I want to just, Pete said at the end the Company's balance sheet remains quite strong despite the fact that as we build up our Ampligen supplies, because it is an experimental product we immediately write it off.

Essentially we are building up supplies of both products and at the same time the facility is really humming, several million dollars have been put into improvements in that facility. I understand the shareholders of the facility of this company you can be very proud of that facility. As you know it's over 40,000 square feet. You are also aware of the fact that it is a major portion of the facility is already FDA approved. It already has an establishment license, it gets regular inspections including next spring or late winter of 2006. So what we are trying to do is build this facility out so that it will configure with the FDA requirements not only for Alferon, not only for Alferon LDO, but also for Ampligen, we are trying to anticipate not only ample supply of Ampligen for Chronic Fatigue Syndrome but also other indications you have read about now news flow and in our 10-Q, which would of course require substantial material.

As you know we continue to be very active in the Avian influenza, and the seasonal influenza space. There h was a paper red by the Director of Pathology at the Japanese Institute of Infectious Disease several weeks ago, Dr. Hasegawa in Vienna, and he stated very, very clearly in a paper that has now been submitted for publication that Ampligen can provide a high cross protection against Avian influenza viral mutations. To our acknowledge this is the only product that has demonstrated this type of activity in primate models and you may have seen on Monday less than 48 hours ago, that the FDA issued new warnings about the use of Tamiflu, new side effects which have not been recorded and also additional warnings that the only known use of this product is in seasonal flu which the, only known use which the FDA recognizes is in seasonal flu. So there's a big opportunity in the seasonal and Avian influenza space.

We will be initiating very, very shortly, a major clinical trying looking at the ability to enhance the effectiveness of vaccines in Australia. And, of course, we are continuing a very active dialogue, very active experimentation in Canada, in the United States and a major, major program in Japan working at the highest level of sophistication within the Japanese health research complex which I think most people would say is in the lAboratory of Pathology At the National Institute of Infectious Disease which is Dr. Hasegawa's laboratory. So it's a broad ranging program, additional clinical studies of LDO are occurring in Hong Kong and other locations.

I want to come to the important milestones for the coming quarter. In this particular quarter we expect to initiate the filing of the new drug application for Ampligen for chronic fatigue. I will tell you that every week we are buttressing our staff in any area that we see that may a shortfall. Fortunately for us there's an unusually large pool of talented professionals in the northeast corridor of the United States specifically in the Princeton, Philadelphia, New Brunswick area because of all the attritions that are occurring in the multinational pharma-companies. And indeed many more are planned for December and January apparently, largely driven by the lack of robust drug pipelines and drugs going off patent. This is a great opportunity for us to fill any voids and I can assure you that we are hiring, we will call visiting firemen on a regular basis, to come in and with their expertise help us in one part of a very gigantic undertaking.

We are going to initiate a pivotal trial in Australia with Ampligen. It's a very exciting thing, we are going to be looking at the vulnerable populations, particularly the young and people over 60 years old who usually have very poor responses to the vaccines. We are also going to be initiating a very major study in the Netherlands in a place called The Viral Clinic. These are primates, the significance of primates in Avian influenza of course, is you can get in under the two animal rule test if a disease does not exist in the United States at this time which of course at this time it does not. It is however an endemic disease in southeast Asia.

In the first quarter of this coming year we expect to announce an integrated overview of all of the studies, we've done three studies with Ampligen and Chronic Fatigue Syndrome. We have submitted a paper to the eighth international Chronic Fatigue Syndrome conference which is due to be this year in Fort Lauderdale, marks and assuming this paper is accepted we will be reviewing a comprehensive analysis of safety and efficacy. This will be a very impressive document. And this in effect our leading position with respect to our New Drug Application. It is called the Integrated Safety Summary, Integrated Efficacy Summary and this is what we are forming for the FDA and we may have an opportunity to present it on January 10 through 14, 2007.

We are also commencing in January or February another animal study in Avian influenza at Southern Research, a distinguished location in Birmingham, Alabama. Again, this would allow us the animal rule accelerated approval track and we would be basically going for amendments to the existing approval of Alferon and then, of course, an additional amendment to the application that we have for approval to Ampligen. So you would be looking in 2007 to up in theory up to three or four approvals that we would be seeking. And I'm talking about approvals to market, obviously.

In the second quarter of 2007 we would expect to be able to report the results from the Australian study and I would also say that the FDA has issued new guidance documents that in influenza antibodies itself is enough to proof efficacy which means that it's an accelerated path to efficacy in which hundreds of, limited numbers of patients, 50, 100, 200 patients, can substitute for 5,000. This is a major, major advance by the FDA designed to try to accelerate vaccines and agilents and immunomodulators that assist vaccines. A major advance and we may be able to take an active role in that.

We also expect in the second quarter of 2007 to complete or our stability data on our new manufacturing applications in New Brunswick and Spokane, Washington. This is very important because you have to have full stability data on your new manufacturing sites before the FDA will permit you to sell. They will often review the application but will not give you the final approval until you have stability data in your new locations and we are targeting that for some time in the second quarter.

By the third quarter, we would believe that we are in an excellent position to receive an approvable letter from the agency on CFS. I am talking about what that approvability means in a moment. We also believe that we will be able to initiate new studies with Alferon in a very devastating disease called VBS. This is a disease that affects 14 million women in the United States and prevent them from having sexual relations. Obviously this is a huge problem for these 14 million women and the studies that have been done by independent sponsors in two different studies would suggest that Alferon may be a biologically active drug in this disease. Again, there's two studies, about 150 patients not sponsored by the company.

With respect to the approvable letter, our belief is that the number of patients that we have studied and the three different well-controlled trials that we have studied given the seriousness of the disease, given the recognition by the Centers For Disease Controls, specifically Dr. Gerberding and her staff and given the $60 billion of what's being lost and the seriousness of the disease, we think we have met the regulatory standard. Now we are obviously not in a position to speak for the FDA but we believe that the numbers of patients that we've treated, the responses that we've seen place us in a very strong position. And we believe that no further studies should be needed given the seriousness, given the consistency of our results, given the 80,000 administrations which have not resulted in a severe, adverse event which a doctor believed was due to our drug. So this is a shorthanded way of saying that the physicians who have been involved in our studies believe the drug has been generally very safe.

So in the fourth quarter of 2007, our target is to launch this product of Ampligen for the CFS market opportunity. We believe that that quarter will also result in a full detailed peer reviewed publication of the Phase III data either in the New England Journal of Medicine or in some comparable publication. And finally we should be in a position by the fourth quarter of 2007 to file an amendment to our FDA approved Alferon N to include Avian influenza and a new round of administration. These are all targets that we are aiming for and these are intrinsic desires that are forming the basis of our thinking as we build out this already approved biological facility in New Brunswick.

Now, I will tell you that we believe that the best way to launch this product initially is through a specialty pharma-organization, one of or more specialty pharma-groups. These are organizations that deal with patients who need infusional treatment, need a lot of care, a lot of observation. The FDA wants to know what's happening in terms of adverse events and benefits, et cetera, and especially pharma-organizations have that capacity.

One of the last products to have such a successful launch was actually help Epogen. Epogen by Amgen was launched by specialty pharma-who like Ampligen was an orphan drug product that went into a much larger market and within a couple of years, our sales were were $2.6 billion. This is one of many examples where these high need products that meet unmet medical needs in very sick population given the right nursing, the right physician base, small, elite marketing forces can do great things for the patients and for the shareholders. You will be hearing more in the coming months or so about, month or two about our specific launch plan.

At this point, operator, we will take just a couple of questions. We have about five minutes or less for questions.

[OPERATOR INSTRUCTIONS]. We will take the first question from Chris Sassouni. Your line is live.

Given all the milestones that you've got lined up for 2007 and for the fourth quarter, roughly how much capital will be required to execute the plan and is it likely that you will have to have to raise more capital or drive down on that visit million dollars facility?

We expect it to be a modest drawdown if any, if indeed any, because one of the things that we are going to do with the Alferon N product is to relaunch it with what we believe will be a more, much more effective marketing strategy which will actually fold into a potential Ampligen launch. As I sort of suggested, although I didn't make the conclusive statement, much of our infrastructure building in terms of construction, building up of inventories, et cetera, while not all of it it is done, the majority of that is apparently behind us. So we don't anticipate to have any major tranches out of this drawdown.

We will, however, at all times keep a very strong balance sheet to deal with any vagaries that may come up either in terms of new requirements or unexpected requirements that we don't project. But right now we see that as essentially an insurance policy in case any money might be needed.

You are saying for all of 2007 you don't expect to spend even $19 million?

As I said I don't expect to take down any major tranches out of that $50 million drawdown. Obviously we are going to maintain a strong balance sheet and I think our definition of a strong balance sheet is in the range of where it is now.

Okay. Second question I had is that when Ampligen is launched who would you expect would be the target physician population and what is available today to diagnose a patient with Chronic Fatigue Syndrome other than --

Those are two good questions. Let me answer them very briefly. If any of you happened to see the replay of the Rodman and Renshaw conference, we spoke about the 50 centers that have been part of our clinical development program. Most of these centers have been in Chronic Fatigue Syndrome. The average rolodex is about 2,000 patients per center. So these up to 50 centers constituting up to 100,000 patients with relationships that we already have in place, those are our target patients, those are our target doctors. They tend to be almost always internists with a subspecialty in infectious disease immunology, one or two of them are neurologists. But essentially they dedicate a lot of their professional practice to a multidisciplinary clinic which is dedicated to Chronic Fatigue Syndrome, and those are people we will be seeing in Fort Lauderdale on January 10 and these are people we have been working with and copublishing papers with over the last ten years. That's our target and that's our target group.

What's interesting about the diagnosis is that even though the Centers For Disease Control has been prolific in publishing and sponsoring many papers which speak to the organic issues here, the severe debility, the genetic disorders, with possibly one or two exceptions including the test that was developed in Belgium partly under our sponsorship, which is a test that shows a defect in the immune system, no test has risen to be the absolute gold standard in clinical diagnosis. No laboratory test. But notwithstanding this, the remarkable thing is that when you go through the clinical diagnostic conundrum which is to exclude disease A, which might be systemic Lupus, exclude HIV, exclude hepatitis, et cetera, exclude malignancies, when you go through this checklist which the CDC has recommended you ends up with a uniform group of people, you see, well, doctor, how do you know this? Look at the CDC's own papers. When they look at the genetic profiles of these patients that show the defects in the energy producing genes, the genes that cause people to walk, contract muscle, drive cars, et cetera, et cetera, they don't find it in numbers of defects, they finds a very specific set of energy related genes which are deficient in these people and which are apparently the reason they can't stay on treadmills and they can't walk and they have post exertional fatigue.

So what's fascinating here is that if you use the clinical diagnostic booklet that the Centers For Disease Control provides and walk through those steps and do those laboratory tests which exclude other diseases, you do in fact end up with a homogenous group of people even at the genetic level, which is really remarkable. And, of course, when you -- which is obviously the test that we used, and when we applied this in three different studies in more than whatever it was, 700 patients, we found a consistent endpoint being met repeatedly in the majority of those patients. So I would say that use the book that exists. Yes, if you want to use some of these more sophisticated laboratory tests, they can provide data but it's not necessary.

I'm going to take one more quick question and then that will be it.

We will take the last question from [Lou Ritorno], your line is live.

Dr. Carter, good afternoon. Two quick questions. When you presented at Merchant Capital, you projected towards the ends of the conference and presentation you projected hundreds of millions of revenue within the first 12 months of marketing and sales of Ampligen for Chronic Fatigue Syndrome. What type of a penetration rate do you expect within the first 12 months of marketing Ampligen?

Would you repeat the last part of your question?

Penetration rate, okay?

The penetration rate is going to be, of course, very, very, very low given the fact that there's 4 million people out there and given the fact that we are going to be looking at a subset of very severely debilitated patients who are principally encamped in these up to 50 centers. We are going to have a very, very low penetration rate by design because we want to launch this product initially into the very debilitated patients which are the once that tends to go to these multidisciplinary centers.

Obviously with the passage of time and assuming that the drug behaves post launch as we think it should, then we will undertake to enlarge the market size. But initially it's going to be very small. Operator, thank you for your question, by the way, Lou. I think we have to end the call now. I want to remind, first of all, thank you all for attending and participating. We will be playing back this conference call for several weeks for those of you who might be interested. So thank you so much. Goodbye.

Thank you very much, ladies and gentlemen. This does conclude your conference call. You may disconnect your lines and have a wonderful day.