Armata Pharmaceuticals, Inc. (ARMP) 2006 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Targeted Genetics' second quarter 2006 financial results conference call. Today's presenters are Stewart Parker, President and Chief Executive Officer, of Targeted Genetics; and David Poston, Targeted Genetics, Chief Financial Officer. Miss Parker will open today's call with highlights from the second quarter and a brief discussion of goals and objectives for the remainder of the year. Ms. Parker's comments will be followed by a financial update from Mr. Poston. And then the call will be opened up to a question-and-answer session. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded this Thursday morning, August 10, of 2006. At this time, I would like to turn the conference over to Miss Stewart Parker. Please go ahead, ma'am.

Thanks, Andrew. Good morning and I'd like to welcome you to the Targeted Genetics' 2006 second quarter financial results conference call. Today I will review our recent accomplishments and discuss what you can expect us to achieve in the remainder of the year. Then David will review our financial results for the quarter.

Before I begin, I'd like to remind you that during the course of this call we may make projections and other forward-looking statements regarding future events or future financial performance of the Company. We do wish to caution you that such statements are indeed only predictions and actual events or results may differ materially from the statements we make, so please see our documents that we file from time to time with the SEC for information about risks that may affect the Company, including a -- please see our most recently filed annual report on Form 10-K. We also filed a quarterly report for the second quarter of 2006 on Form 10-Q yesterday.

I'll start this morning's call by discussing our continued progress this quarter and our lead clinical program in inflammatory arthritis. tgAAC94, a targeted localized protein therapy for inflammatory arthritis is an investigational therapeutic designed to inhibit the activity of tumor necrosis factor alpha, TNF alpha, which is a key mediator of inflammation. tgAAC94 utilizes an adeno associated virus or AAV vector to deliver the gene encoding TNF RSC directly into affected joints to inhibit TNF alpha. The data presented this quarter further demonstrate that tgAAC94 has significant clinical and commercial potential in a variety of inflammatory diseases, and we continue to make significant progress towards this end.

Most notably in June at both the American Society of Gene Therapy meeting in Baltimore and the European Congress of Rheumatology meeting in Amsterdam we reported encouraging data from a completed Phase I and an ongoing Phase I, 2 trial of tgAAC94. The data from both trials support the safety and tolerability of interarticular administration of tgAAC94 to affected joints and suggest that this product candidate may result in improvements in signs and symptoms of arthritis in injected joints.

In the completed Phase I study, 15 patients received an injection into the knee or ankle and were followed for 24 weeks. Improvement in a composite tenderness and swelling score was noted in all treatment groups, particularly amongst subjects who received the higher dose of tgAAC94 which may suggest a dose response correlation. We also observed a trend toward a sustained treatment effect in the non-injected joints of the treated group suggested by a decrease in mean tenderness and swelling scores in non-injected joints. Now, we find this impressive particularly since there was not a positive change in the non-injected joints in the placebo group. Interarticular administration of tgAAC94 was also safe and well tolerated.

Now, in the ongoing Phase I, 2 study approximately 120 adults are being randomized into three dose groups to receive a single interarticular injection of either tgAAC94 or placebo, followed by an open label injection of tgAAC94 after 12 to 30 weeks depending on when swelling in the target joint meets criteria for reinjection. The primary end points of this Phase I, 2 are to establish the safety of higher doses and of repeated administration of tgAAC94 into the joints of subjects who may be taking TNF alpha inhibitor therapy unlike the earlier study.

Secondary end points include evaluation of pain, swelling, duration of response, and overall disease activity following interarticular administration of tgAAC94 to the affected joints. Those enrolled in the latter half of the study will undergo more extensive evaluation including additional target joint assessments such as functional measures, tenderness, and swelling evaluation by a second examiner and MRI scan. The interim Phase I, 2 data reported in the second quarter summarized the safety and efficacy measurements for the first 40 patients from the first two dose cohorts and I will go into a bit more detail on this now. Although the number of patients evaluated so far is relatively small we are very encouraged by what the data suggests.

First, a single interarticular injection of tgAAC94 resulted in measurable and sustained reductions in pain and swelling for at least 12 weeks compared to placebo for which the response was variable. This data relates to the lower 10 to the 11th dose and we have not yet been able to completely evaluate the full 12 week period for the 10 to the 12th dose. Second, not only were improvements noted in subjects with and without concurrent systemic TNF alpha antagonist therapy, the data suggests the trend toward greater responses to tgAAC94 in patients who are taking systemic TNF alpha antagonist therapy compared with patients not on these therapies.

Third, we are encouraged by the length of time to second injection even at the lowest dose. Fewer patients who receive tgAAC94 had symptoms requiring reinjection at the 12-week time point compared with patients in the placebo arm. Specifically only 6 out of 16 patients who received the 10 to the 11th dose have required their second injection, after a mean period of 101 days. For those who received placebo as the first dose, three out of five have received their open-label dose of drugs after a shorter mean time of 91 days. So this dose timing information may be particularly helpful in the establishment of a treatment effect. And fourth and finally, an extremely important result of this trial is that the data indicate tgAAC94 is safe and well tolerated at doses of up to five by ten of the twelve particles of DNA resistant particles per mill in subjects with and without systemic TNF alpha antagonists and no significant safety concerns have been identified after 12 to 24 weeks of follow-up.

Now although -- all of the 120 subjects on the study have not yet been evaluated, the trends observed thus far are very encouraging and consistent with the positive indications of sustained improvement in signs and symptoms of inflammation from our completed Phase I trial and in preclinical studies. Our growing body of data continue to support that local administration of tgAAC94 to affected joints may provide additional clinical benefit to the many patients with inflammatory arthritis who have unresolved symptoms despite existing arthritis treatments. We also believe local administration may advance as an alternative therapy to systemic protein treatments for patients whose disease is limited to a few joints and therefore may not warrant use of systemic TNF alpha antagonists.

Our clinical goal is that interarticular administration of tgAAC94 provides local therapeutic concentrations of soluble inflammation inhibiting proteins for an extended period of time without requiring frequent administration. Now given the number of inflammatory arthritis patients who still experience unresolved symptoms, despite treatment with systemic TNF alpha antagonist therapy there's a compelling need for additional approaches to treatment and we believe that tgAAC94 has significant clinical and commercial potential in a variety of inflammatory arthritis diseases. These encouraging results reported thus far provide a solid evidence toward continued clinical development and ultimately commercialization of the first gene-based therapy for rheumatoid arthritis. We're moving the program forward at a good pace. And are pleased that our abstract to report additional data has been accepted by the American College of Rheumatology, for presentation at their meeting in November. We continue to use opportunities like these to further educate our constituents about our progress and the potential of targeted localized protein therapy for inflammatory arthritis. We anticipate more complete data from the Phase I, 2 study and clarity on our next clinical steps by mid-2007.

Now in addition to inflammatory arthritis we also continue to make progress in our partners programs in HIV/AIDS congestive heart failure and Huntington's disease so let me spend a few moments on those. First, in the AIDS vaccine clinical program, as we've previously discussed, we are developing tgAAC09, in collaboration with the inter International AIDS Vaccine Initiative, IAVI, Children's Research Institute of Columbus, and Children's Hospital of Philadelphia. tgAAC09 is an AAV-based vaccine candidate designed for high-risk populations in developing nations to protect against the progression of HIV.

In support of the development and commercialization of HIV vaccines, during the second quarter we entered into a new collaboration and license agreement with IAVI, CCRI, and ChOP. The new agreement contractually addresses the development and commercialization aspects of the HIV/AIDS vaccine development program for all parts of the world. The new agreement supercedes a previous collaboration agreement entered into by Targeted Genetics, IAVI and CCRI in 2000 when the parties started working together on the development of an HIV/AIDS vaccine for the developing world.

To recap, the first HIV/AIDS vaccine candidate developed under this collaboration is being evaluated in Phase I clinical trials in Belgium, Germany, India and in Phase II clinical trials in South Africa, Uganda, and Zambia. Interim data from the Phase I trials in Europe and India will be reported at the upcoming AIDS Vaccine 2006 Conference, on August 30, in Amsterdam, and completion of enrollment for the South African arm of the Phase II study is anticipated for the third quarter.

Also as part of our comprehensive development strategy of -- with the AIDS program, we have R&D activities underway to identify HIV vaccine candidates for the developed world. These efforts stem from a $22 million NIAID contract awarded in November of last year to Targeted Genetics and our research collaborators at CCRI and CHOP. Agreements of this kind not only validate our AAV-based vaccine approach and underscore the growing appreciation of the AAV technology platform, but also highlight our extensive capabilities in the manufacturing and development of AAV-based product candidates. This significant funding mechanism expands our development of AAV-based HIV/AIDS vaccines against other HIV strains and augments our comprehensive development program with IAVI.

In another of our collaborations we continue to make progress with Celladon Corporation, to develop gene-based therapies for congestive heart failure. The partnership is pursuing novel AAV delivered -- a novel AAV delivered product candidate that would improve contract of heart muscles in patients with congestive heart failure. Given positive results from ongoing preclinical studies AAV circa 2A is anticipated to move into human clinical studies as early as the first half of 2007.

Now in our collaboration with Sirna Therapeutics we are pursuing a new class of therapies for Huntington's disease a devastating neuro degenerative disorder for which there is as yet no cure and very few treatment options. We are working with Sirna to develop an AAV RNAi-based therapy for this disease designed to inhibit the production of the Huntington protein. This approach will provide a treatment to the approximately 250,000 people who carry the gene, and are at risk for developing the disease. Preclinical studies to select a lead AAV HD siRNA clinical candidate are ongoing and the program is currently anticipated to enter human clinical studies in the first half of 2008.

Corporate partnerships like the ones I have discussed today are key to achieving our goals for the development and commercialization of novel therapeutics, these partnerships not only validate the broad applicability of our AAV manufacturing and development capabilities in multiple disease settings, but they also provide substantial revenue and upside to the Company. We continue to pursue additional strategic partners, like these, as a key element of our business strategy. And will continue to work on these opportunities in 2006 and beyond. Now with that I'll turn the podium over to David Poston, our Chief Financial Officer. David?

Thanks, Stewart. And thanks to everyone for joining in this morning. Now that Stewart has reviewed the progress we've made on our product and business development efforts for the quarter, I'll start my comments with a summary of our financial results. I'll then touch on the non-cash goodwill impairment charge recognized in the quarter and I'll finish with an update on our cash position. This morning, we announced our second-quarter financial results, which included revenue for the second quarter of 1.4 million, a slight decrease from $1.5 million for the second quarter of 2006 -- of '05. And revenue of $3.8 million for the first half of 2006, up from $3.5 million for the same period in 2005.

We also reported a non-cash goodwill impairment charge of $23.7 million, which I will speak to in more detail shortly. As a result, our net loss for the second quarter was $27.9 million, or $2.83 per common share. Compared to a loss of $5.3 million or $0.62 per common share for the second quarter of 2005. Our net loss for the first half of 2006 was $31.6 million or $3.37 per share compared to a loss of $10 million or a $1.16 per share for the first half of 2005. Revenue for the second quarter and first half of 2006 primarily reflects amounts earned under our congestive heart failure collaboration with Celladon and our HIV/AIDS vaccine development collaboration with both the International AIDS Vaccine Initiative and the NIAID.

Revenue in both the second quarter and the first half of 2005 primarily reflects amounts earned under our HIV/AIDS vaccine collaboration with IAVI. Total operating expenses for the second quarter of 2006 were $29.3 million, compared to total operating expenses of $6.6 million for the second quarter of 2005. Total operating expenses for the first half of 2006 were $35.5 million compared to $13.2 million for the first half of 2005. The second quarter non-cash goodwill impairment charge of $23.7 million makes up the lion's share of our second quarter and first half 2006 operating expenses.

In our last two conference calls, we discussed the Company's intention to reduce cash uses and operating expenses, focusing on the key programs that drive increased value for the Company. The good news is research and development expenses for the second quarter and for the first half of 2006 were down over 20% compared to the same periods in 2005 and general and administrative expenses were down 5% compared to the second quarter of 2005 and down 14% compared to the first half 2005 results. Restructured charges for the first half of 2006 were $1.4 million compared to $338,000 of charges for the first half of 2005. As we recognized a $1 million first quarter charge to our restructuring reserve to account for changes in our assumptions with respect to our Bothell facility lease.

These decreased research and development expenses and general and administrative expenses are a continued effect from our first-quarter 2006 restructuring efforts and reflect decreased personnel expenses and decreased outside costs as we focus our energies on the clinical trial portion of our inflammatory arthritis program. We will continue to pursue cost reductions in facility occupancy costs, supplier costs, and outsource expenses. In the second quarter, we also took the action to write down the carrying value of our goodwill asset from $31.6 million to $7.9 million.

For those of you who follow the Company closely, you are probably aware that we must monitor our goodwill balance and in certain circumstances must writedown the carrying value of goodwill down following the strictures of Statement of Financial Accounting Standards number 142, goodwill and other intangible assets. For those of you who are not as aware of our goodwill balance and these rules, I'll cover some of the key points affecting the Company. We first recorded our goodwill balance as part of our acquisition of Genovo in 2000. This goodwill asset was valued at a net amount of $31.6 million at the end of the first quarter of 2006.

The accounting rules relating to goodwill and intangibles require us to perform annual and sometimes interim evaluations of the goodwill balance to test for signs of impairment. In the latter part of June, just weeks ago, we triggered the requirement within Standard number 142 to perform an interim impairment test as a result of the decline in our market capitalization. This resulted in a valuation of goodwill of $7.9 million, which in turn resulted in a non-cash charge of $23.7 million in the second quarter. As you can imagine, the details of this accounting standard are complicated and would require considerable explanation to fully describe. We have provided a complete description of the application of this accounting standard in our Form 10-Q for the second quarter, which we filed yesterday with the SEC.

The important goodwill impairment points to understand are, first, the goodwill impairment charge is a non-cash charge and does not affect our cash horizon or upcoming business plans or strategies. Second, as a result of this accounting entry, our shareholders' equity is $4.4 million, which means that we continue to maintain full compliance with all of the NASDAQ continued listing requirements. And, finally, as Stewart has outlined, we are executing on developing our products, we are bringing them into the clinic, and are now generating promising data on our inflammatory arthritis program and will have additional data from our HIV/AIDS vaccine program later in August. Finally, I will discuss our cash position.

We started 2006 with $14.1 million in cash and ended the first half with $12.2 million in cash and cash equivalents. During the first quarter, we added $4.8 million of cash from the sale of about 1.3 million common shares of our stock and we have used about $6.6 million in the first half of 2006 to fund operations. Net of funding from Celladon, IAVI and an NIAID. I am pleased to report that we are still on track for approximately $9 million of revenue from our partnered programs and our guidance for our estimated 2006 burn rate also is on track at a range of 13 to $16 million.

Our plan going forward is to drive our clinical programs forward and build on the promising inflammatory arthritis data we shared in June and moreover continue our progress in our HIV/AIDS vaccine program with data from our Phase I and boost studies later in August. In addition, it is to extend our cash horizon to maintain compliance with the N-A-S-D-A-Q, NASDAQ, listing standards by raising capital through a combination of new product development collaborations or strategic transaction, sales of stock or placement of debt, expansion or extension of current collaborations, and initiatives to leverage our manufacturing capabilities and product development infrastructure. To continue to watch over our expenses and build our -- build on our cost savings momentum experienced in the first half of 2006. All of these efforts supporting the goal of placing this company in a position to succeed. And with that, I will turn the call back to Stewart to wrap things up. Stewart?

Okay. Thanks, David. So we've made good progress in the first half of 2006 and we very much are intently focused on achieving the important clinical business development and financial management milestones ahead of which we have many. And to that end I will close today's call with a review of our primary areas of focus for this year.

First, we continue to pursue development of our inflammatory arthritis program. We are very encouraged by the early human data so far in this program and very happy with the pace of our current ongoing Phase I, 2 clinical trial. We focused our resources appropriately to advance this clinical program as quickly as possible, and as we said the next data will be available for presentation in November at the ACR meeting. We are also continuing to deliver on current partnered opportunities, our product development collaborations focused HIV/AIDS, congestive heart failure, and Huntington's disease continue to progress and will generate important clinical and preclinical data in 2006.

These collaborations as we said serve to further validate the broad applicability of AAV in multiple disease settings and they also provide substantial revenue to the Company. They also allow us to monetize our earlier investment in AAV scale up, manufacturing, and product development. We are pursuing additional product opportunities in therapeutic areas of interest that are complementary to our lead product opportunity in inflammatory arthritis, in the context of strategic transactions as well as product end licensing. The Company is also pursuing opportunities to further leverage its investment in AAV manufacturing and scale-up, through additional product collaborations, or through relationships potentially even with contract manufacturers to create additional value for our shareholders. And finally, we continue to closely scrutinize our cash and take advantage of every opportunity to extend our runway through all the means at hand.

Before we close, I'd like to take this opportunity to let you know that we've been invited to present at the Bio CEO and Investor Forum in San Francisco in October and the Rodman & Renshaw Healthcare conference in New York this November. Both presentations will be webcast live and also archived on our website and I do hope that you'll all be able to join us. So in closing we thank you very much for your support and for your time this morning, and at this point we're very happy to answer any questions you might have. Andrew?

Thank you, ma'am. [OPERATOR INSTRUCTIONS] Our first question will come from Mark Monane with Needham & Company. Please go ahead.

Thank you and good morning, thanks for taking my question. Greetings from the East.

Hi, Mark.

Greetings.

Can you -- I want to focus on the Phase I, 2 data and what you've learned from the program. First question has to do with dosing. Clearly a big challenge in every early stage trial but especially interesting when dealing with novel therapy. Do you believe that you have the dose well established at this point?

Well, I think -- the candid answer is no, but I think that the current trial will -- the Phase I, 2 trial, not the earlier Phase I but the Phase I, 2 trial will give a significant amount of data on that. So as I think you know we're actually testing three different doses there's a lot of difference in each dose so 10 to the -- excuse me, 10 to the 11th, 10 to the 12th and 10 to the 13th DRPs per mil of joint volume, we are in the third dose right now. And all this data will be presented at ACR in November. And so I think we'll have a much better idea then. Certainly we were encouraged that we saw a sustained 24-week response in the Phase I trial and so far so good on the Phase I, 2 but I think we just need the data to be able to know what we have and what we don't.

That makes sense. And in terms of -- rheumatoid arthritis. The -- on various medicines at various stages of their disease. Do -- do any of the preclinical or early data tell you which therapies it might be most efficacious and maybe what's -- what sequence of therapies?

In terms of what combination, et cetera, et cetera?

Yes.

I don't think the preclinical data in a broad sense tells us that, but once we unblind this current study I think we'll have a much better handle on that as well. For example, we don't -- because the study still is blinded and the data we're looking at is on an aggregate basis we don't even know what the placebo patients are on. So we will have, as you know, about 120 patients worth of data to be able to analyze that and understand that a little bit better. So I mean I guess what I'm saying is this Phase 1, 2 trial is pretty key for us in terms of giving us a broad base of information that we can move ahead with.

That makes sense. Thanks very much for that information. We look forward to hearing more updates on the trial.

Thanks, Mark.

Thank you. Our next question comes from Matt Kaplan with Punk, Ziegel & Company. Please go ahead.

Good morning, Stewart.

Hi, Matt.

A couple questions just following up on Mark's. Could you talk a little bit about the durability of the positive effects you're seeing in the Phase 1,2 trials and how long it's lasting and then a couple follow-on questions to that. Why are you getting this positive result in kind of the contralateral joint where you're not actually injecting the medication? And then also the third part of the question is talk a little bit about the magnitude of the effect you're seeing so far in the clinical results. Is it on par with -- or better than what you -- what physicians or patients typically see with the systemic TNF inhibitors?

Okay. Well, first, in terms of how long is the effect lasting, we -- in the first study we measured out the 24 weeks and we did see a sustained reduction in signs and symptoms of disease and tenderness and swelling for as long as 24 weeks. So we -- will we see that in the next study I certainly hope so, but we don't know yet. Now, in the second study we'll actually measure even longer periods of duration so the first dose is given at day zero, the second dose is given to both drug recipients for the first dose and placebo at the latter of 12 weeks or when signs and symptoms reappear. So we will go as far as 30 weeks and if signs and symptoms don't reappear at 30 weeks then we'll redose then and then we'll follow those patients out. So you can imagine that we will have quite a bit of data related to this sustainability of the effect. But so far so good. And I think from a market standpoint, we'd be pretty happy with once a quarter administration, but if we're seeing longer effects then that's even better. Okay. Second question was a contralateral effect.

Right.

And I wish I could tell you exactly why this is happening, but I don't think that scientifically we really know. We -- other people have seen it in preclinical studies of arthritis products but I -- not to my knowledge has it been seen in human studies in terms of a localized therapy. There are a lot of different theories. First of all, what we don't think it is is systemic protein leaking from the joint based on our assays it doesn't seem to be the case. It seems to be staying local we have pretty sophisticated assays that would measure amounts of TNF receptor protein in serum and that doesn't seem to be an affect. The other theories are that we're hitting immune cells that are then tracking the sites of inflammation. There are other theories as well. I think we are cautious about this contralateral effect because it is somewhat of a surprising finding.

But the good news we still -- even though it was a small study was that in the Phase I patients when we did ACR 20 measurements, we didn't see that effect in any of the placebo patients, their signs and symptoms continued to -- well, they didn't -- they didn't improve let's put it that way. So I -- I don't think we have the answers yet for that, Mat. But we'll see.

So then in terms of magnitude of response. So the end points we're measuring as you remember are localized end points. So the scores that are classically used for systemic therapies, the ACR 20, 75 -- 70, et cetera, don't really apply although what we're measuring are actually composite scores of ACR 205070. So localized, measurements are important for a composite reasons. We -- the scores are 0 to 3 and then we add them together and then we look at reduction from the knee. So it's a little hard when you look at the aggregate data which I know you've had a chance to look at to see the magnitude of the response and when we look at the individual data from the -- what -- once we unblind we'll have a better idea of that, but if we're seeing for example, an average score of 4.5 adding the scores of tenderness and swelling together, and if we're reducing those to 1.5, then certainly those are good results and very much comparable to what the success hurdle for systemic therapy would be.

But as you know we're working with the group that actually validated and set up the ACR scores called OMERACT, outcome measures for the evaluation of rheumatoid arthritis clinical trials to validate our own localized end points and we're making good progress with them on that.

Okay. Great. One -- just follow-up question. Talk about the -- and you hit on this a little bit, but the market size. What percentage of patients don't respond to the systemic anti-TNF antagonist?

Remember we're not looking at the non-responders we're looking at the successful users who still have unmitigated disease.

Okay.

So that is -- it's a broad percentage and we're going to be doing some more wok on this, but it's anywhere from 20 to 40% of the responders still have a major joint, which is resistant to systemic therapy. So out of that $7.5 billion market, you could look at a nice piece of that obviously depending on your pricing.

So basically 20 to 40% of that market.

Exactly.

Great. Thanks for taking my questions.

Thank you.

Thank you. Our next question will come from David Miller with Biotech Stock Research. Please go ahead.

Good morning. Thanks for taking my questions.

Hi, David.

Good morning.

What kind of HIV data Phase I data are we going to see coming up towards the end of this year? Are we going to see -- is it just going to be safety or are we going to see immunogenicity data as well?

So this will be at the Amsterdam AIDS conference in -- it's August 30, so it's not even at the end of the year it's coming up and it will be all the safety data from the trials in Belgium, Germany, and India. Although there will be some additional follow-up data for India. And it will be immunological measurements from the boost component of the studies which were done in Belgium and Germany. So you will see what we have with antibody and T-cell responses.

Okay. And then a similar question for the dataset that you'd expect in November for the RA trial. How -- I mean are we going to see the entire patient data set, or is it going to be a subset again?

What you'll see again, is aggregate data we're not unblinding, the aggregate data for the first three cohorts, so 60 patients total at 12 weeks.

And when will we expect to see the blinded, unblinded data?

The middle of '07.

Okay.

That's with the second -- the second component of the study, which is , open-label, additional 60 patients, 20 at each dose level.

Okay. Great. Thank you very much.

Thank you.

Thank you. Our next question comes from Laura Ingall with Stonegate Securities. Please go ahead.

Good morning. How are you all?

Hi, Laura.

Good.

Just looking at your financials. You had a great reduction in the restructuring charges in the second quarter. And did I hear you say the majority of that is related to the Bothell facility?

Yes. That's correct.

Okay. So we know what that is and we know what to expect going forward. And on that same note, I guess at one point I'd heard maybe there were new owners at that facility and you all were investigating I guess conversations with them as far as the leased or subleasing opportunities as well, if you all could just comment on the status of that?

Yes. We continue to watch and pursue the new owners Blackstone Group to work with them to reduce either the lease terms that we're under now or perhaps come up with some creative solutions there. We also, though, continue to try to sublease the facility in order to bring the costs down of carrying it.

Right, right. And then on the goodwill charge, how often are you required under the FASB statement to reevaluate that?

We are required to evaluate it on an annual basis.

Okay.

And our measurement data is October.

Right. Okay. Got it. Thanks. Good program results.

Thank you.

Thank you, ma'am. [OPERATOR INSTRUCTIONS] Our next question will come from Steve Chess with Martin Bellson & Company. Please go ahead.

Good morning.

Hi, Steve.

Stewart, the market cap for the Company stock has gone down dramatically to less than $20 million. And price matters if you're trying to raise capital, which you probably will have to do in the near future. Is management failing its shareholders by not effectively communicating to the investment community the potential value of the Company?

Well, it's hard for me to answer that. I mean, I think our audience has to be the judge of that. We are working on a number of opportunities. We are working on new partnerships. We are working on strategic relationships. We try to communicate with our shareholders on an ongoing basis. We can't make up news so if we're not out there as often as we'd like then that's sort of the reality of our business since it's -- clinical trials take a long time to run. So we are confident of our results and of our clinical programs and we're pushing ahead with those and keeping our nose to the grindstone and I think we're doing the job we should do there so.

I agree that it looks like you're making progress and there just seems to be a major disconnect between the price of the stock and what you're saying. So that's why I'm asking the question. Biotech stocks in general are down but it seems like Targeted Genetics has dropped dramatically relative to other biotech stocks.

We couldn't agree more.

Okay. Thank you very much.

Thank you.

Thank you, sir. Management, at this time we have no additional questions in the queue and I'll turn the conference over to you for any further remarks.

Okay. Well, thank you very much and as you see we are off to a good start. We do have a number of challenges and certainly have a number of important milestones in the clinical business development and financial management ahead of us. That we are working very hard to accomplish. So I very much appreciate your help and your support and your interest and thank you for joining us and please stay tuned.

Thank you. Ladies and gentlemen, at this time we will conclude today's conference. If you would like to listen to a replay you may do so by dialing 1-800-405-2236 or 303-590-3000 with the access code of 11066751. You may also listen to the replay by contacting Targeted Genetics's website at www.targetedgenetics.com. Once again, if you would like to listen to the replay, you may do so by dialing 1-800-405-2236 or 303-590-3000 with the access code of 11066751. Or you may also contact the replay by the internet at www.targetedgenetics.com. Ladies and gentlemen, at this time we will conclude today's program. We thank you for the participation at this time you may now disconnect. And please have a pleasant day.