Avid Bioservices Inc (CDMO) 2012 Q3 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Peregrine Pharmaceuticals third quarter fiscal year 2012 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time.

(Operator Instructions)

As a reminder this program is being recorded. I'd now like to introduce your host for today's program, Mr. Jay Carlson, Manager of Investor Relations. Please go ahead, sir.

Thanks, Jonathan. 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 Clinical and Regulatory Affairs; and Rob Garnick, Head of Regulatory Affairs. Steve will begin by providing an overview of our clinical progress over the last quarter, and highlight what will be numerous near-term clinical data milestones. Joe and Rob will discuss our clinical and regulatory plans, as we advance our 3 Phase II clinical programs for bavituximab and Cotara. Paul will then finish with a summary of our financial results for the third quarter 2012. After our prepared remarks, we welcome your questions. 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 our fiscal year 2011 ended April 30, 2011, and quarterly report on form 10-Q for the third quarter ended January 31, 2012, which will be filed later 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, Jay. In the third quarter we have continued to make progress in all areas of our business, including clinical development for both our bavituximab and Cotara programs, and in our contract manufacturing business, Avid Bioservices. These advancements have set the stage for what we expect will be an exciting rest of 2012, with a number of potential catalysts on the horizon, including data from 7 ongoing clinical trials, results of negotiations around a pivotal trial design for Cotara, and record revenues in our biomanufacturing business, Avid Bioservices. Let me begin by just addressing the most recent news. This morning we announced data from our randomized Phase II front line non-small cell lung cancer trial, evaluating bavituximab in combination with carboplatin and paclitaxel. Joe will cover the results in more detail, but just let me say that in our opinion, we view the results as encouraging, but inconclusive.

Based on the fact that, by one measure, which actually much better matched historical experience of carboplatin and paclitaxel, we saw a difference in progression-free survival or PFS, whereas by another measure, which is supposedly more robust, but was not consistent with the historical experience of carboplatin and paclitaxel, we saw very minimal differences in PFS. PFS is a surrogate end point for the ultimate end point, which is median overall survival, which does not have the same issues with bias and uncertainties associated with surrogate end points. This is also the most important end point, particularly in a front line disease setting, so in no way do these results dampen our enthusiasm for the bavituximab program. It simply means that we now have to wait for median overall survival from the study to make a judgment on the overall trial results. In addition, during the quarter we announced initial data from our randomized Phase II trial of bavituximab in patients infected with genotype-1 HCV. The results from this trial were encouraging, and we believe they warrant further study of bavituximab in HCV patients as part of a longer dosing regimen with some of the new antivirals that are coming to the market.

We are actively seeking a development partner with the resources to advance this program, as we feel that bavituximab holds the potential to be part of a better tolerated HCV combination therapy. Joe will discuss these results in more detail. In addition to the progress in the bavituximab clinical programs, we also continue to make progress in our discussions with the FDA concerning a possible pivotal trial design for Cotara. Rob will go into more detail on those discussions and give his thoughts on progressing the Cotara program. And we continue to see good revenues coming through our manufacturing subsidiary, Avid Bioservices. Paul will cover this as part of his financial results discussions. We believe this is an exciting time for both pair Peregrine and Avid Bioservices, as more potential clinical milestones for 2012 emerge for the Company.

As you know, the backbone of Peregrine is our first-in-class technology platforms, which have broad intellectual property estates, and remain mostly unencumbered for partnering. We have seen, and are seeing, an increase in interest by potential partners in both bavituximab and Cotara programs, and while I cannot comment as to the details or status of these discussions, or timing to a partnership deal, what I can say is a number of these companies are in the midst of conducting active due diligence, and in some cases waiting for additional clinical data. It is our goal to secure regional partners for our bavituximab oncology program, while simultaneously looking for an appropriate partner to advance the HCV and Cotara programs into later stage clinical development. Looking beyond the bavituximab and Cotara therapeutic programs, we anticipate pursuing opportunities in the areas of medical imaging, and will update you on our activities as future milestones are achieved.

Before you hear from the others on the Management team, I want to summarize our near-term milestones. By the time we have our next earnings call, we anticipate a number of important data points, including unblinding and data reports from our randomized Phase II second-line non-small cell lung cancer trial, and 7 data presentations at AACR, including data from 3 of our clinical ISTs in breast, lung, and liver cancer, and an update on our PS imaging agents, as well. In addition, we have a number of opportunities for potential presentations at ASCO. Taken together, it is lining up to be an exciting next few months, and we look forward to updating you as we continue to make progress. I'll now turn the call over to Joe. Joe?

Thanks, Steve. Over the last quarter, we've made considerable progress in advancing our bavituximab and Cotara clinical programs. I want to start by providing an update of our bavituximab lung cancer program, which currently comprises 3 clinical trials in non-small cell lung cancer; a Phase II front-line study, and Phase II second-line study, and a phase I-B investigator sponsored trial, all expected to yield multiple data points throughout 2012. This morning, we reported data from our front-line study. This was a randomized trial designed to compare the overall response rate, or ORR, of carboplatin and paclitaxel with or without bavituximab in patients with untreated stage 3B or 4 NSCLC. The data reported was based on 83 protocol-eligible patients for the protocol population, and ORR, defined as the percentage of patients with objective tumor reduction as well as progression-free survival, which is the time until objective tumor progression or death, were determined based on both investigator and independent central assessments of radiographic scans.

Now, back in December, we reported very preliminary investigator assessed ORR, which at that time was showing a 50% difference in favor of bavituximab. However, after all patients on both arms completed the maximum chemotherapy cycles, and with additional data collection and clean up, a significant difference was not seen in ORR by either investigator or central assessments. While the primary end point of the study was ORR, as this provides the earliest potential sign of anti-tumor activity, it is a surrogate end point, and often does not correlate with clinical benefit, particularly in front-line lung cancer, so I'd like to spend a few moments to discuss the next end point, PFS. Based on investigator assessments, patients treated with bavituximab plus carboplatin and paclitaxel show a current median PFS estimate of 5.8 months, versus 4.6 months in patients treated with carboplatin and paclitaxel alone, representing a 26% difference. These results are consistent with a prior single-arm Phase II study testing the same bavituximab combination in front-line NSCLC patients, which showed a 6.1 month median PFS, and with several prior published studies with carboplatin and paclitaxel, showing approximately a 4.5 month median PFS.

Based on independent central imaging reads, the current median PFS estimate is 6.7 months for the bavituximab containing arm, and 6.4 months for the chemotherapy only arm. Now, differences between investigator and central reviewers are expected, as investigators have, in addition to the scan, clinical knowledge of the patients, and independent reviewers rely solely on the identified scans. And although independent image review is intended to eliminate investigative bias, at this point, it is not clear which method of determining PFS, if any, correlate with overall survival. We now wait to reach and report on median overall survival from this trial in the second half of 2012, which is ultimately the most definitive and meaningful end point. Turning to our second line non-small cell lung cancer trial, you may recall that in October we completed enrollment of 121 patients in our randomized, double-blinded, placebo-controlled Phase II trial. This set the stage for the unblinding of trial results, and sharing with you the primary end point of ORR, and potentially, PFS have reached in the first half of this year. Our strategy is to pursue this second-line indication in order to gain the fastest potential regulatory approval path. Finally, data from the lung cancer IST will be presented at the upcoming AACR annual meeting.

Meanwhile, we continue to explore bavituximab's potential in treating metastatic pancreatic cancer. With over 25 clinical sites in the US and abroad, we are on track to complete patient enrollment and report interim data in 2012 from our 70 patient randomized Phase II trial of bavituximab with gemcitabine. Before turning the call over to Rob for an update on Cotara, I'd like to briefly mention our Hepatitis C program. In December, we provided an update from our randomized 12 week Phase II trial evaluating 2 doses of bavituximab plus ribavirin, versus pegylated interferon plus ribavirin in treatment-naive patients infected with genotype-1 HCV. Analysis of data indicated that both dose levels of bavituximab, when combined with ribavirin, appeared safe and well-tolerated, with patients reporting fewer side effects than in the interferon containing arm. We were encouraged to see that the combination of bavituximab, as both doses tested with ribavirin, demonstrated a consistent gradual viral load reduction in some patients, which was not seen in our prior single-agent bavituximab studies, suggesting additive activity when combined with ribavirin.

Of interest, more patients achieved the primary end point of 12 week early viral response, or EVR, in the lower 0.3 milligram per kilogram bavituximab dose, but robust responses were also seen in patients treated at the higher, 3 milligram per kilogram dose level. While the EVR rate was greatest in the interferon containing group by the end of this 12 week pilot study, based on the nature of the late EVR development in patients responding to bavituximab plus ribavirin, a longer-term evaluation is needed to adequately compare the effectiveness of bavituximab versus interferon. As the interferon remains a cornerstone of HCV therapy, we believe bavituximab warrants further investigation in this indication, and as Steve mentioned, we are actively seeking a development partner to continue moving the program forward. Now, I'd like to turn the call over to Rob.

Thanks, Joe. I'd like to discuss the progress that has been made on the Cotara program, and then to hit my perspectives on today's data announcement on bavituximab. Regarding the Cotara program, over the last several months, as you know, we have continued our dialogue with FDA, with specific emphasis on next development steps we need to be taking for this novel approach for treating recurrent glioblastoma multiforme, or GBM. Recently, FDA has provided specific feedback to us regarding our proposed Phase III trial design, and we in turn have submitted our responses back to the agency. This is part of a process that continues, and we're looking to develop a study for Phase III that has criteria of enrolling a reasonable number of patients, and a study that can be completed in a 2 year time frame or less in this orphan indication. We believe that having an FDA reviewed protocol for Phase III is critical to advancing our partnering discussions, and-or initiating a pivotal trial on our own. From our perspective, these discussions with FDA to date have been extremely positive, with the FDA being quite responsive and very helpful.

Overall, the process is progressing very well in my opinion, and I believe a properly designed pivotal trial can be agreed upon, and that we will be able to continue moving Cotara closer towards regulatory approval. At this time I'd like to provide my personal perspective on the data that was announced. As I'd like to explain, these data in no way impact our enthusiasm for developing bavituximab as a novel anti-cancer agent, or the clinical path that we have established. We have been clear that we do not know fully what to make of these results, given the unusually high control arm results. As Joe mentioned, and I will repeat, bavituximab armed data from this trial was in line with our expectations, and consistent with the previous data that we've seen in earlier development programs. But what also adds to the confusion surrounding this data is the discrepancy between the 2 types of analysis, which when taken altogether, really says that we need to wait for the overall survival data, with the ultimate end point that matters in front-line non-small cell lung cancer. With that, I'd like to turn it over to Paul.

Thanks, Rob. Since our financial results for the third quarter of fiscal year 2012 can be found in our press release, I will focus my discussions on a few financial highlights that directly relate to our various sources of capital, and our strategy to fund our investments in research and development. Our consistent goal, which we have stated over the last several quarters, is to closely match our financial investments in research and development with our various sources of capital, and by ending the January quarter with an increased cash position of close to $20 million in cash and cash equivalents, compared to $18 million reported at the end of October 2011, we have reached this goal. An important part of our cash in flows comes from our hybrid business model that includes Avid Bioservices, a revenue generating business that truly sets us apart from the majority of other biotechnology companies. Avid generated $3.2 million in contract manufacturing revenue during the current quarter from third party clients, and $12.8 million for the 9 months ended January 2012.

Looking ahead at Avid's pipeline of committed projects, we are revising our guidance for contract manufacturing revenue to between $14 million and $16 million for fiscal year 2012, which could represent a record year for Avid, and this is only possible with the longstanding and successful relationships Avid has with its clients, including Halozyme Therapeutics, where Avid continues to be an important part of their overall supply strategy. We are looking forward to continuing this mutually beneficial partnership, one that directly speaks to the success of our partners and the dedication of our employees. In closing, let me say that we are planning for success as we get closer to unblinding data from our second-line non-small cell lung cancer study, and reporting several other clinical data points from our other ongoing trials, and it's important to note that, while we always seek other non-dilutive opportunities to fund our future development efforts, it is always prudent to prepare for other ways to fund our operations. In line with this strategy, we will be filing a new shelf registration statement later today as a potential measure to assist us in advancing our pipeline of novel drug candidates. We look forward to keeping you updated on our progress, and we will now open the call up for your questions. Operator?

Certainly.

(Operator Instructions)

Our first question comes from the line of Charles Duncan from JPM Securities. Your question, please.

Hi, guys, thanks for taking my question. I'm with JMP Securities. But I did want to ask a couple of questions regarding today's news on bavituximab. I know that you don't know, but I'm just wondering if you could speculate on the reason for the high control arms in terms of PFS. I'm wondering if the new diagnostics standard that was implemented in 2010 could help to explain this result.

Yes, hi, Charles, this is Joe. Are you referring to the new RECIST guidelines?

Yes.

I think it's difficult for us to say without trying to compare it with the prior RECIST versions, but these are relatively small studies. I think that's probably one of the bigger contributing factors, and when you look at these scans, like I mentioned in my remarks, that the independent readers, while they are more unbiased, they only have radiographs, so they can only read what they have. And so sometimes if there's not clear progression, or an event, then the patients are censored in the actuarial analysis like Kaplan Meyer, so I think that certainly can contribute to numbers that are a little bit outside of what you expect.

And with regard to that PFS inconsistency, could you remind us what type of imaging was employed? Was it CT or MRI?

These are typically [style] CTs. MRIs will supplement it for certain anatomies

Okay, and then with regard to disease progression, or at least with regard to the investigator assessment, how comfortable are you that you've defined that pretty rigorously, and that -- I guess what have you done to try to eliminate or reduce investigator bias on that assessment?

Sure. Well, I think certainly we provide training on RECIST. They all have to be selected before they can participate on the trial. And we've also, in the process of reviewing case report forms, tried to ensure accuracy of transcription. Now, ultimately even though radiographs are objective, which lesions that are selected by a radiologist, there is some clinical judgment and subjectivity involved. So even at the central read facilities, those radiologists are making determinations of which lesions they are assessing over time.

And then when you look at your overall response rate for this trial and compare it to your single arm trial, it's a little bit lower. I'm wondering if you could share with us if you had differences in patient inclusion criteria, and if you know what the percentage of stage 4 versus stage 3B patients were in this trial.

Right. So the number in each arm was similar to the sample size in our prior single arm study. So I think we did have fewer stage 3Bs in this study. I think we only had a handful, so that might partially explain the slightly lower response rates. But I think it's very difficult in a small study like this to really say if it's due to staging. When you start splitting the patients by these different baseline characteristics that the numbers get really really small.

Could just be the luck of the draw. My final question is if, you look at the design and conduct of the second-line lung cancer trial, and compare it to the first-line trial, I guess it seems like in some ways in second-line you may be able to get a better signal to noise, but I guess what are your thoughts on that trial with regard to potential compounding variables, particularly given what you know now in the first-line trial.

Well certainly, this was our lead indication all along, and in fact was the initial study that we discussed with FDA, so as we've said all along, this deal has the potential to be the first regulatory indication. Yes, you're right. I think there could be a better signal to noise, if you will, in your words. The response rates are quite low with the existing chemotherapies, and we believe even a few patients here and there could make a significant percentage difference, and so hopefully we'll see that.

Okay, thank you.

Just to add to that Charles, I think one of the other added features of this study, of course, is that it's double-blinded and placebo-controlled. So also if we're, as the investigators, are looking at scans, as well as the central readers, of course, really pretty much all the bias should be taken out of the system by that blinding process, so I think that's another thing that is a real significant difference from the front-line study. And so it should hopefully be a cleaner result. We think from the study it's just a little bit more robust of a trial design, so I guess just another aspect to that study.

Yes, I agree with you, Steve and Joe. This is the one, the second-line is the one that we're kind of hanging our hat on, if you will. Thanks for the added information and taking my questions.

Thanks, Charles.

Thanks, Charles

Thank you. Our next question comes from the line of Joe Pantginis from Roth Capital Partners. Your question, please?

Hi guys, good afternoon. Thanks for the update, and thanks for taking the question. Guys, I have more of a face value sort of cut to the chase question, just based on the market reaction today, which sort of views the study as a failure, because it didn't meet the primary end point of overall response rates. So based on the fact that the primary end point wasn't met today, how would you describe -- and I know you touched on this in a lot of your prepared comments, how or why should we in the market not view the first-line indication as a dead dedication for bavi at this point, and then I have a follow-on for Cotara. Thanks a lot.

Sure. Thanks, Joe. So I mean, I think the purpose of running this study was to really identify whether, in part, whether front-line non-small cell lung cancer is a good target indication for bavituximab. So the goal of the study, really, while the primary end point was overall tumor response, we recognize that in any pivotal study in front-line non-small cell lung cancer, median overall survival is almost assuredly going to be your end point in that study. And so I think all along we knew the secondary end point, progression-free survival, which again is yet another surrogate was next in line in importance. But really, it is the median overall survival, because as we're thinking about potentially moving this into pivotal study, then it would be based on those overall survival results, not the earlier end points.

In addition, this is just kind of the first inning of the ballgame here, and we've gotten some initial results from the study. We need the most important results that are still up and coming. In addition, we have a another investigator-sponsored trial in combination with pemetrexed and carboplatin in a front-line setting, so this is just part of the overall strategy in front-line, and then, again, as Joe just mentioned, really the target primary indication is still in second-line non-small cell lung cancer, and that's the reason for more robust design in that particular trial. So I think what I'd like to do is maybe ask Rob to kind of share some of his experience, because he's certainly been through many successful development programs, seen the ups and downs that happened during many of those development programs, and maybe give a little bit more of his personal experience.

Thank you, Steve. I think, really, to put this in the proper perspective, this is a front-line trial, and front-line is relatively healthy [table]. It's very hard with a small number of patients to show any real affect in front-line, and certainly, response rate and PFS, in my view, while they're early reads and you get some information, the fact is that the only end point that really counts is median overall survival, and the FDA pointed that out multiple times. We've seen a great many trials show pretty mediocre response rate results, but have yet gone on to show extremely good overall survival results. I think Herceptin is a great example of that.

During the development of Herceptin, if you looked at Phase II response rate data, you'd be extremely unimpressed, compared to what the ultimate results were in survival, certainly in breast cancer. So I personally don't get a lot into overall response data, nor PFS, and really go for the standard that really counts, that's unequivocal, and relatively straightforward to measure, which is overall survival. And I think we have to wait for those results in order to make any judgment. And on top of that, I'd like to point out that our primary goal is in second-line non-small cell lung cancer, which is a disease with very low response rates in general, I think around 10% or 11%, and what we're expecting to show there is a real increase, ultimately, in survival, and if we see that, that's what we'll take forward into a Phase III pivotal trial. So I'm personally not at all dismayed, or upset, or in any way doubt the drug. I think we're 100% behind it, and I think all of you should understand how we're thinking about it. Steve, any other comments?

No, I think that's good perspective, because you've seen this quite a number of times, now, so you have that additional perspective on these situations.

That's very helpful, thank you. And then my follow-up question for Cotara was just, I was wondering, Rob, thanks for the update. Can you give any sense of the extent or the tenor of your discussions as to how close we might be to a final agreement?

I think we're still working through it with the agency. We've sent in our responses, and they're evaluating those. These tend to be kind of an iterative process. We are trying to balance providing sufficient data in a trial that's enrollable and actually executable in a reasonable time frame, and we have to balance that with FDA's needs to assure that safety and efficacy of the product. It is a orphan indication, and a difficult one from that standpoint, but I think we're making good progress with them, and the relationship is very positive and collegial. It's a back and forth game until we finally get to a place where everyone is comfortable.

Great. Thanks a lot guys.

Thanks, Joe.

Thank you. Our next question comes from the line of Edward Nash from Cowen and Company. Your question please.

Hi, thanks, guys. So, you've actually addressed one of my questions, which was could you give me an example of potentially when we've had a drug where we've not seen -- or we've questionable overall response rates, or progression-free survival, but we've ended up seeing great overall survival, and I think you used Herceptin as an example, and maybe if there's another one you could throw out there, that would be great. And I just wanted to also know, have you run this through the stat-anal, your SAB, what kind of advice have they been kind of saying? Is it just a matter of -- Wait, let's go through, and just wait and see what the overall survival looks like at the end of the day? And then the last, the third question, which is the last one, is just, we aren't looking at -- I realize that, obviously, overall survival could still be successful, but I kind of use the comparison with HEP-C that we have an RVR and a EVR that kind of gives us some indication as to what an ultimate SVR is going to look like. So are ORR and PFS just not really good markers? At the end of the day, this really isn't getting us anything, or is it that they usually are helpful, and it's just we have to wait, and sometimes they don't pan out, but overall survival still wins?

Yes, I think we're all in agreement that, after really spending hours and hours poring through the data, the site reads versus the central reads, and everything else, we really came to the conclusion that, well, we really can't make a firm judgment based on these surrogate end points. And basically, it's just, now, yes, let's see what the survival data looks like, and will that be more indicative of the signs of difference in progression-free survival we saw in the site reads, or will it be more indicative of the lack of difference we saw in the central reads, and ultimately, that will be borne out in the most important end point. So I think everybody is in agreement, our advisors, everyone we work with, and at the end of the day, we all came to the same conclusion. As far as the other examples of drugs that haven't shown good -- typically in non-small cell lung cancer, there hasn't been a great correlation between, particularly, tumor response rates and median overall survival.

As Rob said, you can learn some things from tumor response rates and from progression-free survival, but a lot of times they just don't end up working out in the end, and it's, I think, for some of the same reasons we saw in this trial; there is some subjective nature to those sorts of measurements, and as much as you try to control them, there's still people involved in this, and it's complex business, when you get down to the way it's evaluated. So I think if you look at some of the other second-line non-small cell lung cancer studies, typically when you see small studies, you see these same sorts of variabilities and the lack of correlation between those early end points, and eventually, median overall survival. Joe, I don't know if you want to add a little bit more to that?

Sure. I think just your analogy of the RVR, EVR, SVR; those are very consistent, they're all directly measuring viral load. So I think those have demonstrated to correlate with the SVR, and in fact, is itself a surrogate, but accepted end point for ACB cure. Now, in cancer of course, response rates are shrinking tumors, which originally, I think, was to measure cytotoxic chemotherapy activity, but correlating that with a time to event -- and progression-free survival, how long it takes before patients progress again, those are very different ways to look at end points, so I think that's one major factor why response and PFS and neither of those necessarily correlate with overall survival. And certainly, we have new targeted agents that don't work by this traumatic cytotoxic effect, and so it may not be dramatic response differences.

And again, I think each type of cancer is going to be a little bit different story. Obviously a non-small cell lung cancer, there may not be good correlations, whereas other particular indications, there could be a better correlation. But I think when we look at the data, its just been pretty inconsistent, and while, again, as Rob said earlier, you can learn something, it's really the overall survival that's going to be your guidepost.

Just to add another point in terms of the response rate, I mean, there are a lot of drugs, Iressa, for example, was approved, which had, actually, a pretty impressive overall response rate, and it was given an accelerated approval based on that. And then when the actual pivotal trials were done with Iressa, it showed no overall survival benefit, and FDA recommended pulling it off the market. So I've seen this go both ways, and again, I think you would like to see, what you'd live to see is a direct correlation between response rate PFS an median overall survival, but most of the time it doesn't work out that way, and that's why FDA really believes that overall survival is the most appropriate end point for judging the value and benefit to these products it would provide to the patient.

So there are a lot of horror stories. I could go through hundreds of horror stories of drugs that had early development issues, and a good example is Avastin failed as a monotherapy, and I think everyone questioned, why would this drug ever work if it didn't work as a monotherapy agent, given the mechanism of action that Avastin was designed and expected to have. And yet when it was combined with chemotherapy, it showed really stunning results in colorectal cancer. So, again, I think drug development is all about designing your studies properly, and making, giving the product the best opportunities, and seeing where the data actually takes you. So that's kind of the perspective that I have, and hopefully it provides some value to you.

Great. That was helpful, thank you.

Thank you. Our next question comes from the line of George Zavoico from MLV & Company. Your question, please?

Hi, everyone. Good afternoon. Thanks for the update and the analysis. Rob, in particular, I think your viewpoints and experience has been very helpful in helping us understand the results. I just have a couple of follow-on questions regarding the front-line trial. First of all, would you comment a little bit on the size of the trial? It seems to me that, because it was such a small trial, a couple of outliers could have skewed the results in either direction, in either the investigator review or the central review, number one. And number two, was there any imbalance in the patient demographics that you might be able to speak to, in terms of one group having more 3Bs versus 4s, for example?

Sure. Hi, George. So we've tried to look at the major subgroups, again, to address the question the size of the trial. It is relatively small, but I think it's right in the range for Phase IIs, if you just kind of canvas what other people run. In fact, it might even be a few more patients in each arm. But again, Phase IIs are designed signal seeking, and at the time we felt that it was sufficiently powered to see some dramatic differences in ORR. When we do try to look at imbalances, we aren't seeing significant imbalances in age, or tumor burden, or stage of disease. There are just too few patients in each group to really draw any conclusions.

Okay, and just, I think I know the answer to this, but just to be sure, this is the PFS data, and it is median, and these months, the numbers of the months, that's pretty firm now; in other words, half the patients have gotten to their progression, right? So those numbers are not going to change with further analysis, is that correct?

Well, they actually are still subject to some slight changes. There are patients still on the trial in both arms, and because of some censoring events that might have occurred early, I think these patients could make some small differences in the final numbers, but I think it's going to be in the same ballpark.

And one of our goals, George is, at one of the medical conferences coming up, to be able to really give the full in-depth view of the data from the study, and kind of the outcome, and be able to present it at one of those events.

Sure, and I agree with everyone that, ultimately, it's the overall survival that will really inform the program going forward. I have a question regarding Avid, and congratulations on the growth of Avid revenue. This has been somewhat cyclical in nature, your revenue stream. But now it appears that you're getting more customers, more clients, and it seems to be a little bit more -- or hopefully maybe it's getting to the point where it's not going to be quite so cyclical as you grow the business. Can you comment a little bit as to where you see going forward, just the cyclicality or the potential cyclicality of that business?

Yes, I think it's, I mean you're right. I think the business has become much more consistent, and it's primarily because of the fact that our customers have been very successful. I think Paul mentioned, Halozyme has done quite well, and they are obviously expanding the potential utility of their drugs with their collaborations with Baxter and Roche, and we have the European client that is now finishing up their Phase III and hopefully will be moving their product to the market. And really it's that commercial production which allows you to sort of smooth out the wrinkles, if you will, from the quarter-to-quarter variability. There will always be some of that, just based on the timing of release of lots, and the fact that each lot represents a significant bit of revenue, anywhere from $0.5 million dollars to $2 million. But I think it really is the success of the clients. I think we'll see that, hopefully, continue into the future here, as they're successful, and we bring in new players into the facility as well. So yes, we're actually quite excited about Avid, and the future of the business, and the ability to grow that, and it's an alive and well business. It's doing quite well and we'll make great progress there.

I'm glad to hear that, and it certainly fits into Paul's hybrid model for keeping the capital at a comfortable level. Thank you very much, gentlemen. Look forward to AACR and the overall survival results.

Great. Thanks for the questions, George.

Thank you. Our next question comes from the line of Steve Dunn from LifeTech Capital. Your question please?

Hi, guys. All my questions have been answered except for one. If we look back, the control arm notwithstanding, if we look back at the results we've seen across all the trials, the results almost always match equivalent trials using Avastin plus chemotherapy, the various agents. If we don't see anything tremendously outstanding versus control arms, is there a possibility that you would ultimately file this as a non-inferior against Avastin, and if so, could you describe what benefits bavituximab would have over Avastin, vis-a-vis safety or whatever, that you have different mechanisms of action, but there's similarities as well. So is there a way of being almost a pseudo, biosimilar strategy, if the data comes out ambiguous?

Yes, I think I can start the ball rolling, and I'll get input from both Joe and from Rob. But I think kind of my viewpoint on this is that, absolutely, the results have looked similar, in many cases, to prior Avastin studies. And in fact, we've, in many cases, really been following the Avastin pathway in some of these trial designs and patient numbers we've been running. I think the goal is really to see where this drug does shine. It is a different mechanism of action from Avastin. We think it will have different effects. I think some of the interesting things that come from running the numbers we are is you start to see maybe some of those areas where you potentially have some benefit, whether it be from a safety standpoint, where we don't see some of the, if you will, the side effects that you see with the anti-angiogenesis agents across the board, like hypertension, some of the bleeding problems.

In addition, I'll let Joe address, but in one of our ongoing ISTs, we've also seen some new areas where different drug combinations may be possible with bavituximab that you just can't run with the anti-angiogenesis agents, so I think there's still -- our goal was to show this is a unique drug, with its own indications and own side-effect profile. Maybe it will be used safely in some indications where Avastin couldn't be, potentially. But in the end, I think they are just different types of drugs, with different mechanism, and that will eventually come through in the clinical development, although in some ways, it's been comforting that the results have been so similar to Avastin, because obviously that's become quite a successful drug, and although it itself has a set back here or there, it's still a phenomenally successful commercial agent, so Joe I'll turn it over to you if you want to expand.

Sure. I think Steve already touched on, we're still running these studies, but so far we aren't seeing some of the sort of angiogenic class effects, toxicities such as the bleeding, wound healing, impairment, kidney issues, and hypertension and such, so that certainly could be one advantage. Now as far as the non-inferiority, we really haven't discussed that sort of pathway, but as Steve mentioned, we're trying to figure out where bavituximab works the best, and it may not be any indications where Avastin is actually approved, so I think we need to push forward, and try to find the right way to use bavituximab.

Yes, and before I turn it over to Rob, one of the things that came up, for instance, we're running an IST in combination with sorafenib, and we're in the partnering discussion, they were particularly intrigued by the fact that we were able to, seemingly up to this point, be able to safely give bavituximab with sorafenib, because that's been a significant issue with the anti-angiogenesis drugs, because of some overlapping toxicity. So again, by running all these studies, you start to tease apart where the differences are, and where the similarities are, and I think that gives us a great opportunity for development. Rob, I don't know if you want to add anything to that?

Just the point that I think it is somewhat similar to Avastin. Certainly, the kind of broad spectrum mechanism of action, with respect to, in case of Avastin anti-vegf, or seeking combined with vegf as a neovascularization preventive agent, versus being able to find phosphotyrosine in any number of cancer cells, so both of them have a lot of just kind of broad spectrum similarities, and I agree with Steve and with Joe that what we really want to do is find where bavituximab has the greatest benefit, and that may not be in a place where Avastin is currently approved. And we certainly believe that the drug has, potentially, a good safety profile, and it certainly seems to be very active, so it's really a question of finding the right indication through the studies that we're doing, and then to move aggressively and definitively towards an approval in that indication. So I think that's really the kind of drug development program that we're envisioning.

Okay, thanks very much guys.

Thanks, Steve.

Thank you. Our next question comes from the line of David Musket from ProMed.

Thank you, I have a couple of quickies here. So just to clarify, the data you reported today is on all 86 on the ITT protocol, right?

No, actually we report on the per protocol analysis, this is on the number of 83 patients.

Okay, so maybe you can help us understand, sort of with all of the disclaimers you've already provided about overall response rate, I'm not going back to ask you to do that again, but can you help us understand a little bit about the dropout here, the 26% versus the 39% on the ORR that we had in December, versus the 23% and 26% that we heard about today?

Right. So those, again, were based on local reads, and when we reported in December, we had recently completed an enrollment, meaning the last patients just began the study. And so they were still very early in their treatment cycles. So as patients continue getting chemotherapy cycles, they have that opportunity to achieve a PR response, and so that, over time, explains some of the differences. Also, just over time, as the doctors evaluate some of these patients, there are changes in the scans, sometimes, that render an initial lesion that they're tracking not to be a reliable lesion. So then they would go back and actually take them out of the assessment, and maybe use another lesion if it's available. So that also can affect the responses over time. And so overall, there was a net change of a couple of patients in each arm, and that's how they came together, and we already sort of touched on the nature of the study being a relatively small size study, that each patient is a couple of percents.

And the 3 patients that dropped out? Which arm?

So the 3 patients that dropped out actually were all on the chemotherapy arm. As it turns out, they were not properly staged at entry, and they were not stage 3B or 4.

Thank you, that's very helpful. And so now, just trying to I guess prepare for, not running down the same path again, we're going to get, I guess we're expecting to get ORR data on the second-line trial some time mid-year?

Yes, so the next upcoming kind of milestones, obviously have some data presentations at AACR, but the unblinding of the second-line study, probably around the same time period, will also have progression-free survival. If you look historically, it's been in the range of about 3 months or so with chemotherapy alone, usually a little bit less. Since we completed enrollment in October, there's the possibility that we'll, sort of around the same time period, have the ORR data, as well as the progression-free survival there. These patients are really just in much worse shape than they are in the front-line setting, where tumor response rates are generally less than 10%, and median progression-free survival is around 3 months, and even median overall survival is not a whole lot longer than that.

So this ORR data that we're going to have, just to prepare us in advance, is that going to be independent reads, or just from the physicians again, the investigators again?

Yes, so that will be from both. Now again, keep in mind that in this study, the trial is double-blinded and placebo-controlled. So unlike the front-line study, where the physicians know what the patients are getting at the time of doing the scans and the evaluations, and determining patient treatment, in this study they won't know which of the arms of the study the patients are on.

But are you saying you expect we'll have both the physician, the investigator data, and the independent reads?

Correct, yes.

At the same time?

Before we unblind treatment, want to get all of that.

Great. Which is obviously different than what we had in December?

Right.

Yes.

Okay, that's great so that should help eliminate the potential confusion at the time.

Yes, and second-line study was really designed to be part of a registration package. We've work with the FDA on this, it's meant to be part of eventually 2 confirmatory studies that potentially could lead to licensure, so just a little more robust trial design. Of course, those kind of trials are more expensive, as well, but we do think that's a very robust study, and it's one we've been, ourselves, the most anxious to see, probably, of all of the studies we're running.

Exactly. That's what I'm trying to say, is if we can avoid the confusion, it would be great, so we can actually try to get a little bit more interested. So we'll probably get both the ORR and PFS, you think, around the same time, some time before mid-year?

Yes, I think that that's our anticipation.

Fantastic. And I think you said you filed a shelf, is that what you did? Did I hear that right at the end of your call today?

Yes, we did file a registration statement today on Form S-3.

How big?

That's for $150 million. And our goal is really to plan for success here, and having an effective shelf in place allows us to plan for success. Obviously, our goal is to look at potential partnerships as we move forward to help fund these bigger Phase III studies that we're anticipating, based on promising data. But we want to be prepared internally to have an additional vehicle in place, assuming, if we can't determine when and the time frame of a potential partnership. So we just want to make sure we are taking prudent measures internally to prepare ourselves for success, and a shelf will last 3 years once it's declared effective.

Just maybe you want to, I don't want to push you, but if you want to go even farther here, certainly you can imagine people will be saying this is adding insult to injury, to the extent that you were even considering selling stock at these prices, so do you even want to go so far as to say that that's not something you would do in this time frame, until we get a little farther downstream with some of your clinical trials?

Obviously, we're not pleased with selling stock at any price range where we're sitting today. But the ultimate goal is to make sure, and ensure that we can advance our programs and get to the clinical milestones that we think can add a lot of value to our Company here, and add value to shareholders. We did end the quarter with close to $20 million in cash and cash equivalents, so I don't there is any immediate pressure to sell stock in the open market. But again, over the last several years, we have been able to closely match the amount of capital that we've raised with the resources that we spend on our pipeline, and the worst thing we want to do is not get down to a cash position that makes us vulnerable.

Thank you. Due to time constraints, this does conclude the question-and-answer session of today's program. I'd like to turn the program back to Steve King for concluding remarks.

I'd like to thank you all again for participating in today's conference call. I also look forward to keeping you updated on our clinical progress in upcoming data presentations over the coming months, until we have our next quarterly conference call. Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.