Avid Bioservices Inc (CDMO) 2007 Q2 法說會逐字稿

Hello and welcome to the Peregrine Pharmaceuticals second quarter 2007 financial results conference call. (OPERATOR INSTRUCTIONS). Please note that participants will be afforded the time for one question. Additional questions or follow-ups will be accommodated as time permits. (OPERATOR INSTRUCTIONS). For your information this conference is being recorded. I would like to turn the conference over to Barbara Lindheim.

Good morning, and thank you for joining us on today's call with the management of Peregrine Pharmaceuticals. We are here to discuss the Company's second quarter fiscal 2007 results reported this morning. Before I turn the call over to Steven King, President and Chief Executive Officer, I would like to read the cautionary note regarding forward-looking statements.

This conference call may include statements that are not historical facts and are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Peregrine Pharmaceuticals' current views about future events and financial performance. These forward-looking statements are identified by the use of terms and phrases such as believes, expects, plans, anticipates, on target and similar expressions identifying forward-looking statements.

These factors include but are not limited to the risk factors detailed from time to time in Peregrine Pharmaceuticals' filings with the Securities and Exchange Commission, including but not limited to the annual report on Form 10-K for the year ended April 30, 2006. Investors should not rely on forward-looking statements because they are subject to a variety of risks, uncertainties and other factors that could cause actual results to differ materially from Peregrine Pharmaceuticals expectations. Peregrine Pharmaceuticals expressly does not undertake any duty to update forward-looking statements, whether as a result of new information, future events or otherwise.

I would like now to turn the call over to Steve King. Steve, you may begin.

Thank you, Barbara. On this morning's call, as we have done on recent calls, we will provide a review of the status of our current lead programs. But first I would like to turn it over to Paul Lytle, our CFO, who will provide a financial overview for the quarter.

Thank you, Steve. Thank you, everyone, for joining us today. I would first like to summarize the financial results for the second quarter of fiscal year 2007 which ended October 31, 2006, and highlight some additional points. I would also like to refer you to our press release issued this morning that outlines our financial results in greater detail.

For the second quarter of fiscal year 2007, Peregrine reported a net loss of approximately $5.1 million or $0.03 per basic undiluted share versus a net loss of approximately $4.6 million or $0.03 per basic undiluted share for the same prior year period.

Total revenues for the current quarter slightly increased to approximately $0.7 million and were primarily generated from our wholly-owned manufacturing subsidiary, Avid Bioservices. This is compared to total revenues of approximately $0.6 million for the same quarter in the prior year.

As mentioned in previous calls, Avid continues to be a strategic asset for Peregrine by generating revenues from outside customers on a fee-for-service basis, but more importantly, Avid supports our internal drug development program by providing a number of critical scale-up and manufacturing services.

Now turning to our expenses, we recorded approximately $5.4 million in total operating expenses this past quarter, which was approximately $0.7 million greater than our total operating expenses for the same quarter last year. The majority of this increase was due to increased research and development expenses associated with our increasing clinical trial activities both in the U.S. and India, as well as our continued efforts to advance Peregrine's preclinical programs.

With respect to SG&A expenses during the current quarter, we experienced a slight increase of about $100,000 compared to the same prior year quarter. This increase was primarily driven by an increase in non-cash expenses, including stock-based compensation expense that was reported in accordance with FAS 123R, an accounting standard we were required to adopt this fiscal year. This accounting standard requires us to recognize the fair value of stock options in the financial statements, whereas in previous years we were only required to disclose these non-cash expenses as a pro forma disclosure in the notes to the financial statements. In addition, certain performance milestones achieved during the quarter triggered a non-cash expense associated with our equity compensation plan.

For the quarter ended October 31, 2006, our cash and cash equivalents position was $23.4 million, which we believe is sufficient capital to support our planned operations including the development of our product candidates through at least July 2007. Our goal over the next six months or so is to ensure that our promising products and clinical trials -- products which we are developing for indications with great market potential -- are not delayed for financial reasons.

To ensure that Peregrine is best positioned during the upcoming fiscal year to advance both bavituxamab and Cotara towards later-stage clinical trials, we intend to file a new shelf registration statement with the SEC sometime in the first half of calendar year 2007.

It is important to note that a shelf registration statement does not commit the Company to sell additional shares, but the opportunity as we will continue to seek other potential sources of capital; and if necessary, an effective shelf merely gives us the mere opportunity to raise new capital with terms that are generally much more favorable than unregistered share offerings. Our goal is to secure the least dilutive capital so we can aggressively advance these promising products.

In addition, over the past quarter, we were again active in sharing our promising story, the novel mechanisms of action and the potential of our products by reaching out to the institutional investment community including presentations at a number of investor conferences and meetings with top tier biotech fund managers and analysts. These presentations and meetings continue to help raise our profile among these key audiences and we intend to continue these important efforts. We now have a growing number of significant investors in the industry following our progress and we expect that continued positive clinical data will increasingly be reflected in our share price.

This concludes the discussion of our financial results. I would now like to turn the call back over to Steve to provide a business update for the quarter and to outline our major objectives for the upcoming months. Steve?

Thank you, Paul. Since our last quarterly conference call we have continued to make good progress in our key corporate objective -- advancing the clinical development for our lead compounds bavituxamab and Cotara.

During this past quarter we achieved a number of important milestones that we believe will help set the stage for a successful upcoming year. In our view, 2007 could be a breakout year for Peregrine as our three clinical programs reach milestones that have the potential to be major value drivers.

This morning I want to briefly review our second quarter progress and operational highlights, and provide an overview of the clinical plans and milestones we are projecting during 2007.

First, I would like to update you on the bavituxamab oncology program. Our goal for the bavituxamab oncology program for the remainder of 2006 into early 2007 is to position the program for successful Phase II efficacy studies in 2007.

In order to achieve this goal, we have moved forward on two fronts. First, during the past quarter, we were able to work closely with the FDA to make adjustments to the ongoing Phase Ia study in the U.S. that will ease enrollment restrictions and other requirements for the trial that should both expedite completion of the ongoing Phase Ia study and also speed enrollment in future Phase II studies.

We felt it was important to address these issues with the FDA at this time rather than later in order to avoid potential delays in initiating future Phase II studies. The U.S. Phase Ia study is currently proceeding very well and we expect topline results from the trial to be available in the spring of 2007.

While working with the FDA to expedite clinical trials in the U.S., we were also able to initiate a Phase Ib bavituxamab combination therapy cancer trial in India. Our original plan was to initiate this clinical trial once U.S. Phase Ia study was complete. We were able to accelerate the plan and initiate this study well ahead of schedule by combining clinical data generated to date in the Phase Ia bavituxamab oncology trial with Phase Ia and Ib clinical data generated from the bavituxamab hepatitis C program.

This combined safety data together with compelling pre-clinical cancer data supporting the potential of bavituxamab and chemotherapy combinations form the basis of our successful application to the Indian regulatory authorities. This study is currently enrolling up to 12 patients who are receiving eight weekly doses of bavituxamab along with standard chemotherapy agents, docetaxel, gemcitabine and carboplatin paclitaxel.

Study participants will be followed for four weeks after receiving their last dose of bavituxamab. Patients are being monitored for safety parameters, bavituxamab biodistribution as well as tumor response.

We are running the trial to the same standards as we would run any of our U.S. trials in order to ensure the quality and utility of the data generated. We recently started treating patients in the study and patient enrollment is progressing extremely well. We expect to complete patient enrollment over the next several weeks with topline data from the trial available in the spring of 2007.

We continue to believe that bavituxamab has the potential to be a major addition to cancer therapy with its novel immunomodulatory mechanism and potential for synergistic effects, that can make it a logical companion to many new and existing cancer drugs with enormous clinical and commercial potential.

Next I would like to discuss advances in the Cotara brain cancer therapy program. Our goal for the Cotara brain cancer clinical program this year has been to move Cotara into position for successful Phase II efficacy studies that will extend into 2007.

In order to achieve this goal, we have again moved forward on two fronts. We are continuing our collaboration with the NABTT consortium to conduct a safety and dosimetry study in patients with the deadly brain cancer glioblastoma or GBM at first relapse.

In this multicenter study, up to nine patients are being imaged and treated with Cotara to determine tolerability, as well as radiation exposure to the tumor in normal organs. As well in the trial we will be monitoring median survival time of the patients. This study is now proceeding well and we expect topline results from the trial to be available in the spring or summer of 2007.

While continuing to work with NABTT this quarter, we received regulatory approval in India for a Phase II Cotara brain cancer trial that may enroll up to 40 patients with GBM at first relapse at up to 7 clinical sites. We have successfully met all the requirements and achieved regulatory approval for the clinical study itself, but we also have to obtain approval to manufacture the final Cotara product in India using GMP radiolabeling practices.

This process is now nearly complete and we expect to begin patient screening for the Cotara study shortly after the new year. Although this trial is being conducted in India, we are running the trial and manufacturing the final product according to the same standards we would use for any of our U.S. trials, again, in order to ensure the quality and utility of the data.

We expect patient enrollment in this Cotara study should progress much more quickly than would be possible in the U.S. based on the trial design, the large pool of available patients and the urgent need for effective brain cancer therapies. By conducting this Phase II study concurrently with the ongoing U.S. safety and dosimetry trial, we believe it will be possible to simultaneously generate clinical data supporting the efficacy, safety and radiation distribution profile of Cotara, thereby allowing us to definitively evaluate its potential for the treatment of GBM.

We expect patient enrollment and dosing in this Phase II study to be completed within one year, and we expect to report topline data at the first appropriate opportunity. We continue to believe that Cotara has the potential to be a major addition to the treatment of brain cancer based on very positive clinical data from earlier studies, and we look forward to working with the clinical sites in India and in the U.S. to complete these important studies.

Next I would like to discuss advances in the bavituxamab hepatitis C clinical program. Our goal for the bavituxamab hepatitis C program for the remainder of 2006 into 2007 is to progress the clinical program into combination studies that will enable us to further evaluate the potential of the compound to treat chronic hepatitis C infections.

During this past quarter we achieved two important milestones for this program. The first was an oral presentation of the positive results from the Phase Ia trial at the annual meeting of the American Association for the Study of Liver Disease to an audience of hundreds of HCV experts and biotech industry analysts. The presentation was very well received and helped raise awareness of our HCV program in both the medical and investment communities.

The second milestone was completion of patient enrollment in a bavituxamab Phase Ib repeat dose HCV trial to evaluate safety and bio-distribution. In this study, four bavituxamab doses were administered over a two weak period in 24 HCV infected patients. All patients in the trial have been treated and have either completed or are currently undergoing the 12 week post-dosing evaluation period.

We currently anticipate announcing topline data from this trial during the first quarter of 2007 when follow-up and data evaluation is complete. Based on data collected to date, we have already begun planning and designing the next round of bavituxamab HCV clinical trials.

We expect to initiate a number of new HCV trials in the new year. These trials are expected to include dosing studies to evaluate different dosing regimens which may include weekly, bi-weekly and monthly dosing. Data from these studies should provide essential data that will be important in the design of future Phase II trials. It is essential at this stage of development to determine the optimal dosing regimen for bavituxamab in this indication.

The fact that we are planning additional dosing studies should not be misconstrued as the fact that we are unhappy with the results generated to date. In fact, we are very happy with the results generated to date. The goal of these additional dosing studies is simply to determine the best way to use bavituxamab for HCV treatment and to essentially use the least amount of drug to obtain the maximal antiviral effects.

The second type of trial we anticipate conducting will be initial evaluations of bavituxamab in combination with the current standard of care agents ribavirin, interferon and a combination of the two agents.

The third type of trial we anticipate conducting will be an evaluation of bavituxamab in treatment-naive patients. Up to this point we have typically been treating only patients who have already failed ribavirin and interferon therapy and in most cases multiple attempts to treat with those drugs. Because these patients have already failed standard therapy, they are considered a very difficult to treat patient population.

It has been very encouraging that bavituxamab has already shown signs of antiviral activity in this population. However, we are eager now to test bavituxamab in the easier-to-treat group of treatment-naive patients, the most common target for initial HCV drug testing.

The fourth type of trial we anticipate conducting will be an evaluation of bavituxamab in patients co-infected with HCV and HIV. This is an important patient population since, according to some estimates, it represents up to 40% of the total HCV patient population. In our case, it is a particularly important population since pre-clinical studies suggest that bavituxamab may have potential utility in the treatment of both HCV and HIV viral strains.

The goal of all of these upcoming studies will be to determine the safety of the treatment regimens as well as their effectiveness at stimulating the immune system and reducing viral load in the target patient population. We anticipate beginning to file clinical protocols covering these anticipated clinical trial designs by the end of this year or shortly after the new year begins. Initiation of these studies will then continue into and through the first quarter of next year.

Lastly, I would like to update you on activities at Avid Bioservices. This past quarter has continued to be a very busy time at Avid with multiple ongoing projects for outside customers as well as providing critical support for Peregrine projects. For Peregrine, we have been scaling up production of bavituxamab in order to build inventory in anticipation of the current and upcoming trials.

In addition, we have moved a humanized version of bavituxamab into manufacturing. By completing bavituxamab's scale-up activities now we believe it will be possible during the upcoming year to focus more Avid efforts on external projects while continuing to move Peregrine projects forward.

At this time I would like to open up the floor for questions and answers.

(OPERATOR INSTRUCTIONS). [Michael Twistek]

(inaudible) conference call, you guys referred to Double U Master as supporters of our Company? They also were listed as an institutional investor in our last [funding] PR. But they're not listed as holders of our stock on the NASDAQ institutional holding summary list, so I guess my question is, we're selling them stock at a discount and they're just dumping it back on the market. I think that's hurting our share price. I was wondering if you could let us know if you plan on using someone else that's going to actually hold on to our stock?

This is Paul Lytle. I will go ahead and answer that question for you. Double U Master Fund has been a supporter of the Company and has invested in the Company over the last three and one-half plus years. We have issued stock to them at a minimal discount to market. We have issued no warrants in connection with those financings, and actually we've cleaned up our warrant structure to having over 20 million warrants outstanding over three plus years ago to approximately less than 700,000 warrants today.

I don't know what their position is today, in terms of filing with the SEC I believe you have to have at least a 5% ownership position in the Company to file, which would be in the 10 million share range. I can't monitor how many shares Double U Master Fund owns but I know they are a supporter of the Company because the last deal they did at $1.40 per share I think is a very supportive price for the Company, and I believe they have a number of those shares being held.

Because they're just not listed like Barclays and so on and so forth are listed as institutional holders. And they're not on the list and I was just wondering.

I believe institutions that have a value in their fund of, I think it's $100 million or less are not required to report with the SEC.

[Chris Tare, Newbridge].

I think the short answer to that previous question is, Double U Master Fund operates offshore and offshore doesn't need to report their holdings to anyone; never has.

My questions concern partnerships with large pharma and what Peregrine's strategy might be with that going forward. There were a couple of deals recently, at least in the hepatitis C space -- InterMune and Roche -- which was for a pre-clinical candidate, mind you, which was a $470 million deal, $60 million up front, but it was an exclusive worldwide. Vertex a little bit before that announced a major deal with a unit of Johnson & Johnson just for Europe, South America, Africa and the Middle East, and they got $165 million up front. The deal could be worth a total of $400 million.

I understand why Peregrine hasn't had any or inked any deals to date because it's such a new novel agent and it's not an identifiable target like an antiangiogenesis drug or like these two drugs, they're both protease inhibitors. But I guess now that it's been through Ia with a great safety profile and Ib apparently, with a pretty good safety profile, have you seen some of these big pharmas relax a little as far as agreeing with Peregrine that this is a very viable target and a potential blockbuster drug candidate? And I have a follow-up question to that.

Yes, I can address that question. We are actually discussing potential partnerships with a number of major pharma and biotech firms and have done so for some time now. As you mentioned, this is a very novel agent. Completing the Phase Ia and Ib studies with a good safety profile has been a critical factor in driving a lot of those discussions. And in fact, as we presented more data and even at the AASLD meeting there were representatives of all of these companies present.

So, as the safety database builds and for big pharma safety is a huge component of their willingness to partner, we have seen activity increase in the number of companies that are actively in discussions with us. Having said that, as we continue those discussions, we do still believe we can add tremendous value to the program by continuing to move it forward into additional studies which will further demonstrate the safety of the compound but also show its effectiveness at treating HCV.

So, our general plan is to continue the discussions. As deal terms come to the table and we see terms that make sense for the Company, then we will, of course, seriously evaluate those. In the meantime, continuing the clinical development will continue to add value to the program and should allow us to get the type of deal we would like to have in the future.

So you're basically following down Vertex's road, who did not ink a deal early and waited until they combo'ed their drug and got that multiple log reduction and such and then got a much better deal, obviously.

Well, I think as we've had discussions with these companies, again, it's been for quite some time. Before we were in the clinic they were listening and interested in the program. Then we told them what our game plan was, we executed on that game plan. And so really they're just like the investment community, they want to see the program progressing, that clinical results are matching with expectations, and then that really drives the value.

So if you want to compare that with the Vertex model I guess that's correct, but essentially it's a relationship-building process and eventually that will result in, we hope, some good partnering terms.

And for cancer it's a little different, is it not? I mean, a Phase II I guess the Company is planning on doing sometime next year. That's going to cost big bucks. I would imagine that you would probably have a partner for something like that or at least entertain that because -- I guess what I'm asking is for cancer when you look at these deals that have gone down, when you're doing this trial over in India, if you get some good results out of there, wouldn't you think that one of those companies who has one of those chemotherapy drugs would be looking to partner with Peregrine and possibly fund a Phase II?

And if that did happen, again, are you looking to sign an exclusive deal with one company like Roche did or are you looking to license it out possibly to multiple companies for just certain regions?

I think what you're looking at is -- really the cancer is somewhat similar to the viral indication in that it is still a novel drug and companies have the same safety questions as well as they want to see some clinical data starting to mount and that progress is being made. There has been, again, increasing interest as we have generated more and more clinical data. So I think that is certainly a good sign.

Our game plan is to move into those Phase II studies. They are not really that expensive that we cannot afford to run several of these types of trials. Although the patient numbers will be going up, that is somewhat offset by the fact that in early clinical trials you have lots more bells and whistles, if you will, involved in the trial which add to the expense. So that will be somewhat offset. So I think we are in a good position to be able to move those programs forward.

As far as exclusive licensing or licensing by region, for instance, again, I think we're going to evaluate the opportunities at hand. We have been approached by both companies interested in essentially worldwide rights as well as companies interested in particular regions, such as Asia-Pacific, Europe and what have you.

So I think, again, our goal is to continue the clinical development. We really do feel in the cancer field we are adding tremendous value by continuing to move the program forward, demonstrating safety as well as starting to demonstrate hopefully as we move into Phase II studies, some efficacy parameters as well.

[Mike Mundo, Ladenberg].

My question is more towards the repeat Phase Ib. In the repeat trials you tested in relapsed patients that didn't respond well to any of the forms of treatment and already had a very poor immune system. Now in your Phase Ia results you also tested the same kind of population nonresponders that came in at a 0.8 log reduction, which to me I thought was very impressive since they haven't seen any kind of log reduction in any past treatment. So, in repeat trials what do you see to be an acceptable log reduction in the Phase Ib?

I think it is important to recognize that there are a few different types of HCV drugs in development. There are drugs such as VX-950 and other drugs in that general class which have a direct effect on viral replication. And so essentially those drugs are dosed differently. Essentially they are dosed to a maximal effective dose or a maximum tolerated dose and then you want to maintain the drug at those levels, because it's necessary to maintain a given drug level in circulation in order to have a constant pressure on stopping the viral replication.

So, basically you dose up to a high level and then you want to maintain that high level in order to ensure you have adequate drug on-hand. Now the issue there is when you stop giving the drug that of course the drug levels drop and then in most cases the effectiveness of the antiviral effect goes away very quickly.

The second general class of drugs are drugs that stimulate the immune system, and that would be drugs such as, for instance, interferon. So the goal of those drugs is to stimulate the immune system and then the immune system really does the work against the virus. We generally fit into that second category of antiviral agents.

The first class, which have a direct effect on viral replication, are the drugs where you have seen these multiple log reductions that are now quite famous in the literature.

In general, the drugs that stimulate the immune system you don't see a stand-alone agent, the fantastic log reduction. And in fact with a drug such as interferon, typically even a 1 to 1.5 log reduction is considered a normal or even a good result for those drugs as stand-alone. And where you really see them shine is in combination therapy. So you combine them with a drug that itself lowers the viral load, you're then able to stimulate the immune system which then further drives down the viral load and gives you the more sustained responses.

Because again, when you stop treatment with the drugs that stimulate the immune system, hopefully then the immune system continues to work for extended periods of time. And again, that's generally how we think our drug works.

So to answer your question, we're currently just really building the safety database. We certainly would love to see huge log reductions, but based on the mechanism of action it's not particularly expected from this class of drugs. Where the drug will be most effective is in combination therapy with the existing standard of care or even potentially as new drugs come on the market with those drugs, because in general the new drugs are all geared towards this driving the viral load down. What they need are safe and effective drugs that can then extend that response time beyond the initial treatment period.

So we essentially don't have any preset -- you know, it's got to be a 3-log reduction or a 2-log reduction or even a 1-log reduction. It's more building the safety database, allowing us to move into additional dosing studies and then really in addition early next year into the combination therapy studies which is where we expect the drug to be most effective.

I will also point out -- and you point out yourself -- that we've been treating essentially the hardest to treat patients. So all of our patients, or effectively all of our patients treated to date have already failed interferon, which means the patient's ability to use interferon to stimulate their immune system to then fight the viral infection must be somewhat impaired or the virus has found a way to escape that enhancement of the immune response.

So basically again, that's one of the reasons that this -- in the upcoming year one of the studies we want to evaluate is our drug in treatment-naive patients which haven't already failed this attempt to stimulate the immune system.

[Richard Syracuse], Merrill Lynch.

In the Indian solid tumor trials, when you measure tumor response, what is the regimen for doing that? How will you be doing that, weekly or what? And when would you start?

The patients will be monitored periodically. I don't know off the top of my head the exact timing. I believe it is on a monthly basis during the initial trial period. But we will be evaluating that through MRI and standard techniques.

Just one other quick question, even though I'm only supposed to have one. The Vertex patients in their HCV trial, were they naive patients?

They had been moving into -- I believe all the recent trials have been in treatment-naive patients. And that is very typical for investigational drugs. Again, naturally you want to get your drug into a hopefully easier to treat patient population and so that's a standard paradigm not specifically for Vertex's drug but for most of the drugs in evaluation.

And that's a protease inhibitor much like HIV, I guess, so do you have to take medication every day with the Vertex?

I believe that they are actually taking treatment several times a day. I think it's three pills a day or three times a day every 8 hours.

[Sheldon Trosk, Double U Funds Group].

Good progress, guys. My questions were answered. Thank you.

[Bob Scott].

The rumor is that you guys were in China here. Any truth in that? If so, can you give us any information what went on there?

Well, I won't discuss any of my particular travel exploits but -- I mean I can't address whether or not we have an interest in China. And in fact we do have a considerable interest in the China market. We see it as an emerging market where clearly there's a medical need for the types of drugs we are developing, broad spectrum anticancer agents as well as antiviral agents. We do see that as an area we want to be in for these new compounds we are developing, and we do intend on pursuing that.

Very good. Nothing more, Steve?

That's all I have to report at the current time.

[Roger Adams].

Good morning, gentlemen, great job this quarter. A two-part question. First, regarding pre-clinical studies of bavi for viral load reduction in combination with ribavirin or other compounds, have you done such animal studies? Can you indicate whether those are encouraging in terms of what you hope to expect when you start the combination studies next quarter?

We have done pre-clinical studies using bavituxamab in combination with ribavirin. Those studies are I would say very encouraging. They certainly show the potential of bavituxamab to work in concert with ribavirin. So what you see in those experiments is you see good antiviral effects with either agent alone and then at least additive antiviral effects when you add the two drugs in together. So I think that's actually extremely encouraging from my standpoint as far as guiding the way into these upcoming combination therapy studies.

If you were to duplicate the additive effect in humans that you saw in animals, would that position you to be a market player in hepatitis?

Yes, I believe it would. I mean I think that although we haven't -- because there are no good animal models of HCV -- been able to directly address that through the animal modeling. In the animal viral models we have used I'd certainly see again the additive effects of the two drugs, which I think is a very compelling reason to believe that we could be successful in the clinic.

And my final question concerns the timing of Phase II studies in 2007, -- how soon -- I know you have to finish your 12 patient combination study in India to get a grip on where you go first. But can you give us some indication when you will complete dosing of that 12 patient study and how soon after you complete the 12 patient study you will be able to get rolling with Phase II studies?

Yes. Effectively I will be able to answer that question much better after we've enrolled the last patient in the combination therapy trial. But essentially once you have treated the last patient, again, it's eight weeks of dosing with a four-week follow-up. So following that time period we'll be culling the data. We are already starting to think about the design of those Phase II studies. So hopefully we will be in a position where we can relatively quickly put the data together into a clinical protocol and then be able to initiate or at least submit that clinical protocol to the IRB's for approval to move into the trials.

So I think, assuming over the next few weeks or so we complete enrollment in the combination therapy study, probably by the middle of next year we should be in a position to have our clinical protocols for the Phase II studies defined and then in a position to submit and initiate those studies.

(OPERATOR INSTRUCTIONS) Mike Mundo, Ladenberg.

I guess my second half of my question got cut off regarding the Phase Ib trials and log reductions. Now is the Company prepared to get this message across to Wall Street in a manner that they understand the significance of this trial? I mean I think the results I've seen so far are very impressive. Could this be a possible candidate at these log reductions to replace interferon due to the toxicity profiles?

Well, I think that the replacement of interferon is going to be clinically driven obviously well beyond these initial Phase I studies. But I mean, again, it's in the same general class as interferon. We do see it as an immunostimulatory molecule much like interferon only with the benefit that --.

Effectively what we're doing is specifically targeting the viral particles in the virally infected cells and directing the immune response where you want it; versus some of the current agents in development as well as interferon which generally stimulates the immune system which then hopefully has antiviral effects.

So certainly we want to evaluate this with interferon and in the absence of interferon to address those sorts of questions. But I think you really have to have those combination therapy studies completed before you can get too far down that road.

Like I said, looking at the log reduction, interferon seems to be the same as the single dose on bavituxamab in the initial trials. So I wish you guys good luck.

John Marshall, Canaccord Adams.

I was wondering, are we able to take the years of data that we have in the U.S. plus the data in China on Cotara plus whatever we're going to get in India, and actually go to India and submit for an approval similar to what's in China?

Well, I do think it is our intention to really look at those opportunities. Certainly all the clinical data generated to date that we have access to can be used and certainly was already used to support the studies that are ongoing in India. So I would think that it certainly will be a good leg-up for us, if you will, in that marketplace as far as moving toward product approval.

We certainly intend on pursuing that. But like any regulatory question I think you have to put a package together, submit it to the regulatory authorities and then come to an agreement on exactly where you are at and what you need to do as far as moving to commercial sales.

One more question. The slot that we reserved at Lonza, when you did that in '05, what were your thoughts? Where were you going to be supplying? Why did you want that?

I don't believe we ever reserved a slot at Lonza.

Is it in the 10-K? I'm sorry then if I'm misspoken but I thought it was.

With respect to Lonza and Cotara, we have secured a license to utilize their TS expression system which is an expression system that we utilize to manufacture the antibody. It is purely just a license from Lonza.

I apologize.

No problem.

Richard Syracuse, Merrill Lynch.

You mentioned earlier you made a presentation to the FDA before they gave you approval to go into the combo trial that you're doing in India. Which is kind of unique that they kind of broke stride and let you go forward before you completed the stand-alone trial. What was the data that you presented to them?

Well, I think what we were able to do is, just to separate this out, so the U.S. trial is still very important for us to complete and gather that data because it answers some basic clinical questions as well as is a nice part of our regulatory overall package.

What we presented to the regulatory authorities in India was actually the data that had been collected to date in the U.S. trial in combination with all of the data that was collected in the HCV trials. And obviously when we first went into the cancer study, it was the first in-man study. We now have treated obviously many patients. We have built a good safety database and so we basically were able to use both the HCV data and the cancer data to support those studies in India.

That was our final question. Mr. King, would you like to make any closing comments?

Yes, I would. In conclusion, the first half of this fiscal year has been marked by important progress in our multiple clinical trial programs. We believe that our increasing success in achieving clinical milestones and the growing body of positive human clinical data from our lead programs will provide powerful ammunition for efforts to raise our profile in scientific, medical and investor communities in a responsible and sustainable fashion.

We also believe these milestones will be a key value driver that will ultimately be reflected in our share price. We appreciate the continued, continuing support of our shareholders, collaborators and advisors and look forward to being able to report on our continuing progress over the course of the year.

I want to acknowledge the commitment, vision and hard work of our employees and advisors in helping us to reach this exciting stage and also to thank our shareholders for their continued support. We believe that continued progress in our clinical programs will ultimately help create shareholder value that is commensurate with the clinical and commercial promise of our unique technologies. With that, I would like to thank you for attending today's conference call.