Altimmune Inc (ALT) 2008 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Second Quarter 2008 PharmAthene Earnings Conference Call. My name is Ahmed and I will be your coordinator for today. At this time all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference.

(OPERATOR INSTRUCTIONS)

I would now like to turn the presentation over to your host for today's conference, Stacey, Director of Corporate Communications.

Thank you Ahmed. Good afternoon ladies and gentlemen and thank you for participating today. joining me on the call this afternoon are David Wright, President and Chief Executive Officer, Christopher Camut, Chief Financial Officer, and Eric Richman, Senior Vice President Corporate Development and Strategic Planning.

During the course of this call, management will make projections and other forward-looking remarks regarding future events and the Company's future performance. These forward-looking statements reflect PharmAthene's current perspective on existing trends and information and can be identified by such words as expects, plans, will, may, anticipates, believes, should, intends, estimates, and other words of similar meaning.

Any such forward-looking statements are not guarantees of future performance and involves risks and uncertainties including those noted with PharmAthene's filings with the SEC on forms 10K, 10Q, and 8K. Actual results may differ materially from those projected in the forward-looking statements.

For the benefit of those who may be listening to the replay, this call was held and recorded on August 12th, 2008. Since then, PharmAthene may have made announcements relating to the topics discussed, so please reference the Company's most recent press releases and SEC filings. PharmAthene disclaims any intent or obligation to update these forward-looking statements.

I will now turn the call over to David Wright, President and Chief Executive Officer. David?

Thank you, Stacey. And good afternoon, everyone. Thank you for joining us today to discuss our Second Quarter 2008 Financial And Operational Results. I'll begin with an operational overview after which Chris will take you through the relevant financials. Following that, we will open up the call to your questions.

I'd like to start off today by saying that never before in the Company's history have I personally been more excited about the opportunities that lay before us. With a robust pipeline, potentially significant procurement and development contractor awards coming in the near term, opportunities for international expansion on the horizon and continued progress on the clinical development side, we are at a pivotal point in the Company's growth curve.

As you know, early in the second quarter we closed the acquisition of Avecia's biodefense vaccine business unit. All integration activities have now been completed and as a result, we have significantly strengthened and diversified our development pipeline.

Our pipeline now includes a total of five biodefense medical countermeasures that are urgently needed by the U.S. government and our allies and are listed as high priority procurement opportunities under the government's inter-implementation plan.

With the acquisition activities behind us, we feel we are in a very strong competitive position, which will allow us to continue to address current and future biodefense market needs.

Along these lines, you will recall that in February of this year and RFP was issued by the Department of Health and Human Services for a procurement of 25 million doses of a novel rPA anthrax vaccine intended for the strategic national stockpile.

I'm pleased to report that on July 31st, PharmAthene submitted its response to this RFP. Our product, SparVax meets the mandatory qualification criteria set forth in the solicitation and we are confident in our competitive prospects.

Preclinical studies suggest that up to three doses of SparVax, administered several weeks apart, would be sufficient to induce protective immunity. Phase 1 and Phase 2 clinical trials involving over 700 health human subjects have been completed and show that SparVax appears to be well tolerated and induces a sufficient immune response in humans.

Also in preclinical studies, SparVax has demonstrated the capability to protect non-human primates against a lethal anthrax aerosol challenge. Supporting the the clinical data, a robust and validated manufacturing process for SparVax is at full commercial scale.

Given the unique profile of SparVax, including the potential for improved safety and efficacy, ability to provide protection both pre and post exposure and a lower dose requirement than the currently marketed vaccine, we are highly optimistic regarding our changes of being awarded a procurement contract under the RFP.

Based on historical awards for similar RFPs and other factors, we believe the award would be worth up to $600 million. The government has indicated in the RFP that it intends for the contracts to be awarded by year end.

As alluded to earlier, we are actively assessing international expansion opportunities and are currently in discussions with a number of allied foreign governments to review their procurement needs for medical counter measures. Potential markets include the Middle East, NATO countries, and other markets at high risk for terrorist activities. We will keep you closely posted on our progress in this endeavor.

As you may have seen yesterday, we announced that Lord Lewis Moonie has been appointed special UK advisor to PharmAthene and will be assisting us in developing market opportunities for our medical counter measures within the UK

With regards to our third generation rPA vaccine program, a response to an RFP issued by the National Institutes of Allergy and Infectious Disease, was submitted late last year in response to a solicitation for an advanced development contract for third generation rPA vaccine.

The primary objective of the solicitation was to develop and rPA based anthrax vaccine that can be stored, transported, and used without the needs for a conventional cold chain. In particular, we aim to produce a vaccine that can maintain stability for three years at 35 degrees Celsius and induce protective immunity in just one or two doses.

Turning now to Valortim, we continued to make excellent progress with our fully human monoclonal antibody designed to protect against and treat inhalation anthrax. During the quarter, we completed a PK study in African green monkeys and will continue our ongoing therapeutic study in the African green monkey model.

As you may recall, we initiated work in the African green monkey model last year, which we believe will have excellent predictive value as it appears to closely resemble the natural course of disease of anthrax infection in humans.

We are optimistic that this model, which has been developed at [USAMRICD], may be selected as one of the required therapeutic models for approval of anthrax therapeutics under the animal rule.

Also during the quarter, we initiated GMP manufacturing of [Alergem] at full commercial scale, which is a significant milestone for the program. We are optimistic that an advanced development RFP for anthrax antitoxins will be issued later this year or early next year and continue to believe that Valortim is ideally positioned as a leading candidate under such RFP.

With regard to Protexia, our nerve agent counter measure, we continue to move forward in our collaboration with DoD and CBMS. We have completed clinical scale GMP manufacturing, which was another major CMC milestone for the program.

We also completed pivotal IND-enabling toxicology studies in both rodents and non-human primates. As such, we are on track to file our IND later this month and anticipate initiating a Phase1 human safety trial of Protexia in September.

Our pre clinical program also continues to advance nicely. New preclinical studies evaluating Protexia as a therapeutic agent have been ongoing in collaboration with the Defense Science and Technology Laboratory, which is part of the UK Ministry of Defense. The data are preliminary but they suggest that Protexia may also have efficacy for use as therapeutic agent against nerve agents.

Additional testing is ongoing and we hope to announce the results at an upcoming scientific meeting this fall.

As you recall, in 2006 PharmAthene was awarded an advanced development contract form the Department of Defense, which would be 5.8 million contract modification we announced in March, now totals up to $219 million, if the government exercises all its options.

Assuming successful completion of the Phase1 trial, the DoD can exercise its option to fund additional development activities leading to the FDA approval of Protexia.

So what does all this mean for the Company and its investors? It means that between government contracts and grants that we have already been awarded, bids that we have submitted and are waiting to hear back on, and bids that we anticipate making in the next 12 months, the potential aggregate face value of contract opportunities currently available to us exceed $1 billion.

I have never been more excited about our business, its future prospects and our ability to compete for and win U.S. government contracts for our suite of product candidates. At this point, let me turn it over to Chris to take you through our financial results. Chris?

Thank you, David. In the second quarter of 2008, revenues were $10.9 million compared to $2.3 million for the same period in 2007. For the six months ended June 30th, 2008 and 2007, revenues were $16.8 million and $5.3 million respectively.

Revenues for both periods consisted primarily of contract funding from the United States government for the advanced development of Protexia. Taking into account the acquisition of Avecia, revenues in 2008 were also impacted by government contracts supporting the development of SparVax and RypVax, our plague vaccine.

Research and development expenses were $11.2 million in the second quarter of 2008, compared to $4 million in the second quarter of 2007.

For the six months ended June 30th, 2008, R&D expenses were $17.1 million, compared to $7.1 million for the same period last year. The increase in R&D expense in the second quarter resulted from research and development activities related to our Valotim and Protexia programs, as well as expenses related to our SparVax and RypVax programs, which were acquired in the second quarter of 2008.

Expenses associated with general administrative activities were $5.2 million in the second quarter of 2008, compared to $3 million for the same period in 2007. For the six months ended June 30th, 2008 and 2007 G&A expenses were $9.9 million and $5.5 million, respectively.

Expenses associated with G&A activities rose $4.4 million, including PharmAthene UK costs of approximately $0.7 million for the six month period ended June 30th, 2008, as compared to last year, largely due to increased employee costs, stock compensation expense, and consulting and legal services, associated with our compliance, public entity activities, and bid and proposal efforts.

Net loss attributable to common share holders for the second quarter of 2008 was $21.9 million, or $0.99 per basic and diluted share, compared to a net loss attributable to common share holders of 7 million or $11.25 per basic and diluted common share for the same period last year.

As of June 30th, available cash, cash equivalents, and short term investments totaled $19 million, excluding restricted cash. Total short term and long term restricted cash on our balance sheet is approximately $15.8 million and is comprised of two components, first $8.8 million in connection with our credit facility with our lenders, and second, $7 million supporting a letter of credit related to the Avecia vaccine's acquisition.

In addition, at June 30th, our total short-term and long-term debt was $19.4 million, consisting of $7 million outstanding under our venture GAAP agreement and $12.4 million outstanding under the Company's issued and outstanding 8% convertible notes, which are due August 2009.

Now that we have largely integrated the vaccine's business that we acquired from Avecia, we are going to take a long hard look at strengthening the Company's balance sheet and improving the overall position of the Company.

Although there are no guarantees that any of the following will materialize, as we do in the normal course of business, we will opportunistically explore avenues to bring in additional cash, whether in the form of new debt, refinancing of existing debt, equity or a combination thereof, we will only do this on terms that we believe are favorable to the Company and hopefully will have the effect of reducing the amount of restricted cash that we are required to carry.

We believe that these efforts, along with the opportunities that David described earlier, position PharmAthene well for future success.

At this point, I'll turn it back over to David to wrap up. David?

Thank you, Chris. Before turning your call over to your questions, I'd like to reiterate the very strong position that we now find ourselves in. I'm proud to say that thus far, we have met many significant milestones as part of our strategy and with the acquisition of Avecia's biodefense vaccine business unit earlier this year, we have successfully built out our unique product pipeline such that the value proposition that PharmAthene offers to the market is much more transparent and timely.

As a result, we believe the next six to nine months could be a very exciting time for the Company as there area number of significant milestones before us including the U.S. government award for advanced development contract for the third generation rPA vaccine, which is expected by the end of the year, award by the end of the year of a significant contract by DHHS for procurement of 25 million doses of a novel second generation rPA anthrax vaccine.

Intended for the strategic national stockpile, which could represent a revenue opportunity of up to $600 million, filing and IND for Protexia and commencing a Phase 1safety study in humans during September and pursuing international market opportunities for our portfolio of medical countermeasures.

Finally, it bears reminding that in addition to our current pipeline, PharmAthene is continually evaluating market needs as well as new biodefense products or commercial opportunities to add to our portfolio to read at acquisition, in licensing, or co-development agreements. And I'm very proud to say that we have successfully cultivated a reputation as a partner of choice in biodefense.

In conclusion, our goal is to be the leading provider of biodefense medical counter measures worldwide and I am pleased to say we are solidly on the track to achieve this objective.

Now, I will turn this call back over to the operator for your questions. Operator, could you please instruct the audience to the Q&A procedure?

(OPERATOR INSTRUCTIONS). Your first question comes from the line of [Natalie Rapute] from Rodman and Renshaw. You may proceed.

hi, good afternoon. Thank you for taking my call. I apologize, I'm rather new to the Company, so I'd like to start with a couple of background questions. First of all, how does your strategy for an rPA vaccine differ from those of your competitors? For example, the Walter Reed and IMA studies in development? Hello?

Yes, what studies in development?

Well, Walter Reed and IMA are doing some studies for an rPA vaccine and there is also some studies in development for one that comes through the skin.

IMI - I'm sorry, I didn't understand, IMI is working on a patch using our rPA, so what they are using development - excuse me, a delivery system for our rPA vaccine. So they are actually using our rPA vaccine.

The other vaccines, the currently licensed vaccine which is on the market, is a product which was originally licenses back many, many years ago and its basically just a old style vaccine of ground up bacteria that's turned into a vaccine and has many particles.

Our vaccine, of course, it's a recombinant rPA vaccine which is made in ecoli and is purified and is a much purer form. We're given in three doses rather than six doses of the current vaccine and the side effects, based upon a purified vaccine should be less.

Okay, so you're saying - I'm sorry, you said that IMA uses the same rPA that you do?

We actually provide it for them.

Okay, you do. And also, does your vaccine contain any agivents, and if so, which ones?

The current vaccine contains Alumin.

Almun?

Yes, Alumin.

Alumin, okay. And in any of your animal or human studies have you done any studies as to the antibody response in different animals or different humans and how they differ, what the variability is?

The variability in response between animals and humans?

In either your animal studies or your clinical trials, have you ever studied antibody titers in response to the vaccine and just wondering what the -

Absolutely, (inaudible) in animals we have shown that we can protect animals who have been vaccinated from a challenge - from a 200 times the LD 50 challenge, when we've done that both in rabbit models and non-human primates.

No, no. what I'm trying to ask is, is there a difference in terms of the number of - or the concentration of antibodies that different individuals produce in response to your vaccine?

There is variability in humans and animals in the number of antibodies, but they all were - all the animal models demonstrated they produced enough antibody to provide protection.

Okay, okay thank you very much.

(OPERATOR INSTRUCTIONS). And your next question comes from the line of [Dr. Ira Clauses], private investor. You may proceed.

Good afternoon gentlemen, sounds like its going to be a great year and thanks for taking my call. I have two questions, one is related to the Baltimore sun article of earlier last week where it talks about a potential billion and a half dollar investment by the government in stockpiling the anthrax vaccine and I'm just trying to figure out how you view that in terms of the RFP for the 25 million dose vaccine stockpiling and the second versus third generation, is this all part of the same dollar amount or is this going to be significantly more than the billion and a half if they actually do try to immunize everybody in the country - or potentially immunize everyone in the country.

Yes, it will be significant, more than $1.5 billion if they try to immunize or stockpile product for 300 million people.

The $1.5 billion is for the second generation anthrax vaccines, which we believe will be acquired, we believe that there could be two contracts given for this vaccine for the rPA, each of 25 million doses.

And if they did that, then the price tag with what they are currently purchasing from emergent would probably come close to the $1.5 billion. We believe that's where that number came from.

Thank you. And second question, are there any plans to extend the warrants that are current available and trading on the Company?

We are always discussing different opportunities for investors, there are no current plans underway, and if that were to happen, we would let the market know as soon as that decision was made.

Thank you.

That concludes the question and answer session. I would now like to turn the call over to David Wright for closing remarks.

Thank you very much, ladies and gentlemen. We look forward to keeping you informed as we move forward and keep you informed of exciting events as they happen, as always, any investors who have questions or want to talk to us, please feel free to call Stacey, Chris, Eric, or myself. Thank you very much for your time.

Thank you for your participation in today's conference, this concludes the presentation you may now disconnect. Have a great day.