Avid Bioservices Inc (CDMO) 2010 Q2 法說會逐字稿

Hello. This is the conference call operator. Welcome to the Peregrine Pharmaceuticals second quarter fiscal 2010 financial results conference call. All participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (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. If you should need assistance during the conference, please signal an operator by pressing star then zero on your touch tone phone. For your information, this conference is being recorded.

I would now like to turn the conference over to Barbara Lindheim with BioCom Partners. Ms. Lindheim, the floor is yours, ma'am.

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 results for the second 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 Dr. Rob Garnick, Head of 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 the use of terms and phrases such as believes, expect, 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 30th, 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 would like now to turn the call over to Steve King. Steve, you may begin.

Thank you, Barbara. I'd like to start by thanking all of you for participating in today's fiscal year 2010 second quarter conference call. I am very pleased to be here with Paul Lytle, our CFO, Chris Eso, the Vice President of Business Operations at Avid and the newest addition to our management team, Dr. Robert Garnick, our Head of Regulatory. Since our last quarterly conference call, we have continued to see significant achievements throughout our business. We made advances in our Bavituximab and Cotara clinical programs, including completion of two Bavi Phase II clinical trials, completion of enrollment in our Cotara dose confirmation and dosimetry brain cancer trial, presentation of promising data from both the Cotara and Bavi clinical programs.

In addition, we added world class cancer drug development experts to Peregrine. Dr. Bruce Shatner of Harvard Medical School and Massachusetts General Hospital, as a clinical advisor and former Genentech Regulatory Chief, Dr. Robert Garnick, who has joined us as the Head of Regulatory Affairs. Individuals whose knowledge and stature are already providing invaluable insight into our development efforts.

Perhaps most importantly, we recently completed successful discussions with the FDA regarding our Bavi clinical program, helping solidify our regulatory strategy and clinical plans moving forward. In addition, we recognized record revenues through our Avid contract manufacturing business, and our TMTI government contract and strengthened the management team at Avid as we prepare for future growth and additional commercialization opportunities. It has obviously been an extremely busy time at the Company and we believe these advances are setting the stage for a very positive and exciting 2010 for the Company.

I would now like to turn the floor over the to Paul Lytle, who will provide a financial overview for the quarter. Paul?

Thanks, Steve. Thank you, Barbara. And thank you everyone for joining us.

Early this morning, we released our financial results for the second 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 second quarter of fiscal year 2010. I'll then discuss our current financial position, and I'll conclude with a discussion covering our capital resources and our plans moving forward.

Now, let me begin with the financial results for the second quarter of fiscal year 2010, starting with revenue. I am pleased to report that total revenue for the quarter ended October 31st, 2009 increased 255% to $6.9 million. This compares to $1.9 million in total revenue reported in the same prior year quarter. Let me just mention that the Company has two significant revenue sources. Contract manufacturing revenue, and government contract revenue, and I am pleased to report that both sources of revenue saw positive growth this quarter, and Chris Eso will provide you with a little more insight into Avid's contributions in just a few minutes.

Now as we look to the rest of fiscal year 2010, we projected total revenues would be in excess of $20 million. And of that amount, we have achieved $13.6 million in total revenue during the first six months of fiscal year 2010. That being said, we believe we are on track to achieve at least $20 million in total revenue in fiscal year 2010, representing a record revenue year for the Company.

Now let me turn to expenses. Total cost and expenses increased $2.9 million or 45% this quarter to $9.4 million. The increase was mostly driven by an increase in the cost of contract manufacturing directly related to higher reported manufacturing revenue. In addition, our R&D expenses slightly decreased during the quarter by $169,000 or 4%, while SG&A expenses increased $234,000. The decrease in R&D expenses reflects a slower expenditure rate for our current clinical trials that are nearing completion. While the increase in SG&A expenses 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 $284,000. This is directly related to the $5 million nonconvertible term loan we closed last December.

Now let me turn to the bottom line. For the quarter ended October 31st, 2009, we reported a decline in our net loss of 38% to $2.8 million or $0.06 per basic and diluted share. This compares to a net loss of approximately $4.5 million, or $0.10 per basic and diluted share reported in the same prior year period. This decrease in our net loss is a direct result of the revenue growth we have seen from both Avid and under our government contract. In view of the tough economic times we are still challenged with today, we are pleased 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 improved our cash position and ended the quarter with $13.6 million in cash and $17.7 million in liquid assets, which represents cash and receivables. This compares to $10 million in cash and $13.7 million in liquid assets at our fiscal year end, April 30th, 2009.

Now let me conclude with one other important topic related to our various sources of capital and our plans moving forward. As a back drop, let me say that advancing the clinical pipeline is our number one priority. As you know, our clinical pipeline provides the greatest potential upside to each and every stockholder. But as we get closer to starting later stage clinical trials required for commercialization, drug development becomes more expensive but the potential return is also much greater.

Let me discuss our current sources of capital as we move closer to these later stage trials. First, our preferred source of capital has always been non-dilutive capital. And unlike most biotech companies, we are fortunate to have two key sources of non-dilutive capital, which has helped us reduce our overall reliance on the capital markets. In fiscal year 2009, we generated $18 million in total revenue, and we believe we could generate in excess of $20 million in total revenue during fiscal year 2010. And this revenue we generate reduces the amount of capital we would ultimately need to raise from the capital markets. We are also experiencing continued interest in our clinical programs from potential partners. We will continue to pursue these opportunities and the potential sources of capital they represent.

Along with the potential sources of capital, we must plan for the future. At the current time, we are designing the most important clinical studies in the Company's history that could set the stage for commercialization. And our goal is to match our financing strategy with our clinical strategy, to ensure we have the necessary capital resources to advance these clinical studies. Over the past few quarters, we have been able to do this by closely matching our capital needs with our capital resources by increasing revenue and by raising additional capital under our aftermarket issuance agreement. This financing vehicle allows us to raise additional capital when market opportunities arise by selling shares at market prices and without issuing a single warrant. During the current quarter, we have raised $5.2 million in net proceeds using this mechanism, and these shares were sold at an average selling price per share of $3.78.

Finally, during the quarter, we implemented a stockholder approved reverse stock split, allowing us to streamline our capital structure and achieve full compliance with NASDAQ's continued listing requirements. Now with our current capital structure, combined with our clinical programs being at a very promising stage, we believe we are a very attractive Company for institutional investors. That being said, we are planning an active investor outreach campaign in 2009, including presenting at relevant investor conferences and conducting a number of institutional investor meetings. Our goals of this campaign are to continue to increase the overall awareness of Peregrine amongst the investment community, as well as to increase the institutional ownership of our stock. We are very enthusiastic over the potential of both Bavituximab and Cotara to treat these life threatening diseases, and we want to share this enthusiasm with the investment community.

Thank you for your time today and for your continued support of Peregrine. I will now turn the call over to Chris Eso, Avid's VP of Business Operations, to discuss Avid's financial and strategic progress and plan to pursue new market opportunities. Chris?

Thank you, Paul. And thank you everyone for joining us today and providing me the opportunity to update you on some of Avid's achievements. As Paul mentioned, total reported revenue for the Company was $6.9 million for the second quarter, and $13.6 million for the last six months.

Avid, or our contract manufacturing CMO business, generated $5.3 million of that total for the second quarter, up 440%, and $7.4 million for the last six months, up more than 230%. Avid not only generates third party revenue to help offset Peregrine's research and development spend, but it also provides strategic and monetary value by producing all of the drug material required for the Company's pipeline. Therefore, to fully represent the value Avid brings to Peregrine, we need to include the value Avid generates for Peregrine as a result of manufacturing its products including under the TMTI government contract.

On this basis, Avid's total output was up more than 260% to $7.5 million for the second quarter. And up almost 200% to $16.6 million for the last six months. As you can see, we have experienced tremendous growth in our CMO business over the last year, which is an outstanding accomplishment and a testament to the dedication and quality of the Avid team. As a result of this growth, and as Peregrine continues to advance its pipeline, Avid is an increasingly valuable strategic asset to Peregrine, generating significant revenues while supporting the Company's increasing demand for clinical drug supplies, and offsetting the overall burn rate.

Now let me shift gears and speak to our plans moving forward. As of today, approximately 80 to 90% of Avid's revenue is generated from the contract manufacturing services. While we are taking action to ensure continued growth in our CMO business, we also want to look for new areas of growth, not only to diversify our business, but also to position Avid for long-term success.

One of the areas is expanding our business offering, initially through strategic alliances. At the end of September, we entered into a global strategic alliance with one of the world's largest CMOs, Boehringer Ingelheim, to become their US West Coast partner in their global production alliance network. This is a great opportunity for Avid to join an elite group of strategic biologic manufacturers and to gain access to a proprietary new expression system. Both of which represent key elements in Avid's overall growth strategy. By capitalizing on both companies' strengths and capabilities, this alliance not only allows us to extend our service offering and customer base, but also provides both companies' clients with added production capabilities and scale, while shortening shortening development time lines.

Additionally, we are currently in discussions regarding a number of other strategic alliances and partnerships to further expand Avid's presence, including seeking a partner in the rapidly growing Asia-Pacific region. We look forward to announcing additional strategic relationships in the future. The emerging field of biosimilars represents another potential growth area for Avid. Biosimilars are essentially the generic version of off-patent or soon to be off-patent protein drugs such as antibodies. However, these products are similar but not identical as traditional generics are. In general, biosimilars are the same dose, treat the same disease, and are characteristically the same. However, because no proteins are manufactured under exactly the same conditions every time, they cannot be identical.

The regulatory pathway is yet to be established in the US to approve biosimilars. However, in Europe, the pathway has already been established and biosimilars are on the market. It is only a matter of time before we see the regulatory pathway established in the US for the approval of biosimilars. Actually, it is currently one of the hottest topics in Washington because biosimilars is part of the proposed healthcare reform legislation and is expected to dramatically reduce healthcare costs. Biosimilars offer an unprecedented opportunity for a US-based Company with available capacity such as Avid, which has the biologic manufacturing capabilities, infrastructure, personnel, and the regulatory track record of producing commercial grade biologic products. Capabilities that are relatively scarce and extremely valuable.

What makes this opportunity so exciting is that we are at the brink of an emerging new market, a market that could generate billions of dollars in sales in just a few years' time, a situation only seen before in 1984 when the ground-breaking Hatch-Waxman legislation was passed, paving the way for an abbreviated regulatory approval of generic pharmaceutical products, ultimately creating the generic pharmaceutical industry as we know it today. Once the US regulatory pathway is determined, Avid will have the ability to commercialize biosimilar products in the US as well as abroad, in an expedited fashion. This opportunity is directly aligned with our corporate goal of commercializing at least one product within the next two and-a-half to five years.

We are now evaluating numerous biosimilar opportunities against a demanding set of criteria. Including identifying those biologics that match our current expertise capabilities and capacity of our existing facility, providing the ability to expedite a regulatory approval process, and may have limited clinical trial requirements. We will be especially interested in specialty niche biologics that require smaller sales and marketing efforts, potentially having less competition in the marketplace. We believe we have the right team in place to tackle biosimilars head-on, including the recent additions of production and quality expert Truc Le, the regulatory credibility and expertise of Dr. Rob Garnick, along with my background in generics, coupled with the years of experience the Avid team has in successfully developing and producing clinical and commercial grade biologics. Biosimilars represents a large growth potential for Avid in the near future, both as a provider of contract services to potential clients, but also for Avid directly in potential product revenue, or royalty stream from partners. Ultimately providing another significant revenue source for the Company.

Lastly, we are expanding our analytical services offerings as another potential growth area. We currently have a variety of analytical test methods that we have developed which represent another potential revenue stream beyond our existing contract manufacturing clients. Currently we are developing more sophisticated test methods internally that can be leveraged with our clients but also will be critical for biosimilars as well as in support of Peregrine's own clinical and commercial efforts. The advancement of these initiatives over the longer term will ultimately prepare Avid for Peregrine's later stage clinical drug supply needs as well as for potential commercial production. As you can see, we have a lot of activities going on at Avid and a lot to be excited about. We are repositioning Avid to be the primary partner of choice to capture future growth, both for our CMO clients and ourselves on a variety of fronts.

With that, I'd like to turn the call back to Steve.

Thank you, Chris.

We would like to now turn to the clinical discussions portion of the conference call. Joseph Shan, who heads our clinical group and is normally on our quarterly conference call is traveling this week in support of our clinical programs and will not be able to be with us today. In his absence I will now provide a brief review of recent progress in our clinical programs, and Rob will provide an update on our regulatory efforts.

We have now completed patient enrollment in five clinical trials this year. Four Bavituximab clinical trials, including a Phase I study and three Phase II studies, and one Cotara study. Three of these trial enrollment completions have actually taken place in just the short time since our last quarterly conference call.

I would like to start with Cotara developments. The Phase I Cotara study was a dose confirmation and dosimetry trial in brain cancer patients with relapsed glioblastoma. Completion of this trial was an important milestone because it represents an integral and necessary part of our regulatory data package for the Cotara program and helped confirm the ability of Cotara to specifically deliver radiation to brain tumors, sparing normal organ exposure and concentrating therapy where it is most needed. This study was necessarily complex and demanding for both patients and the institutions running the trial and we truly appreciate their dedication to completing the study. We consider this trial to have been a successful trial because we were able to show in just the first two of three cohorts in the study that Cotara was able to deliver up to 300 times more radiation to GBN tumors compared to normal nontarget organs. And we're pleased to see that patients in these cohorts all either met or exceeded the expected median survival time of six months for recurrent GBM patients.

We are currently completing follow-up and data and analysis from the entire study and look forward to presenting entire data from the study at an appropriate medical conference in the first half of next year. With this study now complete, we are focusing on expanding the ongoing Cotara Phase II study to the sites that were involved in the dosimetry trial. We believe this will allow us to expedite completion of this trial, which represents the next important piece of our Cotara development package. This study has already yielded positive initial results as illustrated by a presentation at the World Congress of Neurological Surgery Annual Meeting, showing that Cotara appeared to be well-tolerated and demonstrated encouraging signs of efficacy in GBM patients at first relapse. The investigators determined that the interim median recurrence-free survival of the first 10 patients treated was 33 weeks, and that interim median overall survival was 40.6 weeks.

These results represent an important improvement over historical data on expected survival time of patients with GBM, which again, is approximately 24 weeks from time of disease recurrence. Based on this data, the study authors concluded that Cotara appears to be feasible, tolerable, and has encouraging signs of efficacy in recurrent GBM patients. We look forward to completing this study and to sharing additional data in 2010.

You now switching gears to our Bavi oncology program. Over the past few months we have seen some very significant results coming from the Bavi program. We were able to complete patient enrollment in a Bavi monotherapy trial in advanced refractory cancer patients as well as two Phase II clinical trials evaluating Bavi with chemotherapy in advanced breast and lung cancer patients. These developments have come on the heels of completing an enrollment in another Bavi Phase II clinical trial a little earlier this year. These ongoing studies have all yielded valuable information.

Just this quarter, we reported a 61% objective response rate in the 46 patient Phase II trial evaluating Bavi in combination with docetaxel in advanced breast cancer patients. Exceeding the 41% tumor response data for docetaxel as monotherapy, that was used as the benchmark for design of this study. In addition, analysis of data from the initial 21 patient cohort in our Phase II trial evaluating Bavituximab in combination with Carboplatin and paclitaxel in non-small cell lung cancer patients, indicated that the median progression-free survival was 6.5 months, which is a very promising improvement to the progress-free survival range of 4.2 to 4.5 months reported in the lung cancer trials that were the basis for the design of this trial evaluating Carboplatin and paclitaxel alone.

At this point I think it is worth a few minutes to review how these trials all fit into our overall Bavi oncology development strategy. Several years ago, we recognized that because of our considerable experience with Bavi in both an HCV and oncology setting that we had a unique opportunity to initiate signal seeking Phase II studies combining Bavi plus chemotherapy in patients with different solid tumors. While simultaneously completing the Phase I study evaluating Bavi alone in advanced cancer patients. By signal seeking Phase II studies, we mean studies to evaluate the safety signals when Bavituximab is given along with different keep therapeutic agents in advanced breast and lung cancer patients.

In addition, our second goal was to look for early signs of anti-tumor activity from these combinations which would support advancing the program to definitive Phase II trials. And by definitive, we were referring to studies designed to solidly confirm patient benefit for patients receiving the combination of Bavi plus chemotherapy versus the standard treatment of chemotherapy alone. This is the ultimate goal of virtually every development program in oncology, and are the types of studies that can support eventual product licensure. By following this strategy, we were able to complete enrollment in the Phase I and Phase II signal seeking studies in the same time frame. And successfully generate meaningful clinical safety data with early signs of anti-tumor activity that we strongly believe supported moving the program into definitive Phase II studies.

Completion of the Phase I study evaluating Bavi alone was a natural point at which to engage in discussions with the FDA regarding the future development plans for Bavi. A critical interaction point with major implications. In preparation for this meeting, and for guiding future development efforts, we expanded our team and were extremely fortunate to be able to bring Rob on board at a critical juncture. Our team worked diligently to compile an integrated summary of all of the studies we have run to date, along with other supporting data that was submitted to the agency. As a result of these efforts, we were able to make significant progress with the agency in defining the current status of the program, and setting the stage for moving into definitive studies. Truly an excellent outcome that met or exceeded all of our expectations going into the discussions.

With that, I would now like to turn the call over to Rob Garnick, our new Head of Regulatory Affairs, who will take a few minutes to share his initial thoughts about our upcoming clinical and regulatory strategy and opportunities. We are delighted to have Rob on board. His extensive industry background in getting new drugs approved and his 24 years of overseeing clinical and regulatory strategy at Genentech is already proving invaluable as we plan for the next phase of our clinical programs. Rob?

Thank you, Steve. And thank you everyone for joining this call. I'm really very pleased to be here with you today, since I've been working with Peregrine for only a few months, in this call I would like to focus sharing with you some general observations I've made on Peregrine and its product pipeline.

Let me start by telling you a little bit about myself. I spent all of my professional career working in the area of drug development, focusing on the regular scientific, clinical and regulatory assessments that must be completed before any potential new product or medical device can be marketed. As you know, this is typically a very long, complex and challenging process. However, the rewards for both drug developers, investors and most importantly the patients who so desperately need these new products can be quite substantial.

In my long career, I've had the good fortune to spend over 32 years in the pharmaceutical industry, 24 years of which were at Genentech, where I was part of the birth of the biotechnology industry. I joined Genentech in 1984 and had the unique opportunity to literally grow up with the Company and played a significant role in the development of its products. At Genentech, I was deeply involved in obtaining market approval for 17 drug products and three manufacturing facilities, including such anti-cancer blockblusters as Rituxan for Non-Hodgkins lymphoma, Herceptin for breast cancer, Avastin for colorectal cancer and non-small cell lung cancer, and Lucentis for age related macular degeneration.

After heading up Genentech's global regulatory efforts for 15 years and growing my own department to over 1300 people, in 2008 I decided it was time to retire from the corporate life of a large Company, and formed a biotechnology specialty consulting Company through which I was very fortunate in which to meet the excellent folks here at Peregrine. After carefully studying the Company's phosphotidylserine targeting antibody platform and its lead product candidate, Bavituximab, I became extremely excited, and agreed to work with Steve and his team to help guide the drug's development. Focusing specifically on how we might accelerate its progress towards marketing approval. I'd like to say that Bavituximab reminds me a great deal of a similar and very important monoclonal antibody, Rituxan, because of the biological elegance of its mechanism of action. Because of the similarity, the regulatory approach I'm recommending to Peregrine for Bavituximab is very consistent with the approach we took at Genentech for obtaining the approval of Rituxan.

I'm extremely optimistic that Bavituximab may represent a unique and valuable new approach for the treatment of advanced refractory cancer in combination with chemotherapy or radiation and based on its mechanism of action may potentially be useful in anti-viral and other indications as well. In addition to my personal scientific interest in the potential of Peregrine's technology, I've also been very impressed with the Peregrine team in the mix of professionalism, enthusiasm and commitment that are so reminiscent of my early days at Genentech. As Steve mentioned, this is a very exciting time for Peregrine's drug development programs. We have recently completed patient enrollment in three signal seeking Bavituximab Phase II cancer trials, as well as an earlier stage Bavituximab cancer and Cotara brain cancer studies, and we eagerly anticipate having data starting to come in from these studies in the next few months. This sets the stage for planning our next set of Bavituximab cancer trials, and we are actively embarking on that progress. Our goal is to implement a clinical and regulatory strategy that will maximize our chances of getting Bavituximab approved and to do so in the shortest feasible time frame.

We're in the process of designing a randomized blinded and placebo controlled Phase II clinical study for Bavituximab in second line non-small cell lung cancer. This type of study is typically the gold standard in the US for drug development and this study will -- is intended to play a major role in our future approval strategy for this product. Just a week ago, we had a very successful meeting with FDA to discuss a number of clinical questions in order to help us design the Phase II program in non-small cell lung cancer, and the team and I are very pleased with how well it went. It's not appropriate to reveal the details of this meeting, but suffice it to say that we were encouraged by the FDA's positive response and by the fact that we have received such excellent advice as to what the Phase II trials which I just described should look like.

I should say that while non-small cell lung cancer is our lead indication, that we're actively exploring other clinical trials and other refractory solid tumor cancers for which Bavituximab may hold particular promise. We forward to sharing more about our emerging Bavituximab clinical and regulatory strategy with you in the coming months.

I am just getting to know the Cotara program so I'll hold my comments for now. However, it is noteworthy that I feel that this drug holds considerable promise for the treatment of such lethal diseases as glioblastoma multiforme, which unfortunately have so few current treatment options. In view of its sizable long-term patient safety database and the promising efficacy results observed in some patients, we will be exploring ways in which Cotara might be advanced towards market approval more rapidly and cost effectively.

The growing body of scientific evidence that phosphotidylserine targeting antibodies may have application in antiviral and other anti-infective indications and Peregrine's success in attracting the support of the biodefense establishment and multiple collaborators to further explore their anti-viral potential is encouraging. I look forward to getting more involved in this program in the appropriate time. In summary, I think this is a very exciting time to be at Peregrine as it moves ahead its programs to the next critical stage of development. And I very much look forward to working with the Peregrine team to advance these promising drug candidates.

Back to you, Steve.

Thank you very much, Rob. From the preceding comments I hope you can see why we are very pleased with the recent developments at Peregrine and why we are so enthusiastic about the future. Turning to our anti-viral program, we are very pleased at the good progress we are making. Our federally funded TMTI biodefense initiative to develop our anti-PS targeting antibodies for the prevention and treatment of viral hemorrhagic fevers is proceeding well. Our researchers presented promising interim data for this program at the 2009 chemical and biological defense conference. The results confirmed the broad spectrum PS-targeting antibodies were able to buy into viral hemorrhagic fever viral particles and all such infected mammalian cells.

Initial anti-viral efficacy studies were encouraging, showing that a single dose of PS-targeting antibodies increase the survival of hamsters infected with a lethal dose of two viral hemorrhagic fever viruses. Based on these findings, additional efficacy studies are now under way so we are making excellent progress under our contract and we and our investigators are actually quite excited about these early results. Now the growing interest in the potential of our PS-targeting technology for the prevention and treatment of infectious diseases has led us to reorganize our anti-viral program during the quarter with the intention of ensuring that the many opportunities potentially available to Peregrine and our varied group of collaborators are fully exploited. The new group has responsibility for coordinating and expanding the Company's multiple external collaborations, currently numbering more than a dozen, to assess the utility of Peregrine's PS-targeting antibody platform for prevention and treatment of serious infectious diseases.

During the quarter, the value of this approach was illustrated with the award of a new federal NIAID funding to our partners at UT Southwestern Medical Center for the expansion of studies in the use of our PS-targeting antibodies in viral hemorrhagic fever infections. This grant provides additional non-dilutive monetary resources and external personnel and expertise to support an ongoing Peregrine program. A win-win situation for all. A second broad anti-viral patent we were recently awarded in the US further reinforced our intellectual property leadership in the field of PS-targeting therapeutics and strengthened the rationale for this initiative.

Before we turn to the Q&A session, I would certainly hope that you can see why we are as a Company are so excited about the future of Peregrine. I think we're in an extremely unique position and really a transition period for the Company. We're really in the process of moving from the goal being to simply move our programs forward, to the goal of really aggressively pursuing the ability to market products and get approved products in the next two and-a-half years. And the two and-a-half years is our goal from the outset of being in a position through our Bavituximab program, Cotara program, and through the exciting new area of biosimilars of being able to bring the Company to a success point where we have our own products.

Now, the actual time frame for getting products on the market of course will be driven primarily by clinical data. We want to be in a position to take advantage of very strong clinical data to expedite those time frames to the market. But we also recognize that we need to be ready for more traditional development pathways. But overall, we think when you combine these three programs, we have an excellent opportunity here to really turn the corner, add a tremendous amount of value to the Company that will be obviously a positive for all of our shareholders. With that, I'd like to turn the conference call over to the operator for the Q-and-A session.

Yes, sir. (Operator Instructions). The first question we have comes from Richard Siracusa of Merrill Lynch. Please go ahead, sir.

Gentlemen, congratulations on your progress and Dr. Garnick, and welcome to Peregrine. Steve, before I ask my question I would like to preface it with a comment.

Okay.

Peregrine has achieved significantly more than some other biomedical companies that trade with market caps in excess of $1 billion. And yet the Company does not enjoy the support and sponsorship of the institutional investment community. Many industry observers believe that this is because there isn't any high level biotech representation on the Company's Board. Are you considering filling the vacant Chairman's position with such an individual or expanding the Board to include some top level biotech talent?

Well, I mean, I think when you look at the Company, the question is and what is going to attract investors into the Company is are we positioned to develop our drugs, do we have the talent internally running day-to-day operations that will make us successful. And, you know, Board representation, we obviously want to add, when we feel it's an appropriate time, members to the Board that will, again, enhance what we already have in the management team. I think our focus has clearly been on day-to-day operations, bringing someone, again, on our management team like Rob just adds a tremendous amount of day-to-day operational excellence and I can tell you that the enthusiasm level, the level of progress we've made in our regulatory strategy, the difference in our interactions with the FDA have been just fantastically better with Rob on board. I think that's the kind of leadership we're looking for.

In addition, we added on Bruce Shatner to our scientific resource Board. Again, another individual with just tremendous insight into drug development and contacts throughout the industry. So I think the Board is one level and we'll of course continue to evaluate that. But if you look at what we're doing on the day-to-day operations of the Company, day-to-day management of both Avid and Peregrine, again, we brought Truc Le on, again, with tremendous industry experience, I think that's what's going to get us there and that's what's going to excite people and I think as we move into the you new year our plan is for us to be out on the road, telling the story, not just why we're excited about the future of the Company, but the unique position we're in with three really solid, legitimate opportunities to move toward marketable products, the management team we believe has the expertise to execute on that plan and really the very unique position we're in with Avid Bioservices.

If it wasn't for our contract manufacturing business we would not be in a position to really be pursuing all these opportunities. So I think our feeling is that that's what's going to bring the institutional investors into the story because, again, the amount of value we can add over the next few years is potentially astronomical and that's our goal and we're going to do everything top to bottom in the Company to make sure that happens.

I'm very pleased with the progress so congratulations and let's move on. Thank you.

Thank you.

The next question we have comes from [Roger Adams], investor. Please go ahead.

Thank you, gentlemen, for the excellent work this quarter. Very exciting. Regarding the clinical program, if the results in the three Bavi Phase II trials recently completed, especially tumor shrinkage were achieved in the first half of the definitive trials you're now planning for lung cancer, would you be well positioned to apply for accelerated approval? And my second aspect of the question regarding the clinical programs regards the overall median -- overall survival time, median survival time. Since the Company has not yet reported on that in any of the three Bavi Phase II trials, can we assume that more than half the patients are still living in each of the three Phase II studies?

There's obviously multiple prongs of your question here. So I'll just try to take them in order. I think our goal in the next set of studies, and I'll let Rob expand on this, is to really design and execute studies that will support eventual product licensure and accelerated approval is something that will be driven by clinical data. And if we feel the data is strong enough, and again, our goal of running randomized placebo-controlled blinded Phase II studies is to make them definitive and to have them provide what we thing will be unequivocal evidence of drug activity. And if the results are good enough, then that's certainly a discussion we want to have with the FDA regarding accelerated approval. So we need to see what the results look like from the study and we'll take it from there. Rob, I don't know if you want to expand.

Yes. Thanks, Steve. As you know, I've actually done accelerated approvals in the past and certainly if as Steve said, we want to be positioned such that if the data is striking and very compelling that we would be in a position to apply for that and that as you know takes a lot of coordination across the Company, not just in the clinical and regulatory side, but in the manufacturing and quality operations, but we are actually making sure that should such an opportunity occur, that we would be in an excellent position in order to take advantage of that. Nevertheless, the real goal, though, is to obtain definitive data and develop our programs based on having really good, solid clinical data in which to continue to develop the product.

I think just to expand on that a little bit more, I think because this is a big commitment that we're undertaking moving into these studies, because essentially what we're saying is number one we're going to design really top notch, all the bells and whistles clinical trials that will support, again, eventual product licensure in one way or another. In addition, we're committing on the manufacturing side that we'll also been in a position that if we are successful, we'll be in a position from a manufacturing standpoint also to take advantage of that opportunity. And again, that's what I was referring to earlier, that if we didn't have Avid Bioservices, then making those sort of commitments would be even potentially a limiting factor in moving forward.

But because we do have this opportunity, we really think we're well positioned to take advantage of that. Regarding your question on median overall survival, those are obviously time points that take a considerable amount of time to mature. I don't know the exact status on each one of the trials but we'll certainly report those results as they become clearer. Just as we have with the obviously initially you get the data on the tumor response rates, then you get progression free survival and we've been reporting those and those data look very promising so far. Overall survival will be coming along in the future.

You haven't reached the median time yet.

I don't believe we've reached the median time on any of the studies. Thank you.

The next question we have comes from [Michael Anthony], investor. Mr. Anthony, please go ahead, sir.

Yes, sir. My question is -- this is an excellent quarter. Your revenue's been climbing each quarter. And of course, your losses has declined also. And like the first investor from Merrill Lynch, I believe, I don't understand back in 1995 your stock went to 17, 18, you didn't have any labs, you wasn't in Phase I, Phase II human trails. You was in mice trials and you're so much further today, ten years or better later, 12 years later, and your stock is nowhere near where it was then. It has depreciated instead of advancing. And you're getting closer to Phase III trials also. Shouldn't that be a positive? And doesn't any analyst cover your Company?

Yes, I mean, I think your point is well taken. There's two separate parts of our business. One is executing, moving products toward commercialization and realizing the potential of the products we're developing and absolutely that should be a positive and increasing revenues and keeping our burn under control while making the tremendous progress we have in all of our clinical programs and opening up new opportunities should make the Company many, many times more valuable than it is when you're in preclinical studies and basically treating mice. The market conditions, those are things that are out of our control and again, it's largely driven by the macro environment, not the the micro environments that take place at the Company. Again, we feel we're on track. Again, our goal was to make this a standalone successful Company, cash flow positive, and see it grow from there. So we're controlling the things we can. I think we want to do a better job of getting out, telling the story and making sure that investment community recognizes what a tremendously valuable asset we have here and that's our goal going into the new year is to try to create that enthusiasm for the Company from the investment community.

And we have reached the allotted time for today's conference. I will now turn the conference back over to Steven King. Mr. King?

Okay. I'd like to thank you all again for participating in today's quarterly conference call. I hope today's review conveys the reasons why we believe that Peregrine has entered a new stage in its evolution. They include our tangible progress in every one of our clinical programs, our recent positive interactions with the FDA on our next set of Bavituximab cancer trials, the growing importance, sophistication and value of our Avid manufacturing group, the expansion of our senior team to include highly experienced and accomplished industry leaders, the strengthening of our capital structure and our continuing ability to opportunistically reinforce our capital position. Together we feel like we're in a very unique position with many opportunities for success that we look forward to sharing further advancements with you into the new year. With that I'd like to end today's quarterly conference call and thank you again.

Thank you, sir. This does conclude today's events. At this time, you may disconnect your lines. Thank you.