Altimmune Inc (ALT) 2008 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the First Quarter 2008 PharmAthene Earnings Conference Call. My name is Katy and I'll be your coordinator for today. At this time all participants are in a listen-only mode.

We will be conducting a question and answer session towards the end of this conference. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to your host for today, Ms. Stacey Jurchison. Ma'am, you may proceed.

Thank you, Katy. Good afternoon, ladies and gentlemen, and thank you for participating today. Joining me on the call this afternoon are David Wright, our President and Chief Executive Officer and [Nicole Lisander], Director of Finance and Accounting.

Before we begin, I'd like to remind you that during today's call we'll be making forward-looking statements which are within the meaning of the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

All forward-looking statements included in this conference call are based on information available to the company on the date of this call, Tuesday, May 13, 2008. The company undertakes no obligation and expressly disclaims any such obligation to update the forward-looking statements made in this conference call to reflect events or circumstances after the date of this call or to update reasons why actual results would differ from those anticipated in such forward-looking statements.

For a consideration of risk factors, please refer to our annual report on Form 10-K filed with the SEC. I will now turn the call over to David Wright, PharmAthene's President and Chief Executive Officer. David?

Thank you, Stacey, and good afternoon to everyone. Thank you for joining us today to discuss our first quarter 2008 operational highlights and financial results. I'll begin with a brief review of the quarter and then Nicole will review the financial results. Following this, we'll open up the call to your questions.

The most significant event for us during the first quarter was the announcement of our acquisition of Avecia Biodefense Vaccines Business Unit. Through this acquisition, which closed on April 2, PharmAthene acquired a second generation recombinant protein antigen, or rPA anthrax vaccine, a recombinant dual antigen Plague vaccine, and a third generation rPA anthrax vaccine program.

Our integration activities are going smoothly and we are pleased with the progress to date. Importantly, we're very enthusiastic about the potential opportunities represented by each of the Avecia vaccine programs.

The combination of these assets, these vaccines with our existing biodefense products, Valortim and Protexia, has created a significant biodefense portfolio consisting of five next generation product opportunities, some of which are poised for strong revenue potential over the next 12 to 18 months.

We have also created important critical mass in our portfolio, particularly with respect to anthrax countermeasures, which are recognized by the government as the highest priority biological threat to the nation.

As a reminder, a Form of Solicitation, or RFP, with the requirement to procure 25 million doses of a novel rPA anthrax vaccine, was issued by the Department of Health and Human Services, or DHHS, on February 28.

Based upon this requirement, we estimate the initial market opportunity for an rPA vaccine could be valued in the range of approximately $350 million to $600 million. We are currently in the process of preparing our response to this RFP.

Now while we cannot be certain, DHHS has indicated that it intends to issue a procurement contract for rPA vaccine by December 31 of this year. If we are successful in being awarded a procurement order under this RFP, it would represent a significant revenue opportunity for PharmAthene.

We continue to believe there is a tremendous unmet need for a second generation anthrax vaccine that offers the potential for improved safety and convenience and that our RPA anthrax vaccine is uniquely positioned to meet the government's current requirements.

With regard to the third generation RPA vaccine program, Avecia submitted a response to the National Institutes of Allergy and Infectious Disease last year for advanced development funding for this program. We anticipate that NIAID will award a contract some time this year and we are hopeful that PharmAthene's program will be selected.

Continuing with our anthrax franchise, I will briefly update you on recent activities in our Valortim program. As you may recall, Valortim is a fully human monoclonal antibody designed to protect against and treat inhalation anthrax infection.

The company is co-developing this product, Valortim, with Medarex. We continue to expect to complete manufacturing scale up for Valortim in 2008. Currently, we are focusing on completing formulation development activities for the product.

Also in 2008, we anticipate completing our GLP animal model development for a therapeutic indication for Valortim. We are currently performing PK studies, evaluating several different dosing levels, which will help us to set the dosing schedule in the therapeutic efficacy studies which will commence later this year. If our progress remains on target, next year we also plan to begin a human study of Valortim in combination with antibiotics.

Turning to Protexia, our nerve agent counter-measure, in the first quarter we also made significant progress in this program. Recently we reported new pharmacokinetic data using the final PEGylated product showing that Protexia achieved its target product profile and demonstrated an acceptable half-life in two animal species. The data compared very favorably with what had been predicted for Protexia's profile in these models.

Importantly, we have completed our first clinical scale GMP manufacturing batch for Protexia which represents a major CNC milestone for the program. We have also initiated pivotal IND-enabling toxicology studies in both rodents and non-human primates. Given this progress, we remain on track to file the IND for Protexia in the third quarter of this year and plan to begin a Phase I human safety trial in the fourth quarter.

As previously reported, PharmAthene was awarded an advance development contract from the Department of Defense in 2006. We continue to maintain a very positive relationship with the DoD and they appear pleased with our progress.

As earlier announced, based upon the success of the program so far, DoD recently initiated a contract [mod], which provides an additional $5.8 million in funding for the Protexia program.

Now before I turn the call over to Nicole, I also want to remind investors that we will continue evaluating new biodefense products or commercial opportunities to add to our portfolio through end-licensing, acquisition or co-development agreements to advance PharmAthene's mission to be a leading provider of biodefense medical counter-measures that are urgently needed by the government.

We will continue to focus on high priority biodefense products that the government has a clear need and intent to procure and which also have meaningful near to mid-term procurement potential. At this point, I'll turn it over to Nicole to take you through our financial results. Nicole?

Thank you, David. We released our first quarter 2008 financial results earlier this afternoon, immediately following the close of the U.S. financial markets. We will be filing our Form 10-Q with the SEC shortly.

In the first quarter of 2008, PharmAthene recognized revenues of $5.8 million, compared to $3.0 million for the same period in 2007. Our revenues consist primarily of contract funding from the U.S. government for the development of Protexia.

The significant increase in revenues in 2008 is primarily attributable to revenues provided under the Department of Defense Advance Development and Procurement Contract for Protexia which totaled $5.6 million in the first quarter of 2008 as compared to $2.9 million in the same quarter of 2007.

Research and development expenses were $5.9 million in the first quarter of 2008 compared to $3.1 million in the first quarter of 2007. The year-over-year increase in research and development expense of $2.8 million occurred primarily as a result of increased process development and manufacturing activities related to our Valortim and Protexia programs and from increased employee-related expenses including stock compensation expense.

Expenses associated with general administrative functions were $4.7 million during the first quarter of 2008 compared to $2.5 million for the same period in 2007. The year-over-year increase was primarily due to increased employee costs, increased stock compensation expense and additional consulting and legal expenses associated with our compliance functions.

Net loss for the first quarter of 2008 was $5.0 million, or $0.23 per basic and diluted share. As of March 31, available cash, cash equivalents and short term investments totaled $25.7 million after giving (effect) to $20 million in restricted cash.

The restricted cash on our balance sheet is comprised of $10.0 million in connection with our credit facility, with Silicon Valley Bank and Oxford Financial and a letter of credit for $10.0 million related to the Avecia acquisition.

Prior to the closing, but after March 31, this letter of credit requirement was reduced to $7.0 million. Accordingly, our current restrictive cash is approximately $17.0 million. I'll now turn the call back over to David to wrap up. David?

Thank you, Nicole. With the Avecia acquisition now complete, PharmAthene has made great progress advancing our strategy of becoming a premier biodefense company with industry-leading capabilities and a diversified biodefense portfolio.

We believe our approach is unique. We have sought first to understand the needs of our customer, the government, and then identify and acquire the very best products to meet those requirements.

By adhering to this strategy, we have built a diversified portfolio that includes novel, next generation rPA anthrax vaccine; an anthrax antitoxin, Valortim; a chemical nerve agent bioscavenger, Protexia; and, a novel dual antigen Plague vaccine. Many of these programs are poised to achieve important milestones this year, which have the potential to create significant value for our stockholders.

Second, PharmAthene is a development company, not a research organization. The members of our management team have been involved in the development and launch of over 30 successful biopharmaceutical and biotechnology products and have the necessary experience to bring products to market.

During the first quarter, we enhanced our executive management team and added Joan Fusco as Senior Vice President of Operations. Joan was responsible for overseeing the development and procurement of the smallpox vaccine into the strategic national stockpile during her tenure at Baxter and then subsequently with Acambis.

We believe very strongly in finding the right products and the right people to get the job done and this approach has so far proven successful. 2008 will be a very important year for the company as we expect to reach a number of significant milestones which have the potential to create substantial value for our shareholders.

As I mentioned previously, we will be submitting our response to the RPA anthrax vaccine. While we cannot be certain, DHHS has indicated that it plans to award an RPA vaccine procurement contract by December 31 of this year.

We will also be filing an investigational new drug application for Protexia and commencing the first Phase I safety study in humans which we expect will be completed early next year.

Finally, we expect that the NIAID will decide whether to award PharmAthene a contract to develop its third generation rPA vaccine technology. We expect that 2008 will be a very exciting year and we hope you will stay tuned to our progress.

Before I close, again, let me thank our employees and shareholders for their continued commitment and support without which these exciting developments would not be possible. I'll now turn the call back over to the operator for your questions. Operator?

(OPERATOR INSTRUCTIONS). Your first question comes from the line of [Jeremy Grolick] from GunnAllen Financial. Please proceed.

Hi, I'm very happy with the progress that you guys have made as of today. There's only one thing on the conference calls that we love to hear and I've been a shareholder from the inception with healthcare acquisition.

I would like to ask a question with regards to PR, public relations, with regards to getting the word out to the street -- volume has been a little light. I know a lot of shares are institutionally held as well as insider -- as well as being insider held. Is there anything that you guys, going forward over the near term, are out there on a daily basis telling your story?

Jeremy, that's an excellent question and it actually is something that we have not as done as good a job at as we should and consequently we have made some changes internally just recently, not only in how we're handling PR, but with the emphasis that we're putting on it. We have hired a new firm which we believe will be helpful.

It is in fact the firm that helped [Beringer Nordic] with their program in the smallpox vaccine. So I myself am getting on the street more and we are working with some folks to try to set up some non-deal road-shows as well as create, increase the amount of public relations and investor relations that we're doing.

All right. I'm also -- like I said, I'm very pleased with the -- to date, what's going on and I'm in it for the long haul, but do you guys have an idea who else put in an RFP?

And I was doing a little research on this and it says that the government is looking to initiate procurement -- I guess there's no guarantees on the date -- at the end of September of '08. Has that changed now, from your comments as of year end of this year?

Yes, it actually changed this week, Jeremy. There were several companies that requested an extension and the date for submitting is now July 24 and the date for awarding is December 31.

Okay. So the --

That is as of close of business Friday of last week.

Okay. Very good.

Thank you, sir.

Thank you.

(OPERATOR INSTRUCTIONS). Your next question comes from the line of Gary Siperstein of Eliot Rose Asset Management. Please proceed.

Gary?

Gary, you are in the queue. You may proceed.

Thank you. David, hi. Congratulations on all of the progress.

Thank you, Gary.

Just following up on that gentleman's question about the RFP. You mentioned the delays due to additional people looking to be part of the process. What's your expectation on how many winners there are going to be? It's not a winner take all, I don't suspect.

There hasn't been any direct guidance, though, after what the government had the problem with the failed [Vaxtion] vaccine, it is my guess is that there will probably be two winners and that they'll try and procure 25 million doses from each winner and if something happens to one along the way then we'll see what goes on with the dose, but I'm looking for at least two awards on this program.

Okay, and in terms of pricing per dose. Should we just do the math? You said earlier $350 million to $600 million opportunity. Divide that by 50 million doses?

Divide it by 25 million to get some idea of the range in pricing per dose.

And that's based on 50 million doses? That's the total contract to the winners?

No, that's based on 25 million doses.

So the $350 million to $600 million would be one of the two winners.

Yes. That is correct.

Super. And in terms of the cash balances, I understand the restriction for the letters of credit with Silicon and the Avecia deal. Do you have any auction rate preferreds at this time?

No, there is no preferred stock at this time. If that was the question.

Auction rate securities for your cash.

No, Nicole we do not, or do we? Would that --

I do not believe we do.

That convert wouldn't be in that category, I don't think.

Okay. And then in terms of the NIAID contract for the next gen on the rPA anthrax, any range you can give us on the potential size of that contract?

Yes, I would expect that contract to be somewhere between $75 million and $100 million, in that range. And that's purely a development contract. That's not a procurement contract. That's a development contract.

And how many competitors have next gen rPA?

Oh, I'm aware of at least four.

And again, is that -- would there be multiple winners there as well?

I think there will be multiple winners there, yes, I do.

Okay. And can you give us any color on the pipeline for [M&A]? I know you just closed on Avecia but anything else brewing?

There is absolutely nothing that I can discuss that's brewing. We're looking at the same kinds of things for those products which have high potential for acquisition and quite honestly, Gary, we're getting our hands around this one and getting the RFP in and putting in the best response to the RFP that we possibly can and we'll then pick up on business development activity shortly thereafter.

Okay, and last question. What was the name of the new IR firm?

Stacey?

Actually it's a PR firm that we're using. It's called [TD & Reed].

Okay. Do you also have an IR firm for the street or is this PR firm taking both over?

No, no, we actually work with a firm called Westwood Partners for IR.

Okay, thank you very much.

Thanks, Gary.

Sure thing.

At this time, I'm showing you have no further questions. I'd like to now turn the call back over to Mr. David Wright for closing remarks. Sir, you may proceed.

Thank you. Thank everyone today for their participation. I look forward to updating you again next quarter and hope that we can have at least half as much good information to report next quarter as we did this quarter. Thank you and we'll talk to you soon.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.