Avid Bioservices Inc (CDMO) 2010 Q4 法說會逐字稿

Good day, everyone, and welcome to the Peregrine Pharmaceuticals fourth-quarter and fiscal year 2010 financial results conference call. I would like to remind you that today's call is being recorded. (Operator Instructions). We also ask that you please limit yourself to one question initially and then requeue for any additional questions.

I would now like to turn the conference over to Ms. Amy Figueroa. Please go ahead.

Thanks, Paula. Good afternoon and thank you for joining us on today's call to discuss our financial results for the fourth quarter and fiscal year ended April 30, 2010, and review our clinical development program.

Participating on today's call are Steve King, President and Chief Executive Officer, Paul Lytle, Chief Financial Officer, Joe Shan, Vice President, Clinical and Regulatory Affairs, Rob Garnick, Head of Regulatory Affairs, and Chris Eso, Vice President of Business Operations.

Before we begin, we would like to advise that this conference call includes forward-looking statements. These forward-looking statements reflect our current views about future events and financial performance that are identified by use of terms and phrases such as believe, expect, plan, anticipate, 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 our filings with the Securities and Exchange Commission including, but not limited to, the Annual Report on Form 10K for the year ended April 30, 2010, filed today.

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 our expectations. And we expressly do not undertake any duty to update forward-looking statements, whether as a result of new information, future events, or otherwise.

I would now like to turn the call over to our CEO, Steve King. Steve?

Thank you, Amy. I would like to start by thanking our investors and analysts for joining us for for our earnings call this afternoon.

Before we get started, I wanted to share how frustrated we all are with the current stock price performance which has not, and I repeat not, been attributed to negative events at the Company, our cash position, an erosion of our fundamentals, or the potential of our technologies. To the contrary, we have had significant positive news, our cash on hand has been increasing, our revenues have been solid, and the clinical data and growing body of validating research around our PS technology has never been more encouraging. All of these positive events and momentum moving forward make the Company's current stock price and valuation even more frustrating.

Our clinical and operational results have never been as solid and the outlook for the future has never been as promising as it is today. And we will continue to reach out to the institutional investment community in an effort to have this potential reflected in our stock price.

This past quarter was one of the most important quarters in the history of the Company as we achieved several critical milestones that really set the stage for advancing our clinical programs. Building on consistent positive data seen in multiple solid tumor indications, we have recently initiated two new randomized non-small cell lung cancer Phase IIb clinical trials, establishing two potential regulatory path to our products approval for bavituximab, our first-in-class PS targeting monoclonal antibody. These new opportunities build on our third potential regulatory path toward approval, which is for our product Cotara, our novel approach to treating brain cancer.

Later on in this conference call, Rob Garnick will review more specifics of our regulatory strategy, which are consistent with the approach he used time and time again, successfully, during his 24-year career at Genentech.

Our data presentations this last quarter were both numerous and robust. We had a total of eight unique data presentations at AACR and at ASCO, which were well-received with interest from the scientific, medical, and investor communities. At ASCO, we presented promising data in lung cancer, breast cancer, as well as brain cancer, which clearly showed the broad spectrum potential of our novel monoclonal antibodies.

A particular highlight was the consistent positive results in three separate Phase II trials of bavituximab in combination with standard chemotherapy. This data clearly exceeded historical data for these chemotherapies alone in similar patient populations.

This compelling data formed a basis for proceeding with our two new randomized Phase IIb clinical trials. These trials are in refractory as well as front-line non-small cell lung cancer and these will be augmented by our ongoing efforts to expand the bavituximab clinical program in accordance with its broad potential in many different solid tumor types. In addition, we are anxious to complete patient enrollment in the important Phase II Cotara brain cancer trial.

Looking ahead, we will have multiple opportunities to report clinical data from our ongoing Company-sponsored trials, as well as from our new investigator-sponsored trials program, building towards unblinded topline data from our refractory non-small cell lung cancer trials by the end of 2011. Joe Shan will provide further context on our clinical data and progress later on the call.

Our regulatory and clinical plans could easily exceed our financial resources, if it weren't for the combination of strategic and careful spending and value creation in the form of outside revenues and important cost-saving services provided by our wholly owned subsidiary, Avid Bioservices. With Avid, we are able to manufacture clinical materials for our own Company-sponsored trials, as well as our IST program at a much lower cost than purchasing from third-party manufacturers, literally resulting in millions of dollars in cash burn savings.

Along these lines, this was another productive quarter at Avid to finish a record year of manufacturing output. And Chris Eso, Avid's Vice President of Business Operations, will provide an update later in our call.

In addition to Avid, we have another source of revenue, our contract with the Transformational Medical Technologies Initiative, known as TMTI, of the US Department of Defense's Defense Threat Reduction Agency or DTRA. We recently provided an update on this contract, which supports development and evaluation of bavituximab for the treatment and prevention of viral hemorrhagic fever or VHF.

Over the course of the two-year base period, the TMTI contract has helped us not only evaluate [bavi] for VHF, but it has also been important in advancing our bavituximab clinical development program through funding that supported development efforts, such as production scale up and formulation work.

We recently announced a 45-day extension of the two-year base period from its original expiration at the end of June and we will be using this time to complete our scientific review and to plan continuing preclinical evaluation in more advanced models of VHF. As soon as we have completed the review, finalized plans for the next preclinical studies, and have agreed with TMTI on the specifics, we will be able to provide an update on those plans moving forward under this multiyear contract.

Our progress during the past year has been unparalleled in our history. Equally as remarkable, we have increased our cash position in each of the last four quarters. Paul Lytle, our CFO, will provide an overview of our financial position and our strategy later on the call before we open your call to questions.

As we look back on an extremely productive quarter of clinical and operational progress, we look forward to executing our next set of clinical programs to drive our future success. Thanks to the dedication and hard work of our team, we are on track to achieve several milestones, which include executing our two randomized Phase IIb non-small cell lung cancer trials for bavituximab with the goal of completing enrollment in both by the middle of 2011.

Secondly, initiating up to four additional bavituximab trials by year-end, including both Company-sponsored and cost-effective investigator-sponsored studies in order to explore the broad potential of the PS technology platform. In addition, we are looking to complete enrollment at our Phase II Cotara trial and recurrent GBM, and complete the ongoing Phase I HDV, HIV co-infection trial for bavituximab by the end of this year.

We should have many opportunities to share progress over the coming months, and we look forward to updating you along the way.

I will now turn the call over to Rob for a quick review of our regulatory strategies. Rob?

Thanks, Steve. Since I joined Peregrine last year, I worked closely with the team here to develop a comprehensive clinical, regulatory, and manufacturing strategy for bavituximab similar to what I used successfully for Avastin, while I was at Genentech.

And as you know, Avastin was the first, broad-spectrum anticancer agent. And in my mind, bavituximab could be potentially very similar to Avastin because of the broad presence of bavituximab phosphatidylserine target in numerous cancers.

We designed this comprehensive regulatory strategy to take advantage of the previous signal seeking Phase II trials completed by Peregrine in order to design a regulatory strategy for bavituximab that could lead to a rapid regulatory approval. This strategy, which I again used successfully at Genentech for Avastin and Rituxan, targets a first approval in the refractory disease setting, followed by an approval on the front-line setting which, as you all know, is much more difficult.

In addition, we are initiating a number of investigator-sponsored signal seeking trials, or ISTs, to further develop bavituximab as a broad-spectrum agent similar to Avastin. In order to execute this strategy, we initiated a Phase IIb refractory non-small cell lung cancer trial in June of this year and today announced a Phase IIb trial in front-line non-small cell lung cancer.

As I've described previously, our first approach for approval for bavituximab is a proof-of-concept refractory [in] non-small cell lung cancer trial. We're pursuing a refractory disease setting, as it is a high unmet medical need and potentially the fastest route for FDA approval.

An excellent example, a recent example of this strategy is that last week Genentech submitted a BLA for Herceptin DM-1. This application was based on a single arm Phase II trial in 110 patients with HER-2 positive breast cancer who had failed previous therapies.

Genentech's trial measured objective response rate as the primary end point. Clearly, there is a regulatory approval pathway for bavituximab if the data from our refractory Phase IIb trial are exceptional. In drug development, well-designed trials have the potential to generate exceptional data. And we need to be prepared to file for accelerated approval if we hit the homerun scenario.

I should point out that if the data from this trial aren't a homerun, but still positive, which is the more likely outcome, we would plan to conduct an additional Phase III trial to pursue the refractory non-small cell lung cancer indication for bavituximab.

A third critical aspect of our clinical, regulatory and manufacturing strategy, is that Peregrine has the major advantage of having its own political product manufacturing capability in Avid. While simultaneously developing the regulatory and clinical strategy I just outlined, we also, over the last nine months, have put significant effort into increasing our manufacturing capability for bavituximab. This capability is now sufficient to support an early approval if we are lucky enough to be in that situation.

I am very excited about the opportunity to execute this comprehensive strategy and feel fortunate to have the opportunity to work on a second broad-spectrum agent such as bavituximab.

At this point, I would like to just turn your attention for a moment to our second anticancer drug, Cotara. As you know, we are currently completing the Phase II trial of this product in recurrent glioblastoma multiforme and expect to have an end of Phase II meeting with the FDA early next year, or as soon as these data are available, and then be able to effectively plan our Phase III approval strategy.

I would like to end by, again, saying how optimistic I am about bavituximab's potential. The growing body of research points to bavituximab potentially providing a unique and valuable new approach for the treatment of cancer. The clinical results we have to date support moving forward with our regulatory strategy to advance this novel antibody.

I will now turn the call over to Joe Shan for an update on our clinical programs designed to support a comprehensive strategy I've just outlined.

Thanks, Rob. Over the past three months, we had four presentations at AACR and four at ASCO, leading to the launch of the two randomized Phase IIb trials. Before I describe these new trials, it is probably helpful to take a step back and talk about the rationale leading up to these trials.

First, we began bavituximab clinical development with Phase I studies designed to assess safety in pharmacokinetics of various dose levels in a limited number of doses in advanced cancer or HCB patients. This then led to a pilot study combining bavituximab with one of several standard chemotherapy regimens, again with very limited dosing and safety as a primary end point.

At this point, we did not know whether bavituximab would increase antitumor activity in patients and, if so, to what extent or which tumor types should be further explored. With this in mind, we designed three non-randomized Phase II signal seeking trials to evaluate the effects of bavituximab combined with standard chemotherapies in lung and breast cancers, which would lead to randomized trials if we saw positive results.

You may recall, that these trials, using Adaptive Simon Two-Stage Designs which allowed us to stop these trials early if prespecified end points were not achieved during interim analysis. These signal seeking Phase II trials were designed to match as closely as possible the patient population dose regimen and end point from three published studies that included chemotherapy regimens of interest that we could use as historical benchmarks. These benchmark studies continue to be relevant as a review of the recently published larger trials continue to report very consistent results.

It is important to emphasize that our signal seeking trials are not meant to replace randomized trials but, rather, to estimate effect sizes so that we can properly design and power randomized trials for increased probability of success.

From an operations perspective, we decided to conduct these trials outside of the US where patient populations were larger, recruitment rate is often several times faster, and procedural fees can be a fraction of the cost in the US. All patients consenting to participate in these trials received a standard of care chemotherapy in addition to bavituximab.

Under rigorous ICH-GCP guidelines, the procedures were well-documented, strictly followed, and regularly audited so that data could support further clinical development under IND. Our international search for these signal seeking studies was recently validated by the Department of Health and Human Services statistics -- that 80% of drugs approved in 2008 at trials conducted in foreign countries and 78% of all subjects that come from outside of the US.

With these signal seeking trials near completion, we have met our original goals for these trials, which include providing additional safety data on bavituximab used in combination with chemotherapy, estimating antitumor activity, and supporting the design and initiation of randomized trials. We are very encouraged by the data from all three signal seeking Phase II trials showing consistent, positive results compared to published historical data.

Our front-line non-small cell lung cancer trial showed a 43% overall response rate or ORR in 6.1 month median progression for survival or PFS for patients treated with bavituximab in combination with carboplatin and paclitaxel. These exceed the 15% ORR and 4.5 month median PFS with carboplatin and paclitaxel alone in a separate trial.

Our advanced breast cancer trials, one in front-line and one in refractory patients, also showed promising ORR and PFS for patients treated with bavituximab and chemotherapy, again, exceeding results from historical trials that they were based on.

Taken together, the data from these trials formed the basis of our two recently initiated randomized Phase IIb trials in refractory and front-line non-small cell lung cancer, being conducted again under US IND. The first trial, our refractory lung cancer trial, is enrolling up to 120 patients and has a rigorous randomized placebo-controlled, doubleblinded features typical of a pivotal Phase III trial. We are measuring response rate as our primary end point and PFS, survival, duration of response, and safety at secondary end points. This trial is being conducted in up to 30 sites in the US and internationally with topline data expected by the end of 2011.

As Rob mentioned earlier, refractory non-small cell lung cancer is one of our potential regulatory paths for bavituximab and currently approved drugs, unfortunately, yield very low response rates in these patients. Taking a look at the package insert information from the three top-selling approved drugs for refractory patients, which accounts for most of the market, response rates are between 5 and 9% only.

For our Phase IIb trial, we are combining bavituximab with docetaxel, which is supported by the positive data using this same combination in our signal seeking refractory breast cancer trial.

Our second randomized trial, as we just announced this morning, is a front-line lung cancer trial and we only have [to] 86 patients. This trial is being conducted in up to 20 sites in the US and internationally and we expect to have this trial fully enrolled by midyear 2011.

This randomized trial is open label, which allows us to report interim data as the trial progresses. This trial is intended to confirm, in our randomized settings, the results from our signal seeking lung cancer trial which, again, showed a 43% overall response rate, which is more than double the generally accepted chemotherapy response rate of 120% in numerous publications. If [abril will] result from this trial could then lead to an end of Phase II meeting with the FDA, possibly a pivotal Phase III trial for front-line lung cancer, our second potential regulatory pathway for bavituximab.

In preclinical and clinical studies, bavituximab has shown broad-spectrum potential, which we plan to further study with additional Company-sponsored trials and several investigator-sponsored trials, which we expect to be initiated between now and the end of this year. We are very excited about our IST program as we believe these trials will generate valuable data to guide us on bavituximab's potential use and additional indication as well as different therapeutic (technical difficulties).

We have already received numerous proposals from interested investigators to (technical difficulties) liver, pancreatic, breast, brain, and prostate cancer studies, just to name a few. And we look forward to sharing additional details about these open label studies, once initiated under the investigators' own INDs.

Turning to Cotara, we have enrolled over 75% of the planned recurrent [GB medications] in our Phase II trial. An interim analysis showed a positive survival trend and we look forward to completing enrollment by the end of this year. If the data continues to trend favorably for the entire study population, we plan to meet with regulators to reach an agreement on a pivotal trial design, paving a third potential regulatory path for one of our product candidates.

Our ability to conduct these trials is directly supported by Avid's manufacturing capability. So I will now turn the call over to Chris to discuss Avid's operations.

Thank you, Joe. And thank you, everyone, for joining us today and providing me the opportunity to update you on some of Avid's achievements.

Avid continues its solid performance and continues to play a critical supporting role for Peregrine, as well as our third-party clients. During the year, we supported a multiple, Company-sponsored, and investigator-sponsored trial that Joe described and ramped up production of bavituximab, while maintaining our solid performance for third-party clients.

Not many biotech companies our size are able to offer IST programs, but because of the infrastructure at Avid, we make it possible for Peregrine to further explore the broad therapeutic potential of bavituximab. And do it in a cost-effective manner.

Avid's total output for the year, which includes services to Peregrine, third-party clients, and services under the government contract, achieved a record level of $30 million for the fiscal year 2010, compared to $23 million for last year. As you can see, the activity level at Avid remains high and continues to increase.

While Avid is strategically integrated into Peregrine, our goal has been to continue to strengthen and expand our existing relationship with our key third-party clients. Because of the integration with Peregrine, we are able to offer our clients a broad range of service beyond the typical services provided by CMOs. And our clients have benefited from the breadth of our services and experience.

During the fourth quarter, we successfully extended our existing commercial supply agreement and entered into a second commercial supply agreement with one of our important clients, Halozyme. Additionally, we entered into a long-term, strategic relationship as Halozyme designated Avid their preferred supplier for future products requiring our capabilities.

Going forward, we will continue to strengthen our relationship while augmenting those with new clients that we can service and grow our business strategically, over time, to support the future needs of not only our third-party clients but also Peregrine. At the same time, we will be working diligently to implement efficiencies throughout the organization in preparation for our potential commercialization of bavituximab.

Whether we are adding to Peregrine's topline with our services to third-party clients, or reducing the overall burn rate by manufacturing Peregrine's clinical products at a much lower cost, our contribution to the Company's overall strategy and success are critical and continue to expand.

With that, I will now turn the call over to Paul where he will provide more insight into the Company's financials. Paul?

Thanks, Chris. During the next few minutes, I will review a couple of our key financial highlights for the fiscal year. I will then discuss our financial position as of April 30, 2010. And I will conclude with a discussion covering our various sources of capital and our strategy to fund our investments in research and development.

Starting with the financial highlights, total revenue for fiscal year 2010 hit a record $27.9 million. This compares to total revenue of $18.2 million reported in fiscal year 2009. Year over year, this represents a 54% increase in revenue, mostly driven by our revenue reported under our government contract.

Looking to the future, our goal is to continue to generate revenue from two sources as a way of reducing our overall burn rate and stretching our investments in research and development. Regarding revenue generated under our first government contract, we plan to continue to advance the preclinical research under our TMTI contract based on the terms of that agreement. In addition, we are actively applying for additional government contracts and grants, such as IRS section 48-D, which further validate and supports the development of our technologies.

For contract manufacturing revenue, as Chris mentioned earlier, the value of Avid's total services or output is a key measurement of our subsidiaries' value creation. When Avid provides manufacturing services to third-party customers, we recognize the revenue and we see a reduction in our net loss.

Likewise, if Avid is providing manufacturing services to Peregrine, we see a reduction in our R&D costs and Avid is manufacturing those products at a much lower cost compared to the price we would pay to an external manufacturer. In either situation, we see a lower net loss for Peregrine that allows us to stretch our investment in research and development.

Now turning to the bottom line, during fiscal year 2010, our net loss declined 12% to $14.5 million or $0.30 per share. This compares to a net loss of $16.5 million or $0.37 per share reported last fiscal year. This decrease in our net loss is a direct result of the revenue growth we achieved this past fiscal year.

Now let me shift your attention to the balance sheet. As of April 30, 2010, we reported $19.7 million in cash and this is our fourth consecutive quarter we have achieved an increase in our cash position. Looking forward, our strategy to fund our investments in research and development is based on several potential sources of capital.

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 have helped us reduce our overall reliance on the capital markets. In fiscal year 2010, we generated close to $28 million in total revenue, which reduced our burn rate and the amount of additional funding we raised from the capital markets.

We are also experiencing continued interest in our clinical programs from potential partners. Our goal is to keep potential partners informed of our progress while we advance the pipeline closer to a randomized Phase II data which we believe, with positive results, could add significant value to these partnering discussions. In the meantime, we will continue to pursue partnering opportunities and the potential sources of capital they represent.

Along with these sources of capital, our goal is to use a combination of our revenues from third parties and financing strategies to support our future operations. Over the past four fiscal quarters, we have successfully increased our cash position by closely matching our capital needs with our capital resources. We have raised additional capital when market opportunities arise through a financing vehicle called an at the market or ATM issuance program.

Under this vehicle, we are able to sell shares without a discount to market and without issuing a single warrant. During fiscal year 2010, we were able to raise over $26 million in gross proceeds using this vehicle and these shares were sold at an average price per share of $3.51.

In addition to this financing tool, we are looking to gain a greater institutional ownership position in Peregrine through an active investor outreach program. We are highly focused on building the awareness of Peregrine within both the medical and investment communities. And our progress towards this goal can be measured.

Since January, we went from no analyst coverage to four new analysts covering our stock. We presented at six investor conferences spanning from the East Coast to the West Coast, as well as into Europe. We conducted multiple non-dual roadshows and held close to 50 meetings with targeted institutional investors so far this year.

But this is not the end of our investor outreach campaign but merely the beginning. We have a fresh and powerful story to share with the investment community, and it gets more and more exciting as progress continues.

As of today, we have three ongoing later stage Phase II programs in oncology. And this is an exciting position to be in -- late stage trial using novel targeted therapies with broad therapeutic potential. We all believe in Peregrine, the novel technologies we are developing, and our fight against cancer.

Thank you for your time today and for your continued support of Peregrine.

This concludes our prepared remarks. We will now open the call for questions. Operator?

(Operator Instructions). Joe Pantginis with Roth Capital Partners.

Good afternoon and congratulations on the progress. Couple of quick questions if you don't mind, one for the team and then maybe one for Rob. You did mention a few indications with regard to the IST studies that you've received interest for such as liver, pancreas, breast, brain, etc. You also will look to be starting your own internal study as well by the end of the year.

What kind of thought processes are you going through to decide which indication to actually go after, with regard to IST versus your internal programs?

Thanks, Joe, for the good question. I think the overall strategy is really to look at which programs are best supported by the prior preclinical and clinical data and, then, to really see which ones have the clearest pathway towards a product registration type movement.

So I think each one of these diseases has many different indications, obviously, within that overall cancer type. So, really, what we are doing -- I mean, and a lot of this is based on just -- really the very broad nature of the technology platform. And clearly, as far as we know, virtually every solid tumor type would have phosphotidylserine, our target for bavituximab exposed on the surface of the tumor vessels and, thus, be a good target for therapy.

So our goal is to really, if you will, paint an entire picture through the ISTs as a Company-sponsored program, looking at the indications with the clearest pathways towards registration and really pursuing those as aggressively as we can through the Company-sponsored studies and utilizing the ISTs to really do additional sort of studies into verifying the mechanism of action, showing which tumor types may be more responsive to the therapy.

Also exploring different combinations, you know, we really have an interest in things such as radiation in combination with bavituximab and there's many different treatment modalities. So, really, just trying to pick the ones that we think have the best, most direct pathway towards registration for our Company-sponsored studies. Utilizing the ISTs really expand beyond that into what we really think is a broad potential of the technology.

And if I could just follow up quickly with a question for Rob. Rob, obviously, you've had a lot of experience dealing with the FDA in the past. Based on your historical experience, can you characterize how your interactions have been since you joined Peregrine with regard to the FDA feedback and potential enthusiasm by the agency regarding bavituximab?

Yes, good question. I think our interactions have really been exceptional, frankly. We've had two -- we really had two meetings with the FDA, type C meetings so far in moving into our randomized controlled Phase II trial. And both on the CMC side and on the clinical side, and I would characterize the interactions as the agency's being extremely encouraging. Frankly, more so than I've seen in many other experiences that I've had with them. I was, frankly, pleased and surprised.

But I think our goal -- you know, one of the goals we have is to really have a very collegial, respectful and close relationship with the agency, so that our drug development programs go as smoothly as possible. And that has always been my goal in working with the agency and it has been very successful so far.

Great. Thanks so much, guys.

George Zavoico with MLV.

Good afternoon, everyone, and congratulations on the progress you have shown in the last fiscal year and the last quarter.

I have a question regarding Avid Biosciences and the growth of the contract manufacturing revenue. In the last two years, you've shown, on a percentage basis, greater growth than you did in the last fiscal year and I'm wondering whether that is because, number one, it's the overall economic situation? Number two, that you have shifted perhaps some of the resources over to production of bavituximab in support of the ongoing trials?

And could you speculate, perhaps, or project forward with regard to, as you mentioned, getting new customers and clients for that business?

Yes, I will take a first stab at that, George. First of all, thanks for the question.

I think, we know, we view Avid as the total value asset. So basically the value we get from this is the outside clients, which are clearly a third-party revenue source. And really what we get out of that is covering the cost as well as hopefully making a profit on those activities.

But probably as important, or maybe more important, is is the role that Avid plays in moving Peregrine's technologies forward. I think Rob mentioned earlier that we had a big FDA meeting and, really, on the CMC side to really set the stage for moving the programs into later stage clinical studies and even, eventually, looking forward to commercial production. Clearly that requires a lot of effort and a lot of manufacturing runs to prepare for those meetings, to generate the data which the FDA expects to see to support, you know, again, processed changes and really, again, as we move into later stage couple studies looking at process validation. These activities just get more and more expensive and require more and more activities.

So I think our goal at Avid has been to really continually increase the production output from the facility. I think, as Chris mentioned very nicely, we certainly saw a big chunk this year over previous years. And if you look at the growth of the overall output of Avid, I think that that has been really tracking very nicely year over year with getting more and more out of the facility.

So I think that we do view the outside revenues as one part of the puzzle. But, again, for every dollar that -- and services we provide for Peregrine, those are dollars that are saved in outside [CRO-type] activities we otherwise would have to undertake to support our overall development program.

So we want to keep the right mix. We don't want -- our goal is not to growth the Avid contract manufacturing business at the expense of our product development efforts, or vice versa. So it is really balancing those two, keeping them in the right proportion and then, again, continuing to see the increase in output. And that will be, I think, the best judge of how the business is doing and how we are utilizing that asset.

Thank you for that. And one other question. You've clearly settled on non-small cell lung cancer as the key next registrational indication. You have some trials, obviously, in breast cancer as well and with the IST studies you are considering other targets to pursue.

In that regard, is the breast cancer program on hold for now as you focus on delivering on non-small cell lung cancer?

I wouldn't characterize it as being on hold so much as the fact that we really thought the most compelling data was in non-small cell lung cancer. And in fact, it was the breast cancer Phase II data which provided some of the background information on the combination with docetaxel. And, again, that did look promising.

Just reiterating what I said to an earlier question is, is basically we are looking at the Company-sponsored trials focusing on those indications in which there is the clearest pathway toward product registration. Non-small cell lung cancer getting a combination of the data and the combination with docetaxel, we felt, was very compelling.

Breast cancer, we still have a high level of interest in. I think we will be pursuing that in the future. Right now, it's really just a matter of identifying what is the particular indication there. Clearly, there's a lot of additional clinical programs from other companies in the breast cancer area. And that's when we have to figure out how to navigate.

But you know, so I would say breast cancer is certainly in the mix along with the others you mentioned. Pancreatic cancer, which we've got great support of data. Liver cancer, which is a great fit for the [HTV] program. Again with a broad-natured technology like this, there's so many opportunities, really, you have to just pick the ones we think have the best opportunity for yielding us a nice return.

Yes. I agree with that and then I agree with the non-small cell lung cancer results being the most compelling. At least in this stage of bavituximab development.

I look forward to the result flow for the remainder of the year and into next year. Thank you very much. I'll get back in the queue.

Thanks again, George. Look forward to updating you.

Roger Adams, private investor.

Thank you, gentlemen, for a great quarter. I was hoping to get an update on two areas. Perhaps Rob could update us on the biosimilars program and when we might hear more about the launch of that.

And secondly, in the area of survival data for the Phase II trials, will be possible before the end of 2010 to let us know that the -- that the -- it looks like the median survival will be at least a certain number of months. I note that you finished enrollment back in October of 2009 and it would seem, compared to the other data that's out there for just paclitaxel by itself, that once you get past 12 to 14 months you have a market-sensitive piece of information.

Or do we have to wait until half the patients have died before we can hear anything about survival data?

Yes, I think I'll take the first stab at it and let Joe and Rob augment the discussion. But essentially I think you hit the nail on the head with the survival data. It is a time two event so you need a certain number of events to take place before you can really report that.

So at this point the fact that we haven't reported some of that is probably not a bad thing. You know, we are obviously continually following up and making sure that we are following the opportunity to update on the survival data. And that is something we do anticipate putting out, as we get into the later time points of those studies and that data becomes available.

Joe, I don't know if you have anything to add to that.

I think you've hit the nail on the head.

Okay. On the biosimilar program, I think we do have a high level of interest in that. Again, I think just as a follow-up to the question that George had on Avid and its potential growth in the future, having your own GMP manufacturing facility in the US that has been through, at this point, many different FDA and European inspections, it has a lot of potential utility.

The biosimilars are certainly in an area we have a high level of interest in because, again, it sets the nature of our business and our infrastructure. And it is something that we could tackle without really having a significant impact on our burn rate whatsoever.

So we have been very actively reviewing the opportunities in the biosimilar space, which ones best fit with our core capabilities as well as our capacity. And I think where, you know, we are quite excited to the appropriate time here to be able to roll out our plans in that area and so you can see the progress that we are planning on making there.

Rob, I don't know if you wanted to expand on that at all.

I think you covered it quite well, Steve. Just that, I think, in parallel with the bavituximab development program that we discussed earlier, we've been working equally hard, I think, on the biosimilar program and really have made an astonishing amount of progress in an area which, as you can imagine, is quite convoluted and difficult.

But I think we are nearing our final decisions as to which candidates to bring forward and really probably our next step will be to solidify our final decision and, then, begin discussions with the FDA about how to proceed forward with this program. Because, as you know, the FDA now has, under the Patient Protection Healthcare Act that was signed into law in March, that there now is a pathway for biosimilars in the United States. And we plan to take full advantage of that pathway as soon as possible. So very exciting, very exciting project actually.

Yes. And I think just to finish up here and, again, I think one of the things that fits very nicely with our overall operations is due to the nature of the early work on biosimilars being in the early upstream development, cell line development, assay development and what have you, it fits in very nicely with our getting infrastructure, our ability to take on those sort of projects with really a minimal impact on any burn rates or any significant expenses. It really makes it very appealing to us and just fits in perfectly with our overall business model for both Avid and as well as Peregrine.

So, thanks again for the question.

Ian Somaiya with Piper Jaffray.

Thanks for taking my question. Just was hoping to get a little bit more color on the Phase IIb trial design. I don't know if you have spoken to the statistical powering of the study and what if any feedback you had received from the FDA, given the sort of the use of historical controls in the initial Phase II studies?

Yes, actually when we -- our discussions with the agency, the powering was discussed early on and we certainly have submitted the protocol and they fully accepted the [Herceptin]. The trial actually if you look at -- it's in a double-blind fashion and looking at bavituximab at the couple of different doses or a placebo along with chemotherapy. So it is actually a power to -- tech differences between those as well. But certainly, all of these features were certainly discussed with the FDA and agreed upon.

And what kind of differences are you looking for in the Phase IIb trials?

I don't think we're giving guidance on that right now.

Just maybe a follow-up to one of the earlier questions. Just regarding overall conversations or dialogue with the FDA, you mentioned obviously there have been improvements and for good reason. I was hoping to maybe get a little bit more in quality of that feedback on what some of the -- sort of the nature of the improvement has been? Has it been greater access to more senior individuals in the FDA? Has the FDA been more willing to maybe let you explore Phase IIb trials on your own or additional indications on your own? Just any insights, any color that you can provide.

I think the approach we have taken with the FDA has been basically, I think, a very standard one. We provide as much -- we provided very detailed data packages. We have provided very well thought through questions and we have actually gotten, I would say, a lot of reaction from very senior people within the agency -- certainly within the oncology area, both on the clinical side and on the CMC site.

They really -- I think they really appreciated the types and depth of the data that we have provided them. And the fact that, frankly, the Company has in the signal seeking Phase II trials that Peregrine conducted, there is a substantial amount of safety data which we provided from all those trials to the agency, which really answered a lot of their questions having to do with the plus of title serine target.

And once they became very comfortable that we have that information and that it was on a reasonably large patient population, I think their, really, interactions with us have really been consistent with that.

Generally with the FDA, the more open and sharing you are with information, the more open and willing they are to entertain different options and thought processes of the Company. And I personally found the interactions to be extremely positive and productive. And out of those conversations came the trial design for the randomized controlled Phase II that Joe described.

And other interactions, we've had on the phone, for example, showed that the agency's working with us in a very productive, professional and collegial manner. And, again, it is what I would expect and what I like to see in interactions with the Company. So I would say our interactions are A plus.

Thank you very much.

Joe Pantginis with Roth Capital Partners.

Thanks for the follow-up. Just quick question. On the study you initiated today in front-line patients. [Obviously] you said it's open label and you would be looking at interim along the way. What are the decision points you would be making about what level of events you would need to see before you release data to the street?

I think that is obviously data-driven and the number of patients that basically were able to get into the study at any given point. Clearly these are all time two events, whether it be tumor response, which we need to do the follow-up and give the tumors an opportunity to respond to the therapy. In the case of progression-free survival and then getting into the overall survival, those are obviously much longer time points.

So, I think what we want to do is evaluate. In the past, we've actually had investigators who would give updates just on their particular patient population, their experience with the drug. So if we have high enrolling sites, that's a possibility.

From a Company standpoint, obviously we have the ability to pull together data from local sites and to be able to put that information out there in an orderly fashion at some of the oncology conferences, Either in the late fall of this year or early spring of next year.

So I think our goal is to get out there. The early indications of the tumor response data were possible, but also again it could be even opened up to as much as individual investigators and their experience. And there's a lot of ways in which we can get this data out there.

George Zavoico with MLV.

Thanks for the follow-up. Lot of attention, clearly, on the oncology indications, but the infectious disease indications for bavi and progress with Cotara, I think, are perhaps as compelling as well. You previously guided that you would announce interim or final results fixed to be in bavi with patients co-infected with HCV and HIV. I was wondering, number one, if that is on track?

Yes. I think our goal for that program is still to complete the study later this year. Then we will be able to probably roll out the data from the entire study in 2011.

I think, again, this is an open label study, obviously. So as we get more and more of the patient data and follow-up from the study, we will also be able to evaluate other -- some other opportunities for presenting the data even before the final data will be available. Again, sometime next year.

So I think we are on track to get that study completed. Again, we haven't lost any of our enthusiasm for the HCV program. We still think that that's a very valuable program and, in fact, we have actually started internal discussions about what are the next steps for that program? How do we want to move it forward? And what is the right combinations that we want to test the drug with?

Because again, just like in the cancer setting, we really believe that it is combination therapy, an HCV setting that will work best with this technology platform. And again, this has also opened up even to being potentially IST type trials and as well as Company-sponsored trials.

So, yes, we look forward to getting the rest of the data from the HCV/HIV co-infection trial out there. But most importantly, how do we move the program forward and where do we take it from here?

And could you comment similarly on the Cotara program? That's clearly a very different kind of therapy.

Yes. Cotara is, obviously, we view that as a brain cancer drug at this point. Our current goal is to complete enrollment in the Phase II trial this year, then, basically, to be able to pull together the data from that trial and, hopefully, have some meaningful interactions with the agency and internal discussions about what is the right registration pathway for that program. What is the size of the trial that would be necessary? And what is the patient population?

So I think that that's our goals, to really finish the trial this year, have those discussions, come to a final decision point by the middle of next year on how to move the program forward from a registration standpoint. I think, importantly that opens up a really couple of possibilities in my mind.

One is that if the Company's in a good position, we could potentially could move into those studies ourselves. But also at that point, I believe if we are in a reasonably sized trial and have a pretty clear pathway towards registration, then again it's a highly partnerable program at that point as well. So let's play that by ear, but I think first things first. Let's finish enrollment in the ongoing study. And then make those other decision points happen next year.

Thank you. Good luck with that.

With that, there are no further questions. I would like to turn the conference back over to the CEO, Mr. Steve King.

I would like to end by, again, thanking all of you for participating in today's conference call. Thank you for your continued interest and support of the Company. As we look ahead, we have an active schedule of planned milestones we are working to achieve. We look forward to updating you on our progress in achieving those milestones over the coming months and to the new fiscal year ahead. Thank you again.

And that does conclude today's conference. We'd like to thank you all for your participation.