Altimmune Inc (ALT) 2012 Q1 法說會逐字稿

A very good day to you, ladies and gentlemen, and welcome to your First Quarter 2012 PharmAthene Incorporated Conference Call with your host, Stacy Jurchison. My name's Chris, and I'll be your conference coordinator for today. Throughout today's conference, phones will remain on listen-only until the question and answer session begins.

(Operator Instructions)

At this stage, I'd like to turn the call over to your host. Stacey Jurchison, please go ahead.

Thank you, Chris. And good afternoon, everyone. Joining me on the call today are Eric Richman, President and Chief Executive Officer; Dr. Tom Fuerst, Executive Vice-President and Chief Scientific Officer; Jordan Karp, Senior Vice-President and General Counsel; and Linda Chang, Senior Vice-President and Chief Financial Officer. Eric will begin today's call with a brief overview of the quarter, followed by a discussion of recent progress in our programs by Tom. Linda will then review our first quarter financial results, after which we'll open up the call to your Q&A.

Before we begin, I'd like to point out that, during today's call, we will be making projections and other forward-looking statements which are based on our current beliefs and expectations. Please be aware that these statements are subject to certain risks and uncertainties. We encourage you to consult PharmAthene's filings with the SEC for additional detail. With that, I'll now turn the call over to Eric to begin.

Thank you, Stacey, and good afternoon, everyone. Thank you for joining us today for a review of PharmAthene's results for the first quarter of 2012. We're off to a great start in 2012 in accomplishing our operational objectives and meeting our financial goals. We are moving forward and making steady progress with our second generation RPA Anthrax Vaccine Program, as Tom will detail for you shortly. We are developing SparVax to meet the US government's need for an improved, second-generation anthrax vaccine that is safe, convenient and more cost-effective.

We achieved positive cash flow from operations for the quarter, and in March we closed on a $7.5 million-dollar term loan and revolving line of credit with G.E. Capital, which serves to further enhance our balance sheet and extend our cash runway.

With respect to the SIGA litigation, as many of you know, we are currently awaiting final judgment from the Delaware Court of Chancery regarding its September 2011 decision to award PharmAthene a significant stake in SIGA's smallpox antiviral, ST-246. Specifically, we were granted the right to receive 50% of the net profits from worldwide sales of ST-246 and related products for a period of ten years, after SIGA receives the first $40 million in net profits.

Primarily, it is the definition of net profits that is currently before the court for consideration in its final court order. In December 2011, the court denied SIGA's motion for reargument. The court then denied their subsequent request for additional oral argument on the issue of the definition of net profits, though, at this point, we do not anticipate the trial court requesting further input from either PharmAthene or SIGA, and we are simply awaiting the final judgment.

As a reminder, once a final judgment is issued, each side will have 30 days to file a Notice of Appeal. It is important to note that Delaware has only one level of appeal, the Delaware Supreme Court. So even if the Chancery Court's final judgment is appealed, we would anticipate an appeals process should conclude in approximately six to 12 months. In its First Quarter 2012 Conference Call yesterday, SIGA reiterated that it anticipates deliveries of ST-246 to the US government will commence in the first quarter of 2013. We are therefore optimistic that any additional litigation should be resolved by that time.

With an efficient operation that is focused on delivering products to our government customer and contributing to the nation's security imperatives, an extended cash runway and a potential for future significant revenue, PharmAthene continues to strengthen its position in the global biodefense industry. I will now turn the call over to Dr. Tom Fuerst to discuss recent developments in our biodefense programs. Tom?

Thanks, Eric. We are very excited to be moving forward with plans to begin a Phase II clinical trial of SparVax later this year. The Phase II trial will be a dose ranging and schedule study designed to evaluate the safety and immunogenicity of SparVax in approximately 300 healthy volunteers. While this is the first Phase II trial to use clinical material manufactured in the US, following our successful technology transfer from the U.K., it will be the third Phase II clinical trial of SparVax. Recall that SparVax has been previously studied in two Phase II clinical trials involving 770 volunteers.

Last year, during the tech transfer process, we successfully increased the RPA yield by approximately six-fold, which is highly significant in terms of being able to fulfill a government stockpile requirements, and meet the requirements for surge capacity. The key differentiators for our SparVax Program is our robust and transferable manufacturing process, which enables the production of highly characterized, highly purified and stable vaccine that can be produced on a cost-effective basis in quantities sufficient to meet the government's demand for a modern, second-generation RPA-based anthrax vaccine.

Unlike the first-generation anthrax vaccine or other RPA-based vaccines, our RPA vaccine technology platform is produced by E coli, which enables a much more robust and scalable manufacturing process. This process has the capability of annually producing more than 150 million RPA vaccine equivalent doses of bulk drug substance at 50 micrograms per dose, using a single 1500-liter fermentor. This is a significant improvement in production yield compared to the first-generation anthrax vaccine which, with current capacity constraints, can only produce seven to eight million doses annually -- a key differentiating feature between our vaccine and the first-generation anthrax vaccine, BioThrax, along with the other factors previously mentioned.

In April, I presented an overview of SparVax data at the 2012 World Vaccine Congress in Washington, DC. My presentation included an analysis of immunogenicity data from previous human and nonclinical animal studies. Based on these studies, we determined a preliminary estimate of efficacy in humans for SparVax of over 90% protection, based on an accelerated post-exposure prophylaxis or PEP schedule, and nearly 100% protection after a six or 12-month booster dose. This analysis is based on a correlate of protection established under the animal rule in accordance with FDA guidelines.

Let me also update you briefly on the status of our recombinant BCHE Bioscavenger Program. Significant progress has been made under our contract with the Department of Defense to produce a nerve agent bioscavenger that has the same characteristics as BCHE purified from human plasma. So far, all technical milestones have been reached on schedule, and we continue to enjoy a very productive collaboration with the Department of Defense.

At this point, all indications are that we will be successful in developing a superior method to produce a recombinant BCHE bioscavenger product. We look forward to keeping you apprised of our ongoing progress. I'll now turn the call over to our Chief Financial Officer, Linda Chang, to review our financial results for the first quarter. Please go ahead, Linda.

Thank you, Tom, and good afternoon, everyone. We released our financial results press release after the markets closed today, and you can access this information on our website. Let me briefly review some financial highlights, beginning with our cash position.

We ended the quarter with $20.7 million in cash and cash equivalents and receivables. Included in this number is $3.4 million received from the GE capital financing we announced in March. And we achieved positive cash flow from operations this quarter. As we stated in our 2011 year-end conference call, we continue to expect our annual cash burn for 2012 to be less than $6 million, based on currently projected activities on our contracts.

Now turning to revenue, for the first quarter of 2012, we recognize $6.1 million in revenue, the majority of which was for the development of SparVax and our recombinant BCHE Bioscavenger Program.

Regarding expenses, research and development expenses for the first quarter were $4.7 million, which is approximately 20% less than the first quarter of 2011, mainly due to the reduction of our discretionary research and development activities, and the completion of our 2007 NIAID contract.

General and administrative expenses were $2.9 million in the first quarter of 2012, approximately 40% lower from the year-ago level of $4.9 million, primarily due to reductions in legal fees and other savings from a more streamlined operation.

For the quarter ended March 31, 2012, our net loss was $2.7 million or $0.06 per share.

Over the last several months, we have taken significant steps to strengthen our liquidity position. At this point, we believe that with our current cash and receivables, as well as expected contract revenues, we will have sufficient capital to meet our liquidity needs well into 2013, the current anticipated time for a final resolution in the SIGA litigation. And with the GE Capital financing, we have an additional liquidity cushion to extend our cash runway. With that, I will now turn the call back over to Eric.

Thank you, Linda. With more streamlined operations providing additional financial flexibility and extended cash runway and potential for significant future revenue, we anticipate an exciting period ahead with the opportunity to unlock value for PharmAthene shareholders. I sincerely appreciate you joining us today, and thank you for your continued interest and support. Operator, that includes my prepared remarks. Could you please advise the audience on the Q&A procedure and open the lines for questions? Thank you.

(Operator Instructions)

We just had a question come through from the line of Nathan Cali from Noble Financial. Please go ahead.

Hey, guys, good afternoon. Thanks for taking the questions. As far as the SparVax going into the clinic, what kind of a spend do you guys expect for that in the second -- in the third and the fourth quarter of 2012, and then into 2013?

First of all, Nathan, thank you for joining the call today. And I'm going to turn that over to Linda.

So Nathan, in our guidance that we just gave, that -- of the $6 million of cash burn for 2012, that does include the clinical trial that is slated to begin later this year.

Okay. And as far as the cash goes, how long do you guys expect that to extend operations with your current cash position, and then any available cash that you may have available to you?

Well, as we just released a few minutes ago, we have a total cash available of $20.7 million. And we gave the guidance that for this year, it will be less than $6 million.

Got you.

So, you know, at this point, we think that we have sufficient capital to conduct our business to run our trials. And at this point, we can only look towards, you know, beyond or into 2013 at this point.

So Nathan, just a comment on that. We continue to focus on our monthly burn, and to look for areas of operational efficiency, and continue to look for areas of savings so that we can continually turn in, quarter after quarter like this one, if possible. So that, that's one key point. Secondly, the clinical trial that you mentioned is fully funded. And the activities that we have underway for 2012 related to the Second Generation Anthrax Vaccine Program are completely funded. So that there, there'll be no surprises there related to, to burn.

Okay. Your revenues came in a little bit higher than I expected. Do you guys expect that revenue line to continue along those same lines for the rest of the year -- based upon what you guys have expected for the, you know, for the Phase II trial and so forth?

Well, you know, all I, all I can say, you know, point to, is the guidance that we've given which we expect for 2012 -- the burn will be in the $6 million range which is, as you know, an improvement over prior years. But, you know, as that relates to your first question about deficient cash, you know, what we have talked about over the last several quarters is that we want to ensure that the company had the ability to last until we saw revenue from the ST-246 product from SIGA Technologies.

And they announced yesterday they've reaffirmed their guidance for delivering the first quarter of 2013. So, you know, we had anticipated that, and we had also built in that there might be delays. And we want to make sure that, number one, we had sufficient cash until we re -- until we got to the point of receiving revenue from ST-246, without any need to do a diluted financing; and number two, we had sufficient cash to be able to execute under our current contracts.

Great. Thanks a lot for the extra color there. As far as the agreement on the P&L profit split and the mandates there by the judge -- and I don't know if there's any clarity on this yet, but I asked this question yesterday on the SIGA call as well -- according to the opinion that we've read through, $40 million will be paid to SIGA prior to PharmAthene getting into a profit standpoint from ST-246.

Is that going to be part of the $40 million they already received, or is this -- is there an additional $40 million that they need to receive, albeit that, you know, they could receive a chunk of money quite quickly if, you know -- according to the contract of delivering 500,000 courses? So, but I just had a question on whether the $40 million that they already received was part of the $40 million that the judge had discussed in his opinion letter?

Hi, Nathan, it's Jordan Karp. How are you?

Good, how are you?

I'm fine. You know, it's really going to come down to the details in the judge's order.

Yes.

And so, you know, I listened to SIGA's call, and I agree with their response. It's just too soon to know.

Yes. Okay. And then as far as the conclusion of the Phase II study that you guys are going to be entering into in healthy patients, what will be the duration of that study?

Yes, Nathan, this is Tom.

Hey, Tom.

So we -- yes, we anticipate starting the clinical study in the second half of this year.

Yes.

And then we, we expect to have the final report in mid-2013.

Okay.

And, you know, I'll just add a little bit of color to that as well. We're hoping that we'll have some initial read-out of the data by the end of this year. And that's not something that we can guarantee, but if everything goes as planned, if we can get the study started mid-year, we might be able to have some data to look at by the end of this year. And you know, I want to remind you that this is the third Phase II clinical study where the RPA vaccine is being evaluated. The difference is that this is material that is being manufactured in the United States versus the United Kingdom, where the previous two Phase II clinical studies were done in the UK. So as far as the, the risk of the outcome of the study, we view it as a relatively low-risk study. It's really a matter of execution, which we're very confident about.

And then, just one more follow-up question. Thanks, Eric. Is there any path forward after that that you guys foresee what's going to be required next? Or will that be, you know, part of what BARTA and the FDA are looking for to move into more advanced stages, like procurement?

Tom, I'll turn that question over to you.

Yes. And so, Nathan, we have an ongoing dialogue with BARTA about continued funding for this program. And so we've met all of our milestones thus far. And they have an interest in seeing some of the preliminary data that will come out of the study. And as Eric indicated, we'll start retrieving those data by the end of this year. So we will continue our dialogue with BARTA. And so this will be, you know, a main gating point, if you will, for significant additional advanced development funding for the program.

Thanks a lot, guys, for taking the questions.

Thank you, Nathan.

Thank you for your question, Nathan. We have no further questions in the queue. So at this stage, we are now going to wrap up the call. So I would like to take this opportunity to thank the speakers and thank the participants for joining today. This does now conclude your conference call, and you may now disconnect your lines. Have a great day. Thank you very much for joining.