Avid Bioservices Inc (CDMO) 2008 Q3 法說會逐字稿

Hello and welcome to the Peregrine Pharmaceuticals third-quarter 2008 financial results conference call. All participants will be in a listen-only mode and there will be an opportunity for you to ask questions at the end of today's presentation. (OPERATOR INSTRUCTIONS). For your information this conference is being recorded. At this time I would like to turn the conference over to Barbara Lindheim. Ms. Lindheim, you may begin the conference.

Good morning and thank you for joining us on today's call with the management of Peregrine Pharmaceuticals. We're here today with Peregrine's President and Chief Executive Officer, Steven King; our Chief Financial Officer, Paul Lytle; and Executive Director of Clinical and Regulatory Affairs, Joe Shan, to discuss the Company's results for the third quarter of fiscal year 2008 reported this morning. Before I turn the call over to Steve 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, 2007.

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 and 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'd like now to turn the call over to Steven King. Steve, you may begin.

Thank you, Barbara. I'd like to start by thanking everyone who is participating in today's quarterly conference call. I will start with a brief recap of new developments since our last conference call. Paul will then go over the financial highlights for the quarter and I will conclude with a more detailed review of our product development efforts which will be followed by a question-and-answer session.

Since our last conference call in December we have achieved a number of significant advancements and product development. Specifically we began patient treatment in a bavituximab Phase II clinical trial, a trial designed to evaluate the efficacy of bavituximab in combination with docetaxel in patients with advanced breast cancer. This trial was off and running at an excellent pace.

Second, we received regulatory approval to start two additional bavituximab Phase II clinical trials; one in combination with carboplaten and paclitaxel in lung cancer and the other evaluating the same combination in patients with breast cancer. We believe that data from these Phase II studies should be a major value driver for Peregrine over the coming months.

During the quarter we were also able to raise awareness for our bavituximab program and highlight promising clinical and preclinical data through presentations at Angio 2008, through a presentation at the Liver Meeting, through a publication in clinical cancer research and just this morning we announced that data from our Cotara brain cancer program have been accepted for presentation at ASCO this year.

While moving our product development efforts forward we have also continued to make progress in growing revenues at our contract manufacturing subsidiary, Avid Bioservices. As you can see, the past few months have been a productive time at Peregrine. Before going into more detail on these advancements I would like to hand the conference call over to our CFO, Paul Lytle, for a financial summary. Paul?

Thank you, Steve. Thank you, Barbara. And thank you, everyone, for joining us. Early this morning we released our third-quarter earnings. This earnings release outlines the financial results in greater detail and includes financial tables, so I encourage everyone to read the entire release. We also plan to file our Form 10-Q later today and both of these documents will be available on our website.

Now during the next few minutes I will take you through our financial results for the third quarter of fiscal year 2008, I'll then briefly discuss our current financial position, and I will conclude with a discussion of several other important topics. Let me begin with the financial results for the third quarter of fiscal year 2008, starting with revenues.

Total revenues for the quarter ended January 31, 2008 were up 361% to $1.7 million compared to total revenues of $0.4 million reported in the same prior year period. This increase was mostly driven by increased revenues coming from third party customers of Avid Bioservices, our wholly-owned contract manufacturing business. As mentioned on previous calls, we anticipated record revenues from Avid in fiscal year 2008 and we are pleased to report that we have achieved that mark in the first nine months of this fiscal year.

As reported today, Avid revenues during the past nine months totaled $5.1 million and this is in addition to the important manufacturing services Avid provides Peregrine in supporting our three ongoing clinical programs. Now let me turn to the expenses.

Total cost and expenses increased to $8.1 million for the current quarter. This compares to total cost and expenses of $5.6 million reported in the same prior year quarter. This increase was primarily related to an expected increase in the cost of contract manufacturing directly related to the higher reported revenues from Avid in addition to an increase in research and development costs as we continue to advance our three clinical programs. Steve King will discuss our R&D progress in more detail later in the call.

In addition, we saw a modest increase in SG&A expenses in the current quarter of $334,000. This increase partly reflects our increased investment in business development including the expansion of our business development team and our enhanced partnering efforts. Now let me turn to the bottom line.

For the third quarter of fiscal year 2008 Peregrine reported a net loss of approximately $6.2 million or $0.03 per basic and diluted share. This compares to a net cost of approximately $5 million or $0.03 per basic and diluted share in the same prior year period. The increase in our quarterly net loss was primarily related to our increased investment in research and development as previously discussed. Now let me shift your attention to the balance sheet.

We ended the quarter with approximately $20.1 million in cash and cash equivalents. This compares to $16 million in cash and cash equivalents reported at our fiscal year end April 30, 2007. Now let me conclude with some additional important points.

First, let me say that we are proactively taking steps to control our costs and to reduce our reliance on the equity markets. These steps include -- first, we are focusing our research and development investments towards our ongoing clinical programs that should enhance the partner ability of each program. To that end we are proactively curtailing certain R&D efforts and reducing expenses that are not directly related to our three core clinical programs.

Second, we are growing the Avid business and revenues are increasing. As previously mentioned, Avid revenues for the nine months ended January 2008 more than tripled to $5.1 million compared to $1.5 million generated in the same prior year period.

And third, we are pursuing opportunities that could monetize our rich asset base. This includes a number of proactive steps. First, as Avid continues to increase its revenues the valuation of that business likewise increases. It's important to note that while we are actively pursuing ways to monetize this asset, we are seeking to do so in a way that protects the manufacturing needs of both our clients and the needs of Peregrine. Monetizing our Avid asset is a high priority for the Company and we have a number of people dedicated to this task.

Next, we are continuing to meet with potential partners for our clinical trial programs. Over the past two months our business development team has met with over 40 companies and essentially including every big pharma company in the U.S., Europe and Japan. We continue to stay in touch with these companies and we provide them periodic updates as we continue to achieve our clinical milestones. Our goal is to partner one of our clinical programs within the next 12 months.

And as we have mentioned on previous calls, the valuation of any new drug candidate is greatly enhanced with positive Phase II data in hand and we are marching towards that goal. As Steve will discuss in greater detail in a few minutes, we are currently enrolling patients in two separate Phase II cancer studies and two additional Phase II cancer studies should be underway next month. And to accomplish our partnering goal we have expanded our business development team and we are optimist their efforts will ultimately help us bring in attractive partners for our programs.

The next topic I would like to discuss pertains to our NASDAQ continued listing. As I stated on the last call in December, we were expecting to receive the additional 180-day compliant period from NASDAQ, and on January 23, 2008 we announced that we officially received that extension. Per that letter from NASDAQ we now have until July 21, 2008 to regain compliance with the $1 minimum bid price rule.

And as we look to the future, let me assure you again that maintaining our NASDAQ listing is extremely important to us as shareholders and we will continue to do everything in our power to maintain our NASDAQ listing. I would like to thank you for your time. This concludes the discussion of the financial results. Steve will now continue to update everyone on the Company's recent achievements and our major objectives for the upcoming months. Steve?

Thank you, Paul. I'd like to highlight recent advancements in our product pipeline and I'll walk through each one of the programs in order. Let me start by saying that we continue to believe that Phase II clinical data will be a primary valuation driver for Peregrine as we move forward. And as such this is the area where we are concentrating our resources. We are continuing to pursue an aggressive clinical strategy with the potential to create significant value for our shareholders while helping patients with life-threatening diseases.

In particular we view our oncology program as our highest strategic priority. We achieved a number of major milestones this quarter for the bavituximab cancer program. The first milestone was dosing the first patient in a Phase II trial evaluating bavituximab in combination with docetaxel in advanced breast cancer patients.

Since opening the initial sites for patient screening the trial has progressing very nicely and we are well into the first set of 15 patients in the trial. Just as a reminder, we will treat up to 15 patients initially and pending positive results we will treat up to an additional 31 patients in the study. We anticipate data coming from this trial should be available before the middle of the year.

It is worth noting that our positive experience with this trial also provides a useful model for other Phase II trials we will be starting shortly. We took care to invest the necessary time for the extensive planning and on-site coordination needed to run an efficient trial and we are now reaping the benefits through rapid patient screening and entry into the trial.

The second and third milestones for the bavi program came almost simultaneously when we received regulatory approval to begin two additional Phase II studies. These trials will both evaluate the combination of bavituximab with carboplatin and paclitaxel in patients with advanced breast cancer or advanced lung cancer. Planning for these two trials is well underway and both trials are preparing to begin enrolling patients within the next month or so.

Just as a reminder, these trials are also two stage designs with 15 and 21 patients in the initial treatment group followed by groups of 31 and 28 patients, respectively. Taken together we believe these trials should lead to significant clinical data and news flow throughout the rest of this year. And as we have noted, Phase II clinical data can be an important driver for valuation creation in the investment community, as an important validating event for partnering and other business development activities, as well as for gaining momentum in the medical community whose interest and support we are actively engaging.

While we have been busy moving our Phase II studies forward, we have also continued to make progress in the bavituximab Phase I cancer program. The addition of a new clinical site this quarter helps increase patient screening for the study. We were also able to highlight results from several bavituximab clinical studies at the 10th annual International Symposium on Antiangiogenic Agents. The presentation by one of our clinical investigators, Dr. Alison Stopeck, highlighted the positive experience to date with bavituximab in clinical trials and helped raise additional awareness for the program.

In addition to our progress during the quarter in advancing the clinical program, we also confirmed a critical element of bavituximab specificity in a preclinical study published by Dr. Philip Thorpe and his colleagues in the peer reviewed journal, Clinical Cancer Research. This study in a prostate cancer model confirmed bavituximab's ability to target tumor blood vessels with excellent specificity. The high degree of selective targeting seen in the study provides additional evidence of bavituximab's therapeutic potential to achieve superior safety and efficacy in treating solid cancers.

Now moving on to the bavituximab antiviral program. During the third quarter the Company continued to advance its bavituximab HCV program. In November we presented positive data from our Phase I repeat dose clinical study at the Liver Meeting in Boston.

Also during the quarter we added two additional sites to the ongoing HCV HIV co-infection study, the Johns Hopkins Hospital and a private clinic in Orange County, California. We are still very excited about this program and are motivated to move the trial forward. As soon as the Phase II cancer studies are all underway we will be in a position to turn our attention again back to this trial to expedite the study.

In addition to the HCV clinical study, we have also continued supporting HIV, influenza and biodefense research programs at Duke University, UT Southwestern and other sporting institutions. These research collaborations have expanded and are extremely active. We look forward to presenting data through peer reviewed journal articles in the near future that highlight the potential of our anti-PS technology in these difficult to treat diseases.

A real positive for these preclinical programs is that they have significant support from outside grants. This has allowed us to remain very active in continuing the collaborations while focusing our internal resources on our clinical programs.

Now turning to the Cotara glioblastoma program. We have committed to providing an update on these tests of the Cotara clinical program this quarter and we hope you saw the press release this morning. This update provides data from the first cohort of patients in the ongoing dosimetry trial as well as experience to date in an ongoing Phase II safety and efficacy trial. Highlights included that Cotara appears to be safe and well tolerated with no dose limiting adverse events; that the Phase II trial has reached 20% completion with regard to patient enrollment.

As is typical in clinical trials, ramping up the studies and getting multiple sites actively involved is an important hurdle. We now have several sites that have enrolled patients in the study and we have completed expansion of the number of clinical sites participating in the study to eight. This has already led to a significant uptick in patient screening and we anticipate it will enhance enrollment rates as we move toward completion of the study later this year.

In addition, in view of the short expected survival time of approximately six months in the GBM patient population we are encouraged by the fact that we have patients in these trials who have now survived past the six-month time frame. With one patient now out 15 months post treatment from the dosimetry study and the earliest treated patient in the Phase II study now out eight months.

It is helpful to note that the primary criteria for success in these studies is survival. And while these are early results from the studies, they provide us with a good initial look at data from the trials that we can build upon in future updates as the trial and patient follow-up continue.

Another positive development highlighted in the update is that data from the first cohort of patients in the (inaudible) trial has been accepted for presentation at the 2008 ASCO annual meeting. This will provide us with an excellent opportunity to raise awareness for the program among the medical community at a very high profile conference.

On the corporate side, during the quarter Peregrine continued to ramp up our proactive partnering activities. Our business development team has been very active in meeting with a wide variety of perspective partners. This includes potential partners for both our clinical programs as well as our preclinical programs. We anticipate that our continued progress in advancing our three clinical programs and the expected upcoming appearance of peer reviewed scientific publications will contribute heavily to continued progress in our partnering discussions.

We remained active during the quarter in reaching out to the investment community, presenting at a major investor conference, and meeting with institutional investors. We were also pleased that our analysts appear to be proactive in calling attention to our advancements. We anticipate continued active outreach to the investment community in the upcoming months. With that I would now like to open the floor to questions.

(OPERATOR INSTRUCTIONS). Rodman & Renshaw.

Good morning, this is Navdeep Jaikaria. A quick question -- there are several but I guess I will start with one and get in the queue. Regarding the Cotara studies, let's start with the dosimetry trial. So you mentioned there were three patients that are currently enrolled, one of them is out to 15 months. What about the other two patients?

Yes, obviously the patients from that first cohort -- it was really intended just to be an update on the first cohort because that's the data that we'll be presenting at ASCO.

Okay.

So the patient -- the last patient in that cohort is now out about four months after treatment and then the longest patient is out, as you said, about 15 months. And of course we'll be following those patients as we go out through the -- as follow-up continues over time here. And I'll just say in the Phase II study that we're currently running in India, the first patient was treated approximately eight months ago, so that patient of course is the farthest out in that trial as far as follow-up.

We do have patients that are obviously still out on follow-up in the trial. And so this is really, for that trial, primarily an enrollment update and also it kind of sets a benchmark that we'll now be able to update against those patients as we go forward for instance around the time of ASCO.

That's great. And regarding -- you also mentioned in the press release that Cotara was concentrated in the brain tumor. How did you measure leakage? Was there any leakage from the brain tumor cavity into the blood or anything of the three patients that we saw -- in those three patients in the dosimetry study and how did you monitor the leakage, etc.?

Actually on the call this morning we have our Executive Director of clinical and regulatory affairs, Joe Shan, so I'll actually let him answer that question.

So basically we measure that following some standard guidelines. There's a committee called MIRD that publishes these guidelines. And it is a combination of nuclear imaging as well as blood and urine radioactivity measurements over a period of almost two weeks. And so it's a composite of all of those sorts of measurements. And to answer your question directly, no, we didn't see any leakage outside of the brain, but of course we can't go into too much detail because we're under embargo for ASCO and the full details of each organ, exposure, all those rates will be presented at ASCO.

Great, thank you. I'll get back in the queue.

Richard Siragusa, Merrill Lynch.

Steve and Paul, congratulations on the overall progress. Regarding the breast cancer trial in Georgia, I'd just like a little clarification on that, a little more color on how it's going. And then you mentioned that you're well into treating the first group and then you followed that later by saying we would have data on that trial in the middle of the year. Is that data on the whole trial, the complete trial, the first group, second group? When will you get to the second group? That's basically the essence of my question?

Well, the trial design is to treat the first 15 patients in the trial, evaluate tumor responses in the trial and also obviously safety parameters and other aspects of tumor response. Then too, that really kind of almost becomes a go, no go for moving into the second set of patients which is 31 in that trial. So obviously our primary goal is to as quickly as possible get through the initial 15 patients so we can make that evaluation. The trial design is such that the patients will receive tumor scans on about eight-week time periods, so we'll be able to evaluate patients really for the first time after treatment starting at about week eight.

Okay. Then when would you make the decision to go to the next group?

Basically we have some internal thresholds we've identified. And so really essentially as soon as we reach that threshold we could make the decision to go ahead and move into the additional 31 patients. So there won't necessarily have to be a hard break period between the first 15 and then the second 31 patients; it could just flow into one continuous enrollment of patients. And again, that's partly driven by how quickly you enroll the patients and then how quickly you reach that threshold.

Do you have 15 enrolled yet?

No, we don't have 15 enrolled and obviously I think probably we would provide an update when we enroll the 15th patient that at least we've met that milestone, then people can better guide themselves on when at least at some point we'll know the data.

Then you would update us when you start the second 31?

Right, and certainly as we feel like, again, we've met our threshold and we (multiple speakers) push into the second set of patients.

So when you said data in the middle of the year you were talking about for the complete trial?

I think the data coming through by that time point would be certainly to hopefully reach the go, no go point and hopefully of course be on the go side.

For the second group?

For the first group. Now keep in mind, you treat a patient and it's eight weeks before you get the scans. So you have to build in that eight-week time period. So I think by the middle of the year we should have enrolled enough patients hopefully to be at that decisions point.

Okay, thank you.

And I'm not trying to be vague on the answers here, but it does really rely on the types of tumor responses we're seeing as well as, again, how quickly and how grouped the patients are and you're able to evaluate them.

Okay, so have you evaluated any in their eighth week?

Patient are, again, in various stages of follow-up.

All right, thank you.

Michael Jordan, Securities Counseling & Management.

Hello, gentlemen. Steven, it's nice to hear talk about partnering and licensing and all this stuff, but the Company over the years has announced licensing agreements. There was one with Merck AG; I think there was something with Schering. Why don't we ever hear about the deals you've signed?

Those license agreements that are in place are really technology out licensing, not any of our major products, so we're not involved in the actual development of compounds that are included in those kind of technology licenses. So although we do receive periodic updates that effort is going into those programs, we don't really receive any specifics on the stage of development, so we're really reliant on our partners to put out information.

And I think we did have an update from the Merck Group on the TNT-based compound that we licensed to them. But again, that has to come internally from the licensing partners, not something that we can initiate. So certainly our goal in the product licensing, which is really our primary focus right now, would be to remain much more actively involved in the program and of course be able to give much more detailed updates on development post licensing.

And as a quick follow-up, how much money is the Company going to need to raise this year in order to avoid the going concern statement by the auditors on your 10-K?

I think as Paul mentioned, really our focus at this point is to reduce our reliance on the equity markets. There are a number of ways in which that can happen. Obviously really being careful with the money we're spending, so trying to only spend it on the absolute value driving programs at this point. Secondly, to obviously continue to explore potential revenue raising around our Avid bio services contract manufacturing subsidiary. And the third would be through licensing partnerships and other types of collaboration that would bring direct cash into the Company.

Okay, how much money is the Company going to need to raise? That was a direct question; I haven't heard a direct answer.

I think, Michael, we haven't put out any numbers out there in terms of our projections or how much capital we're going to raise. It's really going to hinge upon how successful we are with the efforts that Steve King just discussed in terms of really monetizing this Avid asset, bringing that to fruition, looking at partnering arrangements --

Okay, well what does monetizing the Avid asset mean? Are you going to sell it?

I think that's one of the opportunities that we are pursuing, absolutely. I think we're looking at if we are successful in that, then maybe that takes us out of the equity markets entirely this year and into next year. That's a high priority for the Company and we are heavily pursuing that. We have a number of people dedicated to that task and we're moving forward with that.

And just to kind of restate, our goal is to not have to go back to the equity markets, especially during these tough market conditions. And if we do have to go back to the equity markets to really reduce the size of whatever money we would need to raise as low as possible.

Thank you.

Navdeep Jaikaria, Rodman & Renshaw.

A couple of questions. The first is going back to again the 11 patients that are enrolled in Cotara Phase I/Phase II studies. So I just wanted to know, they're all alive and responding well to the treatment, is that a fair assumption?

So far in the clinical studies I believe we're currently at nine of the 11 -- of those 11 patients are still alive in follow up. So I mean, again, this is a very tough indication in which patients can progress very rapidly at any given time. And one of the patients that did pass away was, again, past the expected median survival time in this patient population, out about 10 months.

So we are of course following up on monitoring each one of the patients. And again, I think it's one of those things we'll be able to give a better update as time passes by here because then you'll get more and more patients out to the six-month and hopefully beyond the six-month time period, and we'll have a better idea of how the drug is working.

Great. And the second question, Paul, for you. You talked about curtailing the burn rate from these current 6 million or so a quarter and, Steve, you talked about focusing on a core program. So which development programs are you going to put on hold?

I think if you look at our preclinical programs, Navdeep, we have our antiangiogenesis program which is basically at a partnerable state right now. Our goal is not to -- is to put that on hold internally, but actually do some very proactive partnering discussions around that technology.

We also have our vasopermeation enhancement agent technology which is also in preclinical development. We're going to be spending fewer resources on that technology. And then we have our vascular targeting agent technology which also is in preclinical development. So we're really curtailing those efforts, putting together partnering packages, so these programs are not just sitting on the shelf but we're going to be actively pursuing preclinical partnering arrangements for these types of programs.

And I think, just to follow-up on that, on the clinical side clearly our focus is on making sure that we're able to, as rapidly as possible, complete the Phase II studies for both Cotara and for bavituximab. So on the clinical side we'll put most of our resources in those areas and then push the other ongoing clinical studies as we have the resources available.

Great, thank you.

Roger Adams, Wells Capital Management.

Thank you, gentlemen, for the good report this morning. My question concerns the CTL lawsuit. It was good to see that Judge Perk has granted the Company's motion for document production. Could you give us some indication of, based on having that motion granted, when you expect to receive Phase III clinical data from the lung patients treated in China that led to approval of TNT over there?

It's a little bit difficult to predict the exact timing of receiving any documents. So far every step of the way I think every effort has been made to keep us from getting documents that we have requested. And really it's an ongoing process. Obviously we feel that we're in the right here, that we should have access to that data as well as a potential revenue stream from the commercialization of the technology in China. So we're continuing to pursue that vigorously. Again, unfortunately it's hard to make exact predictions on these court cases because there are so many motions that take place on a -- it almost seems like a daily basis.

And we're still in the discovery stage of the litigation, so it's still early in the process. Even though we have had some successes in the trial it is still considered very early in the process.

If you are successful in getting that data produced do you anticipate releasing it in a press release?

I guess that's going to have to be a question I'll have to get back to you after talking to our attorneys about.

Thank you.

Michael [Quisick].

Paul, you stated in your last presentation that the Duke papers would be out by the end of this quarter and that would be within the next I believe 20 days. So are you still sticking to that time schedule?

Yes, I think at the BIO CEO product presentation we talked about a number of preclinical publications that were in the works. We met one of those goals where Phil Thorpe presented data or published data in the Clinical Cancer Research Journal. I also spoke about an antiviral publication coming from the Duke University Group and also from UT Southwestern. So we have a number of those publications that we believe are upcoming and they are moving through the processing and we're optimistic that they will be issued.

In terms of the timing, I believe some of those publications will hopefully hit by the end of this quarter, but it's hard to determine the exact timing and when those will be accepted and how long it takes to get those journals and publications reviewed. So we're still optimistic that those publications will issue, it's just the timing is a little uncertain right now, but they are forthcoming.

Thank you.

Richard Siragusa, Merrill Lynch.

Earlier you had mentioned that you've been in contact with 40 pharmaceutical companies over the complete range of size. How many of those -- I don't know if you can answer the question, but how many of those 40 would you say are serious rather than casual observers?

Well, I think it's hard to predict because you just have this face-to-face interaction with the representative of the company, you're never quite sure what's happening on the internal side of things. What I can say is we have had significant follow-up from really most of the companies we met with. There's clearly a serious interest in the program.

Some people want to be in the loop and updated, everybody's looking for something a little bit different. Even publications such as the imaging paper that recently came out are very helpful for some of the potential partners who have questions about specificity for instance. Other groups want to see a little bit more clinical data like some of the Phase II data coming through.

So I think every one we met with has some at least significant or some significant interest in the program or they wouldn't agree to meet with you to begin with. Because at these conferences they have the option to either meet with you or not meet with you. And in particular I know when we went to the BIO-Asia Conference we had probably seven or eight meetings outside of the conference where we were actually able to visit the companies and spend really a little bit more time with them discussing the programs in more detail.

So I mean, there's definitely a lot of interest and it's growing. And I think, again, as the data from the Phase II studies starts to come through that's really going to even peak the interest more.

Okay, thank you.

(OPERATOR INSTRUCTIONS). Al [Feinblat].

Gentlemen, thank you very much for this most enlightening conference call. I've been a stockholder for over 10 years now. I'd like to also congratulate you on focusing your areas of research that will bring us to fruition in the shortest time frame here. I have two questions. What do you anticipate our burn rate to be per month over the next six months and would you ever consider a reverse split to maintain our NASDAQ listing?

I'll go ahead and answer the reverse stock split and let me just say that our time and energy here at the Company has not really been focused on a reverse stock split because we don't believe that's a value adding idea. But what we have been focused on are really the fundamentals of the Company, meeting milestones, achieving clinical trial goals because we believe this focus will add value.

And although we can't control the price of our stock what we are focused on here are these events that could influence the stock price and ultimately bring us back into NASDAQ compliance. So that is really our goal from the reverse stock split standpoint. But I'd like to also add a point here that if we do have to do a reverse stock split, it's important to note that any of these changes in our capital structure would have to be preapproved by shareholders. So everyone will have a decision and a vote in the decision of that reverse stock split if it ever happens. So that's just a little added highlight on that question.

In terms of the amount of capital that we will need or the amount of what are burn rate will be, we have not publicly stated what our anticipated burn rate will be. But historically it's been in the 5.1 for the first two quarters. This quarter now with the nine months ended it's in the -- a little higher than that, about $5.4 million. So as we take monies away from the preclinical programs our goal is to really put those efforts and those monies into generating data from the Phase II studies. So we haven't adjusted our burn rate going forward from that standpoint.

Okay, I appreciate your answers. Thank you.

Joe [Griffith].

The last caller answered my question on reverse splits, but to follow-up with that, if we were to partner or sell Avid what would you think that would reduce our burn rate to per quarter? Would we see a significant difference?

We haven't publicly stated that the stand-alone business unit of Avid is, but what we can say is that the value that Peregrine receives from Avid is tremendous and the amount of manufacturing services received from Avid is tremendous. But we have not publicly stated what the stand-alone burn rate of that entity is.

I think just to follow-up on that a little bit, again, I think through these efforts to really, again, focus our research dollars on the clinical programs only and sort of curtail efforts in other preclinical type programs combined with the potential of the Avid business growing or, in the case where we actually decide to monetize it, we're bringing that cash.

I think the overall net benefit we're trying to get to is to, again, reduce our overall burn rate and allow us to hopefully not have to go back to the equity markets at all at this point and that's our primary goal. So I think there are a lot of moving parts there, but certainly our goal is to not have to go back to the equity markets. And again, if we do have to then to really make it as small of a raise as we possibly could do.

It would seem right now if you went back to the equity markets it would pretty much destroy the stock price since we're sitting at $0.53 right now. Just an observation.

Right. Like a said, it's a good point that we're obviously in tune with that.

Okay, thank you.

(OPERATOR INSTRUCTIONS). Roger Adams.

Could you comment, please, on the NASDAQ appeal process after July 21? Am I correct that there's availability for an appeal that could stretch the time period out for a month or two during which you could achieve the $1 compliance number?

It is our understanding that at the July 21st time point if you have not achieved that $1 minimum bid price for 10 consecutive trading days that you can appeal to the NASDAQ and that appeal generally takes about 30 days before you actually get a hearing date. And then once you have the hearing date you will propose your plan, how to get back into compliance with the listing requirements and then in general take another 30 days or so to get their final decision. So there is that appeal processes that does take approximately a couple of months.

And if you were to achieve the 10 days of compliance during that two-month appeal process, would that bring you back into good standing?

I don't think we can comment yet on the appeal process because we have not gone down that path in the past. But I'm certain if we do get into compliance with our NASDAQ listing requirements that that would basically satisfy their needs.

One would think so. Thank you very much.

And again, as a follow-up there, our primary focus is to regain compliance well in advance of that deadline. And again, I think with the potentially very exciting developments we have upcoming then hopefully we can achieve that goal and these NASDAQ compliance issues can be dealt with in the right way.

But if there were to be delays in the Phase II data coming out of Georgia and India this gives you a little bit of cushion?

Yes, it's certainly good to know the process.

Right. Thank you very much.

Ladies and gentlemen, at this time I'm showing no additional questions.

In conclusion, I'd like to again thank all of you for participating in today's conference call. We do look forward to building on the developments of the last quarter as we move forward. With multiple Phase II studies now underway we're in the final preparations for opening. And with many active preclinical collaborations and partnering opportunities we believe there will be ample opportunities to highlight our overall activities and to create value for our stockholders. Again, thank you for your continuing support.