Avid Bioservices Inc (CDMO) 2010 Q1 法說會逐字稿

Hello. This is the [conference] call operator. Welcome to the Peregrine Pharmaceuticals first-quarter fiscal-year 2010 financial results conference call. (Operator Instructions). For your information, this conference is being recorded. I would like to turn the call over to Jennifer Anderson with BioCom Partners. Ms. Anderson.

Good morning, and thank you for joining us on today's call with the management of Peregrine Pharmaceuticals. We're here to discuss the Company's results for the first quarter of fiscal year 2010, reported this morning.

With me today are Steven King, President and Chief Executive Officer; Paul Lytle, Chief Financial Officer; and Joseph Shan, Vice President of Clinical and Regulatory Affairs at Peregrine; as well as Chris Eso, Vice President of Business Operations at Avid Bioservices.

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 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, 2009.

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 to now turn the call over to Steven King. Steve, you may begin.

Thank you, Jennifer. Let me start by thanking everyone who is participating in today's fiscal-year 2010 first-quarter conference call. As Jennifer mentioned, joining me on today's conference call are Paul Lytle, our CFO, who will cover financial highlights for the quarter; Christopher Eso, Vice President of Business Operations at Avid Bioservices, our wholly-owned contract manufacturing subsidiary. Chris will provide an overview of our contract manufacturing business and future plans as we look to continue expanding its potential.

And finally, Joseph Shan, Vice President of Clinical and Regulatory Affairs at Peregrine, who will provide a detailed review of our ongoing clinical development efforts.

Before I turn the call over to the rest of the team and we proceed to the Q&A session, I would like to say a few words.

First, I am pleased to report that the momentum we achieved in all elements of our business last fiscal year has continued into fiscal-year 2010. We have continued to successfully advance our Bavituximab and Cotara oncology clinical programs. We believe these programs will be key value drivers for Peregrine in the future, and they are our primary focus.

We have been very active over the past few months on the clinical development front. Since the start of the new fiscal year, we completed patient enrollment in two Bavituximab clinical trials and presented positive interim data from both studies at ASCO, an excellent opportunity to raise awareness for our lead oncology program at one of the largest medical oncology meetings of the year.

In addition, we reported positive clinical data from our ongoing Cotara clinical studies at the Society of Nuclear Medicine 2009 annual meeting. Again, another opportunity to raise awareness for the program.

And just yesterday, researchers from the lead clinical site of our Cotara Phase 2 trial in India presented encouraging interim data for patients treated at their site.

The results we have seen to date from both the Bavituximab and Cotara Phase 2 clinical studies have already convinced us to begin planning the next series of clinical trials.

In conjunction with planning these future studies, we were very pleased to recently add noted cancer clinical researcher, Dr. Bruce Chabner, who is the Clinical Director of Massachusetts General Hospital Cancer Center. He will serve as an advisor on the design of these next clinical trials. Again, another positive sign resulting from our key clinical advancements.

On the preclinical front, we also continue to make substantial progress. Work under our key MTI government contract, potentially work up to $44 million to evaluate and develop Bavituximab for the treatment of viral hemorrhagic fevers, is proceeding on schedule and is already generating promising results.

Meanwhile, our collaborators at UT Southwestern Medical Center at Dallas were awarded a significant grant from the National Institute for Allergies and Infectious Diseases, or NIAID, to start new studies evaluating additional anti-PS-targeting antibodies as potential treatments for viral hemorrhagic fever. This new grant represents another important external validation of the potential of our anti-PS technology platform as broad spectrum antiviral agents.

On the business front, we also saw significant continued advancements in our contract manufacturing and government contract operations, with overall revenues quadrupling this quarter as compared to the first quarter of fiscal-year 2009. This is fueled by increases in both contract manufacturing and government contract revenues.

Paul will cover these in more detail, but let me say that these manufacturing and government contract activities were essential in allowing us to make significant clinical advancements while simultaneously reducing our net loss this quarter by more than half. The manufacturing and government contract activities not only directly support ongoing efforts, but allow us to make preparations for expanding our clinical programs while continuing to control expenses.

In addition on the business front, we recently entered into a sub-licensing agreement with our longtime partner, Affitech, that gives them rights to develop anti-VEGF antibodies we generated together as part of our collaboration. This licensing agreement with Affitech represented an excellent opportunity for both companies. It will allow us to realize positive short-term cash flow and, at the same time, maintain an interest in the significant upside potential of the anti-VEGF program.

This agreement was also in alignment with our announced corporate strategy to monetize and advance our preclinical pipeline through partnerships or licensing agreements, while focusing our research and development efforts on advancing our later-stage clinical programs.

I will now turn the call over to Paul for a more detailed look at our recent financial highlights. Paul.

Thanks, Steve. Thank you, Jennifer, and thank you, everyone, for joining us.

Early this morning, we released our financial results for the first quarter of fiscal-year 2010. This earnings release outlines our financial results in greater detail and includes financial tables, so I encourage everyone to read the entire release.

During the next few minutes, I will take you through our financial results for the first quarter of fiscal-year 2010. I'll then discuss our current financial position and I'll conclude with a discussion covering two other important topics.

Now let me begin with the financial results for the first quarter of fiscal-year 2010, starting with revenues.

We are pleased to report that total revenues for the quarter ended July 31, 2009, increased 345% to $6.8 million. This compares to $1.5 million in total revenues reported in the same prior-year quarter.

Before I go into more detail, I wanted to mention that the Company has two significant revenue sources -- government contract revenue and contract manufacturing revenue. I am pleased to report that both sources of revenue saw tremendous growth this quarter compared to the same prior-year quarter.

Let me first discuss our contract manufacturing revenue generated from Avid Bioservices, our wholly-owned contract manufacturing business.

During the quarter, contract manufacturing revenue increased 74% to $2.1 million. This compares to $1.2 million reported in the same prior-year quarter. I think it's also important to note that, in addition to this third-party revenue of $2.1 million reported in the current quarter, Avid also generated $7 million in manufacturing revenue on behalf of Peregrine, including services provided under our government contract.

So Avid, on a standalone basis, generated $9.1 million in contract manufacturing revenue this past quarter, but on a consolidated basis, the services provided by Avid to Peregrine, including Avid's services provided under our government contract, are eliminated in the financial consolidation used for revenue reporting.

This leads me to our second revenue source, government contract revenue. Our government contract revenue stems from our contracts with the Defense Threat Reduction Agency for the Transformational Medical Technologies Initiative, which I'll refer to now as TMTI. This contract was signed at the end of June last year, and the purpose of the contract is to study our product candidates, Bavituximab and a fully human equivalent antibody, as potential broad spectrum treatment for viral hemorrhagic fever infections.

The contract is potentially worth up to $44 million over a five-year period, with $22 million potentially available over the initial 24-month base period.

Now during the quarter ended July 31, 2009, we reported $4.7 million in government contract revenue under this contract. This compares to $324,000 we reported in the same quarter last year, when the government contract work had just begun. Now that the contract is well underway, we are now seeing the growth in revenue under this contract as work has ramped up and some of the individual projects under this contract have come to completion.

Now looking ahead, we are currently on track to generate total revenues in excess of $20 million for fiscal-year 2010, representing another year of revenue growth. It's important to note that last fiscal year we reported a 198% increase in total revenue, a phenomenal year, and we are projecting another year of revenue growth on top of last year's tremendous growth.

Now let me turn to expenses. Total costs and expenses increased 34% this quarter to $8.9 million. This compares to total costs and expenses of $6.7 million reported in the same prior-year period. This $2.2 million increase in total costs and expenses was mostly related to a $2 million increase in research and development costs, most of which was related to increased research costs associated with our government contract.

Now if you turn to SG&A expenses, we saw a slight increase in SG&A expenses during the quarter in the amount of $87,000. This increase in SG&A was mostly driven by increases in headcount that were necessary to support the corresponding increase in total revenue.

Now moving down the statement of operations to the other income and expense category, we saw an expected increase in interest expense during the quarter of $277,000. This is directly related to the $5 million term loan we closed last December.

Now let me turn to the bottom line. For the quarter ended July 31, 2009, we reported a decline in our net loss of 52% to $2.4 million, or $0.01 per basic and diluted share. This compares to a net loss of approximately $5.1 million, or $0.02 per basic and diluted share, reported in the same prior-year period.

This decrease in our net loss is a direct result of the growing revenues we have generated, combined with the reduction in discretionary costs we have successfully achieved in many areas of our business.

In view of the hard times we are challenged with today, we are proud that we are successfully increasing revenues and significantly reducing our net loss while advancing the programs that are the key value drivers for Peregrine.

Now let me shift your attention to the balance sheet. We ended the quarter with $12.8 million in cash and cash equivalents. During the quarter, we were able to strengthen our cash position with net proceeds of $6.6 million under our at-the-market issuance agreement, whereby we sold shares of our common stock at market prices and without issuing a single warrant.

Now if you look at liquid assets on the balance sheet, representing cash and receivables, we had $15.9 million in liquid assets at July 31, 2009, compared to $13.7 million in liquid assets at our fiscal year-end date, April 30, 2009. With two important revenue sources, liquid assets will be an important measure of our capital resources, representing cash on hand as well as those assets that can quickly be converted into cash.

Now let me conclude with two other important topics. The first point I'd like to address pertains to our various sources of capital and our plans moving forward. As a backdrop, let me say that funding the advancement of our clinical pipeline is job number one. As you know, our clinical pipeline provides the greatest potential upside to each and every shareholder. But as we get close to starting later-stage clinical trials, drug development becomes more expensive, but the potential return is also much greater.

Let me discuss our capital-raising plans as we move closer to these later-stage trials.

First, our preferred source of capital is non-dilutive capital. And unlike most biotech companies, we are fortunate to have two sources of non-dilutive capital, which has helped reduce our overall reliance on the capital markets. We believe these two revenue sources could generate an excess of $20 million in total revenues during fiscal-year 2010.

In addition to these two revenue sources, we have also seen continued interest in our clinical programs from potential partners. We will continue to pursue these opportunities and the potential sources of capital these opportunities represent.

Now in addition to these potential sources of capital, we must also plan for the future. We need to have the ability to internally support our clinical programs and the expansion of those programs, based on the available financial resources and the additional capital we can raise based on market opportunities. As I mentioned on the last call, we filed a shelf registration statement, which allows us to raise additional capital under the best available terms.

As we look to the future, we plan to raise additional capital as market opportunities arise. Our goal is to finance our operations as market opportunities allow and to match our financing strategy with our clinical strategy. At a time in the Company's history when positive clinical data continues to build, we will strive to ensure we have the necessary resources to advance these clinical products, which we believe have great clinical and commercial potential.

Next, I would like to shift gears, and acknowledge that some of you have expressed concerns regarding our continued listing on NASDAQ and the possibility of a reverse stock split. First, let me say that we are 100% focused on the things that we believe can add and drive potential value in this Company to help us regain NASDAQ compliance.

As I just mentioned, we are first and foremost dedicated to advancing our product pipeline. That could provide the greatest potential value to shareholders.

In addition to our clinical pipeline, we are also focused on three key areas. These areas include our contract manufacturing business, our $44 million government contract, and our outside research collaborators.

Let me first turn to Abbott. Abbott represents a tremendous asset, and we are dedicated to growing that business. In fact, we recently announced we expanded our management team to focus strictly on growing the Abbott business. One of these executives, Chris Eso, our VP of Business Operations, will provide you with some additional insight into our plans to grow this business later in the call.

Second, our $44 million government contract is also extremely important to us. We have a dedicated project management team devoted to the success of the project and we believe we have made significant progress. In addition to this contract, we are also looking for new government contracts that complement our research efforts.

And third, supporting our research collaborators at major universities is essential to our future pipeline. These outside researchers obtain non-dilutive grants and other sources of funding that create new ideas, new pathways, and new technologies that could fuel new clinical candidates and new indications in our pipeline.

As an example, we recently announced that our collaborators at UT Southwestern received a large grant to study a panel of second-generation PS-targeting antibodies as potential treatment for viral hemorrhagic fevers. This is research being funded by NIAID, and Peregrine received the value of that research at no cost.

We are working with a number of major research collaborators that continually add value to our Company.

These are the fundamentals of the Company, and we plan to continue to make progress in these areas of focus.

Another fundamental of the Company is maintaining our NASDAQ listing. Being listed on NASDAQ does provide value to the Company and is extremely important for several reasons. Our listing on NASDAQ provides us access to the capital markets, it provides us liquidity, and it provides all of us an efficient market to trade our securities.

As we move forward, our human and financial resources will continue to be dedicated toward the fundamentals of the Company, which we believe will continue to add momentum and value. As we move ahead, it is our hope that we see additional momentum that will allow us to regain compliance with the NASDAQ listing requirements.

But if we are unable to achieve that compliance by November 11 through market appreciation of our stock price, we will have no choice but to take the necessary steps to maintain our listing on NASDAQ, including implementing a reverse stock split that was approved by shareholders last year.

Again, maintaining our listing on NASDAQ does add value to the Company, and our continued listing represents an essential ingredient needed to advance our products toward later-stage clinical trials.

Again, we are proud that we have made advances in our major areas of focus this quarter, and we look forward to building on this momentum throughout the rest of fiscal-year 2010.

I'd like to thank each of you for your time and attention. This concludes my discussion of the financial results. I will now turn the call over to Steve. Steve?

Thank you, Paul. Now for a new addition to our quarterly conference calls. Over the past few years, we have seen significant and consistent growth in our contract manufacturing operations at Avid Bioservices. This was further highlighted by today's earning results.

Avid now represents a substantial component of our overall operations, provides critical manufacturing support for our ongoing clinical studies, and represents significant value as a stand-alone business.

I am now going to turn the call over to Chris Eso, Avid's Vice President of Business Operations, who will discuss recent progress and upcoming plans at Avid. Chris?

Thank you, Steve. And thank you, everyone, for allowing me the opportunity to update you on Avid's advancements.

Before I get into where Avid is today, let me briefly provide you with a little background of how Avid has gotten here since some of you might not be as familiar with Avid as you are with Peregrine.

In 2002, Avid was formed to capitalize on the internal capability to address the growing market and need for biomanufacturing production, and began selling unutilized production capacity to third-party clients.

In 2005, Avid passed its initial pre-approval inspection to manufacture a commercial product, and since then has continued to grow each year, both from a customer base as well as on the revenue front, growing third-party revenue at a compounded annual growth rate of 63%, from $3 million in fiscal-year 2006 to $13 million last year.

With that as a backdrop, Avid is in the midst of a transformation -- a transformation where we have doubled revenues the past year; we continue to expand our customer base; we are seeing growing demand for our service, both internally and externally. We have embraced the use of disposable technologies throughout our facility, including the early adoption of the single-use bioreactors that we installed at the end of last year, a 1,000-liter reactor in our GMP suite and a 100-liter bioreactor in our process development laboratory, both of which have already contributed to our revenue growth and have paid for themselves many times over.

We continue to have an excellent regulatory track record. We have an established and well-recognized client base, including Roche, Halosyme, along with their partners Baxter and Roche; Catalyst, along with their partner Wyeth; and of course, Peregrine, along with a number of other clients.

We continue to recruit highly talented team members and have expanded our executive strength with the addition of Truc Le to manage this rapid growth as well as generate additional growth in the future and improved profitability through optimization.

All of this has been accomplished during one of the worst economic downturns. Today, Avid is a leading mid-size fee-for-service CMO providing high-quality, fully-integrated biologic production capabilities and development services. We are dedicated to suspension cell culture production, primarily monoclonal antibodies, recombinant proteins, and enzymes, all of which are growing markets. And we are uniquely positioned to leverage and capitalize on our size, expertise, and know-how to further grow the business.

Now let me shift gears a little bit and speak about Avid's current and potential output. As Paul previously mentioned, Avid's third-party revenue for the quarter was $2.1 million as compared to $1.2 million for the same prior-year period.

However, to truly represent Avid's full achievement for the quarter, or output, one would need to include internal business from both Peregrine as well as Peregrine's government contract with TMTI, since Avid is a subcontractor on that contract. Therefore for the quarter, Avid's full output was $9.1 million as compared to $3.5 million for the same prior-year period.

Now let's look to last year. Avid achieved record revenues for third-party revenue of $13 million for the full year. However, Avid's full output last year was approximately $23 million in total, when including Peregrine and TMTI business. Based on the current configuration of the facility and operations, with no additional optimization, we believe the revenue capacity, or potential output of the business, can reach approximately $35 million in total. With additional optimization of the facility and operations, we believe we can further advance that mark.

At these levels, Avid is quickly contributing its own value to Peregrine, not only by meeting Peregrine's growing clinical supply needs, but also reducing the overall burn rate for Peregrine and delivering quality products to our clients.

Therefore, because of the success we have seen in the business thus far, in the future we intend Avid to become a best-in-class primary partner of choice for mammalian cell culture production and services, committed to operational and business process excellence, superior customer service, and innovation. We will grow in terms of revenue and capabilities not only to support third-party client needs, but also in preparation for Peregrine's later-stage clinical trials and potential commercial production needs.

In order to achieve these objectives, we must run and manage Avid as a stand-alone business. The complexity of managing a growing business such as Avid is always the challenge. However, we believe we are up to that challenge.

We have established a dedicated management team to run and manage this growing business. We now have a highly motivated team with extensive experience collaborating and partnering with clients and contributing to their success, including having a highly experienced management -- manufacturing executive in Rich Richieri, who has been with Avid since 1997 and has more than 16 years of biomanufacturing experience; a veteran quality expert in John Quick, who spent 37 years with Baxter; and the recent appointment of global operations and Six Sigma expert Truc Le, who has more than 30 years' operational management experience; along with my business and corporate development experience.

The addition of Truc brings a wealth of experience and knowledge of building and optimizing world-class life science manufacturing facilities. We must look to further expand our current business offerings throughout the value chain, by moving upstream as well as downstream into adjacent markets.

Initially, this will be achieved through strategic partnerships and alliances. However, longer term, we must expand our internal capabilities to offer additional services such as proprietary expression system development; additional analytical testing capabilities; and fill-finish, for example.

We must also look to match Peregrine's production needs with that of the potential third-party clients' opportunities. We will be looking to expand our existing production capacity over the coming years to position ourselves not only to manufacture Peregrine's late-stage clinical products, but also our third-party clients.

And lastly, our business has evolved and continues to grow, but we must instill a business acumen and operational excellence within Avid, going above and beyond the high level of quality and technical aspects we currently have in place. For example, we must maintain our high quality standards that our clients have come to enjoy and recognize Avid for, as we optimize our processes and improve our overall effectiveness and efficiency to produce and deliver high-quality products on time and within specification, by implementing and integrating improved systems and streamlined processes.

As you can see, we have achieved great success with Avid in the past few years. We have a great team in place and we believe we are at the cusp of achieving even greater successes. In the coming months, we will be rolling out our strategy for future growth; therefore, I look forward to being able to update you as we progress.

That being said, we are not waiting in the interim, as you can see. We are taking the appropriate actions now to position Avid to be the primary partner of choice to capture that future growth. With more than 200 companies currently working on monoclonal antibodies and more than 250 therapeutic products in clinical trials, and hundreds more in preclinical, we want to be the first choice for their manufacturing needs.

With that, I will turn the call back to Steve.

Thank you, Chris. Now I'd like to switch gears and turn the call over to Joseph Shan, our Vice President of Clinical and Regulatory Affairs, who will provide a review of recent progress in our clinical programs. Joe?

Thank you, Steve. Since the start of the fiscal year, we've made significant advancements in both our Bavituximab and Cotara cancer clinical programs. As Steve mentioned earlier, this quarter we completed enrollment in two clinical studies and had several presentations at major medical meetings.

These clinical programs are the key value drivers for the Company, and we're very pleased both with the progress of these trials as well as the encouraging early data we're seeing.

Let me start with an update of the Bavituximab cancer program. Bavituximab is a monoclonal antibody with a novel mechanism. By specifically targeting a unique cell membrane component, phosphotidylserine, or PS, these antibodies help the body's own immune system to recognize and act on the tumor and its supporting blood vessels, resulting in anticancer effect.

As a reminder, the Bavi cancer program currently comprises a Phase 1 trial and three ongoing Phase 2 trials. Each clinical trial can be thought of as a scientific experiment, designed to address a specific research question. But when evaluated together, the total experience provides much greater insight than any single trial, which helps guide the overall development strategy.

The purpose of the Phase 1 study is to determine the safety and the pharmacokinetic properties of Bavituximab administered as a solo agent in patients with advanced solid cancers. The previously completed pilot study examined the a short-term effects of adding Bavi to a few commonly used chemotherapy regimens in patients with advanced cancers, which then led us to the current Phase 2 trials. These trials are designed to assess the safety and look for initial signs of anti-tumor activity of Bavi with specific chemotherapy regimens in patients with advanced breast or lung cancer.

Since the start of the new fiscal year, I'm pleased to report that we've made substantial progress in each of the four ongoing trials in the Bavi cancer program, which I will now discuss in more detail.

First, we completed client enrollment in our patient -- in our Phase 1 Bavituximab monotherapy cancer trial and presented preliminary data at the ASCO meeting in June. Investigators reported that Bavi by itself had demonstrated acceptable safety and that a maximum tolerated dose was not reached, even at the highest planned dose level. Also, Bavi had a predictable TK profile, which is important when considering dose levels and schedules in future trials.

Enrollment of the planned 46 patients is complete in the Phase 2 Bavi plus docetaxel breast cancer trial. We presented preliminary data from the first stage of this trial in an oral presentation at the prestigious ASCO annual meeting in June, also. 10 of the 14, or 71%, of the evaluable patients in the initial 15-patient cohort demonstrated tumor shrinkage and had a median progression-free survival of 7.4 months, both promising early results.

As the patients in the expanded 31-patient cohort complete their full treatment cycles later this year, we will be able to provide an update from the entire trial.

The Phase 2 trial of Bavi plus Carboplatin and paclitaxel in patients with locally advanced or metastatic non-small-cell lung cancer is enrolling according to schedule. We previously reported that 11 of 17, or 65%, of evaluable patients in the initial cohort of 21 patients achieved an objective tumor response.

This early result not only exceeded the prespecified endpoint needed to expand enrollment in the trial, but it compares very favorably with historical published data with chemotherapy, where response rates are typically less than 20%. We expect to provide an update upon completion of our enrollment of the full study population of 49 patients.

The third ongoing Phase 2 trial is evaluating Bavi plus Carboplatin and paclitaxel in advanced breast cancer patients. In this trial, nine of 14, or 64%, of evaluable patients in the initial 15-patient cohort saw tumors shrink. This data also exceeded the prespecified criteria needed to expand the trial. Enrollment of the 46-patient target is near completion, and we expect to provide an update shortly.

Based on the encouraging signs of anti-tumor activity already seen in our current Phase 2 trials, we have begun planning new trials to further advance the clinical development of Bavituximab. While we've built upon the clinical data we have and continue to generate, we also anticipate some new trials will explore Bavi's activity in tumor indications or treatment combinations we have not yet studied in the clinic.

It is important to understand that cancer drug development is extremely complex. That, for example, lung cancer is not a single disease but many specific indications, depending on stage, histology, prior treatment, etc.. Each indication may require a different set of clinical studies, but also represents a separate potential commercial market.

Our objective is to design the most cost-effective, efficient, and scientifically-sound studies in order to identify our best chances for getting Bavi to the market. To this end, I'm happy to report that we recently signed on Dr. Bruce Chabner, a prominent figure in the field of oncology, as a clinical advisor to assist our development efforts.

Dr. Bruce Chabner is currently the Clinical Director of the Massachusetts General Hospital Cancer Center and Professor of medicine at Harvard Medical School, and was formerly the Science Director at the National Cancer Institute. We believe his participation represents an important validation of the potential of the Bavi cancer program and we look forward to his contributions to the next stage of the clinical program.

In addition to Dr. Chabner, we're also expanding our outreach to key opinion leaders and industry experts to help us finalize our next clinical trial. I look forward to sharing with you our plans going forward in the coming months.

Next, I'll talk briefly about our Cotara program, which is focused on the treatment of glioblastoma multiforme, or GBM, the most aggressive form of brain cancer. Cotara is a monoclonal antibody attached to radioactive iodine, which is infused directly into brain tumors where it binds to the necrotic core of the tumor, resulting in specific anchoring of the radiation.

This quarter, we presented data from our ongoing dose-confirmation and dose-symmetry trial at the Society of Nuclear Medicine's annual meeting, demonstrating that after Cotara administration, the radiation concentration in the patient's brain tumor was on average more than 300-fold higher than any other normal organ. This study is near completion, and we plan to provide more information later in the year.

This ability of Cotara to specifically target a brain tumor is critical for its effectiveness, and this is what we believe we are starting to see in the early results coming out of our ongoing Phase 2 Cotara trial in patients with GBM at first relapse. In fact, just yesterday, investigators from our lead clinical site in that study reported on their initial experience with Cotara at the 14th World Congress of Neurological Surgery.

In the 10 patients included in this presentation, Cotara was well tolerated with an intra-median recurrence-free survival of 33 weeks and an intra-median overall survival of 41 weeks. These data are considered very promising in a disease where median survival from disease recurrence is estimated at only 24 weeks.

While Sen. Kennedy's death from glioblastoma last week is a stark reminder of our desperate need for new treatment options for this terrible disease, the Cotara data being generated gives us and our clinical investigators hope that Cotara can make a real difference in this deadly brain cancer. I look forward to providing -- advancing Cotara Phase 2 trial and providing updates as often as possible.

As you can see, we're off to great start, both with our Bavi and Cotara cancer programs in this first fiscal quarter. I look forward to reporting back on our progress throughout the rest of this fiscal year. I'll turn the call back to you now, Steve.

Thank you, Joe. These truly are very exciting times in both the Cotara and the Bavituximab clinical programs. And in fact, the more data we see from the ongoing clinical study, the more excited we get about the potential really of both of these products to treat these deadly diseases.

With that, Operator, at this point I would like to open up the floor to questions.

(Operator Instructions). [Richard Terracusa], Merrill Lynch.

Congratulations on all the progress, gentlemen.

Joe, on that Cotara data that was reported yesterday -- with the 41-week overall survival. Isn't that likely to increase as time goes by and these patients continue to live?

Hi, Dave, how are you? Yes, that's a great question. This is interim data and, yes, the data can continue to increase. I think, if I recall correctly, this is through a follow-up of up to 73 weeks or so, and there are patients still, obviously, active on follow-up.

And then also in the same release, you mentioned one patient from previous clinical trials that was -- had survived over eight years. I'm assuming that there are others, two years, three years, one year, four years -- is that correct? Survival?

Yes.

I'm sorry?

Yes, that's correct.

Okay. Thank you very much.

And just to expand on that a little bit, certainly in all of the Cotara studies we've completed to date or even in the ongoing study, we see a significant number of patients who end up having very long survival numbers. And that's what really sticks out, I think, about the results we get from this drug.

And again, we're giving the drug as a single agent and a single treatment. So we're really excited by the fact that for some patients, this really does seem to make a big difference in their overall prognosis. And so, that's, of course, what excites us about the program and really spurs us on to increase what we're currently doing in the clinic.

Roger Adams, private investor.

My question regards the Company's very exciting antiviral programs and the scarcity of public information about them. Everyone understands that these programs have been paid for with other people's money, like Duke and NIH, and they should be the first to get the spotlight, but after the Nature of Medicine article is published, will you be able to talk more freely about things -- non-DPRA things like aerosol delivery, HIV microbicides, possible swine flu applications, emergency use, animal [rule], or will the cloak of secrecy have to remain over those antiviral programs?

It's a good question. And certainly, our goal is to see a number of publications, presentations, and such coming from this research to really just to let the public know how the programs are proceeding and what the results are looking like as we move forward. And also to, I think, shine a light on what our future plans are for the program.

So I think we'll have opportunities actually to not just talk about or publish the work we're doing with our collaborators at Duke and the other institutions involved in researching our antiviral applications of our PS technology, but also even some opportunities to present data from the DTRA contract work and to shine some light on how those studies are proceeding.

And I believe that all of our collaborators are equally interested in seeing that information get out there in really the right format and the right setting.

So, all those preparations are in work and I think you'll see more coming out of the programs from a public standpoint over the coming months. And clearly, we're excited to get that information out there because we're very happy with the way -- actually all of these studies are progressing and what we're seeing in the preclinical studies.

Bill Dawson, Jesup & Lamont Securities Corporation.

I think probably, first off, congratulations are in order. It was a very productive and exciting fiscal-year 2009, so I'd like to congratulate you on that.

I think my first question is going to be about Avid. And I have to apologize, I did get disconnected from the line, so if this has been addressed, I apologize. But under current configuration right now, you -- at full utilization, you could project about $35 million in annual revenues? Is that correct?

Yes, I think that's correct. And again, the way we're looking at the business is that $35 million really represents primarily manufacturing capacity as we currently operate. And one of the reasons for bringing on Truc Le and really looking at our operational aspects of our business, it's really optimize our ability to utilize our existing capacity.

As Chris noted in his presentation, we did last year add on additional capacity through the 1,000-liter reactor into the facility. And we're really in a position where we can better utilize even our own existing infrastructure and increase that $35 million probably well over $40 million.

And then, of course, we have the capacity to actually expand the facility into some adjacent space that's also available for increasing our capacity, really, in a big way -- potentially even doubling what we're currently able to do in our facility.

Also, we're looking at other services we can offer. We clearly have a good infrastructure built up. We have the ability to potentially provide things like filling operations, testing services, and all of those can add significant additional revenues to the bottom line for the Company.

So we have a lot of upside potential here. And again, I think we've done a great job of growing it. But now we're excited about taking it to a whole new level.

Looking forward from here, what are we looking at for contract backlogs, as well as how far will that bring you as far as percentage utilization of the space that you have currently? And in conjunction with that question, are you finding it more cost effective to be using Avid services for your own internal programs? Or are you finding it more cost effective for outside contracts? And how is that affecting the percentage of development internal -- you using Avid internally versus you contracting out that business?

We don't really provide a lot of projections on our revenues. What I can say is when we look at our backlog of projects coming through, certainly we're fully utilizing the facility for the foreseeable future. And that's coming through a mixture of external clients, and obviously we want to bring as many external clients as we can into the mix.

But also through Peregrine projects. And that includes, of course, making material that supports our own clinical trials that are ongoing, but also making preparations for the next set of studies and even looking beyond that to eventual -- potential commercialization of Bavituximab. Assuming we're successful in the clinic, we want to be able to commercially manufacture the product here if possible.

So we really view the business as trying to grow the business from the outside clients. We utilize additional excess capacity for Peregrine projects. Again, we've reached the point where we're pretty well fully utilizing our existing capacity as we currently operate.

We believe by coming in and just achieving some very attainable optimization of how we use the facility, we can then create additional capacity without actually any, or very little, additional capital expenditures.

So that's really our focus. But we think, again, with the existing facility, we've still -- utilizing of the potential total capacity, probably not more than 60%. And again, I think our goal right now is to realize that additional 40%, and then look to building out and creating more additional capacity.

I have just one more quick question, probably for Joseph, regarding the Cotara trial. You guys just released data yesterday. That was out of 10 patients and the trial is up to 40, correct? I guess I am just wondering at current enrollment, when do you think that we might be able to see some topline data?

I think a little while ago, we gave guidance that over half of the patients were enrolled. If you recall, a few months ago we had actually -- we directed some resources in that trial in order to direct it to the Bavi program.

Now, obviously, this data that's coming through is exciting not only our investigators, but -- so we're reevaluating what we can do to really accelerate and then push through and finish the study. But that's about all I can say at this point.

Yes, and we are looking at some options there. Clearly, the more data we see from the trial, the more excited we get, and we do want to push forward at this point and get through that.

We're nearly completed with the dose-symmetry trial we've been running that is a much more complex trial. I think as we complete that trial here hopefully very quickly, we'll be in a great position actually to maybe even look at expanding what we're doing in the Phase 2 study to get that completed.

But yes, I think again what excited us about the data that was presented at the Boston conference was really the fact that it's falling nicely in line with previous reports from an earlier Phase 2 study. And so, these results are seeming very consistent across different studies and different locales -- and it really gives us high hopes for this potential treatment.

Thanks very much, guys, I appreciate it. And again, congratulations. I look forward to watching the developments here in the near future.

[Perry Asaris], private investor.

Gentlemen, I have been a shareholder for about 10 years when the Company was Techniclone. I have a question with regard to the listing requirements and the stock. That stock yesterday sold up at $0.95 on about 11 million shares of stock, close at $0.84, $0.85. Today it is trading at 80 dollars -- $0.80. It is $0.80. And if you're going to get this over $1.00 to meet the listing requirements, how do you justify selling into the market with a shelf registration?

I think, obviously, we are very supportive of trying to get the stock price above $1.00. And we're not going to do anything in our fundraising efforts that will inhibit us from being able to achieve that goal, if it's possible. Our focus is on continuing to generate clinical data, get that out there, to generate -- obviously, the great progress we've had on the Avid front and expanding that business.

And really, the fundamentals of the Company are what we're focused on. That generates news flow. And it's certainly our hope that that can bring us back into compliance by bringing the stock price back above $1.00.

That is our primary focus. So rest assured that what ever we're doing on the fundraising side of things will be geared around trying to regain compliance with this $1.00 minimum bid. So we're very cognizant of that and clearly, we do not want to be an impediment to getting back into compliance and then being able to grow the business as we can.

We've reached the end of the time allotted for this call, so this concludes today's question-and-answer session. I will now turn the conference back over to Steven King. Mr. King?

Thank you. We believe the achievements we have realized since the end of the last fiscal year have enabled us to continue to build significant value in our oncology clinical pipeline, to grow the value of our contract manufacturing business, and to realize immediate value from our Bavituximab antiviral platform through our TMTI government contract work.

Planning for the exciting next phase of our Bavituximab oncology clinical program has already begun. With seven ongoing clinical trials on track to generate additional data in the coming months, Avid Bioservices' focus on continued growth, and our government-supported antiviral research contract proceeding well, we believe Peregrine is well positioned to continue building the momentum we have achieved in the first quarter of this new fiscal year.

I would like to thank all of you for participating in today's conference call and for your ongoing support of Peregrine. We look forward to reporting on our continued progress at the next quarterly conference call. Thank you again.

Thank you. This concludes today's event. You may now disconnect.