Avid Bioservices Inc (CDMO) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Peregrine Pharmaceuticals fourth-quarter and fiscal year 2011 conference call. I would like to remind you that today's call is being recorded. (Operator Instructions) I would now like to turn the call over to Amy Figueroa, please go ahead.

Thank you. Good afternoon, and thank you for joining us. On today's call we have Steve King, President and Chief Executive Officer, Paul Lytle, Chief Financial Officer, Joe Shan, Vice President of Chemical and Regulatory Affairs, Rob Garnick, Head of Regulatory Affairs, Jeff Masten, Vice President of Quality, and Chris Eso, Vice President of Business Operations. Steve will begin by providing an overview of our clinical progress over the last year, and highlight upcoming milestones. Joe, Rob and Jeff will discuss our clinical, regulatory, and manufacturing plans as we advance our three Phase II clinical programs. Chris will provide an update on Avid, our strategically-integrated biomanufacturing subsidiary, and then Paul will wrap up with a review of our financial results for the fourth quarter and fiscal year 2011, and our financing strategy. After our prepared remarks, we welcome your questions, and Steve is staying up late tonight from Europe, on business, so we can answer them.

Before we begin, we would like to remind you that during this call, we will be making forward-looking statements that are subject to risks and uncertainties, that may cause actual results to differ. These forward-looking statements reflect our current views about future events and financial performance, and are identified by the use of terms and phrases such as believe, expect, plan, anticipate, on target and similar expressions identifying forward-looking statements. These risks 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 10-K for the fiscal year ended April 30, 2011, which was 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'll now turn the call over to Steve.

Thanks, Amy. Fiscal year 2011 was a building year and a very important year for Peregrine. Over the last year, we have completely transformed our pipeline, reporting promising data from five clinical trials, launching four new, randomized Phase II trials, and kicking off four investigator-sponsored trials or ISTs. We have made significant progress in advancing our clinical programs to build what we expect to be an even more exciting fiscal year 2012.

Over the coming year, we will continue to advance our three, Phase II clinical programs and we are looking forward to clinical data reports and regulatory meetings, which have the potential to be important, value-driving events for our Company. And as we advance our programs, we have our strategic asset, Avid Bioservices, to support our later-stage clinical trials, and prepare for potential, commercial launch of Bavituximab and Cotara.

Avid's revenues from services for its third-party clients and cost-effective manufacturing of our products both have reduced our overall burn. But beyond the financial benefits, Avid is an important, strategic asset. Not many biotech companies have an integrated, cGMP commercial biomanufacturing unit with the potential to commercially manufacture their own products. Representing a significant advantage, as we move our products closer toward potential launch. And, to drive our programs forward into these later stage trials, to potential launch, we have expanded our teams at Peregrine and Avid, bringing on board critical expertise in clinical development, regulatory affairs, quality assurance, and manufacturing.

We have some of the industry's best experts developing our strategy and executing our plans to reach our overarching goal to develop, manufacture and commercialize antibodies to treat patients with cancer and viral infections. Since our last quarterly conference call, we have continued making significant progress with our three Phase II clinical programs, advancing toward key clinical and regulatory milestones, while carefully managing our resources to reach these milestones. We presented data at ASCO, EASL, AACR, and a leading European antibody conference, and Joe will talk more about the data presented, next.

Before handing the call over to Joe, I would like to highlight some of our key upcoming clinical milestones. Starting with Bavituximab. As we explained in our last quarterly call, patient enrollment in clinical trials is becoming increasingly challenging on an industry-wide basis. We responded to the challenges by making amendments to our protocols and expanding the number of sites involved in our trials, and Joe will describe our efforts in greater detail next.

Our many protocols takes time for investigator and regulatory agency review, but taking these steps now will help expand the potential product label for Bavituximab, should it become an approved product. And since amending the protocol, we've seen a noticeable uptick in patient enrollment, further supporting the importance of addressing these patient enrollment criteria, during Phase II development. As a result, we have been able to build momentum and are now making good progress in completing enrollment in our two randomized Company-sponsored, Phase II, non-small lung cancer trials. Over the coming weeks, we expect complete patient enrollment in our front line trial, and evaluating Bavituximab in combination with carboplatin and paclitaxel, versus carboplatin and paclitaxel alone in 86 patients. Keeping us on track to have interim data available by the end of the year, and top line tumor response data available in early 2012.

Our second line trial, evaluating Bavituximab in combination with docetaxel versus docetaxel alone, in 120 patients, is currently running a little behind the front line study, due to the larger size of the trial, the smaller, eligible patient population and the impact of the earlier enrollment restrictions, which particularly impacted this advanced cancer patient population. The result is that enrollment has taken longer than we originally expected. Having said that, with the new protocol amendments approved, and in effect at our active clinical sites, we are now making very good progress and expect to complete patient enrollment early in the fourth quarter of this year, with data unblinded in the first half of next year.

While we are disappointed that the study is running behind our original expected goal for patient enrollment, we believe removing some of the very limiting enrollment criteria was critical for potential future clinical developments, and future potential commercial efforts for this program. We will continue to push these trials to completion, and look forward to updating you as we make further progress. Aside from our lung cancer trials, we have two additional randomized Phase II trials enrolling patients with pancreatic cancer and HCV, and we have four ISTs now underway in prostate, lung, liver and breast cancers. We are pleased by the investigator interest in our program, and the potential for data readouts from these trials over the coming year.

Switching gears to Cotara, one of the highlights for this program, for us, has been the promising 8.8 month median overall survival reported recently from a Phase II recurring GBM trial, as well as the long-term survivors from all of our prior studies. As Rob will discuss later on our call, we are planning to meet with the FDA in the fourth quarter of this year, and are looking to agree on a Phase III, registration trial design. And we think this clarity over the registration path will really enhance the value for this program, for both Peregrine and its potential partners.

I will now turn the call over to Joe for a more in-depth discussion of our clinical programs. Joe?

Thanks, Steve. I will take a few minutes now to review our Bavituximab clinical program before turning the call over to Rob, to discuss our plans for Cotara. Now, our prior clinical trials and preclinical research point to Bavituximab as a monoclonal antibody with very broad potential for treating patients with cancer, or viral infections. To help realize this broad potential, we are currently conducting several randomized Phase II trials. Meanwhile, with our support through the IP program, several motivated investigators are running their own Bavituximab studies in different tumor types or treatment combinations. Starting with our two randomized Phase II trials in non-small cell lung cancer, as Steve mentioned, we're making progress enrolling patients, opening sites and expanding into new countries to reach our enrollment goals.

Dr. Kerstin Menander, our Head of Medical Oncology, and I have implemented strategies to complete this enrollment, and we are seeing patient enrollment accelerate in both trials in recent months. One of the first initiatives we implemented was modifying our protocols, as we have found too many patients were not meeting entry criteria. For example, our initial protocol excluded patients with any history of, or even having risk actors for, bleeding or coagulation issues. However, advanced cancer patients frequently have bleeding or coagulation issues, so after careful consideration, and with patient safety as the primary concern, we amended several of the eligibility criteria to allow certain risk factors or a distant history of these types of events.

Although protocol amendments are costly and time-consuming to implement, these changes are having a positive impact on patient accrual, and may ultimately increase the number of patients that could be prescribed our therapy if Bavituximab is approved. Also, for the past few months, we have been working diligently to expand the number of centers enrolling lung cancer patients, both within the US and internationally. We anticipate opening 50% more sites than originally projected, to over 30 for our front line trial and around 45 for our second line trial. With these enrollment initiatives in place, we are on target to complete enrollment of the last of 86 patients in our front line trial over the coming weeks. This is an open label trial, and we expect to report interim tumor response data, which is the primary endpoint, by the end of this year.

It's important to mention that this trial was designed based on our prior, single arm, Phase II study in 49 front line patients, receiving this same therapeutic regimen of Bavituximab in combination with carboplatin and paclitaxel. In that study, we initially reported a very encouraging 43% objective response rate and 6.1 month median progression-free survival, when historical response rate with chemotherapy alone was 15% with a 4.5 month PFS. Last month, we announced the median, overall survival was 12.4 months, which compares favorably with a 10.3 month historical value. We are especially pleased that all three efficacy readouts from that trial, consistently exceeded the historical reference studies evaluating carboplatin and paclitaxel alone in a similar patient population.

Turning to our second line lung cancer study, while we continue to enroll patients, we have also implemented the enrollment initiatives I mentioned earlier, in this study as well. Understanding that this is a larger trial in a smaller and sicker patient population, it is even more difficult to identify and enroll patients. And though we have experienced some unexpected regulatory start-up delays, which have affected our projected enrollment timelines in India and Europe, we are happy to report that we are ahead of projections in the US, where enrollment is typically much slower. We expect to complete enrollment of the 120 patients early in the fourth quarter of this year, which will result in a unblinding of data in the first half of next year.

In addition to our lung cancer trials, we have two additional Company-sponsored trials. One of the randomized Phase II trials designed to enroll up to 70 patients with previously untreated Stage IV pancreatic cancer, and they are to receive gemcitabine alone, or gemcitabine in combination with Bavituximab. The second is our Phase II HCV trial which will randomize up to 66 treatment-naive genotype one patients to ribavirin with either standard pegylated interferon or Bavituximab.

Also, Bavituximab's broad therapeutic potential is being evaluated by several investigators under our IST program, which now includes trials for advanced liver cancer, HERP-2 negative breast cancer, non-small cell lung cancer and castration-resistant prostate cancer. We are encouraged by the investigator interest in this program, and the opportunity for us to gain additional, clinical insight on Bavituximab's use in different therapeutic combinations and oncology indications.

Now, before turning the call over to Rob to talk about Cotara regulatory plans, I'd like to mention the positive Cotara data which was presented at ASCO last month. Our investigators and our team here at Peregrine were encouraged by the 8.8 month median overall survival from the current Phase II trial in recurrent GBM, which is a tremendously difficult disease to treat. What was most intriguing to us and our investigators is the long-term survivors we have seen in our trials. In the most recent study, two patients survived three years after a single treatment with Cotara, and two patients from an earlier study are alive, still after 10 years. It's results like these that continue to inspire us to develop Cotara as a single treatment approach for this deadliest form of brain cancer. I'd like to turn the call over to Rob, now.

Thanks, Joe. It's really easier to approach regulatory agencies with promising survival data, and a consistent safety profile, which is exactly what we have seen from both Bavituximab and Cotara in our clinical trials to date. I am actually very excited to be working on an antibody like Bavituximab, with such broad therapeutic potential, but today, I will talk about our plans for Cotara, as we prepare for an FDA meeting in the fourth quarter.

Let me start by saying we believe Cotara is an active drug. And, it looks as good as anything else out there, in particular, with the 8.8 month median overall survival and long-term survivors that Joe just mentioned, in our trials. And while the data are as good as anything else in the market, and there are fewer than a handful of products approved for patients with this terrible form of cancer, Cotara is actually very different. It is administered as a single treatment in the trial is conducted to date as a single agent.

I've worked with FDA for over 25 years now, and we have learned that by listening very closely to what the Agency says, and doing what the Agency suggests, we increased our probability for success in our filings and approvals. And as we prepare to meet with the FDA in the fourth quarter of this year, our goal is to come away from this meeting with a very specific information on what they believe would be an acceptable Phase III protocol to support registration of Cotara. On our short list of requests is to negotiate a reasonably-sized Phase III trial that we, ourselves, or with a potential partner, would be able to enroll within 24 months. We would expect our trial design to be multi-centered, conducted in the US, in Europe and in India, and to support global registration packages.

We are considering requesting a SPA or Special Protocol Assessment, from the Agency, but even more importantly, we want and need to hear the FDA's thoughts on our development plans for Cotara, as a new treatment approach for recurrent GBM patients. As we get closer to this FDA meeting, preparations are underway here, to be ready to manufacture Cotara for the Phase III trial, as well as potential, commercial launch from Avid's GMP facility. As part of being prepared for such a GMP facility and launch of product, bringing the right people on board at Peregrine is necessary in order to execute this program, and I am delighted to be working with my former colleague from Genentech, Jeff Masten, who recently joined Peregrine to lead our quality program.

As we move forward in our clinical development efforts, being able to produce high-quality products is one of the major benefits that Peregrine has over other companies. We are fortunate to have gotten Jeff to join the Company, and he is currently designing state-of-the-art quality systems, that will put Peregrine and Avid heads above the rest of the industry. This is a collaborative effort, requiring both knowledge and integrity, and simply put, Jeff is one of the best quality professionals out there at this time, and we are extremely pleased to have him lead our quality program here. With that, I will turn it over Jeff.

Thanks, Rob. I appreciate the confidence that you and the team have placed in me. I have to add that I'm very impressed by Peregrine's recognition of the importance of the quality function, and in bringing on board the right expertise at the right time in drug development. Preparing for successful pre-approval inspections and commercial launch is critical, and I am excited to join the team that has aligned in our mission to develop and commercialize products for patients with cancer and viral infections.

I recall the most exciting time in my career was leading the launch teams at Genentech for four different products, including Avastin. The pre-approval inspection for Avastin was the last step in our process, that we had laid out for the organization to follow. We had regulatory agents inspecting for weeks, and provided hourly updates to Rob, down to the last minute, when we knew we had successfully prepared for launch. When we received the fast approval from the FDA, I walked it over to the quality team, which was waiting to release the product. From there, the product was sent to distribution centers, so the first patient could have access to Avastin. We managed to commercialize the product available for patients within six hours after approval. From fax to patient in six hours is simply unprecedented in the pharmaceutical industry.

Our initial mission was to reach patients in a week, we said our patients deserve better. I'm looking forward to repeating this inspiring experience here, with two potential launches for Peregrine and additional products for Avid's clients, but there's a lot of planning and execution that needs to take place as we drive towards these goal lines, and we have a great team, that is truly dedicated to making a difference to our patients. We are working on developing GMP-compliant best-in-class quality systems at Peregrine and Avid, ones that will be scalable to meet the needs of our business today, tomorrow and five years from now.

Before I turn the call over to Chris, I would like to emphasize the importance of developing good relationships with our regulatory agencies early in the development, and early in the registration process. Working with Rob and Joe and the rest of the team, as we execute integrated clinical, regulatory and manufacturing plans for Bavituximab and Cotara, we are setting the stage for enabling future Phase III clinical trials, as well as potential product launch, and I am excited to be a part of leading this effort. Chris?

Thanks, Jeff. We're definitely excited to have such a quality expert like yourself on board, not only for Peregrine, but also for our clients. As Steve explained earlier, Avid is a strategically-integrated, biomanufacturing asset for Peregrine. Having built-in GMP biomanufacturing services, Avid makes it possible for Peregrine to conduct its current Company and investigator-sponsored trials, but we will also enable Peregrine's later-stage trials and position Peregrine for potential commercial launch of Bavituximab and Cotara.

Over the last year, we have made significant strides in our manufacturing productivity for Peregrine and our clients. A great example of this is how Avid demonstrated comparability between our 1,000-liter single-use bioreactor, and our traditional 1,000-liter stainless steel bioreactor for one of our products. This side-by-side comparability, between stainless steel and single-use technology, might very well be one of the first of its kind to gain acceptance by the FDA, ultimately allowing us more productivity, flexibility and have a scalable, manufacturing process to support potential commercial launch.

Having integrated manufacturing capabilities also helps reduce Peregrine's overall cash burn, first, by manufacturing at a lower cost than outside activities could provide, and second, by generating revenue from the services we provide to our clients. For the fourth quarter of fiscal year 2011, our contract manufacturing revenue was approximately $2 million, and for the full year, we came in, within our guidance, at $8.5 million. As you can see from our financial statements, we also ended the year with an unusually high deferred revenue amount of $5.6 million, all of which was work performed during the fiscal year 2011. However, due to the timing fluctuations of manufacturing lot release, it will be recognized in the coming year when revenue is recognized.

Now, turning to fiscal 2012, we expect revenue to be in line with our fiscal 2011. Before turning the call over to Paul, I'd like to share that we are continuing to service our current clients and are starting to work on several, new projects. On our anchor client front, we already manufacture one commercial product for Halozyme, along with other commercial products for them. Additionally, we've been working with Halozyme, as well as another anchor client, as they approach their BLA filings, which we will have the potential to be two additional commercial products in our facility, firming up our base business.

On the new client front, 2011 represented a great year for us. We secured three new clients during the year. Let me highlight some of those. We've made very good progress on the new bio similar project we secured at the end of last year, and have started to transition it from development into manufacturing. We are in the final stages of GMP production for Affitech, and have completed all of those runs successfully. And lastly, we have started to work on a new client project, in transferring their Phase II product candidate in, while this will position us for potential Phase III and commercial production over the coming years, providing a third anchor client.

As you can see, we have made some great strides on the new client front. As well as positioning us for future with our anchor clients. Additionally, we have numerous, new client opportunities in our pipeline that we are cultivating, to hopefully continue our momentum into 2012 and beyond. We look forward to a productive upcoming fiscal year, and to continuing to advance our business. With that, I will turn the call over to Paul.

Thanks, Chris. Since our financial results for the fourth quarter of fiscal year 2011 can be found in our press release and Form 10-K filing, I would like to spend the next few moments reviewing our financial goals and strategy as they support our overall product development goals. As the team just mentioned, advancing both Bavituximab and Cotara towards commercialization is our top priority, and to achieve this, our investments in these technologies must be closely aligned with our various sources of capital.

Over the past several quarters, we have continued to invest in our clinical programs towards what we believe could be major value inflection points for Peregrine, over the coming months. And we have achieved this clinical progress while maintaining a stable cash position of $23 million, as of our current fiscal year end. This compares to $19.7 million in cash we reported a year earlier. During fiscal year 2011, we had several sources of capital, including $8.5 million in contract manufacturing revenue from Avid, $5.6 million from government sources, and from the capital markets, we raised over $33 million in net proceeds over the last fiscal year, under a cost-effective and a warrant-free financing vehicle called an aftermarket, or ATM program.

And as the name implies, we are selling these shares at market prices. We have used this vehicle to bring institutional investors into our stock and over the past 18 months, we increased our institutional ownership in a significant way. Our goal is to continue this momentum with institutional investors, as our clinical programs advance and our clinical data matures. In addition to these sources of capital, it's important to emphasize that our later stage clinical assets, Bavituximab and Cotara, remain mostly unencumbered. And, these lead product candidates represent an important source of potential, future capital. As we get closer to generating randomized Phase II data for Bavituximab, and have in hand a Phase III registration path for Cotara, we believe a great amount of value will be added to these programs. Value for Peregrine, as well as value for potential partners.

Before opening up the call to questions, I want to reiterate that our goal is to continue to maintain a balanced, financial approach, with multiple sources of capital, and to carefully manage our operations. Advancing Bavituximab and Cotara towards these important, clinical milestones of the coming fiscal year is our number-one priority. Over the last several quarters, we have closely matched our investments in our clinical programs with our different sources of available capital. And, we look forward to keeping you updated on our progress. We would now like to open the call for your questions. Operator?

Thank you, sir. (Operator Instructions). Our first questioner in queue Joe Pantginis with Roth Capital. Your line is now open.

Hey, guys, everyone, thanks for taking the question. Good afternoon, and congratulations on the progress. Two questions if you don't mind. First, I'd like to go to highlight the recent survival data, encouraging survival data, that you recently released for Bavituximab. Would you be able to then, look to correlate that with response rates? And specifically, obviously, there have been prior oncology studies for other drugs in companies where the response rates don't necessarily correlate with survival, so maybe if you just give us a little perspective on where this survival number sits in the treatment armamentarium that is currently out there and then also look to correlate it with the responses that you've seen?

Sure, Joe, first of all, thanks for the question. I think, really, kind of the median of all survival data, when the final numbers came out, I think, really were very pleasing for the Company. I think, in particular, I think you hit the nail on the head, because it's really unusual to have kind of the trifecta of really strong tumor response data, good progression-free survival data and actually have that match up with the good numbers we saw in the median overall survival. So, I think it was the continuity of the data, which really gave us a little extra boost there, and a lot more confidence in the non-small cell lung cancer forward moving forward. I think if you compare this with any of the numbers that are out there, I think they're certainly superior to what we would've expected for the chemotherapy regimen alone, that we were combining with.

So, again, a very good sign across the board on all three of those meaningful numbers, the tumor response, progression-free survival and median overall survival. And, in addition to that, I think they are as good as pretty much, the best drugs that are out there that are being developed that everyone agrees have activity, so I think it's very uplifting, and I think it makes us even more anxious to complete these two -- both of the front line non-small cell lung cancer as well as second line non-small cell lung cancer randomized studies, and see that data, because certainly, these are all good numbers, good data to have going into where we think it's going be a great year for us with non-small cell lung cancer data.

Thanks and if I could just switch gears for fast to Cotara, I appreciate the visibility. I'm sure the Street does, also, with regard to your plans going to the FDA. I was just wondering, if maybe, for Rob or Steve, whomever, if you have a wish list today as to what your study design might potentially look like? Of course, with pending the FDA's comments.

I'll just say a couple things, and then I'll turn it over to Rob. I think our goal, going into this, is to really come out with an executable trial design that we can enroll in that 18 to 24-month time period. It's a little bit of a tricky business from a trial design, because of the fact that we're not going to be able to blind the study, because of the fact that it has [caps] replacement as well as the part that involves radiation, but I think from a larger picture, it's really getting a trial design that we can then execute in relatively short order. And, the number of patients, of course, can vary, depending on what the trial design is, to achieve that goal. Rob, maybe you want to expand on that a little bit?

I think you really hit on some of the good points, Steve. Our major goal is to develop an executable trial, as Steve said, that we can execute within a 24-month period, and of course Cotara is an orphan drug and certainly, extremely quite active as a single agent, and we are hoping that we will be able to work with the agency and design a trial that probably is in the order of number of patients, similar to what Avastin -- was used for Avastin to obtain approval. So, I'm pretty confident we're going to be able to work out something that's quite doable and executable in a reasonable timeframe.

Great. Thanks a lot for the added clarity, guys.

Thanks again, Joe.

Thank you, sir. (Operator Instructions). Our next questioner in queue is George Zavoico with MLV. Please go ahead.

Hi, thank you, and thanks everyone, for taking my question and Jeff, welcome to Peregrine.

Thank you.

Sticking with Cotara, for now, calling up on Joe's question. Regarding patient selection, I mean, the India site seemed to be very successful in having longer survival then your median, which suggests that other sites may have been not quite as successful. Is there a way that you think you could perhaps do either patient selection a little bit better? Or, perhaps is the application of the device, given still, Cotara into adjuvant patients, is there are skill level there that needs to be taken into consideration?

Yes, maybe I can just take a first stab at it and then turn it over to Joe, but, obviously, we are very intrigued with that very question because certainly, the median overall survival numbers for Dr. Gupta were pretty outstanding and we looked quite a bit at his patient selection, patient population, age of patients, and we really haven't identified any clear correlations with anything he was doing differently from his execution of the trial itself. Of course, catheter placement and selection of the area to place the catheters in is certainly technique-driven, and it's not impossible that he has some -- if you will, natural ability in thinking through the issue of where to place the catheters and do the infusion.

But essentially what you're trying to with this treatment is, place two catheters inside the tumor, in such a way that to deliver the drug over 25 hours, it basically expands the drug or pushes the drug through the tumor mass, and you get good coverage of the tumor with radiation, then, from a focalized position. So, clearly, if you miss part of the tumor, you get lower doses of radiation to parts of the tumor, that's not going to work in the patient's favor. And I know, Joe is much more familiar with this, and obviously, has been spending a lot of time in really trying to evaluate this, because we are thinking towards Phase III, those may be things we could including the training and the initiation of sites and things like that. Joe, maybe you want to expand a little bit?

Sure, I think you're right, Steve, catheter placement is technique-sensitive and there is some art to that. Certainly Dr. Gupta has had tremendous results, and as you mentioned, probably will be involved in training for the Phase III study. We have taken a very close look at the data and really, as you mentioned, Steve, there's nothing obvious that jumps out as his patients that are different than the other patients. Part of it might just be the number of patients at his center, as a subset of the total patients treated, and we didn't see much of a cross-center difference among the other centers. So, we wish we could replicate that everywhere. But nothing is obvious, jumping out of this.

Okay. Thanks for that, the second question is, I know you guys provided a nice update as to when to expect data from the non-small cell lung cancer trial, can you provide any guidance on enrollment in the pancreatic and HCV Phase III trials?

Yes, I will let -- Joe, do you want to address that?

Sure. So, that study is underway, we are obviously enrolling patients. We are still in sort of the ramp-up phase, we are actually finding that these are much sicker patients, and we have patients who are not eligible through the screening process, just because they are so sick. So, at this stage, we are still continuing to expand and open sites, I think we have about a dozen open in a number still that are going through their local approval processes so, I think, by the next call, we should have a little bit more to give guidance on.

Okay. And, HCV?

Oh, HCV, I think that one is enrolling very well. We believe that one will be completed some time in the third quarter, with our early viral response read-out hopefully by the end of the year. So it's the 12 week readout.

Third calendar quarter this year? Or third fiscal quarter for you guys?

Calendar

Calendar, okay. And finally if I may, a couple of Avid questions. At what capacity are you now running Avid? Number one. Number two, in the last quarter, you talked a little bit about some contamination issues or something, is that completely now resolved? And finally the third Avid question, with the number of new clients, that you have already signed up and are projecting to sign up, are you just being conservative in projecting flat revenue for Avid? For the next fiscal year?

Yes, I think, I will take first stab at things and turn it over maybe to Chris and Jeff to add a few comments on sort of the percentage of capacity, as well as the quality issues that we talked about last quarter. I think that as we look at Avid, clearly we want to continue to operate that as a business and to continue to grow the business, and make that successful on the business side of things. As far as how I think about the facility and its utility and how we are using it, it doesn't necessarily come down to what percentage of the capacity we are using, because at times it's going to be really running right at full capacity, where we have actually had products in every single reactor downstairs operating simultaneously.

But, it's really working with the client and with Peregrine to meet all of our needs, to continue to advance our clinical programs, and I think, most importantly, as both Jeff and Rob mentioned earlier, it is really starting to look forward to eventually being able to launch our own products out of this facility and that is a lot of prep work. A lot of thinking through the quality systems, the control systems, to meet not just really US standards, but also to meet European regulatory requirements and other territories that might be interested in going for approval. And so, I think that those are clearly the benefits where having our own facility and being able to control the preparation for those broader activities is a huge, strategic benefit. Chris, maybe you want to talk a little bit about the about the new, incoming business, and kind of see how we see that fitting in with their growth of the business?

Sure, absolutely. So, when we look at clients, we have 2 different types of clients. One are the development, going into Phase I clients, and those typical clients come in for about 2 years, and then go out and do their trials. Then, we have the more substantial, anchor clients as we like to call them. That are here, either transferring in a process or have returned to us, and are later stage, either Phase II or beyond, and so, we try to have a nice mixture of those clients to kind of fill the facility.

We obviously have to balance that with Peregrine's requirements and needs based on the clinical trials there. But, as we add new clients, we then sometimes, lose clients that go out to the trials that they are executing. So, in terms of the revenue projection, we are being conservative, it is on our kind of best case scenario, we do see that there is potential upside beyond that, but as you've seen in previous quarters and years, there is fluctuations in terms of timing. So, we felt that it is important to be conservative from a revenue standpoint and, from a guidance standpoint. Jeff, do you want to address the previous --?

Sure, so let me first just say that manufacturing biologics is a complex process, and any time an issue occurs in that process, as required by good manufacturing practices, we have to take a very deep dive and conduct a thorough investigation into the root cause of that issue. This occurrence, that we reported last time, we believe, is a one-time occurrence that we ended up rejecting the batch, because we felt that it did not meet those GMP standards. So, I think it's important, as I mentioned earlier, as we prepare for later stage clinical trials and commercial launch, that we make sure that our quality systems are rigorous and our GMP facility remains compliant for regulatory inspections.

Okay. Thank you very much.

I think, maybe just one more point there, also, I think as you think about capacity and the facility, kind of our goal is to continue to utilize and move closer and closer to utilizing the full capacity of the existing facility. I think what we still have the ability to do is to expand the facility we have adjacent space available, that we could actually make a pretty significant increase in the total amount of capacity. And of course, it would be nice if we could drive that interest and drive that process and have really the business drive the expansion in order to meet its clients' needs, which includes Peregrine's as well as other outside parties. I think there's still really big, significant upside in the ability, and the potential of Avid to manufacture products, and I'm sure it's just a matter of what's going to drive that jump to the next level but certainly I think between Peregrine in our later stage clinical products and eventual commercial products at Avid that will eventually happen.

And in that regard, to jump to the next level, are you transitioning more and more to the single use? Because of its lower cost and then lower cleansing and prepping facility? Do you think you're going to transfer most manufacturing to single use?

Yes, I think, that, for me, is a real goal, is to move as much of our manufacturing to the single use bioreactors as much as we can. I think as Chris mentioned in his prepared remarks, one of big accomplishments last year was getting approval for manufacturing Bavituximab in both the stainless steel as well the single use bioreactors. So, that just gives us tremendous flexibility. I mean, I think the industry is moving more and more to these sorts of production systems for all the reasons you mention. It's much cleaner, they are single-use, you don't have all of the cleaning validations and it just makes for a much quicker turnover also between clients. So I think as we think about building out the facility and expanding the facility, to do it with single use bioreactors is a much less expensive proposition, number one, but number two, really gives you a lot of flexibility in how to design that facility and operate that facility.

Okay, thanks for all the questions, appreciate it. Thanks.

Thanks, George.

Thank you, sir. Our next questioner in queue is Roger Adams, who is a private investor. Your line is now open.

Thank you very much, gentlemen. Exciting report. I have a quick question regarding the HCV trial and a follow-up question regarding Cotara. Is there any chance that the big AASLD liver conference in November will be timing when you could release interim data on that trial?

I will let Joe answer that question, I think that comes down probably as much as anything to the timing of when abstracts have to be submitted and what have you, but Joe, you may be more familiar with that?

Yes, I think that's probably a little early for our time and as we are still finishing up enrollment.

My follow-up question, go ahead.

I was going to say, and generally, for the big meetings, like ASCO and AASLD the deadlines for when to submit those abstracts is often is as much as 6 months in advance, so it's generally one of the issues with the timing-wise in what you want to do as a Company.

I happened to check that issue, the late abstract submission date for the November conference is August 5, I don't know if that helps you answer the question or not.

Thank you for that.

Okay, that's a like a borderline question but if I could move on, to Cotara. Could you comment on the level of interest, hopefully enhanced level of interest, that you are getting from potential development partners, since the mid-May announcement of the median survival results? And also, comment on whether, assuming you get a good outcome from the FDA meeting, whatever, however you categorize a favorable outcome, but assuming it's good results from the FDA, are you inclined to go with a regional license or a global license? What are the considerations you have in that decision-making process? And, how active is the interest?

Sure. I think I can really -- I think for both Cotara and Bavituximab, the level of interest is certainly increasing as we get closer and closer to sort of Phase III clinical trials and included for Bavituximab is going to be the randomized data, we think that is really going to be the validating results that quite frankly, the investment community is very interested in and waiting for, but also that the potential partners will find to be a real value-driving event for the program.

I think regional partnerships are attractive for both Cotara as well as for Bavituximab. We have interest in companies that fit that sort of model for partnering very well. For both programs. I think the interest is picking up, people are starting to do due diligence a little more rigorously, clearly, we have been keeping, especially the big pharma, updated on both programs throughout the years and then, really now, they're reaching a point where, I think, everyone is really getting a much keener level of interest.

So, I think clearly for Cotara, with a clear regulatory pathway laid out, it makes it much easier for people to get involved. I think that is part of our strategy and in fact, ideally, to have potential partners even involved, and helping design that particular protocol, because it is the regional partners and they will be involved in the Phase III, then we want a trial design that works well for everybody, and can really be effective in getting registration simultaneously in multiple territories.

So, I think partnering interest is picking up, I think we are driving toward the clinical result and towards that FDA meeting as Rob talked so well about, and I think that will really kind of put us in a very nice position toward the end of this year or early next year to bring some of those hopeful partners into the programs and help us move it forward. So, I think that's the goal, I think it does, as you said, when you're making presentations at conferences like ASCO, I think it drives a lot of interest because people are really paying a lot of attention to those meetings, and it gives a certain validity to the data and I think, really drive that interest. And, the same thing is true for all of our programs. Obviously, we want to present as much data as we can at meaningful, clinical conferences, and AASLD would be great for the HCV program which may be a little -- the timing may not quite work out. The main thing is to get trials completed, if it is a positive then I think partnering will take care of itself.

Thank you very much.

Thank you. And that concludes our time for questions. I would now like to turn the program back over to Steve King for any closing remarks.

I'd like to thank all of you again for joining us on our call. We've made tremendous progress over the last year, and we're even more excited about the new fiscal year ahead. We've built what I believe is a biotech A-team, capable of executing our strategies to reach our goals; to develop, manufacture, and commercialize antibodies with real potential to improve the treatment of patients. We look forward to keeping you updated on our progress in the future. Good night.

Thank you sir. Ladies and gentlemen, this does conclude today's program. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.